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Liberal Democrats have always believed that it is vital to maintain the independence of lottery funding from Government, but we have always accepted that there will be exceptions to the rule. Four years ago, when the Government proposed that some money be taken from national lottery good causes to fund part of the Olympics, we, along with all the other major political parties, reluctantly agreed to it, because we
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believed that the benefits that would accrue in terms of sport, culture, heritage, regeneration and tourism far outweighed the disbenefit of the cuts to the good causes.

We assumed that that would be the only time we would be asked to do that, but things have not worked out quite as we expected. Part of the package was the £750 million to be raised by new Olympics-related lottery gains. Of that money, more than half—59 per cent.—was to come not as new money from ticket sales but from cannibalisation, as it were, as people switched from the games that supported the traditional good causes. That would have meant a loss of about £450 million to the lottery good causes—but as the recent report by the National Audit Office pointed out, the cannibalisation rate is much higher, at 77 per cent. That means that even the first agreement to cut money from the lottery good causes has involved an additional, unexpected cut of some £135 million.

I am not surprised that that figure has changed. I do not know if any other hon. Members have visited their local lottery distributors recently, but it is impossible to tell from the scratchcards whether they are supporting the Olympics or the traditional good causes. Only in very small print on the back of the cards, not visible to the people who buy them, does it say whether the money is going to the Olympics or to the other good causes. In the outlets that I have visited, a significantly higher proportion of cards were supporting the Olympics than the other good causes. I hope that the Secretary of State will see whether it is possible—I understand that there are difficulties to do with the International Olympic Committee—to make it clearer to those purchasing scratchcards which of the good causes, the Olympics or others, they are supporting.

That cannibalisation will get even worse if we allow the money raised to go beyond £750 million, and we have asked the Secretary of State for an assurance that that figure is an absolute cap.

Adam Price: The hon. Gentleman has eloquently demonstrated why the so-called major parties, as he dubs them, were naive to believe the Government the first time round. Why should anyone believe them this time?

Mr. Foster: The honest truth is that we have to take people at their word and look at as much evidence as possible. I congratulate the hon. Member for South-West Surrey on gaining from the Government the concession whereby more detailed analysis of the figures will be made available for us to study. That is very important. We now have on record an assurance, which we did not have last time, that there will not be any further raid on the lottery good causes to fund the Olympics. Although I said earlier that we expected that to be the case, it had never been put on the record. It has been put on the record today, and I welcome that.

Mr. Weir: I pose to the hon. Gentleman the question that I posed to the Conservative Front-Bench spokesman. Given that the cost has already trebled, what happens if the Government come back and say that they need more money as we get close to 2012? Where will that money come from? Will he refuse any more money when we get to the wire?

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Mr. Foster: In my contribution, which I hope to continue for a brief period, I shall make some proposals as to how we find additional money. I will be particularly interested to hear the contributions from the SNP and the Welsh nationalists in which they explain their position. They can bleat, but it seems to me that there are two choices. People can either sit there and just whinge, and say, “We can’t do anything about it,” or they can make constructive positive proposals. That is what I seek to do.

We know that there have been problems with the budget. We were originally told that it would be £2.375 billion. In 2006 that figure rose to £3.3 billion, and in early 2007 it rose to £5.1 billion. We are now looking at a figure of £9.3 billion. Before the Minister for the Olympics jumps to her feet, I know that putting it like that is not fair because I have not compared like with like; nevertheless, she will accept that the figures have increased substantially. That is why we are being asked whether we are prepared to authorise a further take from lottery good causes to fill that black hole in the budget.

We want the Olympic games and the Paralympics to succeed, which also means ensuring that they deliver a legacy. As we heard from the hon. Member for South-West Surrey, many people believe that a further cut will damage the very bodies that will deliver that legacy. Dame Liz Forgan, chairman of the Heritage Lottery Fund, says that

Robin Simpson, chief executive of the Voluntary Arts Network, warned:

As we have already heard, the Central Council for Physical Recreation has expressed real concerns that the

There is a problem for those of us making a decision today. Do we simply say, “No, we’re not allowing that to go ahead because of all of the potential problems,” or do we come up with constructive proposals to find ways of getting additional money to the lottery good causes that will make up for the cut, to help them to deliver that legacy? That is why we have been in discussion with the Secretary of State, as has the hon. Member for South-West Surrey, and we recognise that others have as well. CCPR has put forward its suggestions in discussions with the Government, including the enhancement of the excellent community amateur sports club scheme through the application of gift aid to junior club subscriptions and the reduction of licensing fees. It has also proposed the use of some of the proceeds from dormant bank accounts to help in sports activities. I hope that those proposals will be considered carefully.

