00.00: Fiona Wallace - PPL Gary Hawkes (Local Hospice Lottery) 22.11.18
F: FIONA: That's just the recorder started now, but do let me know if you want to stop at any point. So to start off with, Gary, could you just tell me a little bit about your organisation and what you do?
G: GARY: The organisation is called Local Hospice Lottery Ltd. We run one society lottery which is owned by the charity Farleigh Hospice; and we not only support Farleigh Hospice through what we do, we also now work with twenty-one other hospices- each of whom receive a share of the income that is raised in their particular area. In essence, what we've done through our model is basically to get the benefits of economies of scale by operating one lottery; so the local hospices we work with can actually be better off and get a better lottery fundraising product by working with us, rather than all the duplication of effort/time/costs/lack of expertise that running very small society lotteries can lead to.
F: FIONA: So the lottery is owned by Farleigh Hospices, but the benefits go broader, to other hospices. Is that correct?
G: GARY: Yes, to some extent; no in another. From a legal point of view, in essence all of the beneficiaries - sorry, the sole beneficiary - is Farleigh Hospice, in terms of the charitable objectives of that charity. Now, those charitable ejectives are basically hospice care and are not limited by geography. In essence, we make a donation to our partner hospices for them to further the objectives of Farleigh hospice. Sorry, it's a technical point. The reason behind that is twofold; one of which, it means rather than Farleigh reporting the donations to hospices as an administrative expense within their account - which would make their accounts look ruddy awful by making the donation in that way, or making the payment in that way - actually it shows us what it is, which is furthering hospice care. The second point - probably the point from a gambling commission point of view - is by making the donations in that way - which is all obviously correct correct and legal - it means that the donations we make to partner hospices are counted towards our impact on our beneficiary, which means that that is always going to be above 20%. Whereas if it was just the Farleigh Hospice locally, it might be below the 20%.
F: FIONA: That makes a lot of sense.
G: GARY: That was just as background. The model we have is fairly unique; and we spend quite a lot of money with our lawyers to make sure that we're not just meeting the needs of the Gambling Act, but also all of the relevant charity and financial legislation as well.
F: FIONA: I see, thank you; could you just tell me a little bit about your role specifically, Gary?
G: GARY: In my role specifically I am, and have been for the last three and a half years, Chief Executive Officer of Local Hospice Lottery. Before that I was head of fundraising and PR of Farleigh Hospice, and within that role I was responsible for the lottery as well. I started that role back in 2004, at which time at the lottery was called Farleigh Hospice Lottery and just operated locally in mid-Essex. Then in 2008 we developed this partnership model of working with other hospices, and East Anglia's Children's Hospices came on board then. Basically it just started to grow and grow and grow - particularly from 2012/13 - and because of that growth my role altered and it was felt - both by me, but also by the Farleigh board and the Lottery board - that actually, there was some real scope to develop this as a very significant source of income for hospice care. I moved from part-time to full-time in the Lottery.
F: FIONA: Okay, great. Thank you. I think we'll come back to some of those ideas of how it's grown and been a component of how you work as an organisation; but what might be useful for me to hear from you is, what you think some of the biggest challenges are facing your organisation at the moment? Whether it's sector issues or other issues; sorry, I'm throwing in quite a big question upfront.
G: GARY: Big issues; the first one for us, the significant one, is the government legislation on society lotteries, particularly in terms of annual turnover. We operate one society lottery, and we are currently - well, last year we turned over, I think, 7.4 million, this year it's going to be way over 8 million - clearly that is starting to move close to the 10 million cap. So, that is impacting on how we plan for growth; it’s impacting on what we might need to do in terms of structure. It’s meaning we're having to spend a considerable amount of time, both working working alongside the Lotteries Council to see if there's anything that can be done - following the recent consultation, and prior to that, to actually get the consultation launched - to see how quickly any changes might be made. Really the significant issue for us amongst all of that is actually timeframe and uncertainty; because if decisions aren’t made relatively soon, we are going to start incurring some fairly substantial costs. Which equally obviously, we don't want to; because that's costs that could be used for for developing hospice care.
F: FIONA: And in terms of – you were speaking about those substantial costs - is that around the time that is spent?
G: GARY: At the moment that is an element. There's certainly the time that's being spent; and to be fair in terms of the team, it’s mainly been me within our team. Little bit of time of with some of our marketing team to look at various bits and pieces; and we put on an event with the support of Priti Patel in Portcullis House last year, prior to the consultation being launched. So there's that element of time, where the cost is much more likely to come in is if the changes aren't made soon; in that we will therefore need to start incurring not only my time, but we're going to need to start incurring costs of lawyers to look at how structures might need to also. We would need to certainly look at getting an additional or additional licenses for our structure, for any structural changes going forward. Possibly the worst thing about that; that could all be money that is then wasted if the changes occur later anyway, so this is a problem. The other more significant cost is, if the changes aren’t made, we are looking at very substantial costs, in excess of about a hundred thousand pounds; in terms of communication costs with all of our [UNCLEAR] "players" if there are any changes. Then we believe we are looking at probably another 260,000 - sorry, 275,000 - in annual costs going forward, because our model is very much predicated on the basis of providing our partner hospices with unrestricted income; which is one of the key benefits of lotteries anyway, it’s a form of unrestricted income. We think the only way we're going to be able to do that is actually by replicating the prize fund, and looking at having a separate - then again, it would need to be a separate legal entity - but that would probably need to have its own prize fund, which we think replicating what we currently have is the only way of doing that. So we're looking at very substantial cost increases, all of which could be used to further hospice care.
F: FIONA: I see. In terms of challenges, do you have any sense of what are the challenges facing local hospices right now?
