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Mr. Chope: Will the Minister therefore speculate on what the situation would be if such retrospectivity were not included in the Bill? Is he saying that its inclusion makes no difference, or that it would put in jeopardy endowments that have already been set up? If so, which existing endowments would be questioned?
Mr. Caborn: I am not going to speculate; it would be very foolish to start to do so. We are only trying to take advantage of the opportunity, which all parties want to take, to reassure people that all those decisions that have been made on endowments are indeed legal. We have no doubt that they are legal, but we want to take the opportunity to give that reassurance, and in my opinion it would be stupid not to take it.
Mr. Greenway: Perhaps we could give the assurance in a slightly different way. Can the Minister confirm that to his knowledge there has never been any suggestion of a challenge as to the legality of the endowments that have been created? That is my understanding.
Mr. Caborn: The hon. Gentleman is correct. There has been no challenge. Indeed, there has been no inference of a challenge. However, I reiterate that it would be foolish if we did not take the opportunity to reinforce the provision and reassure those who are distributing those funds.
Mr. Chope: We have had a useful debate, as I think everyone who has participated in it has accepted. It is important to get on the record the reasoning of the Government and of my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) in introducing a retrospective element. As I said earlier, to have a retrospective element in a Bill is exceptional; it should be
included only in exceptional circumstances. As the Minister has assured us that there have not been any challenges on the matter and we are not seeking to prevent someone from making a challenge, for example, in the courts, I beg to ask leave to withdraw the motion.Motion and clause, by leave, withdrawn.
Mr. Edward Leigh (Gainsborough): I beg to move amendment No. 3, in page 1, line 6, after 'expenditure', insert
- 'as long as the value of funds spent on such endowments does not exceed 5 per cent of the value of total funds given to the Distribution Fund'.
- '(7A) After section 43D there is inserted the following section—
"43E. The Comptroller and Auditor General may, with respect to any person in receipt of money under section 25, 25B, 41 or 43B where that money is paid for the purpose of establishing or contributing to an endowment, examine—
(a) the accounts of that person so far as relating to the endowment,
(b) any records relating to those accounts, and
(c) any report of an auditor on those accounts.'.
- 'Any endowment, or contribution to endowments, established by this bill is liable to be reclaimed by the Distribution Fund in the event that,
(a) the recipient body of such funds ceases to exist, or
(b) the function of the recipient body changes substantively.'.
I will to speak to my other amendments, Nos. 3 and 4, later. They are more probing, particularly amendment No. 3. Although it may be difficult to set any particular figure on the amount of cash to be distributed to endowment funds, it will provide a useful opportunity for my hon. Friend to give some reassurance on those matters.
As I say, I do not think that amendment No. 5 is contentious. The Bill is only seeking to clarify something anyway—that lottery funding can be provided for endowments as well as to fund expenditure. All that I seek to do with amendment No. 5 is to ensure that adequate accountability arrangements are in place to match the new provisions.
My hon. Friend may know that the National Audit Office and the Public Accounts Committee continuously drive to ensure that more and more items of public expenditure—effectively, this is public expenditure—are brought under the purview of the NAO. As we seek to clarify matters and to put the Bill into statute, it is important that the NAO's powers should be clearly stated.
I recognise that the Bill has cross-party support, but it is true to say that concerns have been raised during its passage about the value for money and accountability aspects of funding endowments. That is important territory for my Committee. It is what my Committee is all about: ensuring that we get value for money and accountability.
It is true—I think that my hon. Friend the Member for Christchurch (Mr. Chope) referred to this—that some distributors have already made grants to fund endowments. The Millennium Commission has made a grant of £100 million, which is quite a large grant, to the Foundation for Social Entrepreneurs, which operates under the trading name UnLtd.
The governance arrangements for the Millennium Commission endowment are complicated. Let me try to explain them briefly. For example, the millennium award trust deed requires the appointment of an independent protector of the endowment, whose fiduciary duty is to ensure the integrity of the administration of the trust and the propriety of its procedures. If necessary, his duty is to report matters of serious concern to the Millennium Commission, the Charity Commission and, where appropriate, the Secretary of State for Culture, Media and Sport.
