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Will Gompertz | 09:24 UK time, Monday, 17 May 2010

Jeremy Hunt, the new Minister for Culture, Olympics, Media and Sport was out of the blocks and on to the telly with impressive speed, appearing on Newsnight on Wednesday when the kiss on the coalition cheek was still wet. Maybe such zest just happens when you stick the word "Olympic" into a job title? He's certainly wasted no time in thinking about cutting the arts budget.

Jeremy HuntHe mused that his budget would be cut by £66m should the Treasury grim reaper chose to apply his scythe even-handedly; the discomfort in his body language suggested he suspected this wouldn't be the case. He then voiced a question he is asking himself and his team, which is: "Can we save this money without affecting our core services?"

That's like asking "I wonder if my car will run on olive oil?" You won't know until you've tried, but at the very least some modification will probably be required. Hunt and his team are unlikely to employ expensive consultants to help answer the question - you tend to have been in government a bit longer before you turn to that approach. Anyway, he already has a few targets in mind, which he made clear in the run-up to the election.

He thinks that the Arts Council is wasteful and will be looking for a significant cut in the amount it spends on administration. Such a cut looks like an easy win on paper, but how do you make informed investments and rigorously monitor them without specialist personnel overseeing the process? It's an easy cut to make, but it might prove costly for all in the medium term.

But whether it's £66m, which equates to roughly a 3% cut, or several million either side, the arts institutions that receive public subsidy should largely be able to cope. That's not because they are sitting on big cash reserves or because they are woefully inefficient and will welcome the chance to clear out some dead wood. The reason that, for the most part, they will deal with the blow is two-fold:

• Arts institutions have been expecting cuts for some time and have developed business plans that accommodate a reduction in "core funding"
• A moderate cut in public subsidy is not the biggest threat facing the subsidised arts sector

Generic box-office signTypically, but not universally, arts institutions generate a significant amount of their own money. They do this through commercial means: box office, restaurants, merchandise, corporate sponsorship, partnerships and so on, and also through philanthropy via individuals or trusts and foundations. Many institutions run on this basis: one third public subsidy; one third commercial activity; one third sponsorship and philanthropy.

This means that, in business-speak, our arts institutions are fairly "highly geared". Put more bluntly, they are financially exposed. Say, for example, you are a medium-sized theatre with a turnover of £12m, of which £4m - a third - comes from the public purse. The government decides to cut Mr Hunt's departmental budget by a whopping 10%, which he then passes on to your theatre. That would result in you losing £400,000 out of your total turnover of £12m. Obviously you won't be giving the decision a standing ovation, but you'll get by.

CoffeeBut say that at the same time, the government decides to implement other cuts in public spending to reduce the county's budget deficit. At the very least, it will make everyone feel nervous about spending, and will also very probably lead to job losses. History tells us that the arts do OK when the public is feeling the pinch - eight quid to go to the movies or a free trip to a museum provide cheap solace in troubled times - but the "secondary spend" on coffees, catalogues and cards could well nose-dive. The same could apply to corporate sponsorship. Even if a company is doing well, it may not seem right to spend evenings quaffing champagne after days making people redundant.

There are already signs that some arts institutions are finding a reduction in income due to fewer people going to their shops and restaurants and that this is starting to bite. Take a look at the major organisations which have already received substantial additional hand-outs from the Arts Council's Sustain fund. To my knowledge, there are at least two major arts venues with balance sheets that have more red on them than a Freddy Krueger victim, a fact that will only become public once their accounts are filed early next year.

In my experience, our arts institutions are reasonably well run. Their staff work hard and are not particularly well paid. Management tends to be entrepreneurial. But the success they have enjoyed over the past 15 years has been driven as much by the buoyant economy as by government hand-outs. When the recession of 2009 took hold, arts institutions began to struggle as corporate sponsorship shrunk. But they were saved severe pain because the public continued to spend and the subsidy remained stable.

It is now seems likely that public subsidy will be reduced together with an overall cut in government spending. If that leads to the general public paying out less and staying in more, then Mr Hunt and his colleagues will be pondering not how "we save this money without affecting our core services" but more "how can we save our core services?"

Comments

  • Comment number 1.

    You say the public, having less money, are cutting on the fripperies, thus people might enjoy visiting a (free) museum but are less likely to indulge in a cup of overpriced mocha latte on the way out.

    Now, let me extend the concept to the cash strapped government. Having hugely overspent on its credit card for years, it's now cash strapped and has to give up on a few, highly noble, pursuits. Or would you rather have swanky posh museums while hospitals and schools are having to close?

    Sadly, the arts always suffer in period of economic crisis. The Renaissance only came about because of the huge prosperity of the Italian city states.

    In our present predicament, rather than moaning at this government for having (having no choice), we should complain at the old government which financed its spending through irresponsible over-borrowing.

  • Comment number 2.

    I think the undertone that Arts are being cut "because the Conservatives are in town" is unfair... all departments are facing cuts, and nobody has said whether Arts will be any worse off.

    Every interested party thinks that their area of the economy is more important than the other, be it in Health, Education, Arts or wherever, but the reality is that we have a huge deficit and everyone needs to feel some pain.

    You hear hilariously ill-informed opinions amongst artistic types at the moment, with this crazy ongoing belief that funding another hundred flautists through college is more important than servicing the national debt.

