Examination of Witnesses (Questions 400
THURSDAY 14 DECEMBER 2000
400. This Government did change the rules in
terms of capital against revenue expenditure. Do you think the
balance between those two is now right or would you like to see,
particularly in, say, sports and arts and heritage, a further
shift because yours was never capital based and the others were,
a switch towards more revenue funding and less capital?
(Mr Casey) The balance has certainly changed. It is
interesting to see that about three years ago about 97 per cent
of the Lottery was going to capital projects and it is now below
50 per cent. It is quite significant how much has changed. From
the sports point of view I think the balance is about right. What
it does allow us to do is to make sure that we are providing much
needed capital projects in many inner cities and areas of rural
deprivation but to complement that by, for example, the appointment
of sports developments officers or sports specific officers to
make sure that the local population is encouraged to use those
facilities. They are complementary in the way they operate. Secondly,
at the other end of the scale we have been able to use revenue
funding to identify talented young performers and to make sure
that top performers are being supported. From the sports point
of view the balance is about right; it allows us to meet some
of the demands on capital but also to make sure that that capital
investment is extremely well used for local communities.
(Mr Hewitt) I have very much the same answer. There
is now substantially less money available for capital. The demands
are still very considerable, particularly at the medium and small
scale throughout the country, going back to your question about
local activity. There is a lot of pressure on our capital budget.
On the other hand, what is being achieved in terms of the Regional
Arts Lottery Programme is an essential ingredient in making sure
that the investment in the hardware has the software to make these
places lively and exciting and interesting. It is always a delicate
balance and probably at all times we will be doing a bit of adjustment
one way or the other, but broadly speaking I think it is about
(Ms Case) My spin is slightly different because we
do see our programmes perhaps having a stronger continuing capital
bias than perhaps arts and sports, partly because the heritage
is constantly deteriorating in a sense round about us so there
is a continuing need for more capital investment. That is what
the constituency tell us when we consult them. On the other hand
we do now run revenue or activity programmes and some of them,
like the Museums and Galleries Access Fund, are working well in
exactly the sort of way that has just been suggested for arts
and sports in terms of making use of the capital assets that people
have. We would over time however see a slight shift in our position
which is still very heavily capital dominated to one where there
is a bit more revenue.
(Mr Hornsby) It does not apply to us in quite the
401. At the beginning the Lottery funding was
almost entirely bid led. In other words somebody had to make a
bid before you could give any money to them. That has changed
but again would you still prefer to have a greater overall concept
of where you think the money ought to be going and putting money
there rather than allowing people to come to you? I know it is
a rather big question.
(Mr Casey) I think it is both. It is still very important
that the voluntary sector and the local authorities have the opportunity
to come forward with bids because it allows them first of all
to tell us what they think are requirements at a local level.
At the other end one of the great benefits of the change of the
Act two years ago was the powers of solicitation under which we
can identify where there was most need. I can give you two examples.
One of the great issues is to make sure that in areas of rural
and urban deprivation facilities are provided, and again you can
identify where most need is and work with the local authorities
or voluntary sector so that those bids come forward; and, secondly,
perhaps on a more comprehensive basis to look at parts of the
country which are not putting in many applications. Certainly
in sport, and I think it might be the same in the other distributors,
areas such as the east and west Midlands for some reason do not
put forward many applications.
402. So Dennis Skinner keeps telling us.
(Mr Casey) Therefore near Mr Skinner's constituency
we have set up things like sports action zones in former coalfield
areas to try to turn that round and make sure that applications
(Mr Hewitt) We have also found that in the case of
our first capital programme we got very few applications from
the black community. The reason for that was not that there was
not interest out there but just a sense that this was not for
them. With the second capital programme we have appointed somebody
to go out whose express job is to work with black theatres, black
music organisations and others to encourage them to apply. The
problem there was not that we were turning things down but we
were not getting the applications and we think it is very important
that we play that kind of role.
403. So do you keep an eye for instance on whether
or not there is a folk festival or a jazz festival or whatever
it might be or a youth festival going on and perhaps going to
them and saying, "Do you need funding?" rather than
letting them come to you for funding?
(Mr Hewitt) Absolutely. This happens particularly
with the regional arts boards because they are connected at that
level. They often have a revenue relationship with a festival
of that kind and they are providing assistance on an annual basis.
Out of that dialogue it is right that it can come from either
side. It should not just be bid based but there should be proposals
coming from the regional arts boards that you might strengthen
your case by building this or equipping yourself in that way.
Essentially it is flexible and it can happen both ways.
404. If a festival came to you and said, "There
is a specific artist we would like to bring across from the United
States. It is going to cost us a lot of money", would you
give a specific grant to do that sort of thing?
(Mr Hewitt) Yes, it is perfectly possible within our
Regional Arts Lottery Programme that we would provide assistance.
