Grand Committee Report of 29 January 1998

Official Report of the Grand Committee on the National Lottery Bill [H.L.]
Thursday, 29th January 1998.
The Committee met at four of the clock.
[The Deputy Chairman of Committees (Lord Strabolgi) in the Chair.]
Clause 14 agreed to.
Clause 15 [Objects]:
Lord Skidelsky Lord Skidelsky moved Amendment No. 37A:
Page 18, leave out lines 5 and 6 and insert—
("(a) helping to develop talent and achievements in the fields of science, technology and arts;").
The noble Lord said: I hope that the Committee will forgive me if I slip out slightly before we finish this evening. Also, as this is the last day of the Grand Committee on the National Lottery Bill, I take this opportunity to thank the noble Lord, Lord McIntosh of Haringey, for his courtesy and consideration in the last two sessions of the Committee. I look forward to renewing our engagement today and on Report.
In moving Amendment No. 37A I start by stating briefly our general concern about the way NESTA is being set up. First, we welcome it; it is a good and imaginative idea. We also like the fact that it has been endowed. This links it to an old British tradition in setting up public institutions going back to the Middle Ages. Had the method of endowment been used for our new universities or, to give another example, for the Royal Opera House these institutions probably would not have experienced their recurrent financial crises—or at least not so acutely—and would have been independent bodies in fact and not just in name.
Here our first worry creeps in. I quote what the noble Lord said at Second Reading:
"NESTA is the ne plus ultra of the arm's length principle".— [Official Report, 18/12/97; co1.790.]
However, we see some rather large fingerprints of the Secretary of State on it, especially in Clause 19. Our amendments are designed to give it more genuine independence. Unless some of the Secretary of State's powers are limited, the danger is that it will become his toy.
A second worry is duplication. The objects for which NESTA is being set up are already being partly fulfilled by other grant-giving bodies—for example, the research councils—but also by charities. We do not want either taxpayers' money or private donations to be diverted to NESTA. Again, the question of additionality, which has dogged our footsteps right through the Bill, rears its head. Will NESTA, for example, be able to consider an application from a university group which would otherwise have been directed to a research council or to the British Academy'? We want NESTA to be additional
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to other initiatives including voluntary ones, not a substitute for them. Finally, we do not want NESTA, any more than we want the new opportunities fund in general, to suck money away from the other good causes. We shall therefore be seeking to limit the Secretary of State's powers to enlarge its endowment at the expense of the original good causes.
I turn to my amendment. Amendment No. 37A is simply a drafting amendment. The word "individual" in the Bill suggests that only individuals will be eligible for grants; it carries that suggestion. We do not want to exclude team and group projects: for example, fringe film companies is one object that has been discussed. We believe that our draft accomplishes this aim.
As for Amendment No. 37B, which relates to subsection(2)(b), I should like to ask how exactly NESTA is supposed to help people turn inventions and ideas into products and services. The Government's note on Clause 15 gives no examples. Is NESTA supposed to finance companies or groups to market their products? Is it supposed to enter into competition with banks? If so, is that not back to the bad old days of picking winners?
The contention seems to be that we are very good at inventions but banks or others are reluctant to back them, so they end up being exploited overseas. The argument that our innovators have suffered from lack of venture capital is an old one, but it is very hard to prove. Surely, whatever the case, NESTA should not seek to become a venture capitalist or business angel in its own right. We should have learned by now that government agencies should not try to second guess the private sector. In the end it is the taxpayer, or in this case other National Lottery initiatives, who suffers the losses of bad decisions.
Also, what does it mean "to help protect property rights"? Are these not already protected by copyright and patent laws? It seems to us that the Government are trying to edge NESTA into commercial activities in which it should not be involved. I beg to move.
Lord Crickhowell: This amendment gives me the opportunity to probe the real intentions of setting up NESTA and to seek an explanation from the Minister as to why the Government's intentions in this field appear to be relatively limited. In reading the White Paper, and indeed the debate held at Second Reading, I am left with a considerable series of questions in my mind.
As I understand it, NESTA has an important, though limited, role. Like my noble friend, I am not quite certain how far it goes, particularly with this reference to individuals, and indeed what its limitations are. It is certainly perfectly possible to think of the development of scientific or intellectual ideas, but when we come to the arts, are we only dealing with the encouragement of the writer or the artist in creating a particular individual work? Are we, as has been indicated, going further and talking possibly about the ability to create scripts and productions in the world of film? If we are going that far, then what about artistic productions in the theatre or in opera?

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That takes me to the central question that I have about this Bill, and it is something which genuinely puzzles me. My noble friend Lord Gowrie, in an eloquent speech at Second Reading, drew attention to the huge problems facing the arts at the present time, particularly with regard to the shortage of revenue funding. In column 773 of Hansard on 18th December, he spoke of the huge capital inflows, which he suggested had led the Treasury to cut our small revenue. He spoke of our suffering the worst arts revenue crisis in his adult lifetime, and he referred to specific examples.
A good many of the supporters of the Government have in recent weeks expressed their dismay, concern and surprise about the situation they now face. They criticise the present Government because they believe they are merely continuing policies which they strongly criticised when they were pursued by the previous administration. In making those criticisms, some of those most outspoken tend to paint a picture of the arts having been in a catastrophic period over the past 20 years. I shall go on to comment about the shortcomings which I believe have existed in government policy under both the previous administration and the present Administration, but I happen to believe that the past 20 years have in many respects been one of the most productive periods we have seen in modern times as far as large sections of the arts are concerned. Despite the recurrent problems that have arisen, I do not believe that we have ever in this country had such a wealth of talent in the opera companies, or have seen such a series of outstanding productions from a number of opera companies. The strength of some of our orchestras has been remarkable, and theatre too.
However, it is true that in the early 1980s the arts were greatly helped at a time when there were government constraints by the strength of funding from the private sector. That funding tended to fall away as we moved into a period of recession and the problems grew.
In criticising what is happening now, let me assure the Minister that I am not doing something that I did not do even when I was in government. I did something in this field—I sent a minute to the Prime Minister which I certainly did not make a practice of as Secretary of State for Wales—at some point in the early part of the 1980s expressing my acute concern about policies for funding the arts and expressing the view that even quite modest increases in funding could make a dramatic difference. I supported the then Minister for the Arts—now Governor of Gibraltar, having moved on to a different role in life—in the battle he was having in the PES exchanges in government.
I would add that as Secretary of State for Wales I made a practice of finding financial support out of my block grant in Wales for heritage bodies. I found the money to build the art galleries at the national museum. Indeed those policies were followed by some of my successors; at least one of them supported the Welsh National Opera, for example, in a moment of crisis. This is an ongoing saga, but the fact of the matter is we have a lottery which has been injecting vast capital sums, and we can be thankful for that, but we face the real risk that as
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we move into the next millennium there will be no one to use the buildings. The companies that should be occupying them will be in a state of crisis.
This applies not only to the performing arts. Some of our national museums are still in a pretty bleak condition. I paid a visit to the Victoria and Albert Museum a little over a year ago. (I was practically brought up in the Victoria and Albert Museum. My father was keeper of the department of woodwork for many years.) I went upstairs to look at the British collections. I have to say I was almost in tears, tears of frustration and anger, as I left. I had earlier been admiring the superb exhibits of the Indian and the Far Eastern collections, to take two examples, funded on a magnificent scale by those from overseas. The display of our own collections at the present time in the Victoria and Albert Museum are a national humiliation and a disgrace. I think those involved would admit it. They keep talking about the difficulty of finding adequate funding to do anything about it. The collections are nothing like as good as they were in the period after the war, when those exhibits were first restored by the then director, Leigh Ashton, and others.
We have a pretty desperate situation right across the field of the arts. Here, as I understand it, with NESTA we are taking a modest but important step into a very limited area. I am not at all sure how limited that area is, and nothing I have read provides clarity. We keep hearing statements from those who now have the job of defending arts policy on behalf of the Government that steps are being taken to move away from the previous constraints that limited lottery funding entirely to capital projects. Indeed, the Secretary of State—facing a blitzkrieg from critics on television the other night—used words which indeed suggested that there was going to be a new ability to provide revenue funding for people and for activities taking place in the buildings, not just capital funding.
I am sorry I was not able to be present at Second Reading just before Christmas to make this point, but I do not understand why the opportunity was not taken in this Bill to go much further than appears to be the case with NESTA. Why was the opportunity not taken to give the ability—as we come to the end of the need to go on funding great capital schemes—to help the performing companies, individuals and galleries carry out to the maximum possible extent their own objectives within those buildings? It will be an absurd situation if, when the Bill is passed, we continue to face a series of crises right across the field about which I have been speaking with no real ability to do anything substantially about it out of lottery funding without further legislation.
It seems to me that we may be in the situation where we will be helping talented individuals in the fields of science, technology and the arts to develop their creative ideas, and then at the very moment when we might see them translated into vivid performances, into successful productions to strengthen the companies that invite the public in to see them, somehow the whole thing will fail and there will be no performing companies to take up the ideas. The productions that have been thought of, the ideas that will have been invented, will never be developed simply because we will be going on using money for a further range of capital buildings while the companies face an ongoing series of crises.

