Speaking to many in the arts, there was a collective despair that the Government would not be offering any assistance to beleaguered theatres, museums, music venues, galleries and heritage sites across the UK. As the list of venues closing, entering administration and redundancies grew the loss to the cultural economy seemed too large to calculate.
It was with some surprise and no little relief that an announcement was made on Sunday evening of an aid package to the sector with the Department for Digital, Culture, Media and Sport (DCMS) reporting that “Britain’s globally renowned arts, culture and heritage industries will receive a world-leading £1.57 billion rescue package to help weather the impact of coronavirus”.
Setting aside the hyperbole of “world-leading” when many other countries have long since taken affirmative action, the DCMS went on to say that “thousands of organisations across a range of sectors including the performing arts and theatres, heritage, historic palaces, museums, galleries, live music and independent cinema will be able to access emergency grants and loans.”
Of course, how that aid will be administered and made available will be crucial and the devil will, as ever, be in the detail.
What the DCMS have announced so far is:
- £1.15 billion support pot for cultural organisations in England delivered through a mix of grants and loans. This will be made up of £270 million of repayable finance and £880 million grants.
- £100 million of targeted support for the national cultural institutions in England and the English Heritage Trust.
- £120 million capital investment to restart construction on cultural infrastructure and for heritage construction projects in England which was paused due to the coronavirus pandemic.
- The new funding will also mean an extra £188 million for the devolved administrations in Northern Ireland (£33 million), Scotland (£97 million) and Wales (£59 million).
Decisions on awards will be made working alongside expert independent figures from the sector including the Arts Council England (ACE) and other specialist bodies such as Historic England, National Lottery Heritage Fund and the British Film Institute.
The Government has said that repayable finance will be issued on generous terms tailored for cultural institutions to ensure they are affordable.
Crucially, they said that further details will be set out when the scheme opens for applications in the coming weeks.
Arts Council England (ACE), who will be heavily involved in this, have welcomed the proposals but recognise that there will be a considerable amount of detail to work through and understand. In the meantime, they are opening their own National Lottery Project Grants on 22 July to focus on supporting artists and individuals, recognising that so many workers and freelancers in the industry have fallen through the cracks of the Job Retention Scheme and SEISS grants.
ACE are realistic and recognise that not everything is going to be saved. The cultural landscape will look different and in looking at how this shape will develop, ACE have said they are working with government to understand timelines, process and criteria.
This leads to a number of questions:
Within the arts we are used to seeing overly long and complicated applications that take hours to compile as there is a stated need to make a business case.
That leads to ask what sort of a case would be needed? On one hand venues are just looking for survival and on the other funding may depend on measurement of economic benefit, visitor numbers, programmes and financial analysis.
With existing Government aid packages and ACE’s own Emergency Response Fund, it would not be surprising if the process required disclosure of grants and loans already received. It will be interesting to see how these are taken into account in determining eligibility for further assistance.
Listening to the Government on Monday morning it was notable that the Culture Secretary said that institutions would be asked to prove how they contributed to wider economic growth.
This is a little worrying and crucially, without a date on which many venues know they can start to reopen, it is very difficult to plan and make a coherent economic case. Our hope is that with all the uncertainty that currently exists the process will take this into account.
Notwithstanding that museums and galleries can reopen from 4 July under social distancing measures, theatres or music venues will not be able to reopen for live performances which are their lifeblood.
The economics of institutions lie not just in ticket sales but in the revenue generated from shops, cafes, restaurants and bars. How soon the “package” that they offer can be restored will be crucial and will underpin any wider economic contribution.
If a number of specialist bodies are going to be involved, then hopefully there will be a consistent approach to applications and not different strategies from different bodies.
Speed and clarity will be of the essence.
It sounds a lot of money but….
This is a generous package and that needs, rightly, to be recognised. However, there are venues up and down the country urgently needing aid and the cake can only be cut so many ways. It will be interesting to see how the process balances the multi-million-pound needs of large London and other city venues (the “crown jewels”) as the Culture Secretary called them against local theatres, venues and institutions.
The tax status and impact of receiving funding should not be overlooked. Grants are normally outside the scope of VAT and exempt from corporation tax. However, if the funding received is linked to the provision of specific services (to / for the funder) it could be regarded as a payment and classified as business income. The VAT and corporation tax status of all funding should therefore be double checked to ensure it is correctly recorded and accounted for. It would also be prudent to review and confirm the current VAT recovery position as this will undoubtedly be affected by changes to income, expenditure and activities. The VAT recovery and tax position could also influence the amount of funding an organisation applies for.
Be assured that the team at Campbell Dallas will be watching developments as they emerge and providing further detailed analysis of the processes as they become known. Our specialist teams are ready and willing to discuss specific circumstances and to offer assistance wherever this is needed.
The information in this update should not be regarded as financial advice. This is based on our understanding on 09 July 2020. Laws and tax rules may change in the future.