Funding of the arts and heritage

Written evidence submitted by the National Campaign for the Arts (NCA) (arts 33)

1. INTRODUCTION

1.1 The National Campaign for the Arts (NCA) is the UK’s only independent campaigning organisation representing all the arts. It provides a voice for the arts world in all its diversity and seeks to safeguard, promote and develop the arts and win public and political recognition for the importance of the arts as a key element in our national culture.

1.2 The NCA is a membership organisation. To ensure its independence, the NCA does not receive any public subsidy; membership subscriptions provide the core funding to enable it to carry out its vital remit. The NCA represents some 550 organisations and individuals across the UK, ranging from small and medium enterprises to the major, national institutions, umbrella bodies, trade associations and unions. This response has been informed by input from our members.

1.3 The NCA believes that the arts and culture make an important contribution to people’s lives, their communities, their education and to the economy. Through the Manifesto for the Arts1 published in June 2009 and through briefings for politicians and the press, the NCA has acted as a voice for the arts sector, identifying administrative, practical, and financial issues affecting the arts and working with Government and the sector to find solutions to problems.

1.4 The NCA welcomes the opportunity to inform the Culture, Media and Sport Select Committee’s inquiry, to report on progress made to date and to highlight areas of outstanding concern. The NCA has previously raised concerns with the Committee about deep and swift cuts to the sector. This response has been compiled in order to draw the Committee’s attention to the impact of cuts on the artistic and cultural life of the United Kingdom. We would also welcome the opportunity to provide additional oral evidence to the committee in due course. As the representative organisation of arts sector organisations working the UK we believe we could provide a valuable perspective on the issues covered by this inquiry.

2. IMPACT OF CUTS

2.1 The UK’s arts funding model is mixed and formed of funding from central and local government, earned income and private funding (via trusts and foundations and philanthropy). According to figures from Arts &Business, public funding makes up just over half of the art sector’s income, one third of income is self-generated through box office and other earned income while the contribution made by the private sector accounts for one sixth .

2.2 To understand the impact of cuts it is important to understand the difference in reliance on public funding by art forms and organisations. Some art forms are simply more resource-heavy and costly to produce than others, such as opera or ballet for example. For others, such as museums, fixed costs such as care for collections and building costs cannot be magically spirited away. Public funding forms a vital part of the equation when seeking to raise sponsorship money for exhibitions which are costly to mount and insure, let alone securing the necessary levels of funding to maintain free entry. Most of the larger, national arts organisations and museums have adept and efficient marketing and fundraising functions which secure greater levels of earned income and philanthropy. In many cases, the ‘aspirational’ ratio of 30-30-30 to public, earned and private income is surpassed by organisations such as the Royal Opera House and Tate, whose ratio of earned and private income far exceeds their public income.

2.3 The picture is different again for smaller and regional arts organisations, and those community organisations working to deliver to local and community objectives. For reasons of size, location or remit, these organisations are much more reliant on public funding and particularly on local government funding. It is not always as easy for these organisations to augment their income through private donations or business sponsorship.

2.4 Arts Council England (ACE) has already had a 5 percent in-year cut to its grant-in-aid budget, reducing its original 2010/11 budget by £23 million - from £468 million to £445 million. DCMS’ share of the Government's in-year reduction was 4.1 percent or £88 million. As a result, all ACE Regularly Funded Organisations (RFOs) received a 0.52 percent cut, except Arts & Business and Culture Creativity & Education who bore cuts of 4 percent.

2.5 Arts Council has now been asked to model a 25 – 30 percent cut across four years (along with other DCMS funded bodies). 30 percent would amount to a £134 million cut in ACE’s grant-in-aid budget.3 (Applying the blunt principle of reducing the number of RFOs by 30 percent would equate to the loss of over 200 arts organisations.)

2.6 These cuts are likely to effect smaller, regional organisations more severely. Arts Council has indicated that it will apply cuts equally across the board in the first year, seeing this as the fairest approach to administering cuts in what is expected to be a very short timescale to plan. However, ‘equal pain’ inevitably ends up having an inequitable effect. Some organisations may be fatally damaged, limp on but end up having to fold. This means ACE would have lost the value of its investment in that organisation over that year. ACE is caught between wanting to operate a fair and transparent system, while recognising that some of its investment could end up wasted.

