Photo of Lord Davies of Oldham

Lord Davies of Oldham (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, I beg to move that this Bill be now read a second time.

The national lottery has been a huge success. It was originally promoted by the previous administration and it has been developed and opened up to new and popular good causes by this Government. More than £18 billion has been raised for good causes during the past 11 years. About £16 billion of that money has already been put to good use. It has been distributed to exciting projects around the land by the Arts, Film and Sports Councils and the Heritage Lottery Fund.

The Millennium Commission, Community Fund and New Opportunities Fund have invested in landmark projects such as the Eden Project and Tate Modern, in hospices and healthy living centres, and in thousands of small local and national charitable initiatives.

The money for those good causes comes willingly from those of us who—let's be honest about it—play the lottery to win. Around 70 per cent of us play regularly. More than 1,700 lottery millionaires have been created. Many of those people have been generous in their own right. Eighty seven per cent of jackpot winners have given some of their money to charity; one in seven has given £1 million or more to another family member.

Camelot is the company that we have to thank for much of this success to date. It has brought excellent business skills to running the lottery well and achieving high levels of sales. The National Lottery Commission has worked hard to ensure fairness to players and, with Camelot, to maximise the money raised for good causes.

I mention all these organisations because they deserve credit for what they have done, but also because I want to make clear from the outset how big and how complex is this very British, very successful endeavour. It was a brilliant and experimental idea when Parliament approved the legislation in 1993, and it has flourished subsequently. The reason for that is teamwork between business, public service, voluntary organisations and, above all, the public.

Many of the measures in this Bill are about keeping all those positive forces in balance to give the lottery another decade of successful life. This Bill aims to modernise and simplify the way that lottery grants are distributed and to increase public involvement. It will also create one distributor, the Big Lottery Fund, at arm's length from government, in place of three separate grant-making bodies. Getting grants paid to those who need them as quickly as possible and reducing balances of money that have built up is also an aim. The Bill will improve the way that the licence to run the National Lottery is awarded and the way that the operator is registered.

Clauses 1 to 5 deal with the regulation of the lottery through the National Lottery Commission. Notably, the chairman of the commission would no longer change annually. Executive board members could be appointed, putting the commission in the same position as the companies with which it will be dealing.

Clause 6 and Schedule 1 deal with amendments to the licensing structure of the lottery. Reserve powers will permit the issue of more than one operating licence and the system is designed to deliver significantly greater competition to the licensing process, if required, but there is a clear presumption that there will be a single licence.

Clause 7 deals with the share of lottery money for the Big Lottery Fund. A new good cause with half of lottery funding will be set up for the Big Lottery Fund. This good cause will be very wide. For that reason the Secretary of State will have power to prescribe expenditure at the highest level.

Clause 8 provides for a reserve power to reallocate excessive unspent balances from one distributor to another for the same good cause. It would be used only as a last resort after consultation and affirmative resolution by both Houses of Parliament.

Clause 9 changes the system of allocating investment income to lottery distributors from the National Lottery Distribution Fund. In future it would be in the same proportions that ticket sales income goes to each distributor.

Clause 10 will enable lottery distributors to seek and take account of public consultation in making distribution decisions. The intention is to remove any doubt about the power to allow the public to have a say in such important matters.

Clause 11 will ensure that lottery distributors have powers to publicise the good things that the lottery has achieved.

Clause 12 will allow the Big Lottery Fund to make grants in the Isle of Man and in the Channel Islands.

Clauses 13 and 14 and Schedule 2 will set up the Big Lottery Fund and allow it to distribute lottery funds. The Big Lottery Fund will also be able to distribute non-lottery funds and give advice about the distribution of lottery money and applications for grants. The fund will be required to comply with directions from the Secretary of State and from the devolved administrations.

Clauses 15 to 18 deal with the dissolution of the old distributors that the Big Lottery Fund will replace—the Community Fund, the New Opportunities Fund and the Millennium Commission.

Clause 19 defines "charitable expenditure", in relationship to the Big Lottery Fund good causes, as expenditure that is charitable. This is a purpose-based, rather than an institution-based, approach

The key principles behind the Bill are to open up the lottery to make it fairer and more accessible for its players and their communities. It is about ensuring the best value for beneficiaries. By moving the lottery away from government and to the people, it will create confidence in those who play. The Bill will ensure that lottery money goes efficiently to good causes and that the lottery responds to people's priorities. The Bill will enable increased public involvement with lottery distributors and allow them to seek and take account of public consultation in making distribution decisions. The Bill will deliver administrative savings of some £6 million to £12 million a year through the replacement of the three distributors with the Big Lottery Fund. The Bill will put the National Lottery Commission in a better position to run an effective licence committee, with a view to maximising money for good causes.

I am confident that the overall effect of these measures will be to cut bureaucracy, to speed up the flow of lottery money to good causes and increase the public's say in that, and to underpin the competition to run the lottery games on which the good causes depend. The Bill makes modest but useful changes to keep the Lottery in excellent condition, and I commend it to the House.

Moved, That the Bill be now read a second time.—(Lord Davies of Oldham.)

6:04 pm
Photo of Lord Brooke of Sutton Mandeville

Lord Brooke of Sutton Mandeville (Conservative)

My Lords, I thank the Minister, not just for his lucid introduction of the Bill, but for the courtesy with which he sent an imaginative package of material to those of us in your Lordships' House whom he surmised might take an interest in the Bill. The revision of the 1993 Act that he sent was headed:

"This is a version of how the National Lottery Act 1993 will read as amended by the National Lottery Bill"—

he then went into heavy type, underlined—

"after being considered in Standing Committee A in the House of Commons, November 2005 and Report/Third Reading on 19 January 2006".

This showed remarkable confidence in the ability of the Commons government Whips to ensure the rejection of any amendments—a confidence that, given other events last week, turned out to be illusory.

I declare a non-financial—perhaps an emotional—interest from my prior ministerial association with the National Lottery etc. Act 1993 and an equally non-financial interest, the Daily Mail notwithstanding, from my involvement in the Joint Committee on Pre-legislative Scrutiny on what is now the Gambling Act 2005. It is also a pleasure to be reunited with my noble friend Lord Astor, who was a fellow collaborator on the 1993 Bill in its passage through your Lordships' House.

The gestation of the Bill over the past three years has shown some infirmity of purpose. If the Secretary of State was not of the same gender as Lady Macbeth, the latter's famous words to her husband might have been quoted towards her. Of course I realise that, where she has retreated, she might claim that that was because this Government are a listening government rather than that the original ideas were ill thought out. On balance, however, it looks as though it was six of one and half a dozen of the other.

I realise how these mistakes occur. I was a member of an administration where a No. 10 edict wanted 35 per cent of board places on NDPBs to be held by women by a certain date without recognising that, unless we were going back to male summary execution, an insufficient number of vacancies would occur during the specified period for the accomplishment to be achieved.

Similarly, the Secretary of State's determination to achieve cutting off half the balances in no time at all ignored the fact that the process by its very nature is prone to create new balances every year. Fortunately, the National Audit Office has longer experience of these numerate considerations and advised that running down balances takes real time. I am not even entirely easy about the Government's intentions on the destination of interest on balances. A Rolls-Royce engine takes longer to devise, test and build than the components that make it up, so inevitably it has different financial imperatives. Sending someone to see a war grave is an admirable initiative, which the Big Lottery Fund has recently consummated, but in all respects it is swifter than building a cathedral.

For this very reason, I welcome the extension of the licence period. Any organisation that wins a licence twice will be judged by what it said in its application. Camelot has achieved a remarkable feat by reversing the decline in ticket sales, but product development takes time. I admire what it has done with EuroMillions, in relation to which so remarkable an event occurred over the weekend. The very thought of negotiating such a consortium of nine nations daunts me—and I have four years' experience behind me as British Minister on the EU budget council.

I am also glad that the Government are at last making an honest woman—or, indeed, couple—of the Big Lottery Fund, although in the e-mail wedding announcement someone might have imaginatively recognised that "biglottery" is, at a rapid glance, close to both "bigotry" and "bigamy".

On additionality, which will occupy us, nothing can ever wipe from my screen the memory that, when the New Opportunities Fund allocated cancer equipment to individual hospitals, I heard about my constituency allocations from the Secretary of State for Health before I heard from the New Opportunities Fund.

I look forward to hearing the Minister explain in Committee the claim on the DCMS website during the Committee stage of this Bill in the Commons that:

"Government is investing £2 billion of public and National Lottery money in sport by 2006".

I shall be interested, too, to hear in Committee how he squares that with the statement made by Mr Caborn, the Minister in charge of the Bill in Committee in the Commons, who said:

"We as a Government are strongly committed to ensuring that lottery grants are additional, so new clause 1 is not necessary".—[Official Report, Commons Standing Committee A, 3/11/2005; col. 241.]

The new clause had been tabled by the Liberal Democrat opposition. It may not come as a surprise to your Lordships' House that the subject of new Clause 1 required the Secretary of State to issue guidance on just such additionality.

