Today's humble writers have made the lonely garret fashionable again

HOW ARE writers supposed to live? According to legend, they live in garrets, and on air. The truth is more down to earth: like everyone else, they depend on money, and have to work hard to earn enough to get by.

You wouldn't think so from the lurid way authors are often portrayed, which suggests that their income is inflated and that it comes in four basic forms, all dodgy. Blood money is what writers are said to get for writing about murder - like Gitta Sereny (on Mary Bell) and Sean O'Callaghan (a former IRA terrorist, who has just published a penitent autobiography) - or if they use their flesh and blood for fictional purposes, as Hanif Kureishi has been accused of doing by his sister and ex-partner: either way, the charge is "making money out of someone else's pain".

Prize money should be less tainted, and certainly did no harm last week to the Romanian novelist Herta Muller, who won the IRpounds 100,000 IMPAC Award in Dublin, and to Carol Shields, who won the pounds 30,000 Orange Prize for women's fiction. But the reporting of prizes leaves the impression that authorship is a procession of fat cheques - lotteryture not literature - when in reality a tennis player knocked out in the fourth round of this year's Wimbledon will still pick up more than Ms Shields did. Upfront money means money paid in advance for books as yet to be written: apparently, these advances are never earned back and are always vast - the pounds 625,000 paid to Michael Holroyd for his life of Bernard Shaw was called "obscene", never mind that it represented five books and 12 years of work. As for taxpayers' money, though literature's share of the annual Arts Council budget is infinitesimal, and almost none of it goes directly to writers, an idea persists that any novelist who earns less than Jeffrey Archer, or any poet who sells less than Ted Hughes, must inevitably be living on state handouts - the author as scrounger.

All in all, you get the feeling that any money a writer makes is necessarily dirty money. Ideally, it seems, they ought not to be earning anything. If they do they should be made to feel damn well guilty.

Next Friday, a group of authors, academics and journalists will gather in Warwick to examine "the needs of writers" - the past and present subsidising of literary activity. The conference coincides with the publication of The Cost of Letters, a book containing the responses of 42 writers to a questionnaire on what they earn and how they live and whether they want the state to do more to help them. It says something about writers' incomes that those who contributed to the book (myself included) were not paid in cash for doing so: instead, we were offered pounds 200 worth of book tokens, which somehow seemed a good deal more alluring than a mere pounds 200 cheque.

Nor will it have escaped the notice of the organisers of the conference that whereas the cost of attendance will pose no problem to academics and journalists (who are salaried, and whose employers will reimburse them), any poets or novelists feeling the need to learn about the needs of poets and novelists will have to fork out pounds 100, plus travel expenses. Perhaps they can pay in book tokens.

A week when arts subsidy has been fiercely debated is a good one for considering the economic situation of writers. The six questions posed in The Cost of Letters are the same ones as were asked by Cyril Connolly in the magazine Horizon in 1946, a year after the last great Labour landslide and at a time of optimism about the creation of a fairer Britain. Even so, that great socialist George Orwell, asked how much a writer needed to live on, replied: "I do not think one can with justice expect a writer to do his best on a working-class income."

His recommended figure was pounds 1,000 per annum, which sounds modest enough, especially compared with Elizabeth Bowen's suggested pounds 3,500, until you consider that Philip Larkin, appointed to run the University of Leicester library in 1946 (no small job), was paid pounds 350, and that in Kingsley Amis's Lucky Jim (1954) the hero Jim Dixon feels extremely fortunate to be offered a job at just pounds 500 per annum.

If some of the class of '46 thought it proper that writers should earn more than both proles and fellow professionals, the class of '98 certainly doesn't. Almost to a man (and woman), they say writers need no more than anyone else, and suggest a figure near the national average of pounds 19,115 (or pounds 10,000 if they have no dependents). There are some whimsies. "A writer needs wings," says the poet Paul Durcan, "needs to be able to decide in the morning to get out from under the low, grey cloud and fly to Los Angeles to pray with an old friend and grab a cab to Malibu and gaze at the Pacific." Tongue in cheek, Hilary Mantel suggests that "writers who venture abroad must always travel first-class and stay at the best hotels. Otherwise, they encounter hazards and hardships, write very dull books about them, and become a burden to the spirit". Sebastian Faulks states the case for a little bit extra with the formula "pounds X + 52A + 2RT, where X is the same as anyone else needs, A is the cost of the weekly alcoholic supplement and RT is the price of a return air ticket". But this too is playful. In name at least, we're all egalitarians now.

Interestingly, though most writers say their royalties are not enough to live off, few are enthusiastic about subsidy. There are dangers in cosying up to the state, it's said. Good writing will get done anyway, out of love, and funding won't improve it. If grants are to be awarded, they should go only to older writers, as an acknowledgement of a lifetime of achievement. Any money should go into the public library system, which is shamingly under-funded. Nurses are more deserving cases than writers. And so on. At least one contributor makes the point that we already have PLR (Public Lending Right), which pays money to authors according to the number of times their books are borrowed from libraries: what is this if not state subsidy?

Well, yes, but in one recent year, of pounds 3m distributed by PLR, only 0.18 per cent went to poets and playwrights - about pounds 5,500 to be divided between half the nation's "serious writers". To remedy this, the poet Adrian Mitchell has boldly proposed what he calls The Six Hundred Scheme, whereby 200 poets, 200 playwrights and 200 writers of fiction would be selected to be paid a state salary of pounds 20,000 a year - with half of any royalties they earn being ploughed back into the pool.

I can't see the scheme being implemented: why should writers have guaranteed salaries for life when in most professions the trend is towards short contracts? Still, it says something about the post-Thatcherite attitude of writers - whether we're cowed or simply pragmatic I'm not sure - that Mitchell's should be the lone voice for radical reform. Fifteen years ago, authors were as moany as farmers. Now there's a lack of conviction that subsidy makes any difference. Apart from Mitchell, the Cost of Letters contributor most decisively in favour of state funding is Gary McKeone, literature director at the Arts Council, whose endpiece almost pleads for new ideas.

And surely there's plenty that could be done. Britain lacks a good monthly literary magazine that publishes new fiction, for instance, and we could do far more to encourage the translation of books from the rest of Europe and beyond. But as for putting money straight into authors' pockets, even authors seem to feel that it's just not done.