Lotteries in Great Britain: Regulatory and Social Responsibility Issues in the Funding of Quasi-Public Goods

Introduction

When reviewing the present role of state and national lotteries in funding quasi‐public goods, it has been customary to remark on their general history as a source of public finance, and on the fact that both in Great Britain and elsewhere, they became irredeemably associated with corrupt practice, ¹ mismanagement, and with social and moral harm. In its enquiry in 1808, a parliamentary Select Committee listed an impressive array of the state lottery's evils, elements of which resonate today:

… by the effects of the lottery, even under its present restrictions, idleness, dissipation and poverty are increased, the most sacred and confidential trusts are betrayed, domestic comfort is destroyed, madness often created, crimes, subjecting the perpetrators of them to the punishment of death are inflicted and even suicide itself is produced. ²

Alongside the eventual success of the abolitionists' case, the formal end in 1823 of the state lotteries, which had brought to the Treasury between £250,000 and £300,000 a year during the mid‐eighteenth century, has, as in other countries, always been set in the wider context of the state's development of confiscatory taxation, assured banking, and modern fiscal policy. But the abolition of the state lottery failed to stem the attraction to local societies and charities of what its supporters regarded, and still regard, as a voluntary tax to fund their objects. Throughout the nineteenth century there was a vibrant if largely unlawful market in small scale, privately organized “good cause” lotteries that funded such quasi‐public goods as libraries and museums. ³ In a remarkable anticipation of National Lottery funding of the Arts Council England, the Art Unions Act 1846 gave statutory recognition to a “good cause” exemption from the general prohibition of private lotteries in favour of the public appreciation of art. ⁴

Quasi‐public (or semi‐public) goods have characteristics of both private and public goods. Whereas the benefits derived from pure public goods such as street lighting, sewerage systems, and police services cannot be confined solely to those who have paid for them, quasi‐public goods such as public parks, museums, libraries, and art galleries are semi‐non‐excludable. That is, it is possible but often difficult or expensive to exclude non‐paying consumers, as the occasional debate in London about whether to impose museum and gallery entrance fees on tourists illustrates. Secondly, whereas consumption of a public good by one person does not restrict consumption by others, as is the case with private goods, quasi‐public goods are semi‐non‐rivalrous. That is, up to a point, extra consumers visiting a museum or an art gallery does not reduce the space available for others. But eventually, the resource becomes so strained that some limitation is required, whether by placing a monetary price on, or otherwise rationing access by means of timed or other limits on entry, as anyone who has visited Venice or Florence will know. Finally, quasi‐public goods share with private goods the characteristic of rejectability; but the collective supply of a public good such as a nuclear or a flood defence system cannot be rejected by anyone, even if they do not value those goods, or see their interests as compromised by them.

Their “good cause” aspirations lent these nineteenth century private and charitable bodies a public aspect that made their suppression the more contentious. But as government came to accept the social reality of their constant promotion and, for the most part, honest management, so it also recognized that the proceeds of lotteries and other pool‐based analogues could legitimately form an element in fiscal policy. The prime early‐twentieth‐century example was the Racecourse Betting Act 1928, which, by means of a monopoly on race‐goers' pool (pari‐mutuel) betting on horseraces, captured their expenditure for purposes conducive to the improvement of breeds of horses and the sport of horseracing. As is also the case with pool betting on football and greyhound racing, state and national lotteries offer the prospect of big prizes for a small outlay, a factor that remains central to their continuing appeal, in particular to those with limited means.

By contrast with this modest taxation, the late twentieth century saw a resurgence of state and national lotteries throughout North America, ⁵ Europe, ⁶ and Africa, ⁷ and in Great Britain, a burgeoning charity sector promoting what are now “society lotteries,” which lobbied hard for the introduction of a national lottery. ⁸ In a classic article published a quarter of a century ago, Clotfelter and Cook commented on the position in the United States: “As a commodity, the lottery is notable for its broad market penetration and rapid growth. Sixty percent of the adults in lottery states play at least once in a year.” ⁹ So it remains. Launched in 1994, the United Kingdom's National Lottery (“the Lottery”), is overseen by the Department for Digital, Culture, Media and Sport (DCMS), was regulated until October 2013 by the National Lottery Commission, and since then by the Gambling Commission. Participation in the Lottery remains the most popular gambling medium within Great Britain. In 2015/16 approximately 25 million adults (48% of the adult population) had gambled in the four weeks prior to the Commission's quarterly telephone surveys in 2016, generating for the whole gambling industry a gross gaming yield (GGY) of £13.8 billion. ¹⁰ Of that figure, 62% (15.5 million adults) had participated in the Lottery, generating £1.93 billion income for good causes, a 42% increase over 2014/15. But for a combination of reasons that are examined later, that figure dropped to £1.63 billion in 2016/17 as its sales figures fell by £670 million to £6.93 billion (9%) by comparison with 2015/16.

