Justifying Arts Funding

As spending cuts continue to impact on arts funding, the need for measuring impacts is more important than ever. William Wingate FRSA argues that there maybe an unlikely model from which to learn: transport.

Writing in the Journal in Spring 2011, John Knell argued that arts organisations need to change the way they justify their need for public funding, and suggests exploring the applicability of a “social return on investment” model. The Secretary of State for Culture, Media and Sport, Maria Miller, reinforced the message that arts funding needs an economic case in her recent speech. But the practicalities of creating and presenting the case consistently and persuasively are vitally important.

Having been involved both in the appraisal of transport projects and in making and assessing applications for arts funding, I wondered at the time if – unlikely though it might sound – there might not be something like a ready-made solution in the way in which transport projects are appraised in the UK. The creation of the joint Arts Council/RSA seminar project, which aims to develop a new political economy for the arts and culture, makes it timely to have a first stab at crystallising these thoughts.

Transport projects are often (although not always) Big Projects demanding Big Investment, and rightly require robust justification. The central plank of this has for a long time been Cost Benefit Analysis which sets benefits against costs to understand return on investment (often expressed as a benefit cost ratio, or BCR). However, the need to quantify benefits in monetary terms, which is not always possible, prompted the development of the New Approach to Transport Appraisal (NATA), set out in the 1998 Transport White Paper. The paper included two important innovations: first that NATA looks at a wider range of benefits, including some which may not be quantifiable, and second it developed a consistent format for presenting the results, the Appraisal Summary Table.

The methodology has undergone constant revision and refinement over the years, evolving into a substantial set of guidelines known WebTAG available to all on the Department for Transport website. There is too much detail even to summarise here, but the important thing to note is that the Appraisal Summary Table included effects that may not be quantifiable in monetary terms or even at all but which nonetheless count in the overall analysis (note also that a negative ‘score’ is always possible).

So for example, alongside economic effects such as those that impact business or tax revenues, it includes environmental effects such as heritage and biodiversity, and social impacts such as journey quality, access and affordability.

But why should this be of interest to the arts? The simple fact is that robust transport appraisal gets projects built. Even in these recessionary times, substantial amounts of money have been and continue to be committed to transport projects, especially rail projects. Appraisals may not always give the ‘right’ answer (what forecasts do?), but there are at least two reasons why they are trusted enough to form the basis of investment decisions.

First, consistent methodology and presentation makes it much for fundholders to evaluate, compare and prioritise different proposals. Secondly, the focus on a single appraisal framework has in turn focused research in the areas in the framework, making it more robust. For example, time savings for travellers are one of the most important benefits, leading to a substantial body of research into how these can be given a monetary value. Similarly focused research on, for example, audience benefits could be similarly beneficial.

Developing a consistent presentation of benefits from arts investment akin to the transport model is, in principle, a straightforward task of listing and categorising the benefits. In practise, it will take time and discussion to achieve a consensus, and the result will continue to evolve.

The bigger and more time-consuming task is to build the methodology. But as a starter for ten, consider that the transport appraisal framework includes a ‘hierarchy’ of benefits, which have analogues in the arts. These include financial benefits, which in the arts context are relatively straightforward: for example, the arts world has become adept at quantifying the VAT raised by arts activities. Non-financial but monetisable benefits may be the area needing most work, and would require marshalling existing research and carrying out more work to understand how, and by whom, arts projects are valued beyond the revenues they generate. Meanwhile, non-monetisable but quantifiable benefits can be measured through actual and potential audience sizes (for example, catchment area), whereas non-quantifiable but still tangible benefits might include environmental or reputational effects.

The development of a coherent ‘Arts Appraisal Framework’ is work in progress and these ideas need further development. However, the transport model provides a potential answer to convincing fundholders to fund the arts and an opportunity to learn from and adapt an existing successful mechanism, rather than reinventing the wheel.