Examination of Witnesses (Questions 379
THURSDAY 14 DECEMBER 2000
Chairman: Good morning. Thank you very
much indeed for coming to see us as we proceed on this inquiry
into the National Lottery. Whether or not questions are addressed
to you individually, if any one of you believes that she or he
has an answer they would like to give to any of the questions
then within our time limits please do not hesitate to respond.
I will ask Mr Fearn to ask the first question.
379. Are you satisfied with the way Camelot
are promoting the good causes?
(Ms Case) We see in a sense a distinction between
our interests, which are those of getting the maximum return for
the good causes and the day to day operations of Camelot. We clearly
want the return to the good causes to be as high as possible and
part of Camelot's promotion for the Lottery game feeds into that.
We have all in our turn helped Camelot in the sense of giving
them evidence of what the money we are spending has done which
they have then used as part of their advertising campaigns. I
do not think we have collectively or individually a specific view
about how well Camelot has done as an operator.
380. When you say you advise Camelot what you
have done so that they can use it, do you all do that?
(Mr Hornsby) Yes.
381. Has the delay and uncertainty over the
next promoter done anything to affect you in any way, shape or
form, or is it affecting you?
(Mr Hewitt) The principal concern here would be in
relation to any hiatus that might occur. Whilst it is essentially
a matter for the National Lottery Commission, we have obviously
considered this and the truth is that whilst all the Lottery distributors
are fully committed in terms of the resources that they have there
are variations in the balances that we hold. The Arts Council
balance is probably the lowest of the four before you today. We
have therefore given some careful consideration to the difficulties
that might occur were there to be a hiatus. Our feeling is that
it would be seriously problematic. Obviously, the longer it went
on the more the difficulty that would accrue, but it would vary
greatly among distributors. It would be most acutely felt by the
Arts Council and once it got beyond weeks then it would become
a very major concern for ourselves and increasingly for the other
382. When you said it would be a major concern
to you if it went over a few weeks, in what way?
(Mr Hewitt) The Arts Council's balance is something
in the region of £250 million. I should add, however, that
that is all committed. We are not talking about money which is
still for commitment. We are fully committed, as indeed are the
other distributors. Once those balances start being eaten into
in a significant way, then obviously that would have a major impact
on our capacity to keep the flow of decisions going in terms of
the demands being made on us at the present time, and it would
undoubtedly have a significant effect on our operation.
383. Does that mean that you entirely rely on
the Lottery to keep things rolling? What is the contingency?
(Mr Hewitt) There is a degree of contingency in that
we do hold balances and all of us hold balances of varying degrees.
It ranges from £250 million in our case to something in the
region of £900 million at the top end, so there is degree
384. But that would take more than a few weeks?
(Mr Hewitt) It is the point at which forward commitment
has to be considered alongside resources available over a longer
period of time. One has to take into account the impact of commitments
being made now over a longer period of time. It is quite a sophisticated
analysis that we need to do at any one time to ensure that we
are not committing beyond a certain point.
385. When you talk to the National Lottery Commission
on issues of the new licences that have been issued, is it ongoing
about what may happen?
(Mr Casey) No. The discussion with the Commission
is strictly from Government. The points that Peter has mentioned
we will express to DCMS and obviously that is translated on to
the Commission, so the relationship is an indirect one with the
National Lottery Commission.
(Mr Hornsby) Our concern essentially is to get the
most robust forecasts of future income from DCMS so we can manage
our cash and manage our forward commitments, and it is up to DCMS
to make representations about their forecasts of the likely income
from the commercial operator and it is important to us how robust
those forecasts are.
386. How often does that happen, that you meet
(Mr Hornsby) We are given six monthly forecasts by
DCMS but the most recent forecast, which is due, is a little late
so we are waiting for it rather anxiously.
387. But that does not cause a blip of any kind,
does it, that the five weeks may cause with the Lottery?
(Mr Hornsby) No. What Peter Hewitt was saying was
that a hiatus in cash flow would certainly cause us alarm for
the reasons he has mentioned. A slight delay in getting the forecast
does not have an immediate impact but we do need forecasts if
we are going to get the mix of existing payments and forward future
commitments done as accurately and as responsibly as possible.
