Funding of the arts and heritage

Written evidence submitted by the City of London Corporation (arts 89)

Introduction

1. The City of London Corporation welcomes the opportunity to contribute to the Committee’s inquiry. The City Corporation is one of the principal funders of the arts in the UK. This support now forms part of the City’s focus alongside the promotion of the City as an international finance and business services centre. The mix of modern culture and ancient heritage in the City is a defining feature setting it apart from many other financial centres.

2. The City Corporation currently spends around £80 million on cultural activities. It owns, manages, sponsors or co-funds a range of activities, including the Guildhall School of Music & Drama (GSMD), the Guildhall Art Gallery, the Barbican Centre, the Museum of London, the City of London Festival, the London Metropolitan Archives, the London Symphony Orchestra (LSO), Spitalfields Festival and the City’s libraries. It also commissions public art as part of its street scene strategy, and maintains major green spaces in and around London, such as Hampstead Heath and Epping Forest. There is also a broad range of heritage and archaeology within the Square Mile itself and the City has a growing reputation as an area for modern architecture and design.

Impact of spending cuts

3. Government funding received by the City Corporation for its public functions is, like any other public authority, expected to be reduced in the next spending round . Although the precise level of reductions in grants are still to be determined, all services are likely to be affected to a lesser or greater extent. D espite its strong continued support for the sect o r, since a large proportion of the City’s contribution to the arts, culture and heritage ( 68 % or over £ 55 million) is derived from its public funds , it is inevitable that there will be budgetary pressures on the City’s cultural offer . These pressures will also fall on the City’s private contribution and the City does not have the capacity to use its own resources to fill any funding gap that may arise.

4. There are therefore serious concerns over the impact of spending cuts on the arts and heritage. A rts institutions have always face d some difficult y in balancing budgets, even in less economically constrained times, so the impact of even small cuts in funding can be expected to be severe. To mitigate the cuts, some institutions may seek to increase revenue generated through box office and other admissions which may see ticket prices increase . Many mainstream users of arts institutions will be responsive to price increases and as a result, overall patronage may fall. This in turn may lead to more conservative programming and greater risk aversion by institutions in order to attract greater numbers.

5. The effect of proposed cuts may be more acute on the heritage side since heritage requires long term funding for ongoing maintenance and curation if it is to be safeguarded for the future. For example, t he Museum of London is London ’s statutory repository for archaeology. It runs the London Archaeological Archive and Research Centre, London ’s deposit store for archaeology and reduced funding will undermine the Museum’s ability to fulfil this role effectively . As a consequence, public access to its collections and its learning programmes, for which it has an international reputation, could suffer. In the run up to the Olympics at a time of wanting to see London’s and the UK’s arts institutions looking their best, as the world’s eyes are on London, any reduction could reflect badly.

Reduce duplication and make economies of scale

6. It is reasonably easy to talk about pooling resources into shared administrative structures but in reality the political and practical barriers can often be considerable, especially in the arts where competitive advantage is based on innovation and originality, and collaboration is not a natural route for the sector. Nevertheless opportunities for shared services between similar activities could still arise although these will mostly be in generic services such as finance and HR rather than specific services. However, there is no reason why resource sharing should be restricted to institutions in the same sector. For example on the Barbican Campus, the Barbican and GSMD have conjoined all their generic services (finance, HR, estates, facilities, box office, IT etc) even though one partner is a higher education institution (HEI) and the other is in the performance sector. At the same time, both organisations retain those services which are specific to their sector and which help to constitute their organisational integrity. For example, as an HEI, GSMD has retained its student support systems because they are fundamental to the organisation.

7. Furthermore, shared services can be a stepping stone to more interesting forms of artistic and educational synergy, as has proved the case with the Barbican, GSMD and LSO collaboration to create an international arts and learning quarter at the heart of the City of London. This ‘alliance for creative excellence’ has recently received £2.245 million from the Higher Education Funding Council for England’s Strategic Development Fund, which will enable the three strategic partners to create a new model for partnership working between higher education and the creative and performing arts. The first outward-facing signs of this collaboration was the formation of a new Creative Learning division, whose activities underpin every aspect of the Barbican’s arts programme, and the launch of Centre for Orchestra providing orchestral training, education and early career support for young professional musicians studying at the Guildhall School.

8. The Museum of London is the lead partner in the London Museums Hub working in partnership with the Geffrye Museum, Horniman Museum and London Transport Museum, in the development of a vibrant, diverse and sustainable museum sector. The Hub’s aim is to make the region's museums more relevant and enjoyable. To achieve this, the Hub is building on existing strengths within partner museums in order to develop a concentration of expertise within the sector. This expertise is then disseminated to the regional museum community in order to deliver high quality museum services.

