Funding of the arts and heritage

Written evidence submitted by Historic Houses Association (HHA) (arts 203)

Key issues

· The arts and heritage play a very positive role in the UK economy and some areas of expenditure are essential if our heritage is to play its part at the heart of social and economic recovery

· The historic environment requires not only grant aid, but expertise to underpin conservation

· There is scope for the creation of public-private partnerships to pool resources and improve efficiency

· The restoration to 20%, of the shares of National Lottery funding to the arts, heritage and sport, would be very beneficial

· Government incentives are essential to optimise business sponsorship and philanthropy, whether through funding or reform of taxation

Introduction

The Historic Houses Association (HHA) represents historic houses, gardens, castles and estates mainly in private ownership, although there are a number of charitably owned houses in membership. We have 1,500 members throughout the UK, representing an astonishing variety of cultural heritage, ranging from intimate family homes to some of Britain’s most iconic buildings.

Our members’ houses and gardens welcome 14 million visitors each year; 500 are open to the public, more than the National Trust and English Heritage and their equivalents throughout the UK combined. One in five of all member houses and gardens have developed education resources and programmes and welcome over 300,0001 educational visitors each year.

Historic houses provide character, distinctiveness and a sense of place and help create pride in where people live. 87% of British people think the historic environment plays an important part in the cultural life of the country2. Historic houses are seen as being central to our quality of life and our sense of identity and well-being. The latest English Heritage research shows that in all seven historic environment regeneration areas surveyed, over 90% of people who lived and worked locally agreed that these projects had improved their quality of life3.

The virtual disappearance of grants for the restoration of privately-owned historic houses and the loss of incentives such as the One-Estate Election, have had a significant impact. Since much of the heritage economy is in private hands and operates outside DCMS control, the impact of government funding reductions is in reality much greater than DCMS budget reductions suggest. Government has a critical role in filling the gaps that the market cannot cover.

Over the years, some houses have been sold and have closed their doors to the public, while one owner in eight has had to sell art in order to finance repairs. When art is sold to finance repairs, the chances of it ever coming back to it house of origin in the UK are very slim.

The impact of Government spending cuts

1. The potential negative impact on the UK economy, of significant arts and heritage spending cuts by central and local Government, can be demonstrated by the fact that 80% of international visitors say that their principal reason for visiting Britain is connected to heritage and culture4. Heritage tourism contributes £20.6bn to GDP each year, supporting 460,000 jobs5. Reductions in spending on heritage would be a false economy if they led to reduced tourism revenues, as would be likely.

2. Many historic houses and their gardens are the key players in their local economies, particularly in rural areas, where other opportunities for employment and business activity are often limited. 30,000 people are employed directly at historic houses, or in businesses occupying premises in the grounds6. The beneficial effect that public visiting to these places has on the wider economy is estimated at £1.6bn per annum7. Cuts in spending on grants and advice for privately owned heritage would over time, have a significant and negative impact on the economy of rural areas.

3. The historic environment creates not only a sense of environment, but stimulating and exciting places for learning. For instance, one in five HHA properties offer educational visits. Cuts in grants and advice for privately owned heritage are likely, over time, to reduce the provision of these educational visits, by handicapping the ability of owners to restore and adapt their properties. Cuts in educational spending will also erode the ability of schools to make visits. The combined effect will be a diminished educational experience for school pupils.

4. Since two-thirds of Britain’s historic environment is privately owned and managed, its owners bear the costs of stewardship. HHA owners alone spend £139m per annum on conserving historic buildings and their contents, with practically no public support. Even this figure falls well short of the amount needed to maintain the fabric of historic houses. As a result, the backlog of repairs at HHA houses has risen by 50% from £260m in 2003 to £390m in 20098.

5. The provision of expert advice by English Heritage to owners and managers and through local authorities is of considerable importance. Without this expert advice many local authorities might, inevitably, make uninformed decisions, which cause damage to the historic environment, or avoid making decisions which are essential to the viability of historic buildings. The consequences, including the possible loss of important places and environments and the effects on quality of life could be very damaging, not just in practical terms, but in relation to loss of identity and sense of place.

