I wish to make a few observations in relation to the Bill and in relation to some aspects of the Irish Hospitals Sweepstakes. The first point I would make is that the nub of the difficulty which one encounters in relation to the sweepstakes lies in section 2 of the Public Hospitals Act, 1933. This is a short section which sets out how the amount of money described in the accounts as proceeds of the sale of tickets is to be arrived at. The section reads:
When calculating for the purposes of this Act the amount of moneys received from the sale of tickets in a sweepstake, the value of tickets issued free of charge by way of reward to a seller of tickets shall be excluded from the calculation, and there shall be deducted from the nominal selling price of all other tickets all commissions, prizes, and other remuneration given in relation to the selling of such tickets.
The effect of that section, which dominates the whole question of the accounts of the sweepstakes, is to enable an undisclosed sum to be deducted, quite legally and lawfully, before the figure as shown in the accounts as proceeds from the sales of tickets is arrived at. What gives rise to some concern is that, while it is lawful to deduct these figures in this way or to deduct the various expenses which apparently can be incurred abroad, there is no way whereby the auditors or the Minister for Justice can know the amount of such expenses.
The expenses we are talking about in this Bill are a completely different set of expenses from the expenses that are incurrable and deductible in accordance with the terms of section 2 of the 1933 Act. What we are talking about here today are the expenses of the promoters which are audited by an eminent firm of chartered accountants with whose audits I am totally satisfied. Let us be clear at the outset that we are talking only about the second and audited set of expenses and not about what it is lawful to deduct by way of commission, expenses, prizes and what the Act refers to as other remuneration paid in relation to the selling of tickets.
During my time as Minister for Justice one of the aspects of the sweepstakes which caused me concern from time to time was the fact that under section 2 of the 1933 Act I was not aware of the extent of these expenses and neither had I any way of becoming so aware. I was perfectly satisfied in relation to the expenses shown in the accounts. Section 2 of the 1933 Act— I understand that this is a re-enactment of a similar provision in the Public Charitable Hospitals Act, 1930, when the sweepstakes were established— allows something that is pretty open-ended. I am not suggesting that section 2 of the 1933 Act was abused because I cannot prove that there was abuse, but it is known that substantial payments were made quite lawfully in countries outside Ireland in relation to this. Nevertheless, one would get a truer overall picture of the financial situation of the Irish Hospitals Sweepstakes if what the promoters are allowed to exclude by virtue of section 2 of the 1933 Act were made public.
When I say "made public" I do not mean that it should be shown to the public at large. However, I think that the Minister for Justice should know what is intended when he is being asked to sanction payments for the sweepstake, and he should also be given some account of the payments excluded by virtue of section 2 in previous sweepstakes. My experience as Minister for Justice was that that information was not forthcoming. There was no statutory obligation that it should be forthcoming as the law stood and as it now stands. Therefore neither the Minister nor the public can form a true picture of the overall situation in the absence of this information. This is the nub of the whole question when one is discussing the financial affairs of the Irish Hospitals Sweepstakes. If one is not in possession of the full facts one cannot have an informed opinion in regard to them.
In relation to the functions of the Minister for Justice in sanctioning these sweepstakes, Deputy Collins and the Minister mentioned that the Minister's sanction had to be obtained in advance. The Act sets out the date on which the sale of tickets can commence. My experience as Minister for Justice was that the sweepstake in question was already well under way by the time I was asked to sanction the holding of it. When I pointed out that sanction should be given and that the scheme should be signed before any tickets were sold, I was told that it was necessary to sell tickets in the USA and Canada a long time before the running of the race on which the sweepstake was being held and that it would not be feasible to give the scheme to the Minister for sanction at an earlier date. I had some misgivings about that, but I was faced with a situation in relation to that, as I was in relation to other aspects of the Hospitals' Trust: I did not want to interfere because several hundred people were employed in the organisation. As Deputy Collins said, they were people who would have difficulty, even in those days of comparatively full employment, in finding alternative employment. Of course, today the position is even worse. If many of the people who are employed in the sweepstakes did not labour under certain disadvantages they would still find it difficult to get employment today. That is the factor which must permeate our thinking in relation to this Bill and to the Irish Hospitals Sweepstakes in general. If the sweepstakes were discontinued, several hundred people would no longer be in employment and a net figure of about £4 million per year would be lost to us in terms of foreign earnings.
