COMMITTEE OF PUBLIC ACCOUNTS debate -
Thursday, 8 Dec 2022

Chapter 19 - Exchequer receipts from National Lottery ticket sales

Mr. Andrew Algeo (Chief Executive Officer, Premier Lotteries Ireland) called and examined.

Chairman

I welcome all present to the meeting. If attending in the committee room, attendees are asked to exercise personal responsibility to protect themselves and others against the risk of contracting Covid-19. Members of the committee attending remotely must do so from within the precincts of Leinster House. This is due to the constitutional requirement that, to participate in public meetings, members must be physically present within the confines of the place where the Parliament has chosen to sit.

The Comptroller and Auditor General, Mr. Seamus McCarthy, is a permanent witness to the committee and is accompanied by Ms Ruth Foley, deputy director of audit at the Office of the Comptroller and Auditor General.

This afternoon, we will engage with representatives from Premier Lotteries Ireland, PLI, the operator of the national lottery, in respect of the following chapter from the Comptroller and Auditor Generals Report on the Accounts of the Public Services 2021: Chapter 19 - Exchequer receipts from National Lottery ticket sales. From Premier Lotteries Ireland, we are joined by Mr. Andrew Algeo, chief executive officer, and Mr. Cian Murphy, chief product and digital officer. They are both very welcome. I remind all those in attendance to ensure their mobile phones are on silent mode or switched off.

Before we start, I wish to explain some limitations to parliamentary privilege, and the practice of the Houses as regards reference witnesses may make to other persons in their evidence. As the witnesses are within the precincts of Leinster House, they are protected by absolute privilege in respect of the presentations they make to the committee. This means they have an absolute defence against any defamation action for anything they say at the meeting. However, witnesses are expected not to abuse this privilege and it is my duty, as Cathaoirleach, to ensure that privilege is not abused. Therefore, if their statements are potentially defamatory to an identifiable person or entity, I will direct witnesses to discontinue their remarks. It is imperative they comply with any such directions.

Members are aware of their obligations under Standing Order 218, as well as the long-standing parliamentary practices.

Mr. Algeo is very welcome. As detailed in the letter of invitation, he has five minutes for his opening statement. I invite him to proceed.

Mr. Andrew Algeo

I thank the Chair. Premier Lotteries Ireland welcomes the opportunity to address the committee on the Report on the Accounts of the Public Services 2021, Chapter 19 - Exchequer receipts from National Lottery ticket sales. In 2014, PLI paid €405 million to the State for the licence to hold and promote the national lottery until 2034. This is subject to oversight by the Regulator of the National Lottery, who monitors our compliance with the licence and the National Lottery Act 2013, with extensive enforcement powers so that the integrity of the national lottery is safeguarded and the revenues generated for good causes are as great as possible. The regulator is also responsible for managing and controlling the national lottery fund from which funding for prizes, the amount remitted for good causes funding and the operator’s running costs are paid.

The national lottery was established by the State in 1986 as a State lottery. It has proven hugely successful, generating more than €6 billion for good causes throughout the country. Since PLI commenced operation in 2014, the national lottery has raised approximately €1.7 billion for good causes while increasing by half the annual prize moneys for players. Last year, the amount raised for good causes was €304 million, the highest level since the national lottery was established.

The effect of the licence is that as sales have grown, the amounts disbursed to prizes and good causes have grown by roughly the same proportion. The national lottery operates in an intensively competitive market where we face an array of competing products and platforms continually seeking to persuade the public to otherwise spend their discretionary income. Unlike the national lottery, however, our competitors do not return 90% of their sales to the community through good causes funding, prize funds and commission to local retail agents. As such, it is essential we promote our national lottery to ensure its continued success into the future, while operating under a strict advertising code of practice.

When the State designed our licence, a clear decision was taken to ensure that expired unclaimed prizes do not go to the profits of the operator but instead are repurposed to promote and sustain the national lottery. This approach reflects similar practices adopted across the globe, where state lottery licences recognise the criticality of promoting their national lottery and typically stipulate that promotion of the lottery is not left to the discretion of the operator, but instead is funded directly or indirectly from ticket sales. In the UK, for instance, the UK Government chose to fund the promotion of its national lottery through a combination of a set percentage of ticket sales, at 1.08%, and a portion of good causes funding. In the most recent yearly figures for the UK, this amounted to £160 million, or 2% of sales. In Ireland, the funding for promotions could have been taken from ticket sales or good causes funding but instead the State decided to use funds accumulated through expired unclaimed prizes. As the Comptroller and Auditor General notes in his report, the expired unclaimed prize money must be spent on the promotion of the lottery. It should also be noted that the proportion of prize funds going unclaimed has almost halved since PLI began operating the national lottery.

As the licensed operator of the national lottery, PLI shares the State’s objective to preserve, protect and grow the national lottery, with the interests of players and good causes at the core of our operations. The licence model operated by PLI with oversight from the regulator has proven successful, with ticket sales growing by an average of 7% per year since 2015, a turnaround from the previous seven-year period, during which ticket sales shrank by 20%. This reversal in fortunes of the national lottery must be seen in the context of operating in a fiercely competitive market and facing significant challenges to maintain ticket sales, including against largely unregulated competitors, many of which piggyback on the national lottery without making any contribution to good causes.

I am sure members will recognise the positive impact of national lottery funding in their local areas. Last year, 6,800 community groups, charities and sporting bodies throughout the country benefited from the €304 million allocated to good causes and that made a meaningful difference to their activities and operations.

I thank members for their attention. I am happy to take any questions they may have.

Deputy Catherine Murphy

Mr. Algeo is very welcome. I ask him to provide a breakdown of the €124 million in expired unclaimed prizes since 2015. Do the prizes relate to scratch cards or the lotto draws? What is the proportion?

Mr. Andrew Algeo

I thank the Deputy for her question on unclaimed prizes and the breakdown thereof. Annual unclaimed prizes amounted to €20 million in 2015; €16 million in 2016; €16 million in 2017; €19 million in 2018; €17 million in 2019; €17 million in 2020; and €17 million in 2021.

Deputy Catherine Murphy

What is the proportion?

Mr. Andrew Algeo

The sales of the products are laid out in the annual report, as stipulated in the licence, as between draw-based games, that is, the lotto, EuroMillions and other smaller games, and scratch cards and instant win games, IWGs.

The proportion of those sales is laid out in the accounts. I am unable to provide a breakdown-----

Deputy Catherine Murphy

If Mr. Algeo is unable to provide a breakdown, I will move on because I have limited time and want to ask a number of questions. That is not to be rude but is how the committee works. The unclaimed prizes that end up going back to the lotto must be used for promotion of the lotto. The most recent figures we got stated that 98% was advertising and 2% was prizes. Why did PLI decide to do that? It seems a strange breakdown.

Has PLI done any work on problem gambling and the impact of the promotion by way of prizes, as opposed to advertising? Which is the most harmful?

Mr. Andrew Algeo

It falls under the licence to PLI to decide how the promotional spend is allocated as between additional prizes and incremental marketing. When PLI makes that decision, we make it in keeping with the principles in the Act, which are to promote the long-term sustainability of the national lottery and maximise prizes for good causes. We have many years' experience of running additional prizes in lottery games. In August this year, for instance, there was an extra €1 million must be won prize every Saturday in EuroMillions. We have many years of understanding how much uplift in sales would come from such promotion.

Deputy Catherine Murphy

PLI gets more from advertising, essentially.

Mr. Andrew Algeo

That is correct.

Deputy Catherine Murphy

My second question concerned problem gambling and harm. We are going through legislation at the moment which will restrict advertising before 9 p.m. We see blanket advertising from the national lottery at the moment. Has PLI done an analysis of problem gambling and harm, in terms of prizes as opposed to advertising?

Mr. Andrew Algeo

Some 80% of adults participate in the national lottery, yet Problem Gambling Ireland has stated that less than 1% of its cases relate to national lottery products. The same picture exists in other countries, like the UK. The risk to players of-----

Deputy Catherine Murphy

PLI has not done specific analysis of prizes as opposed to advertising, in terms of which is the most harmful.

Mr. Andrew Algeo

I do not believe we have a way of differentiating between the impact of those two mechanisms but we have many ways of monitoring the activity of players over time as they relate to the national lottery.

Deputy Catherine Murphy

Does PLI do mystery shopper inspections in relation to products being sold to people who are under 18 or does it rely on the retailer?

Mr. Andrew Algeo

As part of the sales code of practice, which is an addendum to the licence under which we operate and which the regulator oversees, we carry out continuous mystery shopping exercises. The purpose of those is to ensure retailers understand the stipulations in the licence and code of conduct.

Deputy Catherine Murphy

What kind of non-compliance has been found?

Mr. Andrew Algeo

PLI provides transparency to the regulator in all matters and the regulator can see, for instance, the output of the activities of that. That is as stipulated in the licence. The licence also allows PLI to hold all information confidential which is not stipulated as necessary to be published. Consequently, I am not in a position to provide that.

Deputy Catherine Murphy

The Comptroller and Auditor General recommends the regulator provide additional information to allow users of the account to see the key provisions of the lotto licence and that they are being complied with. What information is or was PLI not providing to the regulator that could assist?

Mr. Andrew Algeo

The licence is very specific. We must provide any information the regulator wants about the business. We run the national lottery on an open-book basis with the regulator.

Deputy Catherine Murphy

Was there information that PLI was not providing?

Mr. Seamus McCarthy

That was not the point I was making. We did not identify any difficulty in the regulator having information. It was the information the regulator presented in the financial statements that was the focus of the recommendation.

Deputy Catherine Murphy

I thank the Comptroller and Auditor General.

On the prizes allocated to what Mr. Algeo describes as "good causes" - or "necessary infrastructure", as I would probably say - what role does PLI have in that or is the money just disbursed to the Department and distributed on that basis?

Mr. Andrew Algeo

It is the latter. The regulator collects the money from the national lottery and passes it through to the lottery fund. That fund then goes to the Department of Public Expenditure and Reform, which distributes it through Government. PLI has no part in that.

Deputy Catherine Murphy

Has PLI looked at how it is disbursed, even for advertising purposes?

Mr. Andrew Algeo

PLI after the fact asks Departments to tell us where the money went so that we can get a picture. It is not entirely accurate because of the mixing of general revenue money with national lottery money, but we get a picture.

Deputy Catherine Murphy

Has PLI used Benefacts, for example, as a source to get that picture?

Mr. Andrew Algeo

Benefacts has given us a view of how national lottery funding fits into the larger picture, rather than specifically as to where the allocations have gone.

Deputy Catherine Murphy

Does Mr. Algeo have an estimate of lottery sales forgone as a result of persons choosing the lottery option in the bookmaker's?

Mr. Andrew Algeo

We have carried out market research over three years. That research asks customers how much they spend on lottery betting at bookmakers and has given us an estimate of between €400 and €550 million, depending on which year we are talking about.

Deputy Catherine Murphy

That is how much people spend on that product, is it?

Mr. Andrew Algeo

That is correct.

Deputy Imelda Munster

I come back to the percentages spent on advertising versus prizes. It is 98% versus 2%. Mr. Algeo said PLI makes that decision in line with the licence. Is that correct?

Mr. Andrew Algeo

That is correct.

Deputy Imelda Munster

Does anything preclude PLI going with 80% advertising and 20% prize money?

