Baroness Sater
To ask His Majesty’s Government what assessment they have made of the impact of the Budget on arts, heritage and cultural organisations.
Baroness Sater (Con)
My Lords, I am delighted to introduce this debate and am very grateful to all noble Lords who have signed up to speak. I declare my interests as a trustee of the Dartington Trust and a member of the Arts and Heritage APPG, the Royal Academy, the Tate, the National Trust, and Historic Houses. I am a lover of old buildings and an enthusiastic amateur artist. It is an honour to share this debate with so many noble Lords whose many years of experience in the arts and heritage will add far more than I can ever hope to do.
We are a country of deep-rooted cultural and artistic traditions. For many centuries, we have led the way. We are a proud nation where arts, heritage and culture are an essential part of the lifeblood of our country. The arts have an enormous societal impact on our health and well-being. A report by UCL for DCMS in April 2020 showed, for example, that exposure to the arts and cultural activities positively impacts social skills, language learning and overall mental health, particularly among adolescents and young people.
Our cultural contribution is not only about us in Britain. Our institutions are world leaders with global standing, attracting people from around the world, who visit Britain because of the richness, breadth and depth of our cultural offering, delivering a vibrant addition to our tourism and hospitality sectors. These cultural industries support our global soft power. According to the House of Lords Library briefing in January, the UK exported £7.2 billion of cultural goods and £9.3 billion of cultural services. Between 2016 and 2022, the cultural sector in the UK ran a consistent trade surplus. DCMS figures in 2022 reported that gross value added for the cultural sector as a whole was £34 billion, which confirms that the arts and cultural sectors are enormous contributors to the UK economy.
We all know that there is no free meal. There is a financial cost to supporting, maintaining and extending our cultural life. We rely on thousands of organisations and individuals in our globally renowned institutions, including our art galleries, museums, theatres, historic houses and buildings, dance and art production companies, orchestras, choirs, local community organisations and charities. But they all rely on some form of financial income or support, whether from organisations such as the Arts Council, the National Lottery Heritage Fund, the British Film Institute and English Heritage, public funding from local authorities, private philanthropic donations, or memberships or sponsorships from corporations and volunteers.
The most recent edition of the Art Fund’s research, published in June, reported that visitor numbers have been on the rise—which is good news—with over half of venues at or above pre-pandemic levels. However, it also found that local authority-reliant organisations were in a “perilous and uncertain state”. Post-pandemic financial fragility, real-terms funding cuts, ageing buildings and increased overheads were all found to be placing these organisations under “enormous strain”. In addition, the impact of the cost of living crisis on staff and audiences was recognised as the biggest collective challenge facing organisations, with increased outgoings and falling income identified as problems for the sector.
Against this backdrop, we welcome the Chancellor’s recent Budget announcement of keeping tax relief for theatres, orchestras and museums and galleries; the extension of the audiovisual creative tax relief, which helps the film and heritage sectors reduce their tax burden; and the addition of £3 million into the creative careers programme set up in 2018. We also welcome the increase of 16% in the capital budget for DCMS for the next year. However, less welcome is the announcement in the Autumn Budget that the day-to-day DCMS resource spending budget will stay year on year at £1.5 billion. In reality, this represents a 2.5% real-terms cut, accounting for inflation.
This will make it much harder for the department to fund the cultural institutions it supports, such as the 15 DCMS-sponsored museums and galleries, at a time when the Art Fund reports that 89% of adults agree that museums are important to UK culture. Although national museums and galleries saw increased grant-in-aid funding in the recent Budget, regional ones did not.
Visiting York last week, I was overwhelmed by the incredible preservation of the Roman, Viking and medieval city, and was proud to see how we are preserving our history. Tourism thrives in the regions and cities, substantially because of our cultural heritage. None of this is possible without funding in our regional and local communities, together with the support of the dedicated people and volunteers who care so much about our wonderful cultural life.
In the Spring Budget, the then Chancellor Jeremy Hunt announced £100 million of funding for levelling-up cultural projects. The money would have funded projects such as the British Library north in Leeds, the National Railway Museum in York, the Victoria and Albert Museum in Dundee, and the National Museums Liverpool. However, the recent Budget suggested that the Government were minded to cancel them. I ask the Minister: why do the Government not consider this investment to be an important part of their growth mission? Will they provide a commitment to investing in the arts across the entire country?
For the already financially challenged cultural sector, the Autumn Budget contained two further challenges. First, although relief for business rates has been extended, at the same time this is being reduced from 75% to 45% until March 2025, when it will cease. Many arts and cultural organisations operate from a physical location and will struggle significantly to foot the increased overall costs of business rates.
Secondly, British cultural offering contributes significantly to employment, with 2.9 million people in full-time jobs, according to the DCMS creative industries subsector, and with nearly 700,000 in the cultural subsector from the data from April 2023 to April 2024. This is why the employer national insurance contributions rise is causing real concern. It will push up staffing costs for cultural organisations and may impact levels of employment and future pay rises for staff, hurting particularly the lower paid workers. The Southbank Centre in London’s initial calculations showed that these changes will cost it at least £700,000 in 2025. These are not small sums. As we all know, no one can fundraise for tax increases.