It is proposed to increase the post-section 2 expenses, the audited expenses, from 30 per cent to 40 per cent. It is also proposed to regularise the existing position to give 30 per cent to the hospitals' fund. This decreases the prize fund from 40 per cent to 30 per cent and, accordingly, there has to be a fairly substantial drop in prizes as a result of this. I am sure the Minister and the promoters appreciate that this is likely to affect the future commercial success of the sweepstakes. Section 12 (2) (b) of the 1933 Act contained a provision that the expenses of holding the sweepstake should not exceed 7 per cent of the moneys received from the sale of tickets as defined by section 2. For some reason that I do not understand that was taken out in the 1940 Act, but my recollection in relation to the promoter's fee is that for some time it has been 6 per cent. I cannot understand why it was decided in 1940, and again now, not to include in this section which is now being inserted instead of section 12 of the 1933 Act, the same limitation that was in the 1933 Act.
Over the last four or five sweepstakes no organisation and management fee has in fact been earned because the amount of the expenses equalled or exceeded the 30 per cent. This is a phenomenon that has only arisen from late 1973 or early 1974 onwards. It may have been true of one or two sweeps during the war also, when due to war-time conditions the proceeds were abnormally low, but generally speaking the amount earned by the promoters in organisation and management fee, up to approximately the end of 1973 was a figure slightly in excess of £10 million—this is apart from any other income that might derive to the promoters from any other aspect of the hospital sweepstake.
I can recall that a proposal was made either shortly before or after I became Minister for Justice, as to the intention of the promoters to run four sweepstakes a year instead of three. At that time the income from organisation and management fee to the promoters was very substantial indeed, and would have run at well over £¼ million a year. The suggestion was made either by my predecessor or by myself, that if a fourth sweepstake was being run, in view of the three that were being run, it would only be equitable that the management fee or percentage take would be increased because we had a situation at that time that for a very long number of years there had been substantial fees drawn by the promoters, and it would appear that the running of a fourth sweepstake in the year would simply have the effect of increasing further the total amount which they would take.
At that time discussions were held between my Department and the representatives of the promoters and the representatives of the promoters agreed that it was likely that the holding of a fourth sweepstake would certainly increase their income, but they regarded this as fair, because of the provision in the 1933 Act, as amended by the 1940 Act, that if the expenses were going to exceed 30 per cent they, the promoters, would have to bear whatever losses were entailed as a result of such an excess over 30 per cent in the audited expenses, the post-section 2 expenses.
After a good deal of discussion it was finally agreed that we would not seek to reduce the percentage to which the promoters would be entitled for organisation and management fee, on the clear understanding that if the sweep ever did run into this kind of difficulty, the promoters would carry the loss. At that time, in the early seventies that seemed a very remote contingency indeed, but this has happened and the expenses ratio of the audited part of the expenses now exceeds 30 per cent. In considering the proposition that is put to us now to increase the overall ratio of expenses by 33? per cent, up to 40 per cent, one has to take account of the fact that very substantial sums indeed were drawn up to late 1973 or early 1974 by the promoters over a very lengthy period from organisation and management fee alone. I do not want it to be alleged that I am in any sense begrudging the promoters of the sweepstake the fact that they were in a position to draw that amount by way of organisation and management fee for the work they did. Whatever wealth they acquired from their promotion and operation of the sweepstake it can certainly be said that it was a boon to Irish industry generally. There was very heavy investment by the families concerned in industrial and commercial undertakings in this country in earlier years when it was less obviously profitable to make such investment as it became in later years, and some of the undertakings when this investment was made were probably very shaky undertakings even though they subsequently became prosperous undertakings. Nevertheless we are faced with this situation, and we should bear in mind that the amount drawn by way of organisation and management fee over the years by the promoters was very large.
One of the reasons it was allowed to remain at a comparatively high percentage figure was as an insurance for the promoters against the day that might possibly arise when they would be forced into a situation where they would have to carry part of the expenses. This has now happened. However, it is reasonable to ask that if the audited expenses have increased fairly dramatically over the last two or three years, as they appear to have, have the other expenses which are not audited and which are allowed by section 2 of the 1933 Act to be deducted before arriving at this figure of proceeds of sale of tickets, also increased in approximately the same proportion? If they have, is the Minister aware by virtue of the fact that he is introducing this legislation, what the approximate amount of such expenses are?
