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Grand Committee

Tuesday, 15 January 2008.

The Committee met at half-past three.

[The Deputy Chairman of Committees (BARONESS MCINTOSH OF HUDNALL) in the Chair.]

Dormant Bank and Building Society Accounts Bill [HL]

(Fourth Day)

The Deputy Chairman of Committees (Baroness McIntosh of Hudnall): Before we start, I remind the Committee that if there are Divisions in the Chamber—which there may well be—the Committee will adjourn as the Division Bell sounds and will resume after 10 minutes.

Clause 15 [Distribution of dormant account money by Big Lottery Fund]:

Lord Howard of Rising moved Amendment No. 60:

Clause 15, page 8, line 7, at end insert—

“( ) Any grant or loan made under subsection (1) must not—

(a) replace or substitute for government or local authority expenditure;(b) subsidise or provide part of the costs for a service that is provided on a contract basis for a statutory body;(c) replace statutory funding that has been withdrawn or is in danger of being withdrawn; or(d) duplicate services that a statutory body currently provides.”

The noble Lord said: This amendment will not come as much of a surprise to any of your Lordships—certainly not those who have ever had anything to do with the DCMS or lottery matters.

It has always been of great concern to us on these Benches that lottery money should not be used to top up government spending. We have repeatedly raised concerns about the appropriateness of spending what is not taxpayers’ money on government responsibilities. Her Majesty's Government frequently sympathise with that, stating that there is no intention of appropriating non-taxpayer funds for government purposes. Tony Blair stated in 1997:

“We don’t believe it would be right to use lottery money to pay for things which are the Government’s responsibilities”.

Yet it was the Government who insisted that the Big Lottery Fund should give grants to projects providing health and education, and to those connected with the environment, and should spend 50 per cent of the total lottery distribution fund in so doing. I am sure that these areas are the Government’s responsibility. If the Minister wishes to deny that it is the responsibility of government to improve the standards of state schools and hospitals, I am sure that we would all be very interested to hear it.

The money, the distribution of which we are discussing today, is not taxpayers’ money, and the principle of additionality is as relevant as if it were lottery money.

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Already we are seeing that Her Majesty’s Government are attempting to divert this money into projects that are essentially the responsibility of government.

In his evidence to the Treasury Select Committee, the Economic Secretary claimed that youth services have been underfunded for years. I do not have the knowledge to pass an opinion on whether there is adequate funding for youth services. That decision should rightfully be made by the appropriate Minister with all the information and resources at his disposal. What should be explored is how the Minister reconciles the Government’s previous statements that they fully concur with our concerns about additionality with instructions in the Bill to direct money to youth.

It seems very much as though the Government have identified an area in which they have failed and are now mustering resources from everywhere they can think of—even those that should not rightfully be theirs to direct. Can the Minister explain exactly how dormant account money will be spent differently from money spent by the Department for Children, Schools and Families? What sort of projects does he envisage being paid for by Her Majesty’s Government, and what will be paid for by the nominally independent Big Lottery Fund?

Any breach of the additionality principle will no doubt extend to the matter of financial education. How does the Minister intend that dormant account money will be spent so that it does not duplicate the attempts of other departments? The difficulties in this area that the Bill will create have already been noted by the Treasury Select Committee. In paragraph 71 of the 11th report of the 2006-07 Session, it points out the contrast between the Government’s intention to make the scheme voluntary so that there is no compulsion on the banks and building societies to join and the Government’s refusal to consult on where the money should go.

It will be extremely difficult for the disbursement of this money to be directed by a Secretary of State without breaching additionality. It will be impossible for a Minister, with the power to direct taxpayers’ money through his department, to be, or be seen to be, objective when asked to choose between spending which eats into his budget and money which comes from an outside source.

That is precisely why non-taxpayers’ money should be allocated by an independent body. Only an independent body can take a properly objective view on what is suitable for this non-taxpayer money to be spent on. This was, after all, the original motivation for setting up the lottery distributors. As a result, I have turned to the lottery distributors for the drafting of this amendment. The wording is taken from the definition of “additionality” that the Big Lottery Fund uses to report on its distribution of lottery funding and the three criteria against which its grants are assessed to ensure that it does not breach additionality.

