Tax breaks, mergers and overseas opportunities: New thinking on arts funding

Wigmore Hall’s announcement that it would voluntarily withdraw from Arts Council England’s National Portfolio, having successfully raised £10m to become self-sustaining, has ignited debate about ACE’s funding strategy. It has also highlighted that dependence on traditional public funding models has become increasingly untenable.

The need is clear for more significant investment in hard-pressed cultural organisations with many warning they continue to face substantial challenges.

Back in February, the Department for Culture, Media and Sport (DCMS) unveiled £270m of funding for the culture and heritage sectors. While it was widely welcomed, with pressure on public finances continuing, ministers have limited room for manoeuvre, and there is a growing view the sector would benefit from fresh and more varied approaches.

Arts Professional has been looking at some of the novel funding ideas that have recently been floated.

French-style philanthropy incentives

Writing in the Financial Times in January, arts consultant Martin Prendergast argued that France’s Aillagon law – which provides substantial tax breaks to incentivise corporate philanthropy – could suggest a way forward for the UK’s subsidised arts sector.

The law, which offers 60% tax relief on corporate donations (capped at 0.5% of the company’s annual turnover), has led to this type of support increasing from €1bn in 2004 to nearly €4bn in 2018. 

Prendergast thinks a UK version could “catalyse private investment in the arts”, boosting collaboration as well as providing much-needed resources.

Leveraging private investment through public funds

In a report in January (Scene Change: Optimising business model innovation in the performing arts), the National Theatre called for a “once in a generation” leveraged capital fund that would combine government and private investment to support the sector “in building and maintaining sustainable infrastructure”.

The report suggested working with “a new generation of benefactors and corporates, which would bring in a philanthropic match to the government expenditure”. 

The proposed measures include match-funded capital grants to “attract additional philanthropy” and “catalytic grants” that would encourage investment “motivated by environmental outcome metrics”.

Tourist tax

Director of the V&A Tristram Hunt has proposed charging international tourists as an “obvious solution” to ease financial pressure on national museums. Also, in the Financial Times, Hunt recently called for a tourist charge on overseas visitors at hotels and overnight tourist accommodation, with the funds “ringfenced for cultural infrastructure”. 

Based on a report from The Cultural Policy Unit, he claimed a charge of about 3-5% on overnight stays could raise “well over £1bn a year”.

“Sir Sadiq Khan and his fellow city mayors should have responsibility for allocating these budgets, but with funds hypothecated towards art, culture and place making,” he argued.

Two years ago, Manchester introduced a tourism tax, which raised £2.8bn in its first year. The income was spent mainly on street cleaning and marketing campaigns, but it also supported events such as Manchester Flower Festival, Manchester Pride and Chinese New Year. 

Edinburgh is set to introduce a 5% tourism tax in July 2026 after the Scottish Parliament passed a bill granting this power to local authorities. And London mayor Khan last year said his team would look at evidence from Europe and the UK on how cities are using such levies.

In addition to Paris’ tourist tax, the French President Emmanuel Macron said in February that a complete overhaul of the city’s Louvre Museum, costing about £675m, would be funded partly through higher ticket prices for non-EU visitors.

The new rate will apply from January 2026. Macron also said entry fees would increase for other national museums in the country. 

Innovation and mergers

Last year, former Arts Minister and now Lord Ed Vaizey suggested it was time to consider mergers between arts organisations as a response to funding challenges. In November, he posted on LinkedIn that while “long-term, generous funding remains essential… maybe it’s time to embrace innovation – and yes, even M&A – to ensure a sustainable future for our cultural institutions”.

This followed his speech in the House of Lords when he commented: “it is not a one-way street – there has to be some give and take for the arts”. He added that as Arts Minister, he became “increasingly frustrated… that we lived in a world where no museum should ever close, no theatre should ever close… there should perhaps be more M&A in the arts and more co-operation”.

Similarly, the National Theatre’s Scene Change report recommends creating “sector-led playbooks” that set out best practices for sharing models – “from shared procurement to co-production and joint social programmes, to mergers of functions”.

Arts Council England has indicated it would be open to exploring such approaches. Its executive director for enterprise and innovation, Tonya Nelson, said the funder was “supporting organisations to think quite radically about how they might change their business model,” including “working with groups of organisations in pilots to think about how we can do resource sharing”.

As an example of this, in February two poetry charities became the first organisations in ACE’s national portfolio to formally merge. Poet in the City closed as a separate charity and is now a dedicated programme strand within London’s Apples & Snakes.

Funding distribution changes to support grassroots

In 2022, the Culture Select Committee recommended changes to how ACE distributes cultural funding by region as a way to address the sector’s disparities. MPs noted that some areas outside London and the South East still don’t receive enough investment.

Meanwhile, within those largely affluent regions, the fact that a handful of organisations receive “significant proportions” of funding is putting some grassroots venues at “serious financial risk”.

Given this, the committee proposed a model in which “world class, national cultural institutions” were allocated funding separately from local and regional organisations.

In response, the government said: “There is a risk that differentiating ‘national’ from ‘local’ organisations could create or entrench divisions within the sector, perhaps even leading to barriers to growth and innovation.

“High quality is not uniquely provided by large-scale organisations, and Arts Council England seeks only to invest in organisations that provide high quality creative and cultural opportunities.”

Foreign opportunities

As part of the UK’s growing engagement with Saudi Arabia, a number of major UK cultural organisations are working in partnership with the country.

Last year, the Science Museum Group signed an agreement with the Saudi Ministry of Culture to create a Museums Hub in Riyadh. It was also announced that Historic England would cooperate with the country’s Heritage Commission to help preserve cultural landmarks in Saudi Arabia.

In addition, DCMS and the Department for Business and Trade have agreed to work with the Royal Commission for the city of AlUla (RCU) in Medina province. The project will include the UK sharing expertise in creative sectors such as music, theatre, cinema and fashion. Such initiatives are expected to generate new opportunities for the UK cultural sector.

DCMS said the RCU project would allow creative and cultural institutions to become “key stakeholders and points of contact”, representing a “significant commercial opportunity for those UK organisations, who stand to benefit from long-term working relationships, new business opportunities and increased visibility in Saudi Arabia, while also driving further tourism to the UK”.

Last year, representatives of UK arts and culture organisations were criticised for taking part in a government-backed trade mission to capitalise on business opportunities in Saudi Arabia. Speakers at the event included Alex Beard, chief executive of Royal Opera and Ballet, Kate Varah, executive director of the National Theatre and Elaine Bedell, chief executive of Southbank Centre.