ACCEPTANCE IN SATISFACTION OF ESTATE DUTY OF CERTAIN OBJECTS AND COLLECTIONS (Hansard, 11 April 1973)

§ Dr. Gilbert
I beg to move Amendment No. 11, in page 30, line 8, after 'manuscript', insert 'or'.

Mr. Deputy Speaker
With this amendment the Committee is to take Amendment No. 12, in page 30, line 9, leave out 'or other thing '.

§ Dr. Gilbert
The Opposition have put down a series of amendments to Clause 38, and I should emphasise that none of them is intended to be hostile to the spirit of the clause. Most of them are intended to be no more than probing amendments. Where they go a little further than that they are intended, if we have drafted them adequately—we are always willing to take instruction on such matters—to widen, if anything, the provisions of the clause. The Opposition welcome the general principle of the clause. I wish to make that clear beyond peradventure.
Clause 38 refers to Section 34(1) of the Finance Act 1956, but it has some rather significant changes in language which no doubt will be referred to by hon. Members opposite in connection with amendments standing in their names. Section 34(1) gives the Commissioners of Inland Revenue power to accept. any work of art which the Treasury are satisfied is pre-eminent for its aesthetic merit or historical value ". It confines the powers of the commissioners, in other words, to a work of art, without definining precisely what a work of art shall be, whereas Clause 38(a) specifies any picture, print, book, manuscript, scientific object or other things ". What we want to know is what the Treasury has in mind by "other thing". The clause continues by defining these articles as being of national, scientific or historic interest. These three categories are intended to be complementary and the "thing" does not have to satisfy all three criteria in order to be acceptable to the Inland 1456 Revenue. In other words, it does not have to be national, scientific and historic, but one of the three. It means that the Treasury will have power, as I read the provision, to accept any "thing" of historic interest.
That opens up a large range. I can think of many things of historic interest. The provision does not say that they have to be of value or that they have to have great pecuniary value. It merely says that anything of historic interest can be accepted. I accept that, but we would like guidance.
One does not want to be frivolous, but one could widen this to sport—for example, Sir Stanley Matthew's football boots, or the ball with which Jim Laker took 10 wickets in a Test match. These would be of great historic interest.
One should be careful also in considering the clause to recognise that the skill and passion going into collecting things is not the exclusive prerogative of those who have great sums of money at their disposal. People of modest means collect matchboxes, cigarette cards and so on, which can turn out in the end, through the expenditure of modest sums, to be collections of great historic value.
We want to be clear that in the definition which the Treasury has in mind for historic things it will not be exclusively concerned with collections of the very rich aesthete. We want to know that the ordinary man's collection of historic interest will also be considered under the clause. When we have had guidance on that point, we would like to know to whom the Treasury intend to turn for guidance if it interprets the clause as widely as I have suggested it might be intepreted and as widely as I hope it will be.

§ Mr. Nott
I would be happy to explain to the Committee at some length the full underlying reason for Clause 38, but it may be more convenient if I answer the specific question put by the hon. Member for Dudley (Dr. Gilbert), since it is late, and then if a fuller explanation is required I will naturally give it.
Amendment No. 11 and Amendment No. 12 concern the expression "or other thing". What the hon. Gentleman said 1457 is more or less correct. The power to accept objects in lieu of estate duty is an important part of the system which has been used by all Governments since 1956 to keep outstanding parts of the national heritage in this country. "Other things" could cover such items as costumes or photographs or domestic items, which might be of outstanding historic interest and represent major additions to the great national or regional collections. It may well be, to take the hon. Gentleman's own example, that Stanley Matthews's football boots could in future years be considered to be in that category. I cannot commit myself on that, and no one must take that statement as constituting a promise.
It is important to draw the new powers wide enough to cover items which do not fall tidily within the other categories. The restriction involved in acceptance of the amendment would be an unfortunate limitation of the power to acquire outstanding objects.
As has been the case for some time, the decision whether items are pre-eminent lies in the hands of the Treasury, which must be satisfied that they pass the test of pre-eminence. The standard is high, and the final decision is taken by Treasury Ministers. The Treasury first refers each case to its own experts, drawn from the great national institutions.

