In a speech to the Royal Society of Arts in London, Mr Smith said the forthcoming Arts Council reviews of orchestras and regional theatres must be "thorough and unsentimental, based on rigorous analysis of regional patterns, genuine financial positions, quality of management, and - above all - quality of artistic work".
There should be no assumption, he added, "that simply because a particular configuration of funding support has always been in place that that must continue to be the case for ever more. Hard decisions may emerge from these reviews."
There are four subsidised symphony orchestras in London alone - five if one includes the BBC-run orchestra. For decades there have been calls for and investigations into rationalising the number of orchestras as audience numbers for classical music have fallen.
Many institutions have been hit by funding problems, including the Octagon Theatre in Bolton, the Arts Theatre in Cambridge, and the Royal Philharmonic Orchestra.
It is understood that Mr Smith feels strongly that the Arts Council, which funds orchestras and regional theatres, must start makingtough decisions.
At a meeting with his officials this week, Mr Smith quoted a phrase once used by the former Arts Council chairman Lord Gowrie - that the council had to decide whether to be vicars or generals; to help ailing institutions to linger on, or to kill them off.
Mr Smith said privately that it was time for the council to act like generals.
Mr Smith's speech yesterday, entitled "Government and the Arts", challenged the arts world to "change the culture of culture".
He said the 50 per cent of the population who enjoy or take part in the arts by going to concerts, plays and museums, should be increased to two-thirds over the next 10 years. He also said that the Royal Opera House must reopen this December with cheaper ticket prices. "Elite performance on the stage must not be matched by exclusive social performance in the stalls," he said.
Anticipating stricter controls on grant-giving, he said: "I believe passionately in the value of art for art's sake - but I do not believe in grants for grants' sake ... if the taxpayers are putting in, as they should, substantial amounts of public subsidy, they are entitled to see something in return."
Mr Smith tried to lay to rest the charge that the Government was only interested in "Cool Britannia" - pop music, film and fashion.
He dismissed charges of "dumbing down" as nonsense, saying: "Too many use this accusation in lieu of a proper debate about the nature and impact of the arts, and the audience for them."
He continued: "The commercial music and film industries are important and produce outstanding work of real quality, and deserve government attention."
THE OCTAGON THEATRE in Bolton, Greater Manchester, has suffered funding crises over the past few years in a region with a number of city- centre theatres.
THE ROYAL PHILHARMONIC ORCHESTRA has long been the poor relation financially among London orchestras and has suffered diminishing Arts Council grants.
Despite a pounds 7.3m grant, the CAMBRIDGE ARTS THEATRE was almost insolvent after its refurbishment. The Arts Council had to sell off part of the complex to save it.Reuse content