Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by the Scottish Council for Voluntary Organisations (SCVO)

  SCVO is the umbrella body for voluntary organisations in Scotland. Through our members, elected representatives, paid staff and volunteers, we represent the interests of the Third Sector, and provide services to help voluntary organisations work more effectively.

  Our services include: weekly news and current affairs, research, policy and lobbying, conferences and seminars, training, advice, information and publications, IT and intranet, office supplies, design and print, payroll, pension and insurance, project development, European funding guidance, Charity Giving Scotland and Give As You Earn, and direct links with Councils for Voluntary Service and national networks.

  We are the 100,000 professionals and nearly a million volunteers who work in Scotland's Third Sector—44,000 voluntary organisations which support and care for communities and disadvantaged groups throughout the nation. We form one of Scotland's biggest and most far-reaching sectors with our annual income of £1.8 billion providing a major part of the nation's economy.


  The SCVO has maintained a close interest in the impact of the Lottery since it began in 1994 by:

    (a)  hosting three conferences and publishing associated reports on Scotland's experience of the Lottery;

    (b)  submitting evidence to the Select Committee's 1996 inquiry into the operation of the National Lottery;

    (c)  conducting at the request of the NLCB Scotland Committee a two year review into ways in which the transparency of their practice, procedures and decision making of the NLCB Scotland Committee might be improved. A report on the outcome of this review is attached for the Committee's information[36];

    (d)  conducting a number of joint events of the "local surgery" type with Lottery distributors designed to promote good quality applications and improved understanding of the grant making process;

    (e)  acting as the project managers for the considerable programme undertaken by the Millennium Commission and referred to as 21st Century Halls. This programme, funded to a total of £7.8 million, was very substantially oversubscribed;

    (f)  encouraging firstly NLCB Scotland and then the other distributors to pilot the Awards for All package, introduced to meet the aspirations for smaller organisations to have access to Lottery resources, and for whom the main grant application process was excessively expensive for the value of grant sought. In many such cases there were no reserves to enable an application to be properly supported with professionally based advice and costings;

    (g)  experiencing being applicants and grant holders for Lottery grants at first hand. A summary of our application history is attached as Annex A (not printed);

    (h)  conducting research on a commissioned basis for NLCB; and

    (i)  developing a three way agreement with the NLCB Scotland Committee and the Convention of Scottish Local Authorities as a model of good practice, framing common objectives between the voluntary sector, local government and a key Lottery distributor. SCVO is in discussion with other Scottish based distributors on how parallel arrangements might be introduced to help the effectiveness of their contribution.

  As a consequence of this continuing engagement with Scottish based Lottery distributors, SCVO believes it is well placed to comment on aspects of the Lottery's operations in Scotland and would wish to make the following specific points to members of the Select Committee.


  Much the greatest concern to SCVO over the National Lottery remains that which most exercised us at its introduction, namely the level of net additionality it achieves. We believe this is a key area that the Select Committee should revisit as part of their inquiry.

  A substantial portion of Lottery proceeds has to go to prizewinners. That such a small portion of the remaining proceeds goes to good causes continues to surprise the general public when they are asked detailed questions about the destination of Lottery funds. That HM Treasury should be such a substantial beneficiary of Lottery proceeds is contrary to the spirit and intention of the concept of a National Lottery. In our view there is a very strong case to rigorously analyse the real net benefit to the good causes. It should be possible to increase the total share going to the Lottery distributors to 30 per cent from the present 28 per cent.

  There has been very little systematic and published data on the costs to the voluntary sector in preparing applications to the Lottery distributors. Whatever the outcome of an application, these costs represent a net additional cost to the sector's overheads and are not recoverable in the case of successful applications. These costs can be very considerable. In the experience of those preparing applications under the 21st Century Halls programme run in Scotland by SCVO for the Millennium Commission, the level of costs saw £15,000 being invested in a number of cases to prepare a bid that would meet the minimum standards set by the Commission. Putting this in context, research commissioned this year from SCVO by the Carnegie Foundation shows that of the 635 halls in the sample, 49.7 per cent had an income of under £5,000 per annum. This is not the level of profit. This demonstrates a very high access cost, suggesting that for many small voluntary and charitable organisations, there is no additionality from the Lottery as they lack the critical mass or financial reserves to be able to even enter the application phase of the process.

