Separate legislation requiring higher payouts to charity should be introduced to govern larger commercial society lotteries such as the Health Lottery and the People's Postcode Lottery, a Commons committee has said.

The Society Lotteries report published today by Culture, Media and Sport Committee, is the final report following a inquiry into the regulation of society lotteries - not-for-profit lotteries run for the benefity of the sector - and how they relate to larger players such as the National Lottery and the Health Lottery.

The independent committee, which exists to scrutinise the work of the Department for Culture, Media and Sport, launched its inquiry in July last year. Since then the DCMS has launched its own call for evidence on the issue.

The report recommends the creation of a new category of lottery to factor in the growing number of new commercial ‘umbrella lotteries’. 

“Umbrella lotteries, such as those run by the Health Lottery and PPL, are in law, groups of individual society lotteries, marketed under a national brand,” the report said.

According to the Committee's findings, an umbrella lottery formed of ten large society lotteries would be permitted to raise ten times the maximum £10m for a single lottery per year.

"We consider it wrong that the maximum limits on society lotteries should be bypassed in this way," it said.

“We therefore recommend an amendment to legislation to recognise a class of umbrella lotteries, with its own set of limits on individual draws, annual sales and prizes.”

The report recommends “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" and "stipulating different 'large society lottery' limits on the constituent societies”.

In a statement accompanying the report, John Whittingdale, chair of the Culture, Media and Sport Committee, said he was “concerned” by the growth of “so-called umbrella lotteries” which he said were “designed to get around the statutory maximum amounts for sales and prizes”.

“It is not appropriate that large, well-established lotteries should provide only the minimum return to good causes,” he said. “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."

'Fundamental disagreement'

A statement from the Institute of Fundraising said it welcomed the committee’s recommendation for greater flexibility, including a call for new lotteries to be allowed to pay their 20 per cent minimum return to charities over a longer period of time, to allow for initial start-up costs.

But it said it would like to see that flexibility extended to existing lotteries “who perhaps need to invest to reinvigorate an existing lottery programme”.

This morning Clive Mollett, chair of the Lotteries Council, expressed concern over the report’s findings.

“We would want to place on record our fundamental disagreement with any move to further segregate the sector by creating a separate class of so-called umbrella lotteries," he said. "We think the report underestimates the important contribution of more professional fundraising and the benefit that brings to marketing, player recruitment and ultimately the overall sums raised.

“We also disagree with the proposal to allow unlicensed and unregulated commercial operators into the market – the recommendation raises serious questions given, on the one hand, the Select Committee is calling for more regulation for fully licensed and regulated umbrella lotteries, whilst at the same time promoting the idea of unregulated commercial entities entering the market place."
 
Mollett said the report’s proposal that each lottery ticket should state how much of the ticket cost was going to good causes, was “simply unworkable”.

“Very few society lotteries are able to project precisely how many tickets will be sold in each draw,” said Mollett. “Therefore, while at least 20 per cent will always be delivered to good causes, from week to week this could be greater, meaning the information on a ticket would be incorrect.

“As an alternative, the Lotteries Council is pressing ahead with our own transparency register which will provide accurate, aggregated annual data from our members so that the public can be reliably informed where each pence from a lottery ticket goes.”