With this it will be convenient to discuss the following amendments: No. 35, in clause 14, page 7, line 4, at end insert—
‘(1A)The total value of loans made in any financial year may not exceed more than one quarter of the total monetary value of both loans and grants combined,’.
No. 36, in clause 14, page 7, leave out lines 7 to 29.
No. 99, in clause 14, page 7, leave out lines 10 to 15.
The Minister read out his brief the last couple of times he spoke, so for the Committee’s amusement, and because it will be quicker, I shall do the same.
The amendments are designed to amend the legislation governing the Big Lottery Fund’s powers to distribute funds. Amendments Nos. 15 and 35 deal with the BLF’s licence to grant loans. Amendments Nos. 36 and 99 are designed to curb the Secretary of State’s powers over the BLF.
One of the national lottery’s founding principles was that it would support good causes through grant funding. As a result, the lottery distributing bodies have developed a wide range of different grants that meet the voluntary and community sector’s diverse needs. In some cases, however, loan finance can play an extremely valuable role as part of a funding mix for some voluntary and community sector organisations. Organisations such as the National Council for Voluntary Organisations have established programmes that use loans to help bodies to become financially self-sustaining. A loan could help an organisation to set up a trading arm or to purchase a building that they could then hire out. Those initiatives allow voluntary and community organisations to break their dependence on short-term contracts or grants, including grants from the Big Lottery Fund. Those are examples of the way in which lottery funding through loans can sustain the voluntary and community sector. Loans can increase an organisation’s capacity to generate independent income or to obtain more funding.
Although loans can help to promote sustainability among the voluntary and community sector, grants also play a critical role in funding good causes. Grants can be tailored to meet the good causes’ diverse needs and one-off grants can be used to breed innovation. Grants fund projects and organisations that would not secure support from elsewhere. The pressure to repay loans could hamper many organisations’ ability to develop pioneering schemes. The NCVO reports that a general shift towards loans could adversely affect the voluntary and community sector’s income and fundraising activities by forcing it to fundraise in order to repay loans to the BLF. The balance is a difficult one. Loans can be beneficial, but grants, too, are crucial. We must get the balance between the two right. Our probing amendment is designed to ask what proportion of funds will be distributed in loans. Will the Minister confirm that grants will account for for the majority of payments, as our amendment proposes, if not three quarters of all funding, as the Conservative amendment proposes?
The second pair of amendments is concerned, yet again—it does not say yet again in my brief; I admit to adding that, even though the person who wrote the brief might be upset that I have started to busk a bit—with the Secretary of State’s remarkable powers to control the BLF. While the Conservatives have suggested eliminating much of the Secretary of State’s power over the BLF, the Liberal Democrats are particularly opposed to the Secretary of State retaining the power to specify the maximum and minimum amount that may be distributed
“during a specified period for expenditure of a description prescribed under section 23(3A)”.
It is most important that the BLF should retain the right to set its own maximum and minimum amounts and that the Secretary of State should not encroach too far on the distribution of funds. I hope that those comments have been for the edification of you, Mr. Gale, and the entire Committee.
I am more than happy to support the hon. Member for Bath in his amendments, but I rise to speak to the official Opposition amendments in the group. We have several concerns about the ability of the Big Lottery Fund to make loans, two of which I shall address. First, we are concerned that loans could be used as a way to bring down balances in an emergency, as it is much quicker to make a loan than to go through the process of making a grant. Secondly, is it envisaged that the same criteria will be applied to the granting of a loan as to the making of a grant? Both those points deserve clarification, and I would welcome a response to them.
On the first two amendments in the group, neither ours nor that of the Liberal Democrats would rule out the BLF being able to make loans; we merely suggest that there should be a limit on the value of those loans. Such a cap would ensure that the BLF retains its primary role as a distributor of lottery grants, rather than becomes a banker of lottery loans. Loans can be an important part of the funding mix for voluntary and community organisations, but my main concern is that lottery distributors should remain grant makers, for that is the basis on which the good causes have operated so effectively for the past 11 years.
I am sure that the Minister will reassure us that it is not intended that the Big Lottery Fund should make loans of greater value than our or the Liberal Democrats’ amendments would allow, and that the amendments are therefore unnecessary. I hope that he will assure me that the BLF’s power to make loans will not be used as a vehicle for Government funds. I refer here to our other proposed amendments to clause 14 regarding the BLF’s use of non-lottery funds, so you will be glad to know, Mr. Gale, that I will not raise that matter again. I am merely concerned as to whether it is intended that the BLF should make loans out of non-lottery or lottery funds, and whether the powers might be used to make the BLF more than a distributor of lottery money.
