Tax and Fiscal Policy

Should the state support the arts?


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Tax and Fiscal Policy
Those who wish to cut government arts funding are often branded ‘philistines’. But there is a difference between appreciating the arts and believing that the state should support the arts.

Economic arguments in favour of state funding often revolve round ‘public good’ or ‘externality’ effects. In other words, it may be difficult to exclude those who do not contribute to the arts from the benefits they provide; or there may be social benefits from the arts leading them to be under-provided. But, did the arts thrive before 1946 when state funding took off?

In fact, England’s rich cultural tradition developed free of government funding and it often had a commercial edge, suggesting that the arts can thrive in a market economy. In the 16th century we had commercially successful and popular English theatre, including Shakespeare. Although Shakespeare had the patronage of the monarch, this was much more like the royal warrant that a shop might receive rather than financial support. Shakespeare was commercial. Indeed, it is interesting to note that, even today, whilst the Royal Shakespeare Company is 50 per cent funded by the state, the Globe theatre stages Shakespeare plays with no subsidy. In 17th century Britain, the public concert developed and 18th century London was a hothouse of composers. The Hallé Orchestra, the Royal Albert Hall, Gilbert and Sullivan, and the Fitzwilliam are all great cultural creations from the era of subsidy-free culture. Elsewhere, Chopin, Bach and the Dutch masters all paid their own way.

There can be a thriving commercial arts scene without state funding. The economic arguments at best can be used to justify the position that certain types of arts might be ‘under-provided’. But we should also consider that state provision of the arts might lead to problems.

Firstly, with state finance, we will often get the arts that the government wants and not the arts that the people want. This is especially problematic as culture is an important part of civil society which can be used for communicating all sorts of moral and political messages.

Secondly, arts funding can be captured by other interests – such as those leading big, high-profile projects centred on London or the administrators of the funding bodies. Much arts funding goes through the Arts Council. It has slimmed down its operation under much pressure from recent budget cuts but, until recently, the Arts Council spent about as much on administration as it did on arts in three of the nine main regions of England put together. 50 per cent of all funding went to London and the regions got the crumbs.

Furthermore, even after much resisted staff cuts, the Arts Council will have nearly one employee for every £1 million given out in grants; in 2008 it had 50 press and communications staff – effectively all paid advocates of state funding.

State funding also crowds out private funding, which is pitifully low in the UK compared with the US. The removal of user charges from museums not only removed an important source of revenue, but also has the effect of making museums less interested in their visitors and more interested in the bureaucracy that funds them. Few other European countries have totally removed admission charges from museums for good reason. State funding can also raise costs. Performers are highly ‘inelastic’ in their supply, just like footballers. When Sky TV pumps more money into football, footballers are paid more. The same happens to artists when the government pumps money into the arts: it can be the cost and not the supply that increases.

What might be the best solution? If there is to be state support for the arts at all, it is probably best provided at local level. This is less likely to lead to a monoculture in the arts and ensures greater variation in what is provided. Secondly, perhaps the lottery is a reasonable source of funding. This is voluntary: those who buy a ticket are choosing to support the arts. But, our history shows that arts and culture can develop independently of the state.

Academic and Research Director, IEA

Philip Booth is Senior Academic Fellow at the Institute of Economic Affairs. He is also Director of the Vinson Centre and Professor of Economics at the University of Buckingham and Professor of Finance, Public Policy and Ethics at St. Mary’s University, Twickenham. He also holds the position of (interim) Director of Catholic Mission at St. Mary’s having previously been Director of Research and Public Engagement and Dean of the Faculty of Education, Humanities and Social Sciences. From 2002-2016, Philip was Academic and Research Director (previously, Editorial and Programme Director) at the IEA. From 2002-2015 he was Professor of Insurance and Risk Management at Cass Business School. He is a Senior Research Fellow in the Centre for Federal Studies at the University of Kent and Adjunct Professor in the School of Law, University of Notre Dame, Australia. Previously, Philip Booth worked for the Bank of England as an adviser on financial stability issues and he was also Associate Dean of Cass Business School and held various other academic positions at City University. He has written widely, including a number of books, on investment, finance, social insurance and pensions as well as on the relationship between Catholic social teaching and economics. He is Deputy Editor of Economic Affairs. Philip is a Fellow of the Royal Statistical Society, a Fellow of the Institute of Actuaries and an honorary member of the Society of Actuaries of Poland. He has previously worked in the investment department of Axa Equity and Law and was been involved in a number of projects to help develop actuarial professions and actuarial, finance and investment professional teaching programmes in Central and Eastern Europe. Philip has a BA in Economics from the University of Durham and a PhD from City University.



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