§ 8.45 p.m.
§ Mr. H. P. G. Channon (Southend, West)I beg to move Amendment No. 250, in page 47, line 41, after 'If', insert
'the object was acquired by the deceased or any other person within the period of three years ending with the date of the death and'.
§ Mr. Deputy Speaker (Mr. Harry Gourlay)It may also be convenient if, with this Amendment, we discuss the following Amendments: No. 251, in page 48, line 7, after 'If', insert
'the object was not acquired within the period of three years ending with the date of the death or'.1002 No. 252, in page 48, line 9, leave out 'aforesaid' and insert'of three years beginning with the date of the death'.
§ Mr. ChannonIt is accepted on both sides of the House, and has been for many years by all political parties and successive Governments, that it is not in the public interests for great British collections of pictures, furniture, books, or whatever it may be, to be broken up. Successive Governments have done their best to safeguard collections and previous Finance Acts have contained exemptions designed to achieve that end. I assume that that is still the general position on both sides of the House.
Until Budget day, wt en the Chancellor of the Exchequer made the new proposals which have resulted in Clause 33, collections of objects of national interest, as defined in the Clause, were exempted on the death of the owner from estate duty provided that the, owner complied with certain conditions, the principal condition being that the objects were not sold. It is essential that there should be such forms of exemption if there are to be any treasures left in the country. If, in spite of the exemption, the objects were later sold, duty had to be paid on them at the rate which the estate had had to bear.
It was alleged by the Chancellor that this gave rise to an anomaly and to a loophole in the estate duty law. Someone with a large estate of, say, £100,000 shortly before his death might have bought a work of art costing £80,000, which would form the principal portion of the estate. Exemption might be given, 1003 but if the object were later sold, it would bear duty only at the rate payable on the £20,000 remainder of the estate and not at the rate which would have been payable on the £100,000. The Chancellor has introduced provisions to close this loophole and no one has any objection to closing it, and in that respect I support the Chancellor.
However, in closing it he has gone too far and may do serious damage to the art market in this country. Under the new provisions, if a picture is sold within a three-year period of the date of death, the duty on the picture will be at the rate payable on the value of the picture aggregated with the estate, so that the higher level of duty becomes payable on a valuable picture as well as on the estate as a whole. Subsection (3) provides that duty on the sale after three years will be chargeable on the proceeds of the sale of the object at the rate which would have been the rate of duty on the whole estate if the object had not been originally exempted.
I hope that that is clear to the House—I hope that it is clear to me. I must ask the Minister of State whether he would be kind enough to confirm that that is the position, because there is considerable confusion about the effects of subsections (2) and (3). It would be of great assistance to people outside the House if he would spell out the meaning of these subsections in simple language. The Chancellor's proposed remedy has gone too far, he has thrown the baby out with the bath-water.
What are the executors of an estate which includes objects of art, which would properly be exempted, to do? In column 742 of the Committee proceedings the Minister of State implies that there would not be any difficulty for such executors. I have been advised by people involved in this that there may be considerable difficulty in winding-up estates containing such objects, when there may be uncertainty as to whether any of them would be sold within the three-year period. What are the executors to do to protect the interests of the estate?
This places a new burden upon genuine collectors. I am not concerned about the people who used the provisions in the past as a loophole to avoid estate duty. 1004 We are trying to safeguard genuine collectors. The effect of these Amendments would be that if an object was acquired more than three years before death it would not be subject to the provisions of Clause 33. By Amendments Nos. 251 and 252, if the objects are sold after three years from the date of death, the provisions would not apply unless the objects were acquired in the three-year period before death.
Our aims are to safeguard the genuine collector and help retain genuine collections in this country. At the same time, we want to meet the point about the loophole. As the Bill is drafted, the desire and ability to collect will be severely hit. I am convinced that the home market for pictures may suffer. This will have the inevitable effect that more of our pictures and treasures will go abroad. There will be an increased flow of treasures and pictures leaving the country, perhaps at diminished prices.
