You are here: Parliament home page > Parliamentary business > Publications and Records > Committee Publications > All Select Committee Publications > Commons Select Committees > Culture, Media and Sport > Culture, Media and Sport
Funding of the Arts and Heritage - Culture, Media and Sport Committee Contents

2  Funding of the arts

8. There are currently a number of sources of funding for arts organisations in the UK. These include:

  • DCMS direct grant
  • Arts Council England
  • National Lottery funding opportunities
  • European Union funding schemes
  • Local authority support for the arts
  • Trusts, foundations and private giving
  • Box office or admission charges
  • Merchandising or sponsorship
  • The UK Film Council (which is to be abolished - see paragraphs 112 - 126)
  • Collaborations with artistic rivals
  • Foreign governments and businesses

9. The responsible Government Department, the Department for Culture, Media and Sport (DCMS), mainly distributes funds through Arts Council England (the Arts Council) using what is known as the 'arm's length' principle. This is the principle whereby Government issues grant-in-aid to a particular sector, but does so through another body, so that the Government does not make direct funding decisions itself.

10. Arts Council Chair, Dame Liz Forgan, summarised her support for the arm's length principle during a speech in 2009:

    Arm's length [is a] principle by which Government, national and local, contributes to the support of artists and the arts through a mechanism that is separate from day to day party politics.  It is a principle which was first articulated by Keynes in 1946 and which has served us all, politicians and artists, very well since.
    It keeps the arts free of political interference in the content and nature of creative expression.  It protects politicians from being held accountable for the occasionally outrageous, offensive or otherwise troublesome work of artists.
    It is looked at jealously by artists in some countries that do not have these arrangement [and] is seen as an emblem of good practice all over the world.[4]

11. DCMS also directly sponsors 21 institutions including the Tate, National Portrait Gallery and the Wallace Collection. DCMS has summarised the mixture of sources available to arts organisations on its website:

    The Arts in England are funded through a wide variety of sources, which include earned income, Government subsidy, private donations and business sponsorship. Funding the Arts in this way can be beneficial to artists and arts organisations, as relying on a single funding source can be risky. A variety of funding sources also gives greater artistic freedom and financial flexibility.[5]

12. An emerging model of arts funding for organisations is for one-third of income to come from state subsidy, one-third from box office and the remainder from commercial revenue sources.[6] This contrasts with the United States, where arts funding is reportedly 90% private, and continental Europe, where public funding is considerably higher than in Britain or the US.[7]

13. As shown in the table below, from 1999 to 2006 the UK Government invested heavily in the arts with an increase in total grant-in-aid funding to the Arts Council of £248,836,000:

DCMS grant-in-aid to Arts Council England
1998/99
£179,337,000
1999/00
£212,248,000
2000/01
£238,179,000
2001/02
£252,455,000
2002/03
£290,405,000
2003/04
£325,955,000
2004/05
£369,859,000
2005/06
£409,178,000
2006/07
£427,862,000
2007/08
£423,601,000
2008/09
£437,631,000
2009/10
£452,964,000

Source: DCMS

Arts Council England

HISTORY AND FUNCTIONS

14. Public spending on the arts in Britain was first formalised in 1940 when the Government funded Committee for Encouragement of Music and the Arts (CEMA) was set up to promote British Culture. In 1946, under the Chairmanship of John Maynard Keynes, CEMA was renamed the Arts Council for Great Britain and granted a Royal Charter.

15. In 1994 the Arts Council for Great Britain divided into the Arts Councils for England, Scotland and Wales. In the same year the National Lottery was launched, and the Arts Council England became one of the distribution bodies for lottery funds.

16. Today the Arts Council is still a Government-funded body dedicated to promoting the visual, performing and literary arts. The Arts Council has a National Council that is made up of 16 members, including the Chair and nine regional representatives, who are all appointed by the Secretary of State for Culture, Olympics, Media and Sport. The nine regional representatives on the National Council also head regional arts councils which have responsibility for regional strategies and investment plans.

17. The Arts Council has two funding streams: grant-in-aid, and proceeds from the National Lottery. The bulk of the grant-in-aid is currently invested in a portfolio of around 880 Regularly Funded Organisations (RFOs), which have received £1.03 billion between 2008 and 2011.[8] RFOs include large national organisations, such as the Royal Shakespeare Company and English National Opera; high profile regional organisations such as Nottingham Contemporary or Sage Gateshead; and smaller organisations, such as the British Federation of Brass Bands. The Arts Council announced on 4 November 2010 that it was replacing its system of RFOs with a new National Portfolio funding programme (which is discussed in more detail at paragraphs 33 - 43 of this Report). [9]

FUNDING THE ARTS

18. In May 2010, DCMS announced that it would contribute £61 million from its budget towards reducing the Government deficit. It said the savings would be made by:

  • Reducing the Olympic Delivery Authority budget by £27 million;
  • a 3% cut to all bodies within the DCMS sector;
  • cutting the department's own core budget by 3%;
  • an additional reduction in the Arts Council's budget of £5 million, which, combined with the 3% reduction, means that £19 million of the total savings to DCMS budgets will come from the Arts Council.[10]

19. Dame Liz Forgan responded to the DCMS funding announcement:

    We all knew this year would be tough. We do not understand why we have received a higher percentage cut than other DCMS funded bodies.

    Making cuts within the financial year is very difficult. We will now need to carefully assess what this figure of £19m means. The Arts Council has already trimmed down its own budgets by £4m in 2010/11 so this takes our total reduction to £23m.[11]

20. On 18 June 2010, the Arts Council responded to the reduction in its budget by announcing an across-the-board 0.5% funding cut for each of its RFOs. Its press notice stated:

    We've been working hard to find ways to implement this cut (in central government funding) while protecting art, and the organisations that enable it to happen, to the fullest extent possible. The cut to regularly funded organisations' 2010/11 income from Arts Council will, therefore, be limited to 0.5%. 

    This relatively minimal reduction has been made possible only by the exceptional use of £9 million of the Arts Council's historic reserves, access to which was previously blocked by government. Had this not been the case, we would have been forced to pass on a 3% (£10.8 million) cut to our funded organisations.[12]

21. Alan Davey told us that the Arts Council had opted for the initial 0.5% across-the-board cut for organisations in order to make a quick and fair decision.[13] Louise de Winter, then Director of the National Campaign for Arts (NCA), agreed that speed and simplicity was welcomed by arts organisations who accepted the rationale behind the 0.5% cut. However, she argued that a different approach would be needed for more substantial cuts:

    I think the 0.5% cut was more or less understood and accepted by the sector, but that's because it was 0.5%. I think if we're looking at bigger cuts, and Alan knows this, then there will need to be a degree of finessing whereby [...] larger organisations with broader shoulders ought to potentially bear a bigger share of the load.[14]

The cost of the Arts Council

22. Given the heavy investment in the arts since 1997, we asked Alan Davey, the Arts Council Chief Executive, whether he was surprised at the cuts to the Arts Council's budget. He told us:

    This year I think is a particular golden year, if you like. It's the year when the funding is probably the highest it's been, just about, and it's where the arts organisations themselves are performing very highly. If you look up and down the country there are regional theatres, for example, that are doing amazing stuff. There's a whole lot of new writing going on; interesting productions that people are going to see. So there's a real interest in the public there. Our orchestras are all over the country. For about £16 million we fund eight symphony orchestras in the country, including the regional ones, who have some amazing international conductors. The cost of the Berlin Philharmonic is €24 million. So for less than the cost of one German orchestra we get a whole orchestral ecology, which is acknowledged to be one of the best in the world.

    So I think we're in a healthy position. We're not denying that cuts are going to happen, and I think the sector is preparing itself responsibly for whatever cuts come next week.[15]

23. We asked Alan Davey what the Arts Council could do to absorb some of the budget reduction, and if the Arts Council had made any attempts to reduce its own administration costs. He told us:

    We've reduced it [the Arts Council administration cost] considerably by £6.9 million this year alone. We have undertaken a thorough organisational review. I've reduced my board by about half. We've reduced the numbers in head office and, indeed, our regional network to a similar extent. So we've reduced staff by 21% overall-by a fifth.[16]

24. As a result of the Government's CSR, the overall budget for DCMS was cut by 25% in October 2010. DCMS subsequently made a number of spending decisions including overall budget reductions to Sport England (33%); UK Sport (28%); English Heritage (32%) and Visit Britain (29%).[17]

25. DCMS also outlined a 29.6%, reduction in its overall grant-in-aid for the Arts Council over four years from 2011/12 to 2014/15. The grant-in-aid for these years are shown below:

Year Grant-in-aid
2009/10£452m
2011/12£388m
2012/13£360m
2013/14£352m
2014/15£350m

Source: Arts Council England

26. In a press release issued on the same day as the CSR announcement, the Arts Council said "these cuts will inevitably have a significant impact on the cultural life of the country".[18]

27. On 26 October 2010, the Arts Council announced that in response to the 29.6% reduction in its grant-in-aid it was distributing an across-the-board 6.9% cut in funding for arts organisations in 2011/12. As with the previous 0.5% across-the-board cut, the Arts Council argued that this represented a "quick and fair decision" for arts organisations.[19] The Arts Council also announced that it was to reduce its own administration costs by 50% - a cut that would be implemented midway through 2012/13.[20]

28. The Arts Council's administration costs have been reduced considerably since 2001/02, when it spent £58.3 million on administration, which amounted to 9.3% of its grant-in-aid.[21] In 2010 the Arts Council had reduced this figure to £22.6 million, which represented 6.6% of its grant-in-aid. The further 50% cut to be made in 2012/13 will come on top of the reductions already made.