2.7 The NCA is also concerned about cuts at the local level. Museums and galleries for example, are less reliant on subsidy from ACE, and more so on financial support received from their local authorities. Local authorities have flexibility over discretionary budgets and so the impact on arts and cultural expenditure will vary from council, but their budgets are even more vulnerable as all local authorities will be cut by 25 percent. The Spending Review will need to address the impacts of these cuts to the sector too.

2.8 Despite the economic challenges, some our members have experienced increased popularity and continued success. In 2008-9 there was an increase in attendance at RFOs of 17 percent and a 9.2 percent increase in RFOs rated ‘strong’ or ‘outstanding’ in artistic quality.4 NESTA has calculated that with Government support, a 4 percent annual growth rate can be achieved in the coming years by the creative industries, double the rate of the rest of the economy, and by 2013 the creative sectors are expected to employ more people than the financial sector.5 Cuts foreseen in the Comprehensive Spending Review will prematurely halt this growth across the creative industries.

2.9 In addition to the detrimental impact such cuts would have on local economies, we believe Britain’s current ranking of 4th out of 50 countries in terms of culture and art6 would also be compromised by such changes. The Prime Minister’s recent pledge at the Serpentine Gallery on 12th August to make Britain one of the top five tourist destinations in the world is a timely reminder of the role arts and culture will play in this realising this goal. Moreover, as talent nurtured in theatres and music venues continue to win Oscars, Grammys and other awards of international standing, the UK’s reputation as a centre of excellence will also continue to grow.

2.10 While the arts sector accepts that some cuts are inevitable and understandable in the current climate, deep cuts over a long period would result in the loss of many organisations and a reduction in the ability of the public to see or take part in the arts. It will be the loss of opportunities to the public that will have the most damaging long-term effects.

3. COLLABORATION ACROSS THE SECTOR TO REDUCE REDUPLICATION OF EFFORT

3.1 There are already many instances of collaboration in the sector. For example, Sound and Music7 was created from the merger of four contemporary music organisations. The initiative was apparently started by looking at 12-15 different small organisations, of which four eventually merged.  Admin savings were marginal because the organisations already had very basic admin structures, but the merger led to an improved infrastructure for the new organisation as well as investment of £1.2 million from Arts Council’s 'Thrive' programme, some of which went towards providing reserves. 

3.2 Examples of collaborative working include NewcastleGateshead Cultural Venues , a group of the 10 major building based organisations in the conurbation. Gains include:

· Digital - more efficient and effective platforms eg through r ecommendation engines, Social media protocols, Intranets, web visibility, mobile platforms.

· Facilities Management - savings through buying waste recycling, disposal contracts, electricity and other overheads collectively.

· Human Resources – creating a network with larger organisations providing HR support to smaller organisations where their only resort previously would have been lawyers.

· Finance - buying audit or merchant services collectively or individually, sharing practice, looking at developing trends and opportunities eg changing banks because the rates are better, charitable discount for train travel, etc.

3.4 The NCA would like to stress that for many of our members, especially theatres and opera houses, a large proportion of overall cost is due to production, which cannot be squeezed or shared because of the organisation-specific nature of productions.

3.5 For some arts organisations, particularly those working to deliver specific outcomes such as health, social welfare or criminal justice, collaboration with organisations outside the arts sector might prove more fruitful.

3.6 Savings are possible through mergers or collaboration. They are, however, dependent on the strategic and cultural fit of the organisations. Much hangs on the purpose and remit of the organisations and their constitutions and it is important to stress that collaboration or mergers are not always efficient, effective or desirable. Forcing organisations together solely to fit a cost-saving agenda is unlikely to bear fruit in the long run. There are also costs in joining together (such as redundancies) and these should be weighed against the gains. It is salutary to note that when the five Scottish national companies were charged with examining areas of collaboration, the only area they found where this could work was in HR and that involved losing just one post.

4. NECESSARY LEVEL OF PUBLIC SUBSIDY

4.1 The UK arts sector thrives because of its mixed funding model. It is neither solely dependent on state aid nor on private giving for its success and as such is a slave to none. For every £1 that the Arts Council invests, an average additional £2 is generated from private and commercial sources, totalling £3 income. At a local level investment can lever five times its worth.8 This is crucial if we are to have a vibrant cultural sector. The ‘arm’s length’ principle delivers artistic independence from the state and state funding ensures that no one wealthy individual can threaten controversial and challenging works with closure by removing their financial backing. Government has a vital role in continuing to support and encourage - and indeed to protect its investment - in this sector.

