Arts
Viscount Chandos Excerpts(9 months, 3 weeks ago)
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Viscount Chandos (Lab)
My Lords, I join noble Lords in thanking the noble Lord, Lord Bragg, for securing this debate, his powerful introduction and, as so well expressed by my noble friend Lady McIntosh, his exceptional contribution to this country’s cultural and artistic life.
I had the privilege of introducing a debate on a similar subject a year or so ago. Depressingly but unsurprisingly, little has changed for the better since. The real reduction in public funding for the arts has continued to squeeze all institutions while the Arts Council stumbles on in its attempt to distribute that inadequate funding in the context of admittedly incoherent directions from the Government. All the while and against the odds, artists of all disciplines in this country daily create miracles of inspired excellence. So, are we wasting our breath today? I was encouraged last night when talking to the chair of one of the most important artistic institutions in the country, from outside London. He welcomed our debate, saying that: “Nobody else advocate for the arts—least of all the Arts Council”.
I declare my interest in the register as a vice-chair of LAMDA. I strongly endorse the arguments made by the noble Lord, Lord Bragg, and every other speaker about the vital importance of the arts, directly and indirectly, to our lives. I will make two brief points.
The noble Lord, Lord Bragg, highlighted the huge divergence in the teaching of music and the performing arts in the state and independent school sectors. I see this vividly through the more than 120,000 drama exams conducted by LAMDA worldwide every year. While LAMDA, as a world-leading drama school, already draws its students from a broadly representative cross-section of society and works hard to improve that further, its exams are overwhelmingly taken by students from independent schools—a vivid but depressing illustration of the rundown of arts teaching in state schools. My right honourable friend Sir Keir Starmer’s commitment to the Labour Party promoting oracy through state schools is a light at the not-too-distant end of the tunnel.
I hope that the Minister will not again insult the intelligence of your Lordships in winding up by presenting small nominal increases in funding for the arts and shrugging off the savage inflationary cost increases suffered by all arts institutions. Since the start of the Conservative and Conservative-led Governments, public funding has been cut by over 30% in real terms.
A year ago, I suggested that the additionality required for funding from the lottery might be relaxed and that the doubling of distributions to good causes promised by the new lottery franchisee could be used to compensate in part for the real-terms reduction in the Arts Council grant in aid. By coincidence, today is the first day of the new lottery franchise, yet the new franchisee has already talked about struggling to match previous years’ distribution and a delay in any increase. Does the Minister agree that the award of the franchise to Allwyn by the Gambling Commission appears to have been based on a false prospectus? If, as is now predicted, lottery funding for the arts and other good causes does not meet the original projections on which the franchise was awarded, will the Government make up the difference through an increase in the grant in aid?
Royal Albert Hall Bill [HL]
Viscount Chandos Excerpts(1 year, 1 month ago)
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Viscount Chandos (Lab)
My Lords, I am very pleased to be the first speaker able to thank the noble Lord, Lord Harrington, for his clear introduction to the Second Reading of the Bill, and for the work he has done as the DCMS-nominated independent trustee of the hall. If I raise in my remarks today any concerns about the governance of the Royal Albert Hall and issues around its operations, I make it clear from the outset that these are not criticisms of the noble Lord, who has the unenviable position as one of the minority independent trustees who do not have the conflicts to which I will refer.
When I look at the next business in the House, to take note of the long-term strategic challenge posed by China, I feel momentarily that we are focused in this debate on something of relative insignificance. But, as the noble Lord, Lord Harrington, set out so well, the Royal Albert Hall plays an iconic part in our national life, not least as the central venue for the annual BBC Proms, the largest music festival in the world. The hall, as he explained, transcends this headline association by hosting events ranging from top-level sport to film and television premières and awards ceremonies, from Cirque du Soleil to Eric Clapton— 200 performances since 1964.
