A wheel of fickle fortune: Britain's last state lottery became a shambolic source of doubtful profit, warns James Raven

AS THE deadline passed this week for applicants to run the state lottery, much was made of the lateness of Britain's entry to this particular game. Among European nations only Albania still lacks a lottery. But Britain was a pioneer of state lotteries and they have always represented serious money. Lottery schemes built Westminster Bridge, supplied the Navy and established the British Museum.

When Peter Davies, director general of Oflot, which will oversee the lottery, decides between the eight contenders in May, the winner will be one of the largest companies in Britain, raising between pounds 1bn and pounds 4bn a year. Instant millionaires will be made among buyers of anything up to 40 million lottery tickets a week. Saturday television lottery draws are predicted to smash domestic viewing records.

But the successful applicants should temper their jubilation. The last lottery collapsed in 1826 amid public derision and acrimony about the way in which the prize draws were managed and the practices of the private contractors involved. The history of the lottery in Britain is one of the funding of defence and public works, but also of sensational scandals, government corruption, criminal prosecutions and passionate public debate.

Parliament first set up state lotteries exactly 300 years ago. The 'Million Lottery' of 1693-94 launched a succession of 126 lotteries held during the next 130 years. Before that, the Crown had intermittently resorted to lotteries as part of its chaotic borrowing schemes, but parliamentary sanction introduced a new era of respectability and success.

The state lottery Acts were part of the financial experiments of the 1690s that established the Bank of England and promoted the Stock Exchange. National lotteries underwrote state loans, reduced the capital or interest on the national debt, funded all manner of public projects, and raised revenue directly. During the 18th century Britain went to war on loans raised by lotteries. They provided a third of Marlborough's campaign expenses, 40 per cent of what was spent trying to defend the American colonies and more than a quarter of that used in fighting Napoleon.

All the early lotteries were long- term loans to government. No ticket holder before 1769 was a loser, being at the very least assured of a return in annuities. In addition, ticket holders might win a large prize in government bonds. There was usually one prize-winning ticket for every four blanks. In the earlier lotteries the Treasury and its appointed Board of Lottery Commissioners farmed out the ticket selling for a set sum, but from 1787 competitive bidding was introduced.

This week, all the rival bidders said that their main aim was 'getting the lottery right'. They were each offering a professional scheme within the tight timetable set by government. Mr Davies has explained the four criteria he will use in awarding the contract: that the licensee must not make excessive profits, that the applicants are squeaky clean, that sufficient profits will be devoted to good causes, and that the lottery should be, in his words, 'a good taste lottery . . . and not tacky'.

The earliest lotteries tried hard to be tasteful. Good works were very evident. Many borough corporations bought lottery tickets in the name of poor children of the town. Emphasis on alms was designed to justify the lottery as a money-raiser. Even the church was unperturbed. In the 1711 lottery the vicar of St Margaret's, Westminster, won one of the smaller prizes and two years later he carried off the jackpot. The Archbishop of Canterbury was a trustee for the British Museum and Westminster Bridge lotteries. Many clerics gambled avidly. In the words of a lottery poem of 1740:

The rosie-jowled Doctor his rectorie leaves,

In quest of a prize to procure him Lawn Sleeves.

In 1767 a Holborn parishioner persuaded her clergyman to pray publicly for her success from the Sunday pulpit.

What did alarm government, however, was the selling of part- shares in lottery tickets. Tickets had always been highly priced to ensure that participants were exclusively rich and respectable. But when the price of a ticket was divided, sharers could be of humble origin - and in the 18th century, when a working family could survive on pounds 30 a year, even part of the jackpot was a sensational windfall. In 1798 the jackpot went to a divided ticket: pounds 20,000 was shared between a woman servant from Holborn, a woman keeper of a fruit stall in Gray's Inn Lane, a servant of the Duke of Roxburghe and a Covent Garden vegetable carrier.

The paternalistic obsession with protecting the working classes has never entirely been overcome. The parliamentary commission on gambling in 1978 proclaimed a 'duty positively to protect people from over-indulging . . . . Local authorities should have the opportunity of preventing housewives from being deflected into prize bingo establishments during their morning shopping in the high street'. The 1992 White Paper on the new lottery warns that 'the demand for gambling should not be positively encouraged because, if taken to excess, it can cause misery for the individual and his (sic) family, and have damaging consequences for society'.

The decline in the social exclusiveness of the lottery was a factor in its eventual abandonment. It became a target of evangelical disapproval. William Wilberforce recorded that after the 1807 vote to abolish the slave trade, the lottery was singled out as the next target. A year later a select committee report concluded that because of lotteries, 'idleness, dissipation and poverty are increased, domestic comfort is destroyed, madness often created; crimes, subjecting the perpetrators of them to the punishment of death, are committed, and even suicide itself is produced'. The lottery was the fatal attraction for 'the lower part of Creation'.

The main reason behind the lottery's demise, however, was the contradictions of the contract system itself. Contracts to run a state lottery are, after all, business opportunities. It is left to the lottery companies to promote popular gambling while satisfying considerations of taste and morality, and to secure profits while fulfilling government revenue targets and worthy public objectives.

Public confidence rests on proper administration and, in particular, on the performance of the draw. In all the parliamentary lotteries the preliminaries were elaborately staged. Two wheels or 'boxes' to contain the tickets, closed by seven separate locks, and encased in one larger outer box were used at every 18th- and early 19th-century state draw. Accompanied by cheering crowds, banners and a guard of up to 20 constables and a dozen grenadiers, the wheels were taken on ceremonial sledges from the Treasury offices to the drawing place: the Guildhall until 1802 and the nearby Coopers' Hall until 1826.

In the early 19th century, draws were increasingly mishandled. Contractors, under pressure from government and a vociferous moral lobby, tried to shorten the public days of drawing, while extending for commercial reasons the period for buying tickets. To encourage greater participation, lottery companies began topping up the prize money, but also selling tickets for more than the price declared to the Treasury. By the 1820s the lotteries were farcical operations, with contractors' advertising becoming increasingly outrageous and the draw more shambolic. The government was having to pay 29 men to act as informers against illegal private lotteries which threatened the state monopoly. The 19th-century Lottery Board became an early quango dispensing jobs for the boys.

Having weathered several parliamentary attempts at abolition, the lotteries were finally abandoned because the Treasury could not be sure of what exactly their profits were under an increasingly elaborate and uncontrollable contracted-out system.

Earlier this week, Richard Branson claimed that if the public

sees lottery company shareholders creaming off undue profits, people will reject the whole venture. It was campaigning talk, of course, but the history of the last state lotteries in this country teaches a savage lesson about public rejection when presentation was poor and private profiteering suspected. Public derision weakened confidence and the lottery was left with few friends. And derision, as governments past and present have found, is a powerful leveller.

The writer is Director of Studies in History, Magdalene College, Cambridge, and currently completing a book on the history of the lotteries.