Written evidence submitted by the National
Heritage Memorial Fund (NHMF) and the Heritage Lottery Fund (HLF)
(arts 192)
1. INTRODUCTION—NHMF
AND HLF
1.1 The National Heritage Memorial Fund (NHMF)
was established in 1980 to save the most outstanding parts of
our national heritage at risk, as a memorial to people who have
given their lives for the UK. NHMF is the only dedicated source
of Government funding for emergency acquisitions. It helps to
acquire land, buildings, objects and collections of outstanding
scenic, historic and cultural interest. An outstanding national
collection has resulted from £298 million awarded. Without
NHMF funding, key parts of our national heritage such as the Flying
Scotsman, Orford Ness nature reserve and the Staffordshire Hoard
would have been under threat.
1.2 When the National Lottery was created, NHMF's
independent board of trustees was given responsibility for distributing
the heritage share as the only body with a remit for and experience
of grant making for cultural, built and natural environment heritage
across the entire UK. The Heritage Lottery Fund (HLF) is the largest
non-government funder of the UK's heritage, currently distributing
around £205 million a year. The proposed change in the share
going to the heritage Lottery good cause would mean an increase
to £255 million a year in 2012-13.
1.3 HLF's approach is driven by the nature of
its funding from Lottery players. It supports the heritage that
the public values, and helps people to get involved with and learn
about it, thereby sustaining heritage for future generations.
Lottery funding totalling £4.5 billion has been awarded to
a broad range of heritage—from national icons and collections
to small, neighbourhood projects; from landscapes, National Parks
and Areas of Outstanding Natural Beauty to castles and piers;
and from steam trains, museums and parks to oral history and local
traditions. More than 34,000 projects of all sizes have been funded,
with grants from £500 to over £20 million, in every
part of the UK. Almost half of this funding has been awarded to
voluntary and community organisations with nearly all projects
involving volunteers. The need and demand for Lottery funding
remains strong. In 2009-10, HLF received applications for £524
million—more than two and a half times its annual grant
budget.
2. SUMMARY OF
RESPONSE
— The national priority of reducing
the government budget deficit will inevitably mean less public
money is available. Analysis suggests central and local government
funding cuts of between 25% and 40% would mean a reduction in
public spending on heritage of £600 million to £950
million pa across the UK.
— A fundamental re-design of what heritage
services are provided through the public sector is likely to result.
Heritage organisations will need to adapt to these new financial
realities.
— This will not be easy. A transformation
of the sector on this scale will need careful management and the
adjustment will take time. There is a real risk of deterioration
in the quality of physical assets along with the social and economic
capital that is based upon them. It is of vital importance to
protect the legacy of investment and innovation that lottery funding
for heritage has made possible.
— This new environment will also bring
opportunities. It could lead to a sector that is even closer to
local communities and is sustained by a combination of volunteering,
local ownership, income generation and individual donations, working
alongside continued public investment.
— Additional Lottery income of £50
million a year from 2012-13 will mean that HLF will be one of
few bodies able to respond to these pressures. HLF's experience
as a trusted funder of heritage, drawing in private and public
investment, places it in an important position to help organisations
to adapt, by investing in skills and capacity as well as assets.
3. IMPACT OF
RECENT AND
FUTURE SPENDING
CUTS FROM
CENTRAL AND
LOCAL GOVERNMENT
ON HERITAGE
3.1 The scale of cuts
3.1.1 There will be reductions in public funding
across the whole heritage sector. Central government departments
including the Department for Environment, Food and Rural Affairs
(Defra), the Department for Communities and Local Government and
the Department for Culture Media and Sport (DCMS) are all likely
to reduce funding. Changes to the funding of economic development,
with the creation of Local Economic Partnership and the abolition
of Regional Development Agencies, will also have an impact. The
situation will be comparable in Scotland, Wales and Northern Ireland.
3.1.2 HLF/NHMF analysis of the potential scale
of these cuts has assumed reductions of 25% to 40% in the budgets
of both central government departments and local authorities,
between 2010-14.
3.1.3 Central government departments currently
provide £1.4 billion in funding for the heritage sector,
so cuts here could amount to between £370 million and £580
million a year. This covers anticipated cuts of £173 million
to £276 million in the DCMS budgets currently allocated to
English Heritage, the Churches Conservation Trust, the Museums,
Libraries and Archives Council, the nationally funded museums,
the British Library and the Royal Parks. Annual cuts in Defra's
budget for natural heritage are estimated at between £193
million and £309 million. In addition, there are likely to
be cuts to the sector from other parts of central government—such
as funding for the National Archives, a proportion of which supports
heritage.
