Britain’s success at the Rio Olympics last year was partly rooted in funding from the National Lottery © FT Montage
Despite the infinitesimal odds of landing the jackpot, millions of Britons cannot resist buying a National Lottery ticket in the hope of becoming millionaires overnight.
While some critics describe the lottery as a de facto stealth tax, particularly on some of the poorest people in the country who see it as one of the few ways to obtain a life-changing windfall, the game’s existence has been justified by politicians for its ability to raise huge sums for so-called “good causes”.
But changes to Britain’s gambling habits are leading to a drop in the amount of money being raised for good causes. And the sudden fall is forcing a major rethink from Camelot, the company that runs the lottery, as it strives to convince regulators that it should maintain control over the nation’s favourite wager into a fourth decade.
Camelot’s UK arm revealed in June that its lottery ticket sales had fallen 8.8 per cent to £6.9bn in the year to March 31. There was an even larger decline in the amount handed over by the company to good causes. This fell 14.4 per cent to £1.6bn.
Camelot has also predicted a further decline in ticket sales in 2017-18, meaning that the amount going to good causes is expected to drop for a second successive year. This would be the first time this has happened in at least a decade.
Both Camelot, owned by a Canadian retirement fund called the Ontario Teachers’ Pension Plan, and the Gambling Commission, the UK watchdog which grants the lottery operating licence, describe the performance as “disappointing”.
Paul Leyland from Regulus Partners, the gambling industry analysts, blames a number of factors including the rise of online gambling, competition from other lottery-style products, and consumers reacting against recent changes to the lottery draw.
“The underlying trends are concerning, especially from a good cause perspective,” says Mr Leyland.
Camelot has admitted to some self-inflicted problems. In October 2015, it made a number of changes to its main lottery draw, called Lotto, such as adding an extra 10 balls that can be drawn.
The move raised the odds of winning the jackpot from one-in-14 million to one-in-45 million, and increased the frequency of weeks where the top prize is rolled over without a winner.
“While economic uncertainty and increasing competition from the wider gambling sector both had an impact, the main reason for the fall in [ticket] sales last year was the disappointing performance of The National Lottery’s core draw-based games — especially Lotto, with player confidence in the game still fragile following the recent game changes,” says Camelot. “There’s clearly work to be done to re-engage players and address the performance of our draw-based games.”
The National Lottery’s draw-based game Lotto © Mark Collinson/Alamy
When the Gambling Commission last renewed Camelot’s licence in 2012, it laid down a system for how revenues from lottery games are shared between the company and good causes.
Under the arrangements, 28 per cent of sales from draw-based games such as Lotto are handed over to good causes, while only 10 per cent of money generated from “scratch cards” goes to this area.
In the past year, sales of scratch cards, where the prizes are lower but payouts are more frequent, have declined at a slower rate than those of Camelot’s draw-based games.
If the Gambling Commission wanted to change the proportions it demands from Camelot’s games for good causes, the watchdog would need to take a series of legal steps to justify such a move.
But despite the decline in the popularity of draw-based games compared to scratch cards, people familiar with the commission’s thinking say there is no intention to change the terms of Camelot’s licence.
The next licence is due to be issued in 2023, and the commission is already in the early stages of preparing its tender process.
Other companies have bid to run the lottery in the past, and, with one eye on the new tender process, Camelot is making changes.
In April, Andy Duncan, the head of Camelot’s UK arm and former chief executive of broadcaster Channel 4, announced that he was stepping down.
Global chief executive Nigel Railton, who is in charge of Camelot’s other lotteries around the world, has taken charge of the company’s British business until a permanent successor is appointed.
Mr Railton is also leading a strategic review of Camelot’s UK arm, focused on how to boost future ticket sales such as by convincing retailers to do more to promote its games. But the company says it is too early to say what changes will be made.
“We are pressing for Camelot’s plans to address their own predictions of a further [lottery ticket sales] decline,” says Gambling Commission executive director Tim Miller.
“We are continuing to assess, monitor and challenge Camelot’s performance . . . to ensure that the National Lottery is run properly and returns to good causes are maximised.”
Cyclist Laura Trott won four gold medals at the Rio Olympics © Alejandro Ernesto/EPA
Olympic athletes powered by lottery money
Two decades of National Lottery funding for Britain’s elite athletes has helped to transform the country into a sporting superpower.
At last year’s Olympic Games in Rio de Janeiro, Great Britain finished second in the overall medal table with 27 golds, one ahead of China. British athletes won 67 medals in all, recording their best Olympic performance in more than a century.
The result is a remarkable turnround from the nadir of the Atlanta Olympics in 1996, when Britain managed just a single gold. Soon after, John Major’s Conservative government decided to redirect huge sums of lottery money to support the country’s athletes.
UK Sport, the body that distributes money to elite Olympic and Paralympic athletes, has ruthlessly focused on giving cash to sports that offer multiple medal chances and have a past record of success. The best funded sports, such as rowing, cycling, athletics and sailing, have provided the bulk of recent medals.
For the next Olympics in Tokyo in 2020, UK Sport is planning on a budget of £550m, with £296m expected from the lottery and the balance provided by the government as well as money taken from the body’s cash reserves.
However, this budget is predicated on lottery funding staying around its current levels. Should the fall in lottery ticket sales continue, resulting in less money being available for “good causes”, the government has said it will underwrite a further £75m for UK Sport over the next three years to make up the shortfall.
UK Sport says it “is used to managing fluctuations in the National Lottery”, but that “we also welcome Camelot holding a strategic review to increase sales and ensure returns to good causes are as high as possible for the future”.
It will take a “dramatic, unprecedented” decline in lottery ticket sales before UK Sport would need to consider funding cuts for athletes before the Tokyo Olympics, it adds.
A greater fear is that, if revenues from the lottery whittle away further, athletes preparing for the Olympics in 2024 could receive far less money than their predecessors.