Charity Lottery Fundraising Caps

Wendy Morton Excerpts

Wednesday 5th July 2023 Westminster Hall

[Wendy Morton (Aldridge-Brownhills) (Con)]

I beg to move,

That this House has considered the potential merits of removing the caps on charity lottery fundraising.

It is a pleasure to serve under your chairmanship, Mr Gray, and to bring forward this debate on the important work of Britain’s charity lotteries. I must first draw attention to my entry in the Register of Members’ Financial Interests as a vice-president of the Lotteries Council. The charity lottery sector is worthy of Members’ time, as I am confident today’s contributions will demonstrate, and I am grateful to Members present. As I found when researching the debate, the interest of Members from across the House is evident from Hansard and, as I am sure the Minister is aware, from the number of questions to his Department on this important topic.

Back in 2017, the now Lord Bellingham secured a Westminster Hall debate on the future of society lotteries and the limits on prize values. I remember it well because I attended. The debate was well supported by Members from all sides of the House. A little over six months after that debate, the Government concluded their consultation on society lottery reform, and recommended that the maximum draw prize increase to £500,000, that the draw limit be raised to £5 million and, most importantly, that the annual cap increase to £100 million. In 2020, a revised annual limit came into effect, albeit that it was a reduced amount of £50 million.

Today, charity lotteries, or social lotteries, as they are more formally known, generate over £400 million a year for charities and good causes the length and breadth of Great Britain, meaning they constitute a significant funding stream for many well known charities and local community groups alike. I am sure we will hear from Members today about some of their local charities that benefit from those lotteries. Charity lotteries are regulated via the Gambling Act 2005 and are subject to heavy bureaucratic burdens, though the national lottery is not. For example, charity lotteries are subject to stringent caps on annual sales, caps on sales in each individual draw, and caps on the prizes that operators are allowed to offer, and there is rightly a statutory minimum return to good causes—I completely agree with that.

To put it simply, despite existing to fund charities and good causes, the sector is mired in exactly the sort of red tape that our Conservative Government should be focused on eliminating. To be honest, given that charity lotteries predate the national lottery by at least three decades, it is somewhat baffling as to why such a heavy regulatory burden exists at all. From the mid-2000s, the idea took hold in some quarters that the national lottery required protection from charity lotteries, and that is a myth that I am keen to see debunked on the basis of the available evidence. For example, years of Gambling Commission industry statistics show continued growth in sales, and returns to good causes from both sectors have reached record levels.

The recent Culture, Media and Sport Committee report on the national lottery explicitly acknowledged that charity lotteries do not negatively impact the national lottery, and called out the oddly hostile attitude that Camelot has shown to the sector over the years. It is imperative that we do not lose sight of the fact that when both sectors thrive, it is the charities and good causes in all our constituencies that stand to benefit the most. The complementary nature of both funding streams cannot be understated—sorry, overstated; we must ensure Hansard gets that right.

I am sure that many Members present will be familiar with the People’s Postcode Lottery through their constituency or the effectiveness of its advertising, which, as well as admirably shining a spotlight on supported charities, has been known to feature the likes of Jason Donovan. I am certainly aware of fantastic work done in my constituency by a number of organisations that are in receipt of funding from the People’s Postcode Lottery. Such organisations help to deliver vital funding for voluntary sector groups of all sizes.

Funding has been delivered locally to RicNic, Walsall’s “own the stage” project, which provides drama-based classroom resources and workshops to get children to participate in the arts; the Canal & River Trust, which has restored the Black Cock bridge, a Victorian bridge that was built in around 1880 in Walsall Wood, over the Daw End Branch canal; the Royal Voluntary Service, which operates locally from Brownhills Memorial Hall on Litchfield Road, a building known locally as the Memo, where the RVS runs groups who help elderly and vulnerable people to keep active and socially engaged; the Walsall-based Cats Protection, which also has a retail base in my constituency; and Manor Farm Community Association, which was awarded funding for the Silver Connections outreach programme for older people. I could go on, Mr Gray, but I will not. I hope I have given you a flavour of the type of organisations in receipt of this support, and I am sure you have some in your constituency.

