HC Deb 28 April 1993 vol 223 cc1032-40
Mr. Alan Howarth (Stratford-on-Avon)

I beg to move amendment No. 8, in page 2, line 16, at end insert— '() The Secretary of State shall provide for monitoring to be undertaken in order to determine the effect, if any, of the National Lottery on the level of charitable income.'

Mr. Deputy Speaker

With this it will be convenient to take amendment No. 9, in page 6, line 37, at end insert— '; and such report shall include an estimate of the effect, if any, of the National Lottery on the level of charitable income during that financial year.'.

Mr. Howarth

The purpose of the amendment is to place an overriding duty on the Secretary of State to ensure that the effects of the national lottery on charitable donation income are identified and monitored. That was, indeed, a recommendation of the National Heritage Select Committee. Several members of the Committee have participated in our debates this afternoon.

Paragraph 11 of the Select Committee's report of 14 January 1993 states: A fourth matter of concern to the Committee relates to the position of charities and the likely impact of the Lottery on their resources. The Bill contains proposals intended to make small charitable lotteries more attractive. But the Committee remains concerned that competition from the National Lottery will have an adverse effect on the level of funds donated to charities. Nor is it convinced that the distribution of funds through the new National Lottery Charities Board will leave no individual charity in a worse position. The Committee accordingly recommends that the Department of National Heritage should monitor the possible impact of the National Lottery on charities. It is against that background, and because I feel that it is extremely important that monitoring should take place, that I have tabled amendments Nos. 8 and 9.

I am glad that amendment No. 8 was selected. I believe for two reasons that it is preferable that the duty to monitor be placed on the Secretary of State. First, it will ensure that the Secretary of State has control of the methodology of monitoring. Secondly, it should mean that the funding necessary to conduct the exercise will come from the Department rather than from the proceeds of the lottery. Placing that general duty on the Secretary of State will make it possible for the appropriate research to be carried out into any area where the possible effect of the national lottery on charitable income may be a matter of concern.

Three areas of concern have already been identified. Rigorous impartial research to establish the position in each of those areas as the national lottery becomes established and proceeds would make it possible to determine whether any action to restore the financial position of charities were required. I believe that the Government ought to accept this responsibility since they are creating the national lottery and unleashing an immense force, the effects of which cannot be predicted with precision but which will undoubtedly be important.

The first area of concern that I wish to see monitored is that of any possible reduction in funding from local and central Government. I fully accept the genuineness of my hon. Friend's pledges that it is the Government's intention that the resources generated by the national lottery should be additional to any funding that the Government would in the ordinary way provide for the good causes that will also be beneficiaries of the lottery. It is critical that the generation of funds from the national lottery does not, over time, lead to a reduction in the existing funding of charities from either local or central Government.

I greatly welcome what I regard as a significant statement made by my hon. Friend the Minister in the previous debate, when he made it clear that it was his view that Parliament should monitor the issue of additionality. If we are to monitor, we will need the data that a monitoring exercise sponsored by my right hon. Friend the Secretary of State would provide.

It is disappointing to hon. Members on both sides of the House that the Government have not found a way to write their pledge on additionality in watertight terms into the Bill. To be fair, I accept that that is an extremely difficult thing to do—I cannot see how it can be done—but the fact that it is impossible to do so in the way that we would desire, makes it all the more important that the monitoring should take place.

The second concern that should be monitored is the impact that the national lottery may have on the income from small charitable lotteries. There are reasons to be apprehensive that the introduction of the national lottery may lead to a decline in charitable income from small lotteries, and it is a matter of regret that the Government rejected amendments in Committee to prevent the use by the national lottery of games giving an instant win. I would have preferred that the Government had been willing to allow charities to have a clear run in instant lotteries. That would still leave the national lottery immense scope to raise funds for its purposes.