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I simply take this opportunity to try to extract from Government a clearer idea of what their policy is, how far we can now go with the Bill as it now is, and to seek information as to whether there is any prospect as a consequence of this legislation of finding a way out of the mess which we are now in, a mess which I fully accept—and noble Lords are not going to have to use that defence—arose as much from policies of the previous administration as it does from those followed now by the present Government.
4.15 p.m.
Baroness Ramsay of Cartvale: The noble Lord, Lord Skidelsky, began his treatment of the two amendments with some general remarks, and we are in complete agreement with the two main points that he made. There is no intention that NESTA will, as he put it, become the toy of the Secretary of State, and we certainly agree with him about the point which in brief was additionality, that NESTA should not be concerned with substituting for what is already available. We have tried to make this clear again and again in the Bill. The noble Lord, Lord Skidelsky, said that NESTA should be more at arm's length, and I believe he mentioned Clause 19 as giving the Secretary of State too much control. However, Clause 19 is all about powers to allow the Secretary of State to provide safeguards for the lottery endowment, and the powers in Clause 19 are concerned only with financial control and accountability matters; he will have no powers to influence NESTA's policies and programmes.
The noble Lord asked specifically whether NESTA will fund matters that other bodies fund, for example universities. We recognise that NESTA's interests overlap inevitably with some other bodies. We want NESTA to work with or through those bodies. In our opinion NESTA's first task should be to assess current provision, look for partners and ensure that its contributions are truly additional. That is a very important principle that we have tried to embody throughout the Bill.
The noble Lord also asked how NESTA would protect property rights. Intellectual property rights are protected by copyright, patents, design rights and so on, but protecting those rights and seeking registration in the case of some rights is a complex matter, particularly where rights need to be protected not only in this country but also in many other countries. Our idea is that NESTA will be able to work with inventors and artists to ensure that these rights are properly protected and we will be able to help them achieve that.
The noble Lord, Lord Skidelsky, also raised this question of individuals. I now turn specifically to the two amendments that we are dealing with. NESTA is primarily about the talents and creativity of individuals and helping them to reach their full potential, but individuals can also be part of a wider group. It does not have to be one single individual. It can be one individual or a group of individuals. It is difficult to see how NESTA could address its support for talent to whole groups and teams without actually specifying individuals.
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The noble Lord, Lord Crickhowell, raised very important and serious points, which we would all echo, about the state of the arts in this country. Many of them will be dealt with under Amendment No. 39, with which my noble friend Lord McIntosh will be dealing later. We are concerned that lottery-funded buildings should have something to go in them. Other parts of the Bill and other actions we are taking will mean that lottery funding can address the needs of both capital and revenue of the good cause sectors. That is how the distributor strategies will address the framework which governs distribution.
Lord Crickhowell: I should be grateful if the noble Baroness could help me on one specific point. I am not very good at interpreting the legal jargon of Bills, and I have cast my way around this Bill. I keep hearing the statement that there are other parts of the Bill. I simply have not been able to identify them. If there is going to be this change of policy, I want to know where it appears and to what extent action is possible under it to deal with the problem to which I am referring. I simply have not been able to identify it so far, and reading everything that has been said about the Bill. I am as confused about it as I was when I began.
Baroness Ramsay of Cartvale: But what will not be dealt with under parts of the Bill are the objectives of NESTA. That is a negative answer, but I can certainly tell the noble Lord what is not there. When we come to Amendment No. 39 and that part of the Bill I hope that this discussion can continue there.
It is fair to say that the proposals for NESTA have been among the most widely welcomed of all the proposals of our White Paper. Nine out of 10 of the people who responded commenting on NESTA supported its establishment. The proposals which are now embodied in the Bill have been the subject of lengthy discussion and consultation outside and inside the Government, both before and since the general election. The response to NESTA has been overwhelmingly enthusiastic. I was pleased to hear that the noble Lord, Lord Skidelsky, also gives his support to the concept of NESTA.
The reason why NESTA has so captured people's enthusiasm is that it is perceived that there is a major and damaging gap in our national life which NESTA will fill. Britain is a country full of talent, ideas, innovation and creativity. As well as a source of national pride, this surely represents a real economic as well as a cultural value. Many of the jobs of the future will depend upon creativity. If we are to make the most of the advantages of the creativity of the British people, we must ensure that we support and nurture that creativity.
Britain has too often failed to provide this support in the past. Too many of our talented young artists and musicians have found the way barred to them. Too many of our inventions have been exploited overseas because financial support could not be found to develop them here. Too many of our scientists have left to pursue their pioneering work in foreign laboratories. NESTA's primary object is,
"to support … talent, innovation and creativity in thc fields of science. technology and the arts".