4.2 As stated in section 2 above, reliance on public funding also varies across art forms and across the sector; while some smaller, more regional organisations such as community based arts projects are almost 100 percent reliant on public funding, larger, national arts organisations are much less so. It is therefore difficult to determine exactly how much public funding is required. However, we do know that the increase in grant-in-aid, revenue funding made available to arts organisations over the last few years has been instrumental in stabilising and strengthening the sector and the rewards from this in the public’s experience of the arts and the UK’s global reputation have been clear.

5. CURRENT FUNDING STRUCTURE

5.1 The NCA supports the existence and remit of Arts Council England on the grounds that public funding for the arts should be distributed by a body operating at arm’s length from the Government, whose responsibility it is to ensure that the funding available supports artistic work of the highest possible quality and makes this accessible to the public. The NCA recognises that ACE is responsible for making strategic funding decisions and supports its right to do so independently.

5.2 One of the key functions of a national, strategic body is to ensure that there is adequate provision of venues and art forms across the country to ensure people have good access to the arts. This requires a national perspective supplemented by good, on-the-ground knowledge of provision and needs in the regions. While there may be ways of delivering efficiencies within a national/regional structure, it will be important to ensure good local knowledge is communicated effectively up the chain and national and central initiatives communicated regionally to ensure decisions are made on the best possible evidence.

5.3 Local government is the second most important funder of the arts, contributing approximately £220.5m in 2009/10 in England and Wales. The degree to which local authority arts services provide support and facilities varies according to the value (actual and potential) that they ascribe to the impact of the arts on local communities. As funding from local authorities is discretionary, each local council or regional authority will have its own system of grant funding. Cultural budgets vary enormously.

5.4 At least 10 percent of all authorities in England and Wales have lost their arts services since 2000. The withdrawal of local authority support and funding for the arts is expected to worsen, as spending cuts are likely to fall heaviest on non-statutory services such as culture and leisure. Many arts organisations are co-funded by ACE and the local authority. In this, ACE plays a vital role in ‘shoring up’ a local authority’s commitment to the arts. The NCA believes that the DCMS should also play a greater part in supporting arts at the local level by highlighting the economic and social benefits that arts and culture bring to local places, or by providing incentives or good reasons for local authorities to retain funding.

5.5 The NCA would like to see more flexibility in funding mechanisms. Currently, arts organisations are either regularly funded or they are not. The difference between the two states is absolute, although non-RFOs do have greater access to lottery funds. We know that Arts Council is looking to develop different funding streams which will allow for a greater flexibility in the portfolio. We support this and wait to see further detail.

5.6 We would also like to see more flexibility in the duration of funding agreements. A three year funding cycle is too short for many organisations who have to plan and commit to programmes and expenditure even though there is not always the guarantee that their funding will be secure. For some, it may make sense for funding agreements to be extended to five or even ten years, although long-term or continuous funding should never be seen as an organisation’s right.

5.7 In light of expected spending cuts and changes to the apportionment of National Lottery Shares, the ratio of grant-in-aid to lottery-funding available to ACE to distribute is expected to change from roughly 85:25 to nearer 60:40. This change will have implications on what ACE is able to fund and how, given that different rules apply to lottery funding.

6. IMPACT OF RECENT CHANGES TO NATIONAL LOTTERY SHARES ON ARTS AND HERITAGE ORGANISATIONS

6.1 The diversion of funds from the lottery to the Olympics had a significant, detrimental impact on existing grant funds. The Arts Council England Grants for the Arts fund fell from £83m in 2006/7 to £54m in 2007/8, a reduction of 35 percent. This had a dramatic effect on the sector and caused a hiatus in the development of artists and arts projects.

6.2 The NCA welcomes the Department for Culture, Media and Sport’s commitment to restore the shares of the National Lottery Distribution Fund to 20 percent for each of the good causes of sport, heritage and the arts. This would benefit the arts by 4 percent. The proposed changes would see an increase in the apportionment of shares to 18 percent on 1 April 2011, rising to 20 percent on 1 April 2012. This stepped change would be bearable if any potential cuts to the grant-in-aid budget were not front-loaded. If deeper cuts are made early in the funding cycle, then there is a case for accelerating the increase.