I am also keen to hear whether and, if he does, why the Minister disagrees with proposed amendments Nos. 36 and 99, which would remove the Secretary of State’s ability to micro-manage the Big Lottery Fund. The Minister has been assiduous in pointing out the fallacy of Opposition amendments that would, to his way of thinking, involve the micro-management of the whole national lottery enterprise by bringing various matters to Parliament, which he says would be ridiculous. The Opposition now wish to remove the Secretary of State’s ability to micro-manage the Big Lottery Fund, so logically—if there is any logic to the Minister’s thinking on this matter—he should support those amendments.
The Bill allows the Secretary of State to specify individual amounts for prescribed grants. That sort of micro-management is incompatible with the ability of the Big Lottery Fund to operate effectively as a distributor of hundreds of millions of pounds a year. We are not making a political point about the Secretary of State’s power but an operational one about the Big Lottery Fund, and the Minister will no doubt wish to respond to it.
Interestingly, given our discussions on earlier amendments, I note that proposed new section 36B(4)(c) to the 1993 Act, on the power to distribute funds, gives the Secretary of State the power to
“make provision by reference to the aggregate of amounts distributed, to a percentage of amounts available for distribution or otherwise”.
Does that mean that the Secretary of State could, with a wave of her hand, ensure that that 60 per cent. or 70 per cent. of the Big Lottery Fund goes to charities?
The amendments relate to the Big Lottery Fund’s functions as set out in proposed new section 36B to the 1993 Act. Amendments Nos. 15 and 35 would limit the value of the loans made by the Big Lottery Fund and amendment No. 15 provides that the value of the loans made by the fund should not exceed the value of the grants. Amendment No. 35 provides that the total value of the loans made in a financial year should not exceed one quarter of the total monetary value of loans and grants combined.
New section 36B sets out the Big Lottery Fund’s main power to distribute funds. The funds will be used to make grants, loans, or other distribution arrangements. We think that it would be useful if the fund had the flexibility to provide funds in different ways to respond to different needs and different circumstances. Parliament gave similar powers to the Olympic lottery distributors in the Horse Racing Betting and Olympics Lottery Act 2004. We do not expect loan making to be a major function of the Big Lottery Fund; we certainly do not intend to turn it from a grant-making body to a loan company. That is clear from the range and nature of grant-making programmes that have already been announced. The circumstances in which the fund may lend money and the conditions that it will be required to observe will be included in the financial directions; that is the case with all non-departmental public bodies, including lottery distributors. No one wants to turn the Big Lottery Fund into a big loans company. For those reasons, we are not convinced of the need to provide restrictions in the Bill. I hope that the amendments will not be pressed.
Amendments Nos. 36 and 39 focus on the Secretary of State’s order-making powers under proposed new section 36B(3). That power allows my right hon. Friend to limit the amount or proportion of money that the Big Lottery Fund may spend on different types of prescribed expenditure. Amendment No. 99 would remove the Secretary of State’s powers to specify maximum and minimum amounts and amendment No. 36 would remove the Secretary of State’s order-making powers altogether.
I shall explain why those order-making powers are necessary. As I said in relation to clause 7, the new good cause provision is extremely broad. We need to be able to set out at the highest level the types of expenditure on which the Big Lottery Fund should focus, and clause 7 allows us to do that. The order-making powers in clause 14, which would in practice be exercised at the same time as the powers in clause 7, allow us to limit the amount or proportion of that money that the Big Lottery Fund may distribute on the different types of prescribed expenditure. Without that power, the fund could in theory spend all its money on one type of prescribed expenditure—for example, on transformational grants. The Secretary of State plans to use the power to specify the amount or proportion of the money that the fund should spend on transformational grants and the awards for all programme. We do not intend to specify the amount or proportion of money in relation to the three main funding themes.
We recently consulted publicly on an interim order for the New Opportunities Fund; the order is as far as is possible under the existing legislative framework the same as the one that we propose to issue in due course for the Big Lottery Fund. In the 15 responses we received there was no substantive comment from consultees on the draft order, which suggests no great concern about the order-making powers. We have also made available to the Committee an illustrative order using the powers set out in the Bill, which I thought would provide further reassurance about how we intend to exercise these powers. In light of what I have said, I hope that hon. Members will withdraw their amendments.
