FUNDING OF ENDOWMENTS

HC Deb 20 June 2003 vol 407 cc615-34

Mr. Edward Leigh (Gainsborough)

I beg to move amendment No. 3, in page 1, line 6, after "expenditure', insert as long as the value of funds spent on such endowments does not exceed 5 per cent of the value of total funds given to the Distribution Fund'.

Mr. Deputy Speaker

With this it will be convenient to take the following amendments: No. 5, in page 2, line 6, at end insert— (7A) After section 43D there is inserted the following section— 43E. The Comptroller and Auditor General may, with respect to any person in receipt of money under section 25, 25B, 41 or 43B where that money is paid for the purpose of establishing or contributing to an endowment, examine—

1. (a) the accounts of that person so far as relating to the endowment,
2. (b) any records relating to those accounts, and
3. (c) any report of an auditor on those accounts.'.

No. 4, in page 2, line 11, at end insert Any endowment, or contribution to endowments, established by this bill is liable to be reclaimed by the Distribution Fund in the event that,

1. (a) the recipient body of such funds ceases to exist, or
2. (b) the function of the recipient body changes substantively.'.

Mr. Leigh

May I start with amendment No. 5, which gives powers to the Comptroller and Auditor General to look at the accounts of endowments and any records relating to those accounts? I think that it is the most important amendment in the group. The House may remember that I am Chairman of the relevant parliamentary Committee, the Public Accounts Committee, and this amendment has been drafted with the help of the National Audit Office. I do not believe that it is contentious, and I hope that the promoter of the Bill, my hon. Friend the Member for Mid-Norfolk (Mr. Simpson), will accept it.

I will to speak to my other amendments, Nos. 3 and 4, later. They are more probing, particularly amendment No. 3. Although it may be difficult to set any particular figure on the amount of cash to be distributed to endowment funds, it will provide a useful opportunity for my hon. Friend to give some reassurance on those matters.

As I say, I do not think that amendment No. 5 is contentious. The Bill is only seeking to clarify something anyway—that lottery funding can be provided for endowments as well as to fund expenditure. All that I seek to do with amendment No. 5 is to ensure that adequate accountability arrangements are in place to match the new provisions.

My hon. Friend may know that the National Audit Office and the Public Accounts Committee continuously drive to ensure that more and more items of public expenditure—effectively, this is public expenditure—are brought under the purview of the NAO. As we seek to clarify matters and to put the Bill into statute, it is important that the NAO's powers should be clearly stated.

I recognise that the Bill has cross-party support, but it is true to say that concerns have been raised during its passage about the value for money and accountability aspects of funding endowments. That is important territory for my Committee. It is what my Committee is all about: ensuring that we get value for money and accountability.

It is true—I think that my hon. Friend the Member for Christchurch (Mr. Chope) referred to this—that some distributors have already made grants to fund endowments. The Millennium Commission has made a grant of £100 million, which is quite a large grant, to the Foundation for Social Entrepreneurs, which operates under the trading name UnLtd.

The governance arrangements for the Millennium Commission endowment are complicated. Let me try to explain them briefly. For example, the millennium award trust deed requires the appointment of an independent protector of the endowment, whose fiduciary duty is to ensure the integrity of the administration of the trust and the propriety of its procedures. If necessary, his duty is to report matters of serious concern to the Millennium Commission, the Charity Commission and, where appropriate, the Secretary of State for Culture, Media and Sport.

10.15 am

Under the terms of the Millennium Commission's grant to UnLtd, the CAG has access to all documents that are necessary for his audit of the Millennium Commission, or its successor body. While his rights of access concerning grants have recently been put on a statutory basis with the coming into force of the order made under the Government Resources and Accounts Act 2000, which we took a lot of interest in and helped to push through the House of Commons, it is necessary to clarify statutory access to lottery endowments to ensure that all forms of funding are covered. We are trying to ensure that there is absolutely no doubt about the rights of access of the CAG, who operates on behalf of Parliament.

I have taken advice on the matter, and the Minister can deal with the point when he sums up the debate, but I understand that the Bill's omission of accountability arrangements is not deliberate. I am confident that distributors of lottery money will apply to applications for endowments considerations similar to those that they would apply to grants of expenditure. I also understand that the Government will produce guidance for distributors on the factors to take into account when considering applications for endowment funding. However, the amendment ensures—this is why I believe that it is necessary—that all types of lottery funding are subject to the same scrutiny arrangements. Essentially, the aim is that the CAG's rights of access in relation to lottery grants should be extended to cover endowments. The money is raised from lottery players in the same way, and the public surely will have an equal interest in knowing that it is spent properly and well. The CAG's access will provide that assurance.

Let me sum up my argument by putting it in terms of questions and answers. It may be asked in summing up the debate: does not the CAG already audit lottery grants? It is true that he has rights of access in relation to lottery grants, but the Bill will expressly allow funding for endowments and my amendment seeks to clarify that the CAG has similar rights of access in relation to grants that are extended to endowments, so it is a tidying-up process.

Why is the amendment necessary? We are on Report. When better for the whole House to take a view on the matter? Hon. Members raised value for money and accountability issues on Second Reading. Obviously, we followed those debates. This is important territory for the Public Accounts Committee and we are keen to take advantage of the opportunity afforded by Report to ensure that the right provisions are in place, rather than discover problems later.

Another question might be: does not the CAG already have these powers? The amendment simply mirrors the clarity that the Bill seeks to provide, so as to ensure that adequate access provisions match new forms of funding. Just as the Bill is in effect a clarifying Bill, so my amendment is a clarifying amendment. Lastly, do the NAO and Public Accounts Committee have anything against funding endowments? In principle, we have no objection to funding endowments. There are both advantages and disadvantages, and those have been aired in the debates we have already had. The purpose of the amendment is simply to give the same clarity to both the funding and review arrangements, so that we can be assured that those issues have been adequately addressed.