The Big Lottery Fund also has a mild identity crisis between living in sin and the conjugal bed. The official website, which ends up with an abbreviation for aspidistra—I do not know who owns it—tells us that the Big Lottery Fund had spent £13.5 million in grants on 322 projects by the 16th of last month. However, the literature that the Big Lottery Fund has bestowed on us in briefing for the debate does not indicate how this amount is separated from the much larger sums that the same Big Lottery Fund, presumably as an amalgam of the individual prior partners, also claims to have spent. The noble Lord, Lord Rooker, once agreed with me that legislating for regional assemblies' referendums when regional assemblies already exist was Orwellian. In the context of the Big Lottery Fund, it is also confusing.

Moreover, I challenge the Minister—this is a genuine challenge—to take a "Mastermind" examination on the Big Lottery Fund document England and UK programmes 2006–2009, which carries opaqueness to an art form, all against a quote from the Minister in charge of the Bill, Mr Caborn, on the DeHavilland report broadcast on the morrow of Commons Third Reading, which was:

"I think the transparency that we've now put into distribution is one that should not just satisfy Parliament but also the general public as well".

The Minister and I can conduct this "Mastermind" cross-examination in the margins of Committee.

Although Mr Caborn is sure that we do not need to place in the Bill the Big Lottery Fund's commitment that 60 to 70 per cent of its funds will go to voluntary and community organisations, there are ambiguities in what the Government and the fund have collectively said in this area that we shall need to examine in Committee.

There is also an enchanting coincidental irony that one piece of polling by the Big Lottery Fund says that nine out of 10 lottery players believe it is important that the general public are involved in deciding where lottery funding should go. Camelot's analogous research reveals that players are not motivated by the fact that there are good causes, but 91 per cent of the players play the game essentially to win. Of course, I can square that circle, but it does not suggest that opinion polling is a sensible way to defend your choice of individual destinations for the good-causes proceeds if you are a distributor. This is of more than a little importance now that ITV is entering the destination process—the Minister will know what I am talking about. It is not clear whether ITV voters are players, even if the percentage of proceeds on which they will be voting is, at the moment, de minimis. Even if it is de minimis, we shall also have to watch media intrusion, whether by ITV or the Daily Mail, if the public are to be convinced that their actions are meaningful.

I was mildly shocked to hear the other day, quite a long time after many of us voted on 30 conservationist projects on the programme called "Restoration"—our telephone calls were supposed to be paying for the conservation of the winner—that the restoration of the winner has not yet properly started. But in this regard, the Bill is to be welcomed in enlarging the opportunities for the National Lottery Promotion Unit to educate us all.

All in all, I agree with the Minister that the lottery is a good thing—although I realise perhaps I should not say it—and we should all rejoice at Camelot's international reputation and in the energy of its recovery in raising money for good causes. I look forward to Committee and I shall not have to force myself to simulate interest—an engaging phrase, which a typographical error in the final sentence of the Big Lottery Fund's presumably un-proofread briefing on this Second Reading creates by substituting "simulation" for "stimulation" in the text, an error that the Big Lottery Fund's critics might say unintentionally gives the game away.

6:15 pm
Photo of Lord Shutt of Greetland

Lord Shutt of Greetland (Chief Whip; Liberal Democrat)

My Lords, I speak as one who is generally supportive of the Bill, although I have reservations about the whole concept of a lottery and the business of people who cannot afford tickets buying them. Having said that, I acknowledge that it is clearly popular and it works.

Until now we have had five bodies covering the arts, heritage, sport, community and millennium funds, which were joined by the New Opportunities Fund. I want to speak about that amalgamation, which is the major part of the Bill, although there are other features. Clearly the major provision is to amalgamate the Community Fund, the New Opportunities Fund and the Millennium Commission. In reality, it creates a fund for other purposes, which is outside arts, heritage and sports. It covers everything else that could be charitable.

I said that there were other features, and it is worth mentioning one at this stage. It is suggested that the Big Lottery Fund should be able to deal with non-lottery funds. I have some reservations about that. Some people will not accept lottery funds. By embracing funds that are not lottery funds, the Big Lottery Fund could put people off. They would prefer their project not to be supported by the lottery. I accept that the Big Lottery Fund will give us a great number of people who will be experts at grant-making, which, I suspect, is how the business of non-lottery funds has been brought in. I see that point but, if it is to stay in the Bill, perhaps there should be some form of packaging whereby it is clear to the grant applicant that there are resources from non-lottery funds.

I should declare an interest, in the sense that I have had interests in giving away money as a trustee of the Joseph Rowntree Reform Trust Ltd. It is not a charity but the Joseph Rowntree Charitable Trust gives away money. I was involved 16 years ago in setting up the Calderdale Community Foundation, which exists to build up a sum of money to give away in precise geographical areas.

Last week I was invited to lunch by the Big Lottery Fund. Your Lordships will be aware that we receive all sorts of invitations, and I tend to think that I have other things to worry about. However, people from the Big Lottery Fund rang me, so I thought perhaps I would go. I take the view that there is no such thing as a free lunch, but my speaking here today is an unintended consequence of that lunch. It may be that the people there had not bargained for what I might say.

I have three concerns. First, the business of additionality has already been mentioned—how much of this Big Lottery Fund could be purloined by government for activities that ought to be supported from general taxation rather than the lottery? Secondly, I have the package of papers, including the document England and UK Programmes, which lists various headings, such as "Reaching Communities", "Voluntary and Community Sector Infrastructure", "Children's Play", "Environmental", "Well-being" and "International Grants Programme". I am very much in favour of the Big Lottery Fund doing something international. The list continues with "People's Millions" and half a dozen other headings.

There is not a "miscellaneous" heading. I hope that in setting out programmes, which is not a bad idea, there are certain things that are worth concentrating on. We should never give up the opportunity of having something that does not fit the programme. There could be the brightest of ideas, but those running the fund could say, "I'm afraid it doesn't fit with any of our 12 programmes. Goodbye". Therefore, I hope that they can look at miscellaneous activities. Huge sums of money are involved and there must be some flexibility outside the listed programme.

The third point for me is the most important. I am concerned about the spread of the expenditures and where decisions are made. It is interesting to look at what is proposed. There is to be a separate body within the Big Lottery Fund for Scotland, for Wales and for Northern Ireland. It will give money to the Channel Islands and, with a population of not quite 80,000, the Isle of Man will have its own fund in order to be a grant-making body. I am in favour of the Isle of Man; I was taken there as a child at the age of four and I been there several years since.

However, I would like everybody to benefit from that sort of detail. Where are the great regions of England? The Community Fund, which is one of the funds amalgamated in the Big Lottery Fund, had regional committees. It had one for Yorkshire. I spoke to a former member of that committee earlier today. I said, "My instinct is that what has now been proposed is wrong". He said, "You're bang on right with your instinct". He said that it was a wonderful organisation, able to have that regional flavour and to say what are the important things in Yorkshire. I am sure that that is so for the north-west, East Anglia and so on. Is it right that the 80,000 population of the Isle of Man should have their own resources—good luck to them, and I do not oppose it—or that 1.5 million in Northern Ireland should? Yet, in Yorkshire, we cannot.

The Bill concentrates power. I am interested in devolving power. Everybody is now taking about this thing called localism. Where is the localism in this? The more people with a local perspective that are involved, the better the decision; and the greater number of people that are involved, the greater the number who will be able to keep their eye on this additionality business. The Bill is calling out for amendment.

In the hour or two that I have had—as I say, I was provoked into speaking today in one sense—I have looked at the board. It is interesting that of the 17 members—and I am sure that they are all good people; I do not doubt that—three are from Northern Ireland, three are from Wales, and three are from Scotland. Nine of the 17 represent 16.5 per cent of the population and the other 83.5 per cent has got eight. The reason that has been done is because the Government have decided that as Wales, Scotland and Northern Ireland are involved, they had better have people on the committee—not just one, but make it three. That is out of balance. With such a committee, it is no wonder that the 2.87 per cent of the population who reside in Northern Ireland should have 4.5 per cent of the spend, the 4.94 per cent who live in Wales should have 6.5 per cent, and the 8.61 per cent who live in Scotland should have 11.5 per cent.

There may be reasons why these things are not exactly in balance population-wise, but it does not surprise you that you get that sort of balance when you look at the board. Therefore, it seems that this body is crying out for reform. The regions of England should have some input. In principle, it is right to put these two bodies together, which were perhaps fuzzy around the edges and very close together in many respects. It is right to do that on a national basis, but there must be a real regional input and a spread of power. We need some amendments to the Bill.

6:25 pm
Photo of The Bishop of Southwell and Nottingham

The Bishop of Southwell and Nottingham (Bishop)

My Lords, I, too, thank the Minister for his helpful information pack which many of us received and which will undoubtedly be useful in the forthcoming progress of the Bill. I speak in this debate on behalf of historic places of worship. Although a bishop in the Church of England, I speak for a wider constituency base today in my role as chairman of the Church's main committee which represents 40 different Christian denominations and part of the Jewish community as well.

I need to make two preliminary comments. First, in supporting the use of National Lottery funds for work on church buildings, I am in no way wishing to condone gambling. As the noble Lord, Lord Shutt, mentioned a moment ago, there was considerable heart-searching within churches when National Lottery funding began, and some congregations and denominations do not want to touch any funds generated from that source. Others—such as the General Synod of the Church of England and, more recently, the Methodist Church and the United Reform Church—have taken the view that if congregations wish to apply for funding to help support the buildings which they maintain and which benefit the wider community, they should do so.