Given the huge benefits of those and many other organisations to communities across my constituency—a pattern that I know is mirrored in constituencies right across the country—I am proud to play my part as a champion of the low-risk, not-for-profit charity lottery sector, which exists to fund good causes, some of which I have just name-checked. That is the reason why I felt it was important to secure today’s debate.

In addition to confirming the complementary nature of charity lotteries, the DCMS Committee report to which I referred made clear recommendations on empowering charity lottery operators to set their own prize limits of up to £500,000, and on ensuring a level playing field with unregulated prize draws. Those are important recommendations that I would like the Government to adopt as policy. I urge my good friend the Minister and the Government to remove the annual sales cap on charity lotteries without further delay, to ensure that this vital fundraising stream can maximise its charitable returns. It is open to Ministers to deliver that crucial reform, and most of the other reforms I have mentioned, by way of a statutory instrument. I do not believe it needs parliamentary legislation, so I hope that the Government can find time for that.

An analysis undertaken by the People’s Postcode Lottery demonstrates that the £50 million annual sales cap on the sector is restricting the funding that can be provided to 40 large charity partners, depriving them of millions of pounds in funding annually. That is despite the success of the brand in generating lottery ticket sales well in excess of the £50 million permitted annually per licence. Newly released analysis shows that over the next five years, caps on annual sales will deprive more than 70 People’s Postcode Lottery-supported charities of some £200 million in vital funding. It almost goes without saying that charities can ill afford to lose those funds.

I was astonished when I heard that the People’s Postcode Lottery has to operate a structure encompassing over 40 individual gambling licences in order to comply with the law on annual sales limits. That creates a heavy burden of duplication, which constrains the scale and flexibility of the funds so generously raised by the lottery’s players. The over-regulation of charity lotteries means that some well-known charities—for example, Girlguiding, Keep Britain Tidy, Young Lives vs Cancer, the National Society for the Prevention of Cruelty to Children and the Royal Voluntary Service—are losing out. Put simply, the sector is mired in needless red tape that could easily be removed by us in the House of Commons with Government support.

The Government previously committed to a £100 million annual sales limit for charity lotteries. However, if they removed the cap completely instead of increasing it, that would benefit not only the largest operators but smaller charity lotteries such as Essex & Herts Air Ambulance and the local hospice lotteries. It would be a more efficient use of the Department for Culture, Media and Sport’s time, as it would remove the need to revisit the sales cap frequently. Operators such as those that I mentioned could also shed the additional licences associated with the requirements of the Gambling Act 2005, which operators say are difficult and costly for small not-for-profit lotteries to navigate.

It is completely unclear why the sales limits exist. In fact, the Gambling Commission is on record as saying that it has been

“unable to uncover any reference as to why these limits were put in place”. 

The sales limits cannot affect player behaviour in any way, so they do not impact on sales, but they have a negative impact on the charities that receive funding, and they add to the bureaucracy for lottery operators. It seems counterproductive to continue limiting charities’ income in such a blunt manner, particularly at a time of growing charitable need.

Removing charity lotteries’ annual sales limits could better equip the third sector to support those most in need, without costing the Treasury or the taxpayers a single penny. That makes the argument even more compelling. I put it to the Minister that this aspect of the debate is very much worthy of the Chancellor’s consideration, as the change would be cost-neutral fiscally. Perhaps the Minister will put a good word in with the Chancellor ahead of the autumn statement.

As I draw my contribution to a conclusion, I draw attention to the striking support that lifting the cap on charity lotteries and these common-sense sector reforms have attracted from colleagues from across this House, as we see today. That speaks volumes about the value of the charity sector, and of charity lottery reform. I acknowledge that the Government have shown themselves willing to act in support of Britain’s charity lottery sector in recent years—my good friend the Minister comes from a background of fundraising in the charity sector. I commend the reforms to date, but it is clear that further action is required now.

I recognise that the Government have to manage many competing priorities, but charity lottery reform can be undertaken via a simple statutory instrument, or by including the changes in any new gambling Act. Reform has the support of over 100 of Britain’s best-known charities, the sector itself and Members from across the House. I politely call on the Minister to please prioritise action on this worthy issue.

