INTRODUCTION

  Arts Council England is the national arts development agency, responsible for developing and implementing arts policy and funding with and on behalf of the DCMS, and making strategic use of both lottery and Treasury grant-in-aid funding. Our current annual income from the National Lottery is around £180 million. This is an important contributor to England's vibrant cultural sector. The Arts Council has gained tremendous knowledge and experience from its role as a lottery distributor, learning both from the highly successful and the more challenging projects. There is no doubt that lottery money has acted as a catalyst for change for the entire cultural sector.

  Arts Council England welcomes most of the proposals set out in the Decision Document. This document highlights the Arts Council's main concerns and offers views on the key points raised by the Select Committee. Our full response to the Department for Culture, Media and Sport is also attached.

WHAT THE NATIONAL LOTTERY HAS ACHIEVED FOR THE ARTS

—  The landscape for artists and audiences in England has been transformed by National Lottery funding. More than 2,300 projects have received capital funding since the lottery began. The lottery has injected more than £1.7 billion into the arts in England. As a result we have seen unprecedented public support for the arts, as projects like Tate Modern, Baltic, Angel of the North and the Lowry Centre have fired imaginations locally, regionally, nationally and internationally. Furthermore, lottery funds have enabled the Arts Council to support a much wider portfolio of arts activities than in the past. Community arts, jazz and street arts have received awards through a range of lottery programmes.

—  The National Lottery has contributed to over 100 new arts buildings across England, including the £21 million provided for the design and construction of a new arts complex in the centre of Milton Keynes. The centre comprises a large theatre and an inspirational gallery space. Since opening in 1999, the space has transformed artistic provision in the city and firmly established itself as the new cultural heart of the town.

—  Over 500 arts buildings have been refurbished with lottery funds—from small-scale projects, like Sheringham Little Theatre, Norfolk and Acorn Theatre, Penzance, to major landmark buildings such as the bomb-damaged Royal Exchange Manchester and the Birmingham Hippodrome.

—  One of the most important achievements of the lottery has been enhancement of access for people with disabilities to arts buildings around the country. All Arts Council England lottery-funded new buildings and refurbishments have enhanced disabled access. Over £140 million has gone to capital projects where disabled people are the primary users or participants.

—  Lottery money has enabled 320 mainly amateur brass bands throughout the country to buy an estimated 8,000 new instruments and to pass on the old instruments to training bands to nurture future talent. So far, at least 16,000 people have had the opportunity to play a brass instrument thanks to the lottery. The Arts Council's first capital programme helped revitalise the brass band movement by providing funding to bands as the coalmines, their traditional sources of income, closed.

—  Three-quarters of Arts Council England awards have been for amounts of less than £100,000.

—  The Arts Council has made lottery awards to benefit artists and arts organisations in every London and metropolitan borough, every unitary authority and every county and district council of England.

—  The 99 most deprived boroughs in England have, between them, received in excess of £875 million from all of Arts Council England's lottery programmes. This represents more than half of the total lottery money spent by Arts Council England.

—  The Arts Council's first lottery-funded capital programme helped to attract around £1.5 billion in partnership funding—equivalent to 60% of the total cost of the capital projects in that programme.

—  Arts Council lottery investment has supported 230 projects with a specific regeneration focus—totalling £108 million. One example is the £44.6 million provided to Salford City Council to build the Lowry Centre. The Lowry provided focus for the regeneration of Salford Quays—private sector investment alone in the area had exceeded £200 million by 1998. Similarly on the south bank of the Tyne—The Baltic and Sage Music Centre Gateshead have received around £40 million each in lottery funding. They are helping to stimulate a £1 billion regeneration programme, creating 1,500 jobs. Such regeneration is physical, economic and social, providing new or refurbished facilities to areas of considerable social deprivation.

—  Arts Council England has helped to pioneer joint distribution schemes such as Space for Sport and Arts, a £130 million scheme with the New Opportunities Fund and Sport England, enhanced by Capital Modernisation funding, which is providing schools with new arts and sports spaces in the most deprived boroughs in the country.

—  Children and young people are one of Arts Council England's five strategic priorities. This is reflected in almost all of our awards. All lottery capital awards include a significant commitment to young people and education. Our lottery funds work with our grant-in-aid funding. Eighty-nine per cent of all our grant-funded organisations have education programmes. Our lottery investment to date includes major projects which have significantly benefited children and young people. These range from larger schemes like the Stirling Prize winning Laban Centre in Deptford, to smaller projects like the provision of a community arts theatre for Latimer School, Kettering and the Wiltshire Music Centre, Bradford-on-Avon.

MAIN POINTS

The Olympic Fund

  Arts Council England wholly supports London's bid for the 2012 Olympics and warmly welcomes the proposal to use the Olympic Fund to provide a programme of cultural investment. The benefits of an Olympic Games go far beyond sport—they are a major cultural driver and attract millions of visitors and enormous international attention for the host country. It is vital that the cultural sector is involved early in the Olympics planning process, and is a net gainer in financial terms to offset the lottery income which the cultural sector will inevitably lose from the main game's proceeds.