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It will do so by helping talented individuals reach their full potential, and by helping turn good ideas and innovations into marketable products and services at the cutting edge of technology where financial support is often hard to come by. In these ways, NESTA will help the most talented people in our country to give of their best.
The first of the amendments of the noble Lord, Lord Skidelsky, would remove NESTA's focus on,
"helping talented individuals reach their full potential".
Instead, it suggests that NESTA should help,
"develop talent and achievements".
On the face of it I would agree that this does not perhaps seem a significant difference but in practice we believe that the amendment is drawn far too wide. Developing talent and achievement is not the same as talented people reaching their full potential. The amendment seems to be aimed at a wider group of people, including those whose talents are not yet apparent or even noticeable.
It is not a primary objective of NESTA to improve general access and involvement in science, technology and the arts, however laudable these aims are. The Government support many other programmes and projects designed to promote exactly such access, but NESTA's concern is with the brightest talents whose gifts might otherwise be diluted, squandered or just not developed. The wider NESTA's focus, the less support it would in practice be able to deliver to those with the greatest potential. The Government, therefore, support the original wording, rather than the noble Lord's amendment.
The means by which NESTA is to achieve its objects, which are set out in Clause 15(2), include:
"(c) contributing to public knowledge and appreciation of science, technology and the arts".
We see this particular means as supporting NESTA's primary objectives—promoting talent and helping develop ideas. Ensuring public appreciation of the role of creativity will help to secure public support for NESTA's activities, but we do not expect NESTA to spend as much time and money on general public awareness activities as on its primary objectives. We are therefore considering whether we need to make it clear in Clause 15(1) that the public appreciation object in paragraph (b) is subservient to the main object at paragraph (a). If we consider that this needs to be made much more explicit, we will seek to return to this issue on Report.
The noble Lord's second amendment would remove altogether NESTA's capacity to support the development of new goods and services. At the cutting edge of innovation, it is often difficult to bring ideas to the marketplace. The noble Lord, Lord Skidelsky, said he had often heard this, but he was not convinced. However, venture capital often fights shy of creative genius and all its attendant risks. The clear market failure places the UK at an economic disadvantage, and has done so until now, and it leaves others—notably the United States and Japan—to exploit and capitalise upon what was, very often, British creativity. The Japanese Government have estimated that 57 per cent. of major technological innovations which have benefited the Japanese economy
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stemmed from ideas or inventions from the United Kingdom. I know those figures are often quoted—at least, I have read them a great deal recently—but they are nonetheless telling for the fact that they have been reiterated. If one reflects on what that means, it surely makes an unanswerable case about the fact that something needs to be done to help British creativity be exploited in its own country.
We need to do something to address this failure and to ensure that most of the benefit of British innovation, talent and ideas is reaped here and not overseas. The noble Lord's amendment would, we believe, move this major plank of NESTA's activities. That is one of its activities that has been warmly commended by so many people who have been working in exactly those fields.
I hope that the noble Lord will, on reflection, agree with the central purpose and means we have set out for NESTA. I appreciate that at the beginning of his remarks he joined in welcoming the creation of NESTA and the fact that it was endowed by the National Lottery, but I hope that in the light of all this he will withdraw his amendment.
4.30 p.m.
Lord Chorley: Before the noble Lord withdraws his amendment or otherwise, I wonder whether I could ask a question in order to try to understand a little better how this will work. I am not sure whether I am addressing myself to the amendment to subsection (2)(a) or the amendment to subsection (2)(b). But what happens in the case of an individual who works for a company—he may even own the company—which is trying to establish a new technology that it eventually wants to market? Will NESTA be able to give help to that individual? If the property rights—that is, the benefit of the invention— accrue to the company, does that preclude the individual from getting help from NESTA? Can the noble Baroness give me some guidance?
Baroness Ramsay of Cartvale: I am not sure whether I can be of complete guidance to the noble Lord, but it seems to me that it would depend very much on what agreement the individual had with his company. I do not know whether it helps to say that "persons", as used here, also includes companies. However, on the specific point of a person working for a company and applying for something that is his idea, it would depend on the relationship and the agreement between him and the company as to whether it could be treated as his personal idea or the company's. I may have misunderstood the question.
Lord Chorley: I do not want to prolong the discussion but subsection (2)(a) refers to "individuals"; I do not think that an individual can be a company. I can see that "persons" in subsection (2)(b) can be a company. Perhaps the noble Baroness will write to me in due course, but it will help tease out the scope.
Baroness Ramsay of Cartvale: Yes, of course, I shall be happy to write to the noble Lord. However, the point is that "individuals" in subsection (2)(a) does mean one or a few individuals, but "persons" in subsection (2)(b) also includes companies.
Lord Skidelsky: The Minister's reply has given us some indication of the difficulties of this subsection. That is why we are seeking to tighten it. For example, the provision in subsection (2)(a), which states,
"helping talented individuals in the fields of science, technology and the arts to achieve their potential",
seems to me to reflect a rather romantic view of the artist— the talented individual starving in the garret, and NESTA comes to his rescue. The trouble is that NESTA is the national endowment of science, technology and the arts. Unless it was purely for the convenience of the acronym that led to science and technology being put first, that has no relation to innovation in sciences and technology. These are team efforts, and creativity is a collective thing. They are laboratories, they are experiments, they are groups of people.
The word "individuals" just gives the wrong emphasis to the whole thing. It suggests that the Government have the idea of the starving artist as their paradigm. That is surely not the message that NESTA wants to be sent out, especially when coupled with the Minister's sad reflections on how inventions keep going abroad, are exploited by others and so forth, and that NESTA is designed to stop this happening. I suggest that wording does not relate to the objectives of NESTA centrally, as either stated by the Minister or in any of the notes we have had. That is why we want to change it. We may not have come across quite the right wording, but surely we have to find some way of getting "individuals" out of the central position, and making the provision more relevant to the needs of British science and technology, if indeed they are of the types that have been described.
The idea that our economy has lost a war over the past century because the British genius has not found expression in British industry and because owners are too stupid and banks too shortsighted—"Will Huttonism" one might call this—the Government have bought hook, line and sinker. It is totally unprovable. There may be something in it. there may not, but Iam interested in the mechanics of the process.
I asked a number of questions. Is NESTA supposed to enter into competition with banks in lending innovators money? Is its judgment supposed to supersede commercial judgment about the value of the products? If so, at the end of that do the losses fall to the taxpayer or to other National Lottery causes? We do not believe that NESTA should be set up to be a commercial organisation. I know the noble Baroness said this was a subsidiary aim and not the main aim, but there it is, and we believe that it should not be. That should not be the aim because only trouble will lie along that route.
I would beg the Government to take what we are saying seriously, not respond automatically, and do something to tidy up this subsection. It is going to land NESTA in trouble, and we are seeking to avoid that trouble.
Baroness Ramsay of Cartvale: I hoped that what I said would have persuaded the noble Lord that we were taking what he said extremely seriously and considering it very properly. I do not want to prolong this discussion too much at this stage, but I shall just deal with the two main points he made.
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The word "individuals", the noble Lord pointed out, carried us away on a romantic idea about starving artists in garrets. Performing and creative artists usually have a pretty bad time financially, even if one hopes they do not starve in garrets. It is also true that talented scientists and inventors have similar problems. It is not true that one cannot have the same idea about helping people who are talented in the fields of science and technology just as in the arts—whether the performing arts or the creative arts—and giving them the help that they would not he able to get in any other way. That would be a very worthwhile thing to do.
On the issue of trying to help market British inventions, I do not quite know why the noble Lord keeps repeating that this is not provable. When the Japanese Government say that 50 per cent. of the inventions it processes come from Britain, that is part of the proof of something going wrong. I do not think it is arguable that Britain has been as successful as the United States and Japan, and even as some other European countries, in making full use of and fully exploiting economically and technically the inventions of its own scientists and technologists. The noble Lord spoke about whether NESTA is going to be in competition with banks.
Lord Redesdale: I apologise for intervening at this point. One of the problems that many of the people who develop ideas have at the moment—and my own brother-in-law is a designer—is that when taking your product to market it is often easier to get it developed and produced overseas, because the processing is so much cheaper over there. Would NESTA also look along those lines of the secondary manufacture of designed goods?
Baroness Ramsay of Cartvale: Why not? This would be up to NESTA. NESTA will have as its object what we have put down. The way it could try to achieve its end of helping British inventors to market their inventions properly would be up to NESTA, and I would see no problem in it looking at all these potential ways of doing it.
With regard to the question of being in competition with banks, NESTA is not meant to be in competition with anybody and certainly not banks. What NESTA is about is reaching the parts that other methods do not reach in this sense of giving help and support. Yes, the noble Lord, Lord Skidelsky, is right in that there may be losses here, and the reason why venture capital is sometimes reluctant to help create a genius, as we have said earlier, is because there are big risks involved. We therefore must accept that NESTA will have to take risks, and NESTA will undoubtedly back some things which will lose money. That is why NESTA will have to take risks which venture capital will not be prepared to take, but that is one of the reasons why I believe we need NESTA.
Lord Skidelsky: We will not prolong this. One day I hope to persuade the noble Baroness that the Japanese examples she cited are part of what is called the diffusion of technology. There is nothing sinister whatever: it is a

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very natural process that goes on the world over. She has, I believe, hinted that the Government will look at this. Therefore, I beg leave to withdraw my amendment.
Amendment, by leave, withdrawn.
[Amendment No. 37B not moved.]
Lord Skidelskymoved Amendment No. 37C:
Page 18, line 13. leave out subsections (3) and (4)
The noble Lord said: We would see no need for these subsections if subsection (2) had been amended as we proposed. NESTA's remit in that case would cover everything which we believe it should do. If I am wrong about this, will the Minister give examples of the kind of changes in remit which might be required? We probably should not have a long discussion on this, because it may fall within the reconsideration of the previous amendment, but I should like to say that this was the reason behind it. If the Government accept the intention of our previous amendments, it seems to me that the Secretary of State's duties become largely redundant. I beg to move.
4.45 p.m.
Baroness Ramsay of Cartvale: I should make it clear that we do not accept the intentions behind the previous two amendments. I was trying to be very reasonable and appreciative about the points that the noble Lord was making, but we do not accept the intention behind the previous two amendments. On this amendment—and it hangs together with the next one, Amendment No. 37D—it has been a principle from the beginning, as I tried to say when I was speaking to the first two amendments, that NESTA's policies and procedures should be at arm's length from the Government. Ministers should have no power of policy direction over NESTA; that is exactly right and as it should be. NESTA's objects are described in Clause 15(1), and there is no reason why these objects should change as time goes by.
Clause 15(2) describes the means by which NESTA is to achieve its objects. It is conceivable that those means might need to change, or other means might need to be added, if NESTA is to be able to meet its objectives. After all, NESTA is meant as a project for the 21st century. Science, new technology and the arts are developing at a fantastic pace, and we cannot predict what the circumstances will be in 10 years' time, let alone 20 or 30 years' time. We believe that it would be unwise to tie NESTA indefinitely to the means we have identified today.
NESTA's chair and trustees will need to be in command of the latest developments in their fields. They will be chosen to be able to do that. They will be charged with keeping NESTA at the forefront of encouraging new opportunities as they arise. As the arts, sciences and new technology develop, they may find in the future that they could achieve their objects more effectively by different means. Clause 15(3) and (4) give the Secretary of State power to amend the means by which NESTA is to achieve its objects, subject to an affirmative resolution procedure in both Houses of Parliament.
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I should emphasise that this power is exercisable only at the request of the chair and trustees of NESTA itself. There is no question of the Secretary of State being able to change the nature of NESTA's activity of his own volition. I should also say that the Government have no particular circumstances in mind in including this provision. It was felt that it would be too restrictive not to give the chair and trustees of NESTA the opportunity to put the case for different or additional means. With this in mind, I hope that the noble Lord, Lord Skidelsky, will agree that, far from allowing ministerial influence on NESTA's policy, Clause 15(3) and (4) are important provisions to ensure that NESTA remains at the cutting edge of innovation. I therefore invite him to withdraw his amendments.
Lord Skidelsky: I note that the Minister said at the beginning of her remarks that the Government are not really disposed to accept the intention behind the previous amendment on which this hangs. Therefore, in withdrawing the amendment, I reserve my right to return to previous ones. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 15 agreed to.
Clause 16 [General duty and powers]:
[Amendment No. 37D not moved.]
Clause 16 agreed to.
Clause 17 [Initial and subsequent endowment]:
Lord McIntosh of Haringeymoved Amendment No. 38:
Page 19. line 6, leave out ("and") and insert ("or").
The noble Lord said: This is a drafting amendment. I am grateful to my noble friend Lady Young of Old Scone for drawing my attention to the point. Clauses 5 and 6 define the new good cause as "health, education or the environment", but Clause 17, as currently drafted, shows it as "health, education and the environment". I beg to move.
On Question, amendment agreed to.
Lord Redesdale Lord Redesdale moved Amendment No. 39:
Page 19, line 11, leave out from ("allocated") to the end of line 14 and insert ("for expenditure on or connected with health. education and the environment.").
The noble Lord said: The purpose of the amendment is to look at the funding of NESTA. Many of us believe that NESTA will be a very exciting and innovative project and we wish it the best of luck in all it does. However, one aspect about which we are concerned is that under the provisions set out at present funds for NESTA are already accumulating in the shadow funds for the new opportunities fund. With the inclusion of the amendment, we want to probe the Government's intentions over where future finance will come from. We believe that further endowments from the Secretary of State should come from the new opportunities fund rather than from the other good causes, which would give considerable alarm to them. This issue was flagged up by the noble Lord, Lord Rothschild, at Second Reading. The purpose of the amendment is to get an assurance from the Government that it is their intention