10.15 am
Under the terms of the Millennium Commission's grant to UnLtd, the CAG has access to all documents that are necessary for his audit of the Millennium Commission, or its successor body. While his rights of access concerning grants have recently been put on a statutory basis with the coming into force of the order made under the Government Resources and Accounts Act 2000, which we took a lot of interest in and helped to push through the House of Commons, it is necessary to clarify statutory access to lottery endowments to ensure that all forms of funding are covered. We are trying to ensure that there is absolutely no doubt about the rights of access of the CAG, who operates on behalf of Parliament.
I have taken advice on the matter, and the Minister can deal with the point when he sums up the debate, but I understand that the Bill's omission of accountability arrangements is not deliberate. I am confident that distributors of lottery money will apply to applications for endowments considerations similar to those that they would apply to grants of expenditure. I also understand that the Government will produce guidance for distributors on the factors to take into account when considering applications for endowment funding. However, the amendment ensures—this is why I believe that it is necessary—that all types of lottery funding are subject to the same scrutiny arrangements. Essentially, the aim is that the CAG's rights of access in relation to lottery grants should be extended to cover endowments. The money is raised from lottery players in the same
way, and the public surely will have an equal interest in knowing that it is spent properly and well. The CAG's access will provide that assurance.Let me sum up my argument by putting it in terms of questions and answers. It may be asked in summing up the debate: does not the CAG already audit lottery grants? It is true that he has rights of access in relation to lottery grants, but the Bill will expressly allow funding for endowments and my amendment seeks to clarify that the CAG has similar rights of access in relation to grants that are extended to endowments, so it is a tidying-up process.
Why is the amendment necessary? We are on Report. When better for the whole House to take a view on the matter? Hon. Members raised value for money and accountability issues on Second Reading. Obviously, we followed those debates. This is important territory for the Public Accounts Committee and we are keen to take advantage of the opportunity afforded by Report to ensure that the right provisions are in place, rather than discover problems later.
Another question might be: does not the CAG already have these powers? The amendment simply mirrors the clarity that the Bill seeks to provide, so as to ensure that adequate access provisions match new forms of funding. Just as the Bill is in effect a clarifying Bill, so my amendment is a clarifying amendment. Lastly, do the NAO and Public Accounts Committee have anything against funding endowments? In principle, we have no objection to funding endowments. There are both advantages and disadvantages, and those have been aired in the debates we have already had. The purpose of the amendment is simply to give the same clarity to both the funding and review arrangements, so that we can be assured that those issues have been adequately addressed.
I hope that that fairly sums up amendment No. 5. I hope that the promoter of the Bill and the Minister can accept it. If the Minister does not accept it, I hope that he will give a good reason why.
Amendment No. 3 would amend clause 1 by adding the phrase
- "as long as the value of funds spent on such endowments does not exceed 5 per cent of the value of total funds given to the Distribution Fund."
On Second Reading, certain Members raised concerns about "technical matters", even though everybody supported the Bill; indeed, I support it and I am confident that it will soon pass into law. Those Members seemed confident that such technical matters would be thrashed out in Committee. My hon. Friend the Member for North-East Cambridgeshire (Mr. Moss) said:
- "On this side of the House, we will need reassurance on the technical issues that the Bill raises. However, we are confident that those can be teased out in Committee."—[Official Report, 28 February 2003; Vol. 400, c. 534.]
I have tabled such an amendment because putting some form of cap on the amount of money used for endowments provides a safeguard against future developments. I do not know how that could be achieved; if it cannot be done through the Bill, perhaps some form of policy guideline could be laid down. We have tried to obtain firm figures but it is difficult to do so. If the Community Fund is any indication, the evidence suggests that the number of charities applying for endowments is indeed small. An estimated 20 to 30 of 100,000 applications to the Community Fund were for endowments. However, although the total number may be small, the figures can be very large indeed. The same is true of the exposure for the future.
The promoter of the Bill needs to explain to the House how he will provide for a safeguard to be put in place against possible future developments. We must be careful that the law does not allow any such endowments to get out of hand and be unavailable for scrutiny. As we know, there are of course risks involved in giving out endowments. They require large sums of money in advance to provide reasonable revenue for applicants in the longer term, as the Bill's promoter, my hon. Friend the Member for Mid-Norfolk, pointed out on Second Reading. Indeed, he was very fair about this issue. Hence a set amount of money is tied up or committed to a fund. If this got out of hand, less money could be available for other lottery grants in need of immediate funds. Setting some form of cap, or explaining how matters might develop in future, is a reasonable way, therefore, of providing a safeguard against that problem.