29. These figures led us to question whether the Arts Council had previously been spending an unnecessarily high amount on its own administration; and, if this was so, whether its administration budget was so inflated that it could withstand a 50% cut whilst still being able to perform its core functions.

30. In oral evidence, Dame Liz Forgan was adamant that the cut imposed by DCMS was not in any way a reflection of the way in which the Arts Council had previously been run:

    You've got under our skin by suggesting that the settlement in the spending review was in some way related to the view that the Minister might have had that we were not a well run organisation. I must tell you that at no time did the Secretary of State ever say that to me. On the contrary when he said to me, "I want you to make the 50% cut" you've just referred to, he said, "I know this is very tough, I know that you have already, in this year before the spending review, done sterling work on the costs of the Arts Council. I know I'm asking you to do something very harsh, but I'm afraid that's the terms of the settlement with Treasury and that's that." So no, I don't think that the settlement—which I think in the circumstances is fair and decent, though it's tough for the arts—should be seen as some kind of punishment for the Arts Council failing in its duty, because I don't think that's right.[22]

31. The fact that the Arts Council was able to make such significant reductions in spending on its own administration while still functioning well as an organisation indicates it was previously spending far too much on itself. Its previous cuts will undoubtedly make it harder to achieve a further saving of 50%, particularly given the new responsibilities that the Arts Council is taking on.

32. While the overall budget cuts imposed on the Arts Council are severe, it must be remembered that they occur in the context of the Government's Comprehensive Spending Review which aims to reduce public spending by £81 billion by 2015 and that other DCMS arm's length bodies have had their budgets cut by up to 33%. We have to accept, therefore, that the Arts Council should have to take at least a proportionate share of the pain.

NATIONAL PORTFOLIO FUNDING PROGRAMME

33. On 4 November 2011 the Arts Council announced what it described as the "biggest change to arts funding in a generation",[23] in the form of the new National Portfolio funding programme. The National Portfolio, designed to replace the system of RFOs, is an open-application system, in which all arts organisations will have to apply for funding on a regular basis - including those organisations currently listed as RFOs.

34. The main changes that will be implemented through the National Portfolio are:

  • Introduction of an open application process, meaning that any groups or individual artists can apply to be part of the National Portfolio;
  • National Portfolio grants will mostly be for three years, However, the Arts Council says it is willing to be flexible and may agree two-year deals or anything up to six years;
  • Organisations will have tailor-made agreements, rather than the rigid system whereby all RFOs have to meet the same criteria; and
  • Some larger members of the National Portfolio will have a "strategic relationship" with the Arts Council, and will be expected to help smaller organisations.[24]

35. The schedule for the roll-out of the National Portfolio programme, outlined in the Arts Council announcement on 4 November, is:

  • 24 January 2011 - deadline for applications to the National Portfolio;
  • End of March 2011 - the Arts Council announces funding decisions;
  • April 2012 - National Portfolio programme becomes fully operational.

36. The Arts Council's National Portfolio Funding Programme: guidance for applicants lists the criteria used by the Arts Council in assessing funding applications from arts organisations or individual artists. The assessment process is split into two stages. First, a judgement is made about the contribution the applicant would make to the overall aims and goals of the Arts Council; the financial sustainability of the organisation; and the governance and leadership of the organisation. Secondly, a judgement is made about how well that organisation would fit into the Arts Council's notion of a balanced portfolio, based on range of art forms, diversity, size and location.[25]

37. During our visit to Manchester in November 2010, we heard some concerns from arts organisations, including from John Summers, Chief Executive of the Hallé Concerts Society, about the administrative task the Arts Council had set itself in assessing so many applications in the two month window between the end of January and the end of March 2011. We put this concern to Alan Davey, who told us he was confident the Arts Council could manage the task, even given the reduction in its administration budget:

    It's going to be very complicated. We have the skills to do it; we have the people to do it; we know how we are going to do it. We can do it in two months and give people the decisions where, if they are currently Regularly Funded Organisations and there is some material change to their circumstances, they will have 12 months to adopt that change, and also we'll have 12 months with the organisations that we are funding to discuss with them what the funding agreement will be and what their relationship with us would be.[26]

38. Dame Liz Forgan reiterated this confidence:

    The Secretary of State asked us, "Please, head for that date." He was very anxious, quite understandably and rightly, that organisations should have as much notice as possible. We agreed to the target date, but we did ask ourselves very seriously, "Can we do this properly?" and we believe we can.[27]

39. The Arts Council is due to announce which, and how many, arts organisations will be accepted into the National Portfolio at the end of March 2011. The Arts Council has received in the region of 1,340 applications, and Alan Davey told us that he expected only approximately 750 of those applications to be successful.[28]

40. The Arts Council initially stated, in November 2010, that the National Portfolio would be smaller than the list of RFOs, with the potential loss of more than 100 organisations by 2015.[29] The potential consequences of the withdrawal of Arts Council grants from so many arts organisations were summarised by the Arts Council itself in its written submission to this inquiry:

    [...] many arts organisations large and small will be lost. Even those that manage to survive what could be a perfect storm, may find it difficult to produce the work to the quality or on the same scale that they have done previously. Evidence from previous rounds of cuts suggests that less ambitious work loses audience interest and leads to a spiral of decline in artistic standards. [30]

41. This emphasises how serious the consequences of the Arts Council's decisions are. Failure to be accepted into the National Portfolio programme could mean closure for some arts organisations and, as stressed by the Arts Council itself, the reduction in grants could impact on both the quality and quantity of work produced.

42. We welcome the fact that the new National Portfolio is an open application process, and that more flexible and tailor-made funding agreements will be drawn up with arts organisations. However, because the National Portfolio funding programme is open to all arts organisations, it will inevitably attract more applications; and, if funding agreements are to be more flexible and tailor-made, this process will be a heavier administrative burden than previously.

43. We remain concerned at the speed with which the Arts Council is undertaking the massive programme to assess all of the applications to the National Portfolio, many of which come from organisations that were not on the previous list of Regularly Funded Organisations. While we recognise the desirability of giving organisations as much notice as possible, the decisions taken will leave approaching half of those applying disappointed. This is likely to result in some organisations having to close and there will inevitably be complaints that the process has been flawed and insufficiently rigorous.

ARTS COUNCIL FUNDING DECISIONS

44. With the new National Portfolio programme comes a shift in the criteria used by the Arts Council to make funding decisions. For the National Portfolio, the Arts Council is assessing all applications against criteria that extend beyond the artistic work of the organisation and includes factors such as governance and financial sustainability.

45. There is a risk, in using the financial sustainability of an organisation as a criterion for funding, that arts organisations which are already struggling may find it even harder to make their case for funding. Similarly, smaller arts organisations may not have a defined governance structure as it is more likely that, in a small team, people will perform more than one role. We questioned whether there was an inherent contradiction in the criteria which might mean that the more financially successful arts organisations were more likely to gain subsidy. Dame Liz Forgan told us:

    When we say we want them to be financially sustainable, [we understand that] many arts organisations will always need public subsidy. What we want are business plans that work, perhaps with a combination of public and private money, so that we start out knowing what they are going to do and how they are going to pay for it, and that we don't get faced halfway through the year with, "Oh dear, we have just gone a million or two over the budget." I think most of the arts sector, sometimes to the surprise of people who don't know it very well, is extremely well managed.[31]

46. We agree with the emphasis the Arts Council has placed on financial management and sustainability in its criteria for funding applications. It is vital that public money is spent wisely, and this means that arts organisations themselves have a responsibility to be as efficient and financially sustainable as they can. We urge the Arts Council to continue in its role of providing advocacy and advice in this area to help arts organisations plan properly and sustainably.

47. Much of the written evidence we received for this inquiry drew our attention to the many successful arts projects that have been funded by the Arts Council. These ranged from the Horse and Bamboo touring theatre company in Lancashire,[32] to the English National Opera in London.[33] However, we also heard from some successful arts organisations that do not receive Arts Council funding.

