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Westminster Hall

Thursday 22 July 2010

[Mr Joe Benton in the Chair]

National Lottery Reform

Motion made, and Question proposed, That the sitting be now adjourned.-(Miss Chloe Smith.)

2.30 pm

The Parliamentary Under-Secretary of State for Culture, Olympics, Media and Sport (John Penrose): It is a pleasure to serve under your chairmanship, Mr Benton, and to have the opportunity to address Members on what is, by any stretch of the imagination, a British success story-the national lottery. It was set up under the previous Conservative Government in 1994 and has continued ever since, with some ups and downs, to perform an extremely valued job across the country. It has become an integral part of Britain's national life, principally because it gives so much to good causes. The figures are truly remarkable. Since it was set up 16 years ago, the national lottery has given more than £24 billion to good causes and funded more than 345,000 projects. I doubt that there is an MP in the current Parliament, and certainly in previous Parliaments, who could not tell stories of how those donations and projects have transformed the lives of some of their constituents. That is the case in every constituency across the country, from Lands End to John O'Groats. That is a measure of the national lottery's success and of how it has worked its way into the marrow of the nation's bones.

It is important to remember that one of the founding principles of the national lottery was additionality-an arcane piece of Whitehall jargon that means something very important. It means that national lottery funding for good causes needs to be in addition to core Government spending; it should not be used to subsidise or replace Government spending but should go to causes that would not otherwise receive funding. That is essential, because the four areas to which it gives money-heritage, sport, culture and what is now called the big society-all go to making the soul of the country work. They go to make Britain a better place to live in, rather than just somewhere that works okay. We would all be impoverished and diminished if the national lottery did not fund those things, and that is why it has become an accepted part of our national life. That demonstrates how successful and loved the national lottery and the projects that it funds have become.

Not to say that the national lottery is perfect. In the 16 years since it was set up, the world has moved on. It would be irresponsible for any Government, particularly a newly elected one, not to run over the figures with a slide rule and look at whether some things could be improved. The national lottery might be doing a vast amount right, much of which is tremendously valued, but can we give the tiller some small tweaks to improve what is already excellent?

Lorely Burt (Solihull) (LD): My hon. Friend mentions small tweaks, and what immediately springs to my mind are the small charities in my constituency, many of
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which have difficulty planning, sometimes even for the next year, because of the short-term way in which decisions on lottery funding pan out. When charities are turned down for funding, the reasons for the decision often seem inexplicable. That is especially true for small charities, which sometimes suspect that there is an element of fashion in the funding decisions and conclude that they are not in fashion that year and so are left to go to the wall.

John Penrose: I thank my hon. Friend for her intervention and make two points in response. First, it is always open to the distribution agents to award grants that can be disbursed over a period of time, sometimes several years, so that longer-term projects can be funded, and they do that already. It does not always happen that way, so I take her point. Also, the grant-giving bodies are sensibly at arm's length from political interference, and I suspect that all Members, regardless of their party, would applaud the principle that we do not want any politicians to be able to direct or interfere with the grant-giving process, because that way lies political favouritism.

Secondly, if my hon. Friend feels that there are clear examples of funding being granted according to fashion and the direction of prevailing winds, I encourage her to write to me. I would take that evidence to the lottery distribution bodies, following the principle of an arm's-length approach, to ensure that they are protecting themselves against such accusations so that a Minister, either me or my successors, does not take that up in the wrong way.

There are a number of things we can do to move the lottery on after 16 years. There is much to be applauded, valued, maintained and preserved in its current arrangements, but perhaps some things could be updated a little. The coalition Government have laid out a reasonable programme for that. For example, we want to examine the case for instituting a gross profits tax approach to the lottery. The lottery would be allowed to flex the rate at which it offers prizes and, in exchange, could drive up participation and ticket sales. The benefit would be that it could then win more money that could be disbursed to good causes. There are several important concerns about that proposal to be dealt with, not least the fact that the Treasury rightly wants to ensure that taxpayers, as well as good causes, are not disadvantaged. We have pledged to examine that, but good examples and interesting evidence from other gaming organisations indicate that that could be a productive and effective change, so we are looking at it seriously.

We want to reform the national lottery so that the arts, heritage and sport receive 20% of the money that goes to good causes, which was the original intention. In recent years, the funding for those areas has been cut, understandably, so that more can go to the Olympics, so their share is now down to 16.66%. We want to raise it to 20% again so that those important areas of our national life receive more of the cash. Given current projections, each of those areas would receive roughly £50 million a year extra as a result of that change. I am sure that Members from all parties would applaud that, as it clearly means that the benefits are being spread more widely.

Paul Farrelly (Newcastle-under-Lyme) (Lab) The Minister mentioned the arts, and we have all heard of the cuts of up to 40% that are being planned by the
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Department for Culture, Media and Sport. To what extent does he expect that the increased lottery funding for the arts will simply replace grants withdrawn by DCMS?

John Penrose: As I have said, an important principle at the heart of the national lottery is additionality, which should already be enshrined in the grants that DCMS makes and that the relevant national lottery distributors make, so there should be a firewall between the two. We must ensure that any proposed changes do not breach that firewall or that principle. All Ministers in the Department are trying to ensure that we do not breach that principle as we grapple, along with Ministers in other Departments, with the problems of dealing with the spending review. I am sure that the hon. Gentleman and others like him will scrutinise closely any announcements that are made to ensure that we are true to our word. I can assure him that we are being scrupulously careful about that.

Mr Mark Field (Cities of London and Westminster) (Con): The Minister will appreciate that he told only part of the story on moneys being transferred to the Olympics, because from the mid-1990s significant moneys went into the millennium fund, which came to an end shortly after the turn of the century. Many of us have been concerned for some time about the emergence of the Big Lottery Fund. There seems to be a grey area in relation to political interference and additionality, because moneys have been going into a range of projects related to health and education that many people feel should be, and probably in the past were, funded through general taxation. Will the Minister pledge to ensure that the Big Lottery Fund as it currently stands will be diminished, if not abolished, so that the arts, heritage and sport can be restored to their former glory?

John Penrose: I am afraid that I cannot pledge to abolish the Big Lottery Fund, but I can assure my hon. Friend that we share his concern about question marks over some of the donations from the Big Lottery Fund to individual projects in the past 10 years, and we are determined to ensure that such questions should not be asked in future. It is vital that Big continues to donate to the voluntary and community sector-it is an essential piece of the Government's agenda for the big society, as a way of building up and maintaining the kind of voluntary and local community action that is central to the Government's vision. Big, if managed properly and in the pure form we hope to get it in, has a tremendously important future. It will be refocused, sharpened and-if I may put it like that-purified, to match an agenda such as he has set out.

Mr Field: Without wishing to steal the Minister's thunder, or get in the way of other contributions, might an element of rebranding be in the Government's mind? Perhaps the Big Lottery Fund will be rebranded as a big society fund to achieve the very goals he mentioned.

John Penrose: I have to confess that we have not discussed the notion of the label on the door in any great detail so far. I thank my hon. Friend for his suggestion and am sure that it will be taken on board.

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Alun Michael (Cardiff South and Penarth) (Lab/Co-op): I am pleased to hear the Minister talking about the need for consistency and predictability. No one could argue with his wish to refresh the funds and to consider whether they are meeting the intended targets. However, the rebalancing of the arrangements for the Big Lottery Fund in particular would have an impact on the distribution of funds which, at the moment, is needs based, ensuring that funds go to individuals and communities in greatest need. Can he reassure us about that? Wales in particular has fears that a reduction in the amount of money going through the Big Lottery Fund would reduce the overall level going to Wales. It would be wonderful if the Minister could set that fear at rest.

John Penrose: I am delighted to be able to help the right hon. Gentleman out here, and I hope to provide the reassurance that he is seeking.

We will be phasing in the share changes. Currently, they start from a 16.66% share, and we will raise them to 20% each over the course of the next two years. The right hon. Gentleman will have noticed that in two years the Olympic top slice of lottery funding will come to an end. Therefore, although Big's share will fall from 50% today to 40% in two years' time, it will be a smaller slice of a much larger pie, because the Olympic funds will then be part of the whole. As a result, if he does the calculations, he should see a steady increase in cash terms for Big as well as for the other good causes. That is certainly shown by all the figures that I have seen. That outcome is important, which is why we have phased the changes to match the end of the Olympic funding.

Mr Andrew Smith (Oxford East) (Lab): Going back to the question asked by my hon. Friend the Member for Newcastle-under-Lyme (Paul Farrelly), if arts bodies suffer a loss of grant as a consequence of the cuts by the Department for Culture, Media and Sport, will they be able to apply to the lottery to make good that loss?

John Penrose: The short answer to the right hon. Gentleman is that anyone is free to apply, but the real question is whether that application is successful. The test that I expect any lottery grant-giving operation would apply is whether the application matches its terms and conditions and fits the limitations that it can impose on funding. I expect that a fund would look very carefully at a straight one-for-one comparison, because it would be very concerned about breaching additionality. I know that lottery fund grant distributors are alive to that issue.