This would be very sad. In purely practical terms, too, if I am right about the effect on the London art market, it will have a serious effect on invisible exports. It will also damage the London art market which is a remarkable success story, over the past few years. I do not suggest that this damage will occur overnight but rather—over a gradual period this important and growing trade will be severely hit. I therefore recommend the Amendments on these three grounds.
First, there is the point about the executors, a very serious one, and secondly, there is the effect on our invisible exports which will be considerable if the London art market were to suffer and if the art centre of the world were to move from New York to London, as it might, unless something is done on the lines of these Amendments.
The third and perhaps most important point is the damage which will be done to genuine collections because of the diffulty of retaining them in future, the inevitable break up that may occur, and the possible export of great treasures and pictures. This would be extremely sad. I suggest that the Government, by accepting the Amendments, can still deal with the loophole which has given rise to them.
I hope that the Minister of State will consider these Amendments sympathetically. They will not result in the loss of 1005 much revenue. It will still be possible to close the loophole and, at the same time, safeguard the genuine collector. In this way a great deal of good will be done for the London art market which has had an increasing reputation over the last few years and has done such an excellent job for this country.
§ Mr. TaverneI have been asked to make clear, once again, what the charge would be under the new provisions. If a work of art is sold within three years, that work of art and the rest of the estate is taken together and the appropriate estate rate fixed. For example, if a man had a general estate worth £50,000 and works of art worth £100,000 and the works of art are sold within three years, the appropriate estate rate on both the works of art and on the general estate will be that appropriate to a total of £150,000. If the works of art are sold more than three years after death, they will be aggregated with the rest of the estate and will bear duty at the rate of £150,000, but the original estate of £50,000 will be at the estate rate appropriate to £50,000. Therefore, the hon. Member for Southend, East (Mr. Chan-non) was right in his analysis of what the Bill means.
In Committee, an Amendment, which was out of order but which was put down by the Opposition, put forward what I regarded as a reasonable alternative which we carefully considered. The alternative put forward, which was further argued on the Question, That the Clause stand part of the Bill, was that exemption should not be given in cases where works of art had been bought within three years of death. That seemed a reasonable alternative, but the disadvantage was considerable. It meant that a genuine collector who died soon after he had purchased a work of art would fail to get exemption.
The Amendment proposes that the taxpayer should have the best of both worlds. It suggests that these two tests should not be alternative, but should both be applied. Therefore, if a man lived for three years after buying a work of art his executors could claim exemption and sell it at once, or, if he had bought it just before he died, it could be sold after three years. In that event, only the extreme cases would be caught and the vast majority of cases would be ex- 1006 empted. Therefore, I do not think that the hon. Gentleman lives up to his desire to close the loopholes if both tests have to be satisfied.
The hon. Gentleman said that this was a better alternative, because the Government's test involves considerable inconvenience to executors. But we must have placed a time limit of three years on a work of art. It means that in some cases estates will not be wound up completely before the end of three years. But, in practice, this problem concerns large estates, and it it not uncommon for the winding up of such estates to take three years in any event. Even if it is not possible to wind up an estate totally in three years, there will be no difficulty in making provision, because the executor will know the maximum liability which will have to be met. Therefore, there should be no great inconvenience suffered and no practical difficulties arising.
§ 9.0 p.m.
§ Mr. W. R. Rees-Davies (Isle of Thanet)This is the economics of bedlam. Fine arts happen to be my hobby-horse. When a person dies, the executor has not the remotest idea whether the collection is worth £2 going to William Coe's in auction or £200,000 at some later occasion. Is it really to be suggested that he may be liable three years later when he divides up among the beneficiaries the various pictures to which they are entitled under the estate? Who on earth will pay three years later when, perchance, one finds that something turns out to be of considerable value?
§ Mr. TaverneIf it is after three years, the executor does not pay. If it is before three years, I suggest that in the kind of case mentioned by the hon. Member the executor would not be in the difficulty which he envisages. I would not normally call the hon. Member naive, but it is naive to suggest that the executor would have no idea that a collection worth in the region of £200,000 was valuable. In that kind of situation, the estate would obviously be large. In any event,. a considerable time would be taken in dividing it. I am not satisfied that the argument on inconvenience is made out.