6.3 Lottery funding provides the arts with the ability to reach out beyond their core functions and audiences through projects that have a wider community and societal benefit. Increasing the arts lottery share will ensure that more of these activities can take place.

6.4 The NCA is keen to ensure that the increase in lottery shares is not used as a reason to lower public funding to the arts in future. The principle of additionality must remain, whereby the money provided from the lottery is not seen as a substitute for but a supplement to existing Government spending.

7. WHETHER LOTTERY POLICY GUIDLELINES NEED TO BE REVIEWED

7.1 It is important to reiterate the distinction between the type of work supported by core grant-in-aid funding and that supported by Lottery funding which complies with different rules. We believe the current policy guidelines are adequate and do not need to be reviewed.

8. IMPACT OF RECENT CHANGES TO DCMS ARMS’ LENGTH B ODIES

8.1 The NCA would like to draw the Committee’s attention to the significant structural changes that ACE has twice undergone in recent years. These have been the result of efficiency drives among DCMS’ arm’s length bodies. The cuts announced by DCMS and the emphasis on making savings through ACE’s operational budget will force ACE to look inwards once again instead of concentrating its resources on developing the sector.

8.2 These cuts and restructuring exercises now call for a serious and fundamental review of what type of organisation and funding body Arts Council England should be. At present, the expectation seems to be that ACE must simply continue to do all that it does, and more, with much less. This is clearly an insupportable expectation. Arts Council has started exploring this issue and asking these questions of the sector in its consultation on its ten year strategy, which is due to be published later in the autumn. The NCA has responded that ACE should do much more in partnership with other organisations and potentially contract out or delegate work to other organisations that may be better placed, or better networked, to deliver.

8.3 The NCA believes however, that equal thought also needs to be given to DCMS’ own role and remit. It has been some years since the creation of the Department and in that time (as far as we are aware) there has been no serious attempt to address the arms’ length principle and to identify those areas of policy or practice that should remain strictly within the purlieu of ministers and those that should sit in an arm’s length body.

8.4 This becomes even more urgent with the decision taken by ministers earlier this year to abolish the Museums, Libraries and Archives Council and the UK Film Council. For example, many of the MLA’s essential and core functions will need to continue. The NCA suggests that it would make sense for the Department to absorb the responsibility and remit for key statutory functions such as the Government Indemnity Scheme, Acceptance in Lieu and the Reviewing Committee on the Export of Works of Art, while other functions such as improving the standards and efficiencies of museums, libraries or archives could more sensibly be delegated to other agencies.

8.5 We would also like to raise member concerns that in addition to distributing funds, the MLA and Film Council also provided specialist knowledge to practitioners and artists in their field of work. We would therefore like assurances from the DCMS that these functions and support networks will be made available elsewhere.

8.6 This inevitably places Arts Council England in the frontline for potentially assuming more, and wider, responsibilities from both the MLA and UKFC. If this is to be the case, much greater clarity on roles, purpose and objectives needs to be defined, as well as clearer demarcation of remit and responsibility between the department and its agencies.

8.7 The assumption of any additional responsibilities or functions inevitably brings resource implications and requirements. These must be fairly and carefully apportioned to ensure good and effective governance. It will be important to ensure that available Government funds are properly managed especially as DCMS and ACE face their own cuts and staff capacity is reduced

9. THE ROLE OF PHILANTRHOPY

9.1 Philanthropy plays a key role in civil society; it makes the link between the private individual and the public realm. Private giving to the arts, culture and heritage can encourage risk and innovation as it is not constrained by state guidelines. As quoted in the document Private Giving for the Public Good, (of which NCA was a contributor and a signatory) "there are 68 billionaires living in Britain and a hundred new millionaires are being created every day". Nonetheless, "since 1992 charitable giving has actually fallen by 25% as a percentage of GDP."9

9.2 The NCA believes more could and should be done to encourage more private giving into the arts, by the sector and by Government, and we welcome the Minister’s intention to explore this more fully. Nevertheless, we caution against over reliance on the private sector as the panacea to replace government spending.

