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Arrangement of Business


2.11 pm

Baroness Anelay of St Johns: My Lords, I congratulate the noble Earl, Lord Clancarty, on securing the next important debate. Its importance is reflected in the length of the speakers list of 25. It may be for the convenience of the House-I discussed this with the noble Earl earlier today-if I gently remind the House of the rules governing time-limited speeches. The first debate was a model of good behaviour in this House and reminded us of the respect that all Peers give to each other in keeping to time limits within time-limited debates. I know we have many new Members, whom we welcome to this House. Sometimes it is not quite understood that when the electronic clocks within the Chamber display a time-on this occasion one minute-it means that one minute has already elapsed and the second minute has begun. At that stage, one must consider giving way to others. I refer briefly to paragraph 6.66 -perhaps an inelegant number for giving good advice-of the Companion, which says:

"Speakers in time-limited debates should respect the time guidelines and keep their speeches short, so that all those who wish to speak may do so".

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Arts: Funding


2.13 pm

Moved By The Earl of Clancarty

The Earl of Clancarty: My Lords, I am very pleased that we have the opportunity today to discuss the public funding of the arts. I look forward very much to the maiden speeches of the noble Baroness, Lady Bakewell, and the noble Lord, Lord Wasserman. I look forward as well to all the other contributions to be made, including from those here today who are experts in the arts and the media. I notice that broadcasting is particularly well represented. I am confident that the debate we have ahead of us will be not only a good debate but a highly necessary one. I thank the Library for providing an excellent briefing pack.

There are several good reasons to have this debate at this time. First, there has not been a full debate in this House on the subject of the arts for more than 18 months since the debate of the noble Lord, Lord Bragg, in June 2009. In that period the landscape has changed, with a new Government and a new-although not entirely new-political philosophy, as well as the economic problems that we face. Secondly, this debate complements the debate of the noble Lord, Lord Janvrin, on philanthropy on 2 December last year. Thirdly, there is a timeliness in the light of the speeches and comments made by the Secretary of State, Ed Vaizey and others in just the last few days on corporate sponsorship, which now bring into focus a little more clearly the Government's intended direction for the arts for the next few years.

My own background is as an artist. I have been a beneficiary of a free arts college education and Arts Council funding. I am a beneficiary also in all the other ways that every person in this country still, to a great extent, benefits both directly and indirectly from public arts funding.

It would take a book with many volumes to write the story of modern post-war public funding of the arts in Britain. It has been one of huge and continuing success, with our important national collections protected, maintained, conserved and now once again permitted free admission to; a state-aided national theatre and ballet; and considerable help given to orchestras, artists and companies working in many forms, supported often through difficult periods and-although more so in former years-when there was little thought either of an audience or necessarily of commercial return. More recently, there has been the provision of arts centres and of larger-scale projects in the regions, achieved often through lottery funding; of education and outreach programmes; and, in the 21st century, the expansion of funding of new media, as well as the establishment of the national theatres of Scotland and Wales, and the successful refurbishment of Belfast's Ulster Museum, with hugely increased visitor numbers. There has also been much more besides.

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What of the situation now? We have severe cuts across the board, including a cut of about 29 per cent to the Arts Council over four years, with 6.9 per cent cuts for this year. It has been estimated that one in six arts organisations may lose funding altogether, although the precise figures will not be known until the end of March. The national museums and galleries have received a 15 per cent cut spread over four years. It was announced just this week that the National Maritime Museum would introduce charges to the Flamsteed House galleries and the Meridian Courtyard-something that the DCMS seems happy with. Perhaps the Minister could give us a hard-and-fast definition of a core collection, and confirm that my concern about the possible creeping introduction of charges is not justified. The effects of the cuts in funding will be more complicated than at first they might appear. Central arts funding cuts come on top of local government cuts described this week by Richard Kemp, vice-chairman of the Local Government Association, as the "toughest in living memory", and which include, notoriously in my view, the 100 per cent cut to arts provision in Barnet and Somerset.

The interdependence of organisations, individual artists, companies and institutions with each other and their sources of funding are often intricate, so that cuts to one part of the system will affect another. There is also the issue of matching funding, encouraged by the previous and current Governments, which can mean that if one source is withdrawn another may be lost.

There is the abolition of the UK Film Council and of the Museums, Libraries and Archives Council, the functions of which will be transferred to an already overstretched Arts Council England. These will include the significant Renaissance programme of museum regional development, which will have a 15 per cent reduction in funding. There is reduction in funding for library development, alongside the prospect of the closure of hundreds of libraries across the country.

I turn now to the Government's so-called localist agenda, which has important implications for the arts. It is a long-standing issue that the arts have been more poorly served in the regions outside London. The Arts Council over the years has produced more than one report on this. The Government's intention is to devolve powers and responsibilities down to the community level. This appears to be the thinking behind asking the eight non-national museums sponsored by the DCMS to lose their central funding by 2015. One of these is the Horniman Museum in south London. On the one hand, it has collections of an international standard, such as its musical instruments collection, to which the important Boosey and Hawkes collection was added in 2003. On the other hand, it is a museum greatly cherished by the local community; indeed, one can argue persuasively that the Horniman's depth extending from local to international boosts its significance to the local community, and that direct funding is a validation of that.

The London authorities' umbrella body London Councils has axed its entire £3 million arts budget, which includes grants to a number of important theatres, such as the Theatre Royal Stratford East. At least, this

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was the case until last Friday when a High Court ruling decided that the entire cuts of £16.6 million were unlawful because there had not been a proper consultation. This certainly has interesting implications for councils across the whole country, which may now be seen to be in breach of equality laws.

In some ways localism is a chicken-and-egg problem. At present there is a sizeable gap between the local and national tiers of government, and we simply do not- at least not yet-have the strong, stable, responsible regional political structures to allow devolution to take place in a meaningful way. But where real devolution is capable of happening, such as for Wales and Scotland, there is a sense of the emergence of young cultures proud of the importance of their arts to society. The great success of "Black Watch", shown first at the Edinburgh Festival in 2006, and then at the Scottish National Theatre, is emblematic of this.

Coming to the heart of the debate, I want to pose three questions. First, are the cuts actually justified on financial grounds? Every sector of national life, from health to welfare and the arts, has been warned that it must face less government funding while the Treasury seeks ways to pay down the deficit and build growth. As the Arts Council said in Why the Arts Matter:

"The arts budget is tiny; it costs 17p a week per person-less than half the price of a pint of milk".

Actually, with recent inflation, that now amounts to about a third of a pint of milk. As actor and director, Sam West, said about the theatre in the Evening Standard of 27 October last year,

Lee Hall and Stephen Daldry-

The right reverend Prelate the Bishop of Liverpool observed in this Chamber just last week that £20 million- worth of public investment has "generated £120 million" in Liverpool's local economy. In Tuesday's Daily Telegraph, the noble Lord, Lord Hall of Birkenhead, chief executive of the Royal Opera House, pointed out that this sector contributes,


I could spend all afternoon-as I am sure others could, and perhaps will-standing here reciting statistic after statistic suggesting that instead of cutting public funding to the arts we should be increasing it, and by large amounts, and that, indeed, the economic growth so produced would help the country as a whole. But, of course, as things are, the public would not stand cuts to the arts not being made when many important services are being cut.

In January 2010, the Secretary of State, then shadow culture secretary, said that the arts would "not be singled out". Yet the severity of these cuts to the arts, as well as the length of time over which they are to take place, and the degree of cutting to the infrastructure -50 per cent to Arts Council operating costs-seem to tell another story. We have had severe cuts before. In

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my view, what is worrying about these cuts-and not just in the arts-is that they are happening at the same time that other forms of funding are being strongly encouraged to step into the void.

This then brings me to my second question, which is: how should we fund the arts? It is a topical question and an important one because there is considerable evidence that different funding models produce quite different results which will determine the arts culture of the future: whether we stay with our current system of one-third public funding, one-third box office, one-third private investment, or effect a shift in these proportions.

Philanthropy, of course, has been with us for a long time and has, indeed, provided the basis for our major museum collections. The Art Fund works exceptionally well in partnership with public funding to secure works of art for the nation, recent examples being the purchase of Pieter Brueghel's "Procession to Calvary" and Anthony d'Offay's "Artist Rooms". But, of course, the National Heritage Memorial Fund's grant will now remain at less than half it was before the previous Government's cuts, and there is the longer term danger that such constructive partnerships are threatened. In our mixed system, the Art Fund would like to see more contemporary artwork purchased for regional museums-something that I think should be looked at.

On the other hand, there is criticism of the USA's predominantly philanthropic model as producing a blander, more conservative, less innovative arts scene. Philanthropy is inherently undemocratic in its spread and has a metropolitan bias. Interestingly, there is a sense among most philanthropists, if not all, that philanthropy should be the junior partner in a relationship with public funding. In the Guardian of 21 October, 2010, Dame Vivien Duffield, chair of the Clore Duffield Foundation, one of our most successful and sensitive donors, is quoted as saying:

"Charity ought to be providing the icing on the cake".

For the moment, of course, in our current economic climate the reality does not meet the Government's hopes and expectations. Last week, Arts & Business confirmed that total private investment in the arts was down 3 per cent. This in itself is an additional criticism-that both philanthropy and corporate sponsorship can be removed at a stroke, effectively putting the arts directly at the mercy of fluctuations in the economy. I am not at all against philanthropy or corporate sponsorship. Indeed, most artists will take what funds are on offer because they have a responsibility as artists to their work. However, I argue that we should retain the balance of the mixed system we have now-a system that was indeed prized over 60 years ago by John Maynard Keynes, chair of the Council for the Encouragement of Music and the Arts, the precursor of the Arts Council.

This brings me to my final and, I believe, most important question-more important than the economic one-which is this: what precisely is it that as a nation we wish to support in relation to the arts? I believe that it is the work of the artist and of the arts that is itself the contribution to society, and that if we shift the balance significantly against public funding, we will start to narrow down the options for the accomplishment

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of that work. The Arts Council has been, at its best, able to fund those who are off the radar as well as on it-quiet art as well as great art. At its best, it is democratic in a way that no other funding means can be. The good news is its intent to be more democratic, with a greatly simplified application form and more flexible criteria for funding, welcoming all comers. Speaking as an artist, I would like to see closer knowledgeable relationships developed between artist and arts officers, and on a more local basis, although the trend has been towards greater centralisation, but, of course, this takes money. Public funding can also look to our links with, and exploration of, other cultures, and the Arts Council's continuing support of literature translation and the Independent Foreign Fiction Prize should be applauded.

I have not been able to cover every area. For instance, the threat to higher education courses in the arts and in the humanities and social sciences is itself worthy of a full debate in this Chamber. We are fortunate in the UK to have developed a unique style of funding which has evolved naturally, resulting in such extraordinary creativity in the post-war years. We have all benefited from this phenomenon. This is not art for art's sake, but art for everyone's sake. In the end, it must be said that where audiences exist they will have been created by the art itself, not by politicians. At a time of economic uncertainty it is intuitively easier to scale down public funding, leave it to the private sector and say, "What will be will be". Maintaining and developing the intricate funding ecosystem we have now is not safe or easy, but it is right. I beg to move.

2.27 pm

Lord Brooke of Sutton Mandeville: My Lords, I declare an interest, as stated in the register, which is that I have been for 15 years the president of the British Art Market Federation. I look forward to both maiden speeches and wish the maiden speakers well.

The three most vivid indices of the debt that your Lordships' House owes to the noble Earl, Lord Clancarty, so early in his time in your Lordships' House, are: first, that we have been given an extra half hour; secondly, that we have been deluged by briefing from within and without; and, thirdly, that our own Library, at 10.30 this morning, had run out of its own composite briefing, which is a compliment to it, too. I congratulate the noble Earl on his speech, which has set the tone for the debate.

There is a mood of ululation about. After an overexcess of public spending, there was always going to be a hangover, although it was sad that the Treasury reverse alchemists should have believed that they had found the elixir that eliminated bust from boom. At this time we are in a mire where all the sources of financial support for the arts, save two, are in retreat. Although there is, of course, interaction between some of the financial sources, which aggravates the decline, this debate will be the better if we look forward rather than back.

I propose to run through the various financial sources via the briefing that we have received, although in no particular order. We shall not know how severe the local authorities' decline will be precisely until the

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local government elections in May, but the Performers Alliance has given us an harbinger foretaste, triggered, of course, by the decline in local government central funding. Arts & Business told us last year that all sectors of private support were down from the year before except trusts and foundations. We must hold our breath to see how that element develops hereafter. The sensible qualitative briefing by the Corporation of London warned that changing the culture of private philanthropy-the American version is always quoted-is not simply a matter of turning a switch. As this is the Secretary of State's preferred option, we must hope that his confidence in metaphorically placing his chips on the number 31, which is of course the highest prime number on a roulette board, pays off before his credit runs out. However, the City of London Corporation's cautionary advice is prudent, and private support in the mean time is not the best bet to fill a revenue gap.

The Arts Council briefing, coming after its excellent booklet, Achieving Great Art for Everyone, is greatly to be commended for repeating its advice that any applicant for funds-and, admirably, that every hungry mouth must apply if it wishes to receive money-must show that they are contributing to at least two of the council's five goals, as adumbrated in the booklet. Nor does the council disguise the scale of the revenue gap and the consequent disappointments that will be felt-a matter that is being sensitively and intelligently handled.

However, greater clarity and illumination are needed in the degree of meeting of minds between the Arts Council and the department on how they each see, on the one hand, the difference between administrative and operating costs and, on the other, the difference within private sector funding between sponsorship and donations. Words are cheap; misunderstanding is expensive.

Where the Arts Council deserves praise and support is in its intentions towards the lottery as a financial support, which is the second source of funds that is increasing. In Dame Liz Forgan's garden, the rose called additionality is being guarded and fertilised and the grants for the arts programme-the GAP-will be one acronymic gap less in hazard, in consequence.

