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These notes refer to the National Lottery Bill as introduced in the House of Commons on 25th November2004 [Bill 7] NATIONAL LOTTERY BILLEXPLANATORY NOTESINTRODUCTION 1. These explanatory notes relate to the National Lottery Bill as introduced in the House of Commons on 25th November 2004. They have been prepared by the Department for Culture, Media and Sport in order to assist the reader of the Bill and to help inform debate on it. They do not form part of the Bill and have not been endorsed by Parliament. 2. The notes need to be read in conjunction with the Bill. They are not, and are not meant to be, a comprehensive description of the Bill. So where a clause or part of a clause does not seem to require any comment or explanation, none is given. SUMMARY 3. The Bill provides for those elements of the Government's reforms on the licensing and regulation of the National Lottery and for the way National Lottery money is distributed to good causes, set out in the National Lottery Licensing and regulation and Funding Decision Documents, both published on 3 July 2003, that require primary legislation. 4. The main provisions of the Bill are as follows:
[Bill 7—EN] 53/4
* Devolved administrations means Scottish Ministers, the National Assembly for Wales and the Northern Ireland Department for Culture, Arts and Leisure.
5. The National Lottery Licensing and Regulation and National Lottery Funding Decision Documents, both published on 3 July 2003, set out the Government's proposals for reform of the licensing and regulation of the National Lottery and the way Lottery money is distributed to good causes. These were influenced by the response to the consultation papers "Review of Lottery Licensing and Regulation" and "Review of Lottery Funding: A consultation paper on Lottery distribution policy", published in June and July 2002 respectively. Most of the Government's decisions do not require legislation. This Bill deals with those that do. TERRITORIAL APPLICATION 6. The Bill extends to the whole of the United Kingdom. The Big Lottery Fund will also have the power to make grants in the Isle of Man. COMMENTARY ON CLAUSES Clause 1: Nature of the National Lottery 7. This clause amends Schedule 2A to the National Lottery etc. Act 1993 ("the 1993 Act") dealing with the constitution of the Commission. In particular:
Clause 2: Disclosure of information 8. The Gambling Bill, currently in the House of Commons, provides for the repeal of Section 37 of the Finance Act 1993. This clause allows the Commissioners of Customs and Excise and the National Lottery Commission to exchange information. Subsections (3) and (4) places limitations on the further disclosure of information received under this clause. In particular, subsection (4)(c) allows such further disclosure to that National Audit Office for the purposes of some of their functions under the National Audit Act 1983 (economy, efficiency and effectiveness examinations). Clause 3: Length of licence 9. This clause inserts provision into section 7 of the 1993 Act to provide that a licence granted under sections 5 or 6 of that Act cannot exceed 15 years. It also provides that such a licence may include provision allowing the National Lottery Commission to extend the period of the licence or provision allowing the licence to be extended with the agreement of the relevant licensee. Clause 4: Fee 10. This clause inserts new section 7A into the 1993 Act to provide that the holders of licences under sections 5 and 6 of that Act must pay annual fees, to be set out in regulations, to the National Lottery Commission. The fees will reflect the expenses incurred by the National Lottery Commission in the exercise of all its functions under Part 1 of the 1993 Act e.g. granting licences, considering new games, monitoring the licences, whereas the previous licence fee only reflected the granting of the licences. Clause 5 and Schedule 1: Licensing structure 11. This clause provides for Schedule 1 to be commenced by an order under that clause rather than under the normal commencement provision (clause 20). In particular, it requires the order to be subject to negative resolution procedures. Schedule 1 is to be commenced in this different way to reflect that intention that the Secretary of State will not commence Schedule 1 immediately but only if she considers that the current licensing structure has failed in creating an effective competition for the licence under section 5 of the 1993 Act to run the National Lottery and so risks maximising returns to good causes. 12. Paragraph 2 of Schedule 1 will substitute section 1 of the 1993 Act. This section currently provides that a lottery only formed part of the National Lottery if it was promoted by the body licensed to run the National Lottery (currently Camelot plc.) under section 5 of the 1993 Act or in pursuance of an agreement between that body and the lottery's promoter. The promotion of such a lottery must also have been licensed under section 6 of the 1993 Act. New section 1 will remove the concept of a licensed person to run the National Lottery as a whole and will provide that a lottery forms part of the National Lottery simply if it is promoted under a licence under new section 5. 13. Paragraph 4 of Schedule 1 will insert new sections 5, 6 and 6A into the 1993 Act. New section 5 will replace the licensing provisions under sections 5 and 6 of the 1993 Act with the effect that there is only one type of licence - to promote a lottery - rather than the two types of existing licence - to run the National Lottery and to promote a lottery. The current system comprises the section 5 licensee running that National Lottery with section 6 licensees promoting individual lottery games. The section 6 licensee can only promote the lotteries with agreement of the section 5 licensee. In practice, Camelot, the section 5 licensee, also holds all the current section 6 licences. Under new section 5 there will only be one type of licence to promote individual lotteries or types of lotteries. 