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Lord Howell: My Lords, that is absolute nonsense. Will the noble Baroness give way?

Baroness O'Cathain: I do.

Lord Howell: My Lords, I took a prominent part in that debate, as did the noble Lord, Lord Donoughue, from our Front Bench, totally supporting the concept of the lottery.

Baroness O'Cathain: My Lords, I agree that the noble Lords, Lord Howell and Lord Donoughue, did so. But there were many misgivings about the lottery. I am sure that the noble Lord, Lord Howell, will agree with me, that at that time it was stated time and again that the moneys raised by the lottery were not for general public expenditure but for specific good causes--not least football, and those causes about which the noble Lord so ably demonstrated, and on which he received the support of the House.

My second misgiving relates to the very structure of the Bill. The first four clauses have nothing to do with the revenues accruing to the five good causes which were established under the National Lottery etc. Act 1993, but are a veiled criticism of the operations of Camelot. The inference is there. On the basis that one puts the best and most important goods up front when selling anything, the first four clauses lead one to infer that there is huge, deep-seated concern about the current operation of the company that has done so brilliantly. In this season of goodwill I should not even consider that the demons envy and greed are alive and well--but I am not strong enough to resist that temptation.

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The measures proposed in the four clauses leave one with a deep suspicion that all is not well with the lottery operator. I cannot believe that that is so. It has done an absolutely splendid job in organisation and administration terms. Has anyone a list of customer complaints? Are there screaming headlines to the effect that they are inefficient, or worse? If so, I plead ignorance of them.

Camelot (I have to say that I have absolutely nothing to do with Camelot; I have not even received a briefing from it) strikes me as being a shining example of how to do a thoroughly good, efficient job--so good in fact that everyone takes it for granted that no mistakes will be made. But in typical British fashion we do not continue to compliment Camelot, taking such efficiency for granted, despite the fact that it is pretty rare in most areas of British business and commerce to have such an acceptance of the efficiency of an organisation. If I were employed by Camelot, I should be somewhat dismayed and demotivated by the Bill, but doubtless it has made its views known.

My third misgiving relates to the introduction of the new good cause of health, education and the environment. Naturally, I want all those areas to be the subject of good funding. But the National Lottery was not set up to take the place of public expenditure from national revenue. Lest I be considered to be anti any increase in funding to those three areas, let me briefly point out why I feel the way I do.

No recognition is taken of the fact that the Exchequer has had a total of £4.5 billion since November 1994. It is £4.5 billion that could never have been foreseen, say, eight to 10 years ago. How has that been spent? Has any audit been done of the distribution of this windfall? The sums going directly to the Treasury each week amount to some £26 million. According to my mathematics, in a full year that amounts to £1.35 billion. If the annual total of the windfall from the lottery were allocated to health, education and the environment, even on an equal basis to each of the three, there would be an annual increase of £450 million in the funding. Surely that is the fair way to do it. But, no, I believe that the existing five good causes are now faced with a diminution in their funding from the National Lottery despite the assurance of the Minister. Other speakers will describe, I am sure, the impact that this could or would have if the Bill goes through unamended in that respect. All I can say is that anybody employed in the voluntary sector will have life made exceedingly difficult when the known source of funding is reduced. Politicians may not have the experience of trying to plan and budget within known revenue limits, but the real world does, and it is not easy.

I turn to my fourth misgiving. The establishment of the new opportunities fund fills me with foreboding. It is yet another army, small I admit but an army nonetheless, of bureaucrats, of people pushing paper around supported by sophisticated IT back-up, 10 per cent. of which will probably be used, mulling over applications and employing consultants to help them. In this thorough review of the lottery, I should like to know how many consultants' jobs does the Minister envisage will be created by the Bill? Certainly the National Lottery etc.

