Select Committee on Culture, Media and Sport Fifth Report


5  FUNDING AND DISTRIBUTION

Good Causes

95. Since 1994 the National Lottery has raised £15 billion for good causes.[96] This money has been used to fund or part-fund a wide range of life-enhancing projects (although not all projects have proved sustainable). Some examples of large projects that received Lottery funding are: the Millennium Dome; Wembley National Stadium; Tate Modern; the Eden Project; the Falkirk Wheel; the Lowry; the renovation of the Royal Festival Hall; and the Millennium Stadium. On a smaller scale: projects providing disabled access; helping sports clubs build new facilities and equipment; and providing opportunities for people to engage in arts through funds given to many theatres, and music and drama clubs. The number of projects funded by each distributor and the amount spent up to February 2004 is shown below.

Distributing Body
No. of Projects
Amount
Arts Council England
19,979
£1,906,658,088
Arts Council of Northern Ireland
1,211
£45,548,105
Arts Council of Wales
3,979
£118,279,709
Awards For All (England) Joint Scheme
20,988
£79,553,470
Community Fund
53,863
£2,645,829,349
Heritage Lottery Fund
10,451
£2,381,070,632
Millennium Commission
2,947
£2,131,324,379
New Opportunities Fund
15,590
£2,068,742,576
Scottish Arts Council
5,087
£199,495,969
Scottish Screen
105
£6,754,099
Sport England
14,699
£1,860,554,889
Sport Scotland
4,529
£175,652,105
Sports Council for Northern Ireland
842
£42,625,047
Sports Council for Wales
1,047
£103,833,609
UK Film Council
1,059
£111,443,587
UK Sport
2,656
£118,748,032
TOTALS
159,032
£13,996,113,645
NESTA (The National Endowment for Science, Technology and the Arts) has received an endowment of £295,000,000 making a grand total of £14,291,113,645

Source :www.lottery.culture.gov.uk Updated on: 19/02/2004.

Distributors

96. Twenty-eight percent of Lottery revenue is paid into the NLDF. This money is split between the five good causes in the proportions shown in figure 1 below, with sport, arts, heritage and charity all receiving the same proportion and health, education and environment receiving twice that. There are at present 16 distributors of National Lottery funding which represent all five good causes. They each distribute Lottery money to organisations and projects within their individual remit. Some of the distributors were specifically set up to distribute Lottery money (e.g. Community Fund and New Opportunities Fund) whereas others are NDPBs which receive grant-in-aid as well as Lottery money to achieve their overall objectives (e.g. UK Film Council and Sport England). The amounts that each distributor draws down from the NLDF vary from year to year. The figures for 2002-03 are shown in table 10 below.

Figure 1: Pie chart to show the division of NLDF funds between the good causes



Source: www.lotterygoodcauses.org.uk

97. The distributors, the good causes that they fund and the amounts they draw down from the NLDF on an annual basis are set out in the table below:

Table 9: Income to the NLDF and amount drawn down by distributors in 2002-03


98. Each individual distributor is charged with a specific task within each of the five good causes. The Community Fund is aimed at the most disadvantaged in society through grants to charitable, benevolent and philanthropic organisations. It has distributed £2.6 billion in over 56,000 grants allocated to all four UK countries and the nine regions within England on the basis of population weighted by socio-economic factors. It distributes a number of different sized grants (large (over £60,000); medium (up to £60,000); strategic; research; and international). It has six priority beneficiary groups: children and young people; older people and their carers; disabled people and their carers; black and ethnic minority communities; refugees and asylum seekers; and people living in communities, including both urban and rural areas, disadvantaged by economic and social change.

99. The New Opportunities Fund provides National Lottery funding for health, education and environmental projects across the UK. Since 1998, it has granted £2.4 billion to over 10,500 projects, allocated on the basis of population weighted by deprivation.

