Examination of Witnesses (Questions 340
- 358)
TUESDAY 3 FEBRUARY 2004
DEPARTMENT FOR
CULTURE, MEDIA
AND SPORT
Q340 Chris Bryant: Can I ask a process
question? Your department has been exemplary in bringing Bills
forward for prelegislative scrutiny—for instance, the Communications
Bill, one of the heftiest Bills physically that we have seen—but
a large chunk of it came quite late into the prelegislative process
and we are now seeing the same again with the Gambling Bill. It
is exemplary that most of it is out there but there are clauses
that still are not there. Why is that? Why do we have rolling,
prelegislative clauses coming out, not necessarily in sequential
order?
Tessa Jowell: It is simply a reflection
of the volume of legislation that as a government we are seeking
to get through and, secondly, the resources of parliamentary counsel
to draft the clauses. The fact that the clauses would be published
in three groups was an agreement which I reached with the chair
of the Committee and, as far as I understand it, the Committee
is perfectly content with the approach that they are taking. I
think they are doing an excellent job in their scrutiny of the
Bill.
Q341 Chris Bryant: We had the New
Opportunities Fund before us and the Community Fund earlier on
and they have had a difficult time with some media reporting of
some of the awards that they have made.
Tessa Jowell: Do you mean the
New Opportunities Fund or the Community Fund?
Q342 Chris Bryant: Both were before
us. They were talking about how they had to manage their reputational
risk when they made awards. Do you worry that their successor
body will end up being too timid in making awards because they
are frightened of how some awards may be perceived, or should
they still be courageous?
Tessa Jowell: I think they certainly
should continue to be courageous and true to the principle of
the lottery but I also think that the decisions by which money
is awarded to good causes should be much more directly informed
by people who play the lottery. One of the objectives of the changes
that we are bringing about in relation to the lottery through,
for instance, the establishment of the joint promotional unit,
involving the public in decisions about both big and small projects,
is to reinforce the link between buying a lottery ticket and the
benefit that flows from 28p of that to good causes. I do not think
there will ever be a day when the lottery is controversy free
and it should not be because the money it spends is different
from the money the government spends. There is always an inherent
degree of risk in the way in which the lottery makes decisions
and if it lost that sense of boldness, underpinned by public understanding
and a sense of communication with the public, the lottery would
be the poorer for it.
Q343 Alan Keen: Everyone is concerned
about the effect on the other good causes with the introduction
of the Olympic Lottery. Is there one area that still may help
this? There have been allegations in the past that a lot of lottery
money is not distributed. That fund was extremely high at one
stage. Has more efficient redistribution reduced that fund or
is there still the possibility of our getting some of that money
out to the good causes?
Tessa Jowell: That is an important
question about lottery balances. Both Estelle and I have been
very concerned about what we have seen as the unacceptably high
level of lottery balances. They are coming down. I will remind
you—because otherwise you will remind me—that two
years ago we published a forecast which was interpreted as a target
for reduction in the balances by half by March this year. While
the balances will have come down by about a billion, they will
not have halved over the last two years. I am concerned about
this because of the scope for wilful misrepresentation of what
this means, because the balance which is held by the NLDF is a
pool of committed money. Decisions about how it is going to be
spent have been made. What has not happened is that the individual
projects have been signed off and the money has started to be
drawn down. We have had particular concerns about the Heritage
Lottery Fund and the New Opportunities Fund in this, both of which
are explainable in very specific ways. What concerns me and perhaps
also concerns you is public confidence in the proper management
of the lottery when it appears that there is £2.8 billion-worth
of lottery money which is sitting around doing nothing except
earning interest. That is not the case and it is important that
people understand that that is not the case, but this has led
me to call in the National Audit Office who are currently looking
at each of the distributors and the flow of money out of their
distribution fund. I hope that what the National Audit Office
will be able to provide me with is advice on the prudent level
to which the balances can be run down and the prudent level at
which distributors should commit ahead of time. I hope that that
will drive a further reduction in the balances. Our expectation
is that by April this year the balances will be at somewhere between
2.5 billion and 2.7 billion and that does represent quite substantial
progress over the last year. At April last year, the balances
were at 3.26 billion, so they will have reduced by a billion and
I think the lottery distributors deserve credit for the efforts
they have made to respond to that. I think we need a clear idea—and
the NAO are best equipped to do this—of what is the safe
minimum to which we should aim to get the balances.
