Westminster watchdog investigates Camelot’s funding of good causes

Parliament’s spending watchdog has launched an inquiry into whether the National Lottery operator Camelot is failing the good causes it was set up to fund.

Concerns have been raised after auditors found that Camelot’s profits over a seven-year period increased by 122% and have been proportionately greater than sales or the returns for good causes.

The National Audit Office (NAO) report released on Wednesday reveals that National Lottery income for good causes fell by 15% over the year to April and is expected to drop again next year.

The findings have prompted Westminster’s public accounts committee to launch an immediate inquiry. Meg Hillier, the committee’s chair, questioned whether Camelot was operating within the National Lottery Act.

“Profits increasing while money for good causes falls really does go against the spirit of the act. We need to dig in to how such a huge increase in profits can occur,” she said.

The lottery’s overarching objective is to maximise returns for good causes, by selling products in an efficient and socially responsible way.

The NAO report points out that lottery players have turned away from draw-based games and are instead playing scratchcards, which give a significantly smaller amount to good causes.

Camelot’s accounts show that lottery sales increased by 27% (£1.5bn) to £6.9bn , between 2009-10 and 2016-17. Over the same period, , returns for good causes increased by 2% to £1.5bn and Camelot’s profit attributable to its shareholders increased by 122% (£39m) to £71m.

The National Lottery, currently run by Camelot UK Lotteries Limited (Camelot), aims to raise money for good causes in the arts, sports, heritage, health, education, environment and charitable sectors.

The NAO report shows that income for good causes fell to £1.63bn at the same time as three of the six largest Lottery distributors increased their grant commitments by a total of £88m.

The drop in money for good causes came as Lottery sales fell by 9% to £6.93bn compared with the previous year. Camelot has predicted a further fall in sales and income for good causes in 2017-18, the report said.

The NAO said distributors, which include UK Sport, Spirit of 2012, Heritage Lottery Fund and the Big Lottery Fund, often had commitments spanning many years “so it is likely that commitments will exceed their fund balance at a given date”.

In December last year, the Department for Digital, Culture, Media and Sport agreed to underwrite up to £25m a year to cover any shortfalls in lottery income for UK Sport over the 2017-2020 Tokyo Olympic and Paralympic cycle.

Returns for good causes are higher from sales of draw-based lottery games, which fell by 13% in the year to April, than for scratchcards and instant-win games, which fell by 2%, the report said.

As of February this year, the approximate return for good causes ranged from 34p for each pound spent on draw-based games bought online to 10p for scratchcards, with some scratchcards returning as little as 5p.

Camelot told the NAO that scratchcards and instant-win games returned less to good causes because of the need to offer a higher proportion of proceeds as prizes to encourage consumers to participate.

Camelot said the company had recently carried out a wide-ranging strategic review of the business and announced strong plans to get the National Lottery back into growth next year and raising as much money as possible for good causes.

A spokesman said: “We continue to return around 95% of all National Lottery revenue – almost £6.6bn in 2016/17 – back to winners and society, one of the highest percentages in the world. In contrast, our profit after tax is around just 1% of total revenue – £70.5m in 2016/17.

“Since the start of our third operating licence in 2009, returns to winners and society have increased by almost £1.8bn, while shareholder profit has increased by just £26m over the same period.”