I go back to the response that I gave to my hon. Friend the Member for Solihull (Lorely Burt) a little while ago-because such operations are at arm's length, it is rather difficult for any Minister to predict or suggest too strongly what they will do. The decision, after all, is theirs, but I imagine that they would look at such issues tremendously closely.

Paul Farrelly: The Big Lottery Fund is an important body. Many groups will take some comfort from the fact that the Government have no intention to abolish or substantially diminish it-turning it into a small society fund, in effect. In my constituency, the Big Lottery Fund has never been criticised for being politically
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correct or for making grants to bodies other than the thoroughly worth while. It has made grants of £3.8 million in my constituency since 2004.

One of my proudest moments in the previous Parliament was working with the lottery to get a £500,000 grant for the Peter Pan special needs nursery, which cares for profoundly disabled children from birth. The grant allows the nursery to operate comfortably for five years, giving it a secure future. I hope that such projects will continue to be funded and supported by the Big Lottery Fund, under whatever name the Government chooses in the future.

John Penrose: I completely agree with and accept the hon. Gentleman's point about the enormous amount of good will and love for how the lottery distributors have managed to fund all sorts of important good causes ever since the lottery began.

My party has criticised the fund in a small number of cases which, none the less, are important because of the risk to the reputation of the lottery. I do not want to go into huge detail now, unless pressed or provoked, but additionality was the issue on a number of occasions, potentially leaving the way open to damage of the lottery's reputation. None of us would want that to be a possibility even. It is important for the lottery to be like Caesar's wife and seen to be above reproach.

I will give way once more, but then I must make progress, because other people want to speak.

Mr Field: I would like to reiterate the sentiments of the hon. Member for Newcastle-under-Lyme (Paul Farrelly)-he is right. A small number of individual cases have been the subject of a hue and cry in the tabloid press. I once shadowed this role, as the Minister knows, and the point that I would like to make is more philosophical-it is about additionality.

One concern, worthy though much of the work is, is that perhaps the work funded by the lottery is taken out of the health, education or other government budgets. At the outset, the very idea of the national lottery was to provide additional money in areas that would otherwise not qualify for taxpayers' money, that are not run of the mill. Especially in such fraught economic times, which we have not seen in the past decade and a half, the danger remains that, however worthy many of the Big Lottery Fund's projects might be, we are essentially denuding arts, sports and heritage projects of money that they would otherwise receive.

John Penrose: I completely take my hon. Friend's point. I come back to the point that distributors such as the Heritage Lottery Fund-one of the lottery distributors that I am particularly involved with-are required at the end of every year to sign a piece of paper saying that they have satisfied the principles of additionality. The chief executive signs that piece of paper, taking personal responsibility. I am sure that that test will be applied to all the lottery distributors. Even if it was not part of the audit trail, if I may put it that way, I am sure that all hon. Members would want to make sure that it is maintained.

I want to move on quickly, because I am conscious of time and I want to leave time for other contributions.

I have mentioned a number of things that we would like to change, update and alter. I will mention one more. We want to ensure that the lottery distributors are a little more efficient and effective at distributing the
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cash at a lower cost. All of us are conscious that we live in an age of austerity. We all know that we are having to tighten our belts. We all know that we are all in this together-to coin a phrase-and we have to make sure that we are doing more with less. It is reasonable to ask the lottery distributors to ensure that they are as efficient as possible in distributing funds so that the largest possible proportion of the money reaches the good causes for which it is intended.

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): Would the Minister agree that the Big Lottery Fund is currently the most efficient of the distributors?

John Penrose: I would love to agree with the hon. Lady, but the difficulty at the moment is that the data are extremely-

2.50 pm

Sitting suspended for a Division in the House.

3.5 pm

On resuming-

John Penrose: I shall pick up where I left off when we vanished to do our democratic duty in the Lobby. The hon. Member for Kilmarnock and Loudoun had asked whether the Big Lottery Fund was the most efficient of the disbursing organisations. I was saying that nobody is sure which of them is the most efficient, mainly because they all illustrate their figures and report their numbers on slightly different bases. It is therefore difficult to ensure that we are comparing apples with apples when working out what their stated percentage of the funds disbursed is taken up in costs.

To reassure the hon. Lady, I have set the lottery disbursing organisations the challenge of agreeing a common set of reporting standards, so they all show their numbers in the same way, enabling us to make a direct comparison. We then need to ask whether those figures can be reduced and whether we can start to disburse the funds to good causes more efficiently and cheaply, to ensure that more money gets to the front line and reaches the people for whom it is intended.

There may be some legitimate reasons for variation: for example, at the moment the Olympic Lottery Distributor is one of the most efficient because it only has to distribute funds to one organisation, which is comparatively simple, administratively speaking-I am not saying that it is simple all round-whereas Big distributes to a very large number of smaller organisations. There may be legitimate reasons for differentials, but we need clear data, at least, telling us how to compare the distributors and that like-for-like comparisons are safe, and then we need to start looking for ways to reduce costs.

Katy Clark (North Ayrshire and Arran) (Lab): Many small community organisations applying for funding are frustrated because the system is bureaucratic and they require a huge amount of advice and support. Often, mentors are allocated to such organisations to assist them through the process. Are the Government considering simplifying the procedure, particularly for small voluntary organisations seeking support?

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John Penrose: The hon. Lady is right to mention that the administrative costs of disbursement do not fall only on the lottery distributors, although that is clearly part of the process; they also fall on applicants, and the more complicated the process, the larger the costs that fall on them. I expect lottery distributors that are trying to re-engineer their internal processes to make themselves more efficient to consider the entire system cost. I am waiting to see what they come back with and how they think they will react, but I suspect that they understand the importance of ensuring that more money gets to the front line, to be used in the right way. I am sure that they will want to do that without my telling them, because they will hear about it from the people they are disbursing the money to.

I hope that I have, through the highways and byways of various interventions and questions, illustrated some of my points. I hope that I have set out not only the Government's position on the national lottery, which is that we can all be proud of it and we want to maintain, preserve and enhance it in future, but that there are a number of aspects that can and should be improved. The world has moved on in the 15 or 16 years since the lottery was set up and certain developments are needed. I look forward to hearing comments from hon. Members from all parties and, given the chance, to responding to them.

3.9 pm

Cathy Jamieson (Kilmarnock and Loudoun) (Lab/Co-op): I refer Members to the Register of Members' Financial Interests, where I declare that I am a trustee of the Barony 'A' Frame Trust, which has had substantial funding from the Heritage Lottery Fund. I also stand here as a an arts graduate from the Glasgow school of art and Goldsmiths, university of London, so far be it from me ever to suggest that money is not well invested in the arts. I have also been an active supporter of a number of heritage projects in my area and across Scotland, and I stress my support for them. However, I am concerned about the proposals outlined by the Government, because there are general implications for some of our more disadvantaged communities, which, although they were not given special treatment under the previous arrangements, were at least recognised. I also want to raise interests specifically relating to Scotland.

First, let me pick up on the question about efficiency. As the Minister recognised, it is possible in theory for an organisation that simply disburses funds to a small number of large projects to be relatively efficient. He rightly accepted-I was glad to hear it-that the Big Lottery Fund, which deals with a large number of small grants and assesses many different proposals, might not, on the face of it, look so efficient. I understand, however, the Big Lottery Fund itself believes that it has got efficiency down to a fine art and that it is able get the best value for money.

Another important point, which was mentioned by my hon. Friend the Member for North Ayrshire and Arran (Katy Clark), is that many of the small organisations that apply for funds require support in capacity building; they do not have the infrastructure to produce business plans or elaborate proposals to sustain themselves as organisations over months and sometimes years in order to secure funding, given that many use a cocktail of funding from different sources. It is therefore important
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to recognise that the Big Lottery Fund's overheads are not simply about administrative costs, but about capacity building and support costs. I was pleased to hear the Minister refer to that, and I hope that he can give further reassurance that that will be taken into account.

I mentioned that I share some of the general concerns about the Big Lottery Fund. I am particularly worried about the aspect of additionality. We have not yet heard fully how it will be assessed. I have heard people express concerns about how cuts in departmental budgets for arts and heritage projects and moving Big Lottery Fund money into such projects will inevitably result in things that were previously funded by the Government taking lottery money away from smaller organisations that would otherwise have benefited.

The Minister talked about projects in the grey areas that should perhaps not have been funded. I am not entirely persuaded that we had answers on that, either. At a time when local government and other parts of the public sector are feeling the squeeze, I am not sure that the Minister has given a compelling explanation of how local authorities will be able to fill the gaps that will be created if the lottery funding stream is taken away from local communities.

I am particularly concerned about schools and other parent-led organisations in local communities. On the face of it, an application from a school might look like something that the local authority should deal with, but it might in fact be a matter of a group of parents working with a school to provide activities after school-after-school clubs are an obvious example, but I have also seen eco-garden projects in schools in my constituency, which are linked to improving the local environment. Other projects have provided children and young people with sporting opportunities which they might not otherwise have had. That has not been fully addressed.