Q344 Alan Keen: When are you expecting
them to report back on this?
Mr Broadley: They are going to
provide an interim report in April, and a final one before the
summer holidays.
Q345 Alan Keen: I have been approached
by more than one Member of Parliament because of my involvement
in sport. Because of the reduction in income—I am talking
now about the sports lottery money—some applications that
were progressing quite well and the sports clubs have incurred
expense and found that the work that had gone into the application
on the condition that the clubs spent money themselves and that
expense had been incurred. How widespread is this? It is quite
worrying if we are damaging sports clubs themselves.
Tessa Jowell: There are two parts
in answer to your question. One is that in real terms the amount
of money that the lottery is spending on sport has increased very
substantially, both through UK Sport and Sport England and also
through money which is being spent on sport, particularly on facilities,
through the New Opportunities Fund: the £750 million programme
for sport in schools, community facilities, the £100 million
Active England Programme to support the Olympic bid, the Space
for Sport and the Arts Programme and the Green Spaces Programme.
All are providing capital to build new facilities. On the other
hand, what was very clear, when Patrick Carter became chairman
of Sport England and Roger Draper became the chief executive,
was that the Sport England lottery fund was over-committed. What
Sport England did about a year ago was to declare a moratorium
on further allocation of lottery money. They have a two stage
process. The first is to give prospective applicants an agreement
in principle, but that does not mean that they are through the
final hoop and the money is assured. It means that they are able
to proceed from the first to the second stage. The second stage
involves the firm agreement which has contractually binding stages.
My understanding from Sport England is that in the reassessment
they did of all the outstanding lottery applications those that
were rejected were those that were either not going to proceed
anyway or they were applications about which there were doubts,
that had reached the stage one approval but not proceeded to stage
two. If there are specific instances, I suggest you write to the
chairman of Sport England and I am sure he will give you specific
explanations.
Q346 Alan Keen: We are all concerned
about whether we can raise enough money for the Olympics and if
we do will it damage the rest for the good causes. I have put
this to you before. It is up to the International Olympic Committee
but the Olympics do cost more money than they need to cost because
they have to take place such a short distance from the main venue
for athletics and it is something for the future that we should
look at. What other nations, other than us and a handful of others,
could really put on an Olympic Games? The problems with the lottery
have really highlighted this and we are stopping any of the developing
nations from ever being able to compete with developed nations
like us and we are struggling. I would be very happy if you could
keep pushing that point or asking the question.
Tessa Jowell: It is a point that
the International Olympic Committee are now very concerned about.
I know they would like the Games to go to South America and Africa.
The Commonwealth Games are going to Delhi. The fact that that
is now the approach of the International Olympic Committee was
something that we took as a very positive sign in deciding to
bid because it is absolutely essential that the day after the
Paralympics are over—because they follow the Olympics—we
do not have in effect a blighted area of Stratford in East London,
where there are these huge, wonderful, state of the art facilities
that for ordinary mortals are rather intimidating, rather remote
and underused. I was struck by this risk when I visited the facilities
in Sydney. Their sheer scale and perfection does not invite the
community use that would follow an Olympic Games. The 2012 Committee
who are organising our bid are very much seized by this point.
Legacy, legacy, legacy is one of the really key considerations
in putting in our bid and fortunately it is now a key consideration
of the International Olympic Committee.
Q347 Derek Wyatt: When we discuss
the future of how the lottery might happen in the third stage
of the licence, the People's Lottery people said that only one
organisation could win it and that was Camelot. Would you like
to comment on that?
Estelle Morris: In terms of when
the licence is up for renewal again, we want to make sure that
we are in a position where more than one company will have the
ability to bid. I do not think it is in anyone's interest that
it is a monopoly for licence after licence. That is why, as part
of the consultation which we have done recently on the future
of the lottery, we looked at a number of changes that could be
put in place to try and make sure that there was more than one
bidder. It is proper to look at these things from time to time
in any case but the NLC had gone back to people who had bid for
the first licence and asked if they were still interested. There
is a real fear that if we do not take action and make some changes,
when we come to granting the third licence, there will indeed
be only one bidder and that is likely to be the company that holds
the licence at the moment, which is exactly the background against
which we have made the proposals we have done.
