Written evidence submitted by the Royal
Opera House (arts 197)
1. SUMMARY
— The recent and future cuts, coming on
top of the recession and extra costs arising from Government policy
on tax, pensions and National Insurance, will challenge the ability
of arts organisations to create new work, nurture new talent and
to maintain the fabric of our arts venues.
— Arts organisations have a long tradition
of artistic collaboration, from touring to co-productions, but
arguably could do more to pool resources and expertise in developing
infrastructure.
— There is a tipping point at which the
cuts damage an organisation's artistic output and so its ability
to attract earned and philanthropic income. Estimates current
in the sector lie at around the 10% mark, assuming that the cuts
were of short duration.
— The arms-length principle has served
the sector well and should be retained. Longer-term funding agreements
and support for the development of endowments would further enhance
the independence of arts organisations.
— The Royal Opera House supports the Government's
wish to restore the National Lottery to its original purpose and
to restore the shares of the National Lottery Distribution Fund
to 20% for each of the good causes of sport, heritage and the
arts, but believes strongly that this should not be seen as in
any way substituting for any reduction in Government funding.
— We do not believe that the policy guidelines
for the National Lottery need to be reviewed, except to support
the proposal contained in the Conservative Manifesto to make one-off
endowment grants available on a competitive basis from the Lottery
every year.
— We support any changes to the funding
infrastructure that focus more monies on front line arts delivery.
— Businesses and philanthropists can play
a long-term role in funding arts, but are likely to continue to
focus their efforts on London and their funding will continue
to be vulnerable to the vicissitudes of the economy.
— To increase philanthropy it is vital
that the Government creates a tax regime that nurtures and rewards
giving.
These and the comments below are confined to
the Arts sector since our knowledge of the Heritage sector is
limited.
2. THE ROYAL
OPERA HOUSE
2.1 The Royal Opera House (ROH) is home
to world class companies The Royal Opera and The Royal Ballet,
and to the ROH2 programme which develops the artforms, nurtures
new artists and provides a London platform as well as support
for artistic partner companies.
2.2 In 2008-9 the ROH sold 700,000 tickets,
more than half priced less than £50. In addition audiences
around the country saw performances in cinemas and free on television
and big screens.
2.3 The ROH runs important education and
skills programmes and is a leader within the arts sector in developing
digital access to all aspects of its work.
2.4 Public subsidy in the form of an annual
grant from Arts Council England. In the last financial year this
constituted just 28% of Royal Opera House income.
2.5 The ROH was reopened in 1999 following
renovation funded by a mix of National Lottery funding and private
philanthropy with the express intent of increasing public access
to the building and to the artistic work taking place within it.
2.6 Following the reopening an endowment
fund, the Royal Opera House Endowment Fund 2000, was created.
This generated £790k in the last financial year.
2.7 The Royal Opera House has partnered
with Thurrock Council in developing the ROH production facilities
as part of the High House Production Park, a Thames Gateway regeneration
project.
3. ROH RESPONSE
TO THE
COMMITTEE'S
QUESTIONS
3.1 What impact recent, and future, spending
cuts from central and local Government will have on the arts and
heritage at a national and local level
3.1.1 The Government spending cuts come
at a time when a) the economic climate is depressing earned income,
and b) other Government policies are impacting expenditure. In
the case of the ROH the latter are specifically:
— reallocation of responsibility for VAT
on imported services: cost to ROH is £1 million pa;
— rise in VAT to 20%: potential cost to
ROH of £0.6 million pa;
— expiry of transitional relief on Gift
Aid: cost to ROH estimated at £170k pa;
— pensions auto-enrolment: potential cost
to ROH of at least £0.5 million pa; and
— National Insurance: 1% increase from
April 2011 is an additional annual cost of £0.5 million.
3.1.2 It is also worth noting that the cuts
are being imposed and proposed at a time when many arts venues
created or renovated with Lottery funds in order to maximise public
use are suffering from heavy wear and tear requiring increased
capital investment. Deep cuts in arts spending will impair the
sector's ability to safeguard this investment in British culture
for the future.
3.1.3 Sustaining levels of earned income
depends upon maintaining the level of core public investment.
Commercial exploitation depends in large part on the creation
of new and original artworks, and this is exactly the purpose
of public funding.