G: GARY: Local hospices; crikey, you got a number. There's a really significant one at the moment which is in terms of the NHS Pay Award, where that is going to be paid to NHS staff; but that isn't something that is going to be rewarded to hospice staff. That has a significant impact on hospices' ability to meet or match the market for doctors, nurses, other healthcare professionals, and could lead to either A: cuts in services, or [B:] increased difficulty recruiting the right level and right skill of staff. I’ve not got the figures on me, but I do know Hospice UK have been working very hard. There was a recent debate in Westminster Hall on this this topic where - despite asking government to look at the impact of that award on hospices - there is still not much movement from government or from the Treasury. So that's a significant one. More significantly - and I might be going into too much detail - the key impact or key challenges for hospices are very much the changing demographics of the UK, in that we have an increasingly elderly population; just from that point of view, the numbers of people who are going to need hospice care in the future is set to increase substantially. Equally because of medical treatments, people are living much longer with life-limiting conditions; so we're not only looking at an increase in the number of people hospices will be supporting in the future, we're also looking at an increase in the length of time that hospices could be required to look after them. Those are all challenges and those are met with the financial challenges that hospices face - so growing demand - but where actual income is not increasing to meet that demand. NHS grants, broadly speaking, have either stayed the same or have been reduced; I believe over 50% of hospitals made a loss last year or operated at a deficit last year, and that's an increase on the year before. And the challenges in fundraising I've looked at are fairly significant; and that's a sector-wide one, whether that's running events in the increasingly competitive event fundraising environment, whether it's reductions in direct mail response rates. It's quite a broad range of challenges that hospices are facing.
F: FIONA: Thank you. That's a really useful overview for where you guys fit in as well. I think you probably covered a bit of this already, but could I just ask you a bit about Local Hospice Association in terms of – sorry, Local Hospice Lottery - in terms of your main sources of income?
G: GARY: Okay; well, I mean – we have two sources of income, but in essence it's just one - which is we operate a weekly draw, of which there are either 52 or 53 of those in a year. 53 is with the Friday [UNCLEAR] - because we run the draw every Friday. Basically our income is a membership lottery, so people pay a pound a week. They tend to pay that via either standing order - and in the main, direct debit now - for all of our new signups and will pay either monthly, quarterly, half-yearly or annual amount via that method. That's where we receive our income. Now in terms of how we recruit players; the vast majority - I think it's around about the 94% mark, each year of new players - are recruited via, in essence, face-to-face fundraising. We run our own team of fundraisers who work for all of our partner hospices; working in that area and recruiting people locally to support their local hospice.
F: FIONA: Okay; so running a charity society lottery is core to how you operate.
G: GARY: Yeah; that's the only thing- It's all we do, just run a society lottery.
F: FIONA: And it sounds like that's how it's always been for you as an organisation?
G: GARY: Yes, it has. As I said to begin with, it was part of Farleigh hospices portfolio of fundraising - I was in charge, for want of a better phrase, of that - the shops; all the other income generation; legacy promotion events, PR and marketing. As I said, my role changed in 2015 because of the growth of the lottery. so I’m now full time just concentrating on this as an income stream because it is now about 50% of Farleigh Hospice’s overall turnover; but with a view that actually this year it will be more than 50%. We're now turning over probably equivalent to what most individual hospices are, and contributed last year over four million pounds to hospice care.
F: FIONA: Okay, great. I was going to ask you about how you feel that the funding environment has changed now compared to previous years, but I guess maybe your model is slightly different. I mean, do you still have a sense of how raising money has changed?
G: GARY: In a number of ways. I changed role in 2015, and I think I'd been in the post of that two or three months when a lot of the press around fundraising started to change. There was concerns around poor telephone fundraising obviously - face-to-face, direct mail in the Olive Cook case and various other cases - and broadly speaking, the vast majority of what we do is face to face. We also do some telephone fundraising and we also do direct mail, so having moved from a portfolio that included events, legacy promotion and some of the broader areas, we’ve almost moved - to some extent - into what might be considered some of the - certainly at that point, the less publicly acceptable forms of fundraising. Or if not publicly acceptable, certainly less media-acceptable forms of fundraising. Interestingly, we actually launched a telephone campaign one week after or two weeks after the Olive Cook case; and again, I think this is it. We found we actually got some very, very good response rates; minimal - I think possibly two - complaints across the campaign to thousands of people. It was an upgrade campaign and it worked, and actually worked well. I think that's it; sometimes the external environment can seem more hostile than actually the responses of your donors and your supporters are. I think that's very much about how you engage with them, how you talk to them, the clarity you are giving them. [UNCLEAR] The Lottery’s slightly different in that it's not fundraising in exactly the same way. There is a benefit to the individual; and equally it’s a gambling product as well.
F: FIONA: Okay; so we've already spoken about Society Lottery, but we're just going to talk about it more specifically now. What would you say have been the benefits of having this model of running Society Lottery to your organisation, and to local hospices in general?
