Select Committee on Culture, Media and Sport Minutes of Evidence

Examination of witnesses (Questions 620 - 633)



  620. As I understand it, since polling started on what the public would like from the Lottery in 1996, overwhelmingly they would like it spent on health and education which is a dilemma if you continue with the additionality. You do understand the complication here? We saw in America, where there is no additionality, that politicians would sit on the shoulder and say, "I need some schools to be built. You had better hurry up and raise some money because I will not be elected as the Governor of the State." The Committee did not like that inference and that interference but does the Treasury have a view that if that principle was to go how the Lottery might work? Do you think it should be run by the Government as opposed to run by Camelot?
  (Mr Andrew Smith) First of all, I do not think the application of the principle of additionality is any different in relation to health, or for that matter education, than it is, for example, in sports or arts. It is the same question, the same test that has to be applied: if this money were not being provided through the Lottery would it have been provided through the Exchequer? Unless we are careful we can get into a perversely paradoxical situation here—I am not suggesting you are arguing this—but some of the commentary on the application of Lottery proceeds can almost suggest that something is too important to be funded through the Lottery. I think that would be a curious concept to the public who, after all, are buying the tickets. I think at the end of the day people do support a range of different sorts of projects and I think they have no problem, indeed some enthusiasm, for those including health and education. Obviously to the extent that those payments are for one-off or special initiatives, then I think that is more readily accommodated within the Lottery funding framework.


  621. I would like to follow up some of the lines of questioning that Mr Wyatt was starting, perhaps in a rather heretical way. Mr Wyatt talked about the very large take of the Treasury from the Lottery in taxation. I wonder whether it is large enough. After all, here is a source of revenue that is new. My own view, and maybe I am wrong, is that the public really do not care how heavily the Lottery is taxed provided that they do not feel that that rate of taxation is liable to detract from their ability to win a prize. On a number of these issues that we have been discussing this afternoon this Government is very much carrying on the concepts that the previous Government started. I am not saying that what the previous Government started was wrong, after all they started the Lottery and everybody now agrees that is a very important and worthwhile initiative, but just because something was so when the Act went through Parliament, four years on, ought not the Government be looking at asking itself the question is this really the way we need to continue? I ask the first of those about the rate of taxation and the revenue take out of the Lottery.
  (Mr Andrew Smith) You present the hypothesis that the public might be prepared to tolerate a higher level of taxation as long as it did not affect their chances of winning a prize. I wonder about that. Of course, even if it were the case that they would tolerate a higher level of taxation if it did not affect their prospects of winning a prize, that does not mean they want a higher level of taxation. I rather suspect they do not and there would indeed be public resistance to the idea of the Treasury or the Government taking a disproportionate slice of the cake. I think therefore the justification that we have given in terms of seeking to achieve this revenue neutrality and, by all means, re-examining the evidence on that as we were prompted to earlier, is a reasonable way of proceeding.

  622. I would like then to come to the—
  (Mr Andrew Smith) There was a second part to your question which was really saying is it time for a more fundamental re-think. We did make quite a fundamental change in accordance with our Election Manifesto with the introduction of the New Opportunities Fund. As I say, I think that has been generally warmly welcomed. I do not see this is a case for more radical change at this stage.

  623. I would like to come to that.
  (Mr Andrew Smith) But in saying that I am stepping outside my ministerial brief anyway.

  Chairman: And a good thing too, after all we have Ms John here today whose title seems to revolutionise any approach of the Treasury—the Head of a Treasury Spending Team!

Mrs Organ

  624. Small but perfectly formed.
  (Mr Andrew Smith) It is not a contradiction in terms; we do spend quite a lot of money.