100. The Heritage Lottery Fund, created in 1995, has committed over £2.8 billion to more than 15,000 projects in the UK. The HLF strategic plan for 2002-07 sets out three main aims: to encourage more people to be involved in and make decisions about their heritage; to conserve and enhance the UK's diverse heritage; and, to ensure that everyone can learn about, have access to and enjoy their heritage.

101. Arts Council England is the national arts development agency, responsible for developing and implementing arts policy and funding with and on behalf of the DCMS, using Lottery and grant-in-aid funding. The current annual National Lottery income is about £180 million which makes a big contribution to the cultural sector of England. Arts Council England have funded over 2,300 projects with more than £1.7 billion. A similar role is taken on by the Arts Council of Wales, the Scottish Arts Council and the Arts Council Northern Ireland for each of the devolved nations. The UK Film Council and Scottish Screen and the National Endowment for Science, Technology and the Arts (NESTA) also distribute Lottery money for the arts.

102. The sporting distributors include: UK Sport which takes on a strategic role within the sector, particularly focusing on elite sport and with responsibility for creating a strategy for developing high-performance sport in the UK;[97] Sport England; Scottish Sports Council; Sports Council of Northern Ireland; and the Sports Council for Wales. The national sports councils are responsible for delivering the Government's objectives for sport through work at grass roots, community and national level.[98]

NEW PROPOSALS

103. The overall purpose of the new proposals is to achieve more effective, efficient and equitable distribution of National Lottery funds. The Department for Culture, Media and Sport proposes to achieve this aim through a number of changes to the principles behind, and the mechanisms used to distribute, the Lottery money for good causes. The DCMS believes that it can achieve these aims through:

INCREASED PUBLIC INVOLVEMENT

104. The Department wants to see increased public involvement in the funding decisions made by distributors. The DCMS is encouraging each of the distributors to involve the general public in priority setting and funding decisions through the establishment of regional committees, which are made up of a range of types of Lottery players from society, and wider cooperation, with the media providing the general public with more opportunities to vote on which projects Lottery money should be spent on.[100] Standardisation of the application form, providing a common standard of service across all distributors and a common complaints procedure will also help to encourage more of the population of the UK to approach the Lottery for funding.[101]

105. We believe that the increased involvement of the public in the decision-making process should be managed carefully and provisions should be put in place to ensure that meritorious applicants do not lose out to publicly popular projects. The Secretary of State told the Committee that she believes "the decisions by which money is awarded to good causes should be much more directly influenced by people who play the Lottery" but she added that distributors should "continue to be courageous and true to the principle of the Lottery."[102] We believe that there may be tension between these objectives. It is imperative that the public involvement in decision-making does not compromise the ability of the distributors to make independent decisions on projects that deserve Lottery funding within their remit. We feel that the involvement of the public more widely in National Lottery funding decisions should be managed with care but we agree that such involvement could raise awareness of the benefits of the Lottery and increase public confidence in the institution, which in itself is a good thing, and might also lead to higher revenues and returns to good causes.

INCREASED ACCESSIBILITY

106. The DCMS wishes to see increased accessibility to Lottery money in order to achieve a more equal spread of funding throughout the UK. It proposes to achieve this through the introduction of a variety of new and extended funding streams and grants including: open grants (a demand-led programme for voluntary and community organisations) under the control of the new body; national programme funding; a Young People's Fund (initially of £200 million for children's groups and young people); an increase in the limit of the Awards for All programme grants to £10,000; and micro-grants (simplified application for funding of less than £500).[103] These funds are intended to enable more people to gain access to Lottery money by increasing the variety of funding available and by making it easier to apply for them.

