Funding of the arts and heritage

Written evidence submitted by the National Theatre (arts 217)

There is no doubt that spending cuts from central and local government, and regional development agencies, have had and will have a significant impact on the arts and heritage at a national and local level.

This submission seeks to answer the Committee’s questions both in respect of the National Theatre and the wider performing arts sector and to provide evidence for those answers. In making our submission we would like to make it clear that while we regard the current conditions as being close to optimal, we understand that these cannot continue and we are not making a case for special treatment.

However, we want also to be clear that while hand-wringing and despair are inappropriate and that it behoves us to work together creatively and collaboratively to meet the coming challenges, cutting activity to meet reduced budgets will lead inevitably to a decline in public benefit. The National Theatre thrives and is most successful, productive and efficient (both in terms of levering additional income and in making efficiencies) when it is operating at full capacity. It is no coincidence that over the last five years of regular funding the NT has been critically and financially successful.

We can and should continually reinvent ourselves and our ways of doing things and funding activities in response to an ever changing world, as the submission makes clear. But in our view, it is crucial that the coming period of austerity is viewed as a necessary but temporary period of financial retrenchment rather than the harbinger of a long-term withdrawal of state subsidy.

1. The British theatre scene is a remarkably joined-up picture. The expected funding cuts will have an effect upon the system as a whole. Some parts will be more resilient than others and able to withstand a period of austerity; others are likely to start to fail quickly. The test of our collective ingenuity will be the extent to which we are able to manage through a difficult period with the minimum of damage. We regard the current conditions as close to optimal. It is understood that these cannot continue, but, as hand-wringing and despair are inappropriate, so too would be a relish for the cutting blade.

It therefore makes a key difference whether this is thought of as a necessary period of financial retrenchment, or intended to be the harbinger of a long-term withdrawal of state subsidy.

2. Assuming it is the former, what will matter is certainty of funding in order to provide the confidence to plan ahead. We strongly support the idea of long-term funding arrangements being mooted by the Arts Council England (ACE) and their newly introduced Peer Appraisals. The restoration of the Arts Council’s share of Lottery receipts is strongly to be welcomed, although we note that the effect in cash terms occurs late in the period and leaves a difficult period to be negotiated in the shorter term. The effect of cash shortages in the lead-up to the Olympics, which the arts had hoped to support at full throttle, is of concern.

The NT has considerable confidence in ACE and believes it to be the most appropriate system for funding distribution.

3. Past experience (for instance, from the period of zero or minus growth during the late 1980s and mid 1990s) shows that, although the indomitable British appetite for making and going to theatre will persist, some aspects are quick to die back and slow to re-grow. Examples of the latter are new plays of large scale, the development of young directors and emergent theatre-makers, the development of new work, and diversity. The sector will have to work hard to preserve the conditions for R&D, innovation and diversity; and it will be all too easy to fall back into a narrowing artistic and audience range that would in the medium- and long-term be self-defeating.

4. The National takes a particular interest in R&D through the NT Studio, which spends about £1million per year developing work for the NT stages and the British theatre as a whole. The NT engages in relationships with small, mid-scale and regional theatre companies of all kinds. This is enlightened self-interest, since there is a narrowing gap between the NT’s repertory and the kind of work and artists that would hitherto have been thought of as fringe.

5. Theatre is very largely a freelance business. The quickest and simplest way, therefore, to cut costs is by scaling back the number of new productions - thus saving on sets, costumes, writers’ commissions and royalties, creatives’ fees and actors’ salaries – but the consequence of which is to reduce the vibrancy and box office appeal of an artistic programme.

6. Raising ticket prices much faster than inflation has the effect, over time, of narrowing the core audience and making a theatre over-reliant on a coterie, resulting in a programme that is risk-averse and fragile.

Having held price increases to inflation and introduced the Travelex scheme in 2003 the NT has enjoyed average occupancy level of 89% over the last eight years. This compares with an average of 76% during the last period of funding cuts in the mid 90s, and represents 100,000 more people per year seeing theatre at the National and an additional income of £2m pa at today’s prices.

Case-study: Travelex £10 tickets. The £10 Season was introduced in 2003 and has been supported by Travelex since then. The millionth £10 ticket was sold this year. The six-month annual seasons in the Olivier have had a transformational effect upon the size and make-up of the theatre’s audiences and has enabled a broader range of work on our largest stage, including new plays by lesser-known writers. The leaner aesthetic has been popular with designers and directors and has reduced the NT’s production and running costs. Higher attendances, lower costs and Travelex’s support have made it sustainable on a long-term basis.

7. The unintended consequence of cutting productions and raising ticket prices in order to balance the annual budget may therefore be that subsidy is used less well, since it would be used to cover cost-base rather than funding productions, and its benefits would reach fewer audience members. Some attention to value-for-money needs to be applied in order to guard against this.

8. In 2009/10 the NT reached a total audience of 1.4 million1 worldwide, a record number and twice the audience of 2002.

The NT has had success in dramatically increasing activity levels and productivity, with only a small increase in core costs. Turnover has doubled over the last eight years, to £65 million. The NT’s subsidy as a percentage of turnover has fallen from 60% in 1980, to 50% in 2000, and to 30% in 2010. Box office income has risen to represent 47% of the National’s total income for the year.

9. The NT nowadays has three pillars of income:

· box office (NT and War Horse combined box office: £31m; broken down to £18m via the NT and £13m through War Horse);

· subsidy (£19m);

· sponsorship, philanthropy and commercial exploitation (£15m).

Self generated income at 65% to 70% of total income would appear to be a realistic long-term level for the NT.

