“Survival threat to festivals” and across creative and culture sector with DCMS unclear about reach or impact of £1.57bn Culture Recovery Fund, say MPs

In a report today the Public Accounts Committee calls on the Government to support festivals which face a survival threat without government-backed insurance indemnity against the risk of cancellation. It also raises concerns about whether freelancers and supply chains essential to the culture sector have been able to access support.

The Committee was examining the Department for Digital Culture Media and Sport’s culture recovery fund to get funds to help over 5,000 organisations survive after they had to close their doors on 23 March 2020.

In July 2020 the Culture Secretary announced a £1.57 billion support package, the Culture Recovery Fund, with a primary objective of rescuing up to 75% of arts, culture and heritage institutions and organisations at risk of financial ruin following the national lockdown. The Department is accountable for this fund.

The committee says this “biggest ever single investment in the arts and culture sector” will require “skilled oversight and management for years to come”. The Committee has particular concerns about DCMS and Arts Council England’s ability to manage £252 million ongoing loan book commitments created by the Culture Recovery Fund over the next two decades.

The committee acknowledges the department’s efforts to help cultural bodies survive. It also highlights that some organisations reported difficulties in accessing funds and others receiving no feedback whatsoever following unsuccessful applications, leaving them in perilous financial situations. There remain big questions over whether the fund reached the freelancers, commercial organisations and supply-chain businesses essential to the sector, and this year there is also a “survival threat” to Britain’s treasured summer festivals “without a government-backed insurance indemnity package against the risk of cancellation”.

Museums, galleries, cinemas, music venues, nightclubs, theatres, arts centres and heritage sites closed their doors to visitors on 23 March 2020 when the UK entered the first national lockdown. Many organisations in the sector remained entirely or mostly closed for a year and some still are. Festivals are making difficult decisions about whether to risk their survival by going ahead this summer, but DCMS has not modelled the cost of underwriting festival indemnity insurance.

DCMS recognises the ongoing difficulties faced by organisations in the sector, even when they have received funding. The Committee says DCMS must now properly assess and account for the impact of the Fund, which also gives an opportunity for “a fresh look at the challenges the sector faces” and how DCMS can “best support the sector’s creative and economic potential in the future.”

Meg Hillier MP, Chair of the Public Accounts Committee, said: “The pandemic has exposed just how poorly departments across Government understand the sectors that they oversee. DCMS was clear that it ‘would not save every organisation’ but we are concerned about the impact of Covid-19 on those organisations vital to the culture sector - sound engineers, lighting and technical support.

“The government must urgently consider support other than cash, such as insurance indemnity or parts of the sector risk as second summer of forced inactivity with all the devastating consequences to their survival.

“This is a sector famed for making the show go on, no matter what, but it has been hammered by Covid-19 – mostly unable to operate at all for most of the last 15 months. If the pandemic is allowed to steal a significant part of our creative and cultural sector it will have impoverished us indeed.”

PAC report conclusions and recommendations

1. The Department’s biggest ever single investment in the arts and culture sector will require skilled oversight and management for years to come. The Department set up a Culture Recovery Board to strike the balance between speed, proper execution and robust assessment of applications against the criteria of cultural significance and financial viability. We recognise its achievement, while also noting the scale of ongoing monitoring that will be required to oversee the use of taxpayers’ money. We are concerned as to whether the Board’s expertise and the arm’s-length bodies’ capability in assurance and investment is enough to track and oversee the recipient bodies in the long-term.

Recommendation: The Department should write to us within three months setting out is plans for overseeing the capability and skills in its arm’s-length bodies given their ongoing role in monitoring the Culture Recovery Fund.

1. We are concerned about the Department’s and Arts Council England’s ability to manage the significant and ongoing loan book commitments created by the Culture Recovery Fund. As a result of repayable finance awarded under the Culture Recovery Fund, Arts Council England is now responsible for managing £252 million in loans over the next two decades. Loan recipients will not be required to pay back money for the first four years of the typical 20-year loan term. Arts Council England has no previous experience of managing a loan book and says that the extra financial skills it needs to manage the loans are now largely in place. While the Department believes it can manage the risk of default, and Arts Council England is confident of its mechanisms to alert it to risks of non-payment, neither have sought to utilise the considerable loan management expertise that already exists elsewhere in government.