The third area of concern that ought to be monitored is the impact that the national lottery will undoubtedly have on charitable donations. Research carried out by the National Council for Voluntary Organisations suggests that the level of charitable giving will decline with the advent of the national lottery. My hon. Friend the Minister again made it clear that, in the context of taxation, the Government accept that the national lottery will displace expenditure elsewhere. That is the basis on which the Minister sought to justify the level of taxation that my right hon. Friend the Chancellor of the Exchequer has proposed. If expenditure on the national lottery displaces expenditure in other areas, that will obviously include charitable giving and it is important that we should follow exactly what happens.

The NCVO has estimated, based on market research conducted by NOP that the national lottery could lead to a loss in charitable donation income of around £230 million per year or 7 per cent. of the income currently received by charities from the public. That figure of £230 million has been decried as an exaggeration. It is, of course, based on certain assumptions and scenarios. The NOP survey concluded that the lottery is perceived by the public as a scheme to benefit "good causes". That picture of the lottery, as revealed by that survey, is one which accurately reflects the Government's own purpose.

The NCVO concluded from that survey that £230 million is likely to be lost in donation income. That figure, I fear, is within the realms of possibility. I hope that those of us who have this apprehension are proved wrong, but it is on the cards that we could see a diversion of the donations given to charity of that order.

I welcome the commitment given on Second Reading by my right hon. Friend the Secretary of State, and confirmed by the Minister in Committee, that it is the Government's intention that the lottery will not be promoted in ways likely to lead to a reduction in donation income. I should like that commitment to be expressed in the Bill. Even if forswearing that kind of promotion may mean that the loss to the sector proves to be less than the 7 per cent. that I mentioned, research still suggests that it could well be in the region of 4 per cent. of donation income.

The report of the Rothschild royal commission on gambling quoted its own market research, conducted in 1978. That research suggested that the lottery would result in a loss in income to charities of about 4 per cent. More recently, the report of DKM Economic Consultants, commissioned in 1991 by the Irish An Post National Lottery company, also revealed that 4 per cent. of those who bought Irish state lottery tickets said that, in the absence of the state lottery, they would have given the money to one charity or another.

I concede that market research has its limitations. It does, after all, ask people to consider their likely future actions and none of us can be certain of them, not even Ministers; to their own surprise, they may be moved to accept amendments—if not today, perhaps in another place. However, as the Rothschild royal commission accepted, market research is the best means that we have to reach a judgment about the likely activity of the public in such matters.

A drop of 4 per cent. in donation income may not sound terrible, but given the scale of charitable giving in this country, it would mean a considerable loss in cash terms. The same NOP survey revealed that the public donated £3.1 billion to charity in 1992. A drop of 4 per cent. in that income would mean a loss of £120 milion per annum. A loss in income on such a scale would mean a reduction in services to some of the most vulnerable groups in our society that the charities serve.

In Committee, my hon. Friend the Minister referred to the overriding duty placed by the Bill on the director general and the Secretary of State to maximise the proceeds available to beneficiaries from the lottery. The expressed aim of the Bill is to ensure that the lottery generates maximum additional resources for the specified "good causes"—arts, sport, heritage and charities. The available evidence, however, suggests that the lottery would result in a reduction in donation income and public support to charities.

It is possible that lottery proceeds may fail even to compensate for the income lost to charities as a result of the lottery. Surely it is intended that proceeds from the lottery will not only compensate for any loss, but provide additional new money. In Committee, the Minister said that the Government had acknowledged that probable outcome by including charities in the list of beneficiaries, which was not part of the original intention, on the assumption that proceeds from the lottery would, in part, compensate for the resulting drop in income. That decision has been greatly welcomed.

The corollary of the Government's concern that they will wish to satisfy themselves about the practical effect of their policy. As things are, however, nothing in the Bill provides for the effect of the lottery on charities to be monitored. It is vital that its impact on voluntary sector donation income is monitored and assessed.

In Committee, my hon. Friend the Minister also gave a welcome assurance that the impact of the lottery on voluntary sector income would be taken into account when beneficiary shares come to be reviewed. That being so, surely it is sensible to incorporate amendment No. 8, or something along the same lines, to ensure that the Government have the data and the information on which to base their consideration of the effect of the lottery on donations to charities.

