Arts Funding: why we do it and ways to do it better…

“The Arts has never won the battle on its economic benefits, nor on its social or cultural ones.”

I’m seeing versions of that sentiment everywhere these days. After years of chasing the policies, desperately trying to prove that the arts can fix every social problem, desperately gathering data , devising metrics, and making questionable economic claims all in the hope that we can find the “winning” argument the state of the arts across a lot of the world is precarious. Funding is frozen or declining, promises made are broken, goalposts shifting etc.

For decades we’ve argued that the arts pay their way, that every euro invested spins back two or three times through local economies (depending on which report we look at). Yet the argument never quite lands. The political photo-opportunities increase along with the precarity.

So let’s look at the reasons and assumptions underpinning arts funding to see if we can find a better way.

The fundamental reason the state funds the arts is that there are not enough people with sufficient disposable income to buy a quantity of “art” sufficient to sustain either individual artists or the entire sector. To put it another way a ticket to a show in an arts centre would cost upwards of €200 if the ticket price was not subsidised to ensure more people could afford it. This is what’s known in the trade as a “market failure”.

Now we can have a whole debate as to the why of this market failure (most art is irrelevant to most people, art is elitist etc) but that’s a different conversation. The essential point here is that state funding of the arts makes art affordable to as many people as possible whether they need it or not (the same is true of the army, the police, parks etc. – everybody pays for these things through tax because they are good to have, but not everybody uses them).

In a condition of market failure a method must be found in the short to medium term to inject additional cash into the market to ensure that people and organisations can continue to produce at a price that the wider public can afford. Incidentally a lot of market failure occurs in sectors with a high labour dependence and low productivity, in sectors that depend overwhelmingly on people (Health, education, care, etc)

In the case of the arts in the greater European area the method to correct this market failure has been direct state funding.

However, for that to continue politicians and bureaucrats have to believe in the justifications – the arts create shared experiences, cultural identity, civic health, they create contingent value (the value leaks into other sectors — restaurants, tourism, mental wellbeing., etc etc.) If that belief falters the funding is at risk. We’re witnessing that belief faltering now. It’s important to remember that that the primary reason for state funding, it’s to ensure that everybody can afford it, regardless of whether they want it or not.

Now, if the state pays for something it has to tax it back or it either goes into debt or goes broke. it’s a really simple equation.

So, if we want the State to be the sole source of arts funding and fund the sector effectively, then we also want it to tax more — not just income, but profits, property, and wealth. Because public money only comes from public revenue . Now, personally I think this a simple and brilliant plan – but that’s not the Ireland we live in.

Our low-tax, neo-liberal model means government can’t meet every need — from housing to health — and still raise arts funding to European levels (which, incidentally, are declining).

And so we have a dilemma. The arts sector needs more and more money (because they suffer from cost disease and become more and more expensive over time) but the state won’t tax more to fund its direct spending, so arts funding freezes, is sub-optimal, and declines in real terms.

Now if the primary purpose is to keep the price affordable, how many other ways can we inject money into the system to keep the price affordable. Additional funding has to come from somewhere or the situation will just get worse.

So here’s a few ideas from around the world

I was in Budapest recently and when I paid the hotel bill I was charged a small city tax for staying there. A similar small “tourism levy” here could raise €80–100 million annually for local arts infrastructure and production.

A Cultural Levy on multinationals payable to local authorities could raise €100 per employee (or 0.01% turnover) for local arts funds. The amounts here are so small that opt in could be voluntary and be offset against tax. Lists of those participating could be made public.

Progressive income Tax Credits (the less you earn the more you claim) would allowi ndividuals and SMEs to invest in artists and local arts organisations and reclaim all or part through tax, allowing families and friends to support their own, and small narrow-margin local business to support local arts work.

Commercial Theatre Production Relief, a kind of “Section 481 for stage” that de-risks live performance and encourages ambition.

Professional Artist Income Scheme, a €40k taxable base income that treats artists as workers, not hobbyists. All additional income is aggressively taxed at close to 100% so the scheme simply aggregates lifetime earnings.

Sponsorship. There’s a subtle truth about sponsorship: the arts sector as a whole is very very sponsorable, but individual events and small organisations usually aren’t.

One performance offers too little visibility or duration for a sponsor’s ROI.

But the system — the network of venues, organisations, artists, and communities — is an enduring public brand that business can meaningfully invest in. Working in partnership at local, regional and national level could secure real sponsorship.

Each of these models supports the others – the range of sources de-risks the overall funding model, and the tax incentives crowd in investment, linking those who benefit from culture to those who create it.

This kind of mixed funding ecology isn’t a compromise. It’s probably the only way to build a sustainable cultural economy: public funding as the backbone, private participation and local levies as the real muscle.

In short, well-designed levies and tax incentives can correct market failure — essentially using market tools to achieve public goals. The funny thing is that each of these ideas exist and function effectively in some part of the world, and the funnier thing is that most of them have been deployed here in other economic sectors.

Unfortunately in arts policy thinking in Ireland we fall into a binary: either the State funds culture, or the market does.

The reality is that in an economy like ours both are essential and both have roles to play. Together, they make up an economic cultural ecology – a system that can breathe, flex, and grow.