9.3 We contend that donors - individuals and business alike - want to place their investment in a ‘sound bet’. They want their funding to provide the ‘icing on the cake’ rather than the raw ingredients. Private money tends to follow public funding; it is that element which helps to underscore the confidence in an organisation. Cuts to public funds, therefore, will not necessarily lead to a boost in private giving but could have the opposite effect.

9.4 Many museums and galleries across the UK, including our major national museums, are increasingly reliant on private funding to purchase key acquisitions. Even so, the ability of UK institutions to outbid their rivals from the US or Europe is ever diminishing, with the result that many UK works of art or items of historical value are lost to the nation.

9.5 The NCA further believes that over-reliance on philanthropy runs the risk of marginalising organisations not based in London or other major cities. Of all the money that is donated to culture 65 percent goes to organisations in London. Scotland only receives 7 percent, Wales 3 percent, with the remaining 24 percent spread among the English regions.10 It is significantly easier for larger and metropolitan organisations to attract funding of private donors. When looking to increase philanthropy, it will be important to recognise the real and significant difficulties faced by smaller, less well-known organisations.

9.6 Finally, it is important to note that while both business and individuals can play a role in arts funding, historically in Britain this funding has been subject to changing interests and priorities of business and individuals. Experience of sponsorship is that it requires a high level of servicing in order to ensure the desired outcome for both business and the arts organisation, so it brings significant costs as well as benefits, again making it only possible and realistic for larger organisations to pursue.

10. TAX INCENTIVES

10.1 Individual giving is a significant and vital source of private income for the arts in the UK but in order to attract this funding it is necessary for tax concessions to be created and made more generous.

10.2 The NCA supports Gift Aid and particularly the retention of the current higher rate tax benefit but the system could be made simpler for organisations to claim. Our own member research showed that a significant proportion of organisations eligible to claim gift aid had not done so because of ‘operational or administrative’ reasons11 underlining claims that the system is burdensome.

10.3 There is further aspect to Gift Aid and also Payroll Giving Schemes, which is that while some arts organisations are charities, not all are. Many are non-profit companies for which charity status would either not be appropriate or again, administratively burdensome. As legislation currently stands, only registered charities are able to take advantage of the above measures. The NCA would like to explore initiatives that may allow organisations such as these to benefit from Government incentives to private donors.

10.4 The ability to make lifetime legacies with appropriate tax reliefs would be the single most significant breakthrough. The Acceptance in Lieu scheme provides a model, whereby it would be possible to apply the same principles but to living donors.

10.5 A corporation tax system that promotes start-ups, innovative and high-growth businesses will also be important for the future success of the arts sector.

11. CONCLUSIONS

11.1 Less than 0.1% of the total Treasury Budget is spent on the arts. The current level of funding for the arts costs 17p a week per person12. In return we have world-class arts and artists, a sector that gives Britain an international edge as an exciting and creative place to live, work and do business, and the largest cultural economy in the world related to GDP.

11.2 The impact of cuts to the sector will obviously depend on the speed and depth with which they are executed. As we have stated above, the arts sector is not expecting to escape cuts, however the NCA is clear that the health of the sector rests on a fragile ‘ecology’. Large and front-loaded cuts could result in a swift spiral of decline in the sector – not only in audiences, quality and talent, but also in the impact on our creativity as a nation and on Britain’s world standing.

September 2010


[1] A copy of the NCA’s Manifesto for the Arts, produced last June following lengthy and open consultations with the arts sector, is available for download here: http://bit.ly/bpO4RP

[2] ACE was able to reduce the immediate impact on the sector due to use of its historic reserves. If this had not been possible, the sector would have been subject to cuts of nearer 3 percent.

[3] Arts Council, ‘Why the Arts Matter’ http://www.artscouncil.org.uk/about-us/why-arts-matter/

[4] Arts Council England Annual Report 2010

[5] NESTA report on Creative Industries, 2009

[6] Nation Brand Index , 2009

[7] See: http://soundandmusic.org/about

[8] ACE Toolkit, Why the Arts Mattter: http://www.artscouncil.org.uk/about-us/why-arts-matter/

[9] ‘Private giving for the Public Good’ published 2008 .

[10] Arts & Business Private Investment in Culture Survey 2006/07

[11] NCA Private Giving survey, June 2008

[12] ACE Toolkit, Why the Arts Matter: http://www.artscouncil.org.uk/about-us/why-arts-matter/