9. These examples illustrate that it is perhaps easier to implement this kind of arrangement with a different, but complementary, organisation rather than with an institution aimed at the same target audience, as there is much less fear of competition. On this basis, a theatre company could, for example, outsource some of its support systems, say, to a local company that could become the theatre’s sponsor. Both partners would benefit from such an arrangement – the theatre company would be able to reduce its administrative costs and focus on its programming whilst the sponsorship would increase advertising and enhance its corporate social responsibility profile. After all, a lively creative arts scene plays an important role in sustaining an environment in which both businesses and local communities can flourish. Doing away with arms-length bodies, which can help to co-ordinate such activity, may, however, make it harder. 

Level of public subsidy

10. It is not easy to put a value on the necessary and sustainable level of public subsidy. The basic principle that public funding should step in when markets fail should apply, but the difficulty lies in objectively determining when the market has failed. As well as making a valuable contribution to the economy, estimated at 7-8% of GDP, the reputational value of the arts is highly significant and has more to do with their intrinsic rather than their instrumental value. The UK’s pre-eminence in the performing and visual arts is crucial to its global standing and assessing whether or not the market has failed will inevitably involve a judgment about perceptions of prestige, particularly at an international level. If other countries stop looking to the UK as a leader in the arts, the market will have failed and too late to address the problems. It would be ill-judged to put at risk a sector in which the country truly excels only for the pursuit of short-term savings. Many institutions also benefit from commercial or philanthropic funding on the basis of a given level of public funding. If one party were to upset that balance by unilaterally reducing its contribution, it may have disproportionate consequences for institutions reliant on that mix.

11. Echoing points made at para 5 above, continuity and certainty of funding is vital for the heritage sector. Nationally, the UK has long understood the importance of providing public funding to sustain documentary heritage as held, for example, in the British Library and the National Archives. It would be a retrograde step to put that at risk. 

Policy guidelines for National Lottery funding

12. If funding overall is going to be reduced, it will be important to direct what is available towards initiatives with maximum sustainable benefit. Although this should not preclude revenue funding for specific projects where necessary and appropriate (i.e. not to meet core running costs), a greater emphasis should be placed on funding activities with long-term benefits – e.g. buildings, conservation, cataloguing, digitisation – rather than time-limited events which leave no permanent impact.

Changes to DCMS arms-length bodies

13. It is too soon to give a definitive answer on the impact of the abolition of bodies such as the Film Council and Museums, Libraries and Archives Council. However, whilst the usefulness of the MLA and its impact in the professional environment has long been questioned, in all the various guises it has been through over the years, one thing it did usefully do was create a designation scheme for recognising collections of national importance, and the loss of that is likely to create a gap.  Other areas of concern hinge around which replacement body will manage the variety of Government programmes and schemes currently managed by arms length bodies. Such schemes include the Renaissance programme for regional museums, the Acceptance in Lieu scheme allowing taxpayers to transfer works of art and other objects into public ownerships in lieu of inheritance tax, and the Government Indemnity which has allowed some very previous objects to be put on display for which museums may not have been able to afford the commercial insurance. As mentioned in para 9 above, the loss of arms length bodies may also result in a loss of a coordinating voice in the sector.

Role of businesses and philanthropists

14. Arts institutions have in recent years done a great deal to maximise both comm ercial and philanthropic income. The Barbican Centre is in early stages of a new "Individual Giving" programme, and a number of links have been made with businesses who have become Corporate Members of the Centre.  It also attracts sponsorship from companies for certain events, in particular for its Gallery exhibitions. The Barbican is aiming to increase the amount raised from businesses and individuals in order to develop a more plural funding model, which will be more sustainable moving forward. The Museum of London has similarly been successful in raising funds £20 million from outside donors for its new Galleries of Modern London. Going forward however, cuts in funding may act as a deterrent to external donors and sponsors and lead to a spiral of decline in the Museum’s external fundraising abilities.

15. More generally, the common assumption that philanthropy will fill any funding gap is unrealistic. High-worth donors have already made it clear that they will not bridge the gap. Philanthropists usually want to support success stories and, therefore, donations are normally focused on specific projects or exhibitions rather than on funding core activity. Again, this means heritage projects or services requiring continued ongoing funding may suffer in comparison to arts philanthropy which lends itself better to one-off donations. It should not be forgotten that fundraising itself is a resource-intensive activity, and when budgets are under strain, organisations may find it difficult to maintain capacity in this area.

Encouraging private donations

16. Incentives to encourage private donations are not a new phenomenon and one explanation for the lack of new Government backed scheme to encourage philanthropy is that it is not a simple issue. For example, whilst a possible simplification of Gift Aid could have benefits for lower-rate tax payers, it would be less beneficial for those in the higher income tax bracket who, generally, are the ones more likely to give to the arts. The US tax system is consistently held up as an example of an initiative which actively encourages philanthropy, by giving tax breaks to the donor. It is however overly simplistic to say that the UK should adopt the US model, as there is a long-established culture of giving there and there would have to be a major, long-term change of culture in the UK before we reached their levels.

17. One example from a different sector, the Government’s recent matched funding scheme for donations to HEIs may be an initiative that could be transferred to the arts and heritage sector. The scheme appears to have had a very positive effect and it may be that distributing more public funding on a matched basis may help organisations to leverage donations from individuals and commercial organisations.

September 2010