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Lord Redesdale: I would also like an assurance from the noble Baroness, Lady Ramsay, because I believe that the case is that the chairman and trustees are to be

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appointed by the Secretary of State. Can she give some indication of how the independence of that body should be guaranteed or promoted in its inception?

Baroness Ramsay of Cartvale: I hope I can reassure both the noble Lord, Lord Skidelsky, and the noble Lord, Lord Redesdale, on the points they have raised. As the noble Lord, Lord Skidelsky, indicated, the amendment would prevent NESTA under any circumstances from spending any part of the capital of its endowment from the National Lottery. Currently, the Bill provides that NESTA may do so with the Secretary of State's approval.

The principle on which NESTA is established with an endowment from the National Lottery is that it should safeguard the endowment itself and fund its programmes and running costs from the investment income it receives from the endowment as well as from revenues it attracts from other sources. The endowment is an investment for the next century and it needs to be secured. That is the principle.

But the Government recognise that some flexibility is necessary at the edges. When NESTA is first established with the staff and accommodation it needs to start its work and with all the attention it will have upon it, it will need--if I may speak bluntly--ready cash. It will not have started attracting a flow of investment income. Nor can it be guaranteed that donations from third parties will have started flowing in at the beginning when it needs to start its activities.

In those early days, NESTA will need to be able to spend a small portion of the capital sum of the endowment. That is the key reason we have provided a power in Clause 17(5) for the Secretary of State to approve such spending. It is a purely practical response to an inevitable practical issue. The amendment of the noble Lord, Lord Skidelsky, would remove that power.

There may be other circumstances in which NESTA may wish to spend part of its capital. It may have the opportunity to support a one-off programme which it cannot afford alongside other priorities in a single year. It may therefore wish to adjust its spending profile to spread the investment over more than one year. To do so, it may need to spend a little capital, to be paid back into the endowment in the following year. In those circumstances it would appear to us to be reasonable for NESTA to come to the Secretary of State to seek approval for what might be a perfectly sensible course of action.

Whatever the circumstances, any approval that the Secretary of State were to give under this clause could be subject to financial directions which he issues under Clause 19. The Secretary of State could, for example, specify over what period NESTA should budget to pay back into the endowment any part it has spent with permission.

The Government fully intend to do all they can to preserve NESTA's endowment for future generations. This power and the counterbalance provided by the financial direction powers provide necessary flexibility at the margin.

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In answer to a direct point from the noble Lord, Lord Redesdale, the Secretary of State appoints the trustees but he has no power to direct them on their policies or programmes. It is the trustees themselves alone who will have the responsibility for deciding what NESTA should do in seeking to meet the objects that Parliament sets for it. I hope that that answers that specific point.

We feel that the amendment in the name of the noble Lord, Lord Skidelsky, would prevent the Secretary of State from responding flexibly and practically to the issues that NESTA will face in aiming to meet its objectives. I hope that, on reflection, he will agree that the power we propose is necessary and sensible. I assure the noble Lord that our main aim is to ensure probity and accountability. This is a practical proposal for what we see as very occasional practical problems that might arise.

5.30 p.m.

Lord Skidelsky: What the noble Baroness has said is very clear. Flexibility is written all over the place; it is a departmental obsession, not just in the noble Baroness's department but in every department. The Secretary of State has to have flexibility. The intentions of the present Secretary of State are incredibly honourable, and this provision will be used only very sparingly in the occasional practical difficulty that arises in starting something up. Indeed. Then we come to a new Secretary of State and there are all these powers. We remind the new Secretary of State of what the noble Baroness has just said and he says, "New Government, new circumstances".

Discretionary powers of this kind are always rather worrying because, whatever the intentions of the present incumbent, they offer no indication of what a future Secretary of State will do. That is why we are worried about them. Of course, we cannot do anything about it at this stage, and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 41:

Page 19, line 22, leave out subsection (6) and insert--

("(6) In subsections (2) and (5) above, "endowment" means the aggregate of any amounts paid to NESTA under subsection (1) or (4) above.")

The noble Lord said: With the leave of the Committee, I shall speak also to Amendments Nos. 42 and 43. Before I do so, may I comment on the last words of the noble Lord, Lord Skidelsky. He may come back as often as he likes!

May I remind him that we have just had a change of government, and what the present Government are doing is retaining the flexibility that was provided for by the previous government. And it is now being attacked by the supporters of the previous government, who put in the flexibility in the first place. I wonder whether flexibility is more in Opposition than in Government.

Lord Skidelsky: The noble Lord will have noticed that I was not a member of the previous government and therefore do not feel bound by everything they did.

Lord McIntosh of Haringey: At the Dispatch Box there is collective responsibility and that applies to the

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Opposition Dispatch Box as well. Amendments Nos. 41, 42 and 43 are, I hope, welcome in the sense that they simplify the language of the Bill. Clause 17(6) currently defines what is meant by NESTA's endowment as the total of any contribution to NESTA from the lottery. The wording used is less than elegant and the amendments put it more succinctly in the same words. Amendment No. 41 saves seven words, Amendment No. 42 saves 14 words and Amendment No. 43 also saves 14 words. I beg to move.

Lord Crickhowell: I would also entirely agree that the wording is an improvement. I just seek clarification or confirmation on one point. When we talk about the aggregate of the amounts paid, can the noble Lord tell me exactly what that means when we come to the growth of the fund and the investment record of the fund? Is it a fixed amount, or is it an amount that the aggregate then becomes when perhaps the capital has grown? May I just have clarification of what the aggregate means in this sense as the years pass? The fund may grow or it may reduce according to the investment result. We want to know what the answer to that question is.

Lord McIntosh of Haringey: It is the aggregate of any amounts available from the lottery. So of course as lottery funds grow, the amounts will grow.

Lord Crickhowell: I am not sure that the noble Lord entirely understood my question. I take the point that, as each grant is made, they are taken together and you will have a total. However, I am simply seeking confirmation that that aggregate total, which may rise and fall according to the way the investments perform, the whole amount of it--whatever the sum is--remains the aggregate and it takes account of the future changes in value. That is all I am seeking by way of confirmation.

Lord McIntosh of Haringey: If the noble Lord is asking me whether it includes the interest, no, it does not include the interest; it includes the original sums. However, the original sums are the endowment provided in Clause 17(1) and additional payments made under order by the Secretary of State under Clause 17(4). It is therefore the original sums and not the interest payable on them.

Lord Chorley: It seems to me that what is being proposed in the new amendment is what is known as historic cost accounting: that is to say it takes no cognisance of the effect of inflation. Perhaps that is the rule that might be looked at--it should be a more current cost accounting. It is the historic amounts which went into the fund at the particular dates that the noble Lord mentioned and, if 15 years down the line there has been a lot of inflation, you could pay out the difference between the historic cost and the new value if it has been invested sensibly in equities or other things.

Lord McIntosh of Haringey: I do not have the noble Lord's accountancy qualifications to which he referred in an earlier session. This is an endowment and the income from the endowment is being spent to meet the objectives set out in Clause 15 of the

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Bill. Therefore, there is no addition to the endowment from the accrual of interest, because all of that is going to expenditure from the endowment. It is in cash and it is invested by the Treasury under normal arrangements.

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