I hope that that fairly sums up amendment No. 5. I hope that the promoter of the Bill and the Minister can accept it. If the Minister does not accept it, I hope that he will give a good reason why.

Amendment No. 3 would amend clause 1 by adding the phrase as long as the value of funds spent on such endowments does not exceed 5 per cent of the value of total funds given to the Distribution Fund. As I said, this is really a probing amendment. I accept that it is very difficult to establish a figure—should it be 1 per cent., 2 per cent., 5 per cent., 10 per cent. or 20 per cent.? We simply do not know, but the amendment provides an opportunity for a short discussion of the safeguards in the Bill and of how such matters will be administered.

On Second Reading, certain Members raised concerns about "technical matters", even though everybody supported the Bill; indeed, I support it and I am confident that it will soon pass into law. Those Members seemed confident that such technical matters would be thrashed out in Committee. My hon. Friend the Member for North-East Cambridgeshire (Mr. Moss) said: On this side of the House, we will need reassurance on the technical issues that the Bill raises. However, we are confident that those can be teased out in Committee."—[Official Report, 28 February 2003; Vol. 400, c. 534.] But as we heard from my hon. Friend the Member for Christchurch, the Committee lasted only 22 minutes, and no amendments were made. So this is another opportunity to tease out these technical matters and to receive reassurance.

I have tabled such an amendment because putting some form of cap on the amount of money used for endowments provides a safeguard against future developments. I do not know how that could be achieved; if it cannot be done through the Bill, perhaps some form of policy guideline could be laid down. We have tried to obtain firm figures but it is difficult to do so. If the Community Fund is any indication, the evidence suggests that the number of charities applying for endowments is indeed small. An estimated 20 to 30 of 100,000 applications to the Community Fund were for endowments. However, although the total number may be small, the figures can be very large indeed. The same is true of the exposure for the future.

The promoter of the Bill needs to explain to the House how he will provide for a safeguard to be put in place against possible future developments. We must be careful that the law does not allow any such endowments to get out of hand and be unavailable for scrutiny. As we know, there are of course risks involved in giving out endowments. They require large sums of money in advance to provide reasonable revenue for applicants in the longer term, as the Bill's promoter, my hon. Friend the Member for Mid-Norfolk, pointed out on Second Reading. Indeed, he was very fair about this issue. Hence a set amount of money is tied up or committed to a fund. If this got out of hand, less money could be available for other lottery grants in need of immediate funds. Setting some form of cap, or explaining how matters might develop in future, is a reasonable way, therefore, of providing a safeguard against that problem.

Another problem associated with endowments is that they are vulnerable to interest rate fluctuations—a point made by my hon. Friend the Member for North-East Cambridgeshire on Second Reading. The National Endowment for Science, Technology and the Arts was cited in a previous debate as a good example for possible national lottery endowment funds to follow, given the similarity between it and various charities. NESTA was praised not only for its method of funding, but because of the freedom given to NESTA trustees from central Government interference.

However, NESTA, which was in receipt of an endowment of some £200 million, found that the income that it was expecting—and probably spending—had declined because of low interest rates. It appealed to the Government for more money to put into the endowment fund. Given what subsequently transpired, perhaps it was not such a good example to cite. The nature of the stock market and the free market makes it hard to predict how interest rates will perform, and potentially puts limits on long-term planning for charities. Although there is no doubt that the Bill should become law—it is essentially a tidying-up process—it is certainly worth putting on the record the risks associated with endowments. It is therefore perhaps advisable to limit the amount going into them. There is another important point: endowment funding could increase the perception gap between buyers of lottery tickets and good causes. Lottery sales are falling. In February, Camelot announced that sales for the weekend lotto game were the lowest ever. Last November, it announced that sales had fallen by 5 per cent. during the previous six months. Lotteries across the world often show initial signs of great success that soon trails off, so to a certain extent such a decline is to be expected. But as the hon. Member for Twickenham (Dr. Cable) said on Second Reading, another explanation might be that people do not see a clear link between the purchasing of tickets and the good causes that the lottery is supposed to help.

That is why we have some concern about endowments; they break that clear link. Creating too many endowment funds could increase this tendency, so it would be sensible to cap them in some form. Whether that should be done through the Bill or through some other administrative procedure, I do not know; perhaps the Bill's promoter could explain that point. The hon. Member for Twickenham said on Second Reading that the perceived lack of a link is a psychological danger and it should be addressed, although it is not a fundamental argument against the proposals."—[Official Report, 28 February 2003; Vol. 400, c. 535.] Like my hon. Friend the Member for North-East Cambridgeshire, the hon. Member for Twickenham raised an issue that, although not fundamental to the Bill, was important and should have been addressed. As we know, consideration in Committee was rather short, so today provides an opportunity to seek the reassurance that we need and desire.

Several damning recent media reports have discussed how lottery money is given out. For example, in 2002 the national lottery gave £336,000 to the National Coalition of Anti-Deportation Campaigns, which is trying to prevent the deportation of asylum seekers after their applications have been processed by the Home Office. One can agree with that highly controversial decision, or not. I shall not comment on whether it was a good thing, but there was an immediate and massive outcry. That outcry was able to produce a change in policy, because there was no endowment and the matter was not tied up for a long time. If we have endowments, with no limit on how much can be put in, we will lose the immediate link between what is said in the press and how grants are distributed. Another notorious decision was that to give £295,000 to a Worcestershire charity for the breeding of guinea pigs in Peru.

All such grants were given through conventional funding methods under current law. One advantage of non-endowment funding is that the lottery can respond to the public mood quickly. However many endowment policies there are, they will involve very large sums of money and it will not be possible to respond quickly. These policies are supposed to serve the public. For something that the public took issue with, it would be more embarrassing and awkward to terminate an endowment fund than to terminate short-term giving. Non-endowment funding is easier to withdraw, if the public express dissatisfaction with it.