    Every area of government spending will feel a pinch, the arts is no exception.

  • Comment number 3.

    What do you know about Jeremy Hunt?

    There is a pdf of a report on his web site that he wrote in 2008 about the DCMS. I wonder if he will stick to the views he expressed then?

    Note the second to last item (Government underestimates the importance of heritage) and the last item.....

    (Title: History of Neglect- Labour’s Record on Heritage - A Report by Jeremy Hunt MP, Shadow Secretary of State for Culture, Media & Sport
    December 2008

    Report Summary

    * Total public funding for heritage has fallen by almost 40% in real terms since 1997.

    * The Heritage Lottery Fund expects its real annual income to fall by
    another 43% by 2012.

    * The number of annual visits to English Heritage staffed properties has
    fallen by nearly 12% since 1999.

    * With a falling budget to deal with English Heritage has been forced to
    halve the value of its grants to ‘At Risk’ heritage assets from £8m in
    1999 to £4.1m last year.

    * Last year, for the first time in a decade, there was a net increase in the number of buildings on the Buildings At Risk register.

    * 12 Labour ministers have held some responsibility for heritage since
    1997.

    * The DCMS has reduced by almost a quarter the number of staff it
    employs to work on heritage matters over the last five years while the
    proportion of its total salary bill spent on heritage staff has more than
    halved since 1997.

    * From accounting for one-sixth of the Department’s budget in 1998, the
    share of DCMS spending which was assigned to heritage has reduced to 10%.

    * Government underestimates the public’s passion for heritage – 4 million people are members of heritage organisations. Since 2001 membership of English Heritage has increased by 49% while the number of National Trust members has risen by 25%.

    * Government underestimates the importance of heritage to our tourism
    industry – between two thirds and three quarters of Russian and Chinese tourists cite our castles, historic buildings and churches at the top of the list of things to see while here.

    * Conservative proposals for the National Lottery would return an extra
    £40 million per year to the Heritage Lottery Fund to be distributed in the form of grants to heritage organisations.

    )

  • Comment number 4.

    It seems that politicians express their desire to be 'Arts Minister' by shouting about their love of the Arts, and then as soon as they actually become Arts Minister, they set about seeing how much they can cut back.

  • Comment number 5.

    Its good to ensure that our institutions futures are secure, but what of the next generation? As a recent Fine Art graduate, hit by student debt and 6 months of unemployment (although this was useful as time to develop ideas, but without any degree of funding), I want to know that we will still have a culture where artist-led activity is possible. We live in a country famous for its vibrant cutting edge artists, often led and funded from their own pockets with help from Arts Council funds. As our culture expects that art is free for all to see, the challenges of hiring venues, paying for publicity and creating opportunities is likely to become harder to implement by those who are our countries future cultural leaders. I doubt the YBA (although lets please realise this is now well in the past) phenomena could happen in this climate.

  • Comment number 6.

    I think my comment got posted before i'd finished....what do you mean by the arts council? there are 4 arts councils: england, wales, scotland and northern ireland. when talking about issues that are covered differently in different parts of the united kingdom I wish the media would be crystal clear. How much of the above applies directly to Wales, scotland and northern ireland? I feel that the main media - newspaper and tv news just cover england. this is very frustrating when living and working in wales.

  • Comment number 7.

    I suspect this will be a unique perspective, but if we undo the high rises in the cost of property over the last twenty years, we could save ourselves the trouble of cutting spending. Arts spending, and the cost of coffee has absolutely nothing to do with how this financial crisis has arisen, and cutting spending on either will have no impact on the outcome.

    I don't own a property, nor do I have a mortgage that alludes to my 'owning' a property. The current situation our Government is managing, has arisen out of the national belief that borrowing is an appropriate means to raise funds for spending. This is not unique to the Labour Government bailing out the banks, which was necessary to enable us all to buy bread, pay bills, hand out lunch money, etc., as much as it was to keep wealthy bankers in their highly paid jobs, and as I recall, not all of them kept their jobs.

    The general populace have chosen to feed this borrowing/spending cycle by paying too low a price for borrowing mortgage size sums of money to buy property costing too HIGH a price. That house that should of cost you £150k, was sold for £200k, whilst my flat would have cost £70k if the owner hadn't paid £100k, and so on. The result is less well paid tax payers lose out, whilst the better paid tax payers gain a bigger slice of the pie.

    Now that individual revenue is at risk, it would appear perhaps 'you' should have paid the lower price for your home - don't call it an investment - because between the point of purchase, and now, you could have been saving the money you paid out for that extra 25-50% of borrowing. All those 'less well paid tax payers' might be able to afford to buy a flat or a house, instead of renting. I'd be able to afford that holiday, or that new iPad, instead of tightening my belt, to recover from the inflation that 'you' created, and 'we' will have to resolve.

    The economy requires spending to recover, and then it needs to stabilise. If it doesn't we'll be doing this again in another 30 years. With the environment hanging in the balance, we may not get another chance to resolve that crisis, but we're so tied up with rebuilding the economy it may pass us by. Unlike the economy, the environment crisis may not give us another chance.

    If one of you with a seat in Parliament would please take responsibility for this, I'll get back to my underpaid, impoverished but tax paying life. But please shout, if you need my help. I could use the money.

  • Comment number 8.

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  • Comment number 9.

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