3.1.4 Local authorities are also significant
funders of heritage, with budgets for historic building conservation,
museums, galleries and archives, and historic parks and gardens.
HLF analysis suggests that total local authority expenditure in
England and Wales for heritage was £570 million in 2009-10.
A 25% cut would therefore mean a £142 million annual budget
reduction, rising to £228 million pa with a 40% cut.
3.1.5 Overall, cuts to the entire heritage sector
in England alone could be between £500 million and £800
million pa. With comparable budget cuts in Scotland, Wales and
Northern Ireland, UK-wide cuts would be between £600 million
and £950 million pa. For comparison, HLF's funding for distribution
within the sector UK-wide is currently £205 million pa.
3.1.6 These cuts will have an inevitable impact
on HLF funded projects and future applications. All Lottery awards
over £50,000 require partnership funding of at least 10%
with awards of over £1 million requiring applicants to raise
25%. In the HLF programmes targeted at urban regeneration and
public parks, the proportion of match funding from the public
sector has traditionally been even higher, with nearly all match
funding coming from local authorities and development agencies.
HLF funded projects are finding it increasingly difficult to obtain
partnership funding from within the public sector. Amongst the
larger projects supported in the past two years, for example,
70% of match funding was expected to come from the public sector.
But only one half of that has been secured. Some projects will
therefore need to revise their funding and project plans. The
situation is already worse in places, outside of the more prosperous
metropolitan centres, where public sector support has tended to
play a bigger role.
3.2 The impact of cuts
3.2.1 With less public funding available, the
heritage sector's financial model will have to be re-configured.
Heritage organisations will need to evolve, to be flexible and
to adapt to overcome the loss in public funding by revising business
plans and combining greater earned income and local philanthropy
with volunteer involvement.
3.2.2 In time more heritage organisations are
likely to operate outside the public sector. They will become
more locally responsive—operating with a social purpose
and with commercial acumen. This could bring the freedom to experiment
and to innovate—for example by looking after a mix of heritage
assets from across different parts of the sector, or by operating
across a variety of geographical areas, rather than within strict
administrative boundaries.
3.2.3 Organisations in the sector certainly
have the potential to play this type of role and—judging
by a recent increase in applications to HLF for projects involving
asset transfer—there is an appetite for doing so. The National
Trust is often held up as a model but, at the other end of the
spectrum, thousands of small local voluntary groups already undertake
conservation work in parks, nature reserves and historic buildings,
and run sites and museums.
3.2.4 The current level of philanthropic interest
in heritage can help to underpin this transformation. The most
recent Arts and Business survey, for 2007-08, showed private investment
in culture close to £700 million, with heritage organisations
receiving £232 million. This sum mostly comprises individual
donations, legacies, trust and foundation giving rather than investment
from business. Heritage attractions are also benefitting from
the healthy domestic visitor economy, with the boost of the Olympics
to come. The growth of the knowledge economy offers further opportunities
to increase income, for example through intellectual property
and licensing.
3.2.5 However, there are real risks. A transformation
on this scale will take time and will need to be managed. Even
for an organisation that only receives a third of its revenue
from public funding, replacing a 25% cut would require a 13% increase
from other sources—3% a year for the four years over which
cuts will be introduced. A 40% cut would mean a more demanding
20% increase. And there are many organisations in the sector that
operate on a greater proportion of public funding than one third,
and where the percentage increase in private finance would need
to be even higher. Indeed some parts of the sector, especially
those that are not visitor attractions, will always struggle to
achieve high levels of earned income from commercial operations.
3.2.6 Public funding for heritage is fully justified
on the well established principle of market failure—government
resources are needed because no market exists for individual consumers
to pay for the maintenance of heritage assets, despite the high
value that people place upon them. Even where a market could,
in theory, be created—charging visitors entry to a local
park for example—this will frequently be highly inefficient
as well as inequitable. Philanthropy, though a part of the answer,
can't be the whole answer to this market failure issue, either.
Valued heritage in both inner cities and remote rural areas may
equally suffer, due to a lack of donors able to provide financial
support on the scale required.
3.2.8 Therefore, if the financial re-adjustment
required is not managed successfully, or is simply not feasible,
services will have to be cut and the real risk of loss will arise.
In some areas, such as collections and archives, "mothballing"
may be a feasible option for a short period, but this will mean
that there is much reduced access, with educational and other
services based on the collection being reduced or closed, leading,
for example, to a loss of contact with heritage for millions of
schoolchildren and—more widely—a reduction in the
public support that sustains heritage. For historic buildings
and parks, cutting back on maintenance carries the real risk of
longer-term loss and damage that will be expensive to rectify—as
has happened in the past. In the natural environment, a double
adaptation will have to be managed—to financial and climate
change. Across the heritage sector, revenue investment in public
engagement will fall, and conservation expertise will be lost
at both a local level and from within the relevant public bodies.