48. The Theatre Royal in Bath does not receive any regular public subsidy, and yet is regarded as one of the most successful regional theatres in England. It has three auditoria, including a children's theatre, and runs a large education and outreach programme. The Director of the Theatre Royal, Danny Moar, told us that he has some concerns about public subsidy and the Arts Council:

    There is a, possibly fundamental, problem with subsidies. I think some organisations have two audiences. They have their audience that they are trying to develop a long-term relationship with, and then they have their funders, who may have a completely different agenda for the organisation, compared to their audiences. Then what can complicate things even further, you could have the Arts Council wanting one thing, the local authority funders wanting another, and you have an artistic director, administrative director trying to run a theatre with possibly three different audiences. It can confuse the brand, it can confuse where the organisation is going. I'm a total supporter of subsidy, but there are dangers attached to it, for sure.[34]

49. Danny Moar went on to say that from his experience of dealing with the Arts Council he thought they had their priorities wrong:

    What I was struck by was the remorseless and obsessive preoccupation with what they would call audience development, which basically means making people who aren't fundamentally interested in the theatre, come and see your show by any means possible. I think one of the real problems of the funding system in this country is that the system finds it very hard to accept that it's okay not to like the arts. It's okay not to like the theatre, it's okay not to like music. All these things are fine, and it's a testament to human diversity that some people like the theatre and some people don't. I think that's what the funding system has spent so much time doing, chasing after new audiences who, for perfectly legitimate reasons, are just not interested.[35]

50. The Arts Council should encourage arts organisations to build on their core audiences, but should not put pressure on them to relentlessly pursue people who are not interested in the arts.

51. When we put these concerns to the Arts Council, Dame Liz Forgan responded:

    I have a horrible feeling that there may be some justice in this, in the case of some individuals. I wouldn't be surprised; but in policy terms, I think we do perfectly well understand that there are people who don't like the arts and never want it. [...] We're not interested in hitting people over the head and making them go to see Shakespeare. We're interested in not depriving people who would love it from having it.

    One of the cuts in our own expenditure that we had to make was that our next plan for audience development was specifically going to be aimed not at people who never go to the arts, but at people who consume the arts a very little bit to see if we couldn't encourage them to do it a little bit more. I'm sure that's the sensible way to go. [36]

52. We heard other, similar, concerns about the level of control that the Arts Council expects to have in the work of arts organisations. For example the OYAP Trust, Oxfordshire's youth arts charity, questioned the structure and the priorities of the Arts Council:

    The trouble with centralisation is depersonalisation - there needs to be more funding at a local level, and more distribution at a local level, with more local say in how funding is spent - rather than large anonymous bureaucratic structures, where you are just a reference number on a piece of paper, and if you don't put the right words on the paper, you know that really good projects that are in response to a very local need, will just get thrown out. The Arts Council have shifted the emphasis on supporting and advocating for the work that the arts community want to do, in favour of dictating what we should be doing, how we should be doing it, and being policed by this ever changing and shifting body. [37]

53. Some arts organisations also voiced frustration at the time and resources needed to apply for grants. When we visited Dulwich Picture Gallery (DPG) in South London, we heard that DPG had applied for Arts Council funding but had rarely been successful in securing it. DPG felt that the application process was complex, with no-one from the Arts Council to use as a sounding board during the application process and little feedback after the event. They also felt that the time which needed to be devoted to applying was out of all proportion to the funding being sought. Many arts bodies have a small number of staff and limited resources and have to apply for funding from a number of sources. The process of applying for grants and subsidies is something of a necessary evil for the arts sector and it is important that due process is followed. We are concerned that the Arts Council is failing to support organisations sufficiently in this process when it should be one of its highest priorities to do so.

The art supported by the Arts Council

54. The nature of the art that is funded by the Arts Council has also been called into question during the course of our inquiry. Academic and author, Dr Tiffany Jenkins, questioned the Arts Council's role in endorsing certain types of art through the award of grants, and expressed concern that Government pressure on the Arts Council had resulted in a focus away from artistic merit.[38] This concern was echoed by critic and commentator Norman Lebrecht, who suggested to us that the distance between Government and the Arts Council was disappearing and that Arts Council decisions had become "political decisions rather than arts-based decisions".[39]

55. David Lee, Editor of the visual arts magazine The Jackdaw, argued that the Arts Council only funded a narrow section of the visual arts, and this would mean that most visual artists would not be affected by spending cuts or restructuring of the Arts council. He said:

    I think they [the Arts Council] have, over the last 20 or 30 years, focused on one very small area of art that they have promoted to the exclusion of all the others. If you consider that contemporary art is a very broad spectrum of activity, on one side you might have the still lifes of William Packer, Eric Rimmington, James Gillick—artists you won't have heard of—and on the other side you have the kinds of work that get nominated for the Turner Prize: piles of ash, piles of clothes, piles of sweets, piles of virtually anything.

    In between there is a whole range of other work, abstract painting, and so on and so forth. Now, the Arts Council has exclusively funded and promoted through its galleries one area of this work and that's the reason, when the Arts Council funds are cut by 30%, it will affect 1% of artists in this country because the other 99% are effectively disfranchised by them. [40]

56. There are no consolidated statistics about the number of people working as artists, or creating art in their spare time, but it is likely that many visual artists are unsubsidised by the Arts Council. This could also be said of other areas of the arts that are largely produced by individuals, such as literature. Norman Lebrecht told us: "Is literature art? Of course it is. But should it be looked after by the Arts Council? No, of course not; it exists within a marketplace".[41]

57. The Arts Council has a published list of goals and priorities that it expects all arts organisations applying for funding to contribute towards. These goals and priorities do include "artistic excellence" as well as social criteria such as "developing arts opportunities for people and places with the least engagement" and "improving the delivery of arts opportunities for children and young people".[42] Many of the arts organisations which sent written submissions to our inquiry argued that much art has an inherent dual-purpose, such as education or rehabilitation. Manchester arts venue, Cornerhouse, wrote:

    Cultural organisations are at the heart of our 'Big Society', the arts encourage participation, raise aspirations and improve quality of life and opportunities for the young people and disadvantaged communities who need them the most. They are also the North West's economic success story. They develop talent for the creative industries, which are fundamental to the future competitiveness of British business, and provide a massive boost to tourism and the visitor economy.[43]

58. The role of the Arts Council is to distribute public funds to the arts using its knowledge and expertise. Debates about the artistic merit of individual arts projects, whether funded by the Arts Council or not, are often subjective and it is not the role of Parliament to comment on them. It is vital that the arm's length principle, whereby the Arts Council operates independently of Government, is upheld. However, it is equally important that decisions by the Arts Council should not be perceived to be influenced by its own political or artistic prejudices.

59. The social and economic benefits of the arts are not mutually exclusive from artistic merit. Many of the arts organisations from which we have heard provide valuable services while also producing good art. Organisations that use art as a means to engage with young, excluded or vulnerable groups may not be able to raise their own revenue, and therefore may be dependent on subsidy. We welcome the Arts Council's support of these arts projects, but this should not take priority over the need to promote the widest range of art forms based primarily on quality and future potential.

THE PUBLIC GALLERY IN WEST BROMWICH

60. One of the Arts Council's most controversial funding projects is that of The Public, a multi-media art gallery in West Bromwich, owned by the local authority Sandwell Borough Council. From its opening in 2007, The Public received £520,000 funding a year from the Arts Council. However, in 2009 the Arts Council withdrew regular funding, due to the fact that the main interactive gallery still had not opened. In a press release dated 28 January 2009, the Arts Council stated:

    Although the building is open, the interactive art gallery at the centre of the vision for The Public is not. We have done everything we can but there comes a point where we have to make a difficult judgement - and regretfully, that moment is now.[44]

The Arts Council did, however, offer The Public a one-off grant of £3 million for the period between 2008 and 2011, but no agreement for funding after that. The Public was rescued from administration by Sandwell Borough Council who, having already invested £20 million in the project, gave a further £500,000 revenue grant following the Arts Council's decision. This attracted criticism, as it was perceived by local people that the project funded by the Arts Council had been so badly run that it was unable to open; and the problem was only made worse when the Arts council withdrew its funding.

61. Although Alan Davey and Dame Liz Forgan were not at the Arts Council at the time, we asked Alan Davey what lessons the Arts Council had learned from the experience of The Public. He told us:

    [...] I think it's our ability to be firm and to say no when people who are committed, passionate and enthusiastic are urging us to stay with it despite our concerns not being answered. So we had some concerns about a loss of focus as the project got bigger and bigger and we should have been firm, I think, earlier.[45]

62. We also asked Alan Davey whether the Arts Council had produced a report on The Public, or shared the lessons learnt from the failure of the project. He told us that nothing had been published, although that was "an interesting idea".[46]

63. We were disappointed at the inability of the Arts Council to address key questions regarding The Public gallery in West Bromwich. The Arts Council played a major role in a gross waste of public money during its involvement in the West Bromwich project. Mistakes have been made throughout and we were concerned at the inability of the Chief Executive to provide answers to our questions and the lack of any serious attempt to learn lessons or prevent a repetition. We consider this to be a failure of leadership at the Arts Council. It does not inspire confidence in the Arts Council. We recommend that the Arts Council undertake, and publish, an independent review of their role in the failure of the project.

THE ARTS COUNCIL COLLECTION

64. The Arts Council Collection (ACC) is a publicly owned loan collection of post-war and contemporary British art. The Collection contains over 7,500 artworks and is the most widely circulated loan collection in the UK.[47] The ACC is funded by the Arts Council, which in 2008/09 spent £180,000 on ACC acquisitions[48] and is managed by the Southbank Centre and housed in South London on behalf of the Arts Council.