I am sure that my hon. Friend the Member for Mid-Norfolk can address all those points, reassure the House that it will not be necessary to set a cap through the Bill, confirm that there will be a limited number of endowments, and confirm that the entire process will be handled with great care.

Amendment No. 4 would insert the following provision: Any endowment, or contribution to endowments, established by this bill is liable to be reclaimed by the Distribution Fund in the event that,

1. (a) the recipient body of such funds ceases to exist, or
2. (b) the function of the recipient body changes substantively."

On Second Reading, my hon. Friend the Member for North-East Cambridgeshire asked what would happen to endowed lottery funds if the recipient body ceased to exist. In my own constituency, a charity did indeed go under—it was an ordinary charity that had nothing to do with the national lottery. Charities, and endowment funds, do get into difficulties. We therefore need an exit policy. It would be best to provide legal clarification so that the lottery distribution fund can claim back the money disbursed.

The point of the Bill as a whole relates to legal uncertainty. Current legislation does not define what meeting expenditure means in respect of the powers of the distributing bodies. It is therefore reasonable to clarify the law as the Bill proposes. In the same way, including a right of the distribution fund to reclaim its money if a charity ceases to exist would provide greater legal transparency and clarity. That would seem to make sense, and I see no reason why anyone should argue with that point of view.

10.30 am

Section 28 of the Charities Act 1993 allows relevant bodies to investigate dormant charitable accounts, which might be some sort of safeguard. However, in view of the long-term nature of endowment funds, it is reasonable to imagine that a charity's function might change over time. It is important to ensure that the money is being used for exactly the purpose for which it was intended. Recent revelations that lottery funding is going to unpopular causes should not be repeated. An appeals panel reinstated two Surrey schoolboys who had been expelled after threatening to kill their teacher. The lottery gave £200,000 to the organisation giving the expelled boys advocacy—the community education network. My hon. Friend the shadow Secretary of State for Culture, Media and Sport called it another blow to the credibility of the lottery". In another example, £350,000 was given to the Runnymede Trust—the think—tank that described the word "British" as racist.

Those are controversial examples and I am sure that we are not going to get involved in providing endowments for such things. However, if something goes wrong with an endowment—if it is either unpopular or badly managed—surely we need some device to ensure that the moneys can return to the distribution fund. That is what my amendment is about.

Those are my three amendments. The first would provide reassurance that the Comptroller and Auditor General could become involved; the second would provide an opportunity to debate at what level the moneys distributed should be capped; and the third would ensure that moneys could, if there were a problem, be returned to the distribution fund.

Mr. Keith Simpson

My hon. Friend the Member for Gainsborough (Mr. Leigh), from his formidable position as Chairman of the Public Accounts Committee, has outlined his amendments with clarity. I recall during my time as special adviser at the Ministry of Defence that the only Select Committee that truly alarmed the policy-making civil servants was the PAC. That body, together with the National Audit Office, is quite rightly regarded as the guardian of public expenditure. Given that my hon. Friend generally supports the Bill, I hope that we can view his amendments as probing amendments, and that we can answer some of his questions.

I begin with amendment No. 5. As my hon. Friend pointed out, it would enable the Comptroller and Auditor General—and therefore the National Audit Office—to examine the accounts of any person in receipt of lottery moneys for the purposes of establishing or contributing to an endowment". I note that it does not impose any restrictions on the circumstances in which such an examination could take place; nor does it expressly provide for the CAG's power to report to Parliament in respect of any examination that he undertakes.

Mr. Leigh

That is unnecessary, because the Comptroller and Auditor General always reports to Parliament through the Public Accounts Committee. There is therefore no need to build that into statute.

Mr. Simpson

I accept my hon. Friend's intervention.

It is worth mentioning that the CAG is already the external auditor of distributing bodies, with wide-ranging powers to examine their books, documents or papers and to carry out such examinations into the economy, efficiency or effectiveness with which the body has used its resources in discharging its Lottery distribution functions as he the Comptroller and Auditor General "sees fit".

In addition, I understand that the financial directions for lottery distributors require them to include as a mandatory condition of any lottery grant—whether to an endowment or not—a requirement that the recipient of grant provides regular progress reports and any further financial or other information that the distributor may require. That is right and proper. I believe that those two conditions provide the CAG with adequate scope to obtain information about the control and management of funds from lottery grant recipients. I also understand that the Minister is prepared to reflect further on the issue in respect of future lottery legislation and there is a forthcoming White Paper on lottery distribution. We are all in favour of that.

I hope that, when he has heard my hon. Friend the Member for Ryedale (Mr. Greenway) and the Minister, my hon. Friend the Member for Gainsborough will be convinced that the safeguards are adequate. I fully support my hon. Friend's intention and I certainly do not want to open up in respect of the Bill any area of doubt or vulnerability.

Mr. Greenway

First, I welcome the intervention of my hon. Friend the Member for Gainsborough (Mr. Leigh), who has rightly reminded us in timely fashion that we need carefully to examine issues of accountability and transparency in respect of the distribution of lottery funds and the value for money that they achieve. As my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) says, that matter has far wider ramifications than the changes that his Bill will introduce. We believe—it is the view of the official Opposition—that the matter should be addressed in detail in the forthcoming White Paper on proposed changes to the lottery.

It is now time, some 10 years after its introduction, to review the standing of the lottery. On considered reflection of the findings, we should then introduce and implement the necessary changes. The issues should be examined across the board for the lottery as a whole. We need to examine whether further powers of accountability are necessary and how to implement them. I have no doubt that the Comptroller and Auditor General and the Public Accounts Committee will have important roles to play. However, I do not want to jeopardise the Bill today by introducing the changes in the amendments. As I said, the issues are more wide-ranging than the matters in the Bill.

