National Lottery Bill [H.L.]

HL Deb 18 December 1997 vol 584 cc729-92

11.40 a.m.

Lord McIntosh of Haringey

My Lords, I beg to move that this Bill be now read a second time.

I do so with great pleasure because I believe that this Bill will pave the way for the establishment of a people's lottery which truly benefits everyone throughout the whole of the United Kingdom. The proposals which it implements commanded wide support when they were first announced before the election, and they have continued to attract further support as they have developed. The White Paper The People's Lottery attracted nearly 600 responses, and on average 9 out of 10 of those commenting on particular proposals welcomed the reforms which the Government propose. I have today placed in the Library of the House a summary of those responses. The Government have considered them carefully and acted to improve their proposals in the light of them.

The National Lottery Bill introduces reforms in four main areas. It improves the operation and regulation of the lottery by creating an advisory body to help the Director General of the National Lottery to select the best operator, and by strengthening his arm with the introduction of a power to fine lottery licence holders. It establishes a new good cause for health, education and the environment and a new distributor—the new opportunities fund—to direct lottery money into initiatives which will bring long-lasting benefits to the country, in particular to the young and the disadvantaged. It improves the distribution of lottery funds. In future there will be clear strategies in each of the good cause sectors and the distributors (the Arts and Sports Councils, the National Lottery Charities Board and the Heritage Lottery Fund) will be able to be more pro-active to address the needs that those strategies identify. It will also simplify the application process and bring decision-making closer to the grass roots. Finally, the Bill establishes the national endowment for science, technology and the arts. The creation of NESTA shows our commitment to talent and creativity and our determination to create a better future for our scientists, engineers and artists.

Part I of the Bill concerns itself with amendments of the existing legislation, the National Lottery etc. Act 1993. At that time there was a broad consensus in support of a lottery. In opposition we sought to clarify and improve the 1993 Act, and indeed did so. Now we have the opportunity to give it a good shake to deal with some of the problems that we spotted back in 1993 and to help the lottery develop having had three years' experience of it. Those three years have been a tale of remarkable success. In that time £4.4 billion has been raised for the five good causes: the arts, sport, the built and natural heritage, charities and projects to mark the millennium. People in about 90 per cent. of households have played the lottery. Two-thirds play regularly. Many people already know of projects of direct interest to them which have benefited from lottery funds. This was all made possible by the 1993 Act. Having been critical at the time, I pay tribute to those noble Lords opposite who helped fashion it. I hope we can all agree that now is the time to improve it and reform it so that it better reflects the needs and priorities of the country. That is what this Bill is all about.

A Bill which amends existing legislation is never easy to follow so we have produced a draft showing how the 1993 Act will look as amended by the Bill to help the House's consideration of it. It is a scissors and paste job (if such a term is still relevant in this digital age) but I believe that it will be a useful aid for all involved, not least myself. Copies are being made available with the Notes on Clauses. Clauses 1 to 4 and Schedule 1 make changes to the arrangements for licensing and regulating the National Lottery. The Bill does not explicitly mention a not-for-profit operator, but I assure the House that it has always been and still remains our intention to seek a not-for-profit operator, if such an operator will ensure the best possible return to the good causes. There is no need to change the legislation to make this happen: the existing framework allows a non-profit operator to bid. The Director General of Oflot and the Culture Secretary will be doing all that they legitimately can to encourage such applicants, but the key criterion for award of the licence is the money raised for the good causes, which is as it should be.

The Bill does two things which will improve the process for selecting the operator and the regulation of the way the lottery is run. First, it establishes the lottery advisory panel on selection to help the director general select the next lottery operator in 2001 and subsequent licence holders. This means that the process of selection is objective, independent and more transparent. The members of the panel will be appointed by the Culture Secretary and will be well fitted to advise the director general by dint of their experience of the lottery market, lottery distribution or the interests of the consumer. The panel will he called into existence when needed and disbanded when the selection has been made. There is no suggestion in this provision that the director general's selection of the existing lottery operator was somehow flawed. Indeed, the NAO endorsed the selection process in 1995. Nor is there any diminution of the director general's responsibilities. He remains responsible for the process, the evaluation of bids and the award of the licence. The panel's role will be able to assist and advise him on this. It will provide him with expert help—something that I know the director general himself welcomes.

The director general has also welcomed—indeed, he has long asked for—the power to fine licence holders. At present if a licence holder breaches a condition of his licence the director general can either seek a court injunction or lob a nuclear grenade and revoke the licence. Now he will be able if there are serious licence breaches to impose a fine both as penalty and to recompense the good causes if the breach has reduced the amount of money flowing to them. Any fines levied will go into the distribution fund to the benefit of the good causes. The provisions will apply as soon as they are enacted, so the existing operator could be subject to fines under the existing licence. Camelot is aware of this and has been consulted. Neither I nor the director general has any reason to believe that such breaches are likely, but the Bill fills a gap in the regulator's armoury which was highlighted by the Select Committee on Public Accounts.

I turn now to Clauses 5 to 7 and Schedule 2 which establish a new good cause and the new opportunities fund and make adjustments to the percentage flows of money into the existing good causes. When we published proposals before the election to direct lottery money into health, education and the environment while maintaining our commitment to the existing good causes the response was phenomenal. This story has continued. Of those commenting on the specific proposals in the White Paper, 92 per cent. supported the introduction of the new good cause; 93 per cent. supported out-of-school activities and new technology training for teachers; and 96 per cent. supported the establishment of a network of healthy living centres. The Bill fulfils our commitments. It creates the new good cause and the body responsible for distributing funds to initiatives run under it. The three initiatives are not mentioned in the Bill. They will be named in the order made following passage of the Bill. It is done like that because these will be the first of many initiatives to be funded by the new opportunities fund, all of which will be subject to the widest possible consultation. The requirement for that consultation is built into the Bill.

But I am pleased to be able to give the House more information today about each of the initiatives already announced. Noble Lords will recall that our commitment was to provide £1 billion for these initiatives and NESTA between now and 2001. Today I am able to announce that we intend to do better than that. First, as to new technology training for teachers and librarians our original intention was that this should produce much needed training for nearly half a million teachers and librarians. But some respondents to the White Paper were concerned that teachers needed not just training in new technology but also the materials to use in the classroom. At the same time, the Libraries and Information Commission's report New Library: The People's Network highlighted the need to fund the digitisation of educational material held in public libraries so that it might be made available using the latest technology. I am more than pleased to announce that the original programme will now be expanded to provide money for the digitisation of educational and learning materials. In all, £300 million will be made available, £50 million of which will go towards providing content. We are giving teachers and librarians the skills and the materials and every school child in the country will benefit, as well as children and lifelong learners who use public libraries to help their studies.

The programme for out-of-school activities will receive in total £400 million from the new opportunities fund over five years. Of this, £200 million will help support the national childcare strategy which aims to make childcare available in every community that needs it by 2003. A further £200 million will provide homework clubs and out-of-school learning activities in half of all secondary schools and a quarter of all primary schools. Of that £200 million, £20 million will help enhance the childcare elements of these clubs. This is all in addition to the £80 million for childcare announced recently by the Chancellor of the Exchequer.

Finally under the new good cause, we are today committing £300 million to healthy living centres. These centres will positively promote good health by providing advice and contact points on nutrition, exercise, anti-smoking measures and so on. Three hundred million pounds will be sufficient to establish a network of centres aimed at serving 20 per cent. of the population, focused in particular on those deprived areas where the need is greatest. The programme will be rolled out at a sensible pace; one of the themes of responses to the White Paper was that we should take time to evaluate and learn from experience, and this we will do. Funding for healthy living centres, and indeed for out-of-school activities, will therefore be spread beyond 2001. We want centres and clubs which are well-planned, properly supported and will last well beyond the period for which they will receive lottery funding.

The House will wish to be assured that we have paid proper attention to the needs of all parts of the UK. In the case of new technology training, funding will reflect the number of teachers and librarians. For out-of-school activities, we expect Scotland, Wales, Northern Ireland and the regions of England to have funds allocated to them on the basis of population but taking deprivation into account; the kind of model which the National Lottery Charities Board has pioneered. Money for healthy living centres will be allocated on the basis of the population and relative need of each country.

The Bill provides the springboard for these initiatives, and others to follow. But we must move quickly. That is why, with the agreement of the existing distributors, money is already being set aside for the new good cause and NESTA, and the Bill at Clause 5 allows for the transfer of funds from the existing good cause accounts as from 14th October 1997, in accordance with the percentages established in the Bill.

I can also announce today that, following today's debate and in accordance with precedent, we intend to take steps to establish a shadow new opportunities fund from April 1998. Early in the new year, we shall be recruiting an interim chief executive and also advertising to identify a chairman-designate and members of the new body. It is vital that the new opportunities fund should be given a flying start. Establishing a shadow body will mean that the fund can invite bids towards the end of 1998 and money will start flowing during 1999.

The Bill provides that the Secretary of State should appoint the members of the fund. In doing so, we intend to consult a wide range of interested organisations for suggestions for candidates. We will also advertise the posts of chairman and members so that everybody with the necessary skills and experience has the opportunity to be considered. The Bill requires that the fund should have particular members able to make the interests of Scotland, Wales, Northern Ireland and England their special care. The fund itself will be free to determine its own procedures; in particular, it will be free, within the framework of directions which will be issued under the Act, to decide for itself whether to establish committees and if so what the remit of those committees should be. We will, however, ensure, via directions, that there is proper representation of the interests of all parts of the UK on committees which have a UK-wide remit.

I have already mentioned that some respondents to the White Paper had stressed the importance of careful planning and a sensible rollout for out-of-school activities and, in particular, healthy living centres. Other concerns were also voiced which I should like briefly to address.

First, there were inevitably questions about where the money is coming from and our commitment to the existing good causes. The answers are simple: our forecasts of lottery income suggest that it is well on course to delivery £10 billion by 2001 rather than the £9 billion originally forecast. Camelot has recently endorsed this forecast. So we can direct £1 billion into the new good cause without undermining the original expectations of the five good causes. The percentages set in the Bill are designed to deliver this, but one aspect needs further explanation. The percentages for the arts, sport, charities and the heritage are set at 162/3 per cent. but we are leaving the millennium stream at 20 per cent. and setting the new good cause initially at 13 1/3 per cent. We intend to introduce in Autumn 1999 an order to switch these percentages. This means that the Millennium Commission has more of its share earlier to meet its cashflow commitments, but that the new opportunities fund will have £1 billion available to it in total by 2001, with the flow matching the likely profile of expenditure on the three initiatives. Our commitment to the existing good causes is therefore as firm as ever.

Secondly, some respondents questioned our commitment to the principles of additionality and arm's length decision-making. They need have no such concerns. Each of the initiatives under the new good cause is clearly additional to existing provision funded by taxpayers and all future initiatives will pass the same test. And, although the targets and framework for the initiatives will be decided by government, this will only be done after wide consultation and due parliamentary process. After the first order, orders to establish new initiatives will be subject to affirmative resolution in both Houses. In addition, the new opportunities fund will invite and decide on individual applications completely free from ministerial interference, just as the existing lottery distributors do.

Many respondents expressed the hope that the new opportunities fund should be accessible and non-bureaucratic. I share that hope. We do not expect the fund to be large: it should be small and strategic, working with and through those organisations best placed to design and deliver the various initiatives which it will be asked to run. It could not work any other way.

I should now like to turn to Clauses 8 to 12 and Schedule 3, which contain our proposals for improving the way in which lottery funds are distributed throughout the country. The Bill gives lottery distributors two new powers which I know they will welcome: the power to solicit applications, and so to be more pro-active in ensuring that lottery funds produce the greatest benefit for all: and the opportunity to delegate decision-making both within the body itself (to committees or to officers) and externally. This means, at one level, that we can streamline the system. At present, for many distributors all decisions have to be taken at board level. Once the Bill is enacted, distributors will be able to speed up decision-making and hoards will no longer be forced to consider thousands of pages of applications at their monthly meetings. I understand that since May 1995, the National Lottery Charities Board has received more than 60,000 applications. As small and community grants schemes come on stream, numbers may well increase. The Bill will help ease these pressures. It also means that other bodies with expertise in particular areas can he empowered to act on the distributor's behalf. This will be particularly important for the new opportunities fund, but will also help other distributors improve the speed and quality of their applications process. But the House can rest assured that the Secretary of State will use his direction-making power to ensure that these powers are exercised with a proper regard for accountability.

Each distributor will also be required to produce a strategic plan, identifying the needs which they want to address through lottery funds and showing how they intend to go about it. This has been sadly lacking in the past and I know that the distributors welcome the new approach. But I should stress that these plans will belong to the distributors. They will need to consult the Secretary of State for Culture, Media and Sport on them, but he will not approve them.

The response to these proposals as set out in the White Paper was overwhelmingly positive: 93 per cent. of those commenting supported the Government's approach. Many stressed the importance of improving the opportunities for local involvement, and for helping lottery funds to reach small communities and local groups. The Bill will help this, and will build in particular on the experience of the community grants scheme soon to be piloted in Scotland, as announced by the Prime Minister in October. Many also stressed the need for the distributors to work more closely together. Our White Paper had stressed this, too, but at that time we had not proposed any legislative change. But in the light of the weight of response to the White Paper we looked again to see whether there was more we could do. The result is Clause 10, allowing distributors with the Secretary of State's approval or Parliament's blessing, as appropriate, to pool any funds into joint schemes which might then be run by a single body. Such schemes might, as is proposed in Scotland, be for community grants. Or they might be for larger grants implementing a particular programme where many distributors have an interest but none has the clear lead. In this way, the Bill brings greater coherence and direction to the distribution of lottery funds. It brings the lottery closer to the people and makes the application process much more "user-friendly".

Finally, let me turn to Part II of the Bill which establishes NESTA. The creativity of the British people is one of our greatest strengths, but in recent times we have failed fully to exploit our creative potential. Too many British innovations have been developed overseas because of a lack of financial backing for them here. Too many British scientists have left to continue their pioneering work in foreign laboratories. And too many young people with talents in science, technology and the arts have found the way barred to them. If we do not nurture our creativity, we have no right to suppose it will flourish and that we will see its benefits.

That is the justification for NESTA. Its role is threefold. We want it to help talented individuals reach their full potential; to help turn good ideas into good businesses; and to make everyone more aware of the essential role of science, technology and the arts in all our lives. These three objectives are set out in the Bill. Beyond this broad remit, NESTA will be free to determine its own programmes and priorities. The Bill provides a wide range of powers, to enable NESTA to respond flexibly in seeking to meet its objectives. Ministers will have no powers to direct NESTA's policies.

NESTA is an investment in our future. That is why we are establishing it with an endowment from the lottery to be invested for the benefit of future generations. I can today announce that on NESTA's establishment, the Secretary of State will provide it with an initial endowment of £200 million. The Bill leaves open the possibility of further endowments as NESTA's work develops, and also places NESTA under a duty to seek to raise funds from elsewhere. But this initial endowment alone should be enough to place NESTA among the top 10 grant giving endowment funds in the UK.

NESTA will be unique among lottery-funded bodies, relying on an endowment and donations from third parties rather than a stream of funding from the distribution fund. It is important, therefore, that its income from these sources is maximised. The Bill therefore provides for NESTA exemptions from corporation tax, inheritance tax, capital gains tax and stamp duty. It also allows NESTA to benefit from tax-free donations through covenants and gift aid. These provisions reflect both its unique funding structure and its similarity in purpose to a charity.

As for the new opportunities fund, we intend to establish from April a shadow body with an interim chief executive, chairman and trustees-designate, to ensure that NESTA can start its work as soon as its powers are in place. Before appointing trustees, the Secretary of State is required under the terms of the Bill to consult bodies representative of those working in the fields of science, technology and the arts.

NESTA has received a very warm welcome since we published our White Paper. More than nine out of 10 respondents on the proposals supported its creation. Many of those positive responses paid particular attention to NESTA's unique role and the importance of avoiding duplicating the work of existing bodies. Respondents were especially keen to see NESTA focusing its work particularly where the fields of science, technology and the arts meet. The Government support those views wholeheartedly.

The National Lottery Bill is an innovative and reforming Bill. It will improve the way in which the lottery is run, increase the number of people who benefit from the money it raises and bring about a sea-change in the way this country views and nurtures talent and creativity. The funding commitments I have announced today mean that £1.2 billion will be finding its way into IT training, out-of-school activities and childcare, healthy living centres and NESTA over the next five years. For those keeping the tally, it marks a further stage in the realisation of our manifesto commitments to make the lottery work better for Britain. I have no doubt that in this House, and in another place, the Bill will benefit from expert consideration. It is a Bill which meets the people's priorities and which commands, overwhelmingly, the people's support. I commend it to the House.

Moved, That the Bill be read a second time.—(Lord McIntosh of Haringey.)

12.4 p.m.

Lord Skidelsky

My Lords, I am grateful to the noble Lord, Lord McIntosh of Haringey, for agreeing that the National Lottery was one of the undoubted successes of the previous government. It was set up to revitalise capital infrastructure for the arts, sports and heritage; to finance millennium projects; and to help the charities. Over three years, more than £4 billion has been made available for the five good causes. That is expected to rise to between £9 billion and £10 billion by 2001 when Camelot's contract expires. An astonishing 30 million people play the lottery every week, spending, on average, £3. Independent research shows that the UK lottery is the most efficient in the world, returning the highest amount in percentage terms to good causes and the Government, and the least profit to the operator.

The National Lottery, as set up in 1994, was based on clear, defensible principles. Most of the spending was on capital projects. Distribution was based on the hands-off principle, the Government specifying five good causes together with the share each would receive, and leaving it to the 11 independent bodies to distribute the money. A key stipulation was that the lottery should be additional to, not a substitute for, Exchequer grants. It should be spent on desirable things not being done rather than things already being done.

Additionality is not as straightforward as I think the noble Lord implied. It is not an addition to existing Treasury money; it is money spent on things that are not being done. Unless we stick to that principle, there is always the danger that lottery money will be used to substitute for existing money.

