Select Committee on Culture, Media and Sport First Special Report

Appendix 4


House of Commons Culture, Media and Sport Committee First Report 1998-99

In the period since the Committee's helpful Report and the subsequent publication of our first Strategic Plan, we have made significant progress on many of the issues raised by the Committee in respect of the service that we provide to our customers.

By the end of September we had committed over £1,500m on more than 5,700 projects. An increasing number of grants have been to smaller projects, focusing on what communities believe is important to them; a trend on which we are continuing to build through Awards for All and the Local Heritage Initiative. At the same time we have given significant support, on a scale which only Lottery funding can provide, to beacon projects of national importance.

We have increased the extent to which our funding targets deprived areas and the results of the evaluation of completed projects is showing that applicants believe that the impact in terms of wider social and economic benefits is greater than they anticipated.

Looking to the future, we hope to develop more sensitive responses to need at regional level, building on the needs assessment work that we are undertaking, greater outreach by our regional teams and through new Regional Committees in England.

We set out below a report of the progress that we have made in implementing our response to the Committee's recommendations.

    (ii)    Preparation of a comprehensive audit of the heritage sector and its needs should be a high priority, but it is a responsibility of all relevant statutory agencies, as well as voluntary bodies and local government, not just the Heritage Lottery Fund.

A three year programme of research was launched in 1999. Good progress is being made but it will take time to complete a full heritage needs assessment given the wide spread of the sector involving no fewer than 23 statutory agencies and many other heritage organisations that have a legitimate interest in this important work.

The Fund has commissioned a major study of parks in local government ownership (together with the DETR and English Heritage) which has now reported, drawing attention to the declining state of many of the UK's parks. HLF and Resource have worked together to produce a major study of the assessment of needs in the UK's museums and galleries, the first of its kind. With support from HLF the South West Museums Council has published a model audit of museums in its region and similar studies are in hand for the two Southern Museum Councils. In addition, we have supported work by the Transport Trust (for transport heritage) and an updated report by the Inland Waterways Amenity Advisory Council. A schedule of work for other heritage areas is being developed, according to the most pressing areas of concern, and as part of a longer campaign.

In its Report, the Committee saw no basis whatsoever for thinking that the needs of the cultural heritage had in any sense been met by the investment that HLF had been able to make. All of the indications from our early research into need suggest that the scale of the funding deficit is enormous. If it were not already appreciated, it is becoming apparent that investment on the current scale will need to continue for the foreseeable future if the accumulated deficit in the sector is to be tackled in any meaningful way.

    (v)    We recommend that, when any future application follows an earlier application rejected in part due to policies, priorities or criteria established after the initial application was made, that fact should be brought to the attention of the Trustees by staff of the Fund.

This situation has not arisen since the Committee made the recommendation and we believe that this problem has now worked itself out of the system. After a time when we had to change policies, priorities and criteria in response to new legislation and Directions we have more recently enjoyed a period of consolidation which has made possible greater consistency of approach. If any future changes in the Directions prompt a change in our policies or priorities we shall follow the Committee's recommendation.

    (vi)    Once the Heritage Lottery Fund has established a Strategic Plan in the light of consultation, including the conclusions and recommendations of this Committee, it should seek to adhere to that Plan with clarity and consistency over a period of years. Once the Department for Culture, Media and Sport is satisfied that the Strategic Plan reflects the requirements of its Policy Directions and the recommendations of this Report, we recommend that it exercises great restraint in policy changes and amendments to Policy Directions for England until at least 2001.

We have adhered to the policies and priorities set out in our Strategic Plan, reporting on our progress in implementing these in our Annual Report. There have been no further changes to the Policy Directions, which has meant a welcome period of stability. The present Strategic Plan comes to an end in March 2002 and we have started the process of preparing for our next Plan, taking account of the needs assessment work described above.

    (vii)    We recommend that applicants should be advised that the extent to which a project offers demonstrable social and economic benefits to the community will be a significant factor in a final decision and that the assessment process should reflect this.

