Funding of the arts and heritage

Supplementary written evidence submitted by Alan Davey, Chief Executive, Arts Council England (arts 232)

Select Committee follow up

Thank you for your letter of 21 October following the evidence session I attended at the Committee on 12 October outlining a number of follow up questions that I said I would provide the answers to. These are outlined below, along with some additional information about the recent refurbishment at our Head Office at Great Peter Street which was also a topic of debate at the Committee. I have also asked the Arts Council Collection to provide you a separate note setting out its history, role and purpose, which I hope you will find helpful. I apologise for the short delay in responding to your letter, the response for which was due yesterday on 3 November.

I hope that the information contained in this letter answers the questions you raise in your letter as well as provide some additional information for you on some of the other topics discussed at the Committee hearing.

How many diversity officers are employed by Arts Council, and at what cost?

Arts Council employs 3 full time diversity officers at its Head Office in London at a total cost of £184,954 per annum. Their role is to ensure that the Arts Council fulfils its statutory obligations in terms of the previous equality legislation now replaced by the Equality Act 2010, but also to ensure that, in line with the recommendations in the McMaster review on excellence, we fund the arts in a way that properly reflects the talent available in this country. They work with artists from many backgrounds and have ensured that England is a leader in encouraging a broad approach to the arts in terms of gender, disability, race and ethnicity in particular, but also towards a broad approach in line with the Equality Act 2010, We believe that diversity is key to the vitality of the arts in this country. In addition to these posts, Arts Council also employs a further 13 Relationship Managers in its 9 regional offices who have diversity as part of their remit. The primary role of these 13 staff is to manage relationships with our funded organisations as well as other key partners such as local authorities rather than as diversity officers.

How much lottery funding is being used to top-up Arts Council’s pension fund?

The Arts Council’s operating costs, including operating staff costs, are shared between activities funded from grant-in-aid and activities funded from the National Lottery. Arts Council is required to apportion these costs properly between the two areas on a full cost basis in accordance with good accounting practice. The costs for Arts Council’s pension scheme is therefore apportioned based on an estimate of staff time spent on each activity.

The Arts Council Retirement Plan (1994) is a defined benefit scheme which is offered to Arts Council staff as part of their overall remuneration package. Other employers which contribute to the scheme are the Arts Council of Wales, The Scottish Arts Council (now part of Creative Scotland), the Crafts Council, and Creativity, Culture and Education. The actuarial valuation of the pension fund takes place at least every three years. The last valuation was on 31 March 2007. The costs of the scheme will be reviewed following the next valuation which is currently underway.

As discussed at the Committee, a deficit was first identified in the financial year 1999 / 2000. This deficit has been reassessed and contributions adjusted accordingly during subsequent valuations. Decisions on the funding of the deficit in the plan are taken by trustees and employers and agreed with the pensions regulator. Since 1999 / 2000 the Arts Council’s employers’ contribution to the scheme has risen from 9.4% to 25.1%, or 23.1% for staff who joined after 1st July 2006 at the 31 March 2007 valuation. It is worth noting that at the last valuation employee contribution rates were increased from 1.5% to 3.5% to assist with the affordability of the scheme going forward. This current level of contribution is made up of two elements: an 11% / 13% regular ongoing contribution towards future accrual; and a temporary deficit recovery contribution of 12.1% which runs until March 2016. The level of these contributions remains broadly in line with those organisations who buy into the Principal Civil Service Pension Scheme. £4.2m of staff costs derived from Lottery activity has met the increased contributions since 1999. The comparative amount from grant-in aid is £6m.

How many drinks receptions and dinners have Arts Council paid for since October 2008, and at what cost?

In the past 2 years since October 2008 Arts Council Head Office and its additional 9 regional offices have in total paid for 32 receptions and dinners with artists, arts organisations and other partners for business purposes, including a series of working dinners that formed part of a consultation on our 10 year strategy, Achieving Great Art for Everyone, published today. These cost a total of £34,774. This figure includes associated venue hire.

Will you publish the reports produced by Moss Cooper on the lessons learned from the West Bromwich arts centre project?

There is a considerable amount of material on the issue of The Public held in our archive, and it is possible that these records contain a report or reports produced by Moss Cooper about the West Bromwich art centre, as referred to by Tom Watson in his original parliamentary questions on the subject. Records on this issue date back beyond five years and we believe that retrieving them in order to identify whether they contain any reports by Moss Cooper would be at disproportionate cost.

I do absolutely agree however that we must look at the lessons learned from the experience at The Public, and we are looking at options to review the known literature, which is itself extensive, on this issue for that very purpose, publishing the results so that lessons are learned.

I should emphasise that it would be wrong to characterise The Public as solely an Arts Council project. We were one of a number of partners and were not at any point in a position of having sole control in how the project was managed.

The project at The Public presented a number of risks which, when multiplied, made it a considerably risky investment for us.  It was a bespoke building, an organisation with a lack of capacity, an untested business model, and a project that, for the multiple funders, needed to meet a number of different outcomes at the same time. These included arts, regeneration, social inclusion and employment.

