The National Lottery: current trends and future concerns

Luke FitzHerbert
1st Nov 1997

This study analyses the most recent information about grant awards arising from Lottery funds and discusses the policy issues surrounding the future direction of the National Lottery.

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Summary

21The second edition of the National Lottery Yearbook was published in May 1997 by the Directory of Social Change. As well as detailed information about grant awards, it contained analysis of current policies and proposals for change. The policy issues raised in the Yearbook have been updated by Luke FitzHerbert in anticipation of a new Lottery Bill. His analysis finds:

  • The National Lottery has proved a success in terms of economical and effective administration. Sixty-five per cent of the population play the Lottery regularly and a high level of sales has been maintained. At the start of 1997, a midweek Lottery was introduced and the indications are that it has increased revenues by about 15 per cent per week.
  • Sales of scratch cards have continued to decline - falling from about £25m to around £15m per week during 1996.
  • There has been further relaxation of general controls on gambling due to pressure from other organisations promoting gambling. 1996 saw relaxation of the regulations on casinos and slot machines.
  • The evidence does not bear out the claim that charities have lost out overall, although individual charities may have seen falls in income. Nor does it appear that Lottery funds simply substitute for previous public spending: cash for 'good causes' is more than replacing government cuts in spending on the same programmes.
  • Some Lottery Boards have successfully targeted resources on those facing disadvantage. But distribution of grants to the Arts and to Heritage continues to go disproportionately to richer areas, thereby having the effect of discriminating against people on low incomes.
  • Large awards for capital projects have accounted for most of the grant money allocated. The grant process has been problematic for small local organisations.
  • The author concludes that the Government White Paper addresses many but not all of the concerns about the future of the Lottery: in particular, it does not respond to concern over scratch cards and the spread of gambling, and about the openness of grant-making decisions.

The extent of participation

Figures from Camelot show that around 90 per cent of the UK adult population has played the National Lottery at one time. Sixty-five per cent of the population play the Lottery regularly (see Figure 1 for some general statistics).

Figure 1: Lottery facts
Total prize money £6,640m
Largest jackpot (to three tickets) £42m
Largest individual win £23m
Number of £1m individual wins 428
Average weekly household expenditure on weekly draw £2.50

Under-age participation is a cause of concern: a nation-wide survey of 7,000 12- to 15-year-olds carried out for OFLOT revealed that 3 per cent played regularly twice a week or more while a third were less regular players. About 3 per cent of the sample admitted to stealing, mostly from family, to play the Lottery.

The Lottery Regulator, OFLOT, has taken little action against those selling Lottery tickets to under-16s and has not undertaken in-depth research into patterns of addictive behaviour by adults.

Scratch cards have been singled out for particular criticism as being dangerously attractive to children and potentially addictive to a significant number of adults. However, sales of scratch cards have declined from a peak of over £40m per week to £15m. Critics argue, therefore, that this is an opportune moment to phase out this part of the National Lottery.

The effect on gambling

The Conservative Government, despite previous undertakings to Parliament, allowed features which contrast markedly with recommendations from the Royal Commission on Gambling and accepted demands from other gambling interests for greater commercial freedom. Because of complaints by the rest of the gambling industry - for example, by Littlewoods Pools which believes it has lost 30 per cent of its business - there have been increased freedoms for commercial gambling which the Lottery had been expected to pre-empt. In 1996, restrictions on casinos and slot machines were relaxed.

Impacts on retailing

There are 24,000 outlets with Lottery terminals, with average annual Lottery sales of £117,000, and commission to the retailer of £5,850. A number of surveys indicate that those without terminals are losing trade.

Research by the Henley Centre indicates that £2.6bn has come out of consumer spending to finance Lottery tickets. The impact is greater in 'rollover' weeks: sales in one such week in January 1996 reached a level equivalent to 5 per cent of all retail spending. Figures from the Family Expenditure Survey indicate that the normal pattern is 3 per cent of retail sales and 1 per cent of total consumers' expenditure.

Administration

National Lotteries are common throughout the world; the UK's National Lottery is now one of the largest. The running costs and profits of the organisers, Camelot, compare favourably with those in other countries.

However, there is considerable disparity in administration costs between the distributing bodies. The Arts Council of England requires three times more than the English Sports Council to make fewer grants. The highest level of costs has been incurred by the National Lottery Charities Board. It spent £17m in 1996 compared with £12m by the Arts Council but it made six times as many grants.

1996 saw the introduction of successful funding of the 'revenue' aspects of some projects, by the Sports and Arts Boards. Overall, the competence of the distributing bodies appears to have improved.

From the applicants' point of view, discussions with distributing bodies, applicants and assessors suggest that smaller voluntary or community organisations have particular difficulties in preparing applications which match the criteria: the project or the organisation may be ineligible or may be unaware that they are applying for a service which already exists in another form; they may ask for too much or be unable to raise partnership funding; or they may be deemed insufficiently viable as an organisation. Evidence is also emerging that smaller organisations may have difficulties once grants have been awarded due to inexperience in handling relatively large-scale projects.

Substitution for charitable and public money

Overall, the funds for 'good causes' appear to be more than replacing cuts in government capital expenditures on the same programmes. The Lottery is creating big investments in new institutions and facilities which would be unlikely to have gone ahead without this source of finance.

The evidence on whether individual charities have lost out to the National Lottery is inconclusive, though there have been losses and gains for particular sectors.

