Examination of Witnesses (Questions 20-39)
MS SUE
STREET, MS
CAROLE SOUTER
AND MR
STEPHEN DUNMORE
12 JANUARY 2005
Q20 Mrs Browning: How do you differentiate
between those longer term projects where there is a legitimate
reason for a slow drawdown or a delayed start, which are quite
legitimate, and those where they have not got their act together
in the end? What monitoring do you do to ensure that you draw
stumps when there is something which is not going to get off the
ground?
Ms Souter: Obviously we use different
approaches depending on the scale of the grant. Grants under £50,000
are delegated to staff decision making and we have tried to take
a much lighter touch approach there. As part of our efforts to
move money out of the balances more quickly with those low risk
projects we pay half the grant upfront and we have been working
very hard on making that possible. It is particularly helpful
for small community groups which tend not to have much cash. With
the larger grants, if they are coming in at over a million pounds,
we have a two stage process where we will give an initial approval
and then they may take up to 12 months to work out the further
detail knowing that they have got the money if they get things
right, and then they come back to us. We will ask for forecasts
of drawdown of funds and our systems now identify when people
are not coming to us and asking for money at the time that we
expected them to do so. Our grant officers will then be back in
touch with them, asking them what is happening and making sure
there is a reason and they understand what is happening. As you
said, very often there is a perfectly good reason, they may not
be able to find the right hedger or thatcher or whatever it may
be, but it is an issue which needs to be kept under close attention.
The other balance of judgment for us is we want to see the projects
happen because they are important. We want them to take place
on the ground and there is a very fine judgment about whether
to stick with the project and help them through or whether to
withdraw money when they might be half way through delivering
a project.
Mrs Browning: Thank you. My time is up.
Could I just make a plea to you. I am totally supportive of the
decision making about how Lottery funds are distributed and spend
being quite separate from political influence, and I hope that
will always be the case. However, in my experience as an MP representing
a large rural constituency, and also a Lottery player myself,
part of our culture seems to be developing in a way that worries
me, and it is this: very often funds, not just Lottery funds but
funds that people can apply for in their local communities, seem
to have an emphasis on anything which has the prefix "new".
If they have an idea that is "new" they seem to be able
to channel funds into it whereas actually maintaining and sustaining
something that is of value and ongoing value to communities is
somehow denigrated in preference to "new". Could I say
to you that conservatism, with a small "c", should receive
equal treatment as to anything with a "new" prefix added
to it? I will leave you with that thought, if I may.
Q21 Jon Trickett: There seems to
be one word which is riddled through this Report and that is variable
or variations, is it not, between the different operations doling
out Lottery money. Why is there so much variation?
Ms Street: There are 15 different
distributors and they are involved in very different kinds of
businesses. If you think at one end of the Heritage Lottery Fund
there are very large capital projects, long drawdown times—actually
so far no major capital project has failed under the HLF arrangements
so it is quite a heavy long term business—and at the other
end we have the Community Fund awards which are intentionally
very small, fast moving—maybe to paint a hall—and
then you have got things like the UK Film Council where if they
fund a blockbuster they return the money to the Lottery pot and,
therefore, keep more in their balances, there are genuinely different
kinds of businesses. I think there are three big imponderables.
One is what will Lottery sales do? Is it going to be a good year
or a bad year? Those trends are now steady but you never know
exactly how many people are going to buy tickets. You then do
not know how many applications are going to be made to each distributor
and you do not know the way to drawdown from the grants made.
I do not want to give a glib phrase but there is not a one-size-fits-all.
Q22 Jon Trickett: No, I accept that.
There seem to be variations in policy, for example, about the
maximum grant which they will allocate relative to resources available.
Some are saying they will go over, some are saying they will not,
and then of those some break their own policies and some do not
break their own policies, most of them do in different ways. Some
spend more than the maximum, some spend less than the maximum.
Surely there ought not to be those kinds of variations between,
firstly, policies and, secondly, implementation of policies. Would
you not expect them all to have a policy but the policies to be
more or less the same and to be implemented in the same way?
Ms Street: I think it is very
helpful that the report draws out the fact that if boards simply
implemented their own policies that would have a very good effect
on reducing the balances. I am clear from the Department's point
of view that I would like to see the boards implement their own
policies.
Q23 Jon Trickett: Even after you
have said what you want the policy to be it seems to me that they
may agree a policy but then break it almost immediately, do they
not, or they fail to achieve it?
Ms Street: My view is they should
implement their own policies, that is what I think boards should
do.
Q24 Jon Trickett: I will tell you
what I am driving these questions to. I think I read somewhere,
but I cannot spot it, each chief executive—or whatever title
they have—is an accounting officer in their own right. That
is quite striking really because they do not employ huge amounts
of staff and, by comparison with the permanent secretary in a
large department such as Defence or Health or something like that,
they are not managing huge amounts of staff or money either. Why
are each of the heads of each of these organisations accounting
officers in their own rights?