§ Dr. Gilbert
Who is the expert on football boots?

§ Mr. Nott
We should have to turn to an expert in one of our great national institutions to advise us whether the boots were, in his opinion, items which would be a pre-eminent addition to a public collection. That is the test. A preeminent addition could easily be a collection of matchboxes or some famous football boots, but I could not comment on individual items.
I hope that I have explained the position to the hon. Gentleman, and that he will seek to withdraw the amendment.

§ Dr. Gilbert
I am happy to have the Minister's assurance. He may find himself collecting experts in rather more exotic fields than he has expected, but if that contributes to the education of the Treasury I can only be the happier for it.
1458 I beg to ask leave to withdraw the Amendment.

§ Mr. Cormack
I beg to move Amendment No. 15, in page 30, line 8, after 'manuscript', insert "work of art".

§ The First Deputy Chairman (Miss Harvie Anderson)
With this Amendment we may discuss Amendment No. 16, in line 10, leave out 'or historic' and insert 'historic or artistic'.
Amendment No. 18, in line 12, at end insert 'works of art' and Amendment No. 20, in line 15, leave out 'or historic' and insert 'historic or artistic'.

§ Mr. Cormack
I should like to move the amendment, with which we are discussing other amendments tabled by my hon. Friend the Member for Ipswich (Mr. Money) and myself, in the same spirit as the hon. Member for Dudley (Dr. Gilbert) moved his amendment. We are in no way seeking to carp or be churlish, because we appreciate what the Government have done in recent months particularly and in two Budgets to assist those who are concerned about the nation's treasures and their permanent place in this country.
There has been a welcome broadening of the definition of works of art which may be accepted in lieu of duty. This was announced in a written reply on 20th June. My hon. Friend and I are delighted at the reply he received some weeks ago to the effect that the Treasury is preparing a statement of the ways in which advantage can be taken of the laws and administrative practices which encourage the channelling of works of art to public museums and institutions. When it comes, it will be invaluable to owners, executors and legal advisers and to the fine art trade, which is so often called in to advise on policy and negotiate on values.
The proviso in the "in lieu of duty" regulations whereby if an individual item is worth less than 25 per cent. of the total annual purchase grant of the museum that museum cannot receive it in lieu of duty but has to pay for it is more debatable and gives cause for concern. I would welcome a comment from my hon. Friend on this point. No doubt 1459 the condition was inserted in a laudable attempt to help provincial museums, but even they could be caught by this provision.
I think my hon. Friend will agree chat much remains to be done. We sincerely hope that the Government will continue along the lines they have set themselves, because many of our lesser treasures which may not necessarily be works of international importance but are of national significance are in danger of leaving these shores, and the recent figures of Japanese exports underline this danger.
The amendments arise from a certain puzzlement on the part of my hon. Friend and myself. When we studied the clause it was obvious that the phraseology of the categories of object and of the types of national interest is derived from Section 4 of the Finance Act 1930, but there is the inexplicable and not easily defensible omission of "works of art" among the objects and of "artistic" among the types of national interest. These defects could easily be rectified by acceptance of the amendments, and my hon. Friend and I sincerely hope that the Minister will be able to give at least some satisfaction on these scores. If he could make a helpful reference to Ihe effect that the Government recognise the problem created by the 25 per cent. regulation we should be doubly grateful.

§ Mr. Dalyell
Under Amendment No. 18 I think it is in order for me to raise the question of the difficulties of the art trade in relation to VAT.
I refer to correspondence with the Financial Secretary on 18th August 1972, and to a letter from Mr. Hugh Leggatt which appeared in The Times of 21st March 1973 in which he says: Lord Eccles has added to the confusion surrounding value added tax on works of art. He said in the House of Lords (Hansard March 15, col. 513) 'when a museum buys an object from a dealer the tax will be approximately 1 per cent. on the price; that is to say, 10 per cent. on the dealer's margin of 10 per cent.' This is incorrect, as an art dealer's profit margin is variable "—

§ The First Deputy Chairman
Order. I think that the hon. Gentleman perhaps himself had doubts of the relevance of what he is saying.

