Leader:Let Cammelot win a lot - it does a good job

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The Independent Online
There's only one golden finger, one golden finn-gerr, there's only one golden finn-gerr. Such will be the song of Camelot's managers this morning, 50 per cent bonuses in their pockets. But it is also the core of the fiercest objection to the pounds 77.5m pre-tax profits run up by the National Lottery operator last year.

According to its critics, Camelot is just another brazen, cash-crunching monopoly - like the privatised utilities before it - piling profits high against the public interest. Gerald Kaufman believes the National Lottery should be nationalised, putting all profits to public use. Richard Branson takes the parallel private-sector view: his own bid to run the lottery involved pouring all profits into good causes. Branson (bitter, he? surely not) has been particularly vitriolic in his criticism of Camelot, accusing it, in effect, of corporate greed.

But hang on. Imagine for a moment, our favourite national game under Gerald or Richard. How long would it be before a nationalised national lottery tied itself up with the same kinds of administrative confusion as the Child Support Agency or the Inland Revenue. Is it really conceivable that a state agency - like the Benefits Agency, for example - could have got the ticket and prizes system up and running as fast as Camelot did with machines in newsagents across the country? As for the bearded philanthropist, so keen to give his profits away: the adjudicators decided his bid to run the lottery couldn't match Camelot's for raising cash across the board.

You have to hand it to Camelot. Its achievements in the past two years have been quite remarkable. An entirely novel form of gambling was launched on the British public in a very short time. Millions of people play every week, millions of pounds change hands, millions of numbers spin around its computer system, yet there hasn't been a single substantial screw- up so far.

Sure it's been tacky and manipulative. That goofy voice hollers from the adverts: "It could be you," and huge numbers of people rush out to gamble against ridiculous odds. Saturday night prime-time television coos to the inanities of presenters such as Anthea Turner, while the coloured balls rattle. It's gross and it's grossing.

Cheesy, populist marketing, combined with ruthlessly efficient delivery systems are making the National Lottery an immense financial success.

If you're going to have a national lottery at all, you might as well have a good one. And you might as well get the professionals in to run it for you - which Camelot undoubtedly are. The fact that the company makes huge profits, and the executives pick up substantial bonuses, should be no surprise to us. In fact, it should be welcomed. Why not reward them for doing a good job? And why not give them the incentive to make more money and become more efficient in future - by allowing them to keep some of the profits they create.

But, whinge the critics, it's a licence to print money. True, the lottery entirely dominates the national market for gambling. No one else can compete with prizes worth millions every week.

Of course, we shouldn't buy every word of the company's hard-sell campaign to justify itself. These delicious funds from sales sloshing around are not all a result of good management. Lack of competition helps. Alternative instant cards may be springing up all over the place, but no other game can compete with weekly prizes of several million pounds. No wonder sales, and hence profits, are so high.

But never forget that Camelot doesn't keep most of the cash. Unlike its fellow national monopolies - the utilities - the lottery has to share the extra proceeds when turnover and profits soar higher than expected. The utilities, by contrast, can keep any unexpected additional profits. Camelot is obliged in its licence to pass on a certain proportion of sales to everyone else: around 50 per cent of ticket sales go in prizes, over 27 per cent towards good causes, and about 13 per cent for the Treasury. So if sales are higher than expected, Camelot is not the only one to benefit.

So why then, if Camelot's profits are so benign compared with those of the privatised utilities, is there so much controversy? In part, our experience of the utilities has made us rightly suspicious of national monopolies these days. The National Lottery is a monopoly; profits have swollen far higher than expected, and management salaries are now soaring to match. The litany sounds dreadfully familiar. Our other national monopolies, the recently privatised utilities, have piled up mountains of excess profits over the past few years, far and above those the regulators anticipated. An over-generous regulatory regime has been compounded by the selfish greed of management desperate to award themselves huge bonuses. As a result, companies and regulators each have to prove their case to us, for we suspect on the basis of experience that we are being diddled. The public interest can only be served by subjecting Camelot to similar scrutiny.

But Camelot should beware making the Cedric Brown mistake. The chief executives have handled their public affairs with arrogance. They want to plough the pounds 138m excess from fluctuating sales and prizes back into prizes rather than good causes. And they have decided to keep the interest on the excess - presumably totalling millions of pounds - rather than give it away. Big mistake. The company with millions in monopoly profits can never win a battle of the heart-strings over extra cash with children's groups, charities, art exhibitions or a millennium party. If Camelot wants to keep its profits safe in future, it had better start learning from the utilities' mistakes.

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