The headlines surrounding what may be Jeremy Hunt’s final Budget focused on a reduction in National Insurance Contributions that was actually announced in advance together with tax changes that will affect a handful of non-domiciled individuals. Buried deep down were a couple of other measures that have scope to benefit theatres.
Unexpectedly, amidst well over an hour largely comprising smoke and mirrors, the Chancellor was keen to highlight his efforts on behalf of the cultural community, even though the amounts involved are negligible when compared with his overall spending commitments.
National Theatre
First, he smilingly delivered the news that £26 million has been set aside to fund necessary upgrades to stages at the National Theatre. This is undoubtedly good news for the country’s premier company but does raise some questions.
The most obvious might be why the company cannot pay for its own upgrades without governmental support. In part, the answer comes down to one of those classic examples of those in power giving with one hand after taking with the other.
In Arts Council England’s latest funding round, amounts offered to the National Theatre were reduced from £17 million in 2022/23 to 16.157 million in the ensuing three years. To be clear, this does not take into account inflation and therefore what appears to be a 5% cut is in fact much greater.
Putting things into perspective, in each year across the period from 2018 to 2022, the company received £16.7 million. We have already seen the National Theatre cutting back on expenditure, staffing and programming as a direct consequence.
The news on Wednesday means that at least the building won’t fall down and the revolve will continue revolving, but, when Indhu Rubasingham takes over the reins next year, the theatre’s new Director will have a fight on her hands to produce sublime theatre on a slimmed-down budget.
Theatre Tax Relief
The second measure somewhat boastfully announced by the Chancellor of the Exchequer will be shared more widely. Theatre Tax Relief, along with its close cousins benefiting orchestras and museums and galleries, was due to be scaled down and will be but to a much lesser extent than previously envisaged.
This relief is broadly split into rates for touring and non-touring productions. The touring company relief currently runs at a rate of 50% and non-touring 45%. From the 1 April 2025, each will be reduced by 5% to 45% and 40%. If nothing else, this might act as an incentive to spend big over the coming year.
For those unfamiliar with this valuable relief, it was introduced in 2014 and then temporarily increased in October 2021 as the pandemic threatened the very future of many theatre companies and producers. But for the changes announced on Wednesday, the rates would respectively have tapered to 35% and 30% from April next year.
The best thing about this relief, which is only available to those charged corporation tax, is that not only can companies offset expenditure against any profits but they are also able to claim cash repayments if productions are loss-making.
Once again, what sounds like an extremely generous gesture on behalf of the Treasury may not quite be as valuable as it seems. To quote from the government press release, “this measure is not expected have any significant macroeconomic impacts.”
Going a stage further, “this measure is expected to have a negligible administrative impact on the approximately 1,300 companies that claim TTR, OTR or MGETR on an annual basis. One-off costs could include familiarisation with the change. There are not expected to be any further one-off or continuing costs. Customer experience is expected to remain broadly the same as this measure does not alter how businesses interact with HMRC. The measure is not expected to impact civil society organisations.”
According to government calculations, the actual hit to the Exchequer will be £10 million in 2025/26 gradually increasing to £170 million in 2028/29. These numbers cover not only theatres but also orchestras, museums and galleries.
National Insurance Contributions
Jeremy Hunt made a big fuss about another 2% reduction to National Insurance Contributions during his speech. However, even this isn't quite as good as it sounds.
First, employers will not get any reduction in their rate of NIC. Secondly, although the cut is undoubtedly of benefit to most workers, anyone earning less than around £27,000 (or over £59,000) will lose more in income tax than they gain in NIC. Regrettably, in the current economic climate, this will probably mean that many workers in our industry lose out. That is without even touching on the wider cost-of-living crisis.
We should undoubtedly be grateful for any crumbs that are offered but, in the country’s current parlous economic state, with those in the theatre industry struggling more than most, much more support is still needed.
Who knows, if Jeremy Hunt gets to deliver a second Budget in 2024 ahead of the general election, perhaps he will be more generous. Don’t hold your breath.