  We are pleased that the bid team is now recognising the need to build culture into its process.

Range of available funding

  Arts Council England believes that the range of available funding is correct, and that lottery funding should indeed be available for very large and very small projects.

  When the Arts Council of England and the Regional Arts Boards merged to create a single organisation, the new body inherited 115 funding schemes. We have pared this down to just five open application funding programmes, each under the heading "Grants for the Arts". Four of the five programmes are funded using lottery money—these are:

—  Grants for the Arts: Organisations—through which arts organisations can apply for lottery funds from £200 up to £100,000. This programme has been designed to ensure that the application and assessment process falls into different bands. The length and detail of the written proposal required varies proportionately according to the sum applied for (eg 250 words will be expected for up to £1,000). We require at least 10% partnership funding for this programme.

—  Grants for the Arts: National Touring—from £5,000 up to a total of £200,000 available for individuals and organisations to tour in England. We can also consider tours which also include Northern Ireland, Scotland and Wales. We require at least 10% partnership funding for this programme.

—  Grants for the Arts: Stabilisation and Recovery—aimed at larger-scale organisations which are central to arts provision in England and have a financial turnover of £250,000 or more with audiences in excess of 25,000 per year.

—  Grants for the Arts: Capital—grants range from £100,000 up to a total of £5 million. To make our funding as accessible as possible, we will be flexible in how we define partnership support. In most cases, we will want to be the minority funder (under 50% of the total cost of the project). However, there will be cases where partnership funding is clearly difficult to raise and we will be prepared to fund up to 90% of the total cost.

  We have conducted an analysis of the first six months of the Grants for the Arts programmes. This found that:

—  The majority of grants to organisations (80%) are between £1,000 and £29,999 with only 11% in number over £30,000.

—  8% of grants to organisations are below £1,000.

—  Average partnership funding for Grants for the Arts: National Touring is 25% and Grants for the Arts: Organisations is 54%.

—  The figures show a high proportion of successful applications—58% across all aspects of the Grants for the Arts programmes. This is important as it means much less time and money is being wasted by applicants making unsuccessful applications.

CREATION OF THE NEW DISTRIBUTOR

  Arts Council England welcomes the potential simplification brought about by the rationalisation of lottery distributors, and hopes that the new distributor will be able to continue the good work of both the New Opportunities Fund and the Community Fund in areas such as cultural diversity.

  With regard to the transfer of assets and responsibilities of the Millennium Commission to the new distributor and the other proposed new roles of the distributor, we believe that care must be taken to ensure that the Millennium Commission's expertise on capital projects is preserved, and that the experience of other distributors is built upon.

  The Arts Council has several concerns regarding the proposed role of the new distributor, most particularly where there is a risk of duplication. For example, it is not clear how the new distributor will enact its "centre of excellence" role in capital funding. Considerable capital expertise already exists within distributors and the new distributor will not have specialist expertise in the arts, sports and heritage fields. Also, there is insufficient recognition in the Decision Document of the breadth and depth of the expertise which has been developed over the years in each of the lottery distributors. The Arts Council believes it is essential that plans for the new distributor take full advantage of the knowledge and expertise of all the lottery distributors in capital funding and development. Rather than locating "excellence" in one distributor the target should be to add value by creating greater synergy between all the distributors, with the new distributor playing a co-ordinating role.

  Similarly, we would welcome the new distributor's role in capacity building for communities and advising potential applicants, but will seek discussion on how this is done as we already undertake these functions. Our new grants enquiry team and our network of regional specialist officers already provide a valuable advisory service to potential applicants, including information on the range of available funding from other sources. We will work to ensure that a high quality service remains in place and that unnecessary and costly duplication is avoided. The Arts Council is keen to work with the DCMS and the new distributor in developing its new role and is aware that dialogue is needed to ensure that the proposals in the Decision Document can work effectively in practice.

FINANCIAL SUSTAINABILITY

  Arts Council England has responsibility to consider the long-term sustainability of projects from the position of a grant-aid funder. Experience has taught us that enhanced access to arts activity has to be supported by strategies for the longer-term financial sustainability of projects. This applies equally to small-scale and "transformational" projects. We are able to use grant-in-aid and lottery funding in synergy to benefit the arts sector and to ensure follow-up support to projects and organisations that benefit from lottery funding by providing pathways to ongoing non-lottery funding. It should be recognised that a push to make lottery funding more accessible to disenfranchised groups must be matched with a strategy for the longer-term financial sustainability of such projects. Long-term viability can only be achieved through strategic working.