3.1.4 Equally, we cannot expect philanthropists
to fill a gap left by Government funding. The level of individual
philanthropic giving to the arts has increased steadily over the
years, especially in the capital. But it is questionable whether
the best way to encourage higher levels of giving is to ask philanthropists
to replace monies previously provided by Government. Indeed there
is a danger that philanthropists feel that their generosity is
being taken for granted, and that could reverse decades of patient
development of philanthropic habits in the country.
3.1.5 In addition, not all artistic work
is equally attractive to philanthropists. It is much harder to
attract funding for the work of lesser known artists or those
performing in less established artforms. It is also much harder
for regional venues and artistic companies. We know this from
our own experience where we struggle to attract private funding
for our work in developing new creative artists (choreographers,
composers, librettists and directors), for national touring and
for work which does not fit established models.
3.2 What arts organisations can do to work
more closely together in order to reduce duplication of effort
and to make economies of scale
3.2.1 The Royal Opera House is already a
very good example of partnership working. The Royal Opera, The
Royal Ballet and ROH2 all share the same resources, from Costume
and Scenic workshops to Marketing, PR and Fundraising, IT HR and
Finance and of course our ROH Orchestra. This results in considerable
efficiencies and allows us to achieve a greater return on our
public investment.
3.2.2 Co-productions and co-commissions
significantly reduce investment and risk for performing companies.
The Royal Opera regularly joins with leading opera houses across
the world and with small and medium sized British companies in
creating new shows for our main stage and our smaller Linbury
Studio Theatre. The Royal Ballet is undertaking two co-productions
this season.
3.2.3 ROH2 collaborates with a wide range
of artists, companies and venues. For instance, composers nurtured
through our opera development programme go on to work with small
to mid-scale companies that can produce and tour their pieces
cost-effectively, and new works commissioned by ROH2 tour to smaller
regional theatres and festivals.
3.2.4 Many arts organisations have experienced
the need or opportunity to invest in digital, and especially website,
development in recent years. Given the fast pace of change in
this field, many organisations find themselves running to keep
up with customer expectations and commercial practice. The Royal
Opera House is taking steps to establish an "Open Source"
approach in which collaborating arts organisations would work
together to create new formats, new products and new opportunities
for audience interaction and revenue generation.
3.2.5 For performing arts organisations
in particular, the development of audiences and the delivery of
effective ticketing, fundraising and customer relationship management
(CRM) systems is of the utmost importance. The ROH is anticipating
the need to make significant changes in its infrastructure to
support these operations and has already taken steps to involve
other arts venues in looking at new ways of working, including
the possibility of pooling resources for the development of new
systems or working together in a consortium to improve efficiency
and capacity.
3.2.6 The Finance Directors of some of the
major Regularly Funded Organisations are meeting in September
to look at what potential there might be for further collaboration.
3.3 What level of public subsidy for the arts
and heritage is necessary and sustainable
3.3.1 As noted above (3.1.3. and 3.1.4),
sustaining levels of both earned and philanthropic income depends
upon maintaining the level of core public investment. Though the
business models of arts organisations vary, from recent discussions
with colleagues in the sector a common consensus emerges that
there is a tipping point in terms of the cuts, which if exceeded
will destroy those business models. That tipping point for most
organisations probably lies around 10%.
3.3.2 The Arts Council England has stated
that in their reckoning there is a tipping point between 10% and
15% where the sector as a whole becomes less viable.
3.3.3 The organisation Arts & Business
refers to the "gold standard" of one third public funding,
one third philanthropy and one third self-generated. An organisation
such at the Royal Opera House, already generating 72% of its own
revenue, exceeds that gold standard. But by the same token, since
it is already actively exploiting those options it has less scope
to open up wholly new revenue streams.
3.3.4 It should be noted that the risk to
the sector increases if the cuts are sustained. This would compromise
our ability to create new work and to maintain the fabric of our
arts venues. With diminished artistic output and a poorer audience
experience it would be hard to attract earned and philanthropic
income, throwing the sector into a vicious downward spiral.
3.4 Whether the current system, and structure,
of funding distribution is the right one
3.4.1 The arms-length principle has served
the sector very well and we would not want to see that changed.
