Yesterday, at a lunch with journalists, Mr Smith delivered a stinging rebuke to Lord Chadlington, head of the ROH board, and publicly warned that the ROH's days as a publicly funded institution could be numbered.
The stark warning to theopera house management follows the disclosure in The Independent that lottery money was being used to fund redundancies, and the controversy over the appointment of Arts Council secretary-general Mary Allen to the post of general director at Covent Garden without the post being advertised.
Ms Allen's appointment was made by the ROH board and by Lord Chadlington, formerly Peter Gummer, who authorised the pounds 78m lottery award to the opera house when he was head of the Arts Council's lottery board.
Mr Smith said: "It has been noted, and rightly noted, that the Arts Council lottery board chaired by Peter Gummer and serviced by Mary Allen made the grant of money. The Royal Opera House board chaired by Peter Gummer and serviced by Mary Allen will actually be spending the money. And there must be questions in people's minds as to how the relationship can be best monitored to make sure that everything is happening absolutely above board."
Mr Smith said that when Lord Chadlington went to see him accompanied by a fellow board member, the publisher Bob Gavron, to inform him that the then general director of the opera house, Genista McIntosh, was resigning because of ill health, he "questioned them quite severely about their assertion that she was ill, and then questioned them about the lack of proper procedure in appointing a replacement".
Asked yesterday if he now believed that she had been ill, he replied: "I genuinely do not know."
He added: "I have to say, the more I hear about the Royal Opera House the more concerned I become about whether there is administrative control, and about the relationships between senior staff." He felt "uncomfortable" with the disclosure in The Independent that lottery money was funding staff pay-offs at Covent Garden.
Then Mr Smith, who has already ordered the Arts Council to launch an inquiry into the ROH, delivered his bombshell warning. He would be meeting the ROH management, he said, and "I will say 'you have a choice. If you want to carry on being in receipt of public money, you have to show the public responsibilities that go with that.'
"I do have the power to sit down with the Arts Council and talk about their funding responsibilities ... Taxpayers' money should not be going into funding exclusivity. If the Royal Opera House fails to make improvements in developing public access in the work that they do, I will recommend to the Arts Council that they take account of that fact in deciding what they do."
The Royal Opera House confirmed yesterday that the long bar at the back of the Crush Bar would be reserved for corporate clients when it reopened in 1999.
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