§ Mr. Dalyell
In candour I must admit, yes. Equally in candour I do not see 1460 where else in the Bill I can raise this. Much more to the point, the excellent Clerk, Mr. Mackenzie, upon whom we all depend, with all his ingenuity, could not stretch that far. I am always one who obeys the Chair and I will not press the matter too far.

§ Mr. Ernie Money (Ipswich)
I warmly support my hon. Friend the Member for Cannock (Mr. Cormack). As he rightly said, the Finance Act 1956 marked a preliminary breakthrough in this respect. It was concerned with executors dealing with a large estate and with certain works of art of major public importance. That legislation was not concerned with destinations.
In the welcome announcement of 30th June the Treasury very much widened the scope of this scheme, giving weight. I think, to some of the remarks which have been made on this subject as recently as 15th March in another place —[Interruption]—by the Paymaster General—

§ The First Deputy Chairman
Order.

§ Mr. Money
I hesitate to interrupt the private conversation of the Opposition Front Bench.

§ Mr. Ian Mikardo (Poplar)
I apologise.

§ Mr. Money
I am most grateful to the hon. Gentleman. It is a nice change.
On that occasion the Paymaster-General said: The inflation, if that is the right word, has escalated in the last three or four years at such a rate that it is unreasonable to expect any Government to increase the grant for acquisitions to the same extent. Here I pay tribute to the extent to which the Government have substantialy raised the acquisition grants, for both the major national and the provincial museums. The Paymaster-General went on: Therefore we have to be more, and not less, selective in the use of the funds available, and each case must be judged on its merits and according to the financial circumstances. Early in the same debate the noble Lord said: we have been quietly improving the benefits to a British owner who gives, sells or bequeaths some work of national importance to a public collection or offers it in lieu of estate duty. The improvements that we have made are in the nature of a deliberate reply to the United States tax reliefs which 1461 we think Would not be suitable in this country. The Finance Act of 1972, as noble Lords have already mentioned, made changes relating to cash gifts and bequests to national collections and arts charities. The Government also broadened the standards for acceptance of works in lieu of duty."—[OFFICIAL REPORT, House of Lords, 15th March 1973; Vol. 340, c. 510–11.] It is against that background that we are slightly puzzled—when the Treasury is in a giving mood, which is received most gratefully by all of us concerned with the possible loss of works of art and the prominence of our great national heritage—that it now feels it cannot give way, to tidy the whole thing up, on what has been the major factor in the relationship between the collector and the destination of the collection—namely, the desire which that collector has to see specific works of art go to particular collections after his death in accordance with the scheme without penalising those collections with the purchase grant. The amount that would come back to the Treasury with the 25 per cent. caveat would be minimal. The amount it would save the nation in terms of works of national importance being safeguarded would be immense.

§ Mr. Nott
I thank my hon. Friends the Members for Cannock (Mr. Cormack) and Ipswich (Mr. Money) and the hon. Member for West Lothian (Mr. Dalyell) for the pleasing remarks they have made about the clause. My hon. Friend the Member for Cannock commented on the explanatory note which is being prepared. I am glad to tell him that this is at an advanced stage and a draft has been sent to the reviewing committee of the Standing Commission on Museums and Galleries. There will be consultations on this draft.
Both my hon. Friends then referred to the change that we made last year, and we debated it at some length. I am aware that there has been a little disquiet on the part of the national institutions about the change that we made. But I feel, and I felt last year, that there were good grounds for encouraging a wider distribution of works of art round our provincial museums and galleries. As my hon. Friends know, that was the purpose behind the change.

