Funding of the arts and heritage

Written evidence submitted by Arts & Business (arts 75)

"On stage and screen there is a constant message of imagination, radicalism and challenge to the status quo. But in the way it runs itself, the arts world is one of the most unimaginative and conservative industries in Britain." David Lister, Arts Editor, The Independent, 24 August 2010.

"Arts & Business is the most successful arts-funding organisation this country has ever known. When it started, there was barely any private giving to the arts in Britain. In 2008, the figure was £686.7m, falling slightly last year to £654.9m. By 2016, the figure will be £1 billion, according to A&B’s forecasts." Bryan Appleyard, Cultural Commentator, The Sunday Times, 29 August 2010.

UExecutive Summary

1.1 With 70% of arts organisations seeing private investment as more important to them over the next three years, and with the private sector due to recover faster than the public sector, the Government has an opportunity and responsibility to review its strategy on cultural philanthropy and private sector investment into the arts. The DCMS and the Arts Council need to consult carefully with their strategic partners and funded bodies to clearly define objectives, roles and outputs. Only together can we augment public funding with new and innovative private sector models.

1.2 We have identified the two priority aims for government, business and the arts sector in terms of increasing private sector investment: to expand the earned income base and increase private giving.

1.3 Arts organisations need to work harder in innovating new income. Making a greater use of existing intellectual property rights or the potential of digital engagement with audiences are tangible examples of how this can be done. Arts & Business has worked for 34 years to produce some of the most innovative cultural-business partnerships.

1.4 The way that Arts Council England funds the arts needs to change. We need to move away from a grant-giving model to rewarding innovation and diversity in funding over the 2011-2014 period. Targets around innovation and private sector investment must be set in order for the vast amount of organisations which do not bring in sizable private sector investment to work towards. Arts Council England must then work with its partner Arts & Business to raise the sector to the next level.

1.5 Individual giving must be further encouraged and existing fora used to promote giving (Arts & Business’ Cultural Champions programme is a leading example). There is a need for further clarity in the existing tax laws, as well as the preservation of the higher rate of benefit directed to the donor under the present gift aid system. Also HMRC need to be more donor-orientated and understanding of the needs and motivations of giving.

1.6 The arts sector must see itself as part of the wider third sector where it has a great role to play in the development of the Big Society.

What impact recent, and future spending cuts from central and local Government will have on arts and heritage at a national and local level?

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

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

2. 1 Given the proposed public spending cuts of between 25-40 % never before has there been a greater need for the UK government to adopt a coherent policy to promote private sector investment into the arts. Arts & Business has 34 year experience in channelling private sector investment from companies, foundations and individuals into the arts as well as working with arts organisations to facilitate, innovate and celebrate initiatives giving a more entrepreneurial sector. Arts & Business arts members receive four-fold more private sector income than non-members.

2.2 The Chancellor challenged the nation to a dialogue on prospective cuts. Arts & Business with the National Campaign for the Arts responded by creating the Forum for Arts, Culture & Heritage with our combined arts memberships of over 1,650 cultural bodies, to identify the impact of where cuts might fall, where growth can come and how we can build a robust and sustainable cultural sector in the future.

2.3 The Forum notes that very few arts organisations work on an equal mix of public, private and earned income – according to Arts & Business’ Private Investment in Culture 2008/09, the average UK arts organisation receives around 53% of its income from public funding, 32% from earned income and 15% from private investment . Most of the larger publicly funded arts organisations already earn more income than they receive in public subsidy, but most grassroots organisations need to expand – if not double - their earned income as a priority.

For instance Arts & Business research has recently found that around 40% of the sector currently receives no private investment and from the organisations that do, only 8 % have a legacies programme.

2. 4 Generally, organisations outside London find it harder to raise private income. Arts organisations working in the public arena such as health and criminal justice rely extensively on public service contracts and funding. Regional arts organisations also face a double-whammy in that local authority budgets are even more vulnerable, as all local authorities face cuts of at least 25% if not more and they tend to cut culture first.

