Pulse report: Arts Lottery funding – who should benefit?

Funding of the arts sector in England stands at an unfortunate crossroads from which all the roads are rocky. ‘Austerity’ has seen the value of central government arts funding eroded; budget cuts have placed local authorities in the unenviable position of having to make spending choices that they don’t want to make; and whatever their potential for the London institutions, sponsorship and private investment are showing no sign of filling the funding gap across the country. The only bright light anywhere in the tunnel at the moment is the Lottery, which has seen extraordinary growth over the past three years. Thanks mainly to Camelot, the world’s most successful Lottery operator, Arts Council England’s (ACE) Lottery income was at an all-time high in 2012/13 and now represents 40% of its core funds (Fig 1).

But this change in the balance of funding sources presents more than a few dilemmas for ACE, as England’s arts Lottery distributor. The principle of ‘additionality’ – that Lottery grant giving is additional to and not a substitute for Government expenditure – has been implicitly associated with Lottery funding since the National Lottery Act was passed in 1993. But in the 2006 Act this was reinforced with the requirement for all Lottery distributors to publish their policies and practices in relation to additionality in their annual reports. Ever since, ACE, together with the other Lottery distributors, has been pledging recognition and respect for the additionality principle of Lottery funding, claiming it “enables us to extend the reach and increase the impact of the activity that we could undertake if only Exchequer funds were available.” Even though its commitment to using only grant-in-aid funding from the Treasury to support its regularly funded organisations was dropped in 2009, ACE’s policy is still to use Lottery funding only for “specific time-limited activity that would not take place without the support of the Lottery.”

Financial directions from the Culture Secretary require ACE to distribute funds only in response to applications and to have regard to additionality principles in its administration of Lottery funds; so ACE has already faced the risk of a legal challenge to its Lottery distribution policy by dispensing with its normal application procedures and paying its NPO touring organisations a flat 20% of their grants from Lottery funds for the period 2012-15. It was a decision that consumed £54m of Lottery funding and took the total value of Lottery funding allocated to NPOs to £172m last year – around 54% of ACE’s total Lottery grants. It has also set a precedent which has presumably fuelled ACE’s stated intention now to pay certain of its NPOs wholly from Lottery funds.

Faced with a further 5% fall in its Treasury funds from 2015, ACE is between a rock and a hard place. Reducing the size of its National Portfolio to fit its grant-in-aid budget will leave more organisations out in the cold, dependent on bidding for Lottery funds to deliver “specific time-limited activity” in the absence of any grant funding to cover their core costs, though this would preserve Lottery cash for open access schemes such as Grants for the Arts, upon which artists and many non-NPOs rely. On the other hand, lobbying for the 2006 Act to be amended and the additionality principle to be dropped would open the doors for the Treasury to relinquish any responsibility for allocating central government funding to the sector. It’s a potentially slippery slope that could see the arts squeezed further to the margins and at the mercy of a potentially unstable income stream. Camelot’s most recent announcement shows just how quickly the tide can turn.

Read the summary of survey responses here, including over 600 comments on key policy issues related to the distribution of Arts Lottery funding.

Core funding for NPOs?

The AP Pulse survey reveals the extent to which the sector shares these concerns. With 64% tending to reject the use of arts Lottery money for the core funding of NPOs, and 26% tending to support it, the balance of those concerns is clear. But the wide ranging comments made reflect the complexity of the issue: “Ideally grant-in-aid should be solely used for core funding for NPOs but the reality of the cuts to the arts, not just from central government but the impact being felt across the country, needs to be mitigated in some way”, said one, while another was more assertive: “Sustaining the portfolio is the best thing for the sector. In view of other cuts why not use lottery receipts?” But others reflected on the potential long-term consequences of creating Lottery-funded NPOs: “I feel no one but NPOs will end up being funded…”. Many commented on the need to sustain the work of non-NPOs: “It’s vital for the health of Arts in England that there is sufficient funding for new and emerging work and for supporting those geographical areas that at present receive little or no funding” and “Alternative, small and new organisations MUST be supported as well not just the NPO’s.” Some are concerned about fairness to the Lottery players, who effectively foot the bill: “Whether or not lottery money is used to core fund NPOs should depend upon who the audience for these NPOs are. Let’s not forget that the source of this money is the pockets and wage packets of Lottery players, who tend to be from lower socio-economic backgrounds.” Fears that Lottery-funded NPOs will see governments “let off the hook” are also widely held: “LA funding already decimated – it’s a slippery slope. We’ll be back to philanthropy alone enabling ‘art for arts sake’ quality creativity and everything else will be earned-income.”