§ Mr. Money
My hon. Friend is aware that it was the director of one of our great provincial galleries in the city of Birmingham who said specifically about this concession that the works offered in lieu go the rounds of the national institutions first, and then the country cousins are invited to the feast afterwards if there is anything left.

§ Mr. Nott
That is a useful point. The system that we devised can be criticised. It is possible that we might have devised an alternative method. But our aim was to try to ensure first that we did not deny to a great national collection an important work of art, and secondly that we made it more possible for the provincial galleries to receive works of art which were likely to improve their own collections for the benefit of the public.
As for the 25 per cent. rule, I know that my hon. Friends realise the result of this test. Taking the National Gallery as an example, its annual purchase grant is £480,000. If it were allocated a work of art, a group or a collection costing the National Land Fund £121,000, it would not have to reimburse the fund. If the value was more than 25 per cent. of its annual purchase grant, it would not have to reimburse the land fund. If it were less, the amount would have to be found out of the allocation to that national institution.
I feel that it is not unreasonable that these great national institutions, with their grants, should be asked to find sums out of their own allocations where they do not form a very major proportion of their total annual allocations.

§ Mr. Cormack
Obviously one can go some way with my hon. Friend, but, in the case of the National Gallery, most of the really important pictures it is likely to have the chance to acquire will fall somewhere in the region of £120,000 in any event, so the problem probably does not arise. But if one considers the National Portrait Gallery and realises that it is still possible to buy a very good portrait of some worthy not represented in the gallery—one thinks of the Wilkie Collins sold yesterday—for £1,000 or £1,500, surely these are the institutions which could be caught by this 25 per cent. provision. Does not it need a little further thought?

§ Mr. Nott
I appreciate my hon. Friend's point. But there has to be some conflict, given the objective of distributing these works of art more widely, between the National Portrait Gallery, say, which is anxious to acquire for itself a specific work of art and a provincial gallery which would also like to receive it.
In the last resort, this comes down to the allocation of funds which each gallery receives each year. I am afraid that on that I cannot go any further than I have already. Clearly the Government have a reasonably good record in this regard. Certainly I take note of the point that my hon. Friend the Member for Cannock makes about the 25 per cent. rule. We are aware of his views and those of some individuals in the great national institutions on this point, although this whole matter is not strictly within the terms of the amendment or those of the clause. In view of that, perhaps I ought to come to the matters which we are meant to be debating.

§ Mr. Dalyell
I applaud the offer to help the provincial galleries. It is all very well to talk of the allocation, but may I ask whether it is appreciated that the allocation of the Scottish National Gallery, for example, is committed for the next two to three years?

§ Mr. Nott
That is a wider point. It is a question of the sums which are allocated to particular galleries. I take the point that the hon. Gentleman would like the annual allocations to be greater. I have noted the point. I cannot go further on it tonight.
The Government have no policy objections to Amendments Nos. 15 and 16. The corresponding amendments to the second part of Clause 38 are acceptable. The objection is that the amendments do not add to the existing powers contained in Section 34 of the Finance Act 1956 under which the Government can accept any work of art which the Treasury are satisfied is pre-eminent for its aesthetic merit or historical value'. The phrase "aesthetic merit" is equivalent to the word "artistic" proposed in Amendment No. 16. The phrase "work of art" is already in the Finance Act 1956 which is not modified by Clause 38. Therefore, we have no policy objections to the amendments. However, I assure my hon. Friend the 1464 Member for Cannock that they are not necessary as they are already covered by legislation.
The Government are prepared to accept Amendments Nos. 18 and 20 which seek to ensure that the powers to accept collections are exactly in line with the categories of object which can be exempted from estate duty under the Finance Act 1930. The addition of "works of art" will not add significantly to the power in the clause since the words "or other things" would cover items such as sculpture which would not come under other artistic categories such as pictures. The word "artistic" is acceptable to ensure that there is a corresponding reference in the power to accept collections to the "aesthetic merit" provision for individual works of art. If at the appropriate stage my hon. Friend will formally move Amendments Nos. 18 and 20 the Government will be happy to accept them.

