The charity

While some figures for the projected economic performance of the new charity are provided, they are often vague and the reasoning (as highlighted below) is not supported with hard evidence. Consequently, it is impossible to clearly ascertain what the operational costs and necessary income for the new charity will be. However, based on information gleaned from English Heritage’s recent annual reports and the limited projections set out in the consultation document, it is possible to speculate about the estimated expenses, and consequently the feasibility of the proposals.

English Heritage’s current income and expenditure accounts for the National Heritage Collection (the arm that would become the new charity) for the most recent year reported (2012/13), shows that operational costs exceeded revenue from earned income by £17m. Considering these accounts, we can begin to determine how the proposals may affect these levels of income and expenditure.

As is clearly demonstrated in Table 1, a significant annual expenditure for the organisation is its maintenance and conservation bill, termed here ‘caring for our collections’. The organisation has an estimated outstanding conservation backlog of £64m for priority conservation works (EH 2013b: 5), which produces annual maintenance costs of around £29m per annum. The government contribution of £52m across the transitional period will address this outstanding backlog⁴ and leave the charity with an annual conservation bill of £16m. In this case, assuming all other incomes and outgoings increased at broadly the same rate over the period 2015–2023, this investment would leave the charity around £3m away from solvency: operational costs, seeing an annual £13m fall in the cost of conservation would be £60m, compared to income of £57m.

In addition to reducing expenditure, the consultation document notes the ways in which the proposals will enable the charity to generate additional revenue. Firstly, it is predicted that visitor admissions will increase (as will their secondary spend) as a result of the new exhibitions and upgraded facilities resulting from capital investment during the transitional period. Secondly, free from the operational confines of government oversight that currently binds the organisation (due to its status as a non-departmental public body), the scale and scope of the charity’s commercial and fundraising activity could be expanded. Yet despite providing a general description of how the charity can develop and areas of potential growth it may exploit, the document supplies very little quantitative data, either in terms of supporting these claims or projecting estimates for what its accounts and expenditures may be in 2022/23 – the reader is left to assume that the sums will add up and that these arrangements will produce a reliable operational surplus.

For the purpose of this review it is important to have a general idea of what the charity’s accounts might look like at the point it is set to become financially independent from government. This is to arrive at a clearer idea of how criticisms of the proposals in the consultation document might ultimately affect the economic case for the charity. Therefore, a rough projection, based both on the information provided in the consultation document and informed speculation, results in a healthy business, with an annual surplus of around £14m (see Table 2; see endnote⁵ for methodology).

Considering the principal factors for generating more income, the consultation document outlines projected increases in visitor numbers, membership, fundraising, and volunteering. The growth projections for each of these areas are as follows:

Visitor numbers

The baseline visitor number is currently 5.2m per annum to staffed sites. The consultation document assumes an increase to 6.4m per annum by 2022/23 and 6.8m per annum by 2026/7 (DCMS 2013: 3.8).

Increasing membership

In 2012/13, English Heritage had 700,000 individual/family memberships. The consultation document projects this will grow to 1.3m by 2026/7 (an 86% increase) (DCMS 2013: 3.6).

Increasing fundraising

English Heritage’s rate of fundraising is currently £5.6m per annum, which the consultation document projects to rise to £7.6m per annum. Similarly, sponsorship revenue is expected to rise from £0.1m to £1m per annum by 2026/27, while retail and catering etc., are predicted to rise in line with inflation (DCMS 2013: 3.13).

Increased volunteering

In 2012/13, around 1026 people regularly volunteered for English Heritage, which was an increase of 24% on the previous year. The document notes that the organisation will look at ways to increase this number, but does not state how this will be achieved (DCMS 2013: 3.15).

