Lotteries: Limits on Prize Values

Justin Tomlinson Excerpts

Tuesday 12th December 2017 Westminster Hall

[Sir Henry Bellingham]

That is a good point. Camelot has become complacent. It has a new chief executive now, as we know, but my right hon. Friend is absolutely correct. Conservatives remember well when it was launched, because we were in government at the time. There was a tremendous spirit of innovation and a great deal of aspiration, but Camelot has been there for a long time now, and has made some bad mistakes. One, incidentally, was taking the Health lottery to judicial review in an attempt to prevent it from being launched. If ever there were antics by a monopolistic organisation, that was it.

I want to focus on society lotteries. There are now more than 490 organisations running society lotteries. In 2011, they raised roughly £100 million for good causes. The figure is now more than £250 million. Society lotteries are different from the national lottery, as we know. They are regulated under the Gambling Act 2005, unlike the national lottery, which is regulated under the National Lottery Act 1993; they have an annual turnover limit, a draw limit and a prize cap; and they cannot operate in Northern Ireland or the Isle of Man. In contrast to the national lottery, they are highly regulated and controlled.

[Justin Tomlinson (North Swindon) (Con)]

My hon. Friend is giving a characteristically powerful and well thought-out speech on this important subject. It is clear that we have allowed the national lottery to establish its market position, but as he highlighted, a huge number of different companies and societies offer products. It is an opportunity for the market to choose between different prizes, stakes and innovative games, and for customers to choose from a variety of good causes. We should welcome any effort to support the new organisations.

[Sir Henry Bellingham]

My hon. Friend makes a good point, which I will come to in a moment. One key aspect of the argument is that society lotteries complement the national lottery and do not compete directly with it. There is room for them both to operate.

The big difference, obviously, is the prize cap. As I pointed out, society lotteries are limited to 10% of the value of any one draw, with a theoretical maximum of £400,000. In practice, most of the top prizes are about £25,000. That is, frankly, scratchcard territory. I will return to that later in my short speech.

The impact on our constituents of society lotteries is significant. Most high street charities now run such lotteries: cancer research; military charities; disability support charities such as the Royal National Institute of Blind People; and environmental protection and animal welfare charities. Many contract an external lottery provider to service their lotteries. The two best known external providers are the Health lottery and the People’s Postcode lottery, which most colleagues will have heard of.

I have been doing some research in my constituency. Society lotteries’ contribution to good causes has been impressive. For example, a few years ago, the Benjamin Foundation, which runs a hub in Norfolk to help homeless 16 and 17-year-olds to get their lives back on track through short-term supported housing, received £10,000 from the Postcode lottery, having applied to the lottery and not succeeded for a variety of reasons. The strength of society lotteries is that they can be much more flexible and fleet of foot in considering need.

Elsewhere in Norfolk, the People’s Health Trust, supported by the Health lottery, has given numerous small grants. The East Anglian Air Ambulance lottery has done a great deal of fundraising. The organisation HealthSuccess in Norfolk has put money into a number of good causes around Norfolk: for example, supporting local branches of Scope, Dementia UK and the Royal Voluntary Service. It has put nearly £40,000 into creative training sessions with the Wayland Partnership Development Trust, and nearly £50,000 into the Great Yarmouth and Gorleston Young Carers project. Those are examples of particular successes in Norfolk, which I welcome 100%.

The Health lottery has supported two key charities in my constituency, Trading Links and the Hanseatic Union. Across Norfolk as a whole, it has granted more than £1.6 million to 45 local projects since 2011, as part of nearly £100 million in grants supporting 2,600 projects and nearly 450,000 people across the entire country. I pay special tribute to the founders of the Health lottery, particularly Richard Desmond, one of our mostly highly regarded and respected philanthropists. They can be proud of what they have done.

There are arguments for reform, and they are becoming ever stronger—I mention above all the point about the prize limit, to which I will come in a moment. The proliferation of society lotteries is a good example of the big society at work, helping out at grassroots level. It is a movement that has grown organically and gathered momentum.

The key point, as my right hon. Friend the Member for Sevenoaks (Sir Michael Fallon) and my hon. Friend the Member for North Swindon (Justin Tomlinson) mentioned a moment ago, is that society lotteries are not in competition with the national lottery; what they do complements it. I believe strongly that people play the national lottery because they want to win a life-changing prize. They console themselves with the thought that although the odds against them are completely ridiculous, there is nevertheless a remote chance that they might win the prize, and they will also do some good work for charity. However, they have no idea which charities their small share of ticket income will support. That is quite unlike society lotteries, which are often locally based on people’s doorsteps. People can relate to them and understand what is done by the local charity that they are supporting and what impact it will have in the community in question.