  SCVO were aware of this very early in the life of the Lottery. Positive discussions were held with the NLCB's Scotland Committee on the problems this presented to the many smaller organisations that are such a feature of Scotland's voluntary sector. The outcome was the very positive advent of the Awards for All scheme (see also paragraph 2C below). That uses a much simpler application form, has an upper limit within which the needs of many of the bodies applying for relatively smaller levels of grants are met. SCVO believes this scheme, with its low access costs, high levels of approval with no complications, rapid turnaround of applications and decisions and the capacity for repeat applications, demonstrates the optimum level of additionality that the procedures for larger grants have found so difficult to deliver.

  SCVO were apprehensive initially about how the sector would cope with the steep learning curve and the extent to which the Lottery distributors could engage in feedback to unsuccessful clients without compromising the distributors' consideration of new applications that were effectively re-submissions of the original, amended to take account of the feedback. These mutual uncertainties between case officers and applicants and how to resolve them in a transparent way, building mutual confidence, prompted NLCB Scotland and SCVO to set up a Transparency Working Group. The work of that Group has lead to significant improvements in the understanding of what each side can be expected to contribute to the interchanges on projects, the conduct of business, the nature and timing of feedback and the process of appointments to the Scottish tier of distributor committees. These improvements in transparency and mutual understanding have yielded significant benefits for both the distributors and the wider voluntary sector.


A.  Appropriate timing

  It is appropriate to revisit this, as the Millennium Commission strand of funding moves towards its naturally time-defined conclusion. SCVO believes that public opinion has come to be highly critical of the larger grants and the mega-programme style of operation of some of the distributors and the poor quality of consultation on how available resources should be divided among the distributors. We were concerned at the original plans for the very large slice of available funds to be allocated to the New Opportunities Fund, and we believe our concerns have been borne out by the obvious subsequent pressures on other distributors' resources.

B.  SCVO Proposal for changes

  For that reason we would wish to see the NOF share of total resources reduced from its present level to 23 per cent. We appreciate that this would require transitional arrangements to be put in place and that such a change could probably only be effected from the 2002-03 financial year onwards. With the resources thus liberated, we would like to see the following changes:

    (a)  an increase of 5 per cent in the NLCB's share of the total proceeds going to the Lottery distributors. This is to meet, firstly, the expected sharp decline in NLCB resources in the next two years, following the commitment of the backlog of resources in the 1999-2000 financial year. Secondly, this would be a response to the sharp increase in applications to the NLCB in recent months. Thirdly, this would respond to the public aspiration that this type of charitable and other voluntary sector work most closely corresponds to the "good causes" which the Lottery is popularly expected to support.

    (b)  the balance being assigned to create a new and discrete national strand which would be known as Awards for All and would be designed to pick up the smallest applications for any of the distributors of up to £10,000.

C.  The benefits of an Awards for All Funding strand

  The creation of this strand would have the following benefits in our view:

    (a)  it would recognise the very large number of small applications and provide a custom-made applications process for them, using a methodology of proven value developed in Scotland;

    (b)  experience has shown these applications have a very high success rate (over 80 per cent) and the speed of process is highly regarded by applicants. The ability to make multiple applications is a further benefit, particularly in the early establishment phase of a new charity's existence;

    (c)  it would provide a ready means for small variations in total Lottery income to be re-assimilated in a short time period through this strand;

    (d)  it would help build confidence in the wider relationships between applicants and distributors, helpful when these smaller applicants, as they grow, pursue larger applications;

    (e)  it allows staff dealing with all other applicants to develop specialisms more easily and to be able to examine and develop the powers in the 1998 Act to procure applications in areas where Board Members consider this appropriate;

    (f)  it materially reduced the administrative costs to both the voluntary and charitable sector and to the Lottery distributors themselves, increasing the efficiency and effectiveness of the Lottery's performance;

    (g)  it would enable larger organisations to be able to pursue smaller applications appropriate to their evolving needs and pilot new initiatives or modest improvements or modifications to earlier projects themselves funded in a more major way by the same or other Lottery distributors; and

    (h)  it would provide some leeway for the two smallest distributors (Sports and Arts) to help them respond to their higher number of smaller applications, providing an indirect but constructive further internal redistribution of resources.

D.  Using Existing Powers of Devolved Distribution

  NLCB has existing powers to devolve distribution at local level to extend opportunities for local community based groups. SCVO believes that the exercise of these powers, perhaps on an initial pilot basis in appropriate areas, could prove useful in the context both of the development of the community planning approach in local economic regeneration and the Social Inclusion Partnerships. These powers might be particularly helpful in encouraging the NLCB to consult with local bodies before exercising their powers of procurement of specific projects with capable partners.

