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The steady erosion of state funding for the training of young dancers and actors has brought us, says a report by an Arts Council of England working group, "to the very edge of the precipice". The risk to the future of British dance and drama is grave: very soon - apart from a lucky few who live in the right place, or whose parents are able to make enormous sacrifices - only the rich and those from abroad will able to train at British schools of performing arts.

At the heart of the problem is the discretionary grant. This grant is needed from a local authority for a student to study at one of the independent colleges which provide the bulk of dance and drama courses in this country. Up until the late 1980s, the system of discretionary grants - as opposed to mandatory grants, awarded for degree courses at publicly funded institutions of higher education - was generally felt to have worked well. But since then, cuts to local authority budgets have dramatically reduced spending on discretionary grants - a decline of 42 per cent in real terms since 1990-91 - and now only a handful of local authorities make discretionary grants at all. Getting one of these grants depends now, not on how much talent you have, but on where you happen to live.

This month, the Arts Council hopes to finalise, with the Government, an interim scheme designed to help dance and drama students. (The Scottish Arts Council is still reviewing its position.) Funded partly by central government and partly by the National Lottery, in partnership with the training organisations, the idea of the scheme is to reduce the tuition costs for able students who have already been accepted by accredited colleges. If they can secure about #163;1,250 from their local authority - a lower level of discretionary grant aid than at present - up to half of their fees will be met by governmentlottery money, leaving their college (with support, presumably, from parents) to raise the balance.

The scheme is temporary and will operate for three years only from this September; only students beginning three-year courses this year can, therefore, be sure of being funded throughout. It is hoped that a more satisfactory and permanent solution will be reached by the Dearing Committee of Inquiry into Higher Education, due to report this summer.

Dance and drama courses at independent colleges have posed a particular problem for hard-up local authorities because of their relatively high cost: #163;7,500 a year on average for a dance course (excluding maintenance), and #163;6,500 for drama. With no core funding from the Government, these colleges have to recoup their full costs through tuition fees. The courses are, in addition, expensive to run, in that special facilities are needed - ballet studios, rehearsal rooms, with the correct heating and lighting - and students need to spend up to 40 hours a week dancing or in rehearsal.

For an increasing number of colleges, teaming up with a university and converting from a diploma to a degree course has been the only way to survive financially, ensuring that their students qualify for a mandatory grant. But others are reluctant to go down this route. Some fear the loss of autonomy, and too great an emphasis on the academic side. The requirements of dancers, particularly - in terms of studios, showers and so on - are not always easily accommodated by universities. Some, too, have preferred to hold out for a discretionary grant, which could - in the past, at least - have yielded more than the mandatory grant of #163;3,500.

Dance students have tended to come off worst in all this. While it is possible for a budding actor to defer proper training until 20 or 21 - Raphael Jago, principal of the Webber Douglas Academy in London, and chairman of the Conference of Drama Schools, reports an increase in one- and two-year postgraduate courses, as a result of the difficulty in getting grants for three-year diploma courses - a dancer needs to be in serious training by 16, if not earlier, which rules out the degree-course option. There is, too, a long-standing prejudice against dance - a minority art form, a relatively new one, and almost entirely filled by women - compared with, for instance, music. Music, with powerful backers such as Sir Edward Heath and Yehudi Menuhin, has fared far better in the funding wars, and is no longer dependent on the discretionary grant.

As discretionary funds have become scarce, dance and drama colleges report numerous cases of students unable even to take up their places. Those that can, have an unequal struggle to make ends meet, and many of them are forced into part-time jobs: hard enough, perhaps, for any student,but for those faced with the gruelling requirements of a dance course, this represents a serious risk to health and fitness. Unlike university students, most dance and drama students are not eligible for student loans.

Unable to fill their places with solvent, and talented, British students, dance and drama colleges are taking more and more foreign students - up to 50 per cent in some cases. Students from less well-off homes also lose out to the middle-classes who can afford the fees. "This is a tragedy, because some of the most exciting, interesting talent comes from the lower end of the income range," says Christopher Gable, artistic director of the Central School of Ballet in London. "Kids from affluent homes very often, in some way, have lost some of the spark that street-wise, inner city kids have. "

So how far will the interim scheme address these problems? Victoria Todd, at the Council for Dance Education and Training, welcomes it as a "lifeline which will prevent some very good schools from closing". But there is also very real concern that, because the scheme requires an initial grant from the local authority to trigger the government and lottery funds, in local authorities which are not providing any money at all for discretionary grants, students will be no better off.

"We are pressing for a hardship fund to be part of the scheme - say, 20 per cent of the funds - so that students who fall through the cracks can still apply, " says Adele Bailey, at the National Council for Drama Training.

"The scheme is a piece of elastoplast," says Mark Fisher, Labour spokesman for the arts. "It may trigger a bit of activity, but it is not a structural solution. To get this right, we have got to find a system whereby the best and most deserving students get automatically financed."

A Labour Government would, he says, carry out a review of all cultural courses. This would mean a more rigorous accreditation system, with some institutions forced to close while a minority were fully funded. "It would be an unashamedly litist scheme - but far preferable to the slack, demand-led system we have now."

Christopher Gable, however, is sceptical - on the grounds that institutions have very different ideas about what constitutes a good training, and it would be hard to achieve a consensus. For the dance and drama classes of '97 and beyond, the future is still very far from certain.

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