Funding of the arts and heritage

Written evidence submitted by the Association of British Orchestras (ABO) (arts 125)

Executive Summary

· The arts have benefited from sustained public investment over the past 15 years. This public investment is tiny in relation to overall public spending.

· The UK’s mixed economy model of arts funding is effective and efficient.

· The maintenance of both central and local government funding for the arts is essential for the health and cultural wellbeing of the nation.

· Private funding cannot replace a shortfall in public funding for the arts.

· The maintenance of Arts Council England as an independent public body for the distribution of public funding of the arts is essential.

· The Government’s proposed changes to the distribution of National Lottery funds are welcome.

1. Introduction

1.1 The Association of British Orchestras (ABO) is the representative body for professional orchestras in the UK. Its members range from the major symphony orchestras (including the BBC) to chamber, opera and ballet orchestras. Our vision is of a society where orchestral music is valued as a core component of contemporary culture.

1.2 The ABO is pleased to submit evidence to this inquiry as a long standing stakeholder in the full range of issues impacting upon funding for the arts. Our evidence is submitted, as a representative body, on behalf of the entire orchestral sector.

1.3 Our evidence will inevitably focus on the arts rather than heritage. However, it should be noted that orchestras to some extent have a "heritage" role, preserving the canon of great works from the past, while also playing a role in nurturing contemporary composers and artists. In effect, it is analogous to combining the role of museum and contemporary art gallery. In 2008/09 British orchestras commissioned 113 new works and put on 132 first performances.

1.4 It is important to explain the complicated mix of funding for professional orchestras. This investment has helped them not only to perform great music in the traditional concert hall but to extend their reach into schools, rural and hard-to-reach communities, as outlined in the ABO’s publication Beyond The Concert Hall, and to be in the vanguard of innovation in digital delivery and new concert formats, as outlined in the ABO’s publication Orchestras into the Future.

1.5 Arts Council England funds 8 symphony orchestras and 6 chamber orchestras (two of which are specialist contemporary music ensembles and one a specialist period instrument ensemble), across 7 Arts Council regions. While there are four London self-governing symphony orchestras funded by Arts Council England, this funding is also intended to enable them to develop residences and tours outside London. So, for example, the Philharmonia Orchestra has residencies in Bedford, Leicester and Basingstoke, the Royal Philharmonic Orchestra in Croydon, Northampton, Lowestoft, Crawley and Reading, and the London Philharmonic Orchestra in Eastbourne and Brighton.

1.6 Over recent funding rounds in 2004 and 2007 there has been a steady decrease in the number of chamber orchestras funded by Arts Council England. These chamber orchestras have survived without public funding, albeit on a reduced level of activity. Of increasing importance has been the role played by Orchestras Live, the development agency for orchestral music in England, which has successfully enabled partnerships between and levered funding from local authorities and promoters to extend the reach of orchestras into those parts of the county not served by a resident symphony orchestra.

1.7 In Scotland, two orchestras are funded directly by the Scottish government, to a more generous extent than their equivalents in England to enable them to tour widely across the nation. A third orchestra is funded by Creative Scotland.

1.8 The BBC National Orchestra of Wales is jointly funded by the BBC and the Arts Council of Wales. Chamber orchestras in Wales have relied solely on funding from the National Lottery.

1.9 In addition, there are the orchestras of the opera and ballet companies, which are also beneficiaries of public funding through the public investment in the opera or ballet company, funded by their respective Arts Council or by the Scottish Government.

1.10 In respect of this enquiry, we are excluding the BBC performing groups from the evidence we are submitting.

1.11 Funding from local government varies from orchestra to orchestra. Some, such as the Bournemouth Symphony Orchestra, have funding agreements with multiple local authorities. More crucially, local government is often the primary source of funding for the concert halls and local promoters.