These good causes are many and varied. Society lotteries frequently support hospices, air ambulance charities, animal sanctuaries, and the like. A cursory examination of the annual report for 2016–17 of the Big Lottery Fund (BLF, one of the National Lottery's distributing bodies) reveals a wide and eclectic mix: teaching independent living skills to adults with learning disabilities; supporting dads directly experiencing mental health issues related to pregnancy and parenthood; raising the aspirations, self‐esteem, and employability of black, Asian, minority ethnic, and refugee women in Glasgow through the creation, preparation, and distribution of food; a peer led support charity for people on the autism spectrum; and a £2 million project for tackling rural poverty in Wales. ¹¹ These causes closely resemble what might be regarded as the normal range of publicly funded social and economic goods. In this respect, it is important to recognize the quasi‐public nature of the good causes that are funded by the Lottery, because its proceeds are public money. ¹² This in turn raises four key questions to be addressed in this article:

what constitutes a “good” cause

Before discussing these questions it is helpful briefly to set out the principal characteristics of the lottery market in Great Britain, and to note some awkward regulatory and commercial consequences that flow from the porous boundaries between lotteries and other gambling products. The article's conclusions discuss the scope and enforcement of the Lottery's statutory and regulatory obligations to social responsibility, obligations that equally apply to the other products that form part of the good cause lottery market.

The Good Cause Lottery Market

The National Lottery's Good Causes

Who Pays?

As has frequently been shown, the state's “take‐out” from lottery sales imposes on those on low incomes what might be regarded as an implicit tax that is regressive in effect. ⁶⁴ “On average, for every £1 of ticket sales, 25p goes to good causes, 53p to prizes, 12p to Lottery duty, 4p to Lottery retailers, and 5p to Camelot (of which, approximately 4p covers costs and 1p is profit).” ⁶⁵ The 53% average prize level is a poor return compared to that offered by mainstream forms of commercial gambling.

Despite their high take‐out, state lotteries have a very high subjective utility for those players who have little discretionary income for the kind of expenditure that would otherwise yield a “life‐changing” source of funds. ⁶⁶ This utility is especially heightened by rollover jackpots, there being clear evidence that they make a distinctive contribution to ticket purchasing. ⁶⁷ Introduced in order to attract more players and thus increase returns to good causes, a predictable consequence of the change in the National Lottery's main Lotto game, which reduced the chances of winning the jackpot but increased its size, was a succession of rollovers culminating in a £60 million jackpot in January 2016. ⁶⁸ The jackpot was itself augmented by the substantial increase in ticket sales; at that time it was estimated that the expected value for the £2 ticket was between £3.07 and £5.60: this was not just a national but also a rational bet. ⁶⁹

It might be objected that any purchase by the relatively poor of taxed goods or services inevitably entails a regressive tax upon them. Lottery proponents argue that as playing the lottery is voluntary its proceeds cannot be tax revenue, as a tax is a mandatory payment. The fallacy of course is to confuse the purchase of a product with the payment of the tax on the product. Purchasing a lottery ticket is indeed voluntary, but the tax portion of the ticket price is not, just as excise duty is compulsory on a voluntary purchase of alcohol or tobacco. That tax portion is public money, and whereas no question concerning the ethics of raising or distributing money to good causes arises where someone simply puts their hand in their pocket to give to a charity, such questions do arise where it is public money that is involved.