3.4.2 The current system under which the
Arts Council distributes both Government and Lottery monies is
both efficient and effective, enabling the Arts Council to maintain
a holistic view of statutory funding of the Arts.
3.4.3 One helpful change would be longer
term funding contracts for organisations like the ROH that plan
and make financial commitments many years in advance.
3.4.4 From our experience of partnering
with local authorities, we suspect that there might be value in
closer collaboration between the Arts Council and local authorities
in meeting shared objectives in the most cost-effective manner.
3.5 What impact recent changes to the distribution
of National Lottery funds will have on arts and heritage organisations
3.5.1 The Royal Opera House supports the
Government's wish to restore the National Lottery to its original
purpose and to restore the shares of the National Lottery Distribution
Fund to 20% for each of the good causes of sport, heritage and
the arts. However we believe that the restoration of Lottery shares
is justified in its own terms and should be viewed independently
of proposed Government cuts. That is to say that the restoration
of Lottery shares should not be seen as in any way substituting
for any reduction in Government funding for the arts.
3.5.2 In particular we believe that the
additional monies which will be forthcoming to the Arts Council
from the Lottery will enable the Arts Council to assist otherwise
thriving arts organisations that are encountering funding difficulties
due to a) the continuing difficult economic climate, or b) the
need for exceptional capital investment to maintain the fabric
of important arts venues (see also section 3.1.2).
3.6 Whether policy guidelines for National
Lottery funding need to be reviewed
3.6.1 No. Overall we believe that the current
policy guidelines have served the sector well.
3.6.2 We do however support the Conservative
party pre-election pledge to make one-off endowment grants available
on a competitive basis from the Lottery every year.
3.7 The impact of recent changes to DCMS arms-length
bodies—in particular the abolition of the UK Film Council
and the Museums, Libraries and Archives Council
3.7.1 These changes do not apply directly
to the performing arts sector. However in general we support the
policy of focusing monies on front line arts delivery.
3.8 Whether businesses and philanthropists
can play a long-term role in funding arts at a national and local
level
3.8.1 Businesses and philanthropists already
play a long-term role in funding arts, though more at a national
level and more in London.
3.8.2 Private funding is especially vulnerable
to external factors, as demonstrated by the recession in the UK
and, even more strongly, in the United States. In the US, where
the balance of public and private funding is more heavily weighted
towards philanthropy and sponsorship, arts administrators say
they are experiencing a funding crisis. Originality and creativity
is suffering in the US as a consequence. The maintenance of a
steady and more even balance of public and private support protects
organisations, and more importantly their artistic output, against
such vicissitudes.
3.8.3 Business support in the UK has been
particularly hit by the recession and current economic forecasts
suggest that it is unlikely to pick up significantly in the foreseeable
future.
3.8.4 Private funders rarely support core
costs. Even an organisation such as the Royal Opera House that
has a really strong membership base finds that the bulk of its
private funding is project based. Moreover this tendency is increasing
with the shift from commercial sponsorship to individual philanthropy.
3.8.5 Over dependence on private funding
can lead to strategy and practice becoming overly-driven by private
donors, to the detriment of the public interest.
3.8.6 In particular such over dependence
can put pressure on organisations to favour the interests of certain
sections of their audience, to the detriment of the broader public.
In the case of the Royal Opera House, it is public monies that
ensure that our building and our programmes are open to the public
and that our ticket prices are affordable.
3.8.7 However, carefully managed, private
funding can and does play an important role in enhancing the quality,
ambition and reach of our work.
3.9 Whether there need to be more Government
incentives to encourage private donations
3.9.1 Yes. The most effective way that Government
can encourage private giving is through changes to the tax regime.
3.9.2 The higher-rate tax rebate currently
available to donors through Gift Aid incentivises donors and so
maximises the amount of philanthropic monies available to the
sector. Its removal could quickly unbalance established patterns
of giving.
3.9.3 The tax regime must continue to encourage
the setting up of new charitable foundations, both to increase
the number of such foundations and to replace major expendable
funds that are due to conclude in the foreseeable future.
3.9.4 Incentivising long-term, committed
giving could provide the financial security to arts organisations
to take bold, inventive and long-term artistic decisions. Such
philanthropic commitments would also boost Britain's ability to
compete for artistic talent in a tough international market.
September 2010
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