The new National Lottery Bill muddies the waters in all those respects. It establishes a sixth good cause run by a new opportunities fund to support initiatives in education, health and the environment—activities which already enjoy government funding. It abrogates the arm's length principle by giving the Secretary of State the power in Clause 6 to dispose of the extra £1 billion allocated to the new opportunities fund as he sees fit. It sets up a new organisation, NESTA, under government control which, on the face of it, merely duplicates the work of other grant-giving bodies. On the pretext of making a highly successful operation more "accountable" and "transparent", it imposes new and potentially burdensome regulations, including fines, whose object, as stated in the White Paper, is to deprive the operator of "unnecessary profits" and ultimately all profits. I take it that that remains the Government's aim for the new contract in 2001.

Why have the Government decided to tamper with the current system, which was praised by the National Audit Office? I am afraid that the reasons are distressingly clear. The Government want to lay their hands on an extra £1 billion pounds to finance their own spending programmes for which they dare not raise taxes, and they cannot bear the idea of the operator making profits, however efficient and successful its operation.

There has been a long-standing consensus, dating back to the Rothschild Committee on Gambling in 1978, that lottery money might be used to support causes which are desirable but not essential, and therefore not justifying taxation. Tony Blair reiterated this principle only a few weeks ago when he said, We don't believe it would be right to use lottery money to pay for things which are the Government's responsibility". Yet this Bill proposes to use lottery money to train teachers and school librarians to use information technology, and also to set up homework clubs. Do the Government seriously claim that such steps to improve teaching skills and provide facilities for pupils to do homework are not part of their educational responsibilities, that they are on a par with the other good causes? Of course not. They are essential to realising their national curriculum targets. The Government already spend £296 million from the Exchequer to train serving teachers and librarians. Similarly, the DfEE already provides money for out-of-school initiatives. If extra funds are needed for these purposes they should come out of the education budget, not out of lottery money. Moreover, this is the thin end of the wedge. Clause 7(3) gives the Government the power to set up whatever new schemes they like. We shall pay particular attention to that in Committee and seek to limit that power.

Bereft of principle, the Government fall back on populism. They claim that this is the people's lottery and therefore must be spent on the people's causes. Which people? Responses to the White Paper showed overwhelming support for the new sixth cause as the noble Lord, Lord McIntosh, said. But of the 588 responses, 496 came from local authorities, schools and campaign and professional groups and only 92 from individuals—hardly the voice of the people. I wish we would drop the pernicious habit of justifying any policy, however devoid of principle or logic, by shoving the adjective "people's" in front of it, as though to criticise it were an offence against holy writ. This Bill is no more a people's lottery than the people's democracies of Eastern Europe were democracies. It is a government lottery, backed by vested interests.

The principle in these matters is very clear. If a policy is necessary it should be paid for out of taxes. If it is merely desirable it should not be enacted by the Government. The sixth good cause falls squarely between those two stools. The Government refuse to spend extra taxpayers' money on it, but presume to dictate how lottery money is to be spent. It thus breaches both the additionality and the hands-off principles which were integral to the 1993 Act.

The Minister denies that existing good causes will lose out. Although their share of the total will go down, the Government expect the revenue from the lottery to go on increasing, yielding an extra £1 billion above projections by 2001. This is highly doubtful. The Government seem quite oblivious to the possibility of lottery fatigue. Evidence from lotteries abroad shows clearly that sales can fall. For example, revenues from state lotteries in the USA show falls of up to 60 per cent. from the time they were started. In this country, lottery sales dipped from £5.2 billion in 1995–96 to £4.7 billion in 1996–97, largely owing to the decline of scratch card games. The situation was retrieved, admittedly, by introducing midweek lotteries but we cannot keep introducing more games and raising prizes to higher levels to keep up the revenue without eating into the good cause share. In other words, sooner or later lottery resistance will start to set in—quite apart from fluctuations connected with the business cycle. That is the strongest argument for not making incomes, jobs and services permanently dependent on lottery revenues. What will happen to the programmes of teacher training, homework clubs, health centres and so on, if net income from the lottery declines? Will they be discontinued? Will the income come out of the other good causes? Or will the Government be forced to raise taxes? Perhaps the Minister will tell us more about that.

We shall also be seeking clarification on Clause 1 dealing with the setting up of an advisory panel to advise on tenders for the new contract, and the directions which it may be given by the Secretary of State. What is the advisory panel intended to advise on exactly? Is it a way of concealing the Government's hostility to private profit? We shall certainly be asking for its remit to be made more explicit. Labour has clearly signalled its hostility to excess profits, or even any profits at all. Is that still its intention? We believe that the tender process by which Camelot was selected is already the most sophisticated mechanism for eliminating excessive profits. The White Paper acknowledges that our lottery is the most efficient in the world, but still cannot resist the temptation to attack the profit motive, although Camelot's profits are little over 1 per cent. of its net revenues.

So eager are the Government to get their hands on lottery money that they could not wait for the passage of the Bill authorising it. So they started to set aside money for the new opportunities fund on 14th October 1997, even though they had no power to do so under the terms of the 1993 Act. How can the Minister justify that clear breach of legality, which is to be rectified by a retrospective clause in this Bill?

There are a number of other matters on which we feel concern and which we intend to pursue. We intend to move amendments to strengthen the arm's length principle for the new opportunities fund. We will be seeking to limit the power of the Secretary of State to vary the percentages of funds allocated to the various good causes to protect the share going to the arts, sports and heritage. We are doubtful about Clause 8, which allows the lottery distributing bodies to solicit contributions. We are suspicious of the requirement in Clause 11 for distributing bodies to produce strategic plans for distribution, which strikes us as an unwelcome intrusion into artistic decisions by the Secretary of State. We want more clarification of the relationship between NESTA and the Department for Culture, Media and Sport.

This is an unnecessary Bill designed to rob Peter to pay Paul and whose net effect is simply to strengthen the power of the Secretary of State under the guise of giving people what they want. We will mount a reasoned opposition in Committee and hope, by argument, to persuade the Government to improve the legislation and think again about the issues which we shall raise that stand in much need of further thought.

12.19 p.m.

The Viscount of Falkland

My Lords. I thank the Minister for his clear and precise summary of the objectives of the Bill. His department has been kind enough to circulate to us papers which to some extent amplify its proposals. I shall not follow the devastating and brilliant speech of the noble Lord, Lord Skidelsky, because I would feel most inadequate in trying to do so. But I am supported by my noble friends Lord McNally and Lord Redesdale, who will take up a number of the points which the noble Lord raised.

I had thought in my naïvety that the Government had dropped their objection to an operator who operates at a profit. I found his revelation that that is not so, disturbing. I am a punter, if I may use that word—it is probably more accurate than player. I am one of those 3 million people who buy a lottery ticket every week. Curiously enough, doing my sums shortly before I came into the Chamber, I discovered that I am almost exactly the average. I speculate about £3 a week. My returns are rather good. They are not a profit but they reflect something which may be a warning to other noble Lords who may follow me down this path, particularly as at the inception of the lottery I took a strong view about the undesirability of scratch cards. I still do. At home, I became, as we parliamentarians are apt to become at home, rather pompous about it. So I found on my birthday in May 1995 that my wife had bought me a considerable number of scratch cards. I spent some time rather ashamedly scratching and found that I came out with a profit of £148. I may tell your Lordships that I thanked my wife but she has not repeated the gesture.

However, I still think that scratch cards are, by the very ease with which people can repeatedly buy them, an inducement to develop from punting, which is speculating or betting in modest amounts, to the dangerous levels of becoming a gambler, which is, if I may make the comparison, the difference between a moderate social drinker and an alcoholic. However, just to complete my story, I would say that on an expenditure over roughly three years of between £450 and £465 I have had returns of £265. I am still showing a loss but I live in hope that in the next three years I may improve on that performance.

I shall confine my remarks to the operation of the Bill's proposals on the lottery and on the gaming aspects rather than on the distributions aspects. The noble Lord, Lord Skidelsky, touched on them, but there are one or two aspects which require amplification and explanation. Why is it that the lottery operator needs an advisory panel? That is not made clear either in the Bill or in any of the accompanying literature. It is said by the Government—the Minister may be able to enlighten us further—that the panel will have expertise in business and other areas. But will it have expertise in the lottery market? From where will the assistance to the operator come?

The noble Lord said that this development has been welcomed by the director general. I wonder what there is about it that he welcomes. What will the panel be looking for? How will it be able to improve the selection procedures which so far have arrived at what seems to be almost a seamless performance. It is, after all, the performance of the current operator, Camelot, and the experiences that punters like myself have week after week, with very little to criticise, that has given rise to the enormous funds which have been available for the good causes and will be available for the additional cause which the Bill seeks to introduce.

The Bill proposes to give the regulator powers to impose financial penalties for licence breaches. There is no mention of ceilings on those penalties. What is the scope of the penalties? To what particular matters do they refer? Surely their scope should be limited to those breaches which are in the full control of the operator and where there is a significant risk or an actual risk of a loss to the good causes. Financial penalties, if they are indiscriminately and excessively applied, will have a significant effect on prizes and lead to lower sales. Lower sales means less money for the good causes. An additional financial risk would deter possible bidders to succeed Camelot or might even deter Camelot from wishing to apply for reappointment.

Prior to the Bill's publication, Camelot approached the Government and asked for the opportunity to correct licence breaches before penalties became applicable. The Bill does not address that. The regulator should have the ability to safeguard the interests of the good causes way and beyond the breaches of the licence operator. There are many wider threats; for example, illegal lotteries. Perhaps the answers to these problems will emerge through probing amendments during other stages of the Bill or perhaps the Minister will be able to assist us today.

In line with other utility operators, one would expect the lottery regulator to be bound by an appropriate performance standard for reasons of accountability and so on. That has not been addressed either in the Bill or in the notes which the noble Lord's department has circulated to us. The grounds for appeal against financial penalties are quite limited. They are confined to errors on fact, procedural errors or errors of law. That does not compare with other regulators where there can be an appeal against a regulator who has been deemed to have gone beyond his powers. That is not dealt with in the notes which the Minister's department has circulated to US.

There are a great number of matters which need further amplification. The Bill is unclear. It substantially reduces the principle of arm's length from government except in the area which looks most promising and is the one on which initially I took the most pessimistic view—the NESTA concept. However, it seems to have been very well thought out so far. The principle is well laid out. The Government's ability to make sure that the foundation receives constant funding, depending on its performance, for the support of creativity in various fields is a good one. Perhaps the one thing that commends itself to us is that it keeps government at arm's length. I look forward to the noble Lord's reply.

12.30 p.m.

The Lord Bishop of Leicester

My Lords, when the National Lottery was launched some three years ago, I had the task of explaining the House of Bishops' position live, but down the line, from Leicester to Jimmy Young in London on his show on Radio 2. I explained that the bishops were not at all keen on the lottery because they believed that it would encourage more people to gamble and would be supported disproportionately by those who could least afford it. On the other hand, I explained that, if it were the Government's chosen vehicle for financially supporting the national heritage, we in the Church had a large proportion of that heritage in our cathedrals and churches and would understand if local church trustees felt that they needed to make applications to lottery funds in order to maintain their heritage.

I paused for breath and heard an avuncular voice coming back to me down the line, "Let me see if I've got this right, Bishop. What you're saying is, `The lottery's wrong, but it's all right." Nothing much has changed in three years. It has to be said that most people have decided that the lottery is all right. It is immensely popular; indeed, the Minister told us that about 90 per cent. of the households in this country have participated in it. If that is so, it must be that virtually only the members of the House of Bishops have abstained. It must also be acknowledged that the lottery has benefited a large number of individuals, communities and good causes. Indeed, it is expected that the total raised by the lottery for those good causes in the seven year period of the first licence could be as much as £10 billion.

When it was established to provide funds for the five good causes, the single method of fund raising was initially the weekly draw. The draw was thought to be such a mild form of gambling that it was proper to set the age for participation at 16. Subsequently, however, two draws a week were provided and a rather more compulsive form of gambling—the instant game—was created. Sales of instant scratch cards have, I understand, declined in recent months and the initial surge of support for the second weekly draw has levelled off.

It has to be said that, between them, the Churches hold a wide range of views on the lottery. Many church communities and Christian individuals believe that for a government to encourage gambling is simply wrong, and consequently the lottery should not have been established and should even now be abandoned. Others see the lottery as a tax on the poor, who perhaps naïvely see a lottery win as the only way of escape from a life where they feel shut out from the general prosperity of society. Then there is the quite widespread revulsion in some Church circles regarding the size of the jackpot, together with the belief that necessary services should be resourced from taxation rather than through the lottery.

A consensus on the lottery was reached in a statement produced by the Church Representatives Meeting of the Council of Churches for Britain and Ireland in November 1995. That has formed the basis for a subsequent submission and meetings with the Secretary of State responsible for national heritage and the director general of Oflot. Those meetings have been very positive. However, two areas of concern remain regarding gambling and the distribution of lottery proceeds.

The Bill before us makes no reference to the question of gambling, yet it seems to me to be important to echo the disquiet expressed in the Labour Party's 1996 document on the National Lottery, over instant games and the problem of young people and gambling. Oflot has produced some excellent research which suggests a connection between a minority of young people who are already heavy users of fruit machines and who then become excessive players of instant games. The Government clearly recognise some of those dangers, particularly when instant gambling and alcohol are brought into close proximity. Indeed, one of the rapid draw games played in pubs, although supporting some very good causes, has prompted such concern that, I understand, a government Bill is expected to restrict its scope. However, the fact is that the whole of gambling law is in a state of some confusion. It seems to us that the Government should initiate a review of the whole field of gambling regulation with the intention of producing legislation at the earliest possible date.

I wish briefly to refer to the question of the distribution of lottery proceeds in the new Bill, and particularly the changes it contains. The Bill shows commendable enthusiasm for a fairer and more creative pattern of distribution to good causes. The commitment to partnership as regards public voluntary associations, local and national government is very welcome. Also welcome are the proposals for the national endowment for science, technology and the arts. As a research scientist in a previous incarnation, that is a cause very close to my own heart.

However, we share the reservations of those who are anxious concerning some of the proposals for the "new good cause" which aims to channel spending into health, education and the environment. The Minister echoed the contents of the White Paper and told us, for example, that the education programme will provide training and support for the nation's half a million serving teachers. Obviously such training and support are of absolute central importance if we are to see the highest possible standards in our schools. But despite the assurances it seems hard to resist the conclusion that this is a comprehensive scheme which really ought to form part of the core activity of the school system. Surely the offering of such funds through the lottery will virtually compel school governors to apply for lottery funds, and particularly in Church schools this might well give some of them an uneasy conscience.

It seems to me that the Bill creates a new situation. Up until now, the great bulk of applications for lottery funds have been essentially from the voluntary sector or for activities generally seen as desirable enhancements of amenity. Under the Bill's provisions many more applications can be expected from statutory providers. Such providers might well be torn between their commitment to service provision and their reluctance to apply for lottery funds.

As your Lordships are well aware, a number of churches have direct responsibility for such institutions. The Secretary of State has shown himself sensitive to these difficulties and discussions are proceeding chiefly with the Department for Education and Employment to see how they might be eased. The causes are undoubtedly good and the proposals might give your Lordships no anxiety, but I believe that it is important to recognise that there is a conflict for some conscientious people between their seeming public duty to apply for lottery funds and their personal wish not to do so.

In conclusion, we would like to suggest that the Minister considers three policy guidelines. First, there should be a clear acknowledgement of the Government's intention to maintain the privileged position of the lottery in the gambling market place. The lottery was set up to aid good causes, not to expand the gambling industry. Secondly, the question of the conscientious objections which some have to the use of lottery funds needs to be seriously addressed with reference to the new opportunities fund. Thirdly, a comprehensive review of the regulation of the gambling industry needs seriously to be considered. The lottery still makes us uncomfortable but it would be a little more all right if these steps were taken.

12.40 p.m.

Baroness Young of Old Scone

My Lords, I hope your Lordships will pardon the fact that my voice is about to disappear. The noble Viscount, Lord Falkland, declared his interest as a punter. I declare an interest, not as a punter or indeed as a "scratcher", as I am one of that large body of people who thinks that the lottery is probably rotting the national moral fibre. However, in the spirit of the previous speech I should declare my interest as a major recipient of lottery funding—over £2.5 million—which is rather better than the profit level of some £145 from the scratch cards of the noble Viscount, Lord Falkland. Perhaps he would be advised to direct himself in future to the other end of the lottery process.

I broadly welcome the contents of the Bill and think that it is a good start in developing a more focused and effective way of spending the people's money. I use the word "people's" advisedly because it is money donated by a wide range of people in this country who are not necessarily of my non-punting persuasion. What is particularly of value is the greater direction on the part of government in the proposals for the new opportunities fund. I note the assurances of my noble friend Lord McIntosh of Haringey about arm's length procedures. However, I do not think that we should blush too much about the additionality debate. Additionality should certainly mean that lottery funding is additional to existing public funds, but we must be realistic about the situation in which we find ourselves at the moment. At a time of rising demands for public expenditure, when highly important first order priorities for this country are unable to be funded, such as health, education, the environment and—dare I say it?—lone parents and the disabled, and when hard choices are being made, I find it worrying to see only second order priorities by definition being able to be funded by the lottery.

I would not go so far as last night's Evening Standard, which mentioned fountains and follies, because many of the initiatives being funded by the lottery are important. However, we risk finding ourselves trapped in being able to fund only second order priorities if we treat the additionality provision too strictly. Lottery money is too extensive to be squandered on anything other than the most important "first order" priorities. I very much welcome the Government's direction as regards the new opportunities fund.

How do we ensure that the highest priorities are also tackled by the other lottery distributors? I welcome the provisions in the Bill for strategies to be drawn up by each of the distributors. These need to be strategies that will focus on the priorities that will be delivered locally through individual projects and grants. That increased focus is even more vital in view of the reduction in the percentage of lottery proceeds available for the other distributors. I recognise that their original aspirations are not being disappointed but their most recent ones are being somewhat restrained.

