Motion made, and Question proposed, That this House do now adjourn. —[Mr. Michael Foster.]

I am extremely grateful for this opportunity to open a short debate on the future of Harrogate theatre. I do so knowing that, although they may not be in the Chamber, dozens of other right hon. and hon. Members share my real concerns about the way Arts Council England and its regional bodies handled the 2008 to 2011 comprehensive spending review settlement.

Let me say immediately that I recognise the real difficulties Arts Council England faced this year. Budgets were already under severe pressure following the Government's seeming inability to control spending on the forthcoming Olympics. In many ways the arts, which arguably contribute far more to the nation's long-term well-being than four weeks of glory in 2012, have been sacrificed on the altar of illusionary gold medals.

It is unfortunate that Arts Council England chose this particular period to carry out

"the most comprehensive review of arts funding" in its history, to quote its words. Few would disagree that renewal is essential if a vibrant arts culture is to survive, but the manner in which the change of strategy was planned and executed is unacceptable. For the chairman, Sir Christopher Frayling, to state:

"We decided at the beginning of the process that we were not just going to be a cashpoint machine with an over-complicated pin number" was at best unfortunate, and at worst an arrogant demonstration of ignorance. The chairman clearly has little appreciation of how incredibly hard arts organisations struggle to meet the twin objectives of artistic quality and financial solvency. What is more, if Arts Council England believes that dropping potential funding bombshells on organisations a week before Christmas, then allowing a mere 18 working days to lodge an appeal, is a professional approach, something is seriously wrong.

I welcome this debate. "Bombshell" is the appropriate way to describe how some organisations found out about the potential loss of their funding. Is my hon. Friend aware that many organisations were given no indication that there was anything wrong with the way in which they dealt with their affairs? In fact, they were under the impression that they were fulfilling all the Arts Council England criteria, and did not for a second think that there was a possibility of losing their money.

I am grateful to my hon. Friend for his intervention, and I will come to that point later. On the speed with which the cuts were carried out, I trust that the Minister will, if nothing else, carry out an urgent inquiry into the processes used by Arts Council England to distribute taxpayers' money.

The furore that followed the December announcements resulted in a vote of no confidence in Arts Council England from distinguished writers and actors. Protests from Sir Salman Rushdie, Harold Pinter and Sir Ian McKellan to Joanna Lumley, among others, brought about some reprieves, but the net result is that a mere two weeks before the commencement of the new financial year, 185 organisations have had their grants totally removed and 27 face significant cuts that put their future in jeopardy.

One such organisation is north Yorkshire's highly regarded Harrogate theatre. Its grant will be reduced by a staggering 64 per cent. from £409,000 to £150,000 from 1 April this year. That comes after a partially successful appeal against Arts Council Yorkshire's proposal of 12 December to cut £300,000 from the 2008 grant. The actions of Arts Council Yorkshire frankly do not bear the lightest scrutiny. Indeed, they add currency to the view of Nicholas Hytner, director of the National Theatre, that regional arts councils function as "unacceptable fiefdoms".

On the point raised by my hon. Friend Mr. Leech, on 7 August 2007 Harrogate theatre had its most recent annual review with Arts Council theatre officers. It was informed that a "positive" report would be forwarded to the Arts Council regarding the growing financial strength and proposed artistic direction of the theatre. Indeed discussions followed about an initiative called "the academy", a pioneering new artistic enterprise which brings together five regional theatres in a joint venture to nurture new talent by working with established professionals.

There was no indication of disinvestment at that time, nor was there any hint of cuts at the joint funders meeting on 5 November, when Arts Council Yorkshire, together with Harrogate borough council, North Yorkshire county council and the theatre agreed that the theatre had successfully completed recovery and refurbishment as agreed two years earlier. Yet one month later, proposals to cut 75 per cent. of the grant were received, with a miscellany of concerns that were an insult to the board and management of the theatre.

First, there was concern about programming, based almost exclusively on one problematic production, "Look Back in Anger" in 2005, co-produced by Pilot Theatre and the Oldham Coliseum. The wide range of critically acclaimed work produced over a 10-year period, including works from Terry Johnson to Arthur Miller, Yasmina Reza to Chekhov and Tennessee Williams to William Shakespeare, appears to have been totally ignored. On the basis of one production, Arts Council Yorkshire proposes that the theatre should become a receiving house only. To add insult to injury, both Pilot Theatre and the Oldham Coliseum, which collaborated on the production of "Look Back in Anger", received funding increases from the Arts Council for their innovative productions.