More serious would be the argument advanced by the hon. Member for Southend, West (Mr. Channon), and adumbrated also in Committee, if it were valid, 1007 that the world standing of London as an art centre would be damaged as a result of the Clause. I cannot see that that could possibly arise. The Clause is aimed only at the purchase of works of art as an estate duty avoidance device. Works of art will remain an extremely attractive investment, provided that they are kept for three years after death, because they will still be left out of account in fixing the estate rate payable on the rest of the estate. It will, therefore, be of benefit to the immediate heirs and not merely to succeeding generations.
Secondly, if one has regard to the total art market and the problem involved here, it may lead to considerable avoidance of duty but the number of purchases for avoidance purposes are a tiny proportion of the total number of purchases. It cannot be seriously alleged that the art market as a whole will suffer, particularly when the advantage in the bulk of the cases will exist because the difference between the burden which an estate must bear if there is only partial exemption for works of art sold after three years and the burden which they would otherwise bear is still very considerable.
§ Mr. Patrick JenkinThe Minister of State will recognise that he has—I mean it in no unkind sense—trotted out the same arguments as he gave in Committee, which I found unconvincing then and which on a rehash are even more unconvincing. The hon. and learned Gentleman's first argument was that our Amendments would create hardship in the case of the genuine collector who died within three years of adding to his collection.
§ Mr. TaverneI did not say that these Amendments created the hardship. It was the previous Amendments which would have done so. The trouble with the present Amendment is that avoidance is wide open.
§ Mr. JenkinThe hon. and learned Gentleman advanced the argument, however, in his speech. When somebody dies in unexpected circumstances, there is likely to be difficulty with estate duty. I would not think that the hon. and learned Gentleman's argument carried weight.
The Minister rather pooh-poohed the question of inconvenience to executors. I have made inquiries about this to find 1008 whether the case which I put in Committee was not as strong as I thought it was, and my impressions have been entirely reinforced. It has been suggested that the difficulties can be avoided by executors going to the Estate Duty Office and getting an agreed valuation of the picture, which, it must be remembered, is not necessarily within their control. The picture may have been given to a donee or somebody else who will be responsible for the estate duty on it. It is notoriously difficult to value a work of art unless there is the evidence of the auction or sale to go by. My hon. Friend the Member for Southend, West (Mr. Channon) was reminding me, when the Minister of State was speaking, about the Duccio. That may be an extreme case, but we all read regularly in the Press about works of art, the value of which had not been appreciated and which had realised sums which were either enormously greater than anticipated, or smaller. If the value of the work of art is agreed with the Inland Revenue, and if it is sold within a three year period after death, under the Bill as it stands, estate duty will have to be paid on a much larger sum than would otherwise have been the case. One could imagine in an extreme case—and perhaps we should not put too much weight on this—that the estate might be made insolvent if there were a 70 or 80 per cent. rate of estate duty. The suggestion that the executors should agree valuation with the Inland Revenue is an extremely doubtful safeguard.
We are left with the difficulty that the executors cannot distribute the estate until they are satisfied that the work of art will not be sold or, if it is sold, that they know what is the value for estate duty purposes. This detracts substantially from the advantage of owning a collection of pictures.
It will make the art market in this country less buoyant and, without a buoyant home market for works of art, eventually prices will drop. Those who bring their works of art to London to sell will find that the market is not as good as it was and will move to other markets—as my hon. Friend suggested, to New York—and invisible earnings will be lost. This will not result in fewer pictures going abroad, but in pictures going abroad on a lower realisation, and the nation will be worse off.
1009 Nothing that the Minister of State has said, either in Committee or in the House, has convinced me that the Government solution of the problem, which we all recognise, will not be harmful to the art market of this country, damaging to the interests of genuine collectors and the source of severe difficulties for executors of estates which contain such works. I believe that our solution provides a workable
§ system, and that the Government would have been wise to accept it. I hope my right hon. and hon. Friends will agree that we are justified in pressing the Amendment to a Division.
