|Population July 2013:||63 million|
|GDP 2012:||2.772 Billion EUR|
|GDP per capita:||26,800 EUR|
|Taxation for Lotteries:||12% (for the National Lottery)|
|Online Gambling:||regulated, taxation: 15% GGR|
National lotteries were prohibited in the UK for a long time. Pressed by competition from foreign providers and the desire to raise additional funds led to the establishment of the National Lottery in 1994. The National Lottery Act 1993 (revised in 1998) and the Gambling Act (passed in 2005 and implemented in September 2007) shape the legal framework for games of chance in the UK today.
By law, all lotteries are prohibited unless they are small lotteries (incidental to an exempt entertainment), private lotteries, society lotteries, local authority lotteries or part of the National Lottery. Unlawful arrangement of a lottery – without a license – may result in a fine or imprisonment. There is a tightly controlled state monopoly on national lotteries, including instant lotteries. Since the Gambling Act 2005 was fully implemented in September 2007, remote gambling (via SMS, Internet and digital TV) is allowed under certain conditions (see below).
The Gambling Commission, set up under the Gambling Act 2005, is the authority which regulates lotteries, except for the National Lottery. The Gambling Commission is a non- departmental public body sponsored by the Department for Culture, Media and Sport. It has as its main tasks to keep crime out of gambling, to ensure a fair and open conduct of gambling and to protect children and vulnerable people. It issues licenses, imposes fines and revokes licenses if necessary.
SMALL, PRIVATE, SOCIETY & LOCAL AUTHORITY LOTTERIES
There are eight categories of lotteries, of which three need to acquire a licence to operate. Those that do not need a licence, the 5 categories of small and private lotteries, do not need to register with the Gambling Commission nor has the Commission any legal responsibilities for these lotteries. Some of these small or private lotteries may be used for fundraising. For example, incidental lotteries may be held at non-commercial events, such as a school bazaar, dinner or sporting event. Prizes must not total more than £ 500 (around € 600), and operating costs cannot exceed £ 100 (€ 120). Another category, private lotteries, take place within one society (persons who all live or work on the same premises or who all belong to some group or society) that was not established for the purpose of gambling. All proceeds must go to the goal of the society. No limitations on the values of stakes and prizes exist for private lotteries.
The three categories of lotteries that do have to register with the Gambling Commission or the appropriate local registration authority are the small and large society lotteries and the local authority lotteries. A society is defined as a club, institution, organisation or association with a charitable and non-commercial purpose. All proceeds of the lottery must be reserved for the purposes of the society. Private gain or commercial undertaking is prohibited. A local authority (i.e. county council, district council) may arrange a lottery and can use the net proceeds for any purpose for which it has expenditure power.
Society lotteries with sales (or proceeds) of a single lottery below £ 20,000 (around € 24,000) and total sales in one year below £ 250,000 (around € 297,000) fall into the category of small society lotteries. Lotteries with sales in a single lottery or in a year above these figures are large society lotteries. Both large society and local authority lotteries have a sales limit of £ 4 million (€ 4.8 million) for a single lottery, and of £ 10 million (€ 12 million) for a calendar year. The large society lottery and the local authority lottery must obtain a licence from the Gambling Commission. Small society lotteries must obtain a licence from the local licencing authority.
The maximum amount for a prize is £ 25,000 (roughly € 30,000) for small society lotteries. The maximum prize for a large society lottery and local authority lottery is £ 25,000 or 10% of sales, whichever is the greater. As sales may not exceed £ 4 million, the maximum prize cannot exceed £ 400,000 (roughly € 482,000). For all three types of lottery, it is stipulated that a minimum of 20% of sales of each single lottery must go to the charitable purpose of the society or local authority. The Department for Culture, Media and Sport will consult on whether to increase this percentage, with the aim of searching for a market structure that delivers the highest benefits for good causes. There is no maximum on the price of a lottery ticket. There is no restriction on the frequency of drawings per year. Tickets may not be sold to persons under the age of 16
In September 2013 there were 463 non-commercial society lottery operators holding 742 lottery licences. Societies holding a licence for a lottery frequently employ a licensed external lottery manager (ELM) to promote and organize the lottery on their behalf, often together with other societies. An example of this is the Unity Lottery, see below. In 2013 there were 37 ELMs holding 52 licences, of which 31 were non-remote and 21 were remote ELM operating licences.