I think back nostalgically to attending, 40 years ago, an evening with that great figure in public life, the Australian cultural attaché, Sir Les Patterson, created by the much-missed and brilliant Barry Humphries. Most recently, I attended the concert of the National Youth Choirs, with nearly 1,000 young people performing to an audience crammed with their families and friends. Each of your Lordships will have their own memories and connections with the hall—evidence of the huge importance it has in our lives. With that importance goes a responsibility on the part of the trustees who oversee the hall’s operations; that is the focus of my remarks.
I have no direct interest to declare but flag two things. First, I am a trustee of a number of charities, both operating and grant-making, and I will comment on the Albert Hall’s position within the wider charitable context. Secondly, I have followed the relentless attempts to address the governance issues by the former chair, Richard Lyttelton, who is a friend and distant relative. I always follow the principle of the writer Hugh Kingsmill, who said that friends are God’s apology for relations—I think of him more as the former than the latter.
The Corporation of the Hall of Arts and Sciences, the formal name of the Royal Albert Hall, as explained by the noble Lord, Lord Harrington, is a uniquely constituted organisation. Long-term seat-holders comprise a clear majority of trustees. The rights and values of the seat-holder’s position are not unlike those of a debenture holder for Wimbledon, but the All England Lawn Tennis and Croquet Club is not a charity, whereas the Royal Albert Hall is. Not only do seat-holders benefit from the use of seats at events they attend but they are able to sell tickets on the open market for the most popular events, at very high prices in many cases. In doing this they are behaving perfectly legally but, as the Charity Commission has said, this is a clear conflict of interest. The conflict of interest and the trustees’ reluctance to address the resulting governance issues, such as by requiring a majority of their council to comprise independent trustees who do not own seats, not only harm the reputation of the Royal Albert Hall but damage the charitable sector as a whole, providing an uncomfortable example of private benefit being embedded in the position of seat-holding trustees.
I have never been a great fan of the explanation of somebody’s charitable commitments as “giving something back” as, from my own experience, involvement with a charity as a trustee is hugely rewarding in every sense, except—critically—financial. But, to break my habit of avoiding the phrase, the constitution of the Royal Albert Hall and its unaddressed conflict of interests risks giving the appearance of trustees not so much giving something back as taking something out.
The clear concern of the Charity Commission over many years has not prompted any changes by the trustees of the Royal Albert Hall on a voluntary basis—the majority of those whose conflict is self-evident. The commission’s attempt to refer the issue to the charity tribunal was inexplicably refused by the Attorney-General at that time. Can the Minister explain why the Attorney-General concluded that such an obvious conflict did not justify referral? Will he undertake to raise the issue again with his right honourable friend the current Attorney-General?
Although the Bill, as currently drafted, is disappointing in not providing for the governance changes that the Charity Commission and so many independent parties desire, it provides the opportunity for the issues of conflict and poor governance to be raised and, within the constraints of a private Bill’s procedures, debated in detail and prospectively amended at the later stages of its passage.
In conclusion, at a time when the performing arts, not least music, are under huge funding pressure from the severe cuts to Arts Council England’s budget and the freezing of the BBC licence fee, it is unedifying that trustees of such an important venue who are seat owners can make almost unlimited financial gain. It is deeply disappointing that this Private Member’s Bill makes no attempt to address the conflicts inherent in this unique hybrid constitution. However, I welcome the opportunity it presents for this issue to be addressed by Members of your Lordships’ House and the other place during the passage of the Bill.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Parkinson of Whitley Bay) (Con)
I am very grateful to my noble friend Lord Harrington of Watford for introducing his Bill so clearly and, indeed, for the work that he, his fellow trustees, and all the Royal Albert Hall’s staff and supporters do to protect and champion this cherished institution.
Noble Lords have highlighted many ways in which the hall has played an important part in their lives, and in the life of our nation. I know that if my noble friend Lord Lexden had been a participant in the debate, rather than being on the Woolsack for the previous hour of it, he would have mentioned the many historic events to which it has played host. For many years, the Conservative Women’s Organisation held packed-out meetings there. Winston Churchill spoke there on 30 occasions; the first was as a member of the Liberal Government in 1909. The noble Baroness, Lady Barker, may be dismayed to hear that his 10,000-strong audience were all men, the Liberal Party having banned women for fear that suffragettes might interrupt and campaign for votes for women. But, reflecting the long-standing and important neutrality of the hall, it had in fact played host to a meeting of the Women’s Social and Political Union the evening before, some members of which attempted to hide overnight in order to disrupt the meeting. Sadly, they were discovered in the small hours.
