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Report is damning of the way in which ACE is distributing lottery funding. By Geraldine Kendall
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Geraldine Kendall Adams
It has been six months since the Rebalancing our Cultural Capital (RoCC) report kickstarted a national conversation – and led to a government inquiry – on how the arts are funded in England. 
Now the report’s authors, Peter Stark, David Powell and Christopher Gordon, have published the second of three self-funded research papers on arts funding, the Policy for the Lottery, the Arts and Community in England (Place) report.
As its title suggests, the authors focus this time on Arts Council England’s (ACE) distribution of National Lottery funding rather than grant-in-aid. Although the report acknowledges the pressure that cuts have placed on the arts council, the picture it paints of funding policy inequity is arguably more brutal than that found in the RoCC report.
Place examines whether the arts council is successfully meeting the government’s directives on how lottery funding for good causes should be allocated. These include increasing access and participation among those who don’t currently benefit from cultural opportunities; fostering local community initiatives; involving local communities in making policies, setting priorities and distributing money; and reducing economic and social deprivation.
Under almost all of these criteria, the report concludes that the arts council comes up short. It states: “At best, [ACE] appears to have accorded the directions no priority and at worst has ignored them, placing at serious risk of failure the local infrastructure of facilities, organisations and programmes.”
Unequal opportunities
The report shows that since 1995, the 33 local authorities that already had the highest level of “arts usage” have received £1.327bn in arts lottery funding – the equivalent of £275 per person. In contrast, the 33 local authorities where people were least engaged in culture have received a total of £288m in arts lottery funding, or £48 per head – a total difference of more than £1bn.

Furthermore, the report argues, this imbalance offers a poor return on the per capita investment in lottery tickets, which tends to be higher among more deprived communities with low arts engagement. The north-east emerged as the region with the biggest deficit; in Durham, where lottery players have contributed £34m in sales since 1994, the county’s arts organisations have received just £12m in return. 
The report calculates that London, the south-east and east of England have a surplus of £416m from the arts lottery when the contribution of ticket sales is compared with the lottery funding given to arts in the area (see bar chart). All other regions show a deficit.
The report’s authors say this pattern of inequity reflects a closed system whereby ACE prioritises an existing “cartel” of organisations that already have better funding and higher status – in essence, wealth begets wealth. 
The report argues that the similarity between grant-in-aid and lottery distribution shows that ACE has “aligned both the purpose and the recipients of funding” in the two streams within a single structure of decision-making. 
This means that the five biggest London-based arts organisations funded by ACE – already in receipt of the largest annual revenue grants – have been given more lottery money since 1995 than those 33 local authorities with the least engagement. 
It also means that National Portfolio Organisations (NPOs) have a success rate of 86% in applying for strategic lottery funding, compared with 48% for organisations that do not receive grant-in-aid.
Supplementary benefits
These figures make uncomfortable reading for the arts council, but the criticism doesn’t end there. The report also argues that the arts council has eroded the additionality principle that was central to the original aims of the National Lottery – that is, funding should go towards supplementary projects rather than an organisation’s core revenue.
But according to the report ACE is increasingly substituting lottery money for previous revenue funding; in its spending plans for 2015-18, £60m in lottery funding will be locked into three-year funding agreements with organisations previously in receipt of grant-in-aid.
These problems are being exacerbated by severe cuts in local government funding for the arts. The report argues that the arts council lacks a “consistent policy” of partnership funding with local government and should be doing more to champion the benefits of arts funding at a community level, using lottery funds to support work that demonstrates the impacts of the arts on areas such as education, health and local economy.
As one local government representative puts it: “There is no match, no partnership, no champion and no policy. So why the hell would local authorities want to fund this non-statutory activity in the current climate?”
In contrast, the Place report singles out the Heritage Lottery Fund for praise, saying it has succeeded in ensuring local sensitivity and responsiveness in its decision-making through a decentralised regional structure. 
As the report also points out, Scotland, Wales and Northern Ireland all have devolved powers to distribute grant-in-aid and lottery funding for the arts, while English regions with larger populations do not.
The arts council has hit back in defence of its funding policies, pointing to its extensive touring programmes, the £37m Creative People and Places scheme that directly targets areas of low engagement (although this is a time-limited scheme, as Place points out), as well as its plans to increase the budget for the Grants for the Arts programme, which supports work in local communities, to £72m. 
Slowly but surely
ACE says that the best way of transforming cold spots of engagement is to test demand and build capacity gradually. It argues that merely redistributing money to areas where there is little existing arts infrastructure would be unwise.
But the report says a more radical change in policy is needed. It recommends a complete overhaul of the funding system, so that ACE’s lottery funding (about £300m a year) is distributed through three streams: 40% for the social priority of engagement in areas of disadvantage; 40% for the economic priority of dispersed cultural production; and 20% for the artistic priority to support artists. 
The report's authors also advocate that ACE devolves its decision-making to regional and multi-authority stakeholders, and weights its allocations to these areas in recognition of advantage and disadvantage. 
Over the past six months, the arts council has faced criticism for trying to play down the findings in the RoCC report, rather than addressing the issues it raised. 
This time, ACE chairman Peter Bazalgette says he welcomes the debate and recognises that “there is more to do”. It remains to be seen whether those words will translate into meaningful action.
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David Anderson, president, Museums Association
Reports come and go but rarely is there a report that throws a flash of lightning across a dark landscape. One such report was RoCC, written by three independent arts specialists as a calm, evidence-based analysis of the inequity of arts funding in England. The only sane response to this is one of justified anger.
Now the same authors have cast another lightning bolt. The Place report is one of the most significant and challenging documents on cultural policy in decades.
Public funding is supposed to counter market failure. Instead, as Place reveals, the impact of arts lottery funding in England is only to deepen national inequity. It is strategic policy failure on a heroic scale. 
The arts funding system in England is broken. The time to change it is now. 
The MA has never proposed that the Department for Culture, Media and Sport should reduce core treasury funding to national cultural institutions in London. What I and others have asked is that discretionary funding, whatever its source, should be directed to areas of greatest need. This remains our position.

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