I am grateful to my hon. Friend, who is a great, loyal and effective supporter of the theatre.
In his introduction to his last report as chairman of the Arts Council, Lord Rees-Mogg said:
those responsible for the distribution of public monies to the arts must never lose sight of the goal of excellence. The word fell into disuetude as the Arts Council, in collaboration with the Regional Arts Associations, developed policies which had the central aim of increasing the accessibility of the arts to all sorts and conditions of men and women. The Council was right to adopt this course, but must always take care not to be seen to abandon those on whose daring and skill—the painters, sculptors, actors, composers, film makers, writers, musicians, dancers—the whole great enterprise culture depends.
Unfortunately, the recent history of funding by the Arts Council and its current proposals give exactly the wrong
message. I am not suggesting that my right hon. Friend, in asking Lady Soames to become the chairman of the Royal National theatre, offered her a poisoned chalice, but her Ladyship may be forgiven for having woken up wondering whether the contents might not have been a trifle corked.
The current running costs of the Royal National theatre are in the region of £17 million, of which about £8 million comes from Arts Council subsidy. In 1987–88, the subsidy was not increased at all, during a year when inflation was over 4 per cent., and the grant from the Treasury to the Arts Council increased by nearly 3 per cent. In 1988–89, the subsidy from the Arts Council to the Royal National theatre increased by 1·35 per cent. at a time when inflation was nearly 3·5 per cent. and the grant from the Treasury to the Arts Council increased by 9·4 per cent.
It is now proposed by the Arts Council that for the next three years—that is, from 1989–90 to 1991–92—grants of 1·8, 2 and 2 per cent. respectively should be made. In other words, while inflation as measured by the RPI will have increased by 30 per cent. in the period, and the total subvention by the Government to the Arts Council raised by nearly 24 per cent., the Royal National theatre's grant will have increased by a mere 7·3 per cent. over the same five-year period.
In the last two years, the theatre survived its real reduction in subsidy through a number of methods—by continued excellent housekeeping, by holding pay awards down to the movement of the RPI, by keeping high audience attendance targets, by holding back capital expenditure and building costs—a policy which cannot be continued indefinitely, given the cracks and corrosion and the necessities for renovation that are now all too apparent —by implementing the recommendations of the Rayner report and by exceptional receipts from the exploitation of productions such as "Amadeus", "Single Spies", and "A View from the Bridge" in the West End and the United States, and from the film and video sales of the productions.
The theatre also generated new private sector income from sponsorship and patronage—£400,000 two years ago, with a target of nearly £1 million this year. Those achievements enabled the Royal National theatre to build up a fallback reserve, but the continued erosion of the theatre's grant led inexorably to a budgeted deficit for 1988–89 and the virtual elimination of the reserves by March 1989.
The three-year funding budget which the theatre submitted was based on an average inflation rate throughout of 5 per cent. a year, but that now looks too low. The board can balance its budget for the current year only by a series of undesirable devices: by cutting the artistic programmes to a level which puts at risk expectations from the box office—a counter-productive way of proceeding—and by increasing the target for private sector funding to about double that achieved in the previous year—and that, in a market place heavily crowded by arts organisations chasing sponsorship, is an optimistic assumption. It is the view of the board that it would now be unrealistic to rely on private sources as a means of making good the shortfall, by including a rate of inflation that is now out of date and by continuing to hold back capital projects.
Annual building running costs payable by the company, which does not own the building but occupies it on a 21-day licence from the South Bank theatre board, are currently £3 million. Substantial contingent liabilities on necessary capital expenditure, against which the Royal National theatre company has no reserves, have now built up. Those are dangerous procedures in terms of prudent long-term management and a board of directors with limited liability.
Two years ago, the theatre was forced by Lambeth council, under threat of closure, to refurbish and re-equip the main kitchen. At that time, there were reserves, but it could not take such action today. I do not need to remind the House of the closure of the Cottesloe theatre in 1985.
The present budget also assumes the maximum possible award under the incentive funding scheme. I know that the board would like an assurance that the maximum sum 0allowable, of £250,000, will be available over the next two years. The budget submitted probably could not be met without a substantial fall in the general rate of inflation.
In addition, the theatre is under serious pressure from the unions. At the moment, claims are at the rate of 25 per cent. from the musicians, 32 per cent. from equity stage management, 14·5 per cent. from equity actors and 15 per cent. from the Broadcasting and Entertainment Trades Alliance. Following the theatre's policy of linking pay awards to the rate of inflation when it was low over the past few years, rates in the outside market are now higher, and the theatre faces the risk of losing valued staff and industrial unrest.
The nature of a theatre's business is unpredictable. Running a £17 million operation with no realisable assets, with an overdraft facility limited to £150,000 and no reserves, is a hazardous exercise. The budget for 1989–90 is based on revenue assumptions which are necessarily uncertain, and very much on the high side. The inflation assumptions are no longer valid and the reduction in the artistic programme may well put at risk the box office income. It is the considered view of Richard Eyre and David Aukin that any further cuts in the programme could lead to a spiral, in which diminishing activities were followed by diminishing financial returns. The House cannot contemplate such a prospect with equanimity.