  625. I would like to come again to this question of additionality. This Committee and the National Heritage Committee before it has been conducting inquiries on the National Lottery for around eight years and successive Secretaries of State have come before us, and have all avowed as to the integrity, not to say sanctity, of the additionality principle and representatives of the Treasury, including yourself this afternoon, have all endorsed the sanctity of the additionality principle, but why should there be such sanctity? In the United States, as my colleagues have pointed out, they regard their lotteries as a very useful source of revenue for expenditure, sometimes including core expenditure. Again, without criticising the previous Government for the way in which they started this thing off, provided that you are not using revenues from the Lottery in order to cut core expenditure, is there any real justification any more for the additionality principle and in a moment I will come to the categories. I know that all government departments hate the Treasury and feel that unless what is allocated to them is protected the Treasury will raid everything that they can get their hands on (and of course the Lottery is a great thing for the Treasury to raid) but if you are willing to be heretical this afternoon, Chief Secretary, is there really anything so sacred about the additionality principle?
  (Mr Andrew Smith) We adhere to it for the reasons I set out earlier and in considering this I put myself in the position of the person going to buy a Lottery ticket and I think people are happy, comfortable and enthusiastic about the notion that a good part of what they are doing when they are buying that ticket, as well as standing a chance of winning a prize, is giving something extra. If they felt they were simply substituting for expenditure out of taxation which in a sense, as you say, crudely might be defined as allowing that expenditure to be cut, I think they would feel somewhat aggrieved. Judging whether we are adhering to it, you can also look in the round at what has happened to Exchequer funding of some of the things which the Lottery has supported since the General Election, or for that matter since the Lottery started. It is just worth pointing out that arts spending since 1997-98 will have increased by 18 per cent in real terms and spending on sport by four per cent in real terms under this Government, and if you take it from when the Lottery first started to the end of this forthcoming spending review period in 2003-04, the increase in arts spending in real terms will be no less than 43 per cent and in sport 93 per cent (from the current position to the end of the spending review, this corresponds to 32 per cent and 99 per cent respectively). What I am saying is that we as a Government are putting extra into these areas and the Lottery is adding a very considerable amount extra on top of that. I think that is something that the public is happy with and I certainly would hesitate before seeking to change it.

  626. But Mr Wyatt was talking about, insofar as one knows the public's views on this and so on, what the public wants. Again my guess from the evidence that is available is that, okay, the public buys tickets in the end to win a prize but they also look at what the revenues from the Lottery go to in terms of good causes. I have a feeling that, given the choice, the public will be perfectly willing for huge chunks of money from the Lottery to go, for example, to reducing cancer waiting lists or going into cancer wards because cancer is, very understandably, a highly emotional subject. If you ask members of the public would they like £70 million to go to the Royal Opera House or go to the cancer wards in Christie's in Manchester, they would say in language which we do not often use in Manchester, and which I will not use here, they would say in very strong terms that their preference would be for the Royal Opera House never to get another penny and for the money to go to cancer wards not simply in Manchester but anywhere. What I am saying, Chief Secretary, is that if people had their way and were really consulted, if there were referendums on this, I think it is a fair guess that people would say, "We do not care about this additionality principle, if it can provide more computers for schools, if it can help deal with students who cannot afford fees at university, we do not really care about this additionality principle, we would like to spend this money on things that mean a lot to us." So not only for the question of should the additionality principle go on being sacred but the other part of it too. The previous Government, when it created the Lottery, created what were then five categories for awards for distribution from the Lottery and this Government has added the New Opportunities Fund. Why is the Government so utterly preoccupied with those categories? Okay, it has changed it a bit but is there not a case for saying that was then, that was good, we are not criticising it but there is nothing sacred about those categories. Would it not be better to spend more money on health, more on education, perhaps give money to overseas aid? If the Lottery was now to announce it was giving £20 million to the Indian Earthquake fund, I think a lot of people in this country would say "That is a good thing". What I am saying is, this is a very, very traditional Government in the sense that it does not seem to be challenging concepts that are something like ten years old.
  (Mr Andrew Smith) With the greatest respect, I think part of what you are saying there is confusing the concept of additionality, whether spending is not substituting for that which the Exchequer would otherwise have provided, with the question of relative priorities, why should we not give more money to things that the public considers important. As I said earlier, I think we can, through the Lottery, make money available to things which are important without infringing the additionality principle. When you challenge me on the overall distribution, again I just have to enter the caveat that in terms of ministerial responsibility these are very much more matters for the Secretary of State for Culture than they are for me, but I would say there are a number of considerations. One, if you ask people what they want money spent on, yes, a lot will say on health or on education or the environment, I think those were the three which came at the top of that BMA poll, but there will be very substantial numbers, including very many Lottery players, who want to see money also spent on arts and sport and other things as well. I think there is merit here in having a plurality of good causes which are supported. Moreover, having enunciated a principle and saying that we would be guided with and we would stick with additionality, I think it is right that the Government should do so. Moreover, of course, there are those who have come to look to the Lottery as an appropriate source of funding and I think they would question the fairness if there was an abrupt change of policy which adversely affected important activities which they are involved in.

