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Lord McIntosh of Haringey: My Lords, the noble Lord may have arrived at his amendment on the hoof but I believe that he has touched a spot that deserves serious consideration. As the noble Lord has explained, his amendment is designed to ensure that NESTA preserves the real terms value of the endowment from the National Lottery. The Bill currently provides that NESTA may not spend the capital sum of the endowment except to the extent that the Secretary of State permits it to do so. We believe it is important that NESTA does not spend the endowment itself because we see NESTA as a long-term investment. With no such restriction NESTA could spend all its money in the short term leaving no legacy for future generations.

The noble Lord's amendment would go further than this. It would add to the amount that NESTA must preserve an amount equal to the impact of inflation to maintain the purchasing power of the returns on the endowment. I certainly see the logic of the noble Lord's amendment. We are prepared to give it further thought, paying particular attention to the position of comparable bodies; that is, endowment bodies in the private sector. There is one issue which we shall certainly need to address. NESTA has to generate income to pay for its programmes. It must invest the endowment and live off the interest. If it is required in addition to put away an amount equal to the impact of inflation it will have little money left to do anything else in the early years before it has been able to build up its asset base from other sources. It is essential that NESTA is able to make a strong start in meeting the objectives that we have set out for it.

If we accepted an amendment along the lines of that proposed by the noble Lord we would need to waive the requirement in the early years of NESTA's life until other sources of income were such that NESTA could afford to set aside sufficient sums to rebuild the endowment. The existing approval power in Clause 17(5) would enable us to do this. We could then use the financial directions issued under Clause 19(1) to specify the period over which the endowment should be repaid, together with an allowance for the effect of inflation. We would wish to consider the appropriate arrangements with NESTA's chair and trustees when they were appointed. With this proviso, we are prepared to give further consideration to how the noble Lord's point may be achieved in practice and how we can ensure that NESTA's ability to meet its objectives, particularly in the early years, is not compromised. If we decide that an amendment is appropriate we shall table one at a later stage. I am sorry to say that that may be in another place rather than next week.

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The noble Lord has raised a wider concern relating to his amendment; namely, that we are specifying too cautious and narrow a range of investments for NESTA. Perhaps I may respond to the points that the noble Lord raised in Committee rather than his more limited reference to them this afternoon. The Bill does not specify what types of investments are open to NESTA. These will be spelled out in the financial directions. The Bill simply says that the investment in whatever funds should be handled by the National Debt Commissioners on NESTA's behalf. When considering whether to make any stipulations as to the investment of NESTA's endowment there are two requirements of central importance: first, that NESTA should not place the endowment at risk. It is the public's investment in NESTA and it should be safeguarded. Secondly, NESTA should have a secure and stable flow of income on which to plan its programmes right from the start.

We therefore believe it is right that the endowment should be invested, at least in the early years of NESTA's life, in secure investments with a stable but strong return. The comparison that we have most in mind is with the National Lottery Distribution Fund from which the endowment will come. The NLDF is held by the National Debt Commissioners in a range of investments comprising gilts, Treasury bills and local authority loans. We intend through the financial directions to specify the same range of investments for the endowment. We do, however, have complete flexibility in this regard. We intend to use this flexibility to a degree. We intend to give NESTA complete freedom to invest in any way it chooses any additional sums beyond the endowment from the lottery.

Once NESTA has secured its financial position, after the first few years, we shall think again about how much freedom NESTA should have over the investment of the endowment itself. NESTA's chair and trustees may wish to argue for the kind of freedom that the noble Lord advocates. If they did so, we would give the point serious consideration. Our instinct, however, is to take a cautious approach to the public's investment in NESTA at least in the short term.

I have accepted that the noble Lord has a point in arguing that the endowment should be preserved in real terms and I have undertaken to consider tabling an amendment at a later stage. I hope I have also demonstrated that we have the power to give NESTA freedom to decide its own investment policy and that we are prepared to consider using this power if the chair and trustees of NESTA request it. I invite the noble Lord to withdraw his amendment, and pay tribute to him for tabling it.

Lord Chorley: My Lords, I thank the Minister for his reply. I believe that sufficient progress has been made for me to seek leave to withdraw the amendment and carry on the debate. I do not mind whether the appropriate amendment is dealt with in another place if it cannot be dealt with at Third Reading. I am also grateful to the noble Lord for his general observations,

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in particular his comments on investments. I become worried when I hear someone say that funds will be put in something that is safe and gives a good return; that is, in gilts. I believe that that is the last way to make money. However, this is not the time to deliver a lecture on the history of investment returns as between gilts and equities. I stand by what I say.

I end by repeating what I have heard so many times in my professional life from start-up companies. They ask one to have faith. They say that they will spend the capital to begin with but, never mind, they will get it right one day. However, I wish the noble Lord luck. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 [Solicitation of gifts and investment of money]:

Baroness Rawlings moved Amendment No. 21:

Page 19, line 36, leave out ("shall be under a duty to") and insert ("may").

