Just as there is no good way to tell an employee that he is to be made redundant, there is no kind way of imposing an arts cut.

Yesterday may have brought good news for some, but it was a distressing day for other drama groups, arts organisations and specifically the Scots language as the Scottish Arts Council (SAC) announced its new programme for “flexible funding”, which will influence the culture of Scotland up to and including 2011.

Fair? Unfair? Draconian? Philistine? Each group will have its view. But when, against a budget of £6.9million, applications totalling £15million are received, there are bound to be victims, and those who suffer will be hurt and angry.

Explaining to a company that has put its heart and soul into its latest production, collected decent reviews along the way and begun planning an innovative season to come, that its work has been judged to have dropped below some indeterminate standard is hard at best, impossible at worst.

When, as chairman of the SAC nearly a decade ago, we imposed cuts on Scottish Ballet and the Wildcat theatre company, there were furious protests, petitions to Downing Street, and one of the most ferocious grillings I have ever received from a House of Commons committee.

My response was simple, if thankless: if you pay an arts council to take decisions on what is worth supporting and what is not, you must expect it to make judgments on the quality of work produced. Not everyone will agree with those judgments, but if they are not made at all, then standards are bound to drift.

What makes yesterday's programme that much harder to interpret, however, is the climate in which it is brought forward. First, by the time it is implemented, the SAC, which has drawn it up, may not exist. Creative Scotland, which is to take its place some time next year has a different remit, structure and political status. It may wish to review, alter or abandon some or

all of the decisions that its predecessor has taken. Although they will stand until 2011, uncertainty about the longer-term future will make strategic planning that much more difficult.

Secondly, the whole concept of “flexible funding” has a worryingly Orwellian feeling about it, and the explanation offered by the SAC does not help much: “The development and presentation of programmes of activity that are artistically driven ... the development and presentation of programmes that aim to maximise audience attendance ... for arts organisations which have a strategic role in the development of a key policy area or serve a particular community of interest.”

Really, the time has come for public bodies like the SAC to clear up their act and speak in plain English. I know of no arts organisation that is not “artistically driven” or does not want to build its audience. As for the third condition, I find it worrying. It suggests that only arts groups which cater for target audiences such as youth, the disabled or the socially inclusive will be favoured.

This is taking arts funding in precisely the opposite direction to that recommended by Sir Brian McMaster in his recent report, which laid emphasis above all on excellence and high quality rather than special interest.

In theatre, in particular, it means that, apart from the National Theatre of Scotland, and those companies that are building-based, such as the Citizens or the Lyceum, there will be little support for drama, unless it is aimed at a specific audience.

Yet some of the most exciting and innovative work of the past decade has come from the smaller companies, driven, not by the need to cater for special interests, but by a simple desire to produce great theatre.

The Federation of Scottish Theatres estimates that the amount of funding offered to drama and dance organisations in 2009-11 represents a drop of 18 per cent a year, which, if true, is severe.

Meanwhile the five National Performing Companies, which are directly funded by government, enjoyed an increase of 4.4 per cent. Those of us who questioned the decision to hive off the national companies from the SAC wondered whether a two-tier system would begin to develop. It seems that it already has.

These are uncertain times for the arts in Scotland. No one denies that tough decisions have to be taken. What is crucial is that those decisions are properly explained, and the rationale for them clearly understood.

Magnus Linklater, Editor of the Scottish edition of The Times, was chairman of the Scottish Arts Council from 1996 to 2001.

Times Recommends

• Phoebe Caldwell wins Times/Sternberg Award
• Raging against fake pop has its own pitfalls
• How a voice for everyone led to stalemate