This being so, questions concerning accountability for spending decisions by its beneficiaries cannot be lightly dismissed as being of no greater concern than other consumer choices regarding discretionary income. It might also be objected that this tension will be present in any decision to allocate public money, for example to health care or education, whose funding is in part drawn from taxed consumer spending. That objection misses a key distinction. When consumers buy taxed goods and services, they contribute to the Exchequer, but those products were not created for the purpose of bearing tax: the Lottery was. It is precisely because the Lottery was created for the express purpose of redistributing wealth that questions of vertical and horizontal fiscal equity assume importance. ⁷⁰

Additionality

Alongside those issued to the distributing bodies concerning the management of their finances, DCMS issues policy directions which set the framework within which the 12 bodies responsible for the distribution of Lottery grants to sport, ⁷¹ the national heritage, ⁷² and the arts operate. ⁷³ That framework includes considerations relating to who can receive funding, its purposes, and the conditions that the distributing body must meet. ⁷⁴ For example, the Directions to Arts Council England require that, “in determining the persons to whom, the purposes for which and the conditions subject to which it distributes any money,” the Council must take into account some 16 “needs,” including for example, involving “the public and local communities in making policies, setting priorities and distributing money,” increasing “access and participation for those who do not currently benefit from the artistic and cultural opportunities available in England,” and inspiring “children and young people, awakening their interest and involvement in the arts and culture.” These considerations are, in this context, unremarkable; whereas “the need to further the objectives of sustainable development” might be regarded as raising broader questions about the use of Lottery funds. ⁷⁵

Perhaps more controversial was the transfer in 2011 of responsibilities for policy and sponsorship of the BLF from DCMS to the Cabinet Office, as the Coalition Government sought to direct the use of Lottery proceeds to support its mission to build a “Big Society.” ⁷⁶ This shift was reflected in its revised policy directions, that the BLF should “focus its funding on the voluntary and community sector,” and in doing so, meet some explicit value for money criteria. The funding should reflect

While they specify the criteria by which its funding decisions are to be made, the BLF's directions do not specify what decisions should be made; in this respect they were also intended to reinforce the arm's length principle, that funding decisions made by Lottery distributors are made independently of government and ministerial influence. ⁷⁸ Even so, there is, for example, a striking resonance between the government's policies for older people, which include a wide range of initiatives around health and well‐being, and the BLF's “the Accelerating Ideas UK programme” which is “focussed on ageing, developing transformational ideas centred on involving and benefitting older people, and influencing practice across the UK,” celebrated in its 2016/17 Annual Report. ⁷⁹

This may or may not have been a considered element of public policy, but it raises the key question whether the allocation to it of Lottery proceeds adds to or substitutes for what would otherwise have been publicly funded. When the Lottery was originally established, the government was clear that it should not benefit financially from its good cause funding: the Lottery's proceeds should not substitute for existing expenditure programs. But as we have seen, the National Lottery Act 1998 added the three new good causes managed by NOF—health, education, and the environment—areas traditionally associated with government expenditure; indeed the 1998 Act created yet another new distributor, the Community Fund, aimed at the most disadvantaged in society, as weighted by socioeconomic factors. Elements of its good causes can also be seen in the BLF's grants made to charitable, benevolent, and philanthropic organizations. These included six priority beneficiary groups: children and young people; older people and their carers; disabled people and their carers; black and ethnic minority communities; refugees and asylum seekers; and people living in urban and rural communities disadvantaged by economic and social change. It may be that the BLF's decisions as to which good causes it should support do not directly compromise the impartiality of its funding decisions, ⁸⁰ but at the very least, these directions are intended to shape the applications the BLF receives and the decisions it makes.

The notion of additionality is conceptually ambiguous and complex in its implementation, and has been further clouded by the continuing austerity cuts in public sector expenditure. A maximalist interpretation suggests that there are areas, such as health or education, that are government responsibilities and should never be Lottery funded, regardless of whether the government is living up to its responsibilities in funding them. A minimalist interpretation acknowledges that the Lottery should never replace government spending that has been withdrawn, but as the government rhetorically asked in 2005, “why shouldn't some Lottery money be set aside to help where this additional income is needed, can do most good and has public support?” NOF's response to criticism that it was breaching additionality was that “a more helpful way to look at it is really the concept of added value: What value is it that it comes from lottery money rather than from government spending?” ⁸¹

Prompted by the Select Committee's concerns about additionality, and its own concerns about some of NOF's funding, the National Lottery Act 2006 required all distributors, including the BLF, to report annually on their practice in relation to the principle that the proceeds of the National Lottery should be used to fund projects for which funding by central or a devolved government would be unlikely. ⁸² Even so, in its 2011 review of the Act, the government noted that some Lottery funding of NOF's good causes continued to breach the additionality principle, which had in turn led to its policy direction to the BLF to focus its funding on the voluntary and community sector. The BLF has acknowledged that its function is not “to act as a substitute for government funding,” but adds that the effective deployment of its funds with the activities of the charitable, voluntary and private sectors “can make a difference.” ⁸³ This deployment may be the more welcome given the recent downturn in the Lottery's sales, and hence its contribution to the good causes.

