Levels of subsidy
96. As many of our submissions make clear, the recent
history of support for British theatre has been a picture of long-term
decline, more recent renaissance and, most recently, an apparent
return, without warning, to real terms cuts. Mr Hytner, National
Theatre, told us that the performing arts were subsidised to a
much lesser extent than in the rest of Europe. He described the
National as "generously, heavily subsidised" but asserted
that it was accepted that to achieve the kind of critical mass
which can survive the vicissitudes of individual directors, and
other ups and downs of repertory theatre, the kind of subsidy
received by the National was essential.[146]
97. The table below sets out the position in England
over the last 20 years.
| Year |
Amount (£)
| Amount (real terms £)
|
| 1986/87 |
29,765,000 | 57,207,812
|
| 1989/90 |
36,029,000 | 57,268,044
|
| 1994/95 |
45,559,000 | 58,857,895
|
| 1998/99 |
27,128,000 | 31,230,483
|
| 1999/00 |
29,987,000 | 33,785,364
|
| 2000/01 |
29,946,700 | 33,352,554
|
| 2001/02 |
30,288,800 | 32,896,338
|
| 2002/03*
| 74,629,940 | 78,372,141
|
| 2003/04*
| 89,566,873 | 91,481,813
|
| 2004/05*
| 95,601,602 | 95,601,602
|
| 2005/06 |
93,969,133 | --
|
| 2006/05 |
97,431,332 | --
|
| 2007/08 |
98,900,000 | --
|
*Prior to 2002/03 funding listed do not
include awards made by regional arts boards
Source: DCMS and Arts Council England
98. Prior to July 2000, the future of theatre had
looked "bleak". According to the Arts Council, under-funding
for over two decades had left the industry with limited opportunity
for innovation, risk-taking or creativity owing to a stop-start-stop
pattern of funding. Many arts organisations were on the edge of
insolvency. Due, not least, to the pressing priorities of upkeep
there had been a concentration on the survival of buildings and
institutions. The Council's analysis argues that investment in
the art form and its practitioners had become secondary. The sector
had become inward-looking, was losing audiences and failing to
engage its surrounding communities (despite ever-increasing demands
to do so in order to demonstrate value-for-money).[147]
99. In 2000 the Arts Council published the National
Policy for Theatre in England. The policy was the result of
the Theatre Review process, which had identified a sector in crisis
with poor morale, reduced productivity, lowered standards and
declining audiences. This document provided a strategic framework
for the sector and identified clear priorities for action for
both Arts Council England, the sector itself and other potential
partners.[148]
100. The key barrier to change was identified by
the Theatre Review process as a lack of funding. The Arts Council
had estimated that, at the very least, the sector needed an additional
£25 million annually to be invested in regional theatre.
The Government accepted this recommendation. This represented
a 72% increase in the budget for theatre between 2000/01 and 2003/04
and brought grant-in-aid up to £75 million. This allocation
of resources meant that some organisations were able to receive
grants that were more than doubled.[149]
Ms Joanna Reid, Executive Director of the Belgrade Theatre Company,
told us "theatre … is at a really exciting stage. It
is incredibly vital and the work is fantastic. We have seen Schiller
on the West End … and it is wonderful what is happening at
the National. Actually that is a direct result of the Theatre
Review money that came in two or three years ago."[150]
In the regions the effect was said to have been even more marked.
