House of Commons - Culture, Media and Sport

Select Committee on Culture, Media and Sport Third Report

ARTS DEVELOPMENT

IV RESTRUCTURING THE ARTS COUNCIL

59. The Arts Council of England (ACE) is the national body for the Arts. The ACE is a non-departmental government body, with charitable status, incorporated by Royal Charter and responsible for arts development, leadership, policy, research and advocacy.[77]

60. The ten Regional Arts Boards (RABs) are independent, charitable organisations which are not directly accountable to Parliament. Their role is to distribute arts funding, and to develop and provide advocacy for the arts within their regions. The majority of their funding comes from the Arts Council but they also have access to other funding through local authorities and the Regional Development Agencies. Their relationship with the Arts Council is currently formalised in an annual funding agreement. RABs are distinct from the Regional Cultural Consortiums which have a broader remit that includes the arts, sport and tourism.[78]

Background

61. Since 1988, when the then Minister for the Arts asked Richard Wilding to renew the structure of the Arts Council,[79] attempts have been made to analyse and improve the functions and activities of the Arts Council, and the bodies responsible for arts in the regions. In response to the Price Waterhouse consultation in 1992, the Secretary of State for National Heritage asked the Arts Council to conduct its own analysis of its structure with the aim "to ensure that overheads are kept to a minimum and as many as possible of the available resources are passed directly to the funding of artistic activity".[80]

62. Despite the changes made, the underlying dissatisfaction with the funding and administrative structure has led the Arts Council to continue to seek ways to improve the system. Whilst the Arts Council operates at arm's-length from the Government, in a memorandum to the Committee, the Department for Culture, Media and Sport stated: "The Arts Council has been trying for some time to reduce the level of bureaucracy involved in the funding of the arts and the Government also wishes to see a more streamlined and less bureaucratic system."[81]

63. On 15 March 2001 the Arts Council published "Prospectus for Change", proposing to create a single, national arts funding organisation, incorporating and subsuming the ten Regional Arts Boards. In response to the results of the consultation, which included the Regional Arts Boards, Regional Assemblies, Regional Development Agencies and local authorities, the Arts Council published "Working Together for the Arts" on 16 July 2001. Mr Gerry Robinson, Chairman of the Arts Council since 1998, told the Committee:

64. A three month consultation followed "Working Together for the Arts", conducted by Marketlink Research with arts organisations and individual artists. Based upon this second consultation exercise, ACE produced its Draft Transfer Proposal in November 2001. ACE aimed to consider issues raised by the RABs, who were then asked to decide whether to transfer their assets and staff to the new organisation.[83] The final Draft Transfer Proposal, endorsed by the Minister for Arts in December 2001, was produced in January 2002, incorporating changes suggested by feedback from the RABs. As at March 2002, all ten RABs have agreed, in principle, to the new single arts funding and development body for England and will transfer their staff and assets to the new organisation from April 2002.[84]

The new structure

65. Under the new arrangements, a new single national organisation, yet to be named, will absorb the staff and assets of the existing Council and independent Regional Arts Boards. The new body will have nine regional councils and associated executive offices. The executive offices will report to their councils but also have "a direct line of responsibility to the Chief Executive of the whole organisation",[85] as each regional council will have a director line- managed by the Chief Executive of the National Office and a chairman or chairwoman who will represent the region on the National Council.[86] The new structure was argued to have the potential for a more unified corporate identity, a stronger more coherent voice and a firmer strategic grip on the flow of funding (and therefore more responsiveness to changing priorities).

66. Once the Regional Arts Boards transfer their assets and staff to the Arts Council from April 2002, they will continue to exist as shadow organisations until such time as a process of due diligence has determined that they have no further liabilities. The supplemental charter takes effect in April and, in May, a new Council takes control of the organisation following appointment by the Secretary of State.[87]

67. All staff of Regional Councils, or those with a fixed term contract of 12 months' service, will be eligible to transfer their employment rights under the Transfer of Undertakings (Protection of Employment) Regulations 1981 (known as TUPE). The new organisation will adopt a standard set of terms and conditions over time as staff move on or are replaced. The staff remain the responsibility of the Regional Arts Boards until the time of hand over, when they become the responsibility of the Arts Council, rather than the Government. Under the Arts Council's Financial Memorandum the DCMS does have control over some terms and conditions and the annual pay negotiating remit. The ACE have told the Committee that it was not reasonable, within the time frame, to request the RABs to devise a new organisational structure before the transfer; and that legal advice had stated that the design process for the new structure should therefore take place after the TUPE transfer to avoid claims of constructive dismissal.[88]

68. The Government requires that the new National Council reflect the nine Government Office regional boundaries when setting up the Regional Councils. This, it is claimed, should enable those seeking arts funding or advice greater access to alternative sources of support for their work. The new Regional Councils will work closely with other regional bodies such as Regional Development Agencies and Regional Cultural Consortia who will also be invited to nominate potential members of their boards. Despite the loss of a Southern Arts Council (subsequently to be divided between the South East and South West), this seems the right way to go.

