Dormant Bank and Building Society Accounts Bill [Lords]

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Ian Pearson: It is right and important that we have this debate on additionality. I recognise the intention of the amendment, but suggest to the hon. Member for Fareham that it is defective and would be damaging. I want to be clear about the principles that underlie the Bill. We are very clear that additionality is fundamental to the distribution of dormant account assets. I do not take a Manichean view of the world—life is a lot more complicated. I shall simply observe that hon. Members and noble Lords rehearsed arguments about additionality for a great amount of time when debating the national lottery legislation, and they had enormous technical difficulties in trying to produce a workable legal definition for primary legislation. Therefore, they came up with a different approach, which is why the National Lottery Act now requires lottery distributors to report annually on reporting practice with regard to additionality. That reporting is informed by an understanding of additionality agreed between the distributors and the Department for Culture, Media and Sport in that
“Lottery funding is distinct from Government funding and adds value. Although it does not substitute for Exchequer expenditure, where appropriate it complements Government and other programmes, policies and funding.”
The point about partnership funding was made by my hon. Friend the Member for High Peak. The practice is now well established. We are committed to the principle that lottery money will not be allowed to become a substitute for funding that would usually fall to mainstream Government spending. Distributors are well aware of that, and the Government expect them to abide by that principle.
In summary, I wish to restate that spending from dormant account money must be additional to the Government’s provision. We recognise that unclaimed assets are, in effect, community resources and it is right that they are spent for the benefit of communities. They are not, and must not be, a substitute for Government funding, but they can rightfully complement and add value to the Government’s funding streams and strategies, whether at central or local level. The hon. Member for Fareham gave an example of when that might be the case.
Lottery funding allows things to happen that would not take place if they depended on Government funding alone. No one would argue that, just because the Government already spend money on the arts, our cultural heritage and sport, the lottery should not do so. The same is true of health, education and environmental projects, which the hon. Member for Cities of London and Westminster said were popular causes that were added back in 1998. By and large, the current system works well. The practice is pretty well established, and we intend to follow that model in the Bill.
Prescribing additionality is not only incredibly difficult to do—I do not think too much of the attempt made at that by the hon. Member for Fareham—but it could have the unintended consequence of restricting the types of projects to which the Big Lottery Fund could award funds. Organisations and innovative projects that would otherwise meet the purposes for distribution could be hindered in their application simply because they might not meet the strict interpretation and legal definition of what is additional if it were specified in the Bill. A definition of additionality could stymie the Big Lottery Fund’s ability to give dormant account money to worthy causes. It could also significantly increase bureaucracy and it would open distribution policy up to further legal challenge. For those further reasons, a definition would be undesirable.
We have adopted the right approach. We should not have a definition of additionality because we cannot find one that is agreeable. However, we have agreed on an understanding of additionality through the National Lottery Act between the distributors and the DCMS, which we shall replicate through our approach. That is why paragraph 9(3) of schedule 3 requires the Big Lottery Fund to report annually on its
“policy and practice in relation to the principle that dormant account money should be used to fund projects, or aspects of projects, for which funds would be unlikely to be made available by”
the Government. That mirrors the provisions to which I referred earlier in respect of the DCMS. It is the most appropriate way in which to ensure that additionality is delivered in a clear and transparent manner, so we invite members of the Committee to reject the amendment.
However, it is important to debate additionality because we appreciate the concerns that have been expressed about such matters. We want to stress the Government’s commitment to the fact that the money will be genuinely additional.
4.15 pm
Mr. Hoban: I am grateful for the Minister’s comments on how he will seek through the Bill and schedule 3 to ensure transparency in the way that the money is distributed by the Big Lottery Fund. As the schedule makes it clear, there will be a separate set of accounts for that. It is an important principle—particularly as we are talking about a voluntary scheme—that people should know that this is not a substitute for Government expenditure. If people thought that it was, it would increase their cynicism. It would be seen as another way of fleecing people and as a ruse to find a substitute for tax revenues by raiding dormant accounts. It is important to have transparency in the way that money is used, and as much effort as possible must be made to ensure clear blue water between the Government’s own spending priorities and the uses to which the money will be put. That would lend credibility to the assertion that the funding is additional, and it would provide a helpful backdrop against which we could debate the avenues to which other assets could be directed. The scheme would be seen to be working for the benefit of the wider community and not as a substitute.
There are many reasons why additionality is an important feature of the debate and of how the fund will operate in the future. I take on board the comments that the wording may be defective, but parliamentary draftsmen are available to the Government and if they were really keen, I am sure that they could polish it up. It sounds as if the national lottery debate and the National Lottery Act went through the same process without much success, but perhaps Treasury draftsmen would be more efficient and effective. In view of the Minister’s assurances, and my recognition that he takes the issue very seriously, I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 17 ordered to stand part of the Bill.