§ Mr. Cormack
I thank my hon. Friend for his extremely helpful reply. In view of what he has said, I beg to ask leave to withdraw the amendment.

§ Dr. Gilbert
I beg to move Amendment No. 13, in page 30, line 10, leave out 'national'.
This is rather more than a probing amendment. It seeks to remove what appears at first sight to be a constraint in the wording of the clause as it stands. The clause provides that the Commissioners of Inland Revenue may accept any object which the Treasury are satisfied is preeminent for its national, scientific or historic interest". The wording of the clause implies a distinction between something that is of national interest and something that is of historic interest. In other words, that is why the word "or" is there, rather than "and". It implies three distinct categories of criteria, and therefore an item could be of national interest without being of historic interest.
There could be certain items which are of neither historic nor national interest but which could be of great regional or local interest and be suitable for inclusion in the types of goods with which 1465 the clause is concerned. I thought that the Minister touched on this in his reply to the first amendment when he referred to items of national or regional interest, but there is nothing in the clause about something being of regional interest, and the amendment is intended to remove what appears to be a constraint.
Things might not be of historic interest in the sense that they are not 100 years old, but they could be of historic interest at some time in the future, and they could be of great local or regional interest. Perhaps I may give an example from my constituency where the Black Country Museum has just been set up. Many items are being contributed to the museum. Some items are of historic interest in a sense, but they are not particularly old some having been produced since the turn of the century.
I have in mind tramways, old trams, early canal barges, chain-making equipment, locomotives, and so on. Locomotives are often themselves of regional interest. There are all sorts of items which are of great regional interest but not of any national interest. One could not say that they will have historic interest, though I hope that they will be caught under that provision. It is important to identify and preserve these things now, because they might be of historic interest in the future.
That is the sole purpose of the amendment, and I hope that if the Minister cannot accept it he will give a clear assurance along the lines that we are seeking. If the Minister cannot accept the amendment, perhaps he will consider inserting "regional or local" as alternatives. I think that I have made clear the sense of the amendment.

§ Mr. Nott
I think that I can satisfy the hon. Gentleman, because our objection to leaving out the word "national" is that to do so would narrow the position. I am sure that the hon. Gentleman is concerned to keep the provision as wide as possible.

§ Dr. Gilbert
Yes.

§ Mr. Nott
We feel that the omission of "national" from the clause would mean that some items would be exempted from estate duty under 1466 the "national" criterion, but would not then be eligible for acceptance in lieu of estate duty. While many acceptable objects forming part of the national heritage would be classified as historic or of aesthetic merit, some major items might escape both definitions and run the risk of being exported if they could not be accepted in lieu of estate duty and if the public collections lacked the funds to buy them.
I assure the hon. Gentleman that the word "national" has been in this legislation for a considerable time. We are not seeking to make any change in the legislation which has governed these matters. If "national" were taken out, the definition of the clause would be narrowed. I cannot immediately think of an item which would be national and yet would not be historic or of aesthetic merit, but we want to keep the clause wide on the basis of what it has always been.

§ Dr. Gilbert
If we are trying to achieve the same objective, will the Minister undertake to insert the word "regional" at a later stage? If "national" and "historic" are exclusive categories, as the clause indicates they must be, there may be items which are not of historic or national interest but which are of regional interest and ought to be part of important collections.

§ Mr. Nott
I take the point, but as we discussed earlier, the test is: would the item be a pre-eminent addition to a public collection? I do not think the hon. Gentleman's fears are necessary. However, if on further consideration I find any grounds at all for concern I will let him know, in writing if I may.

§ Dr. Gilbert
I thank the Minister for that assurance and beg to ask leave to withdraw the amendment.

§ Dr. Gilbert
I beg to move, Amendment No. 14, in page 30, leave out lines 12 to 15.

§ The First Deputy Chairman
With this we shall also take Amendments Nos 17 and 19, in page 30, line 12, after 'collection', insert 'or group', and in line 14, after 'collection', insert 'or group'.