G: GARY: I’ll start with Farleigh Hospice first. When we set the model up we looked to do it in such a way where it would make sense for a hospice to work with us, rather than to set up their own lottery. In essence, we've aimed always to develop the model so that they would be financially better off; but also where there was less risk, where there was no upfront investment from them. So all the costs are retained and maintained within Local Hospice Lottery; and equally, from that point of view they've also benefited from a fair amount of experience as well, in running a lottery. Having said that, we also aim to do it on the basis of... well, look, it potentially could be - by sharing those overheads, or those overhead costs being spread across more than one hospice - that may well be a way, or aim to be a way, of generating additional income for Farleigh Hospice as the owner. Where we do generate profit - and last year I think it was about 11p in the pound, I think the year before that about 7p in the pound - so, where we do generate a profit, that in itself is also fed back into hospice care; specifically for Farleigh Hospice’s local services. From that point of view it's a win-win situation. What it has meant for Farleigh Hospice in particular is they now have an additional income stream, not only through the local members who are playing to support in mid-Essex. They also then have the income stream of a profit line from the Lottery, which has enabled them to plan for and develop additional services; and have an additional income stream in a fairly difficult fundraising environment. For our partner hospices – and as I say, there’s two types of those - one of which is, and certainly where we started, is those hospices who did not have a lottery income stream at all. They’d never run a lottery before; they were looking into how to develop that income stream, and as part of their assessment looked to us as well as running their own, or using commercial or other lottery providers. Certainly the feedback we get from our partner hospices is that it's generating both a regular source of income for them, and also a significant source of income for them. I think in our accounts we certainly had one of our partner hospices now getting over 400,000 pounds a year, quite a few in the bracket over 200,000; and as I said, it's a significant source of income for them, in a way where actually they've done that in a very low-risk way, without having to take on all of the additional costs of running their own.
F: FIONA: Okay, great.
G: GARY: I should also say it's got a couple of other benefits as well; one of which is for the players, in that we've been able to assess our prize fund as we've grown and we now offer - certainly the largest prize fund of any hospice lottery - but more importantly, we now offer a prize fund that is competitive with, if not larger than, some of the national charity lotteries. I should say it doesn't compete with the likes of PPL and Health Lottery who have a different model; but I think - need to double-check this - but I think with the exception of MacMillan and Age UK, we're pretty close to offering one of the largest lottery prize funds. So, great for players from that point of view. Also the other benefit is, we've been able to look at and invest in what a society lottery needs to really operate legally, efficiently, effectively and ethically. That means developing really good training for our fundraisers; utilizing tablets for sign up - so we can do that very both efficiently from a management point of view - but also where from a GDPR compliance point of view, it's very, very safe and very secure. But we've also been able to look for other compliance areas, which if you were running a small society lottery would be very difficult to do. We've got our own database and compliance manager who then has another compliance officer, so we're constantly looking at, what do changes in legislation mean? What do changes in regulations mean? How do we contribute to any discussions that either the fundraising regulator are having or the gambling commission are having, and adapt our product and our protocols to make sure that we're doing that? Which even at our size, sometimes there's quite a lot going on. How a hospice who are running a lottery - I think an average lottery for a hospice is about 8,000 players; so turns over about 400,000, makes profit of about 200,000 - how they're able to meet some of those needs would be a concern. Certainly I know it was when we were at Farleigh; because you don't necessarily have that resource to invest in that side of things, although obviously you need to.
F: FIONA: That's really interesting, thank you. I think you've mentioned a bit about it already, but it would be good to get your thoughts on the current limits placed on society lotteries. I appreciate there's a few different ones, so feel free to specify what you think of particular ones that are currently in place and then we can speak about the proposed changes as well.
G: GARY: Okay; so right, what are the limits? There’s the third draw limit; at the moment that’s... four million pounds. Now the way we operate - because we operate a weekly lottery - that is to some extent of less concern to us individually. However, I do not know that the Hospice Lotteries Association - who are the umbrella body for, I belive it's roughly about a hundred hospice lotteries - have looked at the paths as to whether they could collaborate together and operate one large lottery or super-draw within the legislation. Funny enough, that figure of 4 million used to be 2 million; I believe it was a change following discussions with the Hospice Lotteries Association - and the Labour government at the time, I believe - that led to the increase in that limit. Again, with the increasing in hospice lotteries and number of players; if that was to be something that was considered collaboratively, moving that limit from 4 million to 5 million doesn't really future-proof that in the future. The sense of moving it to 10 million just give some sense of, 'Actually, if people want to raise more money in more efficient ways by collaborating - which is very much part of our model - that type of change would help.' It would also enable that sort of, I suppose, headline-grabbing prize; although still significantly less than the types of prizes offered at the National Lottery. [UNCLEAR] in of 1 million if it moves to the 10 million, which is the recommendation of the Lotteries Council and of the Hospice Lotteries Association; and I believe of The Institute of Fundraising as well.
F: FIONA: So the 4 million limit is the individual lottery.
G: GARY: Yeah.
F: FIONA: So, this is just me still getting up to speed on some of the process; but when you said because it's a weekly lottery, it's less of a concern....
G: GARY: Because in the main we operate a weekly draw, we are... To be fair, if we were running at 4 million a week, we would be so far over the annual limit of 10 million that we’d need probably 25/26 different lotteries through which to operate. From that point of view as I said, where it would be a concern - and certainly has been in the past - has been in that ability for the hospice sector as a whole to operate collaboratively, and potentially offer a joint super- draw prize fund across all of the lotteries that we operate.
F: FIONA: Okay, great. Thank you very much. So I guess that leaves talking...You mentioned a bit about the annual limit - and I guess it's also the prize cap limit - so would you be able to tell me a bit about those two currently?