We have made some detailed suggestions. First, we have said clearly that we want a cap on that £750 million. There should be no more take from the lottery as a result of the Olympic lottery games. The Secretary of State has made it clear that he accepts that, and we are grateful for that assurance. Secondly, we proposed that the Government carefully consider the proposal to
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change taxation on the national lottery to gross profit tax. We know that they were initially very sceptical about that, but I am delighted that the Treasury has now become agnostic about it, and we seem to be getting some support for the idea from the Department for Culture, Media and Sport. According to independent experts from PricewaterhouseCoopers, if such a change were to go ahead, something like £400 million would go back to lottery good causes by 2019, and a lot of that money would be invested before the 2012 games. I am delighted that the Secretary of State has said that he will carry out a review, but I hope that we will have an absolute assurance in the winding-up speech that such a move will be implemented as quickly as possible if the review says that it would be positive for the Exchequer, because of the extra money for the taxpayer, and for lottery good causes. Thirdly, we asked the Secretary of State to examine what he called the grey areas of lottery-style games. Many people who play the national lottery know that a proportion goes towards supporting good causes. However, in recent years gambling operators have introduced lottery-style betting games, which, they admit, are intended to compete with the national lottery. They look like national lottery games, but they are run solely for commercial gain and they reduce the number of national lottery players. Independent experts have shown that if we can eliminate those games so that players switch back to the national lottery, it would mean, on a conservative estimate, an extra £44 million a year—more than £500 million by 2019—for good causes.

Fourthly, we asked for clarification of a memorandum of understanding between the Secretary of State and the Mayor of London. The House is well aware that the sale of land and buildings will follow the Olympics and Paralympics. We are all interested in knowing how much money that will generate. There has been much debate today, but the speculation is no different from that of many months ago. I would not like to judge which of the many experts is right about the eventual figure, but if there is more information at any stage, we would like to see it. However, the memorandum of understanding made clear the order in which money would be repaid to the lottery good causes, the LDA and the Mayor of London. I should like to have an assurance, which I have not yet received, that the memorandum of understanding is binding, and that no attempt will be made to try to change the way and the order in which money is paid out.

Let me give one example to which the Secretary of State might respond. The memorandum of understanding makes no reference to funding the maintenance of the Olympic park after the 2012 games. Will he assure us that there will be no sudden take from the land sale money that duly arises?

We wanted to persuade the Secretary of State to scrap the Olympic lottery distribution body. We would save £2 million by scrapping a body that simply takes money and hands it back to the Olympics. We know where the money needs to go—but the Secretary of State said that he was not prepared to budge on that small issue.

However, we have received assurances on the four other key issues, together with assurances about there being no further take, and the provision of more detailed budgetary information, and we are delighted. We now have a sensible package of measures on which
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to move forward. If we add the possibility of additional money through the third Camelot licence, leading to between £600 million and £1 billion extra for good causes, and the modest but none the less welcome increase in grant in aid to various bodies, we now have a package that assures us that much of the money taken from good causes will go back to them. Indeed, if all our proposals are accepted, in due course they will get more than was taken from them, and more than £400 million will be returned before the 2012 games. That is a good outcome of the discussions between us and the Secretary of State. On that basis, we are prepared to support the Government.

Several hon. Members rose

Mr. Deputy Speaker: Order. Hon. Members are making it difficult for the Chair because they did not notify Mr. Speaker that they wished to take part in the debate. I must be fair to those who did so. I owe a responsibility to the Chairman of the Select Committee, whom I shall call next. The winding-up speeches will be approximately five minutes each, so, with some co-operation, we should be able to achieve reasonable participation.

5.28 pm

Mr. John Whittingdale (Maldon and East Chelmsford) (Con): I will do my best to keep my remarks brief. As so often, it is a pleasure to follow the hon. Member for Bath (Mr. Foster). I agreed with much of what he said. As the Secretary of State knows, when the Government first decided to bid for London to host the 2012 games, I held the position now filled by my hon. Friend the Member for South-West Surrey (Mr. Hunt). At that time, I expressed the Conservative party’s support for the Government’s decision to bid. I remain of the view that it was the right thing to do, and that the Olympics will greatly benefit the country. The Secretary of State and the Minister for the Olympics occasionally interpret any criticism of the preparations for the games as a lack of support for their coming to London at all, so I put my support on record at the outset.

I am encouraged by the evidence that we in the Select Committee have received that progress is on track so far. Although the costs have escalated, at least the timetable appears to have been observed. The Secretary of State and the Minister for the Olympics would have been encouraged had they joined us this morning when we took evidence from the five host boroughs and heard the enthusiasm with which their leaders spoke of the benefits that they saw coming to their part of London.

However, if more than £5 billion is being spent in an area, it is not surprising that the local people should expect quite a lot of benefits to come from it. The challenge for the Government has always been not just to ensure that there are benefits for that part of London, but to persuade the other parts of the country that they will benefit, too. In that respect, the order before us will not assist, because not only will there be no huge investments outside London, but money is being siphoned from the pot—the national lottery—from which other parts of the country might otherwise have benefited. That will jeopardise part of the soft legacy, which is the Government’s aim, and it comes on top of the Department’s recent decision to cut the amount of money going to VisitBritain, which will
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jeopardise another part of the soft legacy of the Olympic games—the tourism potential.