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Act 1993 has spawned a whole new industry of consultants. I have been involved in the arts sector. In the past three years, in three separate areas of small scale activity in the arts world compared with the major organisations such as the Royal Opera House, I have been amazed by the number of consultants who have latched on to this. It is one of the greatest growth industries and market opportunities of the 1990s. The question is always, "Are you thinking of putting in an application for lottery funding? We can help you. In fact without us you will not succeed". I do not think that people realise the ramifications of what has happened. It is a direct follow-on to the Bill that the Conservative Party introduced in 1993. But that is the reality.

My fifth misgiving is the establishment of NESTA. I am not against putting more money into this worthy cause in terms of uprating our skills in the areas of education and science. But here is yet another acronym, another body. We can no longer call such bodies quangos. They are now non-departmental public bodies. Christmas jollity went to my head when I decided to refer to the Shorter Oxford English Dictionary in the early hours of this morning to look up the word "body". The first definition was a corpse; and the second was a chemise. I do not know whether we shall have a corpse, or a chemise which will cover us up, keep us warm but will really be another body. Despite the fact that the Minister made a correct, impassioned plea for the objectives of NESTA, I do not think that its survival should be reliant upon the whim of the people to choose six numbers twice a week or to buy a few scratch cards. That is surely an area where there should be proper public funding which is not reliant on the lottery.

My sixth misgiving concerns the emphasis placed on strategic planning. This may come as a surprise to the Minister, the noble Lord, Lord McIntosh. He knows that I have been a strategic planner for most of my career. However, I know the perception of economists and strategic planners. It is not universally good. I fear that we shall be spawning yet another industry of strategic planners. I can already envisage the new consultancy organisations which will be founded specifically to help lottery applicants produce strategic plans.

My seventh misgiving relates to Part III of the Bill. I do not believe that the forecasts of additional expenditure relating to administration costs are realistic. Every time a new administration person is appointed, the on-costs in terms of overheads, IT support, and so on, are seriously underestimated. I do not think that anyone yet has the proper answer. I fear that that might be the case here.

I did not give the Minister notice of my concerns. In a Second Reading debate I should not expect specific answers. However, it would be interesting to have figures for the costs of administration between the handing over of the moneys from Camelot to the receipt of those moneys by organisations, as it were, "at the coal face". I should like to know what the administration "muddle" in the middle is. Today, the Minister announced yet another NDPB--yet more costs to be taken out of the distributive pot.

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I am sad that I am taking issue with almost all the points raised by the noble Lord, Lord McIntosh, for whom I have the greatest respect; but I honestly believe that the so-called improvements and reforms are untimely and that they fly in the face of the basic principles on which the 1993 Act was based.

1 p.m.

Lord Rothschild: My Lords, nobody likes money to be taken away from them; but the trustees of the National Heritage Memorial Fund and the Heritage Lottery Fund--I should declare my interest as chairman until 31st March next year--are mindful of the commitment in the government's general election manifesto to create a sixth good cause. It is right that that pledge should now be honoured.

Its creation, however, will reduce the Heritage Lottery Fund's share of lottery proceeds at a time when we are already being asked to do more with less. In the short life of the national lottery it is not an exaggeration to say that the five good causes have been able to make a real and lasting impact on life in this country. The future prospects for sport, the arts and heritage have been transformed.

Let us consider just two areas which the Heritage Lottery Fund has helped. Our urban parks programme, to which we have committed more than £80 million, has received almost universal praise, and led the Secretary of State for culture, media and sport to note:

    "these are precisely the sort of grants that do the National Lottery proud, providing real benefits to millions of ordinary people".

The major museum, archive and library programme could have an impact as far-reaching as the Act of 1845 which helped to create so many of our remarkable museums.

And in other areas the Conservation Area Partnership scheme for towns and the Joint Places of Worship scheme for churches, both set up in association with English Heritage, and the Local Heritage Initiative, launched last month in association with the Countryside Commission, will ensure a wide distribution of funds across the country for crucial and popular areas of heritage which have a sad history of under-funding. In all, I am proud to say that in less than three years the fund has awarded more than £800 million to 1,200 projects across the United Kingdom.

