Clause 1 - Funding of endowments

National Lottery (Funding of Endowments) Bill – in a Public Bill Committee at 4:00 pm on 6th May 2003.

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Question proposed, That the clause stand part of the Bill.

Photo of Keith Simpson Keith Simpson Shadow Minister (Defence)

Thank you, Mr. Benton. I look forward to serving under your chairmanship, I hope briefly, and I thank all members of the Committee and the Minister for giving up their time to debate the Bill. I particularly acknowledge my fellow Norfolk MPs, including my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard) and the hon. Members for Great Yarmouth (Mr. Wright) and for North Norfolk (Norman Lamb). At one stage, the Bill was called the Norfolk Bill, but as you know, Mr. Benton, it will apply nationally. Most importantly, it has received a lot of cross-party support.

The Bill is extremely useful. It is short and, I hope, uncontroversial, so having all-party support is important. Its predecessor was a Bill introduced in the last Parliament by the hon. Member for Norwich, North (Dr. Gibson), which got as far as Third Reading before falling at the post due to the general election. It was introduced in the other place by Lord Walpole of the county of Norfolk, but was withdrawn. This Bill is completely different. I hope that it is near perfect and meets the requirements of not only those of us who supported the previous Bill, but many organisations that would not have benefited from it. As such, it has Government support.

I turn briefly to the purposes and benefits of the Bill. As I explained on Second Reading, it would amend lottery statutes—the National Lottery etc. Act 1993, as amended by the National Lottery Act 1998—to provide all distributors with an express power to make grants to endowment funds. Current statute gives lottery-distributing bodies the power to distribute lottery money to meet expenditure of the types covered by sections 22 and 23 of the 1993 Act. However, it does not make clear what is meant by ''for meeting expenditure'' or contain any explicit reference to funding endowments.

That was crucial in the purpose of the Bill introduced by the hon. Member for Norwich, North, which was a consequence of the efforts made by the Eastern Daily Press ''We Care'' 2000 appeal. The appeal was specifically aimed at providing funds for the tens of thousands of carers in the county of Norfolk. A consequence of the inability to get round a lacuna at the centre of the 1993 Act has been cross-party support to have the Act amended. The Bill's purpose—to provide benefits for hundreds of thousands of carers nationwide—is worthy indeed.

The Bill's benefits would be, first, clarifying the powers of all distributors; secondly, putting the community fund on the same legal footing as other distributors so that they can fund endowments; and, thirdly, and perhaps most importantly, benefiting charities that want to apply for lottery funding to set up or augment endowments, enabling them to manage their resources more strategically with more security of future funding. I should emphasise something that is absolutely crucial: the legislation is permissive, not mandatory. It would provide an option.

Let me turn to the content and purpose of the Bill in respect of the 1993 Act. Clause 1(2) would amend section 22(3), which deals with the apportionment of money from the distribution fund to good causes, by adding a provision that the allocation for expenditure of the description concerned includes establishing or contributing to endowments in connection with such expenditure.

Subsections (3) and (4) would amend sections 25 and 25B, which deal with the application of money by distributing bodies, by inserting a new subsection at the end of each to make it clear that the distribution of money for meeting expenditure of the description concerned includes the distribution of money for the purpose of establishing or contributing to endowments.

Subsections (5), (6) and (7) would amend sections 38(1), 41(1) and 43B(1)(a), which deal with the grant-making powers of the National Lottery Charities Board—now known under its operating name of the Community Fund—the Millennium Commission and the New Opportunities Fund respectively, by adding to each section a provision making it clear that the power to make grants includes grants for establishing or contributing to endowments.

Subsection (8) would amend section 44(1), which deals with the interpretation of part II of the Act, by inserting a definition of endowments to make it clear that the expression includes permanent endowments. Subsection (9) provides for the amendments to have retrospective effect. Some distributors have made grants to endowments, and the provision would ensure that such payments could not be called into question.

The Bill is straightforward. If I may use shorthand, it would make a simple series of amendments to enable the funding of endowments to benefit hundreds of thousands of people.

Photo of Norman Lamb Norman Lamb Shadow Spokesperson (Treasury), Liberal Democrat Spokesperson (Treasury)

I shall not detain the Committee for more than a few moments. I strongly support the Bill and applaud the hon. Member for Mid-Norfolk (Mr. Simpson) for introducing it to achieve clarity in the law.

I learned about the issue from Paddy Seligman, a doughty campaigner in Norfolk who has done much to raise funds for the ''We Care'' 2000 appeal. She made the case strongly for the amendments in the Bill. I am delighted that this is now happening, after a frustrating delay caused by the timing of the last general election. I need say no more, other than confirming that I support the Bill.