107. The Department hopes that these changes will mean that contact with any of the Lottery distributors is easier for applicants, especially those without previous experience. These proposals were generally welcomed in the evidence that we heard, especially by the Coalfields Community Campaign, who believes that the reforms will help many in deprived areas to engage with the Lottery and benefit from its funding.[104]

108. The Department stated that the distributors also need to work together in a more coherent way in order to make grants more accessible to all.[105] The distributors claim that they already work closely in a number of areas. An example of this is the five distributors currently jointly funding the work of the Awards for All programme. This programme currently gives small grants of under £5000. The application process for the scheme is quick, with a maximum turn-around of eight weeks, thus getting smaller amounts of money out in to the community quickly. In addition, the risk assessment is simpler, commensurate with the size of the grants.[106] The Awards for All programme prides itself in being

    "fast, transparent, and reasonably slick, particularly in terms of giving the assistance to the applications at the point where they are making an application, for many of whom that will be their first opportunity of accessing funding."[107]

109. We believe that the development of the Awards for All programme represents a positive step towards greater accessibility of funds. We are encouraged that the Government proposes to make the accessibility of grants even easier by the introduction of a number of new grants and funding streams that will target problem areas and take on many of the characteristics of the Awards for All programme. The Youth Fund and Olympic Lottery Fund have been created to focus on the needs of specific areas. The micro-grants programme will be set up to provide very small grants to a large variety of projects allowing many more people to benefit from Lottery money without the complication of too much paper work, which is a barrier to many people applying. This multi-pronged approach of the Department could cause greater confusion amongst applicants due to the number of funds now in existence, but the reforms have the potential to be effective if the existence of these new funding streams is clearly promoted to those who are eligible to receive it.

110. The need for simplification and increased access has been highlighted by the Coalfield Community Trust, which believe that the cost and complexities of the application process deter many people. The organisation calls for a single application form for all grants and increased support for applicants from the distributors, especially in cold spots, throughout the process so that organisations and community groups can gain access to their share of the Lottery funds available.[108] Lady Brittan, Chairman of the Community Fund, told us that the distributors are aware of the difficulties that small organisations, without sufficient resources, face trying to obtain Lottery funding and that they are trying to reach areas that traditionally miss out by sending staff to 'Fair Share' areas to raise awareness and increase applications in areas which really need the help to set up voluntary organisations and help them become sustainable.[109] Proactivity in tackling the causes of the variation in funding levels across the UK is one of the key responsibilities of the new distributor once it is properly established. We hope that the new distributor will carry out this role with vigour, increasing accessibility to funding throughout the UK.

111. It is widely recognised that it is difficult for some, especially small, organisations to gain funding. Representatives from the new distributor told us that they "do understand that it is hard sometimes applying for Lottery money". [110] Therefore, it is important that applicants receive specific support to enable them to navigate the process successfully. It is envisaged by the Department that this support will be provided by the new distributor. We are encouraged that this problem has been tackled by the new proposals and we hope that more applications are stimulated by these provisions for increasing accessibility. We welcome the DCMS proposals to increase accessibility to Lottery funding for all and hope that the measures taken will stimulate increased levels of application, especially from 'coldspots' and areas of great need.

112. Having said this, the Committee does not believe that spreading Lottery money equally throughout the country, in a mechanistic way, would necessarily represent the best use of the funds. We appreciate the reasons why the spread of funding has been skewed towards major conurbations where large projects have been located. These large projects can benefit a considerable number of people, not only those residing nearby.

THE NEW DISTRIBUTOR

113. The New Opportunity Fund (NOF), which has responsibility for funding health, education and environmental projects, and the Community Fund (CF), with responsibility for allocating grants to charitable and voluntary sector organisations, will merge to create a single distributor with the Millennium Commission's ability to support large projects.

