Examination of Witnesses (Questions 100-120)
MS SUE
STREET, MS
CAROLE SOUTER
AND MR
STEPHEN DUNMORE
12 JANUARY 2005
Q100 Mr Williams: Yes.
Mr Dunmore: None whatsoever.
Q101 Mr Williams: None whatsoever,
okay. £450 million is 30% of your annual income. No, it cannot
be. Yes, £1.4 billion, so it is 30% of your annual income.
Mr Dunmore: Sorry, what was 30%?
Q102 Mr Williams: £450 million
is 30% of your annual income.
Mr Dunmore: I think that was the
figure by which we said we would aim to reduce the balances. As
has already been said, the level at which you pitch your balances—
Q103 Mr Williams: Sorry, there is
a division that has just been called. We were given a figure a
moment ago of £450 million in relation to the Lottery, as
I understood it.
Ms Street: That was in relation
to the Olympics. We may have a misunderstanding. The £450
million is the assessment that we make of the diversion from the
good causes.
Mr Williams: That is a third of a year's
income.
Chairman: Is that a third of the year's
income? Behind you they are nodding, Ms Street.
Q104 Mr Williams: It looks like it
on page 13. Anyone can work it out, as I can.
Mr Dunmore: Are you talking just
about the Big Lottery Fund or about all of the distributors?
Q105 Mr Williams: It says "income"
down here. This is purely income into the Distribution Fund, that
is what I am talking about. On page 13 it shows income for the
Distribution Fund of £1.4 million as of 2003-04 and, therefore,
what you are committing, just to get a comparator, is equivalent
to one-third of a year's income.
Ms Street: I think the calculation
that we have made, and it is an estimate, is that there will be
a 5% diversion, that is a £450 million diversion, over the
seven years up to 2012. It is not really taking it out of one
year's income. I do not know if that helps for clarification.
Mr Steinberg: These figures are just
not what we were told about. These figures are not the ones that
we have been given in the report. The report says: "In total
the National Lottery is expected to provide up to £1.5 billion
to help meet the costs of staging the Games, should London's bid
be successful. In addition to the £750 million to be raised
from the new games, the Government proposes that: £340 million.
. . ." et cetera, et cetera.
Chairman: I think we will have to vote.
We will adjourn for five minutes.
The Committee suspended from 4.35 pm to
4.41 pm for a division in the House.
Q106 Mr Steinberg: The response was,
you said, something like £400 million but I can remember
when I read the report at the weekend (but I could not remember
where I had read it so I have had to quickly go through it) at
4.17, on page 29, it does not say anything about £400 million,
it says: ". . . the National Lottery is expected to provide
up to £1.5 billion to help meet the cost of staging the Games,
should London's bid be successful. In addition to the £750
million to be raised from the new games . . ." That is £2.5
billion. That is a little bit more than £400 million, is
it not?
Ms Street: I will try and clarify
to what I was referring. The £450 million is referred to
in paragraph 4.15. Part of the way down you will see "59%
of the £750 million to be raised from the new games over
their seven year life might come from players switching from existing
lottery games." 59% of the £750 million is the £450
million I was putting on the record which over the years (I think
it is about £64 million a year) from the Report might be
diverted. It is then set out very helpfully in the report that
of the £1.5 billion we expect £750 million to be from
the new games, but not all of that will be diversion, and £340
million mainly from Sport England, so it is exactly as set out
in the report and I probably did not express it very well. It
was the 59% that I missed.[6]
Mr Steinberg: That is as clear as mud.
Mr Field: Beat that one.
Q107 Mr Steinberg: Give us a yes
or a no; does that mean that in fact £2.5 billion will be
taken from the Lottery to pay for the Olympic Games?
Ms Street: No, £1.5 billion
is the expected total, of which a large amount, £340 million,
will come from Sport England and the estimate is a £440 million
diversion from the current causes.