1.12 Public funding for orchestras tends to account for anything between 10% and 55% of income, depending on the orchestra. The rest is generated by a mix of earned income from ticket sales, commercial engagements, foreign tours, broadcasting fees and recordings, and private support (sponsorship and individual giving). In recent years the income from recordings has declined as record labels have suffered from the impact of illegal file-sharing and in consequence are less able to invest in classical music recordings.

1.13 There are a number of orchestras, some of international renown, in membership of the ABO which do not receive direct funding from their respective Arts Council, and which therefore rely exclusively on earned income and private support. They are indirect beneficiaries, however, of the funding for venues and from Orchestras Live, and are part of the delicate fabric of public and private support for the arts. These orchestras are concerned that their viability may be threatened by increased competition for the limited pot of corporate sponsorship and individual giving.

2 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

2.1 The ABO would contend that public funding for the arts and heritage had reached a level in 2008/09 that enabled arts and heritage organisations to achieve a healthy balance between public subsidy, private funding and earned income, under the ‘mixed economy’ model. While concerned at the number of chamber orchestras that had been ‘disinvested’ by Arts Council England in 2004 and 2007, the ABO was pleased that investment in the symphony orchestras and opera and ballet companies had remained stable. The consequence of this sustained investment and funding model was that British orchestras presented over 3,100 concerts in 2008/09, to over 3.4 million people.

2.2 The cuts imposed in 2009/10 by both Arts Council England (0.5% to their regularly funded organisations) and by some local authorities have already led to a contraction in orchestral activity, with fewer concerts planned for 2010/11 and beyond. We have already seen the impact of public spending cuts in Scotland, with Scottish Opera proposing to halve the working hours and salaries of its orchestral musicians.

2.3 This will be exacerbated hugely by the impending spending cuts for 2011/12 through to 2014/15. Arts Council England has already written to their regularly funded organisations recommending they plan for a reduction of 10% in subsidy for 2011/12, and we await nervously what level of cuts will follow. We are working on the assumption that the total contraction in funding for the arts could be as much as 30%.

2.4 The consequence of this will be that there will be a serious contraction in the amount of concerts, opera and ballet productions available to the public. It is simply unimaginable how our members would cope with this level of cuts and the disappearance of some internationally renowned orchestras, opera and ballet companies would be inevitable.

2.5 This of course would also have knock-on effects in terms of unemployment of artists and administrators, loss of tax and national insurance receipts and a rise in welfare payments. It is arguable that the amount saved by cutting the arts, which would make a negligible impact on reducing the national debt, would simply be offset by the increase in costs associated with rising unemployment and decline in economic activity.

2.6 It is important to note that orchestras and opera companies are in a particularly difficult position in that artists such as conductors, soloists and singers are contracted anything from two to four years ahead. They therefore have contractual obligations and a rapid decrease in public funding would be catastrophic and place them in a position of insolvency.

2.7 It is also important to point out that an orchestra carries large fixed costs in terms of human resources. An orchestra may require the employment of upwards of 100 musicians on fixed contracts, in addition to the management team. Unlike, say, a theatre company, an orchestra cannot simply choose to perform works with fewer musicians. If a Mahler symphony requires 100 musicians on the concert platform, that is the number that must be fielded. And the public, of course, expect a symphony orchestra to play the symphonic repertoire. The problem with carrying such a high level of fixed costs is that the same outlay of expenditure on human resources is required regardless of whether activity is reduced, and a reduction in public subsidy would create an imbalance in the ‘value for money proposition’ expressed as a ratio of fixed costs to output.

2.8 Arts Council England’s Stabilisation programme made a massive contribution to the health of some our leading orchestras and other arts organisations, in response to the pressure placed on them by cash standstill revenue grants in the 1990s which had made it increasingly difficult for them to manage their business on a sustainable basis. Not only did it provide additional funding, but also developed their business planning and internal operational reform. The success of our orchestras today, and their ability to compete in a global marketplace, is directly the result of that investment of lottery funds.  However, we should point out the obvious lesson that a shortfall in public subsidy inevitably leads to a build up of deficits for arts organisations such as orchestras that carry a high fixed cost in artistic personnel.

