News in focus: Is the lottery's pioneering spirit about to fade away?

As the National Lottery celebrates its 10th anniversary, the draft Lottery Bill is threatening to spoil the party. Mathew Little looks at some of the implications for the more marginalised fund applicants.

The voluntary sector has a naturally sceptical turn of mind. When the first balls were drawn in the UK's new National Lottery in November 1994, and "good causes" were promised a windfall of 28p in every pound fluttered, the most audible reaction from charities was a low rumbling of discontent.

There were concerns that the new grant stream would give state funders an excuse to cut spending on the sector and that lottery applications were time-consuming, with a low chance of success.

But most of all, the sector feared that competition from the new machines springing up in local newsagents would have a ruinous effect on its own fundraising.

A survey by sector umbrella body the NCVO in 1995 predicted that charities would lose £36m a year. "Our research proves charities could well lose out," said its new director Stuart Etherington.

A decade on, and £16bn in grants to 175,000 projects later, there is a consensus that the lottery has been good for the sector. The NCVO now says that the lottery "has become an important source of much-needed funding for medium-sized charities".

Despite this, the scepticism remains. But instead of questioning the concept of the National Lottery, voluntary organisations are now protective towards an independent source of grant-making they see as threatened by the creeping hand of the state.

In the week of the Lottery's 10th birthday, chief executives' body Acevo is warning that the new draft National Lottery Bill, which will formally merge the Community Fund and New Opportunities Fund, gives the Government draconian powers to control half of all the money to good causes.

The new Big Lottery Fund will have to "comply with any direction" from the Secretary of State for Culture, Media and Sport who can dictate "persons" and "purposes" to whom the fund may or may not make grants.

This contrasts with the old National Lottery Charities Board, the forerunner of the Community Fund which, under the 1993 Lottery Act, could make its own decisions, subject to the Secretary of State's approval.

While there is unease about the future, there is also a recognition that the lottery, in particular in the guise of the Community Fund, has broken the mould of conservative, safety-first grant making in the UK.

The Directory of Social Change's lottery watcher Luke FitzHerbert, says that the fund pioneered a method of scoring grant applications that took the "personal preferences of grant makers" out of the equation.

"In its early years, the Community Fund took risks and supported many groups that wouldn't have got funding elsewhere," he says. "The system didn't allow for personal inclination."

This neutral system allowed unpopular or marginalised groups to access public funding, often for the first time. Professor Jimmy Kearney, former Community Fund board member and chair of two voluntary groups in Northern Ireland, says a fair proportion of the £110m allocated to the sector in the province went to such groups.

"For example, gay and lesbian groups, ethnic minorities and ex-prisoners all benefited," he says. "These are not things that people tend to like to support."

Ethnic minority groups in particular received funding that had traditionally been denied them.

"The past 10 years of the National Lottery has meant a lot to the minority ethnic voluntary sector," says Krishna Sarda, director of the ethnic minority body Cemvo.

"The grants from the lottery arrived at a critical moment when other public sector bodies were cutting back. Lasting change as a result of this remains elusive, but it did make a difference."

David Tyler, director of Community Matters, the umbrella body for community groups, says the Community Fund supported "grass-roots action" and backed risky projects eschewed by others.

In particular, the lottery helped the real hubs of the nation's social fabric - village halls and community centres - to survive. "They were struggling and the lottery enabled them to become anchors in their communities," says Tyler.

An indication of the lottery's role came with research last year that revealed the Community Fund was the largest single source of funding to deprived communities in England - above trusts and foundations, the Single Regeneration Budget, the European Social Fund and central Government.

The Fund provided £391m in 2000/1 to alleviate deprivation.

The NCVO claims it is small and medium-sized voluntary organisations that have benefited most. Lottery funding , on average, makes up 5 per cent of the income of groups with revenue of between £100,000 and £1m, but it drops to 1 per cent for the largest charities.

The lottery has become a steady source of income for middle-range organisations that have faced a financial chill in other areas, while their larger cousins have reaped the benefit of public service contracts from the state.

But the pioneering days of the lottery may be in the past. According to FitzHerbert, caution and procedure have taken over. "The Community Fund got scared, and it was right to, because its risk-taking got it abolished."

For nearly ten years, FitzHerbert has run a simulated lottery grant application from a distinctly leftfield, hypothetical, illiterate homeless people's project.

The simulation uses published criteria on how lottery grant applications are assessed. "The project used to score five out of six, now it is two or three out of six," says FitzHerbert. "People are fixated on petty details, rather than genuine intentions."

The next 10 years of the lottery does not augur well for charities. Signs of the crumbling of the additionality principle as government priorities are incrementally built into in an ever-widening definition of good causes, along with threats of a ministerial veto over individual grants, competition from a potential Olympic lottery and the question of whether ticket sales can hold up, all present potential blots on the horizon. For charities, the golden age of the lottery may be behind them.

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