Recommendation: In its Treasury Minute response, the Department should set out how it will make sure it has the resources in place to take on the new responsibilities for managing loans, and how it has drawn on learning from across government about managing the operation and future risks of its loan book commitments, including risks of organisations defaulting.

1. In implementing the fund during the pandemic, the Department’s need to act quickly to provide funding to applicants while also protecting taxpayers’ money meant some applicants’ experiences could have been better. The Department announced the fund in July 2020, with the intention to pay successful applicants by the end of September 2020. While officials should be credited for working at speed and delivering a programme with low fraud levels, mistakes were made, particularly in relation to the fund’s accessibility. For example, the language used on the grant forms were not well geared to commercial organisations; the Department had intended that the money would be distributed more quickly, unsuccessful applicants did not receive clear feedback to understand why their bids were rejected, and recipients faced continuing requests for information such as proof of bank details for each instalment of a grant, resulting in unnecessary duplication of documents.

Recommendation: In its Treasury Minute response, the Department should set out what more it is doing to communicate with those who were unsuccessful in securing funding and streamline its funding processes to cut out any unnecessary demands on recipients that slow down funding, consistent with protecting taxpayers’ money from fraud.

1. The Department lacks a comprehensive understanding of the coverage and impact of its funding on parts of the sector which found themselves without funds. The Department and its arm’s-length bodies have distributed around £1.2 billion to 5,000 organisations and the Department is confident that all applicants that met criteria for cultural significance and sound finances received funding. But the Department’s analysis of how the funding has been distributed is incomplete. For example, the Department has only partial knowledge about the fund’s impact on freelancers, commercial organisations, supply-chain businesses and festivals. Festivals are making difficult decisions about whether to risk their survival by going ahead this summer, but the Department has not modelled the cost of underwriting festival indemnity insurance.

Recommendation: The Department should write to us within three months setting out what it intends to do to support those that were under-represented in terms of the funding they received from the Culture Recovery Fund such as freelancers and festivals.

1. It remains to be seen whether the Department has achieved its objectives for the Culture Recovery Fund and secured longer-term value for money. The Department and its arm’s-length bodies are looking to build on the new relationships they have made with stakeholders, including many organisations they have not previously worked with or funded. The Department claims that the fund has definitely been value for money already on the basis that it is supporting the survival of organisations and that no organisations that received funding and are “culturally significant” have failed. Yet it could not tell us how it would be measuring the value for money achieved by the fund. The Department’s evaluation of the fund is due to report after the first two rounds have been distributed and round three has been awarded. Capturing what the Department has achieved through the fund and learned about the culture sector will depend on research that has clear value for money criteria, including measures for the impact on jobs and freelancers.

Recommendation: The Department should set out:

• in its Treasury Minute response, the metrics it is using to evaluate the performance of the Culture Recovery Fund against its initial objectives; and
• once its evaluation is complete, what it will do to apply lessons to achieve value for money from its Culture Recovery Fund spending for the whole sector including subsectors that may have been missed.

1. The taxpayer’s investment in the sector, and the Department’s future role in overseeing it, present a huge opportunity for the Department to step up its support and advocacy for the sector. The Department has gained a lot of new information and understanding about the sector, which it could put to good use. We want to see the Department apply what it has learned from the Culture Recovery Fund to build the economic potential of the sector. In addition to the sector’s importance to the domestic economy, we are particularly thinking about the sector’s export potential and the varying levels of cultural and heritage resources across the country. To make the most of this opportunity requires effective action, oversight and advocacy by the Department.

Recommendation: The Permanent Secretary should write to us by the end of 2021 setting out:

• what she sees as the key challenges facing the sector following the Department’s Culture Recovery Fund investment;
• what opportunities the fund has offered for the Department to be a better advocate for the vibrancy of the creative arts and culture sector in all parts of the country; and
• how the Department will realise future cultural and economic impacts, including for export, from its investment