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that any further endowment to NESTA should come from the new opportunities fund in the future and not from the other good causes. I beg to move.
Baroness Rawlings: Coupled with Amendment No. 39 is Amendment No. 39A. This is a probing amendment which is intended to seek clarification about the destiny of the old good causes' share in the lottery proceeds. At Second Reading the noble Lord, Lord Rothschild, raised serious concerns about the provisions of Clause 17(2). The Minister had little reassurance for him at the time. He said:
"The Government have assured [the National Heritage Lottery Fund, the Arts Council, the English Sports Council or any of the other distributors] that they will receive the money that they expected, and will continue to receive that money until the end of the present licence. No further assurance has ever been possible-.— [Official Report, 18/12/97; co1.7881
This provision seems to give the Secretary of State licence to raise a distribution fund at the expense of the old good causes on which so many people depend. We believe that such action is wrong in both principle and practice. In principle, it represents a further departure from the equality between the good causes enshrined in the 1993 Act; in practice, it would cause the problems of planning difficulties, over-commitment and uncertainty for recipients that the noble Lord, Lord Rothschild, highlighted. We want to protect the old good causes. We want to see only the Millennium Commission's share of funds go to NESTA when it completes its task.
Lord Crickhowell: This group of amendments takes us to Section 22(3) of the 1993 Act and the distribution to the good causes. It therefore enables me to press again the point that I raised earlier, particularly to pursue the point that, having got the money from the distribution fund, in whatever proportion, into the good causes, how much discretion then exists for moving from the previous policy of confining expenditure largely to capital projects to a wider interpretation and to a greater use for revenue funding, and what are the Government's intentions in this respect. I look forward the hearing the Minister's reply.
Lord Rowallan: The initial endowment for NESTA is to come from money set aside for the new good causes. However, after one year the Bill enables one to increase the NESTA endowment directly from the National Lottery Distribution Fund. This could reduce the amount to existing good causes.
The home countries' sports councils, as noble Lords are probably aware, have a very good programme at the moment of supporting up-and-coming elite sports performers through their world-class performance programme. Nearly £300 million will go towards that, which is extremely worthy. Can the noble Lord confirm that sports funding will not be reduced? If NESTA is to receive further endowments from the National Lottery Distribution Fund, can the Minister also confirm that this funding will not reduce the amount of funding for sport?
Lord McIntosh of Haringey: My noble friend Lady Ramsay said in response to the earlier amendment that
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we would address these issues of funding when we came to this group of amendments, and I am happy to confirm that I plan to do so.
The noble Lord, Lord Crickhowell, has said that the percentages are set out in Section 22(3) of the 1993 Act. and he is quite correct. If he turns to Section 28 of the 1993 Act, he will see that amendments are possible by order to those percentages, with only the condition that none of the existing good causes can come below 5 per cent. of the money available for good causes. The point I tried to make at Second Reading is still valid—it was the intention of the previous government that there should be this degree of flexibility in the funding of the existing good causes—that any of them could go down to not less than 5 per cent. at any stage by order without primary legislation. In this Bill, we are simply extending the same flexibility as was intended by the previous government to, first, our new opportunities fund, and secondly, to NESTA. I am sorry to deal with these issues before I come to the specific amendments, but this is the right way round because we are talking about the continuing financing of NESTA.
The noble Lord, Lord Crickhowell, asked me in what sense we would tackle the problem which he rightly identified of risking having lottery funding for buildings rather than for people and having a large number of very fine buildings with nothing to put into them. There are two answers to that. On the face of the Bill, from Clause 8 onwards, there is a whole series of measures to increase the flexibility available to the existing distributors in the way in which they handle funding applications. They are enabled to solicit applications if they think that is appropriate, if they think there are significant gaps in applications for funding in different places or for different purposes. They are enabled to delegate their powers of approving applications to smaller groups of people who might be officials or regional committees or whatever. They are enabled to undertake joint schemes so that good causes which fall at the boundaries between arts, sports, charities and heritage, or indeed the millennium, can be undertaken and approved in a more rational way. This comes back to the case which the noble Lord, Lord Crickhowell, himself raised in Cardiff, and on which I still have to write to him. They are required to produce strategic plans which will enable applicants to understand the thrust of their funding policies and make it easier for applicants to respond appropriately.
The specific point the noble Lord makes, which is in addition to these provisions, concerns the change of emphasis from capital projects to revenue projects. That will be given effect by policy directions made under Section 26 of the 1993 Act. We do not need to have it on the face of this Bill, although the provisions to which I have referred in Clauses 8 to 10 will help in the working of distribution.
I should repeat the warning I gave at Second Reading. You cannot simply fund a building and then indefinitely fund what goes into it. That would mean that every time you funded a building, the cost to the good cause would be cumulative. Gradually, over time, the amount of funding available for new projects will diminish as the continuing revenue funding obligations increase. So we

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cannot go that far but we can do what we have done, which is simplify and make more flexible the funding procedures of the good causes, and we can, as we plan to do, change the policy directions to make revenue grants more appropriate. With that necessary digression, I return to the amendments in this group.
If I may respond first of all to the noble Lord, Redesdale, I am afraid we cannot accept his amendment. The 1993 Act provided Ministers with wide order-making powers, subject to the affirmative procedure, to re-allocate lottery funding between the good causes. That is what I referred to in Clause 28. Parliament recognised that there were all sorts of circumstances, not foreseeable at the time of the legislation, which might mean that there was a strong case for increasing or decreasing particular good causes' shares without the inflexibility and delay which would be caused if primary legislation were necessary.
All we are seeking to do by means of Clause 17(2) is to provide an equivalent degree of flexibility for NESTA. NESTA is not, of course, a lottery distributor. It will not receive a percentage stream of lottery funds. nor should it. We see it as a body apart from the lottery, and to tie it to a stream of lottery funds, which would be the effect of the noble Lord's amendment, would undermine this. It might also make other potential contributors more reluctant to contribute. However, we need to give ourselves the opportunity in future to respond to any need to increase its funding with the widest degree of flexibility about how we do so. It might not merely work, but work wonderfully well, and need more money for very good causes indeed.
Therefore, limiting the source of funding to the new good cause share—to the new opportunities fund—as the noble Lord, Lord Redesdale, suggests, would deprive us of that flexibility. We would not be able to take a view, across the good causes as a whole, of the competing demands. NESTA would only be able to receive a further endowment if the new good cause share happened to be able to fund the whole of it. That would not be right since, as I hope is clear already, NESTA will not be a new good cause initiative, nor does NESTA have any more of a relationship with the new opportunities fund than it will with any other distributor.
5 p.m.
Lord Redesdale: I shall press the Minister. We are looking at the Government's intentions here. Is it the Government's intention to replenish on a regular basis NESTA's endowment, and to what extent, if it was a significant amount of money, would that affect the percentages of the other good causes? I realise that it is not within the stream but it would affect the money they expected to receive.
Lord McIntosh of Haringey: That is quite right, of course, and I have some specific assurances that I wish to give to the Committee about that. However, let me deal with Amendments Nos. 39A and 39B, which concern the millennium, before I come to the assurances, because they apply to both.
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The amendment of the noble Baroness, with the accompanying consequential Amendment No. 39B of the noble Lord, Lord Skidelsky, would in effect rule out NESTA ever receiving a further endowment. As I explained when we were discussing Clause 5, the Millennium Commission's entire projected funding of £2 billion is already committed or definitely allocated to programmes. There will be no scope for funding additional resources for NESTA from that money, and when the millennium stream has delivered the projected £2 billion the millennium good cause will cease to receive funding.
As I made clear in discussions on Clause 5, the Government do not believe, any more than the last government did, that it is sensible to limit flexibility to respond to circumstances which cannot be predicted. That is why I hope the Committee will reject these amendments.
However, I can give certain assurances about funding. First, the Government have no current plans to use the power. We consider that an endowment of £200 million provides NESTA with a fair and affordable endowment from the lottery. Circumstances would have to change significantly before we could consider making a further endowment.
Secondly, there would certainly be no question of using the power in a way which went against the expectation of the existing good causes that they will between them receive £9 billion over the lifetime of the current licence. Thirdly, if we were to use it, we would do so only after considering most carefully the outcome of the consultation which we are required to undertake by subsection (3), and in particular the impact any proposal would have on the distributors' ability to meet their commitments or to carry out their strategy.
I hope, with those assurances, noble Lords will feel that their amendments are not appropriate.
Lord Monro of Langholm: I am grateful for the point that the noble Lord, Lord McIntosh, made about the capital and current expenditure by the distributors, for instance the Sports Council on capital projects and on running expenses. We have been talking about this for approximately two years, and informally one understood the Sports Council was moving towards this. When will the Government be making the policy directions so that it can get on with this, and will it be in this financial year, so that sports councils can begin to work firmly towards supporting non-capital expenditure, which we both agree is so important?
Lord Crickhowell: I should like to follow up that point, because I was about to make a very similar point, but to carry it beyond the field of the sports councils. I am most grateful to the Minister for his clarification of the position, and for confirming that the constraints placed upon the distributing bodies—confining their grants largely to capital—was a matter of direction rather than legislative limitation.
Of course, I am well aware that it was originally introduced very largely at the wishes of the bodies to be funded, who feared that if money was initially available on a wide scale for revenue funding any government