Secondly, however, the churches have generally been clear that is for them, not the National Lottery, to fund the running of their services, worship and ministry mission. The lottery has been equally clear that it is not its role to support worship.

We all recognise that the historic church buildings of this country are a key part of our environment and heritage. They matter to people, be they worshippers or not. Surveys in both 2003 and 2005 have confirmed that 86 per cent of the population go into a church building each year. I will be the first to admit that not all, by any means, do so for religious services, but for a whole range of other reasons. These percentages are high whether among Christians, those of other faiths or those professing no faith at all. Some 72 per cent agreed with the statement that,

"places of worship provide valuable social and community facilities".

Some 69 per cent agreed with the statement that,

"places of worship should be more accessible to the local community".

The National Lottery has, along with English Heritage, helped considerably with repairs and new facilities for church buildings, as well as for schemes to help in interpretation and the encouragement of visitors. Over its first 10 years, it contributed in total some £300 million to church buildings and cathedrals. This money, and money to other historic buildings and sites, has helped to transform some communities, empower the people within them, and give them much more heart. Yet the needs have not gone away. Figures from Church of England parishes in 2003 indicate that they have outstanding repair costs of £373 million, on the basis of their last quinquennial inspection—by law, each Church of England church must be inspected every five years by a qualified architect or chartered surveyor. This figure does not include churches of other denominations, or places of worship of other faiths.

This figure needs to be set against the £25 million per annum which has typically come from English Heritage and HLF together for the repair scheme for high-level works to keep buildings wind and watertight. The 2005 repair needs from two Church of England dioceses alone, Norwich and Chelmsford, would totally absorb the available English Heritage and HLF moneys. The simple fact is that our historic environment needs more money, not less. Major capital projects need time to come to fruition; to assemble all the funding, to clear specifications, to put planning permissions in place, and to deal with tendering. A building project does not gain an offer today and start on site tomorrow.

This is why I and many colleagues in the churches and the heritage sector are concerned about certain provisions in this Bill. Clause 9 alters the arrangement whereby lottery distributors accumulate interest on their balances. At present, as I understand it, they gain interest on the balances they have set aside—like any prudent individual. Under the Bill, they will gain only a proportion of the interest. They will receive 16.5 per cent of the total lottery proceeds in the first place. They will equally receive 16.5 per cent of the total interest which builds up on all lottery distributors' balances, even if their balances are greater than those of other distributors.

In one sense, that all sounds fair and equitable, but it has practical implications. It would reduce the amount of money available to the HLF. It means that, where it has prudently set aside money to meet its commitments when a major project gets underway, its interest is effectively capped. That means that there are fewer resources than it may otherwise have anticipated; and, in turn, that it has less money to deal with the pressing needs of our historic environment.

I am quite clear that the HLF is not holding on to those balances to gain more interest. It simply wants to ensure that where money has been provided, it will be available to the applicant when ready to draw it down—to avoid the scenario whereby it may not be available because it has been spent on another project. Really, it needs a bigger slice of the cake.

The other concern is with Clause 8, which will enable the Secretary of State to take away a distributor's balances and give them to another distributor. The Bill now makes clear that the funds would have to be used for the same good cause—that means that any funds taken from the Heritage Lottery Fund would still have to be spent on heritage projects. I also appreciate that the power would be used only after an affirmative resolution in both Houses and consultation with the other distributor.

Even with all those safeguards, transferring balances to another distributor will involve discontinuity, uncertainty and administrative confusion for applicants, who may not know where to turn to resolve their application. At the very least, they are likely to experience delay while any transfer takes place. At worst, they may experience major disruption. What will not be safeguarded, I fear, is the very heritage that the lottery is intended to help.

I suggest that if those draconian powers are to remain in the Bill, the Secretary of State at least considers ways to take into account the views of the major customers of a lottery distributor before such an order is made. I encourage the department to consider a provision for consulting those who will be most affected by such transfer—representative organisations in the heritage world and representative Church bodies. Views from such organisations would give the department a feel for whether such a transfer of resources would benefit or harm the good cause that it is seeking to promote.

I hope that the Secretary of State will be prepared to consider those points sympathetically—both here and, in due course, in Committee.

6:32 pm
Photo of Baroness Pitkeathley

Baroness Pitkeathley (Labour)

My Lords, the National Lottery is one of the great success stories of our nation, as my noble friend reminded us. John Major's Government can take great credit for establishing it in the face of much scepticism and opposition. There was talk of producing a nation addicted to gambling and a great deal of fear in the charitable sector that the National Lottery would entirely divert from fundraising for all charities. Indeed, I must own my position on that: I headed a charity at the time and went on record with my worries about how we could survive the setting up of the National Lottery Charities Board—a position that I soon changed once I had received from the National Lottery Charities Board, which later became the Community Fund, a very large grant that transformed my organisation.

Although the lottery was a success from the beginning, there was a sense that the projects and initiatives that it funded initially were not sufficiently well directed to the benefit of the people who played the lottery in the greatest numbers. The funding of the Royal Opera House and the purchase of the Churchill papers are most usually cited in that regard. That is what the incoming Labour Government tried to address soon after they came to power by setting up the New Opportunities Fund, whose twin aims were to complement existing and planned government initiatives and, most importantly, to focus exclusively on disadvantaged people and communities.

Here, I must declare an interest as the first and, as it turned out, only chair of the New Opportunities Fund—a post that I held for six years. I think that I can be justly proud of that organisation's record. It set up 300 healthy living centres; it transformed libraries by establishing the People's Network; it transformed childcare services in schools and outside; it opened the countryside to many thousands more people; and countless other initiatives were delivered via both statutory and voluntary organisations. That is a fine legacy of six short years. The Community Fund, too, made a huge contribution to the charitable sector and brought many causes to national attention which otherwise would not now exist. It had a particularly fine record of enabling the voice of the user to be influential in policy development and service delivery.

Good though both organisations were separately, I never had a problem with the decision to merge them to form the Big Lottery Fund. Although the Bill formalises that merger, we should be aware that the Big Lottery Fund has in essence been operating as one organisation since 2004, and operating most effectively. So the Bill, which finally formalises that merger and brings the Millennium Commission on board, is long overdue.

The board of the Big Lottery Fund, under the very able chairmanship of Sir Clive Booth, and the staff are to be congratulated on the progress they have made during this period, which could have been one of great uncertainty, given the unfortunate delay in the legislation. However, the launch of the Young People's Fund, which puts young people at the very heart of creating, planning and running projects, the magnificent Veterans Reunited programme, to commemorate the ending of the Second World War, and the launch of the People's Millions, which will fund projects to benefit local communities and which the viewing public can take decisions about, are all very clear indications that the Big Lottery Fund has not stood still. They show that the fund and other lottery funders are adapting to change and focusing more of their work on addressing disadvantage. I am very glad that the New Opportunities Fund can be said to have shown the way on this.

This long-awaited Bill has many advantages, to which I shall refer later and which the Minister has set out for us. However, we can never discuss lottery funding without three particular topics rearing their heads, and although I often think there is absolutely nothing more to say about government control, additionality and funding for the voluntary and community sector, it is inevitable that every speaker today will have their own views, and I am no exception.

On the subject of government interference or control, it is very important to remember that all lottery distributors and not just the Big Lottery Fund are non-departmental public bodies, and are therefore accountable to the Secretary of State and to Parliament. I have chaired five of these bodies, and still hold the chair of two of them, so I am very familiar with how they operate. The relationship between a non-departmental public body and its sponsoring department is set by statute but subject to constant negotiation. The aim has to be for a relationship based on trust, confidence and the right amount of distance. It is for the non-departmental public body and the department to negotiate how much trust, confidence and distance they have, not once and for all, but constantly according to experience and to particular situations.

My belief is that the Bill subjects the Big Lottery Fund to less control than it did the New Opportunities Fund. The Government set the strategic framework in consultation with the Big Lottery Fund and based on three broad themes. The fund will then decide specific priorities independently and will take entirely its own decisions about where the money goes. This is less prescriptive than was the case with the New Opportunities Fund, but I emphasise to your Lordships that although my discussions with Ministers about the priorities of the New Opportunities Fund were sometimes robust, there was never any interference in decisions about grants. I therefore have every confidence both in what is proposed in the legislation and in the ability of the Big Lottery Fund and other distributors to negotiate these important relationships. We must have confidence in them to do that.

On the dreaded additionality word, it was always envisaged that lottery funding would be additional to funding that was properly provided by the state. Everyone I have ever spoken to or worked with in any lottery distributor upholds this principle and believes that funding should complement, not duplicate or replace, government funding. The difficulty lies in trying to find a once-and-for-all definition of additionality. What is seen as appropriate for government funding this year may not have been seen as appropriate five years ago or even two years ago, and may not be considered so again in five years' time.

At present the Big Lottery Fund has an excellent definition:

"Distinct from government funding and adding value".

