Committee of Public Accounts

Press Notice No. 7 of Session 2003-04, dated 13 February 2004


Mr Edward Leigh MP, Chairman of the Committee of Public Accounts, said today that lottery players will be rightly unimpressed that £19 million has been spent by Arts Council England on two centres that have closed, and that Arts Council England must make sure the changes it has made to its approach pay off in delivering viable projects.

Mr Leigh was speaking as the Committee published its 7th Report of this Session, which examined what had happened since the Committee last reported on 15 of the largest capital projects receiving National Lottery funding from Arts Council England. The arts are one of the good causes which benefit from the proceeds of the National Lottery, and Arts Council England is responsible for distributing lottery funds to artists and arts organisations in England. The capital programme covered in this report was Arts Council England's first lottery programme and by far its largest in terms of value. Overall 2,238 grants worth a total of £1.15 billion were made. In December 1999, the Committee reported on 15 major projects and found that the overwhelming majority were not, at that time, going to plan.

The Committee found that, of the 15 projects examined, nine were completed late, six went over budget by 20% or more, and the total cost overrun was £94 million. Ten of the projects received supplementary grants from Arts Council England, totalling £32.5 million, in addition to their original lottery award. These projects were funded in the early days of the National Lottery, however, and since then Arts Council England has taken action to improve its handling of capital grants and reduce the likelihood of similar problems on future projects. For example grants are now awarded in stages, funding is being provided to enhance management capacity, and Arts Council England has strengthened its own project monitoring arrangements and adopted a more risk-based approach.

All in all the things that Arts Council England has done are sensible and in the spirit of the Committee's previous report on these projects. Of course, the impact of the changes will be seen on projects funded under the new capital programme, launched in 2000, and the Committee may wish to come back to this subject and examine the effectiveness of the steps that have been taken and confirm that Arts Council England has delivered on the assurances it has given that performance in the future will be better.

Areas also remain where Arts Council England and the Department for Culture, Media and Sport still need to take action. For example, with nearly £19 million of its lottery money spent on two projects which have closed and a further £78 million tied up in five projects experiencing financial difficulties, Arts Council England does not have a strong track record on project viability. The Council should be satisfied that recipients of capital grants have a robust strategy for their project's ongoing operation and funding after construction, and the management capacity to deliver it. The National Centre for Popular Music closed and is the latest in a series of publicly funded projects to get into difficulty because its visitor number forecasts were greatly in excess of what was actually achieved. Forecasts of visitor numbers should be based on an appraisal of the product and its potential to generate interest, including sensitivity analysis and an assessment of the risk that visitors might not generate and sustain the expected levels of income.

Through its regional structure, Arts Council England needs to achieve a more equitable distribution of lottery funding across the country. It should reach beyond the large, well established arts organisations concentrated in London and encourage applications from smaller bodies and from communities that have tended not to benefit from lottery funding. Arts Council England does not seem to be routinely collecting information on the diversity of audiences, but the information provided to the Committee indicates that audiences remain disproportionately drawn from particular sections of society.

The Department for Culture, Media and Sport should ensure that the lessons learnt by Arts Council England from these and other projects are shared with other lottery distributors which have capital grant programmes. It should identify examples of good practice and develop guidance, for example on selecting and incentivising contractors. It should also work with distributors to identify how the Office of Government Commerce's gateway review process might best be applied to the lottery sector.

Mr Leigh said today:

"Lottery players will be rightly unimpressed that £19 million has been spent by Arts Council England on two projects that have closed, denying that money to other good causes. A further £78 million is tied up in five projects in financial difficulty. Arts Council England must make sure the changes it has made to its approach pay off in delivering viable projects based on a proper strategy and realistic projections of visitor numbers. I also want to see Arts Council England getting more lottery funding to small bodies and communities outside London."

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