Funding of the arts and heritage

Written evidence submitted by Hallé Concerts Society (Arts 80)

Summary

1. In order to compete internationally the Hallé must employ its musicians on contract, and therefore has relatively high ratio of fixed costs.

2. To secure artists in an international market place the Hallé needs to plan two to three years ahead.

3. The past ten years have seen a sea change in both the artistic standards and financial stability of all the Hallé. Modest increased investment has transformed the orchestral landscape and has led to a stable, confident and highly successful sector.

4. Financial Stability relies on a balance of three sources of income: earned income through box office and sales, commercial and private support and grant in aid.

5. The retrospective cut – whilst not significant – has set a precedent which could lead to an erosion of trust not just between the Hallé and its funders, but also with its donors, sponsors and ultimately its audience.

6. Short-term cuts will have the most profound effect on arts organisations with high fixed overheads or with limited reserves. They are bound to have a direct effect on the Hallé’s artistic and educational outputs.

7. In the longer-term the Hallé will have to shrink both its artistic and education aspirations and reduce its artistic and administrative head count. This will, in our view, lead to significant instability and long term damage to our relationships with Local Authority and our private and commercial supporters. Regional audiences will be deprived of an opportunity hear a world-class symphony orchestra.

8. The Arts Council is an important expression of the arms length principle, direct state funding would give everyone problems – politicians as well as artists.

9. Diversifying the use of Lottery funds has had a negative effect on the arts sector. We believe that the Lottery should revert to its original objectives.

10. We believe a lot could be gained by offering incentives for private and commercial giving. This could be directly through schemes to offer funding matches, by influencing positively the climate for giving or through improved tax benefits.

1. What impact will recent, and future, spending cuts from central and local Government have:

1.1. The Background

1.1.1. The Hallé has been in existence as a professional symphony orchestra for 152 years. The Orchestra employs 80 permanent players and uses around 250-300 freelance musicians a year.

1.1.2. It is resident in the Bridgewater Hall in Manchester and plays to audiences of over 230,000 people a year at its home base and the 35 or so English towns and cities it visits annually. Its wide ranging education programme had over 41,000 children and young people participating in its activities in 2009/10. In addition, the Orchestra makes approximately 9 Radio 3 broadcasts a year and is also broadcast regularly on TV. Recently the Hallé’s Harmony Youth Orchestra project was broadcast as a series of 4 programmes – Orchestra United – on Channel 4 television.

1.1.3. The Hallé runs four associated choirs and youth ensembles with a combined membership of 300. The youth ensembles give regular opportunities to gifted and talented young people outside the specialist music education system to work at the highest level with professional musicians.

1.1.4. The Hallé is firmly embedded in its community contributing significantly to civic pride and the quality of life of the inhabitants of Greater Manchester and its other core heartlands. The special place it occupies was amply demonstrated by the outpouring of support, both financial and through advocacy, when the organisation went through its well-documented financial crisis in the late 1990s.

1.1.5. The Hallé’s total income in 2009/10 was £8.6m of which ACE grant was just under 25% and Local Authority income around 14%.

1.1.6. The Hallé, in common with all UK arts organisations, does not hold financial reserves at anything like the level that would enable us to get us through a difficult period. After making provision for the pension deficit the Hallé’s consolidated balance sheet as at 31st March 2010 shows a deficit of £1.1 million.

1.2. The Submission

1.2.1. In the UK and outside London it has never been possible to create and maintain a symphony orchestra of national or international quality without contracting the players on a permanent or semi permanent contract. Indeed it is probably true worldwide that all orchestras of international quality outside the capital city are contracted. This is simply because the best itinerant musicians will almost always base themselves where there is the most potential for work.

1.2.2. In order to deliver consistent high artistic standards a symphony orchestra is required to employ at least 80 core players. Therefore, in the regions, a very high proportion of a symphony orchestra’s budget is invested in salaries.

1.2.3. Where symphony orchestras in the regions have flourished it has always been because a stable financial platform has enabled them, in the right circumstances, to be able to deliver artistic standards well beyond what might be expected of a ‘provincial’ orchestra. This was true in Birmingham in the 1980s and 90s under Sir Simon Rattle and it is true of the Hallé in Manchester now, under Sir Mark Elder.

1.2.4. Financial stability in the UK comes from having the right balance between the three major sources of income. In the Hallé’s case this comprises:

· Box Office and other earned income

· Sponsorship and fundraising

· Grant in aid

by contrast in Europe, funding comes from very high levels of public subsidy and in North America from high levels of private giving to endowments, plus corporate income and box office (see response to Q.3.)

1.2.5. 10+ years ago the Hallé was in life-threatening crisis with a significant accumulated deficit and an endemic hole in its income and expenditure account. Its artistic standards were poor and its role as a significant regional asset was tarnished. Investment – through Arts Council Stabilisation funding and increased levels of revenue grant from both ACE and Local Authorities enabled a programme of strategic change to transform the Hallé into an undeniably and demonstrably world class orchestra. In particular, relatively small but important levels of grant enhancement from ACE enabled the organisation to trigger increased Local Authority and other investment.

1.2.6. The cut in ACE grant in this financial year, while not significant in itself, has established a very worrying precedent.  Can the Hallé rely on its grant offer each year if it is subsequently changed? How can the artistic programme be planned?   This could significantly erode the trust not just between an organisation and its funders, but also with its donors, sponsors and ultimately its audience.

