Lottery cash reserves slammed

National Lottery managers have been criticised by a parliamentary committee for failing to distribute Lottery funds to good causes. The House of Commons Public Accounts Committee, which examined the stockpiling of Lottery cash reserves and delays in distributing it, has reported that the situation has improved since 1999 when the balance in the National Lottery Distribution Fund reached a peak of £3.7bn. However, distributors have still failed to meet a Government-imposed target of halving Lottery reserves.

The National Lottery Distribution Fund holds Lottery monies until they are required by the individual distributors to make grant payments. While there is an inevitable delay between the award of Lottery funding and the actual payment of the money, the report criticises funders for not allocating cash against anticipated future income. In the early years of the Lottery, distributors built up cash reserves, and in 2002 Culture Secretary Tessa Jowell made a commitment to halve the balances by 2004. By March 2004 balances had dropped by 24% to £2.7bn and in May this year they stood at £2.4bn. Edward Leigh, the Committee’s Chair said, “Lottery money is for funding worthy community projects, not sitting in a bank account doing nothing. There is no shortage of high-quality projects to fund but the enormous sum of £2.4bn was stuck in limbo in May of this year – in part because the distributors are too timid to apply their own policies for committing funds.”

The report also highlighted problems in the management of Lottery funds, with the individual distributors taking more money than they need out of the central fund and thus reducing the total amount of interest earned on the reserves. Describing distributors as “risk-averse,” the report says: “Distributors should not keep money in the Distribution Fund just in case it is needed for as yet unidentified future projects when they already have applications worthy of funding and when their balances are constantly being replenished as Lottery tickets continue to be sold.” It acknowledges that there has been uncertainty about future Lottery income and recommends that the Department for Culture, Media and Sport should “provide regular and reliable projections of Lottery income, which incorporate up-to-date assessments of the effect of the funding arrangements for the Olympics in London in 2012”.

No distributor entirely escapes criticism in the report. As of May 2005, Arts Council England had reserves of £175m, the Scottish Arts Council and the Arts Council of Northern Ireland both had reserves of over £30m, while the Arts Council of Wales was holding £19m. The Heritage Lottery Fund and the New Opportunities Fund, which between them had reserves of £1.5bn, are singled out for particular criticism. The Big Lottery Fund, which was formed from the merger of the New Opportunities Fund and the Community Fund earlier this year, issued a statement acknowledging its caution in distributing Lottery funds: “…we have to be reasonably cautious about the level of over-commitment… [but] we anticipate further reductions by the end of this financial year.”