Recommendation 9

We asked the Department whether its usual approach of flat rate annual increases in museums’ and galleries’ funding at the start of the year, with additional top-ups later for those in financial trouble, provided the museums and galleries with insufficient incentive to maximise self-generated income or operate efficiently.21 The Department replied that this approach did provide sufficient incentive as its year-end top-ups were very small and very targeted.22 It also assured us that, when approached by those in financial trouble, it pushed them quite hard, asking them what other sources of income they had looked at and how they were taking money out of their cost base.23 In addition, quite often there were specific obligations attached to the top-up funding.24 It noted that providing flat rate increases meant there was consistency across the 15 museums and galleries and gave them greater security in seeking other income sources. It told us that a more interventionist approach would increase the perverse incentives as it could result in a reduction in the funding of a museum or gallery from the Department following increases in other income sources, such as a successful exhibition.25 It had taken a more interventionist approach in 2025–26 after work done in the run-up to the 2025 Spending Review and in response to the financial resilience of the museums and galleries being at the top of its risk register. This had enabled it to provide all 15 museums and galleries with at least a 5% funding increase and address specific structural issues for a number of them. Going forward, it is likely to undertake a similar review every four years or so in order to respond to broader factors.26 19 Qq 3 and 45 20 C&AG’s report, paras 3.5-3.6 21 Qq 46-47 22 Qq 32, 45 and 50 23 Qq 32 and 44 24 Q 18 25 Q 47 26 Qq 48-49 10