Funding of the arts and heritage

Written evidence submitted by the Society of London Theatre and Theatrical Management Association (arts 193)

Summary

· The performing arts play an important part in the cultural, social and economic life of the UK. Indeed, British culture in general and theatre in particular are the envy of many other countries.

· Theatre in the UK brings real economic benefit. The sector as a whole generates nearly £3 billion pounds a year in economic activity.

· Although the theatre sector does not expect to be immune from the impact of the current economic crisis, state investment is essential to ensure access to high quality, diverse theatre, opera and ballet.

· No doubt more can be done by arts organisations to intensify their search for sponsorship and donations. But there is a limit to what can realistically can be achieved over a short time.

SOLT AND TMA

1. SOLT and its sister organisation, the TMA, are the trade associations that represent theatre managers, producers and owners across the UK at the large and middle scale.

2. Both organisations represent lyric as well as dramatic theatre. Their members represent both commercial and subsidised theatre.

Impact of Spending Cuts

3. It is difficult to respond to the first issue raised by the Committee. At the present time, it is unclear what precise cuts will be required of the DCMS; how those cuts will be distributed between the Department itself and its various Non Departmental Public Bodies. When it is known what cuts will be imposed on Arts Council England and on equivalent organisations in the devolved nations, they will need to consider carefully how those cuts should be distributed across their theatre portfolios; and within their theatre portfolios, they will need to decide the outcome for individual organisations.

4. Having said that, the sector does not realistically expect to be immune from the impact of the current national economic crisis. Yet great care will be needed to ensure that, so far as possible, the implementation of any cuts does not undermine the core functions of those organisations that continue to be in receipt of funding. In theatre ‘front line services’ are what happens on stage.

5. So far as the funding distributors are concerned, SOLT and TMA are anxious that they should not take the across the board approach to equal pain. Their decisions in due course will need to be informed by the significance of their current funding in relation to the total budgets of individual organisations; by the extent of their reliance also on local authority funding support; and by an assessment of their likely ability to raise more funds from the private sector. The issue of local authority funding is particularly important for regional theatres.

6. It is important to emphasise that theatre punches well above its weight in economic terms. The annual economic impact of theatre activity is some £3 billion, of which London theatre accounts for £2 billion. In addition, ticket sales alone account for some £80m annually in VAT receipts. This is more than half the total sum spent on theatre by governments across the UK.

Working more closely together

7. Theatre organisations in both the subsidised and commercial sectors already work very closely together, sharing productions and their associated costs. In the last four years, 45 of the productions seen in commercially operated West End theatres began their life in the subsidised sector. If this source of product were to become significantly attenuated, the consequences would be far-reaching. But it would be wrong to suggest that no more extensive collaborations might be possible. We would expect subsidised organisations to explore this option vigorously, both between themselves and with commercial theatre interest.

The necessary level of public subsidy

8. There is no formula for determining the "right" level of public subsidy for the arts in the UK. Traditionally, funders have tended to look to international comparisons as offering some kind of benchmark. All such comparisons in recent years have shown that central and local government expenditure on the arts as a proportion of GDP is significantly higher in the UK than in the US, but at he same time significantly lower than in the more developed Western European countries.

9. Across Europe, both the total quantum of subsidy and the proportion of arts organisations’ income which is attributable to government support are significantly higher than has typically been the case in the UK. Whereas the larger subsidised lyric and dramatic theatre producers in the UK tend to receive about a third of their income in subsidy, in continental Europe the figure is often as high as two-thirds or even four-fifths.

System and structure of funding distribution

10. In both Scotland and Wales, the devolved governments have recently made significant changes to funding mechanisms in the arts. In England, the Arts Council has endured a number of reorganisations over the last 10 to 15 years. Although systems can always be improved, the most pressing need at this time is for consolidation rather than further change.

11. SOLT and TMA are firmly of the view that the arms length principle is important to the effective assessment of individual organisations and of their need for financial support.

Changes in the Distribution of National Lottery funds

12. The recent announcement of some increase in the proportion of National Lottery funds to be made available to the arts is welcome in itself. However, the increases are small and are likely to pale into insignificance by comparison with cuts in other budgets.

National Lottery policy guidelines

13. In general, SOLT and TMA would like to see lottery distributers in the arts given greater flexibility over the uses to which National Lottery funding may be put. Such flexibility could be particularly helpful at a time of cuts in central government budgets, especially if Lottery funds can be used to facilitate the transition of individual organisations from the current level of public funding to a lower level.

The abolition of the UK Film Council and MLAC

14. These are not matters on which it would be appropriate for SOLT and TMA to comment.

The long term role of business and philanthropy

15. UK arts organisations already devote significant resources to raising sponsorship and donations. They have been doing this for 30 to 40 years, and in some cases longer. Taken over all, the sector has been successful in this endeavour. Having said that, however, some individual organisations find it much more difficult to raise this kind of funding than others. This may be because of their geographical location or because of the nature of the work that they do. All subsidised organisations will undoubtedly respond to cuts in their public funding by intensifying their efforts to raise sponsorship and donations.

16. In this context, it is relevant to look at the US where business and private philanthropy play a much greater role in sustaining certain arts organisations. By and large, US philanthropy has been much more heavily attracted by lyric theatre than by dramatic theatre. One consequence of this is that culturally significant dramatic theatre within the US is largely confined to New York, Chicago, Los Angeles and San Francisco. Across great swathes of the US, the only available theatre is touring Broadway musicals. It is no doubt partly for this reason that Broadway itself is very heavily dominated by musicals. At the time of writing, there are no plays being performed on Broadway.

Incentives to encourage private donations

17. If the government wishes the subsidised sector to increase its income from private donations, it needs to will some of the means as well as the ends. As things stand, donors make a donation of a given sum, and it is for the recipient charity to reclaim the tax. For high-rate taxpayers in particular, the total impact of their donation is obscure. In the US, by contract, donors deduct their donations from their gross income. Introducing this system would have a major impact on people’s willingness to give large sums.

18. In this context, it is relevant to observe that the US also offers a much more benign tax regime for investors in commercial theatre than is the case in the US. Again, if the UK system were amended along US lines, it would have a significant impact on the ability of commercial producers to raise investment.

September 2010