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This 3.5 million of interest earned from the Trust Fund would finance the National Theatre. Not the theatre itself, because we would have sold it, but the company -- which is all that matters.

Apparently the current National Theatre building absorbs about half of the companys grant, i.e. out of a grant of 7 million about 3.5 million goes into the upkeep of that building. Dorothy contends that this is a waste of money, money that could actually be spent on productions. After all Simon Monk was complaining last week that they shouldnt have to spend their grant that way -- "the theatre is about plays and actors, not bricks and mortar.

So where would they put on plays? Answer: there are plenty of theatres in London. And all over the country. The National Theatre could rent them, like any other producer.

The scheme is perfect. The company might even have to go on tour and become genuinely national -- whereas at the moment it only serves a few Londoners and a lot of tourists. Much more money than ever before could be injected into National Theatre productions while still giving the Government that net profit of thirty million, which could then be invested to produce three million a year for the British Theatre as a whole.

I was exultant. No one could accuse me of being a Philistine any more!

She smiled. Not unless they knew you.

December 9th

The night of the Awards dinner. Confidently I arrived at the Dorchester in my dinner jacket, with Annie on my arm, actively looking forward to the encounter. If there was to be a knock-down drag-out fight tonight, I felt I stood a good chance of emerging as the champ.

Knowing that much of the audience for my speech would be experienced performers, Id taken some extra trouble. I had rehearsed in front of the mirror. Dorothy had watched my recent TV appearance and had some advice for me.

Always use full gestures. If you only gesture from the elbow up you look like an Armenian carpet salesman.

On the whole, it could be better to look like an Armenian carpet salesman than an actor. Or even a politician. But since I now see myself as a statesman, only the most statesmanlike gestures are permitted. Punchy, powerful gestures -- but always preceding the sentence, Annie tells me, never after! Gestures afterwards look weak and ineffectual.

Of course, before the speech there was the small matter of a final negotiation with Mr Monk. If all went well, I wouldnt have to say anything controversial, which would be the best outcome of all. I always remember the advice given to me by an elderly peer years ago when I first entered the Cabinet: If you want to get into the Cabinet, learn how to speak. If you want to stay in the Cabinet, learn how to keep your mouth shut.

In the ante-room before the dinner Humphrey got me together with Simon Monk. Hed now heard the news about the grant. I gave him a big smile and a sincere handshake [or was it the other way round? Ed.].

He did not smile at me. This is very bad news about the grant, Prime Minister.

Surely not? I said innocently. Its gone up.

Nothing like enough.

Enough to make it unnecessary for you to recommend closure, tonight?

Im afraid not. He was sombre, but confident.

I helped myself to a handful of peanuts. Because next year, I continued indistinctly, I think we can really do something significant. You remember you complained that 3 million of your grant goes on the upkeep of the building?

Yes?

I have a plan that would relieve you of that.

He brightened considerably. Really? That would be marvellous.

Yes, I enthused, wouldnt it? And it would make the National Theatre really national too.

Instantly he was on his guard. How do you mean?

Im thinking of selling it, I explained cheerfully.

He was aghast! He stood there, his mouth open, staring at me as though I were Attila the Hun. So I took the opportunity to explain that thats how we save three million on upkeep.

He finally found his voice. Prime Minister! Thats impossible.

No its not, its easy, I assured him. Weve had a terrific offer for the site. And we had, too.

Humphrey intervened, apparently shell-shocked. He had been quietly confident that I would submit to Simons closure bluff. But Prime Minister -- the National Theatre must have a home.

I explained that it would have. They could have offices anywhere -- Brixton or Toxteth, for instance. Or Middlesbrough.

Simon asked about theatres, about scene-building workshops.

Rent them, I explained, like everyone else. As it is, most of the workshops at the NT are closed down because of bad management and high cost.

Be like the others, I exhorted him. Perform in the West End. Or the Old Vic. And provincial theatres. Become strolling players again, not Civil Servants. Didnt you once say that the theatre was about plays and actors, not bricks and mortar?

And, while he was reeling on the ropes, I followed up with the knockout blow. I suggested Dorothys second plan -- she came up with it this morning. If anyone complained that the National Theatre needed a permanent home, we would designate all the regional theatres in the UK the National Theatre. For instance, the Heymarket Theatre in Leicester would become the National Theatre in Leicester, the Crucible would be called the National Theatre in Sheffeld, the Citizens could be subtitled National Theatre in Glasgow and so forth. You, I explained to Simon, would just run the London branch of the National Theatre.

It would be a perfectly true description. I reminded him that they are all run exactly the same way, with Artistic Directors and Administrators appointed by local boards of governors, financed by a combination of Arts Council grants, local authority grants and box office income. Why should the London branch of the National Theatre be the only branch entitled to that elevated title? And we could use the 35 million, or the 3 million annual income, to help them all. That would be terribly popular with the profession, dont you think?

Humphrey, who had not heard this plan either, was virtually speechless. His eyes were popping out of his head. Prime Minister, its barbaric! he gasped.

Spending money on actors and writers instead of buildings?

Yes, he spluttered. No, he added as, wide-eyed, he realised what he was saying.

Anyway, I concluded, its only one of the options. I might decide against it. Or I might not. I could outline it in my speech. It all depends, really.

Simon spoke at last. On what?

I smiled benignly at him. To change the subject completely, Simon, have you decided what to say in your speech yet?

He was sweating. Not finally. He knew he was beaten.

You see, I explained, thinking it over, I wasnt sure that those examples of government waste were awfully funny. But of course, its your decision. I waited. He eyed me balefully. Im sure you understand, I said, and walked away from them both.

Well, either way I was the winner. But I didnt know way it would go until the last moment. We ate the usual rubber chicken dinner with croquette potatoes -- I've never ever eaten croquette potatoes anywhere except at formal dinners -- I gave the loyal toast, the smokers were told they could smoke, and in no time it was time for the awards. Monk was introduced by the pompous ringing tones of the Toastmaster: Prime Minister and Mrs Hacker, My Lords, ladies and gentlemen, pray silence for the Chief Associate Director of the National Theatre, Mr Simon Monk.

He rose to a round of warm applause. Ladies and gentlemen, he said, you will have read this morning of the grant to the Arts Council and to the National Theatre. I know that many of us are disappointed by the amount.

Low hostile murmurs reverberated around the Banqueting Suite. Several hear hears. Lots of approving bangs on the table-tops. Simon Monk stopped and looked at me. I stared back. Little pink anger spots appeared on his cheeks and he looked back at his speech.