Funding of the arts and heritage - Culture, Media and Sport Committee Contents

Written evidence submitted by the Department for Culture, Media and Sport (arts 210)

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

  This Government has sought to protect front line artistic and cultural provision wherever possible. The recent in-year cuts to cultural budgets were focused on back office and lower priority functions. Arts Council England Regularly Funded Organisations, for example, received only a 0.5% reduction in their budgets. Any future changes in funding will adhere to the same principle of protecting front line cultural provision as far as is possible. The impact of any changes will also depend on other changes at local government level, the response of the sector in further increasing self-generated income, changes to the National Lottery good cause allocations and the fostering of philanthropy. It would, therefore, be wrong to attempt to predict the impact now, particularly as the outcome of the Spending Review will not be known until 20 October.

2.   What arts organisations can do to work more closely together in order to reduce duplication of effort and to make economies of scale

  This Government would encourage any co-operative work between arts venues, in sharing knowledge, equipment and expertise in order to save money and increase efficiency. There are undoubtedly areas of duplication within publicly funded cultural organisations and we would encourage our Non-Departmental Public Bodies to take the lead in encouraging the organisations they fund to take advantage of the benefits shared services can bring. We welcome Arts Council England's emphasis on regularly funded organisations taking on a greater role as art form leads, which should provide the support structure for this to happen and also the work done by the National Museums and Galleries, English Heritage and CABE to share and collaboratively procure some back office and service functions.

3.   What level of public subsidy for the arts and heritage is necessary and sustainable

  This Government firmly believes in public support for culture, supported by self-generated income and philanthropic giving. We believe public subsidy should be at a level that allows the cultural sector to operate in a sustainable way; that is why we continue to protect front line artistic provision wherever possible. The Spending Review will set the level of public subsidy for the cultural sector from 2011-12 to 2014-15 and we cannot pre-empt the outcome of that process.

4.   Whether the current system, and structure, of funding distribution is the right one

  This Government is committed to the mixed funding model with funding coming from Government, from earned income and from other sources including sponsorship and philanthropy. We are always looking at ways in which we can improve the distribution of funding, as seen with the changes currently being made to our arms length bodies. We also welcome the changes to funding schemes that Arts Council England have recently consulted the public on, including replacing regularly funded organisation status with partner organisations and specific programme funding. This should provide a more flexible way of providing funding to organisations and individuals, reflecting the differing roles they play in the sector and how they can best contribute to delivering public policy objectives.

5.   What impact recent changes to the distribution of National Lottery funds will have on arts and heritage organisations

  "The Coalition: Our Programme for Government" states that this Government will reform the National Lottery so that more money goes into the arts and heritage, and also sport. We propose that the arts, heritage and sport should each be increased from 16.66% to 20% of the funding that goes to good causes, restoring the shares they received when the National Lottery was set up. In order to protect the voluntary and community sector funding through Big Lottery Fund, whose share would be reduced from 50% to 40%, we propose to stage the change, with the shares for arts, heritage and sport increasing to 18% on 1 April 2011, and then to 20% on 1 April 2012. A public consultation on this was run by DCMS between 21 May and 21 August 2010 and the responses are currently being analysed. Taking account of the consultation responses, we propose to introduce an Order to Parliament in the autumn.

  This Government believes that, in line with the principle of "additionality", that Lottery funds are additional to core Government spending, funds should go to causes that would not otherwise receive funding. It is important and accepted that the Lottery funds arts and heritage among its good causes, sectors which are crucial to the well-being and quality of life of the public.

  Arts and heritage currently receive, together, around £500 million each of Lottery income a year, although amounts are currently reduced because of the transfers towards the London 2012 Olympic and Paralympic Games, amounting to a total of £322 million from the arts and heritage together over a period of five years from 2008-09 to 2012-13. These amounts are dependent on ticket sales and so vary from year to year, but income has increased and current projections are healthy.

  Excluding the effect of the Olympic transfers, the Government's change would mean around £100 million a year extra for arts and heritage combined. In cash terms, therefore, taking account of the additional funds available to arts and heritage distributors after the Olympic transfers end, the increase will be greater. Under current projections, the arts and heritage together can expect to receive the following income, year by year:

2010-112011-12 2012-132013-14
Arts£200 million £220 million£285 million £315 million
Heritage£200 million £220 million£285 million £315 million

6.   Whether the policy guidelines for National Lottery funding need to be reviewed

  Policy Directions to the UK and England distributing bodies (which are currently Arts Council England and the UK Film Council for the arts good cause and the Heritage Lottery Fund for the heritage good cause) are issued by the Secretary of State. These Directions set the broad framework within which the individual Lottery distributors work and the distributors are required to take them into account. In line with its support for the principle of "additionality", the Government has no plans to change the system whereby funding decisions are entirely for the distributing bodies to make.

  The existing directions to UK and England arts and heritage distributors have been in place since 2007 and those for Arts Council England and Heritage Lottery Fund include the following:

    —  Fundamental principles of the Lottery as it was set up in 1994, and which the Government has no plans to change, including the need for an element of partnership funding or contributions in kind from other sources; for projects to be for a specific, time-limited purpose; and for projects to demonstrate financial viability; and where capital funding is sought, a clear business plan to show how running costs will be met.

    —  The need to involve communities in making policies and spending money, foster local community initiatives, and support volunteering, in line with the Coalition Government's proposals for the "Big Society".

    —  The need to ensure all areas of the country have access to funding.

    —  The need to assess the needs of the arts and heritage and the priorities for addressing them.

    —  The need to ensure that those receiving Lottery money acknowledge it using the common Lottery branding so that the public know where Lottery money has gone.

