A `good' cause to end good causes?

The Government must act fast to save charities from the National Lottery, says Stuart Etherington

Research published yesterday by the National Council for Voluntary Organisations shows a severe dent in charities' income as a result of the effects of the National Lottery. The survey, conducted by NOP, reveals that individuals' donations to charity have dropped from 81 per cent of the population before the launch of the National Lottery to 67 per cent in March. Based upon this research NCVO estimates a £71m loss to charities so far. If this trend continues for the rest of the year, charities could stand to lose £212m.

As the National Lottery Charities Board has not started giving out grants, it is difficult to say how far it will offset these huge losses. Camelot's latest estimates, based on the first four months' sales, are that charities will benefit from the lottery to the tune of about £155m a year. If that is the case, and losses continue at the level now reached, then charities will suffer a net loss of £57m after a year. For some, especially the smallest organisations, grants may come too late: the criteria for awarding grants have not yet been decided, and the first payments are unlikely to reach charities before the end of the year. Even when grants are distributed it is not clear that money will go to those worst affected.

This drop in donations is due, in no small way, to the confusion in the public's mind about where the proceeds of the lottery go. Two-thirds of people interviewed thought buying lottery tickets was a good way to help good causes. On average, interviewees thought that 22 pence in the pound was going to charities. In fact, charities receive 5.6 pence - one-fifth of the sums going to good causes.

People clearly equate a "good cause" with charity. Research shows that this belief is affecting behaviour: people are not giving to collectors in the street, or buying raffle or charity lottery tickets, in the belief that they have already made a donation. This view was encouraged by the lottery's early advertisements, which emphasised how it would benefit good causes. The proportion of people giving to street collections - the main method of individual donations - is down from 32 per cent to 23 per cent, and those buying raffle tickets have dropped from 23 to 17 per cent. Small lotteries are suffering. Tenovus, a Cardiff-based national cancer charity, announced the end of their own lottery this week, despite it accounting, in the past, for 50 per cent of their income. Over its 15-year lifespan the Tenovus lottery raised more than £10m for cancer research.

National charities have reported a dip in donated income, too. Arthritis Care has recorded a 25 per cent fall and Voluntary Services Overseas a 10 to 15 per cent fall in lottery income.

The blow to individual giving could not come at a worse time. Even before the launch of the National Lottery there was concern that donations from individuals were at best static. The continuing lack of "feel-good factor" has encouraged families to tighten their belts - and this has affected donations to charities. Corporate giving is similarly affected. Though government funding to the sector - both central and local - has grown in recent years, it is increasingly tied to payments for specific services. At the same time, with government policies promoting the role of charities and voluntary organisations as independent providers of many local services, they face an ever-increasing demand for their services.

NCVO is calling for an urgent meeting with Michael Howard, whose Home Office department has responsibility for charity concerns in government, to discuss these findings. Top of the agenda will be ways in which the Government can help charities in difficulties. It is clear that distribution of the proceeds needs to be re-examined - not least the Government's 12 per cent tax take. Calls for a reduction in the Government's tax share have more significance in the light of yesterday's announcement of a tax concession for pools companies. In comparison with other countries the tax is high. In Spain, Ireland and Belgium there is no tax at all. In Greece, Italy, the Netherlands and Portugal only the winnings are taxed. For the past three years in Denmark the government has forgone the tax to free up money for two humanitarian charities and other good causes.

There may also be scope to consider alternative measures: encouraging tax-effective individual donations might make sense, new tax breaks could also help revive charities' fortunes.

The Government must act fast, though, to limit the damage to charity income. NCVO is engaged in a full-scale programme of research to back up these consumer surveys on individual giving and to give a full picture of the impact of the Lottery. This bigger research will include monitoring the effects on charity lotteries, raffles, scratch-card games and other fund-raising events, and analysing the impact on the income of charities and voluntary organisations through examination of two successive financial years' accounts.

It will be some time before the full effects of the lottery emerge. However, charities cannot afford to wait until they are put out of business to be helped. Pressure is on the Government now to respond to these findings to mitigate the worst effects of the lottery. And it should not just be up to NCVO - a charity itself - to monitor the effects and take the initiative to find solutions. The Government needs to think fast to protect one of its most precious national assets - a thriving voluntary sector.

The writer is chief executive of the National Council for Voluntary Organisations.