Mr. Andrew Algeo

Under section 6.9.2.1 of the licence, it comes to PLI to decide how to allocate it. The constraint is that some of it must be used for additional prizes but, other than that, as the Comptroller and Auditor General reported and successive regulators have viewed, it rests with PLI. PLI is minded to promote in the most effective way possible. Last year there were €11 million and the year before €13 million of additional prizes within the lotto and EuroMillions, so we think-----

Deputy Imelda Munster

I am talking about the unspent prize money. PLI has €124 million, of which 98% is spent on advertising and 2% on additional prize money.

Mr. Andrew Algeo

Of that particular pot of money over the years, yes.

Deputy Imelda Munster

There is nothing precluding the national lottery from spending 60% on advertising and making 40% available for additional prize money.

Mr. Andrew Algeo

That is correct.

Deputy Imelda Munster

There is nothing. It is the national lottery's decision alone.

Mr. Andrew Algeo

It is-----

Deputy Imelda Munster

Since the money is unclaimed prize money, does Mr. Algeo not see the benefit of making it available as additional prize money? Instead, the national lottery spends 98% of the pot on advertising.

Mr. Andrew Algeo

Yes

Deputy Imelda Munster

Do the witnesses see that this might irk people somewhat?

Mr. Cian Murphy

The effect of the way the national lottery has-----

Deputy Imelda Munster

No. We know about the 98% and the 2%. Can Mr. Algeo see that people watching who buy lotto tickets or scratch cards day in, day out, or week in, week out, might be irked by the fact that the national lottery spent 98% of the unclaimed prize money on advertising and a mere 2% on additional prize money?

Mr. Andrew Algeo

I can certainly understand how it is put that they may be irked, but I would point out that the prize money available to players was over-----

Deputy Imelda Munster

Sorry, we are talking about this particular pot of money. That was my question.

Mr. Andrew Algeo

The point is linked, so if I might-----

Deputy Imelda Munster

We know about the other prize money. My question was about this particular pot of unspent prize money.

Mr. Andrew Algeo

But the point is related.

Deputy Imelda Munster

I am sorry but when you attend a meeting of the Committee of Public Accounts, you have to answer questions.

Mr. Andrew Algeo

I am trying to.

Deputy Imelda Munster

If I wanted further information, I would ask for it. My question was about a particular stream of unspent prize money. The national lottery spent 98% of it on advertising and 2% on additional prize funds, and Mr. Algeo accepts people might be irked by that.

The Comptroller and Auditor General published a report in September. Was Mr. Algeo embarrassed by that report?

Mr. Andrew Algeo

We welcomed that report. It found that, universally, the lottery was running in accordance with its licence and that the effect of it was that prizes to players had risen by an amount in the order of 50% across the five years and the amount that went to good causes rose by an amount just north of 62%. Therefore, the effect of how the national lottery is run-----

Deputy Imelda Munster

Mr. Algeo was not embarrassed by the report.

Mr. Andrew Algeo

We were not embarrassed by the report.

Deputy Imelda Munster

Mr. Algeo was not concerned that-----

Mr. Andrew Algeo

We noted that all stakeholders in the national lottery were receiving more money than had been the case prior to PLI operating.

Deputy Imelda Munster

Mr. Algeo was not embarrassed by the report or worried it would do reputational damage to the national lottery and affect its profits. Was he not concerned by that at all?

Mr. Andrew Algeo

We were not embarrassed by the report. There was an element of it that involved information we felt was confidential. It related to the amount of money allocated for marketing expenditure. As per a universal principle in companies, we do not publish our marketing expenditure. No company does. The reason is that, were we to do so, it would benefit others in this very large Irish media market, worth over €1 billion. An understanding of how we are marketing would give them information. Why does Dunnes Stores not give its information? It is because Aldi may like it. Why does Aer Lingus not give its information-----

Deputy Imelda Munster

The regulator is a State body. That would be the reason.

Mr. Seamus McCarthy

Obviously, the regulator has the information.

Deputy Imelda Munster

That would explain that aspect of it. Was Mr. Algeo concerned the report would affect the national lottery's profits?

Mr. Andrew Algeo

We were concerned it would affect the national lottery and all its stakeholders, including us as the operator. We are a small part of the national lottery. It is not in the national lottery's interest to be at a commercial disadvantage while it operates in commercial markets.

Deputy Imelda Munster

I suggest it would not be in Mr. Algeo's interest to continue with the practice pertaining to the pot of unclaimed prize money. It would certainly run the risk of putting people off the national lottery. Maybe he might consider that. Does he believe it is acceptable that he would ask the State's financial watchdog to withhold information?

Mr. Andrew Algeo

In clause 20.6 of the licence, the State explicitly gave us permission to hold information as confidential. We release information to the regulator with that protection. The State recognised that a private operator will keep information confidential in the licence or contract with the operator. Like any entity, including State entities, there is information that the organisation holds as confidential. Marketing information is almost universally confidential

Deputy Imelda Munster

Can I ask the Comptroller and Auditor General what his experience was of it? As a member of the Committee of Public Accounts, I am extremely grateful that he published the report in full in the interest of transparency and the public's need to know. Could he outline his experience of what we have just discussed?

Mr. Seamus McCarthy

On the request to withhold information?

Deputy Imelda Munster

Withholding information.

Mr. Seamus McCarthy

The operator asked us for a copy of the report, which we provided. It was a couple of days before publication. It subsequently wrote to us and asked us to remove one piece of information, which related to the 98% and 2%.

Deputy Imelda Munster

One can understand how people feel if they realise unspent prize money is not going towards topping up prizes. That is why my first question was on whether Mr. Algeo was embarrassed by the report. The first impression one gets is that the national lottery did not want the information getting out into the public domain.

Mr. Andrew Algeo

To be very clear, the reason we did not want it to get into the public domain is that we do not want to publish the marketing expenditure of the national lottery. That information is not available to any fast-moving consumer goods company. It is confidential universally in the commercial sector. For that reason, we keep all the information about our marketing expenditure and how it is split confidential. It is not in the interest of the national lottery to publish that.

Deputy Imelda Munster

When you look at the breakdown, with only 2% going towards additional prize money, you can certainly see why it is not in the interest of the national lottery. The national lottery could have opted for a ratio of 60:40, 50:50 or 70:30 but decided to have 98% going towards promotion and advertising and 2% going towards topping up prizes.

Mr. Andrew Algeo

The reason we choose to direct the majority of the promotional expenditure towards additional marketing as opposed to adding to the existent top-up prizes, which are considerable, is that the effect is to grow prizes, good causes and retailer commissions, as well as the operator's revenue, more effectively. That is-----

Deputy Imelda Munster

As Deputy Catherine Murphy said, with all that advertising the national lottery does not have any safeguards concerning gambling. It does not even have a mystery shopper, particularly regarding scratch cards but also regarding gambling. There may well be a particular issue with scratch cards. I am not referring to addiction, as such, but people certainly spend more money than they can afford on scratch cards. The national lottery spends 98% of the funding on advertising and does little or nothing in the way of helping with gambling addiction or anything like that.

Mr. Andrew Algeo

The national lottery is run with very extensive and, I would say, leading player-protection measures, all of which stem from the Act and clause 10 of the licence. Those include-----

Deputy Imelda Munster

With regard to gambling, what are those measures?

Mr. Andrew Algeo

They include mandatory identification verification online, transaction limits on scratch cards, extensive self-exclusion-----

Deputy Imelda Munster

What is the transaction limit?

Mr. Andrew Algeo

Ten scratch cards in a transaction.

Deputy Imelda Munster

Someone could buy 30 in one day, or one hour.

Mr. Andrew Algeo

They are limited. In retail, as the Deputy can-----

Deputy Imelda Munster

You can go in and buy ten bars of chocolate, come out, eat them and then go back in and buy another ten bars.

Mr. Andrew Algeo

The limit is novel. We are not aware of any other lottery in the world - most lotteries sell scratch cards - that adopted the practice of imposing a scratch card limit. PLI adopted it because it has two benefits for the customer.

First, it creates a break between playing scratch cards. Player protection literature is clear, in that a break is a valuable thing.

Deputy Imelda Munster

Does Mr. Algeo accept-----

Mr. Andrew Algeo

I am sorry-----

Deputy Imelda Munster

Hold on. It is difficult to take Mr. Algeo seriously on this. He is speaking about a break, but someone can buy ten scratch cards, go over to a desk, scratch the ten and then buy another ten. That is hardly putting limits on usage or doing anything to tackle possible gambling addiction where scratch cards are concerned. That is a joke.

Mr. Andrew Algeo

The range of measures that the national lottery offers, some of which stem from the licence and some of which stem from further innovations that PLI has introduced over the past seven years, are extensive. The first and foremost – it is really the cornerstone of player protection for the national lottery - is that the national lottery can only sell a subset of products and is explicitly excluded from selling products that are found in mainstream gambling. That stipulation is in the licence. In addition, there are daily, weekly and monthly limits on play in the digital channel as well as self-exclusion limitation options. If someone pays a large-----

Deputy Imelda Munster

Mr. Algeo will have time later, so he might go into those measures in detail then. Other Deputies wish to contribute, so Mr. Algeo might furnish to the committee-----

Mr. Andrew Algeo

If I might conclude,-----

Deputy Imelda Munster

We are over time.

Chairman

Mr. Algeo can conclude.

Mr. Andrew Algeo

I will provide another example. We close our website and our machines between 11 p.m. and 7 a.m. If someone wins a large prize online, we do not put the money back into his or her account. Instead, we send it to his or her house by cheque so as not to encourage recycling. After someone plays five games of digital scratch card online, a pop-up will appear saying that he or she has played five games. If someone is approaching the spend limit that we have asked him or her to apply in addition to the mandatory one, the system will inform the individual of that. I could go on for a long time, but the net-----

Deputy Imelda Munster

What happens after someone is informed he or she has already played five games? Is that person blocked?

Mr. Andrew Algeo

If someone gets to that point, he or she loses the right to adjust his or her limits. Once a person is close to the limit he or she has set, that person is no longer allowed to move it again.

Deputy Imelda Munster

Can people raise their limits?

Mr. Andrew Algeo

The net-----

Chairman

I thank Mr. Algeo. I have to-----

Deputy Imelda Munster

I know there are-----

Mr. Andrew Algeo

If I might, I will make a final point.

Deputy Imelda Munster

Could we get the detail of those measures?

Mr. Andrew Algeo

I would be happy to do so. Mr. Barry Grant from Problem Gambling Ireland was interviewed on television. He stated that, in his years of helping people, fewer than 1% of cases he had encountered came from national lottery products. The committee will find equivalent-----

Deputy Imelda Munster

Is that categorical?

Mr. Andrew Algeo

Yes.

Chairman

I call Deputy Verona Murphy.

Deputy Verona Murphy

What is PLI's spend on player welfare?

Mr. Andrew Algeo

We carry out our spend on player welfare in a number of ways. First and most important-----

Deputy Verona Murphy

No. In millions, what is PLI's spend on player welfare? We know what it is on marketing.

Mr. Andrew Algeo

The most important step we take is difficult to measure after the fact, in that we introduce measures that help to protect people who need help or need protecting.

Deputy Verona Murphy

How much does it cost PLI?

Mr. Andrew Algeo

We do not have the alternative in order to measure the comparison, but there are meaningful-----

Deputy Verona Murphy

How much does PLI spend on player welfare?

