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Reduced Lottery income projections and outstanding capital funding commitments lead to 35% cut to the Grants for the Arts budget.

Arts Council England (ACE) has made a surprise move to cut the budget for Grants for the Arts (G4A), its main source of project grant funding, from £83m in 2006/07 to £54m in 2007/08, a reduction of 35%. The cut, which was announced without warning, will have a dramatic effect on the scheme which last year distributed over 4,600 grants to individual artists, to organisations and for national touring. ACE has already amended funding criteria for the scheme; it will no longer fund multi-year projects (activity which cannot be completed within 12 months) and it will now actively enforce a longstanding rule about not issuing grants of more than £200,000.
By far the largest source of funding for the G4A scheme is the Lottery, and the cut to the 2007/08 budget is being attributed by some to last months news that the Government has earmarked £112.5m of ACEs share of Lottery revenues to support the 2012 Olympics (AP issue 142, 26 March). However, the cash for the Olympics is not due to start being drawn off until 2008/09, and therefore does not have an immediate bearing on ACEs Lottery income for the current year. Of more impact on the G4A budget cut are projections for ACEs share of total Lottery proceeds for 2007/08. According to Lottery operator Camelots most recent accounts, annual ticket sales have been rising for the past three years, but there is evidence to suggest that new Olympic Lottery games are diverting revenues away from other good causes such as the arts. ACE is therefore now projecting a £20m fall in total Lottery income for the current financial year, from £171m in 2006/07 to only £151m.

The decision to cut the G4A budget has also been taken in the context of a need to retain sufficient funds to honour outstanding grant commitments to capital projects and other long-term initiatives made in previous years when projections of Lottery income were higher, but proved over-optimistic. An ACE spokesperson told ArtsProfessional that some 40 to 50 capital projects are still eligible to claim funding valued at over £200m, including £37m for the re-development of the Royal Shakespeare Companys base in Stratford. ACE currently has Lottery reserves of only £145m, so the remaining £55m will need to be available from its future Lottery income. Only £6m has been earmarked for new capital development projects in 2007/08.

Capping future G4A bids at £200,000 is an attempt by ACE to protect funding to smaller arts organisations and individuals. The ACE spokesperson said, We regret the reduction in the Grants for the Arts budget but it is unavoidable given the current freeze on grant-in-aid, the steady decline in Lottery income and competition from the Olympic Lottery. We believe that by limiting the size and duration of grants, we can continue to fund the maximum number of individuals and organisations through a fair and equitable open application system. In 2005/06 almost £8m was claimed through the scheme by 16 organisa-tions with bids of over £200,000, while 1,600 individual artists shared a further £8m, funded through the grant-in-aid budget. With no further grant-in-aid being allocated to G4A, individuals and organisations will now be competing directly for grants from a much smaller fund.