The Treasury manages public spending within two ‘control totals’ of about equal size:

  • departmental expenditure limits (DELs) – mostly covering spending on public services, grants and administration (collectively termed ‘resource’ spending) and investment (‘capital’ spending). These are items that can be planned over extended periods.
  • annually managed expenditure (AME) – categories of spending less amenable to multi-year planning, such as social security spending and debt interest.

National Lottery spending as recorded in the National Accounts reflects money spent from the National Lottery Distribution Fund (NLDF) – a fund for good causes, overseen by the secretary of state for Digital, Culture, Media and Sport – and is included within AME. The money distributed by the NLDF is raised via a transfer from the National Lottery operator. As such, public sector receipts are boosted by the precise amount of the transfer, which is then allocated for spend on good causes. These receipts are separate to ‘Lottery duty’, which is a duty on taking a chance or ticket in a lottery promoted in the UK. All lawful lotteries are exempt from the duty, except the National Lottery.

In our latest forecast, we expect NLDF good cause income to amount to £1.6 billion in 2018-19 and expenditure to amount to £1.8 billion (with £1.3 billion of current spending and £0.5 billion of capital spending). That income would represent 0.2 per cent of total public sector receipts, and is equivalent to £60 per household and 0.1 per cent of national income. NLDF spending amounts to 0.2 per cent of total public spending, and is equivalent to £70 per household and 0.1 per cent of national income.


  • Latest forecast

    Our latest fiscal forecast was published in March 2018. National Lottery current expenditure was £1.4 billion in 2016-17, is forecast to be lower at £1.3 billion between 2017-18 and 2019-20 and then to fall again to £1.2 billion a year from 2020-21. National Lottery capital expenditure is forecast to be stable at around £0.5 billion a year across the forecast period. The latter is included in ‘Other PSGI items in AME’ in the Total Managed Expenditure (TME) table in our Economic and fiscal outlook. As a share of GDP, total expenditure is forecast to be just below 0.1 per cent throughout the period. NLDF income is forecast to stay between £1.6 billion and £1.7 billion in cash terms, or just under 0.1 per cent of GDP.

    Expand to read the extract from our March 2018 EFO

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  • Forecast methodology

    Forecast process

    Our forecast for NLDF income reflects our estimate of the overall level of National Lottery ticket sales (including scratch cards and other games) and the share of those stakes that are transferred from the operator to the fund. Our forecast for the overall level of stakes is informed by the assumptions in the HM Revenue and Customs Lottery duty model that we use in our receipts forecast. As the overall level of stakes is the key driver of the spending forecast, with the rest being largely assumption-driven (i.e. that the full level of annual income is drawn down from the Fund by distributing bodies), most of the scrutiny takes place on the receipts side of the forecast. The assumptions that drive the spending forecast are reviewed each year to ensure they remain appropriate. The Department for Digital, Culture, Media & Sport (DCMS) provides us with outturn figures for how spending is split across current and capital, as well as across economic categories. Our forecast assumes these splits remain constant at the same level as the most recent outturn year over the forecast period, and are applied to our forecast for total fund income.

    Forecasting model

    Income to the Fund is derived from the share of all National Lottery ticket sales allocated to good causes under the terms of the National Lottery operating licence. Total income from sales is derived from our Lottery duty forecast by dividing the receipts forecast by the duty rate.

    Lottery duty is forecast using a simple econometric model: the model estimates ticket sales using our nominal consumption forecast as a determinant. The duty forecast is then arrived at by multiplying ticket sales by the duty rate (12 per cent). The forecast for fund income is obtained by applying the yearly growth rates from the duty forecast to the latest in-year estimate, which is informed by the published HMRC data on Lottery duty receipts.

    Up until our November 2017 forecast, we assumed that total AME (current and capital) spending in the forecast period would fully align with the income from the NLDF – i.e. the entire amount would be drawn down by the fund each year. We altered this approach in March 2018, as recent experience showed that this was no longer the case. We now expect expenditure to exceed income in the short term, drawing down on reserves that the fund has accumulated. The amount the fund is expected to spend is informed by the latest bottom-up estimates of funding commitments provided by the lottery distributors and scrutinised by DCMS. We then assume that the fund will begin returning to balance in the longer run. Of the total amount spent, just under three quarters is current spending and just over a quarter is capital. The latest outturn data are used as the basis for arriving at the proportions across the two dimensions (current or capital spending and economic category breakdown), with the proportions held constant over the forecast period.

    Main forecast determinants

    The main determinant driving our forecast for overall stakes is nominal consumption, which drives the duty forecast. (The duty forecast methodology is discussed in further detail in the forecasting model subsection.)

    Main forecast judgements

    The main judgement on the spending side of the National Lottery forecast is the proportion of NLDF income spent each year, meaning that the fund will either draw down on reserves (if spending exceeds income) or add to them (in the opposite case), increasing or reducing net borrowing. We do not make allowances for any lag in income being spent. This assumption will be reviewed each year to ensure it remains a good proxy for total fund expenditure.

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  • Previous forecasts

    The main sources of volatility in our previous forecasts have been the expected income from National Lottery sales that is available for good causes and the assumed drawdown of these resources. Up until March 2014, our forecasts were based on DCMS projections of ticket sales and the allocation of funds to projects, informed in turn by outturn behaviour and operational plans of the Lottery distributors.

    A decline in spending in our early forecasts after strong sales in 2008-09 and 2009-10 reflected cautious expectations that the economic slowdown would lead to a delay in the start of approved projects, as the outturn data suggested at the time. These projects, including high-value capital projects, were assumed to draw NLDF funds later than planned. In subsequent forecasts, we expanded the scope of our projections by including not only known funding commitments, but also anticipated future programmes. This led to a shift from downward to upward trends across the forecast period. Strong sales of Lottery tickets between 2011-12 and 2012-13 also led to upward revisions to our forecasts. In spring 2013, Camelot (the operator) announced that it would increase the price of the main Lotto game to £2 per ticket (double the previous price), which was assumed to raise total sales and therefore spending.

    In March 2014, we changed the basis of our NLDF income and expenditure forecasts and anchored them to our Lottery duty receipts forecast, which is produced using HMRC’s Lottery duty model. One aim was to improve consistency across our receipts and expenditure forecasts. We also revised down estimates for Lottery income in light of weaker-than-expected outturn data. The movements in our subsequent forecasts reflected changes in the expected proceeds from Lottery sales. In March 2018, we reverted to using distributor projections in our short-term spending forecast to supplement information from the forecast of the fund income. This will remain subject to review.



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