National Lottery Reform

Cathy Jamieson Excerpts

Thursday 22nd July 2010 Westminster Hall

[John Penrose]

I completely take my hon. Friend’s point. I come back to the point that distributors such as the Heritage Lottery Fund—one of the lottery distributors that I am particularly involved with—are required at the end of every year to sign a piece of paper saying that they have satisfied the principles of additionality. The chief executive signs that piece of paper, taking personal responsibility. I am sure that that test will be applied to all the lottery distributors. Even if it was not part of the audit trail, if I may put it that way, I am sure that all hon. Members would want to make sure that it is maintained.

I want to move on quickly, because I am conscious of time and I want to leave time for other contributions.

I have mentioned a number of things that we would like to change, update and alter. I will mention one more. We want to ensure that the lottery distributors are a little more efficient and effective at distributing the cash at a lower cost. All of us are conscious that we live in an age of austerity. We all know that we are having to tighten our belts. We all know that we are all in this together—to coin a phrase—and we have to make sure that we are doing more with less. It is reasonable to ask the lottery distributors to ensure that they are as efficient as possible in distributing funds so that the largest possible proportion of the money reaches the good causes for which it is intended.

[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

Would the Minister agree that the Big Lottery Fund is currently the most efficient of the distributors?

[John Penrose]

I would love to agree with the hon. Lady, but the difficulty at the moment is that the data are extremely—

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[Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op)]

I refer Members to the Register of Members’ Financial Interests, where I declare that I am a trustee of the Barony ‘A’ Frame Trust, which has had substantial funding from the Heritage Lottery Fund. I also stand here as a an arts graduate from the Glasgow school of art and Goldsmiths, university of London, so far be it from me ever to suggest that money is not well invested in the arts. I have also been an active supporter of a number of heritage projects in my area and across Scotland, and I stress my support for them. However, I am concerned about the proposals outlined by the Government, because there are general implications for some of our more disadvantaged communities, which, although they were not given special treatment under the previous arrangements, were at least recognised. I also want to raise interests specifically relating to Scotland.

First, let me pick up on the question about efficiency. As the Minister recognised, it is possible in theory for an organisation that simply disburses funds to a small number of large projects to be relatively efficient. He rightly accepted—I was glad to hear it—that the Big Lottery Fund, which deals with a large number of small grants and assesses many different proposals, might not, on the face of it, look so efficient. I understand, however, the Big Lottery Fund itself believes that it has got efficiency down to a fine art and that it is able get the best value for money.

Another important point, which was mentioned by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), is that many of the small organisations that apply for funds require support in capacity building; they do not have the infrastructure to produce business plans or elaborate proposals to sustain themselves as organisations over months and sometimes years in order to secure funding, given that many use a cocktail of funding from different sources. It is therefore important to recognise that the Big Lottery Fund’s overheads are not simply about administrative costs, but about capacity building and support costs. I was pleased to hear the Minister refer to that, and I hope that he can give further reassurance that that will be taken into account.

I mentioned that I share some of the general concerns about the Big Lottery Fund. I am particularly worried about the aspect of additionality. We have not yet heard fully how it will be assessed. I have heard people express concerns about how cuts in departmental budgets for arts and heritage projects and moving Big Lottery Fund money into such projects will inevitably result in things that were previously funded by the Government taking lottery money away from smaller organisations that would otherwise have benefited.

The Minister talked about projects in the grey areas that should perhaps not have been funded. I am not entirely persuaded that we had answers on that, either. At a time when local government and other parts of the public sector are feeling the squeeze, I am not sure that the Minister has given a compelling explanation of how local authorities will be able to fill the gaps that will be created if the lottery funding stream is taken away from local communities.

I am particularly concerned about schools and other parent-led organisations in local communities. On the face of it, an application from a school might look like something that the local authority should deal with, but it might in fact be a matter of a group of parents working with a school to provide activities after school—after-school clubs are an obvious example, but I have also seen eco-garden projects in schools in my constituency, which are linked to improving the local environment. Other projects have provided children and young people with sporting opportunities which they might not otherwise have had. That has not been fully addressed.

There is a particular issue in Scotland. Scotland receives 11.5% of the total Big income in the UK. That is because the income is apportioned by applying the Barnett formula plus a weighting for deprivation to recognise the particular circumstances in Scotland, but it is my understanding that none of the other lottery distributors reflects that. Any change in the shares is therefore likely to result in an overall net loss of available lottery funding in Scotland, which is a concern for me. I appreciate that the Minister has tried to give me some assurance on that, but can he guarantee that Scotland will not lose out as a result of the changes, when it is secure under the current regime?

