Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of Witnesses (Questions 400 - 419)



  400. This Government did change the rules in terms of capital against revenue expenditure. Do you think the balance between those two is now right or would you like to see, particularly in, say, sports and arts and heritage, a further shift because yours was never capital based and the others were, a switch towards more revenue funding and less capital?
  (Mr Casey) The balance has certainly changed. It is interesting to see that about three years ago about 97 per cent of the Lottery was going to capital projects and it is now below 50 per cent. It is quite significant how much has changed. From the sports point of view I think the balance is about right. What it does allow us to do is to make sure that we are providing much needed capital projects in many inner cities and areas of rural deprivation but to complement that by, for example, the appointment of sports developments officers or sports specific officers to make sure that the local population is encouraged to use those facilities. They are complementary in the way they operate. Secondly, at the other end of the scale we have been able to use revenue funding to identify talented young performers and to make sure that top performers are being supported. From the sports point of view the balance is about right; it allows us to meet some of the demands on capital but also to make sure that that capital investment is extremely well used for local communities.
  (Mr Hewitt) I have very much the same answer. There is now substantially less money available for capital. The demands are still very considerable, particularly at the medium and small scale throughout the country, going back to your question about local activity. There is a lot of pressure on our capital budget. On the other hand, what is being achieved in terms of the Regional Arts Lottery Programme is an essential ingredient in making sure that the investment in the hardware has the software to make these places lively and exciting and interesting. It is always a delicate balance and probably at all times we will be doing a bit of adjustment one way or the other, but broadly speaking I think it is about right now.
  (Ms Case) My spin is slightly different because we do see our programmes perhaps having a stronger continuing capital bias than perhaps arts and sports, partly because the heritage is constantly deteriorating in a sense round about us so there is a continuing need for more capital investment. That is what the constituency tell us when we consult them. On the other hand we do now run revenue or activity programmes and some of them, like the Museums and Galleries Access Fund, are working well in exactly the sort of way that has just been suggested for arts and sports in terms of making use of the capital assets that people have. We would over time however see a slight shift in our position which is still very heavily capital dominated to one where there is a bit more revenue.
  (Mr Hornsby) It does not apply to us in quite the same way.

  401. At the beginning the Lottery funding was almost entirely bid led. In other words somebody had to make a bid before you could give any money to them. That has changed but again would you still prefer to have a greater overall concept of where you think the money ought to be going and putting money there rather than allowing people to come to you? I know it is a rather big question.
  (Mr Casey) I think it is both. It is still very important that the voluntary sector and the local authorities have the opportunity to come forward with bids because it allows them first of all to tell us what they think are requirements at a local level. At the other end one of the great benefits of the change of the Act two years ago was the powers of solicitation under which we can identify where there was most need. I can give you two examples. One of the great issues is to make sure that in areas of rural and urban deprivation facilities are provided, and again you can identify where most need is and work with the local authorities or voluntary sector so that those bids come forward; and, secondly, perhaps on a more comprehensive basis to look at parts of the country which are not putting in many applications. Certainly in sport, and I think it might be the same in the other distributors, areas such as the east and west Midlands for some reason do not put forward many applications.

  402. So Dennis Skinner keeps telling us.
  (Mr Casey) Therefore near Mr Skinner's constituency we have set up things like sports action zones in former coalfield areas to try to turn that round and make sure that applications come forward.
  (Mr Hewitt) We have also found that in the case of our first capital programme we got very few applications from the black community. The reason for that was not that there was not interest out there but just a sense that this was not for them. With the second capital programme we have appointed somebody to go out whose express job is to work with black theatres, black music organisations and others to encourage them to apply. The problem there was not that we were turning things down but we were not getting the applications and we think it is very important that we play that kind of role.

  403. So do you keep an eye for instance on whether or not there is a folk festival or a jazz festival or whatever it might be or a youth festival going on and perhaps going to them and saying, "Do you need funding?" rather than letting them come to you for funding?
  (Mr Hewitt) Absolutely. This happens particularly with the regional arts boards because they are connected at that level. They often have a revenue relationship with a festival of that kind and they are providing assistance on an annual basis. Out of that dialogue it is right that it can come from either side. It should not just be bid based but there should be proposals coming from the regional arts boards that you might strengthen your case by building this or equipping yourself in that way. Essentially it is flexible and it can happen both ways.

  404. If a festival came to you and said, "There is a specific artist we would like to bring across from the United States. It is going to cost us a lot of money", would you give a specific grant to do that sort of thing?
  (Mr Hewitt) Yes, it is perfectly possible within our Regional Arts Lottery Programme that we would provide assistance. The grant would not be to the individual artist; the grant would obviously be to the promoter or the festival organisation itself, but we would be very happy to consider that kind of proposal as part of a bid from a promoter.