Grant Dependency

The BLF has developed a close working relationship with the third sector, ⁸⁴ notably its Third Sector Knowledge Portal, ⁸⁵ and Third Sector Research Centre, ⁸⁶ but the sector remains acutely alert to possible threats to its funding, and not only because of the inherent unreliability of lottery proceeds. This was very obvious in the government's decision that the London 2012 Olympics should be funded by a dedicated Lottery, requiring the redirection of money from the NLDF to the Olympic Lottery Distribution Fund (OLDF). It was of course inevitable that the consequent reduction in the statutory allocations to the other good causes prompted their beneficiaries to take exception to what they regarded as a raid on “their” money. Notwithstanding its Olympic success at Rio 2016, many other long‐standing beneficiaries of Lottery funding have been critical of the £274 million of Lottery funding enjoyed by Team GB: £4.1 million for each of the 67 medals. If Team GB were a public company, one might ask (a) did the number of medals represent a good return on the investment of Lottery funds, (b) were its shareholders (Lottery players) satisfied with the return, and (c) what are its dividends (sporting legacy)? ⁸⁷ Lottery funding of quasi‐public goods (sports facilities) is as much subject to value for money audit as is any central funding of these goods.

Allied to these questions are the good causes' increasing concerns about the reductions in the allocations to the NLDF. The downturn in the Lottery's sales can be attributed to a combination of factors, ⁸⁸ the principal being the 2015 changes to the main Lotto draw, which significantly reduced the chances of any one purchaser winning the jackpot. Although another change was the guaranteed two millionaires per draw, its players' initial negative reaction is continuing. Commenting on this reaction, the Committee of Public Accounts was critical of the decisions made by DCMS when in 2012 it renewed Camelot's 2009 license for a further period, until 2023. Intended to incentivize it, the renegotiation was too favorable to Camelot, allowing it to increase its profit margin by 122% between 2009/10 and 2016/17, while returns to good causes increased by only 2% over the same period. ⁸⁹

Nor was the renegotiated license sufficiently flexible to protect the interests of the good causes, where the long‐term decline in participation in draw‐based games in favor of online and offline IWGs, which are more popular with players, has had a particularly significant impact on their income. ⁹⁰ IWGs return 68% of a £1 stake as prizes (compared with 48% in a draw based game), but provide a lower return to the good causes (10% compared with 30%). Overall, returns to good causes fell from 27% to 22% of money staked on the Lottery, a figure some way removed from the initial 28% proportion. Until the expiration of the current license, neither of these matters can be changed without Camelot's consent, and the Gambling Commission's agreement.

Beyond these sector‐specific factors, the National Audit Office attributed the downturn to the impact of a decade of austerity, and to more general changes in how consumers spend their time and money. These pressures on the Lottery's sales have been accentuated by what the Gambling Commission describes as an increasingly competitive and potentially volatile lottery market. ⁹¹ The downturn has also meant that the gap between distributors' grant liabilities and the balance of monies in the NLDF has been increasing, adversely affecting the management of their future funding commitments. ⁹² This disparity has necessarily contributed to the good causes' concerns about the maintenance of their grants, concerns that have been accentuated by the government's apparent reluctance to allocate monies recouped from the sale of Olympic assets, and to reimburse the £425 million that was diverted from the BLF to the Olympic Delivery Authority. ⁹³

Social Responsibility

Reliance on the Lottery necessarily requires a constant player demand. “One of the most attractive features of lotto games is that the portion of the pool designated for jackpot is carried over to the next draw when no‐one wins the jackpot.” ⁹⁴ It is this attraction that routinely trumps the expected value of a Lotto ticket, which, as noted earlier, is typically only half (53%) of the ticket price (£2.00). The question therefore naturally arises, why it is that nearly a quarter of the UK's adult population consider their purchase worthwhile. Economists have remarked on their “availability” heuristic; that is, the ease with which instances of successful outcomes can be brought to mind, ⁹⁵ routinely aided by the publicity around jackpot winners. An exaggerated sense of the likelihood of winning may also be reinforced by Langer's demonstration of the “illusion of control” that accompanies the player's selection of numbers; that is, that the likelihood of success in an entirely chance‐based game may be increased by personal selection. ⁹⁶ It may be that long‐odds gambling alone is unlikely to generate harmful results, but Lottery play relies on the players' credulity of the big win.