With 40% of theatre and performing arts venues at risk of closure over the next five years, according to the Society of London Theatre, and with two-thirds of museums being concerned about funding shortfalls this year—up from 50% in 2022—the future is looking challenging. This was the situation before the increase in NI and the minimum wage and the reduction in business rates relief. Have the Government done an impact assessment on the effects of these increases in NI, the minimum wage and the removal of business rates relief on the cultural sector? Is the Minister able to provide an assurance that the Government will increase funding to the cultural sector, similar to that provided to the public sector, protecting it from these unwelcome rises?
Local authorities are champions of local arts and are the lifeblood of many organisations, playing a huge role in creating a thriving arts and cultural environment for their communities. They are the biggest funders of culture, spending around £1 billion in England alone on services such as libraries, museums, heritage and the arts. It was suggested in the Autumn Budget that the UK shared prosperity fund will be phased out the year after next. It will continue at a reduced level for a transition year by providing £900 million for local authorities to invest.
However, the Government have not said how they will replace it, which makes it difficult for future planning of arts funding. It creates uncertainty at time when local councils’ core services funding is under pressure, putting cultural projects and institutions in increasing jeopardy. Could the Minister give the House assurances that a replacement funding model will be established as soon as possible to provide the security so desperately needed? I know we all share a desire for a long-term settlement for our cultural future for continuing sustainability and enduring creativity, and a major global role for the country.
Let us thank all the extraordinary and talented people who deliver our fantastic cultural life, be they paid or hugely committed volunteers, who are preserving our heritage. They are caretakers for our most amazing buildings and the institutions we enjoy today.
Lord Bassam of Brighton (Lab)
My Lords, I thank the noble Baroness, Lady Sater, for ensuring that we have this debate. We do not talk enough about the arts and cultural industries in our politics, and it is vital that we focus on the issues that she rightly highlighted.
For background, the Library note explains that public funding for the arts has, over the last 14 years, decreased by some 18%. Museums, in particular, have been hit hard, with 32% of them experiencing budget reductions. Overall, local government revenue funding dropped by 48% in that period, and Arts Council funding dropped by 18% in England and a whopping 66% in Northern Ireland. BBC public funding dropped by 23% and the national portfolio criteria were changed—public funding there dropped by 10%. Worse than that, libraries experienced cuts of some 53%. So, if we are asking why the arts are in peril as a result of changes in public funding, the answer is clear: the last Government took money away from arts and cultural industries. Our Government’s challenge is to find ways of ensuring that some of that damage is repaired.
In that context, the recent Budget is very welcome. The DCMS settlement brought an uplift of 2.6%, and the Treasury committed to ensuring that creative sector funding became one of the eight growth areas, because of the way in which arts and culture drive our economy and make an important contribution to our industrial strategy. As the noble Baroness said, another £3 million was put into the creative careers programme, signposting employment in the sector. The Budget also promised additional grant in aid for arts and culture for the long term, to sustain that sector. Most importantly, increased investment in cultural infrastructure was promised to bring in additional capital for cultural institutions. I do not know a museum that has not complained recently about a leaking roof, and there are plenty of them. Money is tight.
So, can we explore other ways of funding? To ensure long-term sustainability, one of those might be the smart fund, which has been proposed by many from DACS. It is a mechanism that compensates artists whose original work is copied or stored on electronic devices. This works in 45 other jurisdictions. A levy of between 1% and 3% on the sale price of electronic devices could fund some 1,200 cultural projects a year, as it does in France. I also recommend to the Government a music venues ticket levy, which might bring in new and very welcome additional revenues, and perhaps help cross-subsidise small venues where talent emerges and where research and development is important.
I urge the Government to look again at Nesta and at Arts Council funding, to see where the balance lies, and to find new sources of revenue so that cultural and arts institutions have a more certain funding base for the long term, in addition to what we make available through public funding.
Lord Berkeley of Knighton (CB)
My Lords, I am grateful to the noble Baroness, Lady Sater, for securing this important debate, and I declare my interests as a composer and broadcaster. I was delighted that the Prime Minister said in the other place recently that it was a priority for his Government to get music back on to the curriculum in schools. In my view, this is the single most important step in music education—indeed, in music. It is an opportunity for the young to make music, to listen and to react to others: there I think we have an analogy with sport. But of course, the devil lies in the detail, and I look forward to hearing more on this from the Government.
What is really relevant to today’s debate is that we also need to think about the financial status of supporting organisations and venues where, once acquired, a musical curiosity can be developed. That brings in small venues and organisations that promote the arts, where funding is most urgently needed after many years of underfunding. I think of the English Symphony Orchestra in Worcester and the plight of Welsh National Opera, both of which have done so much good work in underprovided areas.
I congratulate the Government on the orchestra tax relief, a welcome support, although it still relies on the orchestra activity being able to go ahead in the first place and the money can be received only after a long process, which can cause significant cash-flow issues.
The rise in employers’ national insurance is, as the Government have acknowledged, a difficult burden at this time. One would have hoped that charities, especially small ones with, perhaps, under £1 million pounds in turnover, might have had a dispensation.