14. The provisions in new section 5 will largely re-enact the current provisions in sections 5 and 6. Subsection (3)(c) provides that a licence may require or permit the licensee to make arrangements with other persons for the performance of specified functions. This will allow the National Lottery Commission to require a licence holder work together with another licence holder for specified reasons e.g. a joint promotion. 15. New section 6A relates to the competition(s) to award licences to run the National Lottery. Subsection (1) will provide that the National Lottery Commission may not issue a licence under new section 5 unless it has complied with the regulations set by the Secretary of State relating to the invitation of applications for licences. However, subsection (3) will allow for exceptions when the Commission does not need to comply with the regulations. That is, if the Commission thinks that such course is likely to be in the interests of their duty to do their best to maximise returns to good causes under section 4(2) of the 1993 Act; or it is necessary to prevent a lapse in the lottery (e.g. a lottery promoted may pull out at very short notice which would not allow the Commission sufficient time to run a competition without a strong risk of there being a period where the lottery in question ceasing to operate). In the latter case this exception is not open ended and under new subsection (4) the period of the licence must be no longer than the Commission consider necessary to complete a new competition. 16. Paragraph 5 of Schedule 1 will make consequential changes to section 7 of the 1993 Act. New section 7(3A)(a) and (b) will allow licence holders to be required to provide information and make facilities available in connection to lotteries to other licence holders, potential bidders for licences and others. Such conditions would allow for all bidders as well as incumbent licence holders to have the same information before entering any competition for licences. New section 7(3A)(c), (d) and (e) will allow licence holders to be required to cooperate and participate in arrangements between themselves. For example, to ensure that all licence holders work together and not in competition for the benefit of National Lottery as a whole and to maximise the returns to good causes. Clause 6: National Lottery Distribution Fund: apportionment 17. This clause amends section 22 of the National Lottery etc. Act 1993 ("the 1993 Act"), which deals with the apportionment of money in the National Lottery Distribution Fund to the good causes, to provide that 50 per cent of all sums paid into the Distribution Fund by the licensee who runs the National Lottery (currently Camelot plc) must be allocated for prescribed expenditure that is charitable, or connected with health, education or the environment. This provision effectively creates a new good cause for the Big Lottery Fund, replacing the existing Community Fund and New Opportunities Fund good causes. 18. The Secretary of State will set out by order what is "prescribed expenditure". New section 22(3B) will allow such an order to prescribe "devolved expenditure" - the Big Lottery Fund's functions in relation to such expenditure will be exercised by the English, Welsh, Scottish and Northern Ireland committees set up under paragraph 7 of new Schedule 4A (inserted by Schedule 2 of the Bill) and directions on the exercise of the Big Lottery Fund's functions in relation to devolved expenditure under new section 36E(1) and (2) may only be exercised by the relevant devolved administration. Such an order will be subject to affirmative resolution procedure. 19. The Secretary of State plans to exercise this power, subject to consultation, to prescribe descriptions of devolved expenditure. Possible examples are expenditure on community learning and creating opportunity, promoting community safety and cohesion, and promoting well being. The Secretary of State also plans to exercise this power to prescribe types of expenditure which are not devolved expenditure, such as transformational grants. Clause 7: Reallocation of funds 20. Sections 22 and 23 of the 1993 Act provide that sums paid into the National Lottery Distribution Fund are held in that Fund for particular good causes and Lottery distributors - these sums are commonly known as a Lottery distributor's balances. New section 29A as inserted by this clause will allow the Secretary of State by order to reallocate these sums from one Lottery distributor to other distributors. The Secretary of State would be required to consult with any body mentioned in the order and also the devolved administrations. In practice, the Secretary of State would only use this as a last resort in the event that a distributor was considered to have failed, signally, to reduce balances to a reasonable level and there were serious concerns about the ability of a distributor to act economically and effectively. Such an order will be subject to affirmative resolution procedure. 