National Lottery Reform

Alun Michael Excerpts

Thursday 22nd July 2010 Westminster Hall

[Alun Michael (Cardiff South and Penarth) (Lab/Co-op)]

I am pleased to hear the Minister talking about the need for consistency and predictability. No one could argue with his wish to refresh the funds and to consider whether they are meeting the intended targets. However, the rebalancing of the arrangements for the Big Lottery Fund in particular would have an impact on the distribution of funds which, at the moment, is needs based, ensuring that funds go to individuals and communities in greatest need. Can he reassure us about that? Wales in particular has fears that a reduction in the amount of money going through the Big Lottery Fund would reduce the overall level going to Wales. It would be wonderful if the Minister could set that fear at rest.

[John Penrose]

I am delighted to be able to help the right hon. Gentleman out here, and I hope to provide the reassurance that he is seeking.

We will be phasing in the share changes. Currently, they start from a 16.66% share, and we will raise them to 20% each over the course of the next two years. The right hon. Gentleman will have noticed that in two years the Olympic top slice of lottery funding will come to an end. Therefore, although Big’s share will fall from 50% today to 40% in two years’ time, it will be a smaller slice of a much larger pie, because the Olympic funds will then be part of the whole. As a result, if he does the calculations, he should see a steady increase in cash terms for Big as well as for the other good causes. That is certainly shown by all the figures that I have seen. That outcome is important, which is why we have phased the changes to match the end of the Olympic funding.

--- Later in debate ---

[Alun Michael (Cardiff South and Penarth) (Lab/Co-op)]

I chair the all-party group on the community and voluntary sector, and it is particularly pleasing to see in the new Parliament new Members on both sides of the House taking a real interest in the issues affecting that sector, as well as volunteering and charities. I suspect that that will be reflected further in this debate. I welcome the consultation and opportunity to debate how the lottery funds should be redistributed after the Olympics, when additional elasticity is provided in the way the Minister described. I am certain that restoring the levels of funding for sports, arts and heritage will be important for the next decade.

Responding to a comment by a Government Member, I have to say that I do not accept that either the extent of the cuts in Government expenditure or the precipitate nature of the cuts, which puts private sector growth at risk, is necessary. All the parties certainly knew that we were facing difficult financial circumstances, and that was reflected in what was said in advance of the election by my party. The Liberal Democrats in particular cannot abandon almost everything that they said in the run-up to the election using the excuse that they had somehow failed to notice an international crisis that was affecting our national finances. They put up a set of propositions in the light of well known financial circumstances and were clearly cavalier in what they said, not expecting to be in a position of having to make decisions in government.

One problem is that the precipitate nature of some of the cuts is damaging to some of the poorest communities throughout the country. For example, in Wales, dependence on employment in the public sector is higher than in many other parts of the United Kingdom. That means that public sector cuts are likely to undermine the capacity of private businesses, particularly small businesses that serve the community, when money is extracted from those economies. We must treat that seriously. I make those comments not to stir up controversy with the Minister, but to correct the excuses that were offered by his Back Benchers.

It is certain that lottery money will be important in giving funds to important activities and in many cases attracting additional funding from other sources. I applaud the Minister’s response on the importance of maintaining additionality. It will be philosophically difficult to maintain that when funding is sought for good projects that will provide value for money and for local communities; however, I think he has accepted the challenge to apply the right principles. It is important that that does not result in funds going only to communities that are better off and perhaps have the resources to prepare a good case for their projects.

[Mr Andrew Smith]

My right hon. Friend brings enormous expertise and experience to this debate. In relation to shaping the balance of national lottery allocations for the future, what does he think of the proposition that the views of the people who play the lottery, whose money ultimately funds those projects, should be taken more widely into account when deciding where the balance of priorities should be?

[Alun Michael]

There are two points to make, I think. First, those who play the lottery are contributing and should have something to say. Secondly, many of them are from more deprived communities and are less well off. I spoke to someone about the fact that many of those who play the lottery cannot afford to do so. A friend of mine who was representing a deprived community in my constituency made a good point when he said that the more deprived someone is, the more difficult it is to make ends meet and to provide for their families, so the more they need something to provide hope. The gamble and the likelihood of a return may not make sense, but they are buying a dream, not a ticket. If the way people buy that dream leads to a contribution that is likely to come back to their community and help people in similar situations, surely that principle should be pursued. That is a good way of introducing a point that I want to emphasise: a needs-based approach is important, and that has been the approach adopted by the Big Lottery Fund. I hope that it will continue.

