Council, coffees, catalogues, cards, corporate
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.
He 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
Typically, 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.
But 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?"