Where the Arts Council has been handed a hot potato is on the proposal to replace the Museums, Libraries and Archives Council and to provide less funding. We shall not know the exact dimensions of the challenge and of the concordat between the council and the department until such sentences as,

are turned into English. Bears of little brain, such as me, reckon that the ice is thin when the language becomes complex. The great Lord Goodman, at the end of his life, regretted the arm's-length principle, but less brainy bears regard it and the additionality principle as insurance policies. We may also miss the MLA in its sounding-off role as a commentator on the national scene, as the City of London's briefing averred.

Finally, we have no direct briefing on ticket sales. Like children, we must hope that the goose that lays the golden egg is not force fed by institutional

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management, or we shall be still worse off. Those who eat foie gras should not be treated as geese themselves. Where there is doubt as to whether it is the department or the Arts Council that has taken a particular unpopular decision, it is best if the arm's-length principle is not used to obfuscate and if intellectual honesty prevails.

2.32 pm

Baroness Bakewell: My Lords, it is with great pride that I rise to give my maiden speech in this House on a subject that has played a sustained and sustaining role throughout my own life. However, I first wish to thank noble Lords from all sides of the House who have given me such a warm welcome and to acknowledge the help that I continue to receive from the outstanding staff who work here. It is with pleasure that I thank my two distinguished sponsors, the noble Baroness, Lady Kennedy of The Shaws, and the noble Lord, Lord Puttnam.

I understand that I must first declare an interest. I am chair of the touring theatre company Shared Experience. I was for six years the arts correspondent of BBC television and for six years the chair of the National Campaign for the Arts. I have served on, among others, the council of the Aldeburgh Festival, the board of the National Theatre, the BFI, the council of Friends of the Tate and the Film Council.

It sounds, perhaps, as though I was to the manner born-that this came as some sort of birthright-but it is not so. My grandfather, an iron turner in a Salford factory, died at the age of 33 and my father was sent to Chetham's Hospital, then an orphanage for poor boys in Manchester and now a world-famous music school. Chetham's had, and still has, one of the finest 17th-century libraries in the country. My father grew up loving books. The importance of libraries in the life of a child should not be underestimated. He left school at 13 to work in a foundry and enjoyed a career in engineering. My mother, the daughter of a cooper in a Manchester brewery, also left school at 13. Many years into their marriage they made up for the lost years by studying at the Workers' Educational Association. I am the child of their aspirations. I grew up in the 40s and 50s, enjoying a grammar school and university education without fees and without debt. My life is a testament to social mobility. My arrival in this House is surely its crowning glory.

This, then, is the life that has turned to the arts to understand the world about me. From reading that encompassed Jane Eyre and Mrs Gaskell's novels about industrial Lancashire, visits to Manchester City Art Gallery and concerts by the Hallé Orchestra, I have continued to find nourishment in the sensitivities of those who create and perform works of art. I believe profoundly that the arts are more than the entertainment that awaits us at the end of the working day-a light relief from the real business of living. I believe the arts to be a core essential in shaping and sustaining our human values. So it is not surprising that I am passionate that the rewards should be available to everyone in our society.

Let me speak particularly about how public funding of the arts outreach programmes touches ordinary lives. Not long ago, I opened an art exhibition at the

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QUAD arts centre in Derby. The exhibition was called Objects of Delight and was curated by 14 people between the ages of 55 and 75, who were given total freedom to select their own show, with works of art freely lent from the Arts Council's wonderful collection. The show was full of surprises. It included art by Hockney, Ken Kiff, Gillian Ayres and Grayson Perry. The ferment of the curator's excitement spread throughout Derby, with friends and family catching the mood. This one modest venture was, for those involved, transformational.

It is important to stress that the central purpose of arts funding is to encourage the artistic spirit; that is its absolute undertaking. Art is not a form of social work but, if the enjoyment of art is to be confined to those who can easily afford high prices, public money is not being responsibly spent. Outreach features in the budgets of all our major companies. The Tate currently works with 70 children in Orkney creating art. The sums of money involved are relatively small, but they are important. They are less likely to attract sponsorship or media attention, but they change lives- 76 per cent of adults engaged in the arts in the past year. This is why I commend the matter of the debate today and urge your Lordships not only to enjoy the arts to the full but to endorse a funding strategy that gives all our citizens access to and participation in work that can be uplifting and life changing.

2.37 pm

Lord Puttnam: My Lords, it happily falls to me to warmly congratulate my noble friend Lady Bakewell on a wonderful maiden speech. The fact that it was knowledgeable and eloquent was no surprise at all, but it was a tremendous bonus that she allowed us into the background to her achievement. It speaks volumes for your Lordships' House that in their time both the noble Baroness and my noble friend Lord Bragg, who I am happy to see is in his place, have respectively and respectfully been described as the "thinking person's crumpet"-no Andy Gray moment for me. I was reminded of that last week when, during her introduction, I glanced across at a packed Bishops' Bench to see what I can only describe as a group of men glowing with anticipation at her arrival. I am sure that the rest of us felt similarly and I hope that we will hear from her much more and at much greater length over the coming years.

I, too, am extremely grateful to the noble Earl, Lord Clancarty, for securing this timely debate. I should begin by declaring an interest as chair of the altogether excellent Sage Gateshead and as president of the Film Distributors' Association.

Aneurin Bevan, when drawing attention to the capacity of Governments to pursue counterproductive policies in moments of crisis, famously observed in 1945:

"This island is made mainly of coal and surrounded by fish. Only an organising genius could produce a shortage of coal and fish at the same time".

Today, at a time when this island is in desperate need of every scrap of creative energy and imagination, it would require a very particular genius to fail to support and nurture both. The fulcrum around which originality

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leading to the development of intellectual property is based-the coal and iron of the 21st century-is access to and enjoyment of the arts; that is to say, all of the arts and for all of the people.

On 18 March 1998, I had the privilege of introducing a debate in this House to call attention to the importance of the arts in the life of the nation. During that debate, I suggested:

"The arts are an essential element of the cultural and creative lifeblood of any nation. They sustain the conscience and vitality of a society. One measure of any community wishing to regard itself as truly civilised is the quality and depth of its artistic achievement ... Even in the most enlightened state, there will never be enough funding for the arts".-[Official Report, 18/3/98; cols. 717-19.]

That was the challenge that I set out for the then newly minted Labour Government. Despite the enormous changes that we have witnessed in the world of art and culture since that debate, some things have not changed. I continue to stand by my assertion in that debate that, if we want the arts, we find a way of paying for them. For a society such as ours to consider itself civilised, there is, to echo one of the coalition's favourite phrases, simply no alternative.

During the past 20 years, successive and extremely engaged Secretaries of State consistently sought to expand access to and participation in all forms of the arts, to the benefit of audiences and creators in every discipline right across the UK. At the same time, these policies sought to bring together the arts with education in new and innovative ways. As they did so, it became generally accepted that the type of skills fostered by engagement with the arts-among them, self-confidence, empathy and teamwork-have a value both for the individual's self-development and for nurturing our sense of connection to others.

This sea change was made possible by combining a sufficiency of funding with a series of strategic interventions designed to maximise the value of that funding and connect it with the widest possible range of audiences and creators, while all the time seeking to raise the bar for artistic and cultural excellence.

Free admission to our wealth of museums and galleries was just one way in which the then Government sought to achieve this. So popular and successful has that policy proved that even the coalition has come to the reluctant conclusion that it dare not touch it. According to the National Museum Directors' Conference, in 2008-09 24 million people visited just our national museums; that is, a 70 per cent increase in 10 years.

The enhanced popularity of our museums has also had a very positive impact on tourism, now accounting for eight out of the top 10 visitor attractions here in the UK. At the same time, there was also an early recognition of the power of digital technologies massively to increase access to the arts and to allow people to create, share and re-use artistic ideas in ways that were previously quite undreamt of.

A year ago, when it came to the arts, we had a very great deal to be proud of, but, in the space of barely nine months, I am afraid that the coalition has managed to undo or at least put in jeopardy many of the most effective achievements of the past decade. I regret that time does not permit one to list the full extent of them.

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Of course, we all recognise the financial challenges that the nation faces, even if many of us on these Benches reject the coalition's rather broad-brush and cynically inaccurate explanation of how we came to find ourselves in our present position. Self-evidently, the arts and culture more generally are not and cannot stay immune from the financial pressures that are being brought to bear, most particularly on the public sector. But what I find truly egregious is the arbitrary and ill thought through way in which many of the cuts are being implemented, seemingly devoid of any meaningful attempt to assess their likely impact or, indeed, the value of individual initiatives, the roots of which are being hacked away at. I fear for the arts. I fear for the ill considered impact of cuts on UK tourism, on UK jobs, on UK education, on this country's sense of self-confidence and on the sustainability of its future as a culturally vibrant nation.

2.44 pm

Baroness Bonham-Carter of Yarnbury: My Lords, I declare an interest as a member of the board of the National Campaign for the Arts. I join others in thanking the noble Earl, Lord Clancarty, for the opportunity to debate this important topic. One thing that I can claim to have in common with the noble Baroness, Lady Bakewell, whom I congratulate and welcome, is that we are both alumni of "Newsnight"-although there may be two things, because I think that we both appeared on Michael Crick's blog in that context.

Oscar Wilde said:

"Art is not something which you can take or leave. It is a necessity of human life".

I have made many speeches agreeing with him. The arts bring happiness to practitioners and consumers alike; they define and bind communities; they provide understanding of the world we live in and what makes us human. They also contribute to the economy and to the esteem in which we are held abroad.

The arts are flourishing, as the noble Lord, Lord Puttnam, said, and we wish them to continue to flourish. The coalition has restored National Lottery funding to its original good causes, which means an additional £50 million a year. We hope to introduce a gross-profits tax regime, which will further enhance receipts. Also, after the 2012 Olympics, lottery funding will be fully restored. However, due to the financial circumstances in which we find ourselves, the arts sector has to accommodate funding cuts that reflect wider pressure on public spending. Consequently, helping arts organisations to raise money from other sources is important.

Philanthropy must be encouraged. To that end, last year's announcement of a match-funding scheme of £80 million from public funds is to be welcomed. In 2008, the Labour Government introduced a similar scheme to encourage donations to UK universities, which has been hugely successful. However, a crucial lesson was learnt: the importance of investing in the teaching of fundraising skills.

I read the other day of a rather underhand test that eight regional museums were subject to which illustrates the point. A fictional, recently widowed woman sent a letter to each museum saying how much she enjoyed them and how she wanted a new hobby, making it

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clear that she had money at her disposal. She included a £10 note. Only one museum responded, and only with a brief note of thanks. Can the Minister confirm that part of the £80 million will be used to support small and medium-sized organisations that may not have a history of fundraising?

Looking forward, as my noble friend Lord Brooke rightly said we must, we see opportunities on offer as a result of new technologies. We should investigate how these can be harnessed both to boost fundraising and to extend access to the arts. A type of scheme has emerged on the internet called crowd funding. This involves encouraging large numbers of people to give small amounts of money through the web to causes that they support. WeDidThis is a recently launched site whose manifesto is, "Art for everyone, funded by everyone". Citizen philanthropy connects the giver with the particular work to which they are donating. A company called Digital Theatre uses its own equipment to record theatre productions, which they then sell for far less than the cost of a ticket to watch online, but from the best seat in the house. The money made is shared with the production, so as well as extending access this is another potential new source of income.

Another, rather different way of alleviating funding cuts is also, happily, good for the planet. I have recently come across a young woman, Rachel Madan, who has created a company called Greener Museums. She helps museums and other cultural organisations of all sizes to identify and develop sustainable practices. The consequence of this is both to reduce costs and to attract sustainability funding. The Beacon Museum in Cumbria has changed its habits in such a way as to allow it to reduce operating costs by £10,000 year on year. Warrington Museum has managed to reduce electricity consumption by 14 per cent in just one month. I believe that the Tate, through its own initiative, has reduced utilities costs by £237,000 over three years.

Finally, I am sorry that funding for the Creative Partnerships scheme, which so successfully encouraged creativity in schools by sending artists into them to work with teachers and pupils, has been cut by both the Government and Arts Council England. I urge the Minister to encourage the Arts Council and the Department for Education not to throw away their very valuable relationship and experience.

I started off by talking about philanthropy. While a lot is written and said about the great contribution of so-called cultural giving in the United States, I am sure that the Minister will agree with me that this coalition does not believe in importing the US model into the UK. The connection that is made between the citizen and culture as a result of funding through direct taxation is a crucial part of the equation. Public money dispensed by arm's-length bodies free from commercial or, for that matter, political consideration is an essential part of a thriving arts sector-an arts sector that produces the risky and the challenging as well that which soothes the soul.

2.49 pm

Baroness Young of Hornsey: My Lords, I thank my noble friend the Earl of Clancarty for securing this debate, which is already proving to be a landmark

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occasion, and for providing a comprehensive and subtle overview. I also welcome the noble Baroness, Lady Bakewell, and hope that I can extend as warm a welcome to her as she extended to me when we both served on the board of the National Theatre. I am very pleased to see her contributing today.

I should declare a number of interests. In short, I have been a researcher, consultant, adviser and creative producer and have served on numerous boards in the cultural and creative sector, working, for example, with the Arts Council, the Heritage Lottery Fund, the BFI, the Cultural Leadership Programme and so on. My contribution today will echo what some other noble Lords have said, but what I am driving for is much more clarity about the intentions for the arts from the coalition Government. In that sense, I echo what my noble friend the Earl of Clancarty said earlier. I want to know the longer-term vision of the Government for the arts and the creative and cultural sector, what the strategy is for achieving that vision and, perhaps most important, what the underlying principles are of that vision and strategy.

Public subsidy might be a major part of those underlying principles. If we are going to say that substantial public subsidy for the arts is at an end, that it will not recover but will be reshaped forever, we need to know that now. One issue faced by many arts organisations, in particular those that are not large, national and urban, is that they do not have the capacity-I refer to human and financial resources-to take advantage of what few opportunities there are. Often, because they are firefighting a lot of the time, they do not have the capacity to think forward and work out how they might take advantage of some of the opportunities that might arise or produce some opportunities for themselves. That capacity building is necessary. This was alluded to by the noble Baroness, Lady Bonham-Carter, who is no longer in her place.

