Written evidence submitted by Arts Council
England (arts 77)
1. Arts Council England works to get great
art to everyone by creating the conditions for the making of excellent
art and ensuring that as many people as possible can experience
the art that is produced. We support a range of artistic activities
from theatre to music, literature to dance, photography to digital
art, arts festivals to crafts. We believe that support of the
arts is crucial to our prosperity as a nation and the wellbeing
of its citizens.
2. Arts Council England has two funding
streams—Grant-in-Aid, and proceeds from the National Lottery.
The bulk of our Grant-in-Aid is currently invested in a portfolio
of around 880 Regularly Funded Organisations (RFOs), which will
receive £1.03 billion between 2008-11. 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.
3. We also invest Grant-in-Aid funding in
new opportunities for the development of the arts, through programmes
such as Take it Away, which provides interest free loans for the
purchase of musical instruments, and the Cultural Leadership Programme,
which supports the development of leadership skills for arts organisations.
4. Lottery money is invested in grass roots
arts projects through our Grants for the Arts programme. The minimum
you can apply for is £1,000. Grants for the Arts supports
projects that engage people in England in arts activities, and
help artists and arts organisations in England to make art. It
is the main way we support experimentation and invest in new artists
and organisations. In the period 2008-11, £154 million of
Lottery investment will also see the completion of several big
capital projects and some major new arts spaces. Recently completed
projects include Corby Cube and Dance East in Ipswich; to come
are the Royal Shakespeare Theatre in Stratford and the Visual
Arts Facility in Colchester.
5. We are currently modelling for cuts of
25-30%. Any cuts need to be spread intelligently over four years
so that they can be managed in the best way as sudden, large cuts
will cause damage that will take many years to recover from.
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
What impact recent changes to the distribution
of National Lottery funds will have on arts and heritage organisations
6. On 24 May 2010, the Department for Culture,
Media & Sport cut the Arts Council's 2010-11 budget by £19
million. This cut was in addition to an earlier reduction of £4
million, meaning that our 2010-11 budget was reduced by a total
of £23 million.
7. We worked hard to ensure that cuts to
our RFOs was limited to 0.5% but this relatively minimal reduction
was only made possible by the exceptional use of £9 million
of our historic reserves which we had previously been unable to
access. Had we not been able to use these reserves, we would have
been forced to pass on a 3% cut to our RFOs. As part of the deal
to allow us to use our reserves in this way, £7 million was
given to the Department. £5 million will be returned to our
baseline next year.
8. In order to meet this budget reduction
we also had to make additional cuts to our two highest funded
organisations not directly producing art (Arts & Business;
Culture Creativity & Education); make an additional £0.4
million cut to our operating costs (bringing savings on operating
costs to a total of £6.9 million this year); postpone a major
public engagement project, cut our audience development plans,
and cut funds for partnership working with local authorities and
the public sector.
9. Future cuts will have a far greater impact.
Arts Council England has been asked to model 25-30% cuts over
four years and we have asked RFOs to model how they would cope
with a 10% cut next year. This assumes an overall cut to us in
Year 1 of 15%, extrapolated from overall Treasury figures. We
hope it will not be as much as this. A 30% cut would, if passed
on equally, amount to a reduction in the Arts Council's budget
for regularly funded organisations of £134 million a year.
10. Combined with a reduction in funding
from local authorities (a significant funder of the arts), rising
VAT and a pressure on earned income and private giving, 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.
11. This scaling back of arts provision
and closure of arts organisations will compromise the ability
for people to experience the arts. The closure of arts organisations
will hit local areas hard where the arts provide a focus for tourism,
education, community engagement and creative industry.
12. Cutting back on arts provision at a
local level will undermine the bedrock of support for the creative
economy (the fastest growing economy in the UK). The Work Foundation
has demonstrated how the publicly funded cultural sector in this
country supports the commercial creative sector. This is perhaps
best illustrated in the relationship between West End or other
commercial successes and the skills of actors, directors and those
involved in production developed in the public sector.
13. In response to an anticipated reduction
in Grant-in-Aid and in keeping with our new 10 year strategic
framework, we have been looking at introducing new funding programmes
that will be phased in to replace existing arrangements. These
programmes will better reflect the different kinds of relationship
we have with funded organisations, allow clearer focus on priorities
and will free up opportunities for new entrants and new ways of
working. This will almost certainly result in fewer organisations
supported overall.
14. We are presently still in the process
of developing guidance and criteria for the new programmes and
want to create funding mechanisms that will work flexibly, allowing
us to make best use of all our sources of income (Lottery funded
programmes must be application- based so we expect to run some
kind of application process for the new programmes). The new plans
will be in place from April 2012.
15. Beyond cuts to arts organisations, Arts
Council England would also need to cut back on the strategic projects
it manages. This would limit our crucial developmental role, and
inhibit our capacity to lead, support and develop the sector.