Another problem associated with endowments is that they are vulnerable to interest rate fluctuations—a point made by my hon. Friend the Member for North-East Cambridgeshire on Second Reading. The National Endowment for Science, Technology and the Arts was cited in a previous debate as a good example for possible national lottery endowment funds to follow, given the similarity between it and various charities. NESTA was praised not only for its method of funding, but because of the freedom given to NESTA trustees from central Government interference.
However, NESTA, which was in receipt of an endowment of some £200 million, found that the income that it was expecting—and probably spending—had declined because of low interest rates. It appealed to the Government for more money to put into the endowment fund. Given what subsequently transpired, perhaps it was not such a good example to cite. The nature of the stock market and the free market makes it hard to predict how interest rates will perform, and potentially puts limits on long-term planning for charities. Although there is no doubt that the Bill should become law—it is essentially a tidying-up process—it is certainly worth putting on the record the risks associated with endowments. It is therefore perhaps advisable to limit the amount going into them.
There is another important point: endowment funding could increase the perception gap between buyers of lottery tickets and good causes. Lottery sales are falling. In February, Camelot announced that sales for the weekend lotto game were the lowest ever. Last November, it announced that sales had fallen by 5 per cent. during the previous six months. Lotteries across the world often show initial signs of great success that soon trails off, so to a certain extent such a decline is to be expected. But as the hon. Member for Twickenham (Dr. Cable) said on Second Reading, another explanation might be that people do not see a clear link between the purchasing of tickets and the good causes that the lottery is supposed to help.
That is why we have some concern about endowments; they break that clear link. Creating too many endowment funds could increase this tendency, so it would be sensible to cap them in some form. Whether that should be done through the Bill or through some other administrative procedure, I do not know; perhaps the Bill's promoter could explain that point. The hon. Member for Twickenham said on Second Reading that the perceived lack of a link
- "is a psychological danger and it should be addressed, although it is not a fundamental argument against the proposals." —[Official Report, 28 February 2003; Vol. 400, c. 535.]
Several damning recent media reports have discussed how lottery money is given out. For example, in 2002 the national lottery gave £336,000 to the National Coalition of Anti-Deportation Campaigns, which is trying to prevent the deportation of asylum seekers after their applications have been processed by the Home Office. One can agree with that highly controversial decision, or not. I shall not comment on whether it was a good thing, but there was an immediate and massive outcry. That outcry was able to produce a change in policy, because there was no endowment and the matter was not tied up for a long time. If we have endowments, with no limit on how much can be put in, we will lose the immediate link between what is said in the press and how grants are distributed. Another notorious decision was that to give £295,000 to a Worcestershire charity for the breeding of guinea pigs in Peru.
All such grants were given through conventional funding methods under current law. One advantage of non-endowment funding is that the lottery can respond to the public mood quickly. However many endowment policies there are, they will involve very large sums of money and it will not be possible to respond quickly. These policies are supposed to serve the public. For something that the public took issue with, it would be more embarrassing and awkward to terminate an endowment fund than to terminate short-term giving. Non-endowment funding is easier to withdraw, if the public express dissatisfaction with it.
I am sure that my hon. Friend the Member for Mid-Norfolk can address all those points, reassure the House that it will not be necessary to set a cap through the Bill, confirm that there will be a limited number of endowments, and confirm that the entire process will be handled with great care.
Amendment No. 4 would insert the following provision:
- "Any endowment, or contribution to endowments, established by this bill is liable to be reclaimed by the Distribution Fund in the event that,
(a) the recipient body of such funds ceases to exist, or
(b ) the function of the recipient body changes substantively."
The point of the Bill as a whole relates to legal uncertainty. Current legislation does not define what meeting expenditure means in respect of the powers of the distributing bodies. It is therefore reasonable to clarify the law as the Bill proposes. In the same way, including a right of the distribution fund to reclaim its money if a charity ceases to exist would provide greater legal transparency and clarity. That would seem to make sense, and I see no reason why anyone should argue with that point of view.
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