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Not everyone's a winner, by Alex Klaushofer

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08 July 2005

Voluntary organisations hit the jackpot with the Lottery. But now they feel undermined by government 'raids' on its funds. Alex Klaushofer reports

The National Lottery Bill wending its way through Parliament might seem to deal with nothing more than a few technicalities, of interest only to those who actually work in the highly specialised world of lottery funding. The Bill formalises the merger of two now-defunct lottery funders, the New Opportunities Fund and the Community Fund, into the Big Lottery Fund, the super-distributor that has been blithely going about its business without legislative backing for the past year.

The Bill lays down the framework that will determine BLF's grant making – it is to distribute half the good-cause money, worth up to £700m a year – and the terms of its relationship with government.

But the National Lottery has aroused strong political passions since its foundation by the Conservatives in 1994. Concerns have included Camelot's suitability to hold the operating licence, due for a third renewal in 2009; the wisdom of spending £628m of lottery money on the Millennium Dome; and a prisoner's entitlement to his £7m win.

The Tories' sudden foray into the debate about lottery spending last month, when shadow culture secretary Theresa May accused the government of using the good-cause money as a 'stealth tax', is testimony to how far lottery spending has become part of a wider debate about the funding of public services, and the role of risk and innovation in public service reform.

The latest row was sparked by the award of up to £45m from BLF for a new School Food Trust charged with advising on ways to improve the quality of school meals. It centres on what constitutes additionality – the principle that states that lottery proceeds should fund only work that falls outside the purview of the state.

As the traditional recipient of lottery grants, the voluntary sector has long voiced discontent at what it sees as the erosion of additionality, pointing to such lottery-funded initiatives as healthy-living centres and the provision of MRI scanners in hospitals. They see the new award, following the sudden prominence in government policy of schoolchildren's nutrition following Jamie Oliver's intervention, as a clear breach of additionality. 'There are very few of my members who don't feel very angry about it,' says Stephen Bubb, chief executive of the Association of Chief Executives of Voluntary Organisations, who speaks for about 2,000 charities.

Citing correspondence from BLF chair Sir Clive Booth to Culture Secretary Tessa Jowell about how funder and government can work together to improve school meals, Bubb claims that the lottery distributor was responding to a request from government to give it a helping hand. 'Everyone knows that the government had to fill a funding gap,' he says.

BLF, however, sees the issue differently, arguing that the award is simply an extension of work it has been pursuing on its own initiative for some time. 'We've been trying to do something around school food in the round for four or five years,' says Vanessa Potter, BLF's director of policy and external relations. 'We're not going to do that kind of direct intervention in schools.'

As the debate about additionality has evolved in recent years, the divergence between the two sides has grown ever wider. Funders even have their own, alternative term to describe the coincidence of government and distributors' priorities: 'complementarity'.

In Northern Ireland, the voluntary sector feels particularly aggrieved by the extent to which it perceives lottery funding to have been hijacked by the statutory services. 'There are so many examples we feel like we're banging our heads against a brick wall,' says Neil Irwin, member services manager at the Northern Ireland Council for Voluntary Action. 'They see it as being additional, but to us it clearly isn't.'

He adds: 'Our issue isn't really with the fund; our argument is with government. They're not hearing what the sector's saying – there's such a difference between what they're saying and what we're saying.'

Irwin cites a New Opportunities Fund grant of £111,000 for a heart-failure nurse specialist at the Altnagelvin Hospitals Health and Social Services Trust, and the £4m-plus award from NOF to equip every public library in Northern Ireland with Internet facilities. These, he argues, are examples of lottery cash being used to shore up statutory services.

An e-mail leaked from the Department of Trade and Industry is, Irwin says, clear evidence of the government's attempt to influence the decisions made by lottery funders. In March, the director of the DTI's Energy Strategy Unit, Paul McIntyre, speculated about the possibility of BLF's Transformational Grants programme being used to fund a £50m extension of the gas network. 'Might it be worth seeing if we could slant the policy directions in a way that opened up this possibility, as in making a contribution to relief of poverty?' he wrote to a colleague.

Criticisms have also come from MPs. In the spring of 2004, a report on the National Lottery by the culture, media and sport select committee concluded that the principle of additionality was being eroded, characterising the allocation of £1.5 bn of lottery cash in the event of a successful London bid for the 2012 Olympics as 'a straightforward raid'.

But despite the volume and strength of the criticisms, the government is not owning up to any gap between the rhetoric and reality of its stance on the lottery. 'Lottery money is not government money,' declared Jowell when the National Lottery Bill was published last November. 'It belongs to the people of Britain who play the lottery.' A Department for Culture, Media and Sport official told Public Finance somewhat wearily: 'Additionality always has been, and always will be, a guiding force for the lottery; we will vigorously defend that.'

