Gambling

Written evidence submitted by the Lotteries Council (GA 61)

Executive Summary

The principle issues we would wish to draw to the Committee’s attention are as follows:

· The opportunity to innovate and improve lottery fundraising through the use of remote channels is hampered by a superfluous and burdensome regulatory regime.

· The financial burden has increased under the 2005 Act through excessive Gambling Commission fees imposed on External Lottery Managers (which are them passed on to Society Lottery operators).

· The homogenised approach to regulation adopted by the Gambling Commission imposes unnecessary controls and compliance costs on Lotteries Council members. This is not a good use of money intended for society lottery objects.

· Statutory limits on society lottery proceeds and prizes are not evidentially justified. It is not in the public interest to restrict efficient fundraising for good causes.

· Merger of the Gambling Commission with the National Lottery Commission may damage members’ fundraising interests by compromising the independence of the merged body.

Request to give oral evidence

We are aware that there are likely to be a significant number of requests to give oral evidence. Whilst it may not be possible to accede to all of these, we suggest that the public interest dimension of our members’ work for good causes should be an important factor for the Committee to consider in making a determination.

Introduction

The Lotteries Council was founded thirty-two years ago to represent the collective interests of those seeking to fundraise for good causes with and through the medium of Society lotteries and today comprises 210 member organisations from across the sector. Member activities include Society Lotteries that raise funds on behalf of a variety of good causes, through lotteries ranging from relatively small scale weekly draws by Hospices and sports clubs to counterfoil lotteries often undertaken by national charities. The common objective in all these lotteries is the generation of funds for a wide variety of good causes with recognised social benefits. These include the development of local sports facilities, provision of care for life limited adults and children through Hospices, animal welfare, medical research, disability relief and rescue services.

The Lotteries Council operates on a not-for-profit basis with a Board of unremunerated volunteer Directors and one part-time paid administrator.

Responses to specific issues raised by the Committee

· How effective the Act has been in its core objectives to:

o ensure that gambling is maintained crime-free and conducted in an open and fair manner,

o protect children and vulnerable people from the adverse effects of gambling,

o update the legislative framework with regards to online gambling.

The Lotteries Council (LC) was heavily involved in the development and implementation of the Gambling Act 2005, from the initial review through the construction of the Bill to the passing of the Act. Society lotteries had historically been licensed and regulated by the Gaming Board for Great Britain (GBGB), so the concept of being regulated was not new to us.

· Society lottery operation in the UK has generally been crime-free and conducted in an open and fair manner since the original enabling legislation in the 1970s. Lotteries, as with other low-stake, high-prize games, are less attractive to those wishing to instigate fraud. The Act has not changed this, or the style of the regulatory oversight.

· Lotteries are not considered to present a risk to children or the vulnerable. The law allows 16-year-olds to play lotteries, so considers the risks to children to be lower than most other types of gambling. Our members’ products are characterised by low rates of play and low win ratios, so do not offer the temptation to chase losses, as rapid-draw games can. In the one area of operation where it might be argued that a risk can arise - scratchcards – the market has been dominated by the National Lottery, whose access and control of retail distribution has squeezed out all effective Society Lottery competition.

· Online lottery entry is on the increase. The Gambling Commission (GC) has recognised the lack of threat from lotteries and released them from the stricter requirements of the licence conditions and codes of practice which govern other types of gambling. However we remain concerned that the cost and complexity of regulation for remote lotteries presents an entry barrier to many who wish to take advantage of this fundraising channel. In particular we have questioned the need for concurrent licensing in both non-remote and remote activities, given that the latter imposes a higher standard of compliance than the former.

· The financial impact of the Act on the UK gambling industry

· The cost of being licensed by the GC is higher in real terms than it was under the GBGB. Contributions to the GREaT Foundation and the purchase of independent arbitration would also present an additional burden were they not funded by the LC on its members’ behalf.

· GC fees to External Lottery Managers, especially for remote licences, have inflated exponentially, with these costs then being passed on to Society Lottery operators as charges, reducing eventual contributions to good causes.

· The effectiveness of the Gambling Commission since its establishment, and whether it represents good value for money

· The GC, as with the GBGB before it, has generally been effective since its inception and, on an individual basis; staff there have been very supportive and helpful. Our status as a gambling product, however, has always been questionable in our view; our activities are centred on raising money for good causes, not deriving profits. Money that is taken to pay licence fees or to meet with the requirements of the regulator is money that doesn’t reach those good causes. The homogenised approach to all Gambling regulation imposes superfluous controls and compliance costs on Lotteries Council members. It would be difficult for us to see the GC as good value for money.

· The impact of the proliferation of off-shore online gambling operators on the UK gambling sector and what effect the Act has had on this

· No comment.

· What impact the Act has had on levels of problem gambling.

· As regards society lotteries, we do not believe that they are attractive to those who are prone to problem gambling. Research, such as the BGPS 2010 and the testimony of Gamcare, for example, bear this out. The Act has not changed this.

Other matters of concern not specifically raised by the Committee

· Statutory limits on Society Lottery proceeds and prizes

· The Act maintained the arbitrary restriction on society lottery proceeds and prizes, now standing (after review in 2008) to £2,000,000 proceeds per lottery and £10,000,000 proceeds per year, making the maximum prize per draw £400,000 (25% of proceeds).

· There is no extant rationale for these limits, nor indeed for the imposition of limits per se. The Gambling Commission is on record as stating that there is no justification for limits on Society Lotteries and therefore implicitly their removal would not pose any threat to the objects of the Act.

· In practice limits have been supported by DCMS and successive Ministers in the mistaken belief that they are protecting National Lottery income from an incipient society lottery threat. Under DCMS direction the Gambling Commission have imposed licence conditions which prohibit the linking of separate lotteries, or lotteries to prize draws / competitions, where to do so would have the effect of breaching the prize limit. The proceeds limits have been supported by the specious argument that higher limits are unnecessary since the current ones have not been breached. In fact this premise is untrue; several societies are known to us to have applied for, and been granted, a second licence to allow them to exceed £10,000,000; a scenario which only serves to draw the Act into disrepute.

· The National Lottery does not need protection from the potential predation of de-restricted society lotteries: it has a number of key advantages which no society lottery is ever likely to replicate including dominance of the retail distribution network, brand awareness, technical competence and a massive infrastructure.

· Society lotteries are a significant and crucial force for good in Great Britain, paying typically 55% of proceeds to good causes, (in contrast to the National Lottery’s 28%). We believe that is in the public interest that they be encouraged, not ham-strung by arbitrary limits.

· Merger of the Gambling Commission with the National Lottery Commission

· The two Commissions, as currently constituted, have markedly different objects, The GC being a neutral regulator guarding the three principles, with the NLC having a clear brief to protect and promote the National Lottery. We are very concerned that these two sets of objectives cannot be aligned without compromise; an outturn which may adversely affect our members’ fundraising interests.

June 2011

Prepared 1st August 2011