From these summaries, it is clear that the viability of the business model alluded to in the consultation document is based on a substantial increase in visitor attendance from 5.2m (2012/13) to 6.4m (2022/23) to 6.8m (2026/7). Visitor numbers are crucial for generating revenue through admission fees and membership sales, but also secondary spend such as retailing and catering. Yet these projected increases appear to be based more on assumption than substantive evidence. A glance at English Heritage’s visitor numbers historically demonstrates the ambitious nature of this projection. For the past 10 years visitor numbers at English Heritage staffed properties have been more or less stable, between the 5m and 5.5m figure (see Table 3)⁷.

The consultation document’s main justification for these visitor growth projections is the ‘rolling programme of major projects which the Government’s investment and third party funding will finance’ (DCMS 2013: 3.9). Offering support for this policy the document notes that English Heritage sites that received an investment in visitor exhibitions and facilities between 2003/4 and 2011/12 saw visitor numbers to those sites increase by 12.8% in this period (DCMS 2013: 3.5). Yet, as demonstrated in Table 3, this is not reflected in a sustained overall increase in visitor numbers, suggesting that improving sites through capital investment projects in this way may not necessarily lead to a net gain of visitors for English Heritage, but rather spread the organisation’s established visitors across its sites.

Contrasting these visitor figures with year on year rises in earned income (see Table 3), implies that English Heritage is not making more money from more visitors but maximising revenue from a stable visitor base. While this sophisticated monetisation of its heritage assets bodes well if visitor numbers do increase, there are no obvious trends in this data to suggest they necessarily will.

A broader point to raise regarding these proposals concerns the practical implications posed to the sites themselves. While the beneficial effects of the capital projects and conservation works are mooted, there is no mention of the fact that such activities are inevitably disruptive. For example, Kenwood House was recently closed for a year while restoration work was carried out (EH 2010). To what extent such work at a significant number of sites will affect visitor numbers and the money they spend, is not articulated.

A related point to consider here is the ability of the new charity to fundraise effectively. The consultation document suggests that the organisation’s general fundraising in the period 2015–2023 will rise from £5.6m to £7.6m per annum. This seems like a reasonable increase. What is less clear is how, on top of this, the charity is going to generate the additional £83m (equivalent to £10.375m per annum) from third parties to meet the capital investment budget that the government requires it to have by the end of the eight-year transitional timeframe. To justify its fundraising credentials, English Heritage notes that they managed to raise £16.7m for Stonehenge and £5m for Kenwood House between 2010 and 2013. This point, however, works to undermine its own argument. The two examples provided are ‘prestige’ properties. Sponsors understand the importance of these places and are eager to be associated with these iconic sites and the substantial number of visitors they attract. These examples are presumably some of the easiest sites (and projects) for which to fundraise. How feasible it will be to get trusts, foundations, and businesses, to fund projects at lesser-known properties or to contribute to a general fund is to be seen.

An important test case for these proposals will be Stonehenge. The organisation has recently spent £27m on improvements to the site including a new visitor centre (opened on 18th December 2013) and a radical overhaul of accessibility and interpretation. As English Heritage’s most popular tourist draw (attracting a fifth of the organisation’s annual visitors), it is important for this site in particular to function well economically - the predicted 11% increase in visitor numbers as a result of the recent improvements is cited as a key assumption behind the organisation’s overall projected visitor growth rates (DCMS 2013: 3.9). Such growth is particularly important as these visitors will be paying entrance fees that have increased from £8 to £14.90 (Kennedy 2013) to help pay for the centre.

Yet, it is unclear how feasible this visitor number increase is in practice. New ticketing arrangements mean that the average visit is expected to increase from 30 minutes to at least two hours, which could make the site less desirable to the substantial number of visitors who arrive on packaged coach trips from London with multiple itineraries. It appears that ‘negotiations are continuing to persuade the tour bus operators who bring thousands of tourists to the site to rearrange their schedules’ (Kennedy 2013). Further, the new visitor centre has gotten off to an inauspicious start; the media have reported visitors’ complaints of long queues, inadequate transport to the stones, and the increased price (Western Daily Press 2014). While it is unlikely that visitor numbers and revenue will drop as a result of the changes, it is perhaps unsettling that a clear picture of the attractiveness of the new arrangements to visitors and their resultant economic impact will not be known until after a decision on the splitting of the organisation has be made.

