The impact of Lottery funding

6. Under the National Lottery etc Act 1993, responsibility for the distribution of heritage Lottery money was allocated to the National Heritage Memorial Fund, a body established by statute in 1980 to provide financial assistance for the acquisition, preservation and maintenance of items of outstanding importance to the national heritage.[4] The National Heritage Memorial Fund was not a systematic grant-giving body in the manner of the Sports Council or the Arts Council. Additionally, of the five original "good causes" intended to benefit from proceeds of the National Lottery—arts, sport, charities, the celebration of the millennium and the heritage—the last of these is one of the broadest. The Heritage Lottery Fund has adopted an inclusive approach to the heritage, stating that:

"A definition of heritage might ... be considered to include that which has survived because every age has found it remarkable, beautiful or important; that which has survived because it was central to the lives of former generations; and that which has survived by accident and will not survive much longer without care or protection".[5]

The Fund has supported projects reflecting this inclusive definition—from works of art to urban parks, from museums to wildlife reserves, from archives to churches. This approach to the cultural, built and natural heritage has helped to broaden understanding of what constitutes our heritage.

7. Since 1995 the Heritage Lottery Fund has committed over £1 billion to projects across the United Kingdom.[6] Much of that money is for projects which have yet to be completed. Consequently, it is too early to reach a definitive judgement on the Fund's impact.[7] Nevertheless, Mr Howarth thought that there was no question that the Fund "has had an enormous impact across virtually every sector of the heritage, on museums, on historic buildings, urban parks, nature conservation and much else".[8] This positive assessment was borne out partly by evidence from particular sectors.

8. The largest beneficiaries of Heritage Lottery funding to date have been museums, galleries and collections.[9] The Museums and Galleries Commission believed that the Fund had rescued the sector from what amounted to a "severe crisis" in the early 1990s, enabling a "transformation" of museums which had been "under-capitalised" in a highly competitive leisure market.[10] Dr Alan Borg, Director of the Victoria and Albert Museum and Chairman of the Conference of Directors, National Museums and Galleries, told us that the Fund had "made an extraordinary difference to museums in this country".[11] Mr Neil MacGregor, Director of the National Gallery, added that the Fund's support for acquisitions had helped to save great works of art which might otherwise have been lost to the nation.[12]

9. The Heritage Lottery Fund's impact on other sectors was also widely praised. Its effect on the built heritage was described as "highly beneficial" by English Heritage and its creation was viewed by the Ancient Monuments Society as "the single most important development since the War in the field of architectural conservation".[13] The Fund has provided significant new investment in the countryside and natural heritage.[14] According to the Garden History Society, the Fund's work on urban parks "has been of far-reaching benefit, not just to historic parks and gardens, but to the urban environment and the lives of millions living in towns and cities".[15]

10. The Heritage Lottery Fund has already had a considerable, positive impact. As well as the Fund itself, this is a tribute to those whose efforts led to the creation of a National Lottery, most notably the last Prime Minister. The Lottery has already made over £1 billion available to the heritage.

Future needs and heritage strategy

11. The Heritage Lottery Fund's investment to date represents only a beginning. According to Dr Eric Anderson, Chairman of the Fund and of its parent body, the National Heritage Memorial Fund, "the money available has not satisfied a need but actually revealed a need". There was "a huge, huge field out there of things that have still to be done".[16] This can be illustrated in part by a growing number of applications from organisations increasingly aware of the work of the Heritage Lottery Fund. Approximately 52 per cent of the applications which have been fully assessed and a decision reached have been supported. However, the Fund estimated that it was now four times over-subscribed.[17] This has affected certain areas particularly. For example, the Places of Worship Scheme, run in conjunction with English Heritage, has a joint annual budget of £20 million, but has attracted applications with a total project cost of £222 million.[18]

