HC Deb 11 July 1984 vol 63 cc1254-62

An allowance against income tax shall be given for any contribution towards a purchase of art objects as identified and approved by the Minister for the Arts, for donation to any public museum or gallery collection, up to a percentage of the total income of the donor to be determined from time to time by an order made by statutory instrument by the Treasury — [Mr. Rathbone.]

Brought up, and read the First time.

Mr. Tim Rathbone (Lewes)

I beg to move, That the clause be read a Second time.

Mr. Speaker

With this, it will be convenient to discuss new clause 36 —Tax incentive to protect the Arts in Britain—increase tax benefit for payment of capital transfer tax in kind— The tax exemption benefit to the individual donor to the Nation of any work of art, or payment in kind of capital transfer tax debts, shall be increased from 25 per cent. to 50 per cent.

Mr. Rathbone

New clauses 35 and 36 refer to the heritage. Some of us feel as though we are part of it at this hour of the morning. The new clauses are intended to help the Government to follow the clearly established Government policy to preserve and protect the British heritage, in both public and private hands, and to encourage private ownership in the belief that that is both the most satisfying and most economic way of preserving and extending our national assets. That was clearly stated by the Minister in the excellent debate that was initiated in another place by my noble Friend Lord Fanshawe on 15 May.

The intent is under serious threat, as we have been reminded in this past week in our own salerooms by the sale abroad of most of the 70 old master drawings from Chatsworth and the purchase for an undisclosed destination of the Turner seascape from Lord Clark's estate.

Under our present tax system these sales are bound to continue as purchasers from other countries, especially from Germany, Latin America and Japan, become more active in our market, and as purchasers from the United States such as the Getty museum search to improve their collections by purchasing in Britain, which is the only remaining market in the world where works of art such as those I have mentioned still become available on the market from private collections.

The Getty collectors alone have to spend at a rate of £1.25 million per week from an income of £1.65 million per week. Those enormous sums are being used responsibly to cherish, preserve and catalogue the arts and to educate people about the arts. But to meet and sometimes to beat those competing collectors, the Government will need to examine and introduce ways of using the tax system to encourage further growth in private support for the arts and the heritage, as we promised in those very words in our election manifesto only a year ago.

New clause 35 is one way to provide much-needed help. It is designed to establish a principle for future Government action, as the words of the new clause make clear. It would embrace only those art objects that are identified as important, probably by the application of the Waverly criteria, establishing both the importance of an art object and its association with this country. The level of relief must be established according to the ability of our national coffers to meet such costs at any particular time.

With that leeway, I hope that my right hon. Friend and our hon. Friends at the Treasury will not find the new clause too threatening. It is not peculiar, as similar schemes have existed in many countries for many years, most notably and successfully in the United States. Such a scheme, at whatever most generous level the Government think fit, taken with the direct funding for museums that the Government already make available, should go a long way towards meeting the ever-increasing art values and ever-increasing competition for good art objects. Such an incentive scheme should encourage private collectors to do even more than they do already to protect and enhance our country's art heritage.

The debate on fiscal incentives for the arts often turns into an argument about the pros and cons of covenants versus income tax incentives. I shall not be tempted down that route. However, they do not have to be alternatives. They can run together, people can choose between them, and the net additional cost will be no larger.

New clause 36 touches on another aspect of the same problem, because capital transfer tax is so often the motivating force behind sales of so many of our art treasures often sold overseas. This is in spite of the system whereby CTT liabilities may sometimes be settled in kind by surrendering art objects to the state in lieu. But this system was only applied to a total tax debt of less than £1 million in the fiscal year just ended, and only £6.5 million since 1979—a real drop in the ocean of total annual art sales in this country alone, and in stark contrast to the purchasing power, particularly, of the United States museums and trusts.