The strategies of each of the distributors are important for another reason. If this is genuinely to be the people's lottery—as I think it should be—we must recognise that the quality of the environment is vital to the quality of people's lives. The Government's manifesto laid down a commitment that sustainable development would be put at the heart of all policies. Indeed, several of the lottery distributors have a key role to play in achieving sustainable development and in protecting the environment. Several more distributors could have an adverse effect on the environment, if they are not careful, in the way that they distribute funds. The commitment that the environment will be at the heart of policy needs to be reflected also in the way that the lottery is operated. All distributors should be required to take account of sustainable development in the drawing up of their strategies for distribution, and to build adequate measures into those strategies to ensure environmental appraisal of the bids.

I give an example of that in terms of the new opportunities fund. We welcome the fact that an environmental strand will form part of the three main strands that were initially set up by order. Alas, that will take some time to come to fruition—some two to three years—and we must be patient. However, if that process could be accelerated, that would be welcome. The strands will be selected by government after wide consultation. That consultation is absolutely vital, but we must address high priorities and not optional extras. No amount of planting bluebells by cycle tracks will address the major environmental challenges that we face on a local basis right across the country. I refer to challenges such as climate change, air pollution and the alarming decline in the biodiversity of ecosystems that people in this country depend on.

I have another concern which I do not believe is directly addressed by the Bill but on which some of the provisions of the Bill will impact. I believe that an element of frustration with the lottery is arising in many quarters. There are now too many applications chasing not enough grants. The ratio of applications to grants is alarming in some cases. The National Lottery Charities Board has five applications for every one successful grant. At the moment the heritage lottery fund can fund only one out of every 10 applications. I suspect that that frustration will increase as further kinds of applications are made. It is important that in connection with the strategies and the powers in regard to projects that are laid out in the Bill, potential applicants should be more clearly signposted towards those projects that are most likely to be successful, because for every one successful candidate at present we are in danger of having five or 10 unsuccessful candidates who will feel rather disgruntled, let down and disengaged.

I commend the provisions of the Bill. I believe that this vital slab of the people's money is too important to be spent other than in a targeted and focused fashion.

12.47 p.m.

Baroness O'Cathain

My Lords, although I do not welcome this Bill, I welcome the opportunity afforded to us by this debate today to make several points as to why I do not welcome it. First, I believe that the timing of the Bill is inappropriate. I shall elaborate further on that. I also have serious misgivings about some of the content.

Is it possible for the Minister to confirm some of the financial implications of the Bill which seem to me somewhat woolly? I take it that those details can be elaborated upon during the Committee stage. The thought that hit me between the eyes when looking at the Bill was, what has Her Majesty's Treasury actually done with the £4.5 billion of what I can only call a windfall resulting from the introduction of the National Lottery in November 1994?

As regards the timing of the Bill, the lottery has been running for just over three years. There seems to be a raft of different timescales operating within government for review periods. Is three years the correct time to pull up the roots of the lottery Act, shake them about and prune the plant, graft onto the plant and replant in shifting sandy soil, particularly as—to continue the metaphor—the plant has been thriving, has grown way ahead of initial expectations and is universally admired in the international field of lotteries? In effect this is the best lottery in the world. The facts bear repetition of the point made by my noble friend Lord Skidelsky; namely, it is the world's most efficient lottery in terms of percentage of sales to good causes and in terms of percentage of duty to government. Why do we have to mess about with it now?

Camelot was given a five year contract to run the lottery. It has been extraordinarily successful. Surely the time to review it is in the six months or so period before the contract expires. But I am not naïve; and I am certainly not naïve enough to believe that the purpose of the Bill is to analyse whether or not Camelot has been successful. The purpose of the Bill, it appears to me, is to change fundamentally several principles of the National Lottery, not because it has been unsatisfactory but because the Government see a wonderful opportunity to milk the lottery funds for ongoing public expenditure. The noble Baroness, Lady Young, reinforced that view by listing all the basic national expenditure categories which will be funded by the lottery. I seriously believe that this is a betrayal of the basis on which this House debated the lottery in the past. If I may say as an aside, it was a debate which was not memorable for the support of the then Opposition to the concept of the lottery.

Lord Howell

My Lords, that is absolute nonsense. Will the noble Baroness give way?

Baroness O'Cathain

I do.

Lord Howell

My Lords, I took a prominent part in that debate, as did the noble Lord, Lord Donoughue, from our Front Bench, totally supporting the concept of the lottery.

Baroness O'Cathain

My Lords, I agree that the noble Lords, Lord Howell and Lord Donoughue, did so. But there were many misgivings about the lottery. I am sure that the noble Lord, Lord Howell, will agree with me, that at that time it was stated time and again that the moneys raised by the lotter were not for general public expenditure but for specific good causes—not least football, and those causes about which the noble Lord so ably demonstrated, and on which he received the support of the House.

My second misgiving relates to the very structure of the Bill. The first four clauses have nothing to do with the revenues accruing to the five good causes which were established under the National Lottery etc. Act 1993, but are a veiled criticism of the operations of Camelot. The inference is there. On the basis that one puts the best and most important goods up front when selling anything, the first four clauses lead one to infer that there is huge, deep-seated concern about the current operation of the company that has done so brilliantly. In this season of goodwill I should not even consider that the demons envy and greed are alive and well—but I am not strong enough to resist that temptation.

The measures proposed in the four clauses leave one with a deep suspicion that all is not well with the lottery operator. I cannot believe that that is so. It has done an absolutely splendid job in organisation and administration terms. Has anyone a list of customer complaints? Are there screaming headlines to the effect that they are inefficient, or worse? If so, I plead ignorance of them.

Camelot (I have to say that I have absolutely nothing to do with Camelot; I have not even received a briefing from it) strikes me as being a shining example of how to do a thoroughly good, efficient job—so good in fact that everyone takes it for granted that no mistakes will be made. But in typical British fashion we do not continue to compliment Camelot, taking such efficiency for granted, despite the fact that it is pretty rare in most areas of British business and commerce to have such an acceptance of the efficiency of an organisation. If I were employed by Camelot, I should be somewhat dismayed and demotivated by the Bill, but doubtless it has made its views known.

My third misgiving relates to the introduction of the new good cause of health, education and the environment. Naturally, I want all those areas to be the subject of good funding. But the National Lottery was not set up to take the place of public expenditure from national revenue. Lest I be considered to be anti any increase in funding to those three areas, let me briefly point out why I feel the way I do.

No recognition is taken of the fact that the Exchequer has had a total of £4.5 billion since November 1994. It is £4.5 billion that could never have been foreseen, say, eight to 10 years ago. How has that been spent? Has any audit been done of the distribution of this windfall? The sums going directly to the Treasury each week amount to some £26 million. According to my mathematics, in a full year that amounts to £1.35 billion. If the annual total of the windfall from the lottery were allocated to health, education and the environment, even on an equal basis to each of the three, there would be an annual increase of £450 million in the funding. Surely that is the fair way to do it. But, no, I believe that the existing five good causes are now faced with a diminution in their funding from the National Lottery despite the assurance of the Minister. Other speakers will describe, I am sure, the impact that this could or would have if the Bill goes through unamended in that respect. All I can say is that anybody employed in the voluntary sector will have life made exceedingly difficult when the known source of funding is reduced. Politicians may not have the experience of trying to plan and budget within known revenue limits, but the real world does, and it is not easy.

I turn to my fourth misgiving. The establishment of the new opportunities fund fills me with foreboding. It is yet another army, small I admit but an army nonetheless, of bureaucrats, of people pushing paper around supported by sophisticated IT back-up, 10 per cent. of which will probably be used, mulling over applications and employing consultants to help them. In this thorough review of the lottery, I should like to know how many consultants' jobs does the Minister envisage will be created by the Bill? Certainly the National Lottery etc. Act 1993 has spawned a whole new industry of consultants. I have been involved in the arts sector. In the past three years, in three separate areas of small scale activity in the arts world compared with the major organisations such as the Royal Opera House, I have been amazed by the number of consultants who have latched on to this. It is one of the greatest growth industries and market opportunities of the 1990s. The question is always, "Are you thinking of putting in an application for lottery funding? We can help you. In fact without us you will not succeed". I do not think that people realise the ramifications of what has happened. It is a direct follow-on to the Bill that the Conservative Party introduced in 1993. But that is the reality.

My fifth misgiving is the establishment of NESTA. I am not against putting more money into this worthy cause in terms of uprating our skills in the areas of education and science. But here is yet another acronym, another body. We can no longer call such bodies quangos. They are now non-departmental public bodies. Christmas jollity went to my head when I decided to refer to the Shorter Oxford English Dictionary in the early hours of this morning to look up the word "body". The first definition was a corpse; and the second was a chemise. I do not know whether we shall have a corpse, or a chemise which will cover us up, keep us warm but will really be another body. Despite the fact that the Minister made a correct, impassioned plea for the objectives of NESTA, I do not think that its survival should be reliant upon the whim of the people to choose six numbers twice a week or to buy a few scratch cards. That is surely an area where there should be proper public funding which is not reliant on the lottery.

My sixth misgiving concerns the emphasis placed on strategic planning. This may come as a surprise to the Minister, the noble Lord, Lord McIntosh. He knows that I have been a strategic planner for most of my career. However, I know the perception of economists and strategic planners. It is not universally good. I fear that we shall be spawning yet another industry of strategic planners. I can already envisage the new consultancy organisations which will be founded specifically to help lottery applicants produce strategic plans.

My seventh misgiving relates to Part III of the Bill. I do not believe that the forecasts of additional expenditure relating to administration costs are realistic. Every time a new administration person is appointed, the on-costs in terms of overheads, IT support, and so on, are seriously underestimated. I do not think that anyone yet has the proper answer. I fear that that might be the case here.

I did not give the Minister notice of my concerns. In a Second Reading debate I should not expect specific answers. However, it would be interesting to have figures for the costs of administration between the handing over of the moneys from Camelot to the receipt of those moneys by organisations, as it were, "at the coal face". I should like to know what the administration "muddle" in the middle is. Today, the Minister announced yet another NDPB—yet more costs to be taken out of the distributive pot.

I am sad that I am taking issue with almost all the points raised by the noble Lord, Lord McIntosh, for whom I have the greatest respect; but I honestly believe that the so-called improvements and reforms are untimely and that they fly in the face of the basic principles on which the 1993 Act was based.

1 p.m.

Lord Rothschild

My Lords, nobody likes money to be taken away from them; but the trustees of the National Heritage Memorial Fund and the Heritage Lottery Fund—I should declare my interest as chairman until 31st March next year—are mindful of the commitment in the government's general election manifesto to create a sixth good cause. It is right that that pledge should now be honoured.

Its creation, however, will reduce the Heritage Lottery Fund's share of lottery proceeds at a time when we are already being asked to do more with less. In the short life of the national lottery it is not an exaggeration to say that the five good causes have been able to make a real and lasting impact on life in this country. The future prospects for sport, the arts and heritage have been transformed.

Let us consider just two areas which the Heritage Lottery Fund has helped. Our urban parks programme, to which we have committed more than £80 million, has received almost universal praise, and led the Secretary of State for culture, media and sport to note: these are precisely the sort of grants that do the National Lottery proud, providing real benefits to millions of ordinary people". The major museum, archive and library programme could have an impact as far-reaching as the Act of 1845 which helped to create so many of our remarkable museums.

And in other areas the Conservation Area Partnership scheme for towns and the Joint Places of Worship scheme for churches, both set up in association with English Heritage, and the Local Heritage Initiative, launched last month in association with the Countryside Commission, will ensure a wide distribution of funds across the country for crucial and popular areas of heritage which have a sad history of under-funding. In all, I am proud to say that in less than three years the fund has awarded more than £800 million to 1,200 projects across the United Kingdom.

Yes, we have received significant resources; but the scale of that achievement must be put in the context of government expenditure generally. The Heritage Lottery Fund's annual income, following the introduction of a sixth good cause, is likely to run at about £250 million per annum. That is the amount it costs to run the hospitals in the London Borough of Hammersmith. Approximately £250 million would run the bureaucracy of government for about seven hours. The annual budget of the Department of Health, for example—an area set to benefit from the introduction of the sixth good cause—runs at £34.9 billion, several hundred times greater than our current resources.

I hope, therefore, that we can be assured that there will be no more squeezing of funds, and that we can look forward to the present ratios being maintained between now and the expiry of the Camelot licence—and indeed, we should very much welcome confirmation that there will be life thereafter.

There is one particular clause in the Bill, however, which causes me concern. I should like the Minister to reassure me in respect of Clause 17(2), which gives power to the Secretary of State to lay an order accumulating the National Lottery Distribution Fund solely for the benefit of NESTA, even though those moneys had been allocated to the existing good causes. That would come into effect one year after the Bill becomes law.

That could mean in our case, albeit after consultation and a resolution moved in both Houses, that moneys not drawn down by the Heritage Lottery Fund could be forfeited after June 1999. The impact on our ability to plan ahead with capital projects, many of which are carried out over a period of many years, could be very serious indeed. If we are no longer sure of being able to draw upon this fund in respect of the share designated to us, we may not be able to fulfil commitments that we have budgeted for and approved. That could create difficulties for the Heritage Lottery Fund in managing future cashflow and, equally importantly, add to the uncertainty for grant recipients.

We welcome many aspects of the Bill, including the proposal that the lottery distributors should seek to take a more strategic approach. Indeed, as some noble Lords may know, by selecting themes such as urban parks and museums, we were in effect deploying funds in that manner well before the publication of the Bill. We welcome, too, the power to delegate decision-making, which I hope will make life easier for future applicants.

There are provisions in the Bill to give powers to the distributors to delegate and enter into joint schemes so as to improve the distribution of small grants. In response to that, perhaps I may draw the attention of the House to our own Local Heritage Initiative, which was launched last month in association with the Countryside Commission. It will seek to award hundreds of small grants to local rural and town communities across England, just as the Bill has proposed. The fund is also taking an active role in a joint distributor, small grant initiative which is to be piloted in Scotland next year.

The Bill requires each lottery distributor to prepare a "strategic plan" if the Secretary of State instructs it to do so. After consultation with the Secretary of State, the distributor will make such modifications to its plan as it considers necessary or expedient. The balance of power between the Government and the distributor bodies and their trustees has been, and always will be, a delicate one. But the independence of trustees is their lifeblood. Their point is to be able to offer some alternative to the state's politically oriented conception of public need. Therefore, if the distributor bodies are too restricted in exercising their own independent judgment and vision, if the arm's length principle is not rigorously upheld, then organisations such as the Heritage Lottery Fund will become little more than adjuncts of a state department.

The bold experiment of giving lottery proceeds to five, and now six, good causes is, so far as I know, unique to this country. I genuinely believe that a noble beginning has been made, and that a renaissance is under way which is helping to broaden and improve our lives. My distinguished predecessor, the noble Lord, Lord Charteris, who is sitting behind me, began his first National Heritage Memorial Fund annual report in 1980-81 by quoting Sir Francis Drake, who, in 1587, said: There must be a beginning to any great matter, but the continuing unto the end until it be thoroughly finished yields the true glory". This great matter of the heritage will never be finished, but we look forward to a voyage of mercy with many more ports of call. I hope that under this new Bill we shall be allowed to continue on our voyage, with no further incursions and with our independence maintained.

1.9 p.m.

Lord Inglewood

My Lords, I believe that in any consideration of lotteries in this country there are two things we must bear in mind. The first is that ever since the first lottery in this country in 1569 to raise funds for the Cinque Ports—I do not wish to give the Government an idea for an additional new cause—through the 1826 last British state lottery to today. we as a nation have been ambivalent.

Secondly, in this country there is a very rigid and unbending attitude to public expenditure. The Treasury is a Cerberus which guards the nation's money with a series of arcane, Byzantine and sometimes, it seems to me, completely nonsensical rules.

As the noble Lord, Lord McIntosh, said, since November 1994 the success of the lottery has been far beyond the greatest expectations of those who thought about it at that time. We must not forget, to re-coin a phrase, that "It's Camelot wot done it". We are now looking at the problems of success, not failure, something for which we should all be grateful. I believe that it is right and proper that where we have success of this kind we should look at it carefully. I also understand that a new government would want to put their own imprimatur on the project. I entirely sympathise with that, and were I in the Government's shoes I would try to do the same.

From the time when I was in the ministerial chair of the Department of National Heritage, I could see the Opposition's spin doctors operating a populist attack on the lottery through the media. The noble Lord, Lord Rothschild, was absolutely right in his brave decision to acquire the Churchill papers. The criticism wrongly levelled at it was triggered by a distaste in some quarters for the identity of the vendor. But if you want to buy something, you must buy it from the person who owns it.

There was criticism of money from the good causes, the charity distribution groups, to certain minority groups such as gays, lesbians, prostitutes. But those people are the kind whom charities exist to serve. To put it another way, if it was good enough and respectable enough for Mr. Gladstone, it is good enough for me.

There was criticism of spending money on opera. We in this country want a world class arts scene and it is integral that if we have a world class arts scene we have world class opera. It is not my favourite art form, but if that is our aspiration then that is what we should set our stall out to do.

What concerns me about the proposals in the Bill is that it seems that populism has been a prime driver of change and I do not believe that that is in anyone's long-term interests.

As I mentioned, the lottery has lived in the shadow of the Treasury. As we know, because we live in a world of non-hypothecated expenditure, the concept of additionality has been developed. As my noble friend Lord Skidelsky said, it has a kind of superficial intellectual coherence. But I believe it is at bottom bogus because the parameters of public expenditure are themselves set by the lottery or the European Regional Development Fund or whatever it happens to be.

It is clear that governments are necessary and they must raise taxes in order to spend money. But it is interesting that all across the political spectrum there is a questioning of the indiscriminate use of taxation for all kinds of non-specific public purposes, each of which in its own way has merit. In that context, it is interesting that at least in one part of the current public expenditure scene there is a recognition of a qualitative distinction between categories of expenditure. I refer to the distinction between compulsory and non-compulsory expenditure in the European Community budget. I believe that there may be a good case for looking at what the Government do and when the Government disburse money to see whether some things can be done in different ways which might be better. In a sense it is an evolution of the idea behind privatisation.

