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I declare a number of interests in the arts. I am director of the Clore Leadership Programme, chairman of the London Cultural Consortium, the Donmar Warehouse and the Wordsworth Trust, and I am on the board of the National Theatre. I am in some difficulty, because I believe on the one hand that huge benefit can and will come to this country and to many people in this country from the Olympics and Paralympic Games in 2012, including from the vast range of cultural activities that will and should take place before and around the Games. On the other hand, I absolutely recognise the deleterious impact that the recent decisions about lottery funding have had, particularly on the arts, heritage and, importantly, on community sport.

It is difficult to overestimate the impact that these decisions have had on the cultural sector. The noble Lord was absolutely right that the principal impact on the arts is on the grants for the arts scheme, which provides small grants to individuals and small organisations, particularly organisations that are not regularly funded from Arts Council England’s mainstream budget. They are already suffering from the decisions that have had to be taken to reduce the grants for the arts programme.

I have talked to people right across the cultural sector, and virtually everyone engaged in the arts believes that money has been taken away from the arts to fund the Olympics. That perception is a real tragedy. The Government made a serious error of judgment when they took their decision on this funding. I do not particularly blame the DCMS. I see the hand of the Treasury in this, and I suspect that the DCMS fought valiantly to minimise the damage that was going to be caused.

This has set the arts against the Olympics. That should absolutely not be the case, because the two should go hand in hand. The original de Coubertin vision was that sport and the arts together would have a great festival. I believe that that can still be the case. In the next few weeks, I suspect that we will hear more about the plans for the cultural Olympiad—the cultural activity around the Olympics and in the run-up to it. There has been enormous enthusiasm in the cultural sector for that concept until now. The decisions that have been taken on lottery money have done great damage to that enthusiasm. I believe that it is possible to rekindle the enthusiasm, but we need to put some effort into doing it.

How can all this be put right? I fear that the raid on the lottery cannot now be reversed, at least in the short term. I am sad about that. It was a mistake, and I hope that at some stage the Government will admit that. It is especially so because it comes after the first blow—the introduction of the Olympic lottery, which is already siphoning some money away from the mainstream National Lottery and reducing the money for the good causes. The way to put things right is through the Comprehensive Spending Review, which is due to be announced in the autumn and where decisions will probably be made at an earlier date.

At the moment, the DCMS is canvassing on options for funding for the arts and the spending review, which range from the status quo plus an allowance for inflation, to a cash standstill and on to cuts of 5 per cent or even 7 per cent per year. I cannot say what a disaster it would be if, on top of what has happened to the lottery, cuts of any kind—even a standstill is a cut—were to be made in funding for the arts. At the very least, an increase for inflation is needed. Let us remember that these would be rounding figures for any other department of state. They would be small change for the Department for Work and Pensions or the Ministry of Defence, but they are absolutely vital, and make a huge difference, to the all-important arts.

In contradistinction to the noble Lord, Lord Baker of Dorking, I would argue that the arts have been a huge success story for this country, and for this Government, in the past 10 years. Recent decisions have put that success in danger. I plead as passionately as I can with the Government not to make it worse later on this year.

2.58 pm

Baroness Bonham-Carter of Yarnbury: My Lords, I, too, thank the noble Lord, Lord Baker, for initiating this very important debate. As all of us interested in this area know, despite the greatness of this country’s cultural endeavour, this subject is somehow a poor relation in the political arena. Too often, it struggles to be heard, and, too often, it is treated as an optional extra. Today, we are talking about the result of both these responses.

Ever since it became clear that the financing of the 2012 Olympics was running into difficulty, the arts and heritage sectors have feared that they would be targeted. They were right to worry. Only two months ago, as the noble Lord, Lord Baker, said, the Prime Minister made one of his so-called legacy speeches—a speech about the arts. He referred to his pledge that the arts should be,

Gordon Brown has said something similar:

This of course was precisely the line taken in London’s bid for the 2012 Games and one of the main reasons why it won.

The modern Olympic movement was created by Pierre de Coubertin, who was not only an amateur boxer, but also a part-time poet. His vision was not just about sport, but about bringing together culture and sport. London’s bid for the 2012 Games outlined a vision for a cultural Olympiad, a festival celebrating the diversity and richness of culture in London and the United Kingdom. There was more: the London bid was unique in promising that this cultural Olympiad would be held across the whole country and not just confined to the Olympic city.