  405. Can I just finish by asking Mr Casey specifically whether he believes that we would have had anything like the success in Sydney if we had not had the Lottery?
  (Mr Casey) Rather than me answering the question I think the athletes answered the question from Sydney. I was very encouraged by the fact that at both the Olympics and the Paralympics the athletes said that their success was very much down to the Lottery. I will just add two points to that though. What we saw in Sydney was not just the Lottery money per se making a difference. I can quote Frank Dick, the athletics coach. He said that what made the big difference in Sydney was the planning to get the money, in other words the focus, the thinking, about high performance and I think that was shining through, and I think we have got a very strong base for future Olympics. Secondly, yesterday I was sitting next to Tim Foster, one of the coxless four rowing team and he was saying that about five or six years ago, through the Sports Aid Foundation which did a fantastic job before the Lottery, he was getting something like £400 or £500 and that was helpful, but the fact that Lottery funding now allowed him to train longer and harder and see the rest of the team doing the same has made an enormous difference. What was very encouraging was to see the athletes themselves saying that and getting so much support from the general public as well.

  406. And equally grass roots support presumably means that more people come through?
  (Mr Casey) Absolutely. There is always this debate: should you fund the top or fund the grass roots, and of course you have got to do both. That is why so many of the other programmes in schools and the community are so important as well and there is such a huge emphasis on that. Again it is encouraging that during the Olympic week the Prime Minister announced an extra £750 million going into Sport in Schools to make sure that we were providing for the base of the pyramid at the same time as the much narrower range of people at the top and those who have the potential to get to the top.
  (Mr Hewitt) What happened in the Olympics I like to think is very good for all of us, that it is worth remembering that although the arts may not always work in a competitive vein we also have our Oscars. On the way here this morning I bumped into Stephen Daldry who of course made Billy Elliott, which of course is very likely to receive a whole range of accolades in this next period. He comes out of the Royal Court Theatre, which was a beneficiary of a major capital grant. Within all our sectors there are stars and there are stars who have been assisted by the Lottery.
  (Mr Hornsby) Just picking up Mr Maxton's point about targeting, as paragraph 13 of our evidence said, the Board is shifting more towards a targeted approach. As an example of that, we have been looking very closely at priority area initiatives, that is, those parts which, in the jargon of the trade, can be referred to as "cold spots" where we just have not been getting our grants out and there is real need. I think that sort of targeting is very important.

Mr Faber

  407. Could I first of all ask each of you to give me the figure of your annual income from the Lottery for each of the last three years?
  (Mr Hornsby) It might be more convenient if we provided a detailed note[1] but the short answer is that our income over the last few years has been moving at about £280-£290 million. I do not have the precise figures immediately to hand.

  408. And it has remained constant at that rate?
  (Mr Hornsby) More or less, yes. There are some fluctuations because, as this Committee knows only too well, the larger the balances you retain in the National Lottery distribution fund, the greater interest earned by them, so as my own Board has been progressively reducing the balances and getting more out in grants our income has dropped a bit, nothing to do with the commercial operator but because our interest payments are kept down.
  (Ms Case) My position is almost exactly the same as Mr Hornsby's, given that we get exactly the same share of the grant.[2]

  (Mr Casey) The figures that we have provided in our evidence show that the figure for 1997/98 was just over £300 million from the Lottery and for the last financial year it was about £220 million.

  (Mr Hewitt) In our case I would have to give you a detailed figure for all three years but something very similar to Derek Casey's figure.

  409. Mr Casey, you said earlier that you were pleased that your Exchequer funding was due to double. What is your Exchequer funding in this current year?
  (Mr Casey) It is £37.5 million.

  410. When is that expected to double?
  (Mr Casey) That will be at the end of the financial year, 2002/03, by that time.

  411. So you have lost over £80 million in Lottery funding over the last three years and you are due to get another £37.5 million, roughly £40 million let us say, over the next couple of years. That seems like a pretty big shortfall.
  (Mr Casey) Yes, except that I would argue that there are two issues about the decline in income. One was that at the start of the Lottery everyone was surprised by the scale of the ticket sales and perhaps it has actually evened out and settled downwards. Secondly, there has been the establishment of the New Opportunities Fund, but I would not say that that money that has gone to NOF has been lost to sport because clearly, as we mentioned before, we are working closely with them on a whole series of programmes which will benefit sport and physical activity.