G: GARY: I mean, the annual limit is the most significant concern for us. It's one where we are approaching it, and we've believed - it depends on levels of growth - but certainly when we were looking at figures, we were looking at 12-18 months away. Now one set of hospices we do work with - not only hospices who haven't had their own lottery - but ones who have their own lottery and have decided that, actually, they can work with us as a more efficient way and more profitable way of generating a source of lottery income. Now at the moment we’ve got a number of hospices talking to us, in that case; and we're having to be careful to some extent, about the time frames in which we’re looking to potentially work with them. If somebody transfers five thousand players to us, for example, that has an immediate boost in our annual turnover and moves us towards that turnover limit really quickly. So it’s having a number of impacts. One, we're having to manage within our existing number of hospices. Two, it's impacting on whether we can take on, or how quickly we can take on new ones. As I said before, it's certainly the uncertainty of not knowing. If we knew it wasn't going to change - it would seem ridiculous that it wouldn’t change, when the limits have been the same for so long now - but at least then we’d know what we're planning for. At the moment we just don't know, and I think that's one of the biggest frustrations. Although having said that, we clearly want them; we do need them, and believe there is very good reason for changing the limits. What is happening is; if the limits don't change, there are clear legal ways of creating a separate entity to run another society lottery. So all that happens is, you increase administration, you increase bureaucracy and at the end of the day you provide less hospice care. It just seems absolutely ridiculous. So as I said, that's a key one for us, and we know it potentially is going to mean another… If those changes are made we’re talking not only 275,000 pounds per annum saved, but that that will be replicated ten times if the limits stayed the same, and if we do grow to 100 million. You're talking actually about two and three quarter million pounds saved by making that change potentially in the future. And that's per annum as well, by the way.
F: FIONA: Yeah. Quite amazing.
G: GARY: It doesn't make sense. It just does not make any sense at all, you know. I think in total - I think roughly, for the estimate for the number of people playing society lotteries for hospices - it's around about 900,000 people every year. So it is a very solid form of income for hospices, and one that does attract local people to support their local hospice; whether that's through Local Hospice Lottery, whether it's through another model, or whether in the main, it is through that individual hospices own lottery as well.
F: FIONA: Okay. The one other kind of limit that we haven't spoken about so much is the prize limit. Has that had any effect on your organisation, or not so much?
G: GARY: A little bit, in that at the moment we operate one of our prizes weekly as a rollover prize. The largest amount that we can bill that at is capped by the legislation, and the limits are either £25,000 or 10% of turnover. Now we are in essence capped by the 25,000, so that rollover can only ever get as high as £25,000 pounds, which - to some extent, I wouldn't say no if I won £25,000, it'd buy a couple of nice cars or whatever - but you know - from a marketing point of view, if that limit was altered and we could change our rollover - potentially you've got a more attractive prize that could be offered. As I said, the other key thing would be if hospices wanted to collaborate together - I know certainly back in 2008/9 possibly, when we through the Hospice Lotteries Association were looking at running our own super draw, which potentially would be across a large number of hospices - the thought of actually having a large prize to offer was felt, changes or adds to the demographic of people who would be interested in supporting a hospice. So rather than just the people who have been attracted by the fact they're supporting a local charity, those who are more motivated by the prize fund would then be interested. So I think from that point of view it does have an impact on us, but it is probably the less significant one of the changes that we'd be looking at.
F: FIONA: Yeah, I see.
G: GARY: Part of that, interestingly, is we have changed prize funds on a number of occasions; certainly soon after I started, we actually reduced the prize fund. We had a fairly static membership at that point and thought "Well, one of the ways we can raise extra money is to reduce the price fund"; I know a number of hospices have done that. Interestingly, I think for a local charity it's really important that you are seen to spend your money effectively and efficiently; and sometimes if you put too high a prize fund - as a hospice or even as an air ambulance - that can be deemed negatively by the local community. They’re quite interested in, 'How much in my pound goes to the good cause?' That often will be the driving factor locally; and actually, to be fair is one of our selling points, where you've got, what- 31/32p for People's Postcode Lottery goes to a good cause; 24, I think, at the moment - maybe 23p - from the National Lottery, and 20p for the Health Lottery. Our figures over the last several years have been 55/65p; and certainly hospice lotteries as a whole, the average is 51p. It's a great selling point for the air ambulances, becuase it's about 75p for them.
F: FIONA: I'm speaking to them later on today.
G: GARY: Well, probe them on that figure, not me. Basically, what that does do – whether you want to include this, because it’s me talking from the hospice perspective - but I did do some working with the Lottery's Council, and quite closely with Essex and Herts Air Ambulance. I was looking at how air ambulance lotteries compare with hospice lotteries; because certainly in terms of the turnover limit, there's a lot more air ambulances that are facing that issue as opposed to us, because they cover larger areas and they've got larger membership because of that. But what it also demonstrates is, I think there are about 27 air ambulances as opposed to 200 hospices. Most of those run lotteries; their turnover is almost exactly the same as the hospice lottery turnover - both turnover about 70 million a year collectively - so you're talking about 140 million quid a year in turnover through lotteries just for air ambulances and for hospices. But because air ambulances cover a bigger area, they're able to have a prize fund that’s shared over a larger membership; their admin is shared over a larger membership; and therefore as I said they deliver 75p in the pound, the air ambulances. Whereas the hospices; because they're smaller, they're not able to share those costs in same way. It's more likely an average of 51p - whereas, ours is - because we’re getting some of those efficiencies of scale - ours is around 65p in accounts last year.
F: FIONA: Still, incredibly impressive. Great. Thank you. I think you've already spoken a bit about the consultation and the government's proposed changes. What are your views on what the government is proposing, in terms of changes to the annual sales limit and the sales limit from individual draws?