There is a particular issue in Scotland. Scotland receives 11.5% of the total Big income in the UK. That is because the income is apportioned by applying the Barnett formula plus a weighting for deprivation to recognise the particular circumstances in Scotland, but it is my understanding that none of the other lottery distributors reflects that. Any change in the shares is therefore likely to result in an overall net loss of available lottery funding in Scotland, which is a concern for me. I appreciate that the Minister has tried to give me some assurance on that, but can he guarantee that Scotland will not lose out as a result of the changes, when it is secure under the current regime?

John Penrose: I will not interrupt many speeches, but the hon. Lady asks a direct question and I thought that I might be able help. As I am sure she would expect, we have done some calculations. Last year, the Big Lottery Fund's total income was £564 million, so 92%-the percentage that Big says it gave to voluntary and community services last year-works out at £520 million. With a 40% share, the projection for Big for 2013-14-after the Olympic transfers end-is £630 million. We are therefore comparing £520 million with £630 million, so the hon. Lady will see that there is a large increase UK-wide. If we apply that to Scotland, the figures for Big come out at £54 million beforehand and £65 million afterwards. The result should therefore be a net cash increase, which I hope reassures the hon. Lady.

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Cathy Jamieson: That is a reassurance. I will watch the matter with great interest and no doubt scrutinise the figures in more detail when I have time.

Another issue that concerns me is the proposals to restrict lottery funding 100% to the voluntary and community sector, which will have a real impact on schools and other organisations. About 90% of the funding already goes in that direction, so what is the point of cutting that 10%-the very small grants to very local organisations that really benefit from them? When I looked at where the money went in my constituency, I discovered that many of those small grants are linked to things such as arts projects-for example, a dance project in a special needs school-or community arts. It might include things such as local community councils being able to apply to put their Christmas lights up or to decorate the village for festivals. These things might not seem important in the global scheme of things when people are looking at very large sums, but a few hundred pounds can make a difference to the quality of life of people in such communities. Similarly, many of the relatively small grants were going to projects that involved getting young people actively involved in sport.

I hope that the proposals can be looked at again in full, because they may have unintended consequences. I say that as gently as I can, which is not my usual style. I am usually a bit more robust, but I am trying to say very gently that there may be unintended consequences, and I seek an assurance from the Minister that he will go back, look at the issue again and seek to ensure that there is proper consultation with communities.

Many organisations have had funding from the Big Lottery Fund and the relatively small grants to them have had a big impact. I do not want us to get into a situation where Awards for All becomes awards for some. Everyone in local communities should have the opportunity to have their say. Will the Minister address that point when he winds up the debate, and will he consider how communities and organisations that have received grants will be consulted?

3.18 pm

Stephen Gilbert (St Austell and Newquay) (LD): I am grateful to have been called in what is clearly an important debate. I will be outlining the Liberal Democrat position on the reforms in place of my hon. Friend the Member for Bath (Mr Foster), who could not be with us today. Before I do that, however, I want to acknowledge how incredibly valuable lottery money is.

When I think of the odds of winning the lottery, a saying comes to mind: "Don't bet on the lottery, bet on yourself." However, the fantastic thing about the national lottery is that that is exactly what it allows us to do; it contributes hugely to the things that allow us to better ourselves as individuals, as members of our local communities and as a country.

The various arts councils contribute to the UK's artistic culture, which is one of the most exciting in the world. Our arts help to drive our immensely successful creative industries. However, they also nourish the inner life of everybody who engages with them. The sports distributors support activities that improve health and longevity. They promote not only self-esteem and the drive to succeed as individuals, but teamwork and co-operation.

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As a country we have been bequeathed a physical heritage that is part of our national character, which the Heritage Lottery Fund helps to maintain. It also helps to preserve our local identity. In St. Austell, the Heritage Lottery Fund has provided £850,000 to regenerate the china clay museum where I worked before being sent by my constituents to this place. The museum celebrates the history of the china clay mining communities in the heart of Cornwall and provides a fascinating insight into how the industry changed and shaped the environment that I represent.

I recently attended the opening of a local art exhibition on the theme of Newquay and the sea, a display of 19th century paintings, many of which were owned or created by local people. That also benefited from £10,000 of Heritage Lottery Fund assistance. Through Big, lottery funding is directed to a host of other community groups and volunteers working on all manner of important projects. There are other benefits from promoting all those good causes and organisations-far more than I can list here-which work very hard. Indeed, as the Minister said, we have all benefited from the £24 billion that the lottery has generated for them since its creation. That does not mean that improvements cannot be made, and the coalition Government are right to look at ways to make the most of lottery money.

The lottery reforms, as has been mentioned, will lead to a boost in funding for the arts, heritage and sport. The relevant distributors have welcomed the changes. The Minister will be aware that no one funding stream can completely replace another: £1 million of public money is not the same as £1 million of private money, and £1 million of lottery money is something else again. There are plans to boost private donations for the arts, for instance, and that is welcome, but we must still try to ensure that risky projects, smaller groups and organisations based outside London, such as in the constituency of the hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) or, indeed, in the south-west, all of which may be less appealing to private donors, do not miss out in the reforms. We must remain aware that sometimes funding is conditional. Money is offered from one source only because another has signed up, and if one goes there is a risk the other will also be withdrawn.

Therefore, the boost in lottery funding will not be a panacea, but it is still an important step. To make the most of it we need to ensure that cuts will not be implemented immediately, but phased in gradually. I understand that statutory instruments to enact changes to lottery distribution will be laid in September, according to recently published DCMS plans, but it will be 2012 before distributors receive their full 20% of good cause funding. Bearing in mind that £88 million of cuts have already been found this year, our side of the coalition would like reassurances that spending reductions will be restrained until that money comes into play. As the Minister said, the money that was redirected towards the Olympics will also start to find its way back, and will provide some relief; but we seek further reassurances.

The coalition agreement contains a promise to look more closely at a gross profits tax system for the lottery. Camelot's figures showed that that would generate many millions of pounds of extra income for the Exchequer, but there has been little movement since the coalition agreement was published, and I should be grateful if the Minister would tell us what recent discussions have
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taken place with the Chancellor about gross profits tax, and when we can expect further announcements. Overall, we want greater urgency from the Government on those points. Most importantly, I urge the Department not to front-load the cuts but, instead, to phase them in, so that they begin to bite only when the new funding sources that I have mentioned become available.

That brings me to the matter of how we handle cuts to administration. Under current plans, lottery distributors will be instructed to reduce their spending on admin to below 5%. It is of course right to make the most of limited funds and ensure that they are spent as efficiently as possible, but, again, such cuts need to be implemented intelligently. As other hon. Members have said, and distributors have made clear in representations to us, distributors are not just banks doling out large sums of money. Indeed, the Public Accounts Committee, in a report in 2008, considered the efficiency of grant making and said:

The report goes on to stress the importance of making funding available to small organisations, and stimulating higher-quality applications. To provide the support needed to make that happen, distributors need dedicated backroom staff. Such staff should be seen as valuable assets, not unnecessary paper-pushers.

Mr Ben Bradshaw (Exeter) (Lab): It would be helpful to hon. Members if the hon. Gentleman would explain when the Liberal Democrats changed their policy from their manifesto commitment of protecting spending on arts and culture, which the hon. Member for Bath (Mr Foster) repeated ad nauseam before the election, to their present supine acquiescence in what are likely to be savage cuts by the coalition Government.

Stephen Gilbert: The right hon. Gentleman was a member of the Government who left the country in a situation that meant that some difficult choices had to be made in the negotiations between the two coalition parties. If he lets me finish my remarks he will see that I am trying to encourage my right hon. and hon. Friends in the Government to make the changes as softly as possible.

Backroom staff should be seen as valuable contributors to building the capacity of the sector. Even if a small organisation does not eventually succeed in securing a grant, the recommendations that a distributor makes can improve the operation that it is advising. The risk is that distributors will have to make a few large grants because making lots of small grants becomes too expensive. Small organisations should not lose out as a result of cuts. For that reason, such "hand-holding" should not fall within the definition of administration; I should be grateful if the Minister would address that point.

I have mentioned the PAC's assessment of Big and its valuable work. My constituency has benefited from around £4.5 million in Big awards since 2004. Some of them are as large as the £1 million given to the Eden project; others are as small as the few hundred pounds offered to war veterans, their families and their carers, so that they could travel to memorial services or the
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places where they saw active service. There are already many deprived communities around the country and the challenges that they face will not get any easier as we try to get a grip on the country's miserable financial situation-an unwelcome gift from the previous Administration. Big, and the organisations that it supports, will have an important role in creating opportunities and making such places better places to live. I note that some have received more money than others in the past, and that some-including places in my own constituency-are much more deprived than others. I urge Big to rise to that challenge, and funnel money where it is most needed.

Overall, I welcome the Government's intention to prevent abuses of lottery money. Lottery funding is not a piggy bank to be dipped into to plug Government spending or fund ministerial pet projects. However, we are concerned that limiting Big to funding the voluntary and community sector only could mean that a lot of good projects miss out. There are concerns that individuals could no longer be funded-such as the veterans I mentioned from my constituency, who were helped by the "Heroes Return" scheme. Sometimes a statutory body, such as a parish council, or a school, may be better placed to implement a project. If the aim, for example, is to reduce antisocial behaviour, and a school can do that by putting on after-school activities, why not give the money to the organisation that is best placed to do that? Biscovey junior school in my constituency received an award to do just that by involving older boys in its choir.

