Funding of the arts and heritage

Written evidence submitted by English Heritage (arts 74)

Summary

· Our heritage is at greater risk as a result of the recession

· Tackling heritage at risk is dependent on public funding and resources, both national and local

· Cuts to public funding, added to other impacts of the recession such as restrictions on credit and the liquidation of developers and construction companies, will make it more difficult to find solutions for heritage at risk.

· Over the past 13 years, English Heritage has received real terms cuts in our grant in aid. This contrasts with increases in funding to the DCMS and to other DCMS bodies.

· English Heritage has already made significant efficiency savings which limit our ability to make further efficiency savings over the next four years.

· If there were further cuts to English Heritage funding, depending on their level, we would aim to protect our core services, target our resources more effectively and generate more income from other sources (depending on our capital allocation from government). We are already working more creatively with other organisations and we aim to do more.

· We hope that the government will allow English Heritage to use income generated from other sources to complete the Stonehenge project for 2012

· Public subsidy will continue to be necessary to address the market failure in funding heritage which provides a public benefit and to conserve and maintain the historic properties which English Heritage cares for on behalf of the nation.

· English Heritage is happy to consider any structural changes which result in better services for the public and reduced costs.

· Changes to the Government’s rules on End Year Flexibility would help us make greater use of private philanthropy.

Q. What impact recent and future spending cuts from central Government will have on heritage at a national and local level.

1. English Heritage is the UK Government’s statutory adviser and a statutory consultee on all aspects of the historic environment and its heritage assets. This includes archaeology on land and under water, historic buildings sites and areas, designated landscapes and the historic elements of the wider landscape.

2. English Heritage monitors and reports on the state of England’s Heritage. Each year we publish the Heritage at Risk survey which is an Official Statistic. The condition of our heritage and the recent trends, including the impact of the recession, provide the context for the consideration of the impact of reductions in funding.

3. In 1999, one in six buildings on the Heritage at Risk Register was fully economic to repair. In 2010 that figure has fallen to just one in eight. The "conservation deficit" – the difference between the cost of repair and the end value – of these 1,218 buildings is now estimated to be £465m, a 10% rise on the 2009 figure. Public funding and resources are critical to ensuring these, our most important national assets, are brought back into viable economic use and are not lost to future generations. Reductions in public funding alongside restrictions on credit, falling investment returns and the failure of development companies will make it much harder to find viable solutions for our heritage at risk.

4. There will be impacts at national and local levels, both in the resources available to look after publicly owned historic properties and in the support public organisations give to private and voluntary sector owners. 16% of the properties on the Heritage at Risk Register are in public ownership and public resources, in the form of advice as well as grants, are also vital in bringing back into use properties owned by the private and voluntary sectors.

Impact on publicly owned historic properties

5. A significant part of England’s heritage is owned and managed by public organisations. Reductions in public spending are likely to affect their ability to maintain the heritage in their care. We have already seen evidence of this in the withdrawal of the Higher Education Funding Council’s dedicated funding stream for historic buildings in university estates.

6. There will be increasing pressure to dispose of property regarded as superfluous to requirements – Finsbury Health Centre being one example. This could lead to an increase in sensitive buildings and sites coming on to a flat property market at a time when investors with the capital and experience to take on challenging restoration projects have become increasingly scarce. At the same time, voluntary and charitable organisations may have more limited ability to take on such projects as a result of the falling value of their endowments.

Impact on public sector support for private and voluntary sector owners

7. Public bodies provide a range of practical support to maintain our heritage. English Heritage grants to historic places although modest (about £25m per year) are carefully targeted and enable us to help owners of heritage at risk in ways that other organisations cannot by removing enough of the risk to make it worthwhile for the private sector to invest. For example:

o We invested £250,000 to keep the roof on the Roundhouse in Camden at a time when no long term solution was in prospect. This helped to attract the philanthropic investment which has secured the future of the building and provided new cultural facilities for London and the local community.

o In August this year a £50,000 grant was made to save the lead mining centre at Grassington Moor in the Yorkshire Dales where water erosion had caused such severe damage that the site was on the Heritage at Risk Register. This relatively small sum will pay for emergency repairs and a management plan to ensure a long term future for this important part of our industrial heritage which would otherwise be lost.

When necessary we can make grants available very quickly to save buildings at urgent risk. However, the value of our grants has declined with the real terms reduction in our grant in aid over the past 13 years. This trend will continue if our grant in aid is cut in the next spending round and without our ‘last resort’ assistance, historic buildings and sites will be lost forever.

