The jury's verdict damned the lottery regulator, too

Richard Branson's victory in court yesterday was one of those rare events which unite the lowliest and the highest in the land. It ought to command as much attention in Downing Street (and those adjacent regions where the Dome project is being managed) as in the neighbourhood newsagent selling tickets for tomorrow's draw. The National Lottery, its prize, its winners, its proceeds, its extravagances have been a deep source of national interest (and amusement) during the past four years. Now the Branson libel trial has cast new light on mechanics that most people are happy to take for granted - the organisation of draws and prizes and their regulation on behalf of the state. The verdict in his favour not only puts in doubt the probity of one of the principal partners in the consortium running the enterprise but the effectiveness of the regulator, Oflot. Mr Branson asserts that the watchdog has failed. The jury believed him. As a result, a precious element of public trust in a great public enterprise is in danger of being lost.

It would be wrong (and inconsistent of us, long-time critics of the libel law) to put too much weight on a single courtroom drama. Yesterday the jury believed Richard Branson. He cuts a very attractive figure, a walking advertisement for business as buccaneering fun. In this playlet he was cast against an overpaid American, Guy Snowden. Yet it is more than personal. The jury decided that over the National Lottery there hangs a miasma of doubt and dishonesty. In short, the thing smells.

A peculiar odour attaches to the way the contract to run the lottery was granted by the Conservatives. After Mr Branson's victory we need to ask again why wasn't his bid to run the thing as a not-for-profit operation not accepted. The answer is not graft. Whatever else they are, the former Tory ministers Peter Brooke and Virginia Bottomley were not bribe-takers. The true answer is probably worse. They were ministers in a government which, however much it said it had left behind the dogmatic certainties of Thatcherism, remained imprisoned in her ideological cage. Worse, they failed to see that the pursuit of profit in monopolistic markets demands the strictest regulation.

A nasty smell thus attaches to the man the Tories put in to guarantee the public interest, Peter Davis of Oflot. The fact that he has been examined and found wanting by the Public Accounts Committee makes things worse. That Mr Davis commissioned a senior lawyer to investigate Mr Branson's charges against GTech looks in retrospect to be even more ill-advised than it seemed at the time. When Mr Branson refused to cooperate (because he had no confidence in Mr Davis as a regulator because of his admitted acceptance of GTech hospitality) Mr Davis should have considered his position.

He did not then but really ought to go now. And if he won't go before his contract expires in the autumn, that at least gives the Government an opportunity to think deeply about how to rectify the mistakes made by the Tories. Tony Blair and Peter Mandelson surely understand that if the processes of public gambling get tainted, the good causes it is supposed to benefit are harmed, too. Peter Davis never seemed to realise that his perceived proximity to the commercial interests hurt the charities receiving the proceeds of the Lottery. It won't do to say that the everyday punter is concerned only about odds and prize money. The role of the regulator ought to have been that of an assurance mechanism, guaranteeing the fairness and above-board nature of the enterprise. That public faith is in jeopardy.

Unless Labour ministers use the Branson imbroglio as an occasion to regroup. They have a problem in winning public approval of the lottery-funded Dome. It is in their own interests - let alone those of the public - to make Oflot a muscular agency of public purpose. Margaret Beckett, Secretary for Trade and Industry, has been reviewing the operations of the regulators overseeing gas, electricity and water. Typical of British government's enervating departmentalism has been the way in which this review has failed to look across the experience in telecommunications and gambling regulation. Taking the new regulators together, we now know a lot about the kind of personality and the kind of structure that ensures effective and fair regulation of monopolistic industries. Regulators have to do more than sit back and let the wheels turn. Peter Davis appears to have failed even to begin to inquire into the commercial background of the entities of the Camelot consortium. That lesson must be absorbed, and applied elsewhere. Regulators must be energetic, all-seeing, unafraid - and extremely careful about offers to pay for their plane tickets coming from fat-cat Americans judged in court to be liars.