Ironically, the funders themselves are more open and pragmatic about how fuzzy the line between 'additional' and 'statutory' is. For example, the Heritage Lottery Fund's director, Carole Souter, concedes that sometimes the funder decides to support the restoration of a neglected building or park that was strictly speaking the responsibility of a statutory body. But, she adds, the grant applicants must demonstrate that their project will add extra value. 'Local authorities have a whole shopping list of things they are required to do, and limited resources to do them,' she says. HLF might give a local authority a leg-up in bringing a site back into public use, provided they sign up to a ten-year maintenance plan. 'If they are now prepared to look to the future, then let's give them a good basis,' Souter says. 'That's a win for everybody.'

Away from Whitehall, though, the voluntary sector is convinced that the golden age of lottery funding has now ended. 'I don't see lottery money as being generally available any more,' says George Hepburn, chief executive of the Community Foundation that serves Tyne & Wear and Northumberland. The situation, he says, contrasts sharply with the lottery's early years, when the region's community organisations were excitedly launching initiatives with grants from the Community Fund. 'I went to see five projects last week, and none was talking about lottery funding,' he says.

Bubb points out that this amounts to the loss of a huge proportion of the resources that have been funding charities' work in recent years. Some regions have been particularly hard hit. 'In the East of England, half of the funding for the sector comes from the lottery,' he says. 'That's what's at risk.'

Paradoxically, the knock-on effect of any shift in resources from the voluntary to the statutory sector might be the curtailment of the contribution that not-for-profit organisations, from their relatively independent position on the sidelines of public service delivery, make to reform. John Crossman, assistant chief executive of community learning charity ContinYou, sees the lottery's role as promoting the risk-taking and innovation that government, under pressure to deliver cost-efficient services in an age of close scrutiny, finds it hard to justify.

Out-of-hours schooling, now hailed as the Next Big Thing in education, started out as local pilots run by NOF with expert advice from ContinYou some five years ago. 'The Out of School Hours programme is a good example of something that is in the grey area between government and non-government provision, used by the lottery in an effective way but now becoming more mainstream,' says Crossman.

Lottery funders might also claim credit for the current push for better nutrition in schools: the National School Fruit Scheme, a Department of Health initiative that provides every child aged four to six with a free piece of fruit daily, originates from a £42m NOF regional pilot that was launched in 2001.

From this follows another major impact on the voluntary sector: a project that began its life thanks to lottery cash, but has made a successful transition to the mainstream, should cease to qualify for 'additional' funding. 'When something becomes mainstream, then it should change over and be paid for by mainstream funding,' says Campbell Robb, director of public policy at the National Council for Voluntary Organisations.

And therein lies the main difficulty besetting everyone involved in the debate about additionality – its shifting, fluid nature. 'You could get ten people in the room, and get 20 definitions of additionality,' says BLF's Potter. 'I've not seen a definition that I think would hold,' agrees Robb.

But despite the consensus between the funders and funded about the slipperiness of the term additionality, they are unlikely to stop bickering about it soon.

Irwin thinks that a definition of additionality drawn up by a range of people from the voluntary sector would lay the debate to rest. Campbell argues that the only solution would be a working definition of additionality that is constantly updated to take account of new practice.

The supporters of both proposals are dissatisfied with the catch-all definition of additionality adopted by BLF at the beginning of the year, which now forms one of its seven values. 'Our work', its statement runs, 'is additional to government, ensuring our funding is distinct from government and adds value.'

In the meantime, the voluntary sector's concern is firmly focused on the vexed question of BLF's relationship to government, as laid down in the National Lottery Bill. In some ways, the new legislation will give the super-distributor more freedom in grant-making than its predecessors: it will not contain the policy directions that guided NOF's health, education and environment programmes, set up to reflect government priorities. 'That's the big difference. It's a strategic relationship, rather than a relationship of programme delivery,' says Potter.

But charities detect a new threat to the lottery's independence in a clause of the Bill that gives the secretary of state the power to step in to veto a grant that is deemed inappropriate. With memories still fresh of the Daily Mail's campaign against the Community Fund after its 2002 £340,000 grant to the National Coalition of Anti-Deportation Campaigns, they fear that the new power will give the government the excuse it needs to cave in to political or media pressure about the merits of particular funding decisions. 'It's dangerous,' says Bubb. 'They weren't able to tell the Community Fund not to give grants to asylum seekers. Under the new Bill they will be able to.'

The Department for Culture, Media and Sport dismisses such concerns. 'It's a last-resort power to prevent lottery money being abused,' says a spokesman. 'The government is not going to be interfering in individual grants – that's just not going to happen.'

The BLF is in discussions with ITV about The People's Millions, an autumn TV programme that will enable viewers to vote for the most deserving charities to receive lottery awards of up to £50m. As the trend to justify decisions about lottery spending through public involvement gathers momentum, the voluntary sector might find that the threat to the lottery's cherished independence has taken yet another form.

PFjul2005

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