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Lord Skidelsky: I am full of anxiety. I would just ask the noble Baroness whether she could answer my second point concerning the practical problem of projects in the pipeline, which would presumably have to be cancelled if the Secretary of State withdrew parts of the endowment and, therefore, the income stream which went with that endowment.

Baroness Ramsay of Cartvale: It seems to me that in the extreme, almost unimaginable, circumstances of something so untoward happening that the Secretary of State had to ask the trustees to reimburse part of the endowment which had been grossly misspent, there would still be money in place for the projects which were considered perfectly legitimate. It would only be in order to retrieve what had been misspent that the money would be demanded back. We are dealing in very hypothetical situations here of course, but we are, after all, legislating for that.

If a "melt-down" situation applied--which is why we have included the provision--then the trustees would be changed and Clause 17(2) would be used to re-endow whatever new trustees would be in place. The whole point is to try to get back the money that was misspent. Presumably the trustees would also be replaced by new trustees. We are dealing with a situation in which there would be a considerable crisis. I do not believe that a

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project which was up and running would present a big problem. Indeed, the whole point of trying to get the money back is so that there would be money for legitimate projects to go forward.

Lord Skidelsky: I am impressed by the ability of the noble Baroness to think out these matters on the hoof. Unimaginable though any of this may seem, the Bill is always ensuring against unimaginable contingencies and this is one against which it has not insured because it is not convenient for the Government to do so. I was raising the case, which does not seem to me at all unimaginable, that a percentage of the endowment is cancelled, and therefore the projects that depend on that stream of money cannot go ahead. The noble Baroness says, "Ah!", but in that case we can re-endow NESTA and Clause 17(2) gives us the machinery to do it. However, it does not mandate that at all, it does not say that it has to be done. It may possibly be done not at that moment, at some other point, and therefore there is still the practical problem I raise. I wish that the noble Baroness would give it some consideration because it is there--unless she can allay my deep anxieties even further.

Baroness Ramsay of Cartvale: I shall write to the noble Lord at greater length, but the basic point is this. What must be done in a situation of crisis where money has been clearly misspent is to get the money back and to secure the endowment. I accept there might be a hiatus in which legitimate projects would have a cash-flow problem from NESTA, and that would be put right by restoring the endowment, both by getting the money back and by making good the shortfall. It might make the matter clearer if I write to the noble Lord at greater length.

Lord Chorley: I do not quite see how one can get the money back if it is gone, but perhaps that can be covered in the letter that the noble Baroness is to write to the noble Lord, Lord Skidelsky.

Lord Skidelsky: I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord McIntosh of Haringey moved Amendment No. 43:

Page 20, line 29, leave out subsection (7) and insert--

("(7) In this section "endowment" has the meaning given by section 17(6) above.").

The noble Lord said: I beg to move.

On Question, amendment agreed to.

Clause 19, as amended, agreed to.

Clause 20 [Annual report and forward plans]:

[Amendment No. 44 not moved.]

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Clause 20 agreed to.

Clause 21 agreed to.

Clause 22 [Exemption from taxation]:

Lord Bassam of Brighton moved Amendment No. 45:

Page 21, line 27, at end insert--
("(g) the Sports Council, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993,
(h) the Scottish Sports Council, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993,
(I) the Sports Council for Wales, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993, and
(j) the Sports Council for Northern Ireland, in respect of sums allocated to it from the National Lottery Distribution Fund or solicited under section 25(2A) of the National Lottery etc. Act 1993.".").

The noble Lord said: I am rather nervous in moving this amendment because it is clear that the noble Lord, Lord Howell, would have been much better at it. No doubt he is a corporation tax expert, and I do not claim that talent.

However, what the amendment seeks to explore is Clause 22. As currently drafted, it exempts NESTA from corporation tax. The Arts Council of England and the Heritage Lottery Fund are both exempt from paying corporation tax on the interest accrued and they draw down funds from the National Lottery Distribution Fund, as they both have charitable status. The English Sports Council has, however, to pay corporation tax on the interest it receives on lottery funds it holds between the period of drawing down from the National Lottery Distribution Fund and passing to lottery recipients.

The amendment has three objectives: to seek an exemption from corporation tax, perhaps to right an anomaly and also to encourage flexibility. The amendment would give the English Sports Council and those for Wales, Scotland and Northern Ireland exemption for distribution purposes. The English Sports Council and the others are not seeking charitable status, merely a relief from the corporation tax on moneys transferred to award recipients. Their view is that this is an anomaly in the operation of the distribution fund.

I wonder whether it could have been Parliament's intention in the 1993 Act in effect to subject parts of money going to good causes to a form of double taxation. The amendment seeks to address what was an unintended anomaly. It has always been my understanding of corporation tax and other taxation that there should not be a situation where double taxation comes into play.

The other point of the amendment is this. It seeks to encourage flexibility in the drawing-down arrangements, and there are many who would argue that encouraging flexibility will make more effective and efficient use of the funds so distributed.

There are six or seven points to be considered here. In distributing the proceeds from the National Lottery to good causes, the money is not really a form of income.

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Therefore I would argue, and others might argue, that perhaps it should not be taxed as such. Corporation tax is charged in addition to the 12p paid to the Treasury on the National Lottery ticket sales, so that is a double taxation on the moneys raised by Camelot.

The third point is a matter of illustration. Between March 1995 and March 1997 the English Sports Council advises me that it paid out approximately £80 million, and paid on that £122,240 in corporation tax on the interest accrued. On current estimates, it calculates that over the life of the current lottery franchise it will pay £1.5 million corporation tax up to September 2001. That seems to me not to be a very efficient way to work with money which is primarily intended at this stage to go to beneficiary bodies.

The National Lottery Charities Board has confirmed that in the financial year 1996-97 it paid £42,000 in corporation tax on £130 million drawn down. That is, after all, a board which operates with much more draw-down flexibility. This compares with the £122,000-plus paid out by the English Sports Council. I remind noble Lords again that this is with the National Lottery Charities Board drawing down weekly rather than on a monthly basis.

I have no doubt that the Minister will argue that alternative draw-down arrangements should ameliorate the situation, but they will not resolve it. That is what the amendment seeks to encourage. Corporation tax paid by the English Sports Council, the National Lottery Charities Board and the Millennium Commission reduces the overall funding available to all of the good causes by increasing the amount that these organisations have to draw down from the National Lottery Distribution Fund. I do not believe that that acts within the spirit of the National Lottery, nor could it have been the original intention of those who legislated.

Perhaps the Minister will consider those points and give us some assurance that they will be taken into consideration. We could then make progress on what is clearly a rather thorny issue. I beg to move.

6 p.m.

Lord Addington: The amendment draws attention to the fact that the Treasury is having a second bite at the cherry. It already receives money when people buy their lottery tickets, and the funds being accrued are supposed to go towards good causes. The amendment just says that those sporting bodies should get the same treatment as other bodies. That is all.

The sums may be comparatively small in relation to the total figure that has been distributed--it may be £1.5 million--but if it is going to small causes like coaching courses or new kit for clubs and so on, that is a lot of courses; it is a lot of kit. I suggest that this amendment, or something similar to it, should be addressed because it is merely stopping the Treasury taking a second bite.

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