National Lottery: DCMS predicts £65m boost for good causes

The new licence for the National Lottery is likely to provide an additional £65m a year for good causes even if overall sales remain static, MPs have been told.

DCMS Minister Chris Philp told a select committee hearing today that changes have been made to the contract awarded to new provider Allwyn, which is due to take over the lottery in 2024. They changes ensure worthwhile projects around the UK get a larger proportion of revenue.

This is in addition to any increase in money for good causes a result of increases in overall lottery revenue – something Allwyn has already pledged to achieve.

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Under the existing contract, Camelot retains around around 1% of lottery revenue in profit with 4% going on operating costs and around 95% going back to winners and society.

Philp told MPs that the new 10-year licence, the fourth to be awarded since the lottery began in 1994, has been designed to ensure a higher proportion of proceeds goes towards good causes. 

"It essentially provides that the operator has to firstly pay a fixed amount of money to good causes and then secondly, after deduction of reasonable costs, the remaining money is divided in an agreed ratio between good causes and the lottery operator themselves by way of profit," Philp said.

"So there is a clear incentive on the operator to maximise the profit and therefore maximise the amount of money going to good causes because that is essentially the source of their own profit.

"We saw under the old lottery scheme, conversely, some situations where the operator at the time – Camelot – made more profit while not delivering commensurate increases in funding to good causes."

He told MPs that Camelot made profits of around £95m before tax last year, but under the new contractual arrangments "profit would have gone down to £30m and that £65m saving would have gone to good causes". 

"I think that illustrates structurally that the fourth National Lottery licence is designed to deliver more money to good causes," he said.

In addition to this, the amount of money available for good causes could rise if Allwyn increases overall revenue.

Allwyn has promised to raise £38bn for good causes over the 10-year duration of the contract, £7.6bn of which would go to the arts (£760m per year), compared with Camelot's record of £45bn over 28 years, or about £321m per year for arts grants.

It has said it will achieve this in part through increased sales of draw-based games that deliver a greater proportion of profits to good causes.

Legal claim

But during the select committee session Philp did concede that potential damages relating to an ongoing legal claim by existing operator Camelot, worth anywhere up to £600m, may have to be paid with money earmarked for good causes.

In response to committee chair Julian Knight, who asked him whether thought had been given in the DCMS as to "exactly how that £600m would be funded if such an eventuality happened", Philp outlined two possible scenarios for covering such an amount. 

"There are clearly a number of ways damages could be funded if they are awarded. One is it could come out of good causes, another is it could be funded by the Treasury," he said. 

"But given that no damages award has been made, and I fervently hope none is, that isn't a question that we have directly decided or discussed with the Treasury."

The legal case is due to be heard in the High Court in October this year.

Gazprom links

Philp was also quizzed by committee member Clive Efford on whether DCMS had investigated possible links of Allwyn owner Karel Komarek, a Czech national, with the Russian regime.

"Were you aware of the link of Mr Karel Komarek with a [majority Russian state-owned energy company] Gazprom, which is run from the Kremlin? And did you ask the Gambling Commission to conduct any kind of deep dive into his background to make sure this wasn't likely to be a sanctioned individual?" Efford, Labour MP for Eltham asked.

Responding, Philp said he was aware from press reports that question had been raised about a joint venture involving Komarek and Gazprom in the Czech Republic.

"I did raised the question with the Gambling Commission and I received two specific assurances, firstly that they had done background checks on all of the four applicants to make sure they are fit and proper persons to run the lottery, and that all of the applicants had passed that test," he said.

"Also, they then subjected anybody with significant control of the winning bidder and the second bidder to a form of vetting using government agencies and that work was initiated as well.

"I received those assurances and on that basis was content there wasn't an inappropriate link with the Russians."

* Chris Philp subsequently resigned as a DCMS minister on 7 July.