The Minister made the point that we will be talking about the funds that go into the Big Lottery Fund being a smaller proportion of a larger sum, so there will at least be an increase in money terms, but I would prefer a greater proportion of increased funds to go to areas and communities with the greatest needs. That is the essence of a needs-based approach. It is not impossible to achieve it while pursuing the Minister’s objectives. For example, it might be a question of emphasising the importance of a needs-based approach to the other lottery funds. There is more than one way of achieving a specific outcome, but I hope that the Minister will undertake today to consider how best the needs-based approach can be protected within the new arrangements for the Big Lottery Fund, and perhaps the other funds.

The Big Lottery Fund formula for allocating funding within the United Kingdom—I believe that this applies to Scotland and Northern Ireland as well as Wales—is based on need rather than population. Wales is likely to be worse off from any change in shares, unless that point is taken on board. The Minister has a pleasantly listening visage this afternoon, so I hope that he will take my points into account.

We need a larger proportion of a larger sum to go to the places in greatest need, but that does not necessarily apply only to the crude figures of the distribution between different lottery funds. The Big Lottery Fund distributes its money to charities, health, education and the environment, and its mission is to support people and communities in the most need. That is why I am concerned about the consultation. The Minister seems to have someone sitting behind him who specialises in shaking her head, but I have given a factual description of how the Big Lottery Fund works.

[Dr Thérèse Coffey]

I am shaking my head because I completely and fundamentally disagree with the right hon. Gentleman’s proposal. Unfortunately, I cannot stay for the whole debate, but if I am called to speak I will make precisely the opposite plea—that we get rid of the politically correct nonsense formula, and allow the lottery to be what it is: additional funding that celebrates communities throughout the country, not just more politically correct indices that the Labour Government dreamed up.

[Alun Michael]

I am glad that the hon. Lady has exposed her views, but I hope that the Minister will take a more intelligent approach to what I am saying. I am not talking about political correctness; I am talking about the difficulty of getting money to the most deprived communities that lack resources. As my right hon. Friend the Member for Oxford East (Mr Smith) pointed out, those are the communities that contribute most to the lottery because people are buying a dream.

The Big Lottery Fund has sought to enable such communities to develop the skills and contributions of individuals who often have a great deal to offer but struggle to do so. Often, the lack of an infrastructure as well as the lack of money in those communities acts as a considerable obstacle to bringing projects forward. I have worked in deprived communities in my city of Cardiff and within my own constituency. Those communities do not lack commitment or a degree of energy; what they lack is money and often a professional infrastructure among the people who live there, so they often find themselves at the end of the queue when projects are proposed.

Such communities often lack the capacity to produce big schemes, because planning, infrastructure and voluntary contributions by architects and so on can make a big difference to achieving projects that meet the criteria of the different lottery funds. I do not think that what I said is controversial. I thought that the Government were intent on creating a big society that involves the concept of inclusiveness. The hon. Lady is expressing the political correctness of the right in—if I may say so—a most unpleasant and worrying manner. I hope that we will hear later that that is not the view of the Government as a whole.

The Secretary of State stated his desire to protect the voluntary and community sector and proposed that the Big Lottery Fund should exclusively fund that sector. I am instinctively sympathetic to that approach because it is too easy for funds to slide into the public sector rather than the voluntary sector, where more effort is sometimes required. I share the concern expressed by the hon. Member for St Austell and Newquay (Stephen Gilbert), and I hope that the Minister will take care to leave some flexibility so that priority and preference is given to funding outcomes that will actually be delivered for the local community, while allowing some discretion for lateral thinking and for those communities that struggle to obtain the necessary infrastructure. At least I can agree with the hon. Member for St Austell and Newquay on that. It is right to have tight criteria, but it also makes sense to have some flexibility.

I hope that the Minister will reassure us that the three essential principles laid down to underpin the national lottery will continue to apply. The first is the independence of the lottery distributors, which are independent of Government but accountable to Parliament and have the freedom to take decisions on funding priorities and specific grant allocations, after consultation. Second is the principle of additionality, which the Minister has already markedly underlined, and third is sustainability, meaning that lottery funding should cover the full cost of the activity being funded with the aim of helping organisations to deliver and sustain the project throughout and beyond the life of the grant.

I ask for care in portraying the national lottery as an efficient way of giving to charity. The Minister has said that the lottery raises considerable funds that go to charitable, voluntary and community purposes, and that is correct. However, it is fair to note that if gift aid is used, a £1 donation given directly to charity results in £1.23 for that charity, whereas only 28p in every £1 spent on the lottery goes to good causes. I make that point not to undermine the effectiveness of the lottery, but to suggest that if people want to give to a good cause, additional value is created by donating with gift aid and a greater sum will go to that good cause.