Schedule 3

Further provision about the functions of the Big Lottery Fund
Question proposed, That the schedule be the Third schedule to the Bill.
John Howell: I am looking for some reassurance about the process that will be used—how the money will be delivered and how the grants will be given—and whether that will be entrenched in the strategic plan. The reason for seeking such a reassurance is because the experiences that I and my constituents have had on specific projects funded by the Big Lottery Fund, have not been particularly happy ones. It has been a bureaucratic and long-winded process. I appreciate the need to be careful and to undertake the necessary diligence where public money is involved, but on one occasion the process got close to breaking the project on grounds that proved unfounded in the end. The Big Lottery Fund has a reputation for a bureaucratic approach, and I wonder whether, in the strategic plans for the process, we can see some step change in the way that it deals with the people to whom it gives money.
Ian Pearson: As I understand, the process is this. The reclaim fund will transfer moneys to the Big Lottery Fund. Strategic direction will be given by the Secretary of State for the Department for Children, Schools and Families as the lead Department, based on cross-Government advice. The Big Lottery Fund will operate its normal approval procedures and processes.
We can debate the Big Lottery Fund. We believe that it has proved its worth over the years, and that it is the most appropriate body to have reclaim funds and to distribute them to worthy causes.
Question put and agreed to.
Schedule 3 agreed to.

