By Cliff D'Arcy
May 25, 2006

If you thought that this article was in any way linked to the reality-TV nonsense currently being shown on Channel 4, then I'm sorry to disappoint you!

In fact, I'd like to discuss the National Lottery with reference to the work of genius that is George Orwell's 1984. In this political novel (first published in 1949), Orwell describes a society in which democracy has been ruthlessly suppressed by the tyrannical government of Oceania, whose figurehead is "Big Brother", the all-seeing, all-knowing, all-controlling eye of the ingsoc party.

Many of the words and phrases Orwell coined in 1984 are now in common usage, such as "Big Brother", "doublethink", "Newspeak", "Room 101" and "thought police". Furthermore, many of the futuristic ideas which Orwell explored in 1984 became reality in the intervening six decades.

For example, in Chapter Eight, Winston Smith, the "hero" of 1984, overhears some "proles" arguing over which Lottery numbers had been drawn in previous months. Orwell goes on:

"Winston had nothing to do with the running of the Lottery, which was managed by the Ministry of Plenty, but he was aware (indeed everyone in the party was aware) that the prizes were largely imaginary. Only small sums were actually paid out, the winners of the big prizes being non-existent persons."

In other words, in 1984, the Lottery was a State-sponsored scam, whose sole purpose was to provide much-needed funds for the never-ending war in which Oceania was engaged. These days, national lotteries exist in many large nations, and act as revenue-raising mechanisms for governments, as well as randomly redistributing wealth among their players.

Some people have described the Lotto and its variations as a "tax on people who are bad at maths", since the odds of winning the jackpot are so astronomically high. Indeed, the odds of picking six numbers from the forty-nine on offer are almost 14 million to one.

Despite the tiny probability of winning a life-changing prize, millions of punters hand over money each week, in order to indulge their pipe dreams of winning a fortune. The Lotto is particularly popular among low-income groups, many of whom believe that they have no chance of getting rich any other way. Hence, even playing a lottery with dreadful odds is better than having no hope at all!

Although I used to play the Lotto, I haven't done so for many years, ever since I kicked a heavy gambling habit in the late Nineties and instead turned my hand to saving and investing. Here are six reasons why, figuratively speaking, I thumb my nose at the Lotto terminal when I'm at the till:

1. Only half of the stake money is returned as prizes

If you buy a Lotto ticket for £1, only 50p is returned to winners in prizes. Thus, on average, we as a nation lose half of all the money we stake on the Lotto. Hence, with sales totalling over £5 billion in the year to 31 March 2006, gamblers lost a total of £2.5 billion. Ouch!

2. Most of the prize pot goes to a few lucky winners

So, 50p in the pound is returned to "winners" and, after paying out a tenner to all players who match three numbers, the remaining pot is divided up as follows:

Win
% of pot
Odds

Jackpot (all six balls)
52%
1 in 13,983,816

Five plus bonus ball
16%
1 in 2,330,636

Five balls
10%
1 in 55,492

Four balls
22%
1 in 1,033

As it's massively improbable that you'll win either of the top two prizes, your return is likely to come from the remaining prizes (matching five, four or three numbers). If this is the case, you can expect a return of perhaps 20p in the pound. In other words, you should expect to lose roughly £4 for every fiver that you spend on the Lotto. Eek!

3. 53 out of 54 tickets end up in the bin

Overall, the odds of winning any prize on the Lotto are 54 to 1. In other words, 53 out of every 54 tickets end up in the bin. How bad are those odds?

4. The taxman takes one pound in every eight

To be precise, 12% of all Lotto sales goes to HM Treasury and is swallowed up in the pot for general taxation. In other words, Gordon Brown made £600 million from Lotto punters last year. I feel that I pay more than enough tax to benefit my fellow Brits, so I draw the line at paying more via the Lotto!

5. It's a poor way to support good causes

Supporters of the Lotto argue that it provides valuable support to good causes, since 28p in the pound goes into a fund which has awarded over 237,000 grants to various community groups and other good causes. In its latest year, the fund for good causes received £1.4 billion from ticket sales.

However, if I want to give a pound to a charity, I use Gift Aid, which means that the charity gets £1.28 and I get a tax rebate of 23p. So, my 77p contribution is worth £1.28, which is miles better than handing over a quid so that a charity gets 28p! What's more, I can choose which organisations to support, whereas I have no control over Lotto spending. Further, some grants actually replace funding which I believe should have come from local or government taxation, leaving the taxman quids in again!

6. I prefer a merit-based philosophy

I dislike the idea of money being randomly distributed among the population without merit, with even convicted criminals benefiting from Lady Luck's fortunate gaze. This quote helps to sum up my approach to the Lotto:

"For every hundred people dreaming of winning a million, there is one individual working hard to earn his/her first million."

So, if you'd like to make a million, why not try one of these ideas instead?

More: Make your fortune slowly but surely by saving and investing for the long term!