This government has the admirable ambition of reversing decades of centralising state power and giving some power back to the people. Its intention not to raise the burden of taxation is consistent with that ambition. So how to finance the growth of the arts? The Government is in part urging museums and galleries to become more enterprising and to raise more money themselves.
The Academy is alone among major arts institutions in not receiving a penny of state money, and so we have experience on which to draw. The Academy charges for entry; it was first in the field to get major sponsorship from corporations and one of the first to set up membership schemes for friends and for corporations. We have done all the things others are now gearing up to do. And still there is a gap between all this income and our expenditure.
We have just reported an operating surplus for 1997 of pounds 175,000 after a deficit the previous year of pounds 1.4m, and a good part of the reason was a scheme for individual giving, the Exhibition Patrons Group, for individuals giving over pounds 5,000 each. We are just about to widen this scheme to individuals giving a minimum of pounds 1,000. But, my, the complications of ensuring that we do not risk the wrath of two sets of tax authorities.
Customs rules mean that any benefit, worth even pounds 1, would make an entire donation of pounds 1,000 subject to VAT. The donation would then be worth only pounds 850 to us.
The Inland Revenue do allow some benefits to be offered before a donation ceases to be tax-effective, but there are different rules for covenants and gift aid. Rules on the latter are particularly crazy because a donor can only receive benefits up to 2.5 per cent of the gift subject to an absolute ceiling of pounds 250: try explaining to a donor giving pounds 1m that the gift is tax-ineffective.
The financial impact of these rules is huge. This year the Inland Revenue ruled that we must refuse payment for Friends' membership by deed of covenant and had to withdraw tax reclaims of pounds 178,000; the same value as our operating surplus.
People who give usually like to get something back, and it is difficult to explain that a benefit cannot be promised, and the institution can be left looking mean or stupid. The incentive of a simplified tax break will encourage more individuals to give more money.
Royal Academy of Arts
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