HL Deb 14 January 2003 vol 643 cc188-98

6.33 p.m.

Lord Davies of Oldham rose to move, That the draft order laid before the House on 11th December 2002 be approved [5th Report from the Joint Committee]

The noble Lord said: My Lords, I speak on behalf of my noble friend Lady Blackstone. The order increases the endowment of the National Endowment for Science, Technology and the Arts under powers conferred on the Secretary of State for Culture, Media and Sport by certain sections of the 1993 and1998 national lottery Acts. I am satisfied that the draft order before the House is compatible with convention rights.

We propose to increase NESTA's endowment by £95 million out of money held in the National Lottery Distribution Fund for expenditure on health, education and the environment. The increase will serve two purposes. There will be an addition of £50 million to the existing £200 million endowment to enhance NESTA's income, which has fallen considerably since its inception, and a further £45 million will be used over the next three years to launch a range of new initiatives.

NESTA was established under the National Lottery Act 1998 in recognition of the need to enhance the UK's capacity to develop and commercialise ideas. Its overarching objective is to support and promote talent, innovation and creativity in the fields of science, technology and the arts. The initial endowment of £200 million from the lottery was granted in 1998 and was expected to generate annual income of around £12 million. With that income, NESTA funds three programmes: invention and innovation; fellowships; and education. It also runs projects, such as Science Year.

NESTA has already achieved much, but it is still relatively young and its success will be seen more clearly in the long term. Under the strong and determined leadership of NESTA's chairman, my noble friend Lord Puttnam, significant progress has been made. Since the first awards in 2000, NESTA has awarded more than £34 million to cover 270 people across its three core programmes. More than 30 new patents have been filed, 25 new companies have been registered and the first royalty cheque has been received. Some of NESTA's fellows have already produced significant bodies of work. Funding of more than 75 education projects has led to the development of national models of excellence.

NESTA has also attracted significant support from government departments. It won the contract to deliver the Government's Science Year in 2001–02, since extended to the current academic year. With substantial support from the DfES and the DTI, it has established the NESTA FutureLab, a research and development facility bringing together the academic community and cutting-edge creative industries to develop educational software. NESTA has won awards for the way it conducts its business, and has received increasingly positive and widespread recognition from the business and investment communities and the media

NESTA was set up to take risks and that means we should expect some failures. What is important is that it learns from experience as it evolves. NESTA is doing just that and it has carried out initial evaluations of its programmes. Those have led to improvements in application processes; an increase in the diversity and range of its fellows; improved communications with applicants; and a redesign of its website. It is also taking positive steps to raise its profile and increase applications in Scotland, Wales and Northern Ireland and in regions such as the North West and the East Midlands.

That is encouraging, but as the recent report by the Select Committee on Science and Technology on NESTA's achievements made clear, there are a number of areas where NESTA could and should do better. The Government have responded to that report, and we expect that response to be published very shortly. However, noble Lords will wish to be aware that, although we support a number of the committee's recommendations, we do not accept the committee's view that it is premature for NESTA to receive an increase in its endowment.

We believe that that recommendation arose from difficulties in interpreting NESTA's financial information, which led the committee to conclude that NESTA did not have a sufficient grip on its finances. I can give an assurance that that is not the case and that we are satisfied that the financial information contained in NESTA's reports is accurate and reliable. However, we agree with the committee that NESTA must take steps to ensure that in future it presents financial information in the clearest possible manner and that its running costs are limited. We have given a clear and unequivocal assurance that we will work with NESTA to address those key issues identified in the committee's report over the next few months.

I turn to the reasons for proposing the increase. When NESTA was established, provision was made in the National Lottery Act for the endowment to be increased by order of the Secretary of State. That provision recognised that the initial endowment alone might not be sufficient in the longer term for NESTA to achieve its ambitious and challenging objectives.

In 2001, NESTA submitted a proposal for an increase in its endowment of around £300 million. That increase would have provided income to extend significantly its three core programmes, to launch a number of new initiatives and to counter the effects of prolonged low interest rates. We have considered this proposal and believe that it is too soon to approve such a significant increase in the endowment. NESTA must clearly show that it can walk before it runs, and we do not believe that the time is right for such a radical change.

However, NESTA's annual income has fallen significantly from £12 million to £8 million because of low interest rates, and its reserves are being used to sustain current levels of programme expenditure. We believe that that is unsustainable and that it is vital that NESTA is able to maintain its core programmes at an effective level. Any reduction in the level of awards would send out a very negative message about our support for developing the nation's talent. Therefore, in this order we propose to increase the endowment by £50 million to provide a return which restores annual income to around £10 million to £12 million and to provide a cushion against future fluctuations in interest rates.