65. Any museum or gallery can apply to borrow an artwork from the ACC, and applications are only usually refused for reasons of security, climate control or other logistic factors.[49]

66. The ACC states that at any one time 25-30% of its works are on show somewhere in the country and that this figure is high in comparison to most public collections, which typically have around 10% of their work on show at any one time.[50] Nonetheless, this means that up to 75% of the collection is not on show at any one time. We were also told that over 4,000 works had not been on loan for over 10 years. Alan Davey told us that he regarded the ACC as a very hard-working collection:

    One of the things that we have been talking to the Arts Council Collection about is how we think it's a very hardworking collection already—around a third of its contents are out at any one time and we'd like to get that up to about 50% if we can. We've been discussing with them what the barriers are to that and I think you got the flavour of that in your visit. Not many people actually know that they can borrow from the Arts Council Collection. There are only six members of staff, so we need to talk to them about how we can improve that performance. But we also need to keep these wider questions under review as part of some wider work on collections policy in general.[51]

67. We visited the Collection in January 2011, and were impressed with the dedication of the ACC staff and the work they do. We were told of ACC programmes to increase the number of artworks loaned to hospitals and schools, as well as a collaboration with the National Trust and the ACC's programme of guest curators. We also saw some of the artworks being conserved, as well as some of the work being done to photograph and digitize the Collection in order to make it accessible online. Up until our visit to the ACC we had been unaware of a lot of the work done by the ACC, and that the Collection was available for public borrowing.

68. ACC's acquisition decisions are made by a committee made up of Arts Council and ACC staff, and its external advisors who are often visual artists.[52] The ACC says the following about its acquisitions policy:

    The Collection purchases innovative work by artists living in Britain, with a focus on the work of younger and emerging artists. While funding occasionally enables the purchase of work by more established artists, the Collection has received support in the past from the Henry Moore Foundation, The Art Fund and Outset Contemporary Art Fund for particularly ambitious acquisitions.[53]

69. The ACC has attracted some criticism for its acquisition policies. Art critic and The Jackdaw editor, David Lee, questioned whether the Arts Council should be purchasing works by artists already represented in the ACC, and whether the ACC represents good value for money given there are already other publicly owned collections:

    [...] in times of financial hardship it is imprudent that new acquisitions should be made of work by artists who are either already extensively represented in its own or in other Government collections [...]. Such duplications are obviously wasteful and indicate more generally that collections might rationalise their purchasing nationally, or at least regionally. How many national collections, each harbouring enormous quantities of unseen work do we need buying works - even the same ones - by the same few fashionable artists?[54]

70. As at 31 March 2010, the ACC was valued by its curator at £96.9 million, compared with £91 million in March 2009.[55] The ACC has never sold any of its artworks. We asked the Arts Council whether it would consider selling any of the Collection in order to make the Collection self-sustaining. Dame Liz Forgan told us that the ACC is being reviewed but issued a word of caution:

    We're talking to the Government Art Collection and the British Council. We need to look at these collections together. A private collector collects for a different purpose from a public collection. It is not the same thing. This is the nation investing in its young artists and in its patrimony of art. The question is: is the public getting the value it should from that investment? […] that could be done by increasing the use that is made of it and it could be by thinking carefully about whether you de-accession works from time to time.[56]

71. The Arts Council Collection is an important and valuable public asset. We welcome the work it has done to make British works of art more accessible to British people, and specifically commend their programme of lending artworks to schools and hospitals, although this is insufficiently well known.

72. We recommend that the Arts Council Collection should review its policy of never selling any of its artworks. At a time when the Arts Council is under serious financial pressures, strategic de-accessioning could make the Collection more dynamic and financially sustainable, as well as help fund the operation costs of increasing its loans.

73. The Arts Council Collection is a very lean operation and we acknowledge that with such limited resources it is not an easy task to get more of the artwork out on loan. However, a public collection should be more visible to the public. The Arts Council Collection is not as well publicised as it should be, and this has resulted in a majority of its works remaining in storage. We believe that the Collection should aim to have at least 50% of its works out on loan at any one time. We also recommend that a review of public art collections is undertaken, with a view to amalgamating the Government and British Council Art Collections with that of the Arts Council, in order to achieve economies of scale, with a consequent renaming of the Collection to reflect its public ownership.

Local authority funding

74. The Local Government Association (LGA) describes the role that local authorities play in funding the arts:

    Supporting the arts, culture and heritage is a billion pound concern for local authorities in England. In 2008-09 this investment supported a total of 1099 theatres, concert halls, arts centres and museums and galleries. Councils also play a major facilitation role, helping to maintain networks of people, groups and facilities, and in particular supporting community and voluntary groups.[57]

75. In a speech on 17 May 2010, the Chancellor of the Exchequer announced that the "coalition has agreed that £6 billion of savings to non-front line public services should be made this financial year".[58] On 24 May 2010 it was announced that £1.165 billion of these savings would be made in local government by reducing grants to local authorities. In addition, the Government announced the removal of the ring-fences around over £1.7 billion of grants to local authorities in 2010/11, "to give them greater flexibility to re-shape their budgets and find savings in the areas set out above, while maintaining the quality of services to their customers".[59]

76. Local authority subsidy of the arts is often used as a lever for 'match funding' - whereby private sponsors, or lottery funds are given to match those of the local authority. The cuts in local authority spending are causing considerable concern in the arts sector. Most of the arts organisations who sent written submissions to our inquiry told us that they would suffer a 'double-whammy' of funding cuts due to the reduction in Arts Council grants, as well as reductions in local authority spending. For example, Birmingham Museums and Art Galleries (BMAG) wrote that it was:

    [...] facing significant reductions in its local authority core funding and is consequently reducing the range of public services it delivers in areas such as education, family and community cohesion programmes. Delivery of previously free public services such as temporary exhibitions and provision of education programmes are now reliant on charging in order to be retained, this will present a barrier for many families on low incomes as well as culturally diverse audiences, something that is particularly important in a city such as Birmingham.[60]

77. The National Campaign for the Arts (NCA) suggest that some areas of arts and culture would be hit harder than others by reduction in local authority spending:

    Museums and galleries, for example, are less reliant on subsidy from the Arts Council, and more so on financial support received from their local authorities. Local authorities have flexibility over discretionary budgets and so the impact on arts and cultural expenditure will vary from council to council, but their budgets are even more vulnerable as all local authorities will be cut by 25%.[61]

78. The National Association of Local Government Arts Officers voiced considerable concern about how cuts would be administered:

    Local government funding for arts and heritage underpins the sector in England, but these services are not statutory (excluding some record office obligations and minimum provision of libraries). Consequently, cultural and leisure budgets are under major threat as councils ask what is the minimum they are required to do. Furthermore, these budgets have already been under pressure for some time - there is little room to manoeuvre.[62]

79. In oral evidence, Ed Vaizey, the Minister for Culture, Communications and the Creative Industries, agreed that removing ring-fences around local authority spending would inevitably create disparities from one council to another:

    We can't dictate to local authorities what spending decisions they make within the envelope of spending they are given but I hope that the signal from us that we want to support arts organisations across the country in terms of their funding will be taken on board. There will be certain local authorities that support their culture and others that perhaps don't support it as strongly as others.[63]

80. We asked some representatives from local government how cultural services could be protected, given the removal of ring-fencing for local authority spending. Simon Eden, the Chief Executive of Winchester City Council, told what was important was understanding the impact of the spending:

    It is inevitable with localism that some may take a decision, "We'd rather spend on this than that" culture or whatever you choose to call it. I think the issue is making sure that we properly understand the ramifications and the consequences of cultural spend. It's not just about pumping £200,000 into subsidy for your local theatre. It's about supporting a theatre with an education programme, making sure it reaches the schools, in our case, for example, in the rural communities or making sure in other cases, it reaches more deprived communities with an education programme and saying, "Is that having an impact". If it's having an impact and it's having effect, fine. If it's not, then maybe you have your funding wrong. You shouldn't be funding that. You should be funding that over there.

    So it does come back to a local choice and we shouldn't be, I think, expecting—which is my argument against statutory culture, if you like—that, therefore, everybody will get it and will spend money on culture.[64]

81. We also heard from Councillor Gary Millar from Liverpool City Council, who said that Liverpool had received "£800 million of additional economic spend because of arts and culture in 2008 and 27.5 million visitors came to the city because of arts and culture". [65] He argued that this elevated cultural activities above being luxuries, and made them necessities for the economic health of the city.[66]

82. Simon Eden added that in his local authority in Winchester, "in the south, and prosperous",[67] cultural spending still had a social element:

    We put [...] a significant amount of money into cultural projects and we don't do it just because culture and arts are good things, for art's sake. Of course there's an argument for that. But the way the members I work for and the members I work within that partnership, see it is that by investing in cultural activity they're providing something for young people to do.

