Memorandum by Department for Culture,
Media and Sport (ERF 14)
1. The responsibility for distributing proceeds
from the National Lottery does not rest with the Government but
with fifteen independent distributing bodies who make their funding
decisions independently of Government, but within a framework
of Government policy directions.
2. The Government considers that proceeds
from the Lottery represent a state resource for the purposes of
the European Community State Aid rules. This brings the treatment
of Lottery proceeds into line with the treatment of all other
Government spending with regard to the State Aid regime. The Department
for Culture, Media and Sport—works with Lottery distributing
bodies to ensure that they are aware of the rules.
3. The Department has been working closely
with the Department for Trade and Industry's State Aids Policy
Unit (SAPU) to provide specific guidance as and when requested
by bodies such as the Lottery Distributors. We are aware that
there may from time to time be a question as to whether individual
grants fall under the State Aid regime. When such cases arise,
the policy is to seek to find a way in which the grants can be
offered in compliance with existing state aid rules. Notification
of individual project grant awards to Brussels is seen as very
much a last resort, because it is time and resource consuming.
4. On the other hand, notification of an
entire scheme allows legal certainty to be obtained that all grants
made subsequently under that scheme will be automatically state
aid compliant. On SAPUs advice, a formal notification of the Heritage
Lottery Fund's (HLF) main grant scheme will be submitted to the
European Commission within the coming month and the English Heritage
(EH) funding regime was notified in July 2001. We are still awaiting
the Commission's decision in the latter case. In the meantime,
HLF, EH and all other funds are being administered, as far as
possible, such that state aid problems should not arise.
5. Article 87 of the Treaty of Rome, which
sets out the basic principles governing the State Aid regime,
does make an allowance for culture and heritage conservation.
Under Article 87(3)(d), aid to provide culture and heritage conservation
where such aid does not adversely affect trading conditions to
an extent contrary to the common interest may be considered to
be compatible with the common market. This does not mean that
aid for culture and heritage conservation is not state aid, but
it does mean that the Commission must look upon it favourably,
as long as the negative impact on competition is minimised and
acceptably small. It is, however, a matter for the European Commission
to consider whether any aid meet the criteria in Article 87(3)(d).
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