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The partnership and enthusiasm also extends to the official business partners for London. Lloyds TSB, our first domestic partner, is already looking at ways in which it can be involved in the cultural Olympiad as a way of activating its Games involvement.

I remain optimistic that over the next five years—to 2012—we will be able to bring new, additional funding into the cultural sector, both from public and private sources. Our own culture team will be announcing plans for the culture Olympiad shortly. We are still five years ahead of the Games, which is the right time to be planning. I thank your Lordships for allowing me to share what I hope you will see is the full extent of our ambition and the opportunities available to us from hosting the London 2012 Games, an event which for all of us will always be so much more than simply sport.

3.51 pm

Baroness Kennedy of The Shaws: My Lords, I join others in congratulating the noble Lord, Lord Baker, on securing the debate and on the role that he has personally played in supporting the arts in our country. I also thank him for his rollicking, frolicking contributions in this House, which are always a joy to listen to.

First, I declare my interests. I am a trustee of the British Museum, a patron of the Tricycle Theatre and chair of Arts & Business. I wish to speak particularly about the role of the private sector in enhancing the cultural life of our nations in the United Kingdom.

We have good reason for rejoicing in Britain’s cultural output. Public financing is crucial to this success, but it is not the whole story in the ecology of cultural funding. This success would not be possible without a huge private sector contribution and this contribution cannot happen without the essential work of Arts & Business. It behoves a civilised Government to invest properly in the arts. The present Government have a proud record in this respect. From 1999 to 2005, the increasing investment in the arts, year by year, was one of the most important things that this Government have achieved. Yet we see that our spending on culture and its consequences amounts to only 0.6 per cent of our national income—the loose change of government spending.

There has been a lot of rumour and fanfare on the transfer of lottery funds, but a crucial element has largely been neglected, which I want to distil. We cannot assume that there will ever be enough public sector funding for the arts. Recently, an Arts & Business publication warned of the further demise of cultural funding from local authorities.

By recognising and celebrating the role of the commercial sector and of individual philanthropists, we can avoid the current dependency on a single line of finance and find more effective new ways to resource the arts, be they showcasing artists as cultural entrepreneurs, making venture philanthropy work for the arts, rolling out new tax campaigns, or signposting responsible cultural practice. Indeed, in the next two months, Arts & Business will launch a major initiative to stimulate greater giving in the City of London. Arts & Business has the crucial knowledge, pioneering ideas and research capability to show us all how to embed corporate cultural responsibility.

The point that I want to emphasise is that it is only by investing in Arts & Business that we shall uncover the best ways to tap into the commercial sector to further augment the success of the cultural sector. The Government have to champion and promote the role of the private sector in supporting the arts in the run-up to London 2012. The arts world does not want to undertake endless juggling to keep the show on the road or to eke out temporary solutions to funding issues. The corporate world can help, but it needs assistance to enable it to do that.

I mentioned earlier the essential work conducted by Arts & Business, and I want to highlight the five valuable roles that we play. In 1976, the amount of business investment in the arts stood at £600,000; it now touches £150 million. When you add in funding from private individuals, which is £262 million, and money coming in from trusts and foundations— £113 million—the figures rise to £525 million a year. Arts & Business creates the environment to make this happen, and the annual Arts & Business awards showcase outstanding examples of what happens when culture and commerce connect.

Corporate engagement is not about simply writing a cheque, however. It uses the skills, be they marketing, legal, financial, branding or sponsorship, which can be offered by businesspeople to the cultural sector. Last year alone, Arts & Business placed over 5,500 business volunteers in arts organisations. This work is worth just under £4 million. Arts & Business trains the cultural community with over 12,000 fundraising executives in the arts, learning how to prosper within the commercial sector. People do not just pick this up easily; that have to learn how to do it. Arts & Business’s research shows that 83 per cent of cultural organisations would have reduced audiences had they not received private investment.

To all this work, however, Arts & Business needs seed funding from central government to help us to foster initiatives and long-term partnerships between business and the arts through investment. We therefore cannot have cuts to our core funding. Clearly, a lot of learning has taken place since Arts & Business was first launched. Big institutions such as the National Theatre and the Tate Gallery can now go directly to the corporate sector for money, but that is not the case with any of the lesser-known arts organisations or those of medium size. As a network, Arts & Business covers the whole of the United Kingdom and employs over 100 people to efficiently run programmes and projects tailored to local conditions and needs, bringing together the commercial and arts worlds.

