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Patterns of inequality in privatefunding of culture across the UKDiego Méndez-Carbajo a & Javier Stanziola ba Department of Economics , Illinois Wesleyan University ,Bloomington, IL, USAb Museums, Libraries and Archives Council , London, UKPublished online: 27 Sep 2008.
To cite this article: Diego Méndez-Carbajo & Javier Stanziola (2008) Patterns of inequalityin private funding of culture across the UK, Cultural Trends, 17:3, 165-179, DOI:10.1080/09548960802362009
To link to this article: http://dx.doi.org/10.1080/09548960802362009
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Patterns of inequality in private funding of culture across the UK
Diego Mendez-Carbajoa� and Javier Stanziolab
aDepartment of Economics, Illinois Wesleyan University, Bloomington, IL, USA; bMuseums, Librariesand Archives Council, London, UK
By calculating an additively decomposable inequality measure following the lines of Shorrocks(1980; see Econometrica, 48(3)) we are able to evaluate regional disparities in private fundingof cultural enterprises in the UK in a novel way. The country-wide index of inequality separatesfunding differences across regions from disparities within regions. Using data on privateinvestment in UK cultural organisations, we consider three datasets: the first includes 139organisations between 1993 and 2005; the second includes 573 organisations between 2002and 2005; the third includes 898 organisations between 2005 and 2006. Differences amongthe 12 UK regions account for between a quarter and a third of overall funding inequalities.The largest contributor to funding inequality of cultural institutions in the UK is the degreeof heterogeneity among cultural organisations within each region. We find that successfulprivate fundraising is not significantly associated with the region where the organisationoperates or with the particular cultural expression object of its activity. These are significantfindings for cultural policymakers working on addressing issues of regional concentration ofculture and diversifying sources of funding for the sector.
Keywords: cultural policy; private funding of culture; regional distribution
Introduction
Cultural organisations in the UK have traditionally relied on public subsidies and direct tradableincome (e.g. ticket sales) to support their activities. In the past 30 years, private sources offunding – including corporate membership, sponsorship and donations, individual giving,and trust and foundation support – have become a reliable funding option for many culturalorganisations. In 2004/05, private funding accounted for 13.7% of total income for these organ-isations, with more than 78% of them expecting this form of income to increase in 2005/06(Stanziola, 2006). However, this source of income is highly concentrated amongst a few organ-isations. Of the total private funding reported in 2004/05, 70% went to 1.7% of UK culturalorganisations. Most of these major recipients are located in London with annual turnover ofmore than £5 million. Similar to patterns in other areas of the economy, this sort of inequalityis likely to create inefficiencies in the sector and increase entry barriers (Frank & Cook, 1996;Netzer, 1978). Furthermore, the highly concentrated nature of private funding of arts and heri-tage has prompted some policymakers and arts professionals to cast doubt on the sustainabilityand feasibility of this source of funding for small to medium cultural organisations that do notbenefit from the so-called “London Effect”. To respond to these challenges, policy makers havegiven priority to rebalancing regional disparities and supporting the fundraising capacity of
Cultural TrendsVol. 17, No. 3, September 2008, 165–179
�Corresponding author. Email: [email protected]
ISSN 0954-8963 print/ISSN 1469-3690 online
# 2008 Taylor & FrancisDOI: 10.1080/09548960802362009http://www.informaworld.com
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cultural organisations (Shanbury, 2006; Stanziola, 2006). We study these regional disparitiesand quantify their relevance as a driver of overall funding inequality.
Using a database of more than 4000 UK cultural organisations that have received or havepursued private funding between 1993 and 2006, we explore the factors behind these fundingdisparities in this paper. We do so by computing a decomposable inequality measure capable ofseparating the funding disparities due to differences between regions and the funding differencesdue to inequalities within regions. The period of analysis allows us to document the evolution ofthese inequalities before and after significant events affecting cultural provision and funding in theUK, namely, the end of 18 years of Conservative government in 1997, the advent of the culturalpolicies pursued by the Labour government since then and the emergence of the National Lotteryas one of the most important funding sources for charities in the UK. The paper makes an extensiveanalysis of the last two years of data available (2005–2006). We will employ this dataset to studypatterns of private funding according to cultural form within each individual region.
The results suggest that regional disparities are not as important as previously thought. Instead,differences across organisations within each region are responsible for the largest share of overallinequality in private funding. These findings have implications for policy makers and fundingbodies promoting greater access to culture throughout all UK regions and nations, as well asfor arts professionals developing business and fundraising strategies.