I will confess at the beginning of my remarks that I am going to do as the Minister says and beg leave to withdraw. Notwithstanding his joke and his assurance that it is not anyone’s intention to create “Loans R Us” and that loan making is not to be a major function of the Big Lottery Fund, the Committee would have found it helpful had he given some ballpark indication of the split between loan making and grant giving, at least so that we could get a feel for the Government’s position. It is slightly odd that he is not prepared to do that while resisting amendments that would remove the right of the Secretary of State to specify in detail how different parts of the BLF money is to be spent. On the one hand, he is asking us to allow the Secretary of State to have powers to micro-manage and to specify precisely how the money will be distributed; on the other hand, he is not prepared to give any indication of the sort of split that there might be. I say to the Minister that perhaps he has not treated the amendments with the respect that they deserve.
I end by saying to the right hon. Gentleman, in the kindest and most gentle way possible, that he seems to want to have his cake and eat it. One minute he is telling us that it is disgraceful for the Opposition parties want to write in the Bill that 60 per cent. to 70 per cent. of the money should be spent in a particular area—in this case, on voluntary community activities—despite the assurances that everyone under the sun has given; the next minute, he wants us blithely to accept that at some later date, via an order to be laid at a later stage, the Secretary of State will be able to do all of that. He will not accept the will of the Committee and perhaps of the House to specify that 60 per cent. to 70 per cent. proportion.
There are many inconsistencies in what we are hearing today and we will want to explore them in more detail, perhaps in another form at a later stage. I am disappointed with the Minister’s response, but I beg to ask leave to withdraw the amendment.
I do not know how long the Committee wishes to sit for. I am prepared to sit until 7 o’clock on this occasion. If we are likely to go on much longer I shall suspend for an hour and a half so that members may make themselves comfortable, but I am at the Committee’s disposal and prepared to come back.
With this it will be convenient to discuss the following amendments: No. 39, in clause 14, page 7, line 35, leave out from ‘party’ to end of line 37.
No. 40, in clause 14, page 7, line 37, at end insert—
‘(2A)An arrangement under subsection (1) may not limit the Fund’s freedom of action in relation to the distribution of the money paid under the arrangement.’.
Mr Gale, you were right to prevent me from speaking again after the hon. Member for Bath sat down and not to allow me to register my disappointment that the Minister had not addressed the two questions about balances that I had asked.
Amendments Nos. 39 and 40 would remove the ability of the person contributing non-lottery funds to the Big Lottery Fund to control what happens to the money. The amendments relate somewhat to the previous discussion and touch again on the financial operations of the Big Lottery Fund. I want to hear from the Minister how he envisages the Big Lottery Fund will be able to distribute non-lottery funds in practice. I admit to what I have been accused of earlier, which is a degree of scepticism, but my fear is that the Big Lottery Fund will become a conduit for Government or taxpayers’ money and the lines will become so blurred that no one will be able to distinguish which is which. It will become a brand through which the Government can channel money in any school dinner-type emergency, as they so enjoy doing.
Amendment No. 41 therefore proposes a reasonable limit on the amount of non-lottery funds that the BLF can handle. It is designed to ensure that the lines do not become blurred. Amendments No. 39 and 40 would remove the ability of the person who gives the Big Lottery Fund non-lottery funds to influence where the money may go. The Bill states that that person may
“limit the Fund’s freedom of action in relation to the distribution of the money paid under the arrangement.”
That impacts on the operational freedom of the Big Lottery Fund. The provision is akin to someone giving money to a charity and saying that they only want it to spend it on this project or that good cause, or even to a taxpayer giving his taxes to the Chancellor and saying, “Don’t spend this on the Department of Culture, Media and Sport.”—perish the thought. We know the Treasury’s view on those who advocate hypothecation in general taxation terms. We feel strongly that if the Big Lottery Fund is to handle this money, those who provide it will have undue influence on its eventual destination.
The amendments would limit the arrangements under new section 36C of the 1993 Act for the Big Lottery Fund to work as an agent distributing money for other public bodies, the Government or private foundations. The suggestion for that provision came from the fund and it has been approached in the past to use the system to get things going quickly. As I explained when we discussed amendment No. 27, it does not have the power to distribute other people’s money, whether that is public or private charity money.