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would see this as a wonderful opportunity to cut revenue funding from the Treasury. It was therefore thought to be a safeguard. I think people no longer see it in quite that light, partly because of the problem, which has manifested itself with increasing strength as the years have passed, that there are magnificent improvements to the facilities but not enough money for what goes on inside them. In any case, people have discovered that revenue funding from the Treasury can, whatever happens, be cut, and indeed funding from the lottery may be cut. It is no longer seen as an effective safeguard, and therefore people—not just the Sports Council—are anxious to have a clarification of government policy.
I know that my noble friend Lord Gowrie, who is chairman of the Arts Council of England, has been discussing these issues with Ministers over a considerable period, but there has not yet been any real clarification of policy. There is considerable anxiety, not only in relation to sports but certainly the arts, that there should be greater flexibility, and that there should be an indication of the way things are going. In any case, the definition of what constitutes capital and revenue is always an interesting semantic exercise, and those of us engaged in business as well as in government affairs sometimes find the distinctions are not easy to make. Certainly in the field of theatrical, operatic or musical productions, for example. it is perfectly easy to argue that one is justified in funding an initial production, because it may last a decade or more, and continue to produce a source of revenue to the company. It is absurd to have a constraint on the ability to provide funding of that kind.
Grateful as I am to the Minister for clarifying that there is the capacity to change the present rules, and for some indication that it is indeed the Government's intention to do so and all the rather vague words uttered by the Secretary of State on television programmes and elsewhere that we are moving in this direction—
The Deputy Chairman of Committees (Lord Strabolgi): I am sorry to interrupt the noble Lord, but there is a Division in the Chamber. The Committee will adjourn and resume in 10 minutes.
[The Sitting was suspended for a Division in the House from 5.10 to 5.20 p.m.]
Lord Crickhowell: I was speaking of the importance of having clarification of the Government's intentions in this regard within the discretion available to them. I am grateful to the Minister for going the limited way he has today, which is helpful. The issue is of such great importance for sports bodies, bodies funded by the Arts Council and indeed the heritage bodies that I propose tabling an amendment at a later stage so that we can have further clarification and a clear statement of the Government's intentions in another place. I intend to pursue the matter further.
Lord Rowallan: I am afraid I feel the Minister did not come back to me either, and I would be grateful if he could expand slightly on his programme. The world-class performance programme and the United Kingdom Institute of Sport which was set up precluded
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any sports money having anything to do with NESTA. I am extremely concerned that money could disappear from this extremely good cause if we are not very careful. Could the Minister confirm or deny the situation?
Lord Chorley: I do not want to take up more than a moment of time. I am glad the noble Lord. Lord Crickhowell, mentioned the Heritage Lottery Fund because it seems to me that exactly the same points about revenue funding apply there. Perhaps also in addition—although I do not want to go into detail if there is to be some sort of clarification—there is the whole question of endowment funding, which is also wrapped up with this sort of issue.
Lord McIntosh of Haringey: Noble Lords opposite are entirely right that the question of capital versus revenue funding is one of very long standing, not just in relation to the lottery but in relation to public expenditure generally and indeed in all walks of life. It has been going on for a long time, it covers all of the good causes and more, and it will not go away. I rather thought that if I left noble Lords opposite to it, they would continue to debate the issue among themselves and I would not need to intervene at all, because they have put both sides of the argument among themselves perfectly satisfactorily. I recognise the validity of the different points which they all make.
All that remains is for me to make clear again that the Government recognise that it is not possible to go over to complete revenue funding, because of the wishes of the distributors and the good causes to preserve additionality and because of the fact that it would gradually clog up the flow of funds for new projects: nor is it possible to stick to the original position of funding buildings and not people. I have already given an undertaking that policy directives are in preparation. I can confirm that we are already in discussion with the distributors about those policy directives. We hope soon to be able to enter formal consultation with the distributors, and we hope to issue the new directions in March or April this year.
Lord Chorley: Before the Minister sits down, can he say whether these policy directives will also cover the question of endowment funding?
Lord McIntosh of Haringey: Yes, I think they should do, because endowment funding is in competition. Although NESTA is not part of lottery funding as such, it is clearly in a sense in competition with streams of funding for new money coming in from the lottery.
Lord Skidelsky: Before the noble Lord, Lord Redesdale, has the last word on this group of amendments, may I make one interjection? The Minister was quite right to remind us that Section 28 of the 1993 Act allowed the percentage for each good cause to sink to 5 per cent. If I may repeat the point I made before. in the situation facing us today there is an urgent need to protect the old good causes against the politically insatiable demands of the new good causes. That is quite

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a new situation because this new good causes did not exist in 1993. That is just an observation which does not call for a reply.
Lord McIntosh of Haringey: I need to reply because, first, I have given firm and literal assurances about our intentions, and, secondly, the Bill itself contains percentages which reflect our intentions which do not include going down to 5 per cent.
Lord Redesdale: The purpose of the amendment was to achieve assurances, which the Minister has given to an extent, although it has been the basis of an extremely wide-ranging debate. I hope the Minister will accept my scepticism, not because I do not believe he has every intention of honouring the commitments he has made but because I do not believe that many governments will pass up the opportunity in the future of making additional alterations to the National Lottery Bill. I believe that is an argument we will have in further legislation, if that ever happens. I take the Minister's assurance that he does not see it happening at the moment, but I look forward to having those arguments during debates on that legislation. I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Baroness Rawlings Baroness Rawlings had given notice of her intention to move Amendment No. 39A:
Page 19, line II, leave out from ("for") to end of line 14 and insert ("expenditure on projects to mark the year 2000 and the beginning of the third millennium").
The noble Baroness said: I hope that it will never get to the stage of going down to 5 per cent. I do not intend to move the amendment.
[Amendment No. 39A not moved.]
[Amendments Nos. 39B and 40 not moved.]
Lord Skidelsky Lord Skidelsky moved Amendment No. 40A:
Page 19, line 21, leave out (", without the approval of the Secretary of State").
The noble Lord said: This is a probing amendment. We do not know what the Government intend here. Subsection (5) states that,
"NESTA may not spend their endowment, or any part of their endowment, without the approval of the Secretary of State".
Is it intended that NESTA should get some approval or might get some approval to spend its endowment? We believe that, on the face of it, it should not spend its endowment. Its endowment should be to provide a stream of income for the causes it supports. Under what circumstances do the Government envisage that NESTA would be spending its endowment? We want to get clarification of these questions. That is why we have tabled the amendment. I beg to move.
Lord Redesdale: I would also like an assurance from the noble Baroness, Lady Ramsay, because I believe that the case is that the chairman and trustees are to be
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appointed by the Secretary of State. Can she give some indication of how the independence of that body should be guaranteed or promoted in its inception?
Baroness Ramsay of Cartvale: I hope I can reassure both the noble Lord, Lord Skidelsky, and the noble Lord, Lord Redesdale, on the points they have raised. As the noble Lord, Lord Skidelsky, indicated, the amendment would prevent NESTA under any circumstances from spending any part of the capital of its endowment from the National Lottery. Currently, the Bill provides that NESTA may do so with the Secretary of State's approval.
The principle on which NESTA is established with an endowment from the National Lottery is that it should safeguard the endowment itself and fund its programmes and running costs from the investment income it receives from the endowment as well as from revenues it attracts from other sources. The endowment is an investment for the next century and it needs to be secured. That is the principle.
But the Government recognise that some flexibility is necessary at the edges. When NESTA is first established with the staff and accommodation it needs to start its work and with all the attention it will have upon it, it will need—if I may speak bluntly—ready cash. It will not have started attracting a flow of investment income. Nor can it be guaranteed that donations from third parties will have started flowing in at the beginning when it needs to start its activities.
In those early days, NESTA will need to be able to spend a small portion of the capital sum of the endowment. That is the key reason we have provided a power in Clause 17(5) for the Secretary of State to approve such spending. It is a purely practical response to an inevitable practical issue. The amendment of the noble Lord, Lord Skidelsky, would remove that power.
There may be other circumstances in which NESTA may wish to spend part of its capital. It may have the opportunity to support a one-off programme which it cannot afford alongside other priorities in a single year. It may therefore wish to adjust its spending profile to spread the investment over more than one year. To do so, it may need to spend a little capital, to be paid back into the endowment in the following year. In those circumstances it would appear to us to be reasonable for NESTA to come to the Secretary of State to seek approval for what might be a perfectly sensible course of action.
Whatever the circumstances, any approval that the Secretary of State were to give under this clause could be subject to financial directions which he issues under Clause 19. The Secretary of State could, for example, specify over what period NESTA should budget to pay back into the endowment any part it has spent with permission.
The Government fully intend to do all they can to preserve NESTA's endowment for future generations. This power and the counterbalance provided by the financial direction powers provide necessary flexibility at the margin.