Mr. Orme

The issue of additionality is important, because there are signs that the Government are considering funding the millennium fund for the year 2000, out of lottery proceeds. Who is to say that the Government would have donated such money to that fund if those lottery proceeds were not available? This issue is important because hon. Members on both sides of the House are concerned about it. How does one check it? How can one tell what the Government would have put into sport or the arts without it? It is only human nature, is it not? My experience of the Treasury, as a Minister and as a Member, is that it cannot be trusted when it comes to finance on this sort of scale.

I accept that the Government have given an undertaking that lottery proceeds should be additional to the funds provided by normal Government expenditure programmes, but there is no evidence of how it will be programmed or monitored. Experience in other countries suggests that unless very firm measures are put in place this undertaking will be eroded after a relatively short time. Elsewhere in the world lottery proceeds are dedicated to particular causes, as they will be in the United Kingdom, either to the arts or to sport. The mention of sport prompts me to refer to the rather small attendance in the Chamber this evening which may have something to do with the fact that England is playing Holland at the moment.

Mr. Corbett

What is the score?

8.30 pm
Mr. Orme

I have no idea, but England is playing Holland at Wembley at the present time, and some of our thoughts are with the English team.

Let me give an example of the erosion of funding. In 1976, the Massachusetts state lottery was set up to raise money for the arts. State funding from taxation for the arts gradually decreased until by 1992 all public funding in that state had stopped. Similarly in New Zealand a lottery for the arts was set up in 1987. For the next three years Government funding of the arts remained at the same level, although without any increase for inflation. Four years after the lottery was established, the Government grant for the arts in New Zealand was cut by half.

We must take these things into account. For instance, a study has shown that, in the state of New York, the decline in support for education programmes set in five years after the establishment of the lottery. In New Jersey it was six years. However, in Michigan and Illinois, the states in the study which has most recently established their lotteries, the decline in expenditure by the state on education was almost immediate.

We are, of course, opposed to any of this money going into education or social services or any other particular area—a point that was made by the right hon. Member for Mid-Sussex (Mr. Renton). But I warn the House that there will be pressure from some sections of the public that this be taken into account, and unless the guidelines are very firmly established and hon. Members clearly stipulate what they want to happen, the effect could be disastrous.

The evidence from Ireland regarding additionality is even more striking. The hon. Member for Stratford-on-Avon (Mr. Howarth) referred to DKM carrying out research in 1989 on behalf of the Irish An Post lottery company. It estimated that, between 1987 and 1989, 49 per cent. of lottery funding substituted for Government expenditure and only 51 per cent. of the total received by the beneficiaries from lottery proceeds represented new money.

In the light of this evidence, it is of the utmost importance that the monitoring proposed in the amendment should also take into account the effect of the lottery on public support of causes benefiting from the lottery. This is particularly important for the charitable and voluntary sectors. Voluntary organisations currently receive almost £600 million per annum in support from local authorities. A National Council for Voluntary Organisations survey in 1991 revealed that in the previous financial year this funding had been cut by almost £29 million.

Local authority support for voluntary organisations is discretionary. It is therefore one of the areas of local authority funding most under threat at times when public expenditure is tight. The availability of new sources of funding locally, such as the lottery, may tempt local authorities into using it as a justification for further reducing their support for voluntary organisations.

The Government have made it clear that they do not intend lottery proceeds to be a substitute for local and central Government support for charities, the arts, sports and heritage projects. They have made that declaration. But we want a guarantee that this will not take place, and many of us are concerned that, in the case of a new opera house or even the development of Covent Garden, or some other spectacular development, much of the money could be siphoned off into that project when it should be funded by the state because of its national status.

Monitoring mechanisms are therefore important. I do not expect the Government to accept these amendments of clauses 8 and 9. Nevertheless, I hope that they will take into account the importance of additionality and monitoring and of the fact that many people will judge the success or otherwise of the national lottery by its development and by its independence from the Government, not least from the Treasury.