2.5 What does this mean for private investment? Arts & Business’s recent research into regional private investment foundF1F:

· 50% of business investment in England goes to the regions outside of London and this £77m of business investment received in the regions accounts for 38% of their overall private income).

· Individual giving continues to rise in the regions - it increased by 38% in 2007-08 - two years after Arts & Business’ individual giving training was rolled out across the country - and by a further 4% in 2008-09, rising to £42m, despite the drop in the UK private sector investment of 7% overall.

The Forum noted that public sector cuts should be back-loaded with deeper cuts coming at the end of the 2011- 2014 spending period.

UThe Private Sector Policy for the Arts

3.1 Given the threats to public spending in the arts, Arts & Business believes we have a once in a lifetime opportunity to rewrite and reboot the arts economy and grow private sector investment. This is the motivating driver behind the five initiatives which make up the recently published UArts & Business Private Sector Policy for the Arts:

3.1.1 Firstly a new Challenge Fund Scheme to stimulate individual philanthropy for the Arts: we believe Challenge Funds are as important as tax incentives for promoting greater giving. Arts & Business has launched a new pilot challenge fund for the arts with an initial fund of at least £500,000 working with 145 registered arts organisations.  In partnership with UK philanthropist Alec Reed and his Big Give initiative, Arts & Business has designed The Big Arts Give as a model dramatically reanimates individual cultural philanthropy in this period of economic difficulty and looks to raise £3 million by Christmas 2010.

3.1.2 A Legacy Campaign for the Arts: many arts bodies with an annual turnover of under £5m have little or no knowledge on how to plan fundraising from non-public income streams over a 3 year period. Many do not have, or have only just started to think about, a major gift programme. Furthermore, according to Arts & Business latest Market Trends survey (August 2010) 68% of respondents don’t currently have a Friends/members scheme. The majority of arts organisations are also under-exploiting the potential of legacies within their fundraising activity. Out of 783 arts and cultural organisations that responded to the Arts & Business "Private Investment in Culture 08/09" survey, only 66 reported that they had a legacy scheme from which they received financial support. The total (extrapolated) value of this support to the sector was approximately £65 million.

3.1.3 A Matching Fund to encourage corporate giving to the arts: respondents to the Arts Council's Great Art for Everyone consultation requested help with identifying alternative sources of funding and were keen to see brokerage of commercial sector investment in the arts sector. We do not believe that it is practicable for a public body to deliver sponsorship brokerage in the volume required for individual arts organisations, however we believe that other forms of "brokerage" and incentivizations are feasible.

The revival of the Arts & Business matching sponsorship grant scheme was the top recommended activity as voted for by arts respondents to our survey. Further evidence (from A&B Scotland research) suggests that matching public funds drive increased business support. Given the current economic climate, however, and desire to make every public pound deliver maximum value for the sector, we propose to deliver a matching fund financed jointly by government and existing regional business supporters of the arts, who wish to encourage other new sponsors to follow their example by offering them a pound for pound matching scheme. This tried and tested model, run by our Sponsors Club for Arts & Business in the North East region, has been running successfully on a regional scale for 10 years. Now with government investment, we propose the national roll-out of an enhanced model, with upwards of a minimum initial investment of £250,000; which we would use to raise an equal sum from regional business to create a matching fund of £500,000, which is in turn used by arts fundraisers to develop new or returning sponsorship relationships on a £2 for £1 basis; delivering a leveraging ratio of public investment of £1:£5. We would welcome partnership working with ACE on the distribution of such funds.

In our recent consultation with the sector through our 2010 Have your Say survey, 67% of arts organisations have chosen one of the two ‘Matching programmes’ outlined above as their primary priorities for Arts & Business to deliver, exemplifying the extent to which incentives are seen as important to encourage more business investment and individual giving.

3.1.4 Greater understanding and reform of cultural tax incentives to underpin a vibrant arts mixed economy: over the past two months Arts & Business has worked in partnership with Ernst & Young to produce clear and definitive recommendations on tax. Too few people understand gift aid or the present HMRC rules affecting high donors.