  Chairman: Thank you. If there is a minute or two before your session is over, I may come back to this but meanwhile I will ask Mr Faber.

Mr Faber

  627. The previous Government founded the National Lottery with a mechanism such that the distribution bodies were to be kept at arm's length from ministers, removing the responsibility effectively from ministers making important grants. The thinking behind this was very often those bodies were specialised bodies who understood better than perhaps ministers might where the funding might go. This Government has carried on that principle. Is that arm's length principle one that you support?
  (Mr Andrew Smith) Yes, it is.

  628. As far as you are aware the current Government has no plans to change that?
  (Mr Andrew Smith) Yes.

  629. What would you say are the strengths of the arm's length principle?
  (Mr Andrew Smith) What the public want to know is that the money is being allocated genuinely in response to sound applications for good projects that are going to be properly run. I think they want to be assured that the distribution mechanisms are not susceptible to political manipulation for political ends. Those are the strengths of that measure of independence, also having people involved in that stage who have particular understanding of the areas which are recipients.

  630. That really does follow on from the previous Government's view. Would you also agree that public perceptions of the Lottery are affected if subsequently people see that funds which have been allocated are allocated to projects which perhaps do not have long term viability. Mr Wyatt touched on it in a sense in terms of cancer treatment but perhaps more so with capital projects. Capital projects, the most obvious is the Dome, I am not here to talk about the Dome but if you look at capital projects all over the country which sometimes are not perceived in the local community as having a long term viability, would you agree that as well causes problems to public perception of the Lottery?
  (Mr Andrew Smith) Where projects turn out to be non viable, it is going to be problematic. No resource allocation process is going to be perfect. Obviously it is up to those judging the viability of proposals to take into account all the relevant factors when they are making their assessment.

  631. That is a job for the distribution bodies rather than for individual Members of Parliament to make. Very often individual Members of Parliament try very hard to lobby on behalf of individuals for projects in their areas. What you are saying is the arm's length principle really protects them from having to do that?
  (Mr Andrew Smith) Yes, it does. I am sure that representations made by Members of Parliament are considered on their merits by the relevant people, just as other representations will be. I think the public has confidence in a mechanism that maintains a measure of insulation between the political process and the distribution of Lottery proceeds.


  632. Mr Faber has mentioned something which perhaps I can use in the remaining moments to ask you something else. As a result of the Lottery there has probably been, in the last few years, the greatest wave of more or less simultaneous building and major construction projects for public use, probably in the history of this country. It is an extraordinary efflorescence of construction and all kinds of major public facilities are being provided which otherwise might never have existed. A lot of those inevitably have revenue spending consequences. The Tate Modern, for example, which you had better make sure goes on being free. All over the country art galleries, theatres and all the rest of it, it is an incredible period in our lives this but quite a lot of them must have revenue expenditure consequences which cannot be borne by the Lottery and will be borne either by local authorities or by the Treasury. To what extent are those consequences taken into account when you are considering the potential taxation proclivities of the Lottery?
  (Mr Andrew Smith) First of all, I join with you in celebrating the scale and the diversity and the richness of the investment which Lottery funding is making available. As I was saying in answer to the previous question, I think on each individual project there has to be an assessment of its viability and prospects for revenue funding and so on but set against the very substantial increases in public spending which we announced in the spending review, which will take us on the figures I gave a few moments ago in sport to a 93 per cent real terms higher level of sports funding by 2003-04 than there was when the Lottery began and a 43 per cent real higher level of expenditure in arts (correspondingly a 99 per cent and 32 per cent real terms increase from the current position to the end of the spending review), and of course there will across that period have been a very substantial uplift in the income to local authorities as well. So I give those as examples of where the revenue to maintain and carry forward the work of these wonderful facilities can be sustained. Of course, the users make an important contribution as well.

  633. A proud credo for the Treasury to end this session on. Thank you very much indeed.
  (Mr Andrew Smith) Thank you. I have enjoyed it.

  Chairman: Thank you for coming.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 16 February 2001