The Obama Presidential Centre’s opening in Chicago this week is a masterclass in how private capital can fund public goods. Meanwhile, Britain’s cultural institutions are still clinging to the teat of a stretched Treasury. The contrast is instructive and, for those of us who watch the public finances, a bit painful.
Let me be clear: I am not here to diminish the Obamas’ achievement. The centre, a $830 million complex on Chicago’s South Side, is a stunning example of what philanthropic capital can build. It is also a monument to the former president’s ability to tap wealthy donors. But the timing of its unveiling, as UK museums and galleries scramble for government handouts, is too delicious to ignore.
Consider the British Museum’s recent plea for £1 billion in maintenance funding. Or the National Theatre’s perennial reliance on Arts Council grants. These institutions are world-class, but their funding model is a relic. They depend on a government that is itself up to its ears in debt, with gilt yields reflecting a market that is increasingly sceptical of fiscal discipline. The 10-year gilt yield has been above 4% for months, a level that historically screams “borrowing spree.”
In Chicago, the Obama centre is funded by private donations, a $100 million tax increment financing package, and a smart leaseback deal. The result? A 235,000-square-foot facility that includes a museum, a public library, and a forum for civic discourse. The city of Chicago is on the hook for some infrastructure costs, but the overall taxpayer burden is minimal. Compare that to the UK, where even the newer cultural projects, like the V&A’s expansion in Dundee, required tens of millions in public grants. It is a classic case of capital flight: private money prefers to flow towards the US, where tax structures and donor culture allow it to have maximum impact. Meanwhile, UK institutions are left to fight over a shrinking pot of state cash.
Some will argue that the US model is unsustainable, that it creates a two-tier system where only certain projects get funded. That may be true. The Obama centre will be a gleaming monument to one man’s legacy, but it does not solve the underfunding of Chicago’s local museums or public schools. Yet the British model is hardly better. Our “National Treasures” endowment fund, touted by the last government as a solution, has barely scratched the surface. It is a classic fiscal sleight of hand: announce a big number, break it down into small payments, and hope no one notices the gap.
And what about the macroeconomic backdrop? Inflation is finally easing, but core services inflation remains sticky at over 5%. The Bank of England is stuck between a hawkish market and a government that wants to spend. The yield curve is not inverted anymore, but it is still telling us that growth expectations are muted. In such an environment, diverting public funds to cultural projects is a luxury we may not be able to afford. The market will punish profligacy, as we saw in the Truss mini-budget debacle. Gilt yields spiked 100 basis points in a week, and the pound tanked. The lesson is simple: if you want to spend, you need to show how you will pay.
But the currency lesson is also about confidence. The Obama centre sends a signal: America can still attract capital for big, ambitious projects. Britain, by contrast, is seen as a low-growth, high-tax environment. Capital flight is a real concern. The pound has stabilised, but it is still down 15% from pre-Brexit levels. There are few signs of a rebound.
So, what is the bottom line for UK cultural institutions? They must diversify their funding bases. Relying on government grants is a mug’s game. The Treasury will always give priority to health, defence, and welfare. Cultural funding is a line item that can be cut. If the British Museum wants to survive, it needs to build a donor culture as robust as the one that funded the Obama centre. That means tapping into the UK’s own wealthy individuals and corporations, many of whom have London connections. It means being more aggressive about naming rights, sponsorships, and endowment building. And it means accepting that the era of generous state support is over.
The Obama centre is not just a building. It is a bet on the future of civic engagement, funded by private capital. It is a stark reminder that in the world of finance, there is no free lunch. And for UK cultural institutions, the bill is coming due.