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In answer to a direct point from the noble Lord, Lord Redesdale, the Secretary of State appoints the trustees but he has no power to direct them on their policies or programmes. It is the trustees themselves alone who will have the responsibility for deciding what NESTA should do in seeking to meet the objects that Parliament sets for it. 1 hope that that answers that specific point.
We feel that the amendment in the name of the noble Lord, Lord Skidelsky, would prevent the Secretary of State from responding flexibly and practically to the issues that NESTA will face in aiming to meet its objectives. I hope that, on reflection, he will agree that the power we propose is necessary and sensible. I assure the noble Lord that our main aim is to ensure probity and accountability. This is a practical proposal for what we see as very occasional practical problems that might arise.
5.30 p.m.
Lord Skidelsky: What the noble Baroness has said is very clear. Flexibility is written all over the place; it is a departmental obsession, not just in the noble Baroness's department but in every department. The Secretary of State has to have flexibility. The intentions of the present Secretary of State are incredibly honourable, and this provision will he used only very sparingly in the occasional practical difficulty that arises in starting something up. Indeed. Then we come to a new Secretary of State and there are all these powers. We remind the new Secretary of State of what the noble Baroness has just said and he says, "New Government, new circumstances".
Discretionary powers of this kind are always rather worrying because, whatever the intentions of the present incumbent, they offer no indication of what a future Secretary of State will do. That is why we are worried about them. Of course, we cannot do anything about it at this stage, and I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringeymoved Amendment No. 41:
Page 19, line 22, leave out subsection (6) and insert—
("(6) In subsections (2) and (5) above, "endowment" means the aggregate of any amounts paid to NESTA under subsection (I) or (4) above.")
The noble Lord said: With the leave of the Committee, I shall speak also to Amendments Nos. 42 and 43. Before I do so, may I comment on the last words of the noble Lord, Lord Skidelsky. He may come back as often as he likes!
May I remind him that we have just had a change of government, and what the present Government are doing is retaining the flexibility that was provided for by the previous government. And it is now being attacked by the supporters of the previous government, who put in the flexibility in the first place. I wonder whether flexibility is more in Opposition than in Government.
Lord Skidelsky: The noble Lord will have noticed that I was not a member of the previous government and therefore do not feel bound by everything they did.
Lord McIntosh of Haringey: At the Dispatch Box there is collective responsibility and that applies to the
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Opposition Dispatch Box as well. Amendments Nos. 41, 42 and 43 are, I hope, welcome in the sense that they simplify the language of the Bill. Clause 17(6) currently defines what is meant by NESTA's endowment as the total of any contribution to NESTA from the lottery. The wording used is less than elegant and the amendments put it more succinctly in the same words. Amendment No. 41 saves seven words, Amendment No. 42 saves 14 words and Amendment No. 43 also saves 14 words. I beg to move.
Lord Crickhowell: I would also entirely agree that the wording is an improvement. I just seek clarification or confirmation on one point. When we talk about the aggregate of the amounts paid, can the noble Lord tell me exactly what that means when we come to the growth of the fund and the investment record of the fund? Is it a fixed amount, or is it an amount that the aggregate then becomes when perhaps the capital has grown? May I just have clarification of what the aggregate means in this sense as the years pass? The fund may grow or it may reduce according to the investment result. We want to know what the answer to that question is.
Lord McIntosh of Haringey: It is the aggregate of any amounts available from the lottery. So of course as lottery funds grow, the amounts will grow.
Lord Crickhowell: I am not sure that the noble Lord entirely understood my question. I take the point that, as each grant is made, they are taken together and you will have a total. However, I am simply seeking confirmation that that aggregate total, which may rise and fall according to the way the investments perform, the whole amount of it—whatever the sum is—remains the aggregate and it takes account of the future changes in value. That is all I am seeking by way of confirmation.
Lord McIntosh of Haringey: If the noble Lord is asking me whether it includes the interest, no, it does not include the interest; it includes the original sums. However, the original sums are the endowment provided in Clause 17(1) and additional payments made under order by the Secretary of State under Clause 17(4). It is therefore the original sums and not the interest payable on them.
Lord Chorley: It seems to me that what is being proposed in the new amendment is what is known as historic cost accounting: that is to say it takes no cognisance of the effect of inflation. Perhaps that is the rule that might be looked at—it should be a more current cost accounting. It is the historic amounts which went into the fund at the particular dates that the noble Lord mentioned and, if 15 years down the line there has been a lot of inflation, you could pay out the difference between the historic cost and the new value if it has been invested sensibly in equities or other things.
Lord McIntosh of Haringey: I do not have the noble Lord's accountancy qualifications to which he referred in an earlier session. This is an endowment and the income from the endowment is being spent to meet the objectives set out in Clause 15 of the

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Bill. Therefore, there is no addition to the endowment from the accrual of interest, because all of that is going to expenditure from the endowment. It is in cash and it is invested by the Treasury under normal arrangements.
Lord Chorley: This is really not the time to get into technical arguments on current cost accounting and historic cost accounting. Perhaps we can have a word outside the Committee on this point.
On Question, amendment agreed to.
Clause 17, as amended, agreed to.
Clause 18 [Other duties]:
Baroness Rawlingsmoved Amendment No. 41A:
Page 19, line 32, leave out ("shall he under a duty to") and insert ("may").
The noble Baroness said: I beg to move Amendment No. 41A. As my noble friend Lord Skidelsky has argued, we are concerned about the nature of NESTA. We accept that it cannot be a charity because it would be unable, for instance, to grant loans or enter into joint ventures, as proposed by Clause 16(2). As set up, it is more akin to a non-departmental public body on a long lease from the Treasury, as the endowment sets it free from the PESC treadmill.
If it is not to be a charity, it appears inconsistent to make NESTA similar to one by placing it under the obligation to fund-raise. It is extraordinary for a government to set up a body to raise public donations to deliver government policy. We feel strongly that a body with clear government backing, which will fund-raise in direct competition with other charities, is bound to affect the flows of charitable giving.
I accept it is a point of debate whether the lottery is the sole cause—or indeed a cause—of the decline of charitable giving in recent years, but it seems rash, however, to rule out that the lottery has damaged charities, and the impact of NESTA on the charitable sector should be carefully assessed. I would therefore argue that it would be prudent to limit the fund-raising powers of NESTA.
Baroness Ramsay of Cartvale: As the noble Baroness has made clear. this amendment would remove the duty on NESTA to seek sources of income other than the lottery endowment. It would, however, give NESTA a permissive power to do so.
Clause 18 places a specific duty on the trustees of NESTA to raise money, as well as other forms of assistance, from a variety of sources, to supplement its endowment from the lottery. We do not agree with the noble Baroness's amendment to make such fund-raising optional.
I hope the Government have demonstrated their determination to establish a body with considerable freedom of action, clearly at arm's length from the Government. Our consultation process told us that people wanted NESTA to be set up, and set on its way, without any ongoing involvement from government in its policies and priorities. We share that vision of NESTA.
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Clearly, in establishing such an independent public body, and in granting it a large endowment from the National Lottery—£200 million—Parliament and the Government need to be clear what they expect from NESTA. That is why in Clause 15 we have set out NESTA's objects and the means by which it should seek to achieve those objects.
If NESTA is to succeed in its mission, it must secure the support of the general public, of talented individuals, and of the creative and business communities. In many ways, NESTA is akin to a charity. Its aims are intended to benefit the nation as a whole as well as the individuals it supports. Like a charity, one of its primary activities must be to seek support from wherever it can.
Whether NESTA is or is not a charity is, of course, a matter for the Charity Commission. The Charity Commission has indicated informally that it is unlikely that NESTA's objects are exclusively charitable, and I think even to a non-expert eye that would seem to be rather a reasonable conclusion.
To the question of whether NESTA is fund-raising for government policy—which I think the noble Baroness indicated in her introduction of the amendment—the answer is certainly not. NESTA will raise funds for NESTA's policies. The Government will have no influence once Parliament has passed and set up the objectives for NESTA. It will be NESTA which pursues whatever policies it thinks fit for achieving its objectives.
The endowment from the lottery will allow NESTA to make a significant contribution from the very outset. It will place NESTA in the list of the top 10 grant-making trusts in the UK. But, if its mission is to continue, to develop and to expand, it must widen its resource base and use its income to invest in what—as we have said so often before—we intend it to invest in; British creativity, talent and ideas. I do not believe that this activity can be an optional extra. The Government and Parliament will commit themselves to NESTA through the endowment from the lottery. It is only right in return to expect NESTA to do all it can to build on that public investment by seeking further contributions to its resources.
I hope that that has helped to convince the noble Baroness and to understand why the Government see this duty as wholly appropriate as a duty and not a permissive possibility. I hope she will consider withdrawing her amendment.
5.45 p.m.
Baroness Rawlings: I thank the noble Baroness for that explanation. I still find phrases like "akin to a charity" rather enigmatic. This duplicates the roles of many charities, which is a great shame. When the noble Baroness also mentions that NESTA will be totally independent, we must not forget that its chairman and the board will be appointed by the Secretary of State, so it is not an elected body like the National Trust. The National Trust chairman is elected from within the body.