I believe in London 2012 as a great enterprise, and want to welcome the world to celebrate London and the whole of the United Kingdom. I want us to inspire our young people with that venture. But we must ensure that there is no reduction of culture to that end. I hope that when the Chancellor and his successor are thinking about the spending review later this year, they in no way cut the funds of Arts & Business. Culture matters at all levels within our society, and investing in it works. But in order to do the business that we do in Arts & Business, bringing commercial money into the arts sector, we must be well funded in our own right. I press those matters on the Government and hope that we can have an assurance from the Minister that we will not be facing cuts towards the end of the year.

3.57 pm

Lord Marland: My Lords, I make this speech having returned from a test match where, for those who are interested, the teatime score is 158 for 2 for England. However, there was also much disquiet there about the cuts in grants to grass-roots cricket. During the next few weeks, I shall visit an event at Salisbury Festival, which is in danger of being cancelled next year, after 25 years, because of further cuts in grants. I shall worship in the magnificent Salisbury Cathedral, which will have its funding slashed—one of the great catastrophes of the freeze on English Heritage expenditure. Yet, on Saturday, I shall go to the FA Cup Final at Wembley, an edifice of gross mismanagement and overspend, overseen by this Government.

I applaud my noble friend Lord Baker for organising this debate. I also declare an interest as a current and former board member and trustee of several arts museums and organisations, and chairman of a pressure group called the Sports Nexus. The 2012 Olympics receives my full support. I applaud the Government—although I can also criticise them—and my noble friend Lord Coe for bringing the Games to London.

But I am afraid that, when the dead hand of government gets involved in a project, it demonstrates its incompetence. We cannot run away from the fact that there have been incompetent budgeting and a failure to learn from the mistakes of other major projects. When budgeting, could anyone in the modern financial world not have taken into consideration building inflation, land price inflation, transport cost inflation and the cost of security? They surely cannot live in London. It would be easy to criticise only the so-called Minister for Culture, but this financial fiasco has the dead hand of the Chancellor on it. It is the Chancellor who is charging VAT of £1 billion, whereas the Commonwealth Games in Manchester did not have to pay VAT, and it is the Chancellor who has had to sanction the original costing and the revised costings at every juncture, having been guided by the Treasury. My goodness, how we look forward to greater things!

We have found ourselves in a situation where, as other noble Lords have enunciated in this Chamber, Peter is being robbed to pay Paul. Who are the Peters? They are the Walnut Whip Peters, the London citizens who Ken Livingstone famously said would not have to pay more than the price of a Walnut Whip for the London Olympics. I fancy that we will be charged for a boxful. Then there are the arts Peters, whose spending allocation is about to be frozen: museums, galleries, local community arts initiatives, local sports facilities, grass-roots sports and, of course, our heritage, including 16,000 churches and all our cathedrals, which are totally dependent on the Government and the lottery for money and support. There are also Peters who think that when they buy a lottery ticket the money will go through an independently run venture for distribution to a number of causes. It is hard to imagine that this freezing of expenditure could have affected so many special interest groups.

A number of questions remain unanswered. Can the Minister furnish us with the answers? I support my noble friend Lord Baker in asking his question. Miss Tessa Jowell said that £675 million will be venture capital, and that it would be a loan from the lottery. What is that about? If it is a loan, it will need to be paid back, so what are the terms? If it is venture capital, the capital is ventured with a view to making a profit. Can we have a straight edge on this? The Secretary of State talked about the profit from the sale of land after the Olympics. Can we have more details of her plan, and do her recent figures include anticipated profit from the sale to mitigate the cost or will it, in fact, reduce the cost?

The much heralded Olympic scratch card was going to raise £750 million in addition to other lottery spending, but recent figures from the National Audit Office show that 80 per cent of the money being raised from scratch cards is to the detriment of other lottery fundraising initiatives. What steps are going to be taken to reverse that trend?

I share the concern of my noble friend Lord Baker that we have not seen the end of this spending mismanagement because there is no sound commercial strategy in place to reverse this trend. Can we have a guarantee that this is the final bill?

It is a tragedy that an event that cost only £2 billion in Sydney—which many people say was the best Games ever—is currently going to cost nearly five times as much in London. Only in a new Labour world do sport and the arts become worse off as a result of London staging the greatest sporting event on Earth.

4.04 pm

Lord Watson of Invergowrie: My Lords, I, too, congratulate the noble Lord, Lord Baker, on sponsoring this important debate. In doing so, I must take issue with him over his contrast between the athlete and the aesthete. He suggested that they were mutually exclusive, but I do not believe that. The achievements of Bannister and Best will long outlive them in the same way as those of Burns and Betjeman have outlived them. It is wrong to counterpoise the two.