I will look at some of the work that I have been involved in over the past couple of years, which has been about the socially engaged arts, culture and critical practice. I agree with the noble Baroness, Lady Bakewell, that artists should not be social workers. However, a number of arts organisations, and indeed artists, have a strong commitment to producing work that will have an impact on people's lives, with a determined set of social objectives lying behind that commitment.

When asking about the strategy of the Government, I am concerned not only about some factors referred to earlier by the noble Earl that will impinge on the arts sector but about a number of other issues, such as cuts in department budgets. Much of the work that I referred to, which concerns reducing reoffending, working with young offenders, working with children in deprived areas and so on, is dependent on obtaining funds from other government departments. The issue is not just the lack of money available from sources directly related to arts activities.

I am a strong supporter of public subsidy for the arts because I believe that the market alone will not give us the creative edge, the innovation and the risk taking that artists, practitioners and entrepreneurs in

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a thriving arts sector need. We are globally very competitive in the arts and creative sector because we have had an ongoing commitment to invest public funds in the arts. It is possible to see that as an investment because of what comes out in future.

Talk of philanthropy and corporate sponsorship is all very well-we have had that to an extent over the years, so we are not starting from scratch-but we do not have an embedded culture of philanthropy or corporate sponsorship that can see beyond the needs of certain kinds of organisations. I get very concerned that, not only in government discourse but elsewhere, the kinds of organisations that are referred to as being the arts sector often fall into the category of national, London-based bodies, which are quite well funded in comparison with smaller organisations. That issue must be addressed.

Bearing in mind the reminder about timing that we were given at the outset of the debate, I have not been able to make all the points that I wanted to make. The key question is: how do the Government see the long-term future of the arts and the role of public subsidy within that?

2.55 pm

Lord Moser: My Lords, I, too, thank the noble Earl for giving us this opportunity for debate, and congratulate the noble Baroness, Lady Bakewell, on her remarkable maiden speech and on all that she has done and will continue to do for the arts. I have spent much of my own life involved in the arts, and sometimes have not been popular. Years ago, an Arts Minister said in Parliament, "We are all used to Claus Moser's annual whingeing for the arts". Today, however, I will not be whingeing, but I will express some concerns.

The arts are in the most flourishing state that they have been in for decades. I refer not just to the great London institutions but to all the small, innovative, risk-taking activities up and down the country. There is massive outreach, wider access everywhere, festivals and lots of personal creativity. At the centre is the vital and highly successful Arts Council, created by Keynes in 1946.

We all know the benefits. Economically, the creative industries earn 7 per cent of GDP and employ 2 million people. They are a great help to tourism and invisible exports; they help to regenerate poor communities; and they enhance the quality of life and happiness of all of us. Now come the cuts, and the damage that they will cause is inevitable and visible. As we heard from the noble Earl, the Arts Council is facing a tough 29 per cent cut, so inevitably many of its clients will suffer.

However, at least the Arts Council is dealing with this in as rational and helpful a way as possible. I say "at least" because my greatest worry is not the Arts Council clients but those of local authorities. The local authorities do not have any central guidance or leadership. Some of them have already decided to abolish arts funding totally. Others, including Birmingham, are cutting by 50 per cent, and we have not seen the end of it by any means. As if that were not enough, the regional development agencies-a very helpful source of arts funding-are being abolished.

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Schools are probably more important than anything else that I will talk about. The schools world is hesitating about what to do with music in future. Universities are cutting the arts and humanities. The combined effect of all this must be to threaten our flourishing arts scene and its obvious benefits, so we must look to the Government to do all that they can to limit the damage.

Private philanthropy is already being urged by Ministers although, as the Economist stated some weeks ago, the practical steps taken so far, including the £8 million spread over four years, will not go very far. The Government must seriously research what chances there might be for helpful taxation changes, with both philanthropy and corporate giving in mind. This possibility is much more realistic for the corporate sector, not least in areas where the local authorities are turning their backs.

What matters most is the atmosphere created by the Government. We want, not least from the Prime Minister himself, encouragement for everybody in the arts world in line with the words of President Kennedy. I have quoted them before and quote them again now in conclusion:

"The life of the arts, far from being an interruption, a distraction, in the life of a nation, is very close to the center of a nation's purpose-and is a test of the quality of a nation's civilization".

That is the kind of idealism that I want from this Government and from all of us, followed of course not just by words but by action.

3 pm

Lord Black of Brentwood: My Lords, I declare an interest as a member of the Council of the Royal College of Music and as a trustee of both the mayor's fund for young musicians and the Imperial War Museum.

I want to talk about the vital role of our music conservatoires to the artistic life of our country and the importance of maintaining a crucial element of public funding for them. Our country is fortunate to have a remarkable musical heritage and educational infrastructure that makes us a beacon of international music excellence and London the world's most vibrant cultural hub. Our major orchestras, the opera, music theatre, dance companies and our chamber ensembles all contribute to a rich cultural life which is not just centred in London but lives in every community. Britain is also home to an astonishing culture of amateur and semi-professional music making-from church choirs to village bands-that enlivens the whole country and is part of the cultural big society in action.

However, none of this comes about by accident. Our national musical life depends on a steady stream of highly trained professional music graduates from our conservatoires. These conservatoires have been the backbone of British music since the mid-19th century. From them, the greatest British composers-Parry, Vaughan Williams, Howells and Britten-have emerged, and over many generations they have acted as teaching magnets for the world's most celebrated musicians. Even more important, their talented graduates, who in recent years have benefited from a much broader curriculum, populate the orchestras, ensembles and opera companies that are the foundation of the UK's musical life. More than 90 per cent of conservatoire

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graduates work exclusively in music, often doing two or three different musical jobs. They are music's future, and without their throughput of expertise it is no exaggeration to say that our musical life would wither.

These conservatoires are therefore vital national institutions of tangible public value and international renown. They need to be nourished, particularly at a time not just when, as we have heard, there is pressure on corporate philanthropic giving but when we will be looking to their graduates to play a key cultural role in the big society through outreach activities to widen access to music teaching, such as the successful RCM sparks programme.

However, there is an issue that we need to acknowledge. Training professional musicians takes time and is expensive because it relies on one-to-one tuition in a high-quality environment. The conservatoires require concert halls with broadcast facilities, recital halls, opera theatres, high-quality keyboard instruments, sound-protected rehearsal rooms and, above all, the best possible teaching from dedicated professors.

I studied history at university and all I needed was a library, a lecture hall and a teacher; the training of musicians requires a significant and expensive infrastructure, just as do engineering and medicine. Over the years, these high costs have been recognised by the Higher Education Funding Council-most recently in a review in 2008-which has provided a modest amount of exceptional funding on top of its normal teaching grant to allow these institutions to fulfil their specialist function. That is less than £15 million across our four English music conservatoires-a tiny amount in comparison with the huge, catalytic contribution that they make to our cultural life.

I know that the conservatoires accept the need to make savings, which are already being implemented, and they already have well-developed fundraising operations. However, the core issue of the exceptional funding, which cannot be met by these means, is central to their future. If that funding is withdrawn, there is no way that it could be recouped from higher tuition fees, as the quantum involved would be impractical. While the normal teaching grant can be replaced through higher fees, the exceptional funding cannot because fees would need to rise well beyond the new government cap. To date, HEFCE has not clarified whether this exceptional funding will continue to be recognised in the future financial landscape, but it is vital that the funding continue. I know that my noble friend will not be able to give us any commitments today, but I ask her to take note of this issue and to talk about it to her colleagues across a range of government departments while decisions are being made that will reverberate down the generations.

Confucius said,

"Music produces a kind of pleasure which human nature cannot do without".

I recognise the power of those words, for throughout my life music has been a constant companion and the source of my emotional nourishment-a wonderful word used by the noble Baroness, Lady Bakewell, in her fantastic maiden speech-consoling, coaxing and civilising in a way that no other art form can. I believe that the Government also recognise the power that

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music has to raise aspirations, as the Secretary of State for Education made clear in his welcome comments on the Henley review of music education.

All of us in this House have over the years been lucky and privileged enough to have our lives enriched by a remarkable musical heritage built on the back of the conservatoires. We have a duty now to safeguard them for those who will come after us.

3 .05 pm

Lord Howarth of Newport: My Lords, I add my warm congratulations to the noble Earl and to my noble friend Lady Bakewell. The House had high expectations of her maiden speech and they were well fulfilled.

We had seven fat years for the arts under the previous Government-I think that I can say that objectively-and I very much hope that we shall have fewer than seven lean years under this Government. It was entirely unnecessary for the Government to compound the damage of the recession to the arts. Public spending on culture is 1 per cent of that spent on the health service. If we abolished the whole of the cultural budget, it would make no difference whatever to the assessment by the markets of Britain's fiscal deficit. As it is, the cuts that are to be faced will have a significant effect on the possibilities of future growth in our economy. There is so much more to be lost both economically and culturally by cutting public spending on the arts than to be gained. Be that as it may, the Government have taken the decision that the arts must make a contribution-hefty for them-to reducing the deficit.

In this situation, what are the essential responsibilities of government? I suggest that they are threefold.

First, the Government should do everything they can, within their self-imposed fiscal constraints, to keep the show on the road and to nurse the arts through to the recovery phase of the economy. Therefore, the pacing and timing of cuts in public expenditure are extremely important. Against the background of the reductions in business investment in the arts, it is devastatingly damaging that local government-a major funder of the arts, museums, galleries and the heritage-is to be required to cut 16 per cent from its spending in the first year. Indeed, the impact on the arts will be worse because support for the arts is not a statutory duty of local authorities-and we have seen that Somerset and Barnet are taking the opportunity to cut their funding for the arts by 100 per cent. The Government need to nurse the system through to at least 2013, when we may hope that there is a stronger economic recovery and when, at any rate, the arts and heritage lottery funds will have significant additional sums to spend-a decision for which I applaud the Government. I believe that Lord Keynes would certainly have advocated counter-cyclical public spending for the arts in these circumstances, so why does the reduction to the Arts Council England budget have to be implemented as to 80 per cent in the first two years? Will the noble Baroness tell us what the prospects are for phasing the cuts to the Renaissance in the Regions budget?

In this situation, the Government should concentrate the resources that they have to spend on the basic necessities and refrain from indulging in expensive

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new initiatives. A new fund of £1 million for technology in the arts is a good idea but one for prosperous times. They should also concentrate on the cost-free changes that they can bring in to assist the arts, cutting in particular the regulatory costs, which, as Neil MacGregor pointed out in his report, bear heavily as it is on arts institutions and inhibit philanthropic giving. I am pleased that the Government have started to act, at any rate, on reserves. They should not have mucked about with institutions that were functioning very well, such as Public Lending Right, the MLA, Arts & Business, Creative Partnerships and CABE. They should have continued to support agencies that themselves support the arts and heritage to build capacity, achieve best practice, and improve fundraising, marketing, exploitation of intellectual property and their understanding of how to participate in the procurement processes of other public bodies.

The Government should also act coherently across government as a whole. The Secretary of State should be the great advocate and champion for the arts across Whitehall departments to ensure that they understand the potential contribution of the arts and heritage to their programmes and that they can benefit from their budgets. Support for the creative economy should be unambiguous. The Secretary of State for Schools should have understood the extraordinary benefit that the Creative Partnerships programme has conferred on attendance and grades that young people in disadvantaged areas achieve. The English baccalaureate should embrace the arts. The barbarism of removing all public support for teaching arts and humanities in universities should never have been contemplated. There is much else that one might say about what the Secretary of State should be aiming to achieve across Whitehall.

I shall say finally that the Government should move intelligently towards a more plural and balanced pattern of funding. They are right to support philanthropy and the development of endowments but those will be gradual processes. In the mean time we need specific decisions and action taken fairly and squarely by Ministers, not hiding behind their quangos, to ensure that the arts right across the country get the help they need. It takes a long time to build up but very little time to dismantle. I look forward very much to hearing the noble Baroness affirm her belief in the value of the arts-no one doubts her own commitment-and describe the Government's ambition and vision for the arts.

3.12 pm

Baroness Benjamin: My Lords, I congratulate the noble Earl, Lord Clancarty, on securing this timely debate. There is a cold wind blowing through the arts world as cuts loom on the horizon and, as usual, the ones who will suffer most are children and young people-our nation's future.

Article 31 of the UN Convention on the Rights of the Child states:

"Every child has the right to rest and leisure, to engage in play and recreational activities and to participate freely in cultural life and the arts".

Yet, in this country we are facing the prospect of a whole generation of children and young people growing up in a sterile environment in which art and cultural

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activities are relegated to the fringes of our society. Organisations, such as Action for Children's Arts-I am a patron, so I declare an interest-believe that this cannot be allowed to happen. Creativity is central to almost every human activity, as well as being part of a happy and fulfilled life, as expressed so passionately by the noble Baroness, Lady Bakewell, in her maiden speech. Without creative ideas, business and industry would fail. If we neglect the imagination of our young, we restrict our futures. But many children's theatre companies, and art organisations, which pride themselves in providing vital creative assets to our children, are very worried about future funding. The next 12 months will be the most challenging that they have ever experienced as it will be a struggle to protect all that is so dear to them.

Like many others, Big Brum, an excellent theatre-in-education company, has voiced its concerns, saying:

"To cut arts funding is to betray young people and the future of our country, by denying those that need access most, to that which makes them truly human".

Nowadays we blame children and young people for joining gangs, graffiti on buildings and developing their own ways of speaking and dressing. Is this behaviour not evidence that it is a basic human instinct to be creative and to form tribal culture? Unless this creative instinct is given direction it could well manifest itself into anti-social ways. In the world of art, experimentation and anti-establishment, ideas often begin with young people and lead to social change. However, without a framework and direction, nihilistic doctrines can develop at a cultural cost to society.