The noble Baroness said: My Lords, I am afraid that the same attitude of ministerial interference that I mentioned earlier permeates the proposals concerning NESTA. As my noble friend Lord Skidelsky so clearly argued, we are concerned about the nature of NESTA. It is a mongrel dreamt up by civil servants to accommodate the contradictory wishes of politicians. As presently proposed, it appears to fall into the category of a non-departmental public body, but on a long leash from the Treasury, as the endowment sets it free from the present treadmill. It is unlikely to be a charity, as it is also proposed that it may undertake activities of a commercial nature, as we have just heard.

We object to that. As the amendment moved by my noble friend Lord Skidelsky demonstrated, if it is not to be a charity, then it appears inconsistent to make NESTA similar to one by placing it under the obligation to fund raise. Seeking support from the public does not necessarily imply seeking funds. I do not accept that it should fund raise, because it is akin to a charity, as the Minister said in Committee. I thought that the drawing up of analogies was the business of theologians, not of legislators.

It is extraordinary for a government to set up a body to raise public donations to deliver government policy. I said that in Committee and I repeat it. I do not accept that that is not the case, because, as the Minister said in Committee, the Government will have no influence once Parliament has passed and set up the objectives for NESTA. The point is that NESTA, in itself, amounts to an intervention in a domain which, more properly, belongs to civil society. It does more than just set the framework in which the arts, technology and science can flourish.

We feel strongly also that a body with clear government backing and fund raising in competition with other charities is bound to affect the flows of charitable giving. I accept that it is a point for debate--whether the lottery is the sole cause or, indeed, a cause of the decline in charitable giving in recent years. It seems rash to rule out the possibility

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that the lottery has damaged charities, but the future impact of NESTA on the charitable sector should be assessed carefully. That brings me to my second amendment to Clause 18(1). The clause places NESTA under the duty--I repeat "duty"--to seek sources of income other than the lottery endowment. I therefore argue that it would be prudent not to place NESTA in a predicament which could prove to be awkward. The intention of my amendment is that the stress should not be on the obligation of NESTA to fund raise, because that could have a serious and unfair effect on general charitable giving. I commend the amendment to the House. I beg to move.

Lord Chorley: My Lords, I support the amendment. The noble Baroness covered the ground comprehensively. I would reiterate the point she made, that I do not believe it to be appropriate for a government body to be in competition with the charitable sector in the matter of raising funds. It may be that NESTA will seek to raise funds elsewhere. We seem to be piling far too many different things onto NESTA. We have been told that we must get it into the venture capital world by backing businesses, which I find distinctly worrying. If anything, it will suck up money and bust NESTA. Then it has to go out and raise money. We do not know upon what basis.

We are only talking about an income from £200 million. We should start NESTA off on a small, narrowly-focused basis so that it can get its act together, and get a track record, before it branches out into wide-ranging activities.

6.15 p.m.

Baroness Ramsay of Cartvale: My Lords, the amendment, as the noble Baroness clearly explained, would remove the duty of NESTA to seek donations of income and other types of support, replacing it with a permissive power to do so. So she clearly does not have a deeply principled objection to it doing so, because she is giving it the power to do so by saying that it "may" do so. She is just removing the absolute duty to do so. The Government find that approach unattractive, and I shall try to explain why.

NESTA is an investment for future generations. We want the benefit of NESTA to be felt well into the next century. Indeed, we would hope that the impact NESTA has will increase, not diminish, as time goes by. The people appointed to the positions of chair and trustees of NESTA will owe a duty to future generations both to preserve and develop NESTA's role.

As we have already discussed in debating the amendment moved by the noble Lord, Lord Chorley, NESTA's endowment from the National Lottery will have an important role to play for the foreseeable future. The initial endowment of £200 million will ensure that NESTA can make a strong start. It is a significant commitment from this Government to NESTA's aims. However, NESTA will only truly be able to rise to the challenge of promoting talent,

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creativity and innovation in the next millennium if it increases its asset base and raises considerable additional sums from sources other than the National Lottery. We want it to seek donations and bequests, gifts of intellectual property rights, a share of returns on successful ventures it has supported, as well as contributions of the time of talented individuals, perhaps the same individuals as it has supported at an earlier stage.

This Bill sets out the challenge for NESTA, on which we believe so much of our future prosperity depends. Part of that challenge must be to develop its activities, well beyond what it will be possible to achieve in the early days. NESTA is, after all, about talents--and I shall not go into the parable of the talents. NESTA must not therefore be content with what it is originally given. It must be a dynamic body, not a static custodian of the lottery endowment.

The Government believe that there cannot be two ways about this. It is an essential part of NESTA's mission to attract other sources of financial support. It cannot be optional. In appointing trustees, the Government will in part be looking for people with a track record of fund raising. The Government have made their commitment to NESTA clear in allocating £200 million as an initial endowment. It is for others, including the chair and trustees of NESTA itself, to take up the challenge of expanding and development NESTA's role over the coming years.

We therefore believe that it is perfectly right and proper that the chair and trustees should be under an explicit duty to seek other sources of support, and we cannot therefore accept the amendment. We oppose it.

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