Yes, we have received significant resources; but the scale of that achievement must be put in the context of government expenditure generally. The Heritage Lottery Fund's annual income, following the introduction of a sixth good cause, is likely to run at about £250 million per annum. That is the amount it costs to run the hospitals in the London Borough of Hammersmith. Approximately £250 million would run the bureaucracy of government for about seven hours. The annual budget of the Department of Health, for example--an area set to benefit from the introduction of the sixth good cause--runs at £34.9 billion, several hundred times greater than our current resources.

I hope, therefore, that we can be assured that there will be no more squeezing of funds, and that we can look forward to the present ratios being maintained

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between now and the expiry of the Camelot licence--and indeed, we should very much welcome confirmation that there will be life thereafter.

There is one particular clause in the Bill, however, which causes me concern. I should like the Minister to reassure me in respect of Clause 17(2), which gives power to the Secretary of State to lay an order accumulating the National Lottery Distribution Fund solely for the benefit of NESTA, even though those moneys had been allocated to the existing good causes. That would come into effect one year after the Bill becomes law.

That could mean in our case, albeit after consultation and a resolution moved in both Houses, that moneys not drawn down by the Heritage Lottery Fund could be forfeited after June 1999. The impact on our ability to plan ahead with capital projects, many of which are carried out over a period of many years, could be very serious indeed. If we are no longer sure of being able to draw upon this fund in respect of the share designated to us, we may not be able to fulfil commitments that we have budgeted for and approved. That could create difficulties for the Heritage Lottery Fund in managing future cashflow and, equally importantly, add to the uncertainty for grant recipients.

We welcome many aspects of the Bill, including the proposal that the lottery distributors should seek to take a more strategic approach. Indeed, as some noble Lords may know, by selecting themes such as urban parks and museums, we were in effect deploying funds in that manner well before the publication of the Bill. We welcome, too, the power to delegate decision-making, which I hope will make life easier for future applicants.

There are provisions in the Bill to give powers to the distributors to delegate and enter into joint schemes so as to improve the distribution of small grants. In response to that, perhaps I may draw the attention of the House to our own Local Heritage Initiative, which was launched last month in association with the Countryside Commission. It will seek to award hundreds of small grants to local rural and town communities across England, just as the Bill has proposed. The fund is also taking an active role in a joint distributor, small grant initiative which is to be piloted in Scotland next year.

The Bill requires each lottery distributor to prepare a "strategic plan" if the Secretary of State instructs it to do so. After consultation with the Secretary of State, the distributor will make such modifications to its plan as it considers necessary or expedient. The balance of power between the Government and the distributor bodies and their trustees has been, and always will be, a delicate one. But the independence of trustees is their lifeblood. Their point is to be able to offer some alternative to the state's politically oriented conception of public need. Therefore, if the distributor bodies are too restricted in exercising their own independent judgment and vision, if the arm's length principle is not rigorously upheld, then organisations such as the Heritage Lottery Fund will become little more than adjuncts of a state department.

The bold experiment of giving lottery proceeds to five, and now six, good causes is, so far as I know, unique to this country. I genuinely believe that a noble

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beginning has been made, and that a renaissance is under way which is helping to broaden and improve our lives. My distinguished predecessor, the noble Lord, Lord Charteris, who is sitting behind me, began his first National Heritage Memorial Fund annual report in 1980-81 by quoting Sir Francis Drake, who, in 1587, said:

    "There must be a beginning to any great matter, but the continuing unto the end until it be thoroughly finished yields the true glory".

This great matter of the heritage will never be finished, but we look forward to a voyage of mercy with many more ports of call. I hope that under this new Bill we shall be allowed to continue on our voyage, with no further incursions and with our independence maintained.

1.9 p.m.

Lord Inglewood: My Lords, I believe that in any consideration of lotteries in this country there are two things we must bear in mind. The first is that ever since the first lottery in this country in 1569 to raise funds for the Cinque Ports--I do not wish to give the Government an idea for an additional new cause--through the 1826 last British state lottery to today, we as a nation have been ambivalent.