21. If the Secretary of State exercises this power she will normally ensure that the balances are distributed to the other Lottery distributors in proportion to the share of Lottery money they receive under section 23 of the 1993 Act. However, the Secretary of State will also endeavour to ensure that where this power is applied to an Arts or Sports Council that the country which that body relates to does not suffer a reduction to the amount of Lottery money it receives. Clause 8: Investment income 22. This clause amends section 32 of the 1993 Act, which deals with returns on investments of money held in the National Lottery Distribution Fund. Subsection (1) provides that proceeds from investment are allocated according to the same percentage shares as money entering the Distribution Fund, i.e. it is allocated to distributors according to the percentages set out in section 23 of the 1993 Act. This replaces the existing arrangement where returns are allocated to distributors in proportion to their share of money already held in the Distribution Fund on their behalf. Clause 9: Distributing bodies: consultation 23. The effect of new section 25(2C) is to permit Lottery distributors, when making a decision about distributing Lottery money both to consult any person about it and to take account of the opinions expressed or information supplied as a result of that consultation. It is intended to remove any doubt about whether the Lottery distributors have to power to consult or take into account such matters in exercising their powers to distribute Lottery money. Clause 10: Distributing bodies: publicity 24. New section 25E is intended to remove any doubt about the powers of Lottery distributors to publicise the National Lottery. While it is already clear that they can publicise their own award of a grant and its purpose, this clause allows them to participate in publishing more general information about the work of all Lottery distributors and the intention is that by doing so they will be able to inform the public better about what the money they award is achieving overall for the Lottery good causes. This will ensure that all the Lottery distributors are able to participate in the National Lottery Promotional Unit which seeks to raise positive awareness of and support for the benefits of the distribution of National Lottery funding across the whole country, while contributing to the brand health of the National Lottery and promoting loyalty and participation. Clause 11: Isle of Man 25. Subsection (1) provides that a body may distribute money to meet expenditure which relates to the Isle of Man. In particular, it is intended that the Big Lottery Fund will distribute money to the Isle of Man. Subsection (2) provides that a body may delegate under section 25A of the 1993 Act to an Isle of Man Body. In particular, it is intended that the Big Lottery Fund will delegate its funding functions in relation to the Isle of Man to Public Lottery Trust. Clause 12: The Big Lottery Fund: establishment 26. This clause inserts provision into the 1993 Act establishing the Big Lottery Fund as a corporate body and inserting a new Schedule 4A (Schedule 2 to this Bill), which sets out detailed provisions on the Big Lottery Fund's constitution, proceedings and money. Clause 13: The Big Lottery Fund: functions 27. Subsection (1) amends section 23 of the 1993 Act to allow the Big Lottery Fund to distribute the money in the National Lottery Distribution Fund allocated to prescribed expenditure that is charitable or connected with health, education or the environment. Subsection (2) inserts new provisions into the 1993 Act setting out the functions of the Big Lottery Fund. 28. New section 36B sets out the Big Lottery Fund's main power to distribute funds. The Fund will be able to make grants or loans, or make or enter into other arrangements, in distributing funds. The Secretary of State will be able to limit by order the amounts that the Big Lottery Fund may distribute on types of expenditure prescribed by new section 22(3A). In practice, these order making powers will be exercised together. Both orders are subject to affirmative resolution procedures. 29. New section 36C allows the Big Lottery Fund to distribute non-Lottery funds provided such funds are for expenditure that is charitable or connected with health, education or the environment. Examples might be third party funds from Government Departments or charitable foundations that wished to make use of the Big Lottery Fund's distribution infrastructure. 30. New section 36D allows the Big Lottery Fund to give advice about the distribution of Lottery money and applications for Lottery grants. 31. New section 36E requires the Big Lottery Fund to comply with any directions given to it by the Secretary of State and by the devolved administrations in relation to their devolved expenditure. The Secretary of State alone has the power to give directions under subsection (3) relating to operational matters such as financial management, staffing and accounts and to give directions under subsection (2) relating to non-devolved expenditure and English devolved expenditure. Before giving directions the Secretary of State must consult the Big Lottery Fund and, except for expenditure relating to England, the devolved administrations. 32. Subsection (4) provides that the devolved administrations have the sole power to give directions in relation to Welsh, Scottish and Northern Ireland devolved expenditure. They must consult the Big Lottery Fund and seek the Secretary of State's consent before giving directions in relation to devolved expenditure. Clauses 14 to 17: Dissolution of old distributors 33. Clause 14 allows the Secretary of State by order to appoint a day on which the Community Fund, the Millennium Commission and the New Opportunities Fund will cease to exist. Clause 15 provides for the property, rights and liabilities of the Community Fund, the Millennium Commission and the New Opportunities Fund to be transferred to the Big Lottery Fund. In particular, subsection (9) confers on the Big Lottery Fund the power to do anything for the purpose of giving effect to any decision, agreement or undertaking of the Lottery distributors dissolved irrespective of whether it has the power to do so under the 1993 Act as amended. This will allow the Fund to continue to pay grants after dissolution in accordance with decisions made prior to dissolution by the Millennium Commission, Community Fund and New Opportunities Fund. 34. Clause 16 provides that money held in the National Lottery Distribution Fund for the Millennium Commission, the Community Fund and the New Opportunities Fund is now held for distribution by the Big Lottery Fund. 35. Clause 17 makes provision for a number of amendments to the 1993 Act where references are made to the old distributors. In particular:
