Perspectives - Increasing yield

Jim Beirne sees commercial financial models as offering the best hope for the arts in the face of shrinking public subsidy.
More or less everything we do in our work is a partnership between ideas and money. Great theatre, orchestras, new plays, new music and meaningful arts education all require vision, plus creative use of resources to make them happen and I dont just mean balancing the budget. Live Theatre, based on the quayside in Newcastle-upon-Tyne, is a distinctive new writing producer with a unique venue and loyal audience. There is a wonderful history of producing new plays over 30 years from writers such as C P Taylor, Alan Plater, and Lee Hall. Since I became its Executive Director in 2000, the creative output has trebled, we have secured one of the largest participation programmes in Newcastle-upon-Tyne, won various awards for our new film and TV projects, trebled our turnover and raised £5.3m towards a capital project that is nearly two-thirds complete.

Ideas and money

Art and patronage/investment go together: Michelangelo and the Vatican, Carnegie and concert halls, The Sage Gateshead and Sage Group PLC. The partnership between ideas and money is inextricably linked, and the experience is sometimes easy, sometimes not. And, depending on the continent where these partnerships exist, they are more, or less acknowledged.

In the USA cultural organisations are lucky to receive 10% core public funding. The new writing company The New Group Ensemble says in its programme, Theater is a collaboration of all who make each plays journey to the stage. Our patrons are as invaluable to The New Group as are our actors, directors, writers and designers. I cannot imagine a similar statement about the parity of art and money from a company in Europe: in Scandinavia core public funding is more like 80%. The UK lies somewhere in the middle which, it is argued, probably provides the right balance between core support and entrepreneurial income generation.

The mechanism of money

Given the potentially deleterious impact on the arts of the Governments forthcoming Spending Review and the re-focusing of cultural resources on the Olympics, the level of public funding for the arts is probably set to reduce. So what do we do now to develop and sustain our organisations? However entrepreneurial we are in balancing the realisation of ideas and the resources needed to create them, were forced to use the same domestic accounting procedures that Mrs Beeton used, in her Book of Household Management published in 1861 though she probably had more flexibility.

We run £1m£25m operations pretty much on the basis of an annual income and expenditure budget. Usually, regardless of the size of the organisation, our funders and investors ask us to embark on that crazy exercise of making our budgets balance. What folly! We know we lie when we put those budgets in front of our boards and stakeholders. The intelligence, creativity, and sheer bloody mindedness that are then applied to make that fabrication a reality is extraordinary.

We, in the cultural sector, are locked in the world of income and expenditure yet the rest of the world the private sector, financial institutions do not work this way. Their financial model is based on yield and gearing; in other words, you invest, you borrow, you gear up. And, if youre patient enough, you will increase both your annual income and your asset base. This model is common among cultural organisations in the USA and fairly common here among major charities, but it is virtually non-existent within our cultural sector (though I note the news in AP issue 138 that WASPS and the Scottish Arts Council are developing this sort of approach.)

Making money work harder

So how do we change this? It seems that getting expertise on boards is not always the best way. As a funder I saw many instances of supposedly experienced financiers, including investment bankers, joining a board and then seemingly leaving their brains in a bucket in the pursuit of the Charitys objectives in other words, failing to introduce their normal working practices for fear of taking risks with the organisation. This same stasis or safe reactive response is present in our public sector stakeholders the Arts Councils and local authorities though generally, the same does not apply to the private sector trusts and foundations. The irony is, of course, that chief executives are constantly taking all sorts of risks, with capital projects, fundraising and box office targets.

In the next decade, entrepreneurial activity in our sector will mean both raising our game with our customers, putting awe-inspiring ideas in front of them, and creating a tangible increase in major gifts and corporate giving. But it will also mean borrowing and investing in the commercial: property, restaurants, intellectual property, equities, supplying services or, more likely, a mixed portfolio of all of these. We need to be empowered to create our own active endowments by making the money we raise work harder for us. Over the past 12 months, Live Theatre has invested in research and worked with charity consultants John Pepin Associates to develop a business plan based on the idea of gearing and yield. We are doing this with a portfolio of projects, including investing in property, and we aim to put some of these ideas into action shortly.

It has been a frustrating process getting Arts Council England to back a new financial approach that lets us change this landscape of money and risk, but the future demands that this change of approach must happen. No more Victorian accounting. We have the ability to balance risk. We need the capacity to invest, to create assets on our balance sheets, and to gear up on them, to build working capital and get away from the idea of annual budgets. Without these fundamental changes we will not secure the money to continue to present our ideas.

e: jim@live.org.uk

Jim Beirne

196769
Left grammar school at 16 and trained as a lithographer at Twickenham Arts College

Music
19701976
Self taught guitar; lived in Madrid and in St Ives Cornwall; had various jobs as sous chef, lithographer, builder.

19761978
Music studies at Maria Grey College and first introduction to the lute.

19781981
Dartington College of Arts Music Honours degree.

19811983
Guildhall School of Music and Drama Postgraduate Diploma in Early Music and Composition. (As a mature student my undergraduate and postgraduate studies were fully funded by the Inner London Education Authority.)

1982 onwards
Lute player and composer.

Arts Administration
19841987
Performing Arts Director, Bluecoat Arts Centre, Liverpool.

19871991
Music Officer, Yorkshire Arts Association.

19911993
Head of Performing Arts, Yorkshire and Humberside Arts.

19932000
Director/Head of Performing Arts, Yorkshire Arts Board.

2000present
Executive Director, Live Theatre.

Other roles
Arts Council Music Panel Member (19891991)

Arts Council Touring Panel Member (19951998)

Board Member Huddersfield Contemporary Music Festival (19881991)

Governor Leeds College of Music (19952000)

TMA Council Member (2005)

The Sage Gateshead Board Member (2004)