I agree with the point made by the hon. Member for St Austell and Newquay about the danger of misunderstanding how administrative costs work. It does cost more to give funds to smaller and more community-based organisations, but often that funding will have a disproportionately large benefit in those communities. Small sums of money can sometimes attract other, greater, funds. When I was responsible for national parks, I set up funding through the sustainable development fund to encourage community-based projects within national parks, based on the principles of sustainable development. That led to millions of pounds of other money coming in from organisations such as parish councils, charities or from business donations and contributions from individuals who wanted to take part in a community project. It was beneficial because everybody could see the value of bonding together to produce positive outcomes that were good for the national parks and for the communities and voluntary organisations, such as youth clubs, that used them.

Sometimes the value of small grants is greater in terms of long-term impact than that of big sums of money. However, it takes more time and administrative effort to achieve those outcomes. Applying simple proportionality in judging administrative costs is too crude, and I hope that the Minister will acknowledge that and take it into account when he responds to the debate. I welcome this opportunity to debate this subject with the Minister, and I hope that he will take account of the constructive points that have been raised.

--- Later in debate ---

[Richard Fuller]

The hon. Lady makes a very wise point, from her point of view. In my constituency, there are splendid independent schools, which are fully involved in their charitable endeavours and do not see a conflict between the two, but see them as mutually reinforcing.

I was making a point about the registration of social enterprises. I think that companies limited by guarantee are regulated by Companies House, and community interest companies obviously have their own regulator, so will the Minister be kind enough to confirm that in the regulation of social enterprises, that will not be listed as the sole reason for their exclusion under the new rules? That would provide a lot of reassurance to many of the organisations that we are talking about.

My next point is about the important principle of additionality, which now applies in a very different economic circumstance for our country. At a time of retrenchments and necessary deficit reduction measures, it is easy to call that principle into question. That would be unfortunate. However, there are some potential tensions between the principle of additionality and the other goal—promoting the big society—part of which I have addressed through the registration of social enterprises. If we want the big society taken from a vision to a reality, we shall have to rely on the vibrancy of our social enterprises and small community groups and their ability to step up and achieve the things that we are talking about. There is a fierce urgency about enabling those organisations to have the capacity in place to do that. The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) made a very good point about that, which I shall turn to in a minute.

As the Minister rightly said, the issues about disbursement are correctly at arm’s length. We would not like political interference in that, but can he give me some idea of whether there will be any review of the guidance to disbursement organisations, so that the overall ambitions that we all share, of seeing a more vibrant civil society and social society, are not affected because of the urgency of the times in which we are living?

My next point is about capacity building versus short-termism. In many of our constituencies, there will be charities and non-profit organisations that have been delighted to receive funding from various sources—not just national lottery schemes, but other sources. For 18 months or two years, they can start to live their dream and build their future, but then they are cut off precisely when they are starting to get traction. One concern about the programmes under the previous Government was that a solution was never found—presumably because it is extraordinarily difficult to find one—to overcome that problem.

Capacity building in social enterprises is more important now than it has ever been. We shall be relying on social enterprises to take on many more responsibilities than they may have anticipated, to achieve many of our social goals. In the review, will the Minister consider carefully how lottery funding can focus on capacity building? There have been very sensible recommendations from a number of Members, particularly the hon. Member for Kilmarnock and Loudoun, about low-cost applications. Making applications really is a bugbear in terms of an organisation’s capacity to apply and the cost of applying. There should also be more encouragement for multi-year funding of social enterprises and charities, because with that effort in place, there will be a much better long-term impact in our communities from the good works that are the objective of the national lottery fund.

[Alun Michael]

The hon. Gentleman makes a very important point. As I listened to what he was saying, it occurred to me that a fresh look at issues such as tapering might be worth while. In the old urban funding periods, for instance, there was a period when people knew what the funding was and then a couple of years when there was diminished funding, which sometimes facilitated finding new partners to ensure longer-term viability for a scheme.

[Richard Fuller]

Tapering is one option, and it is not a bad one. Actually, it is a very good option—I had not thought of it. Furthermore, with the introduction of organisations such as the big society bank and with more pressure on private enterprises to be more involved and to move beyond corporate social responsibility and into really investing in the fabric of our civil society, it would be helpful, if it was in the Minister’s remit, to connect funding sources—perhaps the initial seed funding that comes through the national lottery and the Big Lottery Fund—to other organisations. That could ensure that transitions in funding from one pot to another are handled better and that more signposting is given in the initial grant—“We will fund you for x number of years” or “We will fund you for this amount and after that, these are the two or three funding sources you can go to”. I thank the right hon. Member for Cardiff South and Penarth (Alun Michael) for making that very good point.

--- Later in debate ---

[Dr Coffey]

I thank my hon. Friend for that intervention—we call each other “hon. Friend” because we are friends outside the Chamber, although as a political convention we do not always use that term. I understand what she says. Funnily enough, if the money given in grants by the Big Lottery Fund was part of the 0.7% of gross national income aid target to which we are committed, I could see some logic in it, but lottery funds are about additionality rather than substitution for Government funding, so I do not necessarily agree with her on that point.