388. Do you think that the work of the New Opportunities
Fund complements the work of yourselves as the original distributors?
How do you see that you interface with the new good cause?
(Mr Casey) Perhaps I could give two examples of this.
One of the issues that the New Opportunities Fund is charged with
is on issues relating to education and health. We would argue
strongly that sport and physical activity is also about education
and health, so therefore there is a synergy between our work and
the New Opportunities Fund. Therefore we have a joint programme
with the New Opportunities Fund, and indeed with the Arts Council,
which is for the provision of facilities for the community but
also for youngsters, so a programme which covers all three, helping
the education and health of young people. Another area which we
are charged with is sport in the natural environment, as is the
New Opportunities Fund which has responsibility for environmental
improvements. Again the synergy there is with a programme called
the Green Spaces Initiative which will look at the provision of
new pitches and open spaces and improved facilities again for
youngsters in inner cities and rural areas. The specific objectives
of the two organisations are different. There is a very close
relationship with the fact that we can use sport to achieve health
and education, and health and education can encourage physical
activity particularly among young people.
389. What about heritage? The third item is
about the physical environment which is what the New Opportunities
Fund is charged with looking at and yet is not heritage as important?
(Ms Case) I think the two are complementary. Because
we are a heritage organisation we can only look at certain aspects
of the natural environment. It is shown up perhaps most strongly
in our urban parks programme where the research we have done about
needs assessment in urban parks shows enormous need which we can
only be part of meeting because only some of those parks are,
if you like, heritage assets, historic parks. The needs that we
are meeting in making those parks fit for use today as well as
in preserving heritage are just as acute I think in many other
urban parks which do not in our terms meet our heritage classifications
and they are the sorts of things which could fall to the New Opportunities
(Mr Hornsby) Could I add that we have funded a considerable
number of out of school clubs in our early days. NOF now have
a quite specific programme on that. We have co-operated closely
with them on that. We do in fact deliver that programme, though
the decisions and the money are from NOF. We have looked at some
areas where there is a degree of overlap and we issue joint guidance
because of course a significant amount of NOF's funds go to the
voluntary sector. We also fund the voluntary sector. On the whole
I think our activities are complementary but, as I say, we did
produce a joint leaflet so that charities who are applying will
know which one to go to.
390. It seems to me from your answer though
that you are almost saying that if it was not created you were
developing in that way anyway. Do you think that the New Opportunities
Fund was set up because the public, when they are thinking about
good causes from the Lottery, have made it quite clear that they
would like money to go into health and education and they are
not too interested about arts funding and old buildings being
restored; it is all a bit peripheral and it is chattering classes
stuff anyway, so there is a sort of political move to say, "Let
us have a new good cause and you guys have now got to tailor and
complement into that"?
(Mr Hewitt) If you take the arts, we did some research
into the public's view of arts support last year. Rather surprisingly,
those statistics were extremely good. We found that 78 per cent
of the public were entirely content with public support for the
arts, whether through Lottery or from grant-in-aid. There were
also 82 per cent who applauded the fact that the arts supported
arts and education and indeed 95 per cent of the public said that
they wanted more arts for their kids in school and through education
and youth services. It is a mistake to underestimate the degree
of support there is for the arts, particularly where the public
is looking at the interests of young people, at education and
the aspirations for their children and young people.
(Ms Case) The research which English Heritage have
done which underlies their launch this morning of their review
of the historic environment shows very much the same sort of public
support for the heritage in terms of public funding for it and
particularly its role in education and for young people, so the
evidence is mixed.
(Mr Hornsby) I would not like to attempt to outshine
my colleagues in this Committee but some of the evidence before
this Committee equally shows a fair amount, in fact a very considerable
amount, of public support for the work that charities do. It comes
in the appendix to one of the academics who gave evidence to you
and it is clear from the evidence given to this Committee by the
ACF that there is a very considerable amount of popular interest
and popular support for the large amount of work which charities
do. I do not think any of us would argue that we were in such
marginalised chattering class areas that you had to bring on new
troops. I think most of us feel that there is quite a solid constituency
for the work that we do.
