Health Lottery faces inquiry over claims it hurts charities

Culture Secretary says Richard Desmond's flashy new lottery could create more harm than good

The controversial Health Lottery, launched with a fanfare last month by the media tycoon Richard Desmond, will be investigated after the Culture Secretary added his voice to concerns it was doing more harm than good.

Jeremy Hunt told MPs from the Culture, Media and Sport Committee that he had asked the Gambling Commission and the National Lottery Commission to investigate the enterprise.

Sir Stephen Bubb, head of Britain's voluntary associations, branded the Health Lottery a disgrace at its launch, pointing out that it will only pay out 20.34p of each £1 ticket sold and risked undermining the National Lottery, which gives 28p.

"I am worried about the Health Lottery because protecting the income of good causes is a very, very important responsibility that this Government has," the Culture Secretary told MPs on the committee yesterday, adding: "The National Lottery was set up in way that would generate money for those good causes.

"Society lotteries are allowed on the basis that they are local lotteries. We are doing some work to look into what the impact of the Health Lottery might be on good-cause revenues."

Desmond has promised that the new lottery, which has its Saturday night draw on Channel 5, which he owns, will generate a minimum of £50m a year for local health charities, operating as 51 lotteries, each representing a local authority, which will take it in turn to be a beneficiary of the draw. Prizes range from £50 to £100,000.

Yesterday, asked by the committee chairman, John Whittingdale, whether the Health Lottery was legal and whether the Government would take action, Mr Hunt said: "If they conclude that what's happening is not legal, I would expect them(the commission) to take robust action."

Pointing out that the National Lottery had raised £26bn for good causes since its launch in 1994, a spokesman for the Department of Media Culture and Sport said: "If there is evidence that good causes or individual society lotteries were affected we will take action to address this."

While the Gambling Commission signed off the new Health Lottery, critics have said it circumvents strict caps on the turnover of individual lotteries – which must have a maximum revenue of £10 million - by operating as an umbrella group.

Martin Hall, the Health Lottery chief executive, dismissed the criticisms, claiming that the launch of a rival had seen sales of the National Lottery rise.

"We know from recent data that sales in the National Lottery are in fact £50,000 higher per draw since the launch of the Health Lottery... When this is added to the £50m of new money the Health lottery will generate, this is excellent news for charities, with no losers in sight."

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