G: GARY: The annual sales limit; absolutely fantastic. I think that's what we've been asking for - the HLA, the Lotteries Council, The Institute of Fundraising, lot of large national charities - for a number of years now; move from ten million to a hundred million, future-proof that change. And it is the one that, to some extent, one could argue is the least sensible of all of the limits. It's the one that has no impact really in terms of competition with the National Lottery. All it does is create a lot of additional bureaucracy and administrative costs that quite frankly, can be better used for frontline; be it hospice care, the work of air ambulances, the work of dogs and cats charities, whatever. It just does not make sense to have that limit; and I think when they’d reviewed it before, they weren't that many charities close to it. There are now quite a few charities and society lotteries there or above there, where all that’s meant is, you’re just reducing the amount available for charitable work. So it was a really good thing when the consultation came out that the government's preferred option is the hundred million. I cannot really see anybody who would object to a charity fundraising. So that's great. On the individual draw limits and on the prize fund, I think my view there is that on the individual draw limit, a change after - I'm trying to think how many years now, 8 years or 9 years or so- from 4 million to 5 million; just does not seem that it’s going to make much difference quite frankly. It is an increase, but it doesn't seem to make much of a difference; and certainly doesn't future-proof it. Whereas actually, the position we’ve taken alongside a lot the umbrella bodies of moving it to 10 million does actually provide that future-proofing. I think it makes sense, it just makes sense to future-proof it and change it a little bit. I think one of the issues from that point of view is more around the price, and in this sense that actually - needing quite rightly - and it’s a legislative provision to protect the National Lottery. There was a sense that it’s the individual draw limits that make the difference. Even when you look at that 10 million for a single draw, compared to what the National Lottery make in their single draws; it's such a considerable difference, it’s not really competing at the same level at all.
F: FIONA: Great, thank you. And is there anything you would - I think you’ve probably covered quite a bit of it - but in an ideal world, is there anything you would like to see change in terms of the way society lotteries are regulated, that kind of falls outside of?
G: GARY: Good grief, now you’re talking. I think it’s a really interesting one. It is a form of fundraising clearly, and people very much see it as a way of supporting a local charity; while still serving the chance of winning a prize. What that does mean, however, is it's both - because if there's a chance to win the prize - it comes under the gambling commission, but also comes under charity legislation as well. It therefore means it’s a very complex, complicated - potentially overburdensome and over bureaucratic - formal fundraising, where you've got to make sure you're meeting the needs of both regulators. Where I would say from the point of view of the fundraising regulator - and possibly don't quote me on this - whilst there is a memo of understanding between the two, the levels of understanding – and I think quite rightly, because of the size of the fundraising regulator. Their level of understanding the gambling regulations means that it does make it quite difficult for them - with the scale of organisation they are- to really fully understand it. So, ideally I would like to see one regulator for society lotteries, whether that comes under charity regulations rather than gambling ones or just under gambling ones. In essence, we're then competing unfairly both within the fundraising environment, but also there's no limits on what you can turn over if you're running Paddy Power. I saw on the news yesterday that - I think it was Bet 365, one of the big gambling companies - paid their Chief Exec 265 million quid. That's what we as a society lottery sector expect to make for our good causes in a year; and we’re being told we can’t raise more than 10 million because we're compete with people. Actually, Betfred's probably competing more with the National Lottery than it is - or Bet365 - than we are. That's probably one thing. The second thing which I think is hugely frustrating is; particularly bearing in mind the amount that percentage that we give to good causes, that turnover, and for a lot of people their lottery play - particularly a regular lottery play - is their regular way of giving to charity. My sense is that society lotteries should be able to claim Gift Aid on the donations that they're making to good causes - or from the individual £1 - as long as those individuals aren't getting back more benefit. Now bearing in mind, only a certain percentage of our players will win a prize each week; then why can't those who don't win a prize actually be able to treat that as a donation? I don't know. Actually, funny enough, Joe did a piece a good few years ago - Joe Saxton - actually saying to lotteries, "Just claim it and see if HMR challenge it; because actually as long as you're giving more than 25 or 75% or whatever away, then that's within the limits for Gift Aid." I think he got a stern letter back from HMRC in the end saying "Uh, no; charities will need primary legislation changes." But I think we should be looking at getting those primary legislation changes ;because again, we come under the Fundraising Regulator. We've got to behave in the same way as if we were promoting and selling a donation; yet we don't get the tax benefit from it, which strikes me as ridiculous. Either put us under different regulations; or if we are going to be under those regulations, let’s have the ruddy benefit from it.
F: FIONA: Great. Thank you for sharing your ideal world situation. Okay, so that's us pretty much of the end of the questions I wanted to cover. I think the last thing was just to ask you a bit about PPL’s work. I don't know if you had any feedback on the work PPL has been doing on society lottery limits, any kind of suggestions?
G: GARY: A couple of things. I mean, I didn’t know much about PPL until about 15 months ago. I knew they were there, I knew they had the ties. I knew the lady from GMTV used to be on all their adverts, but didn't really know much about them. I got to know more about them basically through getting involved with the Lotteries Council - on their Public Affairs Committee - and through them working with Malcolm Fleming who works at PPL. It sounded certainly exceptionally knowledgeable in terms of policy; on the way government operates; on links with various MPS and what have you. So from that point of view he's been... he's really led and encouraged other other lotteries, not just PPL, in terms of pushing for changes. I did attend - I was invited because of that work - to an event that PPL held at the House of Commons, where they were talking not only about the limits, but also the impact that they were having. That was quite interesting as well, because quite often you get… It's quite interesting to see the large number of charities that they do support, and the impact that they're having on them. I know we spoke to someone from the Ramblers Association who are one of the significant beneficiaries, who I think get about 400,000 pounds a year from PPL. She was able to talk about absolutely transforming what they've been able to do.
F: FIONA: Thank you. As I mentioned at the start, this is part of a report that PPL are looking to put together. Is there anything you would most like to see in PPL’s report?
G: GARY: There's nothing that I can really think about. If they can mention claiming back Gift Aid that would be good as well. That be a good one, get that one in there; because I know when we first responded to the government consultation back in - crickey, 2014, I think now - that was something that we mentioned, that seems to have dropped off of the agenda. I mean, maybe it was never on the agenda; but certainly in the government response it was mentioned that we've mentioned it. I think more people who pushed for that are saying "Look, if this is a fundraising product it's governed by fundraising regulations for charities, so should it not benefit from Gift Aid?"