391. My next question is more directed at you,
Mr Hornsby, than at the other members before us this morning.
I would like to talk about medical research because we have talked
about the public wanting to have their Lottery proceeds possibly
going into health and education and there has been work done where
the public thought that about £12 out of every £100
raised for the good causes went to medical research, going to
cancer charities and those sorts of areas, whereas in fact the
figure is more like 5p in every pound. Do you think that there
is a complete mismatch between the conception of where money is
going into charities and where it actually is going? People think
that it is going into medical research, cancer charities, but
in fact it is going to (albeit very worthy) the Silver Band of
(Mr Hornsby) Your first point, if I may say so, is
absolutely accurate. What research and tracking has been done
by MORI and others show that the public very considerably overestimate
the amount of the proceeds that go to the good causes, which actually
go to charities or, as a sub-set of that, which actually go to
charities doing medical research. In our own case we must have
made grants of about £30 million to very specialised medical
research very much linked with patient concern. The sort of charities
we fund tend to be those which do work in conjunction with universities
but are very much patient centred. I think your first point is
right, that there is a popular perception of the amount that goes
to this which is much higher than the reality. There are of course
significant amounts of money going into medical research and the
Wellcome Trust is one of the biggest and most generous of the
trust makers, but that of course is a totally separate grant making
392. Lastly in this area, are you concerned
that as time goes on and we tweak around with what the distributing
boards are doing or you work more in synergy with the New Opportunities
Fund, you are going to be providing services and sectors that
really should be dependent on Exchequer funding, not on Lottery
(Mr Casey) I think it is certainly something we do
need to bear in mind. The concept of trying to make sure that
this money is additional to Exchequer funding is still an important
principle. Particularly in funding local authority facilities,
the sports centres and swimming pools, as time goes on it does
become more difficult to see whether or not Lottery funding has
a causal relationship with the decrease in spending on leisure
and recreation because indeed the pressure is on local authorities.
Other pressures may actually cause that. It would be fair to say
that it is more difficult to make that judgment but the principle
of additionality is still one which we think is important.
(Mr Hewitt) From our point of view I would agree with
Derek. It is quite difficult to do the analysis in terms of whether
there is any substitution of local government support for the
arts. What is clear however is that if one takes the five years
from 1998 to 2003 there is no evidence whatsoever (indeed the
contrary is the case) that Exchequer support for the arts, which
will have grown from £190 million to £330 million over
that five year period during which our Lottery proceeds have also
been very sizeable, is subject to substitution in terms of the
Arts Council. I do agree, however, that there is more analysis
that needs to be done in terms of public expenditure in local
(Ms Case) If you are looking forward the position
that we all find ourselves in is, and this is something the Select
Committee itself picked up when we gave evidence about the task
that we were doing, that the needs which have emerged in the heritage
field are still far and away beyond those which either the Government
or local government could conceivably be expected to meet, so
in that sense to the extent we are meeting those needs we are
doing something which is additional to what the Government or
local government would do.
(Mr Hornsby) Again in our case my Board is extremely
concerned that our funds should be in addition and not in substitution.
In practice of course there are always slightly grey areas that
become involved. In fact, only one per cent of our rejects are
on grounds that the bid was for something which breached our additionality
rules so we attach great importance to them but the number of
bids that we get that transgress, as I say, is remarkably small.
393. Could I, before I call Mr Maxton, follow
up on this theme? Ever since the National Heritage Department
was formed in 1992 we have had Secretaries of State both from
that Department and from the Culture, Media and Sport Department
coming to us and affirming in the strongest terms the additionality
principle which we have been discussing. I have got no reason
whatever to disbelieve the averment of those Secretaries of State,
but do you think that successive Chancellors of the Exchequer
have believed in the additionality principle with the same firmness
as the secretaries of state?