Q348 Derek Wyatt: Bidding for the
licence is incredibly expensive. I cannot remember whether the
People's Lottery said it was £20 million or more. The actual
bid document cost £20 million and that in itself means you
need fairly deep pockets to bid. Michael Grade in a memo to us
recently, in the last week, has suggested that perhaps there should
be a hurdle that you should climb that may cost you only £500,000
to get to the final. Is it set in stone that it is just one system
or could there be a smaller hurdle so that people can jump that
and be seen to have all the funding that is in place but do not
have to spend so much to prove that they have?
Estelle Morris: I see the point
of that two stage process so if you are going to bid you are only
committing a certain amount of money to begin with, but I am not
sure that is the analysis of why we did not have more than two
companies last time and why we may only have one company next
time bidding for the licence. I do not think it is just the cost
of applying for it so I do not think it would solve the problem.
What we have come up with is allowing the NLC to have the flexibility
to split the Games into a number of packages and offer licences
for each of those types of games. I think that answers more of
the problems that have come to the forefront that have stopped
people bidding for the licence. I do not believe that merely having
a two stage process in which a company will have to expend a lesser
amount of money will itself bring about the number of applicants
that we need to make it a real competition.
Derek Wyatt: Given that it is still the
most successful lottery in the world—
Chairman: The second most, according
to the statistics.
Derek Wyatt: I bow to you, Chairman.
Chairman: Never bow to me; bow to the
statistics. The Spanish is the most successful.
Q349 Derek Wyatt: Can you tell me
any other incumbent lottery provider or any lottery anywhere else
in the world where it is so successful that they have said, "That
is no good; we must split it up"? What is the evidence for
splitting it up as you have split it up? On what basis did you
decide you needed some new, fresh talent in here? Who else has
done this in the world? We know from our research when we looked
at this that if you lose incumbency you lose sales. Given the
critical nature of the Olympic part of this, if you were to change
and if this was to go down, this would have some serious repercussions
on the whole funding of the Olympics.
Estelle Morris: I think it would
be wrong to be that complacent and say that we are happy to have
one person bid to run the next licence. If we consider a nightmare
scenario, where that company decides not to bid or fails in the
running of the organisation, we have to grow people and grow companies
that are able to bid for the licence. What we are faced with is
that we leave the package exactly as it is with all the games
being under one licence, giving NLC no flexibility whatsoever
to break that up if they see fit, and only if they see fit. We
are tying our hands in a way that might not be necessary. Under
the proposals that we put forward in the discussion document,
it may be the case that the licence is left in its entirety and
it may be the case that the incumbent gets the licence for the
third time. The proposals will not stop that happening but they
will make sure that we do not have that as the only option in
the way forward at the end of this licence period.
Q350 Derek Wyatt: I can understand
the dilemma you are in but the question I asked was who else has
done that in the rest of the world and put at risk their lottery.
I cannot find this evidence and that is what I am nervous about.
Estelle Morris: We have to look
at our record, our lottery, our country, our conditions, our people
who are bidding for it. I do not think we should be fearful to
go forward because nobody else in the world has done it up to
this moment in time. Otherwise, we would never innovate. One of
the things about many of the lotteries in the world is that they
are often state run lotteries, not national lotteries, and are
different in size and scope. Many state run lotteries are for
very limited purposes in terms of expenditure. Our good cause
expenditure goes far wider than lots of lotteries elsewhere in
the world. I think it is right to look at other areas of the world.
There would be worries and concerns if we did not ask the question
that you have just asked us. We have looked at that but, looking
at our own circumstances, we feel that this is the right way forward.
Q351 Derek Wyatt: In the sense that
we have been fond of putting in our manifesto that we would like
a not for profit, where does that now stand in our thinking?
Estelle Morris: If a not for profit
company was to come forward, we would be delighted to look at
it. In terms of our manifesto commitment which obviously I reread
in the light of my appearance here today, it was not based on
the assumption that it would be no profit taken out of fewer proceeds;
it was based on the assumption that it would be no profit taken
out of more proceeds. I would still welcome a bid from a not for
profit organisation but I would not want NLC or anyone else to
accept that if it meant less money going to good causes.
Q352 Rosemary McKenna: Most communities
are impacted on the funding by the New Opportunity Fund and the
Community Fund. Those are the aspects of the lottery that really
matter to local communities. Are you absolutely convinced that
the saving that you will make from merging the two bodies will
increase funding to good causes and what will the new body do
differently?
