Funding of the arts and heritage

INQUIRY QUESTIONS

1. 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;

1. The main sources of heritage funding are:

· Private investment by owners/managers, including the development/tourist industry, in maintenance as well as regeneration and enhancement programmes, and investigation and interpretation work to enhance public benefit.

· The National Lottery, specifically HLF funding but also Arts Council funding and BIG for community projects; National Heritage Memorial Fund

· Private philanthropy, including independent trusts and foundations; non financial philanthropy – in-kind donations and volunteering.

· Central government, primarily through DCMS, CLG, and DEFRA, their agencies and sponsored bodies; local government and partnerships.

2. The DCMS budget of £5.3bn for 2008/9 amounted to 0.8 % of total government spending, and the architecture and history element is just 4% of that (£0.23bn). As much of the heritage economy operates outside DCMS direct control, any reduction in funding will have a much greater impact than this tiny figure suggests.

3. DCMS funding to English Heritage (EH) supports the heritage protection regime and the wider heritage industry to achieve public policy objectives. DCMS figures show EH funding was cut even when DCMS itself received above inflation increases and when other DCMS Arms Length Bodies received increases (Arts Council England (+41%), Sport England (+182%), Museums, Libraries and Archives Council (+199%). So heritage missed out on the ‘golden age’ for the arts and culture.

4. Since 1997, EH has received grant settlements of below inflation, resulting in a real terms reduction of £130m. As a result, past economies have squeezed the grants made by EH, now £32.3m (2009-10). Heritage projects are rarely wholly publicly funded with most forms of grants attracting private funding, usually much more than the grant itself. They support local businesses not only in the repair and development stage but subsequently by attracting other investors in turn so the impact of cutting EH grants is far greater than the sums disbursed.

5. Previous cuts may have been partly masked by the property boom, but the legacy of the recession together with the increase in VAT from 2011 is going to put enormous strain on this remaining resource. Cutting the few funds available to historic fabric, especially those ‘at risk’, regardless of ownership, will make the sector even more heavily dependent on HLF project-orientated funding which is not assured after 2019 and which is not available to capital projects in the private sector.

Cutting English Heritage support to buildings on the Heritage at Risk register by 40% would have resulted in the loss of up to 460 Grade I and II* buildings during the period 1999-2010.

6. Executive capacity is also under scrutiny. Our recommendations for English Heritage’s strategic priorities 2010-15 identified its key responsibilities as being the formal adviser to government and in supporting the sector through grant giving, advocacy and professional expert advice. For English Heritage to do more for less, it needed to work more effectively in partnership. We recommended that English Heritage would be wise to invest strategically in partnership working, in order to deliver more of its objectives in the longer term. DCMS operates through a range of smaller NDPBs. These, frozen like English Heritage under the last government, have already taken a 3% cut this year and are vigorously pursuing independent revenue. If cut too far, too soon, they will not have the capacity to develop alternative income streams.

7. Turning to non DCMS funding, one significant source of heritage funding is the Common Agricultural Policy (CAP) for the way it affects countryside management. DEFRA funding for heritage within the £3.9bn Environmental Stewardship Scheme 2007-13 is essential in drawing down the European commitment and stimulating private sector funding. It illustrates again that without government intervention, some significant sources of funding could be put out of reach.

Without the dedicated £8m per annum funding for traditional farm buildings under Rural Development Programme for England (RDPE), it is estimated that 300 buildings per annum and, over the 7 years of the RDPE (2007-13), 2100 buildings would become derelict through lack of maintenance, to the detriment of our historic landscapes and their economies.

8. Local government involvement in heritage - non-statutory leisure and cultural services as well as planning and historic environment services - is absolutely critical in generating the local identity and civic responsibility that are the twin foundations of localism. So much is in a state of flux that predictions are difficult but already we are seeing plans for across the board redundancies and closures in non statutory cultural resources such as museums.

9. Regular research into the provision of historic environment staff in local authorities has been carried out by the Institute of Historic Building Conservation (IHBC) and ALGAO with English Heritage. 

The IHBC survey of building conservation staff shows a continued and dramatic decline from 2006 to date.   In 14 months from November 2009 to January 2010 the numbers of building conservation staff in local authorities has declined by 6.9%.   This decline in staffing resource is almost double the rate of loss over two years between 2006 and 2008 and highlights the negative impact local authority cuts are already having on the protection of our heritage. Current reports from Local Authorities show that this trend is continuing even more steeply.

Only with a trained workforce can we ensure the historic environment attracts that all-important inward investment through the planning system. We urge the case for proper resourcing for historic environment services in the forthcoming review of local authority finance, and secondly for DCMS and English Heritage to have sufficient resources to work alongside CLG in integrating heritage protection and its resourcing within the new planning regime. It is essential that local authorities have the appropriate resources to inform and operate the planning system for example through Planning Policy Statement 5 (PPS5) to ensure that full public benefits are unlocked.