Secondly, in this country there is a very rigid and unbending attitude to public expenditure. The Treasury is a Cerberus which guards the nation's money with a series of arcane, Byzantine and sometimes, it seems to me, completely nonsensical rules.

As the noble Lord, Lord McIntosh, said, since November 1994 the success of the lottery has been far beyond the greatest expectations of those who thought about it at that time. We must not forget, to re-coin a phrase, that "It's Camelot wot done it". We are now looking at the problems of success, not failure, something for which we should all be grateful. I believe that it is right and proper that where we have success of this kind we should look at it carefully. I also understand that a new government would want to put their own imprimatur on the project. I entirely sympathise with that, and were I in the Government's shoes I would try to do the same.

From the time when I was in the ministerial chair of the Department of National Heritage, I could see the Opposition's spin doctors operating a populist attack on the lottery through the media. The noble Lord, Lord Rothschild, was absolutely right in his brave decision to acquire the Churchill papers. The criticism wrongly levelled at it was triggered by a distaste in some quarters for the identity of the vendor. But if you want to buy something, you must buy it from the person who owns it.

There was criticism of money from the good causes, the charity distribution groups, to certain minority groups such as gays, lesbians, prostitutes. But those people are the kind whom charities exist to serve. To put it another way, if it was good enough and respectable enough for Mr. Gladstone, it is good enough for me.

There was criticism of spending money on opera. We in this country want a world class arts scene and it is integral that if we have a world class arts scene we have

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world class opera. It is not my favourite art form, but if that is our aspiration then that is what we should set our stall out to do.

What concerns me about the proposals in the Bill is that it seems that populism has been a prime driver of change and I do not believe that that is in anyone's long-term interests.

As I mentioned, the lottery has lived in the shadow of the Treasury. As we know, because we live in a world of non-hypothecated expenditure, the concept of additionality has been developed. As my noble friend Lord Skidelsky said, it has a kind of superficial intellectual coherence. But I believe it is at bottom bogus because the parameters of public expenditure are themselves set by the lottery or the European Regional Development Fund or whatever it happens to be.

It is clear that governments are necessary and they must raise taxes in order to spend money. But it is interesting that all across the political spectrum there is a questioning of the indiscriminate use of taxation for all kinds of non-specific public purposes, each of which in its own way has merit. In that context, it is interesting that at least in one part of the current public expenditure scene there is a recognition of a qualitative distinction between categories of expenditure. I refer to the distinction between compulsory and non-compulsory expenditure in the European Community budget. I believe that there may be a good case for looking at what the Government do and when the Government disburse money to see whether some things can be done in different ways which might be better. In a sense it is an evolution of the idea behind privatisation.

In the Bill there is an interesting and helpful lead. I refer to NESTA. While I do not know all the details, it seems to provide an interesting and worthwhile idea--the creation of a virtual Oxbridge college with very real assets. Pluralism is an essential characteristic of a democratic and free society and I am very much a supporter of diverse sources of power, money and patronage. The best way of ensuring institutions and with them pluralism is to endow institutions. Keep them at arm's length. After all, the psalmist was right when he said, "Put not your trust in princes", for these days for "princes" read "the Treasury". We all know about the dissolution of the monasteries, and, none better than the noble Lord, Lord Charteris, about the shameful behaviour of the Treasury in respect of the National Land Fund. But we can have institutions doing good with independent resources and I believe it is in the public interest.

It would have been more imaginative, bolder and braver of the Government at least to have considered seriously the possibility of using some or all of the lottery itself as an endowment for some or all of the heritage, arts and sports sectors, thereby providing for them both their capital and their income needs and, to some extent, decoupling them from the wider public expenditure programme.