3.2.9 The deterioration of assets and curtailment
of services will have a knock-on impact on the social and economic
benefits derived from heritage—from the enjoyment, inspiration
and opportunities for reflection that people value, to the quality
of the local environment. There will be economic consequences
for some areas, where heritage attractions act as important tourism
anchors for local visitor economies. Cuts will hamper local regeneration
and economic development. Finally, if the organisational infrastructure
for managing and running activities stagnates, then opportunities
for the thousands of people who are enthusiastically involved
in heritage projects will be lost. Heritage volunteering, properly
managed and resourced, is hugely popular, with very strong, proven
benefits for the volunteer's own well-being, as well as for the
wider communities in which projects are based.
3.2.10 HLF has particular concerns that the
legacy of Lottery investment of the last 16 years, which has achieved
so much for heritage and people, should not be jeopardised by
cuts to those parts of the sector unable to adapt quickly for
good reasons, or through cuts that are made in too much haste.
4. PUBLIC SUBSIDY
AND THE
SYSTEM AND
STRUCTURE OF
FUNDING FOR
HERITAGE
4.1 Public subsidy is a necessary part of the
mixed economy that supports a thriving heritage sector and is
justified by the importance that heritage has for our society
and the key role it plays in quality of life, contribution to
the economy and our international reputation.
4.2 Government should continue to take responsibility
for protecting heritage of national importance. NHMF is the only
dedicated source of funding for emergency acquisitions, providing
an essential backstop for the UK's Treasure Act and the Export
Control system. NHMF's grant-in-aid was increased from £5
million per annum to £10 million per annum in 2007-08, following
a recommendation from the 2004 Goodison Report to raise its annual
grant-in-aid to £20 million. It currently has insufficient
funds to respond to all the calls on it and in recent years has
had to use its endowment to save Dumfries House and Titian's Diana
and Actaeon.
4.3 NHMF and HLF play a vital role in heritage's
mixed economy. Both are UK-wide funds that cover the full range
of the UK's heritage. Funding should be equally available to all
four countries of the UK, which should continue to have access
to HLF's UK-wide budget for major transformational projects. More
than 50 of HLF's awards of over £2 million have been in Scotland,
Wales and Northern Ireland.
4.4 Communities also want funding bodies to
have an understanding of local heritage and to take decisions
as close as possible to the grassroots. Almost 60% of HLF funding
is decided by locally recruited committees across England and
in Scotland, Northern Ireland and Wales. 40% of HLF funding has
gone to projects in the 25% most deprived local authority areas.
4.5 Funding should also be available for the
whole breadth of the UK's heritage including museums, galleries,
libraries and archives; historic buildings and monuments; designed
and natural landscapes; industrial, maritime and transport heritage;
and the heritage of language, dialect and local traditions. HLF
cuts across traditional, but artificial, heritage boundaries enabling
communities to take action that brings wider benefits to local
areas; for example through our successful Landscape Partnerships
programme, which covers the heritage of an area that people value,
whether natural, built or cultural.
4.6 Funding is needed for both large national
and small local heritage projects. HLF values excellence delivered
through heritage projects of all sizes, with grants from £3,000
to over £5 million.
4.7 Lottery funding for heritage must retain
a people-focussed approach. HLF funding has conserved and opened
up the UK's heritage to a much wider group of people than ever
before. It has given the public a greater say in its care and
management with 90% of awards in the past year helping heritage
projects to recruit and train volunteers. Getting people involved
in heritage is one of the key ways to ensure that it will be sustained
for future generations.
4.8 In order to maintain the arms-length principle,
decisions about applications to both HLF and the NHMF must remain
entirely independent of the Government. Furthermore Lottery distributors
should fund projects that would not otherwise be funded by the
government or public bodies in the pursuit of their statutory
duties. But Lottery funding is not sufficient to replace all of
the likely reduction in central and local government funding for
heritage, of as much as £950 million pa, even with the expected
increases in heritage's share in 2011 and 2012.
4.9 Funders should continue to work together
to maximise their impact and value for money across the heritage,
culture and voluntary sectors. HLF currently delivers a number
of funding streams with others, such as the Parks for People programme
with the Big Lottery Fund, which has invested over £150 million
in public parks since 2006, and the Repair Grants for Places of
Worship with English Heritage, which has awarded funding to Grade
I and Grade II* Places of Worship since 1996.