10. Central and local government funding affects non government heritage bodies, some of whom - including The Heritage Alliance - benefit from EH’s National Capacity Building programme. National and local groups deliver especially strongly on the two main strands of the Big Society concept - social action and community empowerment. The grassroots nature of most heritage organisations means they are an important part of civil society, well used to making small amounts of government money galvanise voluntary action and philanthropy to transform their communities. The heritage sector can point to the Building Preservation Trust movement over the past 30 years as leading the way in mobilising the Big Society. For many of these community groups, local authority support - valuable in itself - unlocks other sources of funding.

11. Big Society can’t just be about cutting funding and expecting others to deliver projects instead of Government. Targeted investment in partnerships with non-government bodies stimulates national and local activity, endorses the shift towards civic responsibility and is a legitimate subject for public subsidy.

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

Non government heritage sector

12. Given the diverse interests and huge voluntary input in the heritage movement, co-ordination is more appropriate than amalgamation. There are successful mergers, shared offices and hubs, but the majority of the Alliance’s 83 members and their local organisations are sustained by voluntary effort where diversity and autonomy is an asset.

13. Most generic groups have a national umbrella body. There are a number of sub-sectoral forums such as the Joint Committee of National Amenity Societies, The Archaeology Forum and Placesofworship@thealliance that work together to reduce duplication of effort and make economies of scale. The Historic Environment Forum (previously known as HEREC) the overarching forum, brings together government and non government interests. The History Matters Campaign in 2006 demonstrated a novel national partnership led by English Heritage, Heritage Lottery Fund, The Heritage Alliance, the National Trust and Historic Houses Association to celebrate public enthusiasm for our heritage. Due at least in part to the Alliance’s success since 2002 in promoting collaborative working, heritage organisations inside and outside the public realm are working together far more closely than ever before.

Public heritage bodies

14. In reconfiguring our public heritage bodies the aim should always be to optimise outcomes rather than necessarily preserve the status quo. Better co-ordination between Government Departments responsible for heritage is something The Heritage Alliance has been calling for since 2004. The Secretary of State Jeremy Hunt told us in March 2010 that once in government he would ensure regular ministerial meetings between DEFRA, DCMS and CLG. It is vital that such a small Department as DCMS has the expertise and capacity to integrate heritage interests across other Government Departments.

15. The ‘agencies of place’ - English Heritage, CABE and Natural England - might explore efficiencies by working more closely together. An amalgamation of English Heritage and the Heritage Lottery Fund seems somewhat mismatched on grounds of geography and their different remits (historic environment/heritage including biodiversity) but the two most critical issues are:

- their objectives – sustaining the historic fabric, support to infrastructure, property manager (EH) compared with fixed-term project funding (HLF)

- public money is not the same as government money.

Whatever firewalls might be invoked, the real danger is of eroding the independence of HLF: indeed, already prevalent is the idea, put forward by two Government Ministers, that HLF with its enhanced funding after 2012 can somehow compensate for the loss of the Government’s Listed Places of Worship Grant Scheme. Any such convergence between lottery funds and the Government’s regulatory functions and grants should be avoided. Any review of relevant public bodies should always include proper consultation with the sector and an assessment of the impact of previous organisational change.

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

16. Public subsidy, direct and indirect, comes via many channels. There is no global figure for public and private investment in our heritage so what we are examining here is more a new balance between state, market and civil society. A ‘funding follows function’ approach is more likely to result in a sustainable solution than salami slicing all budgets.

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

17. We welcome the intention to restore the original shares in the National Lottery, but the Heritage Lottery Fund alone cannot solve the national deficit. Similarly philanthropy is not a magic bullet, nor can civil society take on government functions without additional resources. A mixed economy is the most sustainable model, where Government accepts responsibility through funding as well as legislation and policy.

18. Public subsidy comes under two broad categories:

Direct funding:

§ Regulatory powers: operating the heritage protection system with related advice

§ Providing and encouraging the necessary evidence base

§ Specialist capability to work with other government departments/agencies and partners on legislation, policy and funding

Enabling funding that supports others – private investors, owners, philanthropists, the non government heritage movement – to achieve public policy outcomes including Big Society as well as cultural and economic objectives:

§ Providing incentives for action: grants and fiscal incentives

§ Support for implementation.

The Alliance recommends a shift from direct funding, with Government retaining unique, statutory responsibilities but avoiding duplicating front line services, towards a more enabling framework, including tax incentives as well as subsidy, so that more is delivered by a mixed economy in the longer term.

19. EH is already in discussion with heritage groups over transferring certain functions. Our difficulty is that although we can perhaps deliver services more cheaply than our government colleagues, we can not take on additional roles without financial support which means the efficiency savings are relatively small. Secondly there are certain functions - such as policy guidance, research and evaluation - that require formal government status and are simply inappropriate for a non government organisation.

