Joe Saxton argues that charities must unite in a campaign for charity lotteries to ensure a healthy income stream for the future.

Charity lotteries, also known by their legal name society lotteries, have huge potential for fundraising. We have seen the income raised grow over the past few years and many charities have commented how well their lottery income has held up during a recession. Charities find they often appeal to a different kind of donor and also tap into a different kind of motivation for people. All in all lotteries have a lot going for them. Except that is for three things: the regulatory regime, the attitude of Camelot, and lottery gift aid treatment by HMRC.

The barriers of the regulatory regime

Charity lotteries are highly regulated, and I mean highly regulated. The forms to register for a lottery of £25,000 are the same as those to start a multi-million pound casino. Each and every lottery must produce a profit after costs of 20 per cent. In other words if a lottery takes in £10,000 it must be able to show it produces income for the charity of £2,000 after prizes and marketing costs. For existing established lotteries this isn’t a big deal, but for any lottery that wants to grow or start afresh it’s a major barrier.

Other regulatory headaches include the need to register twice if you want to do a lottery online and on paper. The fact that income from lotteries is capped is another regulatory barrier. Yet despite all these barriers lotteries are still growing. Imagine how well they would be doing if the regulatory barriers were swept away.

The attitude of Camelot

Camelot, which runs the national lottery, has been fierce in its opposition to the Health Lottery, and in turn this has an impact on the charity lottery sector more generally. They have lobbied government that the 20 per cent profit margin should be increased to nearer 30 per cent. Not satisfied with that they are now lobbying that the non-prize costs should be limited to 15 per cent of income (which is a return to how it was over a decade ago). Make no mistake: if both these changes were bought into effect fundraising income from lotteries would plummet over night. It’s akin to telling companies that they can only exist if they make a certain level of profit and they can only spend so much on marketing. Why and how a state monopoly can be allowed to openly campaign for the squishing of its tiny, tiny level of competition is beyond me.

Should lottery tickets be eligible for gift aid?

Buying a lottery ticket is not tax effective. In other words it isn’t eligible for gift aid. This is because HMRC say that donations should not get benefits, if the benefits are more than 25 per cent of the donation. This is understandable. However 99 per cent of lottery tickets don’t get any benefits only the winning tickets do. So imagine if tickets which didn’t win a prize were eligible or those lotteries whose prize fund was less than 25 per cent of the income were. There is a real opportunity to argue to HMRC that lottery tickets should be eligible for gift aid within certain conditions. Despite having approached a couple of charities to take up the idea with HMRC, none of them have done so to my knowledge.

Fundraisers must campaign for lotteries

The Department for Culture, Media and Sport have been threatening to do a consultation to change the minimum percentage, up from 20 per cent, and also possibly to float the idea of a marketing costs limit. The fundraising community needs to work really hard to argue against these ideas. These proposed changes will make not one jot of difference to the success of the National Lottery, but they will decimate the income from individual charity lotteries. There is a desperate need for fundraisers who have an interest in seeing charity lotteries flourishing not only to make sure that the DCMS see the wisdom of not carrying out a consultation on crazy ideas, but also to press for deregulation of charity lotteries generally, so they can flourish.

Joe Saxton is driver of ideas at nfpSynergy