Apportionment of Money in the National Lottery Distribution Fund Order 2010

Baroness Garden of Frognal Excerpts

Wednesday 17th November 2010 Grand Committee

Moved by

[Baroness Garden of Frognal]

That the Grand Committee do report to the House that it has considered the Apportionment of Money in the National Lottery Distribution Fund Order 2010.

Relevant document: 4th Report from the Joint Committee on Statutory Instruments.

[Baroness Garden of Frognal]

My Lords, this order fulfils the commitments in the coalition programme for government and the Department for Culture, Media and Sport’s structural reform plan and business plan to reform the lottery so that more money goes into sport, the arts and the national heritage, restoring the shares for these good causes to 20 per cent each. The order amends the percentage apportionment of money held in the National Lottery Distribution Fund in two stages in order to protect the funding to the voluntary and community sector through the Big Lottery Fund.

From 1 April 2011, the shares for the arts, heritage and sport will increase from the current 16.66 per cent each to 18 per cent each, with the Big Lottery Fund going from 50 per cent to 46 per cent; and on 1 April 2012, the arts, heritage and sport will each go to 20 per cent, with the Big Lottery Fund moving to 40 per cent. Why we are doing this? The National Lottery was set up 16 years ago this month. It has been a huge success, raising £25 billion for good causes and over 350,000 projects. Every part of the country has benefitted. The success of the lottery depends on people continuing to buy tickets, of course, but sales remain very strong and noble Lords will be pleased to hear that, on current projections, they should remain strong.

It is important to remember the “additionality” principle. The lottery is intended to provide additional funds in the areas of the arts, the national heritage, sport and the voluntary and community sector. The lottery funding is not used for government matters and purposes, but rather for projects which the Government would be unlikely to fund. So despite the success of the lottery, we need to reform it so that it can remain true to its founding principles.

We have said that the share change alone will provide £50 million a year extra each for the arts, heritage and sport: a total of £150 million. However, when the effect of increased lottery income and the end of the Olympic transfers is included, the cash figures will be much higher. Arts Council England should receive around £80 million a year more from 2013-14. The Heritage Lottery Fund should receive around £115 million a year more. Sport England should receive around £70 million a year more.

We carried out a public consultation on our proposals between May and August, and received 362 responses. As well as the lottery distributors and the devolved Administrations, we also heard from local and community organisations and others with an interest. The response was overwhelmingly supportive of the change. Seventy-three per cent of the responses clearly supported the change, with just 12 per cent opposed. In the arts, heritage and sport sectors, 97 per cent were supportive.

Many respondents welcomed the idea of more lottery funding for these good causes. Some wanted the change to be made in one go. We considered that option, but because the diversion to the London 2012 Olympics does not end until 2012, it would not have been able to protect voluntary and community sector funding through the Big Lottery Fund. Some respondents from the voluntary sector were concerned about the impact on their sector, but others felt, as the Government firmly believe, that the protection of voluntary and community sector funding through the Big Lottery Fund, together with the additional funds that are available through the arts, heritage and sport, will enable the sector to benefit overall. Indeed, all lottery distributors should, on current projections, have more lottery income after the Olympic transfers end, including the Big Lottery Fund.

Alongside the order, we intend that the Big Lottery Fund will, in future, be able to focus its funding on the voluntary and community sector. We intend to issue a policy direction which the Big Lottery Fund would be required to take into account when it makes funding decisions. Our public consultation on this ended on 29 October and we are currently considering the responses received.

Many respondents wanted to ensure that increases in lottery funding should not be used as an excuse for reductions in government funding. The Government agree. We remain committed to the principle of additionality, as I have already mentioned. Nothing in the order would change the principle of additionality. The lottery regime, as set out in the legislation, and the way in which distributors function, are untouched by the order, save for a discrete percentage share change to the good causes.

The reductions to government funding announced in the spending review are necessary across the whole of government because of the structural deficit. They have not been made to the arts, heritage and sport, because increased lottery funds will be available. Actual funding decisions are for the lottery distributors themselves to make, acting independently of government, and they will continue to be required to report each year on how their grants have met the additionality principle. So the pattern of lottery spending will continue to meet the principle of additionality, and will not be used to replace the kind of Exchequer spending that is being reduced.

