The rationale for subsidising the arts and priorities for spending the money

1. The rationale for subsidising the arts and priorities for spending the money ‘Investment in the arts is not only an end in itself, it is also a means of achieving our promises, our policies and our values.’ Rt. Hon Tessa Jowell MP, 2002 Contents • The economic rationales • The citizenship rationales • The mixed economy of the arts • Priorities for spending Jamie Cowling, January 2005

2. Economic rationales for subsidising the arts are based on perceived market failures Rationales The Cost-disease Lack of productivity gains compared to the wider economy in the performing arts produces productivity lag between the arts and the wider economy unless provision of the arts is to decrease (Baumol & Bowen 1966). Merit Goods - Option Value - personal, social & future generations Even if I do not want to engage with the arts myself at this time I may do so in the future, I may value that others can experience the arts or I may value that future generations could experience the arts (Towse et al 2003). Public Goods (Club Goods) Certain art forms – like the Angel of the North – are non-rivalrous and non-excludable. If entry is free to other art forms they become quasi-public goods (Towse et al 2003). Investment in the arts can be seen as a form of cultural R&D. All developed nations provide public support for R&D (HMT 2004). See Helm 2005 for discussion of club goods aspects. Monopoly Many arts organisations will have monopoly power given the importance ascribed to original works by the public. Governments may wish to enforce access terms on monopolies or take natural monopolies into public ownership (Helm 2005). Merit Goods - Positive Social Externalities Engagement by a proportion of the population with the arts could have positive social benefits for the whole of society, for example through learning, which people would otherwise under invest in. Economic Impact Arts activities can have a wider economic impact, e.g. through promotion of tourism, disproportionate to the cost to the public. Claimed impact of UK theatre is £2.6bn p/a (Shellard 2004). 1

3. Democratic rationales are rooted in the language of democracy and citizenship Rationales “If we, citizens, do not support our artists, then we sacrifice our imagination on the altar of crude reality and we end up believing in nothing and having worthless dreams.” Yann Martel, The Life of Pi, 2002 Human rights “Everyone has the right freely to participate in the cultural life of the community, to enjoy the arts, and to share in scientific advancement and its benefits.” UN Declaration of Human Rights, 1948 Art.27 Expression and means of exploring of who we are as individuals, communities and societies what we value and where we want to go (Everitt 2001; Mulgan 1996 & forthcoming). For individuals to be truly at liberty they need to be able to exercise real choices as citizens – see Amartya Sen capabilities approach. Citizenship & identity Social capital & civil renewal Cultural activities are the 3rd most popular form of volunteering activity in the UK (Home Office 2001). Participation in cultural activity leads to increased participation elsewhere (ippr 2005). 72% of the public believes that arts from different cultures contribute a lot to this country (ACE 2002). Poverty of aspiration Fulfilment & life satisfaction. Particularly good at reaching socially excluded groups. Because based on non-verbal communication (ippr 2004). 2

4. Priorities The arts operate in a mixed economy, public money is only one revenue stream among many Real Terms Resource & Net Capital DEL DCMS & ACE Grant-in-Aid, 1998/99 – 2007/08* • Public support should be used where it is needed most and to stimulate the private sector (i.e. private giving) towards a sustainable arts economy. • In 2001 National Lottery via ACE £208 million. Additional funding goes to cultural projects form NOF, CF, HLF. • Local Authority spending on the arts was estimated to total £217 million for 2001/02. • The arts receive indirect subsidy via tax breaks e.g. charitable status, tax credits & Gift Aid. • Arts also receive public funding from OGDs e.g. MoD, DfES & DoH. • Corporate sponsorship reached £114 million for the Arts in 2001/02. • 2002/03 total ticket sales for the Society of London Theatre members (large West End) reached £330.7 million. (£ Billion) (£ Billion) Sources: PESA 2004, SR2004, DCMS/ACE Funding Agreement 00-03, 01-04, 03-06 Real Terms Charitable Giving to the Arts 2000/01 – 2002/03* £68,265 by 02/03 (£ Million) 3 Source: Arts & Business2004 – Note includes Heritage *2002/03 market prices

5. Priorities Priority for public subsidy is to tackle socio-economic and geographic inequality and to target children and young people to build demand ‘The argument for public subsidy accordingly rests above all on the desire that all, not just a minority, should have access to the thrill of engagement with great art.’ Rt. Hon. Tessa Jowell MP, 2004 Probabilities of participation, membership and engagement in sports/cultural/hobby organisations across Europe in 2001 • Participation is skewed by geography (supply), SES and ethnicity (demand). Both opportunity and access remain unequal. • Supply • The majority of arts based activity takes place in the South-East. However, despite increases in supply (e.g. Tate Modern) over the last 5 years there is little evidence to suggest that more people are attending (TGI data). • London has attracted over 75% of private giving over the last 3 years (Arts & Business 2004). • Demand • Cohort studies suggest the arts are an experiential good. Attention at a young age lasts into later life (Robson 2003). Therefore, like Sure Start and higher education, the state should progressively direct resources towards children and young people. • ‘There is strong evidence that suggests that participation in these [cultural] activities in high school increases participation in community activities in later life.’ Putnam 2005 • BM&E participation in “traditional” arts is very low . Particularly striking given concentration of BM&E population in major towns and cities. E.g. White British 300x more likely to attend opera than Indian (ACE 2002). UK is above European average in participation 19 country average UK attendance at arts events by (a) geographic area & (b) social class, 2002 % (b) % 4 Sources: ESS 2002; TGI data 2002