114. The proposed body, which is yet to receive a name or formal powers until primary legislation is passed, will control 50% of Lottery funds and will be able to handle funds from other sources.[111] The Department proposes that the new body will:

  • provide a single point of entry for all new applicants that are unsure of where to seek advice;
  • be the first port of call for projects that do not easily fit the remit of specific distributors;
  • be a centre of excellence for managing major projects and be able to coordinate cross cutting projects;
  • encourage joint working between distributors and disseminate best practice;
  • lead on giving pre-application support to organisations building up capacity in the community and;
  • help to simplify the procedures used for organisations which need to apply to more than one distributor at a time.[112]

This body is intended to be the strategic leader for Lottery distributors and therefore it is vital for the recipients and the distributors that it is an "intelligent distributor".[113]

Advantages

115. There are clearly some potential advantages to the merger, which are primarily the increased simplicity of applying and the creation of economies of scale due to the amalgamation of staff and resources from the two organisations. The new body will be able to distribute a range of funds of different sizes from very small to major capital projects, helping a large number and range of applicants and it will have the ability to handle non-Lottery funds for joint-funded projects. It will also be responsible for disseminating best practice to all distributors, helping to increase cooperation between them.[114]

116. The Coalfields Community Campaign (CCC) was very keen to see this single point of entry for all Lottery applications and sufficient development support to enable their communities, and many others like them, to apply for Lottery grants without having to spend money on advice or be put off by the complicated processes in place.[115] The CCC welcomes the new distributor's roles in these areas, as does the Committee.

117. Overall, the new distributor is supposed to be more than the sum of its parts.[116] The Department envisages it as "a true community distributor, funding projects to revitalise and regenerate communities."[117] We believe that the distributor has the potential to improve the distribution of funds within its area of responsibility.

Disadvantages

118. Much of the evidence we have received has welcomed the merger. However, there have been a few key concerns raised through the course of the inquiry principally by some of the specialist distributors: Sport England, Arts Council England and the UK Film Council. They are worried that the new body may take over as the centre of excellence managing major projects and coordinating cross-cutting projects, roles which they have traditionally carried out.[118] The established distributors have had a large amount of experience managing these projects and have gained skills and built up relationships with many of the key organisations in their specialist fields. They do not wish to see the new distributor taking over the management of projects which they have administered in the past as this would ignore the skills currently available and be an unnecessary duplication of effort.[119] Mr Stephen Dunmore, Chairman of the New Opportunities Fund and the community Fund, believes that a variety of distributors are needed and that they must continue to work closely together to achieve common aims rather than further reducing the number of distributors.[120] However, he believes that it is right for the new distributor to take a lead role in some areas such as transformational projects and helping other distributors to learn from each other and work together. We believe that the new body could usefully take on an overarching role, coordinating efforts in cross-cutting projects, but should also allow those distributors with established skills, experience and relationships to take the lead on projects whenever appropriate. The Department must take steps to allay the fears of some of the specialist distributors over the role of the new body as a 'centre of excellence', making clear to everyone the exact role that the merged body will take on and how this will combine with the work already undertaken by others.

119. Another concern is that the merger will not actually create any extra funds for good causes because the costs associated with the extra responsibilities of the new body will eradicate any savings made through economies of scale. The Secretary of State told us that she expected the merger of the NOF and the CF to create savings "within a range of 10 to 20%'"[121] However, she confirmed, this may not bring about extra grants. The new distributor would provide extra services and take on an increased role, being more proactive, building capacity in poor communities, supporting applicants, providing a single point of entry for all applications and managing transformational and cross-cutting projects.[122] The NCVO stressed to us that it is important that any costs associated with the extra roles and responsibilities of the new distributor do not "eat into the fund for the good causes."[123] We agree that the extra services provided under the merged body will enhance the distribution process but very much hope the cost of these will not erode the grants given by the new body. DCMS must ensure the merger of the New Opportunities Fund and the Community Fund is properly managed so that expertise is not lost and maximum savings are achieved.

MANAGEMENT OF THE NATIONAL LOTTERY DISTRIBUTION FUND

120. The Department is concerned, alongside many commentators, about the current balances held in the NLDF by the Lottery distributors, especially the level of the balances held by the Heritage Lottery Fund and the New Opportunities Fund.[124] The Department is concerned at the implication that NLDF balances are high because the allocation of funding is not being managed quickly enough therefore delaying the benefits of Lottery grants being felt by the public. The DCMS wants to see the reduction of current balances through greater efficiency by the distributors in allocating resources.

