So, do the arts really offer value for money?

So should the Government subsidise the arts – and on what basis, artistic merit or economic contribution? As so often, the simpler the question the harder it is to give an answer, and this one is about as political as they come. But there some economic pointers.

The economic case for support is that, more than most industries, it brings external benefits. Many industries bring the reverse: external costs, typically in the shape of pollution. In the case of the arts there are clear benefits to travel and tourism, and less clear ones to cultural life in general. If you tax polluting industries, should you not subsidise those that do the reverse?

Some numbers. The arts are a big industry but not a huge one. It depends on how to draw the boundaries, but if you include everything from crafts through to design and literature, you get about 700,000 people. Narrow it down to the performing arts and it is nearer 100,000. The Arts Council is shortly to make the detailed case for the industry in which it will argue that the arts are one of Britain’s top 15 exporters.

Every industry will argue a case for government support. As far as cash through the Arts Council is concerned, it gets some £400m from the taxpayer, roughly the same as the budget of the British Council and the BBC external service combined, the two main bodies promoting British culture overseas. There is lottery money on top of that, plus other forms of support, mostly through local government.

The difficult question to answer is to what extent the industry is being changed by the fall in public support, because that is what is happening. Some parts are largely unsubsidised and are hugely successful. The O2 centre, at what used to be called the Dome, is the largest venue for performing arts in the world – yup, the world. London has more theatre venues than any other place on earth.

It is a legitimate question: if the subsidised elements of the arts are squeezed, will that bring collateral damage to the more overtly commercial parts of the industry? The intuitive answer is, to some extent, yes. There is however another legitimate question: to what extent is arts funding regressive, in that the beneficiaries are better off than the general taxpayers? That is extraordinarily difficult, but again intuitively the answer is, to some extent, yes. So while the economic case for arts support is a strong one, its value-for-money needs to be demonstrated to the taxpayers who foot the bill.