Funding of the arts and heritage

Written evidence submitted by the Royal Shakespeare Company (arts 25)

Key points:

· Whilst the arts must share the burden of cuts in government spending, they have a key role to play in economic recovery through tourism, regional regeneration and feeding the skills and expertise of the commercial sector – deep cuts will affect this negatively.

· Any cuts should be implemented in a phased way to allow organisations to prepare and seek alternative sources of funding.

· Larger organisations have a responsibility to share skills, expertise and resource with others in their sector and to create partnerships across sectors to benefit audiences and artists.

· Given the significant return for a relatively small investment, we urge the government to maintain investment to organisations directly producing art at a broadly similar level.

· We support the arms length principle and can see benefits in a revised funding system which offers both longer term partnerships and one-off flexible grants for specific work.

· We look forward to restitution of lottery funding to the arts, but we don’t believe that philanthropy can quickly or easily replace public funding and fill any shortfall.

· Creating a culture of giving is a long term challenge and one that we support, but it needs to be matched with new tax incentives to encourage giving.

1. Introduction

a) The RSC is one of the world's best known theatre companies.  It's our job to connect people with Shakespeare and produce bold, ambitious work with living writers, actors and artists.

b) In the last decade, we have given over 11,600 performances, commissioned 186 new plays and worked with 250,000 young people through our education programmes. We’ve taken over £100m at the box office, sold 6.3m tickets, earned £16.4m from commercial activities and generated £16m in revenue from fundraising.

c) We have also raised over £108m from public and private sources for the £112.8m on-time and on-budget transformation of our Stratford-upon-Avon home, due to reopen in November 2010.

d) Our annual contribution to the regional economy is estimated at £58m a year (source: PricewaterhouseCoopers) and over 1000 full time equivalent jobs.

2. 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;

a) Whist we don’t yet know the final figure for cuts to arts funding, it’s clear that cuts on the scale proposed (25-40%) will have real and significant impact for the arts and for the audiences who enjoy them. Most likely for the us it will mean fewer productions, less touring, and a curtailment of the free events and educational activities which help us reach new audiences.

b) Arts funding is a tiny proportion of the national budget (17p per week per person) and the return on investment is enormous. For theatre alone, it’s obvious that the investment of the last decade, coupled with the entrepreneurial skill and commercial professionalism of the sector, has delivered a ‘golden age’ for audiences, with all the national companies and many smaller ones delivering outstanding work recognised across the world and re-establishing the UK’s position as a world cultural leader.

c) Whilst acknowledging that every area of public life must play a part in reducing the country’s deficit, we argue that the cuts must be balanced and phased as the subsidised arts can play a significant part in economic recovery. Our sector must be strong enough to play its vital role in encouraging in-bound tourism, boosting regional regeneration (each £1 of ACE investment in the RSC helps generate £3 for the regional economy from other sources) and feeding the skills and expertise of the commercial sector – as Sam West has pointed out, 145 of the 187 British Academy Award winners started their lives in the subsidised theatre. The majority of productions in the West End begin as subsidised shows.

d) During the current year 2010/11, Arts Council England (ACE) has been able to keep cuts to its regularly funded organisations to 0.5%. The RSC has absorbed this cut through across the board adjustments to departmental budgets. We have however also seen a significant drop-off in educational investment through cuts or abolition of Department for Education and DCMS funded programmes such as Find Your Talent, resulting in a loss of £25,000 in income for projects and services that we had been commissioned to provide. These range from an 18 month project with Looked After Children to help raise their aspirations, to professional development courses for English teachers cancelled by local authorities due to budget cuts.

e) It’s clear that ACE funding also has a vital role to play in leveraging other forms of public support, such as local authority funding. The RSC doesn’t receive any funding from local authorities, but many smaller regional companies do and it’s an important part of the economic mix. We would be concerned that ACE cutbacks have a domino effect, encouraging local authorities to remove funding (especially as it’s not a statutory obligation) and potentially leading to the closure of regional theatres and the loss of many non-building based theatre companies.

f) We are also concerned about the timeframe for implementing the cuts. Too much too soon could have a catastrophic effect, as most organisations will find it extremely difficult to secure alternative sources of funding or develop new commercial models quickly. A longer timeframe allows organisations to plan for and adapt to change – and would allow for the benefits of the restitution of the arts element of the Lottery to be felt, rather than facing a ‘cliff edge’ in 2011 and 2012..

g) For audiences – the most important part of the picture – the cuts will inevitably mean less to enjoy and less easy access. The arts are not just a ‘nice to have’ they are part of everyone’s birthright and public investment in institutions such as the RSC allows us to a run a repertoire, reduce our ticket prices, offer free events, and provide £5 16-25 tickets, encouraging in audiences who may not otherwise have access to the arts. For instance, the 400 schools in our Learning and Performance Network1, with whom we have deep and long-lasting relationships, are selected precisely because they have a high proportion of children who are entitled to free school meals and have little access to live culture.

h) We fear a return to a disproportionate domination of the arts by artists and practitioners with private incomes who can survive lean times, and by audiences who can afford higher prices, and that this will lead to a narrowing of the field of reference and decline.