Clause 18

Apportionment of dormant account money
Mr. Hoban: I beg to move amendment No. 31, in clause 18, page 9, line 26, leave out from ‘apportioned’ to end of line 33 and insert
‘on a per capita basis between England, Wales, Scotland and Northern Ireland’.
I am bemused about why the Bill states that the money will be allocated between England, Wales, Scotland and Northern Ireland in accordance with prescribed percentages that must add up to 100 per cent. That sounds fine, and it is good that the percentages will add up to 100 per cent.—I am not sure what we would say if they did not—but why does the Bill not state what the prescribed percentages will be or how the money will be allocated to the four countries of the United Kingdom? I do not understand why that is not made clear. The explanatory notes refer to the Barnett formula, but that is the Government’s position today and they may change their mind. All I am looking for is some certainty and clarity.
The Minister might argue that the amendment is not particularly well drafted. I am sure that I could have probably added more bells and whistles to it, but simply allocating money pro rata in accordance to the populations of England, Scotland, Wales and Northern Ireland would be the most obvious method. I do not understand why the Bill permits some uncertainty about what the prescribed percentages might be. [Interruption.]
The Chairman: Could we ensure that mobile phones are switched off?
Mr. Browne: I promise that it was not my phone—it is like being a teacher in a classroom. I rise briefly to share the bewilderment expressed by the hon. Member for Fareham about the fact that, although the Government have concluded that the total amount allocated to the four constituent parts of the United Kingdom should come to 100 per cent., which seems an entirely sensible percentage to arrive at, no formula is indicated for how that should be divided between the four component parts.
One could come up with many different formulae and make a case for them all. A formula could be based on population, the number of bank accounts held in each country or the dormant revenues within the bank accounts in those countries. The latter would give Scotland a higher proportion than if the allocation were made purely on the basis of population. One could argue for each of those different formulae, but it is strange that the Government appear not to specify any of them.
I have some reservations about the amendment. If I had to pick a formula, it would be based not on the population of each country, but on the formula used for the lottery funds, which attempts to make some assessment of social need that goes beyond a straightforward head count. I suspect that it would come quite close to being a per capita formula, but it would perhaps be more satisfactory for assessing which communities would most benefit from the allocation of funds.
Although I have reservations about the amendment and would not be inclined to support it in a Division, the motivation behind it seems entirely reasonable.
Ian Pearson: This is not complicated, although it could be if hon. Members want it to be. Any number of allocation formulae could be used in these circumstances. I appreciate the concern to ensure that the distribution of unclaimed assets is fair and transparent across the United Kingdom, and that is the Government’s intention and the basis on which we consulted. Having designed the scheme in such a way as to enable spending decisions to be devolved, it follows that we should use Barnett principles for dividing the available money, as that is the normal way of proportioning spending between UK Administrations. It simply is not established practice or policy to put the Barnett formula into legislation, and I am aware of no other circumstances in which we have done so.
Mr. Hoban: The Treasury commissioned a factual review of the Barnett formula that was due to be published in the summer, but the summer has been and gone and we are still waiting for its publication. What would happen if the Government changed the Barnett formula, as that might end up creating a distribution that was different to the straightforward per capita basis?
Ian Pearson: I will not indulge in speculation, but we have had a consultation exercise on that and are devolving expenditure. It is right to use the Barnett principles, and it is a convention that we do not put them into Bills. That is the basis on which we will operate in the future.
Mr. Hoban: Having received clarification that the formula is not in the Bill simply because that has not been done before and therefore will not been done now—precedence and tradition always appeal to Conservative Members—I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Mr. Hoban: I beg to move amendment No. 30, in clause 18, page 10, line 5, at end insert—
‘(3A) For the purposes of this section, B should not be more than 5 per cent. of A’.
This straightforward amendment addresses a concern about the costs attached to the allocation of the funds. The formula to which the amendment refers is set out in subsection (3) and stipulates that
“the apportionable income of the Big Lottery Fund for a given financial year is—
A - B - C—
where A is the amount of dormant account money received by the Fund in the year; B is the amount of the expenses defrayed in the year under subsections (1) and (2) of section 27; C is the amount paid in the year under subsection (3)(b) of that section.”
Clause 27 does refer to the expenses that can be defrayed: subsections (1) and (2) deal with the costs incurred by the Big Lottery Fund and; subsection (3) deals with
“expenses...and...any other expenses incurred by the Secretary of State”.
As has been a feature of our consideration of the Bill, we want as much money as possible to be used in pursuit of the three quarters identified in the Bill for England and the approaches that will be taken in Scotland, Wales and Northern Ireland. We want to spend as little as possible on administration, so that we can maximise the amount of money spent on good causes, particularly after the year 1 bulge of money from dormant accounts comes through, as that will give a big amount to be spent. When we reach more normal circumstances, the amounts being spent on an annual basis through the BLF will be relatively small by comparison, so we want to ensure that as little as possible is spent on administrative costs.
4.30 pm
This is a probing amendment, and we will not push it to a vote, as I am trying to encourage the BLF to minimise its costs with regard to the distribution of the money. It is worth pointing out that the BLF has had significant operating expenses in the past. Its expenses rose from £72 million in 2005-06 to £77 million in 2006-07. Historically, its operating costs seem to be about 10 per cent. of the amount it distributes by way of funds and grants. We want some reassurance that the BLF will spend as little as possible on operating costs. The amendment is also an incentive to the Government.
One issue that I have been made aware of when talking about the cost of distribution is that the more specific the Secretary of State’s directions to the BLF are, the more expensive the fund will be to administer. Indeed, the Minister alluded to that in response to my earlier amendment on additionality. The more detailed the restrictions and the more cumbersome the conditions to be satisfied, the more expensive it will be to allocate that money. There is a pressure on the Government to keep administrative costs down by giving the BLF more freedom in how it uses the money. Given the priorities that have been set, that is a good way of keeping the cost of lottery distribution down. The message from this debate is that it is important to keep those costs down to a minimum, so that we can maximise the amount of money that goes to good causes.
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