Of course, the definition has been somewhat amended. Amazingly, the Big Lottery Fund maintains that it is not breaching additionality to spend money to add value to a government project. As that has resulted in it distributing more than £1 billion since 2004 to statutory bodies such as local councils, schools and

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National Health Service trusts, there is a strong argument that this is, to say the very least, an inappropriate definition.

Just in case the Minister seeks to argue that such spending was not on core government projects, let me give examples of some of those grants. In October, Lancashire County Council received £1.4 million to fund a three-year advice, training, information and support service for carers. I am not commenting that this service should not be offered to carers, who no doubt would gain an enormous amount from it, but there is no doubt that such a service, provided by a government body in line with this Government’s stated objectives to improve support for carers, should be funded by government, and not by lottery fund, money.

In 2006, another grant from the Big Lottery Fund supplied the Danish energy company, Elsam, with £50 million to subsidise the construction of a wind farm. How can the Minister justify spending this type of money on projects which are so clearly tied to Her Majesty’s Government’s targets on renewal energy, targets that the Government are struggling to meet? The inappropriateness of this grant is made even worse by Elsam’s statement that it would have gone ahead anyway, even without the grant.

The definition has therefore been strengthened and I should like to hear from the Minister why such a safeguard as this amendment represents would be inappropriate in primary legislation. Do the Government think that a definition such as this would open the Big Lottery Fund to litigation from rejected applicants? If so, is there any evidence? The Big Lottery Fund has been using a stated definition of “additionality” for some time and has not suffered from litigation of which I am aware. I look forward to hearing the Minister’s response on these points. I beg to move.

Lord Newby: We support the thinking behind this amendment. Whether it is as straightforward to introduce into legislation as the noble Lord says, we will wait to hear the Minister’s response. In our view, such an amendment has merit because there is widespread cynicism about the Government’s motives in respect of this money and widespread cynicism about the way in which the Government have appeared at times to use lottery money for their own purposes rather than as additional expenditure. At all stages so far, when the Minister has described the purposes of the expenditure to be incurred under this Bill, he has been at pains to spell out that it will be additional. Of course, if a social investment bank is established, almost by definition that is additional because it is not being undertaken at the moment and there is no suggestion that if the money does not come from this source, it will come from another source from government.

However, on the other two heads of expenditure, the Government are already spending a great deal of money on youth policies and on financial inclusion. In theory, it would be possible for the Government to allocate money from this fund that they would otherwise have taken from general expenditure. It is sensible to

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introduce a safeguard, as proposed by the noble Lord, Lord Howard of Rising. At the very least, I hope that the Minister can give us a categorical assurance that any funds raised and spent via this route will be additional to planned or potential government spending.

Viscount Eccles: Following on what the noble Lord, Lord Newby, said, it could be difficult to introduce a safeguard. I have a lot of sympathy with the amendment and I wish to see some of the things looked for in the amendment happen. If we look through the Government’s end of the telescope, it is very difficult, and, of course, it is the same telescope and is looked at through the same end by the Big Lottery Fund. In its annual report, under “Policy Directions”, it says:

“The Big Lottery Fund is a non-departmental public body and therefore operates under Policy Directions issued by its sponsor department, the Department of Culture, Media and Sport. The Policy Directions set out the principles with which the Big Lottery Fund must comply”.

A house divided against itself shall surely fall. There we are: the Big Lottery Fund is a part of government and it must comply.

3.45 pm

Let us then look from the other end of the telescope. When will the public judge that something done is additional? That is a key consideration and the matter of perception which the noble Lord, Lord Newby, raised. The public will use phrases such as, “That would never have happened if it had been left to the local authority”, or “The Treasury would never have supported that”. The Treasury supports the transfer of lottery funds to the Olympics. In contrast, the public might judge that one would have expected such and such a playground to be funded from public taxation rather than from lottery funds.

The judgments reached depend on two principal factors. The first is how independent is the funding body concerned; the second is how that body will present its own case for saying that what it is doing is additional. I again refer the Committee to the publications of the Big Lottery Fund, which do not set out to say, “Here we are. We are genuinely independent, and we have made this decision which we are pretty sure the DCMS would not have liked, but nevertheless we have made it, and that shows how independent we are”. There is no sense of a dialogue and a debate. It seems seamlessly to be agreed between the two that what is being done is being done in the right way.

