It was an honour to start the year speaking at the first anniversary of the re-launch of The London Magazine. To witness such a bold attempt at reviving a two hundred and eighty-year-old arts journal – a literary zine just slightly older than the RSA itself – is incredibly admirable, but to do so following one of the deepest recessions in history is further testament to the strength and dynamism of British culture. The RSA knows the importance of this pragmatism better than most. Earlier this month saw more than four hundred people from across the arts sector gather at the second annual State of the Arts conference. They did so under a looming cloud of thirty-percent cuts to arts funding over the next three years, but they also came with an appreciation that they must evolve and adapt if they are to survive in new and challenging circumstances.

The overriding message of the conference was that the arts sector does not have time to wallow in self-pity. It needs to develop new ways of working which make less funding go further. One answer is for arts organisations to become more entrepreneurial, finding new ways of marketing and selling content. Broadcasts of live ballet and opera to cinemas and offering cheap theatre seats on quieter weeknights are just two examples of how a broader audience can be reached while at the same time generating income. The government – represented at the conference by Arts Minister Ed Vaizey – puts great store by individual and corporate philanthropy. But with seventy-five percent of all private sponsorship going to London, it is the capital’s great international brands like Tate Modern or the British Museum that have the greatest capacity to navigate the choppy waters ahead.

There is much less reason to feel confident for the future of regional, local and community based arts projects. Many of these projects are great – from Streetwise Opera’s transforming work with homeless people to the STRIDE dance project’s inspirational work with young men – and are used to having to make ends meet. But they might not need to if the arts sector could break free from a woolly and self-serving case for public subsidy. Part of the problem has been a tired old argument between the ‘instrumental’ case for arts funding (that arts projects can achieve concrete outcomes like reducing youth offending or improving mental health) and the intrinsic (art for art’s sake).

This is a spurious distinction. For a start the arts sector has never really been subject to the rigorous audit culture other public services accept as an inevitable consequence of spending taxpayers’ money. More fundamentally the idea that in straitened times we should fund art just because artists and their audiences enjoy making it and consuming it is untenable, especially as the beneficiaries of high culture tend overwhelmingly to be among the better-off in society. Instead the arts sector needs to have the confidence to show it is vital to making good lives in a good society.

There is, for example, evidence from the US and the UK that – even accounting for differences in education and class – people who get involved in the arts are more likely to participate in civic life and to volunteer in other aspects of their communities. To succeed in the global economy we need people who harbour the confidence and imagination to feel comfortable with other cultures. Engagement in the arts, therefore, which presents us with new experiences, is good training for modern citizenship and entrepreneurial success. Conversely, eroding the arts will diminish the life chances and prosperity of future generations.

So the arts must make a strong case for being part of both the big and the good society. If it does so it will be able, in time, to open up new funding sources. But the subsidised sector will also probably have to change the way it works. Drawing upon the arguments laid out at this year’s State of the Arts conference, a new vision for the sector might include, among other things, a recognition that the major national arts institutions need either to accept a smaller subsidy or work more closely with grassroots community organisations; a commitment to much greater collaboration between arts organisations at the local level; and a renewed emphasis on engaging a broad range of people from across society. In just a year the arts sector has gone from feast to famine; its prospects for the long term rest on subscribing to a new vision which proves that we all – culture vulture and arts novice alike – have a stake in its success.