Amendment No. 41 would restrict the proportion of non-lottery business for the Big Lottery Fund to a quarter of total grant payments, while amendments Nos. 39 and 40 would prevent the persons providing non-lottery money from putting limits on the Big Lottery Fund’s freedom of action in distributing it. The new powers should not, in our view, be constrained in such a way. It would limit the potential to streamline and simplify a range of funding and limit further developments of specialism, skills and knowledge, as well as the potential reduction in the cost of distribution and grant management through economies of scale.
We do not expect the distribution of non-lottery funds to become a major part of the fund, so I am not saying that we wish to ensure that more than 25 per cent. of their business can be non-lottery. No one wants the fund to be distracted from its main lottery function, but there is a danger that amendment No. 41 would set limits that prevented good opportunities from being exploited. The fund must have the flexibility to get involved where it thinks that it can add value.
I would not have thought so, although I cannot say it categorically. I will ask my officials to look at that and will write to the hon. Gentleman.
As I was saying, amendments Nos. 39 and 40 give me the opportunity to assure the Committee that the arrangements are the minimum necessary. If the fund takes on the job of distributing someone else’s money—money from a health promotion charity, for example—funding partners will expect some say in how it is spent. The arrangements cannot be forced on the fund, so if funding partners expect too much there will be no arrangements at all. If the amendments were pressed, the funder would be forbidden any say at all. Obviously no one will hand over money to distributors on that basis. Basically that would end the new section 36C before it had even started.
We would fall under the same rules. It is not the Government who are doing this; the BLF is coming to us asking for flexibility. It has been approached by funding partners who believe that they could add value to the lottery funds through this type of arrangement. There is an economy of scale, and it is a sensible approach. I understand the concerns, and we will be watching very carefully. In the spirit of co-operation we are prepared to allow this, but we do not want it to be overly influenced, with people who bring money to the fund determining where the lottery money should go. A balance has to be struck, but equally, we will be sensible and allow the people who are coming on to these boards to have the power to add value.
I will seek to speak to the BLF about that and get one or two examples of where it believes that type of partnership could work. We see what is happening in our constituencies where we are bringing schemes together with lottery funding, and I welcome that. I know that we will have a debate later about additionality, but sometimes we are so silent in this area that opportunities are missed to bring various funding schemes, including charitable funds, together. There are a number of areas where charitable funding could sit alongside the BLF and add value without distracting from its core purpose.
I am still marginally alarmed by this. The general concern is about the Government’s ability to direct the flow of funding, especially from the BLF. While other third parties may come in and place criteria on how that funding is matched, surely there must be some understanding of the concern that the Government should not be excluded from the list of funders who can ask that their money be earmarked for a particular project.
That would be a judgment for the BLF. Again, this is not something that the Government necessarily want. The BLF has come to us to say that there are opportunities here. If it wanted to add to public funding and it believed that would add value, that would be permissible too. But it is a decision for the BLF, not the Government. Given the assurances that I have offered, the amendment should be withdrawn, and the BLF should be allowed to continue adding value to its work.
I am not necessarily reassured by the Minister’s response. The Big Lottery Fund wishes to act as independently as it can, so I should have thought that it would say to the Minister, “Look at the amendments. They give us more protection from undue interference from other Government funding sources or the private sector.” That is all that we seek to achieve, and I am sorry if the Minister thinks that we are attempting to tie the hands of the BLF board or constrain it in any way—our amendments would do the reverse. Nevertheless, I shall not press the amendment to a vote, as we and others can return to the issue later, and we must leave some meat for the wolves. I beg to ask leave to withdraw the amendment.
With this it will be convenient to discuss the following amendments: No. 44, in clause 14, page 8, line 10, leave out
‘under any provision of this Act’ and insert
‘by the Big Lottery Fund’.
No. 45, in clause 14, page 8, line 11, leave out
‘under any provision of this Act’ and insert
‘by the Big Lottery Fund’.
The amendments are very straightforward. They confine the scope of the BLF’s ability to give advice to other lottery distributors to matters that relate to its own funding or operations. They would allow it, for example, to advise the Arts Council on any project on which the two bodies were joint distributors—we have heard from the hon. Member for Bath that the Arts Council is an organisation that has joint funding arrangements in place—but not on any other project.