Theoretical background
The literature on funding distribution in the cultural sector has focused on how public subsidiesare disbursed (Joy, 2006; Urrutiaguer, 2005; Wilson & Hart, 2003), on the concentration of spon-sorship (Frank & Geppert, 2004; Pharoah, Walker, Goodey, & Clegg, 2005), and the effects ofpublic funding and organisational culture on the ability to identify, obtain and maintain privatefunding (Bolton & Carrington, 2007; Knell, 2007; Macedo & Pinho, 2006; Steinberg, 1991).This literature suggests that the three main factors affecting levels of private funding are geo-graphical location, size of the organisation, and organisational attitudes towards innovation andentrepreneurialism.
The literature indicates that private funding for culture is likely to concentrate in urban areas, inregions with a solid cultural infrastructure and amongst large cultural organisations. In the absence ofstrategic price discrimination and effective market segmentation, cultural organisations tend to phys-ically locate in the middle of the market, usually major cities. This strategy, according to Urrutiaguer(2005), allows cultural organisations to take full advantage of the positive externalities associatedwith urban areas in terms of close proximity to a large number of consumers and resources. As aresult, major urban areas tend to house a relatively larger number of cultural organisations andhave the infrastructure (i.e., venues, labour supply and know-how) needed to sustain cultural clus-ters. This agglomeration allows cultural organisations to form strong formal and informal linkagesamong themselves and other institutions such as local universities, businesses and local government.The larger the cluster, the more it is able to supply its own demand for resources, allowing it tobecome self-sufficient and increase its linkages even further. Cultural activities enjoying economiesof scale benefit from agglomeration further because their costs of production per unit fall as theiraudiences increase. Overall, the likelihood of professional cultural events being regularly stagedin urban areas is larger than the likelihood of similar events being regularly staged in rural areas.
The aforementioned benefits of hosting cultural organisations in major urban areas make themmore attractive recipients of private funding, relative to organisations based in smaller cities andregions. As O’Hagan and Harvey (2000) argue, sponsoring a cultural event in an urban area
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provides corporations with an opportunity to influence a large number of key politicians, opinionformers and suppliers at a lower cost per unit than in a rural setting. These influential urban cul-tural consumers are also more likely to become individual donors and participate in “Friends” andMembership schemes. Trusts and foundations looking to increase the impact of their limitedresources are likely to invest in organisations with a proven track record of efficiently reachinga large number of people.1 These dynamics have been used to explain why most privatefunding tends to go to larger and more established organisations. Shanbury (2006) finds thatmedium-sized organisations find themselves in a difficult position, neither able to offer servicesat the scale of major organisations nor capable of proving that they can deliver on a local com-munity level. Similarly, smaller organisations are even less likely to have the resources to increasetheir reach and impact or provide clear evidence that they can deliver the results corporations andtrusts and foundations expect.
The literature provides a less clear picture of the concentration of funding amongst cultural formsand its regional patterns. Corporations tend to prefer sponsoringmuseum exhibitions, theatre and thevisual arts since these sectors provide them with the perfect venues to entertain clients (O’Hagan &Harvey, 2000; Martorella, 1996). On the other hand individual donors and family trusts and foun-dations seem to have more diverse objective functions when deciding which cultural sector tosupport. Andreoni and Payne (2003) find that these private donors are likely to be influenced bytheir own past artistic activities, as well as by strong fundraising campaigns.
The regional differences in the level of private funding to culture are also likely to be affectedby the distribution of income amongst its four nations (England, Northern Ireland, Scotland andWales) and the English regions, especially London. There is a considerable body of literature con-cerned with the issue of regional income inequality in the UK. This work mainly discusses thecauses of the strong dominance of England, in particular London and the South East. Thesetwo English regions alone accounted for 32.1% of total UK Gross Value Added (GVA) in2004. According to MacKay (2003), this concentration is explained in terms of a long historyof centralised political power in London whilst regions beyond this core are seen as geographi-cally peripheral both within the UK and within Europe (see also Crafts, 2005; Gardiner, Martin, &Tyler, 2004). The growing consensus (see “Regional Futures: England’s Regions in 2030”, 2005),is that London itself is an anomaly of highly concentrated wealth, political power, population,education and infrastructure. The devolution of political administration to Scotland, Wales andNorthern Ireland and the strength of regional development agencies2 in England illustrate anongoing politically motivated focus on development outside the capital. More recently, the UKgovernment published the Subnational Economic Development and Regeneration Review (HMTreasury, 2007), setting out plans to refocus powers and responsibilities at all levels of regionalgovernance to support economic development. One of the three main recommendations of thereport calls for ensuring policy is managed at the right spatial levels. This suggests a continuationof recent efforts to take a devolved approach to meeting local needs, aligning economic impactswithin regions and encouraging a bottom-up approach to collaboration between them.