12. Moreover, the level of applications made to the Fund is not a wholly reliable indicator of need and may well under-state it. There are a number of reasons why potentially eligible projects may not be the subject of an application, some of which are examined in this Report. We received evidence of considerable need in areas already substantially supported by the Fund. Although capital projects from museums and galleries have been a principal beneficiary of the Fund, the Museums and Galleries Commission was aware of applications in the pipeline valued at over £600 million, which alone is equivalent to more than the total planned programme expenditure of the Fund for 1999-2000 and 2000-01 combined.[19] The Wildlife Trusts produced an estimate of natural heritage needs of comparable scale and considered that the Fund's commitment to the sector so far was "still only scratching the surface".[20] English Heritage's Buildings at Risk Survey, which that organisation hoped the Fund would use as a guide-line in future policy, identified a funding requirement of £150 million for Grade I and Grade II* listed buildings alone, which constitute only 5 per cent of all listed buildings.[21] The Heritage Lottery Fund has supported just over 200 urban parks, but the Institute of Leisure and Amenity Management estimated that there might be at least 5,000 urban parks in Britain, of which about half might be eligible for grants in terms of heritage importance.[22]

13. These examples relate largely to areas already supported by the Heritage Lottery Fund. The field of potential applicants increased vastly when the National Heritage Act 1997 came into force in March 1998. This Act removed the requirement for applicants to be the owners of heritage assets and extended eligibility to private owners; about two-thirds of the built heritage of England, for example, is said to be in private ownership.[23] These changes were recommended by our predecessor, the National Heritage Committee.[24] The heritage is extraordinarily diverse, and a memorandum from Save Britain's Heritage highlights a number of areas of potential heritage need which have scarcely begun to benefit from the Heritage Lottery Fund.[25] The Government has recently indicated its intention to investigate whether the Fund's statutory remit ought to be extended yet further to enable it to fund projects relating to the "literary heritage".[26]

14. By its own admission, the Heritage Lottery Fund, at its inception, had no complete overview of the needs of the sector and no clear definition of how far those needs were being met from other sources of revenue.[27] This should now be changing. Under the National Lottery Act 1998, the Fund is required to prepare a Strategic Plan including an assessment of the needs with which it has power to deal and its priorities in tackling those needs.[28] The Fund published a first draft of its Strategic Plan in October 1998 to enable consultation before completion this Spring. It includes a provisional assessment of need.[29]

15. A patchy picture emerges from this provisional assessment of need and from relevant evidence which we have received. To a considerable extent, the Heritage Lottery Fund is the victim of a long inheritance of a piecemeal and incomplete approach to the audit of our heritage and its needs. The Museums and Galleries Commission, together with the Area Museums Councils, does not expect to have prepared a comprehensive list of collections until 2001.[30] Sir Jocelyn Stevens, Chairman of English Heritage, told us that when he took up that post six years ago, there was no register of listed buildings. A condition survey of Grade I and Grade II* listed buildings has only just been completed.[31] Moreover, as the Heritage Lottery Fund itself noted, many surveys of need are based on the "listing" principle, which identifies key assets, but falls well short of a comprehensive map of heritage.[32]

16. In the field of the industrial, transport and maritime heritage, to take one example, the Fund has supported surveys of piers, ships and canals.[33] But, according to the Transport Trust, little or no co-ordinated action has been taken with regard to some transport categories.[34] Save Britain's Heritage argued similarly that little has been done to identify parts of the industrial heritage in need of support.[35]

17. There is a danger that study of a sector can become a substitute for action. In our Report last Session on the preservation of historic ships, we expressed concern that the preparation of a register of historic ships as a basis for identifying a national core collection might have had the effect of "encouraging inertia amongst the public bodies which are responsible for funding ship preservation", most notably the Heritage Lottery Fund.[36] The Inland Waterways Association was similarly concerned at the apparent decision of the Fund to impose a moratorium on the funding of canal restoration projects pending completion of a survey conducted for wider purposes which, the Association maintained, might be of only limited use to the Fund.[37] The National Museum of Labour History believed that the Fund's requirement for a national survey of historic banners would add little to existing knowledge and might further delay financial provision for collective endeavour to preserve such banners.[38]

18. The Local Government Association argued in evidence that a full audit of heritage needs was required, a call echoed by Yorkshire and Humberside Museums Council.[39] The Heritage Lottery Fund acknowledged the absence of a comprehensive needs assessment of the heritage and the role which the Fund could play as a catalyst in such a development, but believed that the Fund alone could not produce such an assessment.[40] The Fund is advised by and works with 24 statutory agencies, as well as a whole host of charitable and voluntary bodies.[41] It works within a policy and public funding framework established by Government. Preparation of a comprehensive audit of the heritage sector and its needs should be a high priority, but it is a responsibility of all relevant statutory agencies, as well as voluntary bodies and local government, not just the Heritage Lottery Fund.