When the right honourable Ed Vaizey was shadow Arts Minister, he said:

"We're blessed in this country with hundreds of arts organisations which achieve artistic excellence. Their role in education, particularly their ability to inspire and engage, needs to be recognised. Far from being an add-on or a nice-to-have, the role of arts companies in the education of our children is essential and needs as much support as possible".

It was with that in mind that Action for Children's Arts suggested that a children's arts alliance should be formed to bring together interested organisations that have a children's arts agenda. The purpose of the alliance was to celebrate the work on similarities and forge a way forward, while maintaining each organisation's differences. The alliance would include organisations, such as the Prince's Foundation for Children and the Arts, Kids in Museums, the Campaign for Drawing, Theatre for Young Audiences, the Council for Dance Education and Training and the British Film Institute.

To achieve that, I ask the Minister whether the Government would consider the idea of calling for a review of arts for children in England. I also ask my noble friend to consider the need to ring-fence resources and allocate an agreed percentage of arts funding for children's arts to represent their number, presence and importance in the population of England.

I declare an interest in the debate as I have spent the past 40 years of my life in the arts both in front and behind the camera, as well as being on various boards. That experience has taught me that to help our children's spiritual and physical well-being, it is very important

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that children's access to the arts is not jeopardised by the financial mistakes of their elders. We must not let that happen.

3.17 pm

Lord Aberdare: My Lords, I am delighted to speak in this debate and congratulate my noble friend Lord Clancarty on initiating it. I shall focus on classical music, which, of all the arts, is closest to my heart. Music is a great success story for the UK. We have world leading orchestras, performers and conservatoires recognised across the globe and generating substantial benefits for the nation. These include economic benefits from employment, tourism and overseas earnings, estimated at 7 per cent to 8 per cent of GDP for the creative sector as a whole. The arts is one of the major reasons for tourists to visit London and other parts of the UK.

The less tangible benefits are perhaps even more important. Those of your Lordships who watched the BBC's "The Choir" programmes with Gareth Malone will have seen how choral singing can build confidence, discipline, teamwork, aspiration and a sense of achievement, even among seemingly unpromising groups. Above all, music is an essential part of a good quality of life for an enormous number of people, and surely is central to the big society and to our nation, as the noble Lord, Lord Moser, said.

The UK's strength in classical music is founded on our mixed funding model, with support coming from a combination of public funding, commercial income and private support. All of those are currently under stress. Orchestras and other music bodies have shown creativity in expanding their earned income through initiatives such as the London Symphony Orchestra's own record label, LSO Live, or the Royal Opera House's live cinema relays. Orchestras already generate 50 per cent or more of their income through their earnings.

The Government are also, rightly, keen to increase arts bodies' income from private sources, but the latest figures from Arts and Business-which is itself losing its Arts Council grant-show that business support fell by 11 per cent in 2009-10 and seems unlikely to resume its previous upward trend before 2013. Individual philanthropy also fell by 4 per cent, and private support as a whole was down by 3 per cent in real terms to £657 million.

The UK does not have a culture of philanthropy like that in the US, where as much as 90 per cent of arts funding comes from private sources. Incentives are needed to drive the growth of private support, such as new tax concessions, matched funding or improvements to the gift aid scheme. Individual giving is often focused on specific projects rather than on core activity. So private funding will remain a supplement to, not a substitute for, public support. Continued public support is essential to maintain the health of the arts and music and to protect their huge contribution to the UK.

Arts Council England supports 15 symphony orchestras nationally, which receive about one-third of their income from public sources. Germany has no less than 129 professional symphony orchestras with anything up to 80 per cent or 90 per cent public funding. The

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returns generated by that funding are several times greater than the investment, as noble Lords have already mentioned. A recent study valued the impact of the Welsh National Opera on the Welsh economy at £22.5 million, more than five times its annual grant from Arts Council Wales. The funding of classical music represents incredible value for money.

The Arts Council England subsidy is being reduced by 6.9 per cent in 2011-12. Orchestras and music organisations accept the need for that, and will find ways to manage it, but they have also been asked to show how they would manage cuts of 25 per cent to 30 per cent, which would be far more damaging, facing some major institutions with a real possibility of closure. Local authority funding is equally important, not just for many orchestras but for the venues where they perform, which are equally subject to cuts.

A crucial factor in the UK's arts leadership is the quality of its education at all levels, from schools and regional initiatives to the elite arts training bodies and conservatoires in London and other major cities. I add to the list of names cited by the noble Lord, Lord Black of Brentwood, major UK revenue earners such as Sir Elton John, a graduate of the Royal Academy of Music, and Sir James Dyson, from the Royal College of Art. Because they need to provide intensive one-on-one tuition and attract leading international artists and musicians, their costs are too high to be recovered entirely through student fees, and they depend on a small but vital quantity of exceptional funding from DCMS. That must be retained to avoid putting any of our great music and arts education bodies at real risk.

At a time when all elements of the mixed funding model are under threat, and until private and lottery funding start to grow again, we must be sure that public support is managed in a way that protects our leading arts bodies from the possibility of irreparable damage. As Jo Cole, head of strings at the RAM, said in a letter to the Times last week:

"The Big Society isn't going to have much of a soundtrack unless it acknowledges the exceptional part music could play in building and defining it".

3.23 pm

Lord Ramsbotham: My Lords, I, too, thank my noble friend Lord Clancarty for obtaining this important debate and for enabling many of us to raise issues that are dear to our heart. I declare an interest as president of the Arts Alliance, which is a coalition of all the organisations working to bring arts to offenders. I was therefore very interested to hear the noble Baroness, Lady Benjamin, suggest that the need might be the same for children. I can assure her that it works.

I have two requests to make to the Minister. First, I ask that she will thank the officials from her department who play their part in the Arts Forum, which is the cross-government organisation formed to work with the Arts Alliance by the previous Government. Secondly, I would request her to pass what I am going to say to her colleagues in the Ministry of Justice.

When I was the Chief Inspector of Prisons, several times I went to Low Newton women's prison in County Durham where I talked with the outstanding director of learning and skills. One day she told me that the

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writer in residence had achieved something that no one else had been able to do. A woman had gone in who was incapable of speech thanks to the violence to which she had been subjected from her husband. The writer in residence encouraged her to write down her experiences and then to write them in verse, which people read out. One morning, she said to the woman, "Come on, you read it", and she did. After that the woman could be rehabilitated.

I mention that because I want to put forward clearly for the Ministry of Justice that the arts has an enormous role to play in the rehabilitation of offenders because of its ability to get to the heart of what is wrong and what has failed with some people. Every work of art-it does not matter what it is-is a personal achievement. Every personal achievement can be recognised. Every recognised achievement equals self esteem. Self esteem is absolutely vital in getting people on the right road towards work, education and training, which are the keys to successful prevention of reoffending. Therefore, the arts are a crucial part of any rehabilitation programme, not as something that can be measured as an end in itself but as a means to an end.

What worries me, which is the burden of my message to the Minister, is that present attention in the rehabilitation revolution centres on the phrase "payment by results", under which it is said that organisations working with offenders will be paid for their results, which will be related to whether or not they contribute to the reduction in reoffending. The organisations which deliver the arts-many of which are voluntary and/or small-cannot afford to wait all the years that it may take to assess whether they have made a contribution to the ultimate prevention of reoffending. The money to help them do the work has to be provided.

If rehabilitation is to work, it is absolutely essential that the arts are included in the syllabus of every prison, every young offender institution and every probation area. I would go further and say that contracts for art work should be for not less than three years, but preferably for not less than five, so that proper investment can be made in that work. I say that not just because I have seen the work-of which I have given one example-but because I really believe that the arts have a crucial role to play in the protection of the public by the prevention of reoffending.

3.27 pm

Lord Wasserman: My Lords, three weeks ago today I was introduced in your Lordships' House. These have been action-packed weeks and I know that some noble Lords have found them tiring and perhaps even a bit tiresome. But for a new boy like me, these busy days and long nights have provided a marvellous opportunity to find one's way around the House and to get to know one's fellow Peers.

I feel enormously privileged to be a Member of this historic institution. I want to thank my supporters, the noble Lord, Lord Gavron, and my noble friend Lord Taverne. Both have made enormous contributions to this country over many years and I am deeply honoured that they were prepared to overlook my party affiliation and introduce me. I also want to join the other maiden speaker, the noble Baroness, Lady Bakewell, in thanking the officers and staff of this House for their kindness

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and patience, and for helping us to find our way around both geographically and in terms of process and procedures.

When I decided to make my maiden speech in this important and timely debate, initiated by the noble Earl, Lord Clancarty, I had no idea that the list of speakers would include so many of the brightest stars in Britain's cultural firmament. I feel rather like a football fan whose knowledge and experience of the game is derived entirely from "Match of the Day" but who somehow finds himself addressing a meeting of Premier League club executives and managers. I therefore beg the indulgence of the House if I express views that might appear to some to be naive and simplistic, but I speak as an amateur in this field, although one who cares deeply about the arts and regards them as a national treasure to be protected and nourished.

We are very privileged in this country to have access to a world-class arts scene: theatre, opera, dance, music, museums, galleries and much more. All this is made possible through a combination of state funding and the generosity of a relatively small number of public-spirited individuals and corporations. As far as the state's contribution to the arts is concerned, the amount involved will always be a matter for heated debate, in common with every other aspect of public expenditure. As noble Lords will know, the level of state funding for the arts in Britain is extremely generous when compared with the United States, where I lived for 12 of the last 15 years. Where the Americans do score, however, is in relation to funding by what are now called "high net worth individuals"-we used to call them "the rich"-and corporate sponsors. Taken together, these private benefactors account for the vast majority of support for the arts in that country, as other noble Lords have pointed out. The reason for this is not that Americans are by nature a more generous people. I say this as someone who was born and brought up in Canada and knows Americans well. It is because their tax system encourages giving by making it deductible before income tax is paid.

Giving money is not the only way of supporting the arts. Active participation by attending concerts and joining choirs, visiting galleries and even occasionally buying a picture or two, preferably by living artists, may be an even more effective way of building a rich national cultural life. But, for me, the most important thing that we can do to support the arts, no matter how rich or poor we may be, is to encourage young people to develop a love for the arts and, where appropriate, to help them develop any latent artistic talents they may have. We can do this by encouraging children to learn to play a musical instrument, write stories, act, dance, paint or express themselves in any one of countless artistic forms. We can do this by encouraging local schools and youth groups to devote more attention to the arts and by volunteering to help them to do so. We can do this also by encouraging young people with real talent who are tempted to pursue a career in the arts to follow that dream.

I believe that there is much more to public support for the arts than state funding. Public support includes what all of us can do, in our families and in our communities, to encourage a new generation of artists

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to build upon our cultural heritage and take it forward into the future. It is this kind of public support that we must develop and expand.

3.33 pm

Lord Freyberg: My Lords, it gives me great pleasure to follow the noble Lord, Lord Wasserman, and to congratulate him on behalf of the whole House on his excellent and very thought-provoking speech. He comes to the House with huge experience in policing. A former Rhodes scholar, he served as a special adviser to the New York and Philadelphia police chiefs. He is an internationally known expert in criminal justice, science and technology, and for 12 years was the Assistant Under-Secretary of State for police science and technology in the Home Office. I know we shall all look forward to his contributions on this important area and others in the near future.

I thank the noble Earl, Lord Clancarty, for giving us the opportunity today to discuss public funding of the arts. On an occasion such as this, I would normally hope to draw the House's attention to the pressing issues facing museums and galleries, but today I must make a plea for museums' less glamorous siblings, libraries and archives. Why is that? It is not because all is rosy for museums at this time of austerity. However, there are nearly 4,500 libraries in the UK, the vast majority of which are funded through local authorities. Nearly 400, and at least 48 mobile libraries, are certainly under threat of closure, and we may learn of others once we know the outcome of individual councils' local spending reviews.

Meanwhile, archive services-although a statutory responsibility of counties and designated county boroughs-also face an uncertain future. Reductions in funding are likely to result in drastic reductions of opening hours and staff numbers. The ability of archives to manage the collections they have, let alone to embrace new collections for posterity, will be severely hampered.

In recent weeks there has been much public discussion of this subject, and it has consistently been suggested that there is a choice between keeping libraries, keeping schools and healthcare provision, or caring for the elderly and vulnerable children. But that is not a proper way to think about it. Libraries must remain because they are at the heart of our communities. They are places where people can come to learn and meet and place where lives can be changed through the empowerment that those things bring. I know that that is true by having seen my own children's joy at paying a visit to our local library. There is no question but that the archives also must continue. They are our nation's memory and without them we cannot know ourselves.

So what are we to do when the axe must inevitably fall? First, closures that are based on short-term cost cutting will be irreversible and must be avoided at all costs. But who will be there to oversee all this now that MLA, the organisation overseeing museums, libraries and archives policy, is being disbanded? Arts Council England will take in libraries, but archives have been orphaned and are without a policy home. I implore the Minister to consider carefully who will advocate for archives from now onwards. Can he tell the House what plans are in place to oversee the archives?

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Secondly, archives have for too long missed out on funding that has been forthcoming for museums. With the closure of MLA, it is extremely important that whoever oversees the archives in future can help the sector to gain fairer access to public money than they have enjoyed in recent years. Thirdly, I ask the Government to keep a close watch over progress on this and to ensure that the situation is reviewed at regular intervals.

The Arts Council is having to take over libraries policy at a time when it already faces a budget cut of 30 per cent in relation to its current responsibilities, on top of which it will have to make a 50 per cent cut in administrative costs over four years. That is a huge challenge. Surely checks and balances need to be in place to ensure that the Arts Council has the knowledge to deal with its new responsibilities. A governance review should be instigated immediately so that knowledge within the organisation properly reflects the weighting of its new responsibilities. More importantly, there must be a review within a year or so of how these new arrangements are working and of their impact.