    For example, there's a very good dance project that the county and the district have invested in, which is in one of the more deprived areas. [...] Putting money into that project has those involved in street dance and there was a notable reduction in antisocial behaviour as a result of that. So we don't see arts culture as a luxury.[68]

83. At a time when the Arts Council is forced to make reductions in the grants that it awards arts projects, if local authorities also choose to make cuts to spending on the arts, this could prove to be devastating for some arts organisations. We are encouraged by what we have heard from some local authorities who value the role arts and culture play in their local areas and who understand the social and economic benefits that the arts can provide. However, we are disturbed by the number of local authorities coming forward proposing very substantial cuts, which inevitably will mean the end for a number of local arts institutions and arts events.

Arts in a cold climate

84. Much of the impact of the spending cuts by central and local government remains to be seen. However, we received many submissions from the arts sector predicting the consequences of some of these spending decisions and outlining some of the measures arts organisations have already implemented to try and mitigate the impact of a potential reduction in funding.

85. It is unsurprising that most of the arts organisations which we heard from over the course of this inquiry were very concerned at the impact that the spending cuts would have on them. Many of them state that they are already having to reduce their services, productions and projects. For example, the Royal Shakespeare Company wrote:

    Whilst we don't yet know the final figure for cuts to arts funding, it's clear that cuts on the scale proposed (25-40%) will have real and significant impact for the arts and for the audiences who enjoy them. Most likely for us it will mean fewer productions, less touring, and a curtailment of the free events and educational activities which help us reach new audiences. [69]

86. The Foundation for Community Dance, which represents small dance projects throughout England, told us:

    Small community-based dance organisations, which the Foundation for Community Dance represents, will find it difficult to sustain year-round activity and will be thrown back on small and intermittent project grants - a regression to the funding environment of the 1990s. Much is being made of the potential cuts to national arm's length bodies, yet our concern is that reduction in funding by local authorities will have a deeper impact on community and participatory arts activities. Funding for organisations that offer community dance activities as part of their programme is very often a partnership between the Arts Council and local authorities, and we would regret any return to the game of ping-pong between funders symptomatic of previous decades. [70]

87. In the Committee's annual evidence session with the Secretary of State in September 2010, Jeremy Hunt acknowledged the vulnerability of arts organisations but maintained his stance that he was targeting cuts in order to protect frontline services:

    [...] front-line arts organisations are vulnerable in the situation we're in because if they have a sudden cut in their grant, that means they reduce their artistic output, that means they are able to secure less in ticket sales, less in philanthropic donations, and there is a risk of a cycle of decline. That is why we have to be very careful if we are in a situation, as we are, where overall the money going to such organisations is likely to be reduced. We want to do it in an intelligent way that helps people get through a very difficult patch, and taking difficult decisions about our own admin costs is part of the way that that is possible.[71]

88. However, as mentioned in paragraph 40 of this Report, the Arts Council has already stated that, due to the reduction in its grant-in-aid, it will fund a smaller number of arts organisations from 2012, so it is quite likely that some arts organisations will be forced to close as a result.[72]

89. It is inevitable that the combination of spending cuts from central and local government will have a major impact on the arts sector. The Arts Council is unable to fund the same number of projects as it has previously and this will no doubt result in the loss of some arts organisations, particularly if they have not made alternative funding arrangements.

REGIONAL VARIATIONS

90. We examined whether all arts organisations would be similarly affected by the changes in funding, or whether there would be variances depending on size, location or types of art.

91. Many arts bodies told us that smaller organisations would be disproportionately affected by a reduction in their funding. For example, the Oxfordshire based youth arts charity, OYAP Trust, wrote in its submission to this inquiry:

    Smaller charities are struggling without local government support, as they find it harder to attract funding from trusts and foundations as demand for their support is intensifying to ridiculous levels. So it is the local, grassroots organisations that are going to die, and the national charities and large scale charities with buildings and staffing resources that will survive.[73]

92. Smaller organisations are often already stretched, both in terms of the resources at their disposal and their ability to create revenue or attract private funding. The StopGAP touring dance company, based in Surrey told us that:

    Most small arts organisations already practice "economies of scale" because it's the only way to survive already - there are no more savings in that area for us. There is only a limited number of costs we can reduce as we still need cash to pay wages. Core costs are very difficult to find funding for, and these are the costs that need to be covered by government subsidy.

    Our options of reducing our costs are very limited as we are already operating on a shoe string. We can't reduce office staff as this level of operating is our absolute minimum to manage the workload to keep the dancers in full time employment. If we were to reduce the numbers of dancers in the company, we would invalidate the £50,000 investment we have made in creating our new repertoire that is due to be performed for the next 2 - 3 years.[74]

93. The New Vic Theatre in industrial North Staffordshire attracted 175,000 visitors last year—including 50,000 from education and outreach sessions—and its funding is 60% self-earned, 31% Arts Council England and 9% from local authorities. It is concerned that, on top of existing Arts Council cuts, its ability to sustain earned income is also under threat from the impact of public sector job losses. While welcoming the shift to National Portfolio funding, it remains concerned that arts funding will still have a heavy metropolitan bias and philanthropy will struggle to make up the shortfall in the regions:

    In addition to this funding, it is also comparatively easier to raise money from the private sector in London, where the majority of head offices are found, than outside where regional offices are less in control and have smaller budgets. In addition, a larger proportion of wealthy individuals are London- or South East-based.[75]

94. This is not to say that the spending cuts have not also worried large organisations. Nicholas Serota, Director of the Tate, launched an attack on the Government's spending cuts in an article in the Guardian in October 2010, stating that museums could be forced to close up to two days a week as a result of what he called "savage" spending cuts and went on to say that "you don't prune a tree by cutting its roots".[76]

95. Louise de Winter, then Director of the NCA, expressed concern that if regional arts bodies were cut it would limit the opportunities for art that originated in London to reach people elsewhere:

    It isn't just about museums but it is about theatres and performing houses and receiving houses. If, for example, theatres get cut outside of London, that means a big national ballet company that tours will find it harder to take its work to people outside of London; so what we end up with is a potential concentration of artistic activity in the capital and maybe one or two other metropolitan areas that are fortunate enough to sustain those systems but, for the large majority of the people, potentially their ability to consume and to see is much more constrained. So there is an impact on touring as well.[77]

96. In rural areas, where there is less of an arts and culture infrastructure, local communities are inevitably more dependent on the few arts projects in their area. Arts organisations in areas with a sparse population have less financial leverage when it comes to raising their own revenue streams.

97. This, coupled with the likelihood that rural councils have smaller budgets for cultural spending, can make arts provision in rural areas quite vulnerable. As Derbyshire County Council wrote:

    There needs to be a careful assessment of the effects of the cuts on different parts of the country, both geographically and economically. Rural areas already suffer from a lack of cultural services, and both national and local government intervention is essential in maintaining such services. The free market does not naturally serve rural areas, as venues are often too small to be economically viable. Rural touring of performing arts, for instance, is an essential service in these areas, provides good value for money (compared with subsidy of theatres in city centres), helps with social cohesion, overcomes isolation for both young and old, and provides a focus for local communities.[78]

98. This is also true of their ability to raise private investment or philanthropic giving, which we discuss in more detail in paragraphs 199 - 214 of this Report.

99. Outside London and the metropolitan areas, arts organisations find it a lot harder to make their own money. It is vital that, even in less densely populated parts of the country, people still have access to cultural activities. It is all the more important in this climate that the Arts Council take these factors into account when selecting its National Portfolio and we urge it to continue to do so in the future.

FIXED COSTS

100. During the course of our inquiry we were also mindful of the fact that arts organisations have different fixed costs and overheads depending on the nature of their art, their location and their size. For example as Mark Pemberton, Director of the Association of British Orchestras, explained, orchestras have a high fixed cost due to the number of professional musicians they need to employ:

    Obviously, an orchestra is an extremely different organisation to a theatre, the bricks and mortar and the ability to sweat that asset that you have. The primary cost for an orchestra are the musicians themselves. Sadly, unlike football, there are not transfer fees for musicians and they are not financial assets. It costs a lot of money to have that number of people. Of course, when Mahler wrote a symphony, that number of musicians are required to be on the concert platform. Unlike theatre, orchestras cannot choose to do three or four-handers to slim their costs.[79]

101. Many arts organisations, especially theatres, museums and galleries, occupy old and sometimes listed buildings, which can have high running and maintenance costs. The Theatres Trust wrote:

    Theatres across the UK are still in need of a wide-reaching and coherent programme of capital investment to enable them to upgrade the basic fabric of their buildings to make them more accessible and financially viable, to improve their environmental efficiency, to increase audiences and help revitalise our tourism industry, and to act as a catalyst for urban regeneration.[80]

102. Although the spending cuts will affect a wide range of arts organisations, the larger bodies have more resources to cushion the blow. It is the smaller arts projects which may only have a couple of members of staff that are at most at risk. The speed at which the cuts have been implemented has made it very difficult for these smaller arts projects to look at other options, and it is of great concern that so many of these organisations could be lost.