Although any object accepted for this purpose is by statute exempted from tax, the Treasury withholds, in accordance with an administrative decision made more than 25 years ago, three quarters of the benefit of this statutory tax when arriving at the amount of tax debt that can be written off on its books. That high proportion was criticised as excessive only recently by a House of Commons Select Committee, which in effect urged a reduction to one quarter. Many distinguished bodies and informed persons have taken the view that in any event the benefit of the statutory tax exemption ought in future to be divided more equitably.

It should be done in such a way that, although the state would still come into possession of a heritage object at a reduced figure, the other party to the bargain — the owner—would receive increased encouragement to enter into it. An equal inducement, or the douceur as it is often called, to both parties to the transaction—the 50: 50 division which I suggest and which is reasonably favoured by the Museums and Galleries Commission—obviously has a great deal to recommend it.

Mr. Alex Carlile (Montgomery)

We are now seeing an art drain from the United Kingdom which is affecting not only the most obvious things such as pictures and sculptures, which frequently come up for sale in the salerooms of London, but other works of art of enormous importance. They are a significant part of our heritage, particularly books and manuscripts of great historical interest and value.

As the hon. Member for Lewes (Mr. Rathbone) rightly implied, one of the problems is the inequitable power of the Getty trustees in buying up whatever they can lay their hands on in an effort to spend the vast amount of money at their disposal. However, many other trustees from abroad have enormous purchasing power with which we find it difficult to compete. When that is set alongside the cumulative effect of taxes, one gets the great problem of many works of art coming up for sale and all too many of them going abroad.

This has recently been compounded by what one can charitably call serious misjudgments on the part of the British museum. That compounding effect will deprive us of yet more important works of art which we wish to keep in the United Kingdom.

One of the significant matters dealt with in new clause 35 is that works of art to which donors could make contributions should be kept in museums and public galleries. The adoption of the new clause would mean not only that we would save important works of art from going abroad, but that effectively we would bring many of them out of private ownership and into public galleries and museums where they could be seen by many members of the public.

It is quite wrong that the great museums and art galleries of this country, such as the Manchester city art gallery and our great art gallery in Cardiff, Wales, as well as all other significant, and perhaps not so significant, galleries should have to go to the Government cap in hand to try to obtain funds, when there are imaginative ways of obtaining them from somewhere other than directly from the public purse.

New clause 35 suggests that members of the public should be able to donate contributions from their incomes towards the purchase of works of art and to obtain tax relief on works of art of particular significance. It offers a new and imaginative initiative that would undoubtedly find much favour with the public. I believe, too, that it would have a significant effect on keeping important works of art in this country. I hope that the Government will at the very least say that they will give very serious consideration to accepting such an initiative.

8 am

Mr. Cormack

I congratulate my hon. Friend the Member for Lewes (Mr. Rathbone) on his initiative in tabling these two new clauses. He has done the House a service. I am particularly glad that he referred to the work of the Select Committee. When compiling our report we looked at the systems in operation in America and Germany, and they are both similar to what is proposed in the new clauses.

I await the reply of my right hon. and learned Friend the Chief Secretary with interest and eager anticipation, but not over-optimistically. The Select Committee report was produced in October 1982, and it eventually got a reply 18 months later. We received a fairly dusty document, in which all our fiscal recommendations were turned down out of hand.

My right hon. and learned Friend's devotion to culture and knowledge of the arts is well known and widely acclaimed, but he could do much better, The Select Committee's recommendations should have commended themselves to a Conservative Government. They were the unanimous recommendations of an all-party Select Committee, that was chaired by my friend—and I am pleased to call him that—Christopher Price. Although I had the privilege of chairing most of the sittings on the arts, we worked very closely together. There were hon. Members of all shades of opinion from three parties on the Committee, but we came to a unanimous conclusion that it was sensible, right and proper to have fiscal incentives, such as those commended by my hon. Friend the Member for Lewes, modelled on those that already exist in the United States and Germany, to name but two countries. That should have been music to the ears of a Tory Government, and should have been entirely consistent with what my right hon. Friend the Prime Minister said in her famous candle-end speech. The Tory party had a great conference on the arts in, I think, 1978, before we first came into office. At a gathering composed of illustrious people from all sections of the heritage and arts world, my right hon. Friend said that, whatever it might be necessary to do, we would never make the arts suffer, or impoverish them, as that would mean mere candle-end economies. I have paraphrased her remarks, but at this time in the morning I am sure that hon. Members will forgive me if my memory is less than precise. However, she used the words "candle-end economies", and that was the thrust of her remarks. Since then her speech has been quoted many times.