On amendment No. 3, my hon. Friend the Member for Gainsborough is right to draw attention to the fact that lottery funds are in much shorter supply than when the lottery first started. Indeed, in the charities sector more than others, more applicants are disappointed at being unable to secure the money that they want. However, the Bill does not fetter the discretion or flexibility of the funding body. If it transpires that endowments are not the best way of distributing the bulk of lottery funds made available to the distributor, endowments do not have to be made.

Mr. Chope

Does my hon. Friend share my concern that we have not seen the draft guidance that the Minister intends to give to the distributing bodies? If we had that guidance before us today, it would give us a much clearer idea of the Government's intentions.

Mr. Simpson

My hon. Friend makes a good point. Yes, he is right up to a point, but that does not mean that we should not approve the Bill. I am sure that the Minister and his officials will want to consult funding bodies, particularly the charities board, on that guidance. We are moving into a new area for the charities board, which has not previously been able to give money to endowments. My hon. Friend the Member for Gainsborough touched on another relevant issue: if people can see that their money is contributing to good causes, they are more likely to buy lottery tickets.

Bob Russell

Is the hon. Gentleman seriously suggesting that people buy lottery tickets because a few pence go to good causes? My understanding has always been that people buy lottery tickets in the hope of becoming millionaires

Mr. Greenway

Undoubtedly some people play the lottery in the hope of becoming a millionaire, but others are more realistic and recognise that their chances are around 14 million to one. They care where the money goes, and I am sure one of the reasons why lottery ticket sales have been falling is that people can see that too many of the proceeds are going to causes that the Government should fund out of public expenditure. People want the money to go to good causes.

I can see the point that my hon. Friend the Member for Gainsborough is making. If money is given to an endowment, how can one ensure that it ends up with a good cause? The answer lies in the response that my hon. Friend the Member for Mid-Norfolk has had to his Bill. In Norfolk, it is hugely popular and that is because of the good causes that the endowments promise to support—small, local charities that, on their own, do not have the capacity or the ability to apply for a lottery grant individually. The endowments will be able to support them, and that is very pertinent, especially for projects that require revenue rather than capital expenditure. While my hon. Friend the Member for Gainsborough is right to remind us that we do not want too much of the Community Fund's money to go into endowments, I hope that those endowments that are funded will—through the charities that they support—encourage ticket purchases and increase sales.

My hon. Friend referred to a comment made by my hon. Friend the Member for North-East Cambridgeshire (Mr. Moss) on Second Reading, when he asked what would happen if an endowment ceased to exist. From my experience of supporting lottery applications in my constituency, it is usual for the distributor to ensure, in the funding agreement, that any moneys that are not put to the purpose for which they were given are returned. Indeed, I have a problem in my constituency at the moment because the sports fund gave money to the Huntington stadium to build an athletics track that will have to be ripped up if it becomes the home of York City football club—of which I am the president—and if that happens, the money has to be repaid or a track has to be built somewhere else. The key is to ensure that the agreement deals with the problem that my hon. Friend raised. As my hon. Friend the Member for Christchurch pointed out, that means that the guidance to the funding bodies has to be right to ensure that that point is covered.

The amendments that my hon. Friend the Member for Gainsborough has tabled raise three issues pertinent to the general management of the lottery. I hope that he will accept that those issues are not for the Bill before us today, which should proceed, without the amendments. I assure my hon. Friends who have raised concerns today that if I am involved in the scrutiny process of the changes in the lottery that the Government bring forward—as I hope to be—I will consider carefully the points that they have raised and ensure that they are properly debated. We need to strengthen the management of the lottery, because that will give it greater credibility and encourage confidence in it. That is the best way to increase ticket sales and therefore the support for good causes.

Mr. Chope

My hon. Friend the Member for Gainsborough (Mr. Leigh) has made some excellent points in support of his amendments, so I do not wish to speak at length. However, I wish to press the Minister to give us some more information about the likely policy for the distributing bodies, in the light of what has been said. If we do not hear about that until after the Bill goes to the other place, or reaches the statute book, we will be in the dark. The debate on the amendments gives the Minister a clear opportunity to explain exactly what the Government's policy is.

I am conscious that many of my hon. Friends will not have had a chance to digest the import of the regulatory impact assessment, but paragraph 2 states: The Community Fund has been unable to fund endowments under current statute and so the biggest potential impact is on this body. Whilst firm figures are difficult to ascertain, anecdotal evidence suggests that, to date, only a tiny proportion of charities have applied to the Community Fund for endowment funding (an estimated 20–30 out around 100,000 applications), and there is little evidence that this level of demand would increase if the Fund was given this power.

10.45 am

The limit in the amendment on the amount that could be given to endowments may fit in well with the guidance that the Government intend to give, but it would be helpful to have some assurance of that. The regulatory impact assessment continues: In addition, at a time when Lottery income is falling, it is unlikely that applications for endowment funding would be considered a high priority for funding, compared to applications for revenue funding, for the reason highlighted above. A slight touch of Big Brother there. How does the Minister know that the independent distributing bodies will take such a view? How does he know that they will take that view in relation to non-charitable endowments? That is a legitimate area for concern, because more and more money from the lottery goes to non-charitable causes under the Government's so-called New Opportunities Fund. It would be ironic if, at a time when the Government are telling schools that they will have to forgo their capital expenditure programmes for the sake of revenue funding, the Government were encouraging the New Opportunities Fund to give capital endowments to educational establishments. Those policies would appear to be incompatible.

I share the views expressed by my hon. Friends that the lottery is declining in popularity partly because it is a rip-off and a form of regressive taxation—as I have said in the past—and because people can see that their money is going to causes that they would not think of funding if a tin was shaken in front of them, even if they had just won on the premium bonds. That is probably why more people are turning to premium bonds.

Bob Russell

Can the hon. Gentleman tell the House what is the minimum stake for a premium bond?