By penalising the success of the Royal National theatre in increasing its box office returns and its sponsorship by reducing grants in real terms, the Arts Council is not only abandoning the daring and skill of those who make the National theatre work, but threatening the theatre's very existence. The Royal National theatre lives on a financial knife edge. If, by cutting back on educational and production expenditure, the sale of seats should fall, the council will have started the theatre on that downward spiral from which it will be difficult to recover.
Elsewhere in his valedictory introduction, Lord Rees-Mogg says:
the Arts Council is proud of its traditional commitment to judgment by peers. Our panels, boards and committees are well-stocked with distinguished representatives from the arts professions. Their advice, although central, is not sufficient. The voice of the public must also be given due weight. This is the fundamental reason why I support the Council's objective to reduce the Art World's reliance on State subsidy to lower the proportion, not of course the absolute amount, of grant, to the overall turnover of arts organisations. The way in which the public discriminates is through its willingness to pay for its pleasure.
The National theatre has passed that test with flying colours. Every night of the week, 52 weeks of the year, the National theatre puts 2,300 seats for sale in the market place and depends for its survival on the sale of at least 1,750 of them. Box office receipts have increased by 20 per
cent in the past 18 months and it is extremely short-sighted that such success should be met with a withdrawal, in real terms, of its funding.
Elsewhere in the Arts Council report, Mr. Luke Rittner writes:
there is one constant factor in every annual report of the Arts Council, and it is money. It almost goes without saying that we believe that the Government will see huge benefits if it decided to increase its investment in the Arts. We shall certainly continue to put that case to the Government.
He goes on to say:
no-one on the Council wants to see the National companies held back, nor do we want to stifle the Arts in the Metropolis. However, unless there were a dramatic increase in overall funding, it is difficult to see how we can ever really get the balance more equitable.
What is needed is an increase in the grant for the next three years. The company is not asking to be feather-bedded—far from it. It is proving itself in box-office terms and hopes to continue to do so. It has a very ambitious target of sponsorship, and keeps a close eye on costs, but it has to recover lost ground, invest in fabric and amenities—the lavatories have been described as a public disgrace—and improve revenues from front-of-the-house sales. Failing this, the Royal National theatre will be headed for insolvency and closure.
Although this may sound over-dramatic, I should remind the House that in 1985 Lord Rayner concluded a report, following the Coopers and Lybrand investigation into the theatre's affairs, in which he said:
it would be a mistake if Government and the Arts Council were to use the evidence and conclusion of this Report to contain or reduce further its funding of the National theatre…continuing Government funding at or above its present level in real terms will in my view be essential".
That authoritative view has not been heeded and the theatre is that much nearer to the brink of a grave financial crisis. I urge my right hon. Friend to give serious consideration to this matter in his discussion with the Arts Council on the funding of the theatre.
I am not here suggesting radical solutions such as direct funding of the Royal National theatre, the dismemberment of the Arts Council, or even the privatisation of the South Bank theatre board. What I am suggesting is that a highly prized national institution should not be put at risk, contrary to the advice of the Rayner report, by a real reduction in core funding at a time when a substantial increase would yield enormous dividends, both financial and artistic.
It is healthy that earnings from private sector income now play a larger part in turnover of arts organizations than in the past. I pay tribute to the role my right hon. Friend has played in helping to bring that about. I also pay tribute to his introduction of incentive funding and the introduction of three-year funding, which is a significant development. However, as my right hon. Friend knows, it is now in some jeopardy, at least in the case of the Royal National theatre. I applaud the fact that the Government have increased expenditure on the arts by 33 per cent. in real terms over the past 10 years, and on the performing arts by 13 per cent., but I agree with Lord Rees-Mogg and Mr. Rittner that only a dramatic increase in overall funding will bring about the massive artistic dividends for the country which both he, I am sure, and the whole House would wish to see. I think, too, that he would see enormous political dividends from such action. That is not a wholly unworthy consideration.
Lord Rees-Mogg said in his valediction that the voice of the public must be given due weight. I believe that the public, as represented in this House tonight, would give a massive endorsement were my right hon. Friend to bring about a further substantial increase in funding for the arts —an increase which in absolute terms would be minuscule in relation to overall Government expenditure, but which would be of great significance to the future of the arts in this country, not least the Royal National theatre.
I shall leave the House and the Arts Council with some lines from "Expresso Bongo", which I remember hearing sung a quarter of a century ago by the present director of the Royal National theatre, in the role of Bongo Herbert —drum beats echoing between the bridges and banks of the River Cam as now they might from the Thames to Piccadilly:
Oh, oh, oh, don't sell me down the river
If you wanna throw your baby overboard
Then you're gonna have to answer to the Lord. Remember, rivers keep on flowin'
Down on a one way tide,
And some day that's where you'll be goin'
If you take me for a ride.
Later in the libretto come the softer tones of Maisie:
You're the one who can make me or break me
Don't shake me off your tree
For once in your life, take me
Seriously, I mean seriously.