It may be asked whether those who will travel to London for the Games will pop into the National Gallery between races. I am more optimistic. The Games done well will mean that everyone across the length and breadth of the country will have, through museums, galleries and festivals et cetera, enough opportunity to feel involved with the Games. But the voluntary arts and heritage groups, which are rooted in almost every local community, are crucial in ensuring that this cultural Olympiad does what the London bid promised. Here comes the catch: the Olympic organisers have admitted that they will provide “very little funding”, so the money has to be found by the various arts and heritage organisations. As we have already heard, this latest diversion of lottery funds hits them particularly hard.

The chief executive of the Voluntary Arts Network has said:

Nicholas Hytner, the hugely respected director of the National Theatre, has said:

The Secretary of State argues that the arts should contribute to the Olympic bill because of the cultural Olympiad, but there will not be a cultural Olympiad if there are no funds to run it. At the moment, there is not nearly enough to achieve what the Government envision.

On Tuesday, in a speech full of inspiration about the importance of culture in the Olympics, the Secretary of State, as we have heard, announced a £40 million legacy trust. This trust has been launched no fewer than three times—in October, January and now, May. Can the Minister assure us that this time it is for real? I join the noble Lord, Lord Baker, in asking the Minister to assure this House that there will be no further raids on the lottery. Does he accept that due to the lottery funds that have already been diverted, it is essential that the Arts Council is not delivered real-term cuts in the forthcoming Comprehensive Spending Review?

The latest “transfer” of funds, as the noble Lord, Lord Baker, so politely called it, has, of course, far wider implications. The voluntary arts sector involves more than 3.6 million people who stage plays, operas, concerts, and run classes and workshops. These types of enterprises are the seedbed of our major arts institutions, discovering, nurturing and encouraging the talent that feeds through to the pinnacles of achievement we celebrate across the arts in this country. We undermine this sector at our peril.

In answer to a Question asked yesterday, the Minister pointed out how much money the Government have put into the arts and I congratulate the Government on being so generous. But, in return, they have demanded the stringent setting of targets. How does the Minister expect such targets to be adhered to when funds are withdrawn because the Government cannot stick to their own?

Unlike the noble Lord, Lord Baker, I congratulate the Government on the revitalisation we have seen of museums across the country through the introduction of free admission and on the Renaissance in the Regions programme. But the future of the renaissance programme is far from secure. Only three out of nine regions have received full funding and the other six are now at risk because money is being siphoned off to the Olympics. Will the Minister assure the House that Renaissance in the Regions is not sacrificed to the Olympics?

We on these Benches look forward to a successful Olympic Games and wholeheartedly endorse the idea of the cultural Olympiad. I shall conclude by quoting the Prime Minister, Tony Blair:

Noble Lords probably think that the Prime Minister is talking about the Olympics. Let me continue:

In raiding the arts and heritage to deliver the hardware of the Olympics, the Government are in danger of failing to deliver on another vision and we are potentially witnessing a lost legacy.

3.06 pm

Lord Luce: My Lords, I recall with pleasure the days when in the late 1980s I was Minister with responsibility for arts and the noble Lord, Lord Baker, gave me enormous encouragement and help when he was, I think, Secretary of State for Education. I am delighted that he has launched this very important debate because the strength and independence of the arts depends on diversity of funding rather than dependence on any one particular source of funding. Therefore, I was very pleased when in the early 1990s a decision was taken to launch the National Lottery system. I campaigned for it in the early 1990s and I am convinced that it has brought about a very important extra dimension for the arts, certainly to the extent that in the past 13 years it has contributed an extra £2 billion for the arts bodies, covering about 25,000 projects.

Of course, whatever the condition of the lotteries, hard choices and judgments have to be made. Today, we are facing the diversion of £675 million from National Lottery good cause funds. The adverse effect of the withdrawal of money from small arts bodies is, as has already been described, very large indeed. Further, when the budget for the Olympics started at just under £3 billion and today stands at over £9 billion, one does not have a great deal of confidence that it is going to end there; it may escalate further.