It is therefore difficult, if not impossible, for Big to argue its own additionality. After all, Big must comply, and it is a public body that is subject to policy directions and the discussions behind them. In some number of years’ time, we shall no doubt be able to read the minutes of those meetings.

As the centralising influence of government has steadily reduced the independence of public bodies, so it has become more important to look for a private- sector solution, and nowhere more so than in the third sector—or as I would still prefer to call it, the charitable sector. National charitable distributors such as the Wellcome Trust, the Esmée Fairbairn

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Foundation or the Henry Smith Charity have no impediment to their decisions on additionality. If we want additionality, we need the private sector, and we need competition for the available dormant funds. Government need to be as little involved as possible, and the public given the chance to identify additionality. Within the centrally controlled public sector, additionality is most probably unlikely to be achieved and quite likely to be an objective which it is not worth pursuing.

Lord Higgins: There is a basic problem here: the Big Lottery Fund is already suspect in the sense that it is felt that its operation so far has involved dispensing money which should otherwise have been provided from government resources. The money we are talking about in the Bill is not government money in any sense. Therefore, it is difficult to understand the argument that it should be administered by a body which is clearly associated with the Government. I was not fully aware that, as my noble friend said in moving the amendment, the Big Lottery Fund says that increasing the effectiveness of government expenditure is legitimate. The right thing to do in the Bill is to have the proceeds apportioned by a body that is clearly independent and cannot be open to suspicion that it is being used to cover expenditure that would otherwise be covered by the Government. The objectives of the Bill are entirely admirable, but the more one goes into the detail, the more one becomes worried that the way they are put forward in the legislation is not ideal. I hope the Minister will understand our concerns on this point and agree that an amendment that provided for the scheme to be administered in an impartial way would be preferable if the scheme as a whole is to get general approval.

Lord Davies of Oldham: I am grateful to noble Lords who have spoken in this most interesting debate. The issue of additionality, as noble Lords indicated, obtains across lottery funds as well. We had one of these debates in extenso with regard to the Big Lottery Fund at the time.

I shall go through the basics of this issue. First, Big has to be separately accountable for this money. It is not government money, as the noble Lord rightly says, but it is not lottery money either. The money actually belongs to those people who can claim it back, and if they cannot claim it back, it is in a fund for defined purposes. It is therefore important that people are assured that the money is spent properly.

I am at one with all the noble Lords who have argued the case for additionality. I can guarantee separateness with regard to the accounts and I can guarantee accountability by the openness of what Big does. I can also assert that Big is not an arm of government; it is a distributor of the lottery. I understand the criticisms of the way it undertakes its most enormous task—and it is fairly extensive—but the Government have never claimed, sought to assert or taken any action to suggest that Big is their agent in getting expenditure through. If someone comes along with an individual case in which they say, “This is money we are due to receive from the Government, properly allocated, but we have this concept of how that money

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can be used to extend what the Government have sought with their expenditure, which is inadequate, and we think that in fact it will improve the delivery of what the Government sought”, that is a case of additionality. After all, individual local people have made that case, not the Government. That is not the Government sequestering any resources in order to supplement what they deliver, but local people making an application.

That is a point that has been missing from all representations. Bids to this fund will be made by the communities arguing on their own behalf. They will have to make the case that it is additional because distribution cannot take place on the basis that this fund has anything to do with being an arm of government. It clearly is not, and the Government are emphatic, with regard to the Bill, that they would not countenance such an interpretation.

There is the question of whether there may be some services that the Government provide that other people then make a submission for. The noble Lord, Lord Howard, referred to Lancashire County Council, which is indeed a statutory body. It carries out a great deal that the Government impose upon it. It also has areas of great discretion where it carries out its own priorities. It is absolutely clear that the Government do not provide universal support for carers—in fact, Members of the Opposition have been a little prone to pointing that out to us in recent times. If Lancashire identified something in its community as a proper use of lottery money and put its case to the Big Lottery Fund, which agreed that it was additional because there was no question of it being funded by the Government for the foreseeable future, the noble Lord, Lord Howard, would not have a case that this was somehow by definition an illustration of the Big Lottery Fund acting as an agent of government. I emphasise again that we are not talking about lottery funds here but a separate fund, separately accountable, which Big Lottery Fund has to operate entirely separately from its normal operations. The noble Viscount, Lord Eccles, is right: he has considerable expertise in this area and has sustained this argument over a number of Bills on a number of occasions. He is right in saying that it is forlorn to think that one can get a definition of additionality that will stand up in law and be the absolute sure rock on which Big distributed resources under this fund.