Application processes

As for whether Lottery funds should be allocated through a separate application process from that for grant-in-aid funding, the response was more unified, with almost three quarters (74%) tending to believe that it should be kept separate and only 17% rejecting this. Some commented on some of the fundamental principles underpinning Lottery funding: “Lottery money must be kept separate from government funding; otherwise it is just another tax but with prizes”, and “Lottery applications should remain for boosting projects and making an added difference not just holding up the finances of core work.” Others pointed to the potential dangers of merging the two: “there is a danger that the blurring of the application processes will lead to a reduction of funding via the government”. One recognised that any attempt by ACE to circumvent a Lottery funding application process could fall foul of the law: “NPOs should be asking to see ACE’s legal advice and its risk strategy to mitigate the effect on ‘Lottery NPOs’ if there’s a legal challenge and they have to give the money back.” And perhaps ACE’s sudden and quiet distribution of Lottery funding to NPO touring companies in 2012 prompted the comment: “If we could rely on transparency from the ACE and trust that they would make the right decisions as to what should and shouldn’t be eligible for government vs lottery then it wouldn’t matter but I’m not convinced that’s the case, especially as the future is so uncertain.” Having said this, the potential for reducing the administrative burden on organisations that have to apply for grant-in-aid separately from Lottery was very attractive to some: “The more applications organisations have to do the more money they have to waste on the application process.” And one commented: “The process should be developed to make it manageable for small and underfunded organisations or indeed unfunded groups and organisations to be able to compete with the big fundraising machinery that NPOs can muster.”

Additionality

The question “should all applicants for Lottery who are also receiving government arts funding be required to demonstrate how their projects will provide ‘additionality’?” elicited a resounding ‘yes’ in response – 57% ‘definitely’, and a further 21% ‘probably’. Some view additionality as a safeguard against ever increasing funds being channelled through “the usual suspects” and one said: “core funded organisations should not also be able to sweep up all available lottery funds.” However, several noted that “additionality’ itself needs better defining”: “Additionality has always been open to ‘fudge’. Better clarity is needed”. Other comments related to what does and should happen in practice. One described the additionality requirement as “totally unrealistic in the current climate” while another said: “This is really tricky: it’s hard to provide additionality, when the core is unfunded.” Some see the distinction between core work and additional work more cynically: “a game played by and for those on the inside, usually attached to building-based organisations requiring large blocks of capital”, said one, while another commented “everyone in the business knows that core funds have to be met somehow and the policy canards of ‘additionality’ and ‘front line services’ are just a cowardly ACE way of pretending everything is fine to government.” The dropping of ACE’s policy of Lottery funding being only for NPOs was noted by one: “What happened to NPOs not being able to apply for Lottery money as well? Talk about move the goalposts and further disadvantage all the other non-NPO orgs.” Another was more forceful still: “Why aren’t we more angry about ACE’s decision to mortgage the additionally principle? Not an easy one to prosecute though. What is additional? What should a nation’s core taxpayers cultural infrastructure look like and consist of? Who is debating this?” Another also called for a wider conversation: “Really hope you can engage the media and lots of MPs in this debate.”

Artforms and activities

At a time when ACE is considering core-funding certain artforms or arts activities using only Lottery funds, the question of whether any specific arts organisations, artforms or types of arts activity should be viewed as ‘additional’ to the type of arts activity that is funded by Government is particularly relevant. There was less consensus on this than on the earlier questions. A quarter tended to think this would be appropriate, though 46% thought not, and 29% were unsure. Many recognised this as “a very tricky question to answer as it all depends on your definition of art”, and the mood of the responses could perhaps be summed up as: “We should value all art forms, not marginalise some.” One said: “A list of ‘government approved’ art forms would produce additional hierarchies and institutionalise some parts of the sector as subsidy based which isn’t helpful”, but another phrased this more strongly: “Truly unbelievable! – a step backward to a version of institutions and ‘high’ arts that deserve govt funding and ‘low’ arts that don’t.” Others were less outraged at the thought of it. One suggested that such a move by ACE could potentially be acceptable, but only under the right conditions: “I can envisage the situation, but it has to be in the right policy context and communicated with absolute clarity to avoid charges of elitism and discrimination”. The types of activity identified as potentially being ineligible for grant-in-aid funding included organisations that “don’t directly make and / or show art”; “emerging artforms that may (eg: performance art) or may not (eg: macramé) endure”; “arts activities which are obliged to cling to existence by operating as societal-repair tools”; “local platforms and annual events”; “activity which ‘looks’ more commercial”; “non professional arts groups…which are recreational and for the benefit of the individual participants only”; and work with a “strong emphasis on socially engaged practice and strong community links.”