  Where there are structural changes to the Lottery distributing bodies, new policy directions will be issued to successor bodies. In the arts and heritage area, the Government has proposed the abolition of the UK Film Council and is considering the role and remit of the Heritage Lottery Fund.

  We continue to look closely at the current directions for the Lottery in respect of arts and heritage and how they can deliver the Coalition Government's priorities. The Government will consider issuing new or amended policy directions in any good cause if it is appropriate to do so, as has already been the case with Sport England, for a specific issue relating to Olympic legacy. The Department is currently consulting on a proposed new policy direction to the Big Lottery Fund.

7.   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

  DCMS is responsible for a network of more than 50 public bodies and one of the priorities of the Secretary of State has been to examine DCMS's network of public bodies critically with the aim of improving accountability, transparency and value for money.

  This forms part of the work being undertaken across Government, and led by the Cabinet Office, to restore proper accountability for activities funded by public money. Public bodies which do not meet one of the three tests outlined will be bought back into departments or devolved if their function is necessary or abolished if not. This work will reduce the number of public bodies, increase the transparency and accountability of the remaining few, and ensure more effective delivery of public services.

  As a result of this review, the Secretary of State announced on 26 July his intention to make a number of changes that included:

    —  the abolition of the UK Film Council;

    —  the abolition of the Museums, Libraries and Archives Council (MLA);

    —  the merger of UK Sport and Sport England;

    —  the merger of the National Lottery Commission and Gambling Commission (subject to a business case); and

    —  the abolition of the Advisory Council on Libraries and the wind up of the Legal Deposit Advisory Panel.

  We will continue to explore further opportunities to improve the accountability and coherence of our public bodies landscape.

  The details and timing of the proposals announced on 26 July are still being finalised and are subject to discussions with the parties involved. Any necessary legislative changes will be made through the Cabinet Office Public Bodies Bill, which is due to be introduced in the autumn.

  Where bodies are to be abolished we will look to transfer key functions to other existing bodies so as to continue to support our sectors and preserve the necessary expertise. In the case of the Film Council, for example, this will include their current responsibilities for those key mechanisms that support the industry including the film tax relief, which is worth more than £100 million a year, which will remain in place and Lottery funding for film which is set to increase because of the changes this Government intends to make. We are now considering options to transfer the distribution of these Lottery funds to other existing bodies, with a view to reducing administrative costs; and we will maintain key priorities such as strengthening the sustainability of the UK film industry and support its diversity. We will maintain a strong relationship with the British Film Institute which plays an important role in our cultural heritage. We are discussing with the BFI setting up a direct, less bureaucratic relationship with DCMS.

  The decision to abolish the MLA was taken by DCMS in order to focus on front-line services, and to reduce costs and the number of its public bodies. The MLA's key functions such as providing strategic leadership for the Museums, Libraries and Archives sectors, administering the Renaissance programme, library improvement work and carrying out statutory functions for cultural property, will continue and will be transferred to other organisations. The DCMS is working closely with the MLA to ensure that the transfer of these functions takes place smoothly.

8.   Whether businesses and philanthropists can play a long-term role in funding arts at a national and local level

  Philanthropy and business support are key elements of the mixed funding model for culture in this country. Some of the most iconic and enduring cultural institutions were established through the generosity of philanthropists and private individuals, from the National Trust to the British Museum, from Tate to the public libraries across the country endowed by Andrew Carnegie and John Passmore Edwards.

  This support continues today, and is a vital strand of the mixed funding model. For example the support for the Cultural Olympiad by Premier Partners BT and BP, and Panasonic. Enlightened businesses have demonstrated corporate social responsibility through their support for cultural activity and while this has in some cases been understandably constrained through the recession, we hope and believe corporate support for the cultural life of the nation will grow as the economy recovers.

  The Government recognises the profound generosity of donors, whether individuals, businesses or trusts and foundations across society. The £655 million of private sector support for culture in 2008-09 formed a key element of the overall funding framework, alongside public funding from central and local government, National Lottery support and commercial revenue. We believe businesses and philanthropists will continue to play a vital role in funding the arts and heritage over the long term, alongside public funding, not replacing it and they deserve our thanks and appreciation for so doing.

9.   Whether there need to be more Government incentives to encourage private donations

  It is right that Government should play a role in seeking to incentivise private donations to culture. Philanthropy should not replace Government funding but Government must take an holistic approach to public support for cultural activity and the broad range of business models pursued across the sector. Government needs to provide leadership and pursue a long-term strategy in pursuit of its public policy objectives, while working in partnership with the sector and other funders. Philanthropists also demonstrate leadership, strikingly so in the case of the recently announced Giving Pledge in the United States, and our aspiration for the Big Society is that all members of the public will embrace charitable giving and decide which charities to support, in their communities and nationally.

  Incentives come in many forms and donors have multiple motivations for their philanthropy, so Government should be cautious about being overly prescriptive, but we believe it is right that people should take informed decisions about charitable giving. We recognise there are occasions on which giving can be incentivised by the tax system, but tax measures also carry costs and it is right that the Chancellor should have primacy in that aspect of taxation policy. Government also has a role to play in ensuring effective giving and that the highest proportion possible of any charitable donation goes to the primary purpose for which it was intended. Transparency and value for money are as important to charitable giving as to any other area of public policy.

  We must not lose sight of the fact that while the act of philanthropy can be an end in itself, giving pleasure to the donor as well as to the recipient, or creating a legacy which may endure beyond the donor's lifetime, it is just as importantly a means to an end. The creation, curation, performance and dissemination of great art, and the preservation of our national heritage for future generations, is the fruit of philanthropy. If we can enhance that public benefit through more incentives to encourage charitable giving, we should do so.

September 2010

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Prepared 30 April 2011