THE GAMBLING MARKET
The British gambling market, excluding the National Lottery and remote gambling not licences in the UK, grew 7.4% in the 2012-2013 reporting year, to £ 6.32 billion (€ 7.64 billion) GGR. This includes revenue from casinos, betting shops, UK licenced remote gambling and society lotteries. Betting (non-remote, i.e. not online) makes up 51% of total GGR. Remote gambling (licenced in the UK) accounts for 13% and society lotteries for 5%.
Society lotteries show steady growth over the last five years. For the year 2012-2013, turnover amounted to £ 346 million (€ 418 million), and GGR to £ 285 million (€ 343 million). Average contribution to good causes was 45% (£ 155 million (€ 187 million)), an increase from 44%. Average expenses stood at 38% (£ 130 million (€ 157 million)), an increase from 34%, and prizes averaged 18% of turnover (£ 61 million (€ 74 million)), a decrease from 22%.
The remote, or online, gambling market as regulated by the Commission (i.e. excluding off- shore operators) totalled £ 832 million (€ 1,005 million) GGR. As of September 2013 there were 275 remote gambling activity licences held by 198 operators. The UK consumer spend on online gambling, including all offshore operators, is estimated at £ 2.1 billion (€ 2.5 billion), with about 60% of the market operating off-shore.
The UK has had one of the most liberal gambling acts in Europe. Recent developments, however, will bring additional licensing requirements for online operators who serve British customers. The UK Gambling Act of 2005 has allowed an increase of bricks-and-mortar betting shops as well as legalizing online gambling, which has been a successful growth market.
Currently, online gambling operators who have all their equipment located outside the UK do not need a license from the regulator, the Gambling Commission. To be allowed to advertise their services, operators must have either a) a license from the Gambling Commission to operate from and in the UK, b) a license from a EEA country or Gibraltar, or c) a license from a ‘white-listed’ territory. The white list territories are Alderney, Isle of Man, Tasmania, and Antigua and Barbuda.
After legalization, the majority of operators, having gained their share of British customers, moved their gambling equipment outside the UK in order to benefit from favourable tax regimes in places such as Malta and Gibraltar. This was an unexpected consequence of the liberal regime, and the state treasury suffered in tax income despite the growing online market.
In 2013, a new Gambling (Licensing and Advertising) Bill was introduced into Parliament. Subject to parliamentary approval, the Bill will require operators that transact with or advertise to British consumers to obtain an operating licence from the Gambling Commission. This will ensure that all remote gambling operators offering services to British consumers will be subject to consistent regulation, according to the Commission. It also means that all operators will be subject to British taxation, at the rate of 15% gambling tax on GGR. This will be a ‘point of consumption’ tax, meaning that the location of the consumer will determine whether the revenue obtained is liable for taxes. The first licences are expected to be issued in 2014.
PEOPLE’S POSTCODE LOTTERY
The People’s Postcode Lottery is an example of a large society lottery, representing 7 societies. The lottery was launched in 2005 in the North East of England as the UK Postcode Lottery. In 2007 the lottery started in Scotland and in 2009 it rolled out to rest of the United Kingdom, now called People’s Postcode Lottery.
Players of People's Postcode Lottery support thirteen Trusts. These Trusts then provide grants to charities and community projects.
In 2012, turnover amounted to € 37.5 million, a growth of 31% over the previous year. The People’s Postcode Lottery donated 23% (€ 8.5 million) of total sales to the 7 societies under its umbrella. These societies distribute the funds to local charities in Scotland, Wales and England. Furthermore, 42% was destined as prize money (€ 15.9 million). For more information visit: www.postcodelottery.co.uk.