Secondly, concern was expressed about the programming operation that included large amounts of amateur productions and a long-running pantomime. In fact, Harrogate theatre does not programme amateur work; rather, amateur companies hire the theatre for their productions, just as the Crucible in Sheffield is hired for the world snooker championships, or other theatres hire space for conferences or corporate events. That is how regional theatres survive. Eighty-five per cent. of Harrogate's theatre time is devoted to professional theatre, with hiring making up less than 15 per cent. As for the Christmas pantomime, like many theatres this comprises a huge windfall to support operating costs throughout the year. Perversely, whereas Harrogate's pantomime runs for six and a half weeks, that at the West Yorkshire Playhouse operates for nine and a half weeks and that at the York Theatre Royal seven and a half weeks, yet neither received a single word of criticism from Arts Council Yorkshire.

The third concern was the physical limitations of the theatre, which has just undergone, with the agreement of the Arts Council, a complete refurbishment paid for entirely by the public and Harrogate borough council. The theatre, built in 1900, with its Victorian proscenium, does not restrict but challenges production teams to place contemporary work in it. It is the same challenge faced by theatres across the region and across Britain. It is what makes theatre so exciting and innovative in the United Kingdom. Audiences in Harrogate theatre now have new seating in the auditorium, disabled access and lifts; backstage there have been massive technical improvements; and new refreshment facilities are planned for this summer—all known of, planned and approved by Arts Council Yorkshire.

Appallingly, none of these three main areas of concern was discussed with the theatre or the other funding organisations before December 2007. It is shameful that no details to support these criticisms have been made available for scrutiny. They appear to be convenient excuses to decimate the budget. I therefore ask the Minister in her reply to instruct Arts Council Yorkshire to publish these details and to do so immediately. The decision to disinvest will have a potentially catastrophic effect on Harrogate theatre and leave Arts Council England open to legal challenge. I urge the Minister to act soon.

At the heart of the concerns of Harrogate theatre, its staff and supporters is a sense of disbelief and injustice at the inconsistency, speed and finality of Arts Council England's decisions. In May 2007, Arts Council Yorkshire announced that it wished to put more money into the visual arts, and in so doing challenged the status quo—quite rightly. It claimed that by simply continuing to fund existing programmes, there was a danger of stagnation—a sentiment applauded by Harrogate theatre's chief executive, David Brown, and the whole trust board. Indeed, in response to the direction of Arts Council Yorkshire and its own appraisal of past programmes, the theatre board went to the Arts Council with its own programme for disinvestment and change. It agreed that it could not match the other six large Yorkshire theatres in full-blown productions, and it accepted that Harrogate's future lay in a mixture of smaller productions and received productions, along with the vital work of taking important theatrical art out into the rural communities of north Yorkshire and supporting arts education in north Yorkshire.

It appears that Arts Council Yorkshire used that highly professional dialogue as an opportunity to humiliate the theatre management, which is exactly what the advice letter of December 2007 appears to have done. Regional theatres should not be pigeonholed as either producing houses or receiving houses. A theatre needs to deliver a service that is relevant to its community, while engaging with innovative targets that provide a challenge for the art, artists, staff and audience.

In the past 10 years, Harrogate theatre has engaged with its community to a point where the community has provided support with its presence and its cash. Last year, 60,000 people attended live events with 10,000 tickets sold to first-time attendees. Over the same period, the public helped to raise more than £500,000 to carry out refurbishment. The theatre's education department has worked with students all over the region, engaging with more than 20,000 youngsters in theatre-related activity, 700 of whom are members of Harrogate youth theatre. Harrogate theatre has been at the heart of Harrogate life for more than a century, and it has a terrific future if Arts Council Yorkshire can be persuaded to think again about those insensitive and ill-informed cuts.

The theatre has proposed a 44 per cent. reduction in grant over the period of this comprehensive spending review with transitional support in the first year to assist with radical adjustment rather than an immediate 75 per cent. cut, which would bring havoc to the organisation. The scenario proposed by the theatre would allow a strong core operation of a specifically produced season aligned with a substantial education and outreach programme that would exist alongside alternative income streams, thus providing a valuable service to the people of Harrogate and north Yorkshire. It is a well thought out proposal that meets the Arts Council objectives, and it will keep the theatre alive in rural north Yorkshire. I plead with the Minister to use her office to seek a sensible and negotiated outcome.

Finally, I will be at Harrogate theatre on Thursday to share in a memorial tribute to a magnificent lady and a dear friend, Joan Mallett, who was not only vice-president of the theatre but a woman who devoted 47 years to the theatre as an actor, producer, director and board member. Shortly before her sad death, Joan said this about her life:

"I've been to a marvellous party!"