E.  The Balance of Benefit—The Tax Dimension of the Lottery

  SCVO has discussed with the Charities Tax Reform Group (CTRG) its concerns over the imbalance between the lucky ticket holder's lack of liability to taxation on their winnings and the scale of liability for subsequent taxation of grant beneficiaries. Our particular concern is the liability for VAT for capital projects which are wholly or principally funded by Lottery grant awards.

  To us, there seems to be an issue of equality of benefit which is not being provided for by the present situation. Why should it be the case that the individual Lottery ticket winners are not liable for any tax and yet those who are seen as the targeted beneficiaries, charities and voluntary organisations, often have to pay VAT, so reducing the net benefits of their Lottery income?

  This issue arose in many different forms during SCVO's management of the Millennium Commission's programme of community hall developments, called 21st Century Halls. The lack of consistency and the anomalous effects of local tribunal decisions produced a situation where the benefits intended by the Millennium Commissioners were seriously compromised by a system of taxation administered in an inconsistent and arbitrary manner. The problems created by the present system are detailed in the attached Annex B[37] and Members are invited to ask themselves how local management committees of charities and voluntary organisations can be expected to navigate such a morass.

  SCVO contends that a blanket exemption for VAT in projects wholly or mainly funded by grants from the National Lottery should be introduced, both to equalise the benefits from the Lottery as between individual winners and successful applicants and to sweep away the anachronistic, inconsistent and unsustainable jungle of VAT's present application to Lottery funded projects.

F.  Post-Devolution Aspects

  SCVO welcomes the various strategies adopted by the majority of the Lottery distributors to take account of the changed circumstances in Scotland following the establishment of the Scottish Parliament. The creation of a Scotland Committee for NLCB, a Committee for Scotland for the Heritage Lottery Fund and the creation of a Scottish Land Fund Advisory Committee and a Scottish advisory committee for the Healthy Living Centres strand of NOF give a much improved knowledge base and sensitivity in considering Scottish based applications. It has, in our view, contributed to the general improvement in the quality and consistency of grant decisions in respect of Scottish applications. This is particularly true when the national (ie Scottish) structures demand a corresponding correlation of accountability and knowledge. We would commend the efforts of all in making the democratic realities of devolution work in the constitutionally difficult reality of the Lottery being a reserved matter.

  For this reason, we consider the absence of a Scottish Committee structure for the New Opportunities Fund to be both anomalous and failing the transparency and accountability tests. SCVO has recently concluded a compact with NOF on how the two bodies will conduct joint business. However, we are in no doubt that NOF should adapt its structures to recognise the post-devolution realities by setting up a Scottish Committee as soon as possible. It's role would be to advise the Board of NOF about the priorities and procedures best suited to meet Scottish needs and conditions, and to determine Scottish based applications to the Fund.

We urge the Committee to adopt this recommendation in their Report to the House.

  SCVO welcomed the statement by the First Minister on the role afforded to Scottish Ministers in giving directions to the Lottery distributors. If there is to be significant Scottish additionality in the distribution of Lottery resources, there is a reasonable presumption that the impact and effectiveness of available resources will be maximised the closer decisions can be made to applicants. There are two potential barriers to this being achieved in Scotland:

    (i)  excessive interference from the Secretary of State for Culture, Media and Sport who has the principal power of direction for the National Lottery conferred by the Scotland Act; and

    (ii)  the claimed power of direction for Scottish Ministers, as an expression of administrative devolution.

  In SCVO's view, there is real potential for either or both these barriers to frustrate the "presumed proximity = maximum additionality" test. To guard against this, we would rather, as in the position of Trustees looking after other funds, that the trustees appointed to the Boards and Committees of the Lottery distributors should be seen to be making independent decisions. The scale of resources represented by the Lottery, even allowing for the recent drop in income, will always be a temptation to Government to divert in whole or in part to meeting its policy objectives. SCVO believes it is for charities and voluntary organisations to compete among themselves for such funds, fairly and transparently, without any pre-emption by the Government's abuse of its powers of direction.

G.  The Impact of the Lottery on Public Giving to Charity

  SCVO were concerned that proper research should be conducted into the impact of the National Lottery on the wider pattern of public giving for good causes. We regard the delays in the Home Office clearing for publication the report of the research commissioned by them to consider this aspect of the Lottery as wholly unacceptable. The delays in publication mean the results (expected to be published soon) will be out of date and of little relevance to the current re-licensing exercise, itself now the subject of legal process.

SCBVO believes that the impact study should be repeated at the earliest practicable date and that there should be a commitment to publish the results no later than June 2001.

