Distribution of dormant account money by Big Lottery Fund

I beg to move amendment No. 29, in clause 17, page 9, line 17, at end insert—

‘(4A) Any grant or loan made under subsection (1) must not—

(a) replace or substitute for government or local authority expenditure;

(b) subsidise or provide part of the costs for a service that is provided on a contract basis for a statutory body;

(c) replace statutory funding that has been withdrawn or is in danger of being withdrawn; or

(d) duplicate services that a statutory body currently provides.’.

The amendment tries to establish, in a not very elegant fashion, the principle that the money from the reclaim fund is in addition to Government spending. That is important. People whose money will be transferred from their dormant accounts to the reclaim fund and then to the Big Lottery Fund will want to know that that is not a substitute for Government expenditure, that it is increasing the resources available for youth services or for financial inclusion. There is no guarantee of that in the Bill. If the choice of the three causes in England had been different, the concern might not be relevant. The problem arises because there is Government expenditure on the provision of youth services, and councils already spend money on it. Financial inclusion is a significant priority not only for the Minister’s Department, but for the Department for Children, Schools and Families and the Department for Work and Pensions. I have looked at Government output and know that money is spent on this area.

I do not believe that any Member of this House would want to see the money that taxpayers contribute to financial inclusion drop from £12 million this year to £10 million next year because the Government know that £2 million will come in from dormant accounts. If an additional £2 million comes in, we want to see £14 million spent on that cause so that there is a boost in spending. I have not touched on the social investment fund in the context of additionality because I do not believe that the Government are currently providing that capital to a social investment wholesaler.

I hope that the Minister understands our concerns. Our argument is that, if this funding comes on stream part way through a comprehensive spending review period, it will be easier to check the additionality because the spending plans will be set out in the CSR. Given that the current CSR will expire at about the time this money comes on stream, it would be very easy for the Government to set their spending priorities taking into account the money that will flow from the scheme. With the amendment, we are looking for confirmation from the Government of the mechanism that they will use to ensure that the money is genuinely additional.

Another problem relates to the Big Lottery Fund, which will be the distributor. It does not give money only to voluntary organisations. That would be one way of ensuring that there were additionality. Having said that, there are even difficulties in that area because on the financial inclusion front some Government money goes to Citizens Advice, which is a voluntary body.

At the start of the CSR period, the Government could decide to reduce the amount of money that is spent in the affected areas in the knowledge that the business plan of the reclaim fund suggests that £10 million or £20 million a year may go to the three causes, as stipulated in the Bill. There is a concern about the additionality of this money and it was not satisfactorily addressed in the other place. Lord Howard tabled an amendment to try to achieve an end of this sort.

I entirely understand where the hon. Gentleman is coming from and I appreciate the intention behind the amendment. I am keen to ensure that there is no such element of substitution. Local authorities rightly make decisions on whether to fund new projects or carry on funding existing projects. It would be difficult to implement the amendment without tying the hands of local authorities and saying that they must continue to fund existing projects. If they withdrew the funding for an existing project, they would not be able to use the new money to replace it. I am concerned by the practicalities.

I do not dispute the challenges behind this proposal. However, I do not want a situation in which a local authority decides to withdraw funding because it knows that money will come. That is why new subsection (4A)(c) in the amendment states that the money must not

“replace statutory funding that has been withdrawn or is in danger of being withdrawn”.

It would be easy for a local authority to decide not to fund a youth club, a youth group or a financial inclusion project in its area in the knowledge that it will be bailed out by the Big Lottery Fund. That is a challenge. The Big Lottery Fund currently gives money to local authorities that might in a way be substituted by some of the money that will come through the scheme. Additionality is critical to the Bill because people want us to spend more money on these priorities, not to substitute the money from dormant accounts for Government money.

One of the original objectives of the national lottery was to try to increase the money available to community organisations and voluntary groups. That purpose has been diminished somewhat because money from the Big Lottery Fund goes to meet some Government priorities. There is a sense that if this creeps into the allocation of money from the reclaim fund, there will be no augmentation of the resources available: the same money will be spent but will be funded from different sources. We want some assurance from the Minister about how he believes the scheme will work in practice to ensure that additional money is found and this is not a substitute.

My hon. Friend has got is absolutely right but I fear that the pass has already been well lost on this matter. Immediately after my hon. Friend succeeded me as the shadow Financial Secretary to the Treasury I had the joy of spending a year on the arts and culture brief, one of the elements of which was the National Lottery Act 2006. As my hon. Friend rightly points out, at the outset the national lottery was designed with four heads in mind: arts, charities, heritage and sports, as well as the millennium fund in the run-up to and immediately after the turn of the century.

