Number is up for Camelot's lottery profits

Camelot agreed yesterday to examine ways of becoming a not-for-profit organisation after failing to quell the row over huge bonuses awarded to directors in a year when donations to good causes had fallen.

It appeared that the lottery organiser's number was up when its chairman, Sir George Russell, emerged from a humiliating meeting with Chris Smith, the Secretary of State for National Heritage, saying he would deliver not-for-profit proposals within six weeks.

Mr Smith called the meeting last week following the publication of accounts which showed that donations to good causes in 1996-97 had fallen from pounds 1.4bn to pounds 1.3bn and profits had shrunk by 8.6 per cent while directors were given bonuses averaging 40 per cent of their salaries.

Following the 75-minute meeting at Mr Smith's office, Sir George emerged with Tim Holley, his chief executive, and communications director David Rigg, and appeared to agree that the writing was on the wall. "We understand there is obviously going to be a change in the shape of the lottery in the future," he said. "We have offered to provide the Government within six weeks our views on the shape of a lottery that is without profit in the long term, and possible change in the short term."

He said Camelot had put three proposals on the table: to give the equivalent of directors' bonuses to charity; to consider changes towards a non-profitmaking lottery; and to give to the good causes the interest Camelot collects on unclaimed prizes, currently about pounds 6m.

"As chairman I'm not able to overturn contracts freely entered into prior to people starting in the company," he added. "I am prepared as chairman to pay out of Camelot's profits the equivalent amount into a charity the amount that directors will receive as bonuses and will also be discussing with directors the subject of long-term incentive bonuses for the future."

Later, a Camelot spokeswoman said the company felt the meeting had gone well, but Mr Smith declared himself anything but happy. "I would say we have made a little bit of progress but we haven't made nearly enough," he said.

"They are showing a bit of contrition but not nearly enough. They came armed with one small concession, which doesn't address the nub of the issue, which was that Camelot should make a donation from its own profits equivalent to the bonuses paid to directors. I don't believe that addresses the public anxiety and concern that's being shown and I was disappointed that they hadn't come armed with anything else.

"I'm seriously very disappointed that they haven't thought further about this before they came to see me. We'll be looking to them to come forward with a firm response by the end of the week."

On BBC Radio 4's The World At One, Mr Smith said he was anxious that the prize draw should be the "People's Lottery" and should be perceived as such. Failure to address the people's concerns would result in a drop in confidence, reduced sales and less for good causes. The Government planned to introduce a White Paper within seven weeks, followed by a Bill in the autumn, aimed at making the lottery not-for-profit by 2001.

Richard Branson, whose bid to run a not-for-profit lottery was rejected by the last government, said he was pleased that it seemed to be heading in that direction. "Some months ago the Labour Party said in its manifesto that the National Lottery would be run on a profits for charity basis. This finally seems to be dawning on Camelot. If they pledge all future profits to charity, they would deserve praise.

"If, on the other hand, they fudge the issue, the lottery will continue to be discredited at the expense of good causes."