2.9 An orchestra is not just about playing great music on the concert platform. Orchestras have been pioneers in developing education and community programmes, that serve both to develop new audiences and to complement music education in schools. Much of this work is celebrated in the ABO’s publication Unlocking Potential: Education and the Orchestra, with over 400,000 young people in England and Scotland benefiting from engagement with orchestral musicians in both the classroom and the concert hall. However, it is important to stress that while the infrastructure that supports an orchestra’s education department may well be supported by the orchestra’s public subsidy, the projects themselves will often be funded by trusts and foundation or by fees from schools/local authorities.

2.10 If concert halls, venues and local promoters suffer significant funding cuts from their respective local authority, the irony could be that there continue to be British orchestras, but an acute shortage of venues in which to perform in. It is vital to recognise the delicate balance that exists between local authority and Arts Council funding. If one is cut, the other will inevitably follow.

2.11 It is also important to point out that the cuts will not just have an impact at a national or local level, but at an i nternational level as well. Orchestras are cultural ambassadors and operate within a global marketplace, and to cover shortfalls in other areas of earned income have increase d the amount of foreign touring they do. This puts them in competition with other European orchestras, which are publicly funded to as much as 85 % of their income. Reducing the amount of public investment in British orchestras will put them at a commercial disadvantage, exacerbated by the recent rise in the value of sterling. Their success can be judged by the fact that in 2008/09, British orchestras played in 39 different countries and performed in 500 concerts overseas.

2.12 The arguments for the financial return on public investment in arts and heritage organisations, including orchestras, have been well-rehearsed. They are generators of income from t ourism , as evidenced in Visit Britains’ recent report Culture and Heritage Topic Profile. Performing a rts organisations also, of course, generate VAT receipts from ticket sales. R ecent research into the impact of Welsh National Opera on the Welsh economy reveals the company contributes £22.5 million to the country – five times its current annual revenue funding of £4.5 million from Arts Council of Wales.

2.13 It is salutary to compare the UK government’s decision to cut spending on culture with the USA’s enlightened inclusion of the arts in its fiscal stimulus plan. President Obama's remarks at the December 6 Kennedy Center Honors included the following statement of support for the arts: "In times of war and sacrifice, the arts - and these artists - remind us to sing and to laugh and to live. In times of plenty, they challenge our conscience and implore us to remember the least among us. In moments of division or doubt, they compel us to see the common values that we share; the ideals to which we aspire, even if we sometimes fall short. In days of hardship, they renew our hope that brighter days are still ahead. So let's never forget that art strengthens America. And that's why we're making sure that America strengthens its arts. It's why we're reenergizing the National Endowment of the Arts. That's why we're helping to sustain jobs in arts communities across the country. It's why we're supporting arts education in our schools, and why Michelle and I have hosted students here at the White House to experience the best of American poetry and music."

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

3.1 Although it seems tempting to assume that there is potential for significant savings from mergers and sharing back office functions, there is a body of evidence that shows this not to be case. Evaluation of Arts Council England’s Thrive programme revealed that for a successful merger to take place, significant additional one-off investment is required, for which there is no obvious source of funds. And merger does not necessarily generate a saving in subsidy or running costs; it merely enables the merged organisation to do more with the same level of subsidy.

3.2 In addition, a study of Scotland’s National Performing Companies was undertaken during 2007/08 into the likely impact of combining backroom HR and payroll services. This reported that whilst it was possible that ultimately savings could have been made through this process in future years, the cost of setting this service up was deemed to be prohibitive and contrary to the expectations of such combined working.1

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

4.1 The answer to this question is that it depends on the individual organisation. Arts Council England will make a judgement on the level of subsidy required based on the mission, need and quality of the organisation.

