"The chance of a non-profit company running the Lottery is still possible. We need competition"

Chris Smith, the Secretary of State for Culture, Media and Sport, is one of those rare cabinet ministers who has kept the same job since the general election. "There are not many of us," he declares with relief rather than pride, when we meet soon after the latest reshuffle. Smith is also the longest serving minister the department has had. Such stability is a novelty for them and him. In opposition he was moved from one shadow portfolio to the next with dizzying frequency. For the first time in his political life he has had time to make a prolonged impact in one policy area.

On the surface, the scope seems fairly limited. Even with the mighty Lottery, Smith's formal powers are severely constrained. It will be the five members of the National Lottery Commission, for example, rather than the Secretary of State, who will decide whether Camelot or another consortium should run the venture from 2001. But Smith is not exactly sitting back passively awaiting the commission's verdict. He is keen to highlight the factors that will sway the commission's decision-making and does not rule out the appointment of a not-for-profit organisation. "The chance of a non-profit making body running the Lottery is still very much in play. Clearly the first criterion is that we need a fit and proper organisation to run the Lottery. Second, we need to get the best possible return to the good causes. The commission will consider any non-profit making bid on that basis. If a non-profit making bid comes from a fit and proper organisation, maximising return to good causes, the commission will want to consider them very seriously. The wider point is we need strong competition and then we'll get a good operator."

Smith is especially keen to make a further point. Indeed, he gets up from the sofa in his office and heads for the desk to get the precise wording of what he sees as a key section in the criteria for a successful bid. "There is one thing that is worth noting," he tells me, as he returns to his seat. "One of the aspects of the bid that the commission will want to look at is the levels of remuneration for the key personnel involved in any bid. This is something I was very keen for them to do."

He then consults the paper he has taken from his desk. "I will read the precise wording to you. It is worth flagging up." He reads aloud the pivotal words: "The commission acknowledges that the size of the remuneration of the packages at senior levels of management can affect the public perception of the Lottery. It is therefore important for the applicant to be transparent over the factors determining the salaries and bonuses. The commission will wish to be satisfied that applicants have procedures that guard against levels of remuneration that are excessive in relation to the responsibility and performance of management." He pauses and looks up. "That is tough wording and the message coming out of the commission, and in everything we did in helping them to frame that requirement, is that open-ended profit formulae, such as in the present contract, and excessive levels of remuneration and bonuses, is not what the people want to see."

Smith's emphasis on levels of remuneration suggests that he remains unhappy about Camelot's highly profitable running of the Lottery. Is Camelot paying its senior managers "excessive" amounts? "As you will recall from two years ago, I had quite a public row with them over levels of bonuses. To a certain extent, we've gone past that period and things are considerably better now. It helped that they said they would pay some of the bonuses to charity."

Note the qualification. Only "to a certain extent" has Camelot progressed past its tense early relationship with Smith. He is still not convinced that Camelot has got its priorities right. "What everyone rightly accepts is that Camelot has run an efficient lottery. …