  412. The language in your written submission is a little more gloomy than that. Under your heading "Levels of Income" you have a heading "Implications of fast falling income" where you say that clearly any further reduction in sport income that is lost could have serious implications for English sport. Are you expecting it to fall any further?
  (Mr Casey) There is no doubt, as my colleagues have said, that the shopping list of requirements for sport in England is significant. We have published figures which show that, for example, just to provide the community with reasonable access to sports centres and swimming pools, it will be of the order of about four and half to five billion pounds, and equally grass roots development and top performance development is important. I think there is a significant demand there and obviously we would like to see as far as possible money for sport either directly or indirectly through the Lottery and its share maximised over the next few years.

  413. Mr Maxton was asking earlier about the historically bureaucratic nature of applying for Lottery funding but is not the truth that in fact people who are applying are going to be squeezed increasingly badly in the future and that, if anything, whilst you may make your process less bureaucratic, there are going to be very many more disappointed bidders?
  (Mr Casey) The balance between trying to make the application as simple possible and public accountability is a difficult one to strike. There are three issues that we have raised within our submission in relation to funding. One is that we would like to see some change in the taxation of the Lottery to provide for, for example, more sports organisations having charitable status which in very simple terms would make the money go 17.5 per cent further. Secondly, there is a case for changing the financial directions to give loans as well as grants so that in some cases where in a sense they have a cash flow problem we would get the money back in due course. That would make a big difference. Thirdly, I would like to see some relaxation in the financial directions for us to work more closely with the private sector, whether it is private finance initiatives or PPP (public/private partnerships). I think that would help in terms of bringing in partnership funding which would sometimes allow the percentage of our investment to go down. There are some issues where we would like to see other changes but those are the key ones in terms of the overall financing.
  (Mr Hornsby) Mr Faber is absolutely right. The figures in paragraph 4.3 of the Joint Distributors' evidence show that there is very considerable over-bidding and, as Mr Faber said, as we make our processes more transparent and accessible we will find ourselves turning more people down. What one is trying to do is to say that if there are hurdles for particular types of, say, small community groups, we would like to be accessible to them. Interestingly, as Ms Case has said, on the Awards for All scheme where we are showing something like a 64 per cent success rate, six out of ten people who apply for those small awards are getting grants: on the main grant scheme one is showing very much less than a 50 per cent success rate and, as I say, the Joint Distributors' submission at 4.3 showed that overall we have been giving one pound for every six pounds requested, HLF one pound for every four pounds, Arts Council for England one pound for every three pounds, and so one is faced with quite a high reject rate.

  414. You mentioned NLDF a moment ago. How does it work? How do you apply for money for balances from the NLDF?
  (Ms Case) We apply for money from the NLDF on a monthly basis depending on our own forecasts of how much cash we need to pay over to applicants in that period but the management of the NLDF is in the hands of the DCMS.

  415. How much is sitting in the fund as far as you are aware on an ongoing basis? What are you trying to do to keep the Fund at it?
  (Ms Case) It is not a question of them keeping the Fund at it. What is paid into the Fund is the distributors' share of the operators' proceeds. That is at one end what determines it. At the other end what determines it is the speed at which we draw it.

  416. What would you say is the global figure which is uncommitted at the moment?
  (Mr Hewitt) Between these distributors there is a current balance for the Arts Council of £250 million going up to £500 million for the Charities Board, £900 million for heritage and £460 million for sport. I would add that in every case those balances are already committed, in some cases slightly (controllably) beyond the point of commitment, so these resources have already effectively been spent. They are simply sitting in the balance awaiting dispersal.

  417. And uncommitted monies?
  (Ms Case) I do not think any of us have any uncommitted money.

  418. Are you satisfied with the rate of return that you get on your money? It is well invested?
  (Ms Case) We talked to the DCMS about this at the beginning of the year because at the beginning of the Lottery when people did not know how quickly the money was going to be paid out by the distributors the DCMS instructions to NILO were to keep it all in relatively short term instruments so that it was there on demand as we needed to pay out the grants. We felt that on the basis of the experience that we now have most of us were going to keep some committed but undrawn down balances, and we had a discussion with them which has led to them changing instructions to NILO so that more of the money is put into longer term instruments reflecting a view that we provide forecasts as to the rate of drawdown that we see on our balances over the next few years. That has resulted in more of the money being in slightly higher yielding instruments which is all to the good since we get the income.

  419. You would all agree with that?
  (Mr Hornsby) Yes.

1   Note by witness: The income for the National Lottery Charities Board in 1997-8 was £366m, in 1998-9 was £307 million, and in 1999-00 was £294 million. All these figures include interest on our NLDF balances. Back

2   Note by witness: The National Heritage Memorial Fund's income for the last three financial years (excluding investment income) has been: 1997-8 £322 million, 1998-9 £253.3 million and 1999-0 £244.7 million. Back

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