The 2006 Act set up the Big Lottery Fund. There are some very good people working there. I cast no aspersions on their work, but there is little doubt that the whole issue of additionality and substitution was cast to one side by the Government at that time. Time and again we warned that setting up the Big Lottery Fund would move away from the initial heads for lottery funding. I fear that is precisely what will happen with the Big Lottery Fund taking over the issue of dormant accounts.  It will inevitably be assumed that a certain amount of money will come from these dormant accounts each year and there is a worry that it will not therefore be additional. There will be an element of substitution, particularly when Government spending at local or national level is likely to be tight in the years to come.

The Big Lottery Fund, which now spends over half of the lottery funds that are distributed, does so according to one or two of the original objectives when the lottery was set up nearly a decade and a half ago. It also spends, as the Minister will be well aware, significant sums in areas such as health, education and other promotional elements, which would usually be expected to come from general Exchequer funding. The worry here is that there will not be that sense of additionality in some of the funding and some of the proposals that the Big Lottery Fund will have in mind in its distribution policies. I fear that by passing it on to the Big Lottery Fund, we will not be in any position to monitor it properly.

The hon. Gentleman will be aware that the Big Lottery Fund has always denied the Conservative party’s allegations of breaches of the additionality rules. However, there is an acceptance that a lot of Big Lottery Fund funding goes into partnerships that may involve statutory bodies, but that does not mean that the funding itself is not additional to that being provided through statutory measures. I believe that Conservative party policy would be to reduce that part of Big Lottery Fund funding which does not go directly into the so-called good causes—the charities. That would reduce by about 16 per cent. the money that it puts out. It would damage the partnership funding. I accept that on paper that may be a grey area, but does the hon. Gentleman not accept the undertakings and the assurances that the Big Lottery Fund has given that additionality is maintained in its actions?

I do not entirely accept those undertakings. It is extremely difficult. The hon. Gentleman used the phrase “grey area”. I would use the phrase “muddying the waters”. It comes to the same thing. Clearly there is a level of uncertainty about whether funds will be additional. Given the difficulties we will face in relation to public expenditure and the difficulties at local government level with the various partnerships to which the hon. Gentleman refers, there will clearly be confusion. It is therefore important that we have this debate.

I shall give my hon. Friend an example of that confusion. The Big Lottery Fund recently took me on a tour of projects in my constituency. One project was to provide funding to the borough council for play opportunities, which is a good example of the potential for problems. Would the borough council have spent money from its own resources on play opportunities or was it additional? That is where the problem comes from; once one starts to fund what could be seen as a statutory or a Government priority, one starts to lose the clarity about whether the funds are additional.

My hon. Friend gets it absolutely right. The concern is simply that the local authority often has obligations, and it may start a new programme, part of which supersedes an existing programme, in partnership  with the Big Lottery Fund. For example, I was in my constituency yesterday visiting a Home-Start UK programme—a part voluntary project with young mothers in the community. There is little doubt that an equivalent programme had been in place in the past, but it had been rebranded as Home-Start and had benefited from Big Lottery Fund funding. Our concern is that there are grey areas, which is why this debate is worthwhile.

I do not know of an equivalent body to Home-Start UK. It is a magnificent organisation for the families that it helps. I conceded that there was a grey area, but I think that it is a small one and it is inevitable in partnerships with statutory funding and non-statutory funding. Does the hon. Gentleman accept that those partnerships and joined-up funding can be more effective in delivering socially advantageous programmes than they could be if the two were funded completely separately and never the twain should meet? Conservative party policy, by not funding partnerships, would make the Big Lottery Fund less effective in the way that it helps our communities.

I do not accept that, although I do accept what he said before. Clearly, joint funding is often the most beneficial method for our constituents. The question is where that public funding should come from. The initial idea was that the national lottery would be a ring-fenced fund. I trust that there is a hope that the dormant funds will not simply be used to substitute funding from cash-strapped local or national Government, but will provide additional funding in the way envisaged in the clauses that we will come to shortly. I hope that the Minister will give some credence to what my hon. Friend has said. It has been worthwhile to put on the record that we have expressed some very deep concerns, not least because there is likely to be some confusion as the waters are a little muddied.