The noble Lord’s amendment has flaws in it. We recognised the representations that came from the opposition parties several years ago, thick and fast, with regard to the lottery. Our own Members, too, in this place and another place, were very keen that if we could get the concept of additionality in a Bill, it would ease any problems and criticisms. We maintain that it is not possible to do that—and the noble Viscount identified the difficulties. However, we do subscribe to the idea that the fund must be separate and accountable. Within that framework the Government see Big responding to demands from communities.

I emphasise again that the initiative is not going to come from government, which has no right to act by regarding Big, either in its lottery operation or even in

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extenso with regard to this fund, as an agent of government expenditure. It is not. That is why I was emphatic in our last sitting in identifying that the resources that my right honourable friend the Prime Minister identified to be devoted towards the youth service were in the Comprehensive Spending Review for each of the next three years. What will happen with regard to youth services is that local communities will see ways in which they do not have a hope of their project being funded by government and they are able to establish to the fund that they want resources for an additional amenity. I am sure that noble Lords—particularly noble Lords who have been in the other place—who have been involved with communities, were fertile in identifying where there were government gaps in their communities. They often start to raise significant money to fill those gaps—and increasingly, in recent years, they have looked for other resources to give them a hand. Here we are saying that when people come forward with a wish for youth services to be enhanced in their area, this fund can properly be applied to. However, if the application is merely a substitute for what the Government are about to fund, or should fund, the application will not be sustained—because that is not the criteria on which the body will work.

4 pm

There is an obvious difficulty in that the noble Lord, Lord Howard, who has extensive experience of the third sector, will not accept that Governments cannot, on all occasions, necessarily follow the best sentiments expressed when legislation is going through Parliament. Governments are bound by the law, and here the law is quite clear on how the legislation is meant to work. If it is thought that it may be difficult for others to keep these resources accountable, I would point out that local communities cannot reach those judgments, but parliamentarians can because of accountability. And there are other actors on this stage, too. The banks and building societies are carrying out this work voluntarily, and for defined good purposes, and they are acting within the requirement that the objective should not be to supplant what the Government ought otherwise to be obliged to do themselves.

Therefore, the anxieties expressed today are not justified. I heard what the noble Lord, Lord Higgins, said about Big being suspect. It would be surprising if there were not criticism of an organisation that was so extensive and responsible for so many funds. But that does not gainsay the fact that, on the whole, lottery distribution in this country has met public expectations and requirements. It has never been contended that Big is merely an agency of government to plug the gaps. It does not act that way, and in any case it is responsive to proposals put forward. It will certainly be so with regard to this fund.

I recognise the pressure that doubts on the opposition side generate, but I shall resist that. I hope that the noble Lord, Lord Howard, will recognise that I am doing him a favour. If he does not recognise the force of this position, the great danger is that on Report we shall attempt a definition of “additionality” for the fourth or fifth time in legislation, and it will be as fruitless as on all previous occasions.

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Lord Higgins: I am slightly worried about the Minister’s overall attitude, given the fact that on the Floor of the House this afternoon he appeared to imply that if the Treasury were acting as a spending department, it would be more generous than other departments.

Lord Davies of Oldham: I was merely advocating that the department might be more efficient in co-ordination than effective in expenditure.

Lord Higgins: I understand that. However, as the argument, presumably, is that the Big Lottery Fund would carry out the operation more economically than a separate organisation, does he have any figures to support that? Secondly, the Minister referred to applications from Lancashire, which raises the question of whether the money may be used as a substitute for expenditure that ought to be made by a local council. Perhaps I have misunderstood him on that.

Lord Davies of Oldham: If the noble Lord will forgive me, I strayed from the fund and from this Bill to respond to the noble Lord, Lord Howard, who introduced an example of Big in relation to lottery distribution. There was no concept that that would obtain in this Bill and the fund—that must be for the judgments of those who operate the fund. However, it will be recognised that there is a difference between the amounts available under this fund and the exercise with which Big is involved in the distribution of lottery funds.

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