Historic England

Under the proposals outlined in the consultation document, the statutory elements of English Heritage will remain under government auspices as a non-departmental public body. The choice of name itself is particularly interesting as it is clearly marketable (after Historic Scotland), and an increased marketization of this new heritage protection ‘brand’ is alluded to in the consultation document (DCMS 2013: 4.8). However, the main issue of economic viability is whether or not Historic England is funded adequately to fulfil its statutory functions.

In 2010, the comprehensive spending review reduced English Heritage’s ‘Grant-In-Aid’ allocation by 32% in response to extraordinary economic circumstances. The amount that English Heritage apportioned to heritage protection and statutory services in the three years since this funding settlement can be seen in Table 4.

Entering the final year of the comprehensive spending review settlement, the 2013/14 budget for heritage protection stands at £69.3m, consisting of:

• Heritage Protection: £24.4m

• Supporting Sustainable Development and Addressing Risk: £29.4m

• Archives: £2.5m

• Grants: £13m

(DCMS 2013: Table 3)

Crucially, it is this figure, £69.3m that the DCMS has used to calculate the budget that Historic England needs as its on-going ‘Grant-In-Aid’ allocation to fulfil its duties. Essentially, after making drastic reductions in spending due to exceptional economic circumstances, the government has now treated this state of affairs as the norm. The problem with the figures presented for 2013/14 is that the categorisation of the funding allocation has been altered, so it is very difficult to assess what the effects on the provision of heritage protection will be. While at the outset it seems as though core heritage protection services have not suffered disproportionately, when we consider that corporate services and office costs are included in these figures, the amount apportioned directly to heritage protection is certainly lower than is presented.

The proposals have led to voices of caution over the future of government heritage protection from both commentators (see Clark 2013; Wilding 2013) and organisations in the sector, such at the National Trust and the Heritage Alliance. Indeed, there is allusion to further slimming of services in the consultation document:

The provision of heritage services has changed significantly over time. The introduction of Planning Policy Guidance 16 in 1990 led to a growth of an active private sector in archaeology. More recently there have been reductions in local authority services of over 25% since 2006. In some places there have been creative responses, for example the sharing of services. Government and the Commission believe there is a role for Historic England, working in partnership with others, to review the landscape for heritage services… (DCMS 2013: 4.13)

Such a funding settlement leads to concerns that Historic England may be vulnerable to further budget cuts. At present, as something of a holistic organisation, English Heritage can attempt to mitigate cuts to government funding by earning income, redirecting resources and ring-fencing crucial services.¹⁰ Historic England will not have this buffer and consequently any reduction to its funding (or if its funding settlement does not increase with inflation), may lead to more direct cuts to fundamental heritage protection services.

A particular point of concern highlighted by the figures above is the continuing diminution of the grants budget (see Table 5) currently administered by English Heritage (which would continue to be so under Historic England). These grants allow the organisation to contribute to its core remit of mitigating risk to the historic environment, as this funding stream prioritises:

• Significant elements of the historic environment at risk; and/or

• Activities that strengthen the ability of the sector to reduce or avoid risk to the historic environment by understanding, managing and conserving (EH n.d)

The most recent grant prediction (for 2013/14) must be seen as what the sector can expect from Historic England going forward.

The wider implications of the diminution of this budget must be seen in the context of English Heritage’s role as England’s ‘custodian of last resort’. This role means it has an obligation to care for historically significant properties for which no other buyer can be found. Unlike the National Trust, who decide whether to take a property on after calculating the capital endowment necessary for its maintenance (using what is termed the ‘Chorley formula’¹²), English Heritage is expected to step in and offer assistance to significant historic buildings at risk, whether this means taking the property into custodianship or providing grant-aid to owners of such properties. Either way, significant sums of money may be needed to deal with such eventualities.