State lotteries have always been the object of criticism concerning their incompatibility with the values of work and thrift, and their challenge to religious values and beliefs; in particular, that chance based wealth is to be valued. It is not necessary to rehearse this criticism here, but we may note that it persists. ⁹⁷ The aggressive marketing of gambling to low income groups, and its operators' high profile promotion of inducements to play, raises important economic, political and ethical issues about gambling as “voluntary” taxation. ⁹⁸ While state lotteries typically and repeatedly promote the fact of life‐changing jackpots, all lotteries in Great Britain, including the National Lottery, are subject to advertising restrictions on their promotions. ⁹⁹ The Commission requires operators undertaking any advertising to do so in a socially responsible manner, and, in particular, to comply with the advertising codes of practice maintained by the ASA's Committee of Advertising Practice (CAP) and Broadcast Committee of Advertising Practice (BCAP). ¹⁰⁰ Both codes contain sections on “gambling” and “lotteries.” ¹⁰¹ They prohibit the portrayal of gambling as socially desirable, as enhancing personal qualities, or as suggesting that gambling in general, ¹⁰² or participation in lotteries in particular, “can be a solution to financial concerns, an alternative to employment or a way to achieve financial security.” ¹⁰³ Of particular relevance to the promotion of “life‐changing” winnings are complaints to ASA regarding misleading claims about prize levels in the Health Lottery. ¹⁰⁴

The Gambling Commission's social responsibility requirements for its licensed operators are set out in Part II of its 2018 revised LCCP. ¹⁰⁵ All operators must have effective policies and procedures designed to promote socially responsible gambling, to provide information about responsible gambling, to operate self‐exclusion options, and to display the rules governing their gambling transactions. ¹⁰⁶ In addition, there are specific requirements for lottery operators, some of which concern the conditions under which their tickets are sold, and their record keeping. ¹⁰⁷ In their case, both the National Lottery and the Camelot websites provide guidance and information about responsible play, ¹⁰⁸ in respect of which the Committee of Public Accounts concluded that Camelot could do more. ¹⁰⁹

Perhaps the most important of these provisions are those concerning children. The general minimum age at which a person may gamble is 18 years, but a young person (16–17 years of age) may lawfully be sold a lottery ticket, and may engage in those other gambling transactions named in § 46(2) of the 2005 Act. ¹¹⁰ The minimum age provision applies to all lotteries, including the National Lottery. All operators must both clearly state that 16 is the minimum age at which a young person may participate in the Lottery, and have procedures designed to minimize the risk of lottery tickets being sold to children. ¹¹¹ A child under the age of 16 does not commit an offense if they gamble, but it is an offense for a person to invite, cause, or permit a child to gamble. Successive surveys in Great Britain show that gambling prevalence rates among children have remained stable over time. ¹¹² But underage gambling on the Lottery, while low, is persistent, in the vast majority of cases condoned by the children's parents, who bought the tickets for them. Their involvement in their children's access to the Lottery necessarily raises questions about their attitude to and guidance concerning other forms of gambling. As part of the license process for the period after 2023, the age limit for playing National Lottery games will be reviewed to take into account developments in the market and the risk of harm to young people; as the Gambling Commission notes, “low stakes should not automatically lead us to assume that risks associated with these activities are also low.” ¹¹³

There continues to be a wider concern around children and young people's access to gambling facilities, notably licensed betting offices (LBOs) and adult gaming centers, where the customer must be over 18 to play. In addition,

By comparison with the heightened public and parliamentary concern in relation to harmful gambling on the machines available in LBOs, ¹¹⁵ it is rare for players to develop gambling problems where the Lottery is their only medium. There have been concerns about the rapidity with which its scratch cards can be turned around and any winnings quickly churned. This concern has become more pressing as Camelot “transforms into a digital organisation and strengthens its online offering.” Noting that a digital approach to gambling “carries fresh risks,” the Commission will only license new online products where Camelot's “commitment to player protection is at an appropriate level.” ¹¹⁶ In the case of children and young persons, perhaps more acute is the current concern around broadcast advertising and its potential both to reinforce the normality of gambling, as DCMS sees it, as a leisure product, and to encourage those underage to sample and engage.