Mr Hytner, National Theatre, told us: "revitalisation has
been even more dramatic outside of London, in the regions, where
£25 million extra was specifically diverted. I mentioned
the Birmingham Rep earlier. The Birmingham Rep's story is more
dramatic than the National's success story: 100% rise in audiences
at Birmingham Rep, infinitely more exciting work, directly attributable
to the raising of grants."[151]
101. The Government's recent increases in arts funding
were estimated to have almost redressed erosion over previous
years. Between 1993/94 and 2001/02, the total core grant-in-aid
received by Arts Council England was some £120 million less
(at 2001/02 prices) than it would have been had grant-in-aid kept
pace with inflation. Despite the increases in the last two spending
rounds, the Arts Council pointed to a remaining notional shortfall
of some £54 million, which would be restored finally this
year, 2005/06.[152]
102. However, the Arts Council emphasised to us the
fragility of the progress made up until now. Many theatres had
got into a very poor financial position and, although the resources
from Government helped them to stabilise and invest in the future,
ACE argued that the extra funding had not yet been adequate "to
reverse the damage of decades of under-investment." ACE went
on to say that "a significant proportion of the additional
money for theatre of the last two rounds has gone into remedial
support" and that this is before taking into consideration
effects of inflation, reductions in local authority funding or
a decline in income from other streams such as the National Lottery.[153]
103. The funding allocations within Spending Review
2004 did not, as the sector and ACE had hoped, signal a sustained
investment. As we have mentioned, this inquiry was prompted by
disappointment with the potential implications for theatre of
the 2004 funding settlement. Mr
Hytner said: "We did not expect or feel we deserved a huge
raise. I think we were disappointed that a commitment was not
made to keep us up with inflation … cash standstill is effectively
a cut. And a cut seems to us to be a mistake."[154]
We agree.
104. The Arts Council's total grant-in-aid was frozen
at £412 million for 2005/06, 2006/07 and 2007/08. This overall
cash standstill will mean a real terms reduction in total funding
of the order of £33.8m over the period of the spending round.
The DCMS's memorandum stated that: "the Department is working
with ACE to ensure that the funding available for arts organisations
and artists does not fall in real terms." The elements of
this effort are: further efficiency savings; re-shaping arts education
spending; and using budgetary flexibilities.[155]
To us this sounds like cost-cutting, budget raiding and lightly
cooking the books. If the Government does not wish real terms
funding for arts organisations and artists to fall, the obvious
question arises, why then freeze the budget?
105. The Arts Minister, Rt Hon Estelle Morris MP,
told us that she thought the settlement secured from HM Treasury
had been "very good". She emphasised that, while the
allocation of resources to the Arts Council as a whole was stand-still—and
a reduction in real terms—this did not mean that funding
for theatre would necessarily be reduced pro rata.[156]
As we have discussed, the Arts Council has asserted a determination
to target its funding by giving priority to good performance,
and claimed that it would not be a case of "equal misery
for all".[157]
The Minister explained: "I do not accept that there will
be a real terms cut [for theatre]. There is, if you look at ACE's
budget in total, because it is a standstill budget of £412
million, but …the reassurance they have given is that their
central core will take most of the cut, the administration."
The Minister concluded: "I accept that … it is a real
terms cut for ACE. What I do not accept is that, at the end of
the day when the theatres know what their individual funding settlements
will be, all of them will get a real terms cut. Some may; many
will not."[158]
Given the announcement of an
overall funding cut in real terms, the Government and the Arts
Council need a far more effective communications strategy if avoidable
anxieties are not to be raised within particular art forms.
106. After giving evidence, the Arts Council wrote
in confidence to the Committee giving some details of its conclusions
on its funding allocations within the global sum granted-in-aid
by the DCMS.[159] ACE
wrote that its priorities were:
a) to provide financial stability for the majority
of arts organisations;
b) to ensure that organisations with major capital
developments received revenue funding to reach their potential;
c) to develop the infrastructure for black and
minority ethnic artists; and
d) to review the range of organisations receiving
regular funding and redirect funding to priority areas.
107. In order to meet these objectives the Arts Council
said it was: cutting on the development of new opportunities for
the arts (by £13 million); reducing the number of regularly
funded organisations (121 organisations gone by March 2008; although
34 new clients appeared this year); targeting funds (54 organisations
will receive below inflation increases or no increase at all);
reducing its funding for the Creative Partnerships programme (by
£23 million across 2005/06 and 2006/07); and freezing its
administrative budget for three years.