Dr Thérèse Coffey (Suffolk Coastal) (Con): I respect the hon. Gentleman's arguments, but is there not a risk that when organisations, such as schools with after-school clubs, try to do more and more activities, it will start to dilute their original purpose? The same is true of a parish council. Perhaps instead voluntary organisations could be allowed into that area to provide different solutions, rather than dealing with things in a state-controlled environment.

Stephen Gilbert: It depends on one's understanding of the big society. My understanding is that we should be encouraging more groups and individuals to participate in creating vibrant, thriving communities; it will depend on the organisations.

I have talked about the need not to exclude the groups that are best able to carry out projects from receiving the money. There are relevant groups benefiting from the 8% of Big funding that does not go to the voluntary and community sector. It makes sense to make the most of what they can offer, rather than shutting them out completely. We might consider some kind of community benefit test. That would achieve our goal of ensuring that lottery money is not being used to plug gaps in local service budgets-I think that was the point that my hon. Friend the Member for Suffolk Coastal (Dr Coffey) was making-but would still allow Big to fund projects that clearly benefit the community, even if the funding goes to a statutory body, a social enterprise, or an individual. It would have the added advantage of future-proofing Big. When the lottery was first created, we did not anticipate the increasing importance of social enterprises. It is important that any restrictions on Big are flexible enough to enable it quickly to embrace future innovations and changes. I welcome the
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recent announcements about the big society bank, which will work to enable similar projects, but it seems worth giving the Big Lottery Fund the flexibility also to fund projects in its own way.

There are concerns that voluntary and community organisations could see a reduction in the amount of funding that they receive if Big has its funding capped at 40%. Currently, it receives 50% of all good cause money, of which 46% goes to VCOs. I hope that the Minister can provide some reassurances on this matter, as well as considering the other suggestions that I have made.

3.30 pm

Alun Michael (Cardiff South and Penarth) (Lab/Co-op): I chair the all-party group on the community and voluntary sector, and it is particularly pleasing to see in the new Parliament new Members on both sides of the House taking a real interest in the issues affecting that sector, as well as volunteering and charities. I suspect that that will be reflected further in this debate. I welcome the consultation and opportunity to debate how the lottery funds should be redistributed after the Olympics, when additional elasticity is provided in the way the Minister described. I am certain that restoring the levels of funding for sports, arts and heritage will be important for the next decade.

Responding to a comment by a Government Member, I have to say that I do not accept that either the extent of the cuts in Government expenditure or the precipitate nature of the cuts, which puts private sector growth at risk, is necessary. All the parties certainly knew that we were facing difficult financial circumstances, and that was reflected in what was said in advance of the election by my party. The Liberal Democrats in particular cannot abandon almost everything that they said in the run-up to the election using the excuse that they had somehow failed to notice an international crisis that was affecting our national finances. They put up a set of propositions in the light of well known financial circumstances and were clearly cavalier in what they said, not expecting to be in a position of having to make decisions in government.

One problem is that the precipitate nature of some of the cuts is damaging to some of the poorest communities throughout the country. For example, in Wales, dependence on employment in the public sector is higher than in many other parts of the United Kingdom. That means that public sector cuts are likely to undermine the capacity of private businesses, particularly small businesses that serve the community, when money is extracted from those economies. We must treat that seriously. I make those comments not to stir up controversy with the Minister, but to correct the excuses that were offered by his Back Benchers.

It is certain that lottery money will be important in giving funds to important activities and in many cases attracting additional funding from other sources. I applaud the Minister's response on the importance of maintaining additionality. It will be philosophically difficult to maintain that when funding is sought for good projects that will provide value for money and for local communities; however, I think he has accepted the challenge to apply the right principles. It is important that that does not result in funds going only to communities that are better off and perhaps have the resources to prepare a good case for their projects.

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Mr Andrew Smith: My right hon. Friend brings enormous expertise and experience to this debate. In relation to shaping the balance of national lottery allocations for the future, what does he think of the proposition that the views of the people who play the lottery, whose money ultimately funds those projects, should be taken more widely into account when deciding where the balance of priorities should be?

Alun Michael: There are two points to make, I think. First, those who play the lottery are contributing and should have something to say. Secondly, many of them are from more deprived communities and are less well off. I spoke to someone about the fact that many of those who play the lottery cannot afford to do so. A friend of mine who was representing a deprived community in my constituency made a good point when he said that the more deprived someone is, the more difficult it is to make ends meet and to provide for their families, so the more they need something to provide hope. The gamble and the likelihood of a return may not make sense, but they are buying a dream, not a ticket. If the way people buy that dream leads to a contribution that is likely to come back to their community and help people in similar situations, surely that principle should be pursued. That is a good way of introducing a point that I want to emphasise: a needs-based approach is important, and that has been the approach adopted by the Big Lottery Fund. I hope that it will continue.

The Minister made the point that we will be talking about the funds that go into the Big Lottery Fund being a smaller proportion of a larger sum, so there will at least be an increase in money terms, but I would prefer a greater proportion of increased funds to go to areas and communities with the greatest needs. That is the essence of a needs-based approach. It is not impossible to achieve it while pursuing the Minister's objectives. For example, it might be a question of emphasising the importance of a needs-based approach to the other lottery funds. There is more than one way of achieving a specific outcome, but I hope that the Minister will undertake today to consider how best the needs-based approach can be protected within the new arrangements for the Big Lottery Fund, and perhaps the other funds.

The Big Lottery Fund formula for allocating funding within the United Kingdom-I believe that this applies to Scotland and Northern Ireland as well as Wales-is based on need rather than population. Wales is likely to be worse off from any change in shares, unless that point is taken on board. The Minister has a pleasantly listening visage this afternoon, so I hope that he will take my points into account.

We need a larger proportion of a larger sum to go to the places in greatest need, but that does not necessarily apply only to the crude figures of the distribution between different lottery funds. The Big Lottery Fund distributes its money to charities, health, education and the environment, and its mission is to support people and communities in the most need. That is why I am concerned about the consultation. The Minister seems to have someone sitting behind him who specialises in shaking her head, but I have given a factual description of how the Big Lottery Fund works.

Dr Thérèse Coffey: I am shaking my head because I completely and fundamentally disagree with the right hon. Gentleman's proposal. Unfortunately, I cannot
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stay for the whole debate, but if I am called to speak I will make precisely the opposite plea-that we get rid of the politically correct nonsense formula, and allow the lottery to be what it is: additional funding that celebrates communities throughout the country, not just more politically correct indices that the Labour Government dreamed up.

Alun Michael: I am glad that the hon. Lady has exposed her views, but I hope that the Minister will take a more intelligent approach to what I am saying. I am not talking about political correctness; I am talking about the difficulty of getting money to the most deprived communities that lack resources. As my right hon. Friend the Member for Oxford East (Mr Smith) pointed out, those are the communities that contribute most to the lottery because people are buying a dream.

The Big Lottery Fund has sought to enable such communities to develop the skills and contributions of individuals who often have a great deal to offer but struggle to do so. Often, the lack of an infrastructure as well as the lack of money in those communities acts as a considerable obstacle to bringing projects forward. I have worked in deprived communities in my city of Cardiff and within my own constituency. Those communities do not lack commitment or a degree of energy; what they lack is money and often a professional infrastructure among the people who live there, so they often find themselves at the end of the queue when projects are proposed.

Such communities often lack the capacity to produce big schemes, because planning, infrastructure and voluntary contributions by architects and so on can make a big difference to achieving projects that meet the criteria of the different lottery funds. I do not think that what I said is controversial. I thought that the Government were intent on creating a big society that involves the concept of inclusiveness. The hon. Lady is expressing the political correctness of the right in-if I may say so-a most unpleasant and worrying manner. I hope that we will hear later that that is not the view of the Government as a whole.

The Secretary of State stated his desire to protect the voluntary and community sector and proposed that the Big Lottery Fund should exclusively fund that sector. I am instinctively sympathetic to that approach because it is too easy for funds to slide into the public sector rather than the voluntary sector, where more effort is sometimes required. I share the concern expressed by the hon. Member for St Austell and Newquay (Stephen Gilbert), and I hope that the Minister will take care to leave some flexibility so that priority and preference is given to funding outcomes that will actually be delivered for the local community, while allowing some discretion for lateral thinking and for those communities that struggle to obtain the necessary infrastructure. At least I can agree with the hon. Member for St Austell and Newquay on that. It is right to have tight criteria, but it also makes sense to have some flexibility.

I hope that the Minister will reassure us that the three essential principles laid down to underpin the national lottery will continue to apply. The first is the independence of the lottery distributors, which are independent of Government but accountable to Parliament and have
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the freedom to take decisions on funding priorities and specific grant allocations, after consultation. Second is the principle of additionality, which the Minister has already markedly underlined, and third is sustainability, meaning that lottery funding should cover the full cost of the activity being funded with the aim of helping organisations to deliver and sustain the project throughout and beyond the life of the grant.