To a degree, the Government have lived up to that pledge, in that the arts have suffered less than other areas when cuts have been made during the past five years. But the Government now have a marvellous opportunity to do something positive, innovative, exciting, challenging and not too expensive.

I urge my right hon. and learned Friend to demonstrate that he has taken the message to heart. Will he promise to set up the type of committee on which he once served? I remember vividly that in 1978 we set up a committee to consider how best to further the interests of the arts and heritage. Among its members were my right hon. and learned Friend the Chief Secretary, Sir Robert Cooke and myself. The three of us, and others, came to the unanimous decision that this was what we should do.

I hope that two years' hard labour at the Treasury has not so hardened my right hon. and learned Friend's heart as to lead him away from the path of righteousness that he once trod with such delicate felicity. I hope for a sensible and encouraging reply.

Mr. Nicholas Winterton

Does my hon. Friend the Member for Staffordshire, South (Mr. Cormack) agree that the Treasury need not necessarily spend any money on assisting the arts? I agree with the proposals in the new clauses but would it not be sensible for the Treasury to set up an independent panel of experts on the arts who are more appraised of the true value of works of art than the Treasury apparently is? I am thinking in particular of the Chatsworth collection. If the Treasury had recognised the true value of that collection, the nation would still possess it and it would not have gone abroad. Because the Treasury was inexperienced in works of art and their value—

Mr. Cormack

Will my hon. Friend give way?

Mr. Winterton

I am bringing my intervention to a reasonably speedy conclusion. Does my hon. Friend agree that we should set up an independent body of people experienced in the arts and their value? I understand from a number of experts that they are prepared—

Mr. Speaker

Order. This seems a long intervention.

Mr. Winterton

I am bringing my intervention to a speedy end, Mr. Speaker.

Does my hon. Friend support the setting up of a committee comprising experts who would give their services free and advise the Treasury on the true value of works of art?

Mr. Cormack

In a word, yes. My hon. Friend the Member for Macclesfield (Mr. Winterton), with a loquacity which does not always become him, has anticipated what I was about to say to my right hon. and learned Friend. The events of last week in connection with the Chatsworth drawings were an unhappy repeat of the Mentmore experience. For a relatively bargain price the nation could have had a wonderful collection. In the end the Treasury spent almost as much on just a few objects.

My right hon. and learned Friend is supremely equipped to give an encouraging reply, and I confidently expect him to give it. I hope that he will give serious thought to the reincarnation of the committee that we set up before. It should be comprised of experts and he should preside over it. It could then come to the House before long with ringing endorsements of the Select Committee's approach and the line advocated by my hon. Friend the Member for Lewes.

Mr. Peter Rees

I congratulate my hon. Friend the Member for Lewes (Mr. Rathbone) on initiating a short but interesting debate.I am grateful to my hon. Friend the Member for Staffordshire, South (Mr. Cormack) for refurbishing my rather dusty credentials for offering my views on this subject. We all wish to preserve our remarkable cultural heritage and we agree that the fiscal system has a part to play.

My hon. Friend the Member for Staffordshire, South recalled a telling phrase of my right hon. Friend the Prime Minister about candle ends. It is the melancholy duty of the Chief Secretary to concern himself with candle ends. In so doing, he sometimes makes way for more generous and attractive measures that have a bearing on the preservation of our heritage.

