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Arts Council England risks ‘additionality principle’ as it diverts Lottery cash to support core funding

Alan Davey, chief executive of Arts Council England. Photo: Nick Gurney
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Arts Council England has announced a 2% cut to its core funding for cultural organisations from 2015/16, in a move which will also see Lottery cash used for regular revenue funding of the arts for the first time.

Previously, ACE has only used exchequer money – known as grant-in-aid – for its regular, core funding streams. It has previously used Lottery money for one-off grants, building projects and to fund specific organisations via focussed pots of money, for example for touring work.

However, from 2015/16 to 2017/18, it will employ an estimated £60 million of Lottery money annually to help fund its national portfolio organisations.

The move threatens to breach the “additionality principle” which was enshrined when the National Lottery was launched in a White Paper in 1992 and declared that “the government does not intend that the money provided from the Lottery should substitute for that provided in other ways… the government will not make any case by case reduction in conventional expenditure programmes to take account of awards from the Lottery proceeds”.

However, without the extra Lottery funding brought in to fund national portfolio organisations from 2015/15, core funding would have reduced from £327.5 million in 2014/15 to £271 million in 2015/16 – a reduction of more than 17%. The injection of Lottery funds means that the cut will be reduced to around 2%.

Meanwhile, grants for the arts funding – which is traditionally supported via the Lottery – has seen its budget increase to £70 million. The increase, and the extra money diverted to the NPO pot, are funded by a predicted increase in cash from the Lottery, from £222.7 million in 2014/15 to £263 million in 2015/6.

The arts council has said that it believes that the funding arrangement does not breach the additionality principle because the extra Lottery money will allow it to fund additional organisations that it would not have been able to afford to fund solely using grant-in-aid money from 2015/16. Some NPOs will be funded wholly through grant-in-aid and some wholly through Lottery money. ACE has previously used Lottery money to fund specific organisation via focussed pots of money for touring work and for work for children and young people.

Arts Council England chief executive Alan Davey said: “In the last investment process we used Lottery funding as part of the overall total budget for our national portfolio. This was for a specific purpose – touring and work with children and young people. In this next investment process some organisations will be funded wholly through the Lottery, and the rest wholly through grant in aid. This will allow us to fund a greater number of national portfolio organisations than we could have done with a budget comprising solely of grant in aid.

“There has been an on-going debate since the Lottery came into being as to what the additionality principle is and how to test whether any proposed funding might breach the principle. We have listened to the current debate and we are confident that the approach we’re taking does not breach the additionality principle.

“The biggest proportion of our portfolio funding will still come from grant in aid. In using Lottery funds to support additional activity we believe that we adhere to the principle that government funding should be maintained and is an essential part of a mixed funding model.”

However, Dr Dave O Brien, lecturer in cultural industries at City University London, said that he believes the arts council is moving away from the original intentions of the National Lottery Act.

He said:  “ACE’s actions seem to be redefining the principle of additionality away from the original intentions of the 1993 National Lottery Act. Whilst this is understandable given the decline in funding from central government, it raises two questions.

“One, does this mean additonality is being abandoned and Lottery funds can be used in this way for other areas of policy and if so has this been agreed by Whitehall and Westminster? Two, is the use of a regressive form of funding (the CMS select committee work on The Lottery suggests an inverse relationship between wealth and willingness to play The Lottery) appropriate for arts policy, which is already skewed towards the activities of the more affluent, mostly in London. Moreover, the use of Lottery money for ‘core’ funding should be the moment to have a full and frank discussion of what sort of arts policy the Coalition wants, given the levels of funding they are currently prepared to commit.”

Organisations will be admitted into the portfolio for three years though the arts council will only be able to confirm levels of funding for 2015/16. Funding levels for 2016/17 and 17/18 will be subject to the grant-in-aid settlement ACE receives. Applications must be submitted by March 17.