The reform of National Lottery licensing and distribution

Memorandum of evidence for House of Commons Culture, Media and Sport Committee
1. Background

1.1 The Museums Association is an independent organisation representing museums and galleries and people who work for them.

The Association has over 4,500 individual members and 600 institutional members. These institutional members encompass around 1500 museums in the UK ranging from the largest national museums to small volunteer-run independent museums.

The Museums Association is a democratic organisation; its governing Council is elected by the membership. It was founded in 1889 and is a registered charity. It receives no regular government funding.

1.2 The MA welcomes the opportunity to submit evidence to this inquiry. Museums in the UK have received over £750m in funding from the Heritage Lottery Fund (HLF) since the National Lottery began distributing funds in 1994. (To put it in context, £750m is the approximate value of public investment in revenue funding for the museum sector as a whole each year in the UK.)

Museums have also secured funding from the New Opportunities Fund and the Millennium Commission. The National Lottery has begun to transform the UK's museums, improving displays and upgrading buildings, as well as adding to museum collections, for everyone's enjoyment. But there is still much to do and, of course, revenue issues have arisen.

1.3 The Museums Association's comments in this submission are limited to a relatively narrow area of the committee's inquiry. We do not wish to comment on the administration and regulation of the National Lottery itself. We do, however, have some specific comments on the changes to the distribution of good causes income.

2. The pattern of distribution of lottery awards: does the existing pattern of Lottery awards represent a fair and equitable investment in the quality of life across the UK and across society?

2.1 Museums reach wide audiences, arguably wider than many other forms of heritage and culture. Recent research found that just over a third of people from ethnic minority groups had visited a museum or art gallery in the last year, only slightly lower than the figure for the population as a whole.

Over a fifth of people in the two lowest socio-economic groups visit a museum or gallery every year, compared to under 5% of people from the same groups who attend a classical music event, for example. Museums are dispersed across the UK: there are significant museums and galleries beyond the UK's capital cities and major urban centres.

Hundreds of village museums, often volunteer-run, contribute to a sense of identity in communities throughout the UK. Museums also reach out far beyond their walls through their education activities, web sites, research, public art and touring their collections.

Providing funding for museums and galleries has the potential to help to ensure a wider distribution of the benefits of the National Lottery across the UK and across society.

2.2 That said, Lottery funding for museums has certainly so far been weighted in favour of London. Although this is understandable to some degree, given the concentration of major museums in London, the Museums Association would like to see funding spread more evenly throughout the UK.

In England, the regional museum hubs being established as part of the Renaissance in the Regions initiative will offer a useful focus for investment.

Investment from HLF will be an essential addition to the government's new revenue funding, to ensure that the museums in the hubs will be able to renew their displays and facilities.

2.3 However, while greater equity in distribution at a regional level is desirable, equity at a more local level is neither desirable nor achievable.

It would simply not be practical to seek to ensure that all wards or constituencies, for example, received a similar level of lottery funding for museums or any other type of heritage, given the pattern of distribution of museums and collections across the country.

Although there is scope for the Lottery to fund some new museums and galleries, the majority of funding for museums will best be targeted at improving existing facilities. Funding distribution therefore has to be responsive to the current distribution of museums.

A constituency with a small museum cannot be expected to receive the same level of funding as one containing a very large museum. Moreover, museums and galleries serve audiences from outside their immediate local area: one survey found that over 40% of visitors to larger local authority museums were from outside the local authority boundaries.

We would caution against new methods of funding distribution which took a narrow or simplistic approach to ensuring a fairer regional distribution of funding.

2.4 Furthermore, the priorities of distributors like the Heritage Lottery Fund which seek to preserve and enhance the nation's cultural and artistic assets, so that they can be enjoyed by more people, will inevitably be different from those which seek to benefit communities more directly.

It is reasonable that grants for community events should be equitably distributed across the UK, or concentrated in areas of greatest socio-economic need. It is not reasonable that funding for museums and galleries should be driven by a geographical imperative.

The Heritage Lottery Fund has a duty to help preserve and provide access to the most important parts of our cultural heritage wherever they are found. And people can and do travel to visit museums and other kinds of cultural heritage.

3. Development: is enough done to assist communities that potentially merit Lottery funds to develop proposals, etc?

3.1 HLF has gone to considerable effort to improve the support and advice it gives to applicants. We consider HLF's work in this area to be a model of good practice.