I am sure that a resolution to this problem would see Joan raise a glass to the Minister in heaven!

I congratulate Mr. Willis on securing the debate and on the passion that he has shown in the defence of the theatre in his constituency. He has highlighted something that I regard as extremely important, namely the contribution that theatre can make at the heart of community and the contribution that culture can make in building an identity and a feeling of belonging in communities up and down the country.

The hon. Gentleman has discussed the difficulties facing the Arts Council. I would not call them "difficulties"; I would reword that and call them "challenges". Those challenges are of the Arts Council's choosing, and they are challenges that the Arts Council has met and that we support. The Arts Council is looking more radically than it has ever done in the past at the organisations that it chooses to fund regularly. It is easy to forget that just 10 years ago many of our theatres were struggling to survive, because they were caught in a downward spiral of deficits and because funding was inadequate.

The situation has been transformed by our achievements in the past decade. There has been a 73 per cent. real-terms increase in funding to the Arts Council, which has meant the doubling of funding for the theatre, and the theatre sector has responded in the best possible way by improving the quality of its work and growing its audiences. According to our last survey, nearly a quarter of adults attended a theatre performance in 2005-06.

I managed to go to the theatre tonight before coming to this debate. I saw "Random", by Debbie Tucker Green—a terrific, powerful play at the Royal Court. I could not resist the temptation of seeing how excellently it had been directed by Sacha Wares. The solo part was powerfully performed by Nadine Marshall. The play touched on many issues that I know are close to the hon. Gentleman—it was about a black family who had lost a boy through a stabbing. The best line of the play was:

"Don't trouble trouble 'til trouble trouble you."

That will stay with me.

I am proud of the Government's record of recognising and supporting the arts and of the great achievements that the arts sector has delivered with that investment. In October last year, we announced that grant in aid funding for Arts Council England would rise to £467 million by 2010-11, an increase of 3.3 per cent. above inflation. In our tight fiscal environment, that is good. It will represent an extra £50 million above inflation by 2010-11. On 1 February this year, the Arts Council announced its spending plans for the coming three years. Some 753—that is, three out of four—of its regularly funded organisations will receive increases in their funding in line with, or above, inflation and 81 new organisations will be invited to join the regularly funded portfolio.

Let me spell out to the hon. Gentleman what that means for theatre. In 2007-08, annual investment will be £101 million. Proposed investment between 2008-09 until the end of the spending review period is £318 million, a cash-terms increase of 8 per cent. There are 223 organisations and 21 new organisations in the portfolio. Producing theatres remain central to the theatre infrastructure of this country and many organisations are receiving above-inflation uplifts, including the New Wolsey in Ipswich, the Oldham Coliseum, the Arcola in London, the New Vic in Stoke-on-Trent, the Northern Stage in Newcastle and the Hull Truck Theatre Company. Funding for organisations in the theatre sector in Yorkshire will rise from £7.2 million to £7.5 million, an increase of 4 per cent. in cash terms. Overall, Arts Council England will invest nearly £81 million in Yorkshire between 2008 and 2011.

In that context of good news, there has been bad news for some organisations. There will be 43 non-renewals and reductions, including the Harrogate theatre. However, I say to the hon. Gentleman in all sincerity that politicians have to stay away from making decisions on what and what not to fund. Since the Arts Council was founded in 1946, it has been a fundamental principle that funding decisions for individual arts organisations should be made by the council, at arm's length from the Government. When the Leader of the Opposition had a meeting with the Arts Council, he said that he hoped it was not going to fund too many one-legged, Lithuanian lesbian organisations. I hope that he understands why it is so important that we maintain our distance; we do not want those sorts of values to inform funding decisions made by the Arts Council.

The arts change and grow, and it is right that the council's funding plans should reflect that and make room for new talent to develop and succeed. We would not want it to fund the same organisations at the same level year after year. That is why I support the approach that has been taken, although it has led to some difficult situations.

I turn directly to the issues raised by the hon. Gentleman. I urge him to seek a meeting with his regional arts council and with Harrogate theatre to understand better the funding decision. The reason why some of the underpinning rationale for the decision has not been made public is that it is seen as a confidential relationship between the organisation and the Arts Council. It would benefit him, and the theatre, if he had that open, face-to-face discussion with the Arts Council.

I hope that the hon. Gentleman accepts the principle that the Arts Council should not fund things in the present and the future just because it has funded an organisation in the past. However, I understand that this year's process has been painful, and I know that the Arts Council will itself want to review it to see how it can do things better next time. Again, that is something for it, not for us to do, because that would be an unacceptable intervention.