There was a very extensive and deeply researched article on the whole question of the Irish Hospitals Sweepstakes in the Sunday Independent on 21st January, 1973 by Mr. Joe MacAnthony, which caused some controversy at that time, and in the course of that article Mr. MacAnthony estimated that the actual total gross proceeds from the sale of tickets in the Irish Hospitals Sweepstakes is approximately one-third higher than the figure which is lawfully returned to the auditors by virtue of section 2 of the Public Hospitals Act, 1933. If that is still the case, it would suggest that the gross proceeds of the average sweep nowadays is close to £4½ million. The latest accounts which I have been able to obtain are those for the Cambridgeshire of 1975 which were circulated on 18th December, 1975. The Library has no later accounts although I think the Minister referred to the Irish Sweeps Hurdles of 1975, but that is not yet available in the Library. In that we have the situation where the proceeds from the sale of tickets in accordance with section 2 of the Public Hospitals Act, 1933, before providing sellers' prizes, was £3,382,000 and after deducting sellers' prizes it came to £3,297,230.
It is worth comparing the figure from the accounts quoted in Mr. MacAnthony's article of 21st January, 1973, for the sweepstake on the Cambridgeshire in 1972. At that time the tickets cost £1 each, which is half what they cost for the Cambridgeshire in 1975. The gross proceeds after deduction of sellers' prizes were shown as £3,916,000. That is a decrease of over £600,000 in the meantime. This would appear to indicate that the number of tickets actually sold and returned for the draw in the Cambridgeshire sweepstake of 1975 was significantly less than half the number sold and returned for the draw in the Cambridgeshire sweepstake of 1972. The money is over £600,000 less and the tickets cost twice as much. Therefore, the number of tickets actually sold and put into the draw was less than half the number in 1972.
It may be because sales of tickets have dropped dramatically over the past few years the ratio of expenses has increased. Unfortunately we may find ourselves in a kind of vicious circle because the number of tickets sold may decrease further due to the fact that the prize fund will be further depressed as it is being cut by 10 per cent.
In relation to the prizes there is an observation I should like to make about what is described by the Irish Hospitals Sweepstakes as their super prize. The super prize was originally brought in some years ago at £200,000. It was increased last year, I think, to £400,000 when the price of the tickets was doubled. For some reason which has never been explained to my satisfaction the winner of a super prize never gets £400,000. I think he gets £75,000 in cash and an annuity is bought for him which will give him a certain annual income for the remainder of his life.
From the point of view of the promoters or those providing the prize, the cost of the annuity clearly will vary enormously depending on the age of the winner of the super prize. You can buy quite a substantial annuity for an 80 year old man or woman comparatively cheaply whereas, if you want to purchase the same annuity for a 20 or 25 year old man or woman, the cost will be very much higher. It seems, therefore, there is a great element of luck, so far as the promoters of the sweepstakes are concerned, in who wins. The cost of providing the annuity will vary enormously depending on the age and the health condition of whatever person is lucky enough to win.
It seems to me that the original intention, and the intention which was carried out when the super prize was £200,000, was that the prize would be paid to the person and he could do what he liked with it. If he wanted to buy an annuity himself, or to invest it, he was free to do so. I do not know why that should not now be the case, and why there is a payment of £75,000 and a life annuity is substituted for what is advertised as a prize of £400,000.
It is worth noting the contrast between the Cambridgeshire of 1975 and the Cambridgeshire of 1972. Even before the severe contraction of 25 per cent in the prize fund proposed in this Bill, there was already a fairly substantial falling off in the amount paid in prizes. In the Cambridgeshire of 1972, £1,894,000 was paid in prizes, whereas in the Cambridgeshire of 1975, £1,331,000 was paid in prizes. The figure must now inevitably drop by 25 per cent, assuming the sale of the same number of tickets, which would be a drop of about £300,000 in prizes.
It should also be noted—I do think the Minister adverted to it in his opening remarks—that, while the hospitals' fund is now being increased to 30 per cent, the hospitals do not get 30 per cent of the proceeds as defined by section 2. The hospitals get 75 per cent of the 30 per cent of the proceeds as defined by section 2 and the State gets 25 per cent by way of stamp duty. One by-product, if you like, of this proposal in the Bill to ratify the increase to 30 per cent for the hospitals' fund is an increase in the State's take from the proceeds of each sweepstake.