In assessing any application we take into account the social and economic benefits offered by the project. More specifically, three of our grant programmes—the Urban Parks Programme, the Townscape Heritage Initiative and the Joint Places of Worship scheme in England—are all targeted at areas of greatest deprivation and we have established a Special Programmes Unit within NHMF to co-ordinate our approach to these three programmes. We are also considering how best to emphasise the importance of social and economic benefits in our guidance to applicants, which is due to be comprehensively reprinted in April 2001, the first complete revision for several years.

    (viii)    In view of the importance which we attach to social and economic benefits and the past under-funding of coalfield areas we recommend that the Heritage Lottery Fund treat the Coalfields initiative as a high priority among the potential new initiatives listed in its draft Strategic Plan.

When we consulted on a list of potential new initiatives in the draft of our Strategic Plan the overwhelming response indicated that we should adopt new initiatives of the Coalfields type sparingly. However, together with other distributors we have taken part in research led by DCMS to understand why the Coalfields have done less well than other areas. The report was published by DCMS in June. An action plan is now being followed up. We have continued to make significant grants to a number of projects in the coalfields, including museums at Big Pit and at Caphouse, the National Coal mining Museum for England. We have also given the Coalfields explicit priority in our grants to churches in England through the Joint Scheme operated with English Heritage. Where the Coalfields areas coincide with areas of greatest deprivation, we also take this into account as one of the factors in determining whether and at what level to make a grant award. We have recently received an application from the Coalfields Regeneration Trust to undertake a heritage audit of coalfields areas, in order to determine the scale of need and opportunity afforded by heritage projects.

    (ix)    We recommend that the Heritage Lottery Fund maintains, publishes and monitors statistics on the allocation of grants by local authority area alongside information on the level of deprivation of the authority indicated by central Government statistics.

We have always maintained and monitored data on the allocation of grants by local authority and made use of the deprivation indices published by central Government. The top 100 most deprived local authorities (on the 1998 Index) have received more than 60 per cent of total grant awarded in England.

The review of the 1998 Index of Local Deprivation by DETR has led to the production of the Indices of Deprivation 2000 which enable direct comparison at ward level in England but not, as before, at local authority district level. In Scotland the indices are out of date and do not relate to the new local authority districts. We are therefore considering how best to present on our web-site the allocation of grants alongside deprivation information.

    (x)    We recommend that the Heritage Lottery Fund seeks to collect, maintain, publish and monitor statistics on the distribution of grants of distinct benefit to minority communities.

We already ask if applying organisations largely or entirely serve people from minority communities. Following work with all Lottery distribution bodies DCMS has issued guidance on what monitoring information should be collected from applicants and we will be introducing a new form with our reprinted guidance to applicants in April 2001. We have made increasing efforts through our outreach work and research programme, and in new partnerships with leading groups such as the Black Environment network, to improve our understanding of the needs of heritage groups amongst Ethnic Minorities. For example, we strongly supported the recent 'Whose Heritage' conference, and have commissioned research on audience development for small heritage organisations from under-represented groups.

    (xi)    We recommend that the Heritage Lottery Fund amends its policy on partnership funding to provide for payment of up to 95 per cent of total project costs for projects under £100,000 and up to 85 per cent for larger projects in cases of exceptional need within specific geographical areas which suffer from high levels of deprivation or have received consistently low levels of Lottery funding.

The research into financial need that we undertook in conjunction with the Local Government Association did not suggest the need for changes in our policy on partnership funding. However, although the research in the Coalfield areas suggested that there were a variety of reasons why they have attracted less Lottery funding than other areas, it did reveal that some applicants found it hard to raise even small amounts of partnership funding. Although there was no question of a universal exception to the normal requirements for partnership funding for all Coalfield areas the report recommended that Lottery distribution bodies should be prepared to be more flexible in Coalfield areas.