3.38 pm

Lord Bragg: My Lords, I, too, thank the noble Earl, Lord Clancarty, for securing this debate. I also congratulate my noble friend Lady Bakewell on an exceptional maiden speech. I declare an interest as president of the National Campaign for the Arts.

We are seeing a rather mindless scything down across the land-"swish, swish" goes the scythe, and down come the weeds; but down, too, come the crops and the blooms. And who is scattering the good seed on the land? They swish and chop away, the coalition cutters, with little discrimination and less differentiation, but above all they fail to identify that which will grow the future-the knowledge industry; niche, high quality, intelligent, globally marketable; we are good at it, and have been for a very long time, in the sciences, technology and the arts.

How much more do the arts in this country have to prove? It bears repeating that for every pound the Government invest, up to £15 is generated. About 2 million highly skilled people are employed in the field. From a modest start after World War II they have burgeoned into an aurora of lights-London, the world centre of music and theatre, as we heard, and a constellation of interdependent disciplines; more book festivals than any other country on the planet; contesting with America for the lead in musicals, the fine arts, films and pop music, with our television and radio richly irrigating the process. It works, it grows. Why slash it? What gain is there? I would appreciate an answer from the noble Baroness, Lady Rawlings.

Over the past half century we have forged a creative economy that is not only envied but magnetic in its galvanising effect. Recent intensive research in America has shown that when there is fierce and successful economic growth, it is essentially bound up with an arts culture that is in itself fierce and successful. The Silicon Valley story, for instance, owes a great deal to the technology of the west coast, but it has been convincingly proved that it also owes a great deal to the creative pulse that rocked and rolled and flower-powered through California in the 1960s and 1970s.

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When we consider the past, we find that these nodal points of prosperity and advancement share that characteristic-none more than in the glory that was Athens in the 5th and 4th centuries BC. By chance, I did a radio programme on Aristotle last week. What he wrote is central to this debate. He has influenced civilisations for two and half thousand years, so I am sure that your Lordships will give him a hearing here today in your House.

Aristotle lived at a time when creativity and intellectual excellence across the waterfront-science, technology, the economy and the arts-were seamlessly plaited together, and appreciated and supported. The result was a marvel of dynamic growth and a world-changing civilisation. Professor Angie Hobbs of Warwick University pointed out that Aristotle thought of art as much more central to human existence than mere pleasure. He believed that the correct appreciation of art was crucial for the formation of a person's character and would improve their behaviour in society as a whole. He developed this in his other works, and, importantly for this debate, he included it in his description of the best way to educate children.

This is a truth stated then which we can see, and see working now. For instance, a few years ago I made a film with the composer Howard Goodall to show how the introduction of choirs and orchestras into schools had a spectacular effect on the children. Their discipline improved and their self-worth soared. In those schools we saw children-particularly children from underprivileged backgrounds, soon to be more underprivileged-discover, through playing instruments and singing in choirs, the joy, the self-respect and the pleasure of learning, which was a revelation to them. The disadvantaged were given an opportunity and they seized it. These institutions will now be cut.

I suggest that this debate is not only about funding of the arts or the strength of the unique UK tripod of public funding-30 years in the making-through a newly effective Arts Council, of business investment and the box office. It is about giving fuller, democratic advantage to people, especially the children in this country, so that through knowledge and skill in the arts they can have a chance to make the best of themselves and the best of a society that badly needs to look after its own more carefully. This debate is in many ways every bit as much about funding our future as it is about funding the arts.

3.44 pm

Lord Colwyn: My Lords, I take the opportunity that this debate, expertly introduced by the noble Earl, allows to remind your Lordships of the significant contribution of jazz to the economy. According to a new survey carried out by Mykaell Riley and Dave Laing at the University of Westminster for Jazz Services, called Value of Jazz in Britain II, jazz is worth more than £80 million to the British economy. There is an increased interest in jazz among the 15 to 34 age group and a rise in the number of women active in jazz. Yet, most British jazz musicians earn a wage below the national average. The report found that jazz contributes to economic, educational and cultural life at all levels. I declare an interest as a very mediocre jazz musician myself; co-chairman of the All-Party Jazz Appreciation

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Group, which is supported by PPL; a patron, along with the noble Lords, Lord Bragg and Lord Puttnam, of the National Youth Jazz Orchestra; and as someone involved with the Yamaha annual jazz scholarships for young people.

There is an active jazz scene in all major UK cities. Musicians with established reputations and young musicians, many with great flair and originality, seek a serious audience who can understand and enjoy their music. Many UK jazz musicians have developed international reputations for live performance and have recordings that are seen and bought by a worldwide audience. Every year there are jazz festivals all over the country, many featuring some of the finest jazz musicians in the world. More than 3 million people patronise these events with five times that number expressing a definable interest in jazz.

While jazz continues to attract these audiences, 80 per cent of its musicians earn less than £25,000 a year. This is not helped by the current economic climate where there seems to be increasing public reluctance to pay for music. Yet falling CD sales in a download culture are having a smaller impact on jazz income than might have been expected, and ticket sales and public and private subsidy all showed modest but significant increases between 2005 and 2008. The report also reveals a thriving small-scale recording scene among British jazz musicians with widespread and growing use of the internet to sell recorded music.

A different kind of jazz venue has emerged located in a church, library, museum or community centre in response to the new licensing law's red-tape challenge to pub gigs. Jazz festivals also expanded and brought new money. The current situation over the licensing of live music, which has had such a detrimental effect on young musicians, is confusing. My noble friend Lord Clement-Jones is waiting for the second Second Reading of his Live Music Bill. The noble Lord, Lord Davies of Oldham, was encouraging in June 2009, and the coalition Administration have made sympathetic noises, but the problem is not resolved. The Licensing Minister, John Penrose, has suggested that plans to cut red tape for live music are out of his hands and are dependent on consent from the Department for Work and Pensions and the Home Office. In a Westminster Hall debate on Tuesday 25 January, he referred to the many aspects of licensing for live music that are covered by existing legislation, but live music at small events is not exempt. The only arguable justification for a licensing regime pre-emptively criminalising the provision of live music subject to prior consent from the public or the local authority, or both, is where there is the potential for a significant negative impact on the local community that cannot be adequately regulated by existing legislation. This is clearly not the case for the vast majority of small gigs taking place within reasonable hours. It would be very helpful if the Minister would write to me with an easy-to-read explanation of the current licensing situation on live music and small venue exemptions.

The annual turnover of the jazz sector of the British music industry is in excess of £88 million. The report by Jazz Services, as part of its Arts Council England development project, found that sales of CDs through shops and websites and at gigs reached almost £40 million,

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while ticket sales for jazz concerts and festivals were worth £22.5 million. The report estimated that there were 45,000 jazz performances per year in the UK and that jazz received more than £4 million per year in public funding and a much smaller amount in commercial sponsorship. Audience research on music and other art forms showed that more than 3 million adults had attended at least one jazz performance in the previous year, with a core audience for jazz estimated at 500,000 compared to 400,000 for classical music concerts and 100,000 for folk music events. I hope that the Arts Council will recognise this when the new funding arrangements are considered in March.

3.49 pm

Lord Luce: My Lords, my noble friend Lord Clancarty has done a great service in introducing this timely debate on arts funding today. I declare an interest as president of the King George V Fund for Actors and Actresses, president of the Voluntary Arts Network, the amateur arts parent body, and president of the newly formed Commonwealth Youth Orchestra. It was just over 20 years ago that I retired as Minister of Arts having had the privilege of five years in that job. Just before I retired, I recall that the journalist Melanie Phillips wrote this:

"The best thing to do with Richard Luce is to have him stuffed and tucked away in the Natural History Museum".

I took that as a great compliment. Unfortunately, in the past 20 years I have not had time to visit the museum but I have had time to watch with interest and pleasure the improvements that we have seen in the arts world. One great pleasure today is of course to welcome the noble Baroness, Lady Bakewell, whom I recall so well from my time as Minister of Arts. She will make a great contribution in this House.

Perhaps I may make a few reflections on how things have improved in the past 20 years or so. First, the introduction of the National Lottery was a massive improvement for the arts and I welcome the fresh injection now of another £50 million in that area. Secondly, there is the expansion of the creative industries, on which the noble Lord, Lord Bragg, led a debate just under two years ago and which today make a major contribution to the wealth of the nation. Thirdly, the credit must go to the Labour Government for the increase in resources that they gave to the arts over the past 10 or 12 years, although it is sad that the economic crisis that is now being faced leads to such volatility in the funding of the arts, let alone in other areas.

I want to reflect on one or two other things in my short time. First, it is vital that we maintain through this time of adversity the standards of excellence and access to all, because everybody has the capacity to enjoy and to participate in the arts. Secondly, we have to recognise an important change: it is not just about London, which we used to be told was the only real centre of excellence. All parts of the country now enjoy standards of excellence in the arts, from Edinburgh to Glasgow, from Cardiff to Leeds and Chichester, and so on. That is a major improvement. Thirdly, we must not underestimate the importance of the amateur arts-I declare an interest as president of Voluntary Arts-where nearly 10 million adults participate actively in drama, crafts, painting and all kinds of arts. There

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are 49,000 arts bodies in this country. They do not demand money but what they want, to enable them to flourish, is to be freed from all the regulations and red tape that exist today.

That leads me to my main point, which is the funding structure. I agree with other noble Lords who have said that we are placed somewhere between the United States, which gives very little public support to the arts, and the continent, where there is much more of it. That we are somewhere in the middle is illustrated by the experience of the clients of Arts Council England. On average, one-third of their income is from box office, one-third from sponsorship and one-third from the taxpayer. Now, long may that last, because diversity and plurality of funding are absolutely essential to the arts to give them independence from any one source of funding-and certainly from state control.

In 1980, the National Theatre depended on taxpayer funding for 60 per cent of its support. It is quite a remarkable achievement that today the figure is down to 30 per cent. The Royal Academy-I declare an interest as an emeritus trustee-is totally self-generating. There, more than 90,000 friends give vital support, which is a lesson to be learnt for many other organisations: that the support from friends can do so much to finance arts bodies and that retaining the arm's-length principle is absolutely essential.

That leads me to my final point about the background of these cuts. They are familiar to me. Much of the language that I hear today I can recall from the 1980s. I recall one day when I was able to go to the then Chancellor, the noble Lord, Lord Lawson, and prove to him that for every £1 of taxpayers' money I could get back £5 from the private sector. I believe that might be more difficult to achieve today. Nevertheless, that kind of partnership or challenge funding needs to be the way that we go. I end on the point that the chance now is for this Government to produce a whole range and battery of proposals which will encourage the climate of giving in this country-not so that we can ever be like the United States but so that we can at least know that there is a wide range of incentives to enable us to give more to the arts. We should take this time as a challenge to do just that.

3.54 pm

Lord Scott of Foscote: My Lords, I thank the noble Earl, Lord Clancarty, for initiating this debate and congratulate both the noble Baroness, Lady Bakewell, and the noble Lord, Lord Wasserman, on their notable maiden speeches, which have contributed significantly to the debate.

I declare an interest, which is not a personal interest, in that my wife is the chair of the Arts & Heritage Alliance Milton Keynes and a member of various constituent organisations in that alliance. Due to her offices, I was acquainted with the report produced by an organisation called the Culture Forum, which was formed under the initiative of the National Campaign for the Arts some time last year so that a collective voice for the arts and heritage sectors could respond to the Government's call for a national debate on the economy and, among other things, speak for the public funding of those two sectors.

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The Culture Forum's report from last December-I believe that a copy was sent to Ministers, but in any event I have provided a copy to the Minister who will respond to this debate-contains practically all that needs to be said on this important question of the value of funding for the arts and the manner in which the possibility of cuts for that funding should be approached. The forum makes a powerful case for the importance of public funding of the arts. It makes clear the influence of initial public funding for a particular cultural activity or cultural organisation that acts as a magnet to attract private funding for the event or organisation. Together, those funding streams can create economic activity that produces a value of many times the amount of the initial public funding. That multiplier effect of public funding is highly important and should be borne in mind by the Government when considering what, if any, cuts to make to the public funded arts sector.

I shall give an example of that close to my personal home. When Milton Keynes staged an international festival for the arts for the first time last year-Milton Keynes is something of a new city anyway-the festival got off the ground with public funding of something like £600,000 from Milton Keynes Council and other public bodies. That public funding enabled the sponsors to attract private funding of something like £1.8 million. As a whole, that funding led to a very successful festival that lasted nine days, attracted some 90,000 people and generated an estimated £45 million-worth of economic activity in the Milton Keynes area. Similar evidence can be given from other examples-I think of Liverpool's experience when it was the culture capital of Europe in 2008.

Another feature that the Culture Forum report makes clear is the value of the arts and heritage sectors in promoting the health and well-being of society generally. We hear a good deal of talk these days about the so-called "big society", but I doubt whether there can be a big society without a healthy cultural sector. Correspondingly, an impoverished cultural sector in the community is likely to be a sure sign of a community impoverished in many other respects. There may be an unanswerable case-there probably is-for cuts to be made in public spending of various sorts, but of course the Government and other public authorities have to decide where the cuts will fall. In deciding what cuts, if any, should be imposed on the arts and heritage sectors, the value of those sectors must, I suggest, be borne clearly in mind.

The first paragraph of the Culture Forum report states:

"Arts and Heritage is one of this country's greatest success stories. It goes to the heart of what it is to be human. It is a force for good in health, education and strong communities. It is vital for tourism, foreign earnings and urban and rural regeneration. In this field we are world class".

If cuts there must be, let the Government be careful not to achieve through those cuts the result-for which they would not easily be forgiven-of drowning the baby or throwing it out with the bathwater.


Viscount Eccles: My Lords, I add my thanks to the noble Earl. I cannot resist commenting on the contribution of the noble Lord, Lord Moser. I remind him that

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more and less difficult times come and go. More importantly, I wonder whether it was my father who accused him of whingeing; come to think of it, that would sound very like him.