Turning to the suggestions embodied in the two new clauses, new clause 35 is an enlargement of what has been described as the covenant route. In a sense, it reproduces a provision that exists in the United States. It is difficult to cost such a measure. I hesitate, and feel a certain sensitivity, about inflicting on the House such crude considerations as cost. My hon. Friend the Member for Macclesfield (Mr. Winterton) suggested that this could be done without cost through an infusion of private funds. In a sense that may be true, but tax forgone in the arid circles in which I move must be regarded as a cost to the public purse. There is an element of choice and it is up to each hon. Gentleman to express his set of priorities.

I recognise that my hon. Friend the Member for Lewes leaves open the question of what proportion of a taxpayer's income may be devoted in this way. In America the tax forgone on donations to charities is about $9.6 billion. We could be talking about considerable sums.

I do not wish to tread as far back as my hon. Friend the Member for Staffordshire, South did. His notable contribution on both sides of the House over the years is considerably greater than mine. I remind the House that a certain amount has been done. The period for which a covenant can be effective for tax purposes has been reduced from seven to four years, and the relief for higher rate tax is now afforded up to £5,000 for an individual taxpayer. That is a considerable step forward.

New clause 36 relates to capital transfer tax. That mechanism has been in operation for many years. It is well known to my right hon. and hon. Friends as the douceur and derives from the Waverley Committee in the 1950s. We must consider whether the reliefs that have been offered have been sufficiently generous and struck a firm balance between the general body of taxpayers and the individual trustees or executors to ensure that there is a flow of works of art, which legitimately and properly should be regarded as part of our heritage.

I listened carefully to the hon. and learned Member for Montgomery (Mr. Carlile). I understand his anxiety about the buying capacity of some institutions abroad. It is not for me to comment on their resources or buying tactics. Whether they will be found to have made serious inroads into our market it is not yet possible to say. I understand his anxiety, which is not exclusive to the Liberal party, but I am sure that he was not claiming it as such

Mr. Stephen Ross (Isle of Wight)

The right hon. and learned Gentleman said that he is responsible for these matters. He could make himself extremely popular by finding £600,000 with which to purchase the "Crucifixion" for the Manchester City art gallery. Next Monday is the expiry date

Mr. Rees

I do not accept that responsibility. It is a matter for my right hon. and noble Friend the Minister for the Arts. It will be possible to draw his attention to the intervention of the hon. gentleman. There are many cases of that sort and, mercifully, it would probably be outside the rules of order at this hour of the morning to embark on the case of Calke Abbey. The Department of The Environment and the Treasury played a modest role in that, although once again, properly, the lead was taken by my right hon. and noble Friend the Minister for the Arts.

8.15 am

As to the capital transfer tax route, which is the theme of new clause 36, my hon. Friend will recognise that considerable steps have been taken, although not specially in the douceur area. I know of the anxiety that has been expressed twice by the Select Committee of which my hon. Friend the Member for Staffordshire, South is such a distinguished member. My hon. Friends will be the first to recognise that we have taken considerable steps, especially on maintenance funds, which are equally important in safeguarding parts of our heritage. But these matters are not costless; ultimately, they are a charge on the Vote of the Minister for the Arts. If my hon. Friend's new clause is accepted it will reduce the number of works that can be bought unless there is an extension of the funds voted to my right hon. and noble Friend.

Against the background of what has been done, there are still many possibilities, and if resources allowed, we could do more. I hope that my hon. Friends will give credit for what we have done since 1979

Mr. Cormack

Will my right hon. and learned Friend say something about my suggestion of a committee, which was endorsed by my hon. Friend the Member for Macclesfield (Mr. Winterton)?