Mr. Andrew Algeo

We know that the licence stipulates that-----

Deputy Verona Murphy

I am not interested in what the licence stipulates, given that it also stipulates that PLI can choose to spend a percentage on marketing, in which respect PLI chose 98%. I have asked a straightforward question. How much is PLI's spend on player welfare? Is it €1 million, €2 million or €100 million?

Mr. Andrew Algeo

It is difficult for us to-----

Deputy Verona Murphy

Mr. Algeo stated that player welfare was important for PLI.

Mr. Andrew Algeo

It is extremely important.

Deputy Verona Murphy

How much is the spend on player welfare? If Mr. Algeo does not have the figure now, can he provide it later?

Mr. Andrew Algeo

It was difficult for us to quantify how much it cost to provide a mandatory ID verification system -----

Deputy Verona Murphy

Can Mr. Algeo imagine how much it would cost if PLI was-----

Mr. Andrew Algeo

-----in terms of reduced sales, but we did it.

Deputy Verona Murphy

What would the fine have been if the regulator had found PLI to be in breach of Schedule 9, paragraphs 6(b) and 6(c) of the licence? Forty-eight people self-excluded, yet PLI invaded their exclusions by providing them with information from the lottery less than 36 hours after they had self-excluded. Is that not correct?

Mr. Andrew Algeo

The details of that incident and all licence breaches are published by the regulator, and we accept them entirely.

Deputy Verona Murphy

I did not ask about that. I asked what Mr. Algeo believed the fine would be. None was issued, which is a mystery. If I am correct about that, then I cannot understand why we have a regulator. The regulator stated that she had the ability to fine but did not apply one. PLI got away with it.

Mr. Andrew Algeo

The licence provides the regulator with considerable powers of financial sanction. It is up to-----

Deputy Verona Murphy

What would a breach like that have cost PLI? If Mr. Algeo tells me he does not know, he is not credible, so he should not say that.

Mr. Andrew Algeo

It is up to the regulator to impose a sanction or not, and it is not for me to comment. I am not aware of her thinking.

Deputy Verona Murphy

It is up to her. There was a breach. PLI presumably reviewed the situation with an eye to preventing it from recurring. From that review, Mr. Algeo is surely aware of how much it would have cost financially had a fine been imposed.

Mr. Andrew Algeo

I do not know how to estimate that number. I apologise.

Deputy Verona Murphy

Is Mr. Algeo trying to tell this committee and the public watching us that, after a breach, PLI has no cognisance of what it would have cost financially had a fine been applied by the regulator?

Mr. Andrew Algeo

PLI has no way of estimating what the regulator would have fined us.

Deputy Verona Murphy

Did PLI ask the regulator?

Mr. Andrew Algeo

That is not our-----

Deputy Verona Murphy

Does PLI take the breach seriously?

Mr. Andrew Algeo

We take compliance with the licence seriously. When there is an incident of any type, we follow a five-step process. First, we tell the regulator immediately. Second, we stop the issue, whatever it is, from getting any worse. Third, we consider who has been affected and we take the appropriate action in terms of communication and anything else that is necessary. Fourth-----

Deputy Verona Murphy

What action did PLI take?

Mr. Andrew Algeo

-----we get to the root cause. Fifth, we fix that root cause. The details of each of the breaches are published by the regulator and we accept them. I am not going to add-----

Deputy Verona Murphy

How much did it cost PLI to fix the issue and ensure it would not recur?

Mr. Andrew Algeo

I am sorry, but I am unable to answer.

Deputy Verona Murphy

Unable or unwilling.

Mr. Andrew Algeo

Unable.

Deputy Verona Murphy

Mr. Algeo does not know how much PLI spends on player welfare. Even the greyhound industry knows how much it spends, although whether that spend is enough is another question. In a highly addictive scenario, Mr. Algeo does not know what PLI does for people's welfare, to prevent gambling addiction and to ensure that those who have self-excluded are protected. Mr. Algeo knows that PLI has €122 million to spend on marketing - that amount is nearly 100% - yet he does not know how much it spends on player welfare. This signifies that PLI could not care less about the 48 people we know of who are at serious risk. Bearing in mind that, at our earlier session, we discussed how e-gaming was an illegal activity in Ireland, in that it is unregulated, PLI is lucky that it has the national lottery legislation. The people who are accessing the national lottery site are not so lucky, though, as it appears that PLI could not care less. It has no information about player welfare or what it does. It has five steps that it follows, but it does not know how much player welfare costs. If it were me, I would be very interested in knowing how much it cost and whether it was working.

Mr. Andrew Algeo

Player welfare – compliance with the licence is very much about player welfare – pervades all of our technology, processes, staff training and how we organise-----

Deputy Verona Murphy

Then how did the breach occur in the first place?

Mr. Andrew Algeo

I am unable to extract the cost of that from our organisation. Player welfare literally pervades everything we do.

Deputy Verona Murphy

Saying that is not credible. If there was a breach, significant steps must have been followed to ensure it did not recur. There is always a cost.

Mr. Andrew Algeo

In all breaches, there is a cost in first working out who it has affected and taking the appropriate action.

There is enormous cost in getting to the proper root cause and then finally there is a cost of fixing it. Those projects are taken as a priority above any other project that we have and-----

Deputy Verona Murphy

Having had the breach, can Mr. Algeo see a significant financial hole anywhere that was used to ensure it does not happen again?

Mr. Andrew Algeo

Fixing the matters around the breach will consume the resources of the organisation for as long as it takes to do so. The project of fixing any issue goes to the top-----

Deputy Verona Murphy

Everybody working for PLI was put into remedying-----

Mr. Andrew Algeo

The resources of the organisation that are appropriate to fixing the system or process will be used. Fixing the issue is at the very top of the list of priorities ahead of anything else in the strategy. That is right and good.

Deputy Verona Murphy

Have there been any breaches since?

Mr. Andrew Algeo

The regulator-----

Deputy Verona Murphy

My question requires a "Yes" or "No" answer. Have there been any breaches since?

Mr. Andrew Algeo

It falls to the regulator to make decisions as to whether there is a breach or not.

Deputy Verona Murphy

Were any breaches or possible breaches reported to the regulator since?

Mr. Andrew Algeo

It falls to the regulator-----

Deputy Verona Murphy

My question requires a "Yes" or "No" answer.

Mr. Andrew Algeo

It falls to the regulator to-----

Deputy Verona Murphy

I have asked a straightforward question. Have any breaches been reported to the regulator since this breach was found? I would like a "Yes" or "No" answer.

Mr. Andrew Algeo

It falls to the regulator and not the operator to decide what is a breach.

Deputy Verona Murphy

Has anything been reported to the regulator?

Mr. Andrew Algeo

We are in constant communication with the regulator.

Chairman

To be helpful to the Deputy, has the regulator had any discussions with representatives of the national lottery about any breaches since the breach we are discussing?

Mr. Andrew Algeo

I am not in a position to disclose communication between the national lottery and the regulator relating to-----

Chairman

I am not asking Mr. Algeo to disclose individual pieces of information. What the Deputy is trying to ascertain is since that breach, have there been other similar breaches?

Mr. Andrew Algeo

It is for the regulator and not me to communicate that.

Deputy Verona Murphy

That is not an answer.

Chairman

We require a "Yes" or "No" answer. The Deputy has asked a straight question.

Mr. Andrew Algeo

My answer is that under the terms of the licence, it falls to the regulator.

Deputy Verona Murphy

Clearly, given the fact that Mr. Algeo-----

Mr. Andrew Algeo

It falls to the regulator to report on breaches. That is not for the operator.

Deputy Verona Murphy

The regulator clearly has questions to answer in that case. It is obvious that the lottery has had similar breaches but Mr. Algeo is afraid to say it. That is all right. We will bring representatives of the regulator back before the committee. This is a ridiculous scenario. Mr. Algeo has made no effort to give the committee a flavour of how the national lottery regards the welfare of people. All the good that is done by the national lottery is being negated by its neglect for the welfare of those who are operating a system. It is online and it is a highly addictive activity. As I said this morning, families have been decimated by this activity. The safeguards are the only things we can rely on to ensure we can retain it as legalised gaming activity. I am not afraid of gambling but I do not have an addictive nature. I can buy a scratch card, go home and forget about it for another month. As Deputy Munster pointed out, some people buy ten scratch cards and then buy another ten. That is a welfare issue. What safeguards are in place? How much is being spent on them? That must be known for legislators to endorse what the lottery is doing.

Has Mr. Algeo seen the Indecon report?

Mr. Andrew Algeo

I have.

Deputy Verona Murphy

Will its recommendations be implemented in full?

Mr. Andrew Algeo

I understand those recommendations are for the Department of Public Expenditure and Reform and not for the operator. It is not for us to allocate those funds.

Deputy Verona Murphy

Does Mr. Algeo agree with the recommendations?

Mr. Andrew Algeo

We think it is very much in the interests of the national lottery for the public to be aware of where the funds go. The recommendations in that report will go a long way towards doing that. The picture for the public is not complete as to where-----

Deputy Verona Murphy

That is true in respect of many things.

Mr. Andrew Algeo

-----the moneys go.

Deputy Colm Burke

The Indecon report set out a number of policy options for reform which, if implemented, could result in a far more transparent allocation process. That is the recommendation in the report. Has the national lottery engaged with State agencies in that regard? Does Mr. Algeo envisage that there will be engagement?

Mr. Andrew Algeo

I do not envisage that there will be. Our role in the system is to run the lottery in a way that maximises the returns for good causes inside the constraints of the Act and licence. It is for the Government to decide where those moneys go.

Deputy Colm Burke

Does the national lottery not have any input into how funding is subsequently allocated? Does it give an overall view in that regard? There would be benefits for both sides. There would be benefits to the lottery in terms of its marketing profile. There would also be benefits for the community.

Mr. Andrew Algeo

It would be outside our remit to give any opinion on where the money goes. It is, however, important that the national lottery's communications reflect where the money has gone as the result of a Government decision.

Deputy Colm Burke

I will move to another issue that relates to the shareholding and the structure involved. I understand that the Ontario Teachers' Pension Plan, An Post and the An Post pension plan are involved. Is it possible to get a breakdown of how that is divided and the size of share that each group has?

Mr. Andrew Algeo

I believe that is matter of public record available from the Companies Registration Office. The breakdown is that An Post has 11%, another 11% is for the An Post pension plan and 88% is owned by the Ontario Teachers' Pension Plan. There is some rounding error in that but it is directionally correct.

Deputy Colm Burke

Is that going to change at any stage?

Mr. Andrew Algeo

I am not aware of any change, no.

Deputy Colm Burke

I understand that PLI drew down a loan from its parent company at an interest rate of 9%. Why was the interest rate set so high when borrowing could have been at a far lower rate? Because it was not, the net sum available after expenses are paid is smaller.

Mr. Andrew Algeo

I thank the Deputy. The proceeds of ticket sales are split between good causes, prizes and retailers, and 10% goes to the operator. The operator has operating expenses and must fund its balance sheet. The main item in that respect is the €405 million it paid to the State for the licence. How the entity funds its balance sheet is a matter for the board but in every way, it complies both with company law and-----

Deputy Colm Burke

That interest rate of 9% is very high. That was done at a time when interest rates were not as high. I know they are going up at this stage but 9% is a very high interest rate.

