Funding of the arts and heritage

Written evidence submitted by The Sage Gateshead (arts 164)

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;

1.1. Beyond the obvious impact that some things substantially dependent on public funding either won’t happen or will happen in reduced form, more seriously the cuts risk making managers of arts organisations more risk-averse to protect their other income streams. In turn, experience tells us that leads to cultural programmes becoming of lower quality, less challenging and distinctive, and including less new work than we now take for granted. Cumulatively that would erode our current international reputation for the quality and distinctiveness of our artistic production, along with the earning potential that comes with that reputation. It’s important then to remember that those kinds of capacity and reputation may be much harder to rebuild once key productive capacity has been lost, and (from a Best Value standpoint) rebuilding that productive capacity from a lowered base always takes disproportionately longer, and needs more resources than sustaining the original capacity would have needed;

1.2. A falling quality and/or distinctiveness of the produced work would trigger knock-on consequences likely to include lower earned income, and also a lower interest amongst businesses in investing in the arts as sponsors, since commercial sponsors target their investment toward companies they perceive as successful and who recurrently produce distinctive work of high quality and impact;

1.3. Many of our arts and heritage organisations unavoidably operate at the margins of profitability and economic viability. For those organisations it will only take a small adverse change (reduced earned income, other investment failure, public funding reduction) to trigger a crisis. In many of those cases the speed of the change is key – reductions in any income streams that occur over longer time-scales can more easily be planned for and absorbed than cuts which come quickly and unheralded;

1.4. There’s one other impact that does not immediately show up in the figures. Most of our arts and heritage organisations produce education programmes, often of high quality, which complement and extend the programmes delivered in the formal education sector. There has never been a comprehensive national assessment of the economics of this process. Arts and heritage organisations mostly create these programmes from within their total resources, so there is a constant, ongoing supply of cultural education programming effectively funded (largely invisibly) by the arts and heritage funding agencies. When that funding reduces it is often the case that the education programmes suffer disproportionately, since their capacity to generate income for the producing company is vulnerably lower than their ‘main programmes’. Because this situation has never been mapped or quantified it’s impossible to quantify this effect in advance of it happening, but I strongly suspect that another impact of cuts in arts and heritage funding will be a disproportionately large reduction in education programming up and down the country produced - day in, day out - by companies large and small operating in all kinds of different cultural fields.

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

2.1. A lot – this approach is in its infancy in the UK, but it offers real opportunities for sustaining and enhancing existing levels of artistic output more efficiently and economically. In NewcastleGateshead ten cultural companies are developing exactly that approach, and finding it yields fruit not just in the economy and efficiency with which we operate but also in many other aspects of our relations with the community we exist to serve. Some of these organisational networks seek some public sector investment to operate with their own maximum efficiency, but that investment is more than repaid by significant hikes in organisational efficiency and management skill levels throughout the network.

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

3.1. This is the wrong question. The critical economic factor is that cultural organisations should receive public sector investment at the levels required to enable them (given their individual circumstances) to be efficient and effective in producing distinctive, high quality work. When the total quantum of available funds reduces that becomes an important principle, so the right public sector response is to invest in fewer organisations, but to invest in those at sufficient levels to ensure that they can continue to produce distinctive, high quality work.

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

4.1. The current 2-tier UK arts investment structure (Government investing through a distributing quango, and with it the idea of an ‘arm’s length’ principle) came into being immediately after the 2nd World War in circumstances utterly different from those of today, 65 years later. This system is far from universally common around the world – there are countries with proud records of achievement in the arts which have a simpler 1-tier system. This may be the moment to ask the question whether the benefits of our 2-tier system are still worth the additional costs and extended policy linkage chains implicit in our current 2-tier system. Asking this question does not at all presuppose an answer to it, but in the financially challenging context of the next five years the question does at least need asking.

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

5.1. Does this question mean the Government’s intention to restore the original 20% distribution shares to the arts and heritage? If so, the arguments for restoring the National Lottery’s original ‘good causes’ distribution approach feel strong, focused as they are on ring-fencing the distribution to those sectors of public life which have recurrently been ‘squeezed out’ during previous periods of financial pressure and restraint.

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

6.1. The original guidelines (with their focus on capital spending and on a wholly-open application process) represented safeguards built into the Lottery distribution at the start, when many aspects of how the Lottery would work in practice could not be guaranteed. 15 years later there feel to be few risks in relaxing those rules slightly, to allow the distributors to take a more strategic approach to the investment, and also to recognise that not all major developmental investments consist solely of capital spending.

6.2. It seems a near-certainty that the Government’s call to private sector donors, philanthropists and investors to increase their contributions will need some incentivising lubrication. One potentially productive possibility for some of the ‘new money’ resulting from the increased Lottery shares (for arts, sports and heritage) would be to use some of the new money as an incentive budget to lever private sector donors, philanthropists and investors.

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. We don’t deal directly or closely enough with the UK Film Council or the Museums, Libraries and Archives Council to have a fully informed view of the cost-effectiveness of their work – others will be better placed to answer this question authoritatively.

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

8.1. Much has been written about the positive aspects of the UK’s ‘mixed economy’ of the arts, poised (as in so many other things) between the opposed regimes of the USA and Western Europe. As the system currently works in the UK, significant levels of core public sector investment play an important part in encouraging and triggering corresponding contributions from philanthropists, individual donors and private sector/corporate investors – who read the public sector funding variously as a qualitative ’endorsement’ and indicator of public value, or as an economic multiplier. Undoubtedly there are businesses and philanthropists who could play a greater role in funding arts, but in many cases they will need to be encouraged to do that by some reforming changes to the gift-aid and tax regimes, and also to the restoration of some kind of state ‘matching’ or ‘incentive’.

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

9.1. Yes – see 8.

September 2010