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

20. The current proposal to restore the lottery to the original good causes by 2012 could give HLF an extra £50m a year. This welcome uplift will conserve and enhance more of our heritage for social and economic benefit. It will increase public access and understanding and help sustain traditional and specialist conservation skills. It will generate social capital by supporting the professional development of the not-for-profit sector; increasing the level of self-help by enabling more voluntary sector organisations to rescue historic buildings and to find viable, new, community, uses for them; develop community engagement skills with emphasis on underrepresented groups and areas; and increase volunteering opportunities and support to community organisers. It is also likely to bring not-for-profit heritage organisations into innovative partnerships with private and public bodies.

21. We are, however, concerned that the related proposal to cap the Lottery distributors’ administrative costs at 5% could lead to fewer larger grants rather than the smaller grants, which are proportionately more costly to administer but which ‘grow’ the voluntary and community sector. We also value the HLF professional research function which enables it to review the social and economic impacts of projects undertaken by a diverse range of recipients. One such figure is the £20.6bn that heritage-led tourism generates. Other figures relate specifically to the voluntary and community sector: again HLF uniquely has the data and professional expertise to extract the community benefits of heritage investment.

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

22. Increased lottery funding, however timely, is not a universal panacea. Lottery money should not be allowed to become a substitute for funding that would normally fall to mainstream Government spending and we would welcome Government commitment on this. To have a clear idea of the make-up of all Lottery Distributors’ grant-giving and the proportion going to the voluntary and community sector, it would be helpful to see this figure published annually.

23. Much of our heritage is in private hands. Sustaining the quality of place - the villages and streetscapes, the gardens and historic landscapes on public view - is at the discretion of many private owners, who derive no direct financial return. We accept that the HLF does not usually grant aid private owners but it may be timely, subject to national consultation, to review the eligibility criteria.

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

24. Museums are a key route for the public to access interpretations of our heritage, and house many important heritage collections. With the abolition of the MLA there needs to be an appropriate body tasked with providing strategic leadership for museums. Its loss creates uncertainty about programmes and jobs funded through the Renaissance programme. We would like to see an urgent clarification of the future of the Portable Antiquities Scheme.

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

25. We believe that businesses and philanthropists can play a long term role in funding heritage but the different drivers for philanthropy for heritage and arts should be considered when devising incentives. The long gestation of capital projects, and the nature of maintenance and access work compared with say productions and exhibitions, may not be as attractive to some philanthropists who want to see a more instant return. ‘Red carpet’ opening nights, concentrated in London, make attractive media coverage for arts sponsors. Projects may be more attractive to private funders than say capacity building, even though this can then unlock much more ‘in kind’ support through the voluntary sector. In terms of promoting Big Society therefore, Government might explore incentives for this form of philanthropy. Individuals too spend taxed income on their property, their cottage or vintage motorbike - not always but often - regardless of commercial return. That sense of stewardship - for public benefit – is a form of philanthropy that falls outside the usual interpretation. Accordingly, different motives need better refined incentives.

26. There is of course a significant financial contribution made by the development sector through PPS5 which enables an increased understanding of the historic environment and provides increasing opportunities for public engagement. In considering further reform of the planning system it will be important that the principles espoused in the PPS are supported to ensure that this investment continues.

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

27. We support Gift Aid on donations and have taken part in several initiatives to help improve take-up. We support an extension of the Acceptance in Lieu scheme to include some form of lifetime giving for example to keep important artefacts in situ. Ways of making Heritage Maintenance Funds more attractive in order to support the conservation of historic houses open to the public are put forward by the Historic Houses Association. Adjustments to these schemes could safeguard some outstanding historic properties and their contents.

28. It may be that legacies are a significant form of donation in the heritage world. A form of lifetime giving could give the donor the benefit of an income during their life time (as well as appropriate recognition) and furthermore give the recipient charity an indication of future donations. This might have widespread appeal, and we recommend that this be considered in a review of Inheritance Tax.

10. The Committee will also examine other areas of interest that are raised during the course of its inquiry.

29. VAT at 20% from 2011 will add a fifth to the cost of repairs and maintenance, adding to pressure on public and private funds yet the possibility that the UK might take up the EU option of reducing VAT to 5% on repair and renovation to private dwellings seems remote in the present political climate. The Alliance has constantly campaigned for a reduction in VAT arguing that the dynamic effect of a reduction would more than compensate in terms of jobs created and welfare benefits saved.

30. The Alliance and its places of worship grouping have campaigned with others to raise awareness of the value of the Listed Places of Worship Grant scheme which is due to end in March 2011. The loss of this scheme would be a serious blow to those struggling to keep these landmark buildings in community use, not only in financial terms but also in recognition of heroic efforts.

September 2010