There are obvious problems with a flexible approach that treats some applicants more favourably than others and we do not favour the introduction of a universal means test by which to assess the contribution an applicant can afford to make to a project. Our partnership funding requirements are already very generous and we are always prepared to count the cost of volunteer time and other non-cash contributions by applicants. We are not convinced of the need to change our current policy.

    (xiii)    We recommend that the Heritage Lottery Fund includes in its Strategic Plan criteria for the designation of 'beacon' projects of pre-eminent regional or national significance. We further recommend that the Fund maintains, publishes and monitors statistics on funding by nation and region excluding as well as including 'beacon' projects.

Our Strategic Plan speaks of HLF's wish to reinvigorate the very best of the UK's heritage and explains that national heritage is not synonymous with national institutions, but that it does imply something of more than purely local importance. Up to 25 per cent of our annual budget goes to major grants of over £5m, which we hope will meet a significant proportion of the most important heritage needs (for example, beacon projects) wherever they arise. A further 2.5 per cent of our annual budget goes to grants of between £1m and £5m, many of which are for projects of national importance. However, we are not persuaded of the need for any additional criteria or a system of designation, which may serve to limit our flexibility in a way that is unhelpful to the national heritage.

We maintain, publish and monitor statistics on funding for every type of national heritage.

    (xiv)    The Heritage Lottery Fund's approach to distribution should be based on consideration of heritage need, not solely on the current location of heritage assets. We recommend that the Strategic Plan of the Heritage Lottery Fund includes an assessment of heritage need for each nation of the United Kingdom and each region of England.

Our first Strategic Plan set out our limited understanding of need in the heritage sector. A three year programme of research to fill the gaps is underway. With the help of the Committees for Scotland, Wales and Northern Ireland we have produced strategic frameworks for those countries, copies of which are being made available to the Committee. We also look forward to the production of regional cultural strategies by the DCMS Cultural Consortia in the English regions, which will also feed into our strategic planning.

    (xv)    We recommend that the Heritage Lottery Fund includes the following three objectives in its Strategic Plan:

      "to achieve approximate equality in the distribution of funds (excluding funds for 'beacon projects of pre-eminent regional or national importance) between the nations of the United Kingdom and between the regions of England";

      "to ensure that the distribution of 'beacon' projects of pre-eminent regional or national importance reflects project quality and heritage need as well as the quality of heritage assets"; and

      "to increase the social and economic benefits from the allocation of grants to heritage projects".

Our Strategic Plan reflects these principles, although not the particular expressions of them recommended by the Committee.

It is too early in the life of the Plan to judge our success in these areas but our routine monitoring of the distribution of grants by area reveals that the objective of spreading grants under £1m more evenly is proving challenging. A number of projects—for example under the Townscape Heritage Initiative, and to Wildlife Trusts—although over £1m in total are in fact a collection of much smaller grants spread over a wider area. However, even so, since we set ourselves this objective the disproportionate share (in per capita terms) of grants under £1m enjoyed by the three home countries over England has slightly increased and five of the nine regions of England have moved further away from the average for all of England. We are increasing our efforts to reach the parts of the UK that have not had support from HLF, but it may be that we have set the threshold too high at up to £1m. We strongly believe that every area has inherited something of value that it can enjoy and take pride in. The joint distributor Awards for All programme and the Local Heritage Initiative, administered on our behalf by the Countryside Agency, are designed to identify and support this with small grants of £500-20,000. However, the distribution of grants towards the top end of the under £1m range may be influenced more by the fixed location of heritage assets than we had hoped. Certainly, the award of one or two grants of close to £1m can instantly change the position of a region or country in comparison to the national or UK average.