F: FIONA: Great; I know, I've definitely had conversations with Malcolm about it before.
G: GARY: Yeah, I think - yet again, don't quote me on this one - I think once we get the limits changed; that’s the next big prize to go for.
F: FIONA: That's pretty much what I'd heard as well; it would be good to see that happening as well. Just one angle that PPL are looking to take with this specific report, is looking at the impact on smaller and local charities. They’ve done reports before that maybe look at the larger grantees that they support, but we're going to have a bit of a focus on some of their smaller grants schemes; talking about the funding environment for smaller charities, and how actually still, they feel changes to the limits would really have a positive impact on all sizes of charities. I don't know if you have any thoughts on that angle, and anything that you think would resonate?
G: GARY: I think from the point of view of hospices, quite a lot of them run relatively small lotteries. Once they turn over a certain level they have to register with the Gambling Commission; and you're talking about some fairly significant costs, some fairly significant criteria that you need to make. Particularly in terms of even an ancillary remote license, the levels of IT infrastructure you need at that level are exceptionally significant. So there is something where by what… And I know one of the questions in the consultation was, should we change the limits at which charities or society lotteries need to register with the Gambling Commission from their current limits? Should that be raised? So that they could be retained. Those licenses could be held with local authorities; where there is still a regime of compliance and regulation, but it's more appropriate to the size and scale of those small organisations. My view would be, those changes would have a really significant impact on quite a large number of local charities. I think what you've got to do is then balance that with, are there potential abuse out there of some scrupulous people running lotteries, if the limits do raise? I think that's a tricky balance; but I do think some of the legislative requirements at the Gambling Commission level -certainly some of the small ones - I think the proposals that the government have actually suggested, that are being proposed - and certainly have been proposed by Lotteries Counsel and others - do seem to be sensible in getting that balance right. I think from my understanding of PPL, what they’re saying from a lot of the local funding from their point of view and the smaller local charities; the limits at the moment are really limiting their ability to meet the needs and the number of applications that they're getting in, because they’re having to direct funds away from grant-making towards this additional administration cost.
F: FIONA: Yes, absolutely. As part of this report we're looking at kind of applications that they receive from small charities and amount able to give out; although they in theory feel that they could get more of this money out, the caps are really affecting that at the moment.
G: GARY: Yeah, exactly. If you look at the turnover of society lotteries - so just over 5 million - but you then look at where that growth has come from and you look at how that's split; certainly PPL and the Health Lottery in terms of turnover are both exceptionally significant contributors to turnover. But if you start combining air ambulances and hospices, those two combined account for about - I think it's about 25% - of the turnover of society lotteries. It's actually a very important sector to local charities; very, very important. I know you’re going to be talking to some air ambulances later. If you start looking at the percentage of their income, their overall income they get from their lotteries is much, much higher than what hospices get. I think hospices turnover about a billion in total collectively, and 70 million of that is through lotteries. Actually, 35 million of that is after costs of running them; so between 3.5 and 7% depending on whether you’re using the gross or net figure. Whereas actually if you start looking at air ambulances, you're talking 50/60%. It's hugely significant for them.
F: FIONA: Well, that was my last question for you, Gary. I don't know if there's any further comments you'd like to make, or things that we haven't discussed you'd wanted to mention.
G: GARY: I'm not sure. You know, 90+% of our new members come through direct face-to-face fundraising, whether it was worth me saying anything more about that; but in terms of the context of your questions, I’m not really sure that that's going to add any value to the report or is really what you looking at anyway. So, I’ve mentioned the percentage - and I've mentioned the regulations that we come under anyway - so no, I don't think there is anything more to add really.
F: FIONA: Okay. Great. Well, that's been incredibly helpful. Thank you so much for your time; I feel like we've covered quite a lot of ground.
G: GARY: No problem, happy to help; hope it was useful for you.
F: FIONA: Absolutely; and as I said, we would we would come back and check with you if there was any particular quotes that we were thinking would work for this report. I'm actually away next week and the following week, but Joe maybe would get in touch with you.
G: GARY: No worries. I mean, I think I was copied on one of the emails, so he should have my numbers and my email address as well. So feel free for him to contact me, no problem at all.
F: FIONA: I'm actually in a meeting room with a glass window; he came over and was waving and motioning as if he wanted me to say hi to you, so I think that's what it was all about.
G: GARY: Well, thank you very much. What's the time frame on the publication of the report, just out of interest?
F: FIONA: We’re trying to move quite quickly on getting the research side of it done, because I think Malcolm would like it to be mostly done before Christmas. I think they were hoping for maybe another parliamentary event in January, or something that it would tie in with; so I think the idea is to move quite fast.
G: GARY: Yeah, and that makes sense in terms of the time frame for the consultation as well; so, a bit more pressure on government to move- mind you if we still have a a government by then. I think we're now on our third Secretary of State since January and our second Cabinet Minister now, so just when you think you're moving somewhere.... I mean, to be fair - actually, crucial for us - when we were both through the Lotteries Council when we were looking at time frames, we were all saying, "We have to get the consultation before the summer recess", and we got that. So we've got step one; it’s now moving to those changes in legislation. As I said for us - but certainly, I know Essex and Herts Air Ambulance - I think they've already got the licenses because they're getting so close to the 10 million, and governments saying 'All in due course' just isn’t helpful. We need a time frame, because otherwise it's just going to cost an absolute fortune.
F: FIONA: Absolutely; well, thank you Gary. Nice to speak with you and hopefully speak again sometime.