69. A supplemental Charter, which will underpin the new organisation and reflect its regional character, was to be submitted to the Secretary of State for her approval and presentation to the Privy Council by the end of March. The Secretary of State will appoint members to the new National Council by the end of April. The structural changes, including streamlining, will take place thereafter. It will be important that the claimed benefits do materialise from this process rather than being lost along the way.

The consultation process

70. The past experience of attempts at restructuring appear to have resulted in a sceptical attitude by some organisations and individuals noted in the research undertaken by the Arts Council for completion of "Working together for the Arts".[89] The last major attempt at restructuring in 1998 had promised savings and increases in efficiency that many respondents to the research said had not materialised.[90] Indeed, ACE has reportedly stated that the restructuring initiative made assessment of previous reforms impossible.[91]

71. Market research undertaken on behalf of the Arts Council indicated that negative attitudes by organisations and individuals towards the proposals had been increased by the way the proposals were introduced and implemented.[92] Respondents felt that there was a lack of options presented in the proposals, with only one presented as a serious option for consideration whilst others were thought to have been dismissed without proper consideration.[93] One RAB told the Committee that the process had "caused an unnecessary degree of uncertainty, anxiety and instability throughout the arts communities".[94] Some of our witnesses suggested that this process recalled more the approach of a business than a public funding body.[95]

72. In the circumstances the Committee has not looked at the consultation process with a view to recommending, futilely, a halt to the change but rather with regard to what lessons can be drawn from the process adopted by the Arts Council in developing and seeking support for its proposals. We recommend that the Arts Council should, when preparing for any future consultation, consider the evidence submitted to the Committee from arts organisations and individuals on the process of consultations in this case.

The need for change

DEVOLUTION

73. The Arts Council told the Committee that it believed that "better decisions are made nearer the place of those decisions wherever that can possibly be the case".[96] The proposals claim that each regional office will have a council with increased decision making powers, and that more funding will be decided regionally.[97] The Chairmen or Chairwomen at the regions will actually be on the Central Council and are promised a far greater say in the national picture.[98] The Arts Council claims that, where there is a need for proper consultation between regional and national level, having a single organisation will make the consultation much smoother and quicker than in the past.[99] Some Regional Arts Boards and the Local Government Association have expressed concern that there will be a loss of regional autonomy and that, rather than responding to regional needs and ambitions delivered up to the central Council, the new system will deliver central directions outwards.[100]

74. The new organisation will recognise formally the role of regional government and regional development agencies, and each regional office will work in partnership with local government.[101] The promise of "a greater role for local and regional government in the funding of the arts",[102] and the commitment by the ACE to explore better means of a working partnership with local authorities, has been welcomed by the Local Government Association.[103] The Local Government Association and the Arts Council formed a working party in recent months to discuss the reforms, and to identify the best way forward.[104] Local Authority representation on the new Regional Arts Councils is set to increase to 40 per cent, but the LGA hope that the number will be increased in the future to create stronger, more accountable links between the Arts Councils and local communities, to give local authorities a greater say in funding decisions and to engage local authorities more fully in strategic planning of cultural activities.[105] The LGA suggest that improvement of the existing subscriptions system would help create a more strategic partnership between arts officers and the local authority.

75. A concern has been raised by some of the RABs, touring arts organisations and umbrella organisations that, under the future structure, touring and umbrella companies will be funded by the Regional Arts Council in which they are based. Such organisations work across England, developing national policies and strategies and would be better suited to a national office; being restricted to one regional office would restrict collaborations, partnerships and work within other regions.[106]

76. We recommend that the Arts Council continues to engage in constructive dialogue with local authorities to ensure that established links and working relationships are improved rather than disrupted. The funding and subscriptions system should be made transparent and accountable to local communities to ensure value for money. The new structure of the Arts Council must include clear guidelines for the devolution of funding and decision-making to enable Regional Arts Councils confidently to create strategies and activities relevant to their local communities. The Arts Council should consider the evidence to us from umbrella and touring organisations when confirming their position in the new regional structure.