I thank the Government for listening to concerns about VAT on specialist performing arts schools and confirming that courses covering the music and dance scheme and the dance and drama awards scheme will not attract VAT.
On the other hand, as my noble friend Lord Clancarty pointed out a few days ago, the reduction in business rates relief will adversely affect the arts. The Music Venue Trust has calculated that it will place an additional £7 million burden on 350 grass-roots music venues, put at risk more than 12,000 jobs and cost more than £250 million in economic activity. While of course it is good news that the arts tax relief remains unchanged, it is sad that it has not been extended to choirs.
In terms of the arts generally, the exchange of ideas across borders is essential, and the loss of Erasmus tragic, so a new rapport and sense of good will towards and from Europe must be fostered to allow easier touring in both directions. I ask the Minister whether any replacement for Creative Europe has been found or whether we might rejoin it, since the rules allow us to do so.
The Lord Bishop of St Albans
My Lords, I too thank the noble Baroness, Lady Sater, for securing this debate.
A number of elements of the recent Budget are to be welcomed, such as the continuation of Museums and Galleries Exhibition Tax Relief and the cultural infrastructure funding. However, many of us were disappointed that there was no update on the Listed Places of Worship Grants Scheme, which is such a lifeline for so many of our historic buildings. The Church of England and other churches are trustees of some of the most important buildings in this country. We have to raise, voluntarily, tens of millions of pounds, and we really need to find ways to help very many pressurised local communities. These buildings are not used just for worship; many of them are the local concert venue. They have all sorts of music-making going on and they are places where music lessons are given. Many of our schools come into the churches, and they are used for all sorts of reasons beyond Sunday and midweek worship. I hope that DCMS will make a decision on this in the coming weeks, and I urge the Minister to ensure its future.
I want to say a few words about the impact of the introduction of VAT on school fees for cathedral choir schools. These schools are often not well known but, by and large, they are not in the top rank of schools for the privileged. Many of them offer an outstanding musical education for local pupils. Often, we have to raise money for bursaries to keep them going. They are running on very tight budgets, but they are a fundamental part of providing musical education. Many of this country’s leading composers over the last 200 years started their lives in church choirs, on organs or learning through local music-making. This pipeline is really important in bringing such people through.
There has already been a great deal of concern. The increase in employers’ national insurance contributions announced in the Budget has contributed further to the financial uncertainty facing these valuable institutions. I am sure the Minister will be aware of previous comments made by my colleague, the right reverend Prelate the Bishop of Southwark, and by John Glen, who spoke on this in the other place.
About a decade ago, Country Life published a list of 60 things that make Britain great, and the choral tradition was on that list. There is a real threat to this, as we look at the resources, and a danger that, should choir schools be forced to close, state-funded schools will not be able to plug the gap. Does the Minister appreciate that choral music is an essential part of our heritage and agree that we need to do all we can to ensure that it is preserved?
The Earl of Clancarty (CB)
My Lords, the danger for the arts of economic growth being so central to the Government’s plan is that more high-profile commercialised creative industries and institutions get support while other of the arts and related cultural areas, particularly in the regions, as the noble Baroness, Lady Sater, has said, get neglected. Unfortunately, this Budget, while there are certainly good things in it, bears that out, with no emergency help for civic museums and a situation where our already struggling grass-roots music venues are in a worse position now than before the Budget. It is an elephant trap.
With respect to the arts, we need a plan for arts and cultural growth as much as we need one for economic growth, for three reasons. First, the arts are a good in their own right. Secondly, they are important socially and locally, in terms of both production and access. Thirdly, and crucially, they are the grass roots from which the commercial creative industries spring. The arts are an ecosystem.
I have some specific points to make. On Monday, the noble Lord, Lord Murphy of Torfaen, and I—as the noble Lord, Lord Berkeley, has done today—drew attention to the plight of the Welsh National Opera, which benefits both Wales and England. In a recent Answer to a Written Question by Liz Saville Roberts, Chris Bryant said that the WNO is in a “strong place to succeed”. Unfortunately, this is clearly not the case. The noble Lord, Lord Murphy, asked for the Westminster and Welsh Governments to get together on this. Will the Minister use her influence to enable that?
As big operators are now a major factor in the arts, we need to consider levies—and the noble Lord, Lord Bassam, has mentioned a couple. I welcome the introduction of the voluntary ticket levy on big arena gigs to help small venues, although I believe it should be mandatory. Will the Government also consider the smart fund, which the noble Lord, Lord Bassam, also mentioned. Would the Minister be willing to meet parliamentarians and interested parties who have proposed this scheme, including the Design and Artists Copyright Society?
Thirdly, as discussed in the Channel 4 interview with Peter Kosminsky, director of the Hilary Mantel adaptations, there is the application of levies on the big streaming companies such as Netflix to help our film and TV production, which, like the private copy levy schemes, are already applied sucessfully in European countries. Will they consider such levies, too?
Last but not least, there is Brexit, which I mention because this is a Budget geared to a desire for economic growth. Brexit is not in the past but is lived on a daily basis by artists, and it continues to have a detrimental effect on opportunities for, and incomes of, musicians, visual artists and many others. The Government need to set out a coherent plan to address it, because the sector is waiting on that.