53.45: Fiona Wallace - PPL Jonathan Ager (Essex & Herts Air Ambulance) 22.11.18
F: FIONA: So first of all, can you just tell me a little bit about your organisation and what you do?
J: JOHN: We're an air ambulance; we basically take the Accident Emergency Department to the side of the road, or wherever the emergency is. We carry doctors, paramedics; that's what the charity does.
F: FIONA: And you're working across Essex and Herts, that right?
J: JOHN: Yeah, they’re our main areas but we don’t stop at the border of the country; we’re tasked by the ambulance service, so if they need us to go into Suffolk or somewhere like that we will go, if we have the available assets. The Essex and Herts bits is more a fundraising base.
F: FIONA: Could you tell me about your role specifically, Jonathan?
J: JOHN: I’m the Financial Director.
F: FIONA: Great. What I was interested in asking you just first of all is, what you think some of the main challenges are - that are facing your organisation right now - that can be as broad as you want it to be, really.
J: JOHN: Probably our biggest one is that probably about 65/70% of our funding comes from the Lottery, and we use canvases to sign people up to the lottery. So, we're always concerned around changes in the law; if there's some bad press on canvassing and that kind of thing, it could restrict our ability to use the lottery to raise funds. That’s the funding challenge, the classic too many eggs in one basket. On a technical front we've got the... Flying helicopters is a dangerous, risky business; and obviously with the crash in Leicester a few weeks ago, obviously that's raised the profile of that within the charity. Risk.
F: FIONA: Great. One thing I think you’ve maybe already touched on is what would you say are your main sources of income as an organisation?
J: JOHN: Lottery is by far the biggest single; after that it's kind of just donations and legacy income.
F: FIONA: And has that changed over time in terms of the components of your income?
J: JOHN: I've only been with the charity just under two years, but the lottery has been a big growth area; I think that was a decision made over ten years ago, to push the lottery. So yes, I think every time it’s become a bigger and bigger part. It's an easy way for people to give a small amount regularly -or lots of people to give a small amount regularly - that adds up.
F: FIONA: So, the lottery has been running for quite a number of years. You said that it's the biggest component; do you have a sense of how much of your income is coming in through the lottery stream?
J: JOHN: Yeah; I mean, if our total gross income is about 12 to 13 million, lottery accounts for 8 of that in gross terms. Just probably a bit more than that now; closer to 9.
F: FIONA: You mentioned you've been you've been with the organisation for two years. Have you seen any changes more broadly about the funding environment that you work within? Has there been any kind of significant change, or is it much the same as when you started.
J: JOHN: I guess GDPR was the biggest change in terms of funding; getting the database all cleansed and up to speed with the new legislation.
F: FIONA: We're now going to talk more specifically about society charity lotteries. From your experience, what do you think the benefits for your organisation running a society lottery?
J: JOHN: Just producing the regular income. It's lots of people, so you’re spreading your risk across... I guess our membership now is about over 100,000 members, I think we’ve got like 190,000 chances. So you have 100,000 people paying a couple of quid every week. It's a great way of a lot of people to support the charity.
F: FIONA: Do you get a sense of where people are playing? Is it all very local?
J: JOHN: The Essex side of the charity has been going 10 years longer than the Herts side of the charity, so there is a bias towards Essex; but that's only because we haven’t been promoting the lottery as long in Hertfordshire. And we would only ever sign people up within Essex/Hertfordshire, we wouldn’t go outside. Although we might fly into Suffolk, we would never go and fundraise there.
F: FIONA: I see, the fundraising is very much focused on the area where you're based. What do you think of the current limits placed on society lotteries?
J: JOHN: We did an exercise a couple of years ago, speaking to people that had recently signed up for the lottery and asking them why they decided to play; was it the prizes, etc? The bulk of it is more... 90% of the people, it’s not the prizes, It's being able to donate to the charity. So the biggest issue for us is the 10 million sales cap, because we're projecting to get to that kind of this time next year and that will then prevent us from growing the lottery anymore if we carried on as we are. But you then have to create a second lottery with defined objectives; that creates a load of admin and work. Cost, more importantly.
F: FIONA: Sounds like it’s the annual 10 million sales cap that's the biggest issue.
J: JOHN: It’s the biggest issue for us. People are less worried about... in fact, you have to be a bit careful with the prizes. You get the odd complaint when the prize we pay out is 25,000; which is if the super draw rolls over four or five weeks then it gets up to 25 grand and it's been capped there. If you make a song and dance about a winner, people worry that you're spending charitable funds funding prizes, as opposed to spending on your charitable objectives; because there’ll be confusion in the marketplace as to where the prize money is coming from. People see it coming from donations as opposed to being self-funded by the lottery, which is a separate standalone company owned by the charity.
F: FIONA: And the individual draw limit, do you think that is likely to have had have an impact?
J: JOHN: That's four million?
F: FIONA: Yeah.
J: JOHN: No, that won’t impact us. It’s the annual sales figure, is the one that's going to impact us very shortly.
F: FIONA: So you're saying you're projecting that it would be about this time next year, you imagine.
J: JOHN: Yeah; we’ve got about 12 months before we’ll get up to about 10 million.
