The best way to save the arts is to remove the single payer

This newspaper's campaign to persuade the Chancellor of the Exchequer to reform the tax system along American lines and thus "Save the Arts" has got off to a good start. The letters in support are developing the argument and identifying key issues. Daily newspapers can indeed work with their readers to change government policy.

It is important to see clearly what the American system comprises. The US government itself gives little directly to theatre companies, orchestras, museums and the like; instead they are supported by individual donations which, up to very high limits, qualify for tax relief. In effect the government helps the arts by providing donors with a tax deduction.

There is a further point about the American example that its British supporters need to take on board - it is not confined to donations for the arts. Any giving to any charity qualifies for tax relief. This must be correct. I do not see how the arts in the United Kingdom could be given tax advantages that were unavailable to other types of charitable activity. This point was raised by the financial director of Oxfam, David Nussbaum, in a letter to the editor published on Saturday. He was right to argue that the campaign requires consideration across the voluntary sector. And his further point, that such a widening could undermine the covenanting system under which Oxfam now receives numerous small-scale donations, would have to be met.

On the other side of the Atlantic, then, arts institutions survive if, by networking, they can attract a sufficient number of individual backers. In effect there is a free market in donations supported by tax relief. If individual A turns you down, you go to B, and if not B, then to C and so on. In this country, if they are to obtain the funds they need, cultural bodies must persuade the relevant committee of the great and the good and its officials. Everything may depend upon a single source. Failure to convince one body can be fatal. For instance, my fellow columnist on these pages, Trevor Phillips, as chairman of the London Arts Board, has had to take the agonising decision to withdraw the grant upon which the Greenwich Theatre depends. It will probably close down as a result.

It is because I greatly prefer the liberal, unbureaucratic system in the US that I wholeheartedly support the campaign. I also know that there is no chance that this country will follow the Continental pattern, where national or regional governments handsomely support cultural institutions. To see what this means, readers need only visit the hugely ambitious refurbishment and expansion of the Louvre Museum in Paris which has just been completed or travel to any regional capital in Germany and go to the local opera house. These countries hold the arts to be a public good which the state or local government naturally finances. The neglect of the British Museum would be inconceivable elsewhere in Europe. As a result the Louvre's new Egyptian galleries probably now outclass the equivalent rooms in the British Museum, which had the reputation of being the best in the world outside Cairo.

I had hoped that the Lottery would be an effective British way to achieve similar results. Indeed the arts have greatly benefited, so far as new buildings are concerned, but they nevertheless find themselves in a traditional quandary. It is much easier to find the funds for premises than it is for running costs. The same problem faced our Victorian ancestors when they wanted to erect new churches in the fast expanding cities. Businessmen who had done well out of the Industrial Revolution could be persuaded to cover the costs of bricks and mortar - and stained glass windows. But it was much harder to get them to underwrite the salaries of the vicar and curate and other running costs.

Being in a similar situation, the attitude of the cultural institutions is that, as well as receiving lottery funds, they should also continue to obtain state support at its present levels, even if the Government allows a switch to the American system of tax deductions for private donations. They want it all; no "either/or".

I think that this is unrealistic. The best way of persuading the Chancellor of the Exchequer to make a change is to offer a bargain. I would say to Gordon Brown that if the state would funnel its help to the arts by means of an easy-to-use system of tax deductions for individual donors, scrapping the many restrictions that the Inland Revenue currently imposes, then the increased private giving thereby stimulated should in time allow the whole apparatus of the Arts Council, with its grant giving powers and expensive overheads, to be wound up. This, after all, is the American pattern - generous tax relief, little state aid.

To begin with, under this scheme, the effect on the British Exchequer and on our cultural institutions alike would be neutral. From the Government's point of view, it would see a rise in the tax relief granted to donors to the arts offset by a fall in public expenditure. The cultural institutions would experience the reverse of this - more funds from individual donors, less from the state. But even in this preliminary situation, I think the arts would be better placed. Their sources of finance would have been diversified. And they could feel themselves more masters of their own destiny, less dependent upon government policy.

Then the cultural institutions would find out whether adopting the American method of tax deductions for private donors would allow them to do better than break-even as compared with the present arrangements. At least there would be no ceiling. The harder any institution worked at raising funds from individuals, the greater the reward. Some institutions would flourish in the new circumstances and some would not. But the failures could hardly complain, as Greenwich Theatre does today, that the system itself was unfair.

Let the debate continue. The main difficulty for me at the moment is the Oxfam point. What sort of bargain could the Chancellor be offered which would, over time, provide a net benefit for cultural institutions without harming the rest of the voluntary sector?