APPENDIX 4: CORRESPONDENCE ON THE NATIONAL
LOTTERY BILL
Letter from the Chairman to Lord Davies of Oldham,
Government Whips Office
The Committee, which I chair, has scrutinised the
National Lottery Bill, which was introduced into this House in
your name on 20 January and has been set down for second reading
on 6 February. My purpose in writing is to seek clarification,
before second reading, of two aspects of the bill.
The first concerns the decision of the Government
to establish the Big Lottery Fund in July 2004 before the National
Lottery Bill was introduced to the House of Commons. We understand
that the Big Lottery Fund, as currently operating, was created
by an "administrative merger" between the New Opportunities
Fund and the Community Fund. My Committee is however concerned
about the manner in which the creation of the Big Lottery Fund
was announced to Parliament. The practical creation of a public
authority before paving legislation reaches the statute book is
not without precedent, but where this is necessary there is a
particular obligation on Government to inform Parliament of its
actions in a clear and timely way. This is to ensure accountability
where there is a departure from the constitutional ideals of parliamentary
democracy and the rule of law which dictate that parliamentary
debate and legislative authorisation should precede, not follow,
the establishment of a public body. We would therefore welcome
clarification of (i) the legal basis on which the Big Lottery
Fund is currently operating, (ii) when and how the Big Lottery
Fund was announced to Parliament, and (iii) the reasons why it
was thought necessary to set it up before the coming into force
of the legislation intended to give it a statutory footing.
The second area on which we should welcome elucidation
concerns the inclusion of the Isle of Man and the Channel Islands
in the new scheme for distributing lottery funds (clauses 7 and
12). The bill as originally introduced into the House of Commons
referred only to the former, with a Government amendment in Standing
Committee A on 25 October 2005 inserting references to the latter.
On that day, the Minister for Sport and Tourism (Mr Richard Caborn
MP) was unable to provide an explanation of the circumstances
surrounding the decision to include the Channel Islands, but undertook
to write to the Member who asked about this. The Crown Dependencies
are not, of course, part of the United Kingdom and the people
of the islands are not represented in the United Kingdom Parliament.
It is therefore appropriate for the United Kingdom Parliament
to be assured that adequate consultation has taken place between
Her Majesty's Government and the insular authorities before legislating
in relation to the islands (which currently have their own lotteries
separate from the National Lottery). My Committee would therefore
welcome an explanation of the circumstances in which the Department
for Culture, Media and Sport decided to extend the scheme for
distributing National Lottery funds to the islands.
Because it raises matters of constitutional concern,
I am sending a copy of this letter to the Lord Chancellor. A copy
also goes to the Secretary of State for Culture, Media and Sport.
I should perhaps add that a copy of this letter will
be put on our website. Naturally, we shall also post your reply
on the site.
30 January 2006
Letter from Lord Davies
Thank you for your letter of 30 January raising points
of clarification on the National Lottery Bill before second reading
on 6 February.
You raised first a number of points about the establishment
of the Big Lottery Fund. It may help if I explain that the Big
Lottery Fund is the joint operating name of the National Lottery
Charities Board (which made grants under the name of the Community
Fund) and the New Opportunities Fund. The Big Lottery Fund was
launched on 1 June 2004.
I should make clear that there has been no change
in the legal status of either the National Lottery Charities Board
or the New Opportunities Fund. Both bodies continue to have a
separate statutory existence, with powers and duties as set out
in the National Lottery Act 1993 (as amended).
What is referred to as the "administrative merger"
of the National Lottery Charities Board and the New Opportunities
Fund has been conducted solely at an operational level, within
the framework of the existing legislation. We were keen to encourage
closer working to exploit the synergies which existed between
the two bodies and to begin to realise expected efficiency savings
of £6-£12 million a year. Such a merger enables the
two bodies to exercise their grant making functions in a co-ordinated
way given the overlap between their grant-making powers.
