Examination of Witnesses (Questions 1180
- 1199)
TUESDAY 3 FEBRUARY 2004
MS MOIRA
BLACK CBE AND
MR MARK
HARRIS
Q1180 Baroness Golding: So you believe
you do not need a gambling advisor? Is that what you are telling
us?
Mr Harris: It depends very much
on the issues that come up. Generally, so far, we have found NERA
quite adequate for us—very good in fact—to advise
us on the issues that we have been asked about and have had to
consider.
Q1181 Viscount Falkland: You have
explained to us where the consideration of the returns to good
causes comes in your normal procedures of examining these things.
Obviously, because the good causes suffer ultimately in the situation
where there is a drop in turnover, is there not a lot of psychological
pressure on you there to slightly alter your priorities? What
kind of pressure are you under when you get a dip, and does that
not have an effect on your ultimate decisions?
Mr Harris: From my perspective,
it is quite clear that the Commission has the first two responsibilities
that I alluded to earlier, and the Commission has to be satisfied
that those are met. You ask what would happen if there were a
dip in sales. There are a variety of things that the Commission
would look to Camelot to do. One may be to introduce new games,
another may well be to work harder at selling existing games.
If one looks, although it is partial evidence at the moment, the
UK National Lottery has a very low per capita rate compared with
lotteries across the world for weekly purchases. So for example,
across the piece, that gives us some reassurance that the National
Lottery is not encouraging excessive play. However, we would look
very carefully at individual games and individual proposals, and
from my perspective, I would want to make sure that the Commission
was fully informed about risks, for example, to players, and that
it took those fully into account before taking the step of considering
whether or not a game was likely to generate extra returns for
good causes.
Ms Black: That is very much how
it feels at the Commission. We do not feel under any pressure
that because sales are dropping—although this year, as you
will have seen from the press, they have been holding up—we
should license something simply because sales are dropping and
therefore we need to do something. That is certainly not the case.
Q1182 Viscount Falkland: Do you think
you are the most appropriate regulator to deal with these problems
should they arise with a dip in turnover and what you have just
eloquently described to us, rather than the Gambling Commission?
Ms Black: Yes, we do, because
of that underlying duty to maximise returns to good causes. If
that was all put into the Gambling Commission, and we do not believe
you can separate everything we do, then the Gambling Commission
would have an irreconcilable conflict of interests between the
National Lottery operator, for whom it would have a duty to maximise
the returns, and other commercial gambling operators for whom
no such duty applies.
Q1183 Chairman: I just do not understand
how you can say that that conflict applies to the Gambling Commission
but does not apply to the National Lottery Commission.
Ms Black: It is the conflict between
regulating one operator for whom we have the duty to maximise
the returns, and if the Gambling Commission is then regulating
others for whom it did not have the duty. Our duty is still subsidiary
to our prime responsibilities.
Q1184 Chairman: But if you are going
to license other games, and move into the world of having more
than one operator, which is what the Government says the policy
would be, and what we assume these additional clauses will allow,
who is going to make a judgment about the extent to which the
licences that you then grant may impact on other gambling opportunities
where someone may say, "Actually, there is a potential confusion
here"? Your conflict is worse than the Gambling Commission's
conflict, because you have this requirement to raise money for
good causes.
Ms Black: Yes. We have the requirement
to maximise the returns, not simply to raise money per se. I wonder
if I could just clarify. Obviously, we have not seen the draft
clauses, so we are slightly talking in the dark.
Q1185 Chairman: We know what the
policy is.
Ms Black: Indeed. If I can just
clarify what we think our proposals are, in a sense, we do not
have them right now. We are still waiting to see what happens,
but I wonder if we can just comment on some rather inaccurate
representations that are floating around as to what we might be
doing. We are merely seeking the flexibility to enable us to structure
the competition, the next one, in such a way as to make it as
effective as possible. We have clearly got to consult and do research
and find out what the best thing to do is. We may well end up
with one licence covering everything for one operator. What we
perceive as possible at this stage, although clearly, as I say,
consultation and research will need to be done, is that we may
end up with two or three licences—not two or three licences
for a jackpot game but two or three licences each licensing classes
of games that hopefully are pretty independent of each other so
that we do not get competition for the Lottery, because clearly
that is counter-productive. So we might have one for the main
lottery jackpot type draws, and we might have a separate one for
scratch cards, because research has shown that broadly there is
not a great deal of competition between those two types of games.
We believe that if we have that flexibility to enable us to offer
that, if that is what bidders are going to bid for, we would encourage
bidders who could only bid for bits rather than the whole lot,
which is big—we think it would reduce their costs clearly
if they are only bidding for part of it—but we think it
will also encourage the innovation in the design of the games
and the marketing, which is actually very necessary. It is clearly
a risk, but we do perceive a serious risk if we carry on as we
are and have the same type of competition as at present. That
is not just our view. It is talking to people at the time of the
last competition, it is talking to possible bidders since, it
is coming from the National Audit Office and the Public Accounts
Committee and the Culture, Media and Sports Select Committee.