A stark example of both the importance and the costs of this function is the case of Grade I listed Apethorpe Hall in Northamptonshire. Compulsorily purchased in 2004 for £3m, English Heritage has since spent £5.9m on conservation work with a further £3.5m projected (Thurley n.d.). Attempts to return the property to private ownership have so far failed and the property’s annual conservation bill (estimated at £100,000) currently falls to English Heritage (Hall 2012). While such an extensive intervention is rare, the involvement of English Heritage was crucial to the survival of this unique building. As Simon Thurley notes, it would be ‘a total catastrophe’ if this function was undermined in the new arrangements (quoted in Clark 2013). The approach outlined in the consultation document is noted below:

…as a last resort taking into ownership the most important vulnerable sites for which there is no other solution. In those cases Historic England will take on responsibility for putting the property into good order, funded through its grant programme. It will then seek an owner prepared to take on its long-term management. If none can be found the charity will be obliged under the terms of the license, subject to certain terms and conditions, to take on the management of the property which will become part of the National Heritage Collection. (DCMS 2013: 4.12).

In this context it is vital that Historic England is properly resourced to meet such a need. Yet it is not clear whether the grants budget will retain the capacity to intervene in such cases, in addition to providing grants to the wider sector. Under the 2013/14 projections for the grants budget, if a property on the same scale as Apethorpe needed to be taken into guardianship, and ‘put in good order’ by Historic England, this would have the potential to significantly undermine their grants programme for other ‘heritage at risk’ for a number of years.

The criticisms of the economic positions of both the new charity and Historic England laid out above do not fatally undermine the proposals in the consultation document, but they do raise concerns over the optimism of the commercial outlook presented for the charity and whether Historic England is as well resourced as it needs to be. As clear substantive evidence has not been provided to support the proposals, and with the changes to Stonehenge unclear in terms of economic return, it does call into question the likelihood of the charity being financially independent by 2023 (we may speculate that the predications given in the consultation document, to 2026/7, accounts for this uncertainty). In addition to the concern over the economic viability of these proposals, a more comprehensive plan outlining how the provision of ‘custodian of last resort’ will be met in a practical manner needs to be a key priority and outcome of the consultation process.

Legal issues

The consultation document notes that under the new arrangements, the charity will operate the National Heritage Collection under a ‘property licence’ from the Historic Buildings and Monuments Commission for England for the duration of the transitional period (2015–2023), with subsequent arrangements to be made at a later date. An important concern with this arrangement is whether there is a legal basis for the Commission to manage the properties in such a way. The National Heritage Act (1983) formed the Commission and stipulates its powers in directly managing the properties, but it is unclear whether the Act provides the Commission with the authority to effectively sub-contract the properties in this manner (even to an organisation that, it seems, it will own – see page 3). The government seems to believe that no problems will be caused by the use of a ‘property licence’ as the document notes that no amendments to the Act need be made (DCMS 2013: 2.10). However, there is no indication as to which clause of the Act would be used to justify this move, how strong this case would be, and whether such a move could be open to legal challenge.

Move from non-departmental public body to public corporation

A corollary issue here regarding the formation of the charity is exactly what its relationship with government will be. One of the principal motivations of the change to charitable status is to free the organisation from the oversight of government accounts, funding cycles, and procurement rules that it currently operates under as an non-departmental public body, and which will enable a greater flexibility in its general management and income generation activities over the longer term (DCMS 2013: 3.28). Under the present proposals, the Historic Buildings and Monuments Commission for England will ‘licence’ the properties to the new charity. However, while the charity will be a separate organisation from the Commission, it appears it will be a wholly owned subsidiary of it. Therefore, as the Commission will still retain some control over the charity, such as having recourse to cancelling the ‘licence’ if certain operating criteria are not met, this element of government control means that ultimately, the charity is likely to be classified as a public body, most likely a public corporation. While such a classification will result in less scrutiny, it is unclear as to what oversight and commercial restrictions the charity may still be subject to from government.