When the Government originally drew up their funding package, it was to meet an estimated cost of £2.375 billion, of which £1.5 billion was intended to come from the lottery—£750 million from the new game, £340 million from the sports distributors and £410 million from the non-Olympic distributors. In the report that the Select Committee issued a year ago, we expressed concern about the impact that the original £1.5 billion take would have on good causes, in particular sport. We quoted the Central Council of Physical Recreation, which my hon. Friend the Member for South-West Surrey (Mr. Hunt) has also quoted, which said that the move

which would

We also received evidence from the non-Olympic distributors, such as the Heritage Lottery Fund and Arts Council England, which expressed concern about the money going into the Olympic pot that would be lost to them. That was why the Select Committee concluded that any further transfer of funds out of the lottery to support the Olympics would penalise good causes yet further. We made it clear that that was not our preferred option.

When the Secretary of State had to reveal a budget of £9.325 billion—a considerable extra cost, which had to be found from somewhere—it was with some trepidation that we read reports that the extra would come from the lottery. It appears that the Minister for the Olympics achieved a better deal in her negotiations with the Treasury than some suggested she would. We should therefore be grateful that we are debating an order that will take only a further £675 million from the lottery, and not an even bigger sum. However, there is no doubt that taking £675 million, in addition to the original £1.5 billion, will have a further detrimental effect. Indeed, that sum alone will result in £420 million being taken from Big Lottery Fund, £90 million from the Heritage Lottery Fund and £63 million from Arts Council England. Those sums cannot be taken out without a detrimental effect on those bodies’ funding programmes. That will make it harder to sell the Olympic games to the other parts of the country, which are not seeing the immediate benefits from the investment in east London.

At the time of the report last year, the Committee suggested that the rise in land values that would undoubtedly result from such investment should not benefit just the London Development Agency. We therefore very much welcomed the then Secretary of State’s announcement, a few months later, that part of the money that would become available from the sale of that land in due course would be repaid to the lottery. As has been said in this debate, she set out a clear order of priorities for how it would be allocated.

It appears, however, that some doubt has arisen over how much will be available. The Mayor’s office, which gave evidence to the Committee this morning, dismissed the story in The Times and said that it had always been the case that the amount of money raised
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from land sales could be between £800 million and as much as £3 billion. However, when I look at the memorandum of understanding I see no mention of the word “if” in relation to the land sales achieving the necessary £1.8 billion to repay the London Development Agency and the lottery distributors. In fact, it uses clear language, stating:

and that the LDA will be reimbursed.

However much it is now suggested that this does not represent a new story, a degree of uncertainty that did not previously exist seems to apply to the likelihood of the lottery being reimbursed for its contribution. That is obviously a matter for concern. Even if the money is repaid in full, it seems unlikely that that will happen until about 2030. The lottery will therefore have to put up with a substantial hit for a considerable time, and it will not be a great reassurance to the bodies that hope to receive lottery funding to hear that the amount of money available will increase again by 2030.

The one other concession that the Secretary of State has made this afternoon, which I strongly welcome, is his pledge that the Treasury will look again at the case for a gross profits tax for the national lottery. I am always slightly suspicious when I am told that a taxation change will increase not only the amount of revenue to the Exchequer but the amount available to good causes—but PricewaterhouseCoopers has apparently assured us that that would be the case, and that should be grounds for at least examining the idea. The Secretary of State has clearly been extremely persuasive in his discussions with the Treasury, so perhaps he could push his luck and ask whether it will reconsider its intention to have its tax take from the national lottery game. That money, too, could provide extra funding that could be better used elsewhere.

I welcome the Secretary of State’s concession, and I also strongly welcome his pledge that there will be no further raid on the national lottery. I hope that that will not be necessary, in any case. Of the £9.375 billion, £2.75 billion represents a contingency fund, and we all hope that that fund will not be fully drawn down. We are alarmed, however, by the evidence that has already been given by the permanent secretary in the Department, who stated that he expected that it might well all be necessary—and the Minister has said that she cannot guarantee that the final figure might not prove even higher. We understand that she can offer no such guarantee. I regret the necessity for this order, as I still believe that the Government could have found other sources for the funding that would have been less damaging to the good causes, and I must express my strong hope that it will not be necessary to come back to this issue, either to raid the national lottery or to find some other source of funding because the bill has risen even higher than it is currently predicted to do.

5.37 pm

Pete Wishart (Perth and North Perthshire) (SNP): If there were a gold medal for the mismanagement and botching of a large infrastructure project, it would go to this Government and their Olympic ambitions. This is one project that is in need of a performance-enhancing drug—

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