Lottery sale to private firm is gamble that will cut funds for ‘good causes’
Yet the likely sale of the licence to operate the National Lottery, suggested by the Government months ago, has been met with indifference. Few seem to care that a major cash-generative machine owned and operated by the State might be placed into hands that would seek to make serious profit from its operation, thereby reducing the annual amount available to spend on “good causes”.
The Government cleverly floated the idea publicly. The licence would be sold with a specific purpose: the creation of the new national children’s hospital, something worthy that might not otherwise be built. Who could argue with that, the ultimate ‘good cause’.
This hospital — from the plans drawn up — would cost €650m to build. The site, at the existing Mater Hospital complex in north-inner city Dublin, has been confirmed despite misgivings about its suitability that were not allayed by a recent report in its favour. Things have changed since publication of that report gave the Government cover to proceed with a location it had doubted when in opposition.
The answer to previous concerns about the lack of car-parking in the area has been removed by recent announcements of capital-spending cutbacks. We had been told, dubiously, that patients and families could use public transport to access the busy, near-city-centre location, as the hospital would be built over a station for the new Dublin Metro train line. Now that train line has been abandoned, the issue of getting to and from the new hospital is live again, but the new Government — members of whom previously questioned the provenance of this location in the heart of Bertie Ahern’s old constituency — intends to press on regardless.
The issue is raising the money to fund construction when the State is bust. The clever wheeze is to sell a 20- or 25-year licence to run the National Lottery and to charge between €500m and €600m to do so. Voila, almost the entire cost of building the new hospital is met. Who could argue with that? Has there ever been a better cause for the lottery to fund?
Since its creation in 1986, the National Lottery company has been operated by the State-owned An Post, under licence for the State, in return for a modest operation payment. The licence is near to expiration and is up for review. But it is possible that An Post would not be able to finance the payment of such a large up-front fee, even if it was able to get bank funding to do so, given the other demands on its resources.
There is precedent in other countries to allow private operators to run State lotteries. This appears to be the Government’s plan. The UK lottery is run by Camelot, a private company. The idea for a sale of the licence in Ireland may have come from Spain, where its government is selling its company, Loterias, to generate much-needed funds. That won’t stop An Post trying to hold onto a valuable cash-generative business, and there is every reason to suggest that it might be better if it is given that opportunity, instead of allowing the baton to pass to a profit-hungry foreign operator.
Last year, the National Lottery had sales of €772m from its products; these include lottery tickets and scratch cards. It gave out €419.9m in prizes and had costs of €108.4m. This meant that it generated a surplus of €243.7m. There have been suggestions that a new operator would be allowed a fee of 6% of revenue each year, which would provide revenue of just under €50m each year (or €1bn over a 20-year licence). That would comfortably exceed the annual financing costs of the initial €500m payment and leave it with a hefty profit.
Assuming that the National Lottery continues with its existing level of sales, (and remembering that An Post gets a very small management fee) it would also reduce the surplus to under €200m for ‘good causes,’ which is still a sizeable amount but much less than at present. To maintain the payment to ‘good causes’ all it would take would be a reduction in the prize payout.
The problem is that people might not be as enticed to gamble on the lottery if it offered smaller prizes. Maintaining public interest in the long shots offered by the lottery has been a problem, and will be more so at a time when cash in the domestic economy is tight. The odds on success are so long that very large prizes have to be offered to maintain interest. In which case the money going to those ‘good causes’ is likely to reduce.
But where does it go now anyway? The distribution of lottery cash by the Government is nowhere as transparent as it was. Recently, the Fianna Fáil TD Sean Fleming said that he had tried through parliamentary questions to establish where all the national lottery funding distributed by the Government went. He had no success and said there was no new scheme for the sports capital grant from lottery funds. He said spending was much less visible than it had been and that funds were being used, among other things, for “tarring roads in and out of hospitals.” In other words, the lottery money is being poured into the overall national coffers, to be spent by the Government as a substitute for normal spending. It appears to have become part of the overall tax revenue of the State.
An Post chief executive Donal Connell (on behalf of the National Lottery) recently told a Dáil committee that his company did not have “a full accounting audit trail” of how the funds were allocated. He said the National Lottery remitted the money it collected directly to the Government each week. He said the company was anxious to ensure it got acknowledgement for funds through the use of its logo in order to “get our name out there.” It is doubtful that there are €250m of projects less than one-year-old that bear its name.
All of this is grist to the mill for those who believe that the National Lottery is a cynical tax. It is a ploy to lure the gullible to part with cash that they could spend better elsewhere — or give to charity if they so wanted. It is based on greed for big prizes that only a small number of people ever win. It drains cash away from worthy charities. It was reported this week that Ireland remains the second most charitable nation in the world, people donating without expecting any financial reward in return. The National Lottery simply does not fit into that profile.
But if we are going to have the National Lottery — and the chances of the Government ever giving up this source of additional funding are zero, even if it encourages reckless and unnecessary gambling — then we should, at least, have a debate as to where the money is really going and how the locations for investment are selected. (In the past, the sports facilities built in some constituencies where ministers reside have had to be seen to be believed). We should also have a debate as to how to ensure that the greatest proportion of the money raised by the lottery is turned over for use rather than rewarding the holders of the licence.
Especially if that holder is a private company set to make a massive return on its “investment” in a sure thing.
* Matt Cooper’s book, How Ireland Really Went Bust, is out now.
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