§ Question put, That the Amendment be made:—
§ The House divided: Ayes 135, Noes 196.
1011| Division No. 339.] | AYES | [9.8 p.m. |
| Atkins, Humphrey (M't'n & M'd'n) | Grieve, Percy | Page, Graham (Crosby) |
| Baker, Kenneth (Acton) | Griffiths, Eldon (Bury St. Edmunds) | Page, John (Harrow, W.) |
| Balniel, Lord | Gurden, Harold | Peel, John |
| Bell, Ronald | Hall, John (Wycombe) | Percival, Ian |
| Berry, Hn. Anthony | Hall-Davis, A. G. F. | Pike, Miss Mervyn |
| Bessell, Peter | Harris, Frederic (Croydon, N.W.) | Pink, R. Bonner |
| Biffen, John | Harvey, Sir Arthur Vere | Powell, Rt. Hn. J. Enoch |
| Biggs-Davison, John | Hastings, Stephen | Prior, J. M. L, |
| Birch, Rt. Hn. Nigel | Heseltine, Michael | Pym, Francis |
| Black, Sir Cyril | Higgins, Terence L. | Quennell, Miss J. M. |
| Boardman, Tom (Leicester, S.W.) | Hiley, Joseph | Rees-Davies, W. R. |
| Body, Richard | Hill, J. E. B. | Ridsdale, Julian |
| Boyd-Carpenter, Rt. Hn, John | Holland, Philip | Rippon, Rt. Hn. Geoffrey |
| Boyle, Rt. Hn. Sir Edward | Hordern, Peter | Russell, Sir Ronald |
| Brinton, Sir Tatton | Hornby, Richard | Scott, Nicholas |
| Bullus, Sir Eric | Hunt, John | Shaw, Michael (Sc'b'gh & Whitby) |
| Burden, F. A. | Iremonger, T. L. | Silvester, Frederick |
| Campbell, B. (Oldham, W.) | Jenkin, Patrick (Woodford) | Sinclair, Sir George |
| Campbell, Gordon (Moray & Nairn) | Jones, Arthur (Northants, S.) | Smith, John (London & W'minster) |
| Carlisle, Mark | Joseph, Rt. Hn. Sir Keith | Speed, Keith |
| Channon, H. P. G. | Kershaw, Anthony | Steel, David (Roxburgh) |
| Chichester-Clark, R. | Kimball, Marcus | Taylor, Sir Charles (Eastbourne) |
| Clark, Henry | King, Evelyn (Dorset, S.) | Thatcher, Mrs. Margaret |
| Cooke, Robert | Kirk, Peter | Turton, Rt. Hn. R. H. |
| Cooper-Key, Sir Neill | Knight, Mrs. Jill | van Straubenzee, W. R. |
| Costain, A. P. | Lawler, Wallace | Vickers, Dame Joan |
| Crouch, David | Legge-Bourke, Sir Harry | Waddington, David |
| Crowder, F. P. | Lewis, Kenneth (Rutland) | Wainwright, Richard (Colne Valley) |
| Dance, James | Lubbock, Eric | Walker, Peter (Worcester) |
| d'Avigdor-Goldsmid, Sir Henry | ||
| Dean, Paul | McAdden, Sir Stephen | Walker-Smith, Rt. Hn. Sir Derek |
| Digby, Simon Wingfield | MacArthur, Ian | Walters, Dennis |
| Dodds-Parker, Douglas | Macleod, Rt. Hn. Iain | Ward, Dame Irene |
| Doughty, Charles | McMaster, Stanley | Weatherill, Bernard |
| Drayson, G. B. | McNair-Wilson, Michael | Wells, John (Maidstone) |
| Eden, Sir John | McNair-Wilson, Patrick (NewForest) | Whitelaw, Rt. Hn. William |
| Elliot, Capt. Walter (Carshalton) | Maddan, Martin | Wiggin, A. W. |
| Elliott, R.W.(N'c'tle-upon-Tyne, N.) | Maude, Angus | Williams, Donald (Dudley) |