[John Penrose]

I will not interrupt many speeches, but the hon. Lady asks a direct question and I thought that I might be able help. As I am sure she would expect, we have done some calculations. Last year, the Big Lottery Fund’s total income was £564 million, so 92%—the percentage that Big says it gave to voluntary and community services last year—works out at £520 million. With a 40% share, the projection for Big for 2013-14—after the Olympic transfers end—is £630 million. We are therefore comparing £520 million with £630 million, so the hon. Lady will see that there is a large increase UK-wide. If we apply that to Scotland, the figures for Big come out at £54 million beforehand and £65 million afterwards. The result should therefore be a net cash increase, which I hope reassures the hon. Lady.

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[Cathy Jamieson]

That is a reassurance. I will watch the matter with great interest and no doubt scrutinise the figures in more detail when I have time.

Another issue that concerns me is the proposals to restrict lottery funding 100% to the voluntary and community sector, which will have a real impact on schools and other organisations. About 90% of the funding already goes in that direction, so what is the point of cutting that 10%—the very small grants to very local organisations that really benefit from them? When I looked at where the money went in my constituency, I discovered that many of those small grants are linked to things such as arts projects—for example, a dance project in a special needs school—or community arts. It might include things such as local community councils being able to apply to put their Christmas lights up or to decorate the village for festivals. These things might not seem important in the global scheme of things when people are looking at very large sums, but a few hundred pounds can make a difference to the quality of life of people in such communities. Similarly, many of the relatively small grants were going to projects that involved getting young people actively involved in sport.

I hope that the proposals can be looked at again in full, because they may have unintended consequences. I say that as gently as I can, which is not my usual style. I am usually a bit more robust, but I am trying to say very gently that there may be unintended consequences, and I seek an assurance from the Minister that he will go back, look at the issue again and seek to ensure that there is proper consultation with communities.

Many organisations have had funding from the Big Lottery Fund and the relatively small grants to them have had a big impact. I do not want us to get into a situation where Awards for All becomes awards for some. Everyone in local communities should have the opportunity to have their say. Will the Minister address that point when he winds up the debate, and will he consider how communities and organisations that have received grants will be consulted?

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[Richard Fuller (Bedford) (Con)]

I am indebted to you, Mr Benton, and to the Minister for the opportunity to debate the national lottery and the Big Lottery Fund.

Although I will focus my remarks mainly on issues relating to social enterprise, I would also like to pick up on a critique that was made of my hon. Friends the Liberal Democrats, suggesting that they had not noticed that there was a financial crisis. Those of us who witnessed the extraordinary sense of denial about the financial crisis in the last Government regard that as a somewhat breathtaking criticism. Perhaps a few minutes in front of the mirror might be worth while for Labour Members. Such comments undermine some of the good points they were making, particularly the exhortation regarding the importance to charities and social and voluntary organisations of long-term planning—something that was particularly absent in the latter months of the last Government.

Before looking at social enterprise and the implications of the statements that have been made today, I want to ask the Minister whether as part of his review of the lottery since 1994—I think he mentioned small tweaks on the tiller—he intends to look at some of the concerns about the impact of the national lottery on gambling. In particular, will he look at the regressive nature of the lottery in taking money from people on low incomes and its general impact on encouraging people to gamble? Those are not necessarily substantive points for the review he mentioned today, but it would be helpful for hon. Members to know whether such matters will be part of it.

In my comments on social enterprises, I am informed by and indebted to the Social Enterprise Coalition and to Michele Rigby. Michele runs Social Enterprise East of England, which is based in my constituency. I would appreciate the Minister’s response to a couple of questions. The first relates to regulation and registration. There are concerns that too tight a focus, particularly on charitable purposes, will have the unintended consequence of rendering a number of social enterprises unable to undertake the very important work that many hon. Members on both sides of the House want them to continue.

In a recent survey, 62,000 social enterprises were listed. Many of us might think that the number is much more substantial, but there are certainly 62,000. If I may, I shall give the Minister the relevant numbers in case he does not have them to hand. The maths does not add up to 100%, because of double registration, but 37% were listed as registered charities, 59% as companies limited by guarantee, 17% as community interest companies, 12% as industrial and provident societies or co-operatives, and 9% came under other forms of registration.

Can the Minister provide some assurance that as we look to the ways in which the big society’s remit is written, social enterprises that are not listed as registered charities will not be excluded purely on that basis? As the organisations are regulated in a number of different ways, it will be important to consider that as well. Those registered under a trust deed or a charitable constitution are, I think, registered and overseen by the Charity Commission.

[Cathy Jamieson]

Given the hon. Gentleman’s support for the social enterprise and co-operative sector, which I welcome, does he agree that it would be somewhat iniquitous if independent, private schools, which have charitable status, were able to apply for some of the funding when some of the very organisations that he describes would not be able to do so?