And all distributors are pledged to report regularly on the additionality issue. Many of the arguments about additionality are philosophical rather than practical, especially if we look at this from the point of view of the recipients of the money, whether individuals or communities. So far as they are concerned, the important thing is that the money is supplied, not where it comes from. Indeed, research has shown that recipients are unaware of the distinctions between lottery and government funding, and certainly of the distinctions between different lottery distributors. Actually, a disturbing proportion of the public thinks that Camelot provides the money.

I know that my strong views about the impossibility of arriving at a definition of "additional" which would serve for a prolonged period will not stop others feeling just as strongly the other way, and certainly will not stop us having long discussions on amendments. Let me end what I have to say on this topic by quoting from the mission statement of the Big Lottery Fund, which is supported by seven values. One refers to additionality in these terms:

"Additional to government, ensuring our funding is distinct from that of government and that it adds value".

That is good enough for me.

On the funding available to the voluntary and community sector, I understand the anxieties on this matter. I have confessed my own when the lottery was first established. Colleagues in the sector want a direction that 60 to 70 per cent of the money should go to the voluntary and community sector, and they want that included in the Bill, although of course the Big Lottery Fund has already given an undertaking that that sum will go to the voluntary and community sector and that there is nothing previously funded by the Community Fund which could not be funded by the new distributor. But at the same time the voluntary and community sector wants a less prescriptive approach. Personally, I fail to see how asking the Government to lay down in statute the exact amount to go to one particular sector fits with a less prescriptive approach. My own view is that the undertaking made by the Big Lottery Fund, together with its extensive and ongoing consultation with stakeholders and its commitment to report regularly to Parliament, will ensure that the voluntary and community sector receives more funding than ever before.

Nor should we forget that this sector will also benefit from the other provisions of the Bill, allowing non-lottery funding which has charitable health, educational or environmental purposes to use their distribution infrastructure. That will open up new avenues for the voluntary and community sector from which it and its stakeholders will benefit hugely, I am sure.

In conclusion, let me say that I am a fan of this legislation and, in passing, that I am delighted that it is to apply to the Channel Islands. As a Channel Islander myself, every time I have visited over the past 10 years, I have been roundly lobbied on this issue. The Bill will also help us to save on administration costs. It will simplify lottery application and distribution mechanisms. It will secure funding for the voluntary and community sector and, importantly, it will allow full-cost recovery by allowing all legitimate overheads to be funded. The voluntary and community sector has wanted that for as long as I can remember. It will increase the participation of the public in decision making and improve public understanding of the huge contribution the lottery has already made to our lives, and enable it to make that contribution more effectively and efficiently. I wish it a safe and speedy passage through your Lordships' House.

6:43 pm
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Baroness Flather (Conservative)

My Lords, having listened to the noble Baroness, Lady Pitkeathley, sing the praises of this Bill, I hardly dare to say that I am rather worried about it. For me, it has set off some quite serious alarm bells. I am concerned that the Government will use the 14 per cent to be allocated to the Big Lottery Fund in a way that might blur the lines between what the Government should be doing and what the lottery should be doing. I am not the first person to point this out; nor will I be the last. But there are concerns about the Bill because greater powers have been taken by the Secretary of State on the direction of the Big Lottery Fund and the exercise of where the money is going to be directed.

Not only that but the main priorities selected—education, health and environment—are those areas where it is very difficult to separate what the Government should be doing and what the Big Lottery Fund should be doing. With the term "additionality" goes independence. I have deep concern about the independence of the Big Lottery Fund.

Before turning to my views on the Big Lottery Fund, I should like to say a few words about Camelot. I am very pleased that the Minister and my noble friend Lord Brooke have praised Camelot. I would like to add my voice. It has served us very well and has probably done even more than we might have expected. So it is good to know that the licence period will be extended. Clearly, a longer licence period will add to the stability of the system and perhaps provide for more development, as has already been said. As well as the Big Lottery Fund, there are sport, arts and heritage allocations, which stay more or less unchanged—50 per cent is divided between them, including a little for the film sector, which is fine.

I should like to quote from the Big Lottery Fund booklet, which I was sent in preparation for this Bill. It states that the strategic framework is,

"supporting community learning and creating opportunity . . . promoting community safety and cohesion . . . promoting well-being".

Any of those could be absolutely in the remit of the Government. I do not see that any of those broad brushes are apart or separate or additional to what the Government should be doing.

Those three areas are supported by four outcomes. The first is,

"people having . . . chances in life, with better access to training and development to improve their life skills".

Surely, that again is very much a Government remit. The second is,

"stronger communities, with more active citizens working together to tackle their problems".

I do not know how that works in practice. How do you make citizens active? I do not know. The third outcome is,

"improved rural and urban environments, which communities are better able to access and enjoy".

Yes, that is good. And the fourth is,

"healthier and more active people and communities".

This goes around and around in a feel-good way, but it does not tell us very much, which worries me hugely.

I am also worried that the Secretary of State will have a lot of control on setting the priorities and policy direction. He will also make orders specifying recipients, amounts, periods and purposes of funding. If the Secretary of State can do all of those things, surely nothing is left out. Almost everything is covered. This Bill will give more powers to the Secretary of State to control the Big Lottery Fund, about which we should be deeply concerned.

It is said that a commitment of 60 to 70 per cent of the funds will go to community and voluntary organisations. If that is the case, why is that not in the Bill? Why do the Government shy away from telling us how much will go to voluntary and community organisations? Clearly, they want to keep in hand control over what will go to statutory organisations. I am concerned about that.

I should like to share my experience of accessing funds from the Millennium Commission for a project that I took through.

I am referring to the memorial on Constitution Hill, which many noble Lords will have seen. We were initially asked to prepare a feasibility study and have a fundraiser before we had any means of getting all these things together, but we had to do so before we could even make an application. No seedcorn money was provided, and we had to spend a fair bit before the process could be started at all. Dotting the "i"s and crossing the "t"s to get a feasibility study done was not much use as time went on. Indeed, we were not able to get the 50 per cent we should have been able to, because at that stage it was difficult to know how much would be spent on the memorial. As your Lordships know, when you start on a project, you know it will cost more than you planned to begin with. Even one's own house or extension will cost more than you expected in the beginning.

We did not receive the 50 per cent. We did not get back any of the money we spent trying to access the funds. Interestingly, though, another organisation was later given over £100,000 to prepare a feasibility study. That is one of the ways things have worked that has been extremely upsetting to organisations: some organisations seem able to access funds that have been denied to others. The most blatant example of all is the Dome. Hundreds of millions were given to the Dome by the Millennium Commission. The Government broke their own rules. No 50 per cent was required to be collected from any other source, and they have not paid back the money that was due to the Millennium Commission. It is frightening to think that the Government can break their own rules that they set for all little borrowers, take the money and use it from their own back pocket. This should be of concern to all of us.

The Treasury already takes 12 per cent as tax from the lottery. Is the 14 per cent also going to be a floating "good causes tax"? We should not overlook the fact that the Secretary of State has control over this money. People of this country are the ones buying the tickets, so it is our money. If the Government control what they say is for good causes, it is a tax in another form.

I am concerned about the lack of independence. With additionality should go independence. Why is there no watchdog for the lottery? There should be a watchdog, preparing a report annually and presenting it to Parliament. Then we will know exactly where the money has gone, and we can judge whether it has met the additionality condition. After all, we all live in this world. We know what is going on at this moment, and what the needs are. Let it be for Parliament to decide, on the basis of a watchdog's report, whether there is control by the Secretary of State or whether the money is actually additional and going to good causes as it should.

6:53 pm
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Baroness Finlay of Llandaff (Crossbench)

My Lords, I decided to speak on this Bill because I have a concern about safeguarding opportunities for the young. First, I must commend the Government for listening during the consultation period and for ensuring that those who wanted to express their views were able to access people at different levels. There is much in this Bill to be welcomed. For the devolved administrations—and I have an interest in Wales—the changes are welcome.

The noble Baroness, Lady Pitkeathley, deserves praise for her work, and her expertise was evident today in her speech. However, recognising the problems she outlined, I have a concern that the principle of additionality must not be eroded. To ensure that it is not eroded, there needs to be some independence from the core needs of statutory providers in the way decisions are made and yet an awareness of the real needs—an awareness of what statutory providers are doing. This is a difficult balance to strike. For true added value it is crucial that the investment enhances what is already there and also that it is sustainable. We have all seen—sometimes sadly at first hand—the difficulties when pump priming is given to a project which does not have sustainability adequately built in and the project then folds through lack of sustainability later.

I was always taught that the gifts of health and happiness are the greatest you can have. If we look at funding good health as a national priority—which I believe it must be—those projects and services which are known to bring huge enhancements to health and quality of life should also be eligible for funding when they are outside statutory funding. I refer of course to the hospice movement—I declare a major interest in this—and all that it does for the terminally ill. I hope the Minster will be able to assure me that they will still be included in the categories able to apply for lottery funds as they are in large part still charitably funded.

I would also like to address sport and music as the innovators of change for good in society both now and in the future. We have a huge problem looming in our country. We have a whole tranche of youngsters who feel distanced from the rest of us and we need solutions to the problems, not just empty words.

Of course, noble Lords will commiserate with me over the defeat of Wales on Saturday but let us not forget that in Wales rugby has grown out of the valleys, out of a working class culture, out of the very population from which much of the money raised by the lottery comes.