I ask for care in portraying the national lottery as an efficient way of giving to charity. The Minister has said that the lottery raises considerable funds that go to charitable, voluntary and community purposes, and that is correct. However, it is fair to note that if gift aid is used, a £1 donation given directly to charity results in £1.23 for that charity, whereas only 28p in every £1 spent on the lottery goes to good causes. I make that point not to undermine the effectiveness of the lottery, but to suggest that if people want to give to a good cause, additional value is created by donating with gift aid and a greater sum will go to that good cause.

I agree with the point made by the hon. Member for St Austell and Newquay about the danger of misunderstanding how administrative costs work. It does cost more to give funds to smaller and more community-based organisations, but often that funding will have a disproportionately large benefit in those communities. Small sums of money can sometimes attract other, greater, funds. When I was responsible for national parks, I set up funding through the sustainable development fund to encourage community-based projects within national parks, based on the principles of sustainable development. That led to millions of pounds of other money coming in from organisations such as parish councils, charities or from business donations and contributions from individuals who wanted to take part in a community project. It was beneficial because everybody could see the value of bonding together to produce positive outcomes that were good for the national parks and for the communities and voluntary organisations, such as youth clubs, that used them.

Sometimes the value of small grants is greater in terms of long-term impact than that of big sums of money. However, it takes more time and administrative effort to achieve those outcomes. Applying simple proportionality in judging administrative costs is too crude, and I hope that the Minister will acknowledge that and take it into account when he responds to the debate. I welcome this opportunity to debate this subject with the Minister, and I hope that he will take account of the constructive points that have been raised.

3.47 pm

Richard Fuller (Bedford) (Con): I am indebted to you, Mr Benton, and to the Minister for the opportunity to debate the national lottery and the Big Lottery Fund.

Although I will focus my remarks mainly on issues relating to social enterprise, I would also like to pick up on a critique that was made of my hon. Friends the Liberal Democrats, suggesting that they had not noticed that there was a financial crisis. Those of us who witnessed the extraordinary sense of denial about the financial crisis in the last Government regard that as a somewhat breathtaking criticism. Perhaps a few minutes in front of the mirror might be worth while for Labour Members. Such comments undermine some of the good
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points they were making, particularly the exhortation regarding the importance to charities and social and voluntary organisations of long-term planning-something that was particularly absent in the latter months of the last Government.

Before looking at social enterprise and the implications of the statements that have been made today, I want to ask the Minister whether as part of his review of the lottery since 1994-I think he mentioned small tweaks on the tiller-he intends to look at some of the concerns about the impact of the national lottery on gambling. In particular, will he look at the regressive nature of the lottery in taking money from people on low incomes and its general impact on encouraging people to gamble? Those are not necessarily substantive points for the review he mentioned today, but it would be helpful for hon. Members to know whether such matters will be part of it.

In my comments on social enterprises, I am informed by and indebted to the Social Enterprise Coalition and to Michele Rigby. Michele runs Social Enterprise East of England, which is based in my constituency. I would appreciate the Minister's response to a couple of questions. The first relates to regulation and registration. There are concerns that too tight a focus, particularly on charitable purposes, will have the unintended consequence of rendering a number of social enterprises unable to undertake the very important work that many hon. Members on both sides of the House want them to continue.

In a recent survey, 62,000 social enterprises were listed. Many of us might think that the number is much more substantial, but there are certainly 62,000. If I may, I shall give the Minister the relevant numbers in case he does not have them to hand. The maths does not add up to 100%, because of double registration, but 37% were listed as registered charities, 59% as companies limited by guarantee, 17% as community interest companies, 12% as industrial and provident societies or co-operatives, and 9% came under other forms of registration.

Can the Minister provide some assurance that as we look to the ways in which the big society's remit is written, social enterprises that are not listed as registered charities will not be excluded purely on that basis? As the organisations are regulated in a number of different ways, it will be important to consider that as well. Those registered under a trust deed or a charitable constitution are, I think, registered and overseen by the Charity Commission.

Cathy Jamieson: Given the hon. Gentleman's support for the social enterprise and co-operative sector, which I welcome, does he agree that it would be somewhat iniquitous if independent, private schools, which have charitable status, were able to apply for some of the funding when some of the very organisations that he describes would not be able to do so?

Richard Fuller: The hon. Lady makes a very wise point, from her point of view. In my constituency, there are splendid independent schools, which are fully involved in their charitable endeavours and do not see a conflict between the two, but see them as mutually reinforcing.

I was making a point about the registration of social enterprises. I think that companies limited by guarantee are regulated by Companies House, and community
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interest companies obviously have their own regulator, so will the Minister be kind enough to confirm that in the regulation of social enterprises, that will not be listed as the sole reason for their exclusion under the new rules? That would provide a lot of reassurance to many of the organisations that we are talking about.

My next point is about the important principle of additionality, which now applies in a very different economic circumstance for our country. At a time of retrenchments and necessary deficit reduction measures, it is easy to call that principle into question. That would be unfortunate. However, there are some potential tensions between the principle of additionality and the other goal-promoting the big society-part of which I have addressed through the registration of social enterprises. If we want the big society taken from a vision to a reality, we shall have to rely on the vibrancy of our social enterprises and small community groups and their ability to step up and achieve the things that we are talking about. There is a fierce urgency about enabling those organisations to have the capacity in place to do that. The hon. Member for Kilmarnock and Loudoun (Cathy Jamieson) made a very good point about that, which I shall turn to in a minute.

As the Minister rightly said, the issues about disbursement are correctly at arm's length. We would not like political interference in that, but can he give me some idea of whether there will be any review of the guidance to disbursement organisations, so that the overall ambitions that we all share, of seeing a more vibrant civil society and social society, are not affected because of the urgency of the times in which we are living?

My next point is about capacity building versus short-termism. In many of our constituencies, there will be charities and non-profit organisations that have been delighted to receive funding from various sources-not just national lottery schemes, but other sources. For 18 months or two years, they can start to live their dream and build their future, but then they are cut off precisely when they are starting to get traction. One concern about the programmes under the previous Government was that a solution was never found-presumably because it is extraordinarily difficult to find one-to overcome that problem.

Capacity building in social enterprises is more important now than it has ever been. We shall be relying on social enterprises to take on many more responsibilities than they may have anticipated, to achieve many of our social goals. In the review, will the Minister consider carefully how lottery funding can focus on capacity building? There have been very sensible recommendations from a number of Members, particularly the hon. Member for Kilmarnock and Loudoun, about low-cost applications. Making applications really is a bugbear in terms of an organisation's capacity to apply and the cost of applying. There should also be more encouragement for multi-year funding of social enterprises and charities, because with that effort in place, there will be a much better long-term impact in our communities from the good works that are the objective of the national lottery fund.

Alun Michael: The hon. Gentleman makes a very important point. As I listened to what he was saying, it occurred to me that a fresh look at issues such as tapering might be worth while. In the old urban funding periods, for instance, there was a period when people
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knew what the funding was and then a couple of years when there was diminished funding, which sometimes facilitated finding new partners to ensure longer-term viability for a scheme.

Richard Fuller: Tapering is one option, and it is not a bad one. Actually, it is a very good option-I had not thought of it. Furthermore, with the introduction of organisations such as the big society bank and with more pressure on private enterprises to be more involved and to move beyond corporate social responsibility and into really investing in the fabric of our civil society, it would be helpful, if it was in the Minister's remit, to connect funding sources-perhaps the initial seed funding that comes through the national lottery and the Big Lottery Fund-to other organisations. That could ensure that transitions in funding from one pot to another are handled better and that more signposting is given in the initial grant-"We will fund you for x number of years" or "We will fund you for this amount and after that, these are the two or three funding sources you can go to". I thank the right hon. Member for Cardiff South and Penarth (Alun Michael) for making that very good point.

3.58 pm

Katy Clark (North Ayrshire and Arran) (Lab): It is a pleasure to have the opportunity to make a contribution to the debate, which is important for our communities and many community organisations. I shall echo some of the points that have already been made. It is only fair to say that there is a great deal of concern that Scotland will see a net overall reduction in funding from the lottery as a result of some of the proposed changes. Will the Minister examine that?

A number of hon. Members from Scottish constituencies are present. That is because in Scotland at the moment there is conversation and discussion about the proposals, and much of its content is that Scotland will fare badly as a result of them. That would be very sad, particularly as there has already been considerable debate in Scotland about the implications of the funding of the Olympics and the withdrawal of funding from Scotland, and many other parts of Britain, as a result of lottery funding being targeted on the Olympics.

I fear that the effect of some of the proposals may be to target funding on more built-up areas, particularly cities and centres where many large institutions are providing arts and other facilities to the community. I say that partly from my experience over the past five years of representing a very rural constituency and working with a wide range of different organisations that have been trying to obtain funding, not just from the lottery, but from other bodies, such as the Scottish Arts Council and a range of other public sector bodies.