One of the fears of other lottery distributors is that the Big Lottery Fund is or will be—depending on whether we think that it is set up, or is some sort of shadow administration—too big. I am not clear why it should be able to give advice to other lottery distributors whereas others, seemingly, cannot give advice back to it. I look forward to hearing the Minister’s comments.
I raised this point earlier in relation to the national lottery funding decision document of July 2003. I selected from that document four activities that it suggested might be the responsibility of the Big Lottery Fund. The Minister confirmed that the four that I read out are all covered by the clause that we are now debating. On the assumption that the Minister is correct—I take him at his word—what assessment has been made of the cost that the BLF will incur in undertaking those additional activities? What impact will that have on the Government’s estimate that appears in the explanatory notes and various other documents of the sum that will accrue as a result of the economies of scale that will come from the merger of the New Opportunities Fund and the Community Fund? My point is simple: I am not convinced that, in assessing the financial benefits of economy of scale, account has been taken of the additional responsibilities that will be undertaken by the Big Lottery Fund.
I remind the hon. Gentleman that the Millennium Commission will also be feeding into the process, bringing a lot of expertise. Our 2003 national lottery funding decision document, as the hon. Member for Bath says, set out a number of areas of joint working between lottery distributors in which it was appropriate for the Big Lottery Fund to take the lead. That included handling cross-cutting issues. New section 36D will allow the Big Lottery Fund to take the role of lead distributor by allowing it to give advice beyond its own functions. For example, potential applicants are not always sure to which distributor or programme they should apply. Many of us have found that to be the case in our constituencies. The Bill will allow the BLF to take the lead in providing a single point of advice for new applicants who are unsure where they should seek advice or guidance or to which distributor they should apply. We hope that this is more user-friendly and that it will be easier for people to apply for lottery money, thereby ensuring that it goes to good cause projects more quickly.
The Big Lottery Fund will be able to take a lead in developing common standards such as applications and complaints procedures. It will reduce administrative costs for all lottery distributors and ensure that more money goes to good causes. It will be able to share best practice, particularly as the successor to the Millennium Commission, to which I referred earlier, and to become a centre of excellence, advice and expertise for the management of major capital projects, for which there is great capacity. We want to encourage innovative advice on the best management of projects, particularly capital projects. Although distributors can and do work well together, someone needs to take a lead as a centre of excellence, and we believe that the Big Lottery Fund is best placed to do so.
The amendments would prevent the Big Lottery Fund from taking such a leading role by limiting its power to giving advice to its own functions, a role that it will have in any case.
The Minister has not answered my question, which is simply this: what is the estimated cost of the provision of these additional services? While the Minister seeks inspiration for an answer, I remind him that the Culture, Media and Sport Committee report on reforming the national lottery, which the Committee produced in the 2003–04 session, said:
“We agree that the extra services provided under the merged body will enhance the distribution process but very much hope the cost of these will not erode the grants given by the new body.”
It therefore assumed that there was an additional cost. I assume that there is an additional cost, and I believe that the Committee wants to know the Government’s estimate of that cost and how it will be offset against the savings from economies of scale achieved through the merger.
I do not know the estimated costs. We expect savings to be made in the merger, but that is not the hon. Gentleman’s point. He is talking about the cost of the service that is actually being delivered, even though savings might be made by merging the three bodies. That is fine, but the hon. Gentleman is asking what is the cost of providing that one-stop shop for advice. I cannot answer that question, but I shall ask my officials to look into the matter.
All I can say is that we found a great deal of expertise at the Millennium Commission when we were considering its reorganisation, and we believed that that expertise could rightfully be used among lottery distributors. That is why we moved them quite early on to the shadow board of the Big Lottery Fund, which is working quite well.
I understand what the hon. Gentleman is saying. As I said, I cannot answer his question now, but I shall ask my officials to come back with estimates of the cost of the one-stop shop and of keeping the advice inside the organisation.
I am sorry that once again the Minister did not address my point. From what he is saying, it sounds as though the Big Lottery Fund can act like Big Brother and intimidate other lottery distributors by its very size. Perhaps that is what is intended, if one subscribes to the view that this is phase 1 of the Big Lottery Fund becoming the sole distributor. That, however, is not a debate for this afternoon.
For the record, my Secretary of State has given a very clear assurance that the three funding boards—for heritage, arts and sport—will be included alongside the Big Lottery Fund up to and beyond the implementation of the new licence. I reiterate that clear statement, which was made during Question Time earlier this week.