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

a) There is clearly a responsibility amongst the larger arts organisations to share skills, expertise and resource with others in their sector. Along with many other perrforming arts organisations, we put collaboration at the heart of our work.

b) We regularly co-produce shows with some of the best and most innovative small theatre companies in the UK, for instance, Kneehigh, Filter and Little Angel Theatre, which allows costs to be shared and income guaranteed for our partners.

c) Our voice, text, movement practitioners already work with drama schools and other groups to provide expertise and training to artists, and are now extending this to amateur companies, through a major new programme, part-funded by a charitable foundation. Our RSC Studio provides resources to help established artists develop new work, which might include rehearsal space, actors’ time, dramaturgy or access to technical expertise. We make available our education building, Waterside Space, to local amateur arts organisations for rehearsals and our reopening programme includes work by local amateur companies.

d) There are also benefits in sharing resource more broadly with other sectors. For instance, we have joined forces with other charitable and commercial businesses in the region (Warwick Castle and the Shakespeare Birthplace Trust) to promote UK and international tourism to the region and with Warwick University to develop the teaching of Shakespeare and share practice between theatre and academia, via the jointly run CAPITAL Centre.

e) We could improve efficiencies by sharing knowledge about the things we know work for our audiences, as well as the things that go less well. We can often reinvent wheels within the cultural sector because the opportunities to share information with each other are not readily available. In September, the RSC starts working with ROH, NT, Sage Gateshead, Tate Modern and ACE to define and agree how we make sure our work with children and young people is effective and of the highest quality and how we agree a shared set of outcomes for our education work. This kind of initiative will reduce the amount of time we all spend on the needless collection of data we never use, and instead provide us with a rigorous framework that streamlines measurement and improves the experience for the young people, schools and families who work with us.

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

a) Over the last decade or so, arts organisations have worked very hard at reducing reliance on subsidies and broadened their operations, stepping up commercial opportunities, seeking sponsorships, and professionalising their fundraising. But subsidy remains a crucial part of a mix for many, alongside box office income, commercial operations such as catering and retail, corporate sponsorship and charitable fundraising. It allows arts organisations to broaden their programming and to reach new audiences. It keeps ticket prices low and opens up cultural opportunities to lots of people (especially young people) who wouldn’t otherwise be aware of them or feel they were available to them.

b) We want every child to have a positive experience of Shakespeare whilst at school, and without subsidy, our education programme would have remained small and localised. We could not have afforded our £5 ticket scheme, which has offered cheap seats to 16-25 year olds since 2005.

c) As stated above, the current model has delivered great art over the last decade, brought work to new audiences right across the country and has played a part in strengthening British culture in all its guises and making our cultural institutions the envy of the world. The return the public receives for taxpayer investment is significant for a relatively small sum. We would urge the government to maintain the level of investment at a broadly similar sum during the coming years to organisations directly producing art.

d) Clearly, it’s difficult to specify a precise figure, but the right level must surely be one which continues to deliver real value to the taxpayer, with that value regularly reviewed and determined by a combination of professional judgement on the part of those who administer the grants, the support of audiences and approval from the broader tax-paying public.

e) There has been extensive research into the instrumental benefits the arts can bring, but little or none into the value of art for arts’ sake. We believe that there is an instrinsic value in a Shakespeare play - that seeing it performed live can remind us what it is to be human and can connect us to one another in ways which simply cannot be achieved through other means. It is, of course, almost impossible to quantify this in monetary terms, but it is clearly something that the public values.

f) A recent piece of research from the DCMS Culture and Sport Evidence (CASE) programme2, explores the value of public investment in the arts through quantifying the impact of arts participation on well-being. The results of the research look promising, but it is currently an under-developed case. This kind of research could provide an important starting point for understanding the intrinsic value of arts participation on the individual and inform decisions about optimum levels of public subsidy for the arts.

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

a) We remain supportive of the ‘arms-length’ principle, which allows Government to fund the arts at one remove, without becoming enmeshed in specific questions of merit or suitability. There is still value in a professional grant giving body, which understands the sector and is able to take soundings from audiences and artists to help determine its decisions.

b) We are aware that ACE is reviewing its funding operations at present and can see benefits in a revised system which allows longer term partnerships with organisations, which allows them to invest in artistic expertise and plan investment over a period of years and which allows funding in a more opportunistic way to support individual productions, artworks, or seasons. To date, we have had a good relationship with ACE, working with good, knowledgeable officers who have provided both challenge and support in equal measure.