We would also like NESTA to be in a position to move forward and to have the capacity for modest growth in the short to medium term. We are keen for NESTA to develop and launch a number of new initiatives over the next three years, particularly those which support our objectives for children and young people, education, social inclusion, sustainable development and the economy. We therefore propose to increase the endowment by a further £45 million and to allow NESTA to draw down up to £15 million a year of that over the next three years in order to fund a range of new projects. Those include: a scheme to support the best talent emerging from art and design colleges; a fellowship scheme for young people; promoting entrepreneurial talent in schoolchildren; and broadening the scope of existing programmes.

Longer-term decisions on NESTA's funding will be made in the light of a full evaluation of programmes which NESTA is undertaking and further independent reviews which are scheduled to take place over the next few years.

We propose to fund the £95 million increase by a one-off transfer of uncommitted funds from the New Opportunities Fund. The transfer will not affect existing NOF programmes and is not intended to alter the balance of funding between lottery distributors. The Government have given a commitment to maintain the percentage share that goes to the original good causes, and that commitment will not be affected by these proposals.

It is also important to note that the transfer is in no way meant to denigrate the invaluable contribution made by the New Opportunities Fund to thousands of health, education and environment projects around the country. The Government remain committed to ensuring that those important areas continue to benefit from lottery funding.

Finally, we do not propose to present NESTA with a blank cheque. The Secretary of State has sought firm undertakings from NESTA that it will address issues of cost-effectiveness, demonstrate how it might contribute further to our social inclusion and sustainable development agendas and take steps to ensure a balanced distribution of funds across the whole United Kingdom. She has also sought an undertaking that all the issues raised by the Science and Technology Committee report have been properly addressed.

The Secretary of State has consulted her Cabinet colleagues and the devolved administrations on this proposal. They are broadly content, but the devolved administrations have asked that we ensure that there is a more even distribution of funding across the UK. As required by the National Lottery Act 1998, we have consulted the New Opportunities Fund and the other lottery distributors and they are content with the proposed transfer of funds.

In conclusion, we believe there is a sound case for providing NESTA with an increase in its endowment to help to restore its income and to enable it to take forward new initiatives. We believe that that is best effected by a transfer of £95 million from unallocated funds in the National Lottery Distribution Fund. Accordingly, I commend the order to the House. I beg to move.

Moved, That the draft order laid before the House on 11th December 2002 be approved [5th Report from the Joint Committee].—(Lord Davies of Oldham.)

6.45 p.m.

Baroness Buscombe

My Lords, I thank the Minister for introducing the debate on this important order. We have devoted some time to it because, in our heart of hearts, we want to be supportive of NESTA. In some ways, it would have been nice if we had simply been able to stand up and say, "We support it unequivocally", and then to have sat down. But that is not possible.

We have questions about some aspects of the funding; there are some areas where, to be brutal, the figures do not seem to add up; and we are concerned about some of the issues raised in the House of Lords Science and Technology Committee's report, National Endowment for Science, Technology and the Arts: A follow-up (6th Report of Session 2001–02). I believe that those issues should be aired, as, indeed, they were last week in another place in a debate about this order. In a moment, I shall come to some of the issues raised in that debate which, I suspect, will make the Government feel a little uncomfortable. Some of it was quite amusing.

When I first became Shadow Minister for Culture, Media and Sport for Her Majesty's Opposition, one of the first pieces of information—if it can be called that—that I received was from NESTA. I did not understand it or have a clue what it was about. That matter was raised by the Select Committee and I notice that Members in another place have referred to it.

There is no doubt that the objectives of NESTA are extremely worth while and worth repeating: to support and promote talent, innovation and creativity in the field of science, technology and the arts. The objectives were set out in the enabling legislation of the National Lottery Act 1998. The core goals to be achieved by NESTA were: to be a helping hand to talented individuals or groups in the field of science, technology and the arts; to help individuals and groups to realise their potential; to help to turn inventions into ideas in those fields and into products and services which can be effectively exploited and the rights to which can be effectively protected; and, by contributing to public knowledge, to promote an appreciation of science, technology and the arts.

