The Crisis of Capital

In the UK we still tend to think of charities as benevolent organisations. So considering cultural organisations as charitable institutions, deserving of public support, is still a leap for much of the general public.

There has however been a transformation in the cultural institutions own attitude to their charitable status and fundraising. This has of course been in large part been due to cuts in funding and  Arts Council England’s focus in recent years on strengthening organisational resilience. There’s now another crisis facing the future of our cultural institutions, which urgently needs to be embraced and addressed.

You don’t have to have managed a capital campaign to know that there are a few key individuals and charities whose generosity has ensured the longevity of so many of our cultural institutions. The names of a small key group of foundations are ubiquitous in the lists of major donors to almost every successful campaign. For many small to medium size institutions, the support of one or two of these  donors can be critical to the success of the project. We owe them a great debt.

Yet in the 20 years in which I’ve worked on such campaigns, not only has the number of major trust and foundation donors supporting arts capital projects been slow to grow, our dependency on this group has increased. This has in itself created an illusion of a kind of stability, but it’s an illusion and it’s now the long-term future of our cultural institutions that’s under threat as a result of the lack of attention being paid to this issue.

Arts Council England has taken some steps to try and enhance philanthropic support for the cultural sector in general. But even with stable revenue income generation bases in place, very few institutions will have a large enough donor base to make the conversion to a capital campaign, without major grants.

In recent months it has become clear that several of these foundations, on which we are all so dependent, are reaching the end of their natural life and will be closed in the next five to ten years. That may feel like the distant future, but I’m already writing strategies for projects for which the existence of these foundations, and thus their ability to redevelop their organisations, is in question.

The lack of attention to this issue is a time bomb, which is awaiting the cultural sector and one which needs urgent attention and incentives to be averted.

When discussing what can be done to enhance philanthropic support of the arts, a range of factors can be examined: from how the value of culture can be established, to the understanding of the sector as charitable, to public celebration of support. Tax incentives have improved in recent years, so while they could still benefit from simplification they’re less frequently cited as an urgent priority.

However, I believe that there’s an urgent argument for tax incentives, along with other measures, when it comes to establishing foundations to support cultural capital projects. This is due not only to the fact that so few new major foundations supporting capital campaigns have been established, it’s also because of the changes which are taking place in the composition of UK wealth.

The new high net worth individuals, whom we’re seeking to engage in supporting the cultural sector, tend to have come by their wealth by different routes than some of the former generation of cultural philanthropists. While it would be foolish to argue that families such as the Westons and Sainsburys aren’t engaged in business, these are families whose businesses and wealth are of relatively longstanding and individuals who were brought up with a context that enabled an appreciation of the intrinsic value of culture. That may less obviously be the case for some of the emerging philanthropists, who’ve spent their lives establishing their businesses and their wealth, and who are now to their credit giving their assets away. Culture may seem a relative luxury, rather than part of the overall quality of life we know it to be.

So the leap to including culture in the list of potential charitable causes an individual supports can be great. The leap to making major grants to ensure the longevity of those institutions may be even greater and that’s why I consider tax incentives to be a key factor in encouraging the creation of such foundations in the future.

The Hintze Foundation, The Madejski Foundation, names like these are among the newer major foundations supporting UK cultural capital projects, all evidence that such business people can appreciate and will support the arts. But support of the cultural sector from foundations like these has largely been confined to London institutions to date. Those of us who’ve been seeking to build endowments for institutions through ACE’s Catalyst programme know the value they’d bring to our organisations. Major national foundations committed to capital giving are endowments in all our interests, and we need more of them if we’re to face not only the short term future of our cultural institutions with confidence, but to avert a crisis of capital in the medium term.

Caroline McCormick  |  October 2014