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Reaping the rewards of innovative funding mechanisms

Paul Woods
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Newcastle City Council’s treasurer on a new approach to funding arts and culture  

Core funding cuts have led to the innovative use of financial instruments to help sustain important activity, which would otherwise be under threat.

Councils have recognised the value of arts and culture, both in terms of improving quality of life and boosting tourism-related expenditure.

Newcastle has a history of investment in cultural assets and programmes (our revenue budget is 50% more than the national average) and we have a very good cultural offer as a result.

In 2012 the consultation on a budget plan to make savings of £90m over three years affected most services and proposed reducing the revenue culture budget from £4.4m to £2m.  

There was a strong reaction from a number of individuals and Newcastle was portrayed as cutting 100% of its culture budget and closing cultural facilities (which was not true). The phrase “Doing a Newcastle” was coined as an expression, meaning: total arts cuts.   

The council decided that while it had to cut £1.2m from its general fund contribution by 2015-16, it would launch an independent cultural fund. This would receive an annual contribution of £0.6m from the council, which would help it to lever in other funding. This funding comes mainly from interest ‘profit’ on a recent £13m 20-year loan note to Newcastle airport.

The council had provided a loan to help refurbish the impressive Theatre Royal, financed from income the Theatre Trust generates from a supplement on tickets.

The council received requests from other organisations for loan facilities to help fund capital projects that would help them generate additional income and create a sustainable revenue base for future years. A £9m additional loan facility was established and £7.5m of loans have so far been agreed for Live Theatre, Tyneside Cinema, a heritage and a community sports organisation.

To comply with state aid rules the council charges a rate of interest on these loans that includes a commercial mark-up, which can help manage risk.

Although it’s still early days, the positive outcomes of this new approach can already be seen. A very negative story about a 100% cut in council funding for culture has, in partnership with others, been transformed into positive outcome locally.

This has been achieved by innovative funding mechanisms that will lever in income and enable cultural organisations to invest in their assets and generate new sources of income and/or sustain existing ones.

Paul Woods, treasurer, Newcastle City Council

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