19. The Institute of Leisure and Amenity Management questioned whether a national heritage strategy for England could be said to exist; it had approached the Secretary of State for Culture, Media and Sport about the preparation of such a strategy.[42] With regard to the sector with which it was concerned, the Museums Association also felt that there was "a lack of a detailed strategic national overview", a failing for which it considered the Department for Culture, Media and Sport principally responsible.[43] Similar views were expressed by the Association of Independent Museums, which considered that the Heritage Lottery Fund had "found itself in a position to establish national policy by default".[44]

20. Mr Howarth rejected the suggestion that the Department lacked a strategy for the heritage:

"We certainly have a strategy for the heritage. Our strategy is that it should be protected and enhanced, that it should be well presented, there should be good access to it and that the educational opportunities that the heritage provides should increasingly be taken advantage of. So of course we have a strategy."[45]

These laudable but imprecise aims are reflected in the policy directions given to the Heritage Lottery Fund by the Government.[46] The Minister's statement describes the objectives of a strategy rather than the content of a strategy, but the desired content of a wider strategy goes beyond the scope of this inquiry. Nevertheless, the Heritage Lottery Fund is better placed than any other non-departmental public body to contribute to the delineation of a new strategy for the heritage sector because of its singular scale of funding and its involvement across different sectors of the heritage.[47] The content of the Strategic Plan which the Fund is now preparing will do much to determine not only its own success in future, but also the wider development of public support for heritage in this country. We recommend that the Government should now accept its central role as formulator of a national heritage strategy.

The Heritage Lottery Fund's income

21. Clarity about the strategy and priorities of the Heritage Lottery Fund is of especial importance at a time when its income is subject to new limitations. The Fund was originally conceived to receive one fifth of the National Lottery Distribution Fund.[48] Following the enactment of the National Lottery Act 1998 and the establishment of the New Opportunities Fund, the Heritage Lottery Fund's share has fallen to one sixth. The Government has pointed out that, in cash terms, the total received by the Heritage Lottery Fund over the period up to 2001 will be at least in line with the original forecast of income when the National Lottery started of £1.8 billion.[49] Nevertheless, the Fund's income from 1998 to 2001 could be significantly lower than it expected during its first years of operation and this could have a consequent potential impact on some of the projects currently under preparation or consideration.

22. In July 1998 Dr Anderson told us that the Fund wished to see the National Lottery Distribution Fund redistributed equally between the five remaining good causes when the Millennium Commission ceased to be funded.[50] This call was echoed by the Local Government Association, the Countryside Commission, Scottish Natural Heritage and the Countryside Council for Wales.[51] The Government subsequently announced that the additional income would all be given to the New Opportunities Fund, although it guaranteed that the Heritage Lottery Fund and the other original good causes would each receive one sixth of the Distribution Fund after 2001.[52]

23. The Government has subsequently announced that additional Lottery income now forecast during the current licence period will also be distributed unevenly. Of a total additional sum of £600 million, £400 million will be allocated to the New Opportunities Fund; the heritage, sports, arts and charities will each receive £50 million. In consequence, the proportion of the National Lottery Distribution Fund provided to the Heritage Lottery Fund will fall below one sixth between now and 2001.[53] On 20 January 1999, the Government laid before Parliament a draft Order to provide that, from 15 February to 16 May 1999, only five per cent of the National Lottery Distribution Fund will be allocated to the heritage (along with the same proportion to three of the other original good causes), while 60 per cent will be allocated to the New Opportunities Fund. The Heritage Lottery Fund will receive one sixth of the money allocated thereafter.[54]

