ACE is under pressure to reduce its overheads as DCMS cost-saving measures start to bite.
Arts Council England (ACE) is facing demands from the DCMS for a 15% cut in its administration costs by 31 March 2011, amounting to just under £4m. The cost-cutting exercise was one of the conditions imposed on the Arts Council’s settlement following the Comprehensive Spending Review (CSR) and applies only to the costs of administering its Grant in Aid programme, which stood at £31.3m in 2006/07. No savings are being required from the £20.3m of operating costs related to Lottery funding, but an Arts Council spokesperson told AP that they would also be making savings from their Lottery administration budget: “…we expect our total savings may be higher than the £4m target.”
The news of ACE’s enforced efficiency drive follows an announcement of belt-tightening measures during last year’s CSR. It was made clear to all Government departments, including the DCMS, that, built into the calculations of the amounts of money they would receive from the Treasury each year was an assumption that they would each achieve at least 3% annual savings in their departmental budgets. Furthermore, it was made clear that these savings must be “cash-releasing” and “net of implementation costs”, meaning that the full cost of potential cost-saving measures which initially incur high levels of investment, such as the installation of computer systems or moves to lower-cost office space, will have to be factored into the savings. Debate has been ongoing as to the accounting conventions and standards that will be used to determine how any such implementation costs will be identified and reported.
ACE’s budget cut of 15% is less challenging than the 25% cut being required from the Museums, Libraries and Archives Council (MLA) over the next three years. In response to this target, the MLA has already announced plans to rationalise its national and regional operations in a major reorganisation intended to lower costs and channel more funding to front-line cultural activities. MLA funding to its nine independent regional agencies is being scaled back, and their work will be integrated into a single unified structure, in much the same way that ACE took over the activities of the Regional Arts Boards five years ago (see AP7). Having already undertaken major restructuring exercises in recent years, including the ‘streamlining’ of head office (see AP132), it is less clear how ACE will make the scale of cuts currently required of it. The forthcoming relocation of ACE’s support services to Manchester (see AP148) is predicted to reduce annual administrative costs by £800,000 a year, but a significant cash outlay will still be needed to facilitate the move. The Arts Council spokesperson confirmed, “The changes we need to make to meet these cost savings will be very demanding. At this stage it is too early to say what they will look like. However, we are actively considering this at the moment and will be talking to our staff and unions in the months ahead.” Staff costs currently account for around 50% of ACE’s administrative overheads.