Nonprofit players’ plans for 2011

The rise of not-for-profit houses, notably the Royal Court, the Donmar and National Theater, was unquestionably the London legit story of 2010. But the not-for-profit sector is likely to dominate the headlines again in 2011 for a different reason: Its funding is about to be cut. And the effects, in both the short and long term, are potentially devastating for the legit scene.

Arts Council England, the funding body that disburses the U.K. government’s arts coin on behalf of the Dept. of Culture, Media and Sport, has had its budget sliced by the government, in a retrenching that’s affected every department, from employment to defense. And though arts funding accounts for just 0.08% of the national budget, the council has been forced to implement a 29.6% cut over four years, even though 20% of every ticket sold goes straight back to the government in the form of a value added tax.

“These are severe cuts, made worse by the fact that around 80% of them have to come in the first two years” of a four-year period, ACE chair Liz Forgan says. “We are determined to lead the arts through this tough period, using all our knowledge, expertise and brokering skills, and drawing on the resourcefulness and imagination around us.”

Having scaled back its operations and absorbed almost half of the cut within its own infrastructure, ACE will pass on a 14.9% reduction to its regularly funded clients between now and 2015.

This comes on top of a 6.9% cut for 2011-12 (made in October 2010) to all of the 850 regularly funded arts organizations, from theater to music to visual arts.

Theater clients from local projects to the National Theater receive £100 million ($158 million), almost one-third of ACE’s $513 million total for regularly funded organizations. The portfolio runs from small-scale community operations starting at $32,000 to the Royal Opera House, which receives $42 million.

Also among the key theater clients are Cheek by Jowl, Kneehigh, Bush Theater, Donmar Warehouse, Sheffield Theaters, Chichester Festival Theater, Royal Court, Royal Shakespeare Company and the National Theater.

All clients have until Jan. 24 to submit a three-year business plan for 2012-15. Every indication is that the council will not be implementing an “equal misery for all” policy, an approach that would merely hobble every organization. Instead, it is believed ACE will wield an axe over some orgs.

Unsurprisingly, this has generated a climate of fear. Until ACE has done the math and made its announcement — in late March, according to a council rep — the industry is keeping mum for fear of the negative effects public statements would have on the decision-making process.

However, National Theater artistic director Nicholas Hytner recently argued in the National’s annual report that fierce arts cuts would hit smaller and regional institutions the hardest.

“Many of them would simply close,” he says. “The immediate impact would be on the communities they serve, but the impact on national companies would follow swiftly. All the writers, directors, designers and actors currently working at the National Theater started their careers or gained the experience and expertise that made them what they are in the regions or on the fringe.”

The ACE subsidy accounts for only 30% of the National’s income, with the rest coming from box office, plus corporate and private sponsorship. As a bullish Hytner has argued elsewhere, the scale of its operation should allow it to absorb cuts.

But the degree of prestige the National offers to its sponsors is simply unavailable to small-scale companies and regional theaters. And the government has yet to offer anything approaching the U.S. level of tax incentives to encourage and support private donation.

Reduced budgets in theaters that survive are likely to make management risk-averse.

But that understandable “safety first” principle is a short-term solution that threatens new plays and untried talent across the board — and it’s those elements that form the lifeblood of the commercial legit scene.

Four of the last five Olivier best play awards came from shows produced in subsidized theaters, as well as the last four Brit plays to win the Tony — “Copenhagen,” “The History Boys,” “The Coast of Utopia,” and “Red.”

Commercial costs and risks are now so high that almost nothing opens cold in the West End unless it has major film or TV stars attached.

As a result, producers look to the sector for shows they can then pick up to bring in.

Right now, it’s impossible to gauge the potential industrywide fallout. But almost no one is sounding confident.