Funding of the arts and heritage

Written evidence submitted by the Greater London Authority (GLA) (arts 35)



1. The Greater London Authority welcomes the opportunity to respond to the select committee’s inquiry. This submission highlights the Mayor’s and GLA’s key concerns and recommendations.

2. DCMS has asked all its funded bodies – the Arts Council, the national museums and galleries and key heritage bodies – to explain what 20-40% cuts would mean. Jeremy Hunt has sent proposals to the Treasury and proposed to cut DCMS’s own administration budget by 50%. The Mayor’s position is that cuts need to be made, but must be proportionate and managed intelligently.

3. Many arts and heritage organisations in London face a tipping point of around 10-15% - more drastic cuts would put many out of business. Smaller organisations are particularly vulnerable and do not or cannot operate significant reserves.

4. The Mayor recognises the need for spending restraint and that the arts and heritage sectors should not be ring-fenced from cuts. However, he is committed to ensuring continued support for a thriving cultural scene in London; one that is sustained by a mixed economy of private and public investment.

Preserving the Mixed Funding Model


5. The Mayor believes in a mixed funding model for arts and heritage. It is important to recognise that private and public funding are not simply inter-changeable – rather, they encourage one another, with public funds being an effective way of leveraging greater private investment. For every pound of public investment, cultural organisations are able to earn or raise considerably more. For example, for every £1 the Arts Council puts in, £2 is pulled in from elsewhere, totalling £3 in income to the dance company or theatre house. The institutions that have thrived in recent years are those that have been the most entrepreneurial and adept at achieving this mixed economy model. Public investment is crucial to supporting a diverse, risk taking sector. Without it the ability to innovate and retain our leading edge will be undermined.


· That the government encourages and supports the strengthening of the mixed funding model and accepts that a mix of philanthropy, corporate sponsorship and public subsidy is essential if we are to preserve both the immediate and long term health of the arts and heritage.

Intelligent Cuts and the Triple Whammy


6. The Mayor does not believe that the arts or heritage should be exempt from public spending cuts. It is important to recognise however that the level of cuts being considered for the cultural sector will not be achieved through efficiency savings or slashing administration costs alone. While there will inevitably be pockets of waste these will not be sufficient to meet the scale of the challenge and programmes and activity will suffer. For this reason, cuts should be proportionate and not frontloaded. This will give time to the arts sector to adapt to a new funding environment and help preserve a world-class arts infrastructure, which has developed over a number of years.



· It is crucial that DCMS takes into consideration the ‘bigger picture’ for cultural organisations when making cuts. It is the case that many arts and heritage organisations will already be experiencing a drop in financial support from private sponsorship and be preparing for cuts from local government too.

· We recommend that DCMS manage cuts intelligently and in stages. For example the Arts Council have suggested to their Regularly Funded Organisations to model a minimum 10% funding cut in year one (2011/12), which is separated from the next stage of up to 30% cuts over the following two years (2012/2013-2014/2015) allowing a transition year to plan a new approach. Phasing the cuts is one way of mitigating against a potentially ‘perfect storm’ of concurrent government, local authority and private sector reductions.

Value of culture

7. London’s culture makes a vital contribution to the quality of Londoner’s lives and social wellbeing. It also contributes to the national economy and enhances London’s position as a world leader in many respects. Public sector agencies across London recognise the value of culture and invest in programmes and projects which are proven to encourage enterprise, skills, business promotion, education, employment, regeneration and social inclusion.


· That government take into consideration the impact of cuts on the wider social and economic landscape and maintain a sustainable level of investment by which innovation can thrive.

Myths about the capital

8. No doubt there are many people around the UK who believe that London will easily cope with the downturn and that its arts and cultural sector does not need support. This is untrue.

9. The capital is the flagship centre of the arts and heritage in Britain, a magnet for tourism and the driver for creative industries across the UK. In total arts organisations in London receive 69 per cent of all private funding in the UK, worth £449 million in 2008. However, there is now a clear danger that London could be exposed as investment from private sponsorship has started to decline and the capital could take a disproportionate hit. Total private investment in London in the last year has fallen by eight per cent from its previous, a record-high figure of £477million. This is a drop that is in line with the UK as a whole, which saw a decrease of seven per cent.

