Tax funds covering losses on charity scratchcards

Every euro spent on scratchcards produced by some charitable lotteries involves a loss of two or three cent which is being made up for with taxpayers money, the High Court has been told.

Brian Kennedy SC, for the Minister for Justice and Equality, said people buying these cards would not regard as good news the fact, while they were contributing to a good cause, their taxes were being used to make the charities' lotteries profitable.

The court heard the scratchcard lottery operated by the Rehab Group was profitable but others run by other charitable organisations were loss making. Some had been described as "zombie lotteries" by Rehab's director Frank Flannery, Mr Kennedy said.

He was making arguments opposing a challenge by Rehab to the Minister’s decision to phase out assistance for lotteries run by charities under the Charitable Lotteries Scheme (CLS) set up by the Government in 1997. Rehab receives the bulk of the annual €6 million yearly allocation, due to drop to €1 million before it is abolished in 2016.

The Minister says abolition is necessary igiven the state of the public finances but Rehab says it will do irreparable damage to its work helping the disabled and socially disadvantaged.

Rehab claims the CLS is necessary because it is placed in an uncompetitive position as a result of a €20,000 per week cap on its prize fund compared to an almost unlimited fund enjoyed by the dominant player in the market, the National Lottery.

Mr Kennedy, for the Minister, said at a November 2011 meeting, Mr Flannery told Alan Shatter “pulling the plug” on the CLS would be “a serious breach of faith” and it would be morally wrong to do so.

Mr Kennedy said the decision to phase out the CLS was a general policy matter. In 2004, there had been a review of the CLS which was favourable to Rehab and in 2011 there was another review which led to the decision to phase out. Both were general policy decisions made in the general interest by the Minister, he said.

For better or worse, the Mr Shatter considered the CLS was not an efficient fund raising scheme although Rehab disagreed with that, counsel said.

It was also never intended to be a permanent scheme and Rehab had accepted it would be subjected to regular reviews. Rehab had also accepted it had no legitimate expectation it would continue indefinitely, he added.

The court should also have regard to the fact Rehab has an annual turnover of €185m and the CLS accounts for just two per cent of that, although he accepted this was a larger figure in terms of Rehab’s profits.

Funding for the CLS ultimately comes from the Exchequer, even though 65 per cent of it is from the National Lottery surplus, he said. There was no reason why it should not be subject to the same rigours as other State expenditure, he argued.

The hearing continues before Ms Justice Iseult O’Malley.