It is every little boy's dream—or almost every little boy's dream in Wales—to play for Wales. Sport needs innovators outside and beyond the confines of an education authority. It needs opportunities to arise in the life of the genuinely talented child. This can happen when the child is able to experiment with sport in an environment removed from school where sometimes anti-social tactics from others have undermined confidence, where a child may genuinely fear being successful and in an environment where the child is not known by labels of academic performance in other spheres or by what his parents did or did not do. In the mixed-age, mixed-background environment of such sports and arts activities, young people discover inspiring role models, learn to venture far beyond their current social boundaries and develop confidence for integrating into society.

I also want to address musical opportunities. Currently we have orchestras which open doors to those who otherwise would not be exposed to classical, jazz or other types of band music at all. This tuition teaches the child to interact, to have internal self-discipline, to listen and work with peers, to succeed and to experience the language of emotions and the subtleties therein. Indeed, one only has to listen to a teenager's choice of music and it tells you much about their mood. It is the process of making the music itself that differs fundamentally from the monotonous repetitive beat of pop, rap and heavy metal that becomes mind-numbing and incites all kinds of negative emotions in youngsters who listen to this for hours on end in their bedroom or on a street corner.

The direction of funding for more creative arts has somehow to be independent and be outside and beyond what the youngster sees as completely statutory provision—as well as what is statutory provision. If it is too close to the Treasury I fear that it will become consumed in basic service provision and will never be spent on the added-value projects that provide the opportunities for youngsters to discover that they can after all do something well. Without consultation with the charity sector providers and other organisations, how will we guard against money being spent on what is actually core service? How will the public be involved in consultation?

Let us not ignore the evidence that drug-taking is lower in those children who participate in team sport or music, that their physical health is better and their predictions for future health are far better than those who do not have such opportunities. Thinking that local education providers will provide unique focused opportunities is folly. The money will melt away in a bureaucratic maze of core provision and the diversity of opportunity and richness that it affords will be lost. So I would like the Minister to tell us—indeed, to assure us—that the Bill will guarantee an expansion, not a contraction, of all the good projects that have happened to date, and that the cross-boundary projects which have proven value for the physical health and emotional welfare of the youth of today will flourish, not dwindle.

My fear is that if lottery money funds core health projects, we will remove the sources of prevention of illness—the sport and music activities which maintain physical and emotional fitness—and spend ever more on the ill effects that result from physical inactivity and emotionally disturbed people.

The noble Baroness, Lady Pitkeathley, has already touched on the over-inflation of the gambling addiction, which was spoken about before the lottery ever came into being. But the lottery appeals to those with debts and who have a tendency towards gambling. I hope that the Minister will be able to reassure me that the publicity will not encourage gambling by promoting it. We should not forget that it has been estimated that 28p in the pound from the lottery will go to good causes, but I believe that £1.28 per pound comes from tax efficient donation. The publicity must not mislead the public as regards making such tax efficient donations to charities that are already providing added value.

7:01 pm
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Viscount Eccles (Conservative)

My Lords, today we are following the trail of heritage and lottery Acts from 1980 through 1993, 1997 and 1998. As noble Lords have said, by 1997 the National Lottery was well into its stride. While it had been opposed, and its provisions were amended in 1997, it was accepted and today nearly everybody supports its existence.

More widely, in 1997 many people were thankful that consensus politics seemed again to be an option. New Labour saw that the market had come to stay and that social justice could be combined with economic efficiency. That dramatic change in position opened up the possibilities of pluralism and of decentralisation—not just decentralisation of elected political institutions but on a much wider scale. We could hope to be freed up to pursue different solutions to social problems and not just be expected to follow centrally driven prescriptions.

New Labour accepted the benefits of private sector competition. Why should matters stop there? For in the pursuit of democratic advance the role of the charitable sector, with centuries of experience behind it as an institution builder and as a focus for charitable giving and of voluntary endeavour, cannot be exaggerated. Surely with new Labour's strategy and with the benefit of 28p in the pound from the lottery, we expected unqualified support for non-governmental charitable bodies—bodies which can go their own way within the law, and not all go in the same way either.

Many charities can and do massively support health. Many charities can and do support education and the environment. They research, innovate and experiment, and when they get it wrong there are always others ready to pick up the pieces. All that was needed was to wind up the Millennium Fund, go back to four distributors and rearrange the percentages of funds distributed by the four—a rearrangement consistent with strategy and supportable by almost everybody. What do we get instead? A retreat from the strategic promise into step after step of central government control—non-departmental public bodies are part of central government, whichever way we argue the case for independence—and towards single stream decision-making. And what about the Bill? It is effectively a whitewash of decisions taken in 2002 and 2003, which were implemented in June 2004. By making BIG the distributor of half the money, those decisions erode the position of the charitable sector. They ensure that with guidance and directions BIG will implement a centralist government social agenda despite the fact that the issues we face cannot solely be tackled centrally.

The reason given that it was sometimes difficult to fund decentralised charitable programmes because of prevailing legislation is unconvincing. Indeed, Clause 19 can be likened to a fig leaf. The fact is that BIG and the Secretary of State, in either order, want to do it themselves. They do not believe in charitable intermediaries. This is the heart of the matter. Pluralist policies would entail an unacceptable loss of central control. To cap it all, BIG is now to tell the other three distributors how to operate, as is proposed in Clause 36(d).

It is sad that we have come to this, deluged by BIG with new programmes described in the "now you see it, now you don't" language of abstract noun after abstract noun. I gloomily predict that BIG will make more and probably embarrassingly worse mistakes than ever the private charitable sector would. Finally, as a prelude to later stages I will set out the dilemma that faces anyone trying to tease out the purposes and effects of directions. There is theory behind directions, which can be briefly stated. Studies of directions, mindful that they are not subject to parliamentary scrutiny, say that they are for administrative matters. All are agreed that directions must not be unreasonable and that they may not go beyond the provisions of the Act concerned as it will be interpreted by the courts. I would be grateful if the Minister would confirm that that brief description is correct.

However, when studying the proceedings in another place, that précis does not seem to be the end of the matter. There is clearly a concern that directions made will go beyond administrative matters into areas of policy and then could be in accordance with the Act only if the Act is so widely drawn as to defy proper description and debate in Parliament. I admit to being confused. Are directions a minor matter, with an element of last resort available to restrain unreasonable behaviour by bodies accountable to Parliament, or are they instruments for the development by Secretaries of State of policies beyond those that can be derived from the Act as enacted, or both?

I contemplate the later stages of the Bill with scepticism and some sadness. We are being taken in the wrong direction, despite all the hopes of 1997.

7:08 pm
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Baroness Valentine (Crossbench)

My Lords, as a former National Lottery Commissioner I am delighted to be speaking at the Second Reading of the National Lottery Bill. I should also mention that I am chief executive of London First and that Camelot is one of our 300 business members.

The lottery has been a great success. It has raised over £17 billion for good causes nationwide since the first draw in November 1994, and has helped many worthwhile projects to move forward when under other conditions they would have struggled to find funding. I welcome the Bill as it addresses issues that have made the working environment difficult for the National Lottery Commission and the current operator, Camelot.

One such issue is being tackled by proposing that the commission is given the ability to appoint a permanent chair, as well as giving them the ability to increase the number of commissioners. The practice of rotating the chair annually while I was a commissioner in fact meant that the chair spent several months being brought up to speed and introduced to stakeholders, only to begin the process again as soon as the chair had established themselves.

The flexibility to appoint further commissioners will allow the commission to bring in a broader range of experience and provide continuity. It is essential as we approach the renewal of the operating licence that the Bill enables an effective competition to take place. Giving the commission the discretion to increase the period of the operating licence allows it to determine the appropriate period in the light of market factors. A judgment will clearly need to be made on the optimal time frame to maximise returns to good causes as well as achieve investment in technology, products, games and services to that end.

The Bill also tackles the issue of publicity. The range of projects supported by the lottery is impressive including, to mention just two, the Angel of the North, a source of local pride as well as a contribution to UK tourism, and the Tate Modern at Bankside, forming part of the successful regeneration of London's South Bank. I welcome the opportunity to publicise those projects through the National Lottery promotions unit.

Finally, with the draft tender for the competition due in April and the final invitation to apply due out in June, I urge haste in clarifying the licensing provisions contained in the Bill.

7:11 pm
Photo of Lord Clement-Jones

Lord Clement-Jones (Spokesperson in the Lords, Culture, Media & Sport; Liberal Democrat)

My Lords, I thank the Minister for his introduction today and in particular, echoing the noble Lord, Lord Brooke, for his provision of those useful materials in relation to the interpretation of the Bill. Perhaps the fruits are borne out in this debate and we understand the nature of the Bill only too well as a result of those materials.

This debate has reflected many of the uncertainties and concerns surrounding the Bill, but the common ground adopted by all those in the debate is that the National Lottery has been a great success story. The Minister's introduction both in terms of the money raised and the projects supported illustrates that. It has transformed much of Britain in a multitude of ways. I, too, was pleased that Camelot was mentioned during the debate, because I agree that it deserves great credit for the way in which it has run the lottery. It is good to see that returns have begun to grow again after being static or falling for some time.

