Examination of witnesses (Questions 620
TUESDAY 6 FEBRUARY 2001
and MS HELEN
620. As I understand it, since polling started
on what the public would like from the Lottery in 1996, overwhelmingly
they would like it spent on health and education which is a dilemma
if you continue with the additionality. You do understand the
complication here? We saw in America, where there is no additionality,
that politicians would sit on the shoulder and say, "I need
some schools to be built. You had better hurry up and raise some
money because I will not be elected as the Governor of the State."
The Committee did not like that inference and that interference
but does the Treasury have a view that if that principle was to
go how the Lottery might work? Do you think it should be run by
the Government as opposed to run by Camelot?
(Mr Andrew Smith) First of all, I do not think the
application of the principle of additionality is any different
in relation to health, or for that matter education, than it is,
for example, in sports or arts. It is the same question, the same
test that has to be applied: if this money were not being provided
through the Lottery would it have been provided through the Exchequer?
Unless we are careful we can get into a perversely paradoxical
situation hereI am not suggesting you are arguing thisbut
some of the commentary on the application of Lottery proceeds
can almost suggest that something is too important to be funded
through the Lottery. I think that would be a curious concept to
the public who, after all, are buying the tickets. I think at
the end of the day people do support a range of different sorts
of projects and I think they have no problem, indeed some enthusiasm,
for those including health and education. Obviously to the extent
that those payments are for one-off or special initiatives, then
I think that is more readily accommodated within the Lottery funding
621. I would like to follow up some of the lines
of questioning that Mr Wyatt was starting, perhaps in a rather
heretical way. Mr Wyatt talked about the very large take of the
Treasury from the Lottery in taxation. I wonder whether it is
large enough. After all, here is a source of revenue that is new.
My own view, and maybe I am wrong, is that the public really do
not care how heavily the Lottery is taxed provided that they do
not feel that that rate of taxation is liable to detract from
their ability to win a prize. On a number of these issues that
we have been discussing this afternoon this Government is very
much carrying on the concepts that the previous Government started.
I am not saying that what the previous Government started was
wrong, after all they started the Lottery and everybody now agrees
that is a very important and worthwhile initiative, but just because
something was so when the Act went through Parliament, four years
on, ought not the Government be looking at asking itself the question
is this really the way we need to continue? I ask the first of
those about the rate of taxation and the revenue take out of the
(Mr Andrew Smith) You present the hypothesis that
the public might be prepared to tolerate a higher level of taxation
as long as it did not affect their chances of winning a prize.
I wonder about that. Of course, even if it were the case that
they would tolerate a higher level of taxation if it did not affect
their prospects of winning a prize, that does not mean they want
a higher level of taxation. I rather suspect they do not and there
would indeed be public resistance to the idea of the Treasury
or the Government taking a disproportionate slice of the cake.
I think therefore the justification that we have given in terms
of seeking to achieve this revenue neutrality and, by all means,
re-examining the evidence on that as we were prompted to earlier,
is a reasonable way of proceeding.
622. I would like then to come to the
(Mr Andrew Smith) There was a second part to your
question which was really saying is it time for a more fundamental
re-think. We did make quite a fundamental change in accordance
with our Election Manifesto with the introduction of the New Opportunities
Fund. As I say, I think that has been generally warmly welcomed.
I do not see this is a case for more radical change at this stage.
623. I would like to come to that.
(Mr Andrew Smith) But in saying that I am stepping
outside my ministerial brief anyway.
Chairman: And a good thing too, after
all we have Ms John here today whose title seems to revolutionise
any approach of the Treasurythe Head of a Treasury Spending
624. Small but perfectly formed.
(Mr Andrew Smith) It is not a contradiction in terms;
we do spend quite a lot of money.
625. I would like to come again to this question
of additionality. This Committee and the National Heritage Committee
before it has been conducting inquiries on the National Lottery
for around eight years and successive Secretaries of State have
come before us, and have all avowed as to the integrity, not to
say sanctity, of the additionality principle and representatives
of the Treasury, including yourself this afternoon, have all endorsed
the sanctity of the additionality principle, but why should there
be such sanctity? In the United States, as my colleagues have
pointed out, they regard their lotteries as a very useful source
of revenue for expenditure, sometimes including core expenditure.