(Mr Hewitt) From my point of view, to repeat, there
is no doubt that the Exchequer's response to the case from the
cultural sector, at least as directed through national agencies
such as the Arts Council, is such that they would believe and
have supported that in action. As I say, there is a further degree
of analysis needed in terms of other areas of public expenditure.
394. Dealing with your area, Mr Hewitt, there
was a period when not only in real terms but in cash terms the
amount of money going to the arts actually fell substantially
and one had a feeling that that might have been because Chancellors
were saying, "Oh well, the Lottery is around", and while
you have spoken about popular support for the funding of the arts
it may well be that there is less popular support for the funding
of the arts than there is, say, of the funding of sport or heritage.
Are you happy that over these years since the Lottery began the
additionality principle has been completely observed, and I would
be interested in the views of other people on the table, of whether
successive Chancellors might have felt that this was a jolly good
way of saving money?
(Mr Hewitt) I think there has been a degree of variability
during the eight or nine years in question. I would put that down
to the strength of the case made for Exchequer support. I am a
firm believer, having looked at experiences in other countries
where Lottery support has substituted for Exchequer support and
the research has been done, that if the particular agency concerned
or the particular subject area concerned makes a good case for
Exchequer support alongside Lottery support, then there is a lot
of evidence that substitution does not take place. Substitution
occurs when there are vacuums into which Lottery support can move.
I like to think that in the case of the arts broadly speaking
over the eight or nine years, and certainly in the last three
or four years, there is no evidence whatsoever of that kind of
substitution having taken place.
(Mr Casey) Perhaps I can add, Chairman, that, rather
like Peter's example of the Arts Council, the Sports Council also
receives Exchequer funding. It has been variable over the last
few years but I think the trend is very different now and over
the next three financial years the Exchequer funding of Sport
England is going to double. There are examples of other funding
coming through from the Exchequer for particular purposes. Again,
just judging it at the national level, I would agree with Peter's
395. What was it by 1997?
(Mr Casey) It is rather difficult to say, Mr Maxton,
because you know that we have split into Sport England and the
UK Sports Council now so I do not think there is a direct comparison.
396. A very good politician's answer.
(Ms Case) Perhaps I can add two points. On a very
minor scale it was the case that the grant-in-aid to the National
Heritage Memorial Fund, which is our Exchequer money, went down
at the time that the Lottery was introduced but it has now, as
a result of the last spending round, gone back up to what it was
at the time the Lottery was introduced. More generally, as a gamekeeper
turned poacher, as an ex-Treasury official, I think that eternal
vigilance is needed on all our parts to ensure that we are putting
a good case forward and to keep the flag of additionality flying.
(Mr Hornsby) I would agree.
397. In that case the fact that the Lottery
money is very specifically spent on specific projects and specific
areas additional to your normal grants, particularly in sport
and the arts, is that something which you would want to keep as
well rather than just saying the Lottery Fund goes into your general
fund and you just spend it as you wish? You would prefer to keep
(Mr Hewitt) Absolutely. In our case we are very keen
to ensure that the Exchequer support basically provides the core
of arts provision in this country. The Lottery support adds to
that and enhances it. Also, by being clever about using Lottery
with Exchequer, you get more out of both. We are anxious to ensure
that at any one time were there to be a complete change of policy,
which I absolutely would hope would not be the case, the Exchequer
support does still make sense in terms of how it has been allocated
(Mr Casey) I will give one example which is recent
and that is looking at revenue support for example for national
governing bodies of sport where Exchequer funding provides the
core support for those organisations for the whole range of things
they do in the community and in terms of development of sport,
but the Lottery funding has provided the support for top performers
and indeed for talented performance. Again we have a complementary
role of the Exchequer funding and Lottery funding which clearly
from the Sydney Olympics and the Paralympics has been shown to
work well in a complementary fashion.
398. Certainly the evidence from the state lotteries
in the United States was that they would much prefer our system
with what they call arms wrapped around particular projects with
the Lottery funding rather than it going into the general pot.