The "merger" has been achieved by a number
of measures:
- The same persons have been appointed
to be the chair and members of each of the boards of the two constituent
bodies. This required an initial step to align the numbers of
the members of each board. This was achieved by increasing the
number of the members of the board of the New Opportunities Fund
to 16 using the order making powers under paragraph 1(3) of Schedule
6A to the 1993 Act (see SI 2003/2869).
- The National Lottery Charities Board and the
New Opportunities Fund, together with the Millennium Commission,
have co-located in a single head office building.
- A single staffing structure has been introduced
for the Big Lottery Fund, including a single person as Chief Executive
and Accounting Officer of both constituent bodies.
- A single corporate identity has been developed,
but making clear that the Big Lottery Fund is the joint operating
name of the National Lottery Charities Board and the New Opportunities
Fund. A statement to this effect is included in the Big Lottery
Fund's headed notepaper, and in press releases and other communications
and publications.
We believe these arrangements are unobjectionable
on legal grounds provided that there are adequate mechanisms in
place to maintain transparency in the internal decision making
process so that it is possible to differentiate the internal functions
carried out by each body, and to ensure that there is no blurring
in exercise of functions by the two bodies. We believe these mechanisms
are in place. They include:
- Keeping decision making separate
when required so that the board and any of its committees take
decisions as one or other of the two constituent bodies which
make up the Big Lottery Fund.
- Decisions are minuted where required as taken
by the board "as the board of the New Opportunities Fund
or National Lottery Charities Board" as appropriate.
- For funding programmes which started with the
constituent bodies and were or are still operating during the
administrative merger period, the decision making remains with
that body; where functions are delegated to officers there is
a documented decision so that it is clear on which body's behalf
the delegated functions are being exercised.
- The new funding programmes which have been either
announced or formally launched are to be implemented under the
grant making powers of one or other of the constituent bodies.
Where the programme spans the funding powers of both bodies, then
a joint scheme has been set up under section 25B of the 1993 Act
(as with the Transformational Grants Programme). Funding flows
from the appropriate stream of income from the National Lottery
Distribution Fund.
- Separate annual reports and audited accounts
are produced for the two constituent bodies.
- Staff retain employment contracts with either
the New Opportunities Fund or the National Lottery Charities Board.
- Any awards, including their terms and conditions,
are in the name of either the New Opportunities Fund or the National
Lottery Charities Board. Joint schemes will have their own terms
and conditions and will reflect the jointness of the funding.
I hope this answers your questions about the legal
basis on which the Big Lottery Fund is currently operating. Given
that a new public authority has not been created, and there has
been no change in the legal status of either the National Lottery
Charities Board or the New Opportunities Fund, the Secretary of
State did not consider it necessary to make any specific announcement
to Parliament when the Big Lottery Fund was launched. Our intention
to create the Fund in the National Lottery Bill had, of course,
already been announced.
You also raised questions about whether adequate
consultation had taken place between HM Government and the insular
authorities before legislating in relation to the Crown Dependencies,
and for an explanation of the circumstances in which the Department
for Culture, Media and Sport (DCMS) had decided to extend the
scheme for distributing National Lottery Funds to the Isle of
Man and the Channel Islands.
As you say, some questions were raised at committee
stage for the bill in the House of Commons and the Minister for
Sport, Richard Caborn MP, wrote to Hugo Swire MP on 26 October
responding to those points. Some of what I say here reflects what
Mr Caborn told Mr Swire.
I can assure you that extensive consultation has
taken place with the insular authorities, and indeed the short
answer to your questions about the provisions in the bill is that
the impetus for them has all come from the islands themselves.
In addition, consultation between DCMS and the insular authorities
has all been undertaken in the full knowledge of the Department
for Constitutional Affairs (DCA) who of course have the primary
relationship between the UK Government and the Crown Dependencies.
However it may help if I set out the context in a bit more detail.
National Lottery draws and scratchcards have been
available in the Isle of Man for some years (since 1999), that
arrangement having been put in place at the request of the Isle
of Man. Legislation was passed extending the National Lottery
Commission's remit there to regulate Camelot's activities.