Non-Lottery funding of the heritage and "additionality"

24. The value of the Heritage Lottery Fund's contribution to the heritage as a whole is dependent on the continuation of support for the heritage from other public funds, most notably grant-in-aid to the many other public bodies in the sector. As the National Heritage Committee noted, "It is a fundamental principle of the National Lottery that the money raised is for additional projects and none of it should be used as a substitute for ordinary government expenditure".[55] Both the past and present Governments have reaffirmed their commitment to this principle, sometimes termed "additionality", in public statements. Mr Howarth told us that the Government stood firmly to the principle that Lottery funding "should not supplant existing public expenditure and that Lottery funding should only support initiatives which are additional to programmes funded from taxation".[56] The Government has also stated that "there is ... no evidence of which the Government is aware to support any conclusion that the availability of Lottery funding has had any direct effect on decisions about Exchequer funding".[57]

25. Evidence about the inner workings of the Treasury and the public expenditure round is rarely forthcoming. In its absence, we rely upon evidence we received in public. The picture emerging was mixed, which is unsurprising given the wide variety of grant-aided public bodies operating in fields in which the Heritage Lottery Fund has an interest. Baroness Young of Old Scone, Chairman of English Nature, had "no concerns about our grant-in-aid being reduced as a result" of Lottery funding, not least because English Nature's budget had been increased.[58] Central and local government support for museums, and capital support in particular, has declined in recent years, but Mr Timothy Mason, Director of the Museums and Galleries Commission, did not consider that this decline could be attributed to the arrival of Lottery funding.[59]

26. Others gave a less sanguine assessment. Dr Borg felt that the Lottery had encouraged a perception of the museums sector as a rich sector which in turn had had the effect "if not of decreasing then stopping any increase in central government funding".[60] Sir Jocelyn Stevens did not believe it was a coincidence that English Heritage's funding had declined since the Heritage Lottery Fund had come into being, although he questioned whether the concept of "additionality" was anyway sustainable in relation to the built heritage.[61]

27. The principle of "additionality" has been tested most sorely in the heritage sector by the funding of the National Heritage Memorial Fund, which is governed by the same Trustees as the Heritage Lottery Fund. Since the inception of the National Lottery, the National Heritage Memorial Fund's grant-in-aid has fallen from £12 million to just £2 million in 1998-99.[62] The reduction from £5 million in 1997-98 to the new low for the following year was explained by the Department for Culture, Media and Sport, somewhat ominously, with direct reference to the fact that the Fund had "Lottery funds also at its disposal".[63]

28. The National Heritage Memorial Fund has a distinct role as a memorial to those who gave their lives for their country in two World Wars and has a particular importance in relation to acquisitions.[64] The National Trust was concerned that the scale of reductions would prevent the Memorial Fund from carrying out its separate role, independent of Government and free of some of the obligations associated with Lottery funding.[65] The Victoria and Albert Museum raised the possibility of the Memorial Fund being separated from the Lottery Fund in terms of governance to prevent the former being subsumed by the latter.[66]

29. In July, 1998 the Government stated that it recognised the importance of the National Heritage Memorial Fund as a separate body able to deal with particular occasional acquisitions of heritage importance and had "therefore decided to make good the reduction over the next three years".[67] In December, it announced that the allocations to the Memorial Fund for the years 1999-2000 to 2001-02 would be £2.5 million, £3.5 million and £5 million respectively.[68] This means that the reduction in 1998-99 will be "made good" only in 2001-02 and then only in cash terms. Earlier reductions since the creation of the National Lottery will not be made good in the foreseeable future.

30. No assessment of whether the principle of "additionality" is being fully adhered to can be clear-cut, and its application is particularly opaque in the diverse heritage sector. A fundamental factor in determining the extent of the positive impact of the Heritage Lottery Fund is the success of the Department for Culture, Media and Sport in ensuring that the grant-in-aid for other heritage bodies is not reduced in consequence of the availability of Lottery money. This is a matter about which this Committee will remain vigilant, not least to seek to ensure that the recent experience of the National Heritage Memorial Fund is not repeated and that the belated upward trend in that body's grant-in-aid is maintained in future settlements.