4.10 Heritage funders must have robust, transparent
and accessible processes that are trusted by applicants, while
delivering value for money. Specialising entirely in grant-making
allows HLF and NHMF to work impartially alongside the wide range
of bodies they fund, providing support in all areas and maintaining
a strong focus on customer service.
4.11 Funding has been and must continue to be
distributed in a way that leaves a legacy of heritage in better
condition for future generations and meets existing heritage need.
The decision to give heritage a share of the National Lottery's
proceeds in 1994 followed decades of under-investment that had
left the UK's heritage in a parlous state. We must not risk returning
to that state.
4.12 Finally, funding should continue to ensure
that heritage plays a role in the UK's economic recovery. At a
time when the Government is seeking to rebalance the economy,
heritage is playing a vital role in supporting growing industries
such as tourism. Heritage-based tourism contributes £20.6
billion to UK GDP and supports an estimated 195,000 full-time
jobs, not just in London and the South East, but across the whole
UK.
5. BUSINESS,
PHILANTHROPIC AND
PRIVATE DONATIONS
TO HERITAGE
5.1 It is important that the tax system plays
its full part in supporting philanthropic giving and private donations
to heritage. The Art Fund's "Living and Giving" proposal
would be one way of providing such an incentive, for example through
income tax or capital gains tax.
5.2 Both NHMF and HLF awards act as an important
lever for other funders, major donors and public fundraising campaigns.
HLF is often the first funder to commit to heritage projects.
This endorsement gives confidence to other funders and has resulted
in a further £3.3 billion in partnership funding being secured
for heritage projects since 1994. For emergency acquisitions,
NHMF is often the principal funder supported by a small number
of other funders, notably the Art Fund. Whilst trusts and foundations
do contribute to NHMF-funded acquisitions, such as grants from
the Esmee Fairbairn Charitable Trust and the Monument Trust for
the purchase of the Siegfried Sassoon Archive, they cannot be
relied upon as a sole source of funding. Most private funders
expect to see some public funding contribution to acquire items
for the national collection.
5.3 Donations from high worth individuals are
often focused toward large capital projects, such as the National
Portrait Gallery's Ondaatje Wing, which was also supported by
an £11.9 million award from HLF. Private collectors also
play a significant role: for example, with the help of NHMF Anthony
D'Offay's collection of modern art was secured for the National
Galleries of Scotland and Tate for £26.5 million despite
being valued in excess of £131 million.
5.4 Public fundraising campaigns can also raise
money for acquisitions. However, they are quite rare and require
both time and resources to succeed. Two of the most successful
recent fundraising campaigns were those to secure Turner's Blue
Rigi and the Staffordshire Hoard. Both campaigns raised almost
25% of the total required from public donations, but still required
a contribution of around 40% from NHMF.
6. IMPACT OF
CHANGES TO
THE NATIONAL
LOTTERY FOR
HERITAGE ORGANISATIONS
6.1 In 2008 HLF announced an annual grant budget
of £180 million pa from 2009 until the end of the current
National Lottery licence period in 2019. Strong Lottery ticket
sales have enabled HLF to increase that budget for 2010-11 to
£205 million. The proposed change in Lottery good cause share
for heritage from 16.6% to 18% in 2011-12 and to 20% from 2012-13
onwards means HLF could increase its budget by a further £19
million in 2011-12 and £50 million from 2012-13 if ticket
sales remain at £5.4 billion pa.
6.2 As a result, HLF expects to support more
projects and initiatives than originally expected. Additional
income will allow HLF to be even more responsive and flexible
in dealing with the issues arising from reduced public spending
by supporting organisations through this period of change. It
will also enable HLF to respond to other emerging challenges and
opportunities for heritage, such as the public-policy focus on
community ownership, asset transfer and decision-making at local
level; the continuing development of digital technologies; the
challenges of a low-carbon economy; and a growing, ageing and
more diverse population.
7. IMPACT OF
CHANGES TO
DCMS ARMS-LENGTH
BODIES FOR
HERITAGE
7.1 As new architecture is established to support
a number of sectors within DCMS's responsibility, it is important
that places of worship; film, theatre and maritime heritage; and
the museum, libraries and archives sectors continue to benefit
from strategic leadership and investment. HLF and NHMF will work
alongside any future arrangements and will continue to award funding
to these important parts of the UK's heritage.
7.2 DCMS has also stated that consideration
is being given to "the role and remit of English Heritage,
the Heritage Lottery Fund and the National Heritage Memorial Fund".
NHMF is working with DCMS, and other bodies involved, to ensure
the best possible future for the heritage, reinforcing the importance
of the principles set out in section 4 of this submission.
September 2010
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