121. The distributors argue that most of the money held in the NLDF is already allocated. We have received evidence from the Heritage Lottery Fund (HLF) which states that all of the money they are at present holding in the NLDF, and £188 million extra, is not being badly managed but has already been allocated to specific heritage projects that are underway but not completed.[125] The HLF emphasises that all of the interest earned on the balances whilst held in the NLDF is also committed to projects, many of which are major capital works that take a long time to complete and require the commitment of Lottery funding, but not the cash itself, before they can secure any matched or additional funding that is needed. The HLF evidence, and other written evidence that we have received from HLF-funded organisations, all stress the importance of long term funding for many heritage projects, meaning that NLDF balances are unavoidable.[126] The HLF has suggested a number of possible ways that it could reduce balances so that the funding is not taken away for use on other projects. These include: encouraging speedier draw-down by recipients; allowing 50% of smaller grants to be paid up front; and taking advantage of its cash flow flexibility by over-committing funds at prudent levels ahead of time.[127] Although these measures will ensure that Lottery money will reach projects more quickly, they also create the risk that the HLF may not being able to cover its commitments in the future if Lottery revenues fall, with the inevitable loss of some funds that have been paid up front.

122. The Department has asked the National Audit Office (NAO) to look into the balances and flows out of the NLDF in respect of each of the distributors. The Department expects an interim report by April, and a final report in July,[128] which should advise the Secretary of State "on the prudent level at which the balances can be run down and the prudent level at which distributors should commit ahead of time."[129]

123. We believe that long term or future projects should not suffer from this policy change and that NLDF balances should not be reduced just for the sake of it. If money is found not to be flowing effectively to worthy projects through the distributors then this must be dealt with. However, if funds need to be held for legitimate reasons then they should certainly be held in the NLDF where they earn higher interest, tax free, than in the accounts of individual distributors or projects. There are, presumably, significantly fewer risks associated with money being held centrally in the NLDF rather than dissipated amongst the many bank accounts of projects with variable degrees of governance and experience.

DEVOLUTION

124. The Department proposes to retain the UK structure of Lottery distribution but as part of the reforms wishes to give more influence to Scotland, Wales and Northern Ireland over setting specific priorities and strategies for their areas and local communities. Many of the distributors are country-specific (for sport and film) or allocate specific proportions to the devolved nations for spending (NOF and CF). It is important that these reforms build on the present situation and that Lottery players and applicants in Scotland, Wales and Northern Ireland have access to funding and influence over funding decisions in their areas. We agree that funding decisions should be made, wherever possible, at the most appropriate level, whether national, regional or local, so that the needs of the area are known and met.

SINGLE LOTTERY IDENTITY

125. The DCMS proposes the creation of a single Lottery identity to ensure Lottery-funded projects are easily identifiable as such. This has already been initiated through the creation of the National Lottery Promotion Unit (NLPU) and the establishment of a National Lottery Day.[130] The Department believes that it is important for all of the Lottery distributors to work together to promote the benefits to good causes which the National Lottery delivers.[131] The DCMS has suggested that all projects that have received Lottery money should be identified by a single lottery logo and has introduced a 'blue plaque' scheme which provides an instantly recognisable symbol that can be used nationwide to help create the link in people's minds between buying a Lottery ticket and tangible benefits to the community they live in. We believe that it is important for the public to be able clearly to identify projects that have received Lottery funding, but we urge the Department, to monitor the costs and benefits of schemes set up to do this so that value for money is achieved.

126. DCMS must specifically carry out a full cost and benefit analysis of the proposed National Lottery Day before the event to ensure that it actually adds value to the work of distributors and does not bring about a significant diversion of costs away from grant giving.

