Exit Nunn, leaving the National in debt and still searching for a role

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What is the National Theatre actually there for? The chairman and artistic director of Britain's most influential and best subsidised theatre admitted on Thursday they did not officially know the true role and purpose of the institution.

In a history going back nearly 40 years, when Laurence Olivier started his company at the Old Vic Theatre, nothing in the NT's documentation and constitution has ever detailed its official raison d'être.

The NT's annual report, published on Thursday, again failed to cast any light on the theatre's role. So the next artistic director ­ who will be chosen next month ­ can, in the words of a song from the NT's hit My Fair Lady, listen very nicely then go off and do precisely what he (or she) wants. However, one aspect of the theatre's business did become clear: it is in the red to the tune of £626,000.

The new head of the National will inherit the accumulated deficit and will also be bequeathed a belt-tightening exercise being introduced by the chairman, Sir Christopher Hogg, in the hope that stricter budgets will help bring it back into the black.

Belt-tightening will not be the only problem facing the successor to the current artistic director, Trevor Nunn, who steps down next year. The chosen candidate will also come under increasing pressure to spell out the role and purpose of the National Theatre.

Though media debate in the past 12 months has focused attention on the National's role, both Nunn and Sir Christopher admit there is no official guidance on what that role is.

Sir Christopher said: "Surprisingly, the National Theatre's purpose is not precisely defined in its constitution. The board and the director have considerable flexibility to make their own definition and act accordingly. We believe above all that the NT's task is to produce good theatre to top-class operating standards in its performing spaces and to cause it to be seen by a diverse spectrum of the community." He added that the National had a duty to balance its books, but it was "not our sole concern".

Trevor Nunn said: "I have found over the last three years that there are many conflicting definitions of 'the responsibility of the National Theatre', but interestingly there is almost nothing by way of a charter or documentation of a founder's creed. However, the great Harley Granville Barker, dramatist, critic and a vigorous proponent of a representative national house, argued that it must at all costs be popular and be for the people."

Mr Nunn revealed that two years ago he drew up a confidential plan for the next phase of the National in the 21st century. He said on Thursday that a number of his objectives had been achieved, including a much greater emphasis on new writing and touring, "a more welcoming face" with an outdoor summer festival and more foyer music, late-night cabaret and backstage tours and the integration of studio and education work into the schedules. He has also recently announced plans to turn the Lyttelton auditorium into two smaller and more intimate venues to encourage younger audiences.

While Nunn has all that and more to boast about in his tenure, including a number of hugely acclaimed productions, the lack of a defined role for the National has lain him open to fire from the critics. He has been accused of subverting the National's purpose by putting on well-known musicals, an accusation he could answer if the National had a stated role for bringing such musicals to new audiences.

The transfer of My Fair Lady to the commercial West End with a hefty director's fee for Nunn has also caused criticism. One prominent director, who did not wish to be named, said last night: "The next artistic director needs to make it plain how much he or she will earn from West End transfers. Trevor says My Fair Lady has brought in new audiences. But if that is the case, why doesn't the production stay at the National so that these new audiences continue to come? And is there any evidence that these new audiences have actually been to see anything else at the National?"

Sir Christopher Hogg was not able to be questioned about any of these matters on Thursday as the National Theatre, unlike the BBC and other publicly funded organisations, does not hold a press conference when its annual report is published. The £13m Arts Council grant received annually by the institution might also suggest a need for more openness.

In addition, the vacancy for artistic director was not advertised, with candidates being interviewed "by invitation". The head of one regional theatre, Venu Dhupa, executive director at the Nottingham Playhouse, described the board's action as "arrogance" which encouraged a "clique of predictable favourites". She added: "Not only that, but the National should be leading the way in terms of good practice."

A spokeswoman for the National Theatre said on Thursday that there were no plans to formulate a definition of the National's role and include it any of the theatre's literature. She added that the deficit "is not regarded as a serious problem. It's a small percentage of a turnover of £22m."

Five candidates are understood to be on a shortlist drawn up by the board to succeed Mr Nunn. The two biggest names, Sam Mendes and Stephen Daldry, have indicated that they are not interested in the job. Both have become award-winning film directors and want to pursue movie careers in tandem with their theatrical work.

The fight for the succession is increasingly being seen as a head-to-head between Nicholas Hytner and Jude Kelly; but the late entrance of the former Royal Court director Max Stafford-Clark into the fray has added another twist. The board is also thought to be considering whether to ask two candidates to run the NT, with its 800-plus staff and three auditoriums, as a double act. If Ms Kelly were to win, she would be the first female director of the National, following the distinguished line of Trevor Nunn, Richard Eyre, Sir Peter Hall and Laurence Olivier. But whoever wins may have to succeed where their predecessors have failed ­ to tell the public what the South Bank monolith is actually there for.

Trevor Nunn's hits and misses

My Fair Lady

One of Trevor Nunn's great productions, part-funded by Cameron Mackintosh. A wonderful evening, though the show's star, Martine McCutcheon, was often absent through illness.

All My Sons

A production of Arthur Miller's riveting family tragedy that has won several awards. Directed by Howard Davies, Julie Walters and the rest of the cast had audiences in tears.

Not About Nightingales

With the help of Vanessa Redgrave, Nunn persuaded Tennessee Williams' estate to let him stage the writer's prison drama. Unforgettable world premiere.

Romeo and Juliet

Taken off early in its Olivier run. Trevor Nunn had to step in to "fine-tune" Tim Supple's original production.

Sleep With Me

Nunn's search for contemporary writing led him to Hanif Kureishi, the novelist, essayist and short story writer. Critics, however, thoroughly disliked Kureishi's attempt at a play.

Antony and Cleopatra

Casting of Helen Mirren and Alan Rickman guaranteed a sell-out run from advance sales. But Sean Mathias's production got some of the theatre's worst reviews.