The National Council of Voluntary Organisations believes that 5.2 per cent of individual charitable giving is being diverted to the purchase of Lottery tickets, representing a fall of £276m. After new grants from the National Lottery Charities Board of £245m charities face an apparent loss of £31m. However, this ignores large sums going to charities from the other Lottery distributors, which would suggest that overall charities are gainers. Recent research from the Policy Studies Institute shows that, overall, the charity sector appears to have benefited from the Lottery.

Targeting

A survey by the Consumers Association of 2,000 members of the public (in September 1996) showed that 78 per cent felt the money should be distributed evenly around the country and 76 per cent felt that too much money is given to a few projects.

At the level of individual towns and districts, through to whole counties and regions, parts of England have not been given a share of awards from the distributing bodies which accords to their proportion of the population. Richer areas are still favoured over poorer ones and London is still greatly favoured by the Arts and Heritage Boards at the expense of the rest of England (although the local Boards for Scotland, Wales and Northern Ireland do not come in for this criticism).

The Arts Council of England has responded that it is barred from seeking a fairer distribution because it is "simply not allowed to solicit applications". However, the Directions governing the Boards' behaviour leave them free to set strategies and policies and to judge applications accordingly. Distributors were privately urged by the Conservative Government to organise special arrangements for areas from which applications are not forthcoming. The Sports Council did this through its Priority Areas Initiative, but the Arts Council and Heritage Fund have not followed this pattern.

The extent of the uneven distribution is shown by the Arts Council of England figures. Even excluding the £20 a head in awards to London-based institutions, the differences remain great. The top three of the remaining regions averaged awards amounting to over £8 per head of population compared with just £2 per head of population in the bottom three regions.

One example of the extent of advantage for richer areas is shown by the figures of grants for schools (see Figure 2).

Figure 2: Distribution of grants to schools
  Arts Sport
Least disadvantaged areas 33 schools - £9.9m 44 schools - £11.5m
Most disadvantaged areas 13 schools - £0.8m 22 schools - £6.7m
(For this analysis England was divided into two 'areas' of equal population based on DoE indices of disadvantage. The grants were for artistic or sporting facilities for community use.)

Few projects are open to everyone free of charge and most distributors in England do not seem concerned about the difficulty of access for people on low incomes. A brief survey of 40 awards showed that none of twenty Arts Council of England and Millennium Fund winners could recall being questioned on the need to consider access for such people. Only two out of ten had been asked by the Heritage Lottery Fund. However, seven out of ten Sports Council winners recalled discussions during their applications.

The Heritage Lottery Fund - which is administered by the much smaller National Heritage Memorial Fund - has restricted its funding, giving only to areas already possessing 'national treasures'. Environmental projects in other areas have been supported by the Millennium Commission, but this will end when it is wound up in 2000, leaving no Lottery support for the environment in much of the country.

Raising partnership funding has proved less difficult than anticipated though local authorities are among the leading providers of funding. Small local applicants in disadvantaged areas have faced the most difficulty in attracting partnership cash.

The Government's White Paper

The Labour Party in opposition produced a report following a policy review of the Lottery in 1996 and proposed further changes during the General Election campaign.

Its philosophy went further than the Conservatives in support of the expansion of gambling. It stated that "The National Lottery will continue to develop new products, many of which will mirror existing gaming activities. This is a necessary process ...". This goes far beyond the idea originally envisaged by the Royal Commission on Gambling of a Lottery consisting solely of weekly draws.

The White Paper - The People's Lottery - suggests action that would meet a number of the problems already described. It calls for:

  • the benefits of Lottery money to be more widely spread;
  • money to be allocated fairly across Britain and to different groups in society;
  • Lottery distributors, instead of being re-active bodies, to develop grant strategies based on assessed needs;
  • grant decisions to be taken nearer to the grass roots;
  • new areas to benefit, chosen by the government of the day, including health, education and the environment.

A number of specific commitments have been made, both in the White Paper and subsequently:

  1. The government will issue Directions to the distributing bodies, requiring them to take account of these objectives. They will be asked to "target the areas of greatest need and the people who are most marginalised in our society".
  2. New local 'cross-distributor' Community Projects Funds will be established to make small grants. These are likely to make grants to all qualifying community initiatives on a first-come, first-served basis. A pilot scheme, managed by the National Lottery Charities Board, is likely to be introduced in Scotland even before new legislation is in place.
  3. New legislation will establish a sixth funding stream, the New Opportunities Fund, to fund specific initiatives in the fields of education, health and the environment. This fund will take a share of the money presently going to the five initial good causes. The initiatives to be supported will be specified for the Fund by the government. The first three initiatives will be for teacher training in IT, after-school clubs and for the development of Healthy Living Centres.
  4. The legislation will also establish NESTA, the National Endowment for Science, Technology and the Arts, to be funded initially from the New Opportunities Fund.
  5. The choice of a Lottery operator to succeed Camelot plc on the expiry of its licence will again be competitively tendered.

Policy proposals

The Directory of Social Change, while welcoming the White Paper proposals as a whole, has proposed that:

  • a decision should be taken now to phase out scratch cards, and that any further development such as a third weekly draw involving scratch card promotion should be rejected;
  • until the effects on society of the National Lottery and of other associated gambling developments have been fully assessed, there should be no further relaxation of controls on the promotion of gambling;
  • decisions on awards by Lottery distributors should be taken in public;
  • the Heritage Lottery Fund should now be separated from its parent body, the National Heritage Memorial Fund, which should continue in its former role of saving outstanding items for the nation;
  • the Board of the New Opportunities Fund should be independent of government, in the same way as the boards of the other distributors, and it, rather than the government of the day, should decide on the initiatives to be supported.

About the study

The Yearbook is based on published sources together with the Directory of Social Change's own database of Lottery grants, categorising them down to local authority level.

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