Download Economic Impact

The rationale for subsidising the arts and priorities for
spending the money
‘Investment in the arts is not only an end in itself, it is also a means of
achieving our promises, our policies and our values.’
Rt. Hon Tessa Jowell MP, 2002
Contents
1) The economic rationales
2) The citizenship rationales
3) The mixed economy of the arts
4) Priorities for spending
Jamie Cowling, January 2005
Economic rationales for subsidising the arts are based
on perceived market failures
Rationales
The Cost-disease
Lack of productivity gains compared to the wider economy in the performing arts produces productivity lag
between the arts and the wider economy unless provision of the arts is to decrease (Baumol & Bowen
1966).
Merit Goods - Option Value - personal, social & future generations
Even if I do not want to engage with the arts myself at this time I may do so in the future, I may value that
others can experience the arts or I may value that future generations could experience the arts (Towse et al
2003).
Public Goods (Club Goods)
Certain art forms – like the Angel of the North – are non-rivalrous and non-excludable. If entry is free to
other art forms they become quasi-public goods (Towse et al 2003). Investment in the arts can be seen as a
form of cultural R&D. All developed nations provide public support for R&D (HMT 2004). See Helm 2005 for
discussion of club goods aspects.
Monopoly
Many arts organisations will have monopoly power given the importance ascribed to original works by the
public. Governments may wish to enforce access terms on monopolies or take natural monopolies into
public ownership (Helm 2005).
Merit Goods - Positive Social Externalities
Engagement by a proportion of the population with the arts could have positive social benefits for the whole
of society, for example through learning, which people would otherwise under invest in.
Economic Impact
Arts activities can have a wider economic impact, e.g. through promotion of tourism, disproportionate to the
cost to the public. Claimed impact of UK theatre is £2.6bn p/a (Shellard 2004).
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Democratic rationales are rooted in the language of
democracy and citizenship
Rationales
“If we, citizens, do not support our artists, then we sacrifice our imagination on the altar of crude
reality and we end up believing in nothing and having worthless dreams.”
Yann Martel, The Life of Pi, 2002
Human
rights
Citizenship
& identity
“Everyone has the right freely to participate in the cultural
life of the community, to enjoy the arts, and to share in
scientific advancement and its benefits.”
UN Declaration of Human Rights, 1948 Art.27
Expression and means of exploring of who we are as
individuals, communities and societies what we value
and where we want to go (Everitt 2001; Mulgan 1996 &
forthcoming). For individuals to be truly at liberty they
need to be able to exercise real choices as citizens – see
Amartya Sen capabilities approach.
Social
capital &
civil
renewal
Cultural activities are the 3rd most popular form of
volunteering activity in the UK (Home Office 2001).
Participation in cultural activity leads to increased
participation elsewhere (ippr 2005). 72% of the public
believes that arts from different cultures contribute a
lot to this country (ACE 2002).
Poverty of
aspiration
Fulfilment & life satisfaction. Particularly good at
reaching socially excluded groups. Because based on
non-verbal communication (ippr 2004).
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Priorities
The arts operate in a mixed economy, public money is
only one revenue stream among many
Real Terms Resource & Net Capital DEL DCMS & ACE Grant-inAid, 1998/99 – 2007/08*
Culture, Media & Sport
ACE
2,000
0.5
1,500
0.4
0.3
1,000
0.2
500
0.1
2007-08
2006-07
2005-06
2004-05
2003-04
2002-03
2001-02
2000-01
1999-00
0
1998-99
0
Real Terms Charitable Giving to the Arts 2000/01 – 2002/03*
2000/01
90
2001/02
80
2002/03
£68,265 by
02/03
100
60
50
40
30
20
10
Payroll
Giving
Gifts of
Shares
Charitable
Trusts
Friends
Schemes
Legacies &
Bequests
Individual
donations
0
Source: Arts & Business2004 – Note includes Heritage
*2002/03 market prices
• In 2001 National Lottery via ACE £208
million. Additional funding goes to cultural
projects form NOF, CF, HLF.
• Local Authority spending on the arts was
estimated to total £217 million for 2001/02.
Sources: PESA 2004, SR2004, DCMS/ACE Funding Agreement 00-03, 01-04, 03-06
70
• Public support should be used where it
is needed most and to stimulate the
private sector (i.e. private giving) towards
a sustainable arts economy.
• The arts receive indirect subsidy via tax
breaks e.g. charitable status, tax credits &
Gift Aid.
• Arts also receive public funding from OGDs
e.g. MoD, DfES & DoH.
• Corporate sponsorship reached £114
million for the Arts in 2001/02.
• 2002/03 total ticket sales for the Society of
London Theatre members (large West End)
reached £330.7 million.
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Priorities
Priority for public subsidy is to tackle socio-economic and geographic
inequality and to target children and young people to build demand
‘The argument for public subsidy accordingly rests above all on the desire that all, not just a
minority, should have access to the thrill of engagement with great art.’
Rt. Hon. Tessa Jowell MP, 2004
Probabilities of participation, membership and engagement
in sports/cultural/hobby organisations across Europe in
2001
pariticipated
UK is above European
average in participation
0.3
0.25
member
volunteered
0.2
0.15
0.1
60
%
50
Denmark
Sweden
Norway
United
Kingdom
Germany
Austria
Netherlands
Ireland
Finland
Spain
Hungary
Italy
0
19 country
Total
average
0.05
UK attendance at arts events by (a) geographic area & (b)
social class, 2002
40
30
20
•Participation is skewed by geography (supply), SES and
ethnicity (demand). Both opportunity and access remain
unequal.
Supply
• The majority of arts based activity takes place in the SouthEast. However, despite increases in supply (e.g. Tate
Modern) over the last 5 years there is little evidence to
suggest that more people are attending (TGI data).
•London has attracted over 75% of private giving over the
last 3 years (Arts & Business 2004).
Demand
• Cohort studies suggest the arts are an experiential good.
Attention at a young age lasts into later life (Robson 2003).
Therefore, like Sure Start and higher education, the state
should progressively direct resources towards children and
young people.
Greater
London
A
South East
North West
B
C1
South West
East Anglia
West
Midlands
Scotland
Average
Sources: ESS 2002; TGI data 2002
C2
East
Midlands
(b)
D
80
70
60
50
40
30
20
10
0
E
%
Wales
North
0
Yorkshire &
Humberside
10
• ‘There is strong evidence that suggests that participation in
these [cultural] activities in high school increases participation
in community activities in later life.’ Putnam 2005
• BM&E participation in “traditional” arts is very low .
Particularly striking given concentration of BM&E population
in major towns and cities. E.g. White British 300x more likely
to attend opera than Indian (ACE 2002).
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