Lord Vaizey of Didcot (Con)
My Lords, I congratulate the noble Baroness, Lady Sater, on securing this important debate. I am a member of not nearly as many arts organisations as she is, but that is partly because I remain the king of the freebie—and in that sense I am completely aligned with government policy.
As I have said before, it always surprises me that the Tories get such a bad rap when it comes to the arts, compared to the party opposite. We created the DCMS, put in place the National Lottery as well as the museum and theatre tax relief—and there was also the superb support given by the noble Lord, Lord Parkinson, and his colleagues during Covid. Yet here we are today with only one Labour speaker on the Back Benches, and no Minister in the Lords who is in the actual department. The Budget has seen a real-terms cut to DCMS, a cut to the levelling-up funding, the removal of planned capital funds for the national museums of Liverpool and York and the Victoria and Albert Museum. I should declare that I am a trustee of the Tate—although maybe not for much longer after this speech.
With the ongoing impact of the Budget, the national insurance hike, the removal of business rates relief and the war on non-doms, many of whom give to arts organisations, it is not exactly what one would call a refreshing time to have a Labour Government in place for the arts. There have been some bits of good news hinted at in the Budget. The cultural infrastructure fund was mentioned, but we have no detail on that. As the right reverend Prelate pointed out, the listed places of worship scheme is so important, and we need its future to be guaranteed and established. There is, of course, some increase in grant in aid to the national museums, which it would be churlish of me not to recognise.
I give the same speech in this Chamber every time we have a debate on the arts, because securing the future of the arts in this country is such a simple and easy thing for any Government to do—believe me, I have fought those battles as well—by giving long-term and generous funding, which is still a rounding error on the overall budget of government, for all our national and regional institutions. It may be the time to experiment with some other form of funding. As somebody who believes in simplifying the tax system, it is perhaps counterintuitive, but I am interested in Manchester’s experiment with a tourist tax and whether that can make an impact. It is perhaps something that cities should be thinking about to embed the arts in health and education. Of course, we also talk about soft power and diplomacy, and the arts play such a vital role in that.
It is not a one-way street. There has to be some give and take for the arts. I became increasingly frustrated as Arts Minister that we lived in a world where no museum or no theatre should ever close. We celebrated the openings of numerous theatres and museums, which were never covered. The minute that one was under threat of closure, it was supposed to be a disaster for the arts. There should perhaps be more M&A in the arts and more co-operation.
Finally, I think that the national museum should be given independence and that the Parthenon sculptures should be returned to the Greeks—I give way to my noble friend.
Baroness Bottomley of Nettlestone (Con)
Does my noble friend agree that, in these difficult times, waste is to be avoided at all costs? We have the wonderful Imperial War Museum with the Holocaust galleries. The last thing that anybody wants is to waste over £30 million on a memorial museum in the beautiful Victoria Tower Gardens when that money could be spent—
Baroness Blake of Leeds (Lab)
With respect, the noble Baroness was not here at the beginning of this debate.
Baroness Bottomley of Nettlestone (Con)
I tried very hard, but the traffic was very bad.
Lord Vaizey of Didcot (Con)
She was stuck in traffic, which is a side effect of rapid economic growth. I take her point; it is a narrow and focused point, but all I say is that I referred to M&A in the arts. I would like to see museums working together, with perhaps some merging. That is the kind of thing that we should be thinking about.
Lord Janvrin (CB)
My Lords, I too am grateful to the noble Baroness, Lady Sater, for the opportunity to discuss this important subject. I draw attention to my interests in the register, including being on the board of the British Library. Most of what I have to say is in relation to that institution.
The British Library’s stated mission is
“to make our intellectual heritage accessible to everyone, for research, inspiration and enjoyment”.
In the knowledge economy, it has a vital part to play in any growth agenda. In common with other DCMS-sponsored cultural bodies, the British Library has faced a period of sustained pressure on budgets in recent years. This has been mainly due to the inflationary pressures across the whole sector. In our case, this pressure has been greatly exacerbated by the cyberattack on the library last year, which is requiring a major rebuild of our digital infrastructure.
It was reassuring to see the broad commitment in the Budget to increasing grant in aid for our national museums and galleries. This will be a welcome first step in restoring financial stability for a vital part of our cultural sector. For the library, such investment, if confirmed, would be absolutely critical to our continuing recovery from the cyberattack. I pay tribute here to the essential part played by officials at DCMS to support this recovery over the past year.
The Chancellor was unable to commit in the Budget to some of the capital plans announced in the previous Parliament. I am nevertheless pleased to note that the British Library’s partners in Leeds and the wider region are just as committed as we are to making the strongest possible case for a new British Library presence at Temple Works in that city. We continue to believe that a new British Library site in the north can be transformative, unlocking opportunities for innovation and research, culture and regeneration. In doing so, it offers a long-term opportunity to contribute to national economic growth, an aim which unites us all.
Baroness Fleet (Con)
My Lords, I too thank my noble friend Lady Sater for securing this important debate. I declare my interests as listed in the register.
Arts organisations were so full of hope when Labour came to power and there is now just profound disappointment and disbelief. As the esteemed critic Richard Morrison said:
“So much for Labour’s arts-friendly Budget”.