The grant would not be to the individual artist; the grant would
obviously be to the promoter or the festival organisation itself,
but we would be very happy to consider that kind of proposal as
part of a bid from a promoter.
405. Can I just finish by asking Mr Casey specifically
whether he believes that we would have had anything like the success
in Sydney if we had not had the Lottery?
(Mr Casey) Rather than me answering the question I
think the athletes answered the question from Sydney. I was very
encouraged by the fact that at both the Olympics and the Paralympics
the athletes said that their success was very much down to the
Lottery. I will just add two points to that though. What we saw
in Sydney was not just the Lottery money per se making a difference.
I can quote Frank Dick, the athletics coach. He said that what
made the big difference in Sydney was the planning to get the
money, in other words the focus, the thinking, about high performance
and I think that was shining through, and I think we have got
a very strong base for future Olympics. Secondly, yesterday I
was sitting next to Tim Foster, one of the coxless four rowing
team and he was saying that about five or six years ago, through
the Sports Aid Foundation which did a fantastic job before the
Lottery, he was getting something like £400 or £500
and that was helpful, but the fact that Lottery funding now allowed
him to train longer and harder and see the rest of the team doing
the same has made an enormous difference. What was very encouraging
was to see the athletes themselves saying that and getting so
much support from the general public as well.
406. And equally grass roots support presumably
means that more people come through?
(Mr Casey) Absolutely. There is always this debate:
should you fund the top or fund the grass roots, and of course
you have got to do both. That is why so many of the other programmes
in schools and the community are so important as well and there
is such a huge emphasis on that. Again it is encouraging that
during the Olympic week the Prime Minister announced an extra
£750 million going into Sport in Schools to make sure that
we were providing for the base of the pyramid at the same time
as the much narrower range of people at the top and those who
have the potential to get to the top.
(Mr Hewitt) What happened in the Olympics I like to
think is very good for all of us, that it is worth remembering
that although the arts may not always work in a competitive vein
we also have our Oscars. On the way here this morning I bumped
into Stephen Daldry who of course made Billy Elliott, which of
course is very likely to receive a whole range of accolades in
this next period. He comes out of the Royal Court Theatre, which
was a beneficiary of a major capital grant. Within all our sectors
there are stars and there are stars who have been assisted by
(Mr Hornsby) Just picking up Mr Maxton's point about
targeting, as paragraph 13 of our evidence said, the Board is
shifting more towards a targeted approach. As an example of that,
we have been looking very closely at priority area initiatives,
that is, those parts which, in the jargon of the trade, can be
referred to as "cold spots" where we just have not been
getting our grants out and there is real need. I think that sort
of targeting is very important.
407. Could I first of all ask each of you to
give me the figure of your annual income from the Lottery for
each of the last three years?
(Mr Hornsby) It might be more convenient if we provided
a detailed note
but the short answer is that our income over the last few years
has been moving at about £280-£290 million. I do not
have the precise figures immediately to hand.
408. And it has remained constant at that rate?
(Mr Hornsby) More or less, yes. There are some fluctuations
because, as this Committee knows only too well, the larger the
balances you retain in the National Lottery distribution fund,
the greater interest earned by them, so as my own Board has been
progressively reducing the balances and getting more out in grants
our income has dropped a bit, nothing to do with the commercial
operator but because our interest payments are kept down.
(Ms Case) My position is almost exactly the same as
Mr Hornsby's, given that we get exactly the same share of the
(Mr Casey) The figures that we have provided
in our evidence show that the figure for 1997/98 was just over
£300 million from the Lottery and for the last financial
year it was about £220 million.
(Mr Hewitt) In our case I would have
to give you a detailed figure for all three years but something
very similar to Derek Casey's figure.
409. Mr Casey, you said earlier that you were
pleased that your Exchequer funding was due to double. What is
your Exchequer funding in this current year?
(Mr Casey) It is £37.5 million.
410. When is that expected to double?
(Mr Casey) That will be at the end of the financial
year, 2002/03, by that time.
411. So you have lost over £80 million
in Lottery funding over the last three years and you are due to
get another £37.5 million, roughly £40 million let us
say, over the next couple of years. That seems like a pretty big
(Mr Casey) Yes, except that I would argue that there
are two issues about the decline in income. One was that at the
start of the Lottery everyone was surprised by the scale of the
ticket sales and perhaps it has actually evened out and settled
downwards. Secondly, there has been the establishment of the New
Opportunities Fund, but I would not say that that money that has
gone to NOF has been lost to sport because clearly, as we mentioned
before, we are working closely with them on a whole series of
programmes which will benefit sport and physical activity.
412. The language in your written submission
is a little more gloomy than that. Under your heading "Levels
of Income" you have a heading "Implications of fast
falling income" where you say that clearly any further reduction
in sport income that is lost could have serious implications for
English sport. Are you expecting it to fall any further?
