Show them the money

This post explains the thinking behind our response the Culture, Media and Sport Committee’s consultation on society lotteries.

When the Committee launched an inquiry into society lotteries a couple of months ago, I must admit that I was a little surprised: the Department for Culture, Media and Sport had itself announced in December 2012 that it would launch a consultation in this area, although this is currently on hold.

The committee’s inquiry does however take a much broader approach: instead of focusing only on the issue of what the minimum amount of proceeds going to good causes should be, it is seeking views on a number of issues, such as:

• how to ensure that the market delivers the maximum benefit to good causes
• whether there is a case for relaxing the regulatory requirements relating either to the minimum amount of proceeds that a society lottery has to return to good causes or in other areas
• the comparative regulatory positions and protections attaching to society lotteries, the Health Lottery and the National Lottery.

For a full run-though of what the inquiry was about, see Karina’s blog ‘Will less regulation mean more money for society lotteries?’.

Why do we care about this?

We estimate that within our membership around one hundred organisations hold a society lottery licence, and we will also shortly begin running a lottery on behalf of members. Many charities, naturally, want to be able to maximise the income from these in order to make a greater contribution to their cause.

On the other hand, we know there are concerns about certain types of society lotteries. Some see them as blurring the lines between mainstream gambling and charitable lotteries.

This is a distinction that must be absolutely clear to the public: any confusion could have damaging consequences for public trust and confidence in charities.

What our members have told us

Income from lotteries is important to many of NCVO members, whether it’s from their own raffles and lotteries, or in funding from larger schemes. This funding goes towards good causes such as helping the local sports club buy new equipment or other community initiatives. And, perhaps most importantly given the current focus on contracts, it is unrestricted income.

So it’s important society lotteries are able to thrive and deliver the maximum benefit to good causes. But we also need to remember:

• the importance of maintaining public trust and confidence in the sector; and
• the need to ensure the highest standards of transparency in all our activities.

Public trust and confidence

Some may be surprised that we haven’t taken a view on whether changing the ‘20:80 rule’ would increase the amount that goes to good causes. As the saying goes, ‘economics is the only field in which two people can win the Nobel Prize for saying exactly the opposite thing’. But what we are concerned about is the impact that any change to the regulatory framework could have on the public’s understanding of society lotteries, and in turn on levels of trust and confidence in the charity sector more widely.

The public are increasingly, and understandably, inclined to scrutinise charities, particularly when it comes to fundraising and other income generating methods. Society lotteries are valuable fundraising tools and as such are likely to attract similar levels of scrutiny.

Society lotteries are inherently linked to the good causes they were set up for, and therefore legislation that changes the way society lotteries operate could also change the way the public view the charities and good causes associated with them.

So we have been especially mindful of how any liberalisation of current rules could be perceived by the public, particularly the possibility of damage to public trust in charities.

We’ve said we think anyone proposing changes to society lottery legislation needs to prove they would have no negative impact on public trust in the charities associated with the lotteries and the sector as a whole.

In particular, any proposal recommending the relaxation of the statutory minimum of 20% of proceeds going to good causes must be based on sound evidence that such a change would be beneficial to society lotteries and would not damage the public’s trust in charities. We should be mindful that there could be damage to public trust and confidence in charities more widely if one or more society lotteries only give what might be considered a small proportion of their proceeds to good causes but didn’t make this clear in their marketing. We could see a growth in the belief that charity fundraising is inefficient or misleading.

Transparency

We strongly believe lottery players should know how their money is being spent. This means that there must be absolute transparency around the breakdown of money that goes to good causes, prizes and expenses.

We have recommended in our response to the committee that all bodies running a society lottery should clearly communicate to the public information on the amount of proceeds that go to good causes, prizes and expenses.

The Gambling Commission should also make more information available, by releasing comparable data on society lotteries’ income and expenditure breakdowns.

There are two main reasons for this:

• Consumer protection – it is only with greater openness about where their money goes that players can make informed buying decisions.
• Public trust and confidence – providing this information would respond to the public mood that fundraising methods be clear and transparent, and would mean that society lottery operators are clearly communicating with their supporters. It wold also can enable proper public understanding that lotteries cannot be run for private or commercial gain, and in turn increase levels of public trust and confidence.

What we ultimately want to see is the amount of money given to good causes being the ‘selling point’, ie the distinguishing aspect of each society lottery and what attracts the public to this market.

What are the solutions?

We think the regulatory environment should help society lotteries flourish by ensuring they can make as much money as possible for good causes, while still maintaining public trust and confidence in the charity brand.

Critical to achieving this will be really clear information about the ‘products’ (tickets, to you and me) being offered and transparency about where the proceeds go.

At the moment, there’s too much regulation and red tape when it comes to setting up a lottery, making it harder than necessary for charities to benefit from setting up their own lottery. But there’s not enough regulation to ensure transparency for the public once lotteries are set up.

But just as there is a fundamental difference between gambling and lotteries, there is an equally important difference between fair and proportionate deregulation, and liberalisation to the detriment of trust and confidence.

DCMS is still planning to go ahead with its own separate consultation – we’ll be making the same points to them.

Our full submission has now been published on the Committee’s website.