and RHYS WILLIAMS
The Chancellor, Kenneth Clarke, yesterday bowed to back-bench and Opposition pressure and granted pools companies a 5 per cent tax break after warnings that the National Lottery could put them out of business.
The decision to cut the companies betting levy from 37.5 per cent to 32.5 per cent - on the eve of a record lottery jackpot tonight of £20m - came on the day charities announced their donations have fallen by a fifth - £71m - since the lottery was launched.
As charities called for similar tax breaks, Stephen Dorrell, the Secretary of State for National Heritage, denied that the private pools companies were getting a better deal that the voluntary sector.
Despite the charities' losses, announced in a National Council for Voluntary Organisations survey yesterday, he said the Government would need "considerably more evidence" of a sustained effect on them before it acted.
But Stuart Etherington, NCVO's chief executive, said there was already plenty of evidence that the lottery had effected the pattern of charitable giving in Britain. The NCVO survey showed that the number of people giving to charities had fallen from 81 to 67 per cent since the lottery launch.
"Significant fund-raising methods, such as raffles used by large and small charities, have been adversely affected," Mr Etherington said.
He added that the most worrying aspect of the survey was the public "misconception" of the lottery's contribution to charities. Two thirds of those interviewed in the NCVO survey thought buying lottery tickets was a good way to help good causes and that 22p in the pound was going to charities. In fact, only 5.6p goes to charitable bodies.
The Government will propose the pools' tax cut - which will cost the Exchequer £30m a year - at the Report Stage of the Finance Bill. The lottery pays 12 per cent betting tax and 32.5 per cent goes to good causes. Some reports have put the pools companies losses as high as 17 per cent.
The Pools companies had planned to halve from May their contribution to the Foundation for Sports and Arts. The Government said yesterday the companies had agreed that the tax reduction should enable them to "maintain their generous contributions".
Yesterday Phil Jarrold, managing director of Vernon's Pools, said he understood the charities' difficulties. "I am not surprised at where they find themselves," he said. "I am asked if it is fair what is happening to them. And I ask was it fair that we, as an industry, had to make 660 people redundant?"
Labour, which had campaigned for a reduction in pools tax to 30 per cent, welcomed the Chancellor's decision. But Chris Smith, the shadow Heritage Secretary, renewed Labour's call for a review of the impact on charities after six months.
Charities feel chill, page 3