Privatise the Royal Opera House, or nationalise it

In Berlin, they used to say at the turn of the century, the situation is serious but not hopeless, in Vienna, the situation is hopeless but not serious. The joke applies to the Royal Opera House over the past few years, except that it's tempting to say that in that period it has gone from one to the other: first serious but not hopeless, now hopeless but not serious.

The latest news that the ROH is to close "in its present form" next January and reopen - perhaps, and if things work out - at the end of the year is not only startling. It asks larger questions than seems to be realised by any of those concerned, notably Sir Colin Southgate, chairman of the ROH, and Chris Smith, the Secretary of State for Culture, Media and Sport, about public subsidy of the arts and its justification.

Ten weeks ago, Sir Richard Eyre's report recommended a much increased subsidy, and firmly dismissed the idea of privatising Covent Garden. But actions - and inactions - speak louder than words, and the lamentable story suggests that almost any dispensation would be better than the present one.

The closure of Covent Garden for rebuilding has tuned into a gruesome chapter of accidents. Last year, Sir Jeremy Isaacs retired as general director of the ROH, although there was a lengthy overlap, at the taxpayer's expense, with his successor, Genista McIntosh. But she was only in place for a few months before she left, her departure not made less mysterious by the thoroughly unconvincing explanations offered.

Then her successor, Mary Allen, was appointed in puzzling circumstances, arrived, and stayed only months before leaving. A staff vote of no confidence in a senior ROH executive was passed (and leaked), a union representative was suspended, and the vote was withdrawn. A new head of education was appointed but broke all recent Covent Garden records - impressive as they were - by being sacked on the day she arrived. And people complain that the plots of operas like La forza del destino are implausible.

It was hard to imagine the baroque plot thickening further, but it did with yesterday's announcement. Southgate said that in view of the "unmanageable deficit, no proper financial information and ineffective management structure", he and his colleagues on the board propose a complete break. Even then, the company will only reopen after new staff agreements "negotiated in line with a reduced workforce", which is management-speak for mass redundancies.

To be fair to Southgate, he did inherit intractable problems. The ROH is a wonderland of overstaffing, union obscurantism and old Spanish customs (of a kind unknown to those famous Spaniards Don Giovanni and Figaro) reminiscent of Fleet Street 20 years ago.

But the closure, drastic as it is, may be almost by the way. What is now clear beyond peradventure, as that sometime ROH director Lord Goodman might have said, is not only that Covent Garden's management has somehow, somewhere gone horribly wrong but that a larger system has failed: the relationship between ROH, Arts Council, government - and the taxpayer.

Not only the ROH but the whole "arm's length" system of arts funding has long been regarded as a source of national pride. But should it be? Why is it so obviously right that the Government should give money unconditionally to an Arts Council which disburses it as it sees fit?

The Eyre report recommended, among other things, an increase of around pounds 60m a year in subsidy, about which Mr Smith has maintained a silence. And it dismissed out of hand the idea of withdrawing all subsidy and letting the ROH take its chances in the market.

Actually, the argument for privatisation is perfectly good, not only in "right-wing" terms, and is too easily dismissed by the chattering classes and those Sir Trevor Nunn likes to call "the luvvies". A contradiction is too rarely pointed out. Most of those chatterers at once consider themselves on the liberal left and favour heavy state subsidy of institutions like the Royal National Theatre, the Royal Shakespeare Company, and the Royal Opera House.

And yet it is perfectly obvious that all public subsidy of "the arts" represents a net transfer of resources from poor to rich. In this respect, Thatcherite philistines who sneer at the whole idea of subsidising poofs to prance on stage are more honest than lefty luvvies.

I have been attending the Royal opera for more than 30 years, often enough with rapturous enjoyment, but sometimes with a troubled conscience also. Here we sit, the stalls largely occupied by merchant bankers engaged in "corporate entertainment", and almost all of the audience well above the national average income, listening to a soprano who is paid pounds 5,000 for three hours' singing, all of which is largely paid for by the taxes of labourers in Scunthorpe or Southampton. Is this social justice?

What's more, there is a shining existential argument for privatisation 50 miles from Bow Street. The new house at Glyndebourne is not only the most beautiful theatre built in Europe since the war; it was built on time and within budget, a contrast indeed to most large public projects in recent decades. And it was built, as Glyndebourne has always been run, with no taxpayer's money.

That is one logical and honourable path. The other is to follow Sir Richard's advice and increase subsidy in line with comparable opera houses in Europe - but to do so by "direct rule", forgetting about the arm's length which is really a constitutional monstrosity, as Aneurin Bevan called the nationalised corporations.

The greatest irony is that amid these managerial fiascos, the Royal Opera as an artistic enterprise (yes, it is one, however easy that sometimes is to forget) is at a pinnacle of success. Three weeks ago I was in Edinburgh where the Royal Opera gave two Verdi operas. Luisa Miller, in concert performance under Mark Elder, was splendid; Don Carlos, under the Royal Opera's heroic, loyal and baffled musical director Bernard Haitink, wasn't splendid, it was utterly magnificent.

He returns in two weeks to conduct the company in The Ring at the Albert Hall. I trust the directors of the ROH will be more than usually stimulated by Wagner's great parable of greed, intrigue and treachery.