Camelot told to justify lottery profits of pounds 65m

Camelot, operator of the National Lottery, admitted yesterday that it expected to make a pre-tax annual profit of pounds 65m, but denied being granted a "licence for daylight robbery".

The profits, which equate to pounds 108,000 for each of its 600 employees, were scutinised by the all-party Commons Select Committee on National Heritage. Sir John Gorst, Tory MP for Hendon North, asked: "How can you possibly justify the sort of money you are making?"

The directors of Camelot defended their 5 per cent cut from the lottery, to cover their costs and profit, on the basis that the company and its investors had taken a substantial risk in setting it up.

Tim Holley, chief executive, said they faced daily fines of pounds 1m if they had postponed the launch. He defended their profits on the basis that under the lottery licence, the greater the turnover, the smaller the percentage profit for the operator. He said that they would never make more than 1p in the pound from it.

Since the lottery was set up 15 months ago, it has been an unprecedented success with up to 40 million people playing each week, more than vote in the general election. However, Mr Holley said he was anxious that it should not "overheat".

Camelot will bring out new games, including the mid-week draw, gradually to ensure that the public is not saturated by lottery fever. "My concern is that we don't throw everything in the pot in the first year or so, and cannot sustain it over a long period," he said.

The company denied that it had set sales targets for the 28,000 outlets that sell lottery tickets in Britain as part of an aggressive marketing campaign. It also said it was active in preventing the sale of tickets to under-16-year-olds.

Only one retailer, a Liverpool shopkeeper who sold a ticket to a 12-year- old boy, had been forced to give up his ticket terminal. But Camelot said that a further 201 shops were being subjected to under-cover surveillance following allegations of illegal sales.

Any suggestion that prizes should be capped by the committee, chaired by Gerald Kaufman, to prevent huge jackpots - which have included more than pounds 40m in a double-rollover week - was resisted by Camelot on the basis that the public responded best to high prizes.

David Rigg, Camelot's communications director, said that because many people played in syndicates and most jackpot numbers were shared by more than one ticket, the average individual jackpot win was pounds 800,000.

The performance of the company was also largely defended by Peter Davis, director- general of Oflot, the lottery watchdog, who gave evidence to the committee yesterday. Mr Davis recently resisted calls for his resignation following his admission that he had accepted a series of free flights from Camelot's US partner.

Joe Ashton, Labour MP for Bassetlaw, suggested that because Mr Davis had picked Camelot as the lottery operator, he was an "incongruous" choice to act as watchdog. "It's a bit like the referee picking his own team," he said.