Future lottery licence

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We set out the government’s new proposals for how the lottery should be run after 2009

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In June 2002 the government launched a review of the lottery licence to see if it could find a better alternative to the current seven-year monopoly licence awarded to a single private operator.

Alongside the white paper on distribution published on 3 July 2003, the government published a second set of proposals on licensing and regulation. These decisions affect the running of the competition for a ‘third licence’ after Camelot’s second franchise runs out in 2009. The competition, run by the regulator, is a slow and costly business, likely to take two years or more, which is why the review is happening now, just a year after the second licence came into effect. 

Timetable for change
There remains a question mark over when the government will be able to legislate: the white paper says it will make the legal changes as part of its wider liberalisation of gaming law – but we do not know whether that means this year or next. However, the current regulator is insistent that it needs early legislation if it is to be able to get on and run an efficient competition for 2009.

Role of the regulator
In essence the government has decided to accept the preferred options of the current regulator, the National Lottery Commission, both on the kind of licensing arrangements it should be able to make next time around, and also on its own role and future. There had been a possibility that the NLC might have been swallowed up within the new Gambling Commission that will regulate all gaming in future, but the government has decided it wants to keep lottery regulation separate, so the NLC keeps its own role and identity.

Various daft anomalies about how the regulator is run will be sorted out. These include:

• enabling the NLC’s chief officers to also be lottery commissioners
• enabling the commission to increase the numbers of its commissioners
• removing the requirement to change the commission’s chair every year.

Future licence
There will not be a single ‘third licence’ awarded to Camelot or to anyone else. Instead, from 2009 the regulator will be able to offer a number of licences to different firms to run different bits of the lottery. This could mean, for instance, offering one licence to an operator to run all scratchcard games, another to a different firm to run the Lotto draw, a third to a group operating the international game and so on. Or the regulator could cut up the business in a different way, offering, for instance, the entire internet-based business to a single operator, even though that would mean managing games run by other licence-holders.

Reasons for choosing this ‘maximum flexibility’ option are:

• to try and entice more bidders next time around
• to try and create an element of competitive pressure within the lottery (although the white paper also makes it clear that it will expect the regulator to stop licence-holders from vying with each other for lottery market-share)
• to give the regulator room to decide how best to split the operation much closer to the time (changes in the wider gambling picture, Camelot’s own game developments and the onward sweep of new technology are three dynamic factors that might make the lottery cake look different in three years’ time to how it looks today)
• licences can be given out for different time-periods, so there will never have to be another single point when the lottery potentially comes to a halt with an operator changeover – which reduces the riskiness of the whole operation
• it allows the regulator to try out both new operators and new ideas without massively destabilising the whole lottery.

While this proposed structure still makes it perfectly possible for one operator to bid for and run more than one licence, there is a clear need to avert the possibility of a third Camelot monopoly franchise – and particularly one in which no other serious bidders bother to apply. 

A single lottery
Even though the operation will be split, the white paper makes clear the government’s intention to maintain both the separateness of the lottery from the rest of the gambling industry, and also to retain its integrity as a single brand dedicated to maximising returns to good causes. 

Download ‘National Lottery Licensing and Regulation’ from www.culture.gov.uk