Clause 18: Meaning of "charitable expenditure" 36. This clause defines "charitable expenditure", in relation to the new good cause set out in new section 22(3)(d), as expenditure for a benevolent or philanthropic purpose. The reference to 'charitable purpose' has been removed as all charitable purposes are regarded as either benevolent or philanthropic. It is not intended to reduce in any way the scope of the definition or to narrow eligibility. The new definition adopts a purpose based approach in deciding whether expenditure is charitable whereas the existing definition adopts an institutional based approach i.e. expenditure by charities or other institutions set up for charitable, benevolent or philanthropic purposes. Schedule 2 - The Big Lottery Fund 37. Schedule 2 inserts a new Schedule 4A into the 1993 Act setting out detailed provisions on the Big Lottery Fund's constitution (part 1), proceedings (part 2) and money (part 3). 38. Paragraph 1 deals with the membership of the Big Lottery Fund. It provides that there will be 12 members appointed by the Secretary of State. The Secretary of State may vary this number by order, following consultation with the devolved administrations. One member will be appointed as Chairman. One member will also be appointed to represent the interests of each of England, Wales, Scotland and Northern Ireland, with the agreement of the relevant devolved administration. 39. Paragraph 7 requires the Big Lottery Fund to establish a committee for each of England, Scotland, Wales and Northern Ireland, to be chaired by the relevant member of the Fund. The committees will be responsible for devolved expenditure in respect of their countries. The members of the committees will be appointed by the Big Lottery Fund, with the agreement of the Secretary of State in the case of the England committee, or the relevant devolved administration. 40. Paragraphs 12 and 13 deal with disqualifications of members of the Fund from the House of Commons and Northern Ireland Assembly. Equivalent provision for Scotland and Wales will be made by amending the Scottish Parliament (Disqualification) Order 2003 and the National Assembly for Wales (Disqualification) Order 2003 respectively. 41. Paragraph 20 allows the Fund to invest money an in interest-bearing account. Whilst most money the Fund receives will be held in the National Lottery Distribution Fund and invested by the National Debt Commissioners under section 32 of the 1993 Act, non-Lottery money received pursuant to new section 36C of the 1993 Act may be invested under this power. FINANCIAL EFFECTS OF THE BILL 42. The expenses of all the Lottery distributors incurred in consequence of the 1993 Act are met by the money held in the National Lottery Distribution Fund by virtue of section 25(3) of that Act. Therefore there will no direct effect on public expenditure as a result of this Bill. However, the replacement of the old distributors with the Big Lottery Fund is expected to achieve savings of between 10 and 20 per cent of the expenses per year from 2005/06 onwards which equates to between £6 million and £12 million per year. This will result in more Lottery money being distributed to the good causes. EFFECTS OF THE BILL ON PUBLIC SERVICE MANPOWER 43. There is expected to be no effect on public service manpower. However, the replacement of the old distributors by the Big Lottery Fund will result in reductions in manpower for the Fund in comparison to its predecessors. SUMMARY OF REGULATORY APPRAISAL 44. Regulatory Impact Assessments have been prepared to accompany the Bill and will be published alongside the Bill and these notes. 45. Having consulted widely, the Government is of the view that the provisions will have minimal impact on small firms, voluntary organisations and charities. The Commissioners for the Reduction of the National Debt have indicated there is unlikely to be any additional cost arising from the new provisions for investment income. 46. Charities, voluntary organisations, local Government, distributors, Lottery ticket buyers and the community as a whole will benefit from the ability of the Big Lottery Fund to distribute non-Lottery funds since they will be able to maximise the benefits of the Lottery by combining Lottery funding with other funds. The provisions for investment income are likely to result in a slight reduction of interest available to distributors. COMMENCEMENT 47. The provisions of the Bill, except for clause 15, dealing with the dissolution of old distributors, will come into force by order. The order would specify different dates of introduction for different elements although it is intended all would be effective in the beginning of 2006. EUROPEAN CONVENTION ON HUMAN RIGHTS 48. Section 19 of the Human Rights Act 1998 requires the appropriate national authority in charge of a Bill in either House of Parliament to make a statement before Second Reading about the compatibility of the provisions of the Bill with the Convention rights (as defined by section 1 of that Act). The Secretary of State for Culture, Media and Sport has made the following statement under section 19(1)(a) of that Act:
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