Official forecasts, official gloom
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New projections confirm the downward trend for good causes income. Jane Taylor reports 

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After discussions with the distribution boards, the Department of Culture, Media and Sport has come up with a new format for projecting good causes income, which it intends should be ‘more accurate, transparent and user-friendly’. DCMS figures are computed from Camelot’s sales data and trend analysis using key forecasting assumptions from the lottery regulator. The distribution boards use the Government figures as guidance for drawing up their own budgets.

In the past the distributors have been free to choose from three alternative government projections – high, medium and low – of future income. This has been rationalised into a single figure. Accompanying data also shows clearly the relationship between ticket sales, non-ticket income, NLDF interest, good causes income and total NLDF balances. It is more than a year since the last set of government projections came out. In future they will appear quarterly.

The Government forecast, based on Camelot’s sales figures up to 30 June 2002, assumes a decline in lottery sales this year of 3% to £4.69bn, thereafter levelling off to remain stable for the rest of the forecasting period. This is a downward revision from the last official projection a year ago, which assumed that ticket sales would stabilise at £5bn annually. The short-term trend shows still sharper decline, with sales in the first quarter of this year down more than 6%

Table 1
Table Source: DCMS calculations based on National Lottery Commission data
on last year (Table 1). The forecasting paper notes that these figures do not include any effects of the launch of the new ‘Hotpicks’ game (launched 7 July), but goes on to say: ‘While these new games have started well, they have canni-balised some of their turnover from other National Lottery products, including the main online game.’ Moreover, the June quarter’s figures do not reflect the very poor summer sales or any possible effects from the NCADC funding row (see page 1 news story). The DCMS has adjusted the sales figures to smooth out variables (the main one being peaks caused by the number of rollovers and/or superdraws) and arrived at a trend decline of 2-4%, hence its final forecast figure of a 3% sales drop.

In arriving at its projections for total good causes income, the DCMS has also factored in the demand made by Tessa Jowell, Culture Secretary, earlier this year that the distributors should run down the high level of reserves held in the NLDF, to halve the balances by April 2004. This has a knock-on effect on interest accrued and therefore income available (see Table 2).


Table 2
Table Source: DCMS, September 2002

These projections show a total drop in NLDF income between the ‘high point’ of 2001-02 (actual) and 2008-09 of 23.5% – nearly a quarter (Table 3).

Table 3
Table source: Based on DCMS data September 2002 (2000-01 and 2001-02 figures are actual outturns)

As with all official forecasting, the DCMS figures come with lots of health warnings attached. In particular, the following risks are identified:

Positive:

  • development/launch of innovative new games
  • leverage from the new Lotto brand
  • improved public image negative:
  • ongoing problems associated with ‘lottery fatigue’
  • increased competition from substitute gambling products
  • reduced number of rollovers, if number coverage increases.