  SCVO has had more wide wide-ranging concerns about the apparent decline in donated income received by the Third Sector and has concluded an investigation, supervised by its Donated Income Working Group.

  A copy of the Group's Report is enclosed for the Committee*.

  Some funders were inclined to divert applications from themselves to the Lottery in the first few years of the Lottery's existence. This problem has been less evident lately. SCVO feels that the Lottery should be judged on the extent to which its resources are truly additional to the aggregate already available to the charitable and voluntary sector.

  SCVO would urge all funders to respond where they can make a contribution and thus enable the Lottery to operate as a funder of last resort, maximising additionality.

H.  Preserving the Independence of the Distributors

  SCVO has become increasingly concerned at the ease with which Ministers have felt able to give directions to the Lottery distributors. This concern has been heightened by the lack of consultation on the nature of some of the directions given and whether these were always appropriate to Scottish needs and circumstances. This has been most true of the decisions made by NOF where there has been obvious policy dislocation with the stated objectives of Scottish Ministers, in that some of their programmes did not fit the Scottish policy framework. SCVO considers it imperative that the independence of those appointed to act as distributors is protected. This independence is one of the sector's own litmus tests of vitality, freedom of action and free thinking. Its preservation is essential if different solutions, sometimes not always to the liking of those in elected authority, are to be accommodated and encouraged. Cash available via the National Lottery is money given by the public. It is not "public money". The latter is raised by compulsion, through taxes, and Ministers, rightly, have the say on how it is spent. The former is given by choice, albeit with a strong element of hopeful self-interest, and should provide benefits additional to those secured by normal government spending.

I.  An Issue of Lead Responsibility—Disabled Sports

  SCVO is disappointed that Sportscotland is still not accepting responsibility for grant applications from groups working with sportsmen and women with disabilities. We are aware of the friction this has caused between members of the NLCB Scotland Committee and the sports distributing body. We believe a resolution of this issue to be important in terms of the wider social inclusion objectives of both Government and the voluntary sector, It is particularly sad that this issue should have come to be divisive, since Scottish Disability Sport is co-located with Sportscotland, and has had remarkable success in staging Special Olympic events with multi-national participation.

SCVO would urge that Sportscotland assume responsibility for work with sportsmen and women who have disabilities. We welcomed the conference on Sport and Social Inclusion on 4 September and now hope that the Scottish Minister for Sport (Rhona Brankin) will address this issue.

J.  The Value of a Common Research and Monitoring Programme

  The cumulative experience of Lottery grants since 1994 is very substantial. The material held by the Lottery distributors represents an important source of valuable public data, that could reinforce best practice based on the learning curve of the last six years. Analysis of it could enable issues such as additionality to be considered across all of the distributors. Whether there should be a role for the sector in that monitoring process should be the subject of consultation.

  SCVO would like to see the Scottish based distributors come together to discuss the common strands and objectives in their programmes and how their effectiveness could be informed by pooled research initiatives. There would be merit in the distributors being engaged in discussions with the Social Inclusion Committee of the Scottish Parliament on its substantial research programme, so that areas of interest can be developed and researched for mutual benefit. One obvious area for such work would be on the derivation of deprivation and other indices which could then form the baseline for the future work of both the Committee and Lottery distributors. Other potential themes for research could include work on the life cycle of voluntary and charitable organisations and, a related issue, how to improve the longer term sustainability of activities and projects.

  SCVO suggests that there be an early exploration of the potential mutual benefits of a joint research programme between the Lottery distributors with Scottish committees and the Social Inclusion Committee of the Scottish Parliament.

K.  Technical Aspects of the Relicensing Exercise

  Regardless of which of the two bidders secures the new franchise for the Lottery later this year, SCVO is concerned that there should be no question of good causes losing out should the case be made to remove or re-equip the current network of outlets or the machinery and software currently in use. Any such decision should see these costs being borne wholly by the appointed operator as a necessary and contingent expense of securing the contract.

  SCVO would also like to see a clearer commitment from the Boards and Committees of the Lottery distributors to working with local groups and Councils of Voluntary Service in promoting the contribution the Lottery can make to communities. We recognise the considerable efforts made by case officers and management of those distributors active in Scotland to improving the nature of the relationship between (potential) applicants and the distributing bodies. More needs to be done to make the link with those communities where uptake of Lottery resources has been less than expected and to provide better information and support to increase the rate of applications from these groups and areas.

October 2000

36   Not printed. Back

37   Not printed. Back

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