Lottery may be nationalised in effort to halt sales slide

The running of the National Lottery may be handed to the Government in an effort to end a big slide in ticket sales.

Alternatively, it could be thrown open to several operators to inject an element of commercial competition into the flagging game.

Tessa Jowell, the Secretary of State for Culture, Media and Sport, will today pave the way for the biggest shake-up of the lottery since its launch in 1994 with the publication of a consultation document. It comes amid government concern over the loss of revenue to arts and sports projects because of falling sales. It also follows the damaging battle fought between Camelot, the lottery operator, and Richard Branson's rival People's Lottery consortium two years ago to secure the game's licence.

Ms Jowell, in a written Commons answer today, will spell out three options for awarding the next licence. The most radical plan would be, in effect, to nationalise it by handing responsibility to the Lottery Commission, the game's regulator. Its five members are appointed by the Government.

If that happened, the commission would appoint separate companies to run the various elements of the lottery, such as the main Saturday night draws and scratchcards. Such a step would run into resistance within Whitehall, still bruised from its uncomfortable experiences of public projects, such as the Millennium Dome and the new national stadium at Wembley.

Another suggestion would see Camelot losing its exclusive rights to operate the lottery, with different companies allowed to run rival games.

A third option is to leave the system in place and to award the licence to a sole operator.

Ms Jowell's three-month review will also consider ways of giving lottery operators greater freedom to launch lucrative new games. Longer licences with higher potential profits could be offered to attract more companies. Firms interested in running the lottery could also be offered money towards preparing their bids.

Lottery ticket sales dropped by more than 4 per cent last year and have continued falling, despite an expensive rebranding of the game, costing £26m. Camelot renamed the main draw Lotto and launched an extensive advertising campaign led by Billy Connolly. To try to reverse falling sales, the operator will launch another game next month followed by a fresh promotional drive. Camelot blamed the record low sales on a combination of the Queen Mother's funeral, the golden jubilee and the World Cup.

A spokesman said yesterday: "We share the Government's view that competition is good for the good causes."

Tim Yeo, the Conservative Culture spokesman, said: "There is a problem with falling sales and I am concerned money available to good causes is squeezed. But the idea that putting the lottery in the hands of the public sector would be improving it is barmy."

Ministers are keen to avoid a repeat of the unseemly struggle between Camelot and Sir Richard's company for the present licence. They particularly fear it could deter other companies who may believe Cam-elot has an in-built advantage.

The Lottery Commission initially decided to negotiate solely with the Virgin boss, but was forced into an about-turn by the High Court.

Ms Jowell's consultation document is in favour of retaining a separate Lottery Commission rather than bringing the game under the aegis of an overall gambling watchdog.