In the Bill there is an interesting and helpful lead. I refer to NESTA. While I do not know all the details, it seems to provide an interesting and worthwhile idea—the creation of a virtual Oxbridge college with very real assets. Pluralism is an essential characteristic of a democratic and free society and I am very much a supporter of diverse sources of power, money and patronage. The best way of ensuring institutions and with them pluralism is to endow institutions. Keep them at arm's length. After all, the psalmist was right when he said, "Put not your trust in princes", for these days for "princes" read "the Treasury". We all know about the dissolution of the monasteries, and, none better than the noble Lord, Lord Charteris, about the shameful behaviour of the Treasury in respect of the National Land Fund. But we can have institutions doing good with independent resources and I believe it is in the public interest.

It would have been more imaginative, bolder and braver of the Government at least to have considered seriously the possibility of using some or all of the lottery itself as an endowment for some or all of the heritage, arts and sports sectors, thereby providing for them both their capital and their income needs and, to some extent, decoupling them from the wider public expenditure programme.

No one is a greater supporter than I of the Government wholeheartedly being behind these sectors and for public money being available for them. But it is interesting to speculate on whether direct money from taxation is best for that. If we did something in that way, we would be releasing other money which the conventional public sector would have and some of the other good causes which are doing things that I and a number of other noble Lords believe should be done properly by government themselves to enable them to expand their terms of reference.

I recall that when we were in power we were not quite the flavour of the month with the number of sectors we served in the Department of National Heritage. I now suspect that those very same people feel that they have fallen out of the proverbial frying pan into the metaphorical fire. I would not be surprised if there was not considerable support for the idea of making those sectors further from government itself.

However, clearly that will not happen and anyway the example I used has been very much illustrative and not worked through in detail. What we shall see happen is, in general terms, what is contained within the Bill. When I read it I recall one of the first remarks my then Secretary of State, Virginia Bottomley, made to me about the lottery. She said: "It's only a matter of time before it is all used for nurses' pay." That is what the Treasury wants. As we speak now, the Treasury is fingering this money. I know it and I sense that others too feel it happening. It is not the people's lottery: it is the Treasury's lottery. What worries and saddens me is that I feel that the Government have been seduced by an unholy alliance of the Treasury and its own spin doctors whose song they commissioned in opposition, to which they find they must listen now that they are in government.

1.17 p.m.

Lord Annan

My Lords, the other day I read in that remarkable publication which comes to us free every week, the House Magazine, that a Member of Parliament said that the most difficult audience he had ever had to face was sixth formers. A sixth former asked him: "Why do we spend so much money on the arts when someone's life could be saved if we gave that money to the National Health Service?"

There is no answer to that question except to say that there is no limit to what the NHS could spend and absorb in prolonging life, but it is the arts, among other things, which make life worth living. This civilised country, in ancient, medieval and modern times, has always, in one way or another, supported the arts. When the right reverend Prelate was speaking, there came to my mind the enormous proportion of GNP that was spent in medieval times on building cathedrals and churches. Of the prayers and praise which were offered up in those churches nothing remains: but the churches remain, and they are the glory of our civilised lives these days.

The Bill will diminish the amount spent on the arts by the Arts Council from 20 per cent. to 16.6 per cent. The £1 billion for the new opportunities fund will diminish by £60 million the amount available for charity. In its place we shall have money spent on health, the environment and education. I am bound to say that I share the suspicions of those who have said: "This is but the first step, and we shall find more and more money milked from the lottery to provide money which should come from taxation". I shall come back to that in a moment.

What do we mean by "the arts"? In the 1950s—a long time ago—I was asked to join a committee set up by the newly founded Gulbenkian Foundation, under the chairmanship of the noble Lord, Lord Bridges. The committee's function was to say what the foundation should spend its money on. Though it was obviously necessary for the Portuguese part of the foundation to spend a great deal of money on social welfare, in Britain we said that we had an admirable government increasing spending on social security and we therefore felt that the money should go on something on which we did not spend much: the arts.

Time passed and a new secretary of the committee of the Gulbenkian Foundation came into office. He changed the policy. He was not against spending on the arts, but he defined the arts in a very different way. He felt that the arts meant street theatre, pop groups, happenings and other trendy manifestations. Today the Gulbenkian Foundation spends its money in a very different way.

One could argue that the original Gulbenkian Foundation's functions were not wide enough. But it did do something. After the Second World War one could argue that Britain was still a philistine country. It is not so today. It has a vast interest in visual and performing arts, in music especially, in the theatre and of course in the cinema, which has been hard hit by the great success of television. That interest has been revived by what the lottery has been able to do.

Nevertheless, the suspicion remains that when we talk about money for the arts it is for esoteric elitist groups of people. Nobody reads what various public organisations set out in the brochures which thud through one's letter box day by day. Let me repeat, before the noble Earl, Lord Gowrie, what the Arts Council says it spends its money on: 48% of capital grants have gone to community or amateur groups—831 grants worth £137.53 million Arts for Everyone Express was aimed at community and amateur groups, providing over 5,300 grants 57% of all ACE Lottery grants have gone to registered charities, 22% of the total number of grants given". There follows the heading, Lottery money is not just for large projects 70% of capital grants are for less than £100,000 … The 5,300 Arts for Everyone Express grants were for less than £5,000". It goes on to say what a wide range of people benefit from the Arts Council lottery money. There is wide support for those Arts Council lottery projects. I shall not quote further from the publication but I commend it to your Lordships because it indicates how public bodies are spending lottery money on the people. It is a fraud to say that nothing has been done for the people up to this date.

That is one of the points I wanted to put forward. Another point concerns the problem of the Royal Opera House. The Opera House is denounced as an élitist institution. Let me add that I am not in any way defending the way in which that great concern has been managed in the past. There have been grave deficiencies, to which the chairman of the Arts Council referred and on which he advised the board. I well remember when I was a director of the board long ago, I too felt that there was insufficient financial control of productions. But one's words fell on stony ground and the resultant malaise of the present time came about.

The report by the Select Committee in another place—I do not know who drafted it—seemed to he drafted by somebody in whom malice and self-advertisement struggled for mastery. The report was deficient in one very important respect. It noted that certain European cities Berlin, Paris, Munich, Vienna and Milan—also ran international opera houses on the staggione system in which great artists perform and sing, and great conductors too.

The Royal Opera House received one quarter of what those opera houses received. The Arts Council said that it was seriously underfunded. I do not know whether it was by chance, but the government of the time invited the noble Lord, Lord Sainsbury, to become chairman of the trustees—no doubt because he and his family had given fantastic sums of money to build the great Sainsbury extension to the National Gallery under the chairmanship of the noble Lord, Lord Rothschild. However, the noble Lord, Lord Sainsbury, is no fool. No doubt the Government expected him to make some other staggering donation to the Royal Opera House. I take it that when the Government failed to make it possible for the Arts Council to raise the grant adequately he resigned.

That is the point. We cannot have a great opera house on the staggione system unless we fund it on level terms with other great opera houses in the world. The noble Baroness, Lady Warnock, was quoted in the report by the Select Committee as saying, Such comparisons provide a more interesting insight into the differing funding cultures of the respective countries than. necessarily, a guide to the relative cost-effectiveness of the individual organisation concerned". So far as I can detect a meaning in that sentence, it is that if other countries preferred to have expensive opera houses and we do not, then we should not have one. That is a reasonable inference to draw from what has happened. We cannot run an opera house unless we are prepared to fund it.

Faced with that dilemma and urged on by the government of the time the Royal Opera House went out to obtain private donations, private funding. It was immensely successful in so doing. But the more successful it was, the greater its difficulties. It was accepted that now there was no need to increase its grant and so it was impaled on the horns of a dilemma: the more it raised from private sources, the less likely it was to receive support from the government of the day. We must seriously consider whether private donations should not be ring-fenced.

However, there is one way in which something could be done to help the Royal Opera House. I refer to an interesting and curious table relating to the money which the lottery has distributed to the various funds. All the funds are set out—the Arts Council, the Charities Board, the National Heritage Memorial Fund, the Millennium Commission, the Sports Council, and so on. The table sets out the total amounts they have been given and the total amount they have drawn. That amount is very much less than what they have been given. There are good reasons for that. If you are told that you can have a grant from the lottery but you have to match it at a particular level, it takes time to raise that money, and so balances in this account rise and rise, as people struggle to find the matching grants. Even when you have your matching grants, there is some time before you can begin to build or do whatever it is you are getting a grant for. So we have a figure, as it were, of money allocated but not spent, which has risen to £3.3 billion. I realise that that money has been allocated and it certainly should not be taken away. But what has happened to the interest? Has the interest been taken by the Treasury? Where has the interest gone? One could do a great deal with that interest to help, for example, the Royal Opera House.

Lord McIntosh of Haringey

My Lords, the noble Lord has asked me so directly and with such force that I cannot resist answering now his question on where the interest will go. When the Secretary of State criticised the Camelot directors for their bonuses, one of the results of that criticism was an assurance from Camelot that the interest will go to the good causes.

Lord McIntosh of Haringey

My Lords, there is no other way of giving the money except on the same terms as the other money going to the good causes.

Lord Annan

My Lords, I am delighted to hear that. But I wonder whether the interest will be given on the same terms. Is there a chance to use revenue for recurrent purposes?

Lord McIntosh of Haringey

My Lords, there is no other way of giving the money except on the same terms as the other money going to the good causes.

Lord Annan

My Lords, I suggest that this will be an admirable opportunity to add an amendment to the Bill.

The new opportunities fund is an interesting idea in that it is time-funded and has an exit strategy. That is necessary, and it is something which the Arts Council should surely often follow. The moral is that you cannot always have funds which go on and on, difficult though that is for many small ventures which in the end find that they cannot continue without a permanent subvention.

I have one question on NESTA. Will the universities benefit from this? The universities have a great opportunity to put in many bids. I wanted to say something on Clause 17. However, I am afraid that the noble Lord, Lord Rothschild, shot my fox on that. I shall not repeat his criticism. So I conclude with those words.

1.34 p.m.

Lord Howell

My Lords, whatever the merits of the Bill, no one can deny that we are having a fascinating debate today. Although I have not agreed with every point, I do not think a single point has been made which does not merit debate. Therefore, I start by saying that we are deficient in not insisting on having an annual debate on the merits of the lottery. I hope that we shall. Sharing, as I do, fears about Treasury greed, the only way to deal with that is by calling people to account on the Floor of the House. We need more such debates. I hope that my noble friend on the Front Bench will help us to get them.

Lord McIntosh of Haringey

My Lords, in which capacity? I speak for the Treasury as well.

Lord Howell

My Lords, my noble friend has so many hats that I never know which one he is wearing at any time. I do not mind, provided he enables us to have the debates we want.

I intend to speak mainly from my experience in sport and to make some criticisms and suggestions. I want also fully to support the purposes of the Bill and to try to illustrate why it is necessary to develop strategies and priorities. I am sorry that the noble Lord, Lord Skidelsky, is not in his place. I thought that his speech was a little jaundiced. He did not seem to understand the need for strategies, priorities and direction in sport. I shall return to this theme in a moment, but perhaps I may say in passing that, of all the grants given to sport in schools, only 1.6 per cent. have been in urban areas and areas of priority. We should have a social purpose about the giving of grants. There is something wrong there. We can explore this point more fully in the Grand Committee to which the Bill is to be committed. We are not getting our priorities right. Welcoming, as I do, grants being given to all kinds of organisations, it is vital, bearing in mind the problems in urban areas and other areas of deprivation, to use these opportunities to tackle those problems and to encourage youngsters to participate in sport and the arts in order to live a full life. I congratulate the Government on producing the Bill.

There is a need for a strategy to direct these funds to the areas of highest priority. Clause 8 enables the Sports Council and other authorities to solicit bids. That is very welcome indeed. One of the problems at the moment with many of the bids is the difficulty of raising a share of the money to attract success. That is a serious problem. The Government are being imaginative in trying to bring urgency to the distribution of these lottery funds.

On the subject of developing a strategy, perhaps I may welcome the decision this week of the Sports Council and the Government to nominate Sheffield as the headquarters of the Academy for Sport or Institute for Sport. I led the Birmingham bid and we are disappointed that we did not get on the short list. However, Sheffield and Birmingham have one thing in common. They are the two cities that have spent their own money—not government money—on developing significant sporting facilities for this country. Sheffield did it for the World Student Games and Birmingham has done it with the National Indoor Arena and in other areas. I do not begrudge Sheffield a penny. It has earned the right to have the funds. I wish it well in becoming the headquarters of this new, imaginative centre. There are many questions that I would like to ask about the relationship between the headquarters and the regions and the way in which this institute develops, but I shall not trespass on the kindness of the House at this moment to do so. Perhaps we may raise the questions at Committee with appropriate amendments.

Although I want the Government to approve the strategy and I certainly want the Sports Council to be responsible for ensuring that we have one, it cannot succeed if all the decision-making is taken at the centre. The whole point about strategy is that we should decentralise the detail of decision-making after ensuring that such detailed decisions are taken in accordance with an agreed national or regional strategy. That is a very important point.

I certainly agree that if Treasury bureaucracy treats lottery bids as an integral part of government expenditure, that would he disastrous. I hope to table an amendment in order to debate that in Committee. At the moment there is a sort of triple taxation in relation to the bids, which is totally unforgivable. I would like to see our enlightened Ministers—and I believe that they are enlightened—leading the battle. I hope that the Chancellor of the Exchequer himself will try to cut through the bureaucracy. The financial directions under which, for example, the Sports Council operates, need to be reviewed and relaxed. It cannot make any sense for the Treasury to control lottery bids as though they were central government funding. They are not. It is a scandal that the Treasury treats them in that way. All of us have an obligation to come together, wherever we sit in this House, to tackle the problem and to say to Ministers that we are not going to put up with it any longer.

VAT is paid on, for example, sports facilities. Disabled persons lose their disablement benefits if they receive a revenue grant for their sporting activities. Some of us in this House are very keen to promote sport for the disabled. Grants encourage the imposition of the uniform business rate. That is another way of soaking the lottery bids to enhance Treasury and local government finances. That cannot be right.

The great priority for sport—and it probably applies in other fields too, about which I know less—is to re-establish regional sports councils. That is one of the great arguments for enabling the Secretary of State to give some direction and to get decision-making away from the centre. We used to have regional councils for sport. I set them up when I was the Minister. They were a great success because they brought together not only the local authorities, but in particular the planning officers of those local authorities, those who were working on plans for sport and the governing bodies of sport. They generated plans.

The last government closed them down for very spurious reasons. In answer to a question to the then Minister I was told that they were being closed down because it was wrong for members of local authorities to take decisions which might affect other local authorities. That is not a principle that the Government apply to themselves. We have Ministers taking decisions on matters and not thinking that there is anything amiss about the situation. I am a great believer in local government. About 90 per cent. of our local government is of outstanding integrity in this country. There is a tremendous amount of dedication.

It is easy to say that a regional sports council would be given power to make regional grants according to a regional strategy, but that any local authority or planning office involved in such a bid should withdraw, which is the normal procedure now. I therefore very much hope that my noble friend will take back to his colleagues the fact that we must establish regional sports councils as soon as we possibly can.

I certainly approve of the powers in the Bill for the Sports Council, the Arts Council and others, to solicit bids. There is a tremendous gap in provision. I have illustrated that already by reference to schools and sport. The only way to fill that gap is to encourage the Sports Council to carry out a survey and to say. "Look, we desperately need indoor facilities in this part of Liverpool, Birmingham or wherever, and we shall solicit bids that assist people to put in bids to meet the requirement". That should be a prime purpose of this Bill, and I hope that it will follow.

The regional fund distribution powers should he given to regional councils. I envisage that they would be allowed to spend to an agreed limit—perhaps £100,000 provided, as I said earlier, it is in accordance with a regional or national strategy, which the Sports Council or Arts Council has agreed. It makes good sense. It provides local involvement in decision-making.

Under the new opportunities fund I also welcome very much the Government's wish to encourage—although the noble Lord. Lord Skidelsky, is sceptical about it—after-school clubs, homework groups and fitness centres. If we are to provide facilities for sport and the arts, it makes sense that additional money should be added to whatever can be provided now. I would like to see homework clubs, for example, expanded so that in addition to the academic progress that it is hoped youngsters would make, we are helping, by providing facilities in schools, to join in sport and art events, bearing in mind the need for education to provide for the whole man or woman. It is a great step forward to have homework groups, after-school clubs and fitness centres, I would like to see us build on that by the provision of additional money.

I have two final points that I would like to make. I mentioned one of them at the start of my remarks. I was hoping that the noble Lord, Lord Skidelsky, would be back in the Chamber by now so that I could make the point in his presence. Out of a total of 2,827 awards 48 schools in urban priority areas benefited. We should think about that proportion. It is 1.6 per cent. of the total in urban priority areas. That shows, first, our failure to get many of the grants into areas where there is the greatest need and, secondly, it certainly supports the Government's desire to have a strategy on these issues. Facilities should be provided for the schools and for the community. My policy in the 1960s was to put money into schools so that facilities were built that could be used both for the school and the community. The caretaker problem was always the greatest problem. It was necessary to ensure that the facilities received maximum use.

I hope that my noble friend will excuse me mentioning my final concern: the position of the United Kingdom or Great Britain in the light of devolution. I am not quite sure where we are going. We do not have a United Kingdom Minister for Sport and we do not have a Great Britain Minister for Sport, although in my time I had that authority and exercised it, sometimes with some difficulty. But most of our teams—excluding cricket, which plays as England and includes Welshmen, for which we can be grateful—going on to the international sporting stage, do so as Great Britain or the United Kingdom.

I ask that question because it must be faced and the point arises with regard to lottery funding. Will the new assemblies for Scotland and for Wales make their proper contribution to the creation of Great Britain's teams? That is a very important question. I am referring not only to a financial contribution, but also to an inspired contribution in terms of creating a cohesive British team. I have heard whispers about Scotland being represented at the Olympic Games. That would be an absolute nonsense. It would be a disaster of the highest order.

