THIS is, if you hadn't heard, the Year of Creative Scotland.

It is also the year of the Cultural Olympiad. It is the year that began with David Cameron demanding a more "dynamic and entrepreneurial" attitude from the British film industry. This is the year, with January not yet ended, that sees novelist Ian Rankin calling for tax breaks for new writers.

Some of these people would probably object to being seen in the same paragraph as some of the other people. The struggling writers would certainly struggle a bit more if they had to work out what the Year of Creative Scotland 2012 had to offer for their art and craft.

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Dynamic Dave, the Prime Minister, would probably wince, meanwhile, at the thought of tax exemptions for anyone who isn't a banker. All concerned would probably whistle – a cultured tune, no doubt – at the cost of the Olympiad, the artistic counterweight to the running and jumping. It's £97 million, since you ask.

In times of stringency, two old questions are acquiring a new urgency. First, how do we fund the arts? Second, if no answer is forthcoming to the first inquiry, why do we fund the arts? On the one hand, according to the Coalition Government, there is no money for anything. On the other hand, thanks to circumstances and the political belief that art must be justified, there is cash floating around. Feast and famine are combined.

Take the Year of Creative Scotland. The organisation that shares the name, born of the old Scottish Arts Council and other bodies, is spending – sorry, "investing" – £6.5m of its Lottery money on "an exciting programme celebrating our world-class events, festivals, culture and heritage", to put "Scotland's creativity in the global spotlight with a focus on cultural tourism and developing our creative sector and events industry".

In some manner, this effort is supposed to "embrace London 2012 and celebrate Glasgow 2014" – sporting events, as you'll recall – while linking the 2009 Homecoming with the 2014 version. What it's not supposed to do, as best as I can tell, is to make life easier for working artists. Creative Scotland has had its "core" budget cut by 2%; local authorities are freezing or withdrawing funding; and Lottery cash is being sucked into the pit of the Olympics/Olympiad. Meanwhile, our main arts body is devoting itself to tourism.

But why not? What do the arts deserve if they can't earn a living? Cameron's pre-emptive remarks on Chris Smith's independent report, The Future Of British Film – suggesting funding should be directed towards "mainstream" commercial films such as The King's Speech, rather than "art house" cinema – were much mocked, but perfectly valid. Why should film-makers expect subsidy if they can't sell tickets? You could level the same question at Rankin and his plea on behalf of unknown writers.

It isn't a new plea. Authors on this island have been emerald-green with envy towards their Irish counterparts for 40 years. Until recently, the artists' tax exemption was applied to the first €125,000 of a creator's income in the republic. Even after being cut amid Ireland's financial crisis, it still allows tax-free earnings of €40,000 a year. At the time of writing, that's roughly an untaxed £34,000 annually.

With 75% of authors in Britain earning less than £20,000 a year, and with publishers' advances beyond derisory for the vast majority, you can see Rankin's point. Nor is there much in the way of public subsidy as an alternative for writers in Scotland foolish enough to want to eat. So why not follow the Irish example?

It may be the wrong question. According to the Irish Writers Union, more than two-thirds of those who qualify for the exemption earn less than €20,000 a year. Were you of Cameron's disposition, you might draw a simple conclusion: lacking a market and a proper entrepreneurial spirit, these writers have failed to sell many books. If there should be no rewards for failure in banking, why should the taxpayer stump up for failures in literature?

That's harsh. But with more than one million young people in Britain looking for work, harsh responses might be inevitable. To resort to a rhetorical cliche: how many nurses would fancy, and deserve, a tax-free £34,000 a year?

It amounts to an effective higher-rate income for most employees. If writers cannot earn that sort of sum, why should they be aided when so many others are struggling?

Still, let's not be petty. After all, those behind the Cultural Olympiad and the "London 2012 Festival" are blowing many times the annual cost to the Irish Republic of artists' tax exemption. How do you burn through £97m? In part by paying people to write tosh about "inspiring creativity in all forms of art and culture" as a side-show to a £9.3 billion sporting event and its spurious "legacy". This is art as advertising.

Cameron's brow might be lower than his morals, meanwhile, but his off-the-cuff prescription for the film industry is not entirely inane. The Lottery already puts £27m of "support" into film; that figure will rise to £40m by 2014. Who is to say that the investment is worthwhile? Film critics and film festivals, or the paying public? Who decides whether £27m has been well spent, and by what criterion?

The arts depend sales, subsidy, or patronage. Without commercial success, the less populist arts therefore depend on the public purse (Lottery included) or private wealth. Few artists believe they are entitled to a share of the latter; most in Britain still think they have a right to the former. The trouble is, neither comes free of strings.

Culture is a good thing, an essential thing, in its own right and for its own sake. But it is a rare politician with control of arts money who can see beyond "economic benefits", "tourism potential", national "image", or fallacious claims over job creation. It is a rare commercial benefactor, meanwhile, whose altruism is spotless.

John Burnside won the TS Eliot poetry prize recently after fellow poets, Alice Oswald and John Kinsella, withdrew in protest against the sponsor, "private investment company" Aurum. Quite right, too. The pair detected a contradiction between art and the aims of high finance.

Poets are used to penury. In the other arts, nothing happens without money, yet in Britain, currently, that stuff is in short supply. What then? Either we say that culture and cultural workers must be protected at all costs, a tricky proposition when 2.7 million are unemployed, or allow the arts to be turned into another brand fit for "marketing". Neither possibility reeks of moral clarity.

First it was the Lottery, the device that would "never" – said John Major – replace core funding. Then came private sponsors, people who saw the arts as cheap advertising and a route to a knighthood. Now culture is becoming celebratory propaganda by another name.

At least when you starve in a garret you keep your self-respect.