4.2 The level of funding for Arts Council England in the funding round 2008-2011 was in our opinion at the right level for the long-term sustainability of its regularly funded organisations.

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

5.1 We are tempted to argue that if there wasn’t an Arts Council England, one would have to invent it. The model adopted in Scotland of 5 national performing companies, funded directly by the Scottish government, provides an interesting comparison, but it is hard to see how orchestras in England would benefit from a similar approach except for those attached to a national opera or ballet company.

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

6.1 It is important to stress that changes to the National Lottery are currently at the consultation stage and there is no guarantee the proposed return to the original shares will be adopted.

6.2 Should the arts share return to 20%, this should mean an additional £50 million of lottery funding for the arts will be forthcoming by 2012/13.

6.3 However we are mindful of the principle of additionality, and are concerned that any increase in lottery funding may not replace the decrease in revenue support for orchestras.

6. 4 We believe it is important that lottery funding provides some capacity for strategic investment to allow arts organisations to develop.  The Thrive programme, as an example, used lottery funding to help generate mergers, and additional investment will be required in the coming years to develop digital distribution and implement greener working practices.

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

7.1 We are supportive of the principle of additionality and see no need for this to be reviewed.

8 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

8.1 The operation of these non-departmental public bodies has no direct impact on British orchestras. However, we would be concerned if responsibility for the work carried out by these two bodies was passed on to Arts Council England without the provision of sufficient additional resources, thereby impacting on the amount available to support performing arts organisations.

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

9.1 Businesses and philanthropists already play a significant and valuable role in supporting arts organisations at national and local level. As some of the leading philanthropists have made clear, however, in recent correspondence with the Secretary of State for Culture, Media and Sport, their contribution is already generous and they would not take kindly to being taken for granted as a quick fix for a substantial cut in public funding. What a philanthropist gives can all too easily be taken away.

9.2 Corporate sponsorship has been a source of income for arts organisations for many years but evidence from Arts & Business has shown, not surprisingly, a decline during the recent recession.

9.3 Another important source of private support is trusts and foundations. However, these have suffered in recent years from the decline in their investments and reduction in yields, reducing the amount they can make available in grants. In addition, grants can tend to be focused on education and community work, rather than on the main body of an orchestra’s work.

9.4 It is important to note that Arts Council England created the Sustain Fund in 2009 to enable lottery funding to be used to cover shortfalls in earned income and private support that resulted from the recession. This proves that private support declines during a recession, and therefore should not be seen as a stable long-term solution.

9.5 There has been much talk of endowments as a replacement for public subsidy. However, evidence from the USA has shown the danger of an over-reliance of endowments, with the collapse in the markets leading to both a reduction in the capital value of the endowments and in income. This has led to orchestras in the USA having to re-negotiate contracts with their musicians, industrial unrest, contraction in activity, and cessation of operation altogether.

9.6 This is not to say that endowments do not have their place in the UK mixed economy funding model. They should, however, be seen as one tool in the toolkit.

9.7 Arts organisations already work their hardest to secure private support and it is difficult to see how they can "redouble their efforts" at a time of funding cuts, especially as the cuts will inevitably lead to a reduction in the workforce. It is perhaps rather obvious, but for an arts organisation to raise funds, it needs to employ fundraisers.

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

10.1 The Treasury is currently carrying out a review of Gift Aid. The ABO and its members support the retention of the Gift Aid system , in particular the retention of the higher rate tax benefit, with some simplification of its bureaucracy. We also believe ‘lifetime legacies’ should be explored as a mechanism for helping build endowments.

10.2 There has been talk of adopting ‘US style’ fundraising in the UK. It is important to point out that in the USA, gifts to qualifying charities (which include arts organisations) can be offset against income tax by all taxpayers, as opposed to the UK ’s Gift Aid system, where there is a marginal tax benefit for higher rate taxpayers only .

August 2010

[1] National Performing Companies – Report on Activity 2007/08 and 2008/09