New plan for Lottery cash

Who gets the Millennium Fund after 2001? Richard Halstead reports

WHAT will happen to the Lottery money now going to the Millennium Fund when the Millennium is over? The Government's Lottery White Paper, published two weeks ago, is strangely silent on the issue.

Conventional wisdom says that the money, which makes up one fifth of the "good causes" budget from the Lottery, will be redistributed to the other good cause funds when the Millennium Fund is wound up in 2001. It may also go towards the National Endowment for Science, Technology and the Arts (Nesta) and the New Opportunities Fund, ideas put forward in the White Paper by Culture Minister Chris Smith to finance special projects, the latter concerning itself with health and education projects.

Commentators have pointed out that such a fund could become a substitute for statutory government spending; fears have also been expressed about what happens to the pounds 300m a year allocated to Millennium celebrations once they are over.

The answer, according to plans drawn up by leading players in the charity sector, is to take the Government out of the loop altogether. Flemings, the merchant bank, and the charity trade magazine NGO Finance are working on a proposal that lottery cash currently earmarked for the Millennium celebrations should be directed into an independent "national endowment" fund.

Such a fund would be independent of the government, and would operate in much the same way as a charity, investing the Lottery donations in equities, paying out income either as one-off grants or as continuing support to projects. It would go much further than the planned Nesta fund in that it would be completely autonomous and it would not simply act as a distribution method for cash, rather a long-term charitable fund along the lines of the Wellcome Trust.

According to Richard Fitzalan Howard, head of charities at Fleming Investment Management and co-author of the plan, the fund would make Lottery cash go further and might help offset the income losses expected to be suffered by the charities sector when advance corporation tax exemption on charity dividends is phased out in 1999.

"Putting the Lottery money from the Millennium into such a vehicle is useful firstly because it makes good financial sense for long-term distribution of funds to good causes, and secondly because it will be independent of the politicians," Mr Fitzalan Howard said.

Daniel Phelan, the other co-author and editor of NGO Finance, questioned the wisdom of assuming that Lottery revenue would not be affected by the predicted increase in competition from other lotteries.

"No one can guarantee that revenue from the National Lottery will run at current levels forever, and yet no one is saving this money for a rainy day when the commitments will be as great but the revenue won't be there," Mr Phelan said.

The plan calculates that if the Lottery had started 15 years ago, and begun contributing to the National Endowment at that time (in 1982 money), the value of the fund today would top pounds 15bn, generating an annual income of pounds 495m. The authors say they will submit the plan to Mr Smith during the consultation phase of the White Paper.

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