As Minister for Arts and Heritage, I have the pleasure of visiting the hall very regularly, from the Proms to the Olivier Awards, and most recently on Monday evening for a delightful concert hosted by Classic FM Live. Like other noble Lords, I would not hesitate to call the hall a true icon in our cultural life. It is for this reason I am not surprised to see so many noble Lords taking an interest in this Bill and in the governance of the hall.
As noble Lords will know, in relation to private Bills, the Government do not generally adopt a position unless the Bill contains provisions which are considered to be contrary to public policy. We take the view that the Bill does not contain any such provisions; therefore, as is the usual form with private Bills, the Government neither support nor oppose it.
Noble Lords have taken the opportunity to ask a number of questions. The noble Viscount, Lord Chandos, referred to what he called cuts by the Arts Council. As he will recall from the excellent debate we had at his instigation earlier this year, the amount distributed by the Arts Council in the new portfolio is higher than in the previous one. It benefits from an additional £43 million of grant in aid secured by my department at the spending review. Thanks to that, and increases from the National Lottery—
Viscount Chandos (Lab)
The cuts in real terms since 2010 of the Arts Council’s grant in aid are, I believe, about 40%.
Lord Parkinson of Whitley Bay (Con)
Thanks to increases from the National Lottery as well, the Arts Council is spending £30 million a year additionally in this portfolio than in the last. The challenges of inflation certainly do beset many cultural institutions, and I speak to them about it, but I did want to correct what the noble Viscount said there.
More pertinently, the noble Viscount mentioned the decisions by previous Attorneys-General not to refer the matter to the tribunal. I cannot speak for decisions made by previous Attorneys-General, but the Attorney-General, as parens patriae, is the constitutional defender of charity and charitable property. She is required to prepare a report for the other place on certain private Bills affecting charitable interests. If she is asked to report on this Bill in another place, she will of course make her views known.
My noble friend Lady Stowell of Beeston and others referred to the loan which the Royal Albert Hall got through the unprecedented culture recovery fund. That £1.5 billion of funding provided assistance to more than 5,000 cultural institutions across the country during the challenging period of the pandemic. It was emergency support to help them through those difficult months, and no conditions were imposed upon it other than to make sure that where there were loans, they would be repaid. It was not designed as an instrument of wider policy, but as an instrument of assistance to organisations that needed it.
Other noble Lords have—
BBC: Future Funding (Communications and Digital Committee Report)
Viscount Chandos Excerpts(1 year, 11 months ago)
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Viscount Chandos (Lab)
My Lords, what do we want from the BBC and how do we pay for it? Your Lordships’ House should be very grateful to the committee for producing this comprehensive review of the BBC’s future funding options, and to its chair, the noble Baroness, Lady Stowell of Beeston, for her powerful introduction to this morning’s debate.
I declare my interests as set out in the register—and, in particular, as I am a director of and shareholder in the Theseus Agency, which has licensed BBC Studios properties, a director of RSMB, which helps to compile the BARB television and RAJAR radio ratings, and a trustee of the Thomson Foundation, which trains journalists and promotes sustainable media development in low-income countries. My oldest son is a screenwriter who has made and is developing television series for the BBC. As the noble Lord, Lord Vaizey, has already broken the advertising-free principle of this House, I recommend “Cheaters” on the BBC iPlayer for noble Lords’ Christmas viewing—though possibly not in front of granny.
What we can reasonably ask the BBC to provide is, of course, inextricably linked to what we are prepared to pay for it. The report approaches this conundrum with a mixture of references to Reithian principles and the more pragmatic starting point of the BBC’s current scale and range of activities. It does not attempt to make the case for a radically reduced BBC nor for that matter for a substantially increased one, and I agree with that approach.