WHAT ARTS ORGANISATIONS CAN DO THEMSELVES

103. Part of the terms of reference of our inquiry was the question of what arts organisations could do themselves in terms of different ways of working and exploiting different revenue streams. We were particularly interested in whether there was scope for arts organisations to work more closely with each other and any potential for sharing resources.

104. We had a large number of responses from a wide range of organisations, with mixed views on the question of whether arts bodies could co-operate more. The RSC wrote that larger organisations "have a responsibility to share skills, expertise and resources with others in the sector".[81] The RSC cited its own programme of co-producing projects with small theatre groups as well as sharing studio space as a successful example of this. The RSC also said that it worked with local schools and drama clubs and heritage organisations associated with William Shakespeare.[82]

105. During this inquiry we visited the Manchester arts venue Cornerhouse, which is also part of the Plus Tate network. Plus Tate is a programme run by the Tate galleries, which aims to share some of Tate's knowledge, skills and resources with smaller arts bodies throughout the UK. There are 18 arts organisations in the Plus Tate programme including the Baltic in Gateshead, the Hepworth in Wakefield, and the Mostyn gallery in Llandudno. Cornerhouse told us that the scheme had been successful as far as they were concerned and welcomed the opportunity to work alongside representatives from the Tate.

106. Smaller arts bodies claim to be pooling resources with each other already. For example, the Horse and Bamboo Theatre in Rossendale, Lancashire uses a pool of self-employed artists contracted for specific pieces of work, who are shared by other theatre groups.[83] Arts & Business, the body that helps arts organisations raise private investment from businesses, argued that more acquisitions and mergers needed to reduce duplication of work, such as back-office administration, and make economies of scale for arts bodies.[84]

107. The Arts Council argued that it did promote collaboration between its RFOs, but arts bodies did not tend to have large back-room operations:

    Our experience is that organisations are generally very lean in this area, frequently having only a book keeper and a more senior member of staff who is partly responsible for finance in addition to other things.

    There is always an up-front cost involved with shared services, since reorganisation and merger are complex legal operations. This means consultants and lawyers are required. Often the savings are marginal, and so the shared work only makes a saving over time.[85]

108. The Association of British Orchestras (ABO) argued that mergers and sharing resources could be a false economy:

    Although it seems tempting to assume that there is potential for significant savings from mergers and sharing back office functions, there is a body of evidence that shows this not to be case. Evaluation of Arts Council England's Thrive programme revealed that for a successful merger to take place, significant additional one-off investment is required, for which there is no obvious source of funds. And merger does not necessarily generate a saving in subsidy or running costs; it merely enables the merged organisation to do more with the same level of subsidy.[86]

109. The Arts Council currently funds seven chamber orchestras and eight symphony orchestras, four of which are based in London.[87] As well as the Arts Council funded orchestras, the BBC funds the BBC Symphony, the BBC Philharmonic, the BBC Scottish Symphony, the BBC Symphony Chorus based at the Barbican in London, the BBC Concert and the BBC National Orchestra of Wales, as well as the BBC Singers. We are not convinced of the need for so many subsidised orchestras, whether by the Arts Council or the BBC. We recommend that the Arts Council and the BBC work together to identify areas of duplication and options for joint-working.

110. More generally, the different responses we received to the question of whether arts organisations could work more closely with each other highlight the diversity of organisations and working practices that exist in this sector. Wherever savings and efficiencies can be made by sharing resources and skills, this should be done. However, we are mindful that there is not one solution that fits all. Many smaller organisations do not have the resources to spend time strategically restructuring or liaising with other bodies. Therefore we recommend that the Arts Council makes it a criterion for large organisations applying for the National Portfolio to instigate programmes to share their knowledge and skills with smaller arts bodies in the manner of successful programmes such as Tate Plus.

Restructuring of arm's length bodies

111. On 26 July 2010, Jeremy Hunt, the Secretary of State for Culture, Olympics, Media and Sport, announced a review of DCMS' arm's length bodies.[88] The statement also announced the abolition of the UK Film Council (UKFC) and the Museums, Libraries and Archives Council (MLA).

THE UK FILM COUNCIL

112. The British film industry is subsidised in two ways: through tax relief, and from Lottery funds. The UKFC currently distributes Lottery grants to fund script development, film production, short films, film export and distribution, cinemas, film education, culture and archives, festivals and audience support schemes. The UKFC itself receives grant-in-aid from the Government, which in 2009/10 amounted to £37 million, a £7 million increase from its 2008/09 grant.[89] The total Lottery income for 2009/10 received by the UKFC was £34.2 million. Apart from the film projects and production funds that are sponsored by the UKFC, a number of other bodies receive UKFC grants including the British Film Institute (BFI) and the National and Regional Screen Agencies.

113. UKFC statistics, published on 20 January 2011, state that British films made over £1 billion at the box office for the second year in a row in 2010, up 2% from 2009.[90] Investment in new UK film production reached £1.155 billion across 119 films in 2010, a new record for the British film industry.[91] When we visited Pinewood Studios in Buckinghamshire in January 2011, we were very impressed by the quality and the scale of the productions made there and the expertise of the staff.

114. In his statement on 26 July 2010 Jeremy Hunt said that "abolishing the UK Film Council and establishing a direct and less bureaucratic relationship with the British Film Institute […] would support front-line services while ensuring greater value for money. Government and Lottery support for film will continue".[92]

115. In response to this announcement the UKFC Chair, Tim Bevan, who is one of our most distinguished film producers, made the following statement:

    Abolishing the most successful film support organisation the UK has ever had is a bad decision, imposed without any consultation or evaluation. People will rightly look back on today's announcement and say it was a big mistake, driven by short-term thinking and political expediency. British film, which is one of the UK's more successful growth industries, deserves better.

    Our immediate priority now is to press the Government to confirm that the funding levels and core functions that are needed to underpin British film are locked-in, especially at a time when filmmakers and film companies need more support than ever as they make the challenging transition into the digital age. To that end, we will work with the DCMS over the summer to identify how they can guarantee both continuity and safe harbour for British film.[93]

116. The abolition of the UKFC attracted considerable criticism from representatives of the UK film industry and from abroad. In press reports, director and producer, Mike Leigh likened it to "abolishing the NHS",[94] while actor Liam Neeson described the decision as "deplorable" and Clint Eastwood agreed.[95] The Government suggested that the UKFC had spent public money in orchestrating its campaign and the Committee heard evidence that the UKFC had employed a "third party comms strategy". Mr Bevan argued that this was a necessary response to a significant increase in the number of press inquiries.

117. Jeremy Hunt defended his decision to abolish the UKFC in an article in the Observer in August 2010, declaring that "stopping money being spent on a film quango is not the same as stopping money being spent on film".[96] In our annual evidence session with the Secretary of State in September 2010, we asked him about his reasons for abolishing the UKFC. He told us:

    The Film Council spent 24% of the grant that it received on its own admin and we asked ourselves if there was a better way to support the UK film industry than having a large number of executives paid more than £100,000 and an office in LA.[97]

118. When Tim Bevan gave evidence to us in October 2010, he disputed that the UKFC was spending a quarter of its budget on administration, and said that the figure was actually 10%.[98] He also asserted that the British film industry was good value:

    [...] it is very good value for money. It is a business that generates £1 billion-worth of inward investment a year, which is a healthy return to the Exchequer.

    The thing about the film industry is, in production terms, it's divided into two distinct arenas. One is inward investment, which is bringing big studio pictures into the country [...] Then the other half of the production business is domestic British production. In that, we punch a little bit above our weight, I think, in terms of a world film producer in that we have delivered, as it were, to the world film industry probably more writers, directors, actors and producers than other countries of a similar size.[99]

119. According to the UKFC Annual Report published in March 2010, the UKFC spent £8.3 million on its operational costs, which represented approximately 22% of its grant-in-aid settlement of £37 million.[100] However, these operational costs also include the administration of the UKFC's Lottery income of £34.2 million. As a percentage of the combined grant-in-aid and Lottery income, the operational costs make up 11.6%. This represents a decrease on the percentage spent on operational costs in 2008/09, which was 28.6% of the grant-in-aid and 13.8% of the combined income.[101]

120. Tim Bevan claimed that the decision to abolish the UKFC was a complete surprise and said that he was "broadsided by [Culture Minister] Ed Vaizey at midnight on Friday to be told that the announcement was going to take place on the Monday that the Film Council was going to be closed down".[102]

121. We asked Ed Vaizey whether this was a fair assessment of the conversation. He said:

    I think it's fair for Tim Bevan to say that he wasn't expecting us to announce that we were abolishing the UK Film Council. I think that there had been a level of dialogue; it was obviously a very live issue, the relationship between the two bodies. But I think for Tim it did come as a bolt from the blue that we were going to abolish the UK Film Council.[103]

122. The DCMS announcement abolishing the UKFC also mentioned creating a "less bureaucratic relationship" between the Government and the BFI.[104] This implied that the BFI could be involved in taking over some of the roles performed by the UKFC.