I welcome the move in the allocations back to the original percentages of 40, 20, 20, 20 and away from the 50% split. Again, some of my constituents might be surprised that some of the big society funding—I mean Big Lottery funding; I apologise—is used to fund credit unions. That is a great idea. Many of us recognise the extent of the personal debt crisis in this country; rather than having people going into the arms of loan sharks, Members on both sides of the House are trying to encourage credit unions. However, I think my constituents will be more surprised to hear that some Big Lottery Fund money is going to trade unions—for trade union learning or for particular projects such as “The Union Makes Us Strong: TUC History Online”. I do not think that that is appropriate use of the Big Lottery Fund.

I understand that the lottery is growing. I appreciate that we are going back to the principle of additionality and getting rid of redirection towards Government policy. With appropriate marketing, that might encourage more players to resume, as there has been a drop in the number of people playing. This is not necessarily an interest, but I used to play regularly through a syndicate at work. I was determined that the people who worked for me who could retire if they won that magic figure were not going not leave me behind, so I too contributed. I may even get a syndicate going in the House. It is not that we feel poor because of the Independent Parliamentary Standards Authority, but we would all like to enjoy the prosperity of a win on the lottery. Indeed, it could be any one of us. However—to continue this personal anecdote—when the funding formula started to change and when I thought that the Government were starting to redirect money, I decided not to play as regularly, because I thought that the money was not necessarily going to causes in my community. For me, that was an important motivation.

An interesting point was raised about efficiency in the distribution of funds. I hope that the Government can find a way of benchmarking the different funds and distributors. When it comes to the Big Lottery Fund, I would like the Government to consider having a wider range of distributors. I pay tribute to the Community Foundation Network, which I think was set up by the previous Government. Community foundations are either county based or much more local. I pay particular tribute to the Suffolk community foundation; it really has its finger on the pulse and is much better than the big regional offices that we see. We should do all we can to help them.

[Alun Michael]

I am grateful to the hon. Lady for giving way. In view of her earlier comments, I am glad to find some common cause with her. Funding through community foundations means that the communities that find it most difficult to apply are more likely to obtain assistance—the point that I was making earlier. When I was deputy Home Secretary, I set in train something that led to the rural policing grant, because rurality is indeed one of the elements that should be taken into account. It seems that the hon. Lady is not arguing against the basic philosophical starting point, which is that those areas that have the greatest need and which find it most difficult to apply for funding, including those in her constituency, should be assisted with doing so.

[Dr Coffey]

I welcome the right hon. Gentleman’s intervention. I am not saying that the proportion of money spent on the national lottery in an area should automatically result in that much going back to that postcode area. I welcome what he says about the police grant—I did not know that, and I thank him for educating me—but I honestly believe that generally there has been a skew away from rural areas because of the way certain indices have been applied, so we are not likely agree on that point, but I am glad that we have found common cause on the community foundations being an efficient way of distributing funds.

I hope that when the Minister considers the input into the lottery, including trying to encourage more people to take part and ensuring that even more post offices can benefit—I believe that a third of post offices have a lottery terminal on their premises—he will also give careful consideration to getting the money out as efficiently as possible, as cheaply as possible and, dare I say it, as least politically correctly as possible.

--- Later in debate ---

[John Penrose]

I just want to finish this point and then I will be happy to give way again.

I am not sure that the right hon. Gentleman and I will necessarily agree on that basic point of principle about the percentage that should go to the Big Lottery Fund, but I just wanted to reassure him that the situation was perhaps not quite as bad as he feared. Partly, that is because, as I said, the total amount of cash being distributed by the Big Lottery Fund should rise in both Scotland and Wales, along the lines that I was talking about earlier. In addition, a large proportion of money is distributed by other lottery distributors, which also goes to the voluntary and community sector. For example, 48% of the money from the Heritage Lottery Fund has gone to voluntary and community sector organisations and indeed 81% of the projects that the Heritage Lottery Fund supports have been led by the voluntary and community sector. So I hope that that helps him a little, even if it does not satisfy him fully.

[Alun Michael]

I am grateful to the Minister for addressing my point. I was not necessarily arguing that there should be no change in the percentage. I was saying that there is more than one way to achieve a needs-based approach to allocation. One possible way is to look at the other funds, because of course the sort of communities that I am seeking to protect are very interested in issues such as sport, art and heritage. I had hoped that the Minister would reassure me—I think that he is part way to doing so—that that needs-based approach would perhaps be applied more widely and not just in the crude overall percentages.

[John Penrose]

I am not sure that I can reassure the right hon. Gentleman fully on that point. However, I hope that the figures that I have just quoted about other lottery distributors that give money to voluntary and community sector organisations in a way that is perhaps not terribly well publicised show that money is already going to sporting organisations—he gave the example of sport—in needy constituencies such as his.