108. The breakdown for different art forms was given
as set out below.
109. The Chairman of Arts Council England wrote that
the Arts Council had ensured a degree of stability for most of
its arts organisations but that this stability was "fragile"
built, as it was, on "one-off flexibility and a reduction
in other areas of our budget". Sir Christopher set down a
marker in saying that: "if there is not a better settlement
in the 2006 Spending Review it will mean real cuts to more arts
organisations". He added that a strong case for the arts
needed to be developed now to put to the Government for the 2006
funding process.[160]
110. On the last occasion we examined the operation
of the Arts Council, in 2002, it was poised to reform itself;
principally by absorbing the Regional Arts Boards. Cost savings
of between £8-10 million were cited amongst other benefits.
The DCMS told us at that stage that it had "emphasised"
that it wanted to see administrative savings throughout the system
allowing increased funding for arts organisations. Mr Charles
Morgan, independent arts consultant, has questioned the performance
of the Arts Council in achieving efficiencies citing, principally,
substantial rises in senior salaries, numbers of both permanent
and especially temporary staff and spending on consultants.[161]
Evidence from ACE in the current inquiry asserted that the organisation
was "ahead of its target to reduce…overheads by around
£8 million"[162]
with administrative costs currently representing 7.2% of resources.
Sustainable efficiency savings
by public bodies must always be sought with vigour. However, it
seems invidious for the DCMS to press the Arts Council for such
savings on the grounds that the money saved can then to go direct
to the arts; only to reduce the Council's grant-in-aid by roughly
the same amount a couple of years later. No matter what the allocation
to specific art forms, the Arts Council's efforts to increase
efficiency have been rewarded with an equivalent real terms cut
in baseline funding.
111. Government has many competing demands for public
expenditure. Theatre got a good deal in 2002 and the sector was
undoubtedly revived by that action. Arts Council England should
take the pragmatic approach outlined by the Minister and continue
the effort of streamlining its administration and reducing overheads.
We believe ACE must also be prepared to take tough decisions to
encourage, and preserve, the best and most fruitful organisations
and curtail poorly performing organisations and less effective
activities. Subsidy for the arts as practised by most governments
is hardly a matter of bottom-up, assessed-need but rather what
the Chancellor decides can be afforded. Like other areas of life
supported by public funds, the theatre must be prepared to try
and demonstrate value-for-money and make effective arguments for
more investment. This seems not to have been done on this occasion
with a breakdown somewhere along the chain between arts organisations
and theatres, Arts Council England, DCMS and HM Treasury.
112. However, funding creativity is unlike other
spheres of activity. Hard and fast principles of value-for-money
are harder to develop and apply in this markedly diverse and challenging
area. It is somewhat like the debate over whether the BBC should
be chasing ratings; with popularity potentially breeding contempt.
The investment in theatre however is not simply a measure of the
cultural qualifications, or otherwise, of Ministers. This investment
needs to be maintained for economic and financial reasons in addition
to any arts policy objectives. Theatre
is important to the economic life of the country and generates
a significant return for the Exchequer as well as showcasing the
UK to the world. The commercial theatre sector often rests on
work that originates, is developed, tested and proven within the
subsidised sector.
113. The investment
made since 2002—and the resulting virtuous circle of better
productions and bigger audiences—needs to be protected and
built upon. A policy of stop-go-stop, eschewed by the Treasury
in macro-economic terms of 'boom and bust', is not a prudent approach
to the long term investment in the arts to which the Government
claims to be committed.
114. The Government
needs to re-evaluate its allocation of resources to the arts,
taking a long term view, to ensure that real terms cuts are avoided
where no compelling arguments or evidence are presented for their
necessity. In our view no such arguments have been made. The Government
should re-consider and find the £34 million needed to keep
the Arts Council's funding in line with inflation over the period
of the 2004 spending settlement.
88 
