Ian (lovingboth) wrote,

The National Lottery may be a tax on innumeracy but...

In the UK, there is legally only one lottery able to offer many big prizes every year, the National Lottery (NL). From its start, it has been operated by the commercial company Camelot. Out of every £1 ticket purchase, 50p goes into the prize pot and 28p to 'good causes', while Camelot gets 5p to cover its costs (including 1/2p profit). Retailers get 5p commission while the remaining 12p is paid as tax.

Every other lottery is treated as being gambling and thus subject to regulation by the Gambling Commission. This must ensure that at least 20% of the proceeds go to a proper purpose and place severe limits on how much money can be raised, on the maximum prize, and on how often it can happen. As the NL has been a financial success for everyone (except the majority of the players...) there have been several attempts to get around these laws, not least because the Gambling Act 2005 relaxed the previously very strict limits on how much could be taken as 'expenses' (including profit) for running a lottery.

The current one is branded as 'The Health Lottery'. A company called Altala wanted to create a 'multiple society lottery scheme' - a group of thirty or so effectively identical community interest companies would be formed and, together, contract with Altala to run a lottery on their behalf. Each would take it in turns to be the beneficiary of the lottery, enabling the commercial necessity of large prizes to be offered more frequently than once a year.

Before it could commence operation, Altala went bust in 2009 and the assets were bought by The Health Lottery Ltd (THL) who then applied for the series of necessary licences. In 2010, the Gambling Commission decided that it could be a legal scheme and issued the licences, but said THL "should therefore ensure that in actual fact that the scheme represents 31 or more separate lotteries rather than operating as a de facto single lottery which will of course, be unlicensed and operating in breach of the limits imposed by the Act."

A few months later, in February 2011, THL was bought by Northern & Shell plc, the company run by Richard Desmond and owner of, amongst other things, the Express and Star newspaper group plus the Channel 5 TV group. The same day, all - by now - 51 community interest companies agreed to pay THL a pile of money to run 'their' lotteries. (This was presumably made easier by the fact that all of them have the same directors and are registered at the same address.) The deals included receiving a fraction of a penny more than the legal minimum of the proceeds for the proper purposes that the companies are supposed to be engaged in.

When the 'Health Lottery' was announced by the new owner, it became clear that not only was the share of the ticket price going to good causes smaller than the NL, so was the share going to the prize fund. Because it's a fixed odds game, the exact percentage may vary, but it's about 33%. So if THL's actual expenses and the commission it pays to retailers are double those of Camelot's, over 25p of every pound would be profit. (I suspect that the commission is higher - see the number of outlets it has managed to sign up - but that neither is double and so the profit margin is even higher.)

Not surprisingly, there was soon a flurry of memos and questions going between Camelot, the regulators, and Government. Questions were asked in Parliament. But the Health Lottery has continued to operate and in March 2012, Camelot asked for judicial review of the Gambling Commission's decision not to review the relevant licences.

It turns out that only 60% of retailers the Commission researched had any indication about the actual nature of the Health Lottery (critically, that it is 51 smaller lotteries operating in rotation), and barely 10% could answer the question 'which one is being promoted this week?' (Less than 30% could tell the questioner how to find out the answer to that question.) The public also didn't know it wasn't a single national lottery.

Sadly, last month the High Court dismissed Camelot's application for judicial review, primarily for being 'out of time' (i.e. they waited too long before doing anything), but also because Camelot did not prove that what looks and sounds dodgy (51 nominally separate community interest companies taking the minimum for themselves, allowing THL to make more in profit from 'their' lottery than they do) is actually dodgy.

The draw for the Health Lottery is broadcast on Channel 5. You will search in vain for any negative coverage (or, I suspect, any indication that THL makes more in profit for Desmond's company than goes to good causes) in the Express or Star.

This entry was originally posted at http://lovingboth.dreamwidth.org/475384.html, because despite having a permanent account, I have had enough of LJ's current owners trying to be evil. Please comment there using OpenID - comment count unavailable have and if you have an LJ account, you can use it for your OpenID account. Or just join Dreamwidth! It only took a couple of minutes to copy all my entries here to there.

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