Quite often, there is a view that arts institutions in particular should look like the kind of organisation traditionally seen in cities. Therefore, organisations such as the West Kilbride Craft Town in my constituency, and a range of other arts bodies trying to do important work in a more rural environment and in small communities, have found it difficult to get arts funding. That should be looked at, particularly in the light of some of the Government's proposals.

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It is important that rural, poorer, more deprived and working-class areas benefit from the proposals that emerge when the Government decide on the matter. Some powerful points have been made about who buys lottery tickets, and whether those people and their communities are the ones who benefit at the end of the process of lottery allocation. Those arguments may not be made often, but there are important principles that should be taken into account.

As a Member of Parliament since 2005, I have met numerous community organisations and individuals to discuss applications to the Big Lottery Fund, as has practically every constituency MP, I suspect. New Members will have a huge amount of experience of that over time. It is fair to say that my views are anecdotal and probably reflect my constituency. If I represented a different kind of constituency, I would probably make other points, depending on my experience.

I have concerns about the social policy implications of some past policies, which have encouraged institutions in our communities to move into the voluntary and community sectors rather than link with the public sector. I represent an area that was traditionally wealthy, because it was very industrialised, having gone through the industrial revolution early. As a result, we have many small communities with a proud history and impressive buildings, but without the wherewithal to maintain the infrastructure that was developed over time, so old buildings are falling into a great state of disrepair. Almost every community in my constituency has public buildings such as Saltcoats town hall, which is gorgeous but is falling to pieces and boarded up at the moment. Another example is Walker hall in Kilburnie, a town built on industries such as Knox rope, which was sold all over the empire and fuelled the construction of impressive buildings that are not being maintained.

In general, the state has taken over ownership of those buildings. However, because of the way national lottery funds operated in the past it has not been possible to get funding to regenerate them. I am not talking about long-term maintenance because that is a slightly different issue. Pressure has been put on community bodies-for example, voluntary committees that help run those halls-to move into the private and voluntary sectors, so that they can apply for funding. As a matter of public policy, it is appropriate for the national lottery and for Big to provide one-off funding to try to regenerate our communities and buildings of that nature, but that should not involve communities having to take on long-term responsibility for running those institutions, when other parts of the community, such as the council, might be willing to do so. I am concerned about the way in which the funding rules have operated to date, in that they influence the decisions that people make in communities.

I am concerned about the administrative role that local organisations have had to play-the fact that it is necessary to create a business plan when making a relatively small application for funding. People in communities without the skills to present a successful application have to professionalise themselves and put a huge amount of work into making applications. Communities that do not have to hand architects, solicitors and surveyors willing to provide their services free are at a disadvantage. More middle-class communities, where there are individuals who can assist and can present applications, will be at an advantage. No community
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should have to put a disproportionate amount of trouble into making an application. That is something the Government should look at when they consider the matter.

The approach has partly developed from a very cautious decision-making process because money is involved, and organisations have to account for it to the public and the Government. They want to be careful that grants can be justified and are for viable projects, but that makes it difficult for local communities to make applications.

I echo some of the points made about long-term planning and the fact that there has often been a short-term approach to funding. An early experience I had in my constituency concerned the Three Towns Healthy Living Centre, which was set up partly with the support of lottery funding, to provide preventive health services in the community. Eight such healthy living centres were set up in Scotland in deprived communities. According to those who used and had contact with them, they were very successful. However, they were not the kind of project that the NHS was ever going to take on and at the end of the funding period, they had to wind up. We have seen that again and again with the lottery. That point needs to be taken on board. Is it responsible or realistic to provide funding to set up services on a short-term basis if others-whether in the private or public sector-will not come in to fund those projects? I think it would be acceptable for the lottery to say it will fund such projects on a much longer-term basis and that those decisions should be taken in the long term, rather than the short term. It would be helpful if the Government could look at that.

There is great concern that there may be problems with some proposals, particularly at a time of significant cuts in the arts, museums, culture and, no doubt, many sporting facilities, if Government policy is implemented. Although extra funding for that part of society will be welcome, there is concern-particularly if we are to be living through difficult times-that many community organisations and small projects will lose out, if some of the proposals become reality. I ask for that to be taken on board.

4.9 pm

Dr Thérèse Coffey (Suffolk Coastal) (Con): I had not planned to speak today-if Hansard asks for my notes it might not be able to make head nor tail of them-but I felt compelled to speak after intervening on the right hon. Member for Cardiff South and Penarth (Alun Michael). I do not always attend debates to make a speech; I often come to listen, but I enjoyed today's debate so much that I feel I have to join in.

I welcome the lottery. It is John Major's greatest legacy. He may claim that his greatest legacy is the golden economic legacy he bequeathed to new Labour, but I believe that the national lottery is his best and will be his most enduring legacy.

I do not speak for the Government, of course, but for the people of Suffolk Coastal. It is for that reason that I am here. I should perhaps declare an interest: I was recently given lunch by Camelot, but I have no intention of talking about that side of the national lottery today. I believe that all Members were recently invited to surgeries by the lottery distributors. I was surprised to learn how little funding had been received by projects in Suffolk.
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Billions of pounds have been generated for good causes in the past 15 or 16 years, but Suffolk-especially Suffolk Coastal-seems not to have received much, particularly not Big Lottery funding. I asked the lottery distributors why they thought that was so, and they came clean, saying that the funding formula was biased towards certain aspects and indices and that Suffolk, being average, loses out. That is unfair.

One of the things that I have discovered as one of the Suffolk MPs is that the county's statistics seem always to be average, but we all know that there are great pockets of deprivation as well as wealth. The poorer areas definitely lose out when such indices are applied across such a large area. Many of the indices and formulae used for health funding, police funding, education funding and so on, including the basic support grant for our councils, have been consistently skewed away from rural areas, especially in rural England, in favour of other parts of the country.

Opposition Members have spoken of their concern about certain aspects of the lottery in Scotland and Wales. I have an idea for the Minister. He spoke of having arm's length bodies, but I think that it would be fair for the Government to give guidance to distributors, and perhaps there should be a rule to restrict lottery grants to the United Kingdom. My constituents would be surprised to hear that Big Lottery Fund money goes to overseas projects.

An encouraging aspect for people playing the national lottery is that they believe that they are helping their own communities, just as when they give money to Children in Need they are conscious that the money stays in the United Kingdom and does not go abroad. Many of my constituents would be surprised to hear that El Salvador has received funding in connection with setting up trade unions, that in Nicaragua there are projects on certain aspects of the millennium development goals, and that there are other projects elsewhere around the world. One of the reforms I suggest to the Minister is that that the funding generated by the national lottery should be used in the UK.

Fiona O'Donnell (East Lothian) (Lab): Does my hon. Friend not agree that that is wholly at odds with the spirit of the Government's intention to protect (1) the budget (2) of the Department of International Development. The Government should be utterly comfortable with that, as should her constituents, because poverty and deprivation in other parts of the world have an impact on this country.

Dr Coffey: I thank my hon. Friend for that intervention-we call each other "hon. Friend" because we are friends outside the Chamber, although as a political convention we do not always use that term. I understand what she says. Funnily enough, if the money given in grants by the Big Lottery Fund was part of the 0.7% of gross national income aid target to which we are committed, I could see some logic in it, but lottery funds are about additionality rather than substitution for Government funding, so I do not necessarily agree with her on that point.

I welcome the move in the allocations back to the original percentages of 40, 20, 20, 20 and away from the 50% split. Again, some of my constituents might be surprised that some of the big society funding-I mean
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Big Lottery funding; I apologise-is used to fund credit unions. That is a great idea. Many of us recognise the extent of the personal debt crisis in this country; rather than having people going into the arms of loan sharks, Members on both sides of the House are trying to encourage credit unions. However, I think my constituents will be more surprised to hear that some Big Lottery Fund money is going to trade unions-for trade union learning or for particular projects such as "The Union Makes Us Strong: TUC History Online". I do not think that that is appropriate use of the Big Lottery Fund.

I understand that the lottery is growing. I appreciate that we are going back to the principle of additionality and getting rid of redirection towards Government policy. With appropriate marketing, that might encourage more players to resume, as there has been a drop in the number of people playing. This is not necessarily an interest, but I used to play regularly through a syndicate at work. I was determined that the people who worked for me who could retire if they won that magic figure were not going not leave me behind, so I too contributed. I may even get a syndicate going in the House. It is not that we feel poor because of the Independent Parliamentary Standards Authority, but we would all like to enjoy the prosperity of a win on the lottery. Indeed, it could be any one of us. However-to continue this personal anecdote-when the funding formula started to change and when I thought that the Government were starting to redirect money, I decided not to play as regularly, because I thought that the money was not necessarily going to causes in my community. For me, that was an important motivation.

An interesting point was raised about efficiency in the distribution of funds. I hope that the Government can find a way of benchmarking the different funds and distributors. When it comes to the Big Lottery Fund, I would like the Government to consider having a wider range of distributors. I pay tribute to the Community Foundation Network, which I think was set up by the previous Government. Community foundations are either county based or much more local. I pay particular tribute to the Suffolk community foundation; it really has its finger on the pulse and is much better than the big regional offices that we see. We should do all we can to help them.