I feel strongly that there is room for both. As the Secretary of State for Digital, Culture, Media and Sport, my right hon. Friend the Member for Staffordshire Moorlands (Karen Bradley) said in a recent reply to a question:

“As Government, we of course want to ensure that we have one strong national lottery, but that does not mean that we cannot also have strong society lotteries.”—[Official Report, 16 November 2017; Vol. 631, c. 565.]

I agree 100%.

We also need to bear in mind that, from the way Camelot has been carrying on, one would think that society lotteries were right there biting at its heels, with ticket sales in the billions. The truth of the matter is that total ticket sales by society lotteries last year were £586.66 million, compared with national lottery ticket sales of £6.92 billion—it is under 10% of the national lottery’s total sales. Frankly, the society lotteries deserve to have the chance to move up a gear, to increase their ticket sales and to do even more good for those causes in our constituencies.

Very simply, I am asking for some deregulation. I would like the draw limit to be raised from £4 million to at least £10 million; the annual turnover limit to increase from £10 million to £100 million; and the prize limit to be raised to £1 million—the Lotteries Council takes the view that it should be 50% of any one draw, but that could be too complicated. The key thing is that if the turnover limit is raised to £100 million, the administration costs would come down quite significantly. That is not the kind of prize that would change people’s lives in the way that the national lottery prizes can, but there is no question that it would be much more attractive. I would also like arrangements to be made for new society lotteries, which have significant start-up costs in their early years. There must be an argument for the aggregation of the 20% minimum charity contribution over a number of years.

As those of us who were in Parliament at the time remember well, when the national lottery was launched, there was an argument for it being a monopoly. Since, we have seen this revolution in society lotteries. The scenario has changed dramatically. When conditions change, the overarching regulation has to change as well. There is overwhelming support for these changes from every single third-sector charity that has been in contact with me. I quoted the Lotteries Council, which is very supportive, as was the Digital, Culture, Media and Sport Committee’s last report.

Since I requested this debate from Mr Speaker and had it granted, I have had a significant number of emails from non-governmental and other such organisations. To pluck one out from a charity that I know well, ActionAid’s senior advocacy manager told me that he is incredibly supportive of the proposals that we are putting forward because:

“Such changes would mean more funds can be raised for important causes like ours and the many other UK charities benefiting from this funding source.”

He says that

“it would be useful…to mention ActionAid’s support for these proposals”.

If they go ahead, he says, ActionAid will be able

“to help tackle violence against women and girls in Kenya, Ghana, Ethiopia, and Rwanda”

as part of its outreach in Africa. That is quite powerful.

I understand that the Minister is waiting for advice from the Gambling Commission. Is there any news on that? As I understand it, these changes could be brought about by a simple statutory instrument. Perhaps she could comment on that, because that is within her power and a lot of pressure is building up.

Arguments have been put forward against these changes. I will not go into huge detail because that would take all afternoon and I do not want to get bogged down in arguments that are not particularly strong. The key argument that has been made is that a further proliferation of society lotteries would somehow take money out of the pool that is available for buying these tickets and that eventually goes to help good causes. I do not accept that argument at all, because the public are incredibly generous these days. If the ask is right, the public will continue. One very good example of that is national lottery sales, which did not dip in the slightest after the all-time record Red Nose Day.

When the Health lottery was launched in 2011, Camelot kept saying that there would be a huge diminution in the amount of support for the national lottery and in ticket sales, but it widened public support and the public view of lotteries, so the competition benefited everyone, including the national lottery. The public spent more on the society lotteries—through the Health lottery in this case—and on the national lottery.

I have also looked at independent reports. Most notably, in 2012, NERA Economic Consulting published an in-depth report on the impact of society lotteries on ticket sales and on the national lottery that found that they made absolutely no difference whatsoever. The Centre for Economics and Business Research published a report in 2014 which was quite interesting and pertinent in saying that

“there is little evidence to support the notion that society lotteries undermine the National Lottery…If regulations were to be relaxed, the potential increase in society lottery-donated funds to good causes would, in all likelihood, complement rather than detract from those provided by the National Lottery”.

That is very telling.

On the fall in national lottery income last year—it was not very significant, but it was a fall—the Financial Times reported Camelot as saying that

“the main reason for the fall in sales last year was the disappointing performance of The National Lottery’s core draw-based games—especially Lotto, with player confidence in the game still fragile following the recent game changes”.

Camelot is being incredibly candid and honest.

In conclusion, the Minister and the Secretary of State have both said that they believe in the big society, deregulation and a flowering of these different smaller organisations. They believe in communities taking control of their own destiny, and in charities in all our constituencies up and down the country working together to help those good causes. We are now at a stage in the development of lotteries in this country where we can take this important decision. The timing is absolutely spot on. There are many other competing issues in the Minister’s Department and she has many things on her plate, but I urge that this problem could be solved by a simple statutory instrument, which would have massive support from the public and from the organisations I have mentioned. I submit that now is the time to act and for the Minister, who is incredibly talented, to enhance her reputation still further by taking this action.