Obviously the £1 entry in a draw has to be the
same wherever tickets are sold. People on the Isle of Man buy
tickets as enthusiastically as everyone in the UK but do not currently
have access to good cause funding under existing legislation.
However the 12% duty levied on all tickets is returned by HM Revenue
and Customs to the Isle of Man Government which distributes a
similar sum in grants to local good causes (currently the arts,
heritage, sport and the Public Lottery Trust). This has the rough
effect of giving Isle of Man good causes 12p in the pound.
At the beginning of 2003 the Isle of Man Government
first raised with the UK Government the possibility of the Isle
of Man having access also to some National Lottery good cause
money, but at that time it was not seen as possible. We cannot,
for instance, extend the arts, sport, and heritage good causes
to the Isle of Man—or indeed to the Channel Islands—without
raising wider issues about the name and status of the distributing
bodies like Sport England.
It was then in late 2003-early 2004 that both DCMS
and DCA were involved in a round of correspondence with the Isle
of Man Government saying that they could see a way forward with
their request for good cause money in the context of the setting
up of a new funding body. A meeting between DCMS and the Isle
of Man Government was then arranged to take that forward.
So it was at the request of the Isle of Man in early
2004 that the UK Government decided to take the opportunity of
the new legislation setting up the Big Lottery Fund to give them
a remit to fund suitable projects in the Isle of Man. That will
have the effect of giving the Isle of Man access to the equivalent
of another 14p in the pound for good causes—or 26p in total.
That puts them on a footing more similar to England where 28p
in the pound is distributed to good causes.
It was then in the first half of 2005—that
is, at a time broadly simultaneous with the National Lottery Bill
first being introduced in the House of Commons—that the
authorities in Jersey and Guernsey wrote to DCA asking the UK
Government also to extend the National Lottery to them along with
funding for good causes. As you say, the Channel Islands, like
the Isle of Man, are outside the UK and so are not covered by
National Lottery legislation or the good causes. Residents can
currently only buy tickets with a UK address, or through an intermediary
or family/friend. Locally run lotteries cannot generate the prizes
or interest of a major national one, and so the Channel Islands
authorities were interested in getting access to the big National
Lottery prizes for their citizens, as well as a fair share of
good cause money.
Although, for instance, the Customs relationship
between the UK and the Channel Islands is completely different
from that with the Isle of Man, the UK Government's consultations
led them to believe that a similar arrangement might be achieved
for the Channel Islands as had been achieved for the Isle of Man.
It seemed fair to respond favourably to their request if it could
be achieved since this would probably be the only opportunity
to do so in this Parliament. The UK Government therefore decided
that they could make relatively minor amendments to the bill to
pave the way for that.
Therefore the Channel Island provisions now in the
bill do the same in relation to good cause money distribution
as they do for the Isle of Man. But on the taxation side, and
indeed on regulation of the Lottery, discussion is still at a
very early stage. The bill provisions would not be brought into
effect before legal arrangements for taxation and regulation,
which do not currently exist, were in place in the Channel Islands.
Tax and regulation in the Channel Islands are of course matters
for the States of Jersey and Guernsey, not for the UK Parliament.
But obviously the new arrangements would only work if the authorities
there devise something which is the equivalent of the 12p duty
in the UK, and if tickets could be sold at the same price as here.
The Channel Island authorities, DCMS and the National
Lottery Commission are continuing to work together to establish
the appropriate licensing and regulatory framework to allow tickets
to be sold in the Channel Islands.
In conclusion then, by enabling the extension of
the Lottery to the Isle of Man and the Channel Islands, we are
enabling the people on those Islands to join in a much larger
lottery. The bill would bring to them larger prizes and larger
amounts of Lottery funding and enable the Big Lottery Fund to
help address some of the real problems of the communities on those
islands.
I do hope that my comments have now helped to clarify
matters for your Committee, but of course I stand ready to provide
any further detail you might need.
1 February 2006
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