At £3m for 12 seats, a grand tier box in the Royal Albert Hall must count as one of the most expensive pieces of real estate in the world.
When this trophy asset was recently listed by Harrods Estates, it got me thinking: could this provide a solution for funding a new concert hall for London?
I’m instinctively drawn to grand projects. I liked the idea of “Boris Island”. I supported the Garden Bridge, much to the chagrin of my former TaxPayers’ Alliance colleagues. And I cheered last year when the Foreign Secretary floated the idea of a 22 mile bridge across the Channel.
I like big ideas – but I worry about what they mean for taxpayers.
The proposal for a new concert hall for London is being championed by Sir Simon Rattle as a new home for the London Symphony Orchestra. The question is: who should pay?
The current chancellor’s decision was understandable. At a time when voters want more resources for frontline services, the optics of spending millions on a new classical music venue in London would have been electoral suicide.
The cost of the project has been estimated at £200-250m. The City of London has agreed to chip in £2.5m and a design is set to be submitted by the end of the year.
But where will the serious funding come from, if the Treasury is unwilling? After all, taxpayers already provide 20 per cent of the annual income of the Royal Opera House, 40 per cent for the Royal Festival Hall, and nearly 45 per cent for the Barbican Centre.
This is where the example of the Royal Albert Hall comes in, which receives no taxpayer funding.
The idea of a new music hall for London was conceived by Henry Cole and endorsed by Prince Albert in the 1850s. Prince Albert had always been keen that the Hall shouldn’t draw on the public purse, so Henry Cole devised a scheme to raise the money privately.
He issued a prospectus which explained how a purchased seat, owned on a 999 year lease, “in a pecuniary point of view, will prove a remunerative investment”.
Cole’s aim was to raise £200,000 by selling seats for £100 each. Queen Victoria led the way by purchasing 20 seats, other establishment figures joined in, and he succeeded in raising enough money to cover the project, which ended up costing £214,000, a remarkably small overspend in today’s terms.
To jump from 1864 to 2018 prices, if a £200,000 project was viable using this method of funding then, could it suit a £200m project now?
If people were willing to pay £100 for seats in the 1860s, would they be willing to pay £100,000 for seats in the 2020s?
The answer seems to be yes.
Putting to one side the £250,000 per seat cost of the £3m box currently on the market, individual seats at the Royal Albert Hall currently sell for roughly £175,000.
The Hall operates a scheme to buy back all tickets for a seat for a year. So if seat holders see their purchase in purely investment terms, and allow the Hall to sell tickets for their seat on their behalf, they might expect to receive roughly £5,500 a year from ticket sales. This is a return of just over three per cent before tax, on a £175,000 investment.
Or if the owner takes on the administrative burden of selling the tickets themselves, they might at a stretch make near to £10,000, which is a 5.5 per cent pre-tax return. Attractive, but not excessive.
The use of secondary ticketing websites by a small number of Royal Albert Hall members has, of course, been a source of controversy, and has attracted the attention of the Charity Commission.
But with the vast majority of seats in the Hall being open to the public, the generous philanthropy of the members and the absence of taxpayer funding, shouldn’t this institution be emulated, rather than criticised?
Big projects are an important means by which we can demonstrate confidence in post-Brexit Britain. London still tops the influential Z/Yen Global Financial Centres Index, but it needs to continue investing in world class cultural facilities to keep this coveted top spot.
Ordinary taxpayers are understandably reluctant to foot the bill, so it might take imaginative schemes like the one thought up by Henry Cole to seal the deal.