Theatres, orchestras and museums worked so hard to emerge from the dark days of Covid and, thanks to the previous Government’s £2 billion culture recovery fund, distributed by the Arts Council, most were on their feet again with ambitious ideas and programmes. They desperately want to contribute to economic recovery and growth. They are now reeling, with the minimum wage up and employer national insurance up. This is a tax on jobs, work and growth. It is a tax on talent, creativity and ambition.
In the music world, where I have a particular interest as co-founder and chair of the London Music Fund, providing scholarships for pupils from low-income backgrounds, organisations—music charities, music venues, music colleges, conservatoires, opera companies and music hubs, too, which are central to the delivery of music in schools—will be clobbered. At least the national plan for music education, which I chaired for the previous Conservative Government, was embedded in the nick of time, with funded streamlined music hubs, plus £25 million for musical instruments and a £5 million pot for music progression.
The noble Lord, Lord Berkeley, referred to the schools in the Government’s music and dance scheme. I hear different things from what he has heard: incredibly, I am told that they will be affected by the VAT on school fees. That would have a profound effect on the future viability of MDS schools. At the Yehudi Menuhin School, where I was a governor, for example, over 75% of its exceptionally talented pupils receive MDS funding or school bursaries. How can parents with an income of £45,000 or even £60,000 find up to £10,000 a year for VAT? If the school absorbs the costs, it will run out of funds within a few years.
This pernicious tax is a tax on just those young people who we want and need in orchestras and the music industry—young people from diverse backgrounds who have been selected for their talent and potential, not on their ability to pay. They are the sons and daughters of teachers, truck drivers, care workers and refugees. Why should they be punished? I look forward to an update.
As my noble friend said, DCMS real-terms funding for day-to-day spending next year will go down. No doubt the Minister will enlighten us on how this will affect many of the arts institutions. Four months after the election, with all its broken promises and massive tax increases, is the Minister aware that many of our cherished arts organisations, right across this country, are now in peril?
The Earl of Clancarty (CB)
The noble Baroness, Lady Fleet, has just mentioned the specialist schools. Like the noble Lord, Lord Berkeley, I have heard something that was completely the opposite. I wonder whether the Minister could clarify the latest situation on that.
Baroness Grey-Thompson (CB)
My Lords, I thank the noble Baroness, Lady Sater, for tabling this debate today. I draw your Lordships’ attention to my entry in the register; I am president of the LGA, chair of Sport Wales and previously chair of ukactive.
The LGA’s Commission on Culture and Local Government has highlighted that access to culture is not evenly distributed across the nation. Any measures to address this are very welcome. However, I believe that access to sport and physical activity is also very important but under threat. This is not about elite sport but about keeping people fit and well, mentally and physically, and keeping them out of the NHS, which, like local councils, is under significant pressure.
The positive benefits include driving economic growth and educational outcomes and improving the quality of life. Sport Wales has shown that sport contributes £5.89 billion in social value to Wales. Sport England’s figures, in research from 2024, show that participation relieves pressure on the NHS through £10.5 billion a year in health and social care savings, while the annual social value is over £107 billion. Providing people with the right culture and leisure services has the potential to deliver significantly better outcomes and socioeconomic benefits.
I thank ukactive for its briefing. Budget measures, particularly the rise in employer national insurance, the national living wage and business rates, place additional financial strain on the physical activity sector. Large public and private operators estimate that the changes will result in a 10% increase in payroll costs, forcing reductions in staffing, services and future investments. Cost pressures threaten the affordability of facilities such as gyms, pools and leisure centres, risking high barriers to the second-largest driver of physical activity in the country, and worsening health inequalities across communities.
His Majesty’s Government need to work with the sector to mitigate the Budget’s impact on the operating costs of facilities, thus safeguarding jobs, sustaining public health benefits, and allowing for continued growth and investment in local communities. The sector is essential in improving national health, driving economic growth and supporting the Government’s five missions. I understand there are massive challenges, but sport and physical activity are integral to a healthy society.
Lord Harlech (Con)
My Lords, I declare my interests as a member of Historic Houses and the owner of heritage-listed buildings in Wales.
As my noble friends Lord Vaizey of Didcot and Lady Fleet have said, the Conservative Government recognised the significance of heritage to our nation’s cultural fabric, its role as a major employer, its educational value and the joy it brings visitors. This understanding was evident in the robust support extended to the sector during the pandemic.
In just one Budget, the new Government have enacted in this sector measures of financial savagery not seen since the post-Second World War era of country house destruction. At the Historic Houses AGM, held at the QEII Centre this week, owners and operators spoke of their terror at the ramifications of this Budget. Not a single Minister or civil servant from DCMS chose to attend. At best, this Budget shows a total lack of understanding by the Treasury as to the fine margins and long-term planning with which these organisations survive. At worst, much like in the farming community, it is seen by many as an ideological attack on private ownership which will decimate the sector.
The changes to the IHT regime could mean sales of land, buildings, artworks—all diminishing the heritage significance of estates. An increasing number could now be sold in their entirety and new owners may be less inclined to open for visits and events, so a reduction in public access to heritage is another consequence of the Budget. This in turn will reduce the number of jobs and diminish the strength of the UK tourism and heritage sectors.