Can I ask you whether or not you are happy with your own rules
in terms of distribution? We have had complaints in the past about
the fact that you are over-bureaucratic, that getting money from
the Lottery is something that often demands people of some skills
in terms of putting forward a bid and as a result the middle classes
have benefited considerably more than other classes from funding
from the Lottery because they are much better at putting bids
in and getting money from you. Is that right? Are you changing
(Mr Casey) I would make three points, Mr Maxton. First
of all, the new organisation QUEST, which is looking at quality
standards, has had a look at this in the last twelve months and
has largely provided a clean bill of health in terms of the application
process from all the Lottery distributors. They asked us to look
at two things; one was to try to provide perhaps a slightly simpler
method right at the start, and many of us now have a two-stage
process where the first stage is relatively straightforward, much
more interested in the outcome of the investment rather than all
the other elements which go with an application. That has speeded
up the process. The second was to provide perhaps better pre-application
and continuous application advice to applicants. Certainly in
our system, once the applicant has got past the first stage we
can legitimately sit with them and help to get a much better project
at the end. It was good to see independent analysis of this showing
that while there is anecdotal comment about bureaucracy most of
the application processes were straightforward.
399. Before the others come in can I just ask
to what extent that is regionalised? I know you speak only in
England but to what extent do you have people around different
parts of the country who can give that very specific advice in
the area where the project is who have knowledge of that area
and knowledge of the project rather than people doing it entirely
from some London base where they do not know what is going on?
(Mr Casey) Certainly again if I may just speak for
sport we have nine regional offices around the country and once
they have got past the first step of the application process then
it goes to our regional office for the regional officer to work
with the local community applicant. Indeed, even before that stage
there are a number of regional seminars and advice services and
surgeries which are provided for people who are just thinking
of applying, particularly directed towards the voluntary sector.
Increasingly over the last few years all of us have moved towards
a much more regional approach in this to make sure that advice
is given with knowledge of that patch and I think we will see
that trend continuing quite significantly over the next few years.
(Mr Hewitt) In our case we have delegated substantial
sums of money to the regional arts boards so for example all capital
grants of under £100,000 are dealt with by the regional arts
boards. We have a programme called the Regional Arts Lottery Programme
which is about grants to local organisations, regional organisations,
which are decided upon by independent regional arts boards which
do of course have local government representation on them. If
I can just take the broader question about evidence of having
achieved spread, I think in general all four of us would argue
that we have achieved spread, whether it is the Sports Council,
Sports Action Zone strategy or the Charity Board's priority schemes.
In our case and in heritage's case a very large proportion of
our overall spend has gone to the hundred most deprived local
authorities, something between 60 and 70 per cent of our money
has gone to those local authorities. Certainly in our case I put
that down to the fact that we are working with and through regional
arts boards who do have that relationship with local communities.
(Mr Hornsby) On the issue of regionalisation we have
from the outset had separate regional offices in each of the England
regions, two offices in Scotland, in Glasgow and Edinburgh, and
offices in Wales and Northern Ireland. I was interested to see
that the most recent Lottery Monitor survey which polled large
numbers of our applicants concluded, "The good news for the
Lottery Boards is that all are now registering as average to very
good both for their efficiency and for the clarity of their written
material". We have made real efforts in terms of plain English
and in terms of accessibility and I think it is beginning to bear
some fruit where all four of us will co-operate in setting up
with NOF a joint hot-line and a joint web site in the early part
of next year, and I hope that will increase accessibility. Just
to give one example, the new grants programme up to £60,000
that we are launching from my Board in April of next year will
cut the application form down from 28 pages to 12 pages which
is a move in the right direction, and we will knock well over
a month off the processing time, so we are trying to refine our
products and be more customer friendly. It is true that for some
applicants it is a rather higher hurdle to leap over than for
others and we try and lay on helper sessions to make it less of
(Ms Case) The final point worth mentioning is the
success of the Awards for All scheme which is a joint Lottery
distributor scheme which has a very simple application pack and
a quick decision taking process and which the evaluation we have
had done suggests is bringing in a lot of first time applicants
who perhaps would not have thought of embarking on a Lottery application
under many of our main programmes.