123. On 29 November, Ed Vaizey announced that the BFI will become the "flagship body for film policy in the UK"; and the BFI would be nominated as the distributor of film Lottery money via secondary legislation. The statement also announced that lottery funding for UK film will increase from £27 million to more than £40 million by 2014.[105]

124. The BFI's grant-in-aid was reduced by 15% as part of the CSR settlement,[106] and when we had heard from Amanda Nevill, Director of the BFI in October 2010, she said the BFI would have to "change quite fundamentally from the board down [...] to bring in new people and new skills into the additional organisation to do that".[107]

125. The British film industry is good value for money; not just in terms of the revenue it brings into the country, but also in its promotion of the UK as a cultural centre and a tourist destination. However, it is important for bodies that distribute public funds to keep their own administration costs down and we have some sympathy with the Government view that the UK Film Council has spent too much on administration and wages.

126. The abolition of the UK Film Council was handled very badly by the Government. We would not expect a decision with such significant implications for the film industry to be sprung on the UK Film Council with little discussion or consultation. It is extremely regrettable that a film-maker of the stature of Tim Bevan has, as a result, decided to take no further part in Government-sponsored initiatives. It also appears that little or no thought had been given as to who would take on its functions. The UK Film Council was originally created because the Arts Council was felt to be doing a poor job in supporting British film. We would therefore have been very concerned if the initial suggestions that this task would revert to the Arts Council had proved to be correct. We agree that the British Film Institute is the best placed organisation to take over the role of distributing film funding, although given the reduction in its grant-in-aid this will not be an easy task. However, we are encouraged by the latest statistics on the health of the British film industry, and are confident that it will continue to thrive.

THE MUSEUMS, LIBRARIES AND ARCHIVES COUNCIL

127. In the same DCMS statement on 26 July 2010 that announced the abolition of the UKFC, it was also announced that the Museums, Libraries and Archives Council (MLA) would be abolished.[108] The MLA performs a number of roles. It identifies its own key functions as:

  • Managing Renaissance in the Regions - the £50m a year programme which delivers funding to regional museums ensuring government can effectively influence the direction and delivery of non-national museum services across the country;
  • Accrediting and developing museums to national standards;
  • Designating vital collections in non-national institutions;
  • export licensing and providing an expert service to the arm's length Reviewing Committee (which recommends export bars on objects of national significance);
  • AIL (Acceptance of iconic objects in lieu of inheritance tax) and its arm-length panel;
  • Government Indemnity and national security - essential in enabling touring exhibitions;
  • funding the Portable Antiquities Scheme and many smaller, but far reaching and highly valued products such as Culture 24 and Collections Trust;
  • the Strategic Commissioning Programme - helping to build the important relationship between museums and schools (funded through DCMS and Department for Education);
  • National initiatives such as Reference Online, People's Network.
  • The Future Libraries Programme;
  • Working in close partnership with The National Archives to ensure that archive services are integrated into wider public service agendas with the ambition of making them more accessible to the public.[109]

128. Our predecessor Committee commended the work of the MLA in its 2007 Report Caring for our collections, in particular its Renaissance in the Regions programme. The Report also recommended that the MLA deserved a "period of stability to enable it to provide vital support and strategic leadership to the museums, galleries and archives communities".[110]

129. The reaction from the museums sector to the announcement of the abolition of the MLA has generally been one of surprise and concern. In its written submission to our inquiry, the National Museums Directors' Conference (NMDC) highlighted four main concerns about the abolition, namely:

  • the future of MLA functions, particularly the Renaissance in the Regions funding;
  • the transference of the MLA's UK-wide functions to the national Governments;
  • the loss of strategic leadership and policy advice from the MLA, particularly given the reduction in central DCMS staff, and the worry that national museums will be expected to take on this role;
  • the risk of core funding being cut under the pretence of administrative changes.[111]

130. On 9 December 2010, DCMS announced that the Arts Council would be taking over a number of functions relating to museums and libraries, principally:

  • The Renaissance in the Regions programme for regional museums, including completing the re-design of its content and operation;
  • Regional museums improvement and development agenda, including the Accreditation standard and the Designation Scheme and projects relating to the 2012 Cultural Olympiad;
  • Libraries improvement and development agenda;
  • Cultural property functions including, for example, export licensing, Government Indemnity, acceptance in lieu and security advice.[112]

131. The Arts Council has been allocated a budget of around £46 million a year by DCMS to deliver these additional functions.[113] The separate budget for the Renaissance in the Regions programme has been cut by 15% to £43.4 million, in line with the overall cut to the museums sector made in the CSR.

132. We received some words of caution, in written submissions from the museums sector, about any potential transfer of MLA functions to the Arts Council. The National Museum Directors' Conference (NMDC) wrote:

    NMDC is concerned over the future of MLA functions - particularly Renaissance funding, but also other functions such as Government Indemnity and Acceptance in Lieu. If these are to be absorbed into the Arts Council, will museum issues be adequately understood/represented? We need to emphasise that museums aren't just about the arts.[114]

133. Mark Taylor, director of the Museums Association, also expressed scepticism about this development and said that "Arts Council England has precious little money with which to run the museum functions it will take on from the MLA, so the key question is - what is it that MLA does now that will have to be dropped?"[115]

134. Roy Clare, the Chair of the MLA told us:

    I think there is a question over whether the Arts Council, with its new funding regime, has the capacity to absorb the additional work involved and also whether, in its current form, the Arts Council is sufficiently reformed to adapt to the new ways of working with lower overhead costs.[116]

135. In January 2011, we asked the Arts Council if it thought it had the necessary resources and expertise to take on the extra functions. Dame Liz Forgan responded:

    [...] there is a wonderful vision of a whole approach to culture that takes in libraries, museums and the arts. It's very hard, I think, to realise that vision at a time when the whole country, including us, is undergoing recession and there isn't any money to do it with. I think that's very difficult, and we have to be careful. We have to manage expectations about what we really can do. [117]

136. In a press release on 4 February 2011, the Arts Council outlined how it will handle the transfer of responsibilities from the MLA. It made a commitment to retain key MLA staff, and announced that the Chair of the MLA, Sir Andrew Motion, was being appointed to the Arts Council's National Council.[118]

137. We commend the work of the Museums Libraries and Archives Council, as our predecessor Committee did in 2007, and do not see any persuasive reason for the Government's decision to abolish it.

138. We are concerned that the Arts Council does not have the expertise or the resources to carry on, adequately, the functions of the Museums, Libraries and Archives Council. We welcome the Arts Council's commitment to retain key MLA staff. However, given the reductions the Arts Council is having to make in its own operating costs, it is unrealistic to expect that the Arts Council can carry out the role as effectively as the MLA. We recommend that the Government review the Arts Council's museum and library functions and consults libraries and museums in 2012.

THE PUBLIC LENDING RIGHT

139. The Public Lending Right (PLR) was established by the Public Lending Right Act 1979 which gave British authors a legal right to receive payment for the free lending of their books by public libraries. Under the Act, funding is provided by central Government and payments are made to eligible authors in accordance with how often their books are lent out from a selected sample of UK public libraries. To qualify for payment, authors must apply to the Registrar of PLR who is appointed by the Government to maintain a register of eligible authors and books, and to supervise the administration of PLR. Registered authors are paid once a year for the loans of their books during the previous year which runs from 1 July to 30 June.[119]

140. On 14 October 2010, as part of its review of arm's length bodies, the Government announced that the PLR body would be abolished, and its functions transferred to another public body. [120] On 21 October, as part of the Comprehensive Spending Review (CSR), the Government announced the funding settlement for the PLR up until 2014/15 stating that DCMS funding for PLR, which currently stands at £7.45 million will be reduced by 15% over the four year period from £7.22 million in 2011/12 to £6.96 million in 2014/15.[121]

In the same statement, DCMS also announced that it had decided not to extend PLR to audio and e-books.[122]

141. As at March 2011, DCMS has not announced to which public body the current PLR functions will be transferred. In December 2010, we asked Jim Parker, the Registrar of the PLR, what discussion his organisation had had with DCMS in the run-up to the announcement of its abolition. He told us:

    [...] there wasn't a lot of discussion. [...] We knew that arm's length bodies were under review, and being the smallest of the arm's length bodies that are funded by the department, we knew that we would be looked at. But other than knowing the review was going on, we were not asked anything about our own fate.[123]

142. Jim Parker went on to say that during the phone call he received from DCMS informing him of the abolition of the PLR body, it was mentioned to him that the body it had in mind to transfer its functions to was the Arts Council.[124] Subsequently, he was told this would not in fact happen:

    The Arts Council is having a number of other functions transferred to it, and it eventually transpired that for whatever reason that wasn't going to work. Therefore, Ministers and officials looked around for another body within the department that would be best suited to take on our functions. Other than being kept up to date from time to time, saying, "Well, we haven't decided yet" or, "We're making an approach", I have not been consulted on the choice of body.[125]

143. Jim Parker said that his preferred choice would be to form a public-private partnership with the Authors' Licensing and Collecting Society (ALCS), the not-for-profit private organisation that that is owned and governed by the authors whose fees its collects. He said that he had submitted this proposal to DCMS, but had heard nothing further from the Department about it.[126]

144. Speaking on behalf of writers, the author Stella Duffy also argued that PLR functions would be best placed with an organisation that already knew the sector:

    [...]it makes much more sense to have two bodies that know each other and are already working well together, particularly when the Arts Council has already been asked to make massive cuts and is very confused about where those cuts are going to be made. [...]These two bodies seem to me much more adept to work together than any other large organisation that might want to take over PLR, including those that are more about the product than about the writer.[127]

145. Barbara Hayes, the Deputy Chief Executive of ALCS, told us that her organisations would welcome this, and had this to say about the future of PLR:

    I think perhaps that is what has caused where we are now—it [the PLR] is as lean as it can get. It is a very effective and very well thought of organisation, and our preference of course is to keep PLR exactly where it is now. Unfortunately, that doesn't seem to be the way that the current situation is demanding.