I believe that the right questions are: is the deep institutional value of the BBC being focused in the right areas? What can be expected from spending a budget of around £5 billion per annum? How much more than the existing 25% of that budget can be generated by commercial activities? Is there a better and fairer way in which to raise the 75% that comes currently from the licence fee?
I strongly support the committee’s advocacy and that by other noble Lords this morning that the principle of universality should not be sacrificed for a more limited market failure-based remit. The rich mix of services and content that flow from the universality principle is at the heart of the BBC’s strength and appeal. Popular and specialised and more minority programming feed each other and the audience’s tastes.
The BBC is important not just to the audience but to the whole ecology of the creative industries, as other noble Lords have argued. Just as many of your Lordships argued last week, in our debate on the arts and creative industries, that the subsidised arts were a source of innovation and stimulus for the wider creative industries, so the BBC plays a similarly vital role.
On how to pay for this, I wholeheartedly support most of the report’s conclusions. Advertising funding would change the nature of the BBC’s services and have a potentially huge impact on other public service broadcasters. A move to a pure subscriber model would be likely to decimate the BBC’s revenues for the foreseeable future, as well as undermining the central universality on which the committee and your Lordships’ House as a whole—in the debate so far—are agreed.
Is the licence fee still, as the Peacock committee concluded nearly 40 years ago, the least-worst option? That phrase implies flaws and compromises and, in the 37 years that have elapsed since that report, these have only increased. The huge increase in the effective capacity of the spectrum through digitalisation and the growth of the different uses of television sets—as many young people may use their sets almost exclusively for playing video games—make it ever harder to defend the licence fee status quo. It is hardly surprising that there are arguments for contestable funding, although I welcome the committee’s scepticism about going down that path even in part, let alone centrally.
The regressive nature of the licence fee also drives the need to consider change, and the committee has clearly set out the possible changes, such as a household-based tax or a hypothecated tax on income, which should be considered both by the Government and by the BBC. Any form of public funding, whether the licence fee or a hypothecated tax, or even grant funding from general taxation, which I differ from the committee in not ruling out, can all be seen as a threat to editorial independence, but it is up to every Government to exercise their powers in that respect, properly.
A number of noble Lords have mentioned the World Service, the importance of which I fully support. I very much regret the settlement nearly 10 years ago that removed the Foreign Office funding for the World Service. Although I know how difficult it would be, I believe that this should be reversed.
The final topic I want to cover in my remaining time is the question of a hybrid subscription model, which I think there is more openness to consider than a pure subscription model. This hybrid model could be for both domestic and international viewers. I am sceptical about it for two or three reasons. One is the dividing line in domestic, in terms of what is a premium product or content and what is not. More fundamentally, I think the opportunity was missed, again 10 years ago, when Kangaroo—a project between the BBC and the other public service broadcasters for a single, powerful streaming service—was ruled out by the competition authorities. I do not believe that Reed Hastings of Netflix spends much of his time worrying about the threat from BritBox or ITVX. I believe that the BBC may well find that increasing commercial revenues through the exploitation of individual programming, whether through sales or co-productions, such as the deal struck with Disney+ on “Doctor Who”, is a more productive path to go down.
Arts and Creative Industries Strategy
Viscount Chandos Excerpts(1 year, 11 months ago)
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Viscount Chandos
That this House takes note of the case for an arts and creative industries strategy to maintain the United Kingdom’s global leadership within the sector and align the industries’ economic benefits with the Government’s levelling up agenda.
Viscount Chandos (Lab)
My Lords, a friend asked me, pleased as I was to have secured this debate, “Why is Parliament giving time to debate the arts while the country faces an economic crisis with the highest inflation for four decades, horrendous NHS waiting lists and a savage war resulting from Russia’s invasion of Ukraine?” I thought that in response I could invoke Sir Winston Churchill, who has been widely quoted as saying, when asked to cut funding for the arts to support the war effort, “Then what would we be fighting for?” Sadly, that quote does not pass the necessary fact-checking test, but in fact Churchill did say at the Royal Academy on 30 April 1938:
“The arts are essential to any complete national life. The state owes it to itself to sustain and encourage them.”