Mr. Chope

I am sure that the hon. Gentleman knows that it is about £100. The average weekly spend on the lottery each week is more than £2, so people could save that money for a year. I must say that I have never bought a lottery ticket and have no present intention of doing so.

Mr. Leigh

I agree that premium bonds are a much better investment. Does my hon. Friend know that a statistician has worked out that unless a person buys their lottery ticket in the last few seconds before the draw closes, they are more likely to die before the result is announced than they actually are to win? The chances of winning are infinitesimal.

Mr. Chope

I agree; that is why, on the whole, few people with more intelligence—such as my hon. Friend, those who work alongside the Public Accounts Committee, the Comptroller and Auditor General's staff and people learned in mathematics and statistics—enter the lottery in the hope that they might win. Those who do take part may do so because they think the money is going to good causes. When they find that it is not, they may prefer to spend the money on local good causes.

That is why our proposals to change the distribution system—another new fair deal that will be part of the Conservative manifesto at the next general election—will capture the public's imagination and will win support for our cause. That is the view in my constituency, which pays disproportionately into the lottery and gets very little benefit in terms of the funding of good causes.

The figures show that money is increasingly being spent on the New Opportunities Fund—a substitute for Government expenditure—with less going to the Community Fund and to proper charitable causes. That is the main reason why the lottery is on the wane. However, I understand from the Government that there may yet be hope, as lottery tickets might be made available on the continent. We might be able to benefit from the regressive taxation of our continental neighbours going into the Government's coffers.

Perhaps the Government have given up on using the New Opportunities Fund as a substitute for public expenditure and are going straight for the option presented by the new part-time Chancellor of the Exchequer and part-time Leader of the House, that of hiking up income tax.

I hope that the Minister will respond to our serious concerns about the guidance to be given to the distributing bodies.

Mr. Caborn

I am glad that the British public are more charitable than the two hon. Gentlemen who have just spoken. I am sure that many people play the lottery because of its charitable nature. In addition, ours is probably the most successful lottery in the world. The Conservative Government brought the lottery legislation on to the statute book in 1993. The Conservatives ought to be proud of that, and not seek to undermine the lottery as the two hon. Members have tried to do this morning. The vast majority of British people think that the lottery is a good institution that encapsulates a British spirit, and I think the two Members are somewhat out of kilter with the general public.

It is unfortunate that amendment No. 5 has come a little late in the day, like our regulatory impact assessment. However, the amendment is important and merits consideration.The hon. Member for Mid-Norfolk (Mr. Simpson) has outlined the existing powers of the Comptroller and Auditor General over lottery distributing bodies, as well as the relevant mandatory terms and conditions for all lottery grant recipients. I share his view; there are many controls in place to ensure that the finances are used in the right way.

Nevertheless, we should reflect upon the amendment and I assure him that we will discuss the proposals further with the NAO in relation to any legislation that might emerge from my Department's White Paper on Lottery distribution. We take the amendment seriously and while I would take some convincing that we needed further controls, I assure him that we will consult the NAO before we publish the White Paper.

Amendment No. 3 refers to a limit of 5 per cent. There is a danger with imposing such limits; we have done a quick calculation and nowhere near 5 per cent. is made up of endowments. I fear that putting such a ceiling in place gives something for people to aim for.

We will be issuing the guidance notes to distributors, and these will be available in draft in advance of Second Reading in the Lords. They will be in the public domain and will form part of the public debate, while reflecting our debates as well. Some important points have been made on Second Reading, in Committee and now.

The hon. Member for Gainsborough (Mr. Leigh) has concerns about how setting an arbitrary ceiling on the proportion of grants to endowments would work in practice. However, I hope that with the existing responsibilities of the distributors' accounting officers and the guidance that I have mentioned, he will be satisfied on this matter and will withdraw the amendment. I hope that what we put in the guidance notes will satisfy him.

Amendment No. 4 concerns the recovery of funds. The amendment refers to an endowment being reclaimed "by the Distribution Fund", but that would go against charity law—which will govern all the endowments—in that the money should go back to the purpose for which it was originally given. However, the distributing body funds all good causes; therefore it would work against a particular good case if the money went back to the fund. In Committee, I said that I believed that there were sufficient controls through charity law and the lottery statute to enable the recovery of funds to endowments should the charity cease to operate or change its functions subsequently.

Grants for permanent endowments can be made only to a registered charity. Ultimate responsibility for the conduct of a charity rests with the Charity Commission—which is tough by any standards—and the Attorney-General. Existing legislation governing charities requires them to use funds only for charitable purposes. If they fail to do that, or if funds are misappropriated or mishandled, not only will the lottery distributor need to consider what action to take as a result of the breach of the terms and conditions of the grant, the actions of the charity may, depending on the circumstances, amount to a criminal offence. That would almost certainly involve the Charity Commission, where the matter affected a charity in England and Wales, or the Inland Revenue in Scotland and Northern Ireland.

Some draconian actions can be taken if people step out of line. If a charity ceased to exist, charity law would require that, after all debts and liabilities were settled, any remaining assets were applied to a similar charitable purpose to that of the organisation. That would be at variance to the amendment. The Charity Commission, the lottery distributor and, in certain circumstances, the Attorney-General, would be involved in this instance. I believe that we have sufficient controls in place to ensure that money is used for the purposes for which it was given.

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Mr. Leigh

I am grateful to the Minister for the way in which he has summed up the debate, particularly on amendment No. 5, which would give a right of access and control to the Comptroller and Auditor General. He intimated that, if I may read between the lines, it was too early for him to put that on the statute book and that he would need more advice. He said that he was happy for his officials to discuss with the National Audit Office how to obtain some such provision in statute, if not in this Bill, then in a future one. That is very positive.

On amendment No. 3, the Minister repeated my point that we cannot really put a figure for a capping limit in the Bill. He accepted that there was a legitimate debate about that, however, and he will issue guidance. I am very happy with that.