§ Dr. Gilbert
I would wish hastily to reassure hon. Members on both sides that Amendment No. 14 is intended only as a probing amendment. We are interested to know precisely what power paragraph (b) gives to the Treasury which paragraph (a) does not.
We understand that a collection, as such, can be of interest simply by being a collection and that a collection may be of more value than the sum of the values of the individual component parts. We want a real reassurance that the Treasury will not be blackmailed into accepting a whole load of junk in some circumstances as the price of getting a few good pieces. That is what lies behind this amendment.

§ Mr. Money
I wish briefly to call the attention of the Minister of State to the anomaly in the phraseology of Clause 38. As my hon. Friend the Member for Cannock (Mr. Cormack) rightly said, the phraseology of the part of the Finance Bill seems to arise out of Section 40 of the 1930 Act which was specifically concerned with exemption from estate duty.
This is concerned with the offering of objects in lieu of estate duty, which raises a different type of problem. I should like to make clear to my hon. Friend the many types of worry which might arise in the mind of a testator about whether a group of objects makes a collection or not.
I specifically recommend to him, in the interests of ceramic history, the hon. Member for Smethwick (Mr. Faulds)—

§ Mr. Andrew Faulds (Smethwick)
In view of the need for historical accuracy about these things I must point out that I had to sell my ceramic collection simply because I came to this place.

§ Mr. Money
Many sacrifices are made by the hon. Member for Smethwick to come into this place, just as there have been many sacrifices by this place to retain him.
In the interests of all of us who collect what might be called, particularly in the truncated sense used by the hon. Gentleman, groups of objects rather than collections, I hope my hon. Friend will say that he can accept these amendments.

§ Mr. Nott
The clause—[HON. MEMBERS: "Say 'Yes'."]—I cannot accept 1468 the amendment, because we should be in a very much worse state than we are now if I were to do so.
One of the two main restrictions in the Finance Act 1956 power to accept objects in satisfaction of estate duty was that it was limited to the individual preeminent work of art and did not extend to collections some items of which might not be pre-eminent individually.
We cannot accept the amendment, because the proposed deletion of the power to accept pre-eminent collections would be serious. We are endeavouring to make it possible for collections to be accepted. Under the present position, in some circumstances it is limited to individual items and we want to say that the collection as a whole may be accepted. The effect of the amendment would be serious, because it would severely limit what we could accept. I know that that is not the intention of the hon. Member for Dudley (Dr. Gilbert).
The Government are happy to accept Amendments Nos. 17 and 19, because they will add an intermediate category between the individual work of art which may be accepted under the Finance Act 1956 and the individual object which could be accepted under Clause 38(a), and the collection which could be accepted under paragraph (b). These amendments are desirable for the Treasury and for individual museums.

§ Mr. Cormack
I am grateful to my hon. Friend for accepting the amendments. Does this mean beyond doubt that anyone possessing a very fine collection will be able to leave it to one, two or more institutions in various groups?

§ Mr. Nott
I need to give that point consideration, because it raises the question of the procedure for acceptance of the individual groups of works of art within the total collection. What is helpful about my hon. Friend's amendment is that it enables the Government to accept the whole of the collection offered by an estate or a particular part of it. I will have to check whether the amendment would enable a single collection to be split up into different groups and offered to different galleries. I think that that would be possible under what we intend. 1469 I must refer the question to my advisers and I will advise my hon. Friend in writing whether my initial reaction is correct.

§ Dr. Gilbert
It is clear that the combination of Tellers for the Ayes and Tellers for the Noes on a previous occasion has proved irresistible to the Minister of State, who clearly cannot refuse them. I congratulate the hon. Members for Ipswich (Mr. Money) and for Cannock (Mr. Cormack) on having had far more success than the Opposition have had, though I am glad that we have spent more time talking about hanging objects and works of art than we have about hanging people.
Having said that, and in view of the Minister of State's very helpful explanation, I beg to ask leave to withdraw the amendment.