Because an estate will comprise predominantly capital assets, IHT becomes an existential issue for the owners and custodians of heritage businesses. In few other sectors, and I cannot think of another, must businesses relinquish 40% of their net worth at the point of a succession event—that is, death—with all the added stress that can come with a bereavement. Therefore, the long-term sustainability of these businesses depends on their ability to manage the ever-present IHT risk.
The Welsh Government’s 2024-25 budget initiated severe cuts to heritage and this Westminster Budget heaps on further damage. Will the Government raise the £1 million cap or limit it to assets held for less than 10 years, or provide that assets held for 10 years after succession qualify for full relief? This will catch those who have bought land to escape IHT by claiming APR or BPR, while permitting long-term custodians of important heritage estates to continue to benefit from full relief.
Lord Freyberg (CB)
My Lords, I speak today with profound concern for our nation’s cultural and heritage sectors. The current funding situation raises serious doubt about our ability to maintain and develop our cultural institutions effectively. I agree with much of what the noble Lord, Lord Bassam, said about how this came about. Since 2010, grant in aid funding has fallen by 18%, and DCMS’s core cultural funding now represents just 0.17% of public spending per capita, relegating the United Kingdom to among Europe’s lowest cultural funders. The impact on communities has been severe. Local authority revenue funding of culture has suffered devastating cuts, at 48% in England and 40% in Wales. Only two in five cultural organisations can adequately maintain their collections. Heritage site visits remain below pre-pandemic levels—although thankfully they are rising, as the noble Baroness, Lady Sater, mentioned—while school visits have dropped by nearly 40%.
While I welcome the recent Budget’s increased grant in aid for national museums, focused support for the creative industries and sports facilities, revised tax relief rates, an announcement of cultural infrastructure funding and some stabilisation of local authority funding, these measures fall short of addressing the fundamental challenges.
Consider the mounting pressures. National insurance contributions are rising to 15%. Increased minimum wage costs, while essential for supporting workers, burden the charity sector by £1.4 billion, and a 35% reduction in business rates relief will impact heritage venues. The new £1 million cap on agricultural and business property relief threatens centuries-old estates and their collections, a point well made by the noble Lord, Lord Harlech. The £5 billion reduction in levelling-up funding has left vital cultural projects at risk. The National Railway Museum is losing £15 million—one of many—while local authority museums’ urgent plea for a £20 million emergency fund goes unanswered. The Art Fund describes many institutions as in a “perilous and uncertain state”. Local authority museums, vital repositories of community heritage, face redundancies, reduced access and potential closure.
While the Government promise to increase DCMS funding to £2.3 billion by 2025-26, this offers little comfort to institutions fighting for survival today. Our regional and local cultural institutions—the bedrock of our nation’s cultural democracy—cannot endure another year of chronic underfunding. Therefore, like the noble Baroness, Lady Sater, I ask what assessment the Government have made of these measures’ cumulative impact on our cultural sector. What plans exist to address local authority museums’ urgent needs? How will the Government ensure that increased operating costs do not trigger widespread closures across our cultural landscape?
Baroness McIntosh of Hudnall (Lab)
My Lords, I know time is tight. I am very grateful for the opportunity to speak in the gap, and I will do so briefly.
I ask my noble friend the Minister to bear two things in particular in mind, both of which have arisen in the course of this debate. One is the complex interdependency of the entirety of the arts and cultural ecosystem, as referred to by the noble Earl, Lord Clancarty, within which any bit, small or large, is important, as if it comes under threat it is a threat to the whole system.
The second point I want to make is narrower, about the particular challenges facing small performing arts organisations. I remind noble Lords of my many, often rehearsed interests in the performing arts sector. Those organisations operate on tiny margins; very small sensitivities can have a huge impact on them. It is very important—in particular to those organisations that expend an enormous amount of effort on fundraising—that they can feel confident, even in difficult times, that this Government understand and appreciate the value of public funding of the arts and will do their very best to sustain it to the best of their ability, locally and nationally.
Lord Parkinson of Whitley Bay (Con)
My Lords, I am very grateful to my noble friend Lady Sater for this debate. It is an opportunity to welcome the positive news in the Budget, which I do gladly, not least the reconfirmation of the extended rates of tax relief for theatres, orchestras, museums and galleries. As I noted in my Question on 15 October, it is not just the rate but the certainty for planning that is so important. I welcome too the recognition of the need for cultural infrastructure funding. There were no numbers attached to that in the Budget, so maybe the Minister can provide some today.
Today’s debate is also an opportunity to highlight the less positive news and the entirely absent. Like so many other businesses, employers in the arts and heritage sectors are dismayed by the Government’s new job tax, in the form of national insurance contributions and the rise in the minimum wage. My noble friend mentioned the £700,000 cost to the Southbank Centre. The Youth Hostel Association says that the Budget will add another £1.75 million to its cost base, on top of the hit it will receive from the decision to scrap the National Citizen Service.
At a well-attended event hosted by the Heritage Railway Association here in Parliament yesterday, I spoke to the North Yorkshire Moors Railway and the Ffestiniog and Welsh Highland Railways, the latter of which said that the Government’s changes in the Budget would wipe out its entire modest profit, forcing it to re-budget and make some very difficult decisions.