Mr. Andrew Algeo

The rate of interest is subject to external expert review and shared with Revenue. As I say, the balance sheet funding is appropriate versus benchmarks.

Deputy Colm Burke

Camelot Global Services Ltd. provided systems implementation. What support services are included?

Mr. Andrew Algeo

In broad terms, Camelot provides technology and services relating to the operation of the digital channel for the national lottery.

Deputy Colm Burke

Does the €9 million involved relate to back-up support?

Mr. Andrew Algeo

The precise nature of the services is confidential between the parties. Technology and services are involved.

Deputy Colm Burke

Is Mr. Algeo satisfied that the technology available is adequate? He spoke about a growth in sales. Does Mr. Algeo expect that to continue? Are the systems in place sufficient to deal with that growth in sales?

Mr. Andrew Algeo

PLI has invested very extensively in its technology over the past seven years. The total capital expenditure is approximately €18 million. We believe that the technology systems are capable of handling both growth and the evolving requirements of the national lottery.

Deputy Colm Burke

On this whole issue of cybersecurity, is Mr. Algeo satisfied there is enough protection to make sure there will not be an interference with the whole system?

Mr. Andrew Algeo

We invest heavily and use external benchmarks as to the cybersecurity protections PLI has, and those are substantial. I believe the regulator reported on that, saying she was satisfied with the steps we were taking.

Deputy Colm Burke

I wish to go back to one other issue on sales outlets for the national lottery. What is the margin it has now in relation to sales?

Mr. Andrew Algeo

That is stipulated to us. It is 6% of sales for all products, except for the 5-4-3-2-1 product, which is 5% of sales.

Deputy Colm Burke

On that 6%, is there then backup support for sales outlets? Say, for argument’s sake, a particular issue arises for a news agency or a distributor of PLI's product, where, for instance, it becomes aware of and has a concern about people who are addicted to gambling. Does it have the backup support available to it regarding how to deal with that issue?

Mr. Andrew Algeo

Yes. There is a code of practice for sales, which is published and is an addendum to the licence. It includes many aspects of the player protections in which PLI supports the retailer. There is a long list of “dos” and a long list of “do nots” backed up by mystery shopping, as well as training for all staff and the collateral necessary to display information relating to player protection in every single retail outlet.

Deputy Colm Burke

If a retailer runs into a difficulty for one reason, is there someone with whom he or she can discuss how to deal with that issue?

Mr. Andrew Algeo

There is. We have a trained addiction counsellor on our staff who can provide support to retailers. In addition to that, PLI-----

Deputy Colm Burke

In the past 12 months, have retailers contacted PLI? First, are they aware that service is there? Second, what level of contact has been made by retailers over the past 12 months?

Mr. Andrew Algeo

Retailers are aware because there is mandatory training for all retailers, both in player protection as well as how to use the lottery systems. The data relating to those interactions are passed transparently to the regulator. However, we do not publish them.

Deputy Colm Burke

Why are they not published?

Mr. Andrew Algeo

We fulfil the requirements of us in the licence, which are to transfer the data to the regulator. That falls for the regulator to decide whether what we are doing, given she can see the raw data, is sufficient and what action we take in any particular circumstance.

Deputy Colm Burke

There could be a situation where there is only one contact made in the year. Is the level of backup support adequate? The retailer might feel that it is not adequate. It would be interesting to see what level of support there is for retailers. If retailers are not contacting, it then means they do not believe the service is adequate.

Mr. Andrew Algeo

There are two sides to it. First, PLI carries out proactive monitoring of sales and will contact a retailer if we can see from the sales data that something is occurring that looks unusual. It does occur where we are the ones who initiate the conversation. Similarly-----

Deputy Colm Burke

When Mr. Algeo referred to unusual activity, what is he-----

Mr. Andrew Algeo

It could be, for example, an increase in sales or a particular concentration of sales to a particular product – anything that indicates there might be a player who is exhibiting behaviour that might be consistent with problem play.

Deputy Colm Burke

PLI’s backup support team then would contact the retailer.

Mr. Andrew Algeo

That is correct.

Deputy Colm Burke

Will Mr. Algeo indicate how often, on average, this arises per annum?

Mr. Andrew Algeo

I am afraid I cannot. However, we provide that transparently and very regularly to the regulator.

Deputy Colm Burke

Are we talking about 100, 200 or absolutely nothing? If we do not see figures, we have no evidence the backup support is working.

Mr. Andrew Algeo

I understand. However, we provide that information to the regulator, which is the construct that has been set up for us.

Deputy Jennifer Carroll MacNeill

I welcome Mr. Algeo and Mr. Murphy and I thank them for coming in. At the outset, I got a marketing call a few months ago in relation to the national lottery. It was not anything to do with PLI, was it?

Mr. Andrew Algeo

Yes, I suspect it was. I do not know because I am not aware of who our market research agents contact and do not contact. However, we carry out constant market research, as the Deputy can imagine, to see how it is that our-----

Deputy Jennifer Carroll MacNeill

I might just help Mr. Algeo. It was me and, I think, the Chair-----

Chairman

Three members of the committee.

Deputy Jennifer Carroll MacNeill

Three members of the committee were contacted.

Chairman

Deputies Carroll MacNeill and Dillon and I. It was a few weeks ago.

Deputy Jennifer Carroll MacNeill

It was longer; it was perhaps two months ago. It was certainly this term in the period around the publication of the report.

Mr. Andrew Algeo

Once a year, PLI has carried out market research among good causes, retailers and politicians to establish the perception of the national lottery. We have done that for three years. We started the process in October of this year and it lasted a month. We are not aware of who is contacted, but we get anonymised-----

Deputy Jennifer Carroll MacNeill

I am sorry to cut across Mr. Algeo-----

Mr. Andrew Algeo

-----answers back.

Deputy Jennifer Carroll MacNeill

I do not mean to be impolite. Our time is so tight. From our perspective, the report was issued and three members of the Committee of Public Accounts were contacted. We raised it with the regulator two weeks ago, so I think Mr. Algeo has been on notice that we will ask the question and are curious about the source of it. We have other things to discuss, but it was a source of concern to us that we were contacted in what seemed like a-----

Mr. Andrew Algeo

We had initiated that research some time before then.

Deputy Jennifer Carroll MacNeill

Since this came up at the Committee of Public Accounts two weeks, has Mr. Algeo checked with his market research company to see if it did that?

Mr. Andrew Algeo

It will not tell me who it spoke to, and that is right. However, I suspect it was the company. As it happens, we rang it when we saw that come up in the session with the regulator and asked it to stop because it was causing concern, and it had, in fact, already finished.

Deputy Jennifer Carroll MacNeill

The purpose of this report is to increase transparency and Mr. Algeo is here so we can get his view on that on foot of the Comptroller and Auditor General’s report. The 98%-2% advertising top-up is a source of real concern to us for a couple of reasons. It piques our interest very much and is of real concern. First, I think it is fair to say the committee feels there is a sharpness to it. Second, we feel it would not have been apparent to the players of the national lottery without the Comptroller and Auditor General’s report. Third, we want to understand the proportion of advertising that is being used from top-up funds versus other advertising and how that works overall. On an annualised basis, it looks like €17 million of the unclaimed prize money fund, which is unclaimed prize money, is used for advertising and €350,000 is used for top-ups. It piques our interest generally in relation to advertising, not just that funded money. What is PLI’s justification internally for using more than 98% of that in that way?

Mr. Andrew Algeo

It falls to us to make the decision, which we make based on the optimal use of that money to sustain the national lottery and grow the amount that goes to good causes. As a result, all of the other stakeholders-----

Deputy Jennifer Carroll MacNeill

So essentially that was the best commercial decision PLI could make, having regard to all of the different things it does.

Mr. Andrew Algeo

That is correct.

Deputy Jennifer Carroll MacNeill

That is why the rest of the advertising becomes so interesting to us. We wonder why PLI needs to rely on that unclaimed prize money to the extent it has been. How does that relate to the rest of its advertising spend? We see very considerable advertising. There is the marketing information. I might just check the Comptroller and Auditor General. It is not apparent to us from the accounts how much is being spent on advertising and Mr. Algeo said it is commercially sensitive. From the Comptroller and Auditor General’s perspective, was it apparent from the Premier Lottery Ireland accounts or did he have to rely on the information coming through the regulator?

Mr. Seamus McCarthy

The only information we had was from the regulator. Obviously, the company publishes its own financial statements, but I do not think we relied on that.

Deputy Jennifer Carroll MacNeill

Advertising in respect of gambling is of considerable interest to the Oireachtas at the moment because of the gambling legislation before the Houses, which will be familiar to the witnesses. Indeed, I have to take this opportunity to correct the record. I received correspondence from PLI this morning. I had been speaking to the Gambling Regulation Bill on Second Stage in the Dáil on Tuesday. We have talked about how I have been noticing advertising since our engagement with the national lottery regulator, and I spoke about how I had seen a Christmas millionaire advert, where somebody is having difficulty passing over an envelope. I said I had seen it during "The Late Late Toy Show", but that was in error because it was not during that show. Helpfully, Premier Lotteries Ireland sent me all the advertising detail to show the advert had not been aired during the toy show, but I will explain why I had thought that was the case. I had recorded the toy show and was watching it with my seven-year-old son at, say, 6 p.m. on Sunday. I was sitting with my child watching the recording of it but we turned it off because it was boring and we decided to watch the soccer instead. It was during the soccer, at a child-friendly TV time in the evening, that I saw the advert again and again. That is where I made the mistake and I am happy to correct the record.

Helpfully and for the benefit of the committee, PLI wrote to me and I will put on the record of the committee what it said because it is important. It attached a spreadsheet of adverts for the show and the repeats. The letter states, "We take our commitments on responsible advertising very seriously", and refers to an advertising code of practice it has in place with the regulator of the national lottery. It was the first I had heard of that code but why would I have known about it? In fairness to PLI, it outlined it had directed RTÉ not to air those adverts during the toy show and to ensure it would be in compliance with its own advertising code with the regulator. The mistake I made was that I had not considered it amounted to responsible advertising, which is why I was watching the show with a child.

There are many different things going on in the Oireachtas relating to advertising and that is why the witnesses are being asked all these questions about it. Obviously, marketing is a key piece of their work. Because of all these concerns, will they set out the proportions, insofar as they can, that relate to the €17 million used annually to the funds from PLI’s own base marketing resources? Will they set them out insofar as they can within their commercially sensitive concerns?

Mr. Andrew Algeo

I thank the Deputy. I am unable to provide information on the marketing spend we employ because it is commercially sensitive, as it is for any organisation in a commercial field.

Deputy Jennifer Carroll MacNeill

That is fair enough. It is up to us as legislators, therefore, to ensure that will change, given I have a concern about the scale of advertising and gambling. Representatives of the gambling industry appeared before us in the Oireachtas Joint Committee on Justice to discuss a range of these points, which are by no means exclusive to the national lottery. We need to know what the spend is, what the distribution of that spend is and how it relates to other issues. I appreciate Mr. Algeo cannot answer my questions because it is a commercially sensitive matter and I totally respect that in regard to commercial organisations, but we have a different set of difficulties as legislators.

Turning to player welfare, approximately how many people work in Premier Lotteries Ireland?

Mr. Andrew Algeo

Approximately 220.

