HC Deb 09 July 1985 vol 82 cc1045-52

'Donations to bodies whose principal field of activity is in the arts and which are registered charities shall be allowable as follows:

  1. (a donations totalling 2–5 per cent. of gross personal income shall be allowable against income tax; and
  2. (b) donations totalling 2–5 per cent. of pre-tax profits shall be allowable against corporation tax.'. — [Mr. Alan Howarth.]

Brought up, and read the First time.

Mr. Alan Howarth (Stratford-on-Avon)

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

It is traditional that we debate clauses on the tax treatment of the arts at a late hour. That can, I hope, be taken as evidence of the seriousness of our concern about the subject. We are at least more fortunate than my hon. Friend the Member for Lewes (Mr. Rathbone) who was called at 7.50 am to speak on the equivalent occasion last year.

The new clause is intended to help the Government to strengthen their policy of plural funding for the arts. There are three main sources of public funding for the arts—grants from the Office of Arts and Libraries, administered at arm's length through the Arts Council, expenditure by local authorities, and tax concessions and incentives. The three should complement each other, but the balance is not right.

Funding by the OAL has increased by 11 per cent. in real terms since 1980–81. That is to the Government's credit, as is the fact that this year's increase approximately matches inflation. However, there is no further prospect of real increases in the OAL vote. My noble Friend said that central Government funding will remain broadly level in real terms.

That new situation gives rise to difficulties. Aspirations and costs continue to rise, but funding does not. For example, the Arts Council strategy, as set out in "The Glory of the Garden", has widespread acceptance in seeking to achieve a fair balance of support for the arts in the country as a whole. That strategy is likely to be frustrated, however, because there is is not enough money to provide new funding in the regions while preserving adequate funding in the metropolis and in the areas which up until now have received Arts Council funding.

All was relative sweetness and light among the recipients of Arts Council funding over a lengthy period when funds were growing. Now that funds are not growing there is ferocious competition and lobbying. In a fine flight of denunciatory frenzy Sir Peter Hall wrote earlier this year to the Sunday Times: The Government is presiding over the dismantling of the British arts. He then marshalled a chorus of 50 subsidised theatre directors and, as in the "Winters Tale", there was casting up of eyes, holding up of hands That is, perhaps, an understatement. The tighter the money becomes, the tougher and more political becomes the atmosphere.

Local authorities, the second main fount of state patronage, have their legitimate part to play, but too often their part is none too legitimate. Too many cases exist of funding masquerading as funding for the arts which goes to agitprop activities. The GLC's brinkmanship over rescuing the Cottesloe theatre is an example of the arts being abused as a political platform. Too much churning goes on in local government. Money is taken away in rates and comes back in smaller sums by way of grants.

Rightly, the Government's policy is not to relax their hard-won discipline over local government expenditure so we shall not have an increase of state support through that channel.

The only channel through which additional state support might be forthcoming is taxation policy. My new clause is a response to the Government's manifesto commitment to examine ways of using the tax system to encourage further support for the arts and heritage. The method of tax relief is an attractive approach in principle and has been supported by all parties, as evidenced in the Select Committee report produced in the last Parliament. To all of us in all parties who do not want the arts to be politicised, one of its great attractions is that it takes the vexed question of the totality of state support out of politics, because the amount made available to the arts in a particular year will depend upon the extent to which people avail themselves of the concessions and that cannot be known in advance. The larger the proportion of state support which is made in this way the more that will be so. I would not expect my right hon. and hon. Friends in the Treasury to be moved beyond a certain point, if at all, by this consideration, and yet the prospect of being freed from those perennial accusations of philistinism and meanness—totally without justification in their personal capacities—must hold some attraction to them.

It is unhealthy that Government subsidy provides more cash resources for the arts than private patronage. We cannot really want the arts to be a hybrid between a nationalised industry and an underfunded corner of the welfare state. The value of the existing range of fiscal concessions for the arts and heritage was estimated by The Economist last year at £15 million. The amount spent by the state is anywhere between £250 million and £500 million, depending on whether BBC expenditure is counted in. That is no sort of balance.

We must encourage private patrons. All great patronage has been private. The Tate gallery owes its existence to Sir Henry Tate, Lord Duveen and Sir Charles Clore. The National gallery was founded privately and three quarters of the pictures in it owe nothing to state patronage. It is about to enter a magnificent new phase thanks to the prodigious generosity of the Sainsbury family and Mr. J. Paul Getty junior.

2.15 am

It is profoundly encouraging that patrons are again coming forward on a significant scale. We must widen and consolidate the base of private artistic patronage. We need a better balance between public patronage, exercised by a handful of people of acknowledged judgment to whom we should be grateful, and the wishes of individual lovers of the arts. We also need a better balance between concern for the heritage, concern for the prestige items and the prestige institutions, and local manifestations of artistic life and enthusiasm which are the seedbed of new generations of art. The best way for the state to help secure local cultural vitality is to give financial encouragement to individuals and firms through the tax system.

During my study of this subject, I have received letters from people working in the unsubsidised