The brave Ukrainian people have perhaps asked the question, “What are we fighting for?”, even if Churchill did not. The National Opera of Ukraine in Kyiv reopened three months after its closure at the start of the war, on 22 May, and has been performing regularly ever since, with 11 performances during December alone. A Lieutenant Butkevych, who attended that first performance in May, said it was
“a symbol that Kyiv, which was surrounded … has reopened its cultural institutions.”
I hope to make the case for why this country should nurture, protect and grow its cultural institutions—first and foremost to complete our national life, but also because they can contribute to restoring the economic growth that is so vital to a prosperous society.
I should declare my interests as set out in the register. In particular, I am a trustee of the Esmée Fairbairn Foundation, which has been a significant philanthropic funder of the arts for 60 years; a vice-chair of the world-leading drama school, LAMDA, and a past director of English National Opera. My wife is a trustee of Gainsborough’s House.
ENO has of course been the focus of huge attention over the past month, following the announcement by Arts Council England of its intention to remove it, at five months’ notice, from the list of national portfolio organisations receiving certain funding over the coming three-year period. I have deep personal attachment to ENO: I saw my first opera, aged 9, when it was still at its original base of Sadler’s Wells, and I was taken to its opening night at the Coliseum in 1968. But, more than that, I believe it has consistently and successfully served an audience drawn not just from London but, as visitors, from all over the country and the world—many of whom would not otherwise have access to opera at all, as Lilian Baylis, the founder, always envisaged. At the same time, it has been the most important platform for the career development of British singers, directors and conductors, as well as a vital employer of top orchestral players and technical crew.
There is no opera company in the world that has had a more profound impact on the world of opera, from bringing great composers of the past such as Handel and Janáček back into the mainstream repertoire, to commissioning or performing contemporary composers, from the premieres of Britten’s “Peter Grimes”, a month after the end of the Second World War—that’s what we fought for—and of Mark-Anthony Turnage’s “The Silver Tassie”, the first great opera of the new millennium. It has championed other contemporary composers such as Philip Glass, John Adams and Poul Ruders, whose opera based on Margaret Attwood’s The Handmaid’s Tale, performed earlier this year, attracted a buzzing, young and diverse audience.
For a number of reasons, I do not intend to make the rest of my remarks focus unduly on ENO. The other place has held two short debates already, most recently one on Monday initiated by Sir Bob Neill, in which my right honourable friends Margaret Hodge and Harriet Harman spoke powerfully, as did Sir Bob. Only this morning, the Select Committee on DCMS took evidence from Darren Henley, the chief executive of Arts Council England, with ENO taking centre stage. Another reason is that not everybody likes opera. Plenty of classical music lovers and many devotees of theatre do not like it. I believe that the distinguished music critic of the Manchester Guardian and the Guardian, Philip Hope-Wallace, said:
“Opera is possibly the most sublime, certainly the most ridiculous of all art forms”.
“Everyone Needs Opera” was a possibly ill-judged strapline adopted by ENO 30 years ago, guaranteed to annoy the half of the population—or whatever percentage—who agreed that it was a ridiculous art form but not a sublime one.
The arts, though, are a web of interlocking art forms which nourish each other. David Hockney designed some of opera’s greatest sets for Glyndebourne; Sam Mendes made his name as a theatre director, notably at the Donmar, and went on to direct the Oscar-winning “American Beauty” and two James Bond movies; Nicholas Hytner made his name substantially by directing operas for Kent Opera and with his ground-breaking “Xerxes” and “Magic Flute” for ENO.
A friend and colleague, forcing me to admit that I had not been watching much of the World Cup, said “Well, you don’t like football”—not exactly true—“but I don’t like opera. On the other hand”, she went on, “my favourite band is Queen, and Freddie Mercury said that going to the opera for the first time changed his life. He went on to make a recording with the legendary soprano Montserrat Caballé”. This leads down two paths: the importance of access and, as I have already touched on, the interconnection of the arts with the broader creative industries, which represent over £100 billion of gross value added in our economy and at least 2.3 million—around 7%—of the total number of jobs.