6. Spending cuts in this area also pose a threat to the role that historic buildings can play in regeneration of communities and local economies. There are numerous examples across the country of the way in which the historic environment plays an essential role in regeneration through sustainable development. It can make a unique contribution to the quality of the environment and historic houses often support the regeneration of local economies, especially in rural areas, by sourcing local products and services. Castle Howard, for example, does business with 1,000 local companies.

Economies of scale

7. There are, no doubt, efficiency savings that may be made within the funding systems for the arts and heritage. In particular, partnership working may play an important role in husbanding resources efficiently.

8. However, a reduction in the number of agencies does not necessarily equate to a beneficial economy of scale. For example, English Heritage plays a unique role as the specialist body which advises Government on the historic environment, supporting the sector through grant-giving, advocacy and expert advice, as well as playing a critical role in supporting local authorities in championing the historic environment.

9. Any compromising of English Heritage’s (EH’s) highly professional advice service to owners and local authorities in planning and casework, or where complexity is beyond local expertise, could result in disparate standards and short-term interest outweighing the national good. As such, EH has a different geographical remit and plays a distinct role from that of the Heritage Lottery Fund (HLF) and their two sets of functions would not sit well together within a single organisation.

10. Given that EH currently provides both funding and expertise in support of the historic environment, it is important, in order to ensure the best use of public funds, that its expertise is not separated from its capacity to award grants. So even if, for example, the introduction of a single specialist agency for awarding arts and heritage grants were to appear cheaper, it would provide significantly less value for money than the current system, as a consequence of the separation of roles.

Levels of public subsidy

11. Cuts in heritage expenditure have potentially serious consequences, some of which can be demonstrated by examining recent history. For example, reducing EH support to buildings on the Heritage at Risk register by 40% would have resulted in the loss of 460 Grade I and II* buildings during the period 1999-20109.

12. While any reductions in EH’s ability to deliver these services would be undesirable, it would nevertheless make strategic sense for it to invest in external partnership working in order to deliver more of its objectives in the medium to long term. Investment in the private sector could underpin strong, cost-effective partnerships which benefit the historic environment.

13. Currently, while financial support for privately owned heritage from EH is extremely limited, it is specifically excluded from HLF conservation funding. There is, however, a strong case for reviewing this policy and making HLF grants available to projects in the private sector. This case is explained in paragraph 23 below.

14. Sustainable funding sources are particularly important for the historic environment, because once neglect has set in, the ultimate expenditure required to restore a property may be much greater than if funds were available to enable early repair.

15. Some areas of public expenditure are essential if our heritage is to play its part at the heart of social and economic recovery. Certain areas need to be protected, as a consequence. These should include:

· the specialist legislative capability within the DCMS to frame the legislation required to update the heritage protection regime

· proper resourcing for historic environment services in the forthcoming review of local authority finance

· support for cultural learning opportunities for children and adults, in which heritage plays an integral part.

The HHA has put these ideas forward to DCMS as part of our response to the DCMS Structural Reform plan, both on its own behalf and as part of the Heritage Alliance.

The current funding system

16. Public investment in the historic environment is needed for the reasons already given, but also generates employment in the tourism and construction industries. In addition, quality of environment is one of the key factors in promoting inward investment and historic buildings have an important role to play in creating places where people want to live, work and visit. The funding system has a role to play in conserving and enhancing the quality of the environment.

17. Given this and the fact that two thirds of the historic environment is privately owned, we would welcome a statement of policy from government that the privately owned heritage should be as entitled to eligibility for grant aid as historic buildings in public ownership, so long as funding is directly linked to a significant public benefit.

18. The establishment of this principle would not undermine the current system, but could facilitate the establishment of public-private partnerships, which would enhance the existing system and enable the best use of limited resources.

19. The current system lacks fiscal incentives to support the built heritage. Proposals for these are referred to in the final section of this response.

The National Lottery

20. The HHA strongly supports the HLF as a nationwide body delivering the National Lottery for heritage organisations throughout the UK. Its funding is coordinated and has allowed for a more sensitive response to grantees, for example in the percentages of partnership funding needed, particularly for smaller projects.