If we do not do something, we will have a problem, and a something
that gives us flexibility to design something a bit different.
My real concern is, if we do not get flexibility, in two or three
years' time, when we are some little way down the road to designing
a competition for the next licence, if we find that the incumbent's
advantage is simply overwhelming, it will be too late to do anything
about it.
Chairman: We will come on to the licensing
issues in a moment. Let us stick with regulation. There are still
one or two more questions on that.
Q1186 Jeff Ennis: My question has
more or less been asked, but we have obviously heard evidence
from a significant number of witnesses that they feel that
we should just have one single regulator for the gambling
industry, namely the Gambling Commission, and when we look at
the size of your annual budget compared with that of the Gaming
Board, which is responsible for every other aspect of gambling
at the present time, your budget is almost as big. Does this not
show that there is a significant case to be made in terms of economies
of scale in bringing the two commissions together?
Mr Harris: I would say firstly
that the Gaming Board, although it has a wider scope across the
gaming industry, but not, of course, across the betting industry
at the moment, its responsibilities are more limited. As I understand
it, for example, it does not have the same degree of player protection
responsibilities. It is keen to take those on and it has been
looking at those areas. It does not have the same degree of responsibilities.
Equally, at present, as I understand it, what is lawful gaming
and what is not is left very much initially to the companies who
wish to offer gaming products to determine. They bring products
to the market and the Gaming Board then clearly has to express
a view. But what the Gaming Board is not asked to do is to license
each game, which is an additional level of protection that we
are asked to introduce. So I suspect that if the Gaming Board
had the same responsibilities as we have for licensing new games,
new products, and for protecting the interests of players, and
that was across the whole industry, then it would need a very
significantly higher budget to do that. Clearly, I have to say
to you, in all honesty, there would be some economies of scale
if you moved the two organisations together, because, for example,
you would not need the same resources division, HR division, things
like that, but equally, I do not believe that they make up a massive
part of our costs relative to the costs that we bear with the
increased licensing regime. On top of that, of course, we have
responsibilities, as has been mentioned, for overseeing maximising
returns to good causes, and those sit very much within the Lottery,
and they are not responsibilities that we understand the Gambling
Commission would be taking on for the industry more widely.
Q1187 Lord Walpole: What kind of
relationship do you currently have with the Gaming Board?
Mr Harris: I think we have a very
good relationship with the Gaming Board. I see Tom Kavanagh on
a regular basis, and we discuss issues of common interest. Those
issues at the moment are not that extensive because, for example,
the Gaming Board does not have responsibilities around player
protection, but we certainly talk about player protection issues.
We discuss issues of illegal lotteries, of policies the Government
is developing as regards things that might compete with lotteries
more widely. We have discussed betting arrangements where it has
been appropriate to do so. I think we have a strong dialogue.
We have also taken the step, in the light of the Gambling Bill—
Q1188 Lord Walpole: I was going to
say, presumably the Gambling Bill has stimulated that dialogue.
Mr Harris: It certainly has stimulated
it, but I would not like it to appear that this is something that
we have not had in place before. I have been in contact with Tom
Kavanagh on a regular basis since I came to the National Lottery
Commission in 1999. That has become more regular as time has gone
on, but we continue to have a close relationship. We have recently
set up, and it will be meeting for the first time this week, a
standing group that will formalise these arrangements that in
the past have been very much through Tom and me meeting on a regular
basis.
Q1189 Lord Walpole: If the National
Lottery Commission continues as a separate regulator of the Lottery,
how do you envisage working with the Gambling Commission? Have
you considered what would happen if there were any differences
of opinion?
Mr Harris: Yes. I would hope that
we would continue to work very closely in the way that we have
done, but that the closeness, as the Gambling Commission's responsibilities
become more extended and as it has an interest in player protection
and things like that, could be more formalised. I would certainly
personally wish to see some sort of protocol or understanding
between ourselves and the Gambling Commission on how we would
work in future. I would certainly also hope that we could set
up joint working groups and joint arrangements, maybe for getting
legal advice if there were areas of doubt about what did or did
not constitute a lottery. Equally, they will have enforcement
powers that we will not have in terms of lotteries, and again,
that is an area I would expect to liaise with them on. So I would
hope to work very closely with them. In terms of if there were
a difference of opinion, I think firstly the thing is to put in
arrangements that minimise the risk of differences of opinion,
and if there were a difference of opinion, we would have to look
at whether or not that was justified, because we are regulating
something slightly different under slightly different responsibilities,
if that were the case. I hope we would be able to work closely
together to try and resolve that difference of opinion. If you
take, for example, what does and does not constitute a lottery,
I have already mentioned the possibility of taking joint legal
advice. That may well be a way forward if both organisations could
accept that if we went to an appropriate counsel and got that
advice, we would be able to strike a common view.