I mention this point now only because I think that it really needs to be tackled. I wanted to draw the matter to the attention of Government so that they will understand that some of us are watching them on this. The great strength of British teams has been their Britishness. It has been a great source of pleasure to many of us to support Britain. Those of us who believe in a great degree of devolution, as I do, want to ensure that pride at being British on the sports field is maintained as much in the future as it has been in the past.

1.51 p.m.

Lord Redesdale

My Lords, I was hoping to be able to welcome the Bill because it was obvious that lottery legislation would be needed at some point. However, I have deep reservations about this Bill. One thing for which I can thank the Government is that they managed to avoid putting on the face of the Bill a change of name to the "People's Lottery". I have great reservations whenever the word "people's" is placed in front of anything. At the moment it is taking on the aspect of a political slogan and I had been hoping that the lottery could somehow maintain its independence and not be seen as the plaything of one party or another.

I should like to focus on the mechanics of the Bill, and especially on additionality. I apologise for using that word because I know that it sends a shudder down the spine of my noble friend because he particularly dislikes it. I was hoping that we might be able to find another word, but as "additionality" is used so often, I suppose that we must all use it.

The problem is that the Bill goes a long way towards destroying the principle of additionality. We should not fool ourselves about one of the major reasons for the setting up of the lottery in the first place. Although it was set up to fund the arts, one reason why the Government of the day were so keen to establish a lottery was that, apart from the prize money, the biggest beneficiary is the Treasury, which gets 12p out of every £1. We on these Benches opposed that money going to the Treasury in the first place. Indeed, we tabled amendments to say that that should not happen. Although I support many of the underlying principles of the new good cause, I find it problematic that it may be seen as an extra form of taxation, amounting to an extra 4p on every lottery ticket.

That is a problem because establishing the sixth good cause is a new approach. If I was replying to consultation I do not think that I would have anything against the good causes—indeed, I support extra spending on health and education—but some of the things that the Minister said earlier, to which I shall return later, have caused me much anxiety. One problem is that the Government are looking to fund some of their own political commitments through the new fund. We shall have to be careful to ensure that it is made clear in the future that that is not the purpose of the new fund.

I am concerned about some of the good causes because in the areas of health and education we are looking at setting up after-school clubs and health centres. However, they are rolling initiatives and it seemed alien to the debates that took place when the lottery legislation was first passed that such schemes would be initiated. The lottery was supposed to fund causes which would not attract a never-ending price tag. When I first read the Bill I believed that that was the case and that the after-school clubs and the health centres were to be funded on that basis, but the Minister said that they will have a limited time period. If that is the case, who is to fund them after that initial period? Once government funding runs out they will suffer, just as so many other initiatives have suffered in the past. They will be in deep trouble and it is then often a quick descent into extinction.

I support the after-school clubs initiative, but it is unfortunate that no recognition has been given to the work undertaken by the Prince's Trust in this respect. The new after-school clubs will be based on those established by the Prince's Trust some years ago. We should note that those educational projects will be closely aligned to the work undertaken by the Prince's Trust.

I was slightly concerned about what the Minister said on health. I understood that many of the things that he is considering were already provided in GPs' surgeries. I know that the health services are meant to be organic at the moment, but I cannot help feeling that many of the new services will end up being based in GP practices or in health authority grounds. Therefore, are we not talking about matters with which the health authorities were dealing before these provisions on health centres were first considered? Which professionals will man the health centres? Will they come directly from the health service?

My main worry is that within a short period of time the new provisions will be used for areas that were previously funded by taxation. That was confirmed to me by a press release dated 24th September from the Department for Culture, Media and Sport in which the Secretary of State said: As with all Lottery funding, the New Opportunities Fund will only support initiatives additional to core programmes funded from taxation. The Government has a strong and abiding commitment to the principle of additionality. That means that Lottery funding will not he used for core areas like NHS beds or school buildings but will focus on innovative and desirable initiatives beyond". I would say that "core areas" go somewhat further than the provision of NHS beds or school buildings.

There is a problem when following that line of debate. It seems clear that to a large degree the money has already been allocated and spent, despite the cautionary words of the noble Lord, Lord Rothschild. In another statement, the Secretary of State said on 1st October: I can announce today that we will do even better than that. I have taken steps to ensure that money from the Lottery will flow into the New Opportunities Fund ahead of the legislation, so that it builds up ready to be used as soon as the Bill is passed. Part of every pound we spend on a Lottery ticket will be paid into the new Fund. earmarked for education and health. And when will this start? Next week—from next Wednesday's draw". It seems that any debate on this has been overshadowed by the Government's commitment to go ahead without the possibility of the provisions being amended in this House.

I turn now to some of the other areas covered by the Bill. I refer to the provision of financial penalties for breach of licence conditions. The Minister said earlier that we do not wish to lob nuclear handgrenades. I thought that a particularly interesting expression. I have trained with handgrenades and they are dangerous enough as it is; "nuclear handgrenades" sound fairly suicidal. I hope that the Minister will look favourably upon the amendments that we plan to table to limit the scope of the fines in cash terms or to make them commensurate with the breach of licence. Not all breaches of licence are due to fraud; they may be to do with such minor matters as the misuse of the lottery logo. I believe that this is an important point. Although I do not believe that the Government would use it for a smash and grab on excess profits from Camelot's funds, there is a real possibility that those who bid for the new lottery franchise will see it as a direct threat to future operating profit and it may put them off.

I suggest, perhaps cynically, that the Government have changed their position somewhat by setting up an advisory panel. Perhaps I am being paranoid and cynical, but if the Government suffered heavily from the spat between the Secretary of State and Camelot and decided that Camelot might be the best operator for the lottery they would not want to be in a position of directly appointing Camelot again. A lottery advisory board would be able to do that. I see the Minister shaking his head.

Lord McIntosh of Haringey

My Lords, the noble Lord is simply wrong.

Lord Redesdale

My Lords, as to Camelot I hope that the Minister will keep an open mind when looking at the new operator. Camelot has proved to be very effective. It would have to go to the best operator in future.

Lord McIntosh of Haringey

My Lords, I do not want any misunderstanding to continue for the rest of the debate. Of course, Camelot will be able to apply for a continuation of its licence. I believe that it has already indicated that it intends to do so.

Lord Redesdale

My Lords, I thank the Minister for that reply. Perhaps he can provide some clarification when he sums up. I turn to the issue of distribution. I believe that the Bill is vague in one respect. Clause 9 gives the lottery the power to distribute funds through philanthropic and other institutions. This raises a problem. Perhaps my lack of research has led to my failure to find an answer to it. When making a lottery application, one of the major difficulties at the moment is finding matching funds. Someone makes an application to a philanthropic institution to provide matching funds and does not realise that the funds of that philanthropic come from the lottery. If he then goes to the lottery for additional funds will that be viewed as an attempt to try to get 100 per cent. funding directly from the lottery? I hope that the Minister can provide a clear answer to that.

Another area that causes a degree of concern, and which strangely is not on the face of the Bill, is the National Lottery Distribution Fund. When the legislation was first proposed everyone was gazing into a crystal ball as to what profits would be made and how successful the lottery would be. Very stringent targets were set in deciding how the money should be held and distributed. However, there is a major difficulty in that at the moment the NLDF stands at £3.5 billion. That cannot be right. The prediction of the Treasury as of March 1996 was £1.5 billion. There appears to be a massive build up with no significant means of shifting it on. I have heard the argument that that build-up is good for PR. I hope that the Minister will look at the possibility of bringing forward some proposals in this legislation to speed up the process by which earmarked lottery funds can be distributed. I give warning to the Minister that we plan to table amendments to impose a ceiling on the percentage that can be held in the distribution fund. This is dangerous because it implies that money will have to be thrown out. Conversely, the mechanisms for distribution would have to be improved significantly and more money would have to be spent to ensure that this area was carefully looked at. Following the comments of the noble Lord, Lord Annan, on the subject of interest, can the Minister give an indication of the level of interest presently applicable to the NLDF? On what basis is it set? The Government will be the ones to set the level of interest.

I do not believe that this Bill should be a justification for a smash and grab on lottery funds in the way that it has been presented by these Benches, perhaps unfairly, but there is a good deal of concern. While we may be unfair in our assumptions, it does not mean that the Government will not commit a smash and grab. Although lottery money is seen as an easy source of funds, the amount that will be available in future due to the lottery can be only an estimate. I believe that it is dangerous to make assumptions about how much will be available when that is not certain.

2.6 p.m.

Lord Hindlip

My Lords, I declare an interest. In my chairmanship of Christie's I have frequent dealings with the National Heritage Lottery Board. I have been less successful in playing the lottery than the noble Viscount, Lord Falkland. The tally of my expenditure to date is £980, with winnings of £10. The Minister has put the case with considerable clarity and conviction. I realise that the Government have a mandate to make changes to the distribution of lottery moneys. We also welcome the introduction of NESTA.

That said—other noble Lords have made a number of points—I have reservations about the Bill. It is less than wholehearted in its support for the arts and heritage. I would have hoped for something slightly better from a party which I would be the first to admit has a much better record as a supporter of the arts than we on this side of the House.

As the noble Baroness, Lady Young, admitted, the Bill is set against the background of the Government's stand to control public expenditure. However, as my noble friend Lord Skidelsky said, it appears to rob Peter to pay Paul.

When the lottery was first introduced, I was under the impression that it would be additional to government funding. It is not a substitute for the proper funding of education and the health service. I should like the Minister to take on board a concern that the noble Lord, Lord Rothschild, raised about Clause 17. It could have serious effects on any long-term projects. I do not want to attack the Government. On matters such as arts funding we should all work together. When I wrote that, I did not realise that the noble Lord, Lord McIntosh, was also representing the common enemy.

I shall say a little about how enormously important the lottery has been in funding the arts and heritage. It was a museum commissioner, Lloyd Grosman, who wrote: The money that the Heritage Lottery Fund is spending on museums and galleries throughout the United Kingdom represents the greatest acts of munificence in the entire history of museums. This colossal investment in our culture and educational infrastructure will benefit not only us but our children for generations to come, who will praise the intelligent commitment to the common good that has informed the policies of the Heritage Lottery Fund". I share that view. It is true. From time to time that has enabled the nation to make significant purchases.

With the agreement of the director of the National Gallery, I should like to tell your Lordships that tomorrow he and the noble Lord, Lord Rothschild, will make an announcement of the purchase of one of the great masterpieces of British art. I have been involved in the sale of this picture, both as trustee for the family for whom it was painted in the 18th century—with whom, incidentally, I am meant to be having lunch today—and through Christie's, as a broker for the sale. Without the lottery money, that masterpiece—it is a masterpiece—would undoubtedly have gone overseas.

The National Gallery, the Tate, the British Museum and the Victoria and Albert can now compete on the world stage after being for so many years the poor relations of France, Germany and the USA. That has had a crucial effect on the morale of people working in museums. They are men and women of great talent and expertise. They are not rewarded like their counterparts in America. The lottery has given them an incentive to carry on and to make their institutions come alive again, as they should be, and not remain the cobwebbed, covered sleeping beauties that they had become in the 1970s and 1980s.

It would be a cruel blow were the Government to turn from being the fairy godmother who gave us the lottery to the wicked witch who sent them back to sleep again for another 40 years. However huge the lottery moneys may seem to the layman, as the noble Lord, Lord Rothschild, pointed out, they are small beer in terms of overall government funding. They are also fragile. My experience of spending £980 and winning £10 leads one to a certain lottery fatigue which will become more apparent.

I should like to point out the competition our museums face. One museum, the Getty, has a minimum—I know that it has been mentioned previously in your Lordships' House—of 225 million dollars that it has to spend. One picture can today cost £50 million. Funding museums cannot be a stop/go process. It has to be consistent. For our great museums to be the educational establishments that they should be, they have to have comprehensive collections. In the case of the National Gallery they are of European paintings. There must not be huge gaps. That was a point made to me by Neil MacGregor, the director of the National Gallery, because it and the Tate were starved of funds in the 1950s, 1960s, 1970s and 1980s. Those gaps in their collections can never be filled.

There are great pictures in the National Gallery. That brings me to another point which strays slightly from the Bill but it is crucial to arts funding. In Room 45 of the National Gallery there is a painting by Gauguin called "Harvest: Le Pouldu". It was acquired by the Tate in the early 1960s through the acceptance-in-lieu procedure. Here I beg the Minister to give the House an undertaking that that excellent system will not be curtailed, as some of us involved in its operation fear that it may be. The Gauguin was accepted at a cost of £47,000. I asked the Director of the National Gallery what he thought the picture was now worth. He is a cautious man, particularly when talking to me about pictures! He said, "I suppose 200 times what we paid for it". When the nation acquired that picture it was a fantastic investment.

That is not an elitist view. There were 70 people in that one room, Room 45, in the National Gallery in the middle of Tuesday afternoon this week when most people were out Christmas shopping. About one-third were schoolchildren being given an excellent talk by a member of the gallery staff and about half were visitors to this country.

The people—I use that word advisedly—love these picture and I believe that we get superb value from our museums. I am convinced, too, that we get good value from the lottery distributing bodies.

In conclusion—I must try to make that lunch—in order that I can support the Bill, which I believe has merit, will the Minister give assurances, first, that he will look carefully at Clause 17? Secondly, can he give the House an undertaking that the cuts in percentages going to national heritage will be the last? We cannot have a gradual chipping-away process. Thirdly, will he and his colleagues—I purposely have not mentioned the mystery Dome—examine carefully funding for the millennium project?

2.16 p.m.

Lord Charteris of Amisfield

My Lords, I shall not detain the House long. I wish to say a few words about the new good causes of health, education and the environment. I also wish to comment on the National Heritage Memorial Fund, which does not appear in the Bill and has been mentioned today only by my noble friend Lord Rothschild.

I believe that the new good cause Bill tramples over additionality. In my view, the money that will be used for the causes should not come from the lottery but from the Government. Whoever drafted the Bill has done so skilfully because who could object to spending money on health, education and the environment? The only question is where the money is to come from and I believe that it should not come from the lottery. From taking money away from the lottery one gradually begins to hijack it.

That is where the Treasury comes in. I have the deepest admiration for the Treasury, not only the body but many of the people in it who are my great friends. There is only one thing wrong with the Treasury—it is highly unreliable when it comes to money! Mark my words, it has got its fingers in this pie. I am not sure that I blame it, but that is the way it is.

I turn to the National Heritage Memorial Fund of which I had the honour to be chairman from April Fool's Day 1980 until I handed over to my noble friend Lord Rothschild. During 10 years the fund dominated the scene in the arts. It continued to do so until it was absorbed by the huge amount of money coming from the lottery. I remind your Lordships of some of the things it did during those 10 years. It saved, established and endowed 12 great country houses. It bought for the nation many famous pictures; Poussin, Altdorfer and Rembrandt. I remember that my last hour as chairman was spent with Lord Hindlipp, in his office at Christie's arguing with Lord Cholmondeley about whether the nation would be allowed to buy the marvellous picture of the old woman with the cat. I had to leave before we knew the answer but I was very relieved to be told later in the evening that he had accepted.

We have also done lots for the countryside—for bogs, fens and flats. We have done lots for the animal kingdom—for birds, bees, and even, I may say, the greater horseshoe bat, which was one of our great triumphs in the early days.

We did all that and lots more in 10 years. We spent £130 million. We started off with £12.4 million which was all that was left from the ravished land fund. We were promised by the Government that they would give us £3 million each year, which they did, but they also, according to the Bill, were allowed to give us lumps of money when they felt like it. Therefore, I spent my time sucking up to them and we got quite a lot of money that way. We were able to spend £130 million in 10 years and have some left over.

We were able to do that because the Government trusted us and did not try to fiddle about and do it themselves. The National Heritage Memorial Fund has really disappeared under all the money that my noble friend has, but it is still there. The money from the lottery may fade away. People may not want to go on with it. I never buy a ticket. We may find that the National Heritage Memorial Fund is left once again to dominate the scene. Therefore, I ask the Minister to please give it money. In a few days we shall hear what it is to receive this year. I hope that it will be a sizeable sum which will not grow less in years to come.

2.22 p.m.

Lord Rowallan

My Lords, many noble Lords have declared an interest and I should as well because it is my intention to win the £25 million in Saturday's roll-over.

One of the problems in speaking late in any debate is that often what you want to say has already been said. In my case, the noble Lord, Lord Howell, on the Labour Benches and the noble Lord, Lord Redesdale, on the Liberal Democrat Benches, have said a lot of what I wanted to say. But I believe that if a point is right, it is worth while making it again and again.

The lottery has been the most fantastic success, a far greater success, I am sure, than my government thought it would ever produce. But the distribution of the funds is extremely inefficient and cumbersome. We have heard the figures bandied about several times and I shall not bore your Lordships with them too much. But to have £3.3 billion in a reserve fund, which means that 30 per cent. of the funds have actually been used while 70 per cent. are unused, is not good enough.

We have a situation where not one of the distributing bodies has issued much more than about 50 per cent. and some have distributed only 17 per cent. That must be looked at. Is not the answer that we need more of a one-stop shop for lottery funding? My sport in particular is show jumping and it is extremely difficult for anybody involved in it to know where to go for a grant. They do not know whether to go to the Scottish or English Sports Councils or one of the distributing funds. Then, as the noble Lord, Lord Redesdale, said, an equal amount of money must be found to make up the sum that is required. That often makes the whole project, however worthy, totally impossible to accomplish. Therefore, can we not consider grants instead of loans?

The noble Lord, Lord Howell, said that we must help the urban primary schools. I could not agree with him more. However, the big problem for those schools is that they cannot find any land to build upon; indeed, it has all been built over. Therefore, we must do something to enable them to build and create an environment to keep children off the streets.

The Treasury receives 12p in the pound from every lottery ticket sold. It also receives 17.5 per cent. VAT on all capital projects, so it does very well. Lottery funding was ring fenced, but I rather believe that the Bill will be taking us down a slippery slope whereby that ring-fencing will be breached. We must watch the situation most carefully. Lottery funding should not be used for government business; that should come from normal taxation. Funding from the lottery should be for the benefit of specific causes—the good causes. That was a good name, so let us keep it. It is very important that we do not use such funding as an extra layer of taxation and thus avoid government responsibilities.