This sector, in which the UK can genuinely be described as a world leader, is also one of the fastest growing in the economy. At its roots are the creativity and skills and the people who have in many cases, but not all, developed and honed those skills in the subsidised arts sector. The economic benefits of the wider creative industries and their essential role in fostering tourism are a hugely important and welcome consequence of investing in the arts, but we should never let go of the primary purpose of the arts: to enrich the lives of people and complete our national life.
That should be true for everyone, of every age and background and in every part of the country. Not everybody needs opera, but everyone should have the chance to experience opera, theatre, dance, visual arts, heritage and music, and then be able to enjoy and participate in those art forms they enjoy. This is what lies at the heart of the Arts Council’s mission and that of the DCMS.
This brings me back to the recently announced awards by Arts Council England to the national portfolio organisations and the choices that lie behind them. The nature of the arts and of all the creative industries is dynamic change. It is important to be open to that change but, at the same time, established organisations can have such deeply embedded knowledge, skills and value to their audiences and to the infrastructure and ecology of their art form.
A very careful balance needs to be struck between dynamic change and the preservation and enhancement of what is good and excellent. Within that, a balance has to be struck between accelerating the provision of arts in underserved parts of the country, both on a broad regional basis and in terms of individual areas within these regions, and the protection and enhancement of the UK’s world-leading position in the creative industries. The bewilderment and anger felt by many at the NPO awards raise the question of whether the balance has been fairly and wisely struck.
It is not just the ENO decision, behind which there are exceptionally complex and long-running issues dating back 30 years. There have been many other contradictory or incomprehensible decisions. A world-leading orchestra outside London, the Britten Sinfonia, has had 100% of its funding cut. WNO, which tours England from its base in Cardiff, has lost a third of its funding. Hampstead Theatre and the Donmar have both lost all their grants. These theatres are at the heart of new British writing, with innovative, excellent productions. Glyndebourne Tour, a long-standing partnership with the unsubsidised Glyndebourne festival to bring its work to audiences around the country, has seen its support halved.
Choices will always have to be made and balances struck, whatever the total resources available are, but there is no doubt that the task of striking the balance between cultural levelling up and the promotion of the UK’s world-leading position is massively harder against the background of the 40% real-terms cut in Arts Council England’s grant in aid since the start of Conservative or Conservative-led Governments since 2010, unchanged levels of lottery funding in nominal terms and 40% real-terms reductions in local authorities’ spending on the arts over the same period. Meeting both objectives would clearly be easier with a larger pie to divide. I look to a future Labour Government, still within strong public spending financial discipline, to creatively and innovatively increase spending on the arts—starting by avoiding questionable political vanity projects such as Unboxed.
In the here and now, the division of the pie, however inadequate, is the crux of the matter, and the evidence suggests that it has been done unwisely, unprofessionally and chaotically by Arts Council England, however much the directions from the previous Secretary of State may have been unrealistic and contradictory. Does the Minister have confidence in Arts Council England’s ability to play its role in the light not just of the underlying decisions it has made but of the abysmal level of planning and communications with both affected organisations and the world at large? Will he use every effort to ensure that, at the very least, adequate transitional arrangements are put in place for ENO and all the organisations suffering severe proposed cuts? If necessary, will the Government vary the policy and directions relating to lottery funding to enable it to be used to supplement the grant in aid for core funding? There is no point adhering blindly to the principle of additionality if the heart of arts provision is failing.
It is not clear to me—I held this view even before recent events—that the central Arts Council contributes much, if anything, to the effective distribution of funding. I hope that the future Labour Government will re-examine the case for moving the major national organisations under the responsibility of the department, as has always been the case for major museums, while devolving everything else to reconstituted and empowered regional arts boards, working more closely with metropolitan and regional mayors and local authorities, along the lines of the approach advocated by my right honourable friend Gordon Brown in his report this week.