Tessa Jowell: Yes, the savings
which are at the moment expected to be broadly within a range
of 10 to 20% will be put to the benefit of the organisations and
communities that receive lottery funding. I am not saying that
they will get extra grants. We are looking at the new distributor
and offering as a service what we would call capacity building
which is very important in very poor communities which may have
little civil infrastructure and rural communities, those areas
which either do not put in lottery applications, find it difficult
to get lottery projects going or put in lottery applications but
they never get funded. One of the roles of the new distributor
will be to be more proactive and not wait for fair shares or a
coalfields community initiative to be upon them, but to keep under
scrutiny the fairness of the distribution of lottery money; and
also to conduct on a continuing basis some scrutiny of why there
appears to be an imbalance in the areas in which lottery applications
are coming; then, taking it a step further, providing support
to what may be very small, local organisations, in making applications,
in establishing projects and helping to see them through. That
is part of the value added that we hope and intend the new distributor
will provide, a combination of proactivity and community capacity
building. A third area will be streamlining the bureaucracy of
the lottery which is complained about a lot by applicants. It
will provide a single front door through which potential applicants
can post their applications or make inquiries. It will be a very
large distributor. It will command about 50% of all the lottery
money. There were many reasons, as you know, that drove the decision
to merge the two distributors and I would like to thank both the
boards and the staff for the spirit in which they have approached
this. A lot of progress has been achieved in the administrative
merger which now awaits confirmation by legislation. The benefits
will be great. Part of the Millennium Commission which will wind
up in 2005 will also be incorporated in the new distributor and
it will be that part of the Millennium Commission which has shown
such real talent, in my view, at managing big projects. The management
of transformational projects will be part of the function of the
new distributor in addition to the component responsibilities.
Q353 Rosemary McKenna First of all,
it is important not to lose the expertise that is there already
in the organisation. That often happens in a merger and obviously
you are aware of that. Secondly, you will continue to use the
devolved administrations to set up the distribution or organise
the distribution within Wales, Scotland, and Northern Ireland
and across the UK.
Estelle Morris: I have met both
my counterparts in Wales and Scotland over the last six to eight
weeks so we have a good, ongoing dialogue there about the shape
of the future distributor.
Q354 Michael Fabricant: You stated,
Secretary of State, that you feel that the department maintains
the principle of additionality. Colleagues have expressed their
concern that the Olympics are going to take some money out of
existing good causes. Why are we paying for the Olympics from
the lottery? Is that not a breach of additionality?
Tessa Jowell: No. The Olympics
will be an enormous national celebration. One of the benefits
of the Olympics is perhaps one of the most powerful ways of driving
increased participation in grass root sport for people who never
aspire to be athletes but who are enthusiasts but also, and perhaps
more importantly for the long term, a real focus and driving force
for young athletes.
Michael Fabricant: Why are we paying
direct?
Q355 Chairman: It is the deal with
the Chancellor, is it not? The Chancellor was only willing to
finance the lottery provided he did not have to pay for it, so
the lottery is being raided because the Chancellor, as Chancellors
always will, refused to cough up all of it?
Tessa Jowell: No. I would reword
your intervention, Chairman. The lottery is paying or underwriting
a large share of the public cost of the Olympics because this
is something that, were that funding not available, it is very
unlikely that the Government would have supported.
Q356 Chairman: That is exactly what
I said.
Tessa Jowell: I would disagree
with your use of the term "raided". It will bring particular
benefits to London but we are also determined that it brings benefits
to the rest of the country. We are not unusual in using lottery
financing to fund the staging of the Olympic Games. If you look
at all cities, Barcelona probably got closest to—
Michael Fabricant: They do not have an
additionality principle. That is the difference.
Q357 Chairman: I have allowed you
and me a great deal of leeway but a final question is a final
question.
Tessa Jowell: I am content that
the degree of underwriting that the lottery is going to provide
is sustainable for the lottery, is manageable for the other good
causes and will be absolutely fantastic for sport in this country
and for the sense of feel good that people play the lottery, in
part, for. I think it is a wholly proper and consistent use of
lottery funding. Finally, we have identified 1.5 billion as the
amount over the eight year period following on from the decision
that could be taken from the lottery. You should see that as a
maximum, not as a definite allocation, because this all depends
on how much of the very generous contingency that we have provided
for has to be used in the event.
Michael Fabricant: I hope you are right.
Q358 Chairman: Please have the last
word.
Tessa Jowell: I am satisfied,
within 85% of probability, that we are right.
Chairman: Thank you very much indeed.
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