It is right and important that we have this debate on additionality. I recognise the intention of the amendment, but suggest to the hon. Member for Fareham that it is defective and would be damaging. I want to be clear about the principles that underlie the Bill. We are very clear that additionality is fundamental to the distribution of dormant account assets. I do not take a Manichean view of the world—life is a lot more complicated. I shall simply observe that hon. Members and noble Lords rehearsed arguments about additionality for a great amount of time when debating the national lottery legislation, and they had enormous technical difficulties in trying to produce a workable legal definition for primary legislation. Therefore, they came up with a different approach, which is why the National Lottery Act now requires lottery distributors to report annually on reporting practice with regard to additionality. That reporting is informed by an understanding of additionality agreed between the distributors and the Department for Culture, Media and Sport in that

“Lottery funding is distinct from Government funding and adds value. Although it does not substitute for Exchequer expenditure, where appropriate it complements Government and other programmes, policies and funding.”

The point about partnership funding was made by my hon. Friend the Member for High Peak. The practice is now well established. We are committed to the principle that lottery money will not be allowed to become a substitute for funding that would usually fall to mainstream Government spending. Distributors are well aware of that, and the Government expect them to abide by that principle.

In summary, I wish to restate that spending from dormant account money must be additional to the Government’s provision. We recognise that unclaimed assets are, in effect, community resources and it is right that they are spent for the benefit of communities. They are not, and must not be, a substitute for Government funding, but they can rightfully complement and add value to the Government’s funding streams and strategies, whether at central or local level. The hon. Member for Fareham gave an example of when that might be the case.

Lottery funding allows things to happen that would not take place if they depended on Government funding alone. No one would argue that, just because the Government already spend money on the arts, our cultural heritage and sport, the lottery should not do so. The same is true of health, education and environmental projects, which the hon. Member for Cities of London and Westminster said were popular causes that were added back in 1998. By and large, the current system works well. The practice is pretty well established, and we intend to follow that model in the Bill.

Prescribing additionality is not only incredibly difficult to do—I do not think too much of the attempt made at that by the hon. Member for Fareham—but it could have the unintended consequence of restricting the types of projects to which the Big Lottery Fund could award funds. Organisations and innovative projects that would otherwise meet the purposes for distribution could be hindered in their application simply because they might not meet the strict interpretation and legal definition of what is additional if it were specified in the Bill. A definition of additionality could stymie the Big Lottery Fund’s ability to give dormant account money to worthy causes. It could also significantly increase bureaucracy and it would open distribution policy up to further legal challenge. For those further reasons, a definition would be undesirable.

We have adopted the right approach. We should not have a definition of additionality because we cannot find one that is agreeable. However, we have agreed on an understanding of additionality through the National Lottery Act between the distributors and the DCMS, which we shall replicate through our approach. That is why paragraph 9(3) of schedule 3 requires the Big Lottery Fund to report annually on its

“policy and practice in relation to the principle that dormant account money should be used to fund projects, or aspects of projects, for which funds would be unlikely to be made available by” the Government. That mirrors the provisions to which I referred earlier in respect of the DCMS. It is the most appropriate way in which to ensure that additionality is delivered in a clear and transparent manner, so we invite members of the Committee to reject the amendment.

However, it is important to debate additionality because we appreciate the concerns that have been expressed  about such matters. We want to stress the Government’s commitment to the fact that the money will be genuinely additional.

I am grateful for the Minister’s comments on how he will seek through the Bill and schedule 3 to ensure transparency in the way that the money is distributed by the Big Lottery Fund. As the schedule makes it clear, there will be a separate set of accounts for that. It is an important principle—particularly as we are talking about a voluntary scheme—that people should know that this is not a substitute for Government expenditure. If people thought that it was, it would increase their cynicism. It would be seen as another way of fleecing people and as a ruse to find a substitute for tax revenues by raiding dormant accounts. It is important to have transparency in the way that money is used, and as much effort as possible must be made to ensure clear blue water between the Government’s own spending priorities and the uses to which the money will be put. That would lend credibility to the assertion that the funding is additional, and it would provide a helpful backdrop against which we could debate the avenues to which other assets could be directed. The scheme would be seen to be working for the benefit of the wider community and not as a substitute.

There are many reasons why additionality is an important feature of the debate and of how the fund will operate in the future. I take on board the comments that the wording may be defective, but parliamentary draftsmen are available to the Government and if they were really keen, I am sure that they could polish it up. It sounds as if the national lottery debate and the National Lottery Act went through the same process without much success, but perhaps Treasury draftsmen would be more efficient and effective. In view of the Minister’s assurances, and my recognition that he takes the issue very seriously, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 17 ordered to stand part of the Bill.