I was as thrilled as anyone when I learnt two years ago that the noble Lord, Lord Coe, and his team had won the contest to bring the 2012 Olympics to the UK. I want the Games to be viewed in retrospect as the best ever staged, but, I have to say, not at any costs. And, as ever, where there are winners, there are of course losers.

I want to introduce something of a Scottish dimension to the effects of the funding decisions made by the Government. I have real concerns over the diversion of lottery funds from good causes to pay for the rising costs of the Games. I am not one of those who believe that Scotland will gain nothing due to the fact that it is 400 miles north of where most of the Games are to be staged, because I think that many young people will be inspired into taking up some form of physical activity, if not, indeed, organised sport.

As part of the Games bid, the National Lottery pledged to contribute £1.5 billion towards the costs of the Games, a sum that has been estimated to mean a reduction in funding for good causes in Scotland alone of around £80 million. In January this year, a further £900 million increase was highlighted. Big Lottery Fund Scotland estimated that an increase of that amount would add a further £50 million to the costs across Scotland.

For illustration, a £51 million reduction in funding for good causes would be equivalent to closing the BIG Scotland small grants fund, known as Awards for All, for six years, perhaps resulting in as many as 10,000 projects going unfunded and facing almost certain closure. To put that into perspective, there are around 45,000 voluntary organisations in Scotland, so a shortfall of funds that led to 10,000 projects going unfunded would hit the sector very hard.

Two months ago, the Culture Secretary, Tessa Jowell, announced that, to cover some of the costs in the budget, £675 million would be taken from National Lottery budgets, including, as we have heard, £425 million from the Big Lottery Fund. Assurances were given at the time that this would come not from funding for voluntary and community organisations but from the 30 per cent of the Big Lottery Fund that goes to statutory bodies. The point has not emerged sufficiently clearly from this debate that while these assurances will mean—if they are adhered to—that voluntary organisations do not lose out in direct funding, they will nevertheless suffer a heavy hit indirectly, because a considerable amount of the 30 per cent that goes to statutory bodies is in turn used by those bodies to fund voluntary projects.

That point is reinforced in a letter sent to noble Lords participating in this debate by the Central Council of Physical Recreation, Heritage Link, the National Council for Voluntary Organisations and the Voluntary Arts Network. Their joint letter spells out their concern that similar protection has not been provided for charities, voluntary organisations and community groups that apply for funds from Arts Council England, Sport England and the Heritage Lottery Fund.

The National Council for Voluntary Organisations’ equivalent north of the Border, the Scottish Council for Voluntary Organisations, has echoed these very real worries as to the future of third sector provision in its widest sense, including cultural and sporting provision. The Government surely must listen and act to ensure that these fears are not realised.

It is appropriate that the lottery should make a contribution to the staging of the Games, but it is inappropriate that it should subsequently be used as a soft touch to bail out cost increases that, to some extent at least, should have been anticipated by the Government and the Games organisers. That pitfall was identified by the CMS Select Committee in January of this year, when it published its report on the funding and legacy of the Games. It stated:

“We believe that any further diversion of money from the Lottery would reduce the money available for each of the good causes, and it is not our preferred option for funding any overspend”.

I do not know whether the Minister read that report, but just two months later, as we know, Tessa Jowell announced precisely that. There was concern at the time about the projected cultural Olympiad. Noble Lords have referred to Baron de Coubertin and the fact that the modern Olympics at the start had a cultural input. Of course the Greeks themselves in the ancient Olympics had that, too; the role of Euripides is well recorded. But Nicholas Hytner of the National Theatre was quoted last month as saying about the cultural Olympiad for 2012,

“There’s no money and there’s no plan”.

That may have been the case as he saw it at the time, but it was encouraging that Tessa Jowell announced that £28 million from the legacy fund would be provided towards the cultural Olympiad. That will go a long way towards providing what I believe is necessary, although it should be put in context by saying that Sydney had £29 million for its cultural Olympiad and costs have risen somewhat in the 10-year period.

I make one point about the National Lottery operator Camelot, which comes in for criticism, sometimes justifiably. However, as far as the company’s role in raising its share of additional funds through the lottery is concerned, it has to be stated that it is more than playing its part, as it is ahead of schedule for the designated lottery games. But there is a cloud on the horizon, as the CMS Select Committee highlighted. Camelot’s licence comes up for renewal in 2009. The question must be asked: what would happen if it were to lose the licence? Of course, the resources and time of its staff will have to go to seeking renewal, but if it should lose it, we could lose the momentum in the income that has built up from the lottery games. That would be unfortunate. I agree with the committee’s suggestion that Camelot’s licence should have been allowed to continue until after the Games, but that is no longer possible. What do the Government intend to do if there is that shortfall or loss of momentum in funding, should Camelot lose its licence?

