Breaking down the Budget

It’s been a few weeks since the first Budget of the new Labour Government, and media reporting has been dominated by fury over changes to Inheritance Tax for farmers and the rise in Employers National Insurance. This means there has been less focus on other aspects of the Budget, especially its impact on the arts and classical music.

Let’s start with the rise in Employers National Insurance. That is inevitably going to hit those arts organisations that have large numbers of salaried employees, for example the regional symphony orchestras and mainstage opera and ballet companies. Also affected will be the larger artist management companies, universities and conservatoires, and the venues that programme classical music. It is likely that in the next few years there will be a squeeze on salaries and recruitment within these organisations to compensate for increased costs.

But ironically much of the rest of the classical music industry will get off more lightly than other businesses across the UK. This is because so much of the workforce is self-employed, especially musicians, who will benefit from the previous Government’s four per cent cut in Class 2 National Insurance contributions. Plus, gigging musicians will benefit from the continued freeze on fuel duty. Some of the smaller scale orchestras and artist managers will also benefit from the increase in the Employment Allowance from £5,000 to £10,500, reducing their liability for Class 1 National Insurance.

Music venues will be affected by the reduction in the temporary relief for retail, hospitality and leisure businesses in England, introduced during the pandemic, from 75 per cent to 40 per cent. However, many classical music venues will suffer less than their commercial colleagues, due to benefiting from the 80 per cent relief for registered charities.

A final tax change that is of relevance to the classical sector is the toughening up of rules on non-doms. This may drive away some crucial donors on whom some of the orchestras and opera companies have become reliant.

With the classical music industry seeing increases in their costs, surely the Government has come to their rescue through its spending plans (especially after all the warm words from the shadow ministers before they got into power)? Sadly not. While the government has talked about bringing an end to austerity and restoring public finances, some departments are still seeing freezes or even cuts in real-terms spending in the next few years.

The Department for Culture, Media and Sport, for example, will only see average annual real terms growth of 2.6 per cent between 2023-25 and 2025-26, compared with an average 4.3 per cent across all departments. But that uplift is driven by an increase in capital spending – revenue spending actually goes down by -2.5 per cent. That does not suggest there will be any more money coming Arts Council England’s way, and the freeze on their Treasury grant that has been in place since 2010 will continue into the next funding round.

At least there is 10.2 per cent real-terms growth in spending for local government. But this will be swallowed up by the crisis in social care, and is not likely to find its way to hard-pressed local authority arts venues whose programming budgets have been slashed these past years.

There are also increases for the devolved government in Wales and Scotland. With luck this will mean that the recent mess we have seen over funding for Creative Scotland may get resolved, and the Scottish Government will finally deliver on its promised £100m uplift in cultural investment.

Education in England will see average annual real terms growth of 3.4 per cent. We will have to wait and see if a similar increase will be applied to the Music Education Hubs.

But there was one other major announcement on education in the Budget, the imposition of VAT on private school fees, that is going to have a severe impact on the specialist music and dance schools, such as the Royal Ballet School, Chetham’s School of Music and the Purcell School. These schools are, in effect, under a contract with the Department for Education through its Music and Dance Scheme to deliver high quality training for our most talented young musicians and dancers. UK resident students are subject to means-testing, with up to 80 per cent getting full or part bursaries, and only those from the wealthiest families paying full fees.

In spite of a plea in advance of the Budget for specialist music and dance schools to remain exempt from VAT, this has been rejected by the Government on the grounds they ‘also provide academic education. It is the government’s position, therefore, that carving these schools out of the policy would be unfair to other private schools’. 

It doesn’t end there. The Budget also confirms the Government plans to remove charitable rate relief from private schools from April 2025. This means it is likely that some parents of the UK’s most talented young classical musicians will struggle to afford to pay the inevitable increase in fees, and may have to move their children into normal state schools.

So, all in all, the Budget was not good news. And the chilly climate for classical music in the UK will continue. At least we get a penny off beer…

Mark Pemberton OBE is an arts consultant specialising in the classical music industry. He is the former chief executive of the Association of British Orchestras.