Even so, the National Lottery is perpetually in the spotlight. From the outset there was controversy about the objects and the balance of funding by the lottery distributors. There has recently been criticism of the way in which various of the lottery distributors have held balances. We have had concerns about diversion of money from other causes to fund the Olympics; and this past weekend we have had a great deal of publicity surrounding the EuroMillions jackpot, with prize money amounting to over £100 million.

In those circumstances, it is hardly surprising that there has been a great deal of debate about the Bill. Of course there are some elements that we support, particularly the additional flexibility for the length of the national operator's licence in Clause 4. The centrepiece of the Bill is the merger of the New Opportunities Fund with the Community Fund to create the Big Lottery Fund. However, as we have heard today, the essentials of the Big Lottery Fund have been in place for over a year, and much as I respect those who now run it, it does very much look like a Government fait accompli. The Big Lottery Fund was launched on 1 June 2004, more than 18 months before the legislation required to set it up can be passed. In fact, the merger was announced by the Secretary of State Tessa Jowell as long ago as 25 February 2003. When details of the merger decision first emerged, the NCVO said that there would be three tests of any such new lottery distributor: a guaranteed percentage of funding for voluntary organisations; independence from government; and grant making to be additional to existing public spending.

On these Benches, we agree with those tests, and those are the yardsticks by which we shall measure the Bill. In the DCMS consultation on the creation of the Big Lottery Fund, there was clearly general support for retaining the principle of additionality; that is that lottery money should not pay for things that the government would otherwise have funded. However, the most disturbing aspect of the Bill is its failure to safeguard additionality, despite the New Opportunities Fund having a history of not pursuing it. Lottery funding should not be a substitute for general taxation, and governments should not be in a privileged position to use lottery funding for essential services or government-inspired programmes.

Additionality was a founding principle of the National Lottery. The idea was that the public would play the lottery in the knowledge that their money was going to support good causes in sport, the arts, heritage and charities. The Prime Minister said in 1997:

"We don't believe it would be right to use Lottery money to pay for things which are the Government's responsibilities".

However, since that statement, the Government have persistently flouted the principle. The first breach of this founding principle came with the National Lottery Act 1998, which established the New Opportunities Fund to distribute 33.33 per cent of lottery funds among "innovative projects in health, education and the environment". The New Opportunities Fund was established to distribute moneys for these causes, but it then supported a range of government-directed programmes. Examples of breaches of the additionality principle by the New Opportunities Fund include: funding MRI scanners in NHS hospitals; funding a free piece of fruit a day for schoolchildren; funding healthier school meals; and some of those National Health Service projects that were mentioned by the noble Baroness, Lady Finlay.

These are all important projects, but they are all in pursuance of mainstream policy objectives and the Government should have addressed them by means of tax revenue. Both the National Audit Office and the DCMS Select Committee have argued that the Government have not properly recognised in their publicity the difference between government and lottery spending. That point was made by the noble Lord, Lord Brooke.

As Sir John Major—who after all was essentially the creator of the National Lottery when he was Prime Minister—said in his foreword to Ruth Lea's recent booklet, The Larceny of the Lottery Fund, which deals at length with the additionality issue, the intention was for lottery money to be,

"used for additional spending on causes or activities that the taxpayer should not be expected to cover".

Yet the Government, he said,

"has diverted Lottery funding into areas that have historically been funded by the Exchequer".

So, with the Community Fund and the New Opportunities Fund merged, Clause 7 provides for the distribution of 50 per cent of lottery funds. It states:

"50 per cent shall be allocated for prescribed expenditure that is (i) charitable, or (ii) connected with health, or (iii) connected with education, or (iv) connected with the environment".

According to published draft regulations which define "prescribed expenditure"—following regulations under the 1993 Act which were approved last year—this will include promoting community learning; promoting community safety and cohesion; and promoting physical and community well-being. I must agree with the noble Baroness, Lady Flather, that many of these areas are surely the proper responsibility of the Government.

The Big Lottery Fund has a specific remit to fund these projects when taxpayers would rightly expect many of them to be funded directly by government. In effect, we are seeing taxation by the back door. This cannot be what was intended when the lottery was set up. The Big Lottery Fund and other lottery distributors have committed themselves to report on how they will uphold the additionality principle. We on these Benches welcome that commitment, but not to include that commitment in the Bill is a glaring failure.

The National Council for Voluntary Organisations and the National Campaign for the Arts have called for a new clause requiring all lottery distributors to report on how they have upheld the distinction between lottery expenditure and core government expenditure. My honourable friends in the other place proposed an amendment to this effect which we will be pursuing in Committee and on Report.

A further important amendment that we would wish to see would involve charging the Secretary of State with producing additionality guidance for all lottery distributors, making provisions relating in particular to how to distinguish between core government expenditure and lottery funding, and how to ensure that lottery funding is allocated free from political priorities. We also wish to see the Bill amended so that a periodic report is made to Parliament on how that additionality guidance has been adhered to. In other words we on these Benches want to see additionality enshrined in legislation in a practical way. Not only would that increase public confidence in the lottery but it would help ensure against further political interference, the subject of my next point.

In addition, the Bill widens considerably government involvement in the distribution of lottery moneys on a number of fronts and undermines the independence of the Big Lottery Fund. Currently the Secretary of State, under the 1998 amendments to the 1993 Act, has the power to specify the initiatives to which the New Opportunities Fund will give effect—the programmes which it is required to run. The Secretary of State is required to seek the Treasury's approval before specifying these initiatives. The current legislation places the onus on the Secretary of State to consult on the initiatives which the New Opportunities Fund is tasked with running, prior to issuing directions to the NOF, rather than allowing the NOF to consult on the initiatives it will run. The NOF has the scope to consult on the way in which initiatives will be administered, not on what those initiatives will be.

By contrast, the Community Fund has the freedom to set its own strategic direction, priorities and programmes, following consultation with stakeholders, including the Secretary of State. The Community Fund is required only to take account of the policy directions given to it while the NOF is required to comply; and, of course, the Community Fund, as my noble friend Lord Shutt illustrated extremely well, has regional committees which have helped it decide on the projects to be funded.

Clause 14 amends the 1993 Act so that the Big Lottery Fund will be required to comply with directions issued by the Secretary of State. We have heard that the Big Lottery Fund is effectively a non-departmental public body. Clause 14 further specifies that the direction may provide to whom, for what purpose, and under what terms and conditions moneys may be granted by the Big Lottery Fund. I was interested to hear what the noble Baroness, Lady Pitkeathley, said about the status of the Big Lottery Fund compared to the New Opportunities Fund in terms of being less under the control of government. That is not my interpretation of the Bill and the interpretation made by the noble Viscount, Lord Eccles, was much closer to reality.

What assurances do we have about how those ministerial directions will be made? All this is going in the wrong direction. Instead of widening their interference, the Government should be seeking to minimise it. The Big Lottery Fund should be guaranteed greater independence from government in its decision making.

Clauses 8 and 9 need discussion in terms of their impact on balances, and I very much hope that we will explore those in greater detail in Committee.

Finally, we also have concerns about changes to the definition of "charitable expenditure" in Clause 19, which amends Section 44 of the 1993 Act, from expenditure by charitable, benevolent or philanthropic organisations, to,

"expenditure for a charitable, benevolent or philanthropic purpose".

Of course we understand that there are many worthy social enterprises and community projects that do not technically qualify as charities, which would benefit under the new wording. But this would also allow activities undertaken by bodies from any governmental sector, such as local authorities or primary care trusts, to be classified as charitable expenditure.

That is undesirable in two respects. First, the change can be seen also as potentially further eroding the additionality principle. The definition is so flexible as to allow for further moneys to be siphoned off for programmes in the areas of health and education, which are the proper domain of Exchequer funding. Secondly, the change represents a danger to voluntary sector funding. The Government may have given assurances that there will be no shortfall in support for the voluntary and community sector and the Big Lottery Fund board has indeed given a commitment that some 60 to 70 per cent of its funding will go to that sector, but that policy is vulnerable to reversal. We want to see those commitments to the voluntary and community sector safeguarded for the long term. What are the Government's intentions and how do they plan to do that?

I said earlier that the three tests of any new lottery distributor should be independence from Government, that grant making should remain additional to existing public spending, and that there should be a guaranteed percentage of funding for voluntary organisations. Unfortunately, it is clear that the Bill fails to satisfy all three tests and, accordingly, we on these Benches are unable to give our support without substantial amendment.

I look forward to hearing what the Minister has to say.

7:25 pm
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Viscount Astor (Shadow Minister (Culture, Media and Sport), Culture, Media & Sport; Conservative)

My Lords, in 1993 I introduced the Bill to establish the National Lottery on behalf of my noble friend Lord Brooke, who was then Secretary of State for National Heritage. The Bill was greeted with great scepticism by the two then Labour spokesmen, the noble Lords, Lord Donoughue and Lord McIntosh of Haringey, and I have to say that it was greeted with outright hostility on the Lib Dem Benches.

Anyway, time has passed and there has been a reversal of roles—I must warn the Minister that I will try to give him just as difficult a time as I was given then by the Opposition. We fought the battle with the Lib Dems on why there should be a jackpot and with the Labour Party on why the lottery should not be run as a charity as opposed to having competitive bids for its operation. Incidentally, Labour changed its policy on increasing the number of operators when it came into government.