6. What impact recent changes to the distribution of National Lottery funds will have on arts and heritage organisations; and whether the policy guidelines for National Lottery funding need to be reviewed;

a) Arts organisations have been adept at navigating the various lottery distributors to secure much needed funds; Awards for All, Heritage Lottery, Big Lottery, NESTA, the previous Millennium Festival Fund and the now defunct New Opportunities Fund were all available to arts-based projects for qualifying projects. Redirection of lottery funding to the Olympic effort and the narrowing of focus for other distributors has therefore been a double whammy. Whilst we welcome the return of Lottery funding to the arts after 2012 - through what mechanism we are not yet sure - we also hope that arts-based projects will again qualify for funding from other lottery distributors to help diversify and sustain our fundraised income. As the sector develops a response to increasing expectations for ‘measurable outcomes’ and ways of demonstrating return on investment, we would hope to compete well with health, education and community sectors for lottery funds.

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;

We have no comment to make on these decisions.

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

a) Of course, both philanthropy and business sponsorships have a role in funding the arts – and it’s one they already play very effectively, but they cannot quickly or easily replace public investment.

b) We are now in the 7th year of partnership with Accenture, our Global Performance Partner, who have provided both cash and consultancy in kind which has allowed us to transform our business operations. Following their ground-breaking support in helping us understand and segment our audiences, we have been able to revolutionise our marketing activity, targeting it much more effectively and resulting in significant sales increases. Other commercial sponsorships have also delivered mutual benefits, though our Stratford location does limit corporate hospitality opportunities.

c) We have a very significant donor base, and have enjoyed private support for both our revenue funding and our major capital appeal for the Transformation of our theatres (£34.7m raised in private fundraising for our Transformation, including donations from over 13,000 people in 55 countries).

d) However, the present economic climate is such that we are running ever harder to stand still. Fundraising across all types and at all levels of giving has been impacted by the downturn and we have lost at least one major capital pledge as a direct consequence. We are also having to adapt cash flow expectations and invest more in relationships as donors need longer to honour their pledges During the last two years we have only been able to maintain our annual revenue fundraising rather than grow it.

e) Philanthropists themselves have made it clear that their funding neither can nor should replace government subsidy – their contributions allow enhancements and additions, and their resources would not stretch to replace it. An over reliance on philanthropy can also make organisations more dependent on short term planning and vulnerable to changes in a philanthropist’s circumstances and wishes. It is notable that in the US, where the arts has a much greater reliance on private sector funding, the downturn has resulted in severe repercussions for the arts with a number of high profile closures as philanthropists have been unable to continue their levels of support.

f) And finally, to grow these areas of funding in the future, we do need to be able to give greater recognition to those who give. Gifts are constrained by very restrictive rulings (especially on the application of VAT) which limit the ways in which people can be thanked before there is a tax liability. We would welcome a major review on the tax incentives to give to the arts and the Gift Aid Scheme.

g) We also need to beware of adopting wholesale systems of philanthropy from outside the UK where there are different sets of expectations of what arts activities are there to achieve for individuals and the wider community. In the US for example, there is a strong focus on the Social Return on Investment Model – where the organisation receiving funding needs to quantify in monetary terms the level of social benefit that is being experienced by the participant. UK cultural organisations are a way off being able to provide this kind of evidence of impact and we should question whether this very instrumental approach to arts participation is something we want to encourage.

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

a) Yes. There are three ways in which we would like to see more incentives for private donations:

i. new tax rules which permit lifetime giving

ii. more streamlined and simpler to apply gift aid arrangements

iii. greater opportunities to recognise gifts without incurring tax liabilities

b) In reference to the US style of philanthropy, which we are urged to mimic here in the UK, their cultural and attitudinal context for giving is wholly different to our own. It will take more than minor adjustments to tax legislation to change a national mindset that the welfare state is there to help those in need, and that philanthropy is a remote idea reserved for the very wealthy. And, as demonstrated by a number of notable cases in the past few years, if a wealthy individual feels their own giving or role in British cultural life is being dismissed, they will take themselves and their tax contribution out of the country. The cultural shift required to make large scale philanthropy the norm is a major one and will take considerable time to implement.

September 2010

[1] The Learning and Performance Network is a 3 year partnership programme between the RSC and 400 primary and secondary schools across England. To date we have reached 76,000 children and young people through the network and worked with over 1,300 teachers.

[2] Understanding the impact of engagement in culture and sport; July 2010