Again, without criticising the previous Government for the way
in which they started this thing off, provided that you are not
using revenues from the Lottery in order to cut core expenditure,
is there any real justification any more for the additionality
principle and in a moment I will come to the categories. I know
that all government departments hate the Treasury and feel that
unless what is allocated to them is protected the Treasury will
raid everything that they can get their hands on (and of course
the Lottery is a great thing for the Treasury to raid) but if
you are willing to be heretical this afternoon, Chief Secretary,
is there really anything so sacred about the additionality principle?
(Mr Andrew Smith) We adhere to it for the reasons
I set out earlier and in considering this I put myself in the
position of the person going to buy a Lottery ticket and I think
people are happy, comfortable and enthusiastic about the notion
that a good part of what they are doing when they are buying that
ticket, as well as standing a chance of winning a prize, is giving
something extra. If they felt they were simply substituting for
expenditure out of taxation which in a sense, as you say, crudely
might be defined as allowing that expenditure to be cut, I think
they would feel somewhat aggrieved. Judging whether we are adhering
to it, you can also look in the round at what has happened to
Exchequer funding of some of the things which the Lottery has
supported since the General Election, or for that matter since
the Lottery started. It is just worth pointing out that arts spending
since 1997-98 will have increased by 18 per cent in real terms
and spending on sport by four per cent in real terms under this
Government, and if you take it from when the Lottery first started
to the end of this forthcoming spending review period in 2003-04,
the increase in arts spending in real terms will be no less than
43 per cent and in sport 93 per cent (from the current position
to the end of the spending review, this corresponds to 32 per
cent and 99 per cent respectively). What I am saying is that we
as a Government are putting extra into these areas and the Lottery
is adding a very considerable amount extra on top of that. I think
that is something that the public is happy with and I certainly
would hesitate before seeking to change it.
626. But Mr Wyatt was talking about, insofar
as one knows the public's views on this and so on, what the public
wants. Again my guess from the evidence that is available is that,
okay, the public buys tickets in the end to win a prize but they
also look at what the revenues from the Lottery go to in terms
of good causes. I have a feeling that, given the choice, the public
will be perfectly willing for huge chunks of money from the Lottery
to go, for example, to reducing cancer waiting lists or going
into cancer wards because cancer is, very understandably, a highly
emotional subject. If you ask members of the public would they
like £70 million to go to the Royal Opera House or go to
the cancer wards in Christie's in Manchester, they would say in
language which we do not often use in Manchester, and which I
will not use here, they would say in very strong terms that their
preference would be for the Royal Opera House never to get another
penny and for the money to go to cancer wards not simply in Manchester
but anywhere. What I am saying, Chief Secretary, is that if people
had their way and were really consulted, if there were referendums
on this, I think it is a fair guess that people would say, "We
do not care about this additionality principle, if it can provide
more computers for schools, if it can help deal with students
who cannot afford fees at university, we do not really care about
this additionality principle, we would like to spend this money
on things that mean a lot to us." So not only for the question
of should the additionality principle go on being sacred but the
other part of it too. The previous Government, when it created
the Lottery, created what were then five categories for awards
for distribution from the Lottery and this Government has added
the New Opportunities Fund. Why is the Government so utterly preoccupied
with those categories? Okay, it has changed it a bit but is there
not a case for saying that was then, that was good, we are not
criticising it but there is nothing sacred about those categories.
Would it not be better to spend more money on health, more on
education, perhaps give money to overseas aid? If the Lottery
was now to announce it was giving £20 million to the Indian
Earthquake fund, I think a lot of people in this country would
say "That is a good thing". What I am saying is, this
is a very, very traditional Government in the sense that it does
not seem to be challenging concepts that are something like ten
(Mr Andrew Smith) With the greatest respect, I think
part of what you are saying there is confusing the concept of
additionality, whether spending is not substituting for that which
the Exchequer would otherwise have provided, with the question
of relative priorities, why should we not give more money to things
that the public considers important. As I said earlier, I think
we can, through the Lottery, make money available to things which
are important without infringing the additionality principle.
When you challenge me on the overall distribution, again I just
have to enter the caveat that in terms of ministerial responsibility
these are very much more matters for the Secretary of State for
Culture than they are for me, but I would say there are a number
of considerations. One, if you ask people what they want money
spent on, yes, a lot will say on health or on education or the
environment, I think those were the three which came at the top
of that BMA poll, but there will be very substantial numbers,
including very many Lottery players, who want to see money also
spent on arts and sport and other things as well. I think there
is merit here in having a plurality of good causes which are supported.