My point is about how we deal with the present situation, rather than how we got there. I am informed by the Arts Council that one of its five rubrics is that arts organisations need to be sustainable, resilient and innovative. There might be an overlap between sustainability and resilience. Of course, there are different views about innovation. Even some of the recent performances of "Hamlet" have created cries of "Well innovated!"

I could talk about quite a number of different organisations, because I am a sort of long grass-roots fundraiser, but I will talk about the Georgian Theatre Royal, Richmond, and its finances. It is a small organisation. In one of our briefings, it is threatened. The theatre was built in 1788 and went dark in 1842, but it came alive again in 1963. Much credit goes to the wives of previous members of your Lordships' House. The wife of the late Lord Crathorne was instrumental in leading the recreation of the theatre, as then was her sister, the late Baroness Elliot of Harwood. Finally, there has been the present noble Lord, Lord Crathorne, and his wife, who sadly died about 18 months ago.

The theatre has two charities: it is itself a charity, and it has a fundraising and investment charity. It keeps underlying control of its finances separate from the management of the theatre, which is probably wise because theatre managers are not always fired up by a close control of money. It is lucky because it is in Richmond, which is of course much older than 1788 and has a castle, a fine cobbled square, the Landmark Trust's Culloden Tower and the Green Howards Regimental Museum. Richmond is not a place that welcomes top-down instructions. It has an amateur drama company and an amateur opera company. The staff of the theatre is small-sometimes very small-and not paid very much, so the theatre depends strongly on amateurs.

How is the theatre funded? Of course, it has had the lessons of history. There were hard times before, in 1842, and also when we were switched from Northern Arts to Yorkshire Arts. At that time, the policy of Yorkshire Arts was radically different from that of Northern Arts. We were thought to be rather unsuitable for funding by the people from Sheffield. We developed a model that we had in mind from experience. Our experience has been that we can generate about 50 per cent of our total costs from people coming to the theatre. We have one advantage, which is that we have heritage tourists as well as others who attend the about 100 performances of music, drama and opera-some professional and some amateur-that we have in the theatre in a year. That compares with a figure in the mid-40s, which is more the average number of performances.

Ever since the death of the first Lady Crathorne, we have been building up an endowment fund. That has been slow-it takes time-but our target is that income from that will fund 25 per cent of the cost of the theatre. We are more than halfway to that target, and I am confident that if we keep on down the same road we will get there. If you have 75 per cent covered, that

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is not too bad. It also gives you that flexibility and independence, which, if you are a citizen of Richmond who wishes to escape from being told what to do next, you will find very welcome.

4.06 pm

Lord Myners: My Lords, I also express my appreciation to the noble Earl for securing this debate and congratulate my noble friend Lady Bakewell and the noble Lord, Lord Wasserman, on their excellent maiden speeches, which show us all that they will be most welcome to our House and will be important contributors to many of our debates in the future.

I declare my interest: I am a trustee of the Tate Foundation and of Glyndebourne. I was previously chair of the trustees of Tate, briefly a trustee of the National Gallery and a trustee of the Royal Academy. My wife is the chair of the Institute of Contemporary Arts, having previously been chair of the Contemporary Art Society. The depth of declarations made by noble Lords in today's debate speaks powerfully about the experience of the House and how we can bring many wide and different perspectives to debates and discussions, not only on culture, as we do today, but on other issues.

I will not speak about the role of culture and art; others have done that admirably. Culture is certainly uplifting and helps us to understand ourselves and the context and society in which we live, but we have also been told by my noble friend Lord Puttnam how important the arts are as an economic sector. They employ more than 2 million people. I have seen for myself the impact that an arts institution can have on a local community, with Tate St Ives revitalising the economy of west Penwith in Cornwall. I have also seen the impact of an organisation such as Tate. Under the extraordinary leadership of its director, Sir Nicholas Serota, Tate now attracts 8 million visitors a year and is the most visited contemporary art museum in the world. There are more visitors to Tate Modern than to Pompidou and MoMA together. This is an important part of our economy and society. We all get joy when we go to these institutions, but we also see the joy that others get from sharing in the art that has been accumulated over so many generations.

I am sympathetic to the fact that the noble Baroness, Lady Rawlings, is very supportive of the arts. I know we can look to the noble Baroness for sentiments that we will find encouraging. However, she is in turn limited by the interface and negotiations that the DCMS is required to have with the Treasury. I add that I am delighted that this Government continue to endorse the concept of free entry to our major museums and galleries-one of the great achievements of the previous Government.

However, the simple fact is that this Government have concluded that they will not direct as much money towards culture as previous Governments. We have seen draconian cuts in national funding, and these are being exacerbated by cutbacks in local funding as well, which often affect the smaller institutions in the regions. We have already seen how this can lead to brutal actions in Somerset and Barnet. I fear that there is more of this to come. We are very fortunate

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that the Arts Council is responding to this challenge in a constructive way. It is highly efficient, well governed and economical, and it has worked well with arts institutions to explain the new reality and move to a new stage of funding for the future.

But what can we do to improve this situation? The Government can do a number of things. First, they can move to simplify gift aid. It is ridiculous that gift aid is still paper based rather than digitally based. This costs the arts sector and the charitable sector a great deal. That would be a simple thing for the Government to do. They could also encourage greater contributions through admitting higher-rate taxpayers into gift aid.

The Government could also extend the acceptance in lieu scheme. In reality, the most tax efficient way of giving in this country is through dying. We need to ensure that people can give in their own lifetime. In the same way that we allow acceptance in lieu against inheritance tax, we should allow it against other taxes. I particularly welcome the opportunity to advance the case that it should be permissible as a means by which non-doms can make their contribution to the £30,000 which they are required to pay. Non-doms are very important in our cultural sector. An opportunity for them to give to a higher value than the tax they are offsetting would be helpful. I hope that the Government will encourage the introduction of charitable remainder trusts, which have proved so successful in other jurisdictions, and that they will repeal Section 6 of the Finance Act 2010 to substitute a more practical implementation of the Persche decision.

Finally, we need to cultivate a new generation of philanthropists. I look forward to the report being produced by the committee chaired by Mr Tom Hughes-Hallett as there is an opportunity here, with the great riches that we now see in the City and in the financial community, to encourage a new generation of committed philanthropists. We need to see corporates giving more. As Mr Simon Robey, the chairman of the Royal Opera House, has recently pointed out, less than a third of our major FTSE-100 companies give any money at all to the arts and culture. We should seek to improve this situation and I look to the Government to take the appropriate steps.

4.11 pm

Lord Shipley: My Lords, I thank the noble Earl, Lord Clancarty, for initiating this debate and for reminding us of the importance of free admission to museums and galleries, and that public funding of the arts costs only 17 pence per person per week. However, I feel that the distribution of public spending on arts and culture in England is too heavily weighted towards London. In the next financial year of DCMS funding, three-quarters will be spent in London. Of Arts Council funding in 2011-12, £21.92 will be spent in London per head of population compared with just £3.44 in the rest of England.

I fully understand that London has many centres of artistic excellence and that people from all over the UK can benefit from them but that presumes that people, particularly families, can afford it-and, of course, the reality is that not many can. Therefore, I find the difference in spending between London and

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the English regions stark. It is even more so when lottery funding and private sector sponsorship are taken into account. An examination of lottery grants to arts and heritage over the past 15 years shows that 31 per cent of the total sum has gone to London, yet Londoners play the lottery less than any other English region, with only 32 per cent of households participating. In the north-east-here I declare my interest as a councillor in Newcastle and a board member of the Newcastle Theatre Royal Trust-56 per cent of households participate, with an average spend 60p higher than the average spend in London.

In addition, 75 per cent of all private sector sponsorship goes to London, so this is a plea for the English regions. Just last week the Royal Shakespeare Company, whose third home has been in Newcastle since 1977, announced that it would not be coming this year because it could not afford it, to the massive disappointment of thousands of theatregoers, but this is the consequence of the way arts public funding works. I sincerely hope that this can be addressed so that the RSC returns for the long term in 2012.

I turn briefly to film and media. Regional funds have been lost with the decision to close the regional development agency. Here I declare my interest as a board member of One North East. National funding is being lost because of the abolition of the UK Film Council with the regional screen agencies. Although there will be a replacement in Creative England through the British Film Institute, there are suggestions that Creative England will receive a reduced amount of grant in aid, compared to the old screen agency network, and will need to use most or all of its grant to cover its establishment costs and overheads, leaving very little to distribute. The film sector needs urgent advice on its future funding levels. The problem is that, with its existing agency abolished and replacement agents wrapped up in their own internal change, the sector is being told very little.

The fundamental changes being made in the management and distribution of funds for film in the UK are complex and will clearly take time to be resolved. However, in the mean time, the immediate danger is that while these new structures are put in place, a vacuum is opening up which could threaten the UK's film infrastructure in the coming year. Therefore, with just a few weeks to go to the start of the new financial year, I hope that the Minister can clarify what transitional funding arrangements for 2011-12 DCMS has planned for the numerous small independent arts cinema and film festivals across the country that make up the real heart of Britain's specialised film culture. I should like my noble friend to reassure us that DCMS and the Arts Council will remember that England has regions which need fair and equitable treatment.

4.16 pm

Lord Chorley: My Lords, I thank the noble Earl for giving us the opportunity to discuss this important subject. The lengthy list of speakers-my goodness, what a range of experience has been shown-is a testimony to the importance of the subject. I intend to restrict my remarks to one, in a sense, rather narrow subject that is different from all the earlier speeches,

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with the possible exception of the remarks of the noble Viscount, Lord Eccles-the importance and relevance of endowment funding. It is an insurance against the vagaries and ups and downs of annual government grants. The trouble is that endowment funding in a period of government cuts, as today, appears peculiarly unattractive. However, I understand from the noble Viscount that Richmond has good endowments and shows a degree of buffering.

I start with a few words of historical background. Many years ago, in the early years of my association with the National Trust-many years later, I was privileged to be its chairman-it was experiencing financing difficulties with the stately homes and estates that it had taken on with inadequate endowments. I was asked by the trust's then finance committee to come up with ideas. The result was what became known as the Chorley formula. This is neither the place nor the time to go into the details of that. Suffice it to say that the formula was relatively simple, but to some it appeared to be unduly expensive. Nevertheless, the formula has worked pretty well and is still being used 50 or so years later, in spite of inflation.

The big breakthrough in its adoption came when that splendid organisation, the National Heritage Memorial Fund, gave its support for the formula in relation to future properties that we wanted to take on. The formula was endorsed by the fund, particularly by its then chairman Lord Charteris, who alas is no longer with us. It was hugely important to have his support, because the formula was strongly opposed by Whitehall, which considered that it tied up far too much funding and was too much "belt and braces". You did not get much bang for your buck, as it were. This short-termism has always been the great problem of Whitehall.

The important point about the formula was that it was designed to deal with the ongoing costs of the operating deficits of heritage and arts organisations, with a reasonable certainty that it could cope with future inflation. Future inflation was, and remains, the problem. In other words, the formula would deal with ongoing costs, not the initial or acquisition costs-for example, the cost of acquiring a great work of art that needed to be saved for the nation. Put simply, endowments have their role, which is to cover the basic operating costs or overheads-for example, staff salaries or building running costs-of an organisation which has charitable status. The National Theatre would be an example.

I am a fan of endowment funding in the appropriate circumstances. I suggest that the Government look at developing greater use of it. If there had been more endowment funding in the past few years, I suspect that we would have had a rather different debate today. I was therefore surprised, indeed, rather pleased, to learn that the Government had commissioned a paper on endowment funding by Alan Davey. Given that he is the chief executive of the Arts Council, it deserves to be taken seriously. While it is not easy going in all respects, it is thoughtful and thorough. I conclude by quoting just a few sentences of the concluding paragraphs:

"Recommendations for action are split into two key areas ... action that the Arts Council will take to help support the organisational development of arts organisations towards the goal of increasing

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private funding sources, and as part of that, the use of endowments ... action that the Arts Council suggests could be taken elsewhere to more greatly incentivise giving in England, easing the conditions under which arts organisations undertake their fundraising activities".

4.21 pm

Lord Evans of Temple Guiting: My Lords, I join everybody in thanking the noble Earl, Lord Clancarty, for initiating this debate. He told us that this was the House's first debate on the arts for 18 months, since a debate initiated by my noble friend Lord Bragg. This has been such a wonderfully interesting afternoon that I hope that, from now on, we will sit all night talking about the arts rather than other matters.

We heard two very good maiden speeches. It is good for the arts to have my noble friend Lady Bakewell making a contribution here. I also congratulate the noble Lord, Lord Wasserman, on his contribution.

The question before us is quite simple. Although funding is the subject of the debate, a far greater issue than simply money is at stake. The question must be: what sort of country do we want for ourselves, and, most significantly, what do we insist upon for the future? The noble Earl, Lord Clancarty, raised that issue in his opening speech.

As many noble Lords have made clear, the arts make a huge contribution to the financial wealth of the nation. Earlier this week newspapers reported that manufacturing output increased in January by the highest percentage since January 1992. It was also widely commented that sterling rose. However, as a footnote, economists emphasised that the manufacturing sector accounted for less than 13 per cent of the economy. We have the huge task of making our political masters and the press realise that the creative economy contributes as much to gross national product as manufacturing does. Various figures have been mentioned today, including 7 per cent and 9 per cent. I have given a few lectures on the creative economy and always use the figures 12 to 14 per cent. It would be interesting to hear from the Minister, either today or by letter, the Treasury's latest estimate. When did we hear a Prime Minister, Chancellor of the Exchequer or a senior Treasury Minister identify the fastest-growing sector of our economy, namely the creative industries, fuelled by public funding of the arts?

I will give a current example. Many noble Lords will have seen a film called "The King's Speech". It cost less than £10 million to make, it is doing very well in America-I do not have the figures-and here it has grossed $27 million to date. It has 14 BAFTA nominations and will be the biggest grossing independent film of all time. This huge, developing success will make a significant contribution to the creative economy. Yet amazingly, given the British record in filmmaking, the Film Council is being abolished.