The lessons learned in terms of our involvement in the project include clarity of who is in charge of the project, and ensuring relevant capabilities exist in the organisations running it. Also, how firm we should be as an organisation when our conditions are not met.  I conclude that we were anxious to do something in Sandwell based on community arts as a result of local initiative.  We did so with matched funding from Sandwell Council, the RDA and later some ERDF money. The project grew in scope, and seemed to lose its purpose.  In hindsight I would suggest that:

- We should have acknowledged that there was a serious question about the capacity of the team delivering it to do so, and taken action at an earlier stage when these concerns first arose;

- We should have insisted on clarity before we went ahead when it became clear that the scope for the project had become confused;

- We should not have allowed our decision making to be partially driven by the need to secure funding from other funders, on the basis that we had already invested valuable time and funding into the project.

The key is to ensure we are able as an organisation to take firm action more quickly, even when we are anxious to do the best for the people involved.

Since Arts Council’s involvement with The Public, it has introduced a key stage review process based on the OGC Gateway model. This process provides clarity about how projects are monitored and how decisions are taken with other funders. The process provides a clear and robust framework for investment decisions, which I believe provides a reliable context for decision making on capital and other investment decisions now and into the future.

What is now in place at The Public is a facility in Sandwell based on a visitor attraction and space for creative businesses that is now well managed and is finding its purpose, attracting over 100,000 visitors since it opened. 

Can you calculate the full cost of mothballing the West Bromwich arts centre project through the receivership process, and what is your reaction to reports that it cost £10m?

The Arts Council do not hold this information and the question would need to be redirected to the administrator. As I have already said, the Arts Council was not in the lead on running the project.

Why did neither the Chief Executive of the Arts Council West Midlands nor any other senior officer attend any board meeting during the build process?

At the time of the funding decision on The Public the West Midlands Regional Arts Board was a separate organisation to Arts Council England. Arts Council England and the Regional Arts Boards only combined to become one organisation in 2003. Because of this the West Midlands Arts Board were not directly involved in decision making and may not, therefore, have sent representation to board meetings. The staff members involved in the project at this time have now left the Arts Council and we no longer have access to information regarding their diaries to be able to confirm whether they did or did not attend any of the board meetings.

Since the funding decisions about The Public took place we have revised our internal guidance with regard to attendance of our Relationship Managers at the board meetings of the organisations we fund. This includes a responsibility for Relationship Managers to attend board meetings or equivalent as an observer on a regular or occasional basis.

Office refurbishment at Great Peter Street

A further point that was raised at the hearing I attended was about the cost of the recent refurbishment at Great Peter Street and I thought it might be useful to set out some of the background to this to add to the information you heard at the Committee hearing.

Arts Council England has held the lease on Great Peter Street since 1990. Soon after this date, the creation of the National Lottery and the identification of the Arts Council as a distributor of the Good Causes Fund led to an increase in staff to help deliver the very significant investment. The lease on Great Peter Street was taken for 25 years with no breaks and as a result of the increase in staff numbers it became necessary for the organisation to take additional space in two offices in Victoria and spread the organisation across three offices.

Early in 2003, following the merger with the Regional Arts Boards to create a national funding organisation for the arts in England, Arts Council England, in advance of the Lyons Review and other initiatives focusing on Central London properties, embarked on a rationalisation strategy.

Initially we looked to relocate all staff to a new location and targeted more cost effective areas like Kings Cross, Southbank, and the ‘midtown’ area. We developed a proposal for a serviced office provider to take over Great Peter Street and provide a flexible office base in Westminster as this need was identified by the civil estate team at the OGC. The business case identified recurrent annual savings in the order of £1.6m as well as significant organisational benefits by bringing all of our London based staff together in a single location.

Our business case to relocate was the first to go before the Treasury in 2004 following the Lyons review which lead to a shift in policy towards central London properties, and our case was not approved.

Following this decision, we decided to consolidate all staff into Great Peter Street. Having occupied the building for 15 years, we adopted an invest-to-save principle to refresh the building, taking care to repair where necessary and maximise the use of space. During this refurbishment process, we engaged the artist Lothar Goetz, as we believe it is important to reflect the sector we support in our working environments. As we needed to redecorate internally, using an artist to articulate how we went about this was a very cost effective way to achieve an artist commission in our Head Office. £13,750 was paid to Mr Goetz for this work in 2007.

Since we embarked upon this rationalisation strategy, we have successfully reduced all our Central London properties to a single lease at Great Peter Street. The final portion of this strategy was achieved in the summer of 2010 as we brought across the London regional team from their previous offices in Clerkenwell into Great Peter Street in time to meet a lease break at the separate London regional office.

Taken as a whole this rationalisation strategy has realised annual savings of £1.5m in rent, rates and service charge alone as well as £850,000 from the sale of a freehold storage facility.

In the 2009 / 10 property benchmarking performance report, Great Peter Street was reported as performing above the private sector benchmark average across all three measures of efficiency, effectiveness and environment. The report is produced as part of an annual civil government property data return exercise and the defines buildings in this bracket as ‘exceeding benchmark performance by at least 10% and delivering a positive contribution’.

We remain in dialogue with the Government estate rationalisation team about opportunities to further improve in relation to the costs of Great Peter Street.

Arts Council Collection

Finally, I am also keen that we provide you with some additional information about the Arts Council Collection which I hope will provide some additional detail to contribute to your enquiry and which I did not have to hand at the hearing itself. The Arts Council Collection is compiling a note to you on this which they will be submitting to you under separate cover. In addition, my Chair will be writing to set out our new funding arrangements in some detail once they are announced.

November 2010