Projects like the Cultural Leadership Programme, Artsmark and
the Cultural Olympiad are examples of projects currently funded
by us on a strategic basis. Cuts to these programmes will have
a longer term impact on the sustainability and development of
the sector.
16. The way in which the cuts are phased
will be important. If changes to the Lottery distribution go ahead,
the arts should see an increase in Lottery funding. However, Lottery
cannot substitute for grant-in-aid funding under the "additionality"
rule laid down by the Major Government. Furthermore, any increase
in Lottery funding will only be phased in over time. Any increase
in Lottery funding will therefore not mitigate the impact of grant-in-aid
cuts in the early years, and Lottery cannot substitute for Grant-in-Aid
funding because of the important principle of "additionality".
Over the whole four year period the effect of a 25% cut would
be £112 million; extra money resulting from changing Lottery
shares will deliver an extra £40 million to Arts Council
England.
17. Any cuts need to be spread intelligently
over four years so that they can be managed in the best way. A
dramatic cut in funding in 2011-12 would hit organisations hardest
in the Olympic year. Sudden, large cuts which are not managed
properly will cause damage that will take many years to recover
from, as our experience of the Stabilisation Programme shows us.
What arts organisations can do to work more closely
together in order to reduce duplication of effort and to make
economies of scale
18. Working together can create benefits
and opportunities for organisations that collaborate, and there
are a number of arts organisations who already do so, for example
the proposed merger between Cornerhouse and Green Room in Manchester,
Newcastle and Gateshead Cultural Venues Forum (NGCVF), Turning
Point Networks, VALE and LARC in Liverpool.
19. We are actively encouraging our RFOs
to develop sharing and partnership scheme but our experience is
that these projects work best when Arts Council England or another
interested party makes funds available and delegates the decision
on exactly what is done to the organisations concerned. This brings
them to the table in a way that is often not possible otherwise.
Invariably, conversations become easier over time and the entities
explore their similarities and find new ways of working together.
This provides a clear way in which we could encourage further
ways of working together—allocate funds for collaborative
projects with a general aim of finding new ways to make partnership
working effective.
20. We do however need to be open about
the challenges that organisations can face.
— Trustees of funded organisations
have a legal obligation to their organisations not to the sector
or to government efficiency agendas. Trustees need to be confident
that the independence of their organisation is not under threat
and that savings can help them to achieve their objectives more
efficiently.
— Collaborative projects take time
to come to fruition, since there is often distrust between entities
who traditionally see themselves as rivals.
— Areas where collaboration could be
most productive and create the greatest efficiencies are often
the source of greatest rivalry. This is particularly common for
things like marketing or fundraising, where databases are seen
as assets, but also for things like estate services, since the
building is often synonymous with the organisation, and so contracting
out its management is anathema.
— Finance is often cited as a potential
saving. 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.
21. There are however many examples of how
our RFOs are thinking creatively to produce cost and efficiency
savings. As part of the successful rescue programme, English National
Opera outsourced workshops in line with many arts organisations.
Where they co-produce, eg with US partners, their new contracted
out arrangements are more cost-effective and sets are made in
the UK. We are establishing a new Organisation Development function
to make sure RFOs have access to the best expertise and advice
in this area.
What level of public subsidy for the arts and
heritage is necessary and sustainable
22. The arts sector recognises the need
to contribute to the economic recovery—and has already sustained
significant cuts (£112.5 million of Arts Council Lottery
funding has been diverted to the Olympics, in addition to the
£23 million in-year Grant-in-aid cuts). Our research suggests
a tipping point of 10-15% for most arts organisations where current
operating models will not be sustainable, leading to less original
work, or in some cases closure.
23. For every £1 that the Arts Council
invests, an additional £2 is generated from private and commercial
sources, totalling £3 income. At a local level our investment
can lever five times its worth. Arts Council investment therefore
acts as the stamp of approval that draws in funding from the private
sector and philanthropic sources. This mixed economy model in
which public subsidy contributes roughly one-third. A sudden,
or drastic, change to that level of support would threaten not
only the quality of artistic life in England but also the contribution
made by the arts to the future prosperity and the positive image
of the country abroad.
Whether the current system, and structure, of
funding distribution is the right one
24. There has been a broad consensus, since
Arts Council England's inception, that the arts should be supported
through an arm's length model. The principal virtues of this include
protecting the artist's freedom of expression from political interference,
enabling peer experts to make decisions about funding and policy
and allowing the criteria for funding to be focused on considerations
of quality rather than other extraneous factors. We think the
present structure with funds distributed by a non-governmental
body is the right one but we would like a new expression of the
Arms Length Principle that is re-imagined for modern times—one
that verifies and realises the success of the arrangement and
also recognises the existence of a Department of State.