(Mr Casey) There is no doubt, as my colleagues have
said, that the shopping list of requirements for sport in England
is significant. We have published figures which show that, for
example, just to provide the community with reasonable access
to sports centres and swimming pools, it will be of the order
of about four and half to five billion pounds, and equally grass
roots development and top performance development is important.
I think there is a significant demand there and obviously we would
like to see as far as possible money for sport either directly
or indirectly through the Lottery and its share maximised over
the next few years.
413. Mr Maxton was asking earlier about the
historically bureaucratic nature of applying for Lottery funding
but is not the truth that in fact people who are applying are
going to be squeezed increasingly badly in the future and that,
if anything, whilst you may make your process less bureaucratic,
there are going to be very many more disappointed bidders?
(Mr Casey) The balance between trying to make the
application as simple possible and public accountability is a
difficult one to strike. There are three issues that we have raised
within our submission in relation to funding. One is that we would
like to see some change in the taxation of the Lottery to provide
for, for example, more sports organisations having charitable
status which in very simple terms would make the money go 17.5
per cent further. Secondly, there is a case for changing the financial
directions to give loans as well as grants so that in some cases
where in a sense they have a cash flow problem we would get the
money back in due course. That would make a big difference. Thirdly,
I would like to see some relaxation in the financial directions
for us to work more closely with the private sector, whether it
is private finance initiatives or PPP (public/private partnerships).
I think that would help in terms of bringing in partnership funding
which would sometimes allow the percentage of our investment to
go down. There are some issues where we would like to see other
changes but those are the key ones in terms of the overall financing.
(Mr Hornsby) Mr Faber is absolutely right. The figures
in paragraph 4.3 of the Joint Distributors' evidence show that
there is very considerable over-bidding and, as Mr Faber said,
as we make our processes more transparent and accessible we will
find ourselves turning more people down. What one is trying to
do is to say that if there are hurdles for particular types of,
say, small community groups, we would like to be accessible to
them. Interestingly, as Ms Case has said, on the Awards for All
scheme where we are showing something like a 64 per cent success
rate, six out of ten people who apply for those small awards are
getting grants: on the main grant scheme one is showing very much
less than a 50 per cent success rate and, as I say, the Joint
Distributors' submission at 4.3 showed that overall we have been
giving one pound for every six pounds requested, HLF one pound
for every four pounds, Arts Council for England one pound for
every three pounds, and so one is faced with quite a high reject
414. You mentioned NLDF a moment ago. How does
it work? How do you apply for money for balances from the NLDF?
(Ms Case) We apply for money from the NLDF on a monthly
basis depending on our own forecasts of how much cash we need
to pay over to applicants in that period but the management of
the NLDF is in the hands of the DCMS.
415. How much is sitting in the fund as far
as you are aware on an ongoing basis? What are you trying to do
to keep the Fund at it?
(Ms Case) It is not a question of them keeping the
Fund at it. What is paid into the Fund is the distributors' share
of the operators' proceeds. That is at one end what determines
it. At the other end what determines it is the speed at which
we draw it.
416. What would you say is the global figure
which is uncommitted at the moment?
(Mr Hewitt) Between these distributors there is a
current balance for the Arts Council of £250 million going
up to £500 million for the Charities Board, £900 million
for heritage and £460 million for sport. I would add that
in every case those balances are already committed, in some cases
slightly (controllably) beyond the point of commitment, so these
resources have already effectively been spent. They are simply
sitting in the balance awaiting dispersal.
417. And uncommitted monies?
(Ms Case) I do not think any of us have any uncommitted
418. Are you satisfied with the rate of return
that you get on your money? It is well invested?
(Ms Case) We talked to the DCMS about this at the
beginning of the year because at the beginning of the Lottery
when people did not know how quickly the money was going to be
paid out by the distributors the DCMS instructions to NILO were
to keep it all in relatively short term instruments so that it
was there on demand as we needed to pay out the grants. We felt
that on the basis of the experience that we now have most of us
were going to keep some committed but undrawn down balances, and
we had a discussion with them which has led to them changing instructions
to NILO so that more of the money is put into longer term instruments
reflecting a view that we provide forecasts as to the rate of
drawdown that we see on our balances over the next few years.
That has resulted in more of the money being in slightly higher
yielding instruments which is all to the good since we get the
419. You would all agree with that?
(Mr Hornsby) Yes.
1 Note by witness: The income for the National
Lottery Charities Board in 1997-8 was £366m, in 1998-9 was
£307 million, and in 1999-00 was £294 million. All these
figures include interest on our NLDF balances. Back
Note by witness: The National Heritage Memorial Fund's
income for the last three financial years (excluding investment
income) has been: 1997-8 £322 million, 1998-9 £253.3
million and 1999-0 £244.7 million. Back