Some voluntary and community sector respondents wondered about the effect on their organisations, but I hope I can assure noble Lords that the Government believe that the staged change, together with the increased levels of lottery income and the extra money available when the Olympic diversion ends, mean that they will not be worse off. Indeed, from 2013-14, they will be very much better off than at present. Voluntary and community organisations will also be able to benefit from the additional funds that are available in the arts, heritage and sport. The Big Lottery Fund should have about £635 million a year from 2013-14, compared with about £565 million now.

Some respondents from Scotland, Wales and Northern Ireland were concerned that their countries might lose out from the change. The Government appreciate that it is difficult to make a precise estimate because a number of UK-wide distributors do not have formulas for allocating funds to each country, but we believe that in cash terms every country in the UK will be better off. Scotland should receive about £40 million a year more in 2013-14; Wales should receive more than £20 million a year more; and Northern Ireland £12 million a year more.

I commend the order to the Committee. I beg to move.

[Lord Evans of Temple Guiting]

My Lords, I thank the Minister for her comprehensive statement. We on these Benches welcome and acknowledge the huge success of the National Lottery. Thousands of projects, small and large, throughout the country have shared in the fortune bestowed on them by the lottery, and thousands of community groups, millennium halls and galleries would never have existed had it not been for the lottery. That is in part because lottery money has supplemented and enhanced the work of government, thanks to the principle of additionality which the Minister spoke about. I will come back to that issue later.

I also put on record the achievements of those on our Benches in supporting the arts and heritage while we were in government. We greatly increased government investment, raising it to record levels. Funding for the arts rose by more than 70 per cent in real terms; and for sport, investment more than trebled. It is thanks to that that museums and galleries were able to open their doors to the public with free access. One enormous side benefit of that has been to the tourist industry.

Since the general election, we have had the comprehensive spending review, which plans substantially to cut the budget of the Department for Culture, Media and Sport by 24 per cent over the next four years. Cuts to the Arts Council will come to 29 per cent. English Heritage, so ably chaired by noble friend Lady Andrews, will see a third of its income cut. I would be grateful if the Minister could make a statement about what impact the Government consider these cuts will have on these vital areas of our public life.

I turn now more directly to the order in question, which is to fulfil a commitment in the coalition agreement to,

“reform the National Lottery so that more money goes into sport, the arts and heritage”,

as we heard from the Minister. I am sure all in this Room welcome that commitment. However, what was strangely absent from the coalition agreement was the resulting fall in money to the Big Lottery Fund from half of lottery funding to 40 per cent—a cut of 20 per cent. In other words, there will be a cut of 20 per cent to expenditure that is charitable or that is connected to health, education or the environment. The Government’s own assessment of the impact of this change, in paragraph 10 of the Explanatory Memorandum, is that,

“A smaller proportion of funding will be available for organisations and projects via the Big Lottery Fund”.

I also express great concern at the ongoing funding of many of the projects that the Big Lottery Fund has committed to. I quote from the Big Lottery Fund’s 2010 annual report:

“The fact that many of our grants will be paid out several years after they are committed means we make commitments from money we do not yet have”.

It goes on to say that if,

“Lottery income fell, we might be unable to meet all our commitments”.

Is this not an income fall for the Big Lottery Fund? Is this not an issue of great concern to the Government and to all of us?

We have heard a great deal from the Prime Minister about the big society and how important it is that the voluntary sector plays a greater part in our communities—a laudable aim with which we all agree. However, we are concerned that the big society is a mask for handing over swathes of responsibility for work that has been done by government to the voluntary sector simply as a means of reducing government responsibility and expenditure. At the same time, there is great concern that government funding of the voluntary sector is under threat. I would be grateful if the Minister could provide some reassurance on this matter.

It is because of the proposed cut in funding to the Big Lottery Fund that I ask whether the Government will listen to the concerns of those who stand to lose. In any redistribution of money, those getting the increases will, as we know, widely welcome them, often quietly, while those who lose will loudly protest. However, in this case it seems that some of the poorest and most disadvantaged in our country are to be the losers. They are the ones who do not have the voices to protest or friends in the media to make their case. I quote from the DCMS summary of consultation responses on this order:

“Many … respondents were concerned that transferring funding away from the sector would have an adverse effect on many organisations, and that this would compound the effect of the anticipated forthcoming reductions in public spending, both for the organisations themselves and for their clients and the communities they work in”.

I would be most grateful if the Minister could provide assurances to the organisations that have submitted those responses, of which I just gave an example.

I ask the Minister what plans the Government have to improve the efficiency of the lottery distribution organisations. The Government have indicated that they intend to impose a ceiling of 5 per cent of expenditure for administration charges. The Big Lottery Fund has reduced its expenditure on administration from more than 10 per cent to 7.5 per cent in the most recent year. How will the Government fulfil their objective, and when do they plan to do so?

