Lottery slows pace of growth

DIANE COYLE

Economics Correspondent

Lottery fever has slowed the pace of economic growth over the past nine months, it emerged yesterday.

The National Lottery has taken billions of pounds out of the economy and has cut into spending on other items. The latest official statistics show that in the first half of this year spending on entertainment and recreations such as cinemas and trips to leisure centres, confectionery sales and sales of soft drinks all fell significantly.

The Treasury, responding to new research by a City of London economist, admitted that the Lottery had been very much bigger than anyone had expected and must have reduced the economy's growth. But it was impossible to quantify exactly what its impact had been.

''It is pretty much anybody's guess what the significance of the effect is,'' a spokesman said. He said it was ''a bit far-fetched'' to suggest that any change in policy was required just because of the Lottery.

However, David Mackie, economist at the merchant bank JP Morgan, said yesterday that he estimated the Lottery accounted for a third of the fall in growth from about 4 per cent last year to less than 2.5 per cent in the most recent quarter.

''Billions have been taken out of the economy and put into the bank. People have been very reluctant to acknowledge the truth of this,'' Mr Mackie said.

Sales of Lottery tickets since the launch on 19 November 1994 have amounted to nearly pounds 3.3bn. Of this pounds 1.6bn has been given back in prizes, but little of this money has been spent. Winners have put most of it in the bank.

Another pounds 1bn is sitting in the National Lottery Distribution Fund. It could take another year before significant amounts are disbursed from the fund to good causes. Only pounds 50m has been distributed so far, with the rest meanwhile helping to keep down the Government's borrowing requirement this year.

Peter Westaway, an economist at the National Institute for Economic and Social Research, one of the leading independent research groups, agreed. ''Growth must be lower because of the Lottery,'' he said.

Earlier this week Lloyds Bank's chief economist said flutters on the National Lottery had cut retail sales growth by up to 2 per cent. Lottery spending is not counted in retail sales figures but is part of total consumer spending.

It has cut sharply into related categories of consumer spending. For example, the latest available official statistics show that in the first half of this year spending on entertainment and recreations was 7.5 per cent lower than in the same period last year. Confectionery sales fell 2 per cent and sales of soft drinks by 0.7 per cent.

Charities estimate that contributions they have received since the Lottery started are about pounds 275m down on what they would otherwise have been.