The NCVO estimates that the national insurance hike alone will cost the charity sector £1.4 billion. It is calling for the exemption that the Government have given to public sector employers to be made available to charities. Can the Minister say whether that is being considered? If it is, does she understand the invidious position in which that will put many arts and heritage organisations that are currently constituted as companies?
As the noble Earl, Lord Clancarty, noted, it was disappointing that, while the Government are providing welcome support to our national museums, there was nothing to help our brilliant civic museums. There are 2,500 of them, compared to the 15 national museums. Many are reliant on local government, a far bigger funder of culture than central government. What are the Government doing to support both of them?
The Minister’s colleague Sir Chris Bryant today called on the music industry to impose a new levy on larger venues, but the sector is still reeling from the removal of the 75% business rates relief for grass-roots music venues in the Budget. That will create a tax bill of £7 million for a sector that, last year, returned an entire gross profit across all venues of just £2.9 million. The Music Venue Trust says that that £7 million bill is equivalent to 12,000 jobs in the sector.
I congratulate my noble friend Lord Harlech on his award this week from the Historic Houses Association; I was sorry that no one from DCMS attended to see it. Its director-general said that the Budget was a disaster from its perspective, particularly the changes to business property relief—a measure first brought in by a Labour Government in 1976. Many custodians of historic houses are lynchpins to their local visitor economy, providing venues for films, television and music concerts as part of the interconnectivity that the noble Baroness, Lady McIntosh, mentioned.
I am very grateful to the right reverend Prelate for mentioning cathedral schools. I hope that the Minister can give us some clarity on the music and dance scheme for schools and address its importance.
I have mentioned already the halting of funding for the National Railway Museum. That was part of more than £52 million for the culture and capital regeneration projects announced in March, including for National Museums Liverpool, the International Slavery Museum, the V&A Dundee, Venue Cymru, British Library North and the National Poetry Centre—a project led by the Poet Laureate, Simon Armitage. Sadly, the Government have now said that they are “minded to withdraw” funding from all those projects. Those of us familiar with Whitehall jargon fear that that may be just a euphemism to avoid judicial review; I hope that the Minister can put us out of those worries.
Finally, I hope that the Minister will pick up the right reverend Prelate’s point in telling us about the Listed Places of Worship Grant Scheme, which is a vital lifeline for the custodians of historic churches.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross)
My Lords, I thank the noble Baroness, Lady Sater, for initiating this important debate. Noble Lords will notice that we are extremely tight on time. Everyone managed to get about three or four questions into their very short speeches, so if I do not get to every point I will write to noble Lords and place copies of the letter in the Library. I thank noble Lords from all sides of the House for their thoughtful contributions. Many have raised concerns that I will endeavour to address, but first I will highlight the Government’s commitment to the arts, culture and heritage, and their recognition of the value of the sector. At various points, I will refer to what the Budget does to support these sectors.
Most noble Lords stressed the value of culture and heritage, not least the noble Baroness, Lady Sater, and the noble Lord, Lord Vaizey. The arts, culture and heritage are vital to the UK’s economy, well-being and opportunities. They are also fundamental to our cohesion as a society and to our national story, fostering pride and earning global recognition. These sectors employ 666,000 people and indirectly support a whole host of other businesses. Culture and heritage are not simply nice to have. To respond to a point raised by the noble Baroness, they have crucial roles to play in supporting the missions of both growth and opportunity. This Government are committed to making sure that heritage and culture are not just the preserve of a privileged few but that their benefits can be enjoyed by everyone. As the noble Baroness noted, that includes social and mental health benefits.
A number of noble Lords spoke about the pressures faced by the culture and heritage sectors. The Government recognise the financial pressures facing our sectors after 14 years of cultural vandalism and the legacy of Covid-19. The level of the cuts experienced by the sector during the period of Conservative government was highlighted by my noble friend Lord Bassam.
I will go through some of the specific questions raised. The noble Lord, Lord Berkeley, asked about the impact of business rates on grass-roots music venues. The Government are working closely with the live music sector to support an economically sustainable grass-roots music sector. Following the Autumn Budget, we are continuing to support Art Council England’s supporting grass-roots music fund, which provides grants to venues, recording studios, promoters and festivals.
The noble Lord, Lord Vaizey, and the right reverend Prelate the Bishop of St Albans asked about the Listed Places of Worship Grant Scheme. I note the concern for our listed places of worship. Departmental budgets have been set following the Budget announcement on 30 October. The outcome of individual programmes such as the Listed Places of Worship Grant Scheme will now be assessed during the departmental business planning process.
On the points made by a number of noble Lords, including the noble Lord, Lord Berkeley, around touring and the EU, the Government are focused on resetting and strengthening our relationship with our European partners. We will engage with the EU Commission and member states and explore how best to improve arrangements for touring across the European continent without a return to free movement.
My noble friend Lord Bassam made a number of points. I agree that it is absolutely vital that we work with Arts Council England and leading thinkers such as Nesta on understanding how we should fundraise. On the smart fund, we are not ruling out that type of work but we need to look at more evidence on user behaviour.