On amendment No. 4, the Minister took care to deal with the wide-ranging existing safeguards that ensure that if there is a problem with an endowment fund, the money could, apparently, return to the distribution funds.

The Minister's summing up was very satisfactory. We have teased out some important elements of how the moneys will be protected in this important debate, and there will be accountability to Parliament. In the spirit of good will, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Order for Third Reading read.

11.1 am

Mr. Keith Simpson

I beg to move, That the Bill be now read the Third time.

As a number of Members have said, the Bill received all-party support on Second Reading on 28 February and in Committee on 6 May. I thank, in particular, my parliamentary colleagues from Norfolk, the hon. Member for Great Yarmouth (Mr. Wright), who is present, my right hon. Friend the Member for South-West Norfolk (Mrs. Shephard), my hon. Friends the Members for South Norfolk (Mr. Bacon) and for North-West Norfolk (Mr. Bellingham), the hon. Member for Norwich, North (Dr. Gibson), and the Secretary of State for Education and Skills, who represents Norwich, South. Their assistance has been positive and has undoubtedly helped the Bill's progress. I thank, too, my hon. Friends the Members for Gainsborough (Mr. Leigh) and for Christchurch (Mr. Chope) for pressing probing amendments constructively on Report. Both have given the Bill a fair wind, but they rightly teased out some points about the Bill itself and the national lottery in general.

The Bill's purpose is to amend current lottery statute, as already amended by the National Lottery Act 1998. It is intended expressly to provide all distributors with the power to make grants to endowment funds, should they choose to do so. Current statute gives lottery distributing bodies power to distribute lottery money for meeting expenditure of the types covered by sections 22 and 23 of the National Lottery etc. Act 1993. It does not, however, define what is meant by "for meeting expenditure" or contain any explicit reference to funding endowment funds. The Minister has confirmed that the wording was not the result of any deliberate intention to prevent distributors from giving grants to endowment funds.

The Bill's content is straightforward. It amends those sections of the 1993 Act that refer to "for meeting expenditure" to make it clear that the terms include funding of endowments in each case. It also provides for the change to have retrospective effect. Some distributing bodies have made grants to endowments, and the Bill will ensure, as debated on Report, that those payments cannot be called into question.

I shall speak briefly about the origins of the Bill. As a number of Members have said, it came directly from the fair county of Norfolk, and was born from the "We Care" 2000 appeal begun by our regional newspaper, the Eastern Daily Press. It is appropriate to be holding the Report stages and Third Reading of the Bill in the week after UK carers week. We all know the role that hundreds of thousands of carers undertake in our constituencies. Without their caring for their families and friends, there would be an enormous additional burden on our social services and the national health service. I pay tribute to the work of the 130,000 carers in Norfolk.

The EDP's appeal had a target of £1 million, and it has reached £750,000., thanks to a £100,000 lottery grant. Efforts to secure that grant took about 18 months. The first bid was rejected because of an anomaly in wording, but the second was successful. That is great news, and the money will make a real impact. The money from the Community Fund will be used to help another 80 carers a year who support loved ones who are unable to look after themselves. It is a huge boost to the EDP appeal, which was set up nearly five years ago, with its ambitious target of raising £1 million, as a partnership between the newspaper and health professionals. One of the purposes behind the Bill is to enable the appeal to raise more money for carers. The money just received will be spread over two years. It becomes available at the end of July and will enable the purchase of domestic appliances, power packs for wheelchairs, swivel seats and computers to loan to carers in Norfolk. We are very grateful for that.

I hope that the Bill will help many similar charitable bodies that want to establish a secure funding base for their work. The benefits of the Bill are that it will clarify the powers of all distributors, put the Community Fund on the same legal footing as other distributors in being able to fund endowments should it choose to do so, and, perhaps most importantly, benefit charities such as "We Care" that want to apply for lottery funding, enabling them to manage their resources more strategically and with more secure future funding.

We have debated the benefits of endowment funds. There is no doubt that there is both an upside and a downside. The crucial point is that the Bill provides permissive, not mandatory, power for distributors. It will ultimately be up to distributors to determine how to treat applications for grants to endowment funds against other calls for lottery funding. As was rightly said on Report, we must make certain that that is not abused. The Minister has assured us that his Department intends to assist distributors by issuing guidance on that, should the Bill be enacted. Draft guidance will be placed in the Libraries of both Houses shortly, in time for the Bill's introduction in the House of Lords.

As the Bill provides a permissive power for lottery distributors, it will have no impact on central or local government expenditure or manpower. Nor will there be any regulatory cost to business or the voluntary sector. The measure is intended to assist charities and other good causes by helping them to manage their funding more effectively.

Legislation relating to the national lottery is reserved to the UK Parliament, but I understand that the Bill has attracted the support of the devolved Administrations.

Finally, it was remiss of me earlier not to thank my hon. Friend the Member for Ryedale (Mr. Greenway) for his positive and enthusiastic support this morning from the Front Bench.

I commend the Bill to the House.

11.8 am

Mr. Anthony D. Wright (Great Yarmouth)

I will speak for only a couple of minutes because I am aware that other Members have equally important Bills to discuss this morning. I want only to congratulate the hon. Member for Mid-Norfolk (Mr. Simpson), and to offer congratulations, too, to my hon. Friend the Member for Norwich, North (Dr. Gibson), who tried to promote the Bill two or three years ago. We all know the history of why it did not pass then. It is pleasing that the Bill has support on both sides of the House. The project has certainly united political parties in Norfolk.

The probing amendments that were tabled today needed discussion, and I hope that the Bill will proceed with all speed so that charities such as the "We Care" appeal in Norfolk, which has already helped many hundreds of my constituents as well as many other people across Norfolk, can gain more money through endowments and achieve much more throughout the country.