F: FIONA: I think you mentioned it a bit, what are you looking at now in terms of… I guess it looks like there's two scenarios you'd have to look at for this next year, whether it’s-
J: JOHN: There’s the two: A, the change in the law, the limit increased, which somewhat is out of our hands. If that doesn't happen in kind of a timely manner, we would actually have to cancel our existing license and apply for two new ones. Actually, you don’t do it that way around; you apply for two new ones and then cancel the existing setup. Two new lottery companies that do alternate draws; but that’s expensive because you have to write to all of your existing players, telling them that's what's going to happen. Over 100,000 players, it's going to cost, you know... Plus legal fees, you’re going to be spending over 100,000 pounds just communicating and setting these new companies up. Then each lottery company has to have its own defined objectives; whereas at the moment the Lottery is supporting Essex and Herts Air Ambulance, so the funds come across to us unrestricted. Under the 2 Lottery-company system, the funds would come into the lottery restricted... sorry, they come from the Lottery to the Trust restricted around the objectives of that specific Lottery. Which could then give you funding; but if you don't get the objectives right, you can end up with a funding problem in later years. Or if the structure of the charity changes where you're getting five million to spend on one and five million on the other, but you need seven on one and three on the other. So there are funds you can't spend, because it would be restricted.
F: FIONA: To a particular aspect of work?
J: JOHN: Yeah.
F: FIONA: Do you have any views on the government's proposals around the increases in limits?
J: JOHN: For us, they were looking to increase the sales limit to a hundred million; we were really happy with that. That will keep us busy for a few years.
F: FIONA: I guess the other increases on things like prize limits, or the individual draw limits; it sounds like that might not necessarily be such an issue for you for now.
J: JOHN: No.
F: FIONA: Was there anything else you wanted to say about the approach towards the limits of what... Or even, is there anything else in an ideal world you would like to see happen around society lotteries, and how they're regulated in a way that would help your organisation?
J: JOHN: It works quite well for us. I think we don't have... On a day-to-day basis, we don't have too many challenges. It is this limit coming up which would cause... Even if we decide to leave it as it was, how do you keep yourself just below the 10 million? You’d have to switch off your canvases, let your attrition just drift down again, then switch them back on again. How does that work for the canvassing firms, they work every other month or once a month or every three? It’d be virtually impossible to switch off the growth. Do you know what I mean?
F: FIONA: I understand, because you'd want to still get as close as you could to getting to the…
J: JOHN: Getting to the ten million.
F: FIONA: And getting the people that are interested in playing and supporting the cause, but you couldn't ever go over. Just to double check; I understand when you're talking about canvassing, that's in terms of speaking to a method of fundraising, seeing if people want to sign up.
J: JOHN: We use third party agencies who will go and set up a stall in a petrol station or something, and then try and canvas people; like the AA do outside Tesco and that kind of thing. So they'll be all branded in our shirts, but they don't actually work for us; they’re an agency that supplies canvassers to sign people up.
F: FIONA: So they were actually the main questions I was wanting to speak through with you, Jonathan. I don't know how closely you've worked with People's Postcode Lottery, but I was interested if you had any feedback on the work that they've been doing on society lottery limits. Anything that you’ve liked, anything that you’d like to suggest that they do differently?
J: JOHN: It’s a strange one. The lottery manager that’s been looking after us has gone off on maternity leave in September; she’d be the best person to ask, because I think she’s been working closely with them. I’ve only just picked up the bits and pieces in the last couple of months, really. I was up to speed on the challenges with the limit, but the kind of detail of working with People's Postcode Lottery; I wouldn’t be in a position to comment, really. Other than its good to see that someone's pushing the government in all this, because it could quite easily get lost at the moment .
F: FIONA: I totally understand. We’re hoping we can get this report out reasonably soon, so that we can just keep a little bit of focus on it as well.
J: JOHN: We’re expecting the outcome of the consultation soon, aren’t we? Is it before the end of the year?
F: FIONA: I think; that was my understanding, is that they were hoping to get it done by the end of the year.
J: JOHN: I think that the application process is about 15 - 16 weeks to get the new licence; I think we apply in March. We can cancel at any point, so it gives us probably about until the end of June or something like that for the law could change. We’re sitting there fingers crossed.
F: FIONA: I guess if it gets to a certain stage, you have to start that process of-
J: JOHN: You’ve got to do it; and the thing is, once you've done it there’d be nothing to gain by undoing it. If they then subsequently increased the limits and you could go back to one lottery, you’d incur another 100,000; presumably having to write to people to tell them that you were changing the structure again.
F: FIONA: Of course, you have to give people a warning of the changes.
J: JOHN: It all operates under kind of an umbrella. From their point of view they wouldn’t notice anything different; it would just be changing the small print as such. The only reason I guess we would do it is if we thought our funding; that restricted funds would be dramatically affected. The time is of the essence.
F: FIONA: So in terms of the report we’re writing with PPL now, we've done a similar one before that was looking at different organisations they support; but the one we're looking at is going to have a little bit of a focus on smaller and more local-based charities. I don't know if there's anything that you would particularly like to see being drawn out in that report; any kind of suggestions?
J: JOHN: For us, the big thing is it's costs and administration for a very easy-to-make change. It’s a limit that hasn't moved for years, but I think it's going to cause disproportionate amount of cost and impact on the charity; as they reach this limit you'll get those that don't know. MacMillan was one of the ones that hit it early on and then had to do this retrospectively, setting up different lotteries. They’ve been through the pain.
F: FIONA: Great; that’s the questions I wanted to speak with you about. I don't know if you had any further comments you'd like to make, or things that you would like to discuss that we haven't?
J: JOHN: No, that's hopefully all come across.
F: FIONA: It's been incredibly helpful, so thank you. As I said, if we were... Partly it's just about getting the bigger picture, and to be able to talk about the fact it's affecting more organisations than just PPL; and as I said, if there was anything that we were hoping to do - like perhaps, a quote from what you've said - we will absolutely come back and see if you'd be happy for that to be included in the report.
J: JOHN: Or make something up that sounds really intelligent.
F: FIONA: We can do that too.
J: JOHN: Put my name to it.
F: FIONA: That was really helpful. Great to get the perspective from your organisation as well.
J: JOHN: No worries.
F: FIONA: Thank you very much for your time.
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