SPEED, EFFICIENCY AND SIMPLIFICATION

  Building on our experience as a lottery distributor, the Arts Council has made considerable internal organisational improvements in the last two years. We have rationalised our decision-making structures and streamlined our administrative processes, and have introduced central teams to provide national shared services, such as Finance, Human Resources and Information Technology services. Together these changes bring about savings of £8 million per year. Furthermore, we have redesigned our funding schemes (both lottery and grant-in-aid) to create the following benefits:

—  to radically reduce the number of schemes (from 115 inherited from the old Arts Council and Regional Arts Boards, to five);

—  simplified procedures, as applications for funding for individuals, organisations and touring are now made through the same form—a form that was extensively "road-tested" with our user groups;

—  a single-number national contact centre for all enquiries, including information on our funding programmes. This measure enables us to direct applicants to lottery or grant-in-aid funding as appropriate;

—  we have set and achieved stringent turnaround targets for applications, six weeks for awards up to £5,000, 12 weeks for awards over that—88% of applications are being processed within our six or 12 week targets. We are confident that this will improve further; and

—  to make the funding system more accessible to culturally diverse artists.

  We are keen to ensure that the plans within the Decision Document to simplify lottery processes build upon our own recent reforms.

ENHANCE ACCESS TO FUNDING

  Access to funding has been a key concern since the lottery began. Since 1998, distributors have been able to act strategically to address proactively geographical, cultural and social underfunding. The Arts Council has taken advantage of this new freedom to work strategically to tackle this concern. A good example of this was the priority we have given to applications for capital funding from culturally diverse organisations. Recognising that Black, Asian and Chinese organisations had been poorly served by lottery funding, we now have 23 projects in development being supported with around £31 million of lottery money.

  More broadly, the Arts Council has worked hard to make it easier for individuals and organisations to access both lottery and grant-in-aid funding. Our new suite of funding programmes was designed with that intention.

ADDITIONALITY

  Arts Council England fully supports the principle of additionality. However, we will continue to develop policies that make intelligent use of all our investment to raise the profile, and maximise the impact, of the arts. The creative weaving of lottery and revenue funds enables us to respond flexibly to ideas that complement core work, helping to accelerate real change and harness creativity.

  We seek at all times to support, through lottery funds, activities which could not be delivered through our core funding or through the core work of applicants. Indeed, we believe we have demonstrated that enabling organisations to develop innovative and additional pilot schemes, buildings or acquisitions can accelerate and promote real change, but only if there is the possibility of ongoing (ie non-lottery) support beyond the specific initiative.

  In order to safeguard additionality, we give great importance to monitoring outcomes of our funding and to the regular evaluation of the achievements of individual funding programmes. As a development agency which maintains ongoing relations with our applicants, we are well placed to do this.

  We remain conscious of the need to ensure that new and innovative activity has the means of sustaining itself when our lottery support comes to an end. Other issues

YOUNG PEOPLE'S FUND

  The Young People's Fund is a welcome development. It will provide considerable additional funding to those engaging with young people. The Arts Council is keen to play a major role in its development. The Arts Council believes it can play a useful role in helping deliver the Young People's Fund objectives. We have a strong and experienced network of delivery organisations. Part of our role is as a "ladder of support" for many organisations, enabling them to develop and become more self-sufficient.Young people are one of the Arts Council's five key priorities. We recognise the transforming power of the arts in relation to young people and the value of putting young people and high quality artists and arts organisations together. It is important that the Young People's Fund works with existing sector-specific organisations, networks and strategies. The Arts Council works with a complex network of youth arts organisations which have developed the knowledge, infrastructure, contacts and experience necessary to provide high quality arts which meet social inclusion objectives. The Arts Council is concerned to ensure that not only is there a strong arts element to the work of the Young People's Fund, but also that long-term benefit can accrue from Young Person's Fund investment. The Arts Council understands that it is not the intention to operate the new fund through open application programmes. We would fully support this approach. The new fund should recognise existing investment in infrastructure and use this as a ready-made distribution network, rather than through one-off, time-limited projects. We are prepared to consider joint funding with NOF. However, clear protocols will need to be in place to ensure that potential applicants are not confused by the introduction of a further income stream and that arts policies and priorities are considered.

GRANT FUNDED ORGANISATIONS

  The Decision Document concentrates on lottery distribution, but gives little consideration to the other responsibilities of those organisations who invest money from grant-in-aid, like Arts Council England.

  The Arts Council is much more than a lottery distributor, and any actions relating to lottery have to sit alongside and complement other functions. There is a marked difference between organisations like the Arts Council and those who only distribute lottery money.

CONCLUSION

  The Arts Council supports much of what the Decision Document aims to achieve. The Decision Document represents an ambitious and timely attempt to reinvigorate the National Lottery. We will work with the DCMS and other distributors to help deliver simplification and renewed trust in the lottery good causes.

  The lottery has made a tremendous difference to England's artistic landscape and has become an indispensable source of funding. To this end, the reiterated commitment that the percentage share of good cause money going to the arts will remain at the current level until 2009 is most welcome.

16 January 2004