Proposals to introduce Ireland’s first-ever state lottery caused alarm among charity organisations that already ran similar schemes.

Frank Flannery — the head of Rehab and then a senior Fine Gael adviser — lobbied the government intensely to allow his organisation operate the national lottery ahead of its launch in 1986.

In a joint proposal on behalf of Rehab and the Central Remedial Clinic, Mr Flannery said that the lottery was capable of generating a turnover of at least £1 million per week with annual revenue quickly rising to £100 million and to £250 million after five years.

He said that it would result in annual income for the government of £30 million that would eventually increase to £75 million.

Mr Flannery argued that it would be inappropriate to contract the operation of the lottery to a commercial organisation because of the huge amounts of money involved. He also opposed setting up another semi-state body to run it.

A memo drafted by an unknown official for Garret FitzGerald, the then taoiseach, about the merits of the various parties wanting to operate the franchise, displayed a strong bias in favour of a joint bid by Rehab and the Central Remedial Clinic.

It stated that excluding Rehab from the lottery would “slam the door in the face” of it developing a service of sheltered employment for people with disabilities.

The author said that the public sector was not the only sector which could be relied upon to perform major tasks, protect the public interest and guarantee public confidence.

“This is a fallacious assumption,” he added.

The official said that while An Post, the semi-state company eventually awarded the contract, was superficially a very credible contender, its claims did not stand up in practice.

He argued An Post had no experience of running lotteries, while the vast majority of its offices were not suitable outlets for tickets. In addition it would be “at the mercy of some of Ireland’s most powerful unions.”

“There is moreover a serious question as to the social advisability of selling lottery tickets in the same premises as handing out children’s allowances,” he added.

The taoiseach was informed that the proposal from the charities offered a simple, safe way of getting a lottery up and running in the shortest possible time. The official said that giving the licence to the charities would probably also receive the support of Fianna Fail.

The Union of Voluntary Organisations, which represented around 40 charities including the Irish Cancer Society and the Society of St Vincent de Paul, warned the taoiseach that serious damage would be caused to their fundraising if a major portion of lottery income was not allocated to them.

Alan Dukes, the finance minister at the time, selected An Post to run the new lottery on the advice of a steering committee that believed it should be operated by a state-sponsored body.

Several other bodies and consortia had indicated their interest in running the franchise, including: Cospoir (the Irish Sports Council); the Hospitals Trust; and Independent Newspapers.

However, Mr Dukes said that there would likely be a negative public response if a private sector commercial group was awarded a licence allowing them to control substantial sums of public money.