National Lottery director Mr Ray Bates is expected to become the next chief executive of the Voluntary Health Insurance Board if the Government approves an enhanced remuneration package for the position.

The chairman of the VHI, Mr Derry Hussey, has sought Government approval for a remuneration package which would be acceptable to Mr Bates. Under the Gleeson pay guidelines for state companies, a new VHI chief executive would receive about £70,000 per annum. VHI has been seeking a new chief executive since Mr Brian Duncan resigned in July 1996. But the £70,000 salary level has proved a stumbling block and the VHI board considers it to be out of line with industry norms. In addition it is understood to be close to Mr Bates' existing salary at the National Lottery. Sources have confirmed a Sun- day Independent report that Mr Hussey has sought Government approval for a consultancy arrangement with Mr Bates offering about £125,000 per annum plus generous performance bonuses.

Mr Bates is understood to have been in negotiations with the VHI chairman for some weeks. The current acting VHI chief executive, Mr Aidan Walsh, is due to return to his firm, accountants Price Waterhouse where he is a partner, at the end of the year. Mr Walsh stepped into the position on a temporary basis after Mr Duncan resigned and the VHI had difficulty replacing him.

Mr Bates' arrival at VHI would come as the health insurance group needs to upgrade its marketing effort following the arrival of a competitor, BUPA, in a market where it was the exclusive operator.

Mr Bates was appointed director of the National Lottery in 1990. He started his working life as a civil servant. He was head of computer operations at the OECD in Paris between 1980 and 1984 after which he returned to the civil service and worked in the Department of Finance.