10. As well as support from strategic funding agencies like the Arts Council or Heritage Lottery Fund, local boroughs provide significant public subsidy. This is not always recognised. Local authority funding made a revenue investment in 2008/09 of over £400m. However, culture is not statutory and so in the face of falling tax revenues, reduced funding from central government and increasing demands on many of their services, many fear that they will struggle to maintain the same levels of support for the sector in the years ahead.

11. London is home to many of the national institutions and therefore receives the bulk of public funding. However, London is not homogenous; the level of cultural provision and local funding differs greatly from borough to borough.

12. It is worth noting that the biggest disparity in levels of arts engagement in the whole of the country can be found in the capital – between Kensington and Chelsea, which has the highest level of engagement in the United Kingdom at 66 per cent, and Newham, which has the lowest, at 29 per cent. It is also the case that levels of funding from central and local government differ widely from borough to borough. Cultural organisations in London also differ in size, profile and their capacity to raise private and public funds.



· That DCMS consider the disparity of government funding from borough to borough. Culture is not a statutory commitment for local authorities and therefore is very vulnerable to local authority cost cutting.

· We recommend that DCMS commission independent research into the effects on arts and heritage of government cuts across the board so that there is an understanding of the full extent of the impact and how this can be best managed.

· DCMS acknowledge that it is usually the larger organisations with established branding that can attract private sponsorship. Smaller organisations are not in the same position and government cuts to these organisations can mean closure rather than restructuring.

London & 2012


13.The last two decades have been a period of extraordinary growth and development and London’s arts and cultural institutions have made great progress in the last twenty five years in terms of widening their financial base, matching public funding with increased private investment, both from individual donors and businesses. Consequently London now differs markedly from the rest of the country, with far higher levels of private finance and support. However, with the decline in private sponsorship, abolition of the RDAs, and the proposed government cuts it will be difficult for London to maintain this success.

14. London’s cultural and creative industry is a major contributor to tourism; it is worth about £80bn. That is why so many ambitious companies and individuals from across the world have relocated here. London’s cultural institutions attract significant visitors from overseas and the rest of the UK - 15.6 million per year. Surveys show that our unique mix of rich heritage and creative energy is key to London's appeal.

15.The London 2012 Olympics is a unique opportunity to reach new audiences from overseas and the rest of the UK. An estimated 750-800 thousand extra people will visit the city per day and over four billion will be watching the games on television. It is a great opportunity to present London’s arts and culture and maintain its reputation - one of the key selling points for London. With only two years to go it is important that investment is sustained. The capital is the gateway to the rest of the UK and therefore its success benefits the whole country. Without sufficient investment and support many arts, cultural and heritage organisations will be excluded from participating in a once-in-a lifetime opportunity.

16. All projections show that demand for tickets significantly outstrips supply, so cultural activity will be a key way for people to engage and feel involved in the Games.

17. London expects to lose £375 million in 2012 due to tourism displacement - people staying away because they think it will be too crowded and expensive and agents reluctant to sell London packages to main markets. Visit London has identified culture as a key way to mitigate against this displacement, enabling London to offer once in a lifetime cultural events to bring people to the capital throughout the Olympic year.



· DCMS continue to back and support the London 2012 Olympics, in particular the Cultural Olympiad. Also recognise that the stability of cultural organisations will be an important factor in the success of the cultural element of the Games.

Sensible efficiencies & new models of partnership

18. As well as using public subsidy to leverage further funds, arts organisations are a powerful catalyst in the Big Society. They engender a great deal of goodwill enabling them to draw upon substantial numbers of volunteers. They have powerful brands that attract top-class professional services (such as design and marketing), despite shoestring budgets; and through partnerships with businesses, charities and government agencies, they attract significant in-kind support.

19.Many museums and galleries are already merging their back room activities such as shipping and storing. Film London recently formed an alliance with Paris to support the international film sector through sharing of services and products. Local authorities are looking at new models of working and there is an increased appetite for shared services, joint procurement, transferring services to trusts, outsourcing areas of work to private contractors and so on.


· That government take action to mitigate complexities of VAT, making it easer for organisations to adopt this method of joint working. Organisations pursuing this route often end up paying higher VAT.

· DCMS should consider tax incentives for organisations seeking to share services, as well as reducing bureaucracy on VAT.

· Government should therefore respond to the appetite around the sector for greater coordination through regional partnerships. This could be through regional hubs that bring together cultural organisations and local authorities to share resources and reduce duplication

September 2010