5  Towards a Strategic Plan for the Heritage, Heritage Lottery Fund, October 1998, p 5. Back

6  Evidence, pp 2, 136. Back

7  Evidence, pp 11, 38. For information on projects nearing completion, see www.hlf.org.uk/newsz.htm. Back

8  Q 412. Back

9  Evidence, p 2. Back

10  Evidence, p 27; QQ 60, 84. See also Evidence, p 179. Back

11  Q 153. Back

12  Q 157. Back

13  Evidence, p 59; Memorandum from the Ancient Monuments Society, p 1. Back

14  Evidence, pp 94, 106; Q 388; Memorandum from the Woodland Trust, para 4. Back

15  Evidence, p 215. Back

16  Q 41. Back

17  Evidence, pp 152, 148. Back

18  Evidence, pp 6, 60. Back

19  Q 60; Evidence, pp 27-28, 46; Towards a Strategic Plan, p 28. Back

20  Evidence, pp 128-129 ; Q 388. Back

21  Q 234; Evidence, p 60. Back

22  QQ 415, 296; Towards a Strategic Plan, p 44. Back

23  Evidence, pp 6, 57,137. Back

24  Second Report from the National Heritage Committee, The National Lottery, HC (1995-96) 240-I, para 99. Back

25  Evidence, pp 233-237. Back

26  A New Cultural Framework, Department for Culture, Media and Sport, December 1998, unpaginated, supra Libraries and Archives. Back

27  Evidence, p 6. Back

28  Evidence, p 138. Back

29  Evidence, p 148; Towards a Strategic Plan, pp 39-48. Back

30  Q 97. Back

31  Q 234. Back

32  Towards a Strategic Plan, p 14. Back

33  Ibid, p 42. Back

34  Evidence, p 239. Back

35  Evidence, p 235. Back

36  Third Report from the Culture, Media and Sport Committee, The Preservation of Historic Ships: The Case of HMS Cavalier, HC (1997-98) 561, para 37. Back

37  Evidence, pp 218- 219. Back

38  Memorandum from the National Museum of Labour History. Back

39  Evidence, pp 72, 203. Back

40  Towards a Strategic Plan, pp 13, 15. Back

41  Evidence, p 24. Back

42  Evidence, p 81; Q 295. Back

43  QQ 114, 120, 121. Back

44  Evidence, p 210. Back

45  Q 435. Back

46  Evidence, p 137. Back

47  Evidence, p 147. Back

48  HC (1995-96) 240-I, para 65. Back

49  Evidence, p 138. Back

50  Q 42. Back

51  Evidence, pp 75, 95, 107, 120. Back

52  HC Deb, 19 October 1998, col 919w. Back

53  QQ 423-429; Evidence, pp 146-147. Back

54  Draft Apportionment of Money in the National Lottery Distribution Fund Order 1999. Back

55  HC (1995-96) 240-I, para 72. Back

56  Q 412. Back

57  Fourth Special Report from the Culture, Media and Sport Committee, Objectives and Performance of the Department for Culture, Media and Sport: Government Response to the Fifth Report from the Committee, Session 1997-98, HC (1997-98) 1079, p viii. Back

58  Q 341. Back

59  Q 71. Back

60  Q 164. Back

61  QQ 223-224. Back

62  Evidence, p 11; Department for Culture, Media and Sport Annual Report 1998: The Government's Expenditure Plans 1998-99, April 1998, Cm 3911, p 112. Back

63  Fifth Report from the Culture, Media and Sport Committee, Objectives and Performance of the Department for Culture, Media and Sport, HC (1997-98) 742, p 3. Back

64  Evidence, p 11. Back

65  Evidence, p 223. Back

66  Evidence, p 232. Back

67  HC (1997-98) 1079, p vii. Back

68  A New Cultural Framework, Financial Tables. Back