View from City Road: Lottery looks just the ticket for charities

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Contrary to initial impressions, the new national lottery is unlikely to be a free lunch for the private sector. But the consortia queueing up to get a slice of the pounds 1.5bn-pounds 6bn a year action are going to have to wait for a few more weeks yet before they find out what the bill will be.

That is when Peter Davis, the new director general of the Office of the National Lottery, is aiming to publish the draft tender documents for the lottery. At that point the likes of Camelot, the Cadbury Schweppes consortium, and Rothschilds, both of which are interested in bidding, will get some idea of what will be expected of them.

So far only the tax take has been fixed; for this year at least it will be 12 per cent of revenues. For the rest, the assumption has been that Mr Davis will set conditions that will mean the UK's lottery will be run along roughly the same lines as those in other countries.

An analysis of the world's 100 biggest lotteries, used by the Government as its template for the exercise, indicated 48-52 per cent of the lottery money would have to be returned as prizes if people were to be sufficiently motivated to keep on buying tickets. Administrative fees - the slice of the cake available to the private sector - took 4-18 per cent, depending on the degree of technology involved.

Since Mr Davis is charged with maximising the share taken by the five charitable causes, which get whatever is then left, this last element is the key variable.

But why should the private sector make anything at all? As Peter Brooke, the National Heritage Secretary pointed out yesterday, it is open to non-profit-making organisations to bid. In theory there is nothing to stop a group of charities putting together a consortium.

The corporate sector is sceptical. It says the Government will want its licensee to have experience of running a national lottery, and there is little of that around. And it argues charities could never raise the pounds 200m or so of start-up costs - a figure based on the idea that a dedicated terminal at pounds 10,000 a throw will have to be put in each of the 10-20,000 outlets necessary for the lottery to achieve critical mass.

This seems a trifle negative. Modern charities are sophisticated operations. And a number of charities overseas already have experience in lottery management. If they are not already doing so, they should think about it. They have until next spring to get their act together.