· The composite rate of gift aid is not adopted. Given that 80% of higher rate gift aid tax relief is currently claimed the composite rate would destroy this incentive and therefore much high-level giving. As a counter, we would recommend that instead light touch steps are introduced to ensure that the remaining 20% is actively sought out.

· That the system of valuing benefits within Gift Aid is clarified, possibly through a clearer "split payment" system or the abolition of the "aggregate value test."

· That appropriate changes are made to enable philanthropists to create light touch private foundations to help facilitate their philanthropy.

· That tax breaks should be introduced on the gifts of works of art, heritage, or archive items to the nation.

· That the US model of Lifetime Legacies (or Charity Gift Annuities) be adapted and then adopted in the UK.

As the only representative body of the arts on the Treasury tax group on charitable giving we are proposing our tax recommendations on behalf of the sector.

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

4.1 Arts & Business argues that there is a need to increase the final 1/3 or earned-income element of the arts funding ecology. Arts organisations need to work harder to ‘sweat their assets’ as well as collaborating together when possible to reduce costs and maximise access to audiences and new income streams.

4.2 Mergers and acquisitions are just two ways to reduce duplication and make economies of scale for instance joining back office functions and structures is a particularly sound strategy – according to Arts & Business’ most recent Market Trends survey (August 2010) with 250 arts organisations representative of the whole sector, 32.1% are considering merging/ collaborating with other similar organisations and 13% are already merging / collaborating with other similar organisations. This exemplifies that a number of arts organisations are proactive in this area and are already considering how this can best be done. Two immediate examples:

4.2.1 The museums model of hub and spoke organisations in the regions, funded via MLA’s ‘Renaissance in the Regions’ programme;

4.2.2 And joint purchasing models such as the consortium of London museums which has negotiated a bulk purchase deal for electricity.

4.3 Underlying this is our need as a sector to work harder to understand the relationship between public and private funding. The production of the Woman in Black took £5k subsidy and turned it into £8m of Treasury income after becoming a blockbuster West End hit.

4.4 The best of the arts world is formed through ongoing partnerships with business which deliver private funding – but also the business methods, planning and ethos of the private sector. Bridging the divide between the two has been one of Arts & Business’s key priorities for the past 34 years.

4.5 A further highly commended example of this partnership in action is that existing between Lanson Communications and HighTide Theatre Company. Since 2008, Lansons Communications and HighTide have enjoyed a relationship that is unique between an arts charity and business. Lansons Communications donate to HighTide office space, IT support, meeting rooms, and reception services. What the charity saves annually on administrative overheads is reallocated towards achieving its charitable aims through the production of more theatre. Lansons also contribute business planning and strategy services.

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?

5.1 We believe the concept of so called "arms-length" bodies should be reviewed. This was a proposition introduced to prevent political interference in the arts when the Arts Council of Great Britain was established in 1946.

5.2 Our Forum for Arts, Culture & Heritage agreed that the swift and stark announcements of the abolition of the Museums, Archives and Libraries Council (MLA) and the UK Film Council were decisions taken without an apparent clear plan for understanding which functions should simply cease and which should be absorbed by other organisations. Arts & Business believes in the interests of transparency and accountability more consultation with the arts and creative industries is need before decisions like this are taken.

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

Whether there need to be more Government incentives to encourage private donations?

6.1 At present individuals give £363m to the cultural sector. 48% of this is paid as membership to Friends schemes and other structured giving programmes. 18% is in the form of legacies and the remaining 34% are donations. Businesses currently contribute around £157m, mostly through sponsorship, and according to an Arts & Business survey in November 2009 with key businesses already working with the arts; by 2013 all respondents expect to either increase or maintain their levels of business investment to the arts.

6.2 Looking at the UK wide-picture, cultural organisations outside of London are only raising 20% of income from philanthropy. We argued in at point that 2.6 that regional organisations raise 50% of the total business support given to the arts in this country. This year, cultural organisations outside of London were responsible for 46% of the nominations for The Prince of Wales Medal for Arts Philanthropy, which celebrates cultural philanthropists of national significance.