Q108 Mr Steinberg: So I am right
that it is going to cost £2.5 billion to stage the Olympic
Games here?
Ms Street: No, that is not correct
but I would be happy to write to you.[7]
Mr Steinberg: There are two questions
I wanted to ask but I am hoping to come back on that.
Chairman: Roll them into one.
Q109 Mr Steinberg: Ms Souter, the
National Lottery sent us a briefing which makes quite desperate
reading if you were to believe it, and I am not saying it is not
true. You told us that clause 7 of the new Bill would create a
power that would, if used, force the Heritage Lottery Fund to
either tell projects that have already been awarded grants they
cannot have the claim or even to close the doors to new applications
altogether. In clause 8 you told us that if the invested income
were to be shared, you would lose something like £15 million
a year. Do you still stand by those two points that you made in
the briefing?
Ms Souter: Yes, what we were attempting
to do was draw attention to what we thought the impact of the
clauses as currently drafted (in our understanding of what they
meant) would be, and we subsequently, as we do on a regular basis,
had further discussions with the Department, and I am sure that
the Department will be clarifying and Ministers will be clarifying
during the second reading and other stages of the Bill exactly
what that will mean. I think that it is clear that the clause
which reallocates interest will have the impact that the NAO itself
estimated to be £15.7 million in 2003-04 so I think that
can be factually calculated. The way in which the other clause
on possible reallocation of interest is handled I am sure is something
Parliament will explore further in the next stages of the Bill.
Q110 Mr Allan: To come back to the
Olympics again briefly. In Sheffield our plan A is to host a team
for the London Olympics and our plan B is to host a team for the
Paris Olympics so we intend to get in on the act either way. The
expectation is that bodies like Sport England that do have a national
focus would be spending more sports money in the run-up to the
Olympics all around the country so it not just London expenditure.
Is that a correct understanding of what we have just been discussing?
Ms Street: Yes.
Q111 Mr Allan: The other point is
this sting in the tail which now I have looked at it looks like
quite a big sting—the remaining £410 million, which
should it be needed to meet the cost of the Games will come from
the decision that is taken for the post-2009 distribution, and
that will come out of presumably the three years 2009 to 2012
so that would be the big hit, and that would mean taking £140
million-odd a year out of the funds available to people like HLF
between 2009 and 2012, should it be needed?
Ms Street: Should it be needed,
that is where it might come from.
Q112 Mr Allan: If that is the case,
then the advice to bodies like HLF has to be to build up their
balances in the run-up to 2009 just in case? They should be reversing
the trend if they are going to be responsible managers presumably?
Ms Street: As I say, our projections
set out Olympic scenarios and we discuss those constantly and
we will know in six months whether we get the games or not.
Q113 Mr Allan: There are some scenarios
(just for us to know) where the only responsible course of action
for them is to reverse the current trend and start increasing
their balances? That is what it looks like here.
Ms Street: I would not interpret
it that way. I think with balances of £900 million now there
is a good case for reducing that. We have to assume that if Lottery
sales hold up the pool is being filled all the time, so you can
turn the tap on for a few years yet.
Q114 Mr Allan: Just on the 50% target—and
any round number like that sounds a bit arbitrary—is that
anywhere in anything like a public service agreement or is it
a target that can be quietly dropped? Is there any compulsion
on you to meet the 50% target or can you come back next year and
say we think 25% is okay or 10%?
Ms Street: The intention is to
drive down the balances as fast as we can.
Q115 Mr Allan: It is an indicative
target?
Ms Street: We have not met the
target that was set for 2004 and I have to be clear about that
but we are down 30% from a peak. We are not letting go of that
target but we did not meet it in the timescale we set.
Q116 Mr Allan: It is nothing like
a public service target, there is no special status to it?
Ms Street: No it is not, but it
was an announced target and we will drive it down.