Those are all good goals but they do not seem entirely to marry with the order, which talks about the need for additional funds for expenditure on or connected with health, education and the environment. When the Minister comes to reply, I should like him to reassure your Lordships' House and me that there is not some skew or hidden agenda here. Why does the order not make it absolutely clear that this is additional funding required for the core objectives relating to science, technology and the arts? Why are we suddenly looking at wording connected with health, education or the environment? Is that to pacify all the other worthy groups which feel hard done by because they believe that they should have received this type of funding? Do they feel that because, as a Member in another place said, NESTA is rather trendy, it is more likely to receive this substantial funding so early in its life, whereas village halls and other community projects are losing oat? I believe that, for the sake of clarity and for the benefit of NESTA, it would be a good idea if we were all to be clear that the funds are straightforwardly for science, technology and the arts.

I said at the outset that I was unsure as to the meaning of "NESTA". Therefore, I asked a researcher to look up some information about it on the website so that I could fully understand what it is all about. Some of the journals—I have one here entitled, NESTA Journal Issue 02—are incredibly glossy. I should love to know from the Minister the amount of expenditure on that kind of material. I assume it was free, which is probably quite right. At whom is it aimed? Who, in addition to privileged individuals like myself, is able to receive this kind of literature? It is well set out but—NESTA may not like me saying this—frankly it lacks clarity in terms of its goals, achievements and objectives.

People want to know how their money is being spent. The money comes from lottery tickets that people cherish. When people spend their money on the lottery they want to be sure that the money goes to good causes. In October we looked on the website of NESTA. It read well: Moving forward, our programmes went live in December 1999 and since then we have made steady progress supporting over 225 awards worth £15 million". In May of last year—I jump further back—we received a NESTA briefing that stated that NESTA has made 248 awards at a total commitment of £17.7 million. So in May there were 248 awards worth £17.7 million; in October on the website there were 225 awards worth £15 million; and now the Minister reports to the House that NESTA has made 273 awards worth £34 million. That shows a huge discrepancy or jump in the figures.

Talking of a huge jump in the figures, we found it remarkable to learn from our inquiries that NESTA had been so bold as to ask for an additional £300 million only 18 months into its lifetime. I accept that the Government turned down that request, but that leads us to question whether it is fair to give NESTA £200 million partly on the basis—I put it as simply as that—of the problem with lower interest rates. That is a problem that all businesses have to confront, but unlike NESTA other businesses have to re-jig the management of their money accordingly.

I read the debate in the Commons. There were a number of stinging references to the achievements of NESTA that I do not feel were answered properly in another place. I believe that it is worth asking the Minister whether we could have some salient examples of the achievement of NESTA during its short life to indicate that it seriously deserves such an increase in funding.

As I have already said, there was reference to NESTA being seen, in the eyes of the Government, as more deserving because it is trendy. It was suggested that, Carol Vorderman is on the board on NESTA, so how could it be anything but trendy?".—[Official Report, Commons First Standing Committee on Delegated Legislation; 9/1/03; col. 13.] I think that is a rather unfair reference, but the Minister may like the opportunity to respond to it. Later in the debate at col. 15 there was this comment: The point was that much of the money appears to be heaped on the Islington dinner party set and not enough on causes to inspire the people who buy a lottery ticket on a Saturday morning". Quite understandably, there were also references to the expenditure by NESTA on a wonderful building and on the style of reports that it produces—not just the glossy magazine that I have shown today, but also its annual report. I read many annual reports but I have never seen one in hardback before. It is stylish but the Sixth Report of Session 2001–02 said, quite rightly, that, Annual reports should not read"— this is the important point— like the production notes in a theatre programme. Creativity should not be at the expense of clarity. We recommend that NESTA in future provide Annual Reports which contain clear and full information on expenditure, including awards made; the targets; and expenditure plans". I heard what the Minister said, that the Government do not accept that there was a lack of clarity, but I believe, as I have said before, that it is important for NESTA to ensure that its credibility is sustained and enhanced by listening and responding to the criticisms contained in the Sixth Report of Session 2001–02.

We are sure that many good works are under way. We welcome NESTA. We want to give it support into the future, but we ask that the Government continue to scrutinise closely the spending by NESTA on projects and that NESTA does not feel obliged to respond too closely to the wishes and the will of the Government, thereby compromising or diffusing its core objects in any way. That is probably our priority. We want to be sure that the additional funding really will be spent on the core objectives because it is those objectives that we applauded at the outset and that we want to support.

6.57 p.m.

Viscount Falkland

My Lords, the Minister explained clearly, for which we are grateful, what the order is about. We accept the order; it would be pointless to do otherwise. It appears to be a simple proposition. I do not intend to go much further than to welcome it and to make one or two comments about NESTA, but the noble Baroness, Lady Buscombe, has taken the debate into other interesting areas so perhaps I may go further than I had originally intended. I believe that most of us would find much of what she said appropriate and would agree with her.

