Gambling Act 2005 (Variation of Monetary Limits) Order 2020

Considered in Grand Committee

Moved by

That the Grand Committee do consider the Gambling Act 2005 (Variation of Monetary Limits) Order 2020.

My Lords, Section 99 of the Gambling Act 2005 imposes monetary limits on the per-draw and annual proceeds of any lottery promoted in reliance on a lottery operating licence. This order will amend the per-draw sales limit from £4 million to £5 million. As a consequence, the maximum prize limit will increase from £400,000 to £500,000, due to the rule that the prize must not exceed 10% of per-draw proceeds. This order also amends the annual sales limit from £10 million to £50 million.

In July 2019, the Government announced proposals to help society lotteries: that is, fundraising lotteries run by charities and other non-commercial organisations such as sports clubs or local community groups. Last year, society lotteries raised over £330 million, in support of a diverse range of charities, including hospices and air ambulances, which so many in this country rely on. The current annual sales limit has been in place since it was implemented in 2007, and the per-draw sales and prize limits have been in place since 2009. Indeed, the issue was looked at by the DCMS Select Committee in 2015, which recommended that the department and the Gambling Commission examine the sector in some detail. This led to the 2018 public consultation. I am grateful to the committee for raising this important issue.

I know that stakeholders on both sides have strong views, evident in the 1,600 responses the department received to its consultation. A key consideration in developing the changes being debated today has been the relationship between the National Lottery and society lotteries. Together they raise around £2 billion a year, improving our communities and life in this country in countless ways. It is imperative that any changes enable both to grow, and that society lotteries’ growth is not at the expense of the National Lottery. As Minister for Civil Society I can say that this is particularly close to my heart, as the sector benefits considerably from funds raised by the National Lottery.

My Lords, I apologise, but this is not quite as simple a statutory instrument as the Minister has said. There are a number of issues and questions that I want to put to her. I was delighted that, on 19 November last year, we were able to celebrate the 25th anniversary of the National Lottery and the staggering £40 billion that it has been able to give to good causes since it was introduced by John Major in 1994. Equally, we should celebrate the incredible work done by small-scale society lotteries that have provided funds for hospices, schools, clubs and many other good causes alongside the National Lottery.

My concern is that the original, untaxed society lotteries were characterised by relatively low prizes and generally limited distribution footprints. Those factors traditionally differentiated them from the National Lottery and, as the Minister said, that distinction helped them both to thrive and funds to go to good causes because they were not in competition.

However, then came the idea of grouping together a number of these society lotteries under a single umbrella; two key examples are the People’s Postcode Lottery and the Health Lottery. I have argued on many occasions that, although both of them undoubtedly do good work, they are being allowed to operate contrary to the concept of there being a single national lottery.

As I intend to demonstrate, notwithstanding what the Minister said, they are already having a damaging impact on the National Lottery. Currently, they are run by private external lottery managers and their revenues have increased dramatically, from £179 million to £736 million over the last 10 years. The measures in this statutory instrument look set to cause even greater damage to the National Lottery than has already been done. We must gauge the measures being proposed against the impact that they will have on the National Lottery.

What is the key component of that administration cost? The vast majority of it is spent on advertising, seen in the volume of advertising on television and radio and in newspapers coming through our letterboxes. Even currently at Westminster Underground station, we see that billboards have been taken out. The advertising I get at home from the People’s Postcode Lottery certainly goes out of its way to make it look as if it is operating in exactly the same way as the National Lottery. Camelot, which operates the National Lottery, told the committee that this had led to a marketing “arms race” in the lottery market. The People’s Postcode Lottery is spending 75% of the amount spent on advertising by the National Lottery, yet is only 5% of its size. It is allowed to spend so much because the Gambling Act 2005 removed any cap on expenses, replacing it with the simple condition that expenses should be “reasonably incurred”.

Umbrella-style society lotteries can therefore spend significant sums—as they are doing—as long as a minimum of 20% is returned to good causes, and they can claim to be “reasonably” incurring expenses such as these vast sums of money on advertising. Such spending has led to this extraordinarily fast growth, undermining the original intention that there should be a single national lottery. As I will show, that has reduced the funds for National Lottery good causes. What does the Minister understand by a “reasonably incurred” level of expenses? Does she believe that the expenses currently incurred by the two umbrella lotteries are reasonable under that definition?

I have argued for many years for the reintroduction of the expenses cap on the large-scale umbrella lotteries. Is the Minister prepared at least to look at reintroducing a limit of, say, 5% or 10% on the level of expenses allowable for them?

We read in paragraph 10.2 of the Explanatory Memorandum that the Government received clear evidence from the Gambling Commission that

“licensed lotteries have had no … significant detrimental impact on National Lottery sales to date.”

I accept entirely that the National Lottery has continued to grow in the face of growing competition from these other organisations. However, a detailed independent report commissioned by Camelot showed that, contrary to the evidence that the Minister and the Explanatory Memorandum gave us, between 2011 and 2017, the impact on the National Lottery was estimated at £703 million in reduced sales and £266 million in reduced returns to good causes.

Understandably, the National Lottery distributors are concerned because they have relied on this funding. Paragraph 7.4 of the Explanatory Memorandum acknowledges that the order increases the per-draw limit, allowing more headroom for these lotteries to continue to grow and providing even greater competition to the National Lottery. If further evidence were needed, we read in paragraph 7.6:

“It is noted that this will bring the top prize potentially offered by licensed lotteries directly in line with the National Lottery’s Thunderball top prize.”

So, if one wanted evidence that there will be growing competition and impact on the National Lottery, it is provided in the Government’s Explanatory Memorandum —on top of the clear evidence that, even before these changes are introduced, there has already been an impact.

Not only will the good causes continue to lose out, but the Treasury has already lost out. The Minister will know that, as the National Lottery is taxed, Governments have lost 12% of the income lost by Camelot and the National Lottery.

Incidentally, I acknowledge that this is outwith the statutory instrument, but it is relevant to the issues we are debating. I wonder whether the Minister is aware of the very strong case that has existed for many years for changing the way in which the National Lottery operates: if the National Lottery was taxed in exactly the same way as other gambling organisations, the evidence shows that there would be increased money not only for good causes but for the Treasury—so I hope the Minister will agree to review that evidence.

Returning to the measure before us, the economic case for whether good causes are best served by having a single National Lottery provider has been revisited on numerous occasions. I am sure that the Minister has been advised of this. Surely, she would have agreed with the evidence, which is there for all to see. It shows that, if there were 10 lotteries offering a jackpot of £1 million each, far less would be returned to society than having a single lottery with a £10 million jackpot. If she is not swayed by that argument, will she at least acknowledge that the evidence on which she is basing today’s decision is outdated? The evidence provided to her by the Gambling Commission was, at the time, already outdated—it is now four years out of date—and we have now seen a further erosion of the potential levels of income that we would have had from the National Lottery. I hope that the Minister will acknowledge that it is out-of-date information on which we are basing this decision.