Inequalities of infrastructure provision between rural and urban areas in the UK are well docu-mented. Turok (2004) particularly highlights the impact of the expansion of the EU, resulting inthe loss of European Structural Funds to poorer rural areas. In this light, cultural developmentin the UK is often linked to government agendas such as regeneration and renewal of the post-industrial landscape, or to the empowerment of marginal rural communities. As a result, alarge proportion of funding for rural cultural organisations is expected to come from the publicsector. At the same time, the historically strong “north–south divide” in England continues tobe a political issue (Office of the Deputy Prime Minister, 2002/03): in the age of the knowledge
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economy, the growing wealth and size of London and the South East will remain an importantdeterminant of economic development.
For cultural organisations this brings the dual challenge of competing with the diverse andpopulous London market, dominated by major national institutions, and reaching more peripheralpopulations that will potentially become increasingly marginalised. Does this “London Effect”extend to the distribution of funding of culture? Wilson and Hart (2003) report that Londonwas the biggest recipient of Arts Council grant-in-aid subsidy (in England) in 1999/2000,receiving 48.3% of the total distributed to 10 regions, compared with 47.4% in 1980/1981.Similarly, there was a considerable disparity in 1999/2000 between the grant-in-aid subsidyper head in South East England and that in the rest of the country (£5.45 per person and £2.69per person respectively).
In addition to regional dynamics, the literature considers the effect of public funding andorganisational culture on private funding. Steinberg (1991) shows that government grants directlycontribute to drops in private giving of between 0.5 and 35 cent per dollar of government grantsgiven in the US.Macedo and Pinho (2006) also consider the specific results arising from dependencyupon state funding, self-generated income and private funding. They highlight that state fundingtends to diminish strategic autonomy and favours organisational cultures that discourage flexibility,cost-effectiveness, and the capacity to innovate. More recently, Knell (2007) notes that preoccupa-tion with public funding has limited the degree of innovation and risk-taking among recipient organ-isations, many of which are focusing primarily on solutions to cover their cost bases rather thanexploring how hard and soft assets could leverage money differently. In a similar vein, Boltonand Carrington (2007) highlight that many cultural organisations tend not to think of thecompany as an enterprise in which management and financial discipline matters. For some culturalorganisations, “one measure of the excellence of the artistic product is the size of the deficit”(Bolton & Carrington, 2007, p. 6).
The rest of the paper explores further two of the main explanations given by the literature forthe level of concentration of private funding in the UK; namely, regional location and size.
Data and descriptive statistics
Since 1976, Arts & Business (A&B) in the UK has undertaken an annual survey to record theamount of business funding allocated to culture. The number of items in the instrument, mostof them structured, varies per year. However, since 1993/94 all instruments have includeditems on the amount received from trusts and foundations and individual giving and forseveral forms of business giving, including cash and in-kind sponsorship, corporate membershipschemes and corporate donations.
Up to 4000 UK cultural organisations are asked to participate in the survey via post, email andthe Web every year. This represents the total number of UK cultural organisations that have comeinto contact with A&B, are members of its development forum, have participated in its fundrais-ing training programmes, and/or are recipients of A&B’s programme of investment in arts-business partnerships.3 Other studies, namely Selwood (2001) and Casey, Dunlop, andSelwood (1996), have derived larger samples that cover between 7920 and 10,000 cultural organ-isations receiving both public and private funding. As a point of reference, existing online direc-tories of cultural organisations, such as Guidestar UK, contain more than 10,000 organisationsbut include charities with a wide range of educational, cultural and political objectives such asthe Royal Association of Deaf People and the Southern African Cultural andWelfare Association.These types of organisations are unlikely to have as one of their main objectives the production of
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specific artistic or cultural events or services and therefore fall outside A&B’s sphere of activity.A&B’s narrower pool of organisations means that the survey could ultimately be used to makeinferences about cultural organisations that are interested in pursuing private funding.4
All organisations in the database have the same opportunity and chance to participate in thesurvey. Until 2004/05, A&B aimed at reaching the highest overall response rate possible,instead of following a stratified simple random sample of their universe of organisations. Theaverage response rate over the past five years has been 45%, with the highest number of respon-dents in 2001/02 at 2136. This response rate is considerably higher than the average 10% formail-out surveys. Reflecting the UK funding landscape, responses have tended to contain alarge number of major organisations (i.e., turnover above £5 million). Since response to thesurvey is not limited to any particular individuals within the organisations (e.g., finance director,fundraising manager, CEO) the information reported may be influenced by the motivations,knowledge and job pressures of the person who answers the survey. There is also the likelihoodthat, whilst the answers are kept anonymous, organisations with “good news to share” are morewilling to participate in the survey. Similarly, greater interaction with other areas of A&B’s workis likely to increase the probability of an organisation’s response due to a perception that they havea responsibility to the organisation or that they may create a stronger link with it by participating.Some of the financial data received are compared by the research team at A&B against similarinformation contained in publicly available management accounts, grant applications andA&B’s research on major donations and sponsorship deals in the UK. The data are then sentto an independent analyst for further cleaning and descriptive analysis.