The noble Baroness, Lady Fleet, asked about specialist schools and VAT increases and a number of noble Lords also raised the issue of VAT on private schools. The noble Baroness asked whether the specialist schools were in scope of the VAT increase. As set out in the Treasury’s response to the technical consultation on the VAT changes, performing arts schools that offer full-time education to children of compulsory school age and/or 16 to 19 year-olds for a charge will remain in scope of this policy. This is to ensure fairness and consistency across all schools that provide education services and vocational training for a charge.
The noble Lords, Lord Parkinson and Lord Harlech, made points about business property reliefs. Currently, agricultural and business property reliefs contribute to the largest estates paying a lower effective tax rate on average than smaller estates. In our view, that is not fair or sustainable.
The noble Baroness, Lady Sater, mentioned the strain on the sector after the pandemic and local government funding issues, as did the noble Earl, Lord Clancarty. The Government know that the public funding landscape we inherited is very challenging. Net expenditure on cultural services by local authorities—which, as noble Lords made clear in the debate, are the largest funder of culture across England—has fallen significantly since 2010 as councils saw their budgets decimated. This Government have, however, started to address the funding concerns for local authorities, with an increased settlement confirmed at the Budget. We recognise that commercial income is not keeping pace with increased outgoings. We are acutely conscious of these significant challenges.
The noble Baroness, Lady Sater, made a specific point about business rates. The Government are creating a fairer business rate system that protects the high street, supports investment and is fit for the 21st century.
In relation to other Budget issues highlighted by my noble friend Lord Bassam, the measures announced by the Chancellor on 30 October amount to a valuable package of support for these sectors. It included an uplift in grant-aided funding for national museums and galleries to help support their long-term sustainability and a package of cultural infrastructure funding that will build on existing capital schemes, with additional capital investment to support cultural organisations across the country. Further details will be set out in due course. The Budget also included funding for creative industries, one of the eight growth-driving sectors in the Government’s modern industrial strategy, which will see DCMS continue to fund important programmes such as Create Growth and an expansion of the creative careers programme, worth £3 million. This will build on its success in raising awareness of career routes and tackling skills gaps in this key sector.
Another priority for this Government is to improve access to arts and music for all children and young people, which links to our government mission to extend opportunities. That is why we are working with the Department for Education on its curriculum assessment review that promises to review barriers and opportunities in order to ensure that every child has the best start in life.
This Government also committed £3 million at the Autumn Budget to expand the creative careers programme, which will give schoolchildren the opportunity to learn more about creative career routes and directly engage with the workplace.
We are going to run out of time for this debate, so I will address a couple of issues that came up and I will write to noble Lords. I am keen for the noble Baroness, Lady Sater, to get at least a minute at the end to respond.
Baroness Twycross (Lab)
Okay—I will carry on until I am cut off.
The right reverend Prelate the Bishop of St Albans, the noble Baroness, Lady Fleet, and the noble Lord, Lord Parkinson, among others, raised the issue of national insurance contributions. I know that the announcement of an increase in the rate of employers’ national insurance contributions has caused some concern across these sectors. Officials from my department have spoken with a number of major cultural organisations to understand how it will impact them.
Regarding the cuts to the levelling-up funding for cultural projects, mentioned by the noble Baroness, Lady Sater, and the noble Lord, Lord Parkinson, the Chancellor has set out the state of the UK’s spending inheritance from the previous Government—a forecasted overspend of £21.9 billion above limits set by the Treasury in the spring. The MHCLG will consult with potential funding recipients, including funding to some projects related to DCMS-sponsored cultural bodies, before a final decision is made. Recipients will have until mid-December to respond.
This Government are absolutely committed to culture, as we believe is demonstrated by the positive settlement achieved for DCMS at the Autumn Budget. However, to repair the public finances and help raise the revenue required to increase funding for public services, the Government had to take some difficult decisions, including increasing the rate of employers’ national insurance.
On the impact to charities in particular, our tax regime, including business rates exemptions, is among the most generous anywhere in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.
The noble Earl, Lord Clancarty, raised the issue of support for the Welsh National Opera, and I am happy to pick that up with him separately outside this debate.
Lord Parkinson of Whitley Bay (Con)
My Lords, I sympathise entirely with the Minister; I know what it is like to watch the Clock when there are lots of questions to answer. She kindly offered to write. Will she commit to going through the Official Report and picking up some of the detailed and technical questions that noble Lords raised? I know that we would be grateful.
Baroness Twycross (Lab)
Absolutely—I would be happy to. We are almost out of time, so I again thank the noble Baroness, Lady Sater, for raising the issue and securing this debate. A number of these one-hour debates on Thursday afternoons could be considerably longer. I look forward both to working closely with the sectors and to continuing to provide the support they need.
The Earl of Clancarty (CB)
My Lords, the question we asked on specialist schools was about the music and dance scheme, and the dance and drama awards. I am not sure that the Minister mentioned them. They are the ones that I thought were now exempt from VAT.
Baroness Twycross (Lab)
With huge apologies, we have run out of time and we need to move on to the next debate. My officials will go through the Official Report and we will endeavour to write to noble Lords.