HC Deb 17 May 1977 vol 932 cc412-24

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Coleman.]

12.13 a.m.

Mr. Andrew Faulds (Warley, East)

I cannot believe that there is a single Member who has not heard of Christie's and Sotheby's, those two houses whose domination of the auctioneering markets of the world has been one of the great commercial successes of the post-war period. Their business flair has also been combined with scholarship, and in this latter respect some of their experts are among the world leaders in their particular fields.

If the example of the art trade and the auctioneers had been equalled by industry and commerce in this country, our economic position would be considerably healthier than it is. It would be invidious to single out any individuals in these two firms for particular praise, for it is their combined talents that have made London the unquestioned centre of the art trade of the world.

Having said that, I should like to sound some notes of warning, with particular regard to the acceleration of the dispersal of our artistic heritage. This development is sadly underlined, as we all realise, by the colossal sale at Mentmore Towers, which begins in a matter of hours, under the aegis of Sotheby's.

It cannot be disputed that when capital taxes have to be paid works of art may have to be sold. In those circumstances it is evidently the duty of the auctioneer to obtain for his client the best price possible, and many objects will unfortunately find their way abroad. Nevertheless, statutory facilities, which can be very favourable to owners, exist for the discharge in kind rather than cash of obligations for capital taxes. These apply to pre-eminent works of art, which are thus preserved in this country for public enjoyment. But the question that has now become specially relevant and, indeed, urgent is whether these provisions are being fully utilised in the interests of our national collections.

If the possibilities available by statute are to be properly implemented and so enhance our heritage, initiatives and good will are required from the four interested parties: first, the owner and his legal advisers; secondly, the art expert they consult, who is often an auctioneer; thirdly, the appropriate museum officials; and, fourthly, the Treasury, represented by the capital taxes office. Alas, those interests can well diverge and may result in the nation becoming the loser. This has indeed been the history in some sad cases.

The first essential is that the striking financial advantages that may accrue to the owner of a pre-eminent work of art upon adopting such a procedure are placed fairly before him. But if his expert adviser happens to be an auctioneer it must be admitted that the latter stands to lose financially by doing so. Since the recent much-criticised introduction of a 10 per cent. buyers' surcharge, which naturally cannot apply when works of art are accepted in satisfaction of tax, the difference between the commission charged for such negotiation and the fees that would arise from a sale by auction becomes very considerable. Nevertheless, since transactions of this kind form so relatively small a proportion of an art auctioneer's ever-increasing turnover, it is surely not unreasonable to suggest that, in these few cases, the nation's interest should take precedence over financial considerations as a matter of course rather than as a consequence of outside pressures, which is too often the case.

It is unfortunately a fact that the computations laid down by the Treasury in connection with the acceptance of a pre-eminent work of art in lieu of tax are so complex as to be daunting. Consequently it is only too easy for an owner to conclude, in spent bafflement, that the simplest course is to sell by auction and have done with it. One's tax can thus be paid from the proceeds, and if a British institution is outbid, well, that is just a risk that has to be run.

But the Director of the National Gallery, that admirable fellow, Michael Levy, whom some of us are fortunate enough to know, pointed out in a letter to The Times a couple of months ago that, taking due account of the very substantial tax concessions, the knock-down price at auction would have to be quite exceptionally high to realise a greater net sum for the vendor. The nub of the private treaty sale is that not only does the owner who is selling have the concession of paying no tax, but 25 per cent. of the tax he would have paid is included in the negotiated sum which he subsequently receives. When the auctioneers do co-operate in giving such advice, is it not obviously to the benefit of all parties and, of course, in the best interests of the nation?

The only way in which a deal beneficial to our cultural heritage can then be thwarted is by the Treasury becoming somewhat difficult or intransigent. The Treasury's knowledge and understanding of works of art leaves a great deal to be desired. Such obstruction, if it should take place, entitles one to ask: What is the use of statutes being enacted in this House to protect our heritage if they are rendered ineffective in practice, not merely by the obscurity—and, my God, they are obscure—of the consequential regulations insisted upon by the Treasury, but, I am sorry to have to say, by its obvious lack of good will?

This lack of good will has been recently highlighted by the utterly unconvincing insistence of the Treasury that when capital tax obligations are discharged in kind rather than in cash, by means of qualified objects at mutually agreed valuations, public expenditure is incurred. The so-called reason adduced is that certain payments connected with such a discharge have in the past, by custom, taken place within the Treasury between the National Land Fund and the Board of Inland Revenue.

