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

Supplementary written evidence submitted by the Arts Council England (art 237)

  Following the evidence session that Alan Davey attended and your letter of the 15 November I am writing to provide you and members of the committee with a complete briefing regarding our settlement, our plans for funding organisations for the duration of our funding settlement (2011—2015) and two key pieces of work; our 10 year strategic framework, and our new programme for funding arts organisations in England. I would also like to take this opportunity to update you on our emerging thinking on philanthropy.

We are absolutely committed to ensuring that public investment in the arts works as hard as it can and I am concerned to see that recent statements from the Committee regarding the Arts Council's record on transparency and efficiency continue to arise from out-of-date information. To this end I am also setting out more detail here on our current and future plans to remain a strong, efficient and outward looking organisation.

  Arts Council England has consistently worked to reduce administration costs-we have cut our operating costs by 30% since 2002-03 and since 1 April 2010 the Arts Council's overall operating costs have been brought down to 6.6% (reduced from 9.3% in 2001-02). By current Treasury definitions we estimate just 3.4% of our grant in aid is spent on administration. When combined with lottery support work the combined figure is 4.1%. We believe this to be an extremely low figure for an organisation to operate at.

  During the evidence session Alan Davey attended he was asked about a number of areas of Arts Council expenditure which committee members thought were too high, including attendance at party conferences (which we have not done for the last two years), and the high numbers of staff employed in Advocacy and Communications (which were reduced by 46% as part of our organisation review). I would urge the Committee to make sure that it is looking at up to date figures, and calling well-informed witnesses, as a considerable reform of our working processes has occurred over the past two years, many of which go directly to some of the concerns voiced by your colleagues. I am sure that you and the Select Committee will appreciate our continuing efforts to reduce administration costs as far as possible.

  We have also worked with our partners and stakeholders to develop Achieving great art for everyone, a clear set of priorities for the arts over the next ten years, and our new arrangements for funding arts organisations in England. We are confident that both will support us in ensuring a strong and resilient future for the arts, realising our vision of England as a world leading creative and cultural nation driving innovation and excellence in the arts.


  On 20 October the Arts Council was given a reduction of funding of 29.6% over the period of our funding settlement. This cut means that our budget will reduce from £449 million to £349 million by 2015.80% of this reduction will take place within the first two years of our settlement. This was obviously a very significant reduction that presented us with a serious challenge.

However, we will ensure that over the four year settlement period the overall budget available for funded organisations will only be reduced by 14.9%

  In our conversations with the arts sector we had made clear our commitment to make funding decision for this period in two stages which I outline below.

  In addition, we have also been asked to reduce our administration costs by 50% over the course of our settlement. Our National Council has expressed concern at the potential impact on our Charter responsibilities but we will work hard to maintain the quality and effectiveness of our advice, support and expertise, and to ensure that value for money continues to be secured from the investment we make in the arts.


  In anticipation of our move towards a new programme for funding, to replace the current regularly funded system, we have put in place transitional funding for 2011-12.

Regularly Funded Organisations (RFOs) will receive a year-on-year reduction of 6.9% during this transitional year 2010-11.

  This transitional year will mean that organisations who currently receive regular funding will have the benefit of secure funding for one year, and a full year's notice of significant future changes to their funding. It will also allow time for discussions with co-funders and partners to minimise damage.

  We are now asking organisations to apply, through a very simple on-line process, for funding from 2012 onwards. All applicants will be notified of the outcome of their application to this new funding programme in March 2011.

  We have limited the reduction to our budget for front-line arts organisations through significant reductions to two bodies we currently fund—Creativity, Culture and Education, who administer the Creative Partnership and Find Your Talent schemes, and Arts & Business, who both received a 50% reduction in funding. The government's complete cut to the Creative Partnership's programme as part of the Comprehensive Spending Review meant that we had to reassess the level of support we gave to CCE. Children and young people continue to be a priority for us and we will still provide leadership in ensuring that the resources invested across the sector are used to achieve a high quality arts offer for children and young people.

  I understand that the Committee has expressed a strong interest in the work of Arts & Business, an organisation that has received around £4 million a year over the course of our previous funding settlement (2008-11). This will be reduced to £2 million for 2011-12, and we have informed them that they will not be eligible for regular funding beyond 2012.

  We have taken this decision as we believe our funds are best used to support front-line organisations directly engaged in the production and provision of art and that it is unsustainable for us to continue to provide core funding for Arts & Business in such a challenging financial climate. We are looking to move towards a private giving strategy that is owned and led by the sector and to which a number of specialist organisations—quite possibly including Arts & Business—will contribute on an openly tendered basis.

