More serious, though, is the cash crisis afflicting local authorities, which are an even larger source of funding for the arts than the Arts Council. Local authorities are cautious about making prophecies for next year's spending, but it is clear that the arts are in trouble.
The painful government settlement with councils and a strict capping regime will lead to severe cuts, and tens of thousands of job losses. Councils are likely to opt for minimising redundancies while maintaining those services they are obliged to provide, in preference to discretionary spending such as support for the arts.
Those councils that have traditionally been the most positive towards the arts are likely to make the biggest cuts, as they are also those facing the toughest spending squeeze.
The arts have already lost committed supporters with the abolition of the Greater London Council and the metropolitan counties. At the time when Liverpool was locked in conflict with the Government, and refusing to support 'peripheral' activities, the Liverpool theatres were saved by Merseyside County Council.
A less obvious blow to funding came in quiet announcement recently by Michael Howard, Secretary of State for the Environment, that the Urban Programme would be wound down. This has been an important source of funding in areas where councils' main budgets have been under strain, and it is feared the shortfall is unlikely be made up elsewhere. The result could be a severe reduction in arts provision, particularly in the inner cities.
In Scotland, one tier of local government, the district councils, has a mandatory responsibilty to support the arts. But the districts fear that if the regional councils are abolished, as expected, the districts will not have the money to fill the gap.
There is no consistent picture of where councils are choosing to make cuts. Some are avoiding job losses internally by restricting cuts to community groups. Others see community arts as offering the best value for money, and are withdrawing from direct arts provision.
Derbyshire, as a response to capping, went from an arts budget of pounds 500,000 to zero two years ago, before re-establishing it at pounds 150,000 for this year. Milton Keynes last week held crisis meetings to lop pounds 8m off its total council spending over the next 18 months. It has cut its arts budget by 70 per cent, ceasing to host Royal Shakespeare Company and other touring performances, and its Olney music concert season.
Manchester has begun emergency meetings to reduce next year's overall budget by pounds 40m, or 10 per cent. It is looking at closing either the Wythenshawe Forum or Library Theatres, and may start charging for services previously provided free.
Wolverhampton, following a change in political control from Labour to a Conservative/Liberal Democrats coalition, has withdrawn funding to its only professional community theatre.
In Basildon, where Labour was defeated by the Conservatives in the last election, the Towngate Theatre has been closed. Dudley will probably have to make savings amounting to pounds 1m-2m in its total budget, with proportional cuts in the arts, which could mean more emphasis on commercial performances at the expense of grants to community arts groups.
Coventry is seeking cuts of about pounds 7m off its total budget, following reductions this year of 36 per cent in its grants to the arts. Wirral council on Merseyside has suspended its contributions to Liverpool's theatres. Birmingham is aiming for cuts in all departments of an average of 10 per cent.
Sheffield is a special case, burdened by excessive capital debt repayments, even before it nearly bankrupted itself on the World Student Games. It will have to pare pounds 525,000 from its pounds 3.8m arts budget. This will lead to increased use of the City Hall, to spread fixed costs, but the city will review its mix of commercial and subsidised performances. Sheffield's museums, funded through the same budget, are likely to be closed more often.
The axe is also falling in areas with smaller budgets for the arts. Cambridgeshire, a low spending authority but severely restricted by its Standard Spending Assessment failing to take account of a rapidly growing population, is expected to end all its community education funding, including community arts.
To make matters worse, the recession has been reducing audiences. Geoff Sins, manager of Birmingham's Midlands Arts Centre (partly funded by Birmingham City Council) said that people were being more selective. 'The cinema is doing well, but with the theatre and concert performances, people are being more choosy,' he said.' There has been a 50 per cent increase in our cinema ticket sales, because it is a cheap night out, but many theatres are doing badly, with some of them only having 35 per cent in the house some nights. Many theatres are moving to 'safer' performances - only nothing is really safe now.'
Other theatres and councils are sounding the same warning - an end to experimental and minority performances, with more emphasis on the 'commercial'.
David Patmore, director of arts at Sheffield, warns against driving away real theatre-goers by putting on performances with popular appeal. 'It is a question of reaching the right balance between commercial and subsidised performances.'
Newham in London stressed that its priority would be 'front-line services', including continued support for the Theatre Royal in Stratford-upon-Avon. That does not sound promising for community arts groups, many of which rely on council support.
Leicestershire's director of museums and arts, Tim Schadla-Hall, considers that community groups offer the best value for money in arts provision. 'Cuts wouldn't make any impact on the council's finances, they're too small. But it's a very fragile sector, often at parish level, which we are pump-priming.'
Lobbying is now taking place to persuade councillors not to cut support for the arts. The Association of Metropolitan Authorities refused to speculate on possible cuts, saying its job was to persuade members not to make them.
Jeremy Greensmith, the Arts Council's campaigns manager, is sure that there will be severe cuts. 'Local authorities are the largest providers, what happens to them is very important. I see things as having their own ecology. The whole thing can be brought down if one leg goes. The Arts Council doesn't have a fire engine which we can send round if authorities cut back.'
Jim Davenport, finance spokesman for the Conservatives on Leicestershire council, believes hard choices must be made. 'If we have to choose between care in the community and a theatre what do we do? The arts are not always so good at managing their financial affairs. There will have to be some slimming down, and they will have to look increasingly to outside sponsorship.'
Some artists are taking to the stage in defence of their trade. Sir Yehudi Menuhin finished a performance last week in Dudley by pleading with councillors to maintain their support for the arts. 'In times of recession it's arts that people turn to,' he said.
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