But it has recently been officially admitted—I have been chasing this matter for some time—not merely that these interdepartmental transactions do not in themselves constitute public expenditure but that they are not mandatory, in the sense that the acceptance of works of art in lieu of tax does not by statute require them to be made. Since these payments are merely optional, and if they are deemed in some mysterious way and however implausibly to involve public expenditure, why not dispense with this nonsensical ritual altogether? The answer to that seems to be that they provide a pretext for the thwarting by bureaucratic means of the intention of the statute.

Next, I turn to what I consider to be one of the most worrying developments to have arisen in recent years—the increasing number of overseas branches of the two leading London auction houses, Christie's and Sotheby's. Of course, any initiative that increases the profitability of these companies and, at the same time, ensures that British companies are world leaders is to be welcomed. But I am worried that the very competition and drive that stimulates overseas business may, in the end, lead to London taking second place to Geneva or, more probably, New York, as the centre of the art trade of the world.

Today, both auction houses have premises in New York, and they are constantly vying with each other to obtain the works of art that they must sell in order to justify their extra-territorial expansion. Overheads in America are high, far higher than here, and I believe that it cannot be long before both auction houses are tempted to draw on works of art from houses in this country for their New York branches. Once this begins—I seriously fear that it cannot be long in coming—the drain on our national heritage will be exacerbated to a very dangerous extent.

Corporate tax legislation, which is far more favourable to business in the United States than here, will naturally further encourage the financial advisers of both these firms to persuade their fellow directors that the maximum benefit of their respective shareholders lies in having their headquarters overseas, with all the resulting fiscal benefits. Can anyone who examines these developments seriously doubt that that will happen?

Now I want to discuss the most controversial innovation that I mentioned briefly earlier. Our two leading London auction houses have introduced, without consultation with the museums or, indeed, with their best clients, the art and antique dealers, the buyer's 10 per cent. surcharge, which is in addition to the normal seller's commission of 10 per cent., thus making an effective profit of 20 per cent. on each transaction. Once this was introduced, reasoned arguments were advanced against the practice by all sections of the artistic community. Fortunately, this greedy innovation was not imitated by all their rivals, and in particular I wish to praise Messrs. Phillips, the distinguished auctioneers, which held out against this practice and which has prospered without any surcharge whatever, so disproving the claim that the buyer's premium was a financial necessity, the argument adopted by those two leading auction houses, Sotheby's and Christie's.

Since it is clear from Phillips' example that the buyer's premium is unnecessary, I would have hoped that Christie's and Sotheby's would have second thoughts. Sadly, they have not. At the least, neither firm should contemplate imposing a surcharge on acquisitions by any public museum in this country, either directly or indirectly. I could not understand why Christie's insisted on applying the surcharge to the subscriptions raised by the public for the recent acquisition by the Fitzwilliam Museum of that splendid Van Dyck of the Virgin and Child from the Duke of Sutherland's collection. The efforts to raise nearly £250,000 were impeded by the knowledge that Christie's was to take an extra £20,000 in buyer's commission on top of what it charged the seller.

Surely, if the auctioneers cannot be persuaded voluntarily to help to protect our heritage it is not unreasonable for this House to debate how best to ensure that they do so.

I turn to the activities of so-called art investment trusts, most of which are nothing more than art dealers in disguise. There is one to which I must draw attention—the British Rail Pension Fund. I do not think that the Government are fully aware of the extent to which railwaymen's savings have been invested in works of art. I am damn sure that railwaymen are not. The British Rail Pension Fund has been coy in revealing not only the extent of its acquisitions, but—and this is silghtly sinister—the fact that a member of Sotheby's staff actually advises the fund about its purchases. If ever there were a conflict of interest, that must rank as one of the worst examples.

At the moment the National Gallery has at least one painting on loan from the Fund, and the Victoria and Albert Museum is negotiating the loan of a number of works of art from British Rail. What harm is there in that? Well, it does not need much imagination to see that the borrowing and display of works of art which have been bought for investment—that is, for sale at a profit at a future date—cannot be in the best interests of the museums concerned, particularly if they themselves might later wish to acquire some of the items. Foreign competition would be stimulated by the cachet that would attach to a loan to a national institution, and if a sale were eventually effected, presumably at Sotheby's, the works of art concerned would, in all likelihood, go abroad.