[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.

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[John Penrose]

I am delighted to respond to the various points that have been made by Members from all parties during this debate. There is a very pleasing unanimity about the importance of the national lottery, which is not exactly unexpected but none the less welcome. I think that there is also a general acceptance that the national lottery has become a tremendously important part of our national life. While there may be some important questions to be asked and some important quibbles here and there, there is a vast fund of good will and cross-party consensus on the importance of the national lottery carrying on and continuing to do good work.

I will try to collect the various points that hon. Members have made into a series of themes. If I miss anybody out, I apologise and perhaps they can sort of grab me after the debate. However, I will try to ensure that I have picked up every point that was made.

A number of Members asked whether the commitment to focus the Big Lottery Fund even more closely on operating through the voluntary and community sector rather than statutory bodies would have an unintended negative effect. Looking around Westminster Hall, I think that that point was made by the hon. Members for Kilmarnock and Loudoun (Cathy Jamieson), my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert), the right hon. Member for Cardiff South and Penarth (Alun Michael), my hon. Friend the Member for Bedford (Richard Fuller) and the right hon. Member for Exeter (Mr Bradshaw), the shadow Secretary of State for Culture, Media and Sport; I am not sure whether my hon. Friend the Member for Suffolk Coastal (Dr Coffey) made it too.

In response to all those Members, I will say that the reasoning behind that commitment is purely an attempt to prevent any questions being raised about a breach of the principle of additionality. It is an attempt to ensure that there can be no question that money goes to statutory bodies as a way of getting round the principle of additionality. I think that it was the right hon. Member for Cardiff South and Penarth who said that it was terribly easy for that appearance to be created, which is something that we must watch out for at all times.

Therefore, I think that we are all agreed on the importance of the principle of additionality. I also think that it is right to say, as the shadow Secretary of State said, that the Big Lottery Fund has been tending towards that direction anyway. It used to be the case that 80% of its donations went to the voluntary and community sector, but that share has recently gone up to 92%, and we are encouraging the fund to make the percentage go even higher.

However, in response to a point that was raised by a number of people, I must say that we have no intention of phrasing the revised policy direction that we are aiming to come up with so narrowly that we end up with the unintended consequence that, if a voluntary and community sector organisation is partnering the local library or whatever local organisation it may be, it would be discounted. That consequence would clearly be counter-productive and unintended, and it is not what we want to achieve. There needs to be enough flexibility for a balance to be struck.

[Cathy Jamieson]

For the record, and for the benefit of those of us who have represented Scottish interests in Westminster Hall today, will the Minister tell us whether the policy direction that he will announce for the Big Lottery Fund will be for England? What discussions has he already had with the Scottish Government in relation to this issue?

[John Penrose]

I thank the hon. Lady for drawing everybody’s attention to that issue. She is absolutely right to point out that any such policy direction would be purely for England; it would then be up to the devolved Administrations to decide whether they wished to follow or not. Alternatively, if they wanted to change or flex the policy direction, it would be entirely up to them to decide how they wanted to react. I hope that that answers the hon. Lady’s question. It is important that we strike the right balance and are flexible on that issue, because an overly rigid approach could create some unintended consequences.

I also want to pick up briefly on one or two of the points made by my hon. Friend the Member for St Austell and Newquay, who is standing in today very nobly for my hon. Friend the Member for Bath (Mr Foster). He asked how we were getting on with the gross profit tax; incidentally, that is an answer to the shadow Secretary of State’s question about whether there was a policy that the Liberal Democrats as well as the Conservatives had backed. The answer to my hon. Friend’s question about the gross profit tax is that discussions with the Treasury are already under way. I am afraid that the timetable is still slightly elastic, because the Treasury is in charge of it, since it is a tax rather than something that is directly the responsibility of the Department for Culture, Media and Sport. However, as I say, discussions are happening, officials are already involved and I have spoken to the relevant Minister at the Treasury about it already.

[John Penrose]

I am afraid that I shall have to rely on my hon. Friend the Member for St Austell and Newquay, who is speaking for the Liberal Democrats today, to answer that question, as I am not quite such an expert on their election manifesto as I am sure he is. I am certain that he will be willing to be buttonholed by the right hon. Gentleman after the debate and will put him right, as necessary.

My hon. Friend the Member for St Austell and Newquay asked about the speed at which the spending cuts would be made. He and a number of other Members also asked whether we would try to be flexible in making those cuts. In fact, the right hon. Member for Exeter was also very concerned—to put it charitably—about the extent of cuts. We have four years in which to achieve those cuts and therefore we will carefully phase any reductions that have to be made. None of us here like the notion that there have to be cuts at all; sadly, they are a necessary thing rather than something that anyone is looking forward to implementing. But we will try to ensure that we phase them over that four-year period in the most intelligent way possible, to minimise the effect on the front line and to ensure that adjustments that have to be made can be made during that period.

