Some are more equal than others

For many "good causes", the benefits of Lottery grants have turned out to be uneven or short term, w

At its inception the Lottery was not universally welcomed. Apart from the gambling arguments, several early reports predicted dire consequences for charitable income as the public transferred its giving into Lottery spending. Several big charities explicitly blamed the Lottery for a decline in their voluntary income. Tenovus, a cancer charity, found its own lottery was wiped out by the introduction of scratchcards. The National Council for Voluntary Organisations produced a report saying that more than 5 per cent - nearly £300 million - of individual giving was being spent on the Lottery. As the Charities Board was at the time giving out £250 million a year, the Council argued that the Lottery represented a net loss to charity.

Over time, it turned out, the picture was more ambiguous. Many charities reported that their income was unaffected by the introduction of the Lottery. Nor is there evidence to suggest that committed givers (the most important group of donors) changed their patterns of charitable donation. And crucially, the Council's research, by concentrating on grant income from the Charities Board, conveniently ignored another £500 million or so coming from the other distribution boards.

The Lottery has been a significant net gain for charities. Indeed, it is clear that random forms of public giving, such as street collections, were in decline before the Lottery started. Also, the public are increasingly wary of charity fund-raising messages (they trust fund-raisers about as much as they do pension salesmen, apparently). It may well be that the public were so disenchanted with some of the techniques of charity fund-raisers that the Lottery provided a convenient excuse to protest, rather than a reason for irrevocably stopping giving.

Today, public giving seems to be back on the rise. Although individual voluntary organisations have clearly missed out, the net financial effect of the Lottery has been positive. Much new, imaginative and exciting work has begun with Lottery funding. Theatres and museums are being refurbished and revitalised; public parks are being restored and headlands conserved; community centres and village halls have new roofs and house new activities; advice and support services are springing up all over. And there's the Millennium Dome.

All this, supporters say, more than justifies John Major's claim that the Lottery would offer "benefits for all, irrespective of income". Yet there is still more than the odd dark cloud in the Lottery sky. In practice income and geography remain the key determinants of access to the Lottery's benefits. Some of the decisions of its distribution boards reflect, and have been a catalyst for, damaging trends in the funding of voluntary activity. Dare I say it, forces of conservatism have been in evidence.

It was clear at the outset that the government was expecting more than its 12 per cent tax return from the Lottery. John Major was particularly keen to announce sporting developments without, it seems, having to go to the trouble of filling out a Lottery application. New Labour's raid on Lottery funding is more substantial. By the end of 2000, one-third of all distribution money will go to the New Opportunities Fund (NOF), whose programmes are decided for it by the government. Not only has the government given it all the former Millennium Commission money, it has also deducted a further £50 million a year or so each from art, sport, charities and heritage boards to add to the NOF's already oversized pot.

This is symptomatic of the government's view of the role of voluntary organisations. New Labour talks about partnership with an independent voluntary sector. In practice, "partner" appears to mean "agent" and strategic funding is given, in the words of the government's Compact with the Voluntary Sector, to "ensure the continued capacity of voluntary and community organisations to respond to government initiatives". Voluntary organisations are seen as important deliverers of mainstream government services and policies. Government, through its existing tax slice and the NOF, will be taking more than half of all Lottery revenues after prizes and operating costs have been deducted. The Lottery is firmly in the grip of new Labour.

The government argues that NOF grants do not represent a shift in responsibility, that they are additional to what the government can be expected to provide (so the NOF pays for IT training for teachers and equipping NHS hospitals). The other distribution boards have resisted this rather phoney definition of additionality in their own grant allocations. But some have been complicit in helping shift the whole voluntary sector on to a damaging cycle of short-term, project-based funding.

Project funding has been the mantra of grant-givers throughout the 1990s. The idea behind it is twofold: first, the funder identifies a particular piece or aspect of work that it wants to fund; and second, it only funds the costs associated with that piece of work. This ensures a match between funder priority and the activities of the recipient organisation.