Until 2004/05, A&B did not conduct any formal work to assess the reasons for non-response tothe survey. As a result, no inferences can be made about the entire universe of cultural organis-ations contained in A&B’s database. Similarly, the differences in size and composition of thesample responding to the survey from one year to the next does not allow for meaningfulyear-on-year comparisons for the entire database.
For this paper, we will use three different samples from this extensive dataset. The first consistsof a 12-year (1993–2005) constant sample of 139 organisations and it will help us establishgeneral descriptive trends of total private funding. The second is a three-year (2002–2005) con-stant sample of 573 organisations that will illustrate concentration patterns in terms of regions andcultural forms. Lastly, the third and latest annual survey available (2005–2006) where a sample of898 organisations reported receiving private funding will allow us to check how these funds aredistributed across cultural forms within each individual region. As discussed in earlier sections,small numbers of cultural organisations attract large amounts of funding across samples. Theselarge figures have been kept in all samples as they provide us with a more accurate descriptionof the funding landscape in the cultural sector in the UK and clearly highlight the issues facedby most organisations trying to increase their levels of private funding.
The number of organisations by region, their respective average turnover, and private funding arepresented in Table 1 (139 organisations between 1993 and 2005), Table 2 (573 organisations between2002 and 2005), and Table 3 (898 organisations between 2005 and 2006). In all datasets Londonhouses the largest number of cultural enterprises, although its relative predominance isdisproportionate in the first dataset. Scotland, Wales, the South East and the South West are rep-resented by a proportionally constant number of organisations, with only minor differences acrossdatasets. The remaining eight English regions house a much smaller number of organisations. Ingeneral terms each of these regions maintains its relative weight across datasets. As previouslynoted, the existing literature describes a positive relation between the size of the organisation andthe amount of private funding received. Such is the case in our datasets. Considering aggregate
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Table 1. Sample of 139 organisations: 1993–2005.
Region ni % Average turnover Average funding
London 48 34.53 31,376,934 2,841,394Scotland 20 14.39 4,800,061 344,933Wales 14 10.07 2,605,915 147,757South East 12 8.63 3,379,125 479,480South West 11 7.91 1,666,084 177,467West Midlands 8 5.76 6,040,518 283,146North West 5 3.60 6,161,468 332,786Yorkshire 5 3.60 6,200,572 289,630North East 5 3.60 4,256,802 256,488East 5 3.60 1,089,807 217,069East Midlands 4 2.88 2,224,814 106,096Northern Ireland 2 1.44 10,163,846 135,497
N 5 139 13,814,467 1,161,874
Table 2. Sample of 573 organisations: 2002–2005.
Region ni % Average turnover Average funding
London 108 18.85 18,389,868 2,325,132Scotland 74 12.91 2,847,396 327,524South East 68 11.87 1,268,821 143,494Wales 44 7.68 1,518,919 159,499South West 43 7.50 744,077 131,260West Midlands 37 6.46 3,280,654 260,856North West 37 6.46 2,796,830 191,540East Midlands 34 5.93 1,445,749 63,738North East 33 5.76 1,532,679 186,921East 33 5.76 616,120 132,990Yorkshire 32 5.58 1,935,782 139,384Northern Ireland 30 5.24 1,667,668 61,942
N 5 573 5,376,470 343,690
Table 3. Sample of 898 organisations: 2005–2006.