127. Some evidence suggests that when players are aware of the good causes supported by the Lottery they are less likely to pull out of playing. The NLC believes that promotion of the Lottery projects is important because "the better Lottery good cause money is promoted, the more positive people feel about that and the more positive they are likely to feel about gains".[132] However, it acknowledged that this may not necessarily give rise to increased sales but may sustain levels of participation for longer periods.[133] Representatives from the NOF, CF and Awards for All agreed that the general public are not aware enough of what Lottery money has funded and Baroness Pitkeathley OBE, Chairman of the New Opportunities Fund, pointed out that "almost every community throughout the United Kingdom has some improvement as a result of the Lottery."[134] The NLC informed us that at present the NLPU "are doing a range of research to work out what people want and how people can be helped to make that association [between buying a Lottery ticket and benefits to good causes] most effectively"[135], working towards raising awareness of what the Lottery funds in order to boost sales. It is, however, widely acknowledged that the main driver of sales is the possibility that the player will be able to win a large prize. Whether, in fact, good causes have any demonstrable effect on sales is widely debated. We welcome the creation of the NLPU and believe that promoting the benefits to good causes of the Lottery is positive. However, we note that Camelot has both a responsibility and an incentive to promote National Lottery sales and suggest that the operator of the National Lottery should fully fund the work of the NLPU, as it will benefit from any increased sales.

128. The NCVO, although it agreed that people should be made aware of the benefits to good causes from the Lottery, was concerned that playing it should not be promoted as an effective way of giving to charity because "a pound given directly to charity, tax effectively, is worth £1.28 to the charity, whereas only 28 pence in each Lottery pound goes to the good causes."[136] We agree with the NCVO and believe that whilst the National Lottery and the benefits it gives to good causes should be publicised, it should not be promoted as an effective way of giving to charity. The percentage of the amount spent on a Lottery ticket that actually goes to good causes should be made clear to players.


96   www.national-lottery.co.uk/player/p/goodcauses/fundraising.jsp Back

97   UK Sport website www.uksport.gov.uk. Back

98   Sport England website www.sportengland.org. Back

99   "National Lottery Licensing and Regulation Decision Document" July 2003  Back

100   "National Lottery Licensing and Regulation Decision Document" July 2003 p27 Back

101   "National Lottery Licensing and Regulation Decision Document" July 2003 p30 Back

102   Q 342 Back

103   "National Lottery Licensing and Regulation Decision Document" July 2003 p 17-19 Back

104   Ev 25 Back

105   "National Lottery Licensing and Regulation Decision Document" July 2003  Back

106   Q 192 [Mr Wilkins] Back

107   Q 192 [Mr Wilkins] Back

108   Q 45 [Mr Flannagan] Back

109   The fair share initiative supports projects that have a sustainable impact on the lives of disadvantaged people in the areas that the New Opportunities Fund and Community Fund have identified as not having received a fair share of lottery money. Back

110   Q 192 [Lady Brittan] Back

111   "National Lottery Licensing and Regulation Decision Document" July 2003 Back

112   "National Lottery Licensing and Regulation Decision Document" July 2003 Back

113   Q 45 Back

114   "National Lottery Licensing and Regulation Decision Document" July 2003 Back

115   Q 37 Back

116   "National Lottery Licensing and Regulation Decision Document" July 2003 Back

117   "National Lottery Licensing and Regulation Decision Document" July 2003 p 6 Back

118   "National Lottery Licensing and Regulation Decision Document" July 2003 decisioin docs/ Specialist distributors evidence. Back

119   Ev 100, 117, 227. Back

120   Q 183 Back

121   Q 352 Back

122   Q 352 Back

123   Q 35 Back

124   Q 343 Back

125   Ev 140 Back

126   Ev 194, 196, 201, 203-4, 222. Back

127   Ev 140 Back

128   Q 344 Back

129   Q 343 Back

130   "National Lottery Licensing and Regulation Decision Document" July 2003 Back

131   "National Lottery Licensing and Regulation Decision Document" July 2003 Back

132   Q 108 Back

133   Q 108 Back

134   Q 179 [Baroness Pitkeathley] Back

135   Q 103 Back

136   Q 35 Back


 
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