    (xvi)    The scale of investment in the cultural heritage by the Heritage Lottery Fund has been impressive, but we see no basis whatsoever for thinking that the needs of the cultural heritage have in any sense been met. Nevertheless, we have concluded, with reluctance, that the proposed reduction in the share of Lottery funds for this area is correct. We also consider that a greater emphasis should be put on those projects within the sector which bring significant social and economic benefits. A reduction in grants for acquisitions may be the unavoidable consequence of this. This blow should be softened by increases in the budget of the National Heritage Memorial Fund

The indications from our early research suggest that the needs of the national heritage are larger than suspected and that meeting them will take continued investment in all the sectors we support at the current scale for the foreseeable future.

We share the view that greater emphasis should be put on projects within the museums and galleries sector that bring significant social and economic benefits and we will reflect that in our reprinted guidance to applicants in April 2001.

The grant-in-aid to the National Heritage Memorial fund was £3.5m in 2000-01, rising to £5m in 2001-02. The Secretary of State has not yet announced the size of the grant-in-aid for future years.

In our view, £5m is the minimum amount necessary in a year to maintain even the most basic defence of the most outstanding parts of our national heritage which are at risk. In anticipation of the increase in the Government's grant-in-aid in 2001-02 to that amount we intend, exceptionally, to make available £1.5m from our endowment, thus providing a fund of £5m in 2000-01 also.

    (xx)    We support the proposal of the Heritage Lottery Fund to increase its support of the natural heritage as a proportion of its total grants over the period of its forthcoming Strategic Plan. We recommend that the Fund gives particular consideration to the requirements for appropriate revenue support for natural heritage projects to ensure viability and the long-term maintenance of countryside and land in receipt of funding.

We are considering this recommendation as part of an overall review of the Fund's revenue grants programme and a review of the priorities for our land and countryside policies. These reveal that there is a low take up of revenue grants in the land and natural heritage areas. We will be considering re-focusing the revenue programme as a whole, in order to raise the number and quality of 'activity' grants. We will also consider the possibility of merging our separate capital and revenue schemes in the Fund's new application literature in April 2001. But on-going revenue support for long term maintenance of countryside would fall outside our present Policy Directions.

    (xxi)    This Committee considers it vital that the total commitment of National Lottery resources to urban green spaces is maintained or even enhanced in coming years. In view of the disproportionate gain to the New Opportunities Fund from additional proceeds to the National Lottery Distribution Fund, increasing responsibility for ensuring this should lie with the New Opportunities Fund We recommend that a joint scheme for urban green spaces be operated by that Fund and the Heritage Lottery Fund, drawing upon the experience and excellent track record of the Heritage Lottery Fund in this area, but not confined to urban space of heritage importance. Even if the balance of funding switches to the New Opportunities Fund, we consider that it would send the wrong signals if the Urban Parks Programme's separate identity within the Heritage Lottery Fund was not retained.

We welcomed the Committee's comments and entered discussion with the New Opportunities Fund about the scope for co-operation and joint action. In the event, NOF's priorities were too different from our own to make a joint scheme possible at this stage although we will continue to look for opportunities to collaborate.

The Urban Parks Programme continues to be one of our most successful programmes and retains its own identity.

    (xxii)    What is not sufficiently taken into account in current processes is the large and disproportionate burden on smaller projects of the present procedures. We recommend that a simplified assessment process should be introduced which will clarify the prospects for smaller projects at an earlier stage to avoid costs which cannot be afforded and hopes which ought not to be dashed.

The very successful Awards for All Scheme provides a simple and rapid process for grants under £5,000. A simple application process for capital projects under £50,000 is presently being piloted in the North West and London with a closing date for applications of the end of September. It is too soon to judge the success of the pilot, the material for which has been approved by the Plain English campaign, but initial feedback has been positive. We will reflect any lessons learned in our reprinted guidance to applicants in April 2001, which we shall try to make as simple as possible.

    (xxiii)    Given the potential of the two-stage process to reduce costs for applicants and clarify a project's prospects of success at an earlier stage, we also recommend that the Heritage Lottery Fund extends the two-stage process to all Projects. We further recommend that it introduces a three-stage process for larger and more complicated projects.