Deputy Jennifer Carroll MacNeill

I know that Mr. Algeo could not provide a cost to Deputy Verona Murphy regarding the spend on player welfare, but how many people are dedicated exclusively to that? I appreciate that many people contribute in lots of different ways, but is anyone dedicated exclusively to it?

Mr. Andrew Algeo

As the Deputy said, many people are involved, in that everybody who creates a product, a website, an app or an advertising campaign is expert in how player protection applies to his or her part of the business, not least because we have to be under the terms of both the licence and the various codes of practice. As regards people who interact with players, if that is a way of narrowing it down-----

Deputy Jennifer Carroll MacNeill

I might give an example. When other parts of the gambling industry were being represented before the justice committee, we asked the same questions of the representatives of Flutter and they were able to tell us the figures. While they used United Kingdom figures, they subsequently provided to the justice committee a subset of them that were dedicated to player welfare concerns within Flutter, what they did to address them and what proportion that related to. They had a team dedicated to that, albeit not in a sufficient way as far as we were concerned. Similarly, a team must be involved in, for example, notifications to the regulator of any difficulties with the licence.

Mr. Algeo stated that was the first step of a five-step process that PLI takes. Obviously-----

Mr. Andrew Algeo

The first thing we do is tell the regulator.

Deputy Jennifer Carroll MacNeill

Is it a regulatory person who does that?

Mr. Andrew Algeo

Yes.

Deputy Jennifer Carroll MacNeill

On the player welfare side, I think 48 people were contacted subsequent to their self-exclusion. Are people within the national lottery to dedicated helping or managing that? I appreciate Mr. Algeo does not want to trigger them in any way, as the regulator contact said, but who is dedicated to the follow-up of finding the system error, fixing it and making contact with gambling support groups? What does PLI do there?

Mr. Andrew Algeo

The senior leadership team meets whenever there is an incident that may turn out to be material. That is the eight most senior people in the organisation, including Mr. Murphy and me. We go through those five steps. The amount of resource that is necessary to address the issue is impossible to tell at the beginning and becomes clearer as we go into it. In the end, with the lottery, most things are implemented through technology change, so it will involve weeks, if not months, of work and multiple suppliers, as well as project managers, quality assurance, QA, specialists and test people. That is the nature of our lottery.

Deputy Jennifer Carroll MacNeill

I appreciate Mr. Algeo cannot talk about communications with the regulator but has PLI had to invoke that process within its organisation in, say, 2022?

Mr. Andrew Algeo

We have certainly notified the regulator that there is an incident that might turn into a P1 or some-----

Deputy Jennifer Carroll MacNeill

PLI has notified the regulator, therefore.

Mr. Andrew Algeo

We have notified it of an incident. An example would be that if our retail terminals were not working for some minutes one afternoon, the regulator would know.

Deputy Jennifer Carroll MacNeill

Nothing of the nature we were talking about, however, has been notified to the regulator in regard to self-exclusions.

Mr. Andrew Algeo

I am not commenting on anything that might be perceived by the regulator to be a breach, such as saying "Yes" or "No". As the Deputy can imagine, the regulator would be surprised at my having-----

Deputy Jennifer Carroll MacNeill

I was referring to the notifications of issues about which PLI should notify the regulator. Of course, she has her own capacity to make assessments as well. Deputy Verona Murphy asked about the upper limit on a fine that might issue or about the withholding of funds that might be applied by the regulator. From a commercial perspective, what is the upper limit of the sum to be withheld that the regulator can impose? The phrase she used was "withholding funds". What is the upper limit of that?

Mr. Andrew Algeo

I believe it is €20 million in a year.

Deputy Jennifer Carroll MacNeill

Presumably, that is something Mr. Algeo, with his senior management team, builds into PLI’s risk management in some way, taking account of its capacity to have that sort of funding withheld.

Mr. Andrew Algeo

We work very hard to stay inside the licence and to be best in class at player protection. We do not make decisions based on the risk of the downside. We just attempt, and have real ambition, to stay inside the lines of the licence and to do everything we can on player protection.

Deputy Jennifer Carroll MacNeill

I fully understand that. The question I am trying to get to might be better directed at the regulator, whom we may again invite to appear before the committee. She confirmed to us on the previous occasion that there have been no such withholdings, if that is the phrase, ever within the terms of the licence. While the upper limit, therefore, is €20 million and PLI works in the way it does, which I understand, there have been breaches but nothing has happened. I am not being facetious, but there is probably no reason to bank in the risk profile of a €20 million fine when the regulator has not appeared to want to use her power, even for a breach we regarded as much more serious than she may have regarded it because we thought it was a case where the withholding of funds would be appropriate. These are observations rather than fair questions to Mr. Algeo, but they go back to our earlier dialogue with the regulator.

Mr. Andrew Algeo

We are very mindful of the considerable powers the regulator has, up to the point of rescinding the licence.

As a result, we put enormous resources into operating the national lottery in a way that minimises the risk of licence breach. Unfortunately, from time to time, things go wrong. We deeply regret that when it happens and we work through the five steps I spoke about to address them.

Chairman

Does PLI pay out dividends to its shareholders every year?

Mr. Andrew Algeo

Not each year but there have been returns to the shareholders, yes.

Chairman

I believe the Ontario Teachers' Pension Plan fund owns 78% of the company. I think Mr. Algeo said 88% by mistake.

Mr. Andrew Algeo

The Chairman is correct. I made a mistake and it is 78%.

Chairman

I note that. A loan was taken out from PLI's parent company at an interest rate of 9%. That was in 2014. Is that correct?

Mr. Andrew Algeo

I believe that is correct, yes.

Chairman

When I looked at the summary of the 2018 accounts, and some material attached to them, I was puzzled as to why a loan would be taken out at a 9% interest rate in 2014. If I had wanted to, I would have been able to get a loan at 0.5% interest in 2014. Other entities would also have been able to do that if they had wanted to. Why did the board draw down a loan at a 9% interest rate? It is extraordinarily high.

Mr. Andrew Algeo

I cannot comment on the decisions of the board in 2014 as I was not on the board then. I can say that-----

Chairman

Can Mr. Murphy comment on the 9% interest rate?

Mr. Andrew Algeo

If the Chairman does not mind, I would like to finish that. There is very clear law in Ireland and Revenue codes around the financing of balance sheets. Revenue is aware of our balance sheet and no issue has arisen, including the rates-----

Chairman

That is not the question I am asking. Does Mr. Algeo not find it extraordinary that an entity would take out a loan at a 9% interest rate at a time when interest rates were at rock bottom or very low? Commercial decisions have to be taken. Mr. Algeo is in the commercial world and knows how it works with the laws of economics. One must try to get the best price. Why did the company go for a loan with a 9% interest rate?

Mr. Andrew Algeo

I cannot answer for the why because I was not there. Looking at it, the company has equity finance, bank debt and shareholder debt-----

Chairman

There is a 4% loan as well.

Mr. Andrew Algeo

-----and there is a sequence to those in how they rank in the capital structure. The lower part of the capital structure attracts higher interest rates.

Chairman

Does Mr. Algeo find that figure for the interest rate very high or burdensome?

Mr. Andrew Algeo

It is not burdensome. It is capitalised. It is appropriate.

Chairman

Does Mr. Algeo find it an extraordinary rate of interest? This is what I am trying to get to. Money could have been borrowed a lot cheaper at that time.

Mr. Andrew Algeo

I am confident the rate is appropriate to the market, given where the debt is within the structure.

Chairman

At that point, it would not have been appropriate given that interest rates, even on short-term loans, were not 9%. This is the point I am trying to make here. Was Mr. Murphy in the company in 2014?

Mr. Cian Murphy

I was not.

Chairman

Does anybody know why this was done?

Mr. Andrew Algeo

I am unable to comment on the decisions of the board in 2014.

Chairman

Can we just find out? The outworkings of this are that almost €25 million in interest was paid to related parties in 2020. Is that correct? To be exact, €24.7 million was paid in interest to related parties in that year.

Mr. Andrew Algeo

If it is helpful, I might give a summary statistic. Perhaps that would help. The cash returns to shareholders from PLI since 2015 are in total €173.6 million, or 42% of the €405 million the shareholders invested. This means that 35% of the way through the licence the shareholders have received back 42% of their money.

Chairman

They are also receiving 9% interest on the loan.

Mr. Andrew Algeo

That is being capitalised.

Chairman

Whatever way it goes, it is money in the bank. Along with what Mr. Algeo has outlined regarding what the parties are receiving annually, there is also this interest payment on the loans. In 2020, that was €24.7 million. I would count that as a very good return. A lot of people with money on deposit would love to know where they could get 9% interest. It would seem to me to be inflated. It appears to me and others who have looked at this that it is very beneficial for Premier Lotteries Ireland and the parent company for that transaction to be taken and that loan to be taken out. Does Mr. Algeo agree it is a very favourable position for the parent company to be in receipt of 9% interest? Does he agree that is a favourable position to be in?

Mr. Andrew Algeo

Regardless of how the balance sheet is funded, the cash available to the shareholders will be what is retained after the costs of the business have been spent and the third-party debt has been repaid. It may not-----

Chairman

It increases the transfer of cash, though. Let us not beat around the bush with this. It increases the transfer of cash from Premier Lotteries Ireland and the lottery system to the parent company in the form of this 9% interest rate. Mr. Algeo has not clarified whether he believes this to be an extraordinarily high rate. Anyone who has any knowledge of basic economics would look at this and say it is an extraordinary figure.

Mr. Andrew Algeo

I am afraid I cannot comment on whether it is extraordinary or normal, other than to say I believe it is appropriate to the market.

Chairman

I am telling Mr. Algeo it is extraordinary. I am not a qualified financial adviser but based on common sense, why would I take out a loan at 9% if I could get one for 1%, 2% or 3%? This is a relatively long-term loan. It is an extraordinary transfer of cash that seems to be happening along with the dividends that are being paid. This seems to be an extraordinary transfer, which seems to benefit the parent company.

I will move on to advertising. I have been following this carefully. Mr. Algeo has said he is restricted in what he can say due to commercial sensitivities. Of the complaints received by the Advertising Standards Authority for Ireland, ASAI, in one year, 40% were related to the national lottery. Was Mr. Algeo aware of that?

Mr. Andrew Algeo

The ASAI was good enough to contact us after the last hearing and informed us that of the complaints received in 2022, the relevant figure related to the national lottery was 3%. That summed to 13 complaints, which was up from six complaints in the previous year. It is 3%. That is what the ASAI has informed us.

Chairman

That is okay. The advertisement make the claim over and over again that "90% of National Lottery sales [are] returned to communities". I looked at this, starting off with the ticket sales. We took the year 2021 and also looked back over a number of years. What actually goes back into good causes works out between 27% and 28.5%. In 2021, the national lottery had ticket sales of more than €1 billion. When the prizes are taken out, the figure is nearly €600 million. The gaming revenue is left, which is €168 million, of which 65% goes to the Exchequer and 5% goes to retailers in commission. There is no argument with that, although that figure may be 6%.

Mr. Andrew Algeo

It is 6% on all products except for 5-4-3-2-1 which is 5%.

Chairman

The regulator is funded by €1.5 million and the operator gets €103 million. I have asked members of the public what they believe that means. I do not claim this is scientific but I asked people locally what they thought about the 90% claim and they took it to mean that 90% of all money from ticket sales goes into the community and good causes, as in various environmental, charitable, community groups, organisations, projects, etc. That was their firm belief based on the advertising. That is what they take the national lottery advertising to mean. Does Mr. Algeo accept that there is a problem of credibility with that advertising?