| Emery, Peter | Mawby, Ray | Wilson, Geoffrey (Truro) |
| Errington, Sir Eric | Mitchell, David (Basingstoke) | Wolrige-Gordon, Patrick |
| Foster, Sir John | More, Jasper | Wood, Rt. Hn. Richard |
| Gilmour, Ian (Norfolk, C.) | Morrison, Charles (Devizes) | Wright, Esmond |
| Glover, Sir Douglas | Murton, Oscar | Younger, Hn. George |
| Goodhart, Philip | Nabarro, Sir Gerald | |
| Goodhew, Victor | Nott, John | TELLERS FOR THE AYES: |
| Grant, Anthony | Orr-Swing, Sir Ian | Mr. Reginald Eyre and Mr. Hector Munro. |
| Gresham Cooke, R. | Osborne, Sir Cyril (Louth) | |
| NOES | ||
| Abse, Leo | Boston, Terence | Crossman, Rt. Hn. Richard |
| Albu, Austen | Boyden, James | Dalyell, Tam |
| Archer, Peter | Bradley, Tom | Davies, G. Elfed (Rhondda, E.) |
| Armstrong, Ernest | Bray, Dr. Jeremy | Davies, Ifor (Cower) |
| Ashton, Joe (Basssetlaw) | Brown, Bob (N'c'tle-upon-Tyne, W.) | Delargy, Hugh |
| Atkins, Ronald (Preston, N.) | Buchan, Norman | Dewar, Donald |
| Atkinson, Norman (Tottenham) | Buchanan, Richard (G'gow, Sp'burn) | Diamond, Rt. Hn. John |
| Bacon, Rt. Hn. Alice | Butler, Herbert (Hackney, C.) | Dickens, James |
| Barnes, Michael | Butler, Mrs. Joyce (Wood Green) | Driberg, Tom |
| Beaney, Alan | Caliaghan, Rt. Hn. James | Dunnett, Jack |
| Bidwell, Sydney | Cant, R. B. | Dunwoody, Mrs. Gwyneth (Exeter) |
| Binns, John | Carmichael, Neil | Dunwoody, Dr. John (F'th & C'b'e) |
| Bishop, E. S. | Castle, Rt. Hn. Barbara | Eadie, Alex |
| Blenkinsop, Arthur | Concannon, J. D. | Edelman, Maurice |
| Booth, Albert | Craddock, George (Bradford, S.) | Edwards, Robert (Bilston) |
| Edwards, William (Merioneth) | Kelley, Richard | Parker, John (Dagenham) |
| Ellis, John | Kenyon, Clifford | Parkyn, Brian (Bedford) |
| English, Michael | Kerr, Russell (Feltham) | Pavitt, Laurence |
| Evans, Fred (Caerphilly) | Lawson, George | Pentland, Norman |
| Evans, Gwynfor (C'marthen) | Lee, Rt. Hn. Frederick (Newton) | Perry, Ernest G. (Battersea, S.) |
| Evans, Ioan L. (Birm'h'm, Yardley) | Lee, Rt. Hn. Jennie (Cannock) | Perry, George H. (Nottingham, S.) |
| Faulds, Andrew | Lee, John (Reading) | Prentice, Rt. Hn. Reg |
| Fernyhough, E. | Lever, Rt. Hn. Harold (Cheetham) | Price, Thomas (Westhoughton) |
| Fletcher, Raymond (Ilkeston) | Lewis, Arthur (W. Ham, N.) | Price, William (Rugby) |
| Fletcher, Ted (Darlington) | Lomas, Kenneth | Probert, Arthur |
| Foley, Maurice | Loughlin, Charles | Randall, Harry |
| Ford, Ben | Luard, Evan | Rankin, John |
| Forrester, John | Lyon, Alexander W. (York) | Rees, Merlyn |
| Fowler, Gerry | McCann, John | Richard, Ivor |
| Fraser, John (Norwood) | MacColl, James | Robinson, Rt. Hn. Kenneth (St. P'c'as) |
