Arts: Funding

Lord Chorley Excerpts

Thursday 3rd February 2011 Lords Chamber

[Lord Chorley]

My Lords, I thank the noble Earl for giving us the opportunity to discuss this important subject. The lengthy list of speakers—my goodness, what a range of experience has been shown—is a testimony to the importance of the subject. I intend to restrict my remarks to one, in a sense, rather narrow subject that is different from all the earlier speeches, with the possible exception of the remarks of the noble Viscount, Lord Eccles—the importance and relevance of endowment funding. It is an insurance against the vagaries and ups and downs of annual government grants. The trouble is that endowment funding in a period of government cuts, as today, appears peculiarly unattractive. However, I understand from the noble Viscount that Richmond has good endowments and shows a degree of buffering.

I start with a few words of historical background. Many years ago, in the early years of my association with the National Trust—many years later, I was privileged to be its chairman—it was experiencing financing difficulties with the stately homes and estates that it had taken on with inadequate endowments. I was asked by the trust’s then finance committee to come up with ideas. The result was what became known as the Chorley formula. This is neither the place nor the time to go into the details of that. Suffice it to say that the formula was relatively simple, but to some it appeared to be unduly expensive. Nevertheless, the formula has worked pretty well and is still being used 50 or so years later, in spite of inflation.

The big breakthrough in its adoption came when that splendid organisation, the National Heritage Memorial Fund, gave its support for the formula in relation to future properties that we wanted to take on. The formula was endorsed by the fund, particularly by its then chairman Lord Charteris, who alas is no longer with us. It was hugely important to have his support, because the formula was strongly opposed by Whitehall, which considered that it tied up far too much funding and was too much “belt and braces”. You did not get much bang for your buck, as it were. This short-termism has always been the great problem of Whitehall.

The important point about the formula was that it was designed to deal with the ongoing costs of the operating deficits of heritage and arts organisations, with a reasonable certainty that it could cope with future inflation. Future inflation was, and remains, the problem. In other words, the formula would deal with ongoing costs, not the initial or acquisition costs—for example, the cost of acquiring a great work of art that needed to be saved for the nation. Put simply, endowments have their role, which is to cover the basic operating costs or overheads—for example, staff salaries or building running costs—of an organisation which has charitable status. The National Theatre would be an example.

I am a fan of endowment funding in the appropriate circumstances. I suggest that the Government look at developing greater use of it. If there had been more endowment funding in the past few years, I suspect that we would have had a rather different debate today. I was therefore surprised, indeed, rather pleased, to learn that the Government had commissioned a paper on endowment funding by Alan Davey. Given that he is the chief executive of the Arts Council, it deserves to be taken seriously. While it is not easy going in all respects, it is thoughtful and thorough. I conclude by quoting just a few sentences of the concluding paragraphs:

“Recommendations for action are split into two key areas … action that the Arts Council will take to help support the organisational development of arts organisations towards the goal of increasing private funding sources, and as part of that, the use of endowments … action that the Arts Council suggests could be taken elsewhere to more greatly incentivise giving in England, easing the conditions under which arts organisations undertake their fundraising activities”.