I hope that the Trustees of the National Gallery and the Director of the Victoria and Albert Museum will take into account the points that I have raised here before accepting loans from this source, bearing in mind their long-term responsibility for the retention of our national heritage.

One trade practice at present operated by Messrs. Sotheby's which I deprecate is the acquisition of single works of art or collections of works of art by the auctioneers themselves prior to offering them for sale in their own auction rooms. My disapproval of that practice stems from the fact that I, and others, believe that auctioneers should act as agents only and not as principals. This has been a generally accepted tradition in this country. In no circumstaces should it have been altered. The danger is that, as owners of the objects, Sotheby's must be tempted to ensure the best return.

Its new system of estimated prices, which are published before the sale and included in the catalogue, can only lend suspicion to its expectations when it is owner as well as agent.

In conclusion, to return to the auction sales starting at Mentmore today, Sotherby's and the Treasury stand to make a fortune out of the disposal of Lord Rosebery's works of art. The prospect of this auction sale ought never to have been so much as considered by the Government. The house and its contents were offered at a bargain price by Lord Rosebery nearly three years ago, and through indifference, through procrastination and bureaucratic incompetence, the opportunity was lost of retaining for the nation probably the most important collection formed in the high Victorian era of our history.

I have no doubt at all that the Government, who have to bear the opprobrium for this disgraceful dispersal, will stand condemned by those who care for our cultural heritage. Such a deliberate political act of philistinism will not readily be forgotten or forgiven. It is the Government who should be setting to all others the example of responsibility in conserving our national heritage. They have not done a very remarkable job yet in that example.

12.31 a.m.

Mr. Robert Cooke (Bristol, West)

I should like briefly to pay tribute to the energy of the hon. Member for Warley, East (Mr. Faulds) and to his efforts over many years in the House to preserve what has come to be known as the national heritage. He has rightly drawn attention to the sack of Mentmore, which begins today. I think that we might look at it—I hope that the Minister will at least acknowledge in replying to the debate that she is thinking of this aspect of the problem—from the point of view of considering those other houses that will be threatened on future occasions by the same pressures that came to bear upon Mentmore.

The real threat to the national heritage in historic houses is the threat of penal capital taxation. Thanks to the efforts of the hon. Member for Warley, East and other hon. Members in all parts of the House, great progress has been made on capital transfer tax. The hon. Member will recall how we all battled with Governments to make sure that CTT did not bear down upon a historic house, or its historically related contents or its amenity lands, provided that those were accessible to the public. From now on, under CTT, they are not to be destroyed; they are to be kept together.

The one remaining link in the chain is the supporting resources. The estate, or whatever income-producing assets are needed to support that part of the heritage, must be held exempt from CTT. From now on this House must address itself to the question of the supporting resources. There will be amendments tabled to the Finance Bill in Committee this year. This House and the Government—all of us—must face the fact that if we want to keep historic houses and the historically related contents and the amenity lands available for public access, we must leave the owners with the resources—under the most stringent conditions of supervision by the Historic Buildings Council, or whatever we like to call the necessary body. It works with CTT now on buildings and contents and gardens. It must also work for the supporting resources. The hon. Member would support us in this. That is what we must address our attention to in the coming weeks.

12.34 a.m.

The Under-Secretary of State for Education and Science (Miss Margaret Jackson)

As my hon. Friend the Member for Warley, East (Mr. Faulds) and, indeed, the hon. Member for Bristol, West (Mr. Cooke) have outlined, there are four ways in which the Government at present deal with the problem of protecting the national heritage against the excessive sales of works of art.

First, as the hon. Member for Bristol, West mentioned, there are the conditions for exemption from capital transfer tax, which apply on a wide range of material of national interest—exemptions that are designed to encourage owners of works of art to retain heritage property in their own possession. As the hon. Gentleman also suggested, one of these conditions is that there should be reasonable public access to such works of art.

The second arrangemnt that is available is encouragement for owners, if they decide to sell, to sell to public collections or to offer objects to the Treasury in lieu of capital taxes. I think that that, as my hon. Friend suggested, has applied, for example, in the case of Mentmore, in which I think three objects have been offered in lieu of capital taxes so far.

Thirdly, we provide £3.5 million each year—probably my hon. Friend and the hon. Member for Bristol, West will say that it is not sufficient, but at least it is something—to assist the national collections in Great Britain to buy objects of this kind. Although they may feel that more money should be provided, that sum represents an increase of 125 per cent. over the level of acquisition grants for the preceding five years. The period involved finishes this year and we shall be considering before long the level of grants that should apply for the next period.