Photo of Mrs Gillian Shephard Mrs Gillian Shephard Conservative, South West Norfolk

I congratulate my hon. Friend the Member for Mid-Norfolk on this third attempt to enact such change. Tribute should also be paid to the hon. Member for Norwich, North and to Lord Walpole of the county of Norfolk for their attempts to do so, once in the House and once in the other place.

The campaign mounted by Norfolk's well reputed newspaper, the Eastern Daily Press, showed up an anomaly at the heart of the legislation that prevented this particular activity from benefiting from lottery funds. The causes that are helped by the lottery are many and various, and some might be regarded as less deserving than assisting with the work of carers, not just in Norfolk, but throughout the country.

There are some 130,000 informal carers in the county of Norfolk, and only last Friday I had the honour of presenting an award to one of them—a young woman called Emily Smith, who is still at school. She is the full-time carer for her mother, who is heavily disabled. This young woman, and another girl at her school, Rosie Luck, received the Diana, Princess of Wales award for outstanding citizenship. Emily Smith is a wonderful example of the work done by families and others who care for people with handicap and disability, and those who may merely be elderly and in need of care. I hope that, at the third attempt, the Bill achieves the help for carers that they so richly deserve.

Photo of Richard Bacon Richard Bacon Conservative, South Norfolk

I am pleased to add my voice to those supporting the Bill. First, I apologise for being slightly late because of an urgent extradition matter involving a constituent.

I congratulate my hon. Friend the Member for Mid-Norfolk on the third attempt to get the Bill on to the statute book, as my right hon. Friend the Member for South-West Norfolk said, and I hope that the Government will support it.

I want to make three comments. First, as my right hon. Friend said, carers play an invaluable role in the community and save the Government a great deal of money. On that basis alone, there is a strong case for doing something for carers as the Bill proposes, because they do so much for the community.

Secondly, the Bill would not require the national lottery grant-making bodies to engage in distribution of endowments. It would simply make that possible, and therefore add to the flexibility of grant-making bodies. It would not detract from them in any way or require them to go in a particular direction.

Thirdly, one of the principal criteria by which grant-making bodies choose which worthy causes to support is sustainability—the long-term difference that a grant would make. There is no reason in principle why the lottery should not be a creator of sustainability. The fact that there has been an omission in the legislation, which has made it impossible for some grant-making bodies to support endowments, has been detrimental to the aim of sustainability. Therefore, this correction to the law—that is all it is—would do much to help carers in Norfolk constituencies and to enhance the underlying

aims of the lottery in promoting sustainability. I support the Bill.

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

I congratulate the hon. Member for Mid-Norfolk on his Bill reaching the Committee. What set off as a single-issue campaign has evolved into one to ensure that primary legislation is amended to the benefit, I hope, of many more charities than are involved with the single issue that is uppermost in the minds of Norfolk Members and others across the House. I paid tribute on Second Reading to all those involved in that campaign, which is a worthy cause.

The Government welcome the Bill and I fully endorse the cross-party support that the hon. Gentleman highlighted and which was in evidence on Second Reading. I shall refer to one or two principles of the Bill that arise from the clause. It is unfortunate that the wording of the lottery legislation does not expressly refer to the power of distributors to fund endowments. I agree with the hon. Member that there was no deliberate intention in drafting the 1993 Act to prevent any distributor from awarding grants to establish or augment endowment funds.

Although this is a modest, uncontroversial measure, as befits a private Member's Bill, its provisions would help to clarify the legal position of all distributing bodies on funding endowments, but it would also assist charitable bodies to manage their funds more effectively. The sensationalist and, more often than not, inaccurate headlines on lottery grants that all too frequently grace news stands help to obscure the real benefits that the lottery already brings to charitable and community groups throughout the country and overseas. The Bill would add to the lottery's impact on such groups.

The Bill fits well with the theme emerging from my Department's review of the lottery distributors: making lottery funding more responsive to the needs and priorities of local communities. Giving distributors express powers to fund endowments would give them more flexibility in responding to the needs of the applicants and help to give charitable organisations more flexibility to manage their resources.

I take this opportunity to restate the Government's position on a couple of issues raised by hon. Members on Second Reading. The hon. Member for North-East Cambridgeshire (Mr. Moss) highlighted the downside of endowment funds. As I said then, I am under no illusions in that respect and I recognise the concerns expressed over the value for money of grants to endowment funds. Although such funds can be a useful way to provide long-term revenue funding for charities, enabling them to manage their funds more effectively, they require large sums of money upfront to provide reasonable revenue in the longer term and future income is subject to interest rate variations.