Conclusions

The good causes supported by the National Lottery stand in a long tradition of the funding of quasi‐public goods from the proceeds of charitable and other noncommercial lotteries that reaches back to the mid‐nineteenth century, and before that, to the state lotteries of the eighteenth century that directly contributed to the public finances. There are no publicly available figures on the total good cause contribution of all permissible lotteries now promoted in Great Britain—getting on for £1.8 billion in 2016/17—but from whichever source, and particularly from the Lottery, whose raison d'etre is a constant annual increase in good cause funding, the past two decades have encouraged a high degree of grant dependency within the third sector.

All of these lottery‐dependent bodies are threatened by the boundary incursions made possible by the online convergence of gambling formats. ¹¹⁷ The government's response to the Select Committee's report on Society Lotteries considered that the overall risk to the good cause sector was small. ¹¹⁸ Its own consultation, contemporaneously launched in December 2014, conducted on the basic premise that it wishes to “maintain appropriate relative market shares of the National Lottery, society lotteries and commercial gambling and allow them to raise the maximum amount possible for good causes broadly reached the same conclusion. ¹¹⁹

In June 2018, DCMS announced a further consultation on Society Lottery Reform. Its preferred options in each of the three areas concerning large society lotteries are to raise their individual draw sales to £5 million, their individual per draw prize limit to £500,000, and their annual sales limit to £100 million. The government has no preferred options for small society lotteries, but wishes to increase the current thresholds in order to introduce a lighter touch regulatory regime, and therefore reduce regulatory burdens. ¹²⁰ Its overall objective is to support the society lottery sector to maximize returns, whilst ensuring that any changes are not to the detriment of the National Lottery, as well as ensuring the regulatory requirements are consistent with a lottery's size. This is a balancing act that the government has acknowledged may be difficult to achieve: its three aims “cut across each other and have to be suitably balanced,” which may be difficult to square with what it calls its essential task of maintaining the health of the National Lottery. ¹²¹ That, in its turn, has raised for the Gambling Commission some serious questions about Camelot's trading position, ¹²² as it seeks to respond to the recent downturn in ticket sales. The Commission's concerns may be partially alleviated by the increase in the returns to good causes from £1.63 billion in 2016/17 to £1.64 billion in 2017/18. ¹²³

The Commission's ambition is to see a market in society lotteries, commercial gaming, and the National Lottery, where consumers easily understand the product and are clear on the terms, such as the contribution to good causes, are confident in knowing their rights and having access to information to help inform decisions, appreciate the risks as well as the possible rewards, have access to tools to help keep play safe and reduce risk of harm, and know where to go if things go wrong. This ambition faces a number of difficult compromises within a gambling industry that is in a constant state of change, fueled by shifting consumer behavior and the rapid growth of technology. These compromises exist between commercial and good cause interests, in the expectations of a grant‐dependent third sector, and in broader social and political concerns about the actual and potential impact on both adults and children of media exposure to gambling opportunities, of access to remote gambling, and of any growth in problem gambling. ¹²⁴

In its 2016/17 Annual Report, the Gambling Commission's Chairman rhetorically asked, “What kind of gambling market does Britain want? Does the country want gambling to be a constantly growing industry operating within a light‐touch regulatory approach? Or, is the public inclined to be less supportive of growth and increasing accessibility, and more supportive of a tightening of regulations?” The answer is something of a mixed message. On the one hand, 64% of respondents to its 2017 survey thought that people should have the right to gamble whenever they want. But the developments described in this article take place against a backdrop of increasingly negative public attitudes, with 80% of that survey thinking that there are “too many opportunities for gambling nowadays,” and 71% that gambling “is dangerous for family life,” ¹²⁵ currently illustrated by the public support for new constraints on FOBT gaming machines. Discussion of what are, for many critics, threats to an individual's well‐being, broadly conceived, would go well beyond the scope of this article, but forms the context in which these compromises must be made.