Finally, very briefly, I have two points. Where would the money come from if not from the sources that we have been discussing today? The Treasury should look long and hard at the 12 per cent that it takes on every pound that goes to the lottery. Given that the Olympics were last held in this country in 1948 and will now be held here in 2012, we will probably have to wait half a century before they return. Therefore, it can be seen as a one-off event. The Treasury should reduce or even waive that amount to produce additional funding.

Secondly, as other noble Lords have mentioned, the Comprehensive Spending Review is already under way. I understand that the DCMS has the smallest budget of any government department, so, as my noble friend Lord Smith said, it is vital that it is not reduced. Again, perhaps it should be treated as a special case. I hope that when the Minister and his colleagues, when they are in negotiation with the Treasury as part of the CSR, will push that case very strongly and I hope, for the country and the Olympics in 2012, that they have success.

4.11 pm

The Earl of Caithness: My Lords, I am especially grateful that my noble friend Lord Baker was successful in the ballot for this debate and for how he introduced it.

I declare an interest as a trustee and chief executive of a charitable trust preserving the finest castle ruin in the north of Scotland, the only castle in Scotland to be listed by the World Monument Fund on its watch list, published every two years, of the 100 most endangered sites in the world. It has received two small grants from HLF and may receive more in future. I am also a trustee of other heritage and arts charities that are likely to apply to the HLF. Like many, I was a keen sportsman in a number of games but never at a high level, and still enjoy watching a variety of sports.

The HLF has been a huge success and this country has benefited in a number of ways from its work. We owe it a vote of thanks for what it has done in the past, but its role has changed and the future is bleak. I, for one, was never a fan of the British bid to host the Olympics in London and my heart sank when the decision was made. It was abundantly clear to me even then that the Government had significantly underestimated the projected costs and that, as a result, we would all end up paying considerably more than envisaged. I anticipate more rises in costs and, doubtless, more cuts for the arts and heritage, whatever the Minister says today.

Whether the unrealistic bid was deliberate or naive has not been proven, but I have no doubt which it was. Imagine submitting such an application to the HLF for a project. If one went back to the HLF shortly after a grant had been agreed and said that the costs were nearly three times the estimate, one can visualise its reaction. Some cost changes are always likely with a major project, but a trebling in the space of a year? No one in the private sector could behave in that way and get away with it, but the Government can, because they are abusing other people's money in an unethical way.

Let us be clear about the consequences of that unhappy situation. The Olympic infrastructure will take one-sixth of the lottery pot during the years between London winning the bid and the Games. The HLF will lose £161.2 million, as well as revenue through reduced sales of non-Olympic lottery games. Its share of lottery tickets will drop by more than 10 per cent between 2007-08 and 2011-12. In real terms, it will be considerably more.

The heritage of our country is being severely jeopardised and the damage has already started. The HLF business plan shows that, in 2004-05, Scotland was allocated £14.2 million for grants under £2 million. By 2007-08, that has already been slashed to £12.1 million. When the extra contribution of £90 million was taken by the DCMS this March, the HLF announced that, rather than making deeper short-term cuts, it would absorb the impact over a longer period, so the pain will continue past 2012. There is no possible way in which the HLF will be able to support the full range of heritage projects that people care about.

What will all this mean for grant applicants? To date, the HLF has generally been able to fund all good projects that have come to it. Rejected projects have generally been those with perceived weaknesses. This has changed, however, and we have begun to see that the HLF rejects not only projects with perceived weaknesses but good projects. Furthermore, the HLF’s shift of emphasis from preserving pure heritage projects to those with substantial community involvement, and its increasing use of apparently arbitrary economic considerations to justify refusing a project, are a severe threat to the more rural heritage projects, especially where there is no local or national authority involvement.

All this is having a series of adverse consequences. In addition to the direct effect of good projects not going ahead, we are beginning to see that good concepts are not being developed into good projects, as project promoters—be they local authorities, national institutions, or, as many noble Lords have said, independent trusts in particular—reassess their chances of securing project funding. If even good projects are not to be funded, why bother to incur the significant development costs? As an immediate response, the HLF must cut the development costs and provide meaningful feedback before organisations have to spend upwards of £500,000 developing some of the large projects.

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