25. Arts Council England is committed to
ensuring that public funds are used in the most cost effective
way to deliver the greatest public value. In addition, we use
our expertise to support artists and to make strategic interventions
that build the capacity of the sector and ensure that everyone
has access to the very best of the arts.
26. The Arts Council recently consulted
on the 10-year strategic framework that will underpin our future
investment decisions and strategic interventions. Consultation
responses revealed that there is general agreement and support
for our vision and proposed goals and that our framework will
provide a powerful focus for the Arts Council and its partners
over the coming decade.
27. To achieve this we have evolved into
an efficient and outward looking organisation. We have introduced
new systems of evaluation and artistic assessment and will introduce
international Peer Review to National Bodies. We will look at
how we ensure what we do is as transparent a way as possible.
We will continue to drive down costs while maintaining the quality
and effectiveness of our advice, support and expertise. Since
1 April the Arts Council's overall operating costs are down to
6.6% (reduced from 11% in 2001-02), and of that only 3% is spent
on administrative costs.
Whether the policy guidelines for National Lottery
funding need to be reviewed
28. The present policy guidelines have allowed
Arts Council England to support the arts sector in a flexible
manner and to help achieve great art for everyone. The tone and
scope of the current directions are broadly right—we would
not see a great deal of benefit to changing them. We dully the
ambition to keep a clear separation between the project work of
grant-in-aid and Lottery money.
The impact of recent changes to DCMS arm's-length
bodies—in particular the abolition of the UK Film Council
and the Museums, Libraries and Archives Council
29. It is hard to comment on detail at this
stage. We are currently in discussion with DCMS about how the
current work of the UK Film Council and the MLA can be supported
in the future. We believe it is important not to lose the expert
focus of an arms-length body for the sake of minimal cost savings.
Whether businesses and philanthropists can play
a long-term role in funding arts at a national and local level
Whether there need to be more Government incentives
to encourage private donations
30. Businesses and philanthropists already
do play a role in funding the arts at both a national and local
level, and have always done so. Arts Council believes it may be
possible for private sources of funding to increase in the future.
We are currently conducting a short review of this area to see
what role Arts Council and its funded bodies can be doing to support
this goal, especially at a time when public funding will be reducing.
As part of this review we have been conducting an informal consultation
over the summer in which we have interviewed arts organisations
about their needs and challenges. These have included a range
of big and small organisations, based in and outside of London.
31. It is clear that creating a step-change
will, as the Government itself has acknowledged, take many years
and our strategy in this area will reflect this, looking at both
short and long term measures to increase private giving. It will
very much depend on a long term change in the culture of giving.
32. Whilst private funding is an extremely
valuable source of income for the arts, we would stress the value
of the mixed economy model in the UK, and the benefits this approach
brings. This includes the relative stability of plural funding
streams for the arts that does not exist when there is a concentrated
reliance on either public or private funding sources, as is true
in the European and US models respectively. Public funding also
attracts private donations to the arts, and any successful strategy
to increase private giving needs to acknowledge this pattern.
Private giving will not replace Arts Council England public funding.
33. One thing is clear: a move to a US system
should not be the aim, rather we should strengthen the private
element of the mixed economy. Our consultation has confirmed that
organisations outside London or other established metropolitan
centres face very different challenges. This reflects a number
of different circumstances including:
— the reputational pull of nationally
or regionally significant companies compared with more locally
routed organisations; and
— the different micro-economies found
in the English regions compared to those found in our larger economic
centres, which define the potential pool of funding available
to organisations.
34. Smaller non-metropolitan organisations
therefore face challenges in fundraising. Most require very different
types of support. It is also clear that these organisations should
expect to achieve a different level of private funding. We are
looking at what type of support is most appropriate for these
organisations, including the role that larger regionally significant
organisations can play in supporting smaller parts of the infrastructure,
and whether there are new avenues of giving which could help smaller
organisations.
35. There are two areas in which Government
incentives would improve levels of private giving to the arts.
For the small to medium sized entities we believe the simplification
of gift aid would be the most effective. Helpful changes would
include establishing it as an "opt-out" rather than
"opt-in" scheme; changes to donor benefits; as well
as simplification of the claiming process for larger gifts. For
larger organisations in the business of attracting larger scale
one-off gifts it would be beneficial so that it is possible for
gifts of either funds or assets to be offset against tax in the
donor's lifetime.
36. We also believe that increased recognition
of donations at the appropriate level of Government would provide
an increased incentive for donors, and the Arts Council would
be happy to help play its part in helping to identify individuals
or organisations in a more comprehensive way. Those we have consulted
in the sector have said that recognition could be improved through
more systematic and regular use of the existing honours system,
as well as through increased recognition by Government, either
through the use of receptions at Number 10 or 11, or through thank
you letters or meetings.
September 2010
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