Taking the actual position on Harrogate theatre, in 2006-07 the Arts Council grant was nearly £400,000—27 per cent. of total income. In 2008-09, as the hon. Gentleman said, it will reduce to £150,000, which means that about 10 per cent. of its income will be met from Arts Council grant. As I understand it, the theatre therefore faces a cut in grant but not closure. In 2006-07, it earned £700,000 from box office receipts and from activities such as incoming tours and co-productions. It also gets a grant of just under £200,000 from the local authority. It is interesting enough to look at those figures, but there is another aspect. The figures given to me say that £40,000 came from donations and sponsorship and £40,000 from fundraising events.

One of the bits of work that I am trying to do, right across the cultural and arts field, is to try to move these organisations from a total dependence on public subsidy to what I would term a much more social enterprise culture, so that they see themselves with a range of funding streams, not as completely dependent on public funding. That is hugely important, not only because it means that they are not dependent on the vagaries of public funding expenditure rounds but because it gives them an independence that allows them to be much more innovative and adventurous than if they are always looking over their shoulder at the public sector.

The hon. Gentleman's region happens to be rather well supplied with producing houses, including West Yorkshire playhouse in Leeds, York Theatre Royal, Hull Truck Theatre Company, Stephen Joseph theatre in Scarborough and the Crucible theatre in Sheffield. A view will probably have to be taken on that regional infrastructure. There is also a range of Arts Council-funded receiving houses in Yorkshire. Lawrence Batley theatre in Huddersfield and Theatre Royal Wakefield are comparable in scale to Harrogate theatre. Lawrence Batley theatre will receive £120,000 from the Arts Council—not that different from Harrogate theatre—and Theatre Royal Wakefield will receive £96,000. As a receiving theatre, Harrogate does not do that badly.

Many of the organisations that face challenges over their funding this year were surprised. I think that that is because the Arts Council has never undertaken this exercise in the past, and nobody really believed that they would undertake that radical reform to ensure that we fund those organisations that will contribute to future developments. I am told that the theatre was first informed on 12 December 2007. That was a little late, partly because we as a Department took the view that we would not take an early settlement under the comprehensive spending review but hold out for a much better settlement from the Chancellor. That worked in our favour so that we were able to inflation-proof and grow a little bit the totality of the funding to the Arts Council.

The Arts Council told the theatre that it believed that over several years performance had been consistently weaker than other parts of the regional building- based producing theatre network. It says that that was set out in the letter of 2005, and it did not change its view. It recognised that the managerial and financial improvements delivered in the past year addressed some of the issues that it had raised previously, but the inherent weaknesses of the organisation in relation to the quality of the programme and the long-term challenge of the theatre's physical limitations informed the decision that it took. The council thought that the current programme and operation, with large amounts of amateur productions, a long-running Christmas show, and the toured-in work to which the hon. Gentleman referred, is more indicative of a middle-scale receiving theatre than a producing one. It felt that that made its current investment disproportionate.

In the light of those remarks, the Arts Council wanted to enter into discussions with the theatre and other funding partners to explore options for presenting performing arts work in the town. It remained unconvinced that the theatre has the capacity to build and sustain high audience levels for a year-round programme of quality produced work and thus it believed that the scale of its previous investment did not represent value for money.

As the hon. Gentleman will know, representations were made by the Harrogate theatre to the Yorkshire regional arts council, which then met to consider those representations at the end of January. At that meeting, the regional arts council could not accept the argument from Harrogate theatre for an alternative level of reduction, as the hon. Gentleman proposed. However, it acknowledged that Harrogate theatre was distinctive from other similar scale receiving theatres in its significance to a large rural area. That argument, advanced by the theatre and the local authority funding partners when they talked about the importance of maintaining significant rural outreach, youth and educational work, informed the regional arts council's decision to raise the level of support that it was willing to give. That is how we ended up with the £150,000 figure.

I know that my response will not please the hon. Gentleman as much as he would have liked, but I urge him to deal with the issue. I hope that he understands the important reason why Ministers do not engage in challenging such decisions. Our task is to ensure that any information we have is put before the Arts Council, but the decision has to be for the council. I support the proposition that underpinned its strategy this year, which was to refresh its portfolio to fund innovative, new theatre organisations so that the cultural ecology of the UK could remain pre-eminent in the world today. Within that policy, there will always be challenges for individual theatres, and for the theatre sector as a whole, but we are in a better position to meet those challenges, and to make the most of the new opportunities on offer, than we ever have been before. I hope that, in that spirit, the hon. Gentleman will accept my response.

Question put and agreed to.

Adjourned accordingly at twenty-eight minutes to Eleven o'clock.