The time has come to transfer local authority museums to trust status

19 May 2017

Brighton & Hove City Council has announced that from April 2018, it intends operating the city’s Royal Pavilion & Museums via a cultural trust [1]. They believe this will help grow the success of its iconic Royal palace and nationally significant museum collections, while also opening up potential new funding opportunities.

The move makes Brighton & Hove one of many local authorities to convert their museum services to trust status. In Brighton & Hove’s case, the change will be accompanied by a 25-year funding agreement to be reviewed every five years. It will mean the museum's’ management will be transferred to the new charitable organisation while ownership of the buildings and collections stays with the council.

In the previous blogs in this three-part series, we’ve looked at the wider context shaping councils’ strategies towards their museums, and also at the types of commercial responses being taken in response. In this third blog we drill down into one option that – as Brighton & Hove’s decision illustrates – is becoming increasingly prominent: charitable trust status.

At its simplest, switching to trust status trust mean the museum will operate as a charitable company and be registered as a charity with the Charity Commission and HMRC. This isn’t a new option: for example, Sheffield museums moved to trust status in 1998[2] followed by York museums in 2002[3]. Also, converting museum services to a trust isn’t a panacea or one-size fits all solution for all authorities. But in some cases, it represents the best long-term response to the pressures now facing local authority-owned and -managed museums.    

So, what are the pros and cons?

Firstly, on a purely financial level, there are a number of advantages and disadvantages to a trust structure:

 

MusproPotential advantages

 

ConproPotential disadvantages

Ability to benefit from Gift Aid

Exposure to some VAT liabilities

Scope for business rates relief

Initial set up costs

Able to employ staff on more flexible terms and conditions aligned to private sector (although TUPE regulations will still apply)

May no longer have access to central services previously provided by council (eg accounting, IT, HR) so running costs may be higher

However some of the real opportunity lies in longer-term, strategic benefits that a museum trust may be able to capitalise on including:

Oppsmusuems

Nevertheless, these benefits will only apply if the trust is set up correctly at the outset with the right degree of independence and funding. If this isn’t the case, or potential issues aren’t fully thought through before the transition, then the benefits can all too easily morph into pitfalls.

What might these pitfalls be?

In general, the more independent the trust is from the local authority, the greater opportunity the trust has to fulfil its potential. If management are restricted by day-to-day council constraints and bureaucracy, this may limit their ability to act in entrepreneurial ways and pursue new commercial opportunities. But without the necessary financial support from the local authority, the new trust has a greater risk of failure. So it’s vital to strike the right balance in the relationship.

For a trust to become fully independent, a council will no longer be able to retain a majority representation on the board, or carry on providing various support services such as IT, HR and finance. However, it may only be possible to attract the type of high-profile, well-qualified trustees that a museum needs if the trust has a guaranteed commitment of sufficient funding – again this creates a dilemma.

One way of addressing these potential pitfalls, is to have a ‘trial period’ – say five to ten years – during which the local authority commits to act as lender of last resort but has the option to reducing its funding at the end of the period if the trust exceeds its forecasts. After this period, the contractual agreements can be updated based on the trust’s performance and track record. But whatever arrangement is agreed, it’s always important to have a clear ‘fall back’ plan in place in the event of failure.

WorkAnother area requiring a fine balance is the mix of workforce skills within the new trust entity. New appointments may be needed to bridge skills gaps and drive a more commercial culture. However, employees who transfer across under TUPE may have a stronger sense of ownership and connection with the heritage assets, in turn helping support a more entrepreneurial and business-like mind-set. There’s a risk that transferring staff from the local authority to the new trust and directly employing new staff, can result in two tiers of staff – in turn potentially generating resentment among the workforce. Again it’s vital to anticipate and avoid such risks.

Weighing up the pros and cons of trust status for local authority museums, our view is that it can be an effective catalyst for change – but must be thought through very carefully, taking into account all the potential opportunities and pitfalls, financial or otherwise. In communities across the UK, local authority museums make a rich contribution to our social culture, heritage and sense of ‘place’. In many cases, trust status may be the best way of ensuring they can continue to play this valuable role.

Weigh

[1] Source: https://www.brighton-hove.gov.uk/content/press-release/council-moves-secure-long-term-future-museums

[2] Source: https://www.hlf.org.uk/about-us/media-centre/press-releases/bright-future-weston-park-museum-sheffield

[3] Source: http://www.yorkmuseumstrust.org.uk/about-us/history/

 

Julie Clark

Julie Clark | Sport & Leisure Leader
Profile | Email | +44 (0)20 7213 4170

Ian Oakley-Smith

Ian Oakley-Smith | Charities Leader
Profile | Email | +44 (0)20 7212 6023

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