Ms Street: Why are they?
Q25 Jon Trickett: Yes, because it
seems to me once you have that then you have this unilateral declaration
of independence almost by each of the funds, do you not?
Ms Street: Obviously Lottery money
is different from taxpayers' money and it is the taxpayers' money
that goes through departmental accounting officers.
Q26 Jon Trickett: They are each accounting
officers, are they?
Ms Street: They are each accounting
officers. I am responsible for the overall framework and ensuring
they have proper financial directions and there is a longer or
shorter arm depending on which body. You are right, in the end
the board has to decide—and I would like to see this even
more rigorously done—on their appetite for risk for their
kind of business.
Q27 Jon Trickett: Is that 15 separate
boards?
Ms Street: That is 15 different
distributors.
Q28 Jon Trickett: Why though? Why
not have one single accounting officer who has 15 people reporting
to them operating the same policies accepting the difference between
the kind of market place? It seems to me you can have a policy
which allows a heterogeneous application, why not have one accounting
officer and them all reporting to him? That would allow you to
have a greater input, would it not, on behalf of the public?
Ms Street: It would. I do not
know if that would give confidence that all those different kinds
of businesses were really pushing their expertise out to the front
line. I think the kind of expertise we get in the HLF, for example,
would not be found in the department.
Q29 Jon Trickett: Who decided they
should all be separate accounting officers?
Ms Street: This stems from the
1993 Act, the framework which is very clearly set out.
Q30 Jon Trickett: It is a statutory
requirement that each one has a separate accounting officer? That
is on the face of the Bill presumably?
Ms Street: I would need to check
the face of the Bill but the position is they are all set up as
non-departmental public bodies.
Q31 Jon Trickett: Yes, I understand
that.
Ms Street: Each of those has to
have an accounting officer.
Q32 Jon Trickett: There is another
note being passed to you which might be helpful.
Ms Street: This is very helpful.
We did consult on this and there was no support for a one-size-fits-all.
Q33 Jon Trickett: I am not suggesting
that. That might be regarded as a caricature of what I have said
because I am only asking questions to try to help you to manage
this process and achieve your objectives. Are there alternative
management arrangements which might help you to achieve what you
would want which we might be able to recommend to strengthen your
arm in relation to these 15 separate independent entities? Can
I tempt you into commenting.
Ms Street: What I would like to
see—and this is where the Report helpfully gets us, and
indeed the deliberations of the Committee and its conclusion could
help us—is a very clear signal that the boards of the different
distribution bodies need to position themselves very, very accurately
on that difficult line between excessive caution and recklessness
and waste, decide exactly where they are going to be and implement
that and set targets and meet them.
Q34 Jon Trickett: Probably for diplomatic
reasons you are ducking the answer to my question. When we come
to write the report I hope the report might reflect on the future
of management arrangements if you are able to secure the objective
which you have just set out. I want to ask you one other question
which is about the management of the surplus fund which the Report
says the Treasury decided should be handled by this body—which
I have never heard of before—called the Commissioners
for the Management of the National Debt. Is that the right title?
Ms Street: Yes, it is.
Q35 Jon Trickett: At 1.5 ".
. . the Commissioners for the Reduction of the National Debt .
. ." manage the surplus, do they not?
Ms Street: They do.
Q36 Jon Trickett: Are you satisfied
with their management of it or is it something you do not have
to deal with?
Ms Street: I have looked at the
table with interest. It is clear that gilts fluctuate almost inversely
to the market, so if shares drop gilts go up. I have a colleague
from the Treasury here who could answer.
Q37 Jon Trickett: I am going to ask
her.
Ms Street: I do think it is important
that we do not think that this money is just sitting about doing
nothing, it is actively managed and it does earn interest.
Q38 Jon Trickett: We do not want
the public to form the view that the Lottery is being used to
reduce the National Debt by producing a continuing surplus, do
we, because that would be entirely inappropriate. You might conclude
if you did the figures carefully that was what was happening.
Ms Street: Would it be helpful
for my colleague from the Treasury to answer?
Q39 Jon Trickett: Yes. I want to
ask why the Treasury decided to nominate.
Ms Diggle: I think it was seen
as a very safe haven for the funds. You have to think how fast
the funds would need to be used. As Carole Souter said a few minutes
ago, the typical time horizon is something like five years, on
average. It may be less than that for some funds. Putting the
funds into a mix of instruments that would be subject to fluctuations
might not yield a good return on the time horizon required for
the monies which are being held for the various funds. Therefore
one needs to think about using just debt instruments. I do not
think there is sufficient volume of corporate debt instruments
in safe form available to manage the size of balances we have
here.
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