Give us what we want and stand back

New Labour has made a mess of Lottery regulation. In the build-up to the next licence competition, i

On April Fool's Day 1999, the Lottery's one-man full-time regulator, Oflot, was replaced by the National Lottery Commission, which comprised five part-time commissioners and a full-time chief executive. This was an effort on the part of the new Labour government to set two wrongs to right.

The first of those wrongs was the shortcomings of the regulators of privatised utilities such as water, gas and electricity, which had been created as single-person regulators. That they made decisions alone had left Labour, as an opposition party, feeling impotent. In government, it set out to challenge the "cult of personality" by imposing new structures on the regulators.

The other wrong was the downfall of Peter Davis, the original Lottery regulator who was appointed back in 1993. Davis had put Lottery regulation under Labour's microscope by accepting free flights from GTech, Camelot's software supplier, during the competition for the first Lottery licence. Later he became a high-profile victim of the libel case over whether Guy Snowden, then a director of Camelot and GTechUK, had bribed Richard Branson. The acrimony surrounding his resignation in February 1998 was the catalyst for new Labour to address the issue of regulation in the Lottery.

Labour's desire for clean-fingered regulators ensured that the vetting regime was stringent and personal; financial connections were scrutinised and detailed checks ensured that none of them was remotely connected to the gambling industry.

But in his haste to replace Oflot, the then Secretary of State for Culture, Media and Sport, Chris Smith, left the new part-timers only a year to go from ignoramuses of gambling to experts able to appoint a new National Lottery operator. In rugby terms, Smith had thrown the commissioners what is known as a "hospital pass".

Rather than helping the already difficult situation, the government imposed strict rules. Because of its preference for the Lottery to be run by a not-for-profit operator, the regulators spent much of their time designing the bidding rules so that no such bodies were discouraged. It was not possible thereafter for the Secretary of State to take anything other than a close interest in how things were going.

As a final twist, the chairmanship of the commission was subject to a maximum one-year term, the rationale being to dilute the "dangers" of an entrenched and dominant personality.

These were inauspicious beginnings for a tiny body about to referee a con-test between two political giants. On every single front, the carefully crafted plan backfired. The first chair, Brian Pomeroy, handed over to Dame Helena Shovelton halfway through the pro-cess. She had to start from scratch, forging new relationships with bidders and commissioners alike.

The commission ran into trouble with the process, the timetable slipped, both bids were rejected, and in trying to broker an exclusive deal with Bran-son's team, the Commission lost a judicial review to Camelot. Shovelton's eventual resignation came amid a national debacle. The commission went through four chairs in one year.

In the aftermath, Gerald Kaufman's culture select committee tore strips off the commission for its lack of expertise and experience, thus highlighting the deficiency in the thinking behind Labour's initial appointments. And the vitriol poured on the commissioners, paid a mere £6,000 a year, has ensured that few sane people will wish to volunteer for the job in future.

One ironic benefit of the commission's nightmare is that the flawed model used by Labour will surely never be used for any other regulatory body. And the government is now pledged to undoing its failed experiment by revising the governance of the com-mission in its gambling bill. The rotating chair will be ditched. And it has quietly shaved down the vetting requirements.

But many of the flaws still exist and make it difficult for the commission to carry out an intensive competition process. It is uniquely Labour's reg- ulator; it follows a unique Labour model. This puts a premium on it to get the process right, and the risk of fallout on to Labour from any mistakes increases the chances of ministerial interference.

The next licence will begin late into what could be Labour's third term - January 2009 - but the competition process is already starting. For its own benefit, the government should learn from past experience. This time around, it should give the regulator what it needs to do the job properly, then shut up and stand well back.

Mark Slattery is former head of communications at the National Lottery Commission

This article first appeared in the 08 November 2004 issue of the New Statesman, Bleak morning in America