Lady Olga Maitland (Sutton and Cheam)

I support the amendment moved by my hon. Friend the Member for Stratford-on-Avon. The amendment came about as a result of fears voiced to us by a considerable number of charitable and voluntary organisations which can see themselves being totally swamped by an enormously successful national lottery. I fear that the Government are almost backing away from envisaging just the kind of figures that the lottery could bring in. Experts who have studied lotteries in other countries and based their analysis on the success of those lotteries estimate that, within four years of being established, a national lottery in this country could bring in an income of about £2.8 billion in one year or, to put it differently, £55 million a week.

Just how can small voluntary or charitable organisations stand up to such a stupendous success unless provision is made to protect their interests? It is therefore vital that the Government not only monitor the progress of the income of voluntary organisations but put that commitment to monitoring in the Bill so that there will be no doubt about their sincerity. I know that they have taken the point and that it has been heard in Committee. Nevertheless, there is a slight flaw—the belief that somehow or other all will be well on the day.

The voluntary organisations have a real concern that they could be totally overwhelmed and that their donation income could sink unless we pay due attention to the problem. We must make sure that the money they lose is more than made up by additionality which could accrue from the national lottery. I support the amendment, and I trust that those considerations will be taken into account.

Mr. Robert Maclennan (Caithness and Sutherland)

I declare an interest, although not a financial one, in two charities: the Foundation for Management Education and the Cancer Research Campaign, both of which have reason to expect—particularly the latter—that their incomes will be adversely affected by the Bill.

Historians may look back on this as the point when the country first failed to match its aspirations, with Exchequer money, by backing projects that it valued with taxpayers' money. The passage of this Bill is likely to mark the point when a great nation turned away from funding important projects in the arts and in sport in this way. Instead, like the Roman empire in decline, we have begun to rely on lotteries and the impulse of greed to meet our aspirations. Charities will probably begin to feel the adverse effects of the change more immediately than any other sector.

The hon. Member for Stratford-on-Avon (Mr. Howarth) was right to try to chart the consequences of what we are doing.

Mr. Renton

I do not want to interrupt the hon. Gentleman, but he has just made the most astonishing statement. Does he not know that the Sydney opera house was built from the proceeds of a lottery? No one could possibly call Australia a declining or tired nation. How was the British museum built, if not from funds raised in a lottery? It was built to house the Sloane collection in the second half of the 18th century. We are only going back to the same means of raising money for good causes that was followed successfully by our Georgian and Victorian ancestors.

Mr. Maclennan

Our Georgian and Victorian ancestors —particularly the Victorians, who are often prayed in aid by the Government—had a greater sense of civic pride and responsibility. The great municipal collections and institutions were the result of private giving or of municipal endowment. Only in the 20th century have we sought, using taxpayers' money, to establish institutions on the scale that we have come to enjoy. It is a sad comment on the decline of this country that the Government have begun clutching at straws, for that is what this Bill amounts to. Some people have been remarkably naive to believe that the Bill will have any lasting beneficial effects on the good causes that it purports to help.

I say "naive", because it is not possible to write into the Bill any sort of protection for additionality. Ministers have given their word in this respect in earlier debates, but already the Department of National Heritage has been blighted. I cannot prove this, but I would be astonished if the Minister said that the Chief Secretary to the Treasury did not tell him during the last public expenditure round, in which the Department took a savage cut by comparison with other Departments, that he could look forward to the bounty of a national lottery to make up the shortfall in the Department's vote. That was but a foretaste of what is to come. Future public expenditure rounds will show up the consequences of this unfortunate measure.

8.45 pm

The charities did not ask for this. The Government have claimed that charities will be protected, in the sense that they will benefit. To the extent that that intention is translated into fact, it will be necessary to judge the impact on charitable giving. The hon. Member for Stratford-on-Avon has done us a valuable service, although it will be very difficult to chart the impact charity by charity, as people change from putting something in the tin proffered at the underground station on behalf of guide dogs for the blind and instead buy lottery tickets from a kiosk. That this change will happen, however, is certain. I hope that the Government will respond positively to the amendment.

Mr. Peter Lloyd

I can well understand the concerns voiced by my hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) and other hon. Members about the effect of the national lottery on voluntary organisations' incomes. Much of the debate inside and outside Parliament since the national lottery became a real prospect has centred on this.

