MORE than £2.4 billion lies idle in National Lottery coffers while thousands of community projects remain unfunded, according to a damning report by the public spending watchdog.

In a scathing assessment published today, the Public Accounts Committee (PAC) says that the money remains unspent, while £500 million could be released immediately if the lottery distributors were less cautious. Each lottery ticket sold raises 28p for good causes in a total of £1.4 billion revenue each year.

Edward Leigh, chairman of the PAC, said: “Thousands of community projects are losing out. There is no shortage of high-quality projects to fund but the enormous sum of £2.4 billion was stuck in limbo in May of this year, in part because distributors are too timid.”

The PAC says that two thirds of projects applying for funding are turned down because distributors are not prepared to commit more money. Every year about 28,000 projects receive funding but a further 56,000 are turned away because they fail to meet the criteria or the fund has run out of cash.

Charities said yesterday it was scandalous that billions of pounds was lying unspent.

Joe Saxton, of the Institute of Fundraising, and a charity called People and Planet which educates students about environmental and development issues, said: “The fact that £2.4 billion is sitting there when groups like ours are desperately short of money is nothing short of a scandal.”

The committee urges the Government to “get a grip” on the problem by setting strict targets for reducing the balances in the lottery distribution funds.

The lottery operators have already been urged by the Government to halve their balances, but many have failed to make progress, with the Heritage Lottery Fund and the new Big Lottery Fund being the worst offenders. Mr Leigh said that according to the distributors’ own policies an additional £450 million should have been committed by March 2004. He said the answer was for distributors to try to work with those who were given grants to speed up the progress of projects.

More than £17 billion has been raised since the lottery was launched in 1994. All proceeds from ticket sales are held in the Lottery Distribution Fund until needed by the 15 distributors for grants.

The Government has already put pressure on the distributors to take more risks and has asked them to commit at least two years’ income to projects in advance — about £450 million across all funds. But ministers say that they are still prepared to accept balances of about £1.8 billion while programmes are coming on stream. The PAC report says that two distributors, the Heritage Lottery Fund and the New Opportunities Fund, held more than £1.5 billion, 64 per cent of the total, last May.

But the funds argue that although they hold large balances, every penny has already been committed to projects. In addition they are over-committing nearly two years’ income. In many cases the projects take several years to build and complete and money is released only in stages. This means that they have to hold the balance in their bank accounts rather than risking the money on other ventures.

Carole Souter, director of the Heritage Lottery Fund said: “Every penny in the bank belongs to real projects to draw down as their projects progress. We cannot spend that money twice. Getting that money out as fast as possible remains a top priority and, as the PAC noted, we already pay quickly and provide cash up-front for smaller community projects.

“We are steadily increasing our commitments and, as at August this year, we had committed £280 million more than our income to heritage projects across the country.”

The Big Lottery Fund said it had committed more money to grants than is available in the National Lottery Distribution Fund. “This is feasible because we know money will continue to flow in from future ticket sales. But we have to be reasonably cautious about the level of over-commitment,” a spokesman said.

The Government and the PAC want the funds to commit more money which will allow more projects to win finance during a shorter time scale. Part of this involves getting local authorities and planners to speed up applications but also to get funds to divert cash to small projects where they can.

The committee acknowledged that the impact of the planned Olympic Lottery and funding for the Olympics was causing uncertainty about the future among distributors.

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