Guidance

One year review of society lotteries sales and prize limits

Published 1 March 2022

Background

Legislation was laid in March 2020 to increase the sales and prize limits for society lotteries, and these reforms came into effect in July 2020. The changes were:

• Annual sales limit increased from £10 million to £50 million.
• Per draw sales limit increased from £4 million to £5 million.
• Maximum per draw prize limit increased from £400,000 to £500,000.

Alongside these increases, the Gambling Commission introduced greater transparency measures, requiring society lotteries to provide more information to consumers about the use of proceeds and the likelihood of winning a prize.

The government committed to reviewing the early impact of the changes a year after implementation, with a particular focus on looking at trends in good cause returns.

Approach

The review examined publicly available information, supplemented with more detailed data provided by the Gambling Commission from industry returns and a survey of society lottery operators conducted in 2021, together with the Gambling Commission’s views on what would need to be considered before further changes are explored. This is summarised at high-level below. Due to the provisional nature of some of the data and limitations over the period of the pandemic, the Gambling Commission will not be publishing any data alongside this statement. In addition, DCMS officials held a series of meetings with stakeholders to gather additional views and information.

The areas the review has covered are:

• Sales - by society lotteries and the National Lottery
• Prizes - what levels of prize are being offered and what has been the impact of the new prize limit on the sector?
• Expenses - what is the trend in % and total expenses?
• Good cause returns - what is the trend in % and total good cause returns?
• Transparency - what has been the impact of the new transparency measures?

Publicly available data runs to March 2021, due to the timing of society lottery data returns to the Commission. The impact of Covid 19 has reduced the amount of data the Commission has been able to publish.

Sales limits

The increase in the annual sales limit to £50 million has allowed some operators previously selling in excess of £10 million annual sales to move to a single licence and reduce costs. However, not all operators that could benefit from consolidating licences have done so. We heard this could be due to a number of factors, such as timing of new licences coming into force in July 2020 midway through the year, initial costs of restructuring, and most importantly focus being elsewhere during the pandemic.

We would want to see more data on annual growth of the sector to fully measure the impact of the 2020 changes. At present, no individually licensed society lottery has sales close to the £50 million limit, and only one operator (managing 20 society lottery licences on behalf of different Trusts) would currently benefit from further annual increases, so we do not see a case for further change at present.

Prize limits

The data has shown that the vast majority of individual draw top prizes are under £10,000 in value, and this has not changed since the new prize limit has been introduced. Since July 2020 only one draw has taken place offering a prize above the previous £400,000 limit. This suggests that societies are not constrained by the rule that prizes can be no more than the larger of £25,000 or 10% proceeds.

Expenses

Our intention in implementing a significant increase to the annual sales limit was that it would enable the largest operators to reduce the number of licences they held, allowing savings in expenses to be used to increase returns to good causes. However we have heard that, for many society lotteries, the pandemic has impacted on operations, such as player recruitment and marketing costs and therefore it is too early to assess whether the new limits are having the anticipated impact on expenses. Nevertheless, we have seen some early evidence that overall society lottery expenses are reducing, with a fall from 29% to 26% during the course of 2020.

Returns to good causes

There is some evidence to suggest that there has been an increase in returns to good causes from umbrella branded lotteries, but a slight decrease in the percentage from non-umbrella lotteries going to good causes, which may be due to the impact of the pandemic. We have not seen any data to suggest any reason to currently consider a change to the current minimum return to good causes.

Transparency

The Commission has monitored compliance with the new transparency measures, and despite some initial issues, which it was able to tackle directly with operators, it considers that overall compliance has been high.

Stakeholder views

As part of the review, officials met with society lottery stakeholders (People’s Postcode Lottery, the Lotteries Council, Local Hospice Lottery, and Essex & Herts Air Ambulance). They confirmed that the reforms had benefited the sector, and had led to greater transparency for players. The largest operator, the People’s Postcode Lottery has restructured, resulting in savings in expenses and more money raised for good causes, and pressed us to bring forward further reforms such as increasing the annual sales limit to £100 million. The Health Lottery has also taken advantage of the new thresholds to reduce its number of licences, leading to slightly reduced expenses costs.

We also met with National Lottery sector stakeholders (Camelot and the distributing bodies), who are generally supportive of society lotteries run to fundraise for single causes, but continued to be concerned about society lottery marketing, and were opposed to any further changes to the limits, asking for time to carry out their own detailed analysis should we consider making any further reforms.

Conclusion

Our overall view is that early indications have shown that the increased limits are bedding in well and are beginning to have the intended effect of allowing the society lotteries sector to grow and return more to good causes, whilst also maintaining the unique position of the National Lottery. However, we agree with the Gambling Commission’s view that it is too soon to reach any firm conclusions on the impact of the changes, especially during a time that the effect of the Covid pandemic has made any evaluation more difficult, given changes in consumer behaviour over this period which may have had a distorting effect.

We do not consider that any further policy changes are necessary at this time. As set out in the government’s response to the Culture, Media and Sport Select Committee report on Society Lotteries (July 2015), we are committed to working with the Gambling Commission, as part of its regulatory role, to continue to keep the sector under review.

March 2022

Stakeholder meetings held with:

Camelot

Essex & Herts Air Ambulance

Local Hospice Lottery

Lotteries Council

Lottery Forum

People’s Postcode Lottery

We also consulted with the Health Lottery.