Leading Article: Punters' losses are public's gain

BRITAIN'S national lottery is an odd business for the Conservatives to establish. A government that takes pride in breaking up monopolies is creating a new one: bids for the franchise were submitted yesterday. More than that, this competition-free industry will sell a highly seductive, possibly addictive product - the remote but real chance of becoming a millionaire. This enterprise, a veritable cash cow, will milk consumers.

The Government's defence is that it is all in a good cause. Gamblers can expect a raw deal - only half their outlay will be returned in prize money - but good causes will probably receive about a quarter of the takings and the Treasury another 12 per cent. The windfall to the arts, sport and the Millennium Fund may make a punter's losses less painful. Yet many lottery players may still feel cheated if those creating this bonanza make fat profits for themselves.

That is one reason why Richard Branson, who promises that he would give the profits to charity, is favourite to win the franchise. With potential profits estimated at more than pounds 100m a year, the Virgin chairman's abstinence looks positively saintly. Yet his self-denial should not automatically rule out companies that would rather give profits to shareholders than to charities. Unless Mr Branson can maximise the potential proceeds, his apparent disinterestedness would be of no particular value.

An alternative enterprise might be able to spawn a much bigger lottery. Size is all important: experience in other countries suggests that the best way to make money out of lotteries is to make them as big as possible. That is one argument for creating a monopoly.

There are reasons to believe that the Branson bid could prove to be less efficient than a profit-making enterprise. It is possible, for example, that an alternative bidder might be tougher on suppliers, so holding down costs and increasing the share for good causes. Some of the other consortia appear to have more expertise in developing lotteries abroad than does Mr Branson's team.

But even if Virgin's bid is not bound to win, it is certainly a front- runner. Charitable businesses, such as Mr Branson envisages, are often just as efficient and capable of growth as their profit-making competitors. Wellcome's success in the pharmaceutical industry is a case in point. Since the future success of the National Lottery is impossible to measure, the track record of those competing for the franchise is also important. Mr Branson has proved his ability to create new markets and break into old ones.

That reputation may be enough to swing the decision his way. But Oflot, the lottery regulator, should not be afraid to make a different choice if a rival seems more likely to maximise takings, and thus the benefits to all concerned.