6.3.1 Arts & Business believes that this form of support from individuals will be able to play an increasingly important role in the future funding of the cultural sector. However, this will only happen if the cultural sector is seen as a success. Individuals are unlikely to support organisations seen as failing – even if that failure is solely the result of a cut of its public funding. Indeed the cultural sector must become better able at asking for money and maintaining their subsequent relationships with their donors ("donor care").

6.3.2 Vital parts of this much-heralded "American style of philanthropy" include effective donor care, a tax environment that continues to send the important message that giving money to charity is a good thing and a society which better encourages and celebrates those who choose to support the arts at whatever level.

6.3.3 Arts & Business will achieve this through:

· The Prince of Wales Medal for Arts Philanthropy given to five nominated couples or individuals this year

· Celebrating people across the UK who support their local cultural organisations through the Cultural Champions programme.

· Sharing best practice through case studies and events.

· Training cultural fundraisers in the skills they need to develop this income (see appendix).

· Ensuring both cultural organisations and their donors understand - and take - full advantage of the tax incentives available.

· Undertaking targeted impactful research to determine how best these organisations can develop income from individuals.

6.4 ‘The Arts & Business Cultural Champions initiative provides not only a real sense of pride for those already passionately involved and being recognised as champions by the scheme, it also helps others open their eyes to the big and small ways they too can support their local arts and cultural organisations. Whether it’s giving their time, money or skills, anything that gets more people involved, particularly in the current recessionary environment, is a win for the arts organisations and the communities they belong to’.

 Simon Inch, Cultural Champion for the Tobacco Factory Theatre, Bristol

The Big Society

"If the Big Society means we aspire to create more civilised places where humanity prevails, and the individual spirit thrives, then artistic and cultural activity is not just indispensible, it must sit at the core, and national and local government must work together in one cause. Sir Andrew Motion – 15th July 2010.

7.1 Arts organisations are great community assets and place-makers uniquely able to bring together the community and facilitate social change.

7.2 They also can provide an alternative to the Big State by providing opportunities for work, commercial development, the creation of social enterprises using the arts as a conduit back into education particularly for hard to reach NEETS and volunteering opportunities for the wider locality.

7.3 Arts centres should be further encouraged to combine their highly sought after attributes: venue, form, appeal to wide sections of the community as well as good links to local businesses and patrons both high net worth and medium level givers so that they are recognised as key elements of the Big Society initiative.

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

Whether the policy guidelines for National Lottery funding need to be reviewed?

8 .1 Arts & Business welcomes the recent consultation on the National Lottery Distribution Fund changes which will lead to at least £50 million a year extra into the arts by 2012.

8.2 In fact Arts & Business would support the proposal to increase the share for the arts to 20% to be made by 2011 rather than the 18% proposed by DCMS thus bringing in an additional £50 million a year to the arts in 2011. We have argued that this funding should be used by the Arts Council – in partnership with Arts & Business to establish challenge funds to motivate further regional individual giving around the country – much in the style of The Big Arts Give.

UAppendix

A reminder of Arts & Business’ value:

· For every £1 received by A&B, we help lever between £4 to £6 from the private sector

· Total private sector income for A&B arts members is 24% to 30% higher than for non-members

· Equates to an additional £65m to £79m received by A&B arts members over and above that received by non-members in 2008/09

· RFO non-A&B arts members generate only 1/12th of the private sector income of A&B arts members

Arts & Business key facts:

As the leading agency training the arts community:

· Arts & Business delivered 965 free advice sessions to the cultural sector in 2009-10, an increase of +21% on 797 delivered in 2008-09

· In 2009-10 we ran 197 training sessions for 2,166 participants; an increase of +185% and +177% respectively on previous year when we ran 69 sessions for 782 participants – that equates to an almost three-fold increase in training participants.

· The effectiveness of Arts & Business training is rated at 93% by participants

September 2010


[1] Arts & Business’ Private Investment in Culture Survey 2008/2009.