3.2 However, it is clearly the case that there remains a good deal of misunderstanding among potential applicants about the way that lottery funding is distributed. For example, we have heard anecdotally that a lot of small organisations considering applying to HLF believe, erroneously, that they will only get "one shot"; this leads them to put off applying for small grants, so as not to compromise a potential future major application.

More active work needs to be done with potential applicants at an earlier stage to overcome this and similar misconceptions.

4. General: the additionality principle

4.1 We believe that the additionality principle remains under threat. The government seems to favour the New Opportunities Fund, with its explicit link to government policy objectives.

The other distributors also appear under pressure to conform to a government agenda in some respects: for example, emphasising learning and access above preservation.

4.2 We are concerned that this bias towards certain policy imperatives is gradually undermining the position of other distributors. For example, the proposal to change the way that interest on balances in the National Lottery Distribution Fund (NLDF) are allocated will have an unfair adverse impact on HLF.

4.3 HLF has a higher level of balances in NLDF than other distributors. We do not believe that this is an indication of inefficiency or excessive caution on HLF's part. HLF funds more capital projects than the other distributors. Those projects are typically more complicated and subject to more constraints than those in other sectors.

The redevelopment at Stonehenge is just one of example of the kind of complex and ambitious projects undertaken by HLF: years in the planning, highly contentious and demanding careful measures to protect the integrity of this highly significant site.

4.4 The government's decision document implies that for the distributors to hold funds in the NLDF is a waste of public money, a dereliction of the distributors' duty to get the money out into the community. But balances held in the NLDF are not "dead". Clearly, they earn interest, which is ploughed back into good causes. But more significantly, money in the NLDF is money which is already hard at work.

In many cases, match-funding can only be unlocked when there is a firm commitment to funding by a lottery distributor. All the money held in the NLDF by HLF is committed to projects; and HLF is in fact over-committed by almost 10%.

4.5 The decision document argues that paying interest to individual distributors on their balances in the NLDF provides a perverse incentive to maintain high balances. We believe that there are practical reasons why HLF's balance in the NLDF is so high.

If HLF loses the interest on its balance, it is being punished for a perceived inefficiency; but we believe that DCMS has not proven the case against HLF and has not convincingly demonstrated that maintaining high balances is a sign of inefficiency.

We do not see how HLF can operate and continue to fund large capital projects without maintaining large balances. We would be in favour of an independent review of this issue - perhaps by the National Audit Office - before any changes are instituted.

4.6 Although we understand that DCMS has no immediate plans to claw back balances in the NLDF, we are very concerned that this remains a possibility.

If DCMS took away any part of HLF's balance, HLF would then have to dishonour commitments that have already been made. This would lead to a waste of public funds: most HLF-funded projects receive some other form of public funding in match funding, and most have had public investment in the form of staff time and external consultancy to get to the stage of making a successful bid.

More worrying still would be the loss of confidence, which could make it very hard to persuade other funders to invest in projects seeking HLF backing.

4.7 The introduction of a new Olympic Lottery game would also have an impact on the amount of money available for good causes. The Museums Association does not oppose the introduction of a new game: hosting the Olympics undoubtedly offers great benefits to the UK and museums and other parts of the heritage could also benefit from investment as part of the games.

However, the Museums Association notes that the Horseracing and Olympics bill contains a clause allowing the Secretary of State to raid the NLDF to bail out the Olympic distributor in "exceptional circumstances".

The Secretary of State would also have the power to specify what proportions of any emergency funding should come from each good cause area. We are concerned that, in a worst case scenario, this could eventually lead to heritage suffering disproportionately. We hope that the Committee will seek clarification of the government's intentions on this point.

4.8 A review of the share of good causes income allocated to each of the distributors is planned for 2009, when Camelot's current licence comes to an end. In the event of a successful Olympic bid, any shortfall in funding for the games would be met by redistribution of the good causes income.

Even if an adjustment in favour of the Olympics is not necessary, the government has indicated that the proportions allocated to each distributor may be altered, new good causes added, or existing good causes taken away.

We are concerned that this may lead to a further erosion of additionality, as well as a possibility that heritage may cease to benefit from the Lottery. We urge the Committee to maintain a "watching brief" in this area.

For further information, please contact:

Helen Wilkinson
Museums Association
24 Calvin St
E1 6NW
Tel: 020 7426 6950