However, those factors should not prevent us from seeking to clarify the powers of distributors in this respect. It has been said before that this is a permissive, not a mandatory, measure that would expressly allow distributors to grant funding for

endowments should they choose to do so. Although some distributors have funded endowments, that is not a power they have used frequently and there is little evidence that they would do so in future, nor that there would be a major flood of applications for grants towards endowment funds.

Nevertheless, as I announced on Second Reading, my Department will issue guidance to distributors on the factors that need to be considered in awarding grants to endowment funds, a draft of which will be made available to peers during the later stages of the Bill's consideration. The guidance will also address the effect that any increase in grants to endowment funds would have on non-endowment lottery applications. That is a factor that distributors would need to bear in mind during the grant assessment process, but it is worth noting that they already have to take difficult decisions on the best use of lottery funding.

Photo of David Taylor David Taylor Labour/Co-operative, North West Leicestershire 4:15 pm, 6th May 2003

The promoter of the Bill, the hon. Member for Mid-Norfolk, linked the objectives and benefits of his measure closely with the benefits that would be available thereby for carers and care organisations. The Minister referred to clarification of the arrangements. Will he attempt to ensure that clarification is linked to national carers week, which runs from 9 to 15 June? Would not that be an appropriate time to aim for clarification?

Photo of Richard Caborn Richard Caborn Minister of State (Sport and Tourism), Department for Culture, Media & Sport

That is an innovative way to make an announcement on national carers week, to which I fully subscribe. My officials and I have listened to my hon. Friend and we will do our best to ensure that, even if the advice to peers does not coincide with the event, people know about the advantages of endowment funding and of national carers week. Carers play a tremendous role in our society and that should be recognised.

On Second Reading, the hon. Member for North-East Cambridgeshire raised the issue of controls over endowment funding, especially in the long term. That is an important point, as we must ensure that lottery funds, as public funds, are not misused. Grants for permanent endowments can be made only to a registered charity. Ultimately, responsibility for the conduct of a charity rests with the Charity Commission and the Attorney-General. Legislation governing charities requires them to use funds only for charitable purposes. If they fail to do so, or if funds are misappropriated or mishandled, not only must the lottery distributors consider what action to take as a result of the breach of the terms and conditions of that particular grant, but the actions of the charity may, depending on the circumstances, amount to a criminal offence. That would almost certainly involve the Charity Commission, if the matter affects a charity

in England and Wales, or the Inland Revenue, if it is one from Scotland or Northern Ireland.

If a charity ceases to exist—a point raised on Second Reading—charity law requires that, after all debts and liabilities are settled, any remaining assets are applied to a similar charitable purpose. In such cases, the Charity Commission, the lottery distributors and, in certain circumstances, the Attorney-General, would be involved.

A number of additional controls exist in relation to lottery grants to such funds. As public money is involved, the general principles of Government accounting apply to the design and implementation of systems for the distribution of lottery proceeds. Section 26(3) of the 1993 Act gives the Secretary of State the power to issue financial directions to lottery distributors to secure the proper management and control of money paid to them, with which they must comply. Those directions typically include a standard set of terms and conditions that must apply to any grant, and the grant recipient must comply with them. The use of the endowment would be monitored by the distributor, and the recipient charity would need to provide details of what it expected to achieve with the income generated.

The Bill is useful, and I am grateful to the hon. Member for Mid-Norfolk for introducing it. It would clarify the powers for all distributors to fund endowments should they choose to do so, and it would put charities on an equal footing with other grant applicants in accessing lottery funding for endowments. I am therefore happy to offer the Government's support for the Bill.

Photo of Keith Simpson Keith Simpson Shadow Minister (Defence)

I thank the hon. Member for North Norfolk, my right hon. Friend the Member for South-West Norfolk and my hon. Friend the Member for South Norfolk (Mr. Bacon) for speaking so positively. I also note the suggestion made by the hon. Member for North-West Leicestershire (David Taylor), who reminded the Committee that it will shortly be national carers week. I hope that the Bill is considered against that background.

I thank the Minister for his kind comments on the Eastern Daily Press ''We Care'' 2000 appeal. I also welcome his remarks on making lottery funds more sensitive to local requirements and on the two points made by my hon. Friend the Member for North-East Cambridgeshire on Second Reading. They are all positive steps.

Question put and agreed to.

Clause 1 ordered to stand part of the Bill.

Clause 2 ordered to stand part of the Bill.

Bill to be reported, without amendment.

Committee rose at twenty-two minutes past Four o'clock.