Society Lotteries - Culture, Media and Sport Contents

Conclusions and recommendations

1.  In our approach to the suggestions of various changes to the regulatory regime for society lotteries, we have been guided by the principle that the purpose of society lotteries is to raise money for good causes. Unlike other gambling products, they are therefore exempt from gambling and lottery taxes; and the regime governing them should be light-touch and encourage the maximum return for good causes. At the same time, the regime should be carefully adjusted to avoid any perception that charities may be being used mainly as devices to further commercial interests. (Paragraph 34)

2.  We have also been guided by the clear intention of Parliament in 1993—which we do not perceive to have altered—that there should be one National Lottery. We do not consider that there is any indication that the Lottery is being significantly affected by any of the society lotteries currently operating, but we accept that the potential for a competitor remains, especially if an External Lottery Manager, in addition to receiving the reasonable expenses permitted by the Gambling Commission, can also profit from promoting its lottery. (Paragraph 35)

3.  A sliding scale of the percentage of ticket prices to be donated to good causes has some attractions. We consider that there should be more distinctions between society lotteries, lifting burdens on the smallest and increasing them as the lotteries grow in size. (Paragraph 49)

4.  We are sympathetic in principle to the idea that both ticket sale limits and prize limits should be reviewed, but we note the concern expressed by the NCVO and others that society lotteries should not become just another gambling product. We see clear dangers, not least in possibly tempting societies to take risks in advertising prize limits that they cannot afford and in losing contact with their real supporter base. As far as the National Lottery is concerned, though there is a theoretical risk—especially if caps were removed completely—it seems to us that in practice there is no immediate risk of a real rival coming up from the ranks of the society lotteries. (Paragraph 50)

5.  Umbrella lotteries, such as those run by the Health Lottery and PPL, are in law groups of individual society lotteries, marketed under a national brand. However, provided that none of the individual lotteries exceeds the current limits on proceeds and prizes, the total amount that the umbrella lottery is permitted to raise is the aggregate of the maximum amounts each of the constituent lotteries may raise: in other words, an umbrella lottery formed of ten large society lotteries would be permitted to raise ten times the maximum £10 million for a single lottery per year. We consider it wrong that the maximum limits on society lotteries should be bypassed in this way. (Paragraph 51)

6.  We therefore recommend an amendment to legislation to recognise a class of umbrella lotteries, with its own set of limits on individual draws, annual sales and prizes. A number of options are possible: setting overall limits on the amounts that may be raised or paid out in prizes, limiting the number of individual society lotteries that may join together under an umbrella lottery (and thus limiting the multiplier effect) or stipulating different 'large society lottery' limits on the constituent societies. We recommend that the Gambling Commission consult widely on such a change. (Paragraph 52)

7.  We note that there have been no increases since 2005 in the caps on sales and prizes for small lotteries. We received no evidence suggesting specific figures for these caps, and accordingly we consider that the Gambling Commission should review the caps on ticket sales (for both a single draw and for the annual aggregated draws) and on prizes for small lotteries, and should make specific recommendations. (Paragraph 53)

8.  As far as individual large lotteries are concerned, we note that some of the new limits suggested by the Lotteries Council represent a very rapid rise from the current level. We recommend that the Gambling Commission should consider whether the limits on ticket sales and prizes should be relaxed, bearing in mind that the regime for large lotteries was changed in 2008, more recently than that for small lotteries. We recommend that the Gambling Commission consult on the appropriate levels. (Paragraph 54)

9.  We also recommend that the limits on society lotteries be reviewed every three years, and that the Gambling Commission gather and publish information on the annual turnover, single draw size and maximum prize awarded by individual society lotteries to demonstrate the degree to which societies are finding the current limits restrictive. (Paragraph 55)

10.  We understand that the requirement for at least 20% of the ticket receipts for each lottery to be given to the good cause from the offing may well deter societies from running lotteries, when many of the expenses (for organising the lottery and recruiting players) will also be incurred at the start. We therefore recommend the amendment of the present 20% minimum requirement to allow newly-created small society lotteries to spread it over an extended period, possibly three years. (Paragraph 60)

11.  We recommend that the Government draft an amendment to the Gambling Act 2005 to achieve this, taking into account the issues raised by the Charity Law Association about distinguishing between repeat and one-off lotteries, and the need to make provision for lotteries that do not survive for the full three years. We note the suggestion that this could be achieved by requiring lottery licence holders to use their 'best endeavours' to ensure a return of 20%, and by requiring the Gambling Commission to ensure that its licensing processes filter out any would-be 'phoenix' lotteries, being set up with the intention of folding within three years. We consider that the Government should look at these and other options. (Paragraph 61)

12.  We were given two options for enabling other lotteries to benefit from some flexibility in developing new products. We ask the Gambling Commission to consider the advantages and disadvantages of these suggestions, and any others in this area, and make recommendations to Government accordingly. (Paragraph 62)

13.  There is a public interest in transparency, and we therefore endorse the recommendation that information about the proportion of lottery receipts given to the good causes, distributed in prizes and used for operational expenses should be clearly shown on each ticket. We also recommend that the Gambling Commission should maintain a database of this information for each lottery on its website, so that the public can make informed decisions about whether or not they should take part in a lottery. (Paragraph 66)

14.  We accept that lotteries have to invest in order to grow, and that the total money raised is important, but we remain of the view that, to be society lotteries, they must show a substantial return to their good cause. We have ruled out an increase in the minimum contribution to good causes rule, in the light of the need of newer and innovating lotteries for greater flexibility, but we do not consider it appropriate that large, well-established lotteries should provide only that minimum. We therefore recommend a return to a cap, to apply only to the largest lotteries, for all operating costs other than prizes and money set aside for roll-overs. From the information provided by the Lotteries Council, we think the initial rate should be set at 35%. This rate also should be subject to regular, three-yearly reviews by the Government. (Paragraph 71)

15.  In the event that the Government decides not to re-introduce a cap on operating costs, we recommend that the largest lotteries be made subject to Lottery Duty on the same basis as the National Lottery, unless they are giving at least 32% of their proceeds to good causes. (Paragraph 73)

16.  We recommend that the Gambling Commission look again at whether the administrative burdens of applying for a licence could be simplified any more for small, start-up lotteries, and at whether other regulations on lotteries are disproportionately burdensome for the benefit produced. (Paragraph 74)

17.  We recommend that the Government and Gambling Commission consider whether it would be feasible to allow the private sector to run lotteries on behalf of good causes, given the potential major benefits to good causes. It may be the case that commercial entities would have to be licensed to run such lotteries, but it may be possible to establish a relatively light-touch regime for existing companies for which the running of a lottery is clearly part of their corporate social responsibility activities rather than a commercial opportunity. (Paragraph 76)

18.  We endorse the suggestion that any society licenced to run a lottery should be enabled to run a lottery on behalf of another good cause, as long as the customers were clearly informed of the ultimate beneficiary. (Paragraph 77)

19.  Like Camelot and the Gambling Commission, we are concerned that the evolution of online gambling is removing the distinction between society lotteries and betting. We recommend that the Gambling Commission advise the Government on all three measures recommended by Camelot, to determine which would be most effective in reducing consumer confusion. (Paragraph 84)

20.  We think that the value of society lotteries to the charitable and voluntary sector means that the changes to the regime we have recommended are important. We see no reason why the Gambling Commission and the DCMS should not press ahead to be ready with proposed changes for the new Government soon after the general election, given the lack of party political divisions in this area. (Paragraph 85)

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Prepared 25 March 2015