The truth is that in this country we are not particularly good at handling large projects. I had some experience of that myself with the British Library. It is a success today, but was a very difficult thing to manage. However, the Millennium Dome, the Scottish Parliament building at Holyrood, Wembley Stadium and now the Olympics do not exactly give one a great deal of confidence that they are being managed effectively and well. Indeed, miscalculations and the mismanagement of such projects cause immediate damage to other bodies through the diversion of funds.

However, for me the most striking thing about this judgment is the lack of consistency and the muddled thinking. On the one hand, the Government have announced that alongside the Olympics there is to be a cultural Olympiad with three component parts: ceremonies, major art events and a United Kingdom cultural festival. I welcome most warmly the opportunity it provides for the flowering and regeneration of culture, arts and heritage throughout the country. It is a good boost for the arts. But having announced it, the Government suddenly turn around and hit the arts over the head by saying that funds are going to be cut, thus demoralising and making things very difficult indeed for the 50,000 or so smaller, voluntary arts bodies which do so much to lay the foundation of the arts in this country. I am proud to be president of the Voluntary Arts Network, a body that gives support, advice and encouragement to a large number of these small groups. My support for them stems from the belief that there is an essential interaction between the voluntary and professional arts. A strong voluntary arts provision provides a springboard for expanded arts activities, greater public interest and participation, and support for the professional arts.

We have already heard mention of the criticisms being made by leading figures in the arts world. The chief executive of the Arts Council, Peter Hewitt, has already spoken of the adverse effects this decision will have on small arts bodies, while the director of the National Theatre, Nicholas Hytner, said that it is these small bodies which are the lifeblood of creativity in the United Kingdom. Hitting them undermines the future of our major arts institutions.

The Prime Minister’s speech of 6 March has been quoted many times today. Not only did he refer to the need to end boom and bust in culture as well as in the economy, but he also gave a clear commitment to do his best to ensure that any anxieties or concerns over the Comprehensive Spending Review or the claim on resources made by the Olympics could be laid to rest. A week later the Statement was made which led to the massive diversion of funds. To retrieve the situation, I would of course in an ideal world like to see the Government reverse their decision. If that really is not possible, I agree with the noble Lord, Lord Smith, in his effective intervention based on his experience of the arts and heritage, that one will need to look to the Comprehensive Spending Review and for compensation that way. There are not many other avenues that can be pursued, whether through local government, the Legacy Trust UK fund or the Contingencies Fund. However, if it was possible to divert a small sum from the overall budget for the Olympics, that would help.

The Government are in danger of doing serious damage to an important part of our heritage and arts, and certainly jeopardising the cultural Olympiad. We need assurances from the Minister today that they will tackle this issue urgently and seriously in order to retrieve the situation.

3.12 pm

Lord Faulkner of Worcester: My Lords, I start by declaring three interests, all unpaid, which have a bearing on this debate. I am vice-chairman of the Cardiff Millennium Stadium, a major project built on time and to budget ready for the Rugby World Cup in 1998; I am chairman of the Railway Heritage Committee; and a member of the board of trustees of the National Museum for Science and Industry. I join others in congratulating the noble Lord, Lord Baker, on initiating this debate, and I should like to say particularly how pleased I am to see the noble Lord, Lord Coe, in his place and how much I look forward to his speech.

Perhaps unlike all other speakers in this debate, I want to make it clear that I supported London’s bid to win the Olympics, and I believe that all those who were involved in the process deserve our praise—none more so than our colleague on the opposite Benches. I have no doubt that the Games will be good for London as well as for Britain because the benefits will spread well outside the capital.

The Government, in their initial response to the report of the Culture, Media and Sport Select Committee in another place published on 24 January, said that they hope that the benefits to the country as a whole will outstrip costs by at least two to one. That is the figure that the Australians claim for the Sydney Games in 2000. I particularly welcome the promise of long-term economic regeneration and the public transport infrastructure improvements which they will bring. I also strongly support the vision for the cultural Olympiad as a festival celebrating the diversity and richness of culture in London, UK and around the world.