No one is a greater supporter than I of the Government wholeheartedly being behind these sectors and for public money being available for them. But it is

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interesting to speculate on whether direct money from taxation is best for that. If we did something in that way, we would be releasing other money which the conventional public sector would have and some of the other good causes which are doing things that I and a number of other noble Lords believe should be done properly by government themselves to enable them to expand their terms of reference.

I recall that when we were in power we were not quite the flavour of the month with the number of sectors we served in the Department of National Heritage. I now suspect that those very same people feel that they have fallen out of the proverbial frying pan into the metaphorical fire. I would not be surprised if there was not considerable support for the idea of making those sectors further from government itself.

However, clearly that will not happen and anyway the example I used has been very much illustrative and not worked through in detail. What we shall see happen is, in general terms, what is contained within the Bill. When I read it I recall one of the first remarks my then Secretary of State, Virginia Bottomley, made to me about the lottery. She said: "It's only a matter of time before it is all used for nurses' pay." That is what the Treasury wants. As we speak now, the Treasury is fingering this money. I know it and I sense that others too feel it happening. It is not the people's lottery; it is the Treasury's lottery. What worries and saddens me is that I feel that the Government have been seduced by an unholy alliance of the Treasury and its own spin doctors whose song they commissioned in opposition, to which they find they must listen now that they are in government.

1.17 p.m.

Lord Annan: My Lords, the other day I read in that remarkable publication which comes to us free every week, the House Magazine, that a Member of Parliament said that the most difficult audience he had ever had to face was sixth formers. A sixth former asked him: "Why do we spend so much money on the arts when someone's life could be saved if we gave that money to the National Health Service?"

There is no answer to that question except to say that there is no limit to what the NHS could spend and absorb in prolonging life, but it is the arts, among other things, which make life worth living. This civilised country, in ancient, medieval and modern times, has always, in one way or another, supported the arts. When the right reverend Prelate was speaking, there came to my mind the enormous proportion of GNP that was spent in medieval times on building cathedrals and churches. Of the prayers and praise which were offered up in those churches nothing remains; but the churches remain, and they are the glory of our civilised lives these days.

The Bill will diminish the amount spent on the arts by the Arts Council from 20 per cent. to 16.6 per cent. The £1 billion for the new opportunities fund will diminish by £60 million the amount available for charity. In its place we shall have money spent on health, the environment and education. I am bound to

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say that I share the suspicions of those who have said: "This is but the first step, and we shall find more and more money milked from the lottery to provide money which should come from taxation". I shall come back to that in a moment.

What do we mean by "the arts"? In the 1950s--a long time ago--I was asked to join a committee set up by the newly founded Gulbenkian Foundation, under the chairmanship of the noble Lord, Lord Bridges. The committee's function was to say what the foundation should spend its money on. Though it was obviously necessary for the Portuguese part of the foundation to spend a great deal of money on social welfare, in Britain we said that we had an admirable government increasing spending on social security and we therefore felt that the money should go on something on which we did not spend much: the arts.

Time passed and a new secretary of the committee of the Gulbenkian Foundation came into office. He changed the policy. He was not against spending on the arts, but he defined the arts in a very different way. He felt that the arts meant street theatre, pop groups, happenings and other trendy manifestations. Today the Gulbenkian Foundation spends its money in a very different way.

One could argue that the original Gulbenkian Foundation's functions were not wide enough. But it did do something. After the Second World War one could argue that Britain was still a philistine country. It is not so today. It has a vast interest in visual and performing arts, in music especially, in the theatre and of course in the cinema, which has been hard hit by the great success of television. That interest has been revived by what the lottery has been able to do.

Nevertheless, the suspicion remains that when we talk about money for the arts it is for esoteric elitist groups of people. Nobody reads what various public organisations set out in the brochures which thud through one's letter box day by day. Let me repeat, before the noble Earl, Lord Gowrie, what the Arts Council says it spends its money on:

    "48% of capital grants have gone to community or amateur groups--831 grants worth £137.53 million

    Arts for Everyone Express was aimed at community and amateur groups, providing over 5,300 grants

    57% of all ACE Lottery grants have gone to registered charities, 22% of the total number of grants given".