There is nothing wrong in principle with project funding. But the subtext tends to be that the funder only funds for the short term (usually up to three years), expects not to renew the funding at the end of the period and prefers to fund new, rather than existing work. It also creates arbitrary divisions within an organisation: the fund-raiser implies that the project is a discrete piece of work with its own objectives, management and outputs, when actually it is an indivisible part of the ongoing work of the organisation.

The Charities Board lives up (or down) to the worst excesses of project funding. Its mission "to help meet the needs of those at greatest disadvantage in society" is admirable; as a statement of intent, no other UK funder approaches this radicalism. And the Charities Board on one level determinedly pursues this mission.

Obviously you can't tackle the deep-seated problems in low-income communities in three years. Yet this is the maximum commitment the Charities Board will make at any one time and, when you apply, it expects you to show how the work will be funded after its grant runs out. In other words, the medium and long term is not the Charities Board's problem. Someone else should take it on; some other funding mechanism should emerge.

So charities wander from funder to funder, repackaging old work as though it were new, promising financial sustainability and tangible benefits within an impossibly short period of time. Is this semi-fiction really the best way of developing and delivering social care? And why, if medium-term financial independence is such a key part of the application, do so many charities find themselves going back to the Charities Board after three years, asking for what is continuation funding by another name?

NOF presents a similar problem: 90 per cent of its first round of grants for out-of-school-hours childcare included salary costs. And how long were the grants given for? One year! There are provisions for longer-term support, but the guidelines state that most places should be self-sustaining within one year "through a combination of government and other funding and parental contributions".

Clearly there is a need for accountability, transparency and fiscal discipline. However, such expectations of instant success are unreasonable. It is unfair both to service providers and service users to perpetuate such uncertainty of provision. And how does this square with targeting low-income communities where additional resources are, by definition, scarce?

"Benefits for all, irrespective of income" would also imply access to facilities for all parts of the community and an even geographical spread of grants. Three of the distribution boards - art, sport and heritage - have been dominated by capital, rather than revenue-funding programmes. But if the funder is given a one-off grant for building work, how will the building and the expanded activities it houses be paid for in the future? For many sports, arts and heritage facilities the reality is that they will be underpinned to an ever-increasing extent by the paying customer.

Sixty per cent of major capital awards by the Lottery have gone to projects that would be routinely charging for entry or use. Some will offer discounts (say, for unemployed people), but many will not. Such a policy militates against people on low incomes who cannot easily afford full access charges.

The geographical distribution of grants also remains uneven, with London continuing its huge and indefensible dominance. But even away from London there are significant disparities. For example, the North-east of England has received twice as much as the East Midlands.

The actions required by the National Lottery Act 1998 and the resulting "directions" may redress the current imbalances. The act's main aim was to authorise the government's takeover of Lottery money for its own programmes. But it also gave the distribution boards powers to be more active grant-makers and required them to meet new "policy directions".

Distributors should now ensure that "all parts of the UK have access to funding", that they take into account the scope for reducing economic and social deprivation and the need to ensure access to Lottery-funded projects "for people from all sections of society". Partnership funding requirements were also relaxed.

Some of this is a step forward, notably the more active grant-making possibilities and need for access going beyond the previous (and welcome) emphasis on physical access to include economic access. However, "access" to all parts of the UK is a retreat from the earlier new Labour promise to require distributors to achieve a fair distribution to all parts of the country.

The directions should have gone further. For example, they could require localised budgets to be set, surely the most obvious way not only of combating inequality but also of building local support for independent Lottery distribution. They could ensure that grants for projects that charge entry or usage fees include provision for those otherwise unable to pay (by endowments if necessary). If the latter is impractical, they could require an equivalent amount to be spent on projects with free public access. Being open to all in theory doesn't mean being accessible by all in practice.

Mike Eastwood is the director of the Directory of Social Change