Region ni % Average turnover Average funding
London 178 19.82 11,647,747 1,667,621Scotland 115 12.81 1,747,770 183,891South East 108 12.03 920,758 106,295South West 82 9.13 923,774 137,772Wales 71 7.91 1,169,790 94,975Yorkshire 65 7.24 1,196,212 79,213East Midlands 59 6.57 1,158,349 47,992North West 51 5.58 3,772,617 174,308West Midlands 38 5.50 3,002,490 177,640North East 48 5.35 1,233,536 137,651East 45 5.01 404,972 69,594Northern Ireland 38 4.23 553,459 41,843
N 5 898 3,433,851 425,895
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turnover as a direct indicator of size, the regional data shows that on average the larger the aggregateturnover the larger the amount of private funding received. In the first two datasets described abovethe ratio of private funding to aggregate turnover lies between 8 and 12%. Not surprisingly, the thirddataset, containing the widest cross-section of organisations, has a larger spread of private funding toturnover ratios. We will employ this dataset to extend our discussion of regional patterns of fundinginequality by studying patterns of private funding according to cultural form within each individualregion.
Methodology and results
Following Shorrocks’ (1980) seminal paper on additively decomposable inequality measures wewill compute an inequality index that can separate the contributions to total inequality arisingfrom regional differences in private funding from the contributions to total inequality due to het-erogeneity within each region. This way we could identify the regions with the most unequalfunding for their resident organisations and calculate the impact that these disparities withinregions have on the overall distribution of private funding.
The total inequality among all organisations in our dataset is calculated through a Theilinequality index of the form:
I0(x) ¼1
n
Xilog
m
xi(1)
where n is the number of organisations (139, 573 and 898 respectively), m is the average privatefunding for the UK, and xi is the private funding received by organisation i.
The contribution to overall funding inequality due to differences between the 12 administrativeregions in the UK is computed as:
B ¼1
n
Xgng log
m
mg
(2)
where n is the number of organisations (139, 573 and 898 respectively), ng is the number of organ-isations present in region g (g ¼ 1 to 12), the average private funding for the UK is m, and mg isthe average private funding received in region g.
The contribution to overall funding inequality resulting from inequalities within each g admin-istrative region in the UK is calculated as:
Cg ¼1
n
Xng
i¼1
logmg
x gi
(3)
where n is the number of organisations (139, 573 and 898 respectively), ng is the number of organ-isations present in region g, the average private funding for region g is mg, and xi
g is the privatefunding received by organisation i located in region g.
Figure 1 shows the evolution of these three inequality measures for the 139 organisations sur-veyed during the 1993–2005 time period. The top line represents the total inequality index, I(0),which displays a slight positive trend: overall, private funding of cultural organisations is becom-ing gradually more unequal. By computing the degree of inequality among regions, B, and the
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degree of inequality within each region, C(g), we conclude that the major contribution to overallprivate funding inequality is the degree of variation within each region. In other words, theregional location of the organisation does not explain a significant part of the heterogeneity ofvolumes of funding received. The differences across UK regions amount to 26% (on average)of the disparities in private funding of cultural enterprises. The vast majority of the differencesin private funding, 74% (on average), of cultural enterprises can be explained by disparities inprivate funding within each region. Although there is a small positive trend observable in theevolution of private funding disparities among regions, this trend is more marked in the caseof private funding inequalities within each region.
Figure 2 breaks down the aggregate degree of private funding inequality within administrativeregions, C(G), and presents the degree of funding disparity within each of the 12 UK administra-tive regions, Cg. The left-hand side axis of the graph marks the scale of the inequality index for theregion of London (plotted in a thick black line), while the right-hand side axis of the graph marksthe scale of the inequality index for the rest of the UK regions. Several conclusions can be drawnfrom this graph. First of all, it is clear that the inequality in private funding within the region ofLondon drives in great part the aggregate funding inequality within regions, C(G). Even during2001–2002, when the funding inequality within the region of London is at its lowest relative level(0.2489), it is still almost twice that of the second most unequal region, Wales (0.1371). In thisregard, the nations of Wales and Scotland display much larger levels of private funding inequalitythan any other region in England, outside of London.5 Lastly, only the South West displays agrowing degree of internal private funding inequality.
In order to check the robustness of our findings we repeat the analysis on a larger dataset cover-ing 573 organisations during a three-year period between 2002 and 2005. The results of our com-putations are presented in Table 4. We reach the same conclusions as stated above, albeit withsome noteworthy differences. As before, we observe that the greatest contributor to overall
Figure 1. Decomposable inequality measure for sample of 139 organisations, 1993–2005.