21. The HHA welcomes the coalition government’s intention to increase the shares to arts, heritage and sport, restoring the original share of 20% in 2012. However, Lottery money should not be allowed to become a substitute for funding that would normally fall to mainstream Government spending and we welcome the commitment to the principle of additionally that this proposal makes, at a time when other sources of public funding will be under greater pressure.

22. Funding distributed by the HLF has had a huge impact on the historic and natural environment and has helped to generate further investment and presented opportunities for regeneration and community growth. The HHA supports the HLF’s role as investor, rather than funder, which means that grants have an effect substantially greater than the funds invested, particularly when they involve other funders and partners.

23. The HHA hopes that the increase in funding available to HLF will pave the way for further support for heritage projects supported by the private sector. Currently, privately owned heritage is, as stated in 6 above, specifically excluded from HLF conservation funding. We believe that there is a strong case to review this policy and to make HLF grants available to projects in the private sector, so long as the public benefit is sizeable in relation to the grant and particularly in relation to any incidental private benefit. The principle is not new. English Heritage grant aids privately owned heritage (albeit on a tiny scale compared with previous practice) and in other areas, such as environmental conservation, school or hospital building or defence procurement, it is the norm for government to purchase goods or services for public benefit or use from the private sector.

24. The HLF already devotes resources to encouraging applications from underrepresented groups and geographic areas. Increasing this role through additional funding should improve take up from these sectors.

25. The HHA shares the concerns expressed by the Heritage Alliance about the requirement for Lottery distributors to reduce the proportion of funding for administrative purposes. This could have the negative result of discouraging distributors from making smaller grants which are proportionately more costly to administer. Projects with which the HHA has been involved have often had to piece together grants from different funders for relatively modest grants and it would be a great concern if these smaller grants were not properly supported. As an example, the HHA is currently involved in a heritage outreach project which has received £36,000 of public funding but will go on to unlock a further £70,000 of partnership funding and involve a groundbreaking collaborative partnership.

26. The HHA is also concerned that HLF research resources are to be included in administrative costs. The HLF is uniquely able to undertake robust research on the social and economic outcomes of heritage investment and to provide a national UK wide perspective. The Heritage Lottery Fund’s report: Investing in Success: Heritage and the UK Tourism Economy 2010 revealed the scale of the heritage tourism industry in the UK, estimating its gross domestic produce contribution to be £20.6 billion.

Business sponsorship, philanthropy and Government incentives

27. The HHA believes that a mixed economy, involving public-private partnership working and including a robust system of public funding is essential to the health of the arts and heritage in the UK.

28. A strong and unequivocal government commitment to the value of our heritage is needed, in order to avoid demotivating both potential philanthropists (including those responsible for the maintenance of our heritage) and the large number of volunteers who work on the historic environment and whose contribution is increasingly important in times of economic stringency. Such a commitment would also help to focus the attention of potential business sponsors on the benefits of supporting heritage projects.

29. If the historic environment is to meet the challenges which result from reductions in spending – if the gap in funding, and more, is to be made up from the support of large and small-scale philanthropists - practical incentives are needed. Improving the operation of the existing tax regime, for example on Acceptance in Lieu and Gift Aid, would help both to conserve historic houses and extend public enjoyment of the nation’s heritage.

30. Other mechanisms are needed too, to encourage increased and enduring funding from businesses and philanthropists. The historic environment needs schemes similar to the Big Arts Give or Arts & Business’s former Pairing Scheme, by which government support directly stimulates increased investment from private sources.

31. For the privately-owned historic environment, the principal issue may not be reductions in public funding. A tax regime to stimulate the maintenance of historic buildings, including a reduction in VAT on repairs to all listed buildings, which properly recognises their value to society and the economy, would help significantly.

32. The greater use of Heritage Maintenance Funds would eat into the backlog of repairs referred to in paragraph 4 above and generate employment in conservation skills. However, such use will not be made without changes to the currently unfavourable tax treatment of income and capital gains generated within such funds. The HHA has made proposals for improvements in the tax treatment of HMFs, taking into account that the money generated by them can be used only for the maintenance of nationally important historic buildings, usually open to the public. The details can be found at: http://www.hha.org.uk/our-policies/tax-campaigns.html.

September 2010