It is unrealistic to imagine that these reforms can be conducted under present management. The ACE is in dire need of new leadership, not just a new chair and chief executive but a different tier of senior staff who come into the job free of old shibboleths. It requires root and branch reform and there is no shortage of public-spirited individuals who will step up to the plate when it becomes free. Forgan's and Davey's immediate response was to invent a new set of bureaucratic tasks, a job-saving scheme that required every arts organisation to reapply for its funding — an insult to the entire sector that required the National Theatre, along with the tiniest fringe group, to explain its raison d'être.

Can the arts survive the coming years of hardship? Of course they can. Of all industries the arts are the most resilient and, by definition, the most innovative. But their struggle will be greatly eased by having an Arts Council that is on the side of the arts rather than the enforcers, a partner in production and a sponsor of renaissance. It is time to set the arts free of most funding conditions.

Not long ago, an ACE loyalist singled out in its defence the million-pound mechanical object known as the Sultan's Elephant that was imported in 2006 and paraded through the streets of London as "the biggest piece of free theatre ever seen". It certainly gave much enjoyment. But sponsoring French circus acts is not what arts funding is supposed to do. The aim must be to stimulate native ingenuity and improve the national mood. The ACE's incompetence at these tasks has long been the elephant in the Whitehall room. It's time for a second Keynesian revolution, one that will liberate art from the arts bureaucracy.