I look forward to hearing the contribution of other noble Lords speaking today. With their knowledge and eloquence, I believe that the case for the state sustaining and encouraging the arts, as Churchill advocated, will resound not just through Westminster but throughout the country.
Viscount Chandos (Lab)
I thank all noble Lords who have spoken in this debate and the Minister for summing up. I endorse the comments of many noble Lords who welcomed his return to the Front Bench with this portfolio. The richness and breadth of the contributions from the 20 or so speakers are a symbol of the richness and breadth of the creative industries and the arts and culture sector. I have certainly learned a great deal and been challenged to think in a new way about many things.
I mentioned that there had been 20-odd speakers, but my noble friend Lady McIntosh and the noble Baroness, Lady Bull, probably represent the experience of about six people between them, whether as performers, producers or academics.
The Minister picked me up on implying or suggesting that levelling up was in conflict with maintaining our world-leading position. I had meant to make it clearer in my opening remarks that, at least in the medium and long term, I think that they are not in conflict—but in what we are seeing in the clumsy and ill-planned implementation, at the very least, in the short term, there is that danger.
I also wanted to make it clear that this is not about us metropolitan Londoners going out, educating and bringing culture to the north or any other part of the country. As has been mentioned, there are wonderful and long-established institutions all over the country. The noble Lord, Lord Shipley, talked about Sage Gateshead, which is one of the great cultural achievements of the past 25 years, and was very much the initiative of the local community. Indeed, it is two-way traffic; the wonderful Kings Place office building with its two concert halls was the result of a Newcastle property developer, Peter Millican.
I welcome the Minister’s indication that the Secretary of State is pushing—if I understood him correctly—to make the transitional payments available widely to affected organisations and to make them larger and longer, although anything that is transitional rather than ongoing will clearly still be only some small consolation.
The noble Lord, Lord Foster, was I think the first of several noble Lords to mention the absence of the creative industries from the five sectors prioritised in the Autumn Statement. I found that depressing and a bit ominous. This month’s Chancellor was the Secretary of State at the beginning of the coalition Government for what is now DCMS. His ruthless pruning of the departmental budget may have aided his ascent up the slippery pole of his political career, but it did nothing for the sector. That is when so much of the damage was done, whatever modest adjustments there have been to funding more recently.
At the heart of many noble Lords’ concerns is the question of the arm’s-length nature of the Arts Council’s position, and whether it has been dented or breached. I have a different view from my noble friend Lady McIntosh, but I guess I am a bit defeatist, and the reality may be that the arm’s length is not being and will not be maintained, so it is better to acknowledge it by bringing more direct into the department.
I will wind up with one last comment. My noble friend Lord Leong, my newest colleague, said that he sometimes wondered whether he had found himself in Hogwarts. This is my 40th or 41st year in the House, and the only difference is that I know that it is Hogwarts.
Charities Bill [HL]
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Viscount Chandos (Lab)
My Lords, I thank the Minister for her very clear introduction to the Second Reading of the Charities Bill. She has exceptional commitment to and experience of the charitable sector, which informed her remarks and reinforced the authority with which she spoke.
I welcome this Law Commission Bill, even though its status limits the extent to which there can be any amendments even to the technical and tidying-up objectives the Minister summarised. Other noble Lords have already covered many of the Bill’s key issues so I propose to focus on one specific and perhaps rather narrow area relating to permanent endowments. Therefore, in drawing the Committee’s attention to my charitable entries in the register of interests, I should disclose that three of the charities of which I am a trustee have endowments, but in all cases these are expendable rather than permanent.