In the Cambridgeshire of 1975 the amount the hospitals actually got was £741,000. Those are the latest accounts available in the Library. Assuming the Cambridgeshire of 1975 is fairly representative of four sweepstakes in any one year that would mean that the hospitals' take for a full year would be in the region of £3 million. I am not quite sure what the up-to-date figure is for health expenditure. It goes up so much from day to day almost, that one finds it difficult to keep up with it. Between capital and current expenditure, so far as I have been able to ascertain, the figure for the current financial year, 1976, for total health expenditure is in the region of £260 million. Therefore the contribution made by the Irish Hospitals Sweepstake towards our total health expenditure is a little over 1 per cent of the total expenditure.
Approximately £3 million is not a figure to be sneezed at. At the same time, one should look at the contribution of the hospitals sweepstake in relation to the entire expenditure. It appears to amount to a little over 1 per cent only. It is fair to say that in the thirties and the forties, when public expenditure generally was only a tiny fraction of what it is now, the Irish Hospitals Sweepstake made a significant contribution to the health of this country, to the cost of hospital buildings and to the meeting of deficits in voluntary hospitals, and so on.
The hospital building programme initiated after the war certainly could not have been undertaken without what was at that time a pretty substantial fund which had been accumulated during the war by the hospitals commissioners from the Hospitals Trust and which became available for spending in 1947-48 and onwards. A very useful and very valuable programme was carried out for which a high proportion of the credit must go to the Hospitals Trust. Their contribution now is very much less significant. There are voluntary hospitals running huge deficits every year, perhaps in the case of some of the bigger ones, approaching £1 million a year. When one sees the size of the deficits now being incurred by voluntary hospitals one realises that the contribution of the Irish Hospitals Trust, while welcome, is only a fraction of the significance it had for the country as a whole in times past.
Mr. MacAnthony's very lengthy but interesting article in the Sunday Independent is available to anyone who is interested and wants to read it, but I think it is only right that one of the things he provoked, as it were, should be referred to in this debate. That was a statement issued by a subcommittee of the associated hospitals sweepstakes committee. It was issued a couple of months after Mr. MacAnthony's article of 21st January, 1973, and it set out the system of running the sweep as provided for in the various Acts and assured the public by and large that the provisions of the Acts were being complied with as were the provisions of the schemes sanctioned by the Minister for Justice. Nobody denies that and Mr. MacAnthony never suggested the provisions of the Acts, except perhaps in minor ways, such as the timing of the submission of the scheme, were not complied with.
The matters that have given rise to concern both to Mr. MacAnthony and others who have written about the hospitals sweepstakes are matters outside the provisions of the Acts and outside the control of the auditors. The committee which dispenses the money when they get it from the promoters after the final audit are all people of the very highest integrity. Their function is simply to spend the money given to them by the promoters. They have no control whatever over the actual running of the sweepstake. Their function is simply to approve of what is given to them and make arrangements to distribute it in accordance with the directions. I think, of the Minister for Health. I believe for the most part the money is given to the various voluntary hospitals to help them to meet deficits. All these people perform their functions precisely as they should. They know very little, if anything, more than the ordinary public about the actual running of the sweepstake, about the expenses incurred, and so on, because it has nothing to do with them. It is not part of their function to know anything about that or to approve of anything. I am quite certain that these people, being persons of such eminence, would not approve anything they believe to be improper and it would be wrong for these people to react to any possible criticism of the Irish Hospitals Sweepstakes as being in any way a criticism of themselves.
There are two supervening difficulties in this whole question of the Irish Hospitals Sweepstakes. One is that section 2 of the 1933 Act is open-ended and enables one entire set of expenses to be incurred without any supervision by the Minister for Justice, the Oireachtas or a firm of auditors. There is no accountability, public or private, in relation to that set of expenses. The second supervening problem is the fact that there are several hundred people employed and it is very much in their interest, in the interest of their families and in the interest of the economy that their employment should continue. The Irish Hospitals Sweep brings into the country a figure of foreign currency which unfortunately is not growing but is a figure of several million pounds a year. These are earnings which would not otherwise be earned because 90 per cent of the sales are foreign sales. The bulk of the sales are in North America, Canada, Britain and Northern Ireland. These are all export earnings. These are the problems within which we have to discuss the question of the Irish Hospitals Sweepstakes and, because these difficulties exist, one is inhibited from being either as frank or as exact as one might be if these difficulties did not exist.