THE HEALTH LOTTERY
The Health Lottery was launched in October 2011. It combines the society lotteries of 51 good causes active for health issues, and promotes these nation-wide under the brand of The Health Lottery. In total, the Health Lottery has raised nearly £ 50 million (€ 64 million) for its charities.
The Health Lottery has had to face charges by the National Lottery, who started judicial procedures against its operations, claiming that its nation-wide scope was contrary to the monopoly rights granted to the National Lottery. However, the National Lottery lost the case, with the court ruling that multiple society lotteries are not prohibited under the current law. The court noted that whether they should be prohibited is a question for political decision makers. For more information, visit www.healthlottery.co.uk.
The Unity Lottery is a society lottery operated by an external lottery manager (ELM). Charities can register themselves as a beneficiary and players can choose which charity they want to play for. There is one draw every week. Of total sales, 50% goes to the chosen charity, approximately 20% is reserved for administrative costs and approximately 30% goes to prize money. In 2012, 190 charities profited from the Unity Lottery, such as the Hook Norton Football Club and the Bobath Children’s Therapy Centre. No data was found on financial results. For more information see: www.unitylottery.co.uk
The profits of this weekly lottery are granted as loans to businesses in Pembrokeshire, Wales, with the objective of creating jobs. The interest free loans vary from £ 2,000 (€ 2,400) to £ 25,000 (€ 30,200) or a maximum of 25% of the capital required for a project - whichever
is the lesser. Since its establishment in 1996, the lottery has loaned £ 4.5 million (€ 5.5 million) and 1625 jobs have been created at 320 Pembrokeshire businesses. For more information go to: www.pembslottery.co.uk
As far as we know, no other lotteries that meet the criteria of a charity lottery exist in the UK. There are, however, many small, private, society and local authority lotteries that have charitable purposes and these are mentioned below. The National Lottery, mentioned lastly, also distributes part of the sales to good causes.
The National Lottery Act 1993 states that only one body may be licensed to run the National Lottery at any one time. The current licensee and operator of the National Lottery is Camelot Group plc. Camelot designs the games of the lottery, provides services for winners and players and maintains the contacts with retailers. The National Lottery Commission, like the Gambling Commission, is a non- departmental public body sponsored by the Department for Culture, Media and Sport, and is responsible for licensing and regulating the National Lottery. The Commission ensures that the operator meets the conditions of the license and that the amount raised for good causes is maximised. It can also impose penalties or even withdraw a license under extreme circumstances. Neither Camelot nor the Commission are responsible for the distribution of the funds to good causes.
The National Lottery Distribution Fund receives the proportion of sales destined for good causes (28%) and distributes it among 16 Lottery funders. These Lottery funders are independent specialists in sectors like sports or arts. The British parliament approves the sectors (the distribution funds) that receive donations. The Lottery funders divide the money among local communities and national projects. Since the establishment of the National Lottery, 420,000 projects have benefited from over £ 30 billion (€ 36 billion) in grants. In addition, £ 2.2 billion (around € 2.7 billion) was contributed to the 2012 Olympic Games and Paralympic Games in London.
Total sales in the reporting year 2011-2012 were £ 6,526 million (around € 7.9 billion, ↑12%). For that year, £ 1,825 million (around € 2.2 billion) was donated to good causes (28%). Prize money constituted 52% of total sales (£ 3,389 million, around € 4.1 billion), and operational costs 9% (£ 529 million, around € 638 million). In addition, 12% of total sales goes to the state treasury in the form of Lottery Duty (£ 783 million, € 946 million).
In 2013, the National Lottery doubled the price of a ticket for their traditional main lottery, the Lotto. The ticket price has always been £ 1 pound, but is now £ 2 (€ 2.40). This is due to the fact that the sales of the Lotto have been falling, amounting to £ 2,345 million (€ 2.8 billion) in the reporting year 2012-2013, a decline of 5%. For more information visit www.nationallottery.co.uk.