I turn from the economic contribution of the arts to the equally important contribution that they make to society. What sort of country do we want? The answer to that should inform how we treat the arts and how the Government should respond to their responsibilities. What is the benefit to the people of the United Kingdom from the feast of fantasy, imagination and history that makes up our culture?

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Do we not understand the educational and emotional benefits of being able to absorb, on our doorsteps, in cities, towns and villages around the country, the presentation of the past as well as, critically, the future fruits of artists, designers, writers and composers working today?

I will quote from the New York Times. Philip Pullman, author of the His Dark Materials trilogy, gave a speech in Oxfordshire. The subject was Oxford County Council's plan to stop financing 20 of its 43 public libraries. He said that,

He continued to attack,

What he registered so forcibly is the fact that a hidebound Conservative approach to deficit reduction creates a social austerity far more harmful than the deficit itself. I look at the Arts Council budget being cut by 30 per cent over four years in the light of this statement.

While huge strides have been made in attracting private philanthropy for the arts, such largesse cannot be a substitute for continued government support. While we owe great gratitude to corporations and individuals for their generous support of favoured institutions and events, what about less fashionable projects? As the noble Earl, Lord Clancarty, wrote in the Guardian last year:

"Philanthropy cannot be a replacement for bodies such as the Arts Council, which reaches out ... and provides the necessary, often long-term funding without which much ... work would otherwise be lost".

It would also help if a central appeal made in the 2004 Goodison review of the funding for museums and acquisitions could be revisited and fully implemented. John Whittingdale, the Conservative chair of the Culture, Media and Sport Select Committee, asked in 2007:

"When will the Treasury respond to the report's tax recommendations, which have universal support in the arts world as a means of substantially increasing private giving at relatively modest cost?".

I was the first chair of the MLA, which is to be merged with the Arts Council. I will ask the Minister two or three questions because, as the MLA's first chairman, I thought that it was a wonderful organisation, and think it continues to be so. One of our first reports was Renaissance in the Regions. We hear that its funding is to be cut. I would be very grateful if the Minister could tell us where the cuts are going to be made and the precise percentage of those cuts. My recollection is that it has been an extremely successful and important initiative.

I should also like to ask what the Government's reaction is to the ferocious and spontaneous opposition to public library cuts that is emerging daily throughout our country. In her maiden speech, the noble Baroness, Lady Bakewell, stressed that the importance of libraries in the life of young children cannot be overstated.

I have one final question about archives-a matter referred to by the noble Lord, Lord Freyberg. I agree with him that they are incredibly important, and they

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were a central part of the MLA'a agenda. What is happening, and where will the investment come from? Does the Minister recognise the absolute importance of archives?

We must recognise that the arts are not a mere add-on; they are as much a part of our way of life as the National Health Service and they are a major generator of national wealth, both economic and cultural. I look forward to the response of the noble Baroness, Lady Rawlings, to some of the points that have been made in this debate.

4.31 pm

Baroness Rawlings: My Lords, I, too, congratulate the noble Earl, Lord Clancarty, on securing this debate and on his informed and valuable introduction. As an artist in his own right, his contribution is all the more valuable to this discussion. I am grateful to him for his consistency in keeping the subject on the public agenda.

Your Lordships' House counts among it several distinguished Peers who have highly responsible positions in the arts, including many artists, writers, composers and impresarios, as well as art lovers, many of whom have spoken in this remarkable debate today. It is indeed encouraging that we, as a nation, are so passionate about the arts and that their future is being discussed again today in this Chamber. I am so pleased that the noble Lord, Lord Evans, has answered this debate for the Opposition. He has spent much of his life involved in the arts and he understands how important they are. I shall write to him with details about Renaissance and the MLA, as there is not an enormous amount of time in which to respond to him now.

The arts are important for countless reasons, many of which have been highlighted by noble Lords this afternoon. They are important to our nation because they give a sense of who we are. Britain evokes thoughts of Shakespeare, Orwell, Turner, Elgar, the Beatles and many more. I agree with my noble friend Lady Bonham-Carter that the arts are important because they communicate the tremendous joy at being alive, and they can communicate, too, the sadness that one can experience. As Pablo Picasso said:

"Art washes away from the soul the dust of everyday life".

They are important because regular participation in the arts is proven to make us healthier and happier. The noble Lord, Lord Evans, is right: the arts also contribute to our country financially; we are a nation famous for our cultural exports.

I reassure the noble Lord, Lord Howarth, the noble Baroness, Lady Young, and my noble friend Lord Brooke that this Government do indeed value the arts in every sense. We recognise their vital role in British society. I thank the noble and learned Lord, Lord Scott, for stressing the value of the arts in heritage. They also play a vital role in the big society and we will continue to support them during our time in government.

Many noble Lords have shown concern about cuts, including the noble Lord, Lord Puttnam, whose expertise in this area is well known. The Minister for Culture, Ed Vaizey, recently told a Commons Select Committee that he would give a blank cheque to the arts sector if he could, as would we all. His and our hands are tied somewhat by our inheritance of the worst peacetime

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economic conditions in living memory. The coalition Government, however, have made a commitment to eliminate the structural deficit by 2014-15 and our challenge is to fulfil that without causing irreparable damage to British cultural life. The former is under way; the latter is still a challenge, especially for services such as schools, hospitals and our Armed Forces.

As a department, DCMS has had to contribute towards achieving that through the spending review. The arts budget is not immune and the Arts Council's grant from DCMS has been cut by 29.6 per cent. Within that, the budget that immediately supports organisations that create or enable art will be cut by no more than 15 per cent over the next four years. The Arts Council will announce its funding portfolio for the next three years within two months of this discussion. Understandably, some organisations may see their funding reduced and some may see their public funding cut entirely, but the British system has always shown itself to be resilient in challenging times.

I add my congratulations at this point to my noble friend Lord Wasserman on his eloquent and witty maiden speech. He spoke so many words so dear to my heart and I agree with his pleas for active participation and for buying young artists' work. Perhaps I should declare an interest in having owned a contemporary art gallery from 1969 to 1988. We need public support for the arts as well as state funding. This House and the Government will benefit from his knowledge, especially of philanthropy tax measures, which, as he knows, are a matter for the Chancellor of the Exchequer.

That leads me to philanthropy, which, in my view, should mean charitable giving without counting the cost. Much has been made of this Government's plan to foster philanthropy, as many noble Lords have mentioned. Let me reassure the House that this is not a plan to replace government funding for the arts but a route to help arts bodies to diversify their income sources. Philanthropy and business support will continue to be key income streams for culture in the years ahead. It will not be easy. We know from many years of experience that relationships take time to be nurtured and we believe that there is still considerable scope for growth in private giving to culture. We are committed to supporting culture in fundraising activities. There is some concern that fundraising is more challenging in the regions outside London. I am sure that that is broadly right, but it is not impossible that many cultural bodies outside London are already securing significant investment from donors and corporate support. I appreciate the kind words from the noble Lord, Lord Myners, and support what he said regarding our outstanding museums and galleries. I will take away his important suggestions concerning "in lieu".

Some concern was expressed by several noble Lords that cultural education programmes will be most badly hit by these cuts. I thank my noble friend Lady Benjamin for her passionate contribution. She continues to be a wonderful advocate for both the arts and young people and I shall write to her on her specific questions. I understand her concerns and those of many others. I believe that it was Sophocles who said:

"Whoever neglects the arts when he is young has lost the past and is dead to the future".

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I agree with the request of the noble Lord, Lord Moser, for the Government to have a vision; the concern of the noble Lord, Lord Aberdare, regarding the support for music; and the plea of my noble friend Lord Colwyn for more support for jazz. One of our priorities for arts and cultural education is to make certain that all children learn an instrument and learn to sing-which is, I dare say, music to the ears of the noble Lord, Lord Moser. It will, I hope, provide reassurance to say that children and young people are one of the Arts Council's priorities for the next 10 years, as mentioned by my noble friend Lord Eccles. The Government will make certain that the young do not miss out on artistic involvement. I am sure that noble Lords will look forward to reading Darren Henley's independent review of music education, which will be published imminently.

I shall say a few words on higher education and, specifically, the role of conservatoires, as raised in the eloquent speech made by my noble friend Lord Black. As he is aware, that is a decision for the Higher Education Funding Council for England, but I reassure him that the Government are well aware of his concerns. The noble Lord, Lord Bragg, mentioned education. He has great experience in that field. His programme on Aristotle tied into the debate concerning education. If I may add one of my favourite quotations, Aristotle said:

"The roots of education are bitter, but the fruit is sweet".

Several noble Lords, including my noble friend Lord Shipley, raised the issue of local authorities that have had to cut their support to arts organisations and libraries. I spoke about libraries the other day. I understand the concern about that development. It is the Government's belief, however, that decisions are best taken at local level. We believe that local government best knows the people and the communities that it serves. We may not always agree with the decisions being taken at local level, but we support each council's right to make them.

I welcome the noble Baroness, Lady Bakewell. I cannot claim to compete with her on the crumpet stakes but, whatever her merits are in that field, they pale into insignificance alongside her knowledge, experience and lifetime contribution to the world of the arts. I reassure her that this Government believe in the arts reaching everyone.

I thank the noble Lord, Lord Luce, for his work in the voluntary arts sector. We will continue to work with that sector to encourage participation.

I thank the noble Lord, Lord Ramsbotham, for his informative contribution on the arts in the criminal justice system. I thank him for his tireless work as president of the Arts Alliance and hope to reassure him when I say that DCMS officials will continue to work with Ministry of Justice colleagues in that area.

The Government are well aware that the next few years will be difficult for the artistic world. We are a nation of art lovers. People are encouraged to visit us to experience the quality of our culture. I am confident that, as long as artists continue to produce exciting, innovative and challenging work-work that the public want to experience-they will go from strength to strength under this Government. I am confident, too,

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that the financial support provided by this Government will continue to support a strong arts infrastructure. With the correct measures put in place, this Government will oversee a considerable increase in the amount of charitable giving to the arts.

Your Lordships' House can boast the most distinguished and experienced group of people, unrivalled anywhere. We have had a most outstanding, constructive debate, from which I am sure that we have all learnt a great deal. This is the House of Lords at its best. I thank noble Lords for their knowledgeable and wise contributions to this debate, especially the two maiden speakers, the noble Baroness, Lady Bakewell, and my noble friend Lord Wasserman.

I apologise to those noble Lords who have contributed but to whose many points I have not been able to respond. Unfortunately, time is limited. I will of course write to my noble friend Lord Colwyn and to all noble Lords to whom I have not responded. I will look into their points and take them back to the department. Once again, I thank the noble Earl, Lord Clancarty, for giving us this special opportunity. I look forward to future discussions on this issue.

4.46 pm

The Earl of Clancarty: My Lords, we have had a remarkable debate today with a nerve being struck not just by the number of speakers that we have had but by their passionate and varied opinions, as well as the considerable concerns voiced about the Government's commitment to the arts and the direction being taken. I thank all noble Lords who have taken part. In particular, I congratulate our two maiden speakers, the noble Baroness, Lady Bakewell, and the noble Lord, Lord Wasserman, on their excellent and thoughtful speeches. I am sure that we will hear much more from both of them. I thank the noble Baroness, Lady Rawlings, for her considered reply and I hope that we will return to many of the issues raised sooner rather than later. In the mean time, I beg leave to withdraw the Motion.

Motion withdrawn.

Investment Bank Special Administration Regulations 2011

The Investment Bank Special Administration Regulations 2011
12th Report Joint Committee Statutory Instruments

Motion to Approve

4.47 pm

Moved By Lord Sassoon

The Commercial Secretary to the Treasury (Lord Sassoon): My Lords, I beg to move that the draft regulations and the draft order laid before the House be approved. The global financial crisis and ensuing economic woes have shown us all the huge costs of inappropriate regulation, excessive risk-taking and overconfidence in the banking system. This was no

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more apparent than with the collapse of Lehman Brothers in 2008, where widespread panic gripped the financial markets and where clients in the United Kingdom were unsure as to whether they would ever recover the billions of pounds-worth of assets and money that they had invested. In fact, that is still being resolved.

We simply cannot afford a repeat of what flowed from the Lehman collapse. It is now our responsibility to develop an insolvency regime robust enough to handle the failure of investment banks. This is essential if we are to maintain the UK's position as the world's leading centre for financial services. However, let us be clear: while the regime being debated today is a step towards addressing this issue, the new regime by itself is not enough. That is why the Government are undertaking comprehensive reforms on both the domestic and international stage.

At home, we are overhauling the failed tripartite structure of financial regulation and strengthening our resolution frameworks. We have also set up the Independent Commission on Banking to advise on how to mitigate systemic risk in our financial system. We are looking forward to receiving the commission's recommendations in September. Internationally, the Government are working closely with the Financial Stability Board and the European Commission to develop a globally consistent approach to resolving systemic firms. This will help to create a level playing field, which is important to ensuring that UK competitiveness does not suffer.

Let me now turn to the focus of this afternoon's debate, which is the special administration regime. The current insolvency arrangements under the Insolvency Act 1986, although perfectly suitable for winding up most firms, do not take into account the complexities and conflicts that an administrator faces when winding up an investment bank. The administrator does not have an explicit objective to return client assets or to co-operate with market infrastructure bodies. Instead, the administrator must act solely under its objective to either rescue the company or maximise returns to creditors before winding it up. This potentially places the administrator in a difficult position if additional focus is required to return client assets or to resolve counter-party positions. The administrator is likely to require frequent directions from the court before taking the necessary actions, and this is extremely costly. The existing regime also creates uncertainty for investors as it is not clear that the administrator has a duty to work to return their assets and money. This is harmful to the UK's reputation as a safe place for investors to entrust their assets.

