Deregulation of society lotteries could impact public trust and confidence in charities, NCVO has told the Culture, Media and Sport Select Committee.

Giving evidence to the committee yesterday as part of its inquiry into society lotteries, Karl Wilding, director of public policy at NCVO, joined calls for individual society lotteries to be more transparent about how they operate and the proportion of proceeds they give to their causes.

The committee launched its inquiry into society lotteries this summer and the MPs are looking at the case for relaxing the regulatory requirements they face.

Wilding told the committee: “NCVO has general reservations about deregulation. One person’s red tape is another person’s safety net. We’re slightly apprehensive about changes to caps on proceeds and prize limits.”

In its submission to the inquiry, the Lotteries Council, supported by the Institute of Fundraising, the Hospice Lotteries Association, the RNIB, Macmillan, Scope and the Royal Voluntary Service, called for “modest deregulation” of the sector.

They call for increases in the amount of ticket sales for a single draw from £4m to £10m, the annual income cap from £10m to £100m and prize values from 10 per cent of the proceeds to 50 per cent, and for the 20 per cent minimum contribution to good causes to be spread over an extended period, such as three years, for new lotteries.

NCVO does support simplifying the regulatory requirements in place for starting up a society lottery.

The umbrella body’s submission to the inquiry says that any legislation aimed at society lotteries could have an effect on how the public views and trusts the charities that run them and the sector more widely. It calls for proof that any changes would have no negative impact on levels of public trust and confidence in charities.

Wilding said: “I would suggest there are questions raised by deregulation in terms of public trust and confidence in charities. There are also issues with raising limits and the impact that could have on smaller lotteries. If we had some better-quality economic evidence that would be extremely useful.”

Society lotteries should make it clearer what proportion of their proceeds goes to good causes and better-quality comparative information should be available so people can make that choice, he said.

“The best way of deciding how much should go to good causes is to let the public decide," Wilding said.

At a time when there is a lot of interest in how charities operate and a lack of understanding among the public about the money spent on fundraising and other costs, there is a need to educate the public about how much is spent on prizes and running lotteries, and how much is returned to good causes, he said. 

The Lotteries Council launched a consultation with its 350 members last week on how to improve transparency in the sector. 

It calls for members to voluntarily publish data about the proportion of their sales that go to good causes, prizes and operating costs.

People's Postcode Lottery backs transparency calls

At an earlier evidence session, Jo Bucci, managing director of the subscriptions-based People’s Postcode Lottery, said she was “a big supporter” of the calls for the industry to be more transparent about operating costs and good-cause proceeds.

She also made the case for deregulation of the sector, saying the voluntary groups the PPL works with ask if there is any more funding available and questioned why society lotteries were the only form of fundraising to be capped.

“One of our grant-giving trusts forecast that demand for this year was £29m worth of applications, but under the current limits it could only give £2.5m. The demand is there but it is capped,” she said.

Donald Macrae, promoter of the Health Lottery, an umbrella brand made up of 51 society lotteries, which sells tickets through retail outlets, said the venture backed by media owner Richard Desmond also supports the Lotteries Council’s calls for relaxing regulations.

He said there was an argument that people should give their money to the lottery that returns the biggest amount to its charities, which would mean people should support their local hospice lottery rather than the National Lottery, because they return an average of 50 per cent to good causes compared to the National Lottery’s 28 per cent.

“What matters is the amount that goes to good causes, not the percentage,” he said. “It is easy to get caught up with the power of this 20 per cent rule.”

Health Lottery questioned over transparency

The Health Lottery came under fire from the committee’s John Leech, the Liberal Democrat MP for Manchester Withington, for refusing to reveal how much it spends advertising in Desmond’s Northern and Shell-owned publications, which include the Express newspapers.

“It’s not very transparent that when you’re saying the lottery runs at a loss but won’t say how much is spent advertising in publications owned by the owner of the Health Lottery,” Leech said.

Macrae said the lottery spent 41.1 per cent, or about £30m, on marketing, and was operating at a loss totalling the same amount.

MP questions spending on campaigning

Taking a slightly off-topic line of questioning, Conservative MP Conor Burns asked Karl Wilding whether he thought a similar emphasis about charities explaining their spend on lottery proceeds should be applied to their advocacy activities.

“If, for example, people donate to a charity helping the homeless they might be surprised to find the charity spends their resources campaigning to change public policy rather than delivering services to help the homeless,” Burns said.

In response Wilding said: “The public strongly support campaigning by charities. The evidence we have suggests that the public not only trusts them but think it is right and proper to spend donations this way. NCVO has long said that charities should set a gold standard on transparency and accountability.

"If you look at some of the big charities they are really moving in the direction of trying to explain their various activities.”