Private firms asked to plug Festival funds gap

Published on Wednesday 18 August 2010 17:31

BUSINESSES are set to be hit with a "festival tax" demand in a bid to plug a major funding shortfall.

&#149 Steve Cardownie

A consortium of city business groups has come together with tourism bodies and city council chiefs to draw up plans for the voluntary scheme to address the cuts in public funding that will hit the festivals from next year.

The plan could see businesses such as pubs, restaurants and hotels asked to pay a lump sum to the cost of staging the world's largest arts festival.

Another option being explored would be asking customers to contribute directly through adding an extra "tax" on their bill.

It is hoped that every sector that benefits from hundreds of thousands of visitors descending on Edinburgh for the festival season will ultimately play a part in providing funding.

&#149 Should private firms be asked to pay an extra tax towards the Festival? Vote here

Private consultants have been called in by the consortium and have been asked to carry out a consultation with businesses and recommend which options could work and how much they would raise.

Business leaders say they are confident that the private sector can contribute more funding than the current public subsidy of around 4.1 million.

Councillor Steve Cardownie, the city's festival and events champion, said: "Very productive discussions are taking place with the private sector and the Chamber of Commerce for voluntary contributions towards the development of the festivals and the promotion of the city.

"Obviously we are in a period of austerity and the festivals and events will have to play their part in terms of cutbacks. Now more than ever we have to look at ways of bridging that funding gap.

"There is a recognition now from the private sector - not just the hotel sector - that a contribution is necessary to sustain the level of the world-class festivals we have."

It is thought that the new proposals could again kill off the prospects of a "bed tax" being forced on hoteliers. Cllr Cardownie, along with his coalition colleagues, had been a supporter of the idea where hotels have to pay a surcharge of around two per cent to help fund the festivals, but there were concerns at such a tax being enforced only on hotels and not other businesses that benefit.

Cllr Cardownie today admitted that a voluntary contribution could be a better option. He said: "I don't care where the money comes from but a voluntary contribution would be better than a compulsory contribution.

"If the private sector is stepping up to the plate then I'd be optimistic that we could reach a formula that would make a difference.

"The private sector has played its part in terms of sponsorship, but there is always room for additional sponsorship in the arts."Restaurants, bars, hotels and shops are the businesses that have the maximum benefit and I am sure they recognise that and will look at mechanisms for sustaining the festivals that benefit them."

The consortium discussing the proposals is being led by the Edinburgh Chamber of Commerce.

Other options include asking businesses to pool together funding for specific marketing initiatives that relate to bringing extra visitors to the festivals. Consultants are expected to make recommendations in October.

Many hotels already ask guests if they want to make a voluntary contribution to charities on their bill, so it is thought that they might find it easier to implement that proposal than pubs or taxis, which may not have such systems in place.

Ron Hewitt, chief executive of the Edinburgh Chamber of Commerce, said: "There is a need to find alternative resources for the preservation, promotion and development of the festivals. We want to maintain the quality and the significant economic impact that brings. There has been insufficient funds for the Festival, it is really peanuts. We can't afford to sit back and hope that public finances change, we have to go and take action."

He said that a "truly significant" amount of money could be raised, although insisted that compulsory donations - like the bed tax - are unlikely to be imposed on firms, with a voluntary approach much more likely.

"I would hope that this consultation will engage with all key sectors and draw up a plan," he said. "From our very early research, there is a very significant amount of businesses that are willing to step up to the plate.

"There are a huge number of businesses that benefit from the festivals, from hotels and restaurants to leisure and taxi companies, and we are looking for a much broader range of contributions,

"We want to have not just a subsidy that makes up for any shortfall in public sector funding but, much more than that, something that helps the marketing that is going on." It is thought that additional marketing activity will take place as a result of the investment, including targeting countries that are not traditionally big markets for the festivals, like India and China.

Martin Reynolds, head of marketing at Festivals Edinburgh, said: "We are currently looking at a number of innovative funding scenarios between the city and the private sector. We are a protagonist but we are not leading these discussions.

"Our commitment remains on the continuing need for investment in and promotion of the city's festivals."

He said that it was right that the private sector is drawing up its own investment options. "They will be the people who have to sign up to it," he said. "They are the beneficiaries of the hundreds of thousands of people that come to the city and they are the people that can come up with sustainable ways of ensuring that the investment and promotion of the city can continue."

CONTROVERSIAL ISSUE

THE idea of a tax on Festival visitors has been around for years, although the council's proposals for a "bed tax" in hotels failed to win Scottish Government support in 2008.

The Audit Commission also raised the prospect of a tourism tax in 2006 in an official report.

The system of adding a supplement to the price of a hotel room is already used in the United States, France, Germany and Austria, where it is deeply unpopular. Italy introduced and then scrapped the tax.

This month, a bed tax scheme was approved in Florida after it was agreed that the money would be used to complete a new building for a Salvador Dali museum.