Turning now to the proposed increase in funding, what criteria will be used to decide how the additional funding is apportioned? How transparent will the process be? Will Ministers be involved in any way? How will the balance between national and grass-roots spending be decided? Finally, as I indicated at the beginning, I come back to the question of additionality. It is right to say that the Minister gave an absolutely irrevocable undertaking on this matter during her speech.

[Lord Brooke of Sutton Mandeville]

My Lords, perhaps I may declare an interest as having been the Secretary of State responsible for the introduction of the lottery. I emphasise that the interest is emotional rather than financial. Additionality was discussed widely when the Bill was going through in 1993 and 1994. In those days it had the agreeable title of the National Lottery etc. Bill. There was a concern as to whether the charities would lose out through the apportionment, which was 20 per cent to each of the five lottery funds. During the passage of the Bill, the Government made the offer that in any Parliament there could always be a day’s debate to discuss whether the apportionments were in fact correct, and whether the charities were losing out as a result of what had occurred by comparison with the charitable money they had received previously. After 1997, when the Labour Government came in, a general debate did not occur, but there was a consultation to which there were about 600 respondents. It was not wholly surprising, given that the people who replied were mainly producers who would be the beneficiaries of any change in the apportionment, that 90 per cent communicated that they would like the apportionments to be altered.

The noble Lord, Lord Evans of Temple Guiting, alluded to additionality both at the beginning and the end of his speech, and perfectly understandably raised his concerns about the change in the Big Lottery Fund’s resources and that, inferentially, of its initial predecessors. I will say, having sat through the whole of the process between 1997 and 2001, that one noticed that if, for instance, the Department of Health decided that it would be agreeable for there to be a rather larger allocation from the lottery for cancer equipment, one did not hear from the lottery distributors that money was going to be coming to one’s constituency. The first thing one had was a letter from Frank Dobson saying how pleased I must be that money was coming to hospitals in my constituency. I did have to warn the Secretary of State for Health that it looked as though the doctrine of additionality was actually being offended against if he was the first person to communicate the news rather than the lottery distributors themselves.

I conclude by saying that I wholly support what the Government are now doing and I congratulate the Minister on the way in which she introduced the order.

[Baroness Garden of Frognal]

My Lords, I thank both noble Lords for their comments and I am pleased to respond to the points made. Our consultation has shown that there is wide support for the changes, with many people pleased to see increased lottery funding for the arts, heritage and sport. However, I would acknowledge to the noble Lord, Lord Evans, the contribution made by the previous Government on aspects such as free entry to museums and other measures that were taken during their time in government. I also reassure the noble Lord that, in cash terms, each of the good causes of the arts, heritage and sport should expect to receive well over £100 million a year extra from 2013-14 compared with the present total of an extra £300 million a year. The additional funds will be for lottery-funded projects and need not raise any questions about breach of additionality. On that, I noted with interest the comments of my noble friend Lord Brooke and assure him that lottery projects should certainly be decided by the distributors. We hope, too, that it will be the distributors rather than Ministers who convey information on those projects in order to get the proprieties right. Nothing about this order changes that in the lottery regime.

The economic situation of the country has meant that government funding has to be reduced across the board. The arts, heritage and sport are not being singled out because more lottery money will be available. The noble Lord raised his concerns about that, but I assure him that in cash terms, Big will have much more money in 2012 than now. Between now and then, Big is not restricted to its annual income because it has a balance on which it can draw, so the voluntary sector should not feel the impact too severely. Of course, if lottery income generally falls, there might be a problem, but we are confident from what we hear from the Big Lottery Fund that that is not anticipated in any way.

All lottery distributors, including the Big Lottery Fund, should have more lottery income after the Olympic diversions end in 2012, and the voluntary and community sector will certainly be able to benefit from the extra funds in the arts, heritage and sport. This order will allow a considerable increase in the funds available for additional projects in the arts, heritage and sport, while protecting the funds available through the Big Lottery Fund for the voluntary and community sectors.

The noble Lord, Lord Evans, asked whether there would be an effect on Exchequer cuts. There will be a spending review, and the Government will shortly announce the administration costs of lottery distributors, which relates to another question raised by the noble Lord.

If there are other points that I have not picked up on in my response, I shall of course write to noble Lords. I beg to move.

Motion agreed.