A further issue to consider is how this relationship may change at the end of this transitional period. The consultation document notes the following:

Towards the end of the programme term, when the charity has reached financial sustainability, appropriate controls and arrangements beyond the eight year period will be considered, in order to enable the properties to be managed with greater autonomy from Government (DCMS 2013: Annex 2)

What is significant here is the desire to consider ‘greater autonomy from Government’, even after the proposed move is effected. In practical terms, it would seem that the only way to further increase this autonomy would be for government to relinquish ownership of the National Heritage Collection entirely. Here, it is instructive to note the recent case of British Waterways, which has often been used as a paradigm for those advocating for the changes occurring at English Heritage. In 2012, this public corporation was transitioned to an independent charity, called the Canal and Rivers Trust; a move effected by the government transferring the assets of British Waterways to the new trust in their entirety (BBC 2012). In this context, it is not difficult to imagine the current changes as a staging post, and a scenario whereby in 2023, with the charity approaching financial independence, a case is made by the Government that a slight tweak in the ownership of the National Heritage Collection could allow the charity even greater economic freedoms, and ensuring an ‘even brighter’ future for the nation’s heritage.

The ‘additionality principle’

A final point to make in this section concerns how the new revenue secured by the charity will relate to other forms of government revenue. The ‘additionality principle’ is a term that was introduced in a 1992 White Paper dealing with proposals for a national lottery (see Home Office 1992: 8). The conservative Prime Minister at the time, John Major, assured the public that lottery funds distributed to good causes would not replace government expenditure, but would be additional to it. Despite its importance, the principle was only written into legislation in the second amendment of the National Lottery Act in 2006 (Stramash Arts 2013; see also National Lottery Act 2006: section 12):

In section 34 of the National Lottery etc. Act 1993 (annual reports) after subsection (2) insert—

(2A) The report shall set out the body’s policy and practice in relation to the principle that proceeds of the National Lottery should be used to fund projects, or aspects of projects, for which funds would be unlikely to be made available by—

(a) a Government department…

Since that time, the Heritage Lottery Fund (HLF)—a non-departmental government body that distributes proceeds from the national lottery to heritage causes—has become by far the largest funder for the historic environment in the UK, investing around £375m per annum in archaeology, museums, galleries, nature, and cultural traditions (HLF 2013a). HLF supplies grant aid to specific projects; it can (and does) provide funds for English Heritage projects. However, HLF cannot fund ongoing revenue costs - its grants have to be awarded to projects which will deliver specific ‘outcomes’ for the heritage, people and communities as outlined in the organisation’s strategic framework (see HLF 2013b).

Under the proposals, in order for the charity to raise the £83m in new sources of revenue from third parties for capital investment projects at the 400+ English Heritage sites, it will clearly have to submit regular and high quality bids to (among others) HLF. As such HLF grants will seemingly be replacing some of the revenue currently provided by government. Whether such works (for example, maintenance and interpretation projects) would have nominally fallen under ‘core funding’ that would have been provided for by government ‘Grant-In-Aid’, and whether such works may be repackaged into ‘projects’ to fall within HLF’s remit is unclear. In a sense this may amount to additionality through the back door.

Wider issues relating to the ‘additionality principle’ are increasingly coming into focus given the contraction of State funds for cultural organisations, and there are concerns that the principle is effectively being eroded and redefined, both by funded organisations and with the tacit approval of government. A recent example of potential infringement is evident at Arts Council England, which has reportedly mitigated a 17% reduction in government cuts by replacing it with revenue from the HLF (Smith, 2014). There is, it seems, no real clarity in the sector at large as to what the limits of the ‘additionality principle’ are and what implications breaching it would have. As noted by ACE chief executive Alan Davey:

There has been an on-going debate since the Lottery came into being as to what the additionality principle is and how to test whether any proposed funding might breach the principle. (Smith, 2014: ¶9)

Yet, given that issues surrounding the principle and its limitations are increasingly being raised, it would be seem to be imperative to seek clarification of just what additionality does amount to before any split of English Heritage takes place. There is no mention of the principle in the consultation document at all, let alone discussion of how the new charity may navigate potential issues relating to this. This lack of consideration may be deemed an oversight, given the likely dependence on the HLF as a significant funder, as if debates (or a legal challenge) leads to a more stringent interpretation of the principle, it could potentially detrimentally affect income for the new charity.