But all this, of course, has to be paid for, and that is what the debate today is about. We have heard about how the costs have risen—that is hardly surprising as no Olympic Games in history have cost less than the original estimate—and it is right that everyone should be asked to pay something, including the general taxpayer and the London council tax payer. I can understand why the Government do not wish the burden to fall on any group disproportionately, and the establishment of a specific National Lottery competition for the Olympics has been tried successfully elsewhere.

But it comes at a price and, speaking in regard to my heritage interests, I want to say a word about the Heritage Lottery Fund. It seems that in this process it will lose £161.2 million, not counting any loss of revenue that may come through lower sales of non-Olympic lottery games. I recognise that the effect on heritage projects will probably be more than this because the HLF is particularly effective in acting as a lever for attracting other funds, often on the basis of 50-50.

In my own railway world, there are numerous examples of lottery money being used to good effect—for example, the National Railway Museum’s restoration and display of the Flying Scotsman locomotive, the creation of the Search Engine Archive Centre at York and the construction of the magnificent new Locomotion Museum at Shildon. There are many, many more examples like that. The museums at York and Shildon attract more than 1 million visitors a year between them, very many of them the children from disadvantaged families that are exactly the kind of audience that the DCMS wishes to encourage to use our free national museums.

The HLF makes a huge contribution to heritage railways as well and there are numerous examples of projects which would not have gone ahead without its funding. I refer in particular to the carriage shed and new engine house on the Severn Valley Railway and the new museum building at the Middleton Railway Trust.

No one is saying that all this good work will come to a juddering halt because of the diversion of lottery money to pay for the Olympics, but it is undoubtedly the case that projects will have to be scaled back at least until 2012. As far as the north of England in particular is concerned, there is likely to be a five or six-year hiatus on major heritage projects. The free entry museums will find it particularly difficult to improve themselves during this period because they cannot raise money by increasing admission charges which my noble friend Lord Smith of Finsbury did so much to get abolished. So it is vital that they should have access to capital elsewhere. In particular, I hope that the Treasury will encourage the regional development agencies to be particularly generous to the regional free entry museums during the period when HLF funding is tight.

The Secretary of State has come in for mixed reviews in the debate so far. I believe that she deserves great credit for ensuring that the projects to be undertaken before 2009 will be unaffected and for undertaking that the lottery will eventually be repaid some of the profits from land sales at Stratford by the London Development Agency after the Games. I understand—perhaps my noble friend will confirm this when he replies—that she has got the Treasury to agree that there will be no further raids on the lottery funds before 2012.

The situation could have been much worse. The Guardian reported that,

In an article in the Observer on 15 April, the Secretary of State described the arrangement as,

The noble Lord, Lord Baker, was a little dismissive of that. Perhaps my noble friend when he replies will say more about how this will work. Certainly if a substantial proportion of the funds which are—shall we say?—“borrowed” are returned later, that will provide some reassurance to those who are concerned about their heritage and other products.

3.19 pm

Lord Inglewood: My Lords, I congratulate my noble friend Lord Baker on having introduced this debate about arts and heritage. I declare an interest as chairman of the Reviewing Committee on the Export of Works of Art, the so-called Waverley committee. The purpose of the committee, which is appointed by the Secretary of State, is to advise her about aspects of export control of works of art, particularly in respect of certain individual licences and more generally on the workings of the system. We do that once a year and publish an annual report, which is laid before Parliament. Our role is that of the candid friend. My remarks today will essentially focus on that; they are based on those that I made in the debate on 30 October last year in the Moses Room and on the Minister’s response. I would like, as we lawyers say, to incorporate those by reference into my remarks.

The reviewing committee subsequently discussed that debate. Although policy discussion is obviously confidential, and I do not speak here as chairman of the reviewing committee, I do not think it improper to say that members were of the view that the serious and important points and issues raised in the debate were not properly dealt with in the Minister’s reply. I shall proceed from that starting point.

As my noble friend Lord Baker has said, the lottery was established to do things that it was thought improper to fund from taxation, at least in part. We have been told in terms by the Secretary of State that one of the functions of the Heritage Lottery Fund is to assist with that position. Already there is a problem, and I have every sympathy with the trustees of the fund and their role in the context of the National Heritage Memorial Fund in this regard. They have had to make some very difficult decisions, because you cannot do everything all the time. The simple consequence of the recent developments in lottery funding allocation is that a bad problem will inevitably get worse.

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