  We will also be reducing our development (or `managed') funds by 64% in 2011-12. These funds are used for a range of projects that help us to create a resilient arts sector through work on audience development, partnership working with local authorities and the private sector, and projects including the Manchester International Festival (2010-11 funding—500k) and the Cultural Leadership Programme (2010-11 funding—£3.3 million).


  During the process of putting together our 10 year strategic framework, Achieving Great Art for Everyone we have consistently made clear our intention to move to an application process for organisations that receive funding on a regular basis for 2012-15. This is an important change in the way that we provide funding to organisations and will make our investment approach more flexible, more open and more transparent.

We see the four major changes to our existing regular funding programme as:

    — an open application process for all organisations;

    — funds awarded will be for a fixed term of normally three years, but there will be the flexibility to have variable funding terms of as little as two years or as many as six years;

    — the funding agreement with individual organisations will be tailor-made, based on the delivery of shared goals and clear criteria; and

    — the funding agreements will be based around "strategic" and "programme" relationships with organisations, rather than a "one-size-fits-all" relationship.

  All funding decisions will be made against a set of published criteria, with organisations demonstrating how they will help us meet at least two of the five goals set out in Achieving great art for everyone. The five goals are: working to ensure talent and artistic excellence are thriving and celebrated; that more people experience and are inspired by the arts; creating an arts sector that is sustainable, resilient and innovative; ensuring the arts leadership and workforce are diverse and highly skilled; and that every child and young person has the opportunity to experience the richness of the arts.

  A list of the criteria against which we will be judging applications is contained within the guidance notes for applicants, and I have attached a copy for ease of reference. We will of course continue to support financially well-run organisations under the new application process as happened under the previous funding arrangements.

  This move will help us to ensure that funded organisations help us to realise the long-term vision for the arts that we have articulated in Achieving Great Art for Everyone, and to manage demand for funding at a time of diminished resource.

  All existing regularly funded organisations have been invited to apply through a straightforward online process. Organisations not currently funded by the Arts Council will also be eligible to apply. Following the closing date on 24 January, applications will be assessed and we intend to let organisations know of their funding for 2012-13 onwards by the end of March 2011. As I pointed out, this will give organisations at least a year's notice of any significant changes to funding.

  Our funding decisions will be made in the context of the more limited resources available. This will of course mean that will have to make some very tough decisions. There will undoubtedly be good applications that we are unable to support. I would also like to reassure you that we do not anticipate a significant increase in the amount of bureaucracy surrounding this new process. Application forms will be light touch and on-line. "Box-ticking" will be minimal. Organisations will be asked to explain in their own words how they contribute to one or more of our stated goals. This is a fair and rigorous process that will enable us to provide funding in a transparent and open way.


  Philanthropy has always been important to the arts but we now need a step change in the level and nature of the contribution from private giving. We do not underestimate the challenge this presents and the Arts Council will shortly be producing a report which we shall share for with the Secretary of State which will set out how together we can achieve this.

As part of this work we have been conducting an informal consultation with a cross-section of arts organisations, philanthropists, and organisations that specialise in fundraising, and a review of the levels of philanthropic giving that funded organisations have received over the past five years.

  Following some very productive conversations with leading arts fundraisers about how they might help to mentor their colleagues we are confident that in the future advice and guidance can be generated from within the sector as well as working to pull together major partnerships. We also anticipate that we will launch Challenge Funds designed to incentivise donors and to direct support to the arts and cultural organisation to build their capacity.

  Many people within the art sector were pleased that the Select Committee chose to initiate an inquiry in funding for arts and heritage and are looking forward to a report that makes afresh case for continued investment in the arts and creative industries, properly examines the mechanisms through which that funding is provided, and makes constructive recommendations about how organisations, government and Arts Council England can work together to increase private giving.

  We have been disappointed that our engagement in this inquiry continues to be dominated by the particular concerns of one committee member, using out of date information that has been exhaustively aired in parliamentary questions mostly focussed on several years back. Of course Mr Watson has a perfect right to raise any matter of concern and Alan and I remain accountable for the Arts Council even in matters before we joined it. However, after six months and 120 Parliamentary Questions I would hope we could now come to focus on the present and future rather than the past. Alan Davey and I have continually attempted to engage with Mr Watson directly but so far our invitations to come and discuss his concerns about our work have been declined.

  We are ready to provide the committee with any further information that will be helpful to your inquiry and look forward to a constructive report that will help us tackle the challenges for the cultural sector caused by the current financial difficulties.

December 2010

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