Alun Michael: I am grateful to the hon. Lady for giving way. In view of her earlier comments, I am glad to find some common cause with her. Funding through community foundations means that the communities that find it most difficult to apply are more likely to obtain assistance-the point that I was making earlier. When I was deputy Home Secretary, I set in train something that led to the rural policing grant, because rurality is indeed one of the elements that should be taken into account. It seems that the hon. Lady is not arguing against the basic philosophical starting point, which is that those areas that have the greatest need and which find it most difficult to apply for funding, including those in her constituency, should be assisted with doing so.

Dr Coffey: I welcome the right hon. Gentleman's intervention. I am not saying that the proportion of money spent on the national lottery in an area should automatically result in that much going back to that
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postcode area. I welcome what he says about the police grant-I did not know that, and I thank him for educating me-but I honestly believe that generally there has been a skew away from rural areas because of the way certain indices have been applied, so we are not likely agree on that point, but I am glad that we have found common cause on the community foundations being an efficient way of distributing funds.

I hope that when the Minister considers the input into the lottery, including trying to encourage more people to take part and ensuring that even more post offices can benefit-I believe that a third of post offices have a lottery terminal on their premises-he will also give careful consideration to getting the money out as efficiently as possible, as cheaply as possible and, dare I say it, as least politically correctly as possible.

4.19 pm

Mr Ben Bradshaw (Exeter) (Lab): I thank all right hon. and hon. Members for coming to the debate regardless of whether they have spoken. It has been good to see so many people here. Furthermore, I am grateful to the Government for giving us the opportunity to discuss these issues.

Let me start by saying that I agree entirely with the Minister's opening remarks about the invaluable contribution the national lottery has made to our national life. Indeed, that is something on which Members on both sides of the House can agree. However, I have a number of questions about the specifics of the review and about one or two things that the Minister and other Members have said during the debate.

When the Conservatives were in opposition, they said on a number of occasions that they would return the lottery to its original four good causes: arts, sports, heritage and charities. The fifth good cause, health, education and the environment, was introduced by Labour through the National Lottery Act 1998, and it enabled lottery distributors to fund a wider range of public projects and things that the public had said in numerous surveys that they valued.

In November 2009, the right hon. Member for South West Surrey (Mr Hunt), now the Secretary of State for Culture, Olympics, Media and Sport, said:

My first question is what has happened to that commitment? When I asked in a parliamentary question whether the Big Lottery would continue to be able to fund the fifth good cause, the Minister replied:

There is an element of confusion, and I would be grateful if the Minister could clarify the matter. Given that it was one of the first things that his party said that it would do after the election, when can we expect legislation to implement that commitment? Or is it yet another commitment that has been dropped since the Conservatives arrived in government?

The Minister has begun to implement the commitment that the Government made before the election to increase the proportion of lottery revenue going into the arts, sports and heritage. However, as a number of my hon.
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Friends have pointed out, increasing the lottery funding going to the arts, sports and heritage will not make up for the savage and unnecessarily severe cuts that the Government appear to be intent on making to the arts, culture and sport. I am disappointed that Ministers from the Department for Culture, Media and Sport are not resisting Treasury demands in the negotiations on the comprehensive spending review. As the Minister has followed the debate very carefully, he will know that there are good economic and broad cultural arguments for protecting spending on the arts and culture. Indeed, I suspect that those arguments were why the Liberal Democrats had a manifesto commitment to do exactly that. I always made it clear that I would fight hard in any negotiations with the Treasury.

Overall spending on the arts and culture represents less than the underspend in the national health service every year. The hon. Member for St Austell and Newquay (Stephen Gilbert) said that the Liberal Democrats had a Damascene conversion because they did not realise how serious the economic situation was, but the argument that the hon. Member for Bath (Mr Foster) repeatedly made before the election was that cutting spending on the arts and culture would have such an infinitesimal impact on reducing the deficit and would inflict such damage that it was not worth doing. I would like some reassurances that when the Treasury asks the Minister and his colleagues to jump, they are not simply saying, "Yes, very nice, but how high?"

Does the Minister accept that by shifting the priorities in lottery spending, the Government are effectively cutting funding to community and voluntary groups? When the Conservatives formulated their policy in opposition, they worked on the basis that the Big Lottery Fund, which at the moment receives 60% of lottery good cause money, spent 80% of its revenue on community and voluntary groups and 20% on the non-CVS sector. In fact, as the Minister acknowledged in his opening remarks, 92% of Big Lottery's spending went to the voluntary sector last year. That means that if Big Lottery's share of funding is reduced from 50% to 40%, even if it is restricted exclusively to funds within the community and voluntary sector, the share of lottery funding to voluntary groups will be cut. Will the Minister explain how his leader's big society will be helped by cutting funds to voluntary groups?

Let me turn now to the administrative costs of the lottery. In its structural reform plan, the Government state that by the end of this year they intend to

In opposition, the Conservatives were more precise:

Are the Government still insisting that administration costs should be cut to 5%? If so, perhaps the Minister can explain on what basis that figure has been chosen. As my hon. Friend the Member for Kilmarnock and Loudoun (Cathy Jamieson) rightly said, Big funds many community projects. The Minister will be aware that it is much more expensive to administer the costs of funding such projects. The National Council for Voluntary Organisations has also expressed concern. It estimates that Big's current administration is 7.5% of its costs. It says:

Will the Minister reassure me that that will not be the result of his policy? Moreover, will he be happy to meet voluntary organisations, perhaps under the umbrella of the national council, to ensure that his drive to reduce administration costs does not make it more difficult for small community and voluntary groups to win lottery funding?

The Government's structural reform plan states that the Big Lottery Fund will be restricted to funding the community and voluntary sector. Will the Minister confirm that the intention is to restrict it exclusively to funding the CVS sector? If so, what does that mean for schemes such as Heroes Return, which provides grants to world war two veterans to enable them to return to the battlefields where they served their country? More than 40,000 veterans and their families have benefited from that scheme. Will the Minister assure the Chamber that such an initiative can continue to be funded by the Big Lottery Fund?

Moreover, will the Minister tell us when we are likely to see the national lottery independence Bill, which we were told was needed so that the lottery

Given that commitment, which was made before the election, will the Minister explain why the DCMS structural reform plan states that Ministers will

Again, I detect a slight conflict. The Government appear to be pointing in two directions at once. The Minister said that he would push forward with the proposals that were made before the election to introduce a gross profits tax. Will he outline the time scale for that?

We all agree, I think, on the diversion of money for the Olympics. The maximum contribution to the 2012 Olympics from the lottery was capped at £2.2 billion, with no more than half diverted from non-Olympic distributors. Will the Minister confirm that the Government will not raise that cap? Furthermore, can he guarantee that the Government will honour the commitment that we gave to return all the money that was diverted from good causes in full, using the proceeds of land sale after the Olympics? If he cannot do that, will he write to me after the debate?

Finally, let me ask the same question that I ask in all such debates. It would interest all Members in the Chamber if the Minister could point to a single Liberal Democrat policy on the lottery that is being implemented by the Government. Or is this yet another example of the Liberal Democrats having absolutely no influence whatever on the coalition Government?

Mr Joe Benton (in the Chair): I call the Minister to wind up.

4.29 pm

John Penrose: I am delighted to respond to the various points that have been made by Members from all parties during this debate. There is a very pleasing unanimity about the importance of the national lottery, which is
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not exactly unexpected but none the less welcome. I think that there is also a general acceptance that the national lottery has become a tremendously important part of our national life. While there may be some important questions to be asked and some important quibbles here and there, there is a vast fund of good will and cross-party consensus on the importance of the national lottery carrying on and continuing to do good work.

I will try to collect the various points that hon. Members have made into a series of themes. If I miss anybody out, I apologise and perhaps they can sort of grab me after the debate. However, I will try to ensure that I have picked up every point that was made.

A number of Members asked whether the commitment to focus the Big Lottery Fund even more closely on operating through the voluntary and community sector rather than statutory bodies would have an unintended negative effect. Looking around Westminster Hall, I think that that point was made by the hon. Members for Kilmarnock and Loudoun (Cathy Jamieson), my hon. Friend the Member for St Austell and Newquay (Stephen Gilbert), the right hon. Member for Cardiff South and Penarth (Alun Michael), my hon. Friend the Member for Bedford (Richard Fuller) and the right hon. Member for Exeter (Mr Bradshaw), the shadow Secretary of State for Culture, Media and Sport; I am not sure whether my hon. Friend the Member for Suffolk Coastal (Dr Coffey) made it too.

In response to all those Members, I will say that the reasoning behind that commitment is purely an attempt to prevent any questions being raised about a breach of the principle of additionality. It is an attempt to ensure that there can be no question that money goes to statutory bodies as a way of getting round the principle of additionality. I think that it was the right hon. Member for Cardiff South and Penarth who said that it was terribly easy for that appearance to be created, which is something that we must watch out for at all times.