There follows the heading,

    "Lottery money is not just for large projects

    70% of capital grants are for less than £100,000 ... The 5,300 Arts for Everyone Express grants were for less than £5,000".

It goes on to say what a wide range of people benefit from the Arts Council lottery money. There is wide support for those Arts Council lottery projects. I shall not quote further from the publication but I commend it to your Lordships because it indicates how public bodies are spending lottery money on the people. It is a fraud to say that nothing has been done for the people up to this date.

That is one of the points I wanted to put forward. Another point concerns the problem of the Royal Opera House. The Opera House is denounced as an elitist

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institution. Let me add that I am not in any way defending the way in which that great concern has been managed in the past. There have been grave deficiencies, to which the chairman of the Arts Council referred and on which he advised the board. I well remember when I was a director of the board long ago, I too felt that there was insufficient financial control of productions. But one's words fell on stony ground and the resultant malaise of the present time came about.

The report by the Select Committee in another place--I do not know who drafted it--seemed to be drafted by somebody in whom malice and self-advertisement struggled for mastery. The report was deficient in one very important respect. It noted that certain European cities--Berlin, Paris, Munich, Vienna and Milan--also ran international opera houses on the staggione system in which great artists perform and sing, and great conductors too.

The Royal Opera House received one quarter of what those opera houses received. The Arts Council said that it was seriously underfunded. I do not know whether it was by chance, but the government of the time invited the noble Lord, Lord Sainsbury, to become chairman of the trustees--no doubt because he and his family had given fantastic sums of money to build the great Sainsbury extension to the National Gallery under the chairmanship of the noble Lord, Lord Rothschild. However, the noble Lord, Lord Sainsbury, is no fool. No doubt the Government expected him to make some other staggering donation to the Royal Opera House. I take it that when the Government failed to make it possible for the Arts Council to raise the grant adequately he resigned.

That is the point. We cannot have a great opera house on the staggione system unless we fund it on level terms with other great opera houses in the world. The noble Baroness, Lady Warnock, was quoted in the report by the Select Committee as saying,

    "Such comparisons provide a more interesting insight into the differing funding cultures of the respective countries than, necessarily, a guide to the relative cost-effectiveness of the individual organisation concerned".

So far as I can detect a meaning in that sentence, it is that if other countries preferred to have expensive opera houses and we do not, then we should not have one. That is a reasonable inference to draw from what has happened. We cannot run an opera house unless we are prepared to fund it.

Faced with that dilemma and urged on by the government of the time the Royal Opera House went out to obtain private donations, private funding. It was immensely successful in so doing. But the more successful it was, the greater its difficulties. It was accepted that now there was no need to increase its grant and so it was impaled on the horns of a dilemma: the more it raised from private sources, the less likely it was to receive support from the government of the day. We must seriously consider whether private donations should not be ring-fenced.

However, there is one way in which something could be done to help the Royal Opera House. I refer to an interesting and curious table relating to the money which the lottery has distributed to the various funds. All the

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funds are set out--the Arts Council, the Charities Board, the National Heritage Memorial Fund, the Millennium Commission, the Sports Council, and so on. The table sets out the total amounts they have been given and the total amount they have drawn. That amount is very much less than what they have been given. There are good reasons for that. If you are told that you can have a grant from the lottery but you have to match it at a particular level, it takes time to raise that money, and so balances in this account rise and rise, as people struggle to find the matching grants. Even when you have your matching grants, there is some time before you can begin to build or do whatever it is you are getting a grant for. So we have a figure, as it were, of money allocated but not spent, which has risen to £3.3 billion. I realise that that money has been allocated and it certainly should not be taken away. But what has happened to the interest? Has the interest been taken by the Treasury? Where has the interest gone? One could do a great deal with that interest to help, for example, the Royal Opera House.

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