10. Since 2004, the NT has taken a more proactive approach to the exploitation of its hits. A US ‘first look’ deal brings annual income and a ready partner to transfer the NT’s work to New York (one production a year on average). In the West End, the NT now tends to produce its own transfers, often in partnership with National Angels, an Enterprise Investment Scheme company run and financed by NT supporters. This model has been financially very successful, both with ‘The History Boys’ and now with ‘War Horse’.

Case-study: ‘War Horse’. The production was developed over three years at the NT Studio. It had two runs in the Olivier Theatre and transferred to the New London Theatre in March 2009. Over 810,000 people have seen the show. It had its 500th performance in the West End on 12 June 2010 and is currently booking until 22 October 2011. A New York production, co-produced by the NT, will open in April 2011 followed by productions in Toronto and for US touring. An international tour starting in Japan is planned for late 2012.

11. The relationship between the subsidised theatre and commercial theatre is close and mutually rewarding. Whereas in Paris or Berlin, they are hostile strangers to each other, in London they are inter-dependent. The commercial theatre relies upon the subsidised sector for writers, directors, actors and designers, who often derive vital supplementary income from the commercial sector.

12. The non-profit sector is very significant to London theatre, in terms both of producing activity and audience numbers. It accounts for 45% of play attendances in London.

13. The NT is very significant within both the non-profit sector and commercial sector. The National is responsible for 28% of all London play-going. It accounts for 67% of non-profit play attendances and, with ‘War Horse’, 16% of commercial play attendances too.

14. British theatre has considerable international impact. In the last six years twelve of the 24 Tony nominees for Best Directors of a Play were for British directors (four of those productions were the NT’s).

15. Innovation requires financial stability and the ability to plan and take calculated risks. Non-profit ‘mission’ can be as effective a driver as bottom-line profit. Such is the case with National Theatre Live, the NT’s HD broadcasts into cinemas.

National Theatre Live: 200,000 people across the globe in the last year have seen the NT’s live broadcasts in HD. While year one has had start-up funding, year two aims to be self-sustaining, with seven screenings in place of five, including one each from Complicite and the Donmar Warehouse. NT Live’s mission is to reach as many UK tax-payers as possible. Foreign sales make the programme affordable – and generate immense enthusiasm and admiration for the quality of British theatre.

In any future funding climate, it will be important to maintain organisations’ capacity for innovation, both individually and in collective groupings.

16. Can sponsorship and philanthropy be increased? The NT’s income from sponsors, individuals and Trusts was £1.2m in 1990, £2m in 2000 and £6.5m in 2009/10.  The growth has been achieved largely in corporate partnerships and individual giving.  Multi-year partnerships are valuable in giving financial security. Travelex, Accenture, Phillips, Bank of America Merrill Lynch, Shell have been responsible for many of the NT’s on-going programmes: respectively, £10 tickets, innovation, energy efficiency, New Connections for 11-19 year olds.

But it is noticeable that many sponsors, individuals and trusts are drawn by an interest in new strands of work that enable or enhance the mission of companies with which they are familiar.  This is a challenge for emergent companies and regional theatres.  Sponsorship is skewed towards London and/or organisations with a national reach.

Delivery of core activity is never an attractive fundraising proposition and there is certainly a risk that private donors and sponsors will be unwilling to step in to make good an abrupt withdrawal of state support. Donors and sponsors give most when they have real confidence in the reputation of an organisation and its ability to meet the agreed programme of work. Buoyancy is a more compelling argument than drowning.

Trusts and foundations, many of whom are traditionally associated with funding capital projects and innovation, will experience competing priorities as they are increasingly looked to for revenue support.


There are some sign of developments in venture philanthropy and a continuing interest from high level donors in making life-time pledges if there was government support through tax reliefs. Some relaxation of the rules governing allowable benefits would also be helpful.

17. There is, we believe, the capacity for companies to work together to reduce cost. British theatre is by nature connected and collegiate. Some work has already begun to investigate the practicalities. The NT has started discussions, with the Royal Court and other London theatres, to provide services at low or no cost in the fields of HR, legal, contracting, IT, box office, welfare and occupational health.

18. The question of capital is an important issue. It would be of considerable concern if the pendulum were to swing entirely away from the funding of essential capital renewal.

When the Lottery finally came into being in 1994 it addressed a critical situation in the state of the infrastructure of many of the country’s arts buildings.  Huge and disruptive rebuilding programmes were required to deal with the cumulative effects of a lack of investment in repairs, maintenance and capital renewal over a period of many years, but particularly exacerbated by the preceding years of cash freezes and cuts in arts funding.

The shortfall in lottery funding for capital has in recent years started to be felt again.  The result of delay in essential capital spend will result in a loss of mission and lead ultimately to greater and additional costs. This is borne out by the experience of the mid 1990s.

If the arts are to thrive and to continue to make a significant contribution to the cultural and economic life of the country, it is essential that they have the means to focus on maintaining current estates; to make sensible alterations to existing buildings to accommodate new work such as digital, collaboration with other arts companies, work with children and young people, and to ensure audience access; to undertake works needed to cope with changes in external environment; and to fund energy-efficiency and environmentally sustainable works.

September 2010

[1] Excellent audience numbers for War Horse at the New London Theatre, alongside the Sunday performances (introduced year-round from July 2009), account for an increase of 45% in attendances compared to 2008-09. War Horse contributed 400,000 attendances to the total paid attendance for NT-produced performances in London of 1.2m, equivalent to 90% of capacity. With NT Live contributing a further 100,000 attendances during the financial year 09/10, and touring audiences in the UK and abroad of 90,000, the NT’s total reach was 1.4 million people worldwide.