Select Committee on Transport, Local Government and the Regions Memoranda

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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Prepared 25 February 2002