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I beg leave to withdraw the amendment for the moment, with the right perhaps to come hack to it at a later date.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 42:
Page 20, line I, leave out subsection (5) and insert—
("(5) In this section "endowment" has the meaning given by section 17(6) above.").
The noble Lord said: I beg to move.
On Question, amendment agreed to.
Clause 18, as amended, agreed to.
Clause 19 [Directions etc]:
Lord Skidelsky Lord Skidelsky moved Amendment No 42A:
Page 20, line 13, leave out subsections (2) to (5) and insert—
("( ) If NESTA fails to comply with any directions given to them under this section, the Secretary of State may after taking into account any representations made by NESTA, act pursuant to paragraph 3(4) of Schedule 4.").
The noble Lord said: The purpose of this amendment is to white out one of the Secretary of State's fingerprints. Schedule 4 gives the Secretary of State power to appoint all NESTA's trustees and remove any or all of them if they are unable or unfit to discharge their duties. These are very ample powers, as my noble friend has just pointed out. We feel that they should not be supplemented by the further power to fine NESTA for not carrying out the Secretary of State's directions. The principle we propose is very simple—appoint people to do a job and sack them if they do not do it, but do not whittle down their financial resources while they are trying to do it.
We also see practical difficulties about fining. Suppose the Secretary of State were to remove the whole or part of NESTA's endowment, as he is entitled to do. What would happen to the projects in the pipeline—applications for grant which had already been approved? Would they just be cancelled? Both on grounds of principle and on practical grounds, there is a good case for our amendment. I beg to move.
Baroness Ramsay of Cartvale: I hope that in a reasonably simple and straightforward way I can clear up what is perhaps a misunderstanding about the situation. The powers which the Bill would enable the Secretary of State to exercise over NESTA are actually very limited. They are chiefly concerned with safeguarding the public investment in NESTA through the endowment from the National Lottery. Clause 19(1) allows the Secretary of State to issue NESTA with directions concerning its financial arrangements.
It is clearly important that the public's investment in NESTA is secure at all times. The financial directions will provide the proper level of accountability and control to allow the Secretary of State to ensure that this achieved. There clearly also needs to be some backstop provision to allow for the unlikely event of NESTA failing to comply with any such direction. The Bill as drafted provides the sensible and responsible solution that in those very unlikely circumstances the Secretary
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of State will be able to require NESTA to pay hack to him all or any part of the endowment. This will enable him to continue to safeguard the lottery endowment.
The amendment of the noble Lord, Lord Skidelsky, as I understand it, suggests an alternative approach. He suggests that the Secretary of State should be given the power in these circumstances to remove the chairman or trustees of NESTA. We can certainly see the point of the amendment. It is both to act as a deterrent to activity outside the terms of the financial directions, and to enable the Secretary of State to change the board so as to address the perceived shortcoming.
However, this amendment does not provide a quick and direct means by which the Secretary of State can assure himself that the lottery endowment is safeguarded. That, I believe, is the main drawback of the amendment. It is high on deterrent value, but low on practical financial protection.
In practice, none of us expects either of these provisions ever to come into play. We do not need a deterrent to reckless behaviour by the trustees. After all, we are placing them in a position of trust, which is why we are calling them "trustees" in the first place. and we are sure they will do their utmost to live up to that trust. All we need is a longstop provision to safeguard the public's money. That is provided by the Bill as drafted, and I hope that the noble Lord, Lord Skidelsky, will accept the point. The point is to secure the endowment, not to sack the trustees.
We are very serious about trusting the trustees, but we are equally serious about securing the endowment, and that is why we have drafted this provision as we have. I hope that puts the noble Lord's mind at rest as to the motivation behind it, and that he will withdraw his amendment.
Lord Skidelsky: I am full of anxiety. I would just ask the noble Baroness whether she could answer my second point concerning the practical problem of projects in the pipeline, which would presumably have to be cancelled if the Secretary of State withdrew parts of the endowment and, therefore, the stream which went with that endowment.
Baroness Ramsay of Cartvale: It seems to me that in the extreme, almost unimaginable, circumstances of something so untoward happening that the Secretary of State had to ask the trustees to reimburse part of the endowment which had been grossly misspent, there would still be money in place for the projects which were considered perfectly legitimate. It would only be in order to retrieve what had been misspent that the money would be demanded back. We are dealing in very hypothetical situations here of course, but we are, after all, legislating for that.
If a "melt-down" situation applied—which is why we have included the provision—then the trustees would be changed and Clause 17(2) would be used to re-endow whatever new trustees would be in place. The whole point is to try to get back the money that was misspent. Presumably the trustees would also be replaced by new trustees. We are dealing with a situation in which there would be a considerable crisis. I do not believe that a

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project which was up and running would present a big problem. Indeed, the whole point of trying to get the money back is so that there would be money for legitimate projects to go forward.
Lord Skidelsky: I am impressed by the ability of the noble Baroness to think out these matters on the hoof. Unimaginable though any of this may seem, the Bill is always ensuring against unimaginable contingencies and this is one against which it has not insured because it is not convenient for the Government to do so. I was raising the case, which does not seem to me at all unimaginable, that a percentage of the endowment is cancelled, and therefore the projects that depend on that stream of money cannot go ahead. The noble Baroness says, "Ah!", but in that case we can re-endow NESTA and Clause 17(2) gives us the machinery to do it. However, it does not mandate that at all, it does not say that it has to be done. It may possibly be done not at that moment, at some other point, and therefore there is still the practical problem I raise. I wish that the noble Baroness would give it some consideration because it is there—unless she can allay my deep anxieties even further.
Baroness Ramsay of Cartvale: I shall write to the noble Lord at greater length, but the basic point is this. What must be done in a situation of crisis where money has been clearly misspent is to get the money back and to secure the endowment. I accept there might be a hiatus in which legitimate projects would have a cash-flow problem from NESTA, and that would be put right by restoring the endowment, both by getting the money back and by making good the shortfall. It might make the matter clearer if I write to the noble Lord at greater length.
Lord Chorley: I do not quite see how one can get the money back if it is gone, but perhaps that can be covered in the letter that the noble Baroness is to write to the noble Lord, Lord Skidelsky.
Lord Skidelsky: I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Lord McIntosh of Haringeymoved Amendment No. 43:
Page 20. line 29, leave out subsection (7) and insert—
("(7) In this section "endowment" has the meaning given by section 17(6) above.").
The noble Lord said: I beg to move.
On Question, amendment agreed to.
Clause 19, as amended, agreed to.
Clause 20 [Annual report and forward plans]:
[Amendment No. 44 not moved.]
Clause 20 agreed to.
Clause 21 agreed to.
Clause 22 [Exemption from taxation]:
Lord Bassam of Brightonmoved Amendment No. 45:
Page 21. line 27, at end insert—

("(g) the Sports Council, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993,

(h) the Scottish Sports Council, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993,

(I) the Sports Council for Wales, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993, and

(j) the Sports Council for Northern Ireland. in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993.".").

The noble Lord said: I am rather nervous in moving this amendment because it is clear that the noble Lord, Lord Howell, would have been much better at it. No doubt he is a corporation tax expert. and I do not claim that talent.
However, what the amendment seeks to explore is Clause 22. As currently drafted, it exempts NESTA from corporation tax. The Arts Council of England and the Heritage Lottery Fund are both exempt from paying corporation tax on the interest accrued and they draw down funds from the National Lottery Distribution Fund, as they both have charitable status. The English Sports Council has, however, to pay corporation tax on the interest it receives on lottery funds it holds between the period of drawing down from the National Lottery Distribution Fund and passing to lottery recipients.
The amendment has three objectives: to seek an exemption from corporation tax, perhaps to right an anomaly and also to encourage flexibility. The amendment would give the English Sports Council and those for Wales. Scotland and Northern Ireland exemption for distribution purposes. The English Sports Council and the others are not seeking charitable status, merely a relief from the corporation tax on moneys transferred to award recipients. Their view is that this is an anomaly in the operation of the distribution fund.
I wonder whether it could have been Parliament's intention in the 1993 Act in effect to subject parts of money going to good causes to a form of double taxation. The amendment seeks to address what was an unintended anomaly. It has always been my understanding of corporation tax and other taxation that there should not be a situation where double taxation comes into play.
The other point of the amendment is this. It seeks to encourage flexibility in the drawing-down arrangements, and there are many who would argue that encouraging flexibility will make more effective and efficient use of the funds so distributed.
There are six or seven points to be considered here. In distributing the proceeds from the National Lottery to good causes, the money is not really a form of income.