I declare that I opposed the extension of the good causes to health education and the environment, and I still do. I say that personally because I am unsure that I carry all my colleagues on these Benches with me. However, NESTA appeared to me to be the one area that had an interesting prospectus. As the noble Baroness has pointed out, at that stage there was a certain lack of clarity about what it intended to do in science, technology and the arts. There is a certain lack of clarity in the explanation of the purpose which was there originally.

When faced with the order I asked my researcher to ring NESTA and ask some simple questions that may help me in my response. I asked what was NESTA's level of satisfaction with the current operation of the funds that were allotted to it. It replied that it was very satisfied with the operation of the current funds. It revealed that its endowment was invested in government stocks in order to maximise the safety of the investment. Safe it may be, but it certainly has not resulted in a happy situation. It did not show much financial foresight because the return on its investment was linked to interest rates. Interest rates have been low, as has been explained so ably by the Minister, to such an extent that this increase in the endowment is to counterbalance that loss of previous endowments. The return has been less than anticipated.

NESTA says that of the £95 million, which is the sum mentioned in the order, £50 million will be used to redress the loss of those investments. I do not blame it for that. Why should NESTA be an investment expert? It chose what it thought was the safest form of investment in order to protect its money and it has not been particularly beneficial.

I then asked what in particular the funds resulting from the order would be spent on; that is the remaining £45 million. NESTA explained that that sum would be drawn down at up to £15 million a year over the next three years, which would allow it to expand its work and to begin to meet its statutory role in new ways. That is very strange and is not clear. Noble Lords will forgive me and the noble Baroness for talking about clarity, but we have been involved in legislation passing through this House which is singularly lacking in clarity. We have that matter very much on our minds. We are looking all the time for clarity.

NESTA says that it will specifically be starting work on a programme of entrepreneurship education for young people. That sounds very worthy and interesting. I wonder exactly what it means. I have spent much of my working life dealing with entrepreneurs and few of the best ones have been educated. It also mentioned a programme of support for new graduates. Perhaps the Minister will tell me what that means. It is undoubtedly very worthy. The last programme is an extension of its existing fellowship programme to provide support for younger people. What does that mean? I wish explanations were given about matters that concern public funds. We will argue in the House that lottery funds are public Funds. The public has a right to know what is happening to these funds.

The falling sales of lottery tickets is an important debate for another day. I look forward to that debate. I have, and I daresay the noble Baroness has, very strong views about why the sales of lottery tickets are falling so dramatically. I do not agree that those moneys set out to support those areas of our life cannot be taken from direct taxation proceeds. The original good causes were, after all, the reason why the National Lottery Act originally passed through this House with little opposition. The case was well made that the arts, charities, sport and so on were deserving causes for such moneys.

One would have been extremely naive not to expect a government sooner or later to put their hand in the till and try to improve their image by spreading the money further. People who buy lottery tickets do not mind that at all. Most of them think that the operator Camelot distributes the funds. Their knowledge of how the mechanics work is slender. It is clear that people are now beginning to be concerned about where money from lottery sales ends up. It may be a kind of—without maligning taxi drivers—taxi drivers' view, but they do not like money to be given to causes relating to immigrants and asylum seekers, and they do not like grand projects, such as the Dome, because they have seen what happens. There has been an enormous wastage of lottery money since the inception of the dispersal of these funds. My particular hates are money given for film production and the Wembley Stadium project, among a few others.

NESTA seems to be a deserving area if only the situation could be made clear. I agree with the noble Baroness that a lot of glossy material is sent out, such as impressive letters and invitations signed by my noble friend Lord Puttnam. Even now we are still fairly much in the dark about what is happening with NESTA. Having said that, I hope the money is put to good use. It would be helpful if the noble Lord, Lord Davies, could enlighten me as to his view of the purposes of the NESTA projects. It will then be on the record. People may pick it up and read about it, and when we next talk about the matter we shall be better informed.

7.7 p.m.

Lord Davies of Oldham

My Lords, I am grateful to both Front Benches for their contributions. While asking proper questions about issues that need to be probed, they have been broadly supportive of the objectives of NESTA and of the work it has done.

I begin by reassuring the noble Baroness, Lady Buscombe, that of course the allocation of increased money to NESTA is for it to fulfil the objectives laid down; namely, to support and promote talent, innovation and creativity in the fields of science, technology and the arts.