Moreover, having enunciated a principle and saying that we would
be guided with and we would stick with additionality, I think
it is right that the Government should do so. Moreover, of course,
there are those who have come to look to the Lottery as an appropriate
source of funding and I think they would question the fairness
if there was an abrupt change of policy which adversely affected
important activities which they are involved in.
Chairman: Thank you. If there is a minute
or two before your session is over, I may come back to this but
meanwhile I will ask Mr Faber.
627. The previous Government founded the National
Lottery with a mechanism such that the distribution bodies were
to be kept at arm's length from ministers, removing the responsibility
effectively from ministers making important grants. The thinking
behind this was very often those bodies were specialised bodies
who understood better than perhaps ministers might where the funding
might go. This Government has carried on that principle. Is that
arm's length principle one that you support?
(Mr Andrew Smith) Yes, it is.
628. As far as you are aware the current Government
has no plans to change that?
(Mr Andrew Smith) Yes.
629. What would you say are the strengths of
the arm's length principle?
(Mr Andrew Smith) What the public want to know is
that the money is being allocated genuinely in response to sound
applications for good projects that are going to be properly run.
I think they want to be assured that the distribution mechanisms
are not susceptible to political manipulation for political ends.
Those are the strengths of that measure of independence, also
having people involved in that stage who have particular understanding
of the areas which are recipients.
630. That really does follow on from the previous
Government's view. Would you also agree that public perceptions
of the Lottery are affected if subsequently people see that funds
which have been allocated are allocated to projects which perhaps
do not have long term viability. Mr Wyatt touched on it in a sense
in terms of cancer treatment but perhaps more so with capital
projects. Capital projects, the most obvious is the Dome, I am
not here to talk about the Dome but if you look at capital projects
all over the country which sometimes are not perceived in the
local community as having a long term viability, would you agree
that as well causes problems to public perception of the Lottery?
(Mr Andrew Smith) Where projects turn out to be non
viable, it is going to be problematic. No resource allocation
process is going to be perfect. Obviously it is up to those judging
the viability of proposals to take into account all the relevant
factors when they are making their assessment.
631. That is a job for the distribution bodies
rather than for individual Members of Parliament to make. Very
often individual Members of Parliament try very hard to lobby
on behalf of individuals for projects in their areas. What you
are saying is the arm's length principle really protects them
from having to do that?
(Mr Andrew Smith) Yes, it does. I am sure that representations
made by Members of Parliament are considered on their merits by
the relevant people, just as other representations will be. I
think the public has confidence in a mechanism that maintains
a measure of insulation between the political process and the
distribution of Lottery proceeds.
632. Mr Faber has mentioned something which
perhaps I can use in the remaining moments to ask you something
else. As a result of the Lottery there has probably been, in the
last few years, the greatest wave of more or less simultaneous
building and major construction projects for public use, probably
in the history of this country. It is an extraordinary efflorescence
of construction and all kinds of major public facilities are being
provided which otherwise might never have existed. A lot of those
inevitably have revenue spending consequences. The Tate Modern,
for example, which you had better make sure goes on being free.
All over the country art galleries, theatres and all the rest
of it, it is an incredible period in our lives this but quite
a lot of them must have revenue expenditure consequences which
cannot be borne by the Lottery and will be borne either by local
authorities or by the Treasury. To what extent are those consequences
taken into account when you are considering the potential taxation
proclivities of the Lottery?
(Mr Andrew Smith) First of all, I join with you in
celebrating the scale and the diversity and the richness of the
investment which Lottery funding is making available. As I was
saying in answer to the previous question, I think on each individual
project there has to be an assessment of its viability and prospects
for revenue funding and so on but set against the very substantial
increases in public spending which we announced in the spending
review, which will take us on the figures I gave a few moments
ago in sport to a 93 per cent real terms higher level of sports
funding by 2003-04 than there was when the Lottery began and a
43 per cent real higher level of expenditure in arts (correspondingly
a 99 per cent and 32 per cent real terms increase from the current
position to the end of the spending review), and of course there
will across that period have been a very substantial uplift in
the income to local authorities as well. So I give those as examples
of where the revenue to maintain and carry forward the work of
these wonderful facilities can be sustained. Of course, the users
make an important contribution as well.
633. A proud credo for the Treasury to end this
session on. Thank you very much indeed.
(Mr Andrew Smith) Thank you. I have enjoyed it.
Chairman: Thank you for coming.