NESTA will provide assistance for artists, musicians and architects. However. I suggest that it should also help sports people because sport is a terribly important part of our upbringing. But let us turn now to the nitty-gritty. In the Bill we see, retrospectively "with effect from 14th October", that four good causes will now receive only 16⅔ per cent. as opposed to 20 per cent. The millennium good cause will continue to receive 20 per cent. and the new health, education and environment cause will receive 13⅓ per cent.

I hesitate to ask the Minister the following question, but I believe it to be one that really needs to be asked. What is the money for the millennium good cause being spent on? Is it a sacred cow or a lasting monument? What will it be filled with? Moreover, how are we to get there? It is becoming more and more apparent every day that the Jubilee Line will not get us there. What is the point in having the site at Greenwich if no one can gain access to it except by way of taxi? That will be a very expensive form of transport, although taxi-drivers will no doubt love it.

I see again that Scotland is to be used as a guinea-pig, as it was for the poll tax and as it will be in terms of devolution to a large extent. However, as this will be testing the water as regards co-operation between distributors, I hope that it will work and that it will be proved to work. I commend the Government for at least experimenting with this and letting the Scots, who have always been known as canny folk, have a crack at the whip.

I have three areas of concern. If we want the lottery to be the people's lottery, which is what the Government seem to want, perhaps I may point out that the distributor at present seems to be interested only in new ideas and new concepts. Laudable though the latter is, I should like to suggest that the time has now come for us to reconsider the position. During Question Time today, the noble Baroness, Lady Hayman, said that she was keen for brownfield sites to be looked at in this connection. But should we not be updating some of our existing facilities rather than building new ones? Is it not strange that London does not have a national exhibition centre of excellence? Would it not be sensible to update something like Wembley Arena and make it into an exhibition centre of excellence? Why do Birmingham and Glasgow have one when London, our capital city, has not? If we want to hold a special exhibition for the sporting world, or anything of that nature, it is difficult to generate any sort of interest and persuade people to come to London. That has to be a great shame.

My second point concerns charities. I know that the lottery was not designed to help charities, but time has moved on. Charities have lost an enormous amount of money; indeed, they have taken a terrible hammering as the result of the lottery. The people still think that lottery money is going to charities in enormous sums. Only 32 per cent. of available funds have been distributed in this area. Donations are not made directly to many mainstream charities. Some have received funds. The Mental Health Foundation and the Samaritans both received over £500,000. The Red Cross received £190,000, but Cancer Research only £100,000. However, the lifeboats have received nothing. This is a slightly different point from what we are discussing. but I have always thought it was rather peculiar that the Lifeboat Association should be run entirely by charity as it performs a fantastic service.

Many charities could save the taxpayer an enormous sum of money, for example if they found a cure for cancer or produced a useful industry to make a third world country more self-sufficient. Charities also help the community by providing healthcare and advice for the ill and infirm. We need to look again at funding for charities. We must give them more if they are to survive. We have taken with one hand and now the time has come when we must give with the other. Surely we could use some of the reserves, or even the interest on those reserves, which have not been distributed.

We must put more money into sport. Let us have an academy of excellence. Let us encourage the youth of today by keeping them off the streets, keeping them away from drugs and creating a team spirit. Sport is the hub of a new beginning. It provides a focal point for pride in one's country. whether that be England, Scotland, Wales, Ireland or anywhere else in the world. There is something attractive in doing something for one's country. One of the proudest moments of my life was when my daughter entered a major show jumping competition for Britain, won the competition and the National Anthem played. That was the most moving moment of my whole life.

How many people never discover what their true vocation is? I wonder how many noble Lords here today have discovered their true vocation in life. How many of us could have been great footballers but have not played football or great golfers but have not played golf? If we had an academy of excellence we could give people a chance to find that out. Let us give tomorrow's youth a chance today. We have the opportunity to do so through the lottery; please let us use it.

2.32 p.m.

Lord Bassam of Brighton

My Lords, I rise to speak with some reluctance this afternoon, caught. like many noble Lords no doubt, between a headache and a lunch. However, a few comments and observations may be appropriate. I greatly welcome this Bill because not only does it give effect to our Government's manifesto commitment to establish a genuine people's lottery, but I think it is also virtuous legislation. I never thought there would be a time when I would say in a House such as this that I welcomed virtuous legislation. However, I believe that this is virtuous legislation. It attempts genuinely both to improve and to reform something which has been established with good, sound foundations.

I was somewhat concerned when I heard the noble Lord, Lord Skidelsky, speak earlier, as I thought he was being unduly churlish. He said in effect that a good idea could not be improved upon. We have a good idea with the lottery and no doubt it will be improved upon. I am sorry that the noble Lord is not here to hear the question, but I ask what is wrong with populism? I thought that the lottery was a fine instrument of populism when it was introduced some three or four years ago. I have no problem with that. Building on populism is no bad thing. To ignore the criticism that people have made of the lottery is churlish in the extreme. After all, it should shape our perceptions as to how the lottery should develop. I could not quite understand why the noble Lord, Lord Skidelsky, was so contentious in his remarks on the people's criticism. This afternoon we have the opportunity to put some of that right.

I also welcome the sixth good cause. There have been complaints in this debate that the sixth good cause is all about undermining the principle of additionality. Perhaps it brings something new to the lottery. Perhaps it is entering the field of hypothecation, trying to set aside specific sums of money for a series of good causes through NESTA, which is surely long overdue as part of our urgent consideration.

My primary concern today is to make a few observations about the valuable impact of the lottery on the sports world. I have been much impressed by the impact of the Lottery Sports Fund. I declare an interest. In my own local authority we have already begun to see the benefit of lottery sports funding. Our sports pavilions, sports clubs, and so on, have begun to benefit from its contribution. Next summer no doubt I shall have the pleasure and privilege of playing at one of the finest little local cricket grounds at Firle. It has benefited from the fund with a new pavilion entirely in keeping with the rustic retreat that the cricket ground surely is.

The Lottery Sports Fund has had a profound impact on investment in sporting organisations at grass roots level. Some 823 football organisations have benefited from it. Awards total in the region of £70 million. Of those awards, 345 were for projects of under £1 million; 202 were to voluntary clubs; and 256 were awards for additional, new provision. That is a fantastic achievement in the period of time that the lottery has been with us.

In considering the way in which funding has been applied, I have been impressed by the efforts and endeavours to reward those clubs and organisations in some of our inner city and deprived areas. I commend the strategy adopted by the Lottery Sports Fund in that regard. It gives us a pointer to the future.

The Government have made it clear that they wish to encourage a more strategic approach to the legislation. That, I believe, is most welcome.

I come to an aspect which is most important from my perspective: the role of the local authorities. It may not be well appreciated that local government is the major investor in the country's sports infrastructure with £1.5 billion of revenue funding on sport and recreation. That covers not only leisure centres, swimming pools and athletics tracks but also the cricket, football, hockey and rugby pitches vital to the existence of local sports clubs. There has been much comment about the demise of our open spaces for sport. The local government sector has done its best to try to protect those open spaces. Working in partnership with voluntary organisations through the careful funding by the Lottery Sports Fund, it has managed to do much good in stimulating and reinvigorating sport at grass roots levels.

I believe that a more strategic approach for the delivery of funds to the good causes is long overdue. I worry when I hear noble Lords on the Benches opposite complaining of the need for a strategy. seeing it as some ghastly form of state intervention. I do not see it in that way. I see it as a positive benefit and gain to us all. Through adopting a strategy, money can be put in the right place to benefit those organisations which can target their resources at those most in need.

I liked the statement of the noble Lord, Lord McIntosh, and his commitment towards new initiatives, in particular the out-of-school clubs, homework clubs and healthy living centres. With a strategic approach, I believe that the funding available through the lottery can be given greater effect by bringing together those funds in a corporate way. I believe that we shall benefit from the strategic approach over time.

I say this to noble Lords. Put your doubts about this legislation to one side. There is much to be gained from it. I like the new approach. I think that we shall begin to deliver a genuine people's lottery, with aspirations which are shared by the wider populace. On that basis, I believe that this legislation should be commended.

2.39 p.m.

The Earl of Gowrie

My Lords, if I could detain the House for only a minute by chanting a mantra, that mantra would be: "Lords Rothschild, Inglewood. Annan, Howell, Hindlip, Charteris, and indeed, Bassam". I was informed by the Whips' Office a fortnight ago that I should be addressing the House following the Government and Opposition speakers. As I represent by far the largest grant distributing body of those asked to distribute lottery funds, I shall have to set out my stall. So fasten your seatbelts, my Lords, as I am about to exceed the 70 m.p.h. limit. I shall confine my contribution to the effects of the National Lottery Bill on the Arts Council of England, which I chair until 1st May next year.

I am often criticised, not least by myself, for concentrating on the material side of the arts: their value to our economy; the jobs they generate; their power to remake cities and restore individual and collective self-respect. As Sir Cameron Mackintosh has said, there is also an immense cross-fertilisation between a small subsidy and the huge commercial earnings for this country from the arts. Just think what the show, "Cats", has delivered, among many other things, to poets—traditionally and continually the poorest and purest of arts practitioners. But when a work of art gets to work on you as an individual, in whatever form you find or choose, the only comparable experience is neither material nor intellectual. It is love.

Perhaps the most interesting day of so many interesting ones—I have often pleaded for a boring one—of my chairmanship of the Arts Council of England was when Chief Superintendent Keith Hellawell, since then appointed as the Government's "anti-drugs czar", came to me under the previous Administration with his beliefs about what participation in the arts could do for an under-class in our society disproportionately attracted to drugs through boredom and a lack of self-worth.

We are a fascinating multi-cultural island now. The demands on the Arts Council involve, as they should, reggae as well as "Rigoletto". I accept, and love, multi-culturalism. I find relatively little of our work "trendy", in the expression of the noble Lord, Lord Annan; I agreed with virtually everything else that the noble Lord said.

The National Lottery was a visionary creation by the previous Parliament—vision translated into action. Great work was done for artists and audiences. I defend that work vigorously. But there was a flaw in the vision. Here I depart from the noble Lord, Lord Skidelsky, although I agree with much else of what the noble Lord so wittily said, especially his "thin edge of the wedge" argument.

The flaw in the vision was that the lottery created a crisis, as well as curing one, where the arts are concerned. We all know that from medicine. You are given something that cures your condition or arrests it; but there can often be bad side-effects. Huge capital inflows led the Treasury to cut our small revenues. As a result, we are suffering the worst arts revenue crisis in my adult lifetime. We were forbidden by law to treat the two streams synergistically. Those faults should be laid at the door of the previous Administration. Additionality was thrown out of the window with the first cash cut that we received.

I therefore intend to concentrate on what went well and what went badly during the first stage of the lottery in order to show that it is right that there should be changes. The National Lottery is an organism, not a monument. I shall then focus on the second state of the lottery, which will be the creation of the Bill before the House.

I pay passionate tribute to the former Prime Minister, John Major, for having had the courage and foresight to launch the lottery on a rare tide of all-party support. It is right to review its successes. It is the task of the new administration to make the improvements. The present Prime Minister granted me generous time before the election. I am hopeful that the arts will remain as they should, ecumenical. My successor must see to it that they do. He or she will also need to keep a sharp eye on what, on the face of it, seems to be an unprecedented increase through this Bill in the powers of the Secretary of State, a withering of the arm's length principle.

Of the loss in previous expectation under the Bill to the five distributing bodies, some £ 1 billion has already been revealed. If Parliament gets it right—and I am confident that it will—then in spite of that we could have before us a unique and golden opportunity to achieve over time a rational arts funding system for an exceptionally creative small country at long last.

The good news for the Chancellor is that we could achieve it without additional cap-in-hand begging bowl visits to the Treasury by our sponsoring ministry. But for his part he has to do two things. He has to make it uncompromisingly clear, backed by the Secretary of State and the entire Government, that following the loss of money to the sixth good cause, including NESTA and the new opportunities fund, he will continue to protect the existing good causes through the lottery in the next Parliament, always assuming his party wins it. He must also put a plug in the bath where our grant-in-aid is concerned. Not more money, I suspect, but at very least no more cash withdrawals.

Let me come to the success of the lottery so far. Contrary to impressions created by some tabloids. unsupported by virtually all the regional media, the council's lottery grants have been hugely popular and of benefit to all sections of society. That is where I agree with the noble Lord, Lord Bassam. Nearly 50 per cent. of lottery capital grants have gone to community or amateur groups. So much for the myth that the council only looks after the high arts, arts for "toffs", whoever such people may be. One example of this is Multi-Asian Arts in Rochdale which has received £40,000 for refurbishments, the purchase of a vehicle and musical instruments. Indeed, our Arts for Everyone Express Scheme was aimed at community and amateur groups. providing over 5,000 grants of under £5,000. We are creating the audiences as well as the buildings and artists for the next millennium.

Another popular misconception is that lottery money only goes on big projects. In fact, 70 per cent. of the total number of our capital grants are for under £100,000. A special favourite of mine was £30,000 for the purchase of a Steinway concert piano for the Great Grimsby auditorium—one of the first awards we made. A vast range of people have gained from the people's lottery. Eighty per cent. of our Arts for Everyone lottery programme has been aimed at children and young people. In short: education, education, education. For example, there is an educational project—Hi8us—in Birmingham. Here young people from six regions can learn professional television and drama skills with on-the-job training also provided for disadvantaged young people. The lottery contributed nearly half-a-million pounds to that.

Similarly, I am proud that the council has been able to give grants to hundreds of projects which have helped improve life for people with disabilities.

The council has often been accused of a London bias in its distribution. We cannot overlook the fact that London is the national capital of a small country. It therefore has a high proportion of our cultural institutions—including this very Palace of Westminster—within it, as well as a huge concentration of our population within or in easy reach of it. The balance is nonetheless shifting towards the regions. Spending per head has been £24.34 pence in London; it has now reached £23.81 in the region covered by the Northern Arts Board. If initially the council seemed to be tilting the balance in favour of London, the lottery legislation expressly forbade us to solicit applications and London was quick on the draw. The Bill proposes to give us greater freedom for the distributors to act strategically. This will help us to achieve a more equitable spread and I welcome it unconditionally.

Yet I cannot emphasise too strongly that while London as a national capital and great world city attracts millions of visitors, London as a region is considered on all current definitions to be a deprived region. We are seeking more small bids here. With the wisdom of hindsight, the abolition of the GLC was, at least from the point of view of the arts, a bad thing. I look forward to a mayor with muscle.

Partnership funding is a key element in lottery distribution. In the period of less than three years since the council started making awards, lottery money has acted as a magnet to attract investments for the arts from many other sources. Local authorities, obviously; but that is public money, European funds certainly; but we are net payers-out. But private individuals, rich and infinitely less well off, have, if anything, oversubscribed to our partnership funding requirements, large and small.

In the case of film, private sector investment has risen significantly since the lottery and the council is now an investment partner and enabler. Whether film sits easily within the purlieus of the Arts Council is for the council and my successor to discuss with the Secretary of State. But we will not be able to see the outcome of the major new capital construction awards I mentioned above ground for the next two or three years, and then the scale of the achievement will become transparent.

Artists and audiences alike benefit from new and refurbished facilities both backstage and front of house. It stands to reason that a welcoming environment will attract more people away from television towards the life-enhancing moments which only encounters with living art can provide. These too improve box office returns.

Newcastle and Gateshead, Manchester and Liverpool, Birmingham, Bristol, London and Sheffield—to mention only the biggest cities—will soon be transformed in a way not seen since the confident years of Victorian and Edwardian industrial and municipal expansion. Much of that has been brought about by Arts Council lottery investment. Our partners in arts funding as well as sports funding, the leaders of the city councils, acknowledge the achievement trenchantly. I know that the noble Lord, Lord Bassam, will welcome that. I can tell him that great plans are astir for Brighton.

A £22 million lottery award contributed to the reinstatement of Manchester's admirable Royal Exchange Theatre, following the devastating effects of the terrorist bomb last year. In Gateshead, the huge Baltic Flour Mills site has been transformed into an international centre for the contemporary visual arts, creating over 1,000 jobs in a deprived area and likely to attract thousands of continental mainland Europeans to it. Arts Council investment is £33 million.

The Salford Quays at the head of the Manchester Ship Canal will become a multi-arts complex creating 6,000 jobs locally from a total lottery investment from the council, the Heritage Memorial Fund lottery and the Millennium Commission of £60 million. The lottery as a whole—not least our share of it—is achieving and ameliorating the effects of a major cultural and social shift; from cities as places founded on manual labour to cities able to compete in the contemporary economy nationally, internationally and globally.

But the bad news is that we have suffered capital feast and revenue famine. We see great theatres like the Liverpool Playhouse put into administration and the Royal Shakespeare Company in debt. Great opera and ballet companies, whose creativity puts into perspective some undoubted managerial deficiencies, have been trading from day to day and month to month. Our orchestras face severe problems. That leaves the council little scope to do part of its job, which is to respond to new creativity and innovation. I do not say this lightly. Again, we are suffering the worst revenue crisis in my grown-up lifetime.

We have seen a grant-in-aid from the Treasury at best held at standstill in cash terms and we have twice sustained cash cuts. I am looking forward—if that is the phrase—to hearing about a third cut this afternoon. I should like to apologise in advance to my noble friend Lord Puttnam. I shall not be here to hear his maiden speech because I have been summoned to the headmaster's study at the conclusion of the debate. So far we have suffered a loss in excess of £25 million in real terms over the past five years out of approximately £200 million. The Bill gives us an opportunity to redress damaging imbalances and to achieve stability by employing our two streams of income. It can be done, though not very quickly because real capital needs remain. Yet it must be done because the entire credibility of a government generally welcomed by the arts world depends on it.