Before I address my specific point on permanent endowments and social investment, I pay tribute to the extraordinary work done by charities across the whole range of everyday life in our society. But, as Bill Gates, for all the financial muscle of the Bill and Melinda Gates Foundation, has regularly emphasised, philanthropy cannot and should not be seen as a substitute for proper governmental funding of public services and international aid. Unfortunately, the economic policies of the Conservative or Conservative-led Governments since 2010 have led to devastating cuts to public service budgets in so many areas, notably that of local authorities. That has forced many charities and funders to replace statutorily provided or funded services. The Government’s levelling-up rhetoric might suggest that this will be reversed, but any detailed examination of the spending assumptions for non-protected departments in the most recent Budget would dispel that optimism. None the less, I hope that in time these cuts will be reversed and philanthropy can return to a greater extent to its correct role of innovation.
Clause 13 gives trustees the power to make social investments out of a permanent endowment as long as the charity has opted into the total return investment approach. Under current legislation, social investment is made with a view to directly furthering the charity’s purposes and achieving a financial return for the charity. It is acknowledged that these investments are likely to deliver sub-market returns, including the possibility of the loss of all or a significant portion of the capital invested.
The example given in paragraph 94 of the Explanatory Notes envisages a charity with a permanent endowment committing half its funds to a single social investment in the hope or expectation that the other half of its assets would deliver sufficient return to protect the long-term value of the endowment. Maybe, but the concentration of risk in one social investment means that a perfectly realistic scenario could be the total loss of that investment, which would be highly unlikely to be compensated for by any normal level of return from a diversified portfolio of mainstream financial investments. The Esmée Fairbairn Foundation, of which I am a trustee and past chair, has been making social investments for 20 years and has suffered a number of partial and total losses on them, but that has been from about 150 different social investments with a maximum exposure of no more than a few per cent of the total value of the endowment.
I understand from the Minister that it is intended that regulations to be made by the Charity Commission in respect of this issue will have specific requirements on trustees to balance the risk and returns on a portfolio of social investments with those on a portfolio of financial investments. Will they include limits on the concentration of risk through diversification among social investments as would apply to a prudently managed portfolio of financial investments?
There is a story, probably apocryphal, of a Boston heiress arrested for an offence which she acknowledged brought shame on her prominent family, who pleaded, “But I thought it was better than dipping into capital.” Unlike her, I do not make a fetish of the preservation of capital, and I applaud major trusts and foundations, such as Gatsby, Monument Trust and the Atlantic Philanthropies, which have adopted spend-down policies, but perpetual endowments derive from the wishes of the philanthropist and settlor to enable a trust or a foundation to do its work in perpetuity, and we owe it to those philanthropists to ensure as far as possible that that is the case.
I am a bit puzzled by why this has been included. I believe that trusts and foundations predominantly have expendable endowments. Social investments can do interesting and innovative work, but they are still only a sideline and, in my view, will remain a sideline to the core activity of grant-making foundations of making grants. Will the Minister say what representations have been made on this? Did they come from trusts and foundations that have perpetual endowments, or from sponsors and promoters of social investments who may have been seeking to broaden the universe of potential investors?
The Minister said in her opening remarks that the Bill was intended to reduce overly bureaucratic processes. Investing endowments have become ever more complicated, not least because of the concerns about responsible or sustainable investing, which the noble Baroness, Lady Hayman, referred to. I am afraid I disagree respectfully with her about what I hope will come out of the Charity Commission consultation. A permissive and clarificatory outcome would be helpful, but a prescriptive one would be unhelpful.
For that reason, I deplore the legal action being taken by a number of trusts and foundations to try to make it legally required for trusts and foundations to invest in line with their mission. It should be left to the trustees of each of those foundations to judge the extremely complex issues around that. One trust or foundation may have a single focus or objective, say in the area of climate change. It is relatively possible to embed that in an investment policy, and most investors, whether individuals, pension funds or trusts and foundations, are in any event incorporating these sorts of ESG and responsible investing criteria. But making it a legal requirement to align investment with charitable objectives could make it almost impossible for a trust or a foundation with diverse objectives to invest without sacrificing significant financial return, from which the trust or foundation’s grant-making activities are derived.
I am afraid that the overly bureaucratic processes we may be eliminating in other areas may inevitably grow in the investment area. I hope that they are not excessive, but I believe that the regulations that will detail what permanent endowments can do in the area of social investment should be a little bit bureaucratic.