Lottery casts chill over cash `competitors'

CHARITIES UNDER PRESSURE: Voluntary organisations fear £57m drop in net annual income in wake of Camelot's success

BY RHYS WILLIAMS

and MARY BRAID

Heeding warnings from pools companies that the National Lottery would soon put one of their number out of business, the Government yesterday eased their financial worries by reducing the levy they pay to the Exchequer.

Confronted on the same day with evidence that the lottery could be having equally disastrous consequences for charities, Stephen Dorrell, the Secretary of State for National Heritage, said: "Wait and see."

The figures released by the National Council of Voluntary Organisations show that the percentage of the population giving to charity since the lottery began last November has dropped from 81 to 67. The proportion of people buying raffle tickets has fallen from 32 to 17 per cent, while the percentage giving to street collections is down nearly a third to 23 per cent.

The research, carried out by NOP, also found that individual donations have dropped by £71m. If that pattern were to continue, the council warned, charities and voluntary organisations could lose £212m by the end of the year, £57m more than the £155m it calculates the National Lottery Charities Board (NLCB) will have to dish out. Two-thirds of those questioned thought that 22p out of every £1 spent on the lottery went to charity, when in reality the figure was just 5.6p.

Mr Dorrell was unconvinced. "We need considerably more evidence that there is a sustained effect on the charities sector than we have yet seen," he said on BBC radio, refusing to be drawn on how much time would have to elapse before he would consider the sort of life-belt that has been thrown to the pools firms.

The NCVO's results appear to bear out, and in some cases surpass, concerns being expressed about charities' ability to compete with the National Lottery's huge pay-outs, which look set to continue tonight with a record jackpot of £20m.

Part of the problem is the direct effect on fund-raising. But there is also doubt among voluntary groups as to whether they will ever recoup their losses through the NLCB, which is responsible for handing out charities' one-fifth share of the "good causes" proceeds.

Last Wednesday, the cancer charity Tenovus announced it was axing its scratch-card lottery and 500 jobs following a "catastrophic" slump in fund-raising. Fearing insufficient interest, the NSPCC in Wales has cancelled its annual prize draw for a car - a key fund-raising scheme.

Lainey Clayton, of the Kidney Research Unit Foundation for Wales, is finding that managers of supermarkets, already choked with queues for the lottery, are unwilling to allow collectors into stores. The biggest problem, however, is public ignorance. "People don't think they have to help any more once they have bought a lottery ticket."

Arthritis Care, a national charity, saw income from its pre-Christmas lottery dip by 25 per cent. Peter Maple, fund-raising director, said: "Contrary to the Government's hope that the lottery would generate extra money, at best we're going to recover our losses and at worst we've got a big hole in funding."

Some charities feel they stand little chance of clawing back anything through the NLCB. Although consultation on the criteria for awards is not complete, draft guidelines indicate that charities covering animal welfare, such as Blue Cross and the RSPCA, and scientific medical research will be low priority.

Diana Garnham, of the Association of Medical Research Charities, said: "It's a double whammy ... On the one hand, their most effective fund-raising efforts are being hit, and on the other, they will be denied money from the lottery."

As the deficits faced by charities grow, attention is bound to shift to the profits made by the organiser, Camelot. The company's financial year ended last night, and it is believed that its revenue will top £1.2bn, or 9 per cent of total lottery sales.

Simon Hebditch, director of the Charities Aid Foundation's policy unit, said the director-general of Oflot should be encouraged "to think again ... so that when the time comes to renew the operator's licence, the public can be assured excess profits are distributed to charity".