The recent report presented to the Secretary of State by QUEST concluded that for the majority of applicants the cost of applying for Lottery grants was not a significant issue—the issue, particularly for smaller organisations, was one of capacity in the applicant body to cope with the application procedure.

The two-stage process has not proved universally popular with applicants and the introduction of a third stage is unlikely to be welcomed. Our experience is that applicants that pass the first stage expect to automatically succeed at the second stage and to receive a grant. That applicants want the first stage to be the substantive test undermines the two-stage concept of a low first hurdle passed with relatively little information provided by the applicant. We must inevitably have a high level of satisfaction at that first stage that the project meets all of our requirements if there is no further effective test at a subsequent stage.

However, we entirely share the Committee's wish to make the burden of applying proportionate to the size of the grant requested and to clarify a project's prospects of success at an early stage. If successful and extended across the UK, the simple application process for capital projects under £50,000 presently being piloted in the North West and London will help reduce the burden for applicants. We are also keen to provide the earliest guidance to applicants on their prospects for success and are considering how we might do that in the context of our reprinted guidance to applicants in April 2001. If we can engage applicants in a dialogue that may even be possible at a stage before they formally apply for a grant, which is the ideal.

    (xxiv)    We recommend that the Heritage Lottery Fund introduces as its normal practice continual involvement by a single member of staff for the whole life of a project as soon as possible.

Assessment and monitoring processes were successfully merged in 1999 and we are now providing a whole life service to applicants.

    (xxv)    We recommend that action is taken by the Government and the Heritage Lottery Fund to enable a simplified standard contract between the Fund and grant recipients to be in place as a matter of urgency and that the contract should employ the plainest possible English.

Although in our response we referred to simpler contracts for revenue and smaller capital projects being in preparation, in the event, we re-wrote our entire suite of contracts to simplify them all substantially and to make them easier to understand.

    (xxvi)    We recommend that all applications for grants from the Heritage Lottery Fund should be in the public domain. We further recommend that the Fund's web-site should include a list of applications, should indicate the stage which each project has reached and should then state the final decision, including a decision to reject the application.

We publish on our web-site a list of all new applications and all decisions, including decisions to reject an application. The sole exception is applications for acquisitions where the knowledge of our potential involvement may adversely influence the sale price of the asset.

    (xxvii)    We recommend that all external advice to the Heritage Lottery Fund requested after March 1999 should be made available to applicants and that applicants should be given an opportunity to respond to and comment upon such advice before a determination is reached.

We consulted our advisers on the Committee's recommendation. Many, particularly those that are membership organisations (e.g., museums councils), had concerns about making advice available. Subject of course to the requirements of legislation, our advisers would rather give us objective and sometimes candid advice on a confidential basis, particularly where they are commenting on a body which is a member of their organisation, and with which they must have a continuing relationship.

We will however review our policy when the Freedom of Information Bill has been enacted.

    (xxix)    There is a strong case for a regional presence for the Heritage Lottery Fund in England. We recommend that this should be developed in tandem with, rather than in consequence of, a regional structure for the Department for Culture, Media and Sport. We further recommend that the Fund considers the case for separate Regional Committees in England which would undertake functions comparable to those of the Scottish, Welsh and Northern Ireland Committees and which would replace the English Committee.

We have decided to establish regional committees in England as a replacement for the Committee for the English Regions as the Committee recommended.

Eight of the nine Chairmen have been appointed and we are in the process of recruiting the last chairman and members of the committees by open competition. Like the Committees for Scotland, Wales and, Northern Ireland, the English regional committees will decide grant requests for more than £50,000 and less than £1m. They will also advise on strategic priorities in their region and on the priority of applications for grants for £1m or more. The committees will be operational at the start of the next financial year.

The decision-taking committees will meet in their regions but they will be supported in their work by staff based in London but spending significant amounts of time in the regions.

October 2000

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