8. Because our heritage is part of the fabric of our daily lives it is generally maintained by funding from organisations whose primary purpose is not conservation, including for example the Regional Development Agencies’ place-based funding programmes and DEFRA’s Environmental Stewardship programme (administered by Natural England) which is the largest source of funding for heritage in rural areas. English Heritage is concerned that pressures on the budgets of other organisations may result in them no longer supporting heritage projects.

9. At the local level, over £1.1bn will be cut from local authority funding for the financial year 2010/11, with further reductions to come across the course of the next spending round1. Reductions in local authority funding will affect their ability to support heritage. Local authority budgets for taking statutory action for repairs and urgent works notices to historic buildings are also likely to be reduced. Partnership schemes involving owners, local authorities, English Heritage and third parties have been particularly successful in tackling some of the more intractable cases, but are now themselves at risk from budgetary cut-backs.

10. The number of heritage staff employed in local authorities has declined by 14 % 2since 2007, a trend that could accelerate as council budgets are squeezed and local authorities look to make cuts in non-statutory services. Conservation and archaeological officers play a vital role in identifying solutions and putting investors in touch with owners and identifying and pursuing funding opportunities from organisations such as English Heritage and the Heritage Lottery Fund (HLF). Without their expertise the task of removing buildings from national and local ‘at risk’ Registers will become much more difficult.

Impact on English Heritage

Funding History

11. English Heritage’s recent funding history affects our ability to sustain further cuts.

Since 1997 EH has received grant settlements of below inflation, resulting in a real terms reduction of £130m. EH funding was cut when DCMS received above inflation increases. Some of the other DCMS Arms Length Bodies have received increases significantly above inflation over recent years. Over the last 10 years, Arts Council England experienced real terms growth of 41%, Sport England experienced 182% growth while English Heritage received a cut of over 11% in real terms.

12. The reduction in our funding over the last 13 years has had a significant impact, including the reduction in the value of our grants referred to above, exacerbated by the fact that construction industry costs have risen above the rate of inflation during that period. English Heritage cares for 420 historic sites and monuments put together since the 1880s as the national collection of historic places and we now have a maintenance backlog at our properties of over £50m.

13. Against this background, we have made significant efficiency savings and generated more income to enable us to continue to provide our services. For example, we have relocated our finance department out of London and reduced its cost by £800k per annum. Our admin cost has fallen by 16% in the 3 years since 2006/07. The scope for additional efficiency savings is limited because of what we have already achieved.

14. English Heritage has been highly successful at generating more income and achieved 7% year on year growth in recent years. The income we generate helps to sustain the heritage in the care of the nation and reduces the burden on the taxpayer but our ability to increase income is dependent on being able to invest to improve our offer to visitors. For example, at Kenilworth Castle we invested around £3m which has taken the property from a deficit of £395k in 2004/05 to a surplus of £414k in 2009/10. We are keen to continue to increase the income we generate but this is dependent on the level of capital we are allocated by government.

In year Cuts

15. Government funding for English Heritage has been subject to an in-year cut of £4.24m. To deal with this, we have introduced a series of measures including an immediate recruitment freeze across the organisation, the withdrawal from our successful bid to the Future Jobs Fund and a cut of £1m to our Heritage Protection Reform budget. Further efficiency measures are also being introduced but given the savings that have already been achieved in recent years, each further saving is more of a challenge to achieve.

Future Cuts

16. Despite our funding history, English Heritage is realistic that further cuts are likely as part of tackling the national economic problems. If we are faced with further cuts our response would be to:

o protect our core services, especially our expert staff who advise on planning, so that we can be most effective in supporting local authorities and owners;

o target our resources more effectively using the National Heritage Protection Plan we are developing to prioritise the resources we (and others) put into the understanding and protection of the historic environment and our Asset Management Plan which will enable us to direct resources towards the most pressing conservation and maintenance needs in the historic properties we care for directly;

o generate more income from other sources, where we have been very successful in recent years (as outline above). Subject to the capital allocation we receive as part of the Spending Review we will continue to invest in our sites. We want to dedicate as much of our resource as possible to improving the experience for visitors to our properties. We will therefore be looking hard at which of our assets could release income which we can use to reinvest for greater public benefit.

o Increase partnership working, including working more closely with the voluntary sector and other public bodies (this is explored further in the section on working together more closely)

Stonehenge

17. English Heritage was bitterly disappointed at the Government’s decision to withdraw Government funding for the Stonehenge Environmental Improvement Project. As the House of Commons Public Accounts Committee concluded in 1993 the presentation of Stonehenge is a "national disgrace." Stonehenge is an iconic site, familiar to millions all over the world. 71% of current visitors to Stonehenge are from overseas and we expect numbers to increase in 2012. In the context of the very considerable investment being put into the London 2012 Olympic Games and Paralympic Games, English Heritage believes it is vital that Stonehenge offers visitors a high quality experience, worthy of the significance of the monument. We therefore hope that the government will allow us to use income generated from other sources to complete the project for 2012.