The special administration regime we are debating today addresses this uncertainty by giving the administrator a specific objective to ensure the return of client assets. It will also reduce the length of a potential administration and minimise the costs for creditors and for the wider economy, and it has undergone extensive public scrutiny to ensure that this will be the case. The proposed regime has benefited from the input of an advisory panel of over 30 industry practitioners. We have also consulted on the regulations themselves, and the introduction of the regime has the

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full support of many in the financial sector. This is because no one wants to see another failure like Lehman Brothers, where the administration is entering its third year with substantial sums of client assets still to be returned.

I shall now provide a brief summary of the two statutory instruments we are considering today, starting first with the Investment Bank Special Administration Regulations 2011. These regulations provide administrators with three statutory objectives. The first objective will give the administrator a duty to return client assets because it is essential that client assets are returned as quickly as possible to prevent any undue suffering and financial hardship. Having this first objective will allow the Financial Services Authority, if necessary, to instruct an administrator to prioritise the return of client assets above the other aims, a power I will return to later. Under these regulations, in order to achieve objective 1, the administrator will also be able to set a bar date for claims to client assets. This will significantly improve the speed at which client assets can be returned. The bar date will include safeguards to reduce the possibility of a client losing out from its implementation-for example, by failing to submit a claim. These safeguards will be set out in the insolvency rules which will be laid separately before Parliament shortly after these regulations come into force.

The second objective ensures that an administrator shares information with market infrastructure bodies. It is essential that when an institution becomes insolvent, the administrator works with the relevant clearing houses and exchanges, and with the authorities, to resolve all failed trades and all open positions. Without this co-operation, market confidence and the stability of our financial markets would be seriously undermined. It is also important that the administrator works with the FSA to facilitate any actions the authorities might need to take as a result of an investment bank becoming insolvent.

Moving on to the third special administration objective, this follows the example set out under the Insolvency Act 1986 to ensure that, in the event of an investment bank special administration, the administrator will continue to work in the best interests of all creditors in either rescuing the investment bank, if that is at all possible, or in winding it up. Having this objective means that the administrator is unlikely to be successfully challenged for working in the best interests of the creditors in winding up the firm. Under the new regime, the Financial Services Authority will have the power to direct the administrator to prioritise one or more of the special administration objectives over the others, although I should stress that the regulations make it clear that this power can only be used if it is in the interests of financial market stability.

Another important part of this regime is that if the administrator continues to meet payments, suppliers of key services to that investment bank will not be allowed to terminate their services. The proposal is relevant to all suppliers of equipment used by the investment bank in connection with the trading of securities or derivatives; suppliers of financial data and infrastructure permitting electronic communications

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services; suppliers of secure data networks provided by an accredited network supplier; and suppliers of data processing capabilities.

On the second statutory instrument, the Investment Bank (Amendment of Definition) Order, the Banking Act currently stipulates that only firms holding client assets are within the scope of the special administration regime. This order widens the scope of the special administration regime to ensure that firms holding client moneys are also included. This is because the Government and their investment banking advisory panel agree that it does not make sense to have two different insolvency regimes-one for firms holding client assets and one for firms holding client money. It is right that the new regime should apply in both instances as it is suitably flexible to do so. Separate insolvency regimes for firms holding client money versus those holding client assets would serve only to complicate further what is already a complicated process.

The Government have, however, excluded from the scope of the special administration regime institutions that hold client assets only for the purpose of carrying out an insurance mediation activity. We have done this for the simple reason that the special administration regime is not designed for these types of business activity. Firms conducting these activities will enter the same insolvency proceedings as before.

This legislation will help preserve the UK's reputation as a leading destination for investment banking. It is a clear demonstration that we have learned from past mistakes, that we are serious about financial reform and that we will do everything in our power to ensure that financial stability is placed at the heart of our regulatory agenda. The legislation is good for the industry and good for the customer.

5 pm

Lord Myners: My Lords, I support both the Investment Bank Special Administration Regulations 2011 and the Investment Bank (Amendment of Definition) Order 2011. The policy objective is to create a special administrative regime in the form of an administration procedure. The aim is to provide administrators with clarity and direction to resolve the firm without needing to approach the court on a frequent basis. These adjustments to current insolvency law will make the process less expensive and less disruptive for an investment firm, its clients and creditors and the market.

The Government have consulted widely and the response has been broadly supportive. It is important that we express our thanks to those who sit on the investment banking liaison panel for the time they have spent working on complex legislation and regulation to ensure that they achieve the Government's purpose.

The regulations and the order are being made, of course, under the enabling powers in Sections 233 and 234 of the Banking Act 2009, which I had the honour to take through the House. This arose as a consequence of the insolvency of Lehman Brothers, when unanticipated complexities emerged in resolving that investment bank, particularly in connection with client money.

The Financial Services Authority has taken significant steps to improve the supervision of client money and to address a number of areas where there were shortcomings and deficiencies. In particular, it has put

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a very strong team under excellent leadership in place to be responsible for the supervision of client money. These regulations are important to maintaining public confidence in the stability of UK financial markets and the integrity of institutions and firms operating in these markets.

I have two questions for the Minister. When Lehman Brothers collapsed, one of the difficulties we experienced was that Lehman was holding money in client accounts which were appropriately designated as client accounts and, accordingly, should have been kept separate from the assets of Lehman Brothers when it came to administration. However, Lehman had placed this money on deposit with a separately incorporated Lehman bank in Germany. The German authorities, after the collapse of Lehman Brothers, passed legislation to say that client money held on the accounts of this German banking subsidiary, when placed by an affiliated Lehman body, would not be deemed to be client money under German law. Is the Minister aware of whether any progress has been made on that point? Has this been raised at ministerial level recently with the German Government? It seems to strike at the very heart of the concept of the segregation of client assets which is intended to make sure that those clients are protected from any failure on the part of the institution with which they thought they had an agency rather than a principal relationship.

My second question relates to omnibus accounts. Will the Minister reflect on whether omnibus accounts are in themselves a source of hazard, and whether the practice of using omnibus accounts is one that the regulators should review in favour of looking at the case for requiring all accounts to be designated? Certainly in my experience, omnibus accounts undoubtedly increase confusion over the ownership of assets and the execution of certain fiduciary responsibility including, in particular, the voting rights of shares in UK companies at shareholder meetings.

Finally, I also express my support for the measures that the Government are taking in respect of the continuity of service arrangements, another problem that emerged with Lehman. The House should support the measures that the Government are bringing forward.

In closing I wish to mention a very crude term that is currently being used: banker bashing. Many members of the Government are engaged in banker bashing. The Secretary of State for Business and the Chief Secretary to the Treasury have made wholly uncomplimentary remarks about banks. Last night I was watching BBC "Newsnight" and was surprised to find the Mayor of London making uncharitable comments about banks. It is quite a volte-face, although it really takes him back to where he originally started.

It is important that we recognise that we have very many talented people working in investment banking in this country. I have had the privilege of working with them-they are in very many cases the best in the world, and they do not work only for our own banks. I would happily hear names like Royal Bank of Scotland. It is very easy to regard that as a bank associated with failure, but there are extraordinarily good people working there. Likewise, many people here in London work for firms such as Morgan Stanley and Citicorp, or for our

3 Feb 2011 : Column 1550

own pre-eminent investment bank, BarCap. We need to maintain context here. Of course some of these problems continue to be self-inflicted by the banks, and I wish the Government well in their talks under Project Merlin, which are intended to bring some sense to bank bonus decisions. However, we need to keep in mind that investment banking, and banking in general, are a source of incredible competitive and comparative advantage for the UK economy. These regulations are entirely consistent with providing the support for a reputable, solid and prudent banking sector of the sort that we should seek to encourage in this country.

Baroness Falkner of Margravine: In his defence of the banking industry, with which I broadly agree, will the noble Lord accept that the idea behind the Government asking bankers to be more responsible and to have a social conscience is not to imply that individual bankers are not worthy of their role and status in the industry, which is very important to us, but is directed at certain levels of remuneration? Irrespective of how talented an individual is, no single individual can add the kind of value-added that we have started to see in terms of remuneration and the bonus pool.

Lord Myners: I had almost concluded my speech but the noble Baroness's intervention has provided me with an opportunity to carry on and say more. There are very talented people working in UK banking and some of them are among the world's very best. They earn their remuneration. Sir Philip Hampton, the chairman of Royal Bank of Scotland, referred to a gangmaster culture in some of the banks. I put down a Question for the Minister on this subject, to which he gave his standard Answer on bank bonuses which I can now recite. Regardless of the Question I ask, I get the same Answer. Perhaps it will change at some point, but I am beginning to lose any great hope that the Minister will seek to answer the Questions that I ask him on these subjects.

The Archbishop of York: The noble Lord, Lord Myners, normally speaks with great sense and clarity on matters of money, but the question is not that banking is not an honourable profession. People who work in the banks are people of good will and good respect, and they do a very good job. The first question is about bonuses. People in this country find the bonus culture indefensible. The second question is about the gambling casinos around banking. Will they get rid of those gambling casinos? Many people say they do not like them. The question that the noble Lord asked the Minister about Lehman Brothers and deposit accounts in Germany illustrated the point. Some people say that that is not the honourable business of banking. Anybody who is having a go at banking is saying not that banking is not an honourable profession or that bankers are not very able people doing a good job but that these bonuses and the gambling casinos taint the entire profession of banking.

Lord Myners: I can only say that there are failures of agency functions here. The shareholders are not holding the boards to account, and the boards are not

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asking the right questions or building depth of talent. It may be that the Minister, with his great experience in this area, can share with us his thoughts about why banking has this problem of high bonuses. My father was a fisherman, and there was not a big bonus culture in fishing. There is no bonus culture in making ball bearings, in engineering or in the hospitality industry. I think the answer possibly lies with the work that the Independent Commission on Banking is doing. The Minister always treats anything I say positively with considerable scepticism and caution, but I repeat my strong endorsement of the creation of the Independent Commission on Banking. It may well raise some interesting perspectives on the points that have been made. I close by simply saying that I fully support the administrative orders being tabled today.

Baroness Maddock: My Lords, I strongly support many of the things that the noble Lord, Lord Myners, said in support of these orders, particularly the measures that allow for clients' assets to be recovered more readily. I have three questions.

Not only will administrators be able to prioritise the three objectives outlined in the instrument as they see fit, but they will also be able to continue to administer their organisations with a guarantee that suppliers must provide their services for up to a period of 28 days without pay. Have the Government fully identified the potential costs to suppliers who have to continue to provide their services for this period?

Secondly, I understand that the regulations allow suppliers to gain a court order to exempt them from this duty if they can prove hardship. Again, can the Government expand a little on the definition of hardship?

Lastly, on the bar date by which time claims for assets must be made, will the Government consider setting out what they think might be a reasonable amount of time to allow for claimants to properly state their case?

Having posed those questions, in summary I support these regulations and hope that the Government will give proper attention to the suppliers who must provide their services without pay and, of course, those clients who seek to recover their assets.

Lord Davies of Oldham: My Lords, I bring some comfort to the Minister, as he has already had a plethora of questions, which I know he will dutifully answer in his wind-up. I have a few questions of my own but I begin by saying that we welcome these regulations, which bring investment banks within the terms of the special administration or wind-up rules for banks contained in the Banking Act, which otherwise apply only to deposit-taking banks. As my noble friend Lord Myners reminded the House, this goes back to the Banking Act 2009 on which he led for the Government-I was pleased to give him some minimal support at the time and enjoyed that experience-but there was always going to be considerable secondary legislation attendant upon that Act. The regulations are part of that process, and we welcome them and commend them to the House, as the Minister will do in his final speech.

I also want to reassure the Minister that I do not think I will go far down the line on which my noble friend Lord Myners managed to stir up the attendant

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House-the issue of bankers' bonuses. There will be a time for debates on that and he will know that we are all watching the work of the independent commission on banking and awaiting its outcome. He will also know that the country expects the industry to be responsive to the obvious fact that mistakes were made and calamities visited both on this country and on the wider world economy because of the significance of the banks. In particular, he will know that their return to the bonuses concept affects our nation adversely in circumstances in which so many people are hard pressed for resources. That applies especially to the banks in which the taxpayer has a substantial stake. The Government must respond to this fundamental question: how is it that, when the rest of the country is suffering such privation, people can pay themselves such enormous sums in bonuses and do so on the basis of a taxpayer bailout? However, that is a debate for another day.

As I indicated to the Minister, I shall concentrate on one or two detailed questions. I want to ask about Regulation 6(1)(b), under which there can be an application for special administration if that is deemed "fair". Fair by whom? Presumably, the decision is made by the Financial Services Authority or the Secretary of State, but who defines what is fair? This seems a very loose term, in what are otherwise tightly drawn regulations, so I ask the Minister to comment on that point.

Secondly, an important element in reducing the vulnerability of investment banks is to require them to hold more capital and, especially, to limit their leverage. Can the Minister outline what steps are being taken to implement either of those measures?

In what ways is this legislation future-proof? Which agency will be responsible once the FSA is wound up? There is an important element of client protection in these regulations, which my noble friend Lord Myners referred to. Who is actually going to ensure that there is consumer protection? Investment banks deal predominantly in wholesale markets, so it might be thought that the Bank of England was relevant. It is clear, however, that once the FSA goes we need to know who is going to take responsibility regarding consumers in both areas.

5.15 pm

One of the key problems in winding up an investment bank is that it is not easy to identify client assets. Again, my noble friend Lord Myners identified some of these issues. That was a crucial element in the collapse of Lehman Brothers. There is nothing in the regulations to facilitate the matching of assets and liabilities for the firm as a whole. What steps are the Government taking to remedy this issue? What answers are they going to give on the issue that my noble friend first identified?

As my noble friend has introduced the subject of German legislation and the way in which the Germans have responded, is it not also the case that US authorities have taken important steps to facilitate netting by requiring derivative instruments to be traded with central counterparties? What is the position in Britain? We do not know what the UK Government are doing

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about these matters. The German and US Governments have already acted, and we need to know what our Government intend to do on these matters.

A truly effective resolution regime-that is, a special administration or wind-up regime-would embody a requirement that firms develop living wills. Will the Government require investment banks to do this? Have we any proposals on that point?

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