The evidence from abroad is inconclusive, but I believe that most people will go on giving to their preferred charities and taking part in their small lotteries, which the Bill includes major measures to encourage.

Nevertheless, I have a great deal of sympathy with the motives behind the amendments. I know that my hon. Friends the Members for Stratford-on-Avon and for Sutton and Cheam (Lady O. Maitland) have actively sought to protect the interests and incomes of charities in the new situation that the Bill will create. I applaud their objectives, although I do not think that they will be effectively advanced by adopting these amendments at this time.

In any survey it would be very difficult to separate beyond dispute the impact of the lottery from the effect of other factors, such as changes in the economic climate or in the voluntary sector. Although I did not agree with everything that the hon. Member for Caithness and Sutherland (Mr. Maclennan) had to say, his scepticism about how far research can dissect what has occurred is well placed.

I do not believe that a requirement to make a comprehensive assessment of the impact of the national lottery on every part of the voluntary sector every year, as the amendments would require, would be illuminating or a good use of resources. It would be quite expensive; there are 500,000 voluntary organisations. The charities board, however, will have to keep a sharp eye on all charities as it decides how best to distribute its share of the funds raised by the national lottery. It will soon learn of it if charities are experiencing a drop in their incomes, for charities will not be slow to let the board—and Ministers —know if they believe that they have lost out.

The Charities Aid Foundation also provides statistics which are illuminating—as far as they can go. My right hon. and learned Friend the Home Secretary will be able to set in train research when he judges that more information on a certain sector is needed. My hon. Friend the Under-Secretary said that he expects the issue to be considered by the House every Parliament so that the House can express its view on these matters.

I accept my hon. Friend's essential point that the Government and the House must continue to take an informed interest in how the charities succeed in living and hopefully prospering, with the national lottery. There are more flexible and useful ways to get the necessary information and to inquire into prima facie problems than the amendment would provide.

Additionality lies slightly outside the scope of the amendment, but it is important and was mentioned by the right hon. Member for Salford, East (Mr. Orme). The Government have given undertakings that lottery money will not be used as a substitute for public spending. The hon. Member for Caithness and Sutherland (Mr. Maclennan) opined some scepticism. As I have said, the hon. Gentleman was right to say that it was difficult to judge whether, ultimately, there has been substitution because public expenditure moves up and down and there are always complaints.

However, it would be difficult to see whether the movement had been affected in any way by the lottery. Suffice it to say that recipients of money from the lottery who felt that they had lost an equivalent or greater sum than that which they could have expected from the Treasury will not be slow to say so. There will be not a dearth of information but a surfeit and hon. Members, the Select Committee and others will have to make a fair and reasonable judgment upon it.

I am grateful to my hon. Friend the Member for Stratford-on-Avon for drawing our attention to this issue and for making it clear that it requires continuing attention. It will certainly have the Government's sustained interest and I am glad that the amendment has enabled me to put that on the record. The Home Secretary and I will seek to produce methods that will show useful known trends in charitable giving and the effect of different lotteries. However, I suspect that we shall rely much more on the resources of outside resource bodies, which will keep an eagle eye on what is happening.

Mr. Alan Howarth

I thank my hon. Friend the Member for Sutton and Cheam (Lady Olga Maitland), the right hon. Member for Salford, East (Mr. Orme), and the hon. Member for Caithness and Sutherland (Mr. Maclennan) for taking part in the debate. I do not agree with everything that the hon. Member for Caithness and Sutherland said in his lugubrious analysis, but he certainly underlined the importance of the lottery's impact on charitable giving and on other aspects of our national life.

I am grateful to the Minister for his recognition of the importance of the issue. I agree that it would be a technically difficult, extensive and demanding exercise to carry out the sort of systematic monitoring that I continue to think it is incumbent upon the Government and Parliament to find ways to carry out. I am grateful that he acknowledged that it is important to continue the search for ways to enable the Government and Parliament to follow closely and assess critically and intelligently the national lottery's impact.

The Minister used a phrase that gave me some encouragement because he suggested that it was not appropriate to legislate now. Perhaps the issue will be further examined in another place. I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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