At a theatre near you: the tragedy of misdirected lottery funding

Financing the arts

Barely a stone's throw from the mighty pounds 800m millennium Dome is the Greenwich Theatre. Despite years as the only theatre company in a vast swathe of south-east London, despite years of highly praised productions, it has just been told that it will lose its government grant and the company will close. The sum needed to keep it open? Just pounds 210,000.

The theatre's talented artistic director of the last seven years, Mathew Francis, is to go. The fine 450-seat building will probably stay open, paid for by Greenwich Council, staggering on with an occasional seedy travelling production by minor commercial impresarios, amateur dramatics and operatics, aerobics classes, bingo and anything else to fill the place. But there will be no more bold original home-grown productions. No more Juliet Stevenson playing The Duchess of Malfi. No more original Dickens adaptations at Christmas, no more new plays by Nigel Williams or Julian Mitchell. Currently the theatre is packed out with a widely acclaimed new production of Miller's View from the Bridge, with an audience that has already drawn nearly 4,000 local school children. The theatre takes in more box office money than the Royal Court.

People living from Eltham to Deptford will now have no theatre company. Those who think London already has a lion's share of the arts should remember that most people living in this area are no more likely to travel into the West End, or to see themselves as central Londoners than people living in Reading or St Albans. This theatre is a prime example of how a distinguished arts venue gives lustre, glamour, community and identity to a neighbourhood only a tiny part of which is posh, the rest very poor indeed. It casts a bright light for many miles around, even among those who may only visit it once in a while or not at all, for their children will.

Greenwich is by no means the only arts company in danger. The highly praised Gate theatre in west London is now also to close, for lack of a mere pounds 40,000. But how can so many established and excellent arts venues around the country be in deadly peril at a time when the lottery is pouring more money into the arts than anyone ever dreamed of? Because the lottery money, despite changes to be made in the up-coming arts Bill, can still only be used to fund new projects.

In the last three years, the government arts budget has been cut by pounds 20m. An unprecedented 100 small performing arts companies have closed since 1992. Everywhere the cuts have salami-sliced the arts to the point where many others may close. The London Arts Board which is withdrawing Greenwich's funding does so with a heavy heart, and worries about who it will have to cut next.

All this calamity is hitting the arts just when its budget of pounds 181m has been more than doubled by pounds 200m from the lottery. (It was pounds 250m until some was taken away for health and education in a sensible redistribution.) At first, all arts lottery money had to be spent on new buildings, so a dazzling cornucopia of miraculous projects are springing up everywhere, from Milton Keynes, Salford and Gateshead to Walsall, Sheffield and Wolverhampton. But some of these risked becoming magnificent white elephants - great buildings, but no money to put anything on in them. So the recent White Paper wisely shifts money from buildings to the people and arts inside.

Yet the sacrosanct principle that all lottery money must be spent on new projects remains largely unbreached. The principle was a good one for there is always a danger governments will cheat on the lottery if they can: the avaricious Treasury itches to get its hands on lottery money, using it to top up an ever shrinking arts budget.

However, keeping the Treasury's itchy fingers off the lottery has lead to an absurd distortion in arts spending policy. For example, the Greenwich company, even as it closes, has a lottery bid in for pounds 5m to build air- conditioning, a restaurant and a new studio theatre. These would be good crowd-pulling extras, but what the company needs to survive is core funding, says their departing artistic director. If pounds 5m of lottery money were available, it would be far better spent by placing it in a trust to guarantee the theatre's future for the next 25 years. The lottery, though, can't and won't do that: it only pays for extras and new activities. In Greenwich's case, that would be extra to nothing.

There is a simple answer to this, but it requires the Treasury to breach one of its many arbitrary rules. It would have to agree to ring-fence the present small arts budget for, say, the next 10 years (or at least for five) signing its name in blood to no more cuts. Then both the lottery and the government money could be merged and spent sensibly where it's most needed, for running costs of penurious existing companies, galleries etc.

The Treasury, of course, will fight tooth and claw against this, claiming, wrongly, that it never ever commits budgets from one year to the next. But of course it does - in signing huge forward contracts of all kinds, from the building of new hospitals to buying pounds 15bn worth of Euro-fighters.

So why not a long-term contract with the arts, in order to ensure that all the lottery money is spent as wisely as possible? Lord Gowrie, now departing from the Arts Council, is calling for this urgently. He has been at the sharp end, trying to administer the two separate budgets. With his Arts budget hand, he cuts valued existing companies; while with his lottery hand, he lavishes largesse on new projects.

This a battle which Chris Smith must have with the Treasury. If he were to win a stand-still budget and then merge it with the lottery money, he could nurture hundreds of the best existing arts programmes. As it is, they all face dilemmas not unlike the Royal Opera House, writ small. The more grant they lose, the higher their prices and the less youth, community and school work they can do to increase their audiences. Then everyone says that they are expensive, out of touch and elitist, sharpening the knives of the philistines in an ever downward spiral.

As for the Greenwich theatre, Peter Mandelson's ears should prick up in alarm on this one. His Dome needs to succeed. It needs popular support. But the complaints of the denizens of Greenwich will resonate loudly among others around the country with arts projects struggling to survive. The Dome's fat pounds 800m will look symbolically gross if a small thriving theatre in its shadow collapses for want of just 0.026 per cent of that sum.