1.2.7. An orchestra’s planning horizon is two to three years in the future in order to secure the commitment of major international artists. The current climate of uncertainty over future funding and the level of possible cuts make it almost impossible to enter into any negotiations with artists or promoters in good faith.

1.2.8. Going forward, significant cuts in the Hallé’s budget will, very quickly, have a regressive effect. The Hallé invests over 85% of its total expenditure of £8.4m in delivering its core Orchestral activity and a further 10% in delivering its community and education work. Support costs are currently 7.4% of overall spend.

1.2.9. In the short term the Hallé will cut artistic and educational outputs (because this is our only significant area of discretionary spend) and, in the longer term, reduce head count, losing key artistic talent by cutting employment and freelance opportunities for musicians in Manchester and cutting youth ensembles. The Hallé will ultimately be unable to attract or retain talent in the region thus depriving the public of the opportunity to see international artists.

1.2.10. Through targeted activity focused on the corporate and private giving sectors income from these sources is currently showing signs of improvement. This is significant for the Hallé, an organisation that does better than most regional organisations in raising income from this area. However, in the climate for giving in this country it will not replace significant cuts in grant, and organisations who plan their budgets on the basis that it will are deluding themselves and their supporters.

1.2.11. All of this has been tested by the first hand effects of the recession - with corporate support in particular taking a hit. With current funding the Hallé is financially stable (but without significant reserves) and in great artistic shape. Funding cuts will put all of this under threat.

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

2.1. Although the Hallé is resident in the Bridgewater Hall in Manchester, it is not directly involved in its management. However, from a financial point of view, particularly on its impact on the public purse, we believe that the arrangements in place are among the most effective in the world. The levels of public subsidy going into the building are as low, if not lower, than any comparable Hall in the UK or overseas.

2.2. As part of these arrangements we already share resources with the Hall (ITC, reception, Box Office, corporate membership administration) where it makes sense to do so and will continue to look for ways to make this work for the benefit of Manchester.

2.3. The Hallé, apart from its major ongoing artistic collaborations with the BBC Philharmonic, Manchester Camerata, Royal Exchange and Lowry Theatres, also works in partnership with many local agencies to provide enhanced services and opportunities to local people

· Association of Greater Manchester ticket scheme for disadvantaged communities

· North West Music Partnership

· Sing Up

· String Leadership and Professional Experience Scheme with Royal Northern College of Music

· Manchester City Council Valuing Older People Programme

· Thorn Cross Young Offenders’ Institute and Youth Justice

2.4. We believe that there is further potential for us to take some weight off the educational sector (which in part we are already doing) by offering enhanced opportunities for gifted and talented youngsters to engage in high quality activities (Youth orchestras and choirs) and for us to help train specialist and non-specialist classroom teachers in practical music making skills at the highest level.

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

3.1. We believe that the UK model – which sits between the highly subsidised levels of central and Northern Europe and the massively endowed – but artistically conservative orchestras of North America offers the best balance between commercial edge and the ability to provide significant public benefit through expanding the art form, providing access and strategic educational intervention.

3.2. We recognise that the Arts need to share some of the pain of budget cuts but hope there is a recognition that most Arts organisations, and the Hallé in particular, could not withstand a reduction of more than 10% without serious long–term, and possibly terminal, damage.

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

4.1. We believe that the arms length principle is central and the Arts Council’s role a very important one.

4.2. However, in the past, a great deal of their policy and funding strategy appears to have been overly influenced by political initiatives, and political correctness, rather than expertly informed, pragmatic, decision making.

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

5.1. We broadly welcome the return of Lottery money to the Arts from the Olympics but it should not provide a significant substitute for government grant-in-aid.

5.2. We also believe that the money should be broadly used for the improvement and maintenance of the capital infrastructure for the arts.

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

6.1. Yes. Apart from anything else – if this were the subject of industry wide debate – it would help focus everyone’s understanding on the true purpose of the lottery support (particularly what it is not for)

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;

7.1. No comment – not within our area of operation.

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

8.1. Yes, of course they can and should, indeed they always have done – the Hallé’s owes its own existence as much as anything to the group of, largely German, Jewish businessmen who came to Manchester in the mid 19c to create wealth, and who invested in culture. Recently we have seen increased interest by companies and philanthropists in supporting our artistic and educational objectives, and we are working hard to improve these sources of support.

8.2. However we believe that significant progress in this area, particularly the building of large endowments, will be very difficult until the climate for giving in this country changes considerably. It is not just about reforming the tax system (although this would help). Regional factors are also at play - from Manchester we have seen, over past last 20 years, a significant reduction in the number of large businesses with their headquarters in the Region. Compared to London, there are very few super rich philanthropic givers living or based here.

8.3. Generally we would see the barriers in the UK (compared to the USA) as:

· No strong ethos of philanthropic giving. (People who have created wealth don’t feel the same sense of duty to "put something back")

· Brits are, by and large, far more resistant to "showing off" their wealth

· The honours system, which provides recognition for public achievement where, in the States, wealthy people often give to capital projects to celebrate their eminence in the community.

· A less sympathetic tax regime to philanthropic giving.

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

9.1. See above. It would clearly be helpful if Government were able to put in place incentives for people to give. However we believe that Arts & Business in its current form does not represent value for money. It would be far better to revert to an administration light system that provided some sort of modest match funding for new and longer-term sponsors. This would be the most effective way to help draw money out of the private sector, using the ingenuity and imagination of the arts sector, particularly if it was allied to a more sympathetic tax system.

September 2010