Mr. Andrew Algeo

I do not believe there is a problem with credibility on that advertising. The advertising stated that 90% of ticket sales went to prize winners, good causes and retail agents.

Chairman

PLI is including prize winners and retailers, that is, the supermarkets or wherever the tickets are sold. In my innocence, from the way the advertising is pitched, I took it to mean that 90% was going to community groups and various projects. That is what I believed until recently. I would not take that much interest in the matter but I was surprised to find, when we got the figures and started crunching them, that we were really looking at a figure of between 27% and 28.5% or a little over one quarter of the proceeds from ticket sales and all other sales by the national lottery going to projects and good causes. That is the advertising piece. It is good that the funds go to these projects and obviously I would like to see more going to them. Does Mr. Algeo accept the point that it is little over a quarter that goes to those groups?

Mr. Andrew Algeo

That goes to go good causes.

Chairman

Yes.

Mr. Andrew Algeo

Yes.

Chairman

If he accepts that, does Mr. Algeo not think that the advertising should be changed?

Mr. Andrew Algeo

From time to time, the national lottery has run advertising to say that almost 30%, or 28%, of ticket sales go to good causes. The advertising campaign that I believe we are talking about was a 90% campaign which stated clearly, and the ASAI and the regulator agreed, that what we meant by the "community" in those advertisements were, as the ad stated, good causes, retailers and prize winners. Those were the findings.

Chairman

It is a very broad interpretation and I find it misleading. I do not claim it was scientific but I asked a number of people who play the lottery what they thought the claim in the advertising that 90% of the proceeds from ticket sales goes to the community meant. They told me they thought it went to local organisations, sports clubs, environmental projects and so on. Is Mr. Algeo aware that unclaimed prizes in the British lottery go to good causes after 180 days?

Mr. Andrew Algeo

Yes. In a twist, the good causes then fund advertising, such is the structure of lotteries. Yes, unclaimed prizes go to good causes and then the regulator decides how much of good causes funding does not go to good causes at all and is used for advertising instead. That figure in total related to about £160 million in the most recent figures.

Chairman

I hear complaints from people who play the lottery that since the two extra balls were introduced, it has become much harder to win and there are far fewer winners. Whose idea was it to add the extra balls? Was that the lottery's, the regulator's or some research company's idea?

Mr. Andrew Algeo

The application to change the number of balls in the lotto draw was made by An Post Lottery Company, approved by the Minister and then implemented by Premier Lotteries Ireland.

Chairman

Okay. I was anxious to know where that idea came from. When the prize went to €19 million because the jackpot had not been won, it had rolled over 51 times. That is an extraordinary amount. The public was getting a bit annoyed, to put it mildly. A decision was taken to change and put a limit on it. Was €19 million the must-win limit?

Mr. Andrew Algeo

There has pre-existed for many years, if not decades, in the lotto game a maximum amount to which the jackpot would grow. That maximum grows every time it is met but it is not met very often.

Chairman

What is the maximum limit?

Mr. Andrew Algeo

It is just above €19 million. I am sorry but I do not have the exact figure. The decision was made to change the rules of the game in the third quarter of last year so that if the jackpot met that cap, it would only roll five times more and then must be won.

Chairman

It can roll over five more times and does not have to be won the following week.

Mr. Andrew Algeo

That construct is also in the EuroMillions game so we felt the customers would be familiar with it.

Chairman

Did the decision to limit the prize fund come from the company?

Mr. Andrew Algeo

That came from the company. Around the time the jackpot hit the cap we thought that while it caused great excitement and was good-----

Chairman

Did the company think there was a credibility issue at that point?

Mr. Andrew Algeo

No. It was very exciting at that time but we also wondered if it had rolled that far, how far would it roll.

Chairman

I can say the excitement went out of it after about 20 or 30 weeks. People were not as excited then. There was a lot of frustration. I picked it up and I do not take much interest in these matters because I am not a gambler, or my gambling is extremely limited. There was a credibility issue with the public. Did the company pick that up?

Mr. Andrew Algeo

When we suggested that there was no credibility issue we foresaw that if this went on too long, one could arise.

Chairman

I call Deputy Carthy.

Deputy Verona Murphy

May I come in as I have to go in five minutes?

Chairman

Briefly, yes.

Deputy Verona Murphy

How much bonuses were paid to employees?

Mr. Andrew Algeo

I am unable to give information about the pay of employees. That is confidential.

Deputy Verona Murphy

The bonus figure in the accounts is €2.6 million. I am wondering how many employees it was paid to. I am not asking for their names.

Mr. Andrew Algeo

I am unable to give any further detail.

Deputy Verona Murphy

Mr. Algeo is not willing. A figure of €2.6 million was spent on bonuses. If there was a top ten, does Mr. Algeo know how many they were paid to? That is standard information. How many people in Premier Lotteries Ireland were they paid to?

Mr. Andrew Algeo

I am unable to provide a breakdown or any information about how it is that we-----

Deputy Verona Murphy

Did everyone in the company get a bonus?

Mr. Andrew Algeo

I am unable to provide information. I am sorry.

Deputy Verona Murphy

Why?

Mr. Andrew Algeo

It is common practice in all commercial organisations not to share remuneration information because it is a means by which companies compete with each other.

Deputy Verona Murphy

Who is PLI competing with? I was not aware that we had another national lottery company being operated by anybody in the country. Who is it competing with?

Mr. Andrew Algeo

We are competing with any organisation that requires good marketers, good digital developers, good retail sales teams, good accountants, good lawyers-----

Deputy Verona Murphy

Is Mr. Algeo for real? Is he really putting it out in the Committee on Public Accounts that this is because somebody else might seek one of his employees? That is not commercially sensitive. I did not ask for a job description. I asked how many employees were paid bonuses. I do not care whether they were sweeping the floor or running the company.

Does he know or does he not?

Mr. Andrew Algeo

I am unable to provide that, as it is commercial information.

Deputy Verona Murphy

I will tell the Chair something now-----

Chairman

Can I just ask a question? Obviously, I do not expect Mr. Algeo to give-----

Deputy Verona Murphy

Nobody is expecting-----

Chairman

Hold on for a second Deputy. I would not expect Mr. Algeo to say he knows Joe Bloggs, who is a technical engineer, got such an amount as a bonus. One question the Deputy asked is whether everybody in the company gets it. A "Yes" or "No" to that would be helpful.

Mr. Andrew Algeo

I am unable to provide a breakdown of that information because it is commercial.

Chairman

Unwilling or unable?

Mr. Andrew Algeo

I have a confidentiality-----

Chairman

Okay. I cannot see how that is commercially sensitive.

Mr. Andrew Algeo

I have a confidentiality agreement with my employer. I am unable to provide information that is-----

Deputy Verona Murphy

What does Mr. Algeo mean by saying he has a confidentiality agreement with his employer? What has that got to do with it?

Mr. Andrew Algeo

Information that belongs to PLI is information I am not in a position to publish.

Deputy Verona Murphy

Why is Mr. Murphy here?

Mr. Cian Murphy

I am here to answer any questions directed at me.

Deputy Verona Murphy

Did he get a bonus?

Mr. Cian Murphy

I am afraid I am going to have to echo Mr. Algeo's answers. Information on salary and remuneration is confidential. That is common commercial practice.

Deputy Verona Murphy

How then is it published in the accounts that €2.6 million was paid out in bonuses?

Mr. Seamus McCarthy

The Deputy may be misunderstanding the figure. I think there is a figure there of €2.6 million, which is salaries and short-term employee benefits for the CEO and senior management team. Is that the figure she is referring to?

Deputy Verona Murphy

That is the figure, and so what I am trying to ascertain-----

Mr. Seamus McCarthy

They are not bonus figures. I would take that to be the full salary amount-----

Deputy Verona Murphy

The full salary.

Mr. Seamus McCarthy

-----for the CEO and the senior management team.

Deputy Verona Murphy

Okay. Let us put it another way. I would call it bonuses, given the amount. What I am trying to ascertain is how many employees there are in that figure. How many are there?

Mr. Andrew Algeo

I am sorry but I am unable to give information beyond what is required by-----

Deputy Verona Murphy

Now that is a joke. This is the Committee of Public Accounts and a little respect would not go astray. How many employees are covered within that figure? I am looking for a number within that figure.

Mr. Andrew Algeo

I am sorry but I am unable to answer that question.

Deputy Verona Murphy

That is absolutely a disgrace, Chair.

Chairman

The Deputy is drawing a blank.

Deputy Verona Murphy

It is a disgrace. I have another question.

Chairman

We will let the public make their minds up on that.

Deputy Verona Murphy

It is a disgrace. We need transparency, trust and confidence-----

Chairman

Absolutely.

Deputy Verona Murphy

-----and we are not getting it. I have one more question. Where is Premier Lotteries Ireland's marketing expenditure accounted for in the accounts?

Mr. Andrew Algeo

It is in the general operating costs of the business, as it is in most commercial businesses. There is not a break-out of marketing in accounts as a norm.

Deputy Verona Murphy

There is not what?

Mr. Andrew Algeo

It is not normal practice for companies to disclose their marketing spend in their annual accounts.

Deputy Verona Murphy

Does the Comptroller and Auditor General agree with that?

Mr. Seamus McCarthy

I do not really audit private sector accounts. One thing that is certainly true is by comparison with the level of detail one gets in a public sector set of financial statements, there is much less in commercial accounts. One gets very little detail.

Deputy Verona Murphy

Are we on par on a competitive footing? That is the excuse being used for keeping it confidential.

Mr. Seamus McCarthy

That I cannot say because I am not familiar with marketing or advertising spends. One would certainly see figures for advertising and marketing in a public sector body. It would be obliged to provide that level of detail but there is a much greater level of breakdown because it is public money and the users of the accounts, which include members of this committee, as well as overseeing Departments and so on, expect a public sector body would give much more detail about its expenditure.

Deputy Verona Murphy

They are distinct from that perspective. I thank Mr. McCarthy. Was he able to ascertain the expenditure from the accounts?

Mr. Seamus McCarthy

No, I cannot see it. I do not believe it is disclosed so it is not there for me to see it.

Deputy Verona Murphy

All right. This is a licence that has been granted courtesy of the people. Two things occur to me.

Chairman

Some of these issues were raised at the time-----

Deputy Verona Murphy

I think last week Chair, as you know-----

Chairman

-----back in 2014.

Deputy Verona Murphy

-----we had the huge issue of the banking bonuses being received. There seems to be an exorbitant level of remuneration here and we cannot ascertain what it is.

Chairman

The level of detail is disappointing.

Deputy Carthy is next.

Deputy Matt Carthy

I thank the Chair. I welcome our guests and thank them for being here.

To put it in language everybody can understand, were a person to spend €10 on national lottery products, how much of it would go to the different dimensions, those being good causes, prizes, retailers and the operator?

Mr. Andrew Algeo

Taking the average over the last five years, because I happen to have the data on that basis, €5.60 would go to prizes, €2.80 to good causes, 60 cent in commission to the retailers and then €1 to the operator.

Deputy Matt Carthy

Okay. That is basically 90:10 in terms of the operator because that is where its 10% comes from.

Mr. Andrew Algeo

Yes.