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private funding inequality (68%, on average) is the degree of heterogeneity within regions, C(G).The differences within regions, B, account to about a third (32%, on average) of the overallfunding disparities. Once again, the region of London exhibits the highest degree of internalprivate funding inequality, accounting for a quarter of the aggregate degree of inequalitywithin regions. Although private funding within the South West region is still highly unequal,private funding within Yorkshire is even more so. If the level of private funding inequalitywithin the regions of London and Yorkshire were to be equal to the average of the rest of the
Figure 2. Inequality within region (Cg), 1993–2005 (London on left axis and logarithmic scale on right axis).
Table 4. Decomposable inequality measures for sample of 573 organisations. Real private funding2002–2005.
2002–2003 2003–2004 2004–2005
Value % Value % Value %
Total Inequality: I(0) 1.0681 100.00 1.1597 100.00 1.0884 100.00Differences between Regions: B 0.3255 30.47 0.3915 33.76 0.3360 30.87Inequality within Region: C(g) 0.7426 69.53 0.7682 66.24 0.7525 69.13East 0.0367 4.95 0.0538 7.00 0.0396 5.26East Midlands 0.0346 4.66 0.0275 3.58 0.0314 4.17London 0.1902 25.61 0.1945 25.32 0.1843 24.49North East 0.0488 6.58 0.0327 4.26 0.0431 5.73North West 0.0244 3.28 0.0286 3.73 0.0244 3.24South East 0.0392 5.28 0.0470 6.12 0.0489 6.50South West 0.0790 10.63 0.0731 9.51 0.0697 9.27West Midlands 0.0338 4.56 0.0382 4.97 0.0340 4.52Yorkshire 0.1152 15.51 0.1228 15.99 0.1168 15.52Scotland 0.0442 5.95 0.0606 7.88 0.0660 8.77Wales 0.0519 6.98 0.0394 5.13 0.0489 6.50Northern Ireland 0.0447 6.02 0.0501 6.53 0.0454 6.03
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English regions, the aggregate inequality within regions would fall to only 58% and the differ-ences in private funding among regions would explain the remaining 42% of the disparities inprivate funding. Within this dataset of organisations, the ones located in Scotland, Wales andNorthern Ireland exhibit very low degrees of inequality, contradicting some of our previous find-ings. Since this dataset of 573 organisations is significantly larger than the one discussed above,the reader could be tempted to conclude that private funding within each of the three nations isindeed fairly homogeneous. We study patterns of private funding within individual nations andregions next.
In order to simultaneously examine the patterns of private funding inequality across regionsand across cultural forms within each of the 12 regions of the UK we employ the widestcross-sectional dataset available which includes 898 cultural organisations in 2005–2006. Asbefore, we find that around two-thirds of the overall inequality in private funding is due todifferences within regions and only one-third of the overall inequality in private funding is dueto differences across regions.6 To better compare organisations of disparate size within eachregion we proceed to normalise the private investment funds received by the reported gross turn-over of the organisation (i.e. the private investment to turnover ratio). Now the inequalities withinregions explain slightly more than 97% of the overall inequality in private funding of culturalorganisations. The first column of Table 5 presents the results of our computations of the totalinequality index, I(0), for each region.7 We find, again, that London, the South East and theSouth West are the most unequal regions; Yorkshire and Scotland are also highly unequal.8
Our next step is to measure, for each region, the fraction of overall private funding inequalityassociated with differences across cultural forms, B, and the fraction of overall private fundinginequality associated with differences within cultural forms, C(G).9 We follow the classificationof cultural forms provided by the Arts Council.10 These computations are presented in the secondand third columns of Table 5. In all but three of the regions (East, North East and NorthernIreland) no less than two-thirds of the overall inequality is the result of funding disparitieswithin cultural forms. In other words, most of the inequality in private funding levels in eachregion arises from one or very few organisations drawing most of the private investmentfunds.11 The decomposable inequality measure previously defined indicates that differences in
Table 5. Decomposable inequality measures for sample of 898 organisations. Private investment to turnoverratio 2005–2006.