I support many of the aims of the Bill. The Bill wants the people's lottery resources to be used for the people. We have been highly ingenious under the present legislative handcuffs in starting the process, with Arts for Everyone and Arts for Everyone Express singled out for praise by the Secretary of State. But what we have done cannot be at the expense of the high and costly traditional art forms. People want access to these as well.

A move towards a more strategic approach to the distribution of lottery funds is proposed in the Bill. I welcome that. We have worked very closely with the National Heritage Memorial Fund in my four years. I welcome the opportunities for greater delegation of funding to the regional arts boards so long as there remains a strategic authority—which I feel I legitimised personally by campaigning successfully for all 10 chairmen of the regional arts boards to have full voting rights in the council. I welcome the relaxing of the current rules which inhibit lottery distributors from soliciting—a curious use of language as in other spheres soliciting tends to be discouraged.

We support many of the objectives of NESTA and the new opportunities fund, which are in line with the work we already do. Concerning NESTA, whether we do it, they do it, or we both do it in tandem is a lot less important than getting the work done. In my view, the council and NESTA should work alongside each other to achieve the Government's objectives for young people and for education as well as important work in the field of intellectual copyright. This is only the arts stream of the work.

Similarly, much of the work of the new opportunities fund is in part carried out by the current lottery distributors. The Arts Council already funds projects which benefit children, including their out-of-school activities, and senior citizens. Support has gone to healthcare projects involving the arts such as Action for Health, in Newcastle. But lottery revenue support is what artists need most. We have done what we can to achieve it. We will surrender lottery money as, by electoral mandate, we must. We will not surrender easily on behalf of the arts in England, all the jobs they create, all the international acclaim they attract, the principle of lottery funds for the arts.

A last word about an issue which, as well as the legislation before us, is an acid test of the Government's intentions towards the arts in the future. As I have said, arts lottery funding revived Britain's creative economy. It has enhanced people's quality of life and sense of worth. We must continue this work. We have taken our mandated and mandatory medicine through the creation of the new good cause. We have even welcomed it—subject to the provisos I have given. But that, my Lords, is it.

Like the noble Lord, Lord Rothschild, we have not yet finished the job we were asked to do. All over the country, good and necessary projects are queuing up. Not all can or will be done; but we cannot address those that must be done within the period covered by our current agreement with government which ends in 2001. We have four or five projects left of major international, as well as national, importance. We wish to allocate around £200 million for planning purposes for them over the next few years. One is the South Bank Centre; the others are located in the regions.

But we cannot commit ourselves to any of these at the expense of the new and necessarily modest, revenue demands likely to be imposed by this legislation. Nor can we ignore good and necessary capital projects which are less expensive, both in the pipeline and likely to be forthcoming. We need therefore an orderly transition from lottery one to lottery two. If allocations are limited to the year 2001 there will be a crash landing, not a soft landing.

To plan for the future in a responsible and strategic way, as suggested by the noble Baroness, Lady O'Cathain, we need confirmation that there will be arts lottery funding following the passage of this Bill until, say 2005 or 2006: at least until the middle of the next Parliament. Given the diminished expectations now before us, we need more time, not more money. The political parties seeking office at the next election must declare their hands now, the party of government especially. Without such commitment, it will be very difficult for us to respond to any of the needs of which I have been speaking.

The South Bank Centre is the test case. Europe's largest and potentially finest arts complex, which includes the Royal National Theatre and the National Film Theatre, is public property. It is, in effect, under government control. Its largest component, the centre itself, is by the admission of its own board, in a disgraceful state. There is even a case, following the Prime Minister's recent statement, that the Government should make major improvements to public property under its control without recourse to the lottery at all. A visionary scheme whose main architectural component is likely to receive almost sufficient support from a single great philanthropist, was overwhelmingly endorsed by the Arts Council last week in principle. We cannot have a situation where the great borough of Gateshead receives, as in the end it is likely to receive, nearly £100 million, and an artistic, multi-form complex, central to London the capital, London the region and London the magnet for artists and audiences from all over the world, is not served properly. If it is also done quickly, there will be huge cost savings to the public: many, many millions of pounds. Many millions of pounds will have to be spent on it in any case.

In sum, the lottery will continue, and profitably, so new money is not required.

Lord Burnham

My Lords, I thank my noble friend for giving way. Is he going to continue for very much longer? If so, we can all go and have a cup of tea while he continues.

The Earl of Gowrie

I am on my last paragraph. While, after 1st May, I may well be the noble Lord's noble friend, if he continues to behave like that, I probably will not be.

My Lords, I recognise—and as a former Treasury spokesman with Cabinet rank, I even approve—public spending restraints, however painful. But new money is not here required: commitment is. It involves all the big regional projects I mentioned as well. It depends on the political parties continuing with a programme of cultural regeneration, education and the creation of audiences and artists, at very least until the middle of the next Parliament. This Government have a unique and golden opportunity to restore confidence which they have lost, in the world of the arts through allowing for the provision I have urged. They must make their commitment plain and make it now.

3.3 p.m.

Lord McNally:

My Lords, it would be presumptuous of me to follow the noble Earl, Lord Gowrie, and his manifesto for the arts. It has been an extremely well-informed and often passionate debate. I have learnt a great deal. I hope that the right reverend Prelate the Bishop of Leicester takes comfort from the success of the noble Viscount, Lord Falkland, with scratchcards. That can only be confirmation of the text that to him that hath, much will be given. The Minister, having confessed that he is in the House as a Treasury Minister, will, I hope, take back to No. 11 the message that each time the Treasury was mentioned it was like Captain Hook in the pantomime. There was hissing and booing in the great tradition of a Christmas show.

I share the doubts expressed by my noble friend Lord Redesdale and the noble Lord, Lord Skidelsky, about the "people's" lottery. I have a certain distaste for such populism. I think that, like patriotism, it is the last refuge of scoundrels. Parliament is rightly concerned about what the Government are doing with the lottery. If I have correctly gauged the tenor of the debate, the verdict at best seems "not proven" with regard to their intentions. I suspect that the House will want to probe the matter deeply in Committee.

When Parliament set up the National Lottery, it had some very clear ideas. It wanted a lottery which was corruption and crime free. We may take that for granted now, but it is not always as guaranteed as one might like. It should not be a pork barrel for the politicians of the day. It should not be a honey pot for the Treasury to raid at will. There should be transparency in both the conduct of the lottery and the distribution of the funds to good causes. Those were Parliament's original intentions; I thought that the last administration got it right.

Perhaps I may say a word about the selection of Camelot. At that time I advised one of the losing companies, the Rank Organisation. Although Camelot may not always have played its public relations with consummate skill, we must acknowledge that it has run the lottery with very great skill indeed. A number of noble Lords quoted the brief supplied to us by Camelot, which states that the National Lottery is the world's most efficient in terms of percentage sales to good causes and duty to government. If that is true, my strong advice to the Government is, "If it is working so successfully, don't try to fix it" because a miscalculation as to who runs the lottery would have a catastrophic impact on the cash flow to good causes which are now working, as is the Government, on the assumption that whoever runs the lottery will do so at least as well as Camelot. The decision on who succeeds Camelot—whether it is Camelot or some other body—must take into account the very high standards that Camelot has set.

I welcome some of the tweaking in the Bill. I acknowledge that the Government are within their rights to tweak the original Act, as they succeeded to it. Like the noble Lord, Lord Howell, I would welcome the right to solicit. It is silly that those administering the funds can neither solicit nor delegate. Both of those provisions will strengthen the legislation. I, too, welcome the idea of a strategic plan.

I return to a matter I raised a couple of weeks ago in your Lordships' House. I refer to the question of sport in schools. On that occasion I raised a parallel question to that just asked by the noble Earl. Lord Gowrie, about funding after 2002. At the time of that debate, the Central Council of Physical Recreation asked me specifically to raise the matter with the Minister who was to respond to the debate, the noble Baroness, Lady Blackstone. I confess that on that occasion I asked the noble Baroness a lot of questions, so it might have been a complete oversight that she did not answer that particular one. I shall ask the Minister only one question today: will sport continue to be a major beneficiary after 2002? As the noble Earl, Lord Gowrie, said in connection with the arts, it is important to have an answer to that question, particularly if, under this Bill, the Government are demanding long-term strategies and long-term planning from the sports organisations.

There is another argument in favour of sport being a recipient of lottery money. I refer to the very eloquent comment made by Mr. Joe Ashton, Member of Parliament, at the time that the idea of the national lottery was being debated. He worried that the lottery would be a way of plucking money from the pockets of people who stood on the terraces and of putting it into the pockets of those who sat in boxes in opera houses. I do not want to get into a debate about the merits of funding. However, a good number of people who play the lottery are sports fans. Research reveals that when the lottery began 40 per cent. of people supported the idea of sport being a major recipient of lottery money. In the three years that the lottery has been going that support has increased to 60 per cent. I suspect that the reason is the strategy of the Sports Council to put lottery money into visible projects that are beginning to have an impact on communities and the lives of individuals.

A number of noble Lords expressed concern about the sixth good cause which covers education, health and the environment. The concern is that although it has great merit it also has many dangers. It involves the possibility of pork barrel politics and Treasury plundering. Most dangerous of all perhaps is the potential for it to become the cuckoo in the lottery nest which over a period of time squeezes out the other good causes. This is a real concern. The noble Lord, Lord Skidelsky, asked what would happen if lottery funds fell for any reason. I suspect that the sixth good cause would remain intact because we know that it is really government spending on projects that should be the subject of general taxation.

During an earlier debate the noble Baroness, Lady Blackstone, made it clear that the Government, in the area of education, would give priority to the drive for literacy and numeracy. That is quite understandable. However, that is why we must he concerned that the intention to give sport a certain percentage of lottery funding is protected. I firmly believe that sport is not only good in itself but that it can promote a whole new commitment by parents and pupils to their schools. I urge the Minister to adopt lateral thinking in relation to healthy living standards, schools, clubs, and voluntary clubs and the extension of the role of NESTA in sporting talent. Do not exclude sport from involvement in these projects. If these projects have a sporting element, young people can he attracted to them.

Both the CCPR and the National Association of Head Teachers have drawn to my attention that one of the reasons why primary schools do not get their fair share of lottery funding is that many of them are small and there is a need for security for young people. For example, it pretty well rules out a large number of adults going into school premises during the school day. The 40-hour rule for community use is very difficult to fulfil. If that is preventing primary schools from getting funding the rule should be changed. I echo the words of the noble Lord, Lord Howell. If sports funding money can be put into deprived communities and into schools it can have a disproportionate effect on the lives of those who live in those communities.

Funding by the Sports Lottery Fund has contained priority area and school community initiatives which have had an impact. I was interested, however, to hear what the noble Lord, Lord Howell, said. If what he said is the case, there is a need for a further look at how funds are distributed. I hope that the freedom-to-solicit provision will enable the opportunity to be taken to do that. Independent monitoring of the first 320 completed projects has shown that the participation by under 18s has tripled; participation by women has doubled; and participation by people with disabilities has doubled.

We have seen that during its first three years the lottery has had an impact, especially as it is used for sporting organisations. That is why it receives support. Over 90 per cent. of all schemes approved, amounting to 65 per cent. of the amount committed to date, have been community level schemes under £100,000.

The noble Lord, Lord Bassam, referred to cricket. Cricket has received more capital awards than any other sports. I do not know whether that was the influence of the previous Prime Minister. The lottery has made a substantial impact on the development of the game. There have been 400 awards to cricket organisations of lottery funds amounting to about £48 million. Of those awards, 290 were for new or additional provision. The example of cricket can be seen in other sports where lottery money has been provided to build up the sport from the grassroots.

The various sporting bodies have already shown themselves capable of developing long-term strategies for sport which are fully compatible with the Government's other priorities, such as inner city deprivation, underclass alienation, and health and education enhancement. But sport is worried that the Bill has too much potential for thin-ended wedges and slippery slopes, and not enough recognition of the need for long-term funding. There is too much potential for sport to be squeezed just at the time when its potential for contributing to social well-being and social progress has never been greater.

There are two challenges for the Minister. One was well put in the Evening Standard last night in an article by Liz Forgan. She said of the new opportunities fund in relation to health, education and the environment: In what way is this spending on health, education and the environment different from the Government's normal spending on health, education and the environment? Send for a Jesuit. This is theology beyond the discernment of ordinary folk". I suspect that it is beyond the discernment of most people in the House.

The other warning I would sound relates to our beloved millennium dome. An article in the Guardian today claimed that if the dome results in overspending in a big way, the Government will raid lottery funds to bail it out. We know who will be squeezed by such a raid. I give Ministers fair warning that if they think they are going to raid sports funds for the Greenwich folly they will have a great deal of opposition, and it sounds as if it will come from all sides of the House. I hope that in those warm and friendly terms I can encourage the Minister in lateral thinking and look forward to his response.

3.20 p.m.

Baroness Rawlings

My Lords, we have been privileged for almost four hours to listen to many outstanding, fascinating, wide-ranging and interesting speeches from so many distinguished speakers and therefore I rise with humility to add my few words.

The National Lottery was a tremendous event for this country, set up by the previous government. I remember it well as it was during the same week that I made my maiden speech. I said then that we had taken an important step in line with the rest of Europe and I congratulate the former Prime Minister, John Major, as did my noble friend Lord Gowrie.

The National Lottery has proved to be an even more important step than I imagined because of the large sums of money it has generated; £4.2 billion to date for the five good causes. I agree with the noble Lord, Lord Annan, and my noble friend Lord Hindlip that the money does and will enhance the quality of life. However, the purpose of the Bill is to divert the lottery from the purpose for which it was set up.

The provisions of the Bill blatantly breach the additionality principle, as we heard in an eloquent and brilliant speech from my noble friend Lord Skidelsky and from the noble Lords, Lord Redesdale and Lord Charteris. It is contrary to the principles of the 1993 Act. In their White Paper, the Conservative Government stated: The Government is firmly of the view that the proceeds should not he directed towards the main area of public expenditure, and that it would be inappropriate for the lottery to be seen as a way of funding the National Health Service, education or similar programmes … The Government does not intend that money provided from the lottery should substitute for that provided in other ways". Assurances that the Conservative government were strongly committed to additionality were repeatedly given in Parliament. Indeed, this was done to oblige the then Opposition, who pressed for the principle to be enshrined in law. When the Opposition became the Government, the Prime Minister said: We don't believe it would be right to use the lottery to pay for things which are the Government's responsibility". Sadly, I cannot agree with the noble Baroness, Lady Young of Old Scone, who did not agree with that, but I can agree with my noble friend Lady O'Cathain, who stressed the point.

Yet, the new opportunity fund proposed by the Bill is to fund areas which traditionally have been funded out of general taxation: health, education and the environment. Recently it was announced that the new opportunity fund will pay for a scheme to extend school childcare. The partnership funds are to be provided by the Exchequer. This proves that any claim that the Government are respecting the additionality principle is hollow. It is a slippery slope. But as was rightly said by the noble Lord, Lord Howell, the importance of sport should be considered. That was also mentioned by my noble friend Lord Rowallan and the noble Lords, Lord Bassam and Lord McNally. I believe that provision for sport should be considered, but not by raiding the lottery.

The Conservative Government also legislated to ensure that lottery money was distributed to the good causes at arm's length from government. With this Bill, the arm's length principle is also jettisoned. That was clearly explained by the noble Lord, Lord Rothschild. The Government are given powers to specify by order, rather than through primary legislation, which initiatives the new opportunity fund is to support. That is referred to in Section 43B of the Act.

The endowment of NESTA, after the first year, may be increased by an order raiding the National Lottery Distribution Fund at the expense of the other distributing bodies. That is referred to in Clause 17 of the Bill. Do we really want that?

The Bill also gives powers to the Secretary of State to instruct the distributing bodies to prepare strategic plans in Clause II. Those are redolent of the single programming documents of the European structural funds, the key instrument for implementing social policy from above. I do not believe that we should dismiss totally the new ideas on funding made by my noble friend Lord Inglewood in his very entertaining speech.

That centralising trend and grabbing attitude are no surprise. The Secretary of State has already shown his colours by earmarking funds for the new opportunities fund ahead of the enactment of legislation and in breach of the 1993 Act, as we heard from the noble Lord, Lord Redesdale. Moreover, he did so before the consultation process was complete, showing little respect for the people or their representatives. This will no longer be the National Lottery; this will be the lottery of a government displaying great arrogance. We have been told by the noble Lord, Lord McIntosh, that the Secretary of State will now appoint the members of the new lottery advisory panel and the members of the new opportunities fund—surely yet another arm of government.

The National Lottery as set up by the Conservative government has been dramatically successful. If proceeds for the original good causes are set against the relevant central government expenditure, the lottery has brought additional funds equal to an increase of about 110 per cent. in each of the first two years of operation; that is, £4.2 billion in all, including the millennium money.

The Bill, which gives the Government the scope to subsidise general expenditure, will severely damage the original good causes, as we have heard in the very forceful speech by the noble Lord, Lord Rothschild. The proposals for the new opportunities fund and NESTA have already diverted funds away from the five original causes, from the National Heritage Memorial Fund, by approximately £50 million, despite the fact that the backlog of capital underfunding has not been cleared. I agree with the noble Viscount, Lord Falkland, that fines would eventually lead us to less money for good causes.

The intention of the 1993 Act was precisely to provide the capital funding needed to put buildings into the state in which people expect to find them. I am pleased that the right reverend Prelate the Bishop of Leicester mentioned the importance of our heritage covering churches and cathedrals and that they should not suffer from the new good cause. For example, the Arts Council of England, expecting a £190 million loss of its share of lottery proceeds, has announced a capping of single capital projects. What is to he the fate of outstanding schemes like the South Bank and the V & A Spiral which are going to benefit millions? The Arts Council of England is also expected to have to reduce drastically the funds set aside to Arts for Everyone from 20 per cent. to 16.66 per cent. That is a heavily oversubscribed scheme intended to benefit the many. The noble Earl, Lord Gowrie, referred to a revenue famine.