I suppose that, at this stage, I should declare an interest. I am trustee of the Stanley Spencer Gallery in Cookham, which has just received approval in principle for a grant from the HLF.

Since the National Lottery was established, we have had two Acts that have affected it. The first, in 1998, created the New Opportunities Fund, with the sixth good cause taking 13.3 per cent from the other good causes. The New Opportunities Fund was for innovative projects in health, education and the environment. In creating the fund, the Act increased bureaucracy, which is one of the reasons for the current Bill to reduce bureaucracy, even though that bureaucracy is of the Government's own creation.

The second Act, which was in the previous Parliament, was the Horserace Betting and Olympic Lottery Act 2004. That created the Olympic Lottery Distribution Fund. We supported that Bill despite the fact that it will siphon off over £1.5 billion from the existing bodies. It is a pity that the Government did not listen with more care during the passage of that Bill to what we had to say about the Tote, which remains in limbo, caught between the incompetence of the department and the diktats of Brussels. That is a subject for another day, however.

The creation of the National Lottery was, as we have heard, the brainchild of Sir John Major, our former Prime Minister. He saw the lottery as a chance to enhance the lives of millions of people by funding arts, sport, charities and our national heritage, and to celebrate the millennium, with each body receiving 20 per cent. It was to be funding free from the grasping hands of the Treasury, additional to government spending and free from the control of Ministers. Those three key principles have been eroded by this Government—the first two by a Chancellor with a vast deficit to fund and the third by a Government who cannot help interfering and exerting control by guidance and regulations and, if that fails, by using their power of appointment.

The creation of the New Opportunities Fund enabled a blatant and overt breach of the principle of additionality, despite the fact that, when the original Bill was going through Parliament, the Labour Opposition stressed the importance of government keeping an arm's-length relationship with grant distribution.

Despite all that, the National Lottery has been a great success, with sales of tickets last year of nearly £5 billion. I have to say that there has been little growth in sales over the past 10 years, although the recent EuroMillions rollover may have added to the lottery's fortunes. As we have heard, the lottery has been well run by Camelot—I was delighted that the Minister was able to give it credit—and has generated about £18 billion for good causes and over £24 billion in prizes. Most of the time, the distributing bodies have done well. They have improved the quality of life for thousands of people around this country and their successes have vastly outnumbered their failures. The Arts Council alone has given over £2 billion to the arts, and sports have received slightly more.

However, the change of the National Lottery Charities Board into the Community Fund in 2001 was not a success and was rightly censured and criticised by the National Audit Office and the Public Accounts Committee. It proved, again, that given the wrong remit, even supposedly sensible people can make ridiculous decisions. Reputations were destroyed by funding the farming of Peruvian guinea pigs.

We must not forget that there was a much more serious failure, the Millennium Dome. That was a good idea, totally mucked up by this Government. We are still bailing it out and financing it and that will go on for some time. It is an embarrassing reminder for the noble and learned Lord the Lord Chancellor. However, we must also not forget that the lottery has been good for the Treasury, which has collected over £6 billion in tax since 1995.

I return to the Bill. Why do we need it? The Government want more control. The original 1993 Act allowed the Secretary of State to issue directions to distributing bodies to ensure good governance, financial control and appropriate allocation of funds. The 1998 Act went much further and introduced the need for all distributing bodies to construct strategic plans in line with government policies. The Government also imposed highly prescriptive policy directions, so that the Big Lottery Fund must comply with directions issued by the Secretary of State as opposed to the other distributing bodies that will have to take into account policy directions only when allocating funds. Directions will also apply to the internal functions of the board, including the employment of staff. Let us not forget that it is the Secretary of State who appoints the chairman and the board members, so delivery has been politicised over 50 per cent of the funds that are distributed.

The Bill in Clauses 7, 8 and 14 gives a new power to the Secretary of State to reallocate funds from one distributor to another, although not between good causes. It is difficult to understand how that can be done and how the other distributors will have the expertise to do it. No doubt that is something that we shall have to discuss in Committee. Clause 9 imposes a new way of calculating interest on lottery balances.

The Bill creates the Big Lottery Fund by amalgamating the Community Fund and the New Opportunity Fund, although we have heard that they have in fact been amalgamated for some time. As a result, that will account for 50 per cent, as I have said. Sports, the arts and heritage will remain with 16.6 per cent, rather than the original 20 per cent that they were always going to receive and did receive at the beginning of the lottery. It will also cost £5 million to amalgamate the two, which is equal to at least one year's supposed savings. A memorandum submitted to the House of Commons Select Committee by the New Opportunities Fund showed that it was,

"established to make grants to health, education and environment projects, UK wide, under initiatives to be specified by Government".

It is quite clear that there is to be greater ministerial control over a larger sum of money. That leaves the Government open to the accusation that they have been able to push money to areas in England where it suits them. Although I am not sure that that is entirely fair, it is an accusation that they will have to answer when they have the control.

Ministers will not admit that they have broken the principle of additionality and they claim to be committed to it. However, it is clear to everyone else that they have. As we know now, this Government can interpret principle by as many means as they want—almost as many as the number of lottery tickets bought on a Saturday afternoon, one suspects. During the passage of the Bill in another place, the Minister gave a commitment that the Big Lottery Fund would produce a report on how it upheld the additionality principle. That is not good enough. It is not answerable to Parliament; only Ministers are answerable to Parliament. The principle must be on the face of the Bill. Ministers must take responsibility, so that through their departments the distributing bodies can be fully answerable to Parliament.

We will seek to insert the principle of additionality into the Bill during its passage through this House. The Chancellor of the Exchequer will no longer be able to rely on the lottery to plug spending holes. We shall support the amendment suggested by the noble Lord, Lord Clement-Jones, about guidance to bodies on additionality. This is an important subject and it is an area where my noble friends Lady Flather and Lord Eccles are concerned. I agree with all that they have said about it.

When the Bill proceeded through another place, the Government were attacked on it a number of times. Their response was quite weak. Their argument was that if additionality were defined in statute, it would leave every funding decision open to legal challenge. The answer to that must be that they will not be any more than they are now. There have been no challenges, as far as I am aware, from those who have been turned down in the past 12 years. The Government's argument, therefore, does not stand up.

The other reason put forward by Richard Caborn at Third Reading in another place was that,

"there is a great deal of Government expenditure . . . that falls outside such expenditure".—[Hansard, Commons, 19/01/06; col. 1010.]

That is a rather convoluted and obtuse statement. He then promised to explain what he meant by the end of the debate, but he managed to come up with only one example, which was that the Government provide money to charities. He failed to explain who provides it, where it comes from, where it goes, how it is accounted for, and who accounts for it. It made no sense and he did not answer the questions. He satisfied neither us nor the Liberal Democrats.

We all know that there is a long list of projects that break the principle of additionality, but I shall not attempt to list them. It is not just me. The Culture, Media and Sport Committee in another place, which is dominated by Labour Members, condemned the erosion of the additionality principle in its 2004 report. It called for an annual statement to Parliament on how the principle was applied. All that, despite the Prime Minister saying in 1997 that the Government did not believe it right to use lottery money to pay for things that were the Government's responsibility.

Ministers in another place tried to excuse their behaviour—that is the polite way of describing it—by offering to implement what was in the Labour manifesto. There would be public consultation by the end of the year on how the lottery's good-causes proceeds were spent after the new lottery licence was awarded in 2009. I thought that that was a trifle convenient. I wonder what else might happen on the political front in 2009 or 2010 to enable the Government to make what could be called extravagant promises. I can think of something, but I shall leave the Minister to ponder that question.

We shall be putting forward amendments on the issues that I have raised, but I have a simple alternative solution to the problems created by the Government. I shall be moving amendments in Committee to put back the four original distributing bodies, covering the arts, sports, charities and heritage. We need to have that debate. I was delighted that my noble friend Lord Eccles supports that principle. We have heard other concerns today, which we shall deal with in detail in Committee. One of them is the definition of charitable expenditure, which is an important issue.

I come back to what I said earlier. I am a great supporter of the lottery. I bought a ticket in the first draw, and have bought many since. I have never won a prize but remain doggedly hopeful. I am reminded of the day of the first draw when we were all encouraged to buy a lottery ticket. The Permanent Secretary got in a panic in case one of his Ministers might win a prize. He sent round a note saying that should a Minister win a prize we were all expected to give the money to charity. I sent back a note saying that if I won £10 I would certainly give the money to charity, but if I won the jackpot, I would consider my position in the government very carefully. That remains my position today.

I thank the Minister for being so helpful in his letters that he sent prior to the debate. We shall have an interesting time in Committee.

7:38 pm
Photo of Lord Davies of Oldham

Lord Davies of Oldham (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, I think the whole House will have recognised that if the last sentence of the noble Viscount, Lord Astor, is true, we shall have a lively time in Committee—particularly on one or two key concepts. I take delight when blood-curdling threats emerge from the opposition Benches about what they will do in Committee. On this occasion it will not be, as so often happens, a destructive analysis of a government Bill, but they will put their minds to constructive amendments—defining in legislation the concept of additionality, in particular, which I shall discuss in a moment. The Opposition have a hard task ahead of them, and they will have to convince the whole House that they know in legislative terms what they are doing with that concept. We look forward to that constructive aspect on the Bill.