Once again, I congratulate the hon. Member for Mid-Norfolk and hope that the Bill proceeds with all haste.

11.10 am

Mr. Greenway

I want only to congratulate my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) on the progress of the Bill and to express the hope that it will be well received in the other place. I thank him for his kind remarks.

I genuinely believe that the way that lottery funds are distributed and the good causes that they are seen to support are vital ingredients in managing a successful national lottery. My hon. Friend's Bill contributes to that process, especially in the county of Norfolk.

May I ask the House to be kind enough to excuse me so that I can return to my constituency, where, this afternoon, I am visiting a project that has just received funding from—believe it or not—the national lottery and the Foundation for Sport and the Arts? I am going to see the new sporty pavilion in all its glory and shall leave the Opposition Front Bench in the capable hands of my hon. Friend the Member for Cotswold (Mr. Clifton-Brown), who, in fact, originally came from Norfolk.

Once again, my congratulations to my hon. Friend the Member for Mid-Norfolk, and I hope that all right hon. and hon. Members have a happy weekend.

11.11 am

Mr. Chope

I wish my hon. Friend the Member for Ryedale (Mr. Greenway) Godspeed and a safe journey to his destination. My constituents will look at his constituents with some envy and ask, "Why can't we get a decent share of the money that is being distributed from the lottery?"

I, too, congratulate my hon. Friend the Member for Mid-Norfolk (Mr. Simpson) on having steered the Bill to Third Reading. Although I was slightly critical of him for not having asked more questions in Committee, I understand the reason and forgive him. I think that he wanted to curtail the Committee stage so that he could ensure that his Bill was heard first today. Strategist that he is, he has succeeded in doing that, although the tactics were not necessarily to all our liking. However, we have had a chance today to examine some of the issues that would have been considered in Committee and the Bill is none the worse for that.

Mr. Forth

This is the second Friday running when it would appear that Standing Committees have not done a satisfactory job of examining Bills and that responsibility has fallen to the House on Report. Although that is perfectly acceptable in procedural terms, does my hon. Friend agree that it is time that members of Standing Committees, especially those for private Members' Bills, bucked up their ideas and did a rather better job?

Mr. Chope

I agree. One of the problems is that the members of such Standing Committees are often closely associated with the promoter of the Bill and their motivation is solidarity with the promoter rather than the desire to scrutinise the Bill. Indeed, often Members who might want to scrutinise the Bill are not invited to serve on the Standing Committee—although I am not sure whether that happened in this case. As long as we are able to consider matters properly on Report, however, we shall hold debates such as today's.

I expressed concern about the use of lottery funds for non-charitable causes. Although I do not object to the Bill, and indeed I warmly congratulate my hon. Friend the Member for Mid-Norfolk on getting it to this stage, in my view it would have been better if it did not contain the power for endowments to be made to non-charitable causes.

Charities can be controlled. If they fall into desuetude and are no longer able to fulfil their charitable objects or the trustees resign, the Charity Commission can intervene to put matters right and any remaining funds can be properly distributed. The situation is not the same for some other bodies, which may be solely dependent on grant funding direct from the Government. In addition, they may also receive funding from the New Opportunities Fund. My hon. Friend the Member for Maldon and East Chelmsford (Mr. Whittingdale), who is an Opposition spokesman on such issues, has expressed grave concern about the abuse of such funding.

At a time when the national lottery is under pressure, fewer tickets are being sold and there is less income, it is ironic that a greater proportion of its profits are being steered towards substituting for Government funding rather than to hard-pressed charities. The best thing that the Government could do for the lottery would be to insist that it concentrate on helping charities; it should not prop up Government programmes as it has done in the past.

My hon. Friend the Member for Gainsborough (Mr. Leigh) gave some examples of the abuse of lottery funds, so I shall not repeat them, but I am sure that there will be further examples, not just in the Daily Mail but in other newspapers. Every time one of those cases arises, it reduces people's interest in buying lottery tickets.

We are reaching the stage where, in desperation, the lottery body is encouraging sales of instant tickets, such as scratchcards, especially to young people, where they can see immediately whether they have won. That is in breach of all the principles that underpin gambling controls. Furthermore, it is well established that the narrower the time gap between gambling one's money and getting the result, the more likely it is to lead to compulsive gambling. Buying a lottery ticket in advance or buying a premium bond gives people longer anticipation of winning and more excitement, but if one buys a scratchcard at the tobacconist, one can see whether one has won within seconds and the temptation is then to buy another ticket. Addictive gamblers will go on and on buying, trying to cover their losses. The lottery raises an increasing proportion of its income from that type of sale rather than the traditional sales that were envisaged by John Major.

Mr. Forth

Does my hon. Friend agree that the whole concept of instant gratification is very much a new Labour one? It is very much in line with the Government's whole philosophy, whereas long-term solid investment is a Conservative concept.

Mr. Chope

I wholly agree with my right hon. Friend. He puts the point succinctly, powerfully and persuasively. It is a good way to distinguish the approach of the Opposition from that of the Government. Instant gratification and compulsive gambling go together—they are the hallmarks of new Labour. The Conservatives take a longer view, which is why we are such supporters of charities. That is why we want to encourage the distribution of lottery funds to local charities, to get more local involvement. That is why the idea in Norfolk, of a local charitable endowment fund, is so excellent, although it would be easier to raise money for that charitable endowment if people who bought lottery tickets in Norfolk knew that their money would go directly to good causes in their county rather than being diluted among good and not-so-good causes in other parts of the country.

I have reservations about the fact that the endowment powers will extend beyond charities, but I am pleased about their extension to charities. Once again, I congratulate my hon. Friend the Member for Mid-Norfolk on what he has achieved.