In response to the comments made by the right hon. Member for Exeter about the need for these cuts, I share the view of my hon. Friend the Member for St Austell and Newquay. I am afraid that it is true that these cuts are not something that anybody wants to implement; none the less, they are the result of the previous Government’s actions. The reason why they have to be made is not that anybody wants to make them but simply because of what is happening to countries such as Greece. If we look at those countries, we can see that if a country’s public sector finances are not in balance, the international capital markets and the rest of the world will form their own view about its creditworthiness. We are borrowing a vast amount from international creditors at the moment so we need to ensure that we are a credible borrower in their eyes; otherwise, we will not be able to carry on doing anything that we want to do. I am afraid that that credibility has been gravely put in peril, and that is why we have to bring the national accounts back into balance as fast as is reasonably possible. However, I take the point made by my hon. Friend the Member for St Austell and Newquay that we need to do that with sensitivity and care and attempt to minimise the impact on the front line as far as possible.

The right hon. Member for Cardiff South and Penarth made some points about the needs-based approach, which were picked up by a number of other Members. I think that he was suggesting that he would prefer to see the Big Lottery Fund contribution maintained at 50% rather than at 40%, although as a result of our creating a smaller slice of a bigger pie the total cash amount will go up; I hope that I also answered his question about the impact on both Scotland and Wales. I think that his argument was that he would prefer that contribution to remain as a higher percentage as well as that higher total cash amount, because he felt that that would maximise the amount of money being given on a needs-based approach.

To reassure the right hon. Gentleman—

[Cathy Jamieson]

rose—

[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.

[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.

[Cathy Jamieson]

For my information, are the figures that the Minister has just given based on an assumption that lottery ticket sales will rise and, if so, by how much?

[John Penrose]

The figures are based on existing public figures for projected lottery ticket sales over the next couple of years. They are available on the website, so the hon. Lady can check them when she likes.

My hon. Friend the Member for Bedford asked about the effect of the national lottery on problem gambling. A large body of work has been done on problem gambling, as I am sure he is aware. I reassure him that if he speaks to the Gambling Commission, or indeed the National Lottery Commission, they will tell him what most of those who have made representations to me say: the national lottery is one of the least problematic kinds of gambling in this country. Large numbers of people play it, but the penetration of problem gambling among them is comparatively low. There are many other types of gaming that are of more concern than the national lottery. He also asked me to confirm whether non-charities would still qualify for Big funding. They do now, and they will continue to do so. I am happy to reassure him about that.

Several hon. Members discussed the cost of making applications to Big, particularly for small organisations. My hon. Friend the Member for St Austell and Newquay asked specifically whether it would not be good for hand-holding to fall outside the definition of administrative costs involved in Big’s distribution. I have two responses to that. First, as I mentioned in my opening remarks, it is important to realise that there may be good reasons why the 5% target that the Secretary of State asked me about might be slightly less applicable to Big. I want to ensure that we have common measurement criteria before we start applying anything in a mechanistic way. We will have to wait and see what happens, but there might be a legitimate reason for an in-built additional cost when dealing with small organisations. I want to benchmark that cost against the cost of doing a similar job in other countries in order to check it.

Secondly, it must surely be better for us to reduce the costs of hand-holding in the first place—to reduce the necessity for it by reducing the complexity of the application process, particularly for small voluntary and community sector organisations—than to fund those additional costs. That is where I would start. As hon. Members commented in responses to interventions by the hon. Members for Kilmarnock and Loudoun and the hon. Member for North Ayrshire and Arran (Katy Clark), it is far more important to understand that costs are incurred not only by distributors; complexity also creates knock-on costs for applicants. It is vital that we reduce the total system costs to all parties. That is probably the biggest and most immediate single thing that we can do.

I hope that I have responded to everybody. As a final remark, the shadow Secretary of State asked about what he called the fifth good cause. I now understand the reasoning behind the written parliamentary question that he asked the other day, which he quoted. We have no plans to legislate to remove the fifth good cause from Big’s charter. We want purely to ensure that any projects in such areas benefit the voluntary and community sector rather than breaching additionality and funding statutory bodies, as we discussed. I hope that that answers his question.

I hope that I have dealt with the issues. We have had a wide-ranging discussion, but the most reassuring and important thing to me is that there is huge respect for and cross-party unanimity on the importance of the national lottery. I am sure that everybody here wishes it well.

Question put and agreed to.