--- Later in debate ---

[The Parliamentary Under-Secretary of State for Culture, Media and Sport (Stuart Andrew)]

It is a pleasure to serve under your chairmanship, Mr Gray.

I thank my right hon. Friend the Member for Aldridge-Brownhills (Wendy Morton) for securing this debate and I thank everybody who has taken part. It has been good to take some time out from the complexities of the gambling White Paper and the questions about levies, betting terminals, casinos and loot boxes, and instead hear about and discuss the fantastic work of the society lottery sector, the great things that it does and the funding that it provides. That includes organisations such as the air ambulances, hospice lotteries, Age UK, the Royal British Legion and so many others up and down the country.

As I said in the House recently, in a previous role I set up a society lottery for the hospice that I used to work at, so I understand the important contribution that society lotteries make to charities’ incomes. I am absolutely committed to doing everything that I can to make sure that charities get as much money as they can. That is precisely why I fought for the £100 million with the Treasury: I went into battle to help with the current situation that many charities, which have been so brilliantly celebrated today, are facing.

Through my wider ministerial role, I have seen at first hand the real impact that funding from charity lottery players has in supporting a huge range of good causes, and it often sits alongside grants from the national lottery. For example, just last week I visited the London LGBTQ+ Community Centre in Blackfriars, which receives funding from the National Lottery Community Fund. Ahead of the Eurovision final in Liverpool, I saw the support that the fund had given to Daisy Inclusive UK for the work it is doing with youth social action groups in that city.

Members have articulated the tremendous amount of work that goes on in their constituencies. Indeed, the People’s Postcode Lottery has supported a range of projects in my constituency, including some that have been mentioned—the Woodland Trust, Magic Breakfast and Farsley Community Orchard. I also recognise the fact that many good causes receive funding from both the national lottery and society lotteries. The V&A in Dundee received over £19 million from the national lottery and £1.2 million from the People’s Postcode Lottery.

As Members will be aware, following a comprehensive consultation, which received more than 1,500 responses, the Government legislated in 2020 to introduce a wide package of reforms to the framework that governs society lotteries, and as a result of those reforms we significantly increased the annual sales limit, from £10 million to £50 million. For many charities that are running their own lotteries, there is plenty of headroom there, but I will come to some of the specific issues shortly.

We also increased the draw sales limit from £4 million to £5 million, which was warmly welcomed by the sector, and the increases also enabled lotteries to offer a prize of up to £500,000. I believe that package of reforms struck the right balance to achieve the best possible outcome at that time. It is important to remember that there were different stakeholders with different perspectives and priorities then. Some wanted us to go further, and called for an increase in the sales limit to £100 million and a maximum prize limit of £1 million, but others thought we had gone too far and felt that those increases would have a negative impact on, say, the national lottery and the good causes it funds.

[Wendy Morton]

I think we all recognise and welcome the changes that the Government made at the time, but having listened to the Minister I want to press him on two points. First, does he accept that there is a place for both the national lottery and the society lotteries? We are not talking about either/or; it is not competition. When we get it right, both sectors can benefit.

Secondly, I appreciate that when there is a consultation there will be lots of different stakeholders to accommodate, but when it comes to the People’s Postcode Lottery specifically, the issue is that charities are being negatively impacted and that, with a bit of tweaking and adjustment from the Government, charities could benefit a lot more.

[Stuart Andrew]

I take those two points. I absolutely agree that society lotteries and the national lottery can coexist; they have done throughout the existence of the national lottery. I will come to the point about the People’s Postcode Lottery in a moment.

Just last week, I met the current operator of the national lottery. It reminded me that the national lottery was purposefully set up to be the most efficient way to get money to good causes. It is important to remember that since it began in 1994, more than £47 billion has been raised for good causes. That is significant, and it equates to the national lottery raising more than £30 million each week. The majority of that funding goes straight to the heart of all our communities. We obviously need to ensure that that continues, because it delivers to a diverse range of groups and organisations in our communities. Given my wider portfolio, I know it is also critical for sport provision and elite sports. It is important to think about that.