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

18. English Heritage already works closely with other organisations and we aim to do more of this in future. For example, we already run a joint scheme with the Heritage Lottery Fund for Repair Grants for Places of Worship. We will continue to explore how we can work together more effectively using English Heritage’s practical expertise to help communities identify, prepare and implement projects that can secure HLF support, and ensure that their funding is used efficiently and effectively.

19. Sharing services in back office functions is being promoted across the public sector. In the light of this, the Commission for Architecture and the Built Environment (CABE) recently requested that English Heritage provide them with a full range of finance services. CABE and English Heritage have sought DCMS approval with a view to starting this arrangement through a service level agreement from December 2010.

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

20. Some level of public subsidy is necessary to sustain parts of our heritage, reflecting its the public value and the fact that market solutions will not always be possible.

21. As already mentioned above, our Heritage at Risk Register estimated the "conservation deficit" to be £465m. This is the difference between the cost of repairing designated heritage at risk and the end value, ie the funding necessary to attract private investment.

22. A level of public subsidy will continue to be necessary for the maintenance and conservation of the 420 historic sites and monuments put together since the 1880s as the national collection of historic places and cared for by English Heritage. As already stated above, there is a maintenance backlog at our properties of over £50m. Our Asset Management Plan provides us with evidence that if investment in the condition of our sites and properties continues at the current level, the maintenance backlog will increase. If we were able o increase the £14m we currently spend on our historic estate by £6m we could reverse the decline in the condition of the properties.

23. Excluding the costs of conservation and maintenance, we have worked hard to reduce the cost of to the taxpayer of opening the properties we care for to the public by cutting our costs and generating more income. In 2009/10 we made an operating surplus of £2.5m compared with a deficit of £2.4m in the previous year. This is partly due to the increase in visitors due to people holidaying at home but also reflects efficiencies and investments in improving the quality of our sites.

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

24. On 26 July 2010 DCMS announced that it is looking at its responsibility for heritage and the built environment, and considering the role and remit of English Heritage, the Heritage Lottery Fund and the National Heritage Memorial Fund. English Heritage is happy to consider any structural changes that would result in better services to the public and reduced costs. We are working closely with the Department for Culture, Media and Sport to see what opportunities there might be.

25. In considering the relationship between English Heritage and the Heritage Lottery Fund it is helpful to understand the differences between the grants made by English Heritage and those made by the HLF. As outlined above, our grants are targeted on heritage at risk and we do not require projects to meet multiple objectives. English Heritage grants safeguard important buildings so that they are not lost while a solution can be found by the market, removing enough of the risk to make it worthwhile for the private sector to invest. Around 20% of English Heritage grants for repairs to buildings at risk go to private owners. Almost half go to charitable organisations. When necessary we can make grants available very quickly to save buildings at urgent risk.

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

26. The Lottery is a vital source of funding for heritage. Against the background of the impact of past and future public spending cuts outlined above, it is very welcome that the government has made a commitment to redistribute Lottery resources to the original good causes, including heritage.

Q. The impact of recent changes to DCMS arm’s length bodies – in particular the abolition of the UK Film Council and the MLA

27. The structures for channelling public funding are a matter for Government to decide. English Heritage hopes that the future will be secured for important functions currently carried out by the MLA, notably the Museum Accreditation Scheme and the Government Indemnity Scheme. We also note the Government’s decision to abolish the Advisory Committee on Historic Wreck Sites. We will work with DCMS to identify options for securing the functions of the Committee which is currently administered by EH on behalf of Government.

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

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

28. English Heritage raises around £3.5m (net) from major benefactors, legacies and smaller donations and corporate fundraising (the latter is relatively small). Philanthropic organisations and individuals have played a significant role for a number of years, but more so in the larger London-based cultural organisations. A mixed economy of public and private funding is preferable but there will be a limit to what can be raised through philanthropy as organisations will be competing against each other.

29. There are two reforms Government could make which would improve our ability to take advantage of private giving:

o Releasing Arms Length Bodies which receive philanthropic donations from End of Year Flexibility requirements would make an enormous difference. This would allow for a much greater degree of coordination across projects and forward planning and would respect the fact that donations are not public expenditure.

o Reform of the Gift Aid scheme in order to simplify the process for both membership and admissions would be of benefit to the heritage sector.

September 2010