The VAT Question

At the State of the Arts conference back in January I asked Ben Bradshaw, Secretary of State for Culture, and Liz Forgan, Chair of Arts Council England, if they (their organisations, I suppose) knew how much VAT the arts contributed to the national coffers, in comparison to the amount of subsidy the arts receive as a whole. I wasn't expecting them to have the figure to hand, obviously, and I knew that it could only be a best guess figure on the VAT, because where do you draw the line...? But I was hoping that they would either know that the figures were known, or that they would think that it would be useful to know these figures.

I was following up from a pertinent question that Jon Spooner of Unlimited Theatre had just asked them, which was: how can we, the creative community, help them to make the case that the Department of Culture, Media and Sport should have its budget maintained at its current level, what ever the outcome of the next election? (Jeremy Hunt, Shadow Culture Secretary was at the event, too). With that in mind, I thought having this information in the public domain might help our case.

Ben Bradshaw took my contact details and promised to get back to me, and I wrote to him after the conference to more fully explain my question. The DCMS Public Engagement & Recognition Unit contacted me this week with the information that is available. So thanks to Ben and to the DCMS staff who researched this. It's not the whole picture, but it is instructive.

I had written to Ben:

My question came from a more specific point I had heard about VAT on theatre tickets, as that is more easy to quantify. A well known theatre director, whose name I now forget, unfortunately, quoted figures in an interview a few years ago, that suggested that VAT on all theatre tickets – so including non-subsidised theatre – actually equals or exceeds the subsidy that the Arts Council has to give to theatre companies. I emailed the Arts Council then to enquire after the figures, but they didn’t have the numbers.

One of the points of raising this, of course, is that the subsidised arts drive and feed into the ‘commercial’ arts. Many of the artists who work in commercial theatre shows, on TV and in film, will also work in the funded theatre sector. The two are inextricably linked.

When this is broadened to the arts as a whole, the effect would be harder to quantify, but that’s because it is more complex. The arts drive, or at least support, the content of all forms of broadcast. How much VAT is raised from the sale of TV, video and stereo equipment? A proportion of that is arguably attributable to the artistic content available for them. How much VAT comes from pre-theatre menus in restaurants. Is VAT paid on art works sold at auction?

I understand therefore that pinning down an exact figure for VAT raised by the arts would be impossible, but it would be interesting to know roughly how it compares to the amount given to Arts Council England.

This week the DCMS responded:

You are right to highlight the important link between subsidised and commercial theatre; this is one of the strong arguments in favour of public funding for theatre, and the arts more widely. A large part of this link is in developing artists and art forms and in widening access to the arts to as many people as possible, and in encouraging excellence at all levels. Part of it is also to do with economic impact.

Which is good to hear. But I'd also like to point out here that whilst I believe this is a valid argument for the support of the subsidised arts, I don't think the fact that they are an "R&D" engine for the mainstream is their raison d'etre. I make, and go and see, small scale, "experimental", devised work for audiences of 200 or less (much less sometimes), because I value the performer - audience relationship that is achieved at that scale, in that mode - I like the eye contact, the intimacy, the immediacy. I think it is important. And that is why it should be funded.

But I know that not everyone thinks that, so I'm interested in being able to counter the 'arts should be able to support themselves if they're any good' and 'how many teachers would that pay for?' arguments.

Which makes the next part from the DCMS very interesting:

You are right to say that VAT income on theatre tickets is greater than the public subsidy theatre receives from Arts Council England. Last year, at London theatres alone, VAT on tickets generated £75m in income. Arts Council England invests just over £100m in theatre.

One way of reading this would be to say that the government doesn’t subsidise theatre, theatre more than pays for itself out of VAT alone, and makes a contribution to the nation’s coffers.

The DCMS only have figures for London theatres, and acknowledge that a further £12m of lottery money went to support theatre in 2008/09. But the DCMS also point out the wider, and better known, arguments for seeing subsidy of the arts as investment that produces a massive return.

However the economic impact of theatre and the subsidised arts is much greater than just VAT. The creative industries, including a number of subsidised sectors, account for 6.2% of the UK’s Gross Value Added (GVA), £16.6bn in exports, and 2m jobs. The subsidised arts also play a major role in attracting inbound tourism, worth £16.3bn, and we know that four million overseas visitors to Britain went to the theatre, ballet, opera or a concert. The relationship between subsidised and commercial arts is vital in maintaining the quality and access that makes the arts, culture and the creative industries so successful.

As our General Manager pointed out to me when we read that yesterday, 2m jobs are also going to channel a lot of employers and employees National Insurance back to the government.

As ever, the thinking is that the arts will have a fight on our hands to maintain the level of government funding we receive in this year's Spending Review, whatever happens on May 6th. I recognise that I have a vested interest in this as this is how I make a living, and I am extremely grateful that Third Angel is an Arts Council England Regularly Funded Organisation. So for me these figures are an important part of the argument.