The axeman cometh (Part 2): Is the Autumn Statement going to prevent a long harsh winter for sports funding?

Part 2 of Leigh's blog on the public finances takes a closer look at how austerity has and will continue to challenge the sporting sector when it comes to funding.

In Part 1 of this blog I set out the scale of the challenge facing the public finances. This challenge has been thrown into stark relief by today’s Autumn Statement which confirms that the public finances remain in a very delicate state.

In this Part 2 I want to return to sport and try to answer the question: what does all this mean for our sector?

The implications for sports funding

In the short term, continued deficit reduction will almost certainly mean further savage reductions in departmental budgets over the next Parliament. The Autumn Statement sets out a plan for at least £10 billion in further efficiency savings by 2017-18 and up to £15-20 billion by 2019/20. This compares to the £14.3 billion in savings banked over the period 2009/10-2013/14.

Looking back, the Spending Review 2013 saw the Department for Culture, Media and Sport (DCMS) come out relatively well: it received a below-average real terms budget reduction of just 7%. Sport fared even better – funding cuts to grassroots sport were restricted to just 5% and funding for elite sport was protected altogether.

It is likely therefore that the Spending Review 2015 will be a more difficult one for DCMS and, by extension, sport. Although DCMS makes up a small proportion of total Government spending, the pressure to maintain current levels of spending on core public services – health, education and social care – means other departments will most likely take a disproportionate hit next time round.

This is illustrated by the Chancellor’s announcement this week of an extra £2bn per annum for the NHS which will almost certainly be funded from further cuts in other departments.

A brief glance at the DCMS budget allocation for the most recent year 2013/14 shows that sport makes up around 10% of the total (Fig 1). However, a large proportion of the spend on media – well over half – is capital expenditure to support the roll out of broadband.

Stripping this out leaves museums and galleries, sport, the arts and heritage as the four largest elements of DCMS expenditure. All of these have strong lobbies that will be vociferous in defence of funding for their respective sectors.

Fig. 1 DCMS budget allocation 2013-14

Source: DCMS Business Plan (excludes adjustments as a result of 2012 Olympics)

While the outcome of the Spending Review is difficult to foresee with any certainty, one area that might come under scrutiny is Whole Sport Plans. These plans set out the funding 46 National Governing Bodies (NGBs) will receive from Sport England between 2013-17 in return for, amongst other things, driving up participation in their respective sports. Over the 2013-17 period more than £400m will be allocated through Whole Sport Plans.

Beyond 2017 therefore, it is possible that funding for Whole Sport Plans could be reduced, focussed on fewer sports or – in the worst case scenario – eliminated altogether as part of wider spending reductions across DCMS.

It is also worth remembering that the Spending Review will very likely affect the resources available for other functions that play an important role in protecting the integrity of sport. In particular any reductions in funding for UK Anti-Doping and the National Crime Agency could have a significant impact on efforts to combat threats from doping and match-fixing (an issue I have blogged about before).

Lottery funding

Of course, DCMS is not the only source of sports funding. The National Lottery is a source of significant additional money via lottery grants and over the past 20 years it has made a huge contribution to British sport, both at grassroots and elite level. Currently sport takes a 20% share of the lottery money allocated to good causes.

However, to assume that additional lottery money will simply be able to compensate for any reduction in central Government spending is to play a dangerous game.

Firstly, like house prices, there is no guarantee that lottery revenues – and therefore the amount going to sport – will go on rising in perpetuity. Lottery sales are influenced by wider economic conditions; if disposable income continues to be squeezed, people will be less likely to part with hard-earned cash for lottery tickets. Further, new lottery competition has emerged in recent years – this has attracted customers away from the National Lottery and represents revenue foregone by the Lottery-funded good causes such as sport.

Secondly, the precise shares of lottery funds allocated to good causes are not set in stone. Prior to 2010 sport received just 16.66% of the total although this was subsequently increased to the current 20% share. It remains a possibility that the lottery shares could be adjusted again in future, particularly if lottery funding is increasingly relied upon to ‘backfill’ central Government spending that has been withdrawn.

The implications for policy design

Looking to the long term, both the Deloitte and IEA reports referred to in Part 1 argue that the scale of the public spending reductions required cannot be achieved by simply continuing with current policies or ‘business as usual’. Instead, Government must adopt policies that take account of the impact on future liabilities; in other words policies must, at the very least, not add to the future debt burden and ideally reduce it.

In practice this means future funding for sport is likely to be tied much more closely to outcomes. At the moment, a lot of current spending is focussed on driving higher participation. While we would all agree getting more people into sport is a good thing in and of itself, a Government focussed on extracting maximum value from every pound it spends might reasonably ask a more demanding question: what contribution does participation make to achieving wider public policy goals (including reducing the pressure on public finances)? Or, put another way, what is the ‘bang’ Government gets for its sporting buck?

These are difficult questions. But in the context of huge cuts in public spending they are questions the sport and recreation sector must be willing and able to answer. To do so requires the sector to undertake a significant shift: moving away from being providers of ‘sport for sport’s sake’ towards becoming agents of wider public change.

Challenges and opportunities

Overall both these changes – deep cuts coupled with a sharper focus on the effectiveness of spending – will create challenges for National Governing Bodies (NGBs).

For example, in future years there is no guarantee that NGBs will be the only bodies funded for sport-related outcomes. NGBs may instead have to compete for funds alongside a range of alternative providers including charities and businesses and/or work within different funding and delivery structures such as Social Impact Bonds.

Indeed it is possible there might eventually be no sport-specific funding via a single department like DCMS; instead funds could be spread across different Government departments or arms-length agencies, each of which may make funding contingent upon delivery of their own policy objectives.

Nonetheless with every challenge comes an opportunity and those NGBs that are nimble and adaptable will be well-placed to capitalise. Indeed many have demonstrated already that they are more than capable of taking advantage of emerging opportunities.

Ultimately though, if the sport and recreation sector doesn’t perceive the threat arising from poor public finances – and act accordingly – it could pay a high price.

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