The Government believe that the Bill considers all the issues which are appropriate to the National Lottery against a background of development over more than a decade. I pay tribute early on to the fact that the lottery was born from the work of the previous administration, but I think that it will be recognised that we have moved on considerably. Changes are necessary and the Bill is about the necessary changes.

I thought that the noble Lord, Lord Brooke, was being uncharacteristically ungenerous when he indicated that I had provided all noble Lords with a Bill which was in its pristine state as it emerged from the Commons, without taking account of possible amendments in the Lords. In factual terms, all I could do at that stage was to indicate what the Bill would look like, and does look like until we get further debate.

Photo of Lord Brooke of Sutton Mandeville

Lord Brooke of Sutton Mandeville (Conservative)

My Lords, I was not in any way suggesting what was going to happen in this House; all I was saying was that the way the matter read was, "The Bill will be as follows after Third Reading", when it had clearly been written before Third Reading.

Photo of Lord Davies of Oldham

Lord Davies of Oldham (Deputy Chief Whip (House of Lords), HM Household; Labour)

My Lords, this was my desperate attempt to be helpful to the House—by indicating what the finished product would be like if in fact no changes had been effected by this House, in circumstances where I am not in a position to anticipate any such changes. Of course, I anticipate that there will not be any changes, but we shall see. We shall see just how constructive the Opposition are and the skill and conviction with which they present their amendments.

The noble Lord, Lord Brooke, raised first the issue of additionality as going to the heart of one of the issues in the Bill. That was the substantial element in the speeches of both noble Lords on the Front Benches of the Official Opposition and the Liberal Democrats. The issue was referred to in many other contributions in the debate, notably by the noble Baroness, Lady Flather.

I emphasise to the House that we remain committed to the principle that lottery money should add to and not be a substitute for government money. There is a very big difference between agreeing priorities and outcomes that align with government priorities and using lottery funding to substitute for government expenditure. We are not doing the latter.

Lottery money is not just for spending in areas where no government spending would ever take place. That would be an impossible situation. We expect the lottery to spend on top of things which government would normally fund. We could not possibly argue that, because the Government spend money on the arts, heritage and sport—as we obviously do—the lottery should have no contribution to these areas due to some concept that it infringes a principle of additionality.

The same is certainly true of health, education and environment. Of course these are key spending areas for government. Are noble Lords really contending that in fact these areas should not be contributed to from lottery funds? Or is it suggested that in legislation it is straightforward to define the principle of additionality? We certainly adhere to that principle. Our contention is that it is extremely difficult to express this concept in legislative terms, but we will see what emerges from the Opposition, who this evening at least were extremely buoyant about their ability to present an effective definition for these issues.

The noble Lord, Lord Brooke, also criticised the Government's announcing of lottery awards, and I think there was a government slip at that time. We have changed the reference to schools sport on the department's website because we accept that the original text was not clear between the lottery contribution and government. The National Audit Office was critical of the Government on this, and we accept the point in that limited area. We have taken steps to amend that.

That does not mean that we do not, in general terms, adhere strictly to the concept of additionality. It makes no sense to argue that the taxpayer should pay for everything to do with our health, learning and environment, or that nothing can be contributed from the lottery. When it comes to additionality, there has been a tendency in this debate to understress the extent to which the Government are committed to and observe the principle. There is also a belief that in legislative terms this is an easy concept to define. We shall see.

The noble Lord, Lord Brooke, also suggested a worry about the failure to spend rapidly the £3 million prize money which the Manchester Victoria baths project won as a result of the first series of the BBC2 Restoration programme. I accept his concern, which he articulated in precise terms. It is just a genuine problem that the Restoration project focused only on the restoration of the Turkish baths, which excited the public's imagination so that it won the first position. Unfortunately, the Turkish baths are only part of an important heritage site, and we could not start work on that project ahead of a solution for the site as a whole. There is no intention in any form of reneging on the commitment made, or the interesting idea of the prize and the development there. There is a genuine, practical difficulty.

The noble Lord, Lord Shutt, raised a question about the Big Lottery Fund and the flexibility about what fitted into the framework. We expect the framework created to be broad enough to allow many different types of project to be funded. We do not pretend that everything is going to fit within the framework, and that is why the fund will also be delivering some demand-led, lightly prescribed programmes, including Awards for All and the new Reaching Communities programme, which have the areas of flexibility and response to community pressure which he was strongly advocating in his speech.

The noble Lord also mentioned the issue of representation. We are in an interim stage. The current arrangement is a temporary measure, and we intend to provide for the final Big Lottery Fund board to have 12 members: one member each to represent England, Scotland, Wales and Northern Ireland, the other members general UK members. I think that addresses what he regarded as somewhat over-representation of the communities of the United Kingdom and the under-representation of the regions of England.

The right reverend Prelate the Bishop of Southwell and Nottingham thought that Clauses 8 and 9 might mean less money for heritage. There is no power within these clauses to move money from one good cause to another. Money could be transferred from the current heritage lottery, but I assure the right reverend Prelate that such moneys transferred could still be spent only on heritage. I give him the assurance that there is not a loss to the heritage funding in those terms. I recognise his obvious special interest, in terms of his representation of the Church in relation to the substantial amount of heritage for which it is responsible.

I am grateful to my noble friend Lady Pitkeathley, who has left her place to preside over our proceedings. She anticipated—she was partly responding to what had already been indicated—the issue of how one defines additionality in legislation. She is so right on that point. She will recognise that our recent statements about the Bill mean that the voluntary sector will not lose out under the arrangements. We welcome her acknowledgement that government intervention with the Big Lottery Fund is appropriate, and intend to operate a light touch. She speaks with many years of direct experience about the lottery funds, so her representations were all the more valuable for that.

The noble Baroness, Lady Flather, and the noble Viscount, Lord Eccles, emphasised their concerns about the degree of government control represented by the measure. I emphasise that we are committed to a light touch on the Big Lottery Fund. I heard the noble Viscount, Lord Eccles, suggest that the directions represent increased power of interference from the Secretary of State. We have already shown our intent by issuing new interim policy directions for the New Opportunities Fund and the Community Fund. We certainly recognise that it would be a mistake for the concept to develop that the Government were operating with a heavy hand on the fund. That is not so. We will allow the fund full scope to make decisions on programmes, choose delivery mechanisms, identify partners and select projects.

I hope that during Committee I shall be able to reassure the House even further on those issues. There is no doubt that that is an important area of public concern and controversy. One advantage of Committee is that we will have the chance further to explore both that and additionality, which are the two issues that have been identified in the debate.

I want to reassure the noble Viscount, Lord Eccles, that Clause 14 does not allow the Big Lottery Fund to tell other distributors what to do. It merely provides the power to allow it to provide wider advice, such as a lottery funding website to help people to apply for lottery funds. It is question not of increased direction, but of extending the opportunity for advice.

The noble Baroness, Lady Finlay, asked whether hospices would still be eligible for funding and whether there would still be funding for cross-cutting health projects. I assure her on both counts. All funding decisions will be for the Big Lottery Fund, but she will recognise that the success of those projects in recent years to which she alluded will commend them in such decisions. I think that she was the only speaker who was worried about the extent to which the National Lottery promotes gambling. The average stake in the National Lottery is £3, so I do not think that when the Gambling Commission considers how we control gambling generally and further legislation, the National Lottery is likely to cause conspicuous concern. We have been operating a hybrid arrangement without a full legislative framework for some time. This is what the Bill sets out to make in legislation. I hear the criticism, but the noble Lord will recognise that there was a pressing need to act then, and I hope that he will recognise that in legislative terms we have attended to the issue as early as we reasonably could.

The noble Lord, Lord Clement-Jones, who is strongly supported by the noble Viscount, Lord Astor, was in a very constructive mood. In my more sensitive moments, I look on constructive statements from the other side as dire threats and warnings of tribulation to come, but we always enjoy ourselves in Committee and pursue these things in a constructive manner, so I wish them well in their efforts to persuade me that they can write additionality into the Bill, although I am not too sure that I will be easily convinced on that front.

The noble Baroness, Lady Valentine, made an informed speech on her background and interest in the National Lottery. I very much welcome her comments on the need to sort out licensing arrangements. We seek to go some way with this under the Bill. I also appreciated the positive things that she had to say about the conduct of the lottery. I emphasise that this legislation is there to enhance the operation of a project in which we can all take pride, both under the previous administration and with careful nurturing under this one, and with support at all times from the Liberal Democrat Benches, although sometimes that support can be a little guarded.

Here is a body from which a huge number of people get a great deal of innocent pleasure, while contributing to projects which, if noble Lords opposite find it difficult to accept additionality, are often ones which we know no government would have been able to finance to the extent that we have of late. Many of those projects involve local communities enormously, and are the best illustration of our community working to improve the lot of everyone in our society with resources which, if not obtained without cost, are relatively painlessly delivered.

On Question, Bill read a second time and committed to a Committee of the Whole House.

House adjourned at two minutes before eight o'clock.

Monday, 6 February 2006.