Deputy Matt Carthy

Does the €1 to the operator cover all administration and operating costs before a profit is derived? That is, all salaries come out of that €1 and all advertising outside of what we have already discussed, meaning all general advertising, comes out of the €1 too.

Mr. Andrew Algeo

Yes, all costs that fall to the operator in the licence are out of that and there is no other source.

Deputy Matt Carthy

That includes interest rates and loan payments.

Mr. Andrew Algeo

Returns to shareholders on their investment or to banks, to the extent that those investments were funded by debt.

Deputy Matt Carthy

Okay, so when we say these are the percentages, these are the gross percentages coming down. There is nothing that has to be skimmed off the top for capital costs or anything else like that.

Mr. Andrew Algeo

Capital costs are at the very bottom of the €1.

Deputy Matt Carthy

Therefore, they all come out that. What is the percentage of prizes that are unclaimed?

Mr. Andrew Algeo

The percentage of prizes that are unclaimed has fallen from 5.1% in 2015 to 2.9% in 2021.

Deputy Matt Carthy

Thus, we could say it is between 3% and 5% on average.

Mr. Andrew Algeo

It has been consistent in falling. Under 3% is where the most recent figure is. It was 3.2% before that.

Deputy Matt Carthy

Yes, but there have been years where is was over 5%.

Mr. Andrew Algeo

When PLI commenced, 5.1% of prizes were unclaimed but we have been successful in lowering that to below 3%. The rate has reduced by nearly half.

Deputy Matt Carthy

Okay. If we go back to the €10, what proportion might the unclaimed prizes be? Would it be 10 cent or 50 cent?

Mr. Andrew Algeo

Unclaimed prizes are 1.6% of total sales, so 1.6% of the €10-----

Deputy Matt Carthy

Okay, it is 1.6%.

Mr. Andrew Algeo

-----is 16 cent.

Deputy Matt Carthy

Okay, and sometimes it is a bit higher.

Mr. Andrew Algeo

It has not been. The number has been relatively stable. It has been falling as a percentage of sales but relatively stable in absolute amounts.

Deputy Matt Carthy

All right, but if we take the assertion of 90% going into the community at face value, it is actually a little less than 90% because 1.6% is money spent on advertising by the operator.

Mr. Andrew Algeo

The advertising campaign is very clear and verifiable, which our advertising has to be. It says "community" means prizes, good causes and retailers and as I laid out, they add up to 90%.

Deputy Matt Carthy

However, it also includes prizes that are not claimed and are subsequently expended on advertising.

Mr. Andrew Algeo

The licence is very clear that once money has been allocated by the regulator to the prize account and remains unclaimed for a period of time, which is over three months in the case of most games, it then ceases to be prize money and becomes promotional money.

Mr. Seamus McCarthy

I think the Deputy's question is focused on effectively whether the figure for prizes Mr. Algeo is counting is for expected prizes or actual prizes. That might be the nub of it. In the 90% is Mr. Algeo counting expected prizes before unclaimed prizes are paid out or actual prizes after the unpaid prizes have been removed?

Mr. Andrew Algeo

The phrase "expected prizes" has a particular meaning in the lottery space, which is the prizes one would expect to be associated with the prize account.

Deputy Matt Carthy

Let me clarify, going back to the original point. Mr. Alego is saying approximately €5.60 out of €10 is allocated for prize money.

Mr. Andrew Algeo

By the regulator into the prize account.

Deputy Matt Carthy

But that includes unclaimed prizes.

Mr. Andrew Algeo

At the time that money is allocated there are no unclaimed prizes and it appears in the accounts as prizes.

Deputy Matt Carthy

Therefore, to clarify my point, 1.6%-----

Mr. Andrew Algeo

Sixteen cent.

Deputy Matt Carthy

Sixteen cent does not go back into the community. Because that is unclaimed, it goes back into the lottery's account, so the amount that is available to the operator is not actually €1 but €1.16.

Mr. Andrew Algeo

The 16 cent that used to be prizes and that the licence stipulates is now for promotion is promotional money for the benefit of the national lottery and does not go towards the profits of the operator and it is-----

Deputy Matt Carthy

That is clear, but it also does not go back into the community, even by the very broad definition the lottery has ascribed as going back into the community because it does not go in actual prize money, it does not go to good causes and it does not go to retailers. It goes to a separate account. Even if we were to take Mr. Algeo's basis that all these things are money going back into the community, the figure is less than 90%.

Mr. Andrew Algeo

The figure is 90%-----

Deputy Matt Carthy

It is not.

Mr. Andrew Algeo

-----as stated by the regulator and the ASAI because it comes from the accounts. Our advertising has to be clear-----

Deputy Matt Carthy

The lottery's advertising does not say 90% of the money is allocated to go back into the community. It says 90% goes back into the community and then, after the wee asterisk at the bottom, it states briefly that it includes prizes blah, blah, blah, but it is actually not the case that the full 90% goes back even, as I said, to that because it does not go to prizes. It is actually unclaimed. It does not go to good causes and it does not go to retailers. It goes into a separate fund. I am not saying there is anything illegal or untoward in how that is allocated, but it does mean that the advertising is not correct.

Mr. Andrew Algeo

The terms used in the advertising appear in both the licence and in the accounts and those are the ones that appear in the advertisement and the ones that add up to 90%. Our adverts have to be accurate.

Deputy Matt Carthy

It is just a yes-no question. For absolute certainty, Mr. Algeo accepts that the 90% includes unclaimed prizes.

Mr. Andrew Algeo

The 90% consists of prizes-----

Deputy Matt Carthy

Including those that are subsequently unclaimed. It is just a yes-no question.

Mr. Andrew Algeo

There are no unclaimed prizes at the time they are allocated to the prize account-----

Deputy Matt Carthy

That is fine.

Mr. Andrew Algeo

-----and that is what is the account is for.

Deputy Matt Carthy

The overall figure of 90% includes money that is not actually subsequently spent on unclaimed prizes.

Mr. Andrew Algeo

The 90% consists of the three figures that were stated, and that is accurate.

Deputy Matt Carthy

Okay, so what I have said is accurate.

Mr. Andrew Algeo

That 90% adds up to prizes, good causes and retailer commissions-----

Deputy Matt Carthy

That includes money-----

Mr. Andrew Algeo

-----and that is what the advertising says.

Deputy Matt Carthy

I am interested to hear Mr. Algeo say that the ASAI contacted the lottery after our engagement with-----

Mr. Andrew Algeo

It did.

Deputy Matt Carthy

Did it contact the Committee of Public Accounts?

Chairman

No, not that I am aware of.

Deputy Matt Carthy

Is it not strange that an advertising standards authority would contact somebody who was not present at the Committee of Public Accounts but not contact the committee? It would be useful if we were to seek clarification and a copy of that correspondence and also if we were to inform the Advertising Standards Authority of Ireland, in case it is not aware, that the 90% includes unclaimed prizes.

Going on to the issue of the unclaimed prizes, we know that about €122 million was unclaimed and the lottery has obligations in that regard. Will Mr. Algeo just remind us what those obligations are as to how that money can be spent?

Mr. Andrew Algeo

It falls to PLI to decide how the unclaimed prize money that is now promotional money is allocated between top-up prizes on the one hand and incremental marketing on the other, subject to the constraint that some of the money must be ascribed to top-up prizes.

Deputy Matt Carthy

I was in the car and was following the proceedings earlier. I will go back to my €10 analogy. I am the eldest in my family and when I was young it could happen that an aunt or an uncle would give me a tenner and tell me to make sure to get something for my little brother. I used to have a system whereby I would give him a euro and, therefore, I had lived up to the condition of the gift. The lottery has a similar method because it is told that it has to give some towards reclaimed prizes, but it is actually giving 20 cent. The lottery makes ten-year-old me look very generous.

Chairman

Pounds or euros, Deputy?

Deputy Matt Carthy

It would have been pounds back in the day.

Chairman

I would have thought so.

Deputy Paul McAuliffe

What type of pound?

Deputy Matt Carthy

If you got a tenner in sterling, it was a good day.

Chairman

South of the Border.

Deputy Matt Carthy

In fairness, the lottery is taking the piss in what it is giving towards top-up prizes. It is going to the absolutely bare minimum. Is that not fair to say?

Mr. Andrew Algeo

We strictly comply-----

Deputy Matt Carthy

I am not saying the lottery does not.

Mr. Andrew Algeo

-----and it is a very important decision for PLI as to how to promote optimally the national lottery. It might be one of the more critical decisions PLI has to make, and we take it very seriously and do it in a way that sustains the national lottery as best we can.

Deputy Matt Carthy

There are two ways the lottery can spend the money. As a matter of interest, would there be anything stopping the company if it decided to allocate a portion of that money towards good causes? Is it so rigid that it has to be spent on top-up prizes or marketing, or is there a flexibility such that if it decided that it would apportion some of that towards good causes, it could do so?

Mr. Andrew Algeo

PLI has to use the money within 365 days for promotion of the national lottery, and that is defined as either incremental marketing or additional prizes.

Chairman

I call Deputy McAuliffe.

Deputy Paul McAuliffe

I do not want to rake over what we have just discussed, but this is simple. The reason an advertisement is taken out is to try to promote or to create a positive feeling towards an organisation, and it is clear that this advertisement has not done that. Does Mr. Algeo believe that the advertisement has been destructive to the image and reputation of the national lottery?

Mr. Andrew Algeo

The way that PLI has operated the national lottery has brought about a situation in which the returns to all stakeholders are materially higher than before we started operating the national lottery.

Deputy Paul McAuliffe

Mr. Algeo is returning to the issues of allocation. That was not the question.

Mr. Andrew Algeo

No, the absolute amounts. All stakeholders have benefited from a situation in which national lottery sales had fallen by 20% in the previous seven years to a situation where, for instance, good causes returns are up 62% in those seven years. There are many parts to running the lottery, promotion being only one of them, but promotion is a very important part of it.

Deputy Paul McAuliffe

That is a separate question. I imagine that the thinking behind including the line that 90% went back to communities was to ensure that people felt that the national lottery was a positive thing. Clearly, however, that advertisement has backfired in a massive way, given the level of speculation and the fact that the witnesses are before the Committee of Public Accounts discussing it. It is not a trick question. Does Mr. Algeo believe that the advertisement has backfired?

Mr. Andrew Algeo

No, we do not.

Deputy Paul McAuliffe

How does Mr. Algeo account then for being before this committee debating the nature of a claim in an advertisement, rather than being here to discuss the positive work being done?

Mr. Andrew Algeo

We accepted an invitation to discuss the report from the Comptroller and Auditor General rather than any specific advertising campaign, but we will be happy to answer the questions on this campaign.

Deputy Paul McAuliffe

Absolutely, I accept that. Many people, though, who participate in the national lottery see the positive work being done in this regard. Many people also question it as just being another form of gambling and are sceptical about it. As a basic marketing analysis of what happened, surely putting together a radio advertisement that results in Deputies and Senators in these Houses questioning its very nature must underline a massive failure on behalf of the national lottery to promote the activity the company is involved in and the credibility of the organisation? Am I missing something in asking this question?

Mr. Andrew Algeo

The campaign-----

Deputy Paul McAuliffe

The very fact that Mr. Algeo is here is a big-----

Mr. Andrew Algeo

We are here to answer questions on the report of the Comptroller and Auditor General's report and not on an advertising campaign. The advertising campaign, however, is accurate in the view of our regulator and of the Advertising Standards Authority of Ireland, ASAI. Awareness of the impact the national lottery has on the community has risen in recent years. I have no evidence to suggest there is an issue about it.

