National Lottery Bill

Part of the debate – in the House of Lords at 7:11 pm on 6 February 2006.

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Photo of Lord Clement-Jones Lord Clement-Jones Spokesperson in the Lords, Culture, Media & Sport 7:11, 6 February 2006

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.