Culture, Media & Sport Committee wants to lift burden on smaller society lotteries

Parliament’s Culture, Media and Sport Committee says regulation of society lotteries should be changed to lift the burden on smaller lotteries and new lotteries starting up.

Society lotteries are intended to be primarily a means of raising money for charities and other good causes. The vast majority are small, often local, and raise sometimes small but vital sums of money for the work of the organisations they support.

The Gambling Act 2005 relaxed some of the restrictions on such lotteries. The Committee say this was not a cause of concern until the recent launch of some larger, ‘umbrella’ lotteries, advertised nationally, run by commercial operations and giving near to the statutory minimum percentage of the proceeds of ticket sales to the good causes they support. These are controversial in part because they are alleged to stretch the definition of a society lottery as primarily intended to raise money for good causes, and in part because they are seen by some as direct competitors to the National Lottery.

The Committee concludes:

• There should be greater differentiation between the regulations applied to the great majority of lotteries, which are small and local, and those applied to larger ones, especially those run by commercial organisations, which tend to give far smaller proportions of their proceeds to the charity
• For new lotteries, the current requirement for at least 20% of the ticket receipts from each lottery to be given to good causes (rather than allocated to prizes or operating expenses) should be spread over an extended period, perhaps three years, to help lotteries to cope with high start-up costs.
• On average, lotteries are able to return about 45% of their ticket receipts to good causes, many make much greater returns. It would be a disincentive to innovation to increase the requirement for the minimum return of 20%, but it is not appropriate that large, well-established lotteries should provide only the minimum return to good causes
• The 35% cap on operating costs other than prizes and money set aside for roll-overs should be reintroduced for the largest lotteries.

The legislation should be amended 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 or stipulating different ‘large society lottery’ limits on the constituent societies.
• The limits on the single society large and small lotteries should be raised, following research by the Gambling Commission into what might be the appropriate limits, and that the limits should be reviewed every three years

John Whittingdale, Chair of the Committee, said: “Many charities now depend upon Society Lotteries as a vital source of funds. We want to see the maximum return to good causes and believe that the regulatory regime governing society lotteries should be designed to encourage that. Provided that the lottery remains focused on its primary purpose, the licensing regime should be light, including continued exemption from gambling and lottery taxes.

“We are concerned at the growth of large, so-called umbrella, lotteries which are designed to get around the statutory maximum amounts for sales and prizes. While we think increasing the minimum return of 20% across the board would be counterproductive, it is not appropriate that large, well-established lotteries should provide only the minimum return to good causes. We therefore recommend the creation of a new category and the reintroduction of a cap of 35 per cent on operating costs for the large well–established lotteries. This will help ensure that these lotteries are genuinely maximising the amount of money they raise for the causes that they support.”