The Royal Opera House is in a big mess. At last it's the end of an era, says Stephen Fay
The clique that runs the Royal Opera House has had it, and about time, too. The process will be agonising and it will end in humiliation for the "self-perpetuating oligarchy" that has been running Covent Garden, spending tens of millions of taxpayers' money to do so. The old establishment in the arts is about to surrender to Labour.

Proof of this came in the following exchange last Thursday at the House of Commons Culture, Media and Sport Committee. The chairman was Gerald Kaufman MP, conducting business in the jocular manner of the master of ceremonies at a Victorian music hall. That damaging phrase about the "self- perpetuating oligarchy" was his.

The witness was Vivien Duffield, the heiress to Charles Clore's property fortune, and Covent Garden's chief fundraiser, with a seat on the board. She is also its most lavish benefactor, having - along with Lord Sainsbury - most recently bailed out the company in July.

Mr Kaufman: "In return for government funding, the Government should appoint the chairman and members of the board."

Mrs Duffield: "I would certainly consider that acceptable. But one or two representatives of private money do deserve a seat on the board."

The fact that Mrs Duffield would be willing to surrender the power of appointment to the Government marks the seriousness of the crisis. For half a century the chairman and board of Covent Garden have behaved as if it belongs to them - despite the fact that there would be no opera or ballet without an Arts Council subsidy that came last year to pounds 15m. Now the board is so short of money that it is willing to concede control.

They have been forced to contemplate the loss of their perks - the boxes, the private dining-rooms - because their own supporters, the core audience for opera and ballet, have lost faith in them. The last six months at the Opera House have been a nightmare. In May Genista McIntosh, an able and attractive chief executive, resigned. The reason given was ill-health. She was replaced by Mary Allen, secretary-general of the Arts Council and a close friend of Lord Chadlington, the public relations man who is chairman of the board. Within hours a conspiracy theory had taken hold.

Opera feeds on gossip and the rumour was that Lord Chadlington and Mrs Duffield had forced Ms McIntosh out because she wanted to attract a new audience by lowering seat prices (the best stalls for an opera in which Placido Domingo is singing cost pounds 155). Lord Chadlington was accused of having persuaded Chris Smith, the Culture Secretary, to let them appoint his friend Ms Allen without going through any of the established procedures.

Lord Chadlington and Mrs Duffield denied this story but they were not widely believed. Ms McIntosh undermined them further: "I did believe that had I continued in my job I might have become ill, because it made me very unhappy," she told Mr Kaufman's committee. She had left because she was unhappy, not because she was ill. It seemed to be final proof that Covent Garden had become over-privileged, over-priced and under-managed. But it was not always like this. A generation ago it had a committed audience that was proud of the Royal Opera House. What went wrong?

It is a modern English story of high expectations and insufficient resources. After the war Covent Garden assumed its place among the world's great opera houses, alongside the Met in New York, La Scala in Milan and the Staatsoper in Vienna. In the Sixties, with George Solti as its dedicated and splendid music director, legendary performances seemed almost commonplace - Callas as Tosca, Visconti's productions of Verdi; Nureyev and Fonteyn dancing together. But the cost of maintaining international standards rose steadily and in the Eighties the government subsidies, which had risen sharply for 15 years, began to fall in real terms. Covent Garden was in a league in which it really could not afford to play. To retain its place the Royal Opera House began to turn to sponsorship.

The need to attract money from industry gradually changed the character of the board. In the Sixties the chairman had been the Earl of Drogheda, the chairman of the Financial Times, who ruled with "a whim of iron". The board included distinguished professors, such as Isaiah Berlin and Lionel Robbins. By the Eighties, however, the chairman was Lord Sainsbury, the supermarket baron, and he was flanked by bankers and property developers. Television was another influence. Sir Denis Forman of Granada joined the board, and when he was established he brought Jeremy Isaacs - the man who set up Channel 4 - on to the board, also with a view to elevating him to the general directorship. Mr Isaacs took the job in 1987.

Instead of high Cs and pas de deux, the watchwords became money and efficiency. The emphasis was on redevelopment and the first of a series of ambitious plans to exploit Opera House property in Covent Garden, and improve backstage facilities, was produced. (That first plan cost pounds 98m; the final version cost pounds 210m, pounds 78m of which is Lottery money.)

Raising money proved fairly easy in the great bull market in the mid- Eighties, but when the recession struck at the beginning of the new decade, the proportion of income provided by the government was falling fast; it was 54 per cent in 1984/85 and only 38 per cent in 1996/97. The board at this stage still looked instinctively to the government and both Margaret Thatcher and John Major found parcels of money. By the middle of the Nineties that source had dried up.

So the board got into the habit of turning to Vivien Duffield and Lord Sainsbury, even after he ceased to be chairman in 1991; Mrs Duffield became an unusually influential and privileged figure. (It is widely believed that she would ask for cast changes in the ballet company on nights when she was proposing to attend.) The pair of them loaned various sums, the most recent being pounds 2m, interest-free, to meet the bills in July, although that was enough for them. "We did say we wouldn't do it again, and we won't," Mrs Duffield told Mr Kaufman last week. "It's gone too far."

This would have been a tricky year for the Royal Opera House at the best of times, but a permanent state of crisis was transformed into a disaster in July when the opera and ballet companies began two years of exile. From May there was no chief executive. (Although he left early to make way for Ms McIntosh, Sir Jeremy Isaacs was on the payroll - at pounds 120,000 a year - until September, and Ms McIntosh was rumoured to have been paid off handsomely.) Ms Allen could not start work until September.

The chairman, Lord Chadlington, became acting chief executive. Known until recently as Peter Gummer, his experience is mainly in public relations. He had done a stint at the Arts Council but now he was controlling a sprawling, badly organised and managed arts house, except it was no longer in the "house". And that has proved crucial.

When the ballet company planned its first season-in-exile at the Labbatt's Apollo in Hammersmith, the box office target was set at pounds 1.9m. Receipts were less than pounds 1.2 million, a loss of pounds 725,000. The ballet audience's loyalty clearly lay with the crimson velvet and gilt of the house in Covent Garden, as well as with the ballet company itself.

The opera company's season at the Barbican featured an early opera by the French composer Rameau which attracted poor houses. The Merry Widow, intended to be a sure-fire money maker, got unenthusiastic reviews - partly because foreign artists could not get their voices round a new English translation. Why were expensive foreign singers hired? "It's a mystery to me," says a senior insider.

In its last year in Covent Garden, the box office brought in pounds 19m. In its first year in exile, the target was set at pounds 9.5m. Revised estimates suggest that income will be just over pounds 8m. The difference will push the Opera House's accumulated deficit well over pounds 6m - and the chance of finding a private benefactor who will pay that off is virtually nil. The Royal Opera House is, to all intents and purposes, bankrupt.

The era that began in 1946 is over. Fiefdoms in the opera and ballet companies will be ended. Covent Garden will be forced to concede that, because British taxpayers are reluctant to subsidise the pleasures of an elite, it cannot compete with the Met or Munich, La Scala or Vienna. Lord Chadlington and the board will surely fall on their swords and propose that, in future, the government selects the chairman and the board, as it already does at the National Theatre. At that point the Culture Ministry and the Arts Council might contemplate a bail-out, especially one that leads to lower seat prices.

So they should. The Royal Opera House matters. Scandal at Covent Garden undermines confidence throughout all arts organisations. The arrogance shown by the Royal Opera House alienates the instinctive allies of the arts in Britain. We can only heartily applaud the curtain coming down on the "self-perpetuating oligarchy".