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UK National Lottery Operators Set To Face Licence Changes, MPs Hear

Future operators of the UK National Lottery could be handed a shorter licence and face increased regulation of scratchcards, a government committee heard on Wednesday.

UK Gambling Commission chief executive Sarah Harrison indicated that future licences were likely to be shorter than Camelot’s current 14-year deal to operate the monopoly.

Asked by MPs whether the current licence, which was extended by four years in 2012 and has seen the lottery giant increase profits by more than 120 percent since 2009, had been too generous, she said licence terms would be reviewed.

“The work we are doing on starting to look at the next licence competition will ask the question about whether a 14-year contract is right,” she told the Public Accounts Committee hearing.

“If you look across other regulated sectors, you don't find contract terms of that length and you find other features like re-openers or in effect break clauses, particularly to reflect where environments and market forces change or indeed where policy shifts.”

The committee also questioned Sue Owen, the Department for Digital, Culture, Media & Sport's (DCMS) permanent secretary,  over potential regulation to address concerns about the increasing popularity of scratchcard gambling, which offers players a higher chance of winning. However, cards also return significantly less to good causes than lottery draws.

She said: "It's definitely something we're looking at. I’m not going to say we're definitely going to do something about it but it’s definitely something we're looking at.”

The potential regulatory changes come as bidding for the next National Lottery licence is expected to open in 2019, with Richard Desmond’s Health Lottery operation set to bid for the franchise when it comes up for renewal.

Meanwhile, MPs criticised Camelot for making excessive profits while money given to good causes had dropped by 15 percent in the last year, with no prospect of improvement in 2018.

Last month, a report by the National Audit Office public spending watchdog said that Camelot profits rose 122 percent between 2009-10 and 2016-17 to £71m. Over the same period, the amount it gave to good causes rose just two percent to £1.5bn. 

MP Chris Evans asked Camelot chief executive Nigel Railton: “How do you justify that to someone who buys a ticket believing their money will go to a good cause?

“You’re a monopoly. You have no direct competitors, you’re getting record profits.”

Railton said the profit increase was partly due to the government cutting corporation tax from 28 to 20 percent, as well as ticket sales and savings following the renegotiation of Camelot’s contract in 2012.

Conservative MP Sir Geoffrey Clifton-Brown, who chaired the hearing, suggested the deal Camelot got in 2012 was “slightly too generous”.

"Profits have risen particularly rapidly since the March 2012 licence renegotiation which suggests Camelot secured too good a deal at that time," he said.

Harrison conceded that changes to the contract at the time, which saw Camelot retain 70p of every £1 in efficiency savings it made in its operations, had boosted its bottom line.

Asked if she was comfortable about Camelot’s profits, she said: “Looking most recently, it’s very difficult to see how one can be comfortable given that sales and returns to good causes have reduced in the way they have.”

However, she said it would be a mistake to accede to calls to re-negotiate the licence. “It would be misleading of me to suggest it is appropriate, at this stage, to completely turn the existing licence inside out and negotiate afresh,” she said.

“We want the principle focus of Camelot to be on improving its performance in trading and in other areas.

"And secondly because there is an important market we want to create for new investors coming in and we don't want to send the wrong signals to that market and competition about how this licence is operated and how this asset is run.”

Railton said the firm hoped to boost sales of its main Lotto draw and instant games by £400m over the next four years, generating an extra £60m to £80m a year for good causes.

He admitted, however, that draw-based games were declining in popularity and the lottery had been affected by the BBC's decision to axe its live Saturday night TV draw in 2016.

Owen added that those distributing money to good causes were now “very cautious” about ensuring they could meet commitments for future spending because of the drop in numbers of players.