Mr. Rees

It is attractive to suggest that keen minds —not necessarily Government minds—should play over the subject. However, I suspect that the dimensions of the problem are known. We could have interesting debates about individual works of art, but that is not the thrust of my hon. Friend's new clause

Mr. Nicholas Winterton

My point was that some art experts would be prepared to give to the nation their services free in valuing works of art such as the Chatsworth collection, whose price was completely underestimated by the Treasury. Had the Treasury allowed the Duke of Devonshire another £500,000, his collection would have remained in Britain. Those people would give their services free to advise the Treasury on value, which people who work in the Treasury cannot assess because they are not international art experts. The committee should be set up to advise the Treasury and thereby save for Britain valuable works of art and collections

Mr. Rees

I am grateful to my hon. Friend for amplifying his suggestion. I must modestly disclaim a lead role for the Treasury in these matters. Of course, resources will become a matter for the Treasury. I do not wish to become involved in any case about which I know nothing in my ministerial capacity, but my hon. Friend cited the Duke of Devonshire's drawings from Chatsworth. That was not a matter for the Treasury; it was a decision of the British Museum. The fact that the museum may have put a price on the collection that was not vindicated by the market raises a range of different issues.

The Treasury would probably not be short of advice; but it is not for the Treasury—this may reassure some hon. Members—to appraise works of art; it is for the institutions such as the British Museum and the National Heritage Memorial Fund, and they are not short of advice. My hon. Friend the Member for Staffordshire, South is saying that from time to time we should reflect whether the fiscal instruments available to us are doing the work for which they were designed. My door—I am sure that I can speak for my right hon. and noble Friend the Minister for the Arts—is always open for fresh consideration of those matters. As the years go by, perhaps an instrument that was suggested by the Waverley committee some years ago will not be operating as satisfactorily as it should. At present there is no overwhelming evidence that the douceur system is failing in its purpose.

Viscount Cranborne (Dorset, South)

My hon. Friend the Member for Staffordshire, South (Mr. Cormack) has established quite a track record in the conservation and preservation of pictures and works of art. Is it not a fact that the American system does more than that in that it encourages people to buy pictures, thereby increasing the stock of the heritage rather than merely preserving it? One advantage of the suggestions of my hon. Friend the Member for Lewes (Mr. Rathbone) would be that we might get away from what some of us perhaps feel is a dangerous museum mentality

Mr. Rees

I take my hon. Friend's point, but perhaps he was not in his place when I commented on what I understood to be the American system, though I cannot claim to have plumbed its depths. I understand it to be costing in tax about $9.6 billion a year, which is a considerable sum. My hon. Friend will accept that perhaps the Americans, with their superb advantages in many spheres, do not start with some of the advantages that we in these islands still enjoy, of having a considerable cultural heritage.

The Americans have a distinguished culture of their own, though, naturally, not spanning the centuries. I am sure that my hon. Friends have a particular feeling for this aspect, and perhaps the Americans feel that they must redress the balance. However, I do not want to embark on a comparative study of the two cultural heritages. We do not start from the same position. Nor, I must admit with utter candour, do we have their economic resources.

We at the Treasury are, naturally, concerned with the fiscal issues. The deployment, as it were, and matters affecting the institutions are more matters for the Minister for the Arts. We are debating whether some of the fiscal instruments can be sharpened. We have been given food for thought and I should like to reflect, without giving any formal commitment, on the matter to see whether more can he done by either of the routes suggested. As my hon. Friend the Member for Staffordshire, South knows, the door is always open when it comes to considering suggestions. I do not know whether we need the formality of a committee, though I look back with nostalgia to the days when he and I, and various others, inside and outside the House, made what I believe was a great contribution to the development of thought in this sphere.

Against that background, I can give the assurance that this Administration will always be astute to see that the tax system is sensitive to the preservation of this country's remarkable cultural heritage. I hope that my hon. Friend will feel that he has initiated a useful debate and that, with that assurance, he will feel able to withdraw the new clause

Mr. Rathbone

We have had a good short debate and my right hon. and learned Friend has reacted positively. I do not think I am wrong in reading into what he said an admission that there is no doubt that the real security of the heritage depends on the tax system. That belief is shared throughout the arts and heritage world and across the political divide. I am pleased that he will give due consideration to having an inspection into whether the tax system is operating to that end, with particular heed being paid to the ideas contained in the new clause. With that assurance, for which I am most grateful, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Forward to