Ring-fenced funding

The question that drew the most polarised responses asked what proportion of Lottery funding, if any, should be ring-fenced for artists and organisations that are not NPOs. Significant numbers thought that all Lottery money should be ring-fenced for non-NPOs, but almost as many thought that none should, and there was an equally polarised mix of responses between the two extremes. Many found it difficult to say in the absence of more information, and some were unwilling to be drawn on proportions. Comments ranged from “Lottery funding should not be ringfenced! Treat each application on merits…” to “Yes to spread the load or else there will be less and less variety and only a handful of huge organisations mopping up the funding.” A number saw the working relationships between NPOs and non-NPOs and artists as a key issue, and pointed out how Lottery funding can trickle through to non-funded artists and organisations: “Lottery funds should be distributed equitably to communities and non-NPOs across England with NPOs benefiting only where recipients choose to commission, or co-produce with them”, said one, while another commented: “Allowing NPO’s to apply for more arts funding will increase artists employment opportunity within those organisations (commissions/community art leaders/professional training/research/performance development etc).” One suggested that NPOs were well placed to use Lottery money effectively: “Many NPOs are indirectly distributing their funding to artists and smaller organisations that they are partnering with or co-working with. Lottery money that comes through an NPO is more certain to reach everyone’s objectives as it has to report on its funding, and has a proven track record”. But another felt that this doesn’t happen often enough: “What becomes exciting then is NPOs being forced to be more open to working with non-NPO artists and organisations to create and showcase new work when it doesn’t currently happen enough.” The importance of a balance between Lottery funding for NPOs and non-NPOs was perhaps the strongest message to emerge: “You want a developing arts sector, not a two tier one” said one, while another commented: “We need both to get the best arts ecology.”

Other issues

The open invitation for respondents to raise Lottery-related issues not covered by the five main questions drew wide-ranging responses, but several themes emerged. Unsurprisingly, given the timing of the survey shortly after the publication of the RoCC report into regional funding of the arts, many comments were about the distribution of Lottery funding across England, demanding a better balance across the country: “Some means of distributing the lottery money geographically in proportion to where it is raised should be found to ensure a fairer spread of money”. In relation to this there were also comments about ACE’s role as a Lottery distributor: “Arts lottery funding should have a greater level of local determination, including being prioritised to address local priorities, with local people. It should not be decided by a call centre in Manchester. I would favour arts lottery being devolved to local government, bringing it in line with arrangements to localise and combine budgets.” One spoke more generally about the fairness of funding distribution: “ACE – get a grip! Make some strategic decisions about artform needs, about clear, honest funding decisions and about equity of opportunity – London (over)funding imbalance and some specific genres (over and under) funding imbalance, measured on an equity of opportunity basis, is a sad reflection on the longstanding inablility of ACE to shift the historical distribution of funds.” One said: “The job of distribution of Arts Lottery funds should be put out to tender every 10 years”, and another: “the responsibility should never have been with the Arts Council ab initio.” The Lottery application process was identified as a problem by some, particularly in relation to the needs of smaller organisations.“The process is too complex for small scale projects” said one; and another suggested, “make the application process easier for those who don’t have huge fundraising teams or could do with more guidance on how to apply.” Some felt that better communication between ACE and the sector would help: “… better communications about the uses of different types of funding distributed through ACE is required to help arts orgs understand their place in the ecology, and audiences and government understand the nature of arts charities.” One commented: “ACE is a very closed organisation who do not engage easily, comfortably or often with the wider community.” Openness and transparency were felt to be important: “There needs to be more clarity about budget share for regions and artforms.”

As ACE’s National Council approaches its decision on whether to endorse the Executive’s proposals for NPO funding, these AP Pulse survey responses from the sector provide valuable food for thought. Whilst there is no consensus, some clear messages emerge. The merging of grant-in-aid with Lottery funding streams for NPOs is a strategy that should not be embarked upon lightly. Key issues are the diminishing of funds for non-NPOs, especially artists; the potential emergence of a two-tier system in which a well-funded elite thrives at the expense of emerging talent; the threat of the Treasury further weakening central government arts funding; and the potential for a legal challenge unless Lottery law changes – something that non-arts Lottery distributors are likely to resist more firmly than the arts. Whilst the administrative simplicity of any such move is beguiling, the potential long-term implications could be so serious as to de-stabilise the funding base of the sector. Whatever the ultimate solution chosen to address ACE’s current funding dilemmas, the sector should be insisting on full transparency and consultation (and on that point, this survey has hopefully played a part.) Let’s not this time fall into the trap of marrying in haste only to repent at leisure.

Download AP Pulse: Arts lottery funding full report (.pdf)

Liz Hill is Editor of ArtsProfessional

This article is not intended to be read as a research report, but rather as a discussion of the issues raised by the findings from the survey. The raw survey data is held by Arts Intelligence Ltd, and can be further interrogated. For details of this service, contact [email protected].