As to the reference to the broader issues of health, education and the environment, the unallocated National Opportunities Fund money is governed by those categories. But the money allocated to NESTA will be directed to the objectives. The noble Baroness required proper reassurance about that.

I suppose that I had a little difficulty in accepting the challenges made about the glossiness of the publications of NESTA. I do not think that there has ever been an organisation asking for more money that has not attracted criticism if people receive from it an artefact, a leaflet or a report which looks as if there has been a substantial investment of money in it. But I think one probably recognises that if one has portrayed oneself as a significant contributor to the improvement of, in particular, design and education in this country and at the edge of creativity, to produce documents which fall far short of desirable standards in that respect would be to do a disservice to the cause. So, I accept on behalf of NESTA that element of criticism that the annual report may have looked a little overweight. I certainly agree with the noble Baroness that it far surpasses a number of annual reports I have received from a number of worthy organisations. However, I am sure that the criticism would have been much more intensive if the noble Baroness and other significant figures had received a report that looked tatty and fell below standard, but purported to come from a body concerned to improve design in this country. That is a proper justification.

Where the noble Baroness is on stronger ground is in pointing to the discrepancy in the figures on the website. I can say only that the reason why the figures have changed is that the Government rightly recognised what the Select Committee in another place pointed out: that NESTA's accounts left something to be desired in their clarity and accuracy. Earlier reports refer to accounts that are not on the same basis as that which we now demand of NESTA. The changes effected are designed to apportion the full costs of supporting and promoting awardees to each programme, so that we know what each programme actually costs.

Previously, those were shown as central administrative costs. The House will recognise the problem with that: first, it inflated administrative costs to what appeared to be an unacceptably high level; secondly, it did not give us accurate information about the costs of individual programmes, which are the very costs that we want to scrutinise. That is the reason for those changes. The discrepancies are to be deplored, but now that we have accounts on a proper basis, we shall have figures that are directly comparable year on year—dare I say it, even month on month.

The noble Baroness also referred to something that she called the Islington factor. I shall not take that criticism as being too sharply intended. Suffice it to say that we—and NESTA—are cognisant of the fact that there is enormous concern that the scheme should be fair across our country, across the United Kingdom as a whole. NESTA is therefore under an obligation to ensure that Scotland, Wales, the regions of England and Northern Ireland receive their proper share of its initiatives. I can only state that that is our intention. When we come to debate these issues next year—not necessarily on an increase of endowment order, but perhaps on the broader issues of the lottery—we may see improvement on that.

I agree with the noble Viscount, Lord Falkland, that people want value for money, but people do not buy lottery tickets on the basis of an accurate identification of exactly where the money is going. In my experience, the average lottery buyer—there may be a few of us present in the House—approves of the good causes concept behind the lottery. Of course we do. We all expect good causes to benefit and want our favourite good causes to benefit, but one cannot suggest that the decline in lottery sales is because people think that money is going in the wrong direction. First, we are discussing fractional amounts, in terms of the lottery.

Viscount Falkland

My Lords, I was not suggesting that. I tried to suggest that falling lottery sales were for reasons that we must discuss at a later date. I did not want to give the impression that I was linking the falling lottery takings to the view of ticket buyers about the good causes.

Lord Davies of Oldham

My Lords, I am extremely grateful for that intervention. If I slightly misinterpreted what the noble Viscount said earlier, I apologise. I merely sought to emphasise that we have a real anxiety about falling lottery sales—that goes without saying, because it means that the good causes that we hold dear will receive less as time goes by. That affects all the good causes, but, as we shall have the opportunity more appropriately to debate, that is not the root cause of the lottery's present problems. In any case, we hope that sales may pick up again in due course.

I reiterate that there are proper criticisms to advance about this relatively new, young body, which itself is involved in promoting initiatives. The noble Baroness, Lady Buscombe, will recognise my difficulty in discussing its achievements. It is a relatively new organisation that is pump-priming to get initiatives and new, creative ideas off the ground. To expect it to achieve a return on its capital in the limited time involved is asking a great deal. There are successes among its initiatives, but the real successes will show themselves over a rather longer time span than we have thus far had.

Suffice it to say that we now have an accounting procedure and a recognition of how NESTA's reports should be presented that will guarantee that we can effectively monitor the use of the additional money that I hope will be agreed for it to further its objectives, which are shared in all parts of the House. Accordingly, I commend the order to the House.

On Question, Motion agreed to.

House adjourned at seventeen minutes past seven o'clock.