Furthermore, the Government have broken the equitable allocations to the five original causes. In view also of the provisions made for NESTA in Part II of the Bill, they appear therefore to intend to squeeze progressively the original five. Will the Minister give us assurances that that is not the intention? I am pleased that my noble friend Lord Rowallan mentioned the distribution deficiency of the funds and reminded us of the Treasury take.

The lottery proceeds were intended, to he a source for projects of lasting benefit to the nation". They were not intended to be used as a slush fund by a government intent on frittering away public money on the latest public relations stunt.

We oppose this Bill both on principle and because we believe that in practice it will not benefit those whom it purports to benefit. This will no longer be the National Lottery. It will simply be the government lottery.

3.30 p.m.

Lord McIntosh of Haringey

My Lords, after that, I shall start by saying that I agree with the noble Baroness, Lady Rawlings, on one point—although I suspect on one point only. The noble Baroness paid tribute to the star-studded cast which has addressed the House this afternoon; indeed, she is entirely right. It would be invidious to pick out individual noble Lords who have made great contributions. However, I believe I ought to pay particular tribute, first, to the noble Lord, Lord Rothschild, who is to retire shortly as chairman of the National Heritage Memorial Fund; and, secondly, to the noble Earl, Lord Gowrie, who is also to retire shortly as chairman of the Arts Council. Their ability to contribute to our debates is much appreciated. I shall, I hope, be able to deal with the points that they raised.

The noble Baroness, Lady O'Cathain, used a horticultural metaphor at one stage of her speech when she referred to the timing of the Bill. She accused us of seeking to pull up the roots of the National Lottery etc. Act 1993. I hope to persuade her that we are certainly not pulling up the roots of the Bill; indeed, it fits into the structure of the 1993 legislation. We are not even seeking to pollard the Bill. What we are doing is a necessary four-year pruning of the Bill to improve the areas where, quite understandably, it could not be perfect. We shall be building on the most important benefits of the Bill and seeking to create new opportunities arising from the undoubted success of the lottery, to which many noble Lords rightly referred.

In responding to the debate, I propose to cover the following subjects. If I miss either completely different subjects or individual bits of my subject, I apologise and I shall of course write to noble Lords on such matters.

I shall, first, deal with additionality. Then I shall respond to comments made about the new opportunities fund. Thereafter, I shall respond to the debate about the impact on existing good causes and deal with the admittedly tricky business of the balance between the arm's length principle and accountability, because there is no completely right answer in that respect. After that, I shall deal with the difficult balance between the accusations made of retrospective action and the equally powerful accusations which have been made as regards the existing funds of underspending. I do not believe that noble Lords have quite recognised that the modest amount of retrospection announced in the Bill is an attempt to deal with the other problem which they have identified. Finally, if I have time, I should like to talk about the accusations of bureaucracy and then say a few words about NESTA, the National Endowment for Science. Technology and the Arts.

I shall begin with additionality. There are many definitions of this word. It is noticeable that they were not included in the 1993 legislation. I have pages and pages of them, but I shall pick just two. The first is the most detailed exposition made by the Conservative Government during the passage of the 1993 Act. It was made by Mr. Key in the other place on 25th January 1993. He said that, the proceeds of the national lottery should not substitute for that provided in other ways. The proceeds will not be brought within the controlled total, and the Government will not make any case-by-case reduction in conventional expenditure programmes to take account of lottery proceeds. The Government will continue to provide the finance necessary from within public expenditure programmes to enable their policy objectives to be achieved".—[Official Report. Commons; 25/1/93: col. 804.] I am sure noble Lords will agree that that is a minimal definition of additionality, as proposed by the previous government.

I turn now to a speech made by the present Secretary of State, Mr. Chris Smith, at a conference on 24th September when he said: The new opportunities fund will only support initiatives additional to core funding programmes funded from taxation. Perhaps I can expand on this. The Government have a strong and abiding commitment to the principle of additionality. That means that lottery funding will not be used for core areas like NHS beds or school buildings but will focus on innovative and desirable initiatives outside those areas—areas that the Goveniment do not currently fund but which are desirable". I think that is a much more constructive definition of additionality and it is one which is reflected in the provisions of this Bill.

The noble Lord, Lord Skidelsky, has described what we are doing as devoid of principle and logic. The noble Lord, Lord Redesdale, has described it as "smash and grab". The noble Lord, Lord Charteris, spoke of hijacking. The noble Lord, Lord McNally, referred to scoundrels. The noble Baroness, Lady Rawlings, referred to a slush fund. I rather think that some noble Lords have gone a little over the top.

Let us look at what is in the Bill and in the announcements that I made in my speech about the new opportunities fund. It is on those matters that the accusation of breaching the rule of additionality stands or falls. I refer to healthy living centres. I read what was said by my old and dear friend Liz Forgan in the Evening Standard yesterday, but I think she is completely wrong. Healthy living centres promote health and well-being in a variety of innovative ways. They will not provide core medical services, which are properly the responsibility of the NHS.

I refer to out of school hours activities. There has never been under any government the statutory provision for out of school activities which was referred to. However, I quite agree with the noble Lord, Lord Skidelsky, that such activities are essential for the national curriculum. But if that is the case, why did his government not provide them? I agree with the right reverend Prelate the Bishop of Leicester in his assessment of the value of that provision for society as well as in terms of education. There is no obligation on any government under any statute to provide those facilities. No one has done so until now. We can do so because we have this money and we can provide these facilities on a nationwide scale rather than as pilot projects.

Exactly the same argument applies to childcare. There is a modest amount of Exchequer revenue to kickstart the programme, but without additional funding it would simply not be possible. IT training for teachers is exactly the kind of programme for which lottery funding is needed. IT training for teachers has been neglected for many years. The expenditure which is proposed over the next few years is intended to enable us to catch up with what should have been done before. Once that has been achieved, and 500.000 teachers and 27,000 librarians have been trained, a much smaller annual sum will be involved but the benefit will be felt for many years. What better subject could there be for lottery funding?

I reject comprehensively the accusation that we have breached the principle of additionality. I do so because it seems to me that there is a great deal of cultural lack of understanding in what has been said. I reject the accusation on behalf of the arts, sport and heritage. It appears to be thought that any lottery money which is spent on the arts, sport, heritage and culture is somehow, by definition, additional, but that these initiatives in the area of health, the environment and education are somehow entirely government responsibilities. The contrast is by no means so clear.

A number of noble Lords, notably my noble friend Lord Howell, the noble Lord. Lord McNally, and the noble Baroness, Lady Young of Old Scone, referred to the new opportunities fund in terms that I find helpful. They have pointed out the interaction between the new opportunities fund and the existing funds.

As my noble friend Lord Howell said, the new opportunities fund projects will make a positive contribution to sport and the arts. As my noble friend Lady Young said, the existing funds have made a positive contribution to the environment which is one of the objectives of the new opportunities fund. I believe that that shows even more strongly that the body is not totally outwith the spirit of the 1993 Act but the rationalisation and expansion, using new money, of the programme set out by the previous government. There has been, understandably, no detailed examination of the new opportunities funding provisions because they are not in the Bill. No one knew about them until I announced them in more detail today. So I shall pass over that part of the problem.

However, as with existing funds, there should be no fear that the new opportunities fund is being overspecified by Government. We had to make a start; and we had to propose the first three major areas. But once those schemes are in operation, continuing funding from the new opportunities fund will be the responsibility of the directors of the fund rather than of central government, and there will be no difference.

I should say a word about the many pleas made for assurances of continued funding under the new contract. The 1993 Act sets out that the new contract provides an opportunity for review of the amounts of the existing funds, even of the existence of the existing funds. Therefore I am in no different position from any Conservative government Minister in saying that no guarantees can be given of future funding. But of course we shall seek to ensure, as the previous government would have done, that success is built upon.

The Earl of Gowrie

My Lords, the noble Lord claims that they are a better government than the previous one.

Lord McIntosh of Haringey

My Lords, this Government do not claim to be more rigid than the previous government, in this respect among many others.

Lord McNally:

My Lords, I am conscious of the time. However, in the Bill the Government encourage strategies but apparently without the funding for those long term strategies. That is the problem which concerns both the arts and the sports bodies.

Lord McIntosh of Haringey

My Lords, that concern is entirely misplaced. I shall come to the reference to strategies in due course. but there is no reason to think that the requirement on funds to produce strategic plans is in any way a diminution of any security that may exist for future funding.

I turn now to the accusation that the existing distributors will lose money. It took up a good part of the debate. I can only repeat, perhaps more loudly and forcefully than I was able to do at the beginning, or than other Ministers have done, that the existing funds are still on course to receive their share of the £9 billion over the life of the licence that they originally expected. The sum of £9 billion is not an insignificant influx of funds into sectors that could never have been a first priority of government before the launch of the lottery. No change is proposed in the Bill from that which was intended by the Government and expected by the existing funds when they were established. What has changed is that more money has become available because of the success of the lottery. Noble Lords who think that that success is fragile should listen to those other noble Lords who have paid glowing tributes to Camelot. If the glowing tributes are right—I have no reason to suppose that they are wrong—I do not think that Camelot has run out of marketing initiatives. I have no reason to suppose that it will not think of new ways of ensuring that the income from the National Lottery keeps up. After all, it is fundamentally in its interests to do so.

Baroness O'Cathain

My Lords, I thank the noble Lord for giving way. I shall be brief. He said that the good causes will receive as much as they expected to receive when it was first estimated that the amount was £9 billion. But, in fact, they will not receive the same percentage. There is only one winner in all this—that is the Treasury, which will receive far more than it expected since the sums of money will be bigger.

Lord McIntosh of Haringey

My Lords, the percentages going to good causes, including the new opportunity funds, will be the same as they would have been under the 1993 Act had we not amended it as is proposed in this Bill. The percentage going to the Treasury is unchanged. The amounts of money—spending is in pounds, not percentages—are no less than was originally anticipated. I am afraid that the noble Baroness's earlier remarks were mere assertions; they did not go any further than that in terms of argument. My advice is that the £10 billion is a cautious figure. I and my advisers believe that Camelot will continue its marketing activities. If anything, the chance is that there will be more money available for good causes in general.

Under those circumstances I have to reject the arguments that the additional funds—whether it be the National Heritage Lottery Fund, the Arts Council, the English Sports Council or any of the other distributors—are losing money in such a way that they require assurances from me of the indefinite continuation of their funds. The Government have assured them 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.

A number of noble Lords made a point about other people losing money, notably the charities. As will be known, we have carried out research, together with the National Council for Voluntary Organisations, on the effect of the lottery on charitable income. I do not deny that some charities—by no means all—have experienced a reduction in charitable income over the period. Whether or not there is a causal effect can never be established.

I remind the House that the National Lottery Charities Board has distributed some £680 million to charities and voluntary organisations since the launch of the lottery. I make that point particularly to the noble Lord, Lord Rowallan, who raised the matter. I know that the right reverend Prelate has had to leave to make a broadcast, although I believe that he will return to the House—

Noble Lords

He is there.

Lord McIntosh of Haringey

My Lords, I am delighted to see him "outside the wall", so to speak. We are continuing with our policies of seeing to it that hard gambling does not take place in soft locations, so to speak. We are continuing to review our policies on gambling. The Home Office has a draft Bill on the subject which it hopes to introduce before too long. I will take the right reverend Prelate's points about the need for a continued review of gambling back to Home Office and other Ministers.

I now turn to the issue of retrospective funding versus underspending. What we did, in accordance with many precedents, which the Official Opposition will no doubt recognise from their comprehensive experience of government, was to announce, on 1st October, that from 14th October the percentages would change and money would be put aside for the new good causes. That appears to have caused some outrage, as if something had happened which was new and entirely illegitimate. What we are doing is trying to avoid the problem identified by many noble Lords of the underspending of money. The National Lottery Distribution Fund has, as pointed out by a number of noble Lords, vast amounts of money sitting in its funds that has not been distributed to the good causes. That cannot be right. It must be right that we should seek to kickstart our new opportunities fund as best we can by the modest means that we have adopted.

The noble Lord, Lord Annan, asked me about interest and I gave an instant answer which was not wrong but incomplete. There are two kinds of interest. The one to which I referred was the interest due from Camelot on unclaimed prizes which it is donating to good causes. The other is the interest on the underspend of the distribution fund, a very much larger figure. That also goes to good causes and it is going currently at an interest rate of 7 per cent.

Lord Skidelsky

My Lords, does the noble Lord agree that the power to divert money from the five good causes to the sixth cause which is mentioned in the Bill was not given by the 1993 Act? Therefore, the Government have no right to do it. It may have been convenient to do so, but does the Minister agree that they were acting illegally in the matter?

Lord McIntosh of Haringey

No, my Lords, I do not agree. They were acting in anticipation of legislation which will be passed by Parliament. There are many precedents for that. It will be passed by Parliament and if noble Lords start opposing it in this House, they had better think carefully about the political implications. It will be passed by Parliament and I shall gladly write to the noble Lord, placing a copy in the Library of the House, about the precedents for that action.

I move on as fast as I can, realising that I have missed out many significant points. I wish to talk about the problems of maintaining the arm's length principle and at the same time maintaining parliamentary and public accountability for the funds. In the second part of Part I of the Bill we say that we require all the distributors to announce their strategies. We are not determining their strategies; it is not for the benefit of government that we want to know their strategies. We wish to know what their strategic plans are, to help those who want to apply for funds. That is what it is about. The noble Baroness, Lady O'Cathain, said that consultants are making a great deal of money out of helping people with applications, and I have no doubt that that is true. But it is happening partly at least because it is not clear what the existing distributors are seeking. There is a kind of mystique about reading their minds. If the strategic plans are to be made effectively, they will deal with that point. On a point that the noble Lord, Lord Annan, made, there will have to be strategies for the continuation of projects when lottery funding ends. That has never been clear and it is intended that the Bill will improve the situation.

In response to my noble friend Lady Young, yes, the strategies will include the requirement for a needs assessment as well as a description of what is intended. I shall come back to that issue.

I wish to say something particularly about NESTA. NESTA is the ne plus ultra of the arm's length principle. NESTA is an endowment fund. Its trustees have full control over the endowment fund; it may increase in the future and there is the possibility of expanding it from private and other sources. But we could not have a fund which is further removed from ministerial interference—which was one of the claims made—than an endowment fund. The noble Baroness, Lady O'Cathain, said that the problem was that it would be reliant on the flow of lottery money, but the reverse is the case.

The noble Lord, Lord Skidelsky, said that the Secretary of State had control over NESTA. Again, that is the reverse of the case. The Secretary of State has no power to direct its policies. He can change its objects, but only at the request of NESTA.

On the other issues of flexibility, of soliciting funds—I know that caused laughter, but everybody understands what it means—on the ability to delegate to officials, to regional or local organisations; all those points were widely welcomed by your Lordships, regardless of political party. A number of noble Lords referred to the need for regional councils, to the role of local authorities, to the success of Art for Everyone and to the need for greater flexibility with matching funds.

I want to refer to the description of the noble Earl, Lord Gowrie, of "capital feast and revenue famine". He will recognise that what he is describing is the effect of the 1993 Act, rather than of the Bill before your Lordships.

The Earl of Gowrie

My Lords, I said so.

Lord McIntosh of Haringey

My Lords, of course. We hope that some of the flexibility which is provided in the Bill will attempt to deal with that. But he will agree, as your Lordships will have to agree, that long-term revenue funding would not be possible because it would progressively erode the amount of money available for new grants; it would stultify the activities of distributors.

A number of points were made relating to the fines which it will be possible for the director general to impose on the operating company. I emphasise again that the fines are requested by the director general. I emphasise to the noble Lord, Lord Skidelsky, that they are part of the regulation process rather than an attack on profit. Indeed, they are a common provision in most regulatory authorities. It is unusual for there not to be provision for fines. The Heritage Select Committee supported it and the provision for fines has been generally welcomed outside.

The noble Viscount, Lord Falkland, queried the need for a ceiling on the fines. Part of the fines is punitive and part is for reimbursement for the losses experienced by good causes through mismanagement by the operator. To that extent we cannot calculate what the losses would be and it would be inappropriate to put a ceiling on them. I say to the right reverend Prelate that there would be a right of appeal on very wide grounds against the fines. I hope that he will be satisfied when he looks at the detail. Perhaps I may say to the noble Lord, Lord Redesdale, that the director general is not obliged to fine the operator unless he believes that it is highly appropriate.

Finally, because I have abused your Lordships' patience, let me say a few words about NESTA. I welcome the response which has been widely given to NESTA. The right reverend Prelate and the noble Lord, Lord Inglewood, welcome it—even the noble Baroness, Lady O'Cathain, was quite welcoming of it. NESTA is not only an endowment and therefore spending its income rather than its capital, but it is also an opportunity to raise money from other sources. The noble Lord, Lord Rothschild, was concerned about Clause 17(2) which provides for the possibility of further endowments and that that might be at the expense of other funds.

I can assure him that we have no plans at present to expand the endowment and that Clause 17(3) says anyway that we would be consulting with existing bodies. The noble Lord, Lord Hindlip, made very much the same point. I am surprised that the noble Lord, Lord Skidelsky, said that there was a danger of duplication. NESTA's first task will be to survey current provision and to see where new provision is appropriate from this very large fund.

In answer to the noble Lord, Lord Annan, universities could benefit from the fund. It is highly likely that they will. But we are not going to dictate to the fund to require that they should. In answer to the noble Lord, Lord Inglewood, the funding could go to other causes. Why not? Those could include sport, although there is an existing fund for sport and we have just announced the Institute for Sport at Sheffield. In answer to the noble Earl, Lord Gowrie, the fund can, and I am sure will, want to work very closely with the Arts Council.

The debate has been very wide ranging. It has been to a considerable extent well informed. It has been to a considerable extent, although by no means universally, welcoming. We have the prospect of a serious and constructive passage of the Bill through the House. I believe that the Bill deserves a Second Reading.

On Question, Bill read a second time.

Lord McIntosh of Haringey

My Lords, I beg to move that the Bill be committed to a Grand Committee.

Moved, That the Bill be committed to a Grand Committee.—(Lord McIntosh of Haringey.)

On Question, Bill committed to a Grand Committee.