In recent months I have learned a great deal about the complexities of transitioning from one national lottery licence to another and about transitioning for the first time to a new operator. It is clear that our objective for the lottery sector is for the national lottery and society lotteries to thrive together. It is also important to remember that our Secretary of State has a statutory duty to enable national lottery receipts to be maximised, and the continued growth of society lotteries needs to sit alongside that.

From the evidence that I have seen, we seem to have got the balance right to date, but, as with most things, there may be a tipping point, and I continue to bear that in mind. We last reviewed the 2020 reforms 12 months after they were implemented. We concluded that there was not yet enough available evidence to determine the full effect of the changes, and we wanted to see more substantive data over a longer period before considering any further changes. It still feels like the right approach to me, but I strongly believe that an evidence-based approach is always the right one. That is why we got the gambling White Paper into a good place: because it was all based on evidence.

We also want to make sure that the regulatory requirements placed on society lotteries are proportionate to their size. Should we enable society lotteries to sell £100 million-worth of tickets each year, we would also need to consider whether the largest lotteries should have placed on them further requirements, such as on the level of information they provide to consumers, and whether the percentage of sales they return to good causes should increase. It is important that we make those challenges too and look at some of the comparisons. I want to make sure that not just one area sees an increase but there is also an increase to charities.

The guiding principle, then and now, is that the regulatory framework regime that governs society lotteries should encourage the maximum return to good causes, and that the licensing regime should be light, protecting players without placing unnecessary burdens on operators. We will continue to work with the Gambling Commission as it keeps the sector and the case for further changes under review.

It is also not certain, when we look at the detail, that a further increase to the sales limit would necessarily result in a significant increase in funding for good causes. For example, despite a five-fold increase in the annual sales limit in 2020, I understand that what the People’s Postcode Lottery returned to good causes did not increase by nearly the same amount. We have to consider such things, so evidence and the consideration of conditions are important. For those who ask me to make further changes immediately, even if there were robust evidence to do so, there are processes that we are obliged to follow.

[Wendy Morton]

May I press the Minister a little more on that? If he is not willing to deal with it immediately, would he look at it as a matter of urgency, given the number of charities that are being detrimentally affected?

[Stuart Andrew]

My right hon. Friend has obviously seen a copy of my speech, because I am coming to that in a moment. We will need to carry out a consultation—we have to do that— take account of those views, study the evidence, seek the views of other Government Departments and find time in a busy parliamentary schedule to bring any proposals to the House. It is not as simple as might sometimes be portrayed. Nevertheless, I have heard in the debate, and throughout my time in post, that there is a desire for us to be clearer about when any such review may take place, so I will ask officials in the Department to consider the matter in more detail with the Gambling Commission to see what is realistic. I will provide an update in the autumn to those who have attended this debate.

As I said, I met the People’s Postcode Lottery just this morning, and my priority remains delivering our ambitious commitments in the gambling White Paper, because I think there is some serious work that needs to be done there. I am also keen to ensure the smooth transition of the fourth national lottery licence and to make swift progress on the horserace betting levy review, which is really important. In this morning’s meeting, the People’s Postcode Lottery recognised the considerable work that we are trying to get through.

The consideration of any further changes to the framework for society lotteries needs to be considered in the context I have set out, but I have committed to continue to explore what flexibility there already is within the system to get us through the interim period ahead of any further detailed review. In the meantime, I am confident that, thanks to the millions of people who enjoy playing the lottery or buying a scratchcard, both society lotteries and the national lottery will continue to raise much-needed funding that benefits so many people. For many independent society lotteries there is plenty of headroom. I recognise many of the points that have been made about the specifics of the People’s Postcode Lottery and assure Members that I will keep a close eye on the matter.

[Wendy Morton]

I am grateful to my right hon. Friend the Minister for responding to the debate, and I am equally grateful to everyone who has contributed. The message was very clear: we understand the value of the charities and the work they do in our communities. I welcome, and look forward to receiving, the autumn update. However, although I understand the importance of the gambling White Paper and know that we have to get that right, some of the women in this place—and gentlemen—will continue to gently push the Minister, because we are so passionate about this. I also recognise the passion that the Minister has for the charity sector, given his experience before he came to this place.

Question put and agreed to.

Resolved,

That this House has considered the potential merits of removing the caps on charity lottery fundraising.