| Freeson, Reginald | Macdonald, A. H. | Rodgers, William (Stockton) |
| Gardner, Tony | McGuire, Michael | Roebuck, Roy |
| Ginsburg, David | Mackenzie, Gregor (Rutherglen) | Rogers, George (Kensington, N.) |
| Gordon Walker, Rt. Hn. P. C. | Mackie, John | Rose, Paul |
| Gregory, Arnold | Mackintosh, John P. | Ross, Rt. Hn. William |
| Grey, Charles (Durham) | McNamara, J. Kevin | Rowlands, E. |
| Griffiths, David (Rother Valley) | Mallalieu, J.P.W.(Huddersfield, E.) | Ryan, John |
| Griffiths, Eddie (Brightside) | Manuel, Archie | Shaw, Arnold (Ilford, S.) |
| Gunter, Rt. Hn. R. J. | Marks, Kenneth | Sheldon, Robert |
| Hamilton, James (Bothwell) | Marquand, David | Shore, Rt. Hn. Peter (Stepney) |
| Hamling, William | Marsh, Rt. Hn. Richard | Short, Rt. Hn. Edward (N'c'tle-u-Tyne) |
| Hannan, William | Mason, Rt. Hn. Roy | Silverman, Julius |
| Harrison, Walter (Wakefield) | Mayhew, Christopher | Skeffington, Arthur |
| Hart, Rt. Hn. Judith | Mellish, Rt. Hn. Robert | Spriggs, Leslie |
| Hazell, Bert | Mendelson, John | Stonehouse, Rt. Hn. John |
| Healey, Rt. Hn. Denis | Mikardo, Ian | Summerskill, Hn. Dr. Shirley |
| Heffer, Eric S. | Millan, Bruce | Taveme, Dick |
| Herbison, Rt. Hn. Margaret | Miller, Dr. M. S. | Thomas, Rt. Hn. George |
| Hilton, W. S. | Milne, Edward (Blyth) | Thomson, Rt. Hn. George |
| Hobden, Dennis | Mitchell, R. C. (S'th'pton, Test) | Varley, Eric G. |
| Hooley, Frank | Molloy, William | Wainwright, Edwin (Dearne Valley) |
| Houghton, Rt. Hn. Douglas | Moonman, Eric | Watkins, David (Consett) |
| Howell, Denis (Small Heath) | Morgan, Elystan (Cardiganshire) | Weitzman, David |
| Howie, W. | Morris, Alfred (Wythenshawe) | Wellbeloved, James |
| Hughes, Rt. Hn. Cledwyn (Anglesey) | Morris, Charles R. (Openshaw) | Wells, William (Walsall, N.) |
| Hughes, Hector (Aberdeen, N.) | Morris, John (Aberavon) | Whitaker, Ben |
| Hunter, Adam | Moyle, Roland | Willey, Rt. Hn. Frederick |
| Hynd, John | Murray, Albert | Williams, Alan (Swansea, W.) |
| Irvine, Sir Arthur (Edge Hill) | Newens, Stan | Williams, Clifford (Abertillery) |
| Jackson, Colin (B'h'se & Spenb'gh) | O'Malley, Brian | Wilson, Rt. Hn. Harold (Huyton) |
| Jackson, Peter M. (High Peak) | Oram, Albert E. | Wilson, William (Coventry, S.) |
| Jenkins, Rt. Hn. Roy (Stechford) | Orme, Stanley | Winnick, David |
| Johnson, Carol (Lewisham, S.) | Owen, Will (Morpeth) | |
| Johnson, James (K'ston-on-Hull, W.) | Padley, Walter | TELLERS FOR THE NOES: |
| Jones, Dan (Burnley) | Page, Derek (King's Lynn) | Mr. Joseph Harper and Mr. Neil McBride. |
| Jones, J. Idwal (Wrexham) | Palmer, Arthur | |
| Jones, T. Alec (Rhondda, West) | Pannell, Rt. Hn. Charles |