The closure of Gurpreet Kaur Bhatti's controversial play Behzti at the Bir-mingham Rep last December exposed a troubling conflict in British theatre. The decision to cancel the production, following riots against its subject matter of sexual abuse and murder in a Sikh temple, put free speech at odds with the responsibility of publicly funded venues to the sensitivities of their potential audiences. Just as so many in the British theatre were reaching out to new audiences, it became clear that those new audiences might not want to know. Behind the riots could be seen a more sinister shadow of political complicity against the theatre.
So how does the theatre industry progress into the 21st century, ticking all the right multicultural and ethnicity boxes while reserving the right to be offensive, or at least critical, in its discussion of our increasingly fragmented society and its faiths? This problem was highlighted at "Raising the Bar", a conference held in London from 18 to 20 May, organised by the three main professional bodies in the £2.6bn-a-year industry - the Theatrical Management Association, the Society of London Theatre and the Independent Theatre Council.
The most alarming session was undoubtedly the one about censorship, not just because of the topic and the way it related to the Behzti saga, but also for what it revealed about the current realities of theatre politics and funding. Interestingly, the Birmingham Rep's executive director, Stuart Rogers, suggested that once his theatre got round to reflecting a much wider variety of Sikh experience in the city - to the same extent that the Rep has done, for at least a decade, in respect of the Muslim community - there might be discerned a light at the end of this particular tunnel.
However, evidence of threatening intervention in programming decisions, even in the mainstream, is serving yet more notice of theatre's capacity to shock and shake things up. A delegate from the Grand Opera House in Belfast said that his front-of-house staff had been verbally assaulted by members of Ian Paisley's Free Presbyterian Church for tearing the tickets at Jesus Christ Superstar (which evokes memories of protesting nuns at the premiere 35 years ago). And religious groups and individuals have warned theatres against booking a touring production of the National Theatre's scatological Jerry Springer: the opera.
Consider this alongside the recent spate of documentary drama - from David Hare's plays about railway privatisation and the build-up to war in Iraq to others about the Hutton and Bloody Sunday inquiries - and it is clear that British theatre has at least recovered one of its prime sources of power: the ability to upset the apple-cart and irritate the authorities as well as religious fanatics and fundamentalists.
This is a welcome change in a cultural climate where good intentions and liberal pieties have prospered in a conspiracy of approval with the funding bodies and the critics. The Arts Council of England is even now persisting in its ludicrous support of a black theatre company called Talawa, which it hopes to house in the Westminster Theatre (a former home of the sinister Moral Re-Armament movement), even though its artistic record is wretched and its director, Paulette Randall, has jumped ship. The Arts Council has promised nearly £1m of revenue funding over the next two years in addition to its (or rather "our") £4m capital investment.
The discredited Arts Council is like a mangy old tail wagging a docile old dog, with its schemes and plans and nannyish social engineering. And since its executive powers were devolved to ineffective local bureaucracies, it can no longer help where help is needed most. Take the case of one of the most successful regional theatres in the land, the West Yorkshire Playhouse in Leeds, which is battling for survival in a surrounding property development on its Quarry Hill site. Developers acquired this land from the city council - which funds the Playhouse to the tune of £1m a year, almost matching the Arts Council's £1.2m - and failed to include the theatre in its consul-tation process. Through sheer obstinacy, the artistic director, Ian Brown, achieved some concessions to preserve (just about) the theatre's architectural autonomy within a development that is likely to last for more than five, possibly seven, years. The consequences for what is supposed to be one of the nation's flagship theatres could be disastrous.
Directors such as Brown now know that political indifference (as opposed to public enthusiasm) to theatre in this country runs right through from local council to government, except in mat-ters of political expediency and the mouthing of platitudes. Even worse, local councils are increasingly calling the tune in policy matters. Jonathan Church, artistic director of the Birmingham Rep, declared at the conference that Labour Party councillors encouraged the shameful events surrounding Behzti for short-term political gain, while the city council as a whole, as in Leeds, showed itself to be uninterested in theatre - or indeed fiction - of any kind. Giles Croft, director of the Nottingham Playhouse, argues that the whole arm's-length principle of state funding for the arts is now under threat. Hamish Glen of the Belgrade in Coventry says that his local council has inserted conditional clauses into his artistic policy documents.
If Tony Blair and his Culture Secretary, Tessa Jowell, do not think that these are serious and seriously disturbing testimonies, they should be badgered mercilessly until they change their minds. Instead, they are probably listening to the absurd blatherings of the former journalist and "ideas generator" Charles Leadbeater, who told the conference that running a theatre should be like having a children's tea party. It should have more "attraction" and less "propulsion", he said, in a world where internet bloggers will mercifully replace newspaper critics as the theatre's sounding board and will "expand the role of creativity to the audience".
This sounds suspiciously like the artistic imperatives in television, where participation and reality shows, amateur dancing and quiz programmes have replaced any sense of public responsibility in the hierarchy for supplying an audience with properly funded creative initiatives among artists.
Nicholas Hytner, artistic director of the National Theatre, who is always good value for common sense, said that the current, extraordinary success of the National was possible only because Peter Hall had won the battle for subsidy and thus the theatre was properly funded - to the tune of £18m of Arts Council money and a whole lot of resultant commercial sponsorship.
The discrepancy in public funding between the National and the West Yorkshire Playhouse - which is on a par with other leading regional theatres in Manchester, Bristol and Sheffield - is outrageous. Vicky Featherstone, newly appointed director of the peculiar National Theatre of Scotland (no theatre, no policy, no shows, no meaning), argued unconvincingly that a thriving poverty line of small fringe and community theatres would ultimately push through to public recognition and the glory of appreciative reviews in the national press.
We have the best actors and playwrights in the world. Perhaps they will continue to prosper in a cultural and political environment that is divisive, mean-spirited and increasingly strident in its opposition on ideological grounds. But, as this disturbing conference made clear, it is going to be a long, hard struggle, and our artists and their audiences deserve the support of politicians at the highest level. Only a complete change of heart on issues of free speech and funding will be sufficient.