Total inequality: I(0)Differences betweencultural forms: B
Inequality withincultural form: C(g)
Value % Value % Value %
East 1.73 100.00 0.96 55.61 0.77 44.39East Midlands 3.03 100.00 1.03 34.12 2.00 65.88London 5.92 100.00 0.85 14.43 5.07 85.57North East 1.90 100.00 0.82 43.39 1.08 56.61North West 2.47 100.00 0.79 31.98 1.68 68.02South East 4.91 100.00 0.64 12.98 4.27 87.02South West 3.48 100.00 0.89 25.55 2.59 74.45West Midlands 1.79 100.00 0.67 37.57 1.12 62.43Yorkshire 3.12 100.00 1.08 34.77 2.04 65.23Scotland 4.68 100.00 1.14 24.39 3.54 75.61Wales 3.49 100.00 0.81 23.24 2.68 76.76Northern Ireland 1.54 100.00 0.64 41.72 0.90 58.28
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private funding across cultural forms generally represent less than a third of the overall disparityin funding in nine regions. Only in the East are differences between cultural forms more signifi-cant than differences within cultural forms. It is noteworthy to point out that when considering thespatial constructs of North (East, East Midlands, North East, North West, West Midlands,Yorkshire, Scotland, Wales and Northern Ireland) and South (London, South East and SouthWest) the aforementioned pattern is reinforced in one particular way: in the South the averagedegree of funding inequality within cultural expressions is more marked than in the North –by about 28%.12 In conclusion, although most regions seem to have a “local champion”, an organ-isation operating in one particular cultural field that attracts a relatively large share of privatefunding, this prominent marker of inequality across cultural forms alone is not strong enoughto explain much of the overall inequality recorded in each region. In other words: the inequalitywithin cultural form is driven by one or two organisations drawing a lot of money, but thisphenomenon does not explain a large fraction of the total inequality for each region.
Conclusions and policy implications
Following Shorrocks’ (1980) seminal paper on additively decomposable inequality measures wehave: (a) separated the relevance of the regional location of the cultural organisation from theimpact that differences in funding within each region have on the overall disparity of funding allo-cations, and (b) quantified the impacts that differences between cultural expressions and differ-ences within cultural expressions have on the overall disparity of funding allocations in eachregion. Our three datasets yield very similar results: differences among the 12 UK regionsunder consideration amount to between a quarter and a third of overall funding inequalities;the largest contributor to funding inequality of cultural institutions in the UK is the degree of het-erogeneity among cultural organisations within each region. Over time, the differences amongregions are relatively constant, so that the overall increase in funding inequality is the result ofgrowing funding disparities within each region.
Regarding this particular, data from the sample of 898 cultural organisations indicate thatoverall private funding inequality in any particular region is driven by the heterogeneous fundrais-ing experiences reported by individual organisations operating in the context of the same culturalexpression. Perhaps surprisingly, we conclude that funding disparities between cultural forms donot explain by themselves the pattern of private funding within any particular region. In otherwords, successful private fundraising is neither significantly associated with the region wherethe organisation operates nor with the particular cultural form. Even though private fundingand organisational size tend to be correlated, our computations are not biased because westudy the ratio of private funding to gross turnover.
A natural extension of this line of inquiry into the degree of inequality in the regional privatefunding of cultural enterprises in the UK would involve a careful examination of cross-regionaldisparities between cultural forms. Are some particular cultural expressions more unequal when itcomes to receiving private funding? Although in our most extensive dataset we have indicated thepresence of “local champions”, there is no immediately recognisable pattern for their distribution.Also, drawing a distinction between more capital-intensive cultural enterprises (e.g. heritage,libraries, museums) and less capital-intensive cultural enterprises (e.g. festivals, crafts) mayprove useful in understanding patterns of private funding. The goals and giving strategies ofdonors are likely to reflect the structural characteristics of diverse cultural expressions.
The findings of this paper have significant implications for policymakers working on issuesof regional concentration of culture and diversifying sources of funding for the sector.
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The slight upward trend in the inequality index from 1993–2005 suggests that as new policieswere increasingly requiring cultural organisations to link their activities and funding to othergovernment priorities, increasing in turn the cost of maintaining subsidies, fewer culturalorganisations were able to successfully bid for private funding. Similarly, as policymakersconcentrate on tackling the “London Effect” and related regional inequalities, our resultssuggest that even within smaller regions there is a tendency for private funding (and potentiallycultural production) to concentrate on a few organisations, irrespective of cultural form and size.The findings suggest that further policy development to promote private funding should notprioritise regional, cultural form or size considerations. Instead, policy should tackle otherfactors that differentiate these organisations such as brand, reputation and organisationalculture. More important, programmes designed to promote funding diversification in the sectormay need to expand their understanding of the training needs of the sector. A fertile area forjoint policy and research exploration would be the analysis of the effects of dependency onpublic funding and organisational attitudes towards innovation and risk on the ability of culturalorganisations to identify, develop, implement and evaluate alternative business and fundingmodels. This line of research would have significant implications for the type of training culturalorganisations receive in this area. For instance, whilst it could be argued that there is a greatavailability of training courses closing the knowledge gap in fundraising, there are fewercourses addressing attitudes towards entrepreneurship, risk and innovation for middle managersand officers implementing development strategies.
