£3.6bn of lottery money is sitting in the bank

A review of the National Lottery was announced by the Government yesterday after the disclosure that the bodies responsible for distributing money to good causes were sitting on £3.6bn.

Tessa Jowell, the Secretary of State for Culture, said in the House of Commons that an overhaul of the system was needed to ensure that money raised from ticket sales went where it was needed. She said a consultation paper, which will be published before the summer, would also look at the award of the Lottery licence after the fiasco surrounding the bidding process in 2000.

Announcing the review, Ms Jowell said although the Lottery had been a "resounding success" since its launch, reform of balances, licensing and regulation was needed. She accepted that difficulties with the £3.6bn distribution fund balances meant money was not going to deserving community projects and charities desperate for cash.

The unspent money, which amounts to a third of total Lottery income, is in a bank account earning £140m a year in tax-free interest. The biggest non-spenders last month were the National Heritage Memorial Fund, with nearly £1bn unspent, and the New Opportunities Fund, with £789m.

"It's clear that the high level of funds currently held in the National Lottery distribution fund is, and should be, a cause of public concern. People ask why good applications are rejected while money appears to languish unspent," Ms Jowell said. "There are things that could be done to speed up the flow of Lottery funds ... I do not consider it right that money should be sitting unspent while parts of the country are losing out of lottery funding."

Anne McIntosh, the Tory Lottery spokeswoman, and Nick Harvey, her Liberal Democrat counterpart, both attacked the "scandal" of the unspent cash.

Ms Jowell also said it was "timely" to review the licensing framework of the Lottery. Her move follows criticism of the handling of the last licence award, when the National Lottery Commission overturned its own previous decision in favour of the People's Lottery, after Camelot succeeded in getting the previous ruling declared illegal in the High Court.

Under current law, the commission is not required to stage an open competition. The commission has itself called for stricter regulations to prevent similar chaos in future.