11.19 am

Mr. Caborn

I congratulate the hon. Member for Mid-Norfolk (Mr. Simpson) on piloting the Bill through the House so effectively. However, I am disappointed that the hon. Member for Christchurch (Mr. Chope) used what I consider to be an extremely good Bill as a platform from which to launch an anti-lottery tirade. Some of the drivel that he brought out about addiction, gambling, and the uses to which the lottery is put was totally unfounded. He should reflect on the speech that he has just made and see what damage he has done to the lottery, which I believe has been accepted across all parties in the House and across the country as a good institution. The vast majority of its expenditure enhances the quality of life of communities throughout this country, and to that extent the lottery—which, after all, was brought into being by a Conservative Government—is to be commended and deserves all-party support. The theme of the hon. Gentleman's contribution, and of others like it, is not well founded and does tremendous damage to the good causes that the lottery supports.

Mr. Chope

Does the Minister dispute the fact that a higher proportion of lottery income is now coming from scratchcards; that scratchcards are sold principally to young people; and that scratchcard sales have been condemned by experts, who are of the opinion that the purchase of such cards is more likely to lead to compulsive gambling than the traditional lottery ticket?

Mr. Caborn

This morning's debate is not a discussion on the lottery. However, if the hon. Gentleman wants a debate about the lottery, let me point out that any lottery, wherever it is in the world, eventually has to branch out from the lotto. Our national lottery derives about 80 per cent. of its income from lotto—the highest percentage of any lottery in the world. Sales for the lotto part of any lottery—such as the lotto that was launched here by the 1993 legislation—initially rise, then plateau out and start to decline. It is necessary to refresh lotteries continually, by changing the portfolio of games, and that may include the introduction of scratchcards. The hon. Gentleman spoke disparagingly about selling tickets for our lottery throughout Europe. That is another means of refreshing a lottery. As he knows, we are looking at the question of funding part of our Olympic bid through the lottery, and we intend to seek the House's permission to support the Olympic bid in that way.

The structure of lotteries must change. If they do not change, they die. Ticket sales in this country have been declining. Unfortunately, the trend has been accelerated by speeches of the type that the hon. Gentleman made this morning. Lotteries must change or die. He may sit there smirking, but a lot of people who are enjoying a better quality of life now because of the lottery would not subscribe to his comments this morning.

The Government endorse the principles behind the Bill and welcome the cross-party support that has been evident during its passage to date. I can confirm that I do not believe it was the deliberate intention, when the National Lottery etc. Act 1993 was originally drafted, to prevent distributors from awarding grants to establish or augment endowment funds. This is an unfortunate state of affairs, which the Bill is intended to rectify.

The Bill is modest and—it says in my notes—uncontroversial. It has been slightly more controversial than we expected first thing this morning, but it is overall an uncontroversial Bill, as befits a private Member's Bill, and I believe its provisions will be helpful not only in clarifying the legal position of all distributing bodies to fund endowments, but in assisting charitable bodies to manage their funds more effectively. I emphasise again to the hon. Members who have been probing this morning that endowments can be dispensed to charitable organisations only.

The lottery brings enormous benefits to charitable and community groups throughout the country and overseas. The Bill will enhance the impact of the lottery on the voluntary sector in this country.

It is entirely appropriate that the debate takes place in the week after UK carers week. The Community Fund has played a key role in supporting the work of carers and carers week, contrary to some extent to what has been said this morning. [Interruption.] I hope that the right hon. Member for Bromley and Chislehurst (Mr. Forth) and the hon. Member for Christchurch will listen. They have been criticising the lottery, but I hope they will have the courtesy to listen—but obviously not.

Last week, the Community Fund announced that since 1995, it has given nearly 3,000—[Interruption.] I thank the hon. Gentlemen very much for their attention. I am trying to put the record straight on the work of the Community Fund. Since 1995, it has given nearly 3,000 grants, worth more than £200 million, to enable carers to provide sustained health and social care to more than 16 million disabled, frail, long-term ill and socially isolated children and adults. Those impressive figures demonstrate the central role played by the lottery in transforming communities throughout the United Kingdom, countering some of the myths that have been created and perpetrated today and all too frequently in some of the newspapers, which the hon. Member for Gainsborough (Mr. Leigh) referred to, and other negative media attention.

The Bill also fits in well with a key theme emerging from my Department's review of lottery distribution: that distributors should strive to be more responsive to the needs and priorities of local communities and others. Giving distributors express powers to fund endowments will give them more flexibility in responding to the needs of applicants and will help give charitable organisations more flexibility to manage their resources. I hope we shall be in a position to publish a White Paper outlining our proposals for the future of lottery distribution next month. I urge all hon. Members present, together with charities and the voluntary sector, to play a full part in the consultation on our proposals, because it is our intention to ensure that the lottery is responding to the needs of their communities, and that more ownership is taken of the decisions made.

To conclude, I welcome the Bill as a useful piece of legislation and I am grateful to the hon. Member for Mid-Norfolk for piloting it through the House. It will clarify the powers of all distributors to fund endowments, should they choose to do so, and put charities on an equal footing with other grant applicants in accessing lottery funding for endowments. I am therefore happy to offer the Government's support for the Bill.

11.28 am

Mr. Keith Simpson

With the leave of the House, Mr. Deputy Speaker.

I shall be very brief. I thank the Minister for his very positive approach, and that of his Department and his officials, throughout every stage of the Bill's passage so far. I am very grateful. I know that it is in the interests of his Department, but it is also of wider interest. This private Member's Bill, with all-party support, helps to change an anomaly in the 1993 Act. It will be of benefit to tens of thousands of people throughout the country. It will have no impact on public expenditure.

I think that, to address the line of argument advanced by my hon. Friend the Member for Christchurch (Mr. Chope), the Bill may not provide instant gratification, but as a former Whip, I believe in anticipatory gratification, because that is the way to persuade people to do something or not to do something. I therefore commend the Bill to the House and hope that it has a trouble-free passage in the other place.

Question put and agreed to.

Bill accordingly read the Third time, and passed.