Fourthly, we come to the system of export control in respect of works of art, which is bound up in many ways with the remarks of my hon. Friend. It is the view of my Department and, I think, of the Department of Prices and Consumer Protection, on whose behalf I am replying—my hon. Friend the Minister of State regrets that he is not able to reply but my hon. Friend will be aware of the problems with Committees elsewhere—that the system of export control has had a good measure of success over many years. We try to operate it with the minimum of red tape, fuss, staff and resources. As a result, it relies on the art trade for co-operation in the working of the system.

My hon. Friend said that perhaps recently we have had more problems with the system than in the past. In the past 21 years only 18 objects have been lost that the reviewing committee on the export of works of art felt should be retained in this country. However, we are aware and very sensitive of the fact that in the past year four objects were lost. That is a considerable increase in the number of objects lost in this way. We are equally aware that important sales such as that at Mentmore are planned for this year. Although the problem has so far been contained by the system of export control, we are aware that it is rapidly worsening.

My hon. Friend referred to the fact that the financial advantages involved in various ways of disposing works of art to the nation should be more widely known. I cannot do other than agree with him. It is not only a matter for my Department, but I shall ensure that his comments are brought to the attention of the appropriate Departments.

My hon. Friend said that the systems now operating are too complex. He said that if they were simpler it would be easier to draw them to the attention of those involved and to ensure that they understood the implications of various options, and would enable auctioneers to take a full part in giving advice to those involved in the sale of works of art. My hon. Friend argued that everyone—the sellers, to some extent the auctioneers, and certainly the nation—benefits from the fact that such people understand accurately the implications of sale that they may make.

I am sorry that my hon. Friend feels that there is a lack of good will on the part of the Treasury in interpreting part or parts of the existing arrangements. It is not a matter of which I have personal knowledge, but I am sure that I can get one of my hon. Friends to write to reassure him that whatever else may be lacking, good will is not.

I was somewhat alarmed when my hon. Friend referred to the establishment of overseas branches of firms such as Sotheby's leading to a greater draw on our works of art for sales overseas. I must admit that it is not entirely plain to me why, given our system of export licences, that should be a greater difficulty than we have experienced so far. I recognise that it would put a greater pressure on our existing system, but it seems, that if we continue to operate our existing system as in the past we shall be able to cope with that greater demand. I shall ask those involved to consider the matter and to write to my hon. Friend if there is some further point that I have not discerned and have not met.

Equally, I am somewhat at a loss to know why it should be the case that a picture or a work of art owned by the British Rail Pension Fund, for example, should be at more risk than any other work of art. If it is on show, if it has the cachet of being shown at a national gallery, why should it be at greater risk for sale abroad than is the case with our export licence system? But, again, these are matters that I shall pursue. If my hon. Friend has evidence to offer which shows that there is a greater risk, I am sure that this is something that we shall be very anxious to consider. I am certainly at one with my hon. Friend in feeling that it is perhaps not wise for firms such as Sotheby's to act as principals in disposing of works of art rather than acting merely as agents.

The principal factor to emerge from this debate has been the concern felt on both sides of the House for the preservation of items that are thought to be part of our national heritage, for the retention of works of art in this country. I do not think that there is any dispute about the aims of our procedures. There is perhaps, some minor dispute about the methods and their effect, but I am sure that these are matters that can be resolved between us.

Mr. Robert Cooke

Will the hon. Lady address herself to the cause of the dislodgement of the national heritage? This is where the hon Member for Warley, East (Mr. Faulds) and I are entirely at one. We want to avoid this dislodgement and dispersal. The reason for it is the penal taxation on everything that a man such as Lord Rosebery possesses. That is why he sells his works of art, and why Mentmore is being sacked. Will the Government address themselves to that problem?

Miss Jackson

I am not aware that the hon. Gentleman and my hon. Friend are at one in thinking that this is the root of the problem or, if it is, that this is a problem that may be dealt with in terms of the disposal of works of art rather than by means of capital taxation. If the hon. Gentleman and my hon. Friend agree on this point, I hope that my hon. Friend will indicate that fact. It is not, however, a matter on which I agree with the hon. Member for Bristol, West. Capital taxation of the kind that my Government and my party have favoured for many years carries with it complications and difficulties. I believe that we should seek to solve those difficulties rather than to avoid capital taxation.

Question put and agreed to.

Adjourned accordingly at eighteen minutes to One o'clock.