Q117 Mrs Browning: Chairman, with
your permission I wonder if Mr Dunmore would write to us outlining
exactly the geographic locations of these eight rural districts
under the Countryside Communities, together with the criteria
that were used to decide where they should be, because I do have
on-going concerns about these geographic areas specifically being
opened for bids and other areas not.
Mr Dunmore: I would be pleased
to do that. [8]
Mrs Browning: Thank you.
Chairman: Mr Field?
Q118 Mr Field: Chairman, I apologise
for being late but I do not apologise if my questions have been
asked before because it will show how centred the Committee is
on some of the issues before us. I do declare an interest. I chair
an organisation which is in receipt of some large Heritage Lottery
Fund grants and I am very grateful for that. The two questions
which I would like to ask the Heritage Lottery Fund are although
there is an argument between the Department and the Fund about
the size of balances and the rate at which money should be spent,
am I right assuming that the Fund has set a budget so that if
when the new licence is granted and heritage is actually not going
to be one of the good causes, the Fund will have enough money
and will spend its money in the last month of its activities?
Ms Souter: Yes. What we have been
aiming to do is to make sure that up to our over commitment level
of two years, which we think we need to be careful about when
we implement (and I should be clear that we are not breaking our
policy, our policy is to have a commitment up to two years) that
we take account of that when we are looking forward and thinking
about what degree of certainty we have about forward income. Once
we know what our share of the income is going to be after 2009
there is no doubt that trustees will want to look again at overall
commitment levels, as indeed they will when we are clear about
the Olympics and a number of other uncertainties. What we are
very, very concerned to do is to make sure that those projects
that are planning on the basis that there will be funds from us
for their projects to happen are not disappointed and, equally,
we want to carry on being able to offer new applicants the opportunity
for funding in a flexible way. It is that area where with the
Department we will have a discussion about how far we should be
going. I should say, as Sue has said already, it will take an
intervention to change the share of income coming to the Heritage
Lottery Fund and given the level of need that exists for heritage
I am sure that the Government will continue its funding at a comparable
level, but I am not in a position as Accounting Officer to take
that for granted and hope it will just be alright on the day.
Q119 Mr Field: My second question,
Chairman, is about your paying of bills. Our experience from the
Churches Conservation Trust is that you pay them really rather
quickly. Could you give us some idea of the average time it takes,
when an organisation is dependent on the Fund to pay its contractors,
to pay the bills?
Ms Souter: On average it takes
us six days which I think is a pretty good record.
Q120 Mr Field: Could I ask the Permanent
Secretary how long does it take the Department to pay its bills?
Ms Street: I know that we pay
99.9% of our bills on time. I think it is something like 20 days
but I would happily give you details. We do, as it happens, have
a very good record on invoice payment but I highly commend the
HLF and indeed our guidance on the speed with which payments can
be made is based almost entirely on their good practice. [9]
Mr Field: Thank you.
Chairman: That concludes our questioning,
thank you very much.
6 The £450 million I quoted related to the impact
of the proposed special Olympic Lottery Games on the existing
good causes. Camelot now estimates that about 60% of the tickets
sold would come from sales diverted from other Lottery products,
and that about £779 million would be raised in total by these
games (note that these figures are slightly revised since the
report was published) >60% of £779 million is £467
million, representing a loss of about 5% in total Lottery income
to the existing good causes over those seven years, though this
would naturally vary from year to year. Back
7
Note by Witness: The situation is essentially as described
in paragraphs 4.15-4.17 of the National Audit Office's Report.
The National Lottery is expected to provide up to £1.5 billion
to help meet the cost of the Games. Of this, about half would
be raised by special Olympic Lottery Games, running over seven
years, and the remaining £750 million would come from the
sports distributors (£340 million) and changing shares to
good causes after 2009, should any of the remaining £410
million be needed. Back
8
Ev. 14 Back
9
Note by witness: We do not record an average payment time
but we monitor prompt payment. The DCMS Resource Accounts 2003-04
show that 99.3% of our invoices were paid within the contract
term of 30 days. Back
| 