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Therefore I would argue, and others might argue, that perhaps it should not be taxed as such. Corporation tax is charged in addition to the 12p paid to the Treasury on the National Lottery ticket sales, so that is a double taxation on the moneys raised by Camelot.
The third point is a matter of illustration. Between March 1995 and March 1997 the English Sports Council advises me that it paid out approximately £80 million, and paid on that £122,240 in corporation tax on the interest accrued. On current estimates, it calculates that over the life of the current lottery franchise it will pay £1.5 million corporation tax up to September 2001. That seems to me not to be a very efficient way to work with money which is primarily intended at this stage to go to beneficiary bodies.
The National Lottery Charities Board has confirmed that in the financial year 1996–97 it paid £42,000 in corporation tax on £130 million drawn down. That is, after all, a board which operates with much more draw-down flexibility. This compares with the £22,000-plus paid out by the English Sports Council. I remind noble Lords again that this is with the National Lottery Charities Board drawing down weekly rather than on a monthly basis.
I have no doubt that the Minister will argue that alternative draw-down arrangements should ameliorate the situation, but they will not resolve it. That is what the amendment seeks to encourage. Corporation tax paid by the English Sports Council, the National Lottery Charities Board and the Millennium Commission reduces the overall funding available to all of the good causes by increasing the amount that these organisations have to draw down from the National Lottery Distribution Fund. I do not believe that that acts within the spirit of the National Lottery, nor could it have been the original intention of those who legislated.
Perhaps the Minister will consider those points and give us some assurance that they will be taken into consideration. We could then make progress on what is clearly a rather thorny issue. I beg to move.
6 p.m.
Lord Addington: The amendment draws attention to the fact that the Treasury is having a second bite at the cherry. It already receives money when people buy their lottery tickets, and the funds being accrued are supposed to go towards good causes. The amendment just says that those sporting bodies should get the same treatment as other bodies. That is all.
The sums may be comparatively small in relation to the total figure that has been distributed—it may be £1.5 million—but if it is going to small causes like coaching courses or new kit for clubs and so on, that is a lot of courses; it is a lot of kit. I suggest that this amendment, or something similar to it, should be addressed because it is merely stopping the Treasury taking a second bite.
Lord Rowallan: I rise briefly to support what has been said. This is not a form of revenue; it is purely
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money going in and out, and for it to he lost at all through taxation is ridiculous when taxation has already been paid on it.
Lord Monro of Langholm: I strongly support the amendment moved by the noble Lord, Lord Bassam. As an old sparring partner of the noble Lord, Lord Howell, I know he would not have introduced this amendment without most careful thought and consultation with the Sports Council and the CCPR. I am quite sure at heart he is right that this was an anomaly which probably crept in with much enthusiasm from the Treasury in the 1993 Act. But now is the moment to redress that and give the sports enthusiasts throughout this country all the money they are entitled to.
Lord Glentoran: I have one last addition to that. I declare an interest: I am a Millennium Commissioner. It would be wrong to say that this would be irresponsible, but it would perhaps not be the ideal way of using funds. People will wish to expend the funds rather sooner than they might, whereas if they were left earning and accruing interest until a more appropriate time, when certain situations in a grant were more appropriate to fund, it would be better.
Lord McIntosh of Haringey: As my noble friend Lord Bassam said, this is a complex issue. I hope your Lordships will forgive me if I try to explain the financial arrangements for the sports councils' share of the good causes money. The share of the National Lottery proceeds allocated to each of the four national sports councils is paid into the National Lottery Distribution Fund, along with the shares of the other distributors. The money earns interest, and each of the sports councils receives a share of that interest in proportion to their balance in the fund. This interest is not subject to tax.
The sports councils then request money to be paid from the National Lottery Distribution Fund into their bank accounts as they need it to meet grant commitments. They normally make a request once a month to meet grants that will be paid in the coming month. During the time between the money being paid from the National Lottery Distribution Fund to the sports councils and its being paid to the grant recipients, it earns interest in the sports councils' own bank accounts. This interest is subject to tax because the sports councils do not enjoy tax exemption as charities do, for example. I note from what my noble friend Lord Bassam says, that it is not the intention of the sports councils to seek charitable status. It is pretty clear that they would not be able to do so.
I should stress that it is only the interest that is subject to tax and not the principle. Indeed, it is my understanding that the tax liability on the interest amounted to only £30,000 in 1995-96 and only £74,000 in 1996-97. My noble friend said he would no doubt be told that there are ways of minimising the tax without obtaining tax exemptions, and of course we do want the sports councils to maximise the amount of lottery money they are able to distribute to sports projects. However. I have to say to him, even though he anticipated it, that the best way of achieving this is not to exempt them from taxation but to ensure that the money is not paid

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to them before it is needed. This means that it is exempt from tax and indeed earns interest for them. This could be achieved through improved cash-flow management by the sports councils and by more frequent payments from the National Lottery Distribution Fund. My department is examining both of those options.
[The Sitting was suspended for a Division in the House from 6.9 to 6.20 p.m.]
Lord McIntosh of Haringey: I want to make only two more points. The first concerns why NESTA has tax exemption when the Sports Council does not. Secondly, I want to refer to the claim which noble Lords made of double taxation.
All public bodies, no matter how worthy, are subject to tax unless, like charities, they have been exempted, and sport is not a charitable purpose. The tax concessions for NESTA in Clause 22 do not set a new precedent for lottery-funded bodies. NESTA is unique for a number of reasons. First, it is a public body with activities similar to those of a charity. Secondly, unlike all other lottery-funded bodies, it will rely for its income on interest earned on an endowment, which would normally be taxable. Thirdly, again like other lottery-funded bodies, it will be under a duty to seek contributions to its own funds from other sources. Taken together, these three characteristics make a unique case for exempting NESTA from tax on its investment income and bequests and for allowing NESTA to qualify for Gift Aid and covenanted giving. The sports councils are not in a similar position.
A number of noble Lords have said that this is double taxation and it is an anomaly. Lottery duty on ticket sales is designed to be revenue neutral and compensate the Exchequer for taxes lost elsewhere (for example VAT, from substitution of expenditure by the lottery). Lottery money held in the National Lottery Distribution Fund is not taxable, as I have explained. Lottery funds drawn down by the sports councils and held in interest-bearing accounts are not taxable, only the interest that they earn. This is consistent with the principles of taxation for bodies that are not exempt from tax.
In summary, the amounts of money are very small, taxation is only on the interest, and only on the interest on that part of the money which is between drawing-down from the National Lottery Distribution Fund and being paid out to the organisations who are receiving the grants. It is better to improve cash management rather than to create what would be an additional anomaly, which would be to exempt a non-charitable body from tax. I am therefore bound to resist the amendment.
Lord Redesdale: Before the noble Lord, Lord Bassam, responds to the Minister, I do not remember hearing the argument when the 1993 legislation went through that the tax on the ticket was to compensate for tax not taken elsewhere. Was that put forward in 1993?
Lord McIntosh of Haringey: I do not know, but I imagine so. If it was not put forward, it was clearly an omission. If it was not put forward, I shall write to the noble Lord. If he does not hear from me, he will assume that I am right.
Lord Bassam of Brighton: In the face of such powerful arguments, it becomes me to withdraw the amendment. While I am encouraged by the Minister's comments that the recipient body should be encouraged to better cash-flow management, it would be nice to think that further discussions could be held on these points. I feel they should be. Perhaps some assistance to better cash-flow management could be engendered by having more flexibility about the way in which the draw-down operates. There is merit in having some further discussions around that point.
On the NESTA issue and the question of the lack of similarity between the sports councils and NESTA, I can accept two, but not all three, of the arguments that the Minister makes. Perhaps this requires some further consideration as there are points of similarity. On the double tax question, I am obviously a great fan of the Treasury and good taxation, and I can see the benefits of having a robust taxation system. Perhaps double taxation is robust taxation; I do not know. I would not wish to comment much further on that point. It is something which merits some consideration in the future. Perhaps it is an anomaly which also requires to be interrogated further. With those comments, I beg leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Clause 22 agreed to.
Clause 23 agreed to.
Schedule 4 agreed to.
Clause 24 agreed to.
Schedule 5 [Enactments repealed]:
Lord McIntosh of Haringey Lord McIntosh of Haringey moved Amendment No. 46:
Page 32, line 45. column 3, leave out ("and, in paragraph (a). the words "or (as the case may be) from meetings of the committee without the committee's consent"").
The noble Lord said: I spoke to this amendment with Amendment No. 32. I beg to move.
On Question, amendment agreed to.
[Amendment No. 47 had been withdrawn from the Marshalled List.]
Schedule 5, as amended, agreed to.
Remaining clause agreed to.
Title agreed to.
Bill reported with amendments.
The Deputy Chairman of Committees (Lord Skelmersdale): This concludes the Committee's proceedings on the Bill.
The Committee adjourned at twenty-six minutes past six o'clock.