Finally, whilst there has been significant policy and programme innovation in this area in thepast 30 years,13 this paper has identified not only a lack of extensive and sophisticated academicand grey literature, but also that inequalities in distribution of funding persist. All of this suggeststhe need for a more open, honest and informed debate on the nature of private funding, itsrelationship to public subsidy and the role of policy and the public sector in achieving a sustain-able diversification of funding sources.14
Notes
1. For literature on the motivations for private funding and what funders expect in return for theirinvestment, see Spedding (2006), Leclair and Gordon (2000), O’Hagan and Harvey (2000) andMartorella (1996).
2. The nine regional development agencies (RDAs) set up in the English regions are non-departmentalpublic bodies. Their primary role is as strategic drivers of regional economic development in theirregion. The RDAs aim to co-ordinate regional economic development and regeneration, enable theregions to improve their relative competitiveness and reduce the imbalance that exists within andbetween regions.
3. Of these 4000 organisations, 16.02% are located in London, 62.7% in the rest of England and 21.28%in the other three nations. Fifty-four percent of them are classified as visual arts, museums andperforming arts organisations; 35% are combined art forms such as festivals; 2% are Heritageorganisations; 12% are classified as “Other”.
4. Stanziola (2006) compares trends for this group of cultural organisations with a sample of the morethan 600 regularly funded organisations (RFO) by the Arts Council. In general, these RFOs tend torely less on private investment than A&B’s sample.
5. Since Northern Ireland is represented in this sample by only two cultural organisations we will not tryto draw any inference about private funding trends in this nation.
6. Detailed tabulated results are available from the authors upon request.7. In order to facilitate their reading the regional decomposable inequality indexes have been multiplied
by 100. This transformation does not alter their relative values or interpretation.
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8. Reframing this question in terms of geographical location instead of administrative location, thatis, focusing on “place” and not on “region”, could yield different conclusions. This line of inquirywould be best followed employing geographical information system (GIS) software, whichlies outside the scope of our analysis. Our datasets qualify the surveyed organisations as operatingin a “rural”, “urban”, “equally divided” or “other” local. In our sample of 573 organisationsless than 10% of private funding inequalities are associated with differences across theaforementioned locales. Private funding of cultural organisations in “urban” and “equally divided”locales is about three times more unequal than that received by organisations established in “rural”locales.
9. We will refer the reader to our previous discussion of the decomposable inequality index, noting thatnow n stands for the number of organisations in each region and g is the number (17) of differentcultural forms recorded in the A&B survey. A list and description of such cultural forms isavailable from the authors upon request.
10. Namely: Arts centre, Arts Services, Community Arts, Crafts, Dance, Festival, Film/Video, Heritage,Library/Archive, Literature/Poetry, Museum, Music, Opera, Other Art Form, Other Combined Arts,Theatre/Drama, Visual Arts/Gallery.
11. In some regions only one organisation reports positive levels of private funding in a specific culturalexpression (e.g. one opera-related organisation in the East Midlands). In these cases the index offunding inequality within that particular cultural expression has a zero value. Eliminating theseobservations from our sample eliminates one source of bias although it creates another one bydistorting the calculation of the inequality index between cultural forms. We have computed theinequality indexes after eliminating the 24 data points described above. This small loss ofinformation (2.6% of the total number of observations) does not bring about any significant changeto our conclusions.
12. This result cannot be exclusively the product of a comparatively large number of organisations, andtherefore higher heterogeneity, in the South. Although 41% of the data points in our sample arelocated in the South, the pattern holds almost unchanged when we eliminate London-basedorganisations from the southern group. The northern group remains significantly less unequal, onaverage, within each cultural form considered even when we eliminate organisations based inWales, Scotland and Northern Ireland from our computations.
13. For instance, A&B’s New Partners, Arts Council England’s Banking on Culture, Mission ModelsMoney, and more recently the Private Giving for the Public Good campaign led by the NationalMuseum Directors’ Conference, the Museums, Libraries and Archive Council and Arts CouncilEngland.
14. We owe this last point to one of our anonymous referees.
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