    [...] we have certainly had joined-up writing together with regards to membership recruitment strategies. Things that we were talking about as a business joint venture included communications and tracing authors for whom we are holding funds. So it's that type of work that we could do together, and there are a great number of synergies going on here. We do not want to be duplicating effort, so there seemed to be a natural partnership that could develop.[128]

146. It has also been reported that PLR functions will be transferred to the British Library, which is directly sponsored by DCMS.[129]

147. We are surprised at the Government's decision to abolish the PLR body and disappointed that DCMS did not discuss the future of the PLR with its Registrar before announcing its abolition. It follows the same disturbing modus operandi as with the other bodies, including the UK Film Council. We have not found anyone who supports this decision. Any proposal that the Arts Council should take over the PLR was unrealistic and rightly abandoned. However, this has left the PLR in a state of protracted uncertainty, which could have been avoided had the department discussed proposals with the PLR sooner.

148. We do not believe that the British Library is an appropriate body to take on the work of administering the PLR. Far more appropriate is the ALCS, which already distributes royalty payments to authors. We understand that there may be a legal technicality preventing this, in which case we recommend that legislative measures are put in place to allow it to happen as soon as possible.

4   Dame Liz Forgan, Chair of Arts Council England, speech at the Theatrical Management Association's Ambitions for the New Age conference, 12 November 2009 Back

5   www.dcms.gov.uk  Back

6   Ev 156 Back

7   Ev 148 Back

8   Ev 154 Back

9   "Biggest change to arts funding in a generation", Arts Council England press release, 04 November 2010 Back

10   "Our contribution towards reducing the Government deficit", DCMS press release, 24 May 2010 Back

11   "Arts council responds to a £19 million reduction in funding from DCMS", Arts Council England press release, 24 May 2010 Back

12   "Arts Council England implements cuts to 2010/2011 budget", Arts Council England press release, 18 June 2010 Back

13   Q 58 Back

14   Q 59  Back

15   Q 2 Back

16   Q 5  Back

17   HC Deb, 28 June, col 368W Back

18   "Arts Council responds to 29.6 percent spending cut", Arts Council England press release, 20 October 2010 Back

19   "Across the board 6.9% cut in funding for arts organisations", Arts Council England press release 26 October 2010 Back

20   ibid. Back

21   ibid. Back

22   Q 480 Back

23   "Biggest change to arts funding in a generation", Arts Council England press release, 04 November 2010 Back

24   ibid.  Back

25   Arts Council England, National Portfolio Programme: guidance for applicants, 25 November 2010 Back

26   Q 522 Back

27   Q 541 Back

28   Q 522 Back

29   "Biggest change to arts funding in a generation", Arts Council England press release, 04 November 2010 Back

30   Ev 155 Back

31   Q 530 Back

32   Written evidence from Horse + Bamboo Theatre [not printed] Back

33   Written evidence from English National Opera [not printed] Back

34   Q220  Back

35   Q253  Back

36   Q 542 Back

37   Written evidence from OYAP Trust [not printed] Back

38   Q 341 Back

39   Q 343 Back

40   Q 334 Back

41   Q 344 Back

42   Arts Council England, National Portfolio Programme: guidance for applicants, 25 November 2010 Back

43   Written evidence from Cornerhouse [not printed] Back

44   "Statement regarding The Public", Arts Council England press release, 28 January 2009 Back

45   Q 36 Back

46   Q 41 Back

47   Written evidence from Arts Council Collection [not printed] Back

48   Written evidence from Arts Council Collection [not printed] Back

49   www.artscouncilcollection.org.uk Back

50   Written evidence from Arts Council Collection [not printed] Back

51   Q 486 Back

52   www.artscouncilcollection.org.uk Back

53   www.artscouncilcollection.org.uk Back

54   Ev 202 Back

55   Arts Council England, Annual Review 2010, HC (2009-10) 272 Back

56   Q 493 Back

57   Ev 191 Back

58   "Speech by the Chancellor of the Exchequer, the Rt Hon George Osborne MP, on the OBR and spending announcements", HM Treasury press release 02/10, 17 May 2010 Back

59   "Government announces £6.2bn of savings in 2010/11", HM Treasury press release 04/10, 24 May 2010 Back

60   Written evidence from Birmingham Museums and Art Gallery [not printed] Back

61   Ev 128 Back

62   Written evidence from the National Association of Local Government Arts Officers [not printed] Back

63   Q 364 Back

64   Q 106 Back

65   Q 102 Back

66   Q 102 Back

67   Q 102 Back

68   Q 102 Back

69   Written evidence from the Royal Shakespeare Company [not printed] Back

70   Written evidence from the Foundation for Community Dance [not printed] Back

71   Q 21 Back

72   "Biggest change to arts funding in a generation" , Arts Council England press release, 04 November 2010 Back

73   Written evidence from the OYAP Trust [not printed] Back

74   Written evidence from StopGAP [not printed] Back

75   Written evidence from the New Vic Theatre [not printed] Back

76   "A Blitzkreig on the arts", The Guardian, 04 October 2010 Back

77   Q 66 Back

78   Written evidence from Derbyshire County Council [not printed] Back

79   Q 220 Back

80   Ev 168 Back

81   Written evidence from the Royal Shakespeare Company [not printed] Back

82   Written evidence from the Royal Shakespeare Company [not printed] Back

83   Written evidence from the Horse + Bamboo Theatre [not printed] Back

84   Ev 147 Back

85   Ev 156 Back

86   Ev 165 Back

87   Q 243 Back

88   HC Deb 26 July 2010 cols 59-61WS Back

89   UK Film Council Group and Lottery Annual Report and Financial Statements for the year ended 31 March 2010, HC (2009-10) 276, p11 Back

90   UK Film Council, Statistical Yearbook 2010,20 January 2011 Back

91   ibid.  Back

92   "DCMS improves efficiency and cuts costs with review of arms length bodies", DCMS press release 081/10, 26 July 2010 Back

93   "Abolition of UK Film council", UK Film Council press release, 26 July 2010 Back

94   "Mike Leigh: scrapping UK Film Council is like 'abolishing the NHS'", Daily Telegraph, 27 July 2010 Back

95   "Liam Neeson condemns UK Film Council abolition", The Guardian, 28 July 2010 Back

96   "Jeremy Hunt, 'I've cut the UK Film Council so that money goes to the industry'", Observer, 8 August 2010 Back

97   Q 25 Back

98   Q148 Back

99   Q 114 Back

100   UK Film Council Group and Lottery Annual Report and Financial Statements for the year ended 31 March 2010, HC (2009-10) 276, p11 Back

101   UK Film Council Group and Lottery Annual Report and Financial Statements for the year ended 31 March 2010, HC (2009-10) 276, p11 Back

102   Q129  Back

103   Q 392 Back

104   HC Deb 26 July 2010 cols 59-61WS Back

105   HC Deb 29 November 2010 col 59WS Back

106   HC Deb 21 October 2010 col 60WS Back

107   Q 170 Back

108   HC Deb 26 July 2010 cols 59-61WS Back

109   Ev 158 Back

110   Culture, Media and Sport Committee, sixth Report of Session 2006-07, Caring for our collections, HC 176-I, para 222 Back

111   Ev 178 Back

112   "Arts Council England takes on museums and libraries functions", Arts Council England press release, 09 December 2010 Back

113   ibid. Back

114   Ev 179 Back

115   "Museums' future under Arts Council England", Museums Journal, January 2011, p15 Back

116   Q 277 Back

117   Q 571 Back

118   "Arts Council and Museums, Libraries and Archives Councilannounce2011/12 funding plans", Arts Council England press release 04 February 2011 Back

119   PLR press notice, 08 November 2010 Back

120   "Improving efficiency and transparency", DCMS press release 096/10, 14 October 2010  Back

121   HC Deb 21 October 2010 col 60WS Back

122   Ibid. Back

123   Q 442 Back

124   Q 442 Back

125   Q 442 Back

126   Q 448 Back

127   Q 453 Back

128   Q 454 Back

129   www.societyofauthors.co.uk  Back


 
previous page contents next page

© Parliamentary copyright 2011
Prepared 28 March 2011