STREAMLINING THE FUNDING SYSTEM

77. Mr Robinson told the Committee: "Let me tell you that the first thing that the arts community think about the funding system is that they do not want to think about it at all and, frankly, I think that is the right way. It is something which should be operating efficiently and slickly behind the scenes."[107] There are currently 111 funding schemes which the Arts Council intends to replace with eight. ACE claim that these will be more easily understood and more consistent, from region to region.[108]

78. The Arts Council also claims that decreasing the number of schemes will reduce bureaucracy and duplication of effort, and will free arts officers from administrative duties to concentrate instead on levering in more funding for the arts.[109] The Committee received evidence from the Regional Arts Boards, who all welcomed the proposals for a more accessible and simplified funding system that would reduce administrative processes.[110] We recommend that the Arts Council includes the benefits of its new funding systems in the audit of the reorganisation, taking into account both customer satisfaction and the efficiency of those implementing the funding system.

COST SAVINGS

79. The current administration costs of the eleven organisations is £36 million. Based on this figure, in the initial proposal in March 2002, the Arts Council promised to make savings of £8-£10million in transferring to the new structure, which would then be diverted to direct funding for the arts.[111] The promise has since been downgraded to a target.[112] The Arts Council told the Committee that it took the view that savings in the region of 25 per cent on current administration costs were achievable.[113] The Government has told the Committee that it "wants" and "expects to see administrative savings throughout the system",[114] but respondents to the Arts Council's market research have expressed concerns that if the Arts Council feels bound to make the savings, staff numbers may be cut at a local level which could have a negative impact on delivery. The Local Government Association expressed concerns that valuable expertise and effective links at regional level might be disrupted or lost.[115]

80. Similarly, evidence to the Committee from the National Union Group of the Arts Council and Regional Arts Boards expressed concern over what is regarded as the lack of a detailed staffing structure for the new organisation, which would be needed to plan the savings, and ensure parity and coherence across the regions.[116] The Arts Council told the Committee that the design of the new structure had been delayed until after transfer on legal advice, but that, once the transfer was complete, the onus was on the new organisation to "reach conclusions rapidly to give staff a clear indication of their individual prospects".[117] After the transfer and the new structure have been put in place, the savings target will be confirmed.[118]

81. The change itself is likely to be expensive, and past experience shows that the advance estimates of savings have tended to be over-optimistic. We recommend that the Arts Council produces a clear and comprehensive process to indicate how it will achieve the £8 million-£10 million target on savings. This should avoid undue pressures on the quality of the service provided by its regional councils further down the line, when the process is subject to audit. We recommend that the estimated savings should be an important but not the determining factor in judging the restructuring a success. Such savings should be additional to providing real devolution to the regional councils, whilst improving the quality of service to the arts, simplifying the funding process and reducing bureaucracy.

Evaluation

82. The Arts Council told us that it was currently in the process of agreeing indicators for the evaluation for the merger process. The evaluation would monitor progress against cultural and policy aims, and the delivery back into the arts of funding currently being spent on administration.[119] We regard this as absolutely crucial. Without a genuine and systematic attempt to demonstrate successful performance and keep the organisation on track against objectives, the exercise could become just another arts funding upheaval. We recommend that the Arts Council develops and publishes indicators of performance with regard to the devolution of resources and decision-making; the attainment of cultural and policy aims; the reduction of bureaucracy and duplication; and the savings of funding previously spent on administration, so that its claims can be assessed in practice.

Conclusions

83. The Committee wish to see the assertions of the Arts Council's proposals delivered. Greater accountability, devolution, simplified funding schemes and transparency within the new funding system must be realised. The Committee will return to this subject once the framework for evaluation and monitoring has been set in place. The Committee are keen to see that valuable expertise at regional level is not lost as a result of the restructure, and that arts organisations and individuals, receiving grants from the ACE, benefit from the streamlining of the current system. The Committee expect to see in action the greater regional autonomy that has been endorsed by the Department for Culture, Media and Sport. The Arts Council should be in a position after the restructuring to create a clearer identity, and the Committee look forward to seeing evidence of greater public recognition and support for the arts as a result of this work. Much remains to be achieved and resolved in practice and we will try to ensure that this process is transparent to the House and to the wider constituency of those who benefit from arts funding and from the arts themselves.

77 Ev 42 Back

78 Ev 198, 199 Back

79 HC Debates, col. 256, 8 December 1988. Back

80 HC Debates, col 354, 21 July 1993. Back

81 Ev 198 Back

82 Q 95. Back

83 Ev 198 Back

84 Ev 198 Back

85 Working Together for the Arts, Arts Council of England, 16 July 2001. Back

86 Ev 199 Back