Therefore, I think that we are all agreed on the importance of the principle of additionality. I also think that it is right to say, as the shadow Secretary of State said, that the Big Lottery Fund has been tending towards that direction anyway. It used to be the case that 80% of its donations went to the voluntary and community sector, but that share has recently gone up to 92%, and we are encouraging the fund to make the percentage go even higher.

However, in response to a point that was raised by a number of people, I must say that we have no intention of phrasing the revised policy direction that we are aiming to come up with so narrowly that we end up with the unintended consequence that, if a voluntary and community sector organisation is partnering the local library or whatever local organisation it may be, it would be discounted. That consequence would clearly be counter-productive and unintended, and it is not what we want to achieve. There needs to be enough flexibility for a balance to be struck.

Cathy Jamieson: For the record, and for the benefit of those of us who have represented Scottish interests in Westminster Hall today, will the Minister tell us whether
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the policy direction that he will announce for the Big Lottery Fund will be for England? What discussions has he already had with the Scottish Government in relation to this issue?

John Penrose: I thank the hon. Lady for drawing everybody's attention to that issue. She is absolutely right to point out that any such policy direction would be purely for England; it would then be up to the devolved Administrations to decide whether they wished to follow or not. Alternatively, if they wanted to change or flex the policy direction, it would be entirely up to them to decide how they wanted to react. I hope that that answers the hon. Lady's question. It is important that we strike the right balance and are flexible on that issue, because an overly rigid approach could create some unintended consequences.

I also want to pick up briefly on one or two of the points made by my hon. Friend the Member for St Austell and Newquay, who is standing in today very nobly for my hon. Friend the Member for Bath (Mr Foster). He asked how we were getting on with the gross profit tax; incidentally, that is an answer to the shadow Secretary of State's question about whether there was a policy that the Liberal Democrats as well as the Conservatives had backed. The answer to my hon. Friend's question about the gross profit tax is that discussions with the Treasury are already under way. I am afraid that the timetable is still slightly elastic, because the Treasury is in charge of it, since it is a tax rather than something that is directly the responsibility of the Department for Culture, Media and Sport. However, as I say, discussions are happening, officials are already involved and I have spoken to the relevant Minister at the Treasury about it already.

Mr Bradshaw: I asked the Minister whether any discrete Liberal Democrat policies that were not shared by the Conservatives before the election were now Government policy.

John Penrose: I am afraid that I shall have to rely on my hon. Friend the Member for St Austell and Newquay, who is speaking for the Liberal Democrats today, to answer that question, as I am not quite such an expert on their election manifesto as I am sure he is. I am certain that he will be willing to be buttonholed by the right hon. Gentleman after the debate and will put him right, as necessary.

My hon. Friend the Member for St Austell and Newquay asked about the speed at which the spending cuts would be made. He and a number of other Members also asked whether we would try to be flexible in making those cuts. In fact, the right hon. Member for Exeter was also very concerned-to put it charitably-about the extent of cuts. We have four years in which to achieve those cuts and therefore we will carefully phase any reductions that have to be made. None of us here like the notion that there have to be cuts at all; sadly, they are a necessary thing rather than something that anyone is looking forward to implementing. But we will try to ensure that we phase them over that four-year period in the most intelligent way possible, to minimise the effect on the front line and to ensure that adjustments that have to be made can be made during that period.

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In response to the comments made by the right hon. Member for Exeter about the need for these cuts, I share the view of my hon. Friend the Member for St Austell and Newquay. I am afraid that it is true that these cuts are not something that anybody wants to implement; none the less, they are the result of the previous Government's actions. The reason why they have to be made is not that anybody wants to make them but simply because of what is happening to countries such as Greece. If we look at those countries, we can see that if a country's public sector finances are not in balance, the international capital markets and the rest of the world will form their own view about its creditworthiness. We are borrowing a vast amount from international creditors at the moment so we need to ensure that we are a credible borrower in their eyes; otherwise, we will not be able to carry on doing anything that we want to do. I am afraid that that credibility has been gravely put in peril, and that is why we have to bring the national accounts back into balance as fast as is reasonably possible. However, I take the point made by my hon. Friend the Member for St Austell and Newquay that we need to do that with sensitivity and care and attempt to minimise the impact on the front line as far as possible.

The right hon. Member for Cardiff South and Penarth made some points about the needs-based approach, which were picked up by a number of other Members. I think that he was suggesting that he would prefer to see the Big Lottery Fund contribution maintained at 50% rather than at 40%, although as a result of our creating a smaller slice of a bigger pie the total cash amount will go up; I hope that I also answered his question about the impact on both Scotland and Wales. I think that his argument was that he would prefer that contribution to remain as a higher percentage as well as that higher total cash amount, because he felt that that would maximise the amount of money being given on a needs-based approach.

To reassure the right hon. Gentleman-

Cathy Jamieson rose-

John Penrose: I just want to finish this point and then I will be happy to give way again.

I am not sure that the right hon. Gentleman and I will necessarily agree on that basic point of principle about the percentage that should go to the Big Lottery Fund, but I just wanted to reassure him that the situation was perhaps not quite as bad as he feared. Partly, that is because, as I said, the total amount of cash being distributed by the Big Lottery Fund should rise in both Scotland and Wales, along the lines that I was talking about earlier. In addition, a large proportion of money is distributed by other lottery distributors, which also goes to the voluntary and community sector. For example, 48% of the money from the Heritage Lottery Fund has gone to voluntary and community sector organisations and indeed 81% of the projects that the Heritage Lottery Fund supports have been led by the voluntary and community sector. So I hope that that helps him a little, even if it does not satisfy him fully.

Alun Michael: I am grateful to the Minister for addressing my point. I was not necessarily arguing that there should be no change in the percentage. I was saying that there is more than one way to achieve a needs-based
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approach to allocation. One possible way is to look at the other funds, because of course the sort of communities that I am seeking to protect are very interested in issues such as sport, art and heritage. I had hoped that the Minister would reassure me-I think that he is part way to doing so-that that needs-based approach would perhaps be applied more widely and not just in the crude overall percentages.

John Penrose: I am not sure that I can reassure the right hon. Gentleman fully on that point. However, I hope that the figures that I have just quoted about other lottery distributors that give money to voluntary and community sector organisations in a way that is perhaps not terribly well publicised show that money is already going to sporting organisations-he gave the example of sport-in needy constituencies such as his.

Cathy Jamieson: For my information, are the figures that the Minister has just given based on an assumption that lottery ticket sales will rise and, if so, by how much?

John Penrose: The figures are based on existing public figures for projected lottery ticket sales over the next couple of years. They are available on the website, so the hon. Lady can check them when she likes.

My hon. Friend the Member for Bedford asked about the effect of the national lottery on problem gambling. A large body of work has been done on problem gambling, as I am sure he is aware. I reassure him that if he speaks to the Gambling Commission, or indeed the National Lottery Commission, they will tell him what most of those who have made representations to me say: the national lottery is one of the least problematic kinds of gambling in this country. Large numbers of people play it, but the penetration of problem gambling among them is comparatively low. There are many other types of gaming that are of more concern than the national lottery. He also asked me to confirm whether non-charities would still qualify for Big funding. They do now, and they will continue to do so. I am happy to reassure him about that.

Several hon. Members discussed the cost of making applications to Big, particularly for small organisations. My hon. Friend the Member for St Austell and Newquay asked specifically whether it would not be good for hand-holding to fall outside the definition of administrative costs involved in Big's distribution. I have two responses to that. First, as I mentioned in my opening remarks, it is important to realise that there may be good reasons why the 5% target that the Secretary of State asked me about might be slightly less applicable to Big. I want to ensure that we have common measurement criteria before we start applying anything in a mechanistic way. We will have to wait and see what happens, but there might be a legitimate reason for an in-built additional cost when dealing with small organisations. I want to benchmark that cost against the cost of doing a similar job in other countries in order to check it.

Secondly, it must surely be better for us to reduce the costs of hand-holding in the first place-to reduce the necessity for it by reducing the complexity of the application process, particularly for small voluntary and community sector organisations-than to fund those additional costs. That is where I would start. As hon.
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Members commented in responses to interventions by the hon. Members for Kilmarnock and Loudoun and the hon. Member for North Ayrshire and Arran (Katy Clark), it is far more important to understand that costs are incurred not only by distributors; complexity also creates knock-on costs for applicants. It is vital that we reduce the total system costs to all parties. That is probably the biggest and most immediate single thing that we can do.

I hope that I have responded to everybody. As a final remark, the shadow Secretary of State asked about what he called the fifth good cause. I now understand the reasoning behind the written parliamentary question that he asked the other day, which he quoted. We have
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no plans to legislate to remove the fifth good cause from Big's charter. We want purely to ensure that any projects in such areas benefit the voluntary and community sector rather than breaching additionality and funding statutory bodies, as we discussed. I hope that that answers his question.

I hope that I have dealt with the issues. We have had a wide-ranging discussion, but the most reassuring and important thing to me is that there is huge respect for and cross-party unanimity on the importance of the national lottery. I am sure that everybody here wishes it well.

Question put and agreed to.

4.43 pm

Sitting adjourned.

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