Good on paper, bad in practice

Last December the DCMS announced its action plan to boost philanthropy. This came at around the same time Arts Council England (ACE) decided to remove Arts & Business (A&B) from its National Portfolio. So I was rather surprised to read that the DCMS action plan resembled, in everything but name, A&B’s recent ‘Private Sector Policy for the Arts’.

Earlier this summer, ACE announced further details of how it would implement one of the key programmes from that action plan – Catalyst Arts, a £40m fund to increase private giving to the arts. By then, of course, it came as no surprise that ACE was proposing to recycle two of A&B’s old schemes: fundraising training and match-funding. I was shocked to realise, however, that such a key cultural scheme appears to be yet another example of a ‘garbage can’ approach to policy-making: it seems that ACE adopted A&B’s schemes because they were there for the taking. Had they followed what they preach – engaging in a fast but thorough review of the evidence to support programme proposals – ACE would have realised that matching grants do not work. Or more precisely, they work for large cultural organisations at the expense of small ones, cultural consumers and artistic innovation.

Theoretical research on what works to stimulate private giving suggests that matching grants are an effective public funding tool, reducing many of the inefficiencies from direct subsidies. However, actual evidence supporting them is mixed. Economists in experimental settings have found that people tend to give more under a matching system than under a tax-deduction-like rebate. However, other experiments have found that the effect disappears completely when the matching stops. In some cases, donations fall below the initial pre-matching grant amount.

In the USA, there is little evidence of the effectiveness of the National Endowment for the Arts’ matching grants. Research suggests that for the cultural sector as a whole, private giving was not affected by these grants. For individual organisations, the effect tends to be limited because the match fund accounts for a small proportion of the resources needed to get things done. For the UK, matching grants have been a poor option as well. Somewhere in ACE’s institutional memory there must be awareness of the many attempts by A&B to make matching grants work. A&B has firsthand experience of the high costs of monitoring such programmes, the difficulties of producing new money, and going beyond the usual corporate donors and large arts organisations. As A&B learned the hard way, the magic of matching grants assumes that new money will be found and that it will be used to increase or improve cultural provision. But in most cases these schemes allow for the use of indirect and re-allocated funds to match public funding. In some cases, the match is constituted by in-kind donations of time. Even if this grant is actually invested in improving or extending a service, it is likely that this service will be implemented by over-worked cultural workers whose time has been committed to other projects and matching schemes. This limits the potential impact of these grants on under-resourced smaller organisations.

Furthermore, matching grants assume that senior managers at cultural businesses think of fundraising strictly as a way of increasing artistic services. Strategically, senior managers have a wider set of objectives. Successful fundraising campaigns are a tool to strengthen an organisation’s brand and reputation amongst peers and policy-makers. Organisations looking to maximise the number of grants they receive without fully considering costs tend to overspend on fundraising efforts, endangering their long-term sustainability.

Finally, an organisation in receipt of an ACE matching grant will be effectively asked to deliver its artistic objectives whilst at the same time developing and implementing a programme of activities to deliver the social or commercial goals of its match funder. In comparison, it is unlikely that a policy tool such as tax incentives would so directly force cultural businesses to redirect resources away from their core offer. Once again, this is likely to represent a heavier burden for small organisations than for large ones. No amount of additional fundraising training, as A&B painfully learned, will be able to change a policy landscape that so obviously favours major cultural organisations at the expense of the more creative and innovative smaller creative firms.

Given that this scheme will be taking place regardless of what the evidence suggests, is there a more effective way of running matching-grants? Yes, but it would require a labour-intensive and expensive monitoring system to ensure that new money is actually being created to deliver new cultural services or improve on existing ones. Expensive evaluations are always good news for academics and consultants, but not for the cultural sector. Is there an option to matching grants? If the policy goal is to increase funding for the sector and democratise the arts, tax incentives are worth considering. In the next issue, we’ll discuss the case for tax incentives looking at the evidence from two countries with very different social and economic systems, France and the USA.