Commentary: Furore over The Substation is opportunity for better understanding of arts funding

SINGAPORE: The announced closure of The Substation and the National Arts Council’s (NAC) response reignites a longstanding debate about the role of government funding in sustaining Singapore’s arts scene.

One issue highlighted is the question of just how financially sustainable The Substation was. The NAC stated the government was providing almost 90 per cent of the arts centre’s income “through direct and indirect funding”, which included the rental subsidy for the building at 45 Armenian Street.

It’s worth taking a closer look at the financial model of arts companies like The Substation, so the public better understands how arts organisations utilise state funds and why the government should continue funding the arts.

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FINANCIAL MODEL BEHIND THE ARTS

Like in the UK and other countries with established systems for arts funding, Singaporean arts companies receiving regular, substantial funding from NAC are non-profit organisations.

They operate on a financial model where income comes from three main sources: State grants, philanthropic or public donations and sponsorships, and earned income from ticket sales, art sales and activities such as school and public workshops.

Under the NAC’s Major Company Scheme, 50 established arts organisations including The Substation, The Necessary Stage and Pangdemonium receive government support for their professional and artistic development.

The 50 companies’ financial reports reveal that government grants – from NAC and other agencies – account for about 24 to 80 per cent of their revenue, with the most commonly reported figure being 40 per cent.

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The NAC spends S$16 million in direct annual funding to these companies and other emerging arts organisations. Funding disbursed under the Major Company scheme should not exceed 50 to 70 per cent of a company’s total qualifying costs.

Hence, arts organisations are expected to secure additional revenue sources. They often allocate time and human resources to fundraising, and have to balance these activities with art-making.

Apart from the Major Companies, larger organisations like The Arts House, the Esplanade and Singapore Tyler Print Institute see government funding accounting for up to 60 per cent of total revenue.

With total government support of the Esplanade in the last financial year reaching S$56 million and the arts centre reporting total expenses of S$80 million, it is clear that establishing Singapore as a “global city of the arts” requires strong financial commitment.

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THE MARKET FAILURE ARGUMENT

Why should the Singapore government be funding the arts at all? The common argument comes from market failure: Art-making is time- and labour-intensive, so if all artwork or theatre shows are priced to reflect the actual costs of production, the arts would be unaffordable to the majority of the population.

This is why even the Major Companies are unable to fully recuperate their operational and programme costs from ticket sales. It is even more difficult for arts groups whose role is to promote and present experimental work or the work of new unproven artists, as The Substation does.

The “market” for the arts is a mixed economy. There are certainly arts programmes and companies which are for-profit and commercially-driven, such as commercial art galleries and auction houses.

At the same time, there is a large number of artistic activity whose aims are primarily aesthetic or for social benefit, and it may not be appropriate to charge fees for these programmes. This is where the government, philanthropists and the community then step in.

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A RETURN OF INVESTMENT FOR ARTS

But what’s the return on investment the government expects from funding?

In the arts, it is difficult to measure returns based solely on numbers. One might cite that government funding for the Esplanade enables the presentation of close to 4,000 activities attracting 1.9 million people last year.

The numbers are impressive, but do we expect the Esplanade to produce even more activities and attract more people the following year? Is that the end game?

Or is it more important to measure whether and how the 1.9 million people enjoyed the activities? What did it mean to their lives? How do we measure that?

We might also say government support enables the Esplanade to present the majority of its programmes for free, making the arts as accessible to as many members of the public as possible.

Also, it ensures that public programming at the Esplanade remains varied and diverse, so the public can enjoy a lively mix of shows.

Another way to look at “returns” is from an economic perspective, for example, the multiplier effects of each dollar spent on a ticket at the Esplanade, or employment and salaries in the arts which means that paid staff and artists spend their income in the other sectors of the economy.

However, while these statistics can be useful to policymakers, they do not fully capture the true benefits of appreciating and participating in the arts.

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PERKS OF RENTAL SUBSIDIES

We shouldn’t discount the intangible benefits the arts brings us through another form of indirect government funding: Rental subsidies.

Some state-owned spaces leased out to arts institutions include buildings in Little India and Chinatown, the cluster-style Aliwal Arts Centre and Goodman Arts Centre, and of course, The Substation’s home on Armenian Street.

How do our tax dollars serve the public here? For one thing, they ensure that art and culture are present in the spaces we work and play in.

Also, as some of the buildings are old, they retain Singapore’s architectural history. In attracting arts audiences and patrons, they add to the character (and possibly, real estate value) of the neighbourhood.

It can be argued that The Substation, which occupies a standalone “arts housing” property as a single tenant-occupier, has generated authentic cultural value for Singapore. The ethos of artistic experimentation and risk, openness, dialogue and civic engagement which was set by founder Kuo Pao Kun has turned it into a cultural icon inspiring two generations of artists.

When one considers that the building has been used by artists, filmmakers, writers and civic groups over the years for rehearsals, performances, exhibitions, workshops and meetings, they may conclude the rental subsidy for The Substation has been well-utilised.

Some in the arts community have observed that The Substation has been “placemaking” the neighbourhood throughout its 30 years of existence.

In the early days when the National Library building was still next door, families and individuals dropped by The Substation to have a drink at the cafe, view an exhibition or visit the weekly Sunday Market.

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A CAFE WITH A NICE MUSEUM ATTACHED

Under the terms of the NAC’s arts housing lease, The Substation was permitted some commercial rental on its premises. In a bid to earn more income, The Substation sublet a much larger portion of its Garden to Timbre bistro and bar.

Incorporating a cafe, restaurant or shop on the premises is a time-tested financing model for museums and arts centres. The National Gallery has 10 restaurants on site. Beyond a museum, it is a lifestyle destination for well-heeled, globe-trotting professionals and tourists.

It is a successful financial model adopted by others – the renowned V&A Museum in London is one example.

The NAC challenged this financial model in the case of The Substation, stating that income derived from its leasing of premises to Timbre should be considered state subsidy as well. It thus considered government funding to comprise up to 90 per cent of The Substation’s income.

Rental income including that from Timbre accounted for up to half of The Substation’s total income. Could one look at this another way and say state support actually provides an entrepreneurial opportunity for arts organisations?

READ: The Substation says NAC statement is 'incomplete', clarifies claims regarding finances

A SPOTLIGHT ON ARTS FUNDING

The case of The Substation has highlighted the extent to which Singapore’s arts scene depends on government funding. Do Singaporeans appreciate this?

They do. According to the NAC’s 2019 National Population Survey on the Arts, 80 per cent of Singaporeans agreed arts and culture are something Singaporeans can be proud of, while 78 per cent of Singaporeans agreed the arts improve quality of life.

Public appreciation for the arts has certainly deepened – possibly a result of the government’s efforts.

This is true when government support extends to any sector. When tax breaks, start-up funds or direct grants are given, they encourage growth. Without this, we wouldn’t have a vibrant scientific or medical research industry, homegrown entrepreneurs or improvement in our cityscape.

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The arts sector is no different. Job losses due to the COVID-19 pandemic were keenly felt and the sector was included in the government’s support packages. For the arts to thrive, government funding, whether direct or indirect, is crucial – as it is in other public goods.

Moving ahead, there needs to be further analysis of financial models to ensure that arts organisations can excel, and in evaluating state allocation of resources, more recognition be given to the unseen and broader benefits of their work.

Audrey Wong is former Artistic Co-director of The Substation (2000 to 2009) and a former Nominated Member of Parliament for the arts.