Q1190 Lord Walpole: How would you
ensure that there was a consistent approach taken in the line
with the Gambling Commission towards, for instance, player protection
and social responsibility?
Mr Harris: We have some expertise
in this area already simply because we have had responsibilities
in this area, and there are various codes of practice that Camelot
is required to comply with under the existing licence. I hope
we would bring those to the table as part of the debate, that
we would work very closely with the Gambling Commission, that
we would be able to sign up to joint codes of practice that reflected
all parts of the industry, and at the very least set minimum standards,
if not absolutely common standards across the piece. I also hope
that we would be able to work very closely with organisations
who have an expertise in this area, possibly beyond ours, such
as GamCare, so that we could work together to come up with common
standards and common expectations.
Q1191 Lord Walpole: Would you expect
to end up with GamCare's telephone number, for instance, on terminals?
Mr Harris: That is not an impossible
scenario. Certainly GamCare's number now appears on the back of
scratch cards, for example.
Q1192 Mr Page: If I could move a
little more into the specifics of it, in the past gambling operators
had more clearly defined areas of operation, and those areas of
operation are becoming increasingly blurred. We have at the moment
interactive lottery games available through Camelot. Have you
considered how you are going to work with the Gambling Commission
on the issue of remote gambling?
Mr Harris: In a sense, the answer
builds on the answer I have already given. We would want to work
closely with the Gambling Commission in terms of codes of practice.
We also would work closely with GamCare, and Camelot has GamCare
accreditation for its websites at the moment. We would expect
to share intelligence, standards and compliance techniques as
well, trying to make sure that we had common arrangements, common
techniques in place that would prevent misuse by organised crime,
that would exclude under-age play, and that would minimise the
risks of excessive play. I think we would want to work closely
with the Gambling Commission on those issues.
Q1193 Mr Page: This follows on from
an earlier question by the Chairman, but again, let us go into
a specific. Suppose the remote gambling operator wanted to promote
an online or interactive gambling product that threatened Camelot's
online scratch card game. Who would do the protection of the National
Lottery product? Would it be the Gambling Commission or would
it be yourself?
Mr Harris: That to my mind would
very much depend on the nature of the product that was being offered.
If the nature of the product was that it was an entirely lawful
product, then I do not think there is any reason why the Gambling
Commission should intervene. If it were a threat to the National
Lottery and that threat were made out, and the Government decided
to change policy on what the National Lottery could and could
not do, that would be a matter for the Government, but I do not
believe it would be a matter for the Gambling Commission. If however
what was being offered was an illegal lottery, I think the Gambling
Commission would have an interest, because it has the enforcement
powers. If it were not, I do not believe that would be a matter
for the Gambling Commission. Otherwise, it would be being drawn
into the conflict of interest problem.
Q1194 Mr Page: You have mentioned
that there could be two or three separate licences in the future.
I know that last Tuesday, when you appeared in front of the Culture,
Media and Sports Committee, you were asked questions about what
would happen if Camelot wanted to go out and start a completely
separate arrangement for harder gambling. Who would you expect
to regulate that?
Ms Black: Currently it would not
be within Camelot, the company, per se. We would not currently
do that.
Q1195 Mr Page: Camelot could set
up a separate company, operating out of the same building, doing
hard-line gambling.
Ms Black: That would not be for
us. That would be for the Gambling Commission.
Q1196 Mr Page: So Camelot, for example,
would then have two regulators operating in its building.
Ms Black: It would have relationships
with two regulators, yes.
Mr Harris: It is important to
say that under the present arrangements there would be two separate
companies. Under the present arrangements, Camelot as a company,
under the terms of its licence, could not start offering products
outside the National Lottery without our agreement.
Q1197 Mr Page: But it could be the
same ownership of the two companies?
Mr Harris: Yes.
Q1198 Baroness Golding: The section
5 licensee is a private sector body whose activities must be compliant
to the Lottery. Would you insist on the same conditions once it
is possible for you to grant more than one section 5 licence?
Ms Black: We have not reached
a view on this. Our prime concern would be to ensure that the
management of the organisation that runs the National Lottery,
or its bit of it if we have that possibility, has every incentive
to focus purely on the National Lottery part of its portfolio.
So if someone comes up with an alternative structure, we would
be very happy to listen to it.
Mr Harris: Our real concern is
that the Lottery operator might, part-way through the licence,
decide that actually there were other things that were more lucrative
and of better benefit to them, and move into those other areas
and neglect the Lottery as a result. That is the reason we have
a single-purpose company at the moment.
Q1199 Baroness Golding: That would
be somebody with a different gambling interest already.
Mr Harris: What we require is
a single-purpose company. We do not require that the shareholding
should be single-purpose. It is quite possible, for example, that
a gaming operator, or a betting company, could be involved as
a licensee. Indeed, that was the case in the first licence round
when the Rank Group, as I understand it, and also Tattershall's,
were both part of different bids. But they were parts of the bid
not in their own right but as a shareholder of a single-purpose
entity to run the Lottery.
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