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Greater London Authority (Referendum) Bill

11.38 a.m.

Baroness Hayman: My Lords, I beg to move the Motion standing in my name on the Order Paper.

Moved, That it be an instruction to the Committee of the Whole House to whom the Greater London Authority (Referendum) Bill has been committed that they consider the Bill in the following order--

Clause 1, Schedule, Clauses 2 to 13.--(Baroness Hayman.)

On Question, Motion agreed to.

National Lottery Bill [H.L.]

11.40 a.m.

Lord McIntosh of Haringey: My Lords, I beg to move that this Bill be now read a second time.

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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.

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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 be 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.

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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.

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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.

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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 16 2/3 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

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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 boards 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 be 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.

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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.

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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

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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.

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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?

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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 naivety 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

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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

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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,

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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 naively 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

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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.

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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.

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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

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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 naive; and I am certainly not naive 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.

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