How may these proposals affect the public?

It appears that the creation of Historic England will work as a further branding exercise for the government, as the consultation document notes that the newly formed organisation offers an ‘opportunity to develop a stronger public facing role…to deepen people’s desire and ability to care for England’s heritage’ (DCMS 2013: 4.8). It seems that this organisation will be anything but reticent, which can be seen as a good thing in terms of promoting heritage preservationism. However, one of the key rationales for splitting the current English Heritage laid out in the consultation document is to avoid confusion in the public’s mind over the grant-giving/planning and advice arm and the grant-receiving/operational arm of the present organisation (DCMS 2013: 2.6). It could be considered that this solution does nothing to alleviate such confusion, and if anything, given its similarity to Historic Scotland, which fulfils broadly the same roles the current English Heritage does, may increase it.

The charity, having a more natural interface with visitors through its properties, is liable to have more of an impact on the public. In day-to-day operational terms the charity will likely function on broadly the same lines as it currently does. Its commercial offer may be increased, resulting in more floor space given to gift shops, cafes, venue rentals, or alternative commercial activities that occur onsite. There will also likely be an increase in marketing and publicity, so the English Heritage brand (that the charity will retain), will become more of an established fixture. There may be further visibility of corporate partners and brand sponsorship affiliated with the English Heritage name, which may be manifest both at heritage sites themselves and in the media. In addition, with the government’s transition grant and projected Capital Investment revenue, we should see the many of the organisation’s exhibition spaces refreshed and sites reinterpreted.

Along commercial lines, a broader challenge here might come from the range of the property portfolio of the charity. Only around 100 of National Heritage Collections’ 400+ properties charge admission fees, and of these, only a small handful may be surmised to make a substantial profit for the organisation (e.g. Stonehenge, Dover Castle etc.). Entering into an overtly commercial context with such a setup poses a risk that resources may be increasingly focused on popular and profitable sites while resources are siphoned away from those which are free to enter, creating a two-tiered heritage system, in terms of both education, interpretation, and conservation.

The sector more broadly

Perhaps those who should be most concerned by the spilt of English Heritage are those in the wider heritage sector, when considering the impact the new charity will have on existing funding resources.

Within the consultation document, the projection is given that delivering the business plan for the new charity will ultimately result in £35.9m GVA (Gross Value Added) for the sector. This figure seems to be drawn from anticipated additional visits, secondary spend, and new investment (such as sponsorship etc.), but like much else in the document, this figure is not adduced in any way. Yet considering the wider implications of the proposals it is important to be aware of what is elided here.

As noted above, the current English Heritage grants budget has been gradually reduced from nearly £35m in 2010/11 to a projected £13m in 2013/14. Accounting for the net reduction to this budget for each of the three years from 2010/11 (see Table 5) means a loss of around £40m of grant funding alone from the sector, without considering cuts to broader English Heritage budgets in this period. Further, the new charity is set to become increasingly reliant on securing grants from third parties, and thus competing for a greater share of the available funds against other organisations within the heritage sector. While ‘new’ money may be sourced by commercial agreements with companies from outside the sector, much of this is likely to come from grants and foundations within it, subsidising revenue that the government previously supplied to English Heritage. It is likely that such a context will cause increased competition in this area for grants and it will be smaller heritage organisations that suffer, with a smaller pot of money to apply for and having to compete against the experienced grant-writing personnel and greater resources of the new charity. At a time of huge competition for funds, dropping a big fish into a small pond may prove to be one of the major risk factors to be considered, for all involved.