Deputy Paul McAuliffe

Perhaps that was a better line to use than the one about 90%. I thank the Chair.

Chairman

On the survey done by Red C, and this question slipped my mind earlier, I and two other members of the committee received these calls in the context of detailed questioning regarding the national lottery and our attitudes towards it. I know that Premier Lotteries Ireland will not be able to find out the responses given by each individual, but does the company seek a breakdown of the analysis of responses from public representatives?

By the way, I have not met any other Deputies around the House who have been contacted by Red C. I am not saying they were not contacted. I have not spoken to all 160 Deputies, or, rather, the other 159 apart from me. I have asked this in different places regarding whether anyone has been contacted, though, and I have drawn a blank in this regard. I do know, however, that three members of this committee were contacted in October and-or November. My office received phone calls a few times but I was not available. Was Deputy McAuliffe contacted?

Deputy Paul McAuliffe

I was contacted on two occasions.

Chairman

Therefore, four people on this committee were contacted. This is a bit of a coincidence. Would Mr. Algeo accept that it seems to be a bit of a coincidence for four out of 13 members of this committee to have been contacted? Would he accept this seems like a high number? I refer to members of this committee being contacted by a polling company, regarding our attitude to many of the topics raised here today, in the few weeks before the regulator was due to appear before this committee and some five weeks before the representatives of the national lottery were also to appear. I assure Mr. Algeo that my responses to the questions would be interesting, and if Red C wishes to provide this information to the company, it can. I will not stop it from doing so. Does Mr. Algeo not find it unusual and odd that at least four members of this committee were contacted in the month or so before the regulator and he were due to appear before us?

Mr. Andrew Algeo

We commissioned the research some time in September, I would imagine, and it started in the middle of October, as it had done in previous years.

Chairman

Regarding the commission, was any request made to Red C to seek the views of members of this committee in particular?

Mr. Andrew Algeo

No, nor would we at that time have had any reason to believe that we would-----

Chairman

Or Dáil Deputies?

Mr. Andrew Algeo

No. A broad sample of politicians was included, and all this was undertaken prior to any suggestion of us appearing. We do not appear here in the normal course of events, so we had no foresight of this.

Chairman

I understand that. Equally, though, I must tell Mr. Algeo that I have never been very good at having my name pulled out of a hat. This is being truthful.

Deputy Paul McAuliffe

The Chair does not play the lotto.

Chairman

No. I assure the Deputy I do not. My point is that I find it unusual that the names of four members of this committee were pulled out of the hat in respect of a random survey of the public, which included politicians and anybody else. Four members of this committee were contacted. We have confirmed that four of those present were contacted, at least, and perhaps there may have been one or two others, about a month or so before the regulator and Mr. Algeo were due before this committee. I find this unusual.

Mr. Andrew Algeo

I imagine that Red C tried to contact all or most politicians for that survey.

Chairman

Right.

Mr. Andrew Algeo

Many will not have responded. This would be the usual pattern.

Chairman

Okay. I call Deputy Carthy to ask one brief question.

Deputy Matt Carthy

There has been much talk about player welfare. I hope this is an area that the national lottery plans to improve, based on the responses earlier. If player welfare is a serious consideration, then this aspect needs to be quantifiable. We are the Committee of Public Accounts and this is how we deal with things. We must be able to assess whether an agency or company we are dealing with is serious about something it says is a priority. The way in which we do that is to be able to get some form of an assessment regarding how much is being spent and how many people are being prioritised in respect of their workload in that area. Moving on, the online purchase of lotto tickets has increased in recent years. A greater emphasis has been placed on this aspect by the company's marketing. People are being encouraged to go down this route. What percentage of overall sales does this product constitute now?

Mr. Andrew Algeo

In 2021, digital sales represented 17% of all sales of the national lottery and the other 83% was through retailers.

Deputy Matt Carthy

Those were the figures for 2021. I presume the national lottery expects this level to increase.

Mr. Andrew Algeo

In the short term, I probably do not, I do in the very long term.

Deputy Matt Carthy

Regarding online purchases, is there a limit on the number of tickets individuals can buy in this way?

Mr. Andrew Algeo

The licence stipulates various limits. There is a limit, in euro, on the amount individuals can spend in a day, a week and a month.

Deputy Matt Carthy

What are those limits?

Mr. Andrew Algeo

It is €75 in a day, €300 in a week and €900 in a month.

Deputy Matt Carthy

If someone was spending €900 in a month, would a red flag be raised? How would this kind of situation be dealt with?

Mr. Andrew Algeo

Premier Lotteries Ireland has a wide variety of player protections. People navigating their way through those in a way that led to spending as high as €900 monthly would have had to have appeared on the daily, weekly and monthly reports. By the end of their first month, then, they would have had multiple flags raised. What would and does happen in such cases is that people receive an ever-escalating set of messages, which point out to them their relative spending versus what they used to spend or their relative spend versus other players. We have used extensive AB testing and third parties to help us with this undertaking to increase the efficacy of these messages.

Deputy Matt Carthy

What is AB testing?

Mr. Andrew Algeo

A message might, for example, be sent to the Deputy saying he is spending more than he did last week. Another message could also be sent to tell him he was spending more today than he did yesterday. One of these messages would be more effective than the other, so we would go to the more effective one. When we say "more effective", we mean that people who have been flagged have reduced their spending and activity.

Deputy Matt Carthy

What happens if somebody does not reduce such activity?

Mr. Andrew Algeo

The person in question would get a phone call from a member of our staff, who would have a conversation about the expenditure and activity on the account. In extremis, if our member of staff is not satisfied that the person is demonstrating that they are in control of their gambling, then we will put some limit on the account, including and up to exclusion.

Deputy Matt Carthy

For the most recent period covered by the company's figures, how many people were contacted by phone? Does Mr. Algeo have the figures for 2021?

Mr. Andrew Algeo

The truth is I do not have the figures, but, equally, we provide all this information to the regulator in regular dashboards, with all the analysis we do.

Under the licence, that is the correct action for us to take rather than publishing it.

Deputy Matt Carthy

Let us to go the other extreme. How many people would have had their accounts cut off essentially?

Mr. Andrew Algeo

That is information we share with the regulator-----

Deputy Matt Carthy

I am asking Mr. Algeo to share it with us.

Mr. Andrew Algeo

Other than disclosing it to the regulator, we keep that information confidential.

Deputy Matt Carthy

Why? It could hardly be described as commercially sensitive.

Mr. Andrew Algeo

We keep all information that does not have to be published confidential unless there is some-----

Deputy Matt Carthy

Does it have to be published that 90% of the national lottery's money goes back into the community?

Mr. Andrew Algeo

That is published.

Deputy Matt Carthy

I know it is published. I see it every time I turn on the television. What I am saying is that there is no legal obligation on PLI to publish that. Here is another piece of information that would be useful to show the national lottery's bona fides in terms of player protection - saying that "X" number of people were cut off from its website because of concerns about their welfare. That would be a very good news story for the national lottery so I am asking Mr. Algeo to share that information with us. The only reason I could think of that PLI would not give that information was if the number was very low or zero.

Mr. Andrew Algeo

PLI operates under the licence the State asked us to operate under and that requires that we disclose that information in full to the regulator, which we do. It also provides a clause-----

Deputy Matt Carthy

Is it fair to say that there is nothing in that legislation that prevents PLI from making that public?

Mr. Andrew Algeo

The licence provides us with the ability to keep information confidential. The State granted us that right.

Deputy Matt Carthy

It gives PLI the right but it does not place an obligation on it.

Chairman

The point the Deputy was making is that if PLI wishes to publish it, it can do so.

Mr. Andrew Algeo

We publish it to the regulator in all its technicalities.

Deputy Matt Carthy

We have had a meeting with the regulator. That is the same as not publishing it at all as far as I am concerned. Can someone purchase tickets on the national lottery website with a credit card?

Mr. Andrew Algeo

No.

Deputy Matt Carthy

Red C contacted my office on a number of occasions about the survey. Thankfully, my staff decided I had better things to do than taking the call.

I understand that PLI sought to have some parts of the Comptroller and Auditor General's report redacted. Is that true?

Mr. Andrew Algeo

That is correct. The Comptroller and Auditor General shared with us the report a couple of days before it was published. While we broadly welcomed the report, we noted that we considered some information in it that related to the quantum of marketing spend, if PLI was included, to be confidentially sensitive, as all private entities would consider their marketing spend to be confidential so we asked-----

Deputy Matt Carthy

PLI wanted to prevent the public from knowing about one of the key issues that has been of public concern and concern to this committee

Mr. Andrew Algeo

Like all commercial organisations, we consider marketing spend to be commercially sensitive and confidential.

Deputy Matt Carthy

This is spend relating to money allocated for prize funds that PLI advertised to all and sundry was going back into the community when in fact it was not but was instead being used to make those same advertisements.

Mr. Andrew Algeo

The use of the promotional spend, which falls to PLI, is carried out according to the research, expertise and experience of PLI. We consider those things to be commercially sensitive and do not publish them. That is the commercial norm.

Deputy Matt Carthy

No, it is not. The State, through a very stupid Government decision, privatised the company and created it through a licence structure that put in place a legal provision, in a law passed by the Oireachtas, which stated there was a proviso under which unclaimed prize funds can be spent. It also stipulated that some part of that money must go towards topping up prizes. That is not the case in any other area. I do not understand how anyone could conceive that it is not in the public interest to find out that only 2% of that money went to that purpose and 98% went towards advertising by the company, particularly when PLI will not give us the figure in terms of other advertising. For all we know, this could be PLI's entire advertising budget.

Mr. Andrew Algeo

That information shines light on the marketing activity of PLI and that is universally commercially sensitive.

Deputy Matt Carthy

Was the company aware that the Office of the Comptroller and Auditor General is one of the few offices that has constitutional protection? Who did it think it was that it had the right to seek to have a section of a report redacted?

Chairman

There is a difference here. The regulator's accounts are audited by the Comptroller and Auditor General and through that, it is accountable to this committee. PLI is a private company. There is a difference.

Deputy Matt Carthy

I am referring to the Comptroller and Auditor General's report not the-----

Chairman

I know that and the Deputy is entitled to do that.

Mr. Seamus McCarthy

PLI was perfectly entitled to ask me and I was perfectly entitled to go ahead.

Deputy Matt Carthy

The Comptroller and Auditor General was perfectly entitled, and I would argue correct, to tell it to go and jump in the lake.

Chairman

That concludes the questions. I thank Mr. Murphy and Mr. Algeo for attending and the staff of PLI for assisting the committee in preparing for today's meeting. I also thank the Comptroller and Auditor General and his staff for attending and assisting the committee. Is it agreed that we will seek any follow-up information and carry out any actions? Agreed. Is it also agreed that we note and publish the opening statements provided for today's meeting? Agreed.

Deputy Matt Carthy

Could we also agree, as was suggested by a number of speakers, that we put the regulator back on our agenda for a forthcoming meeting?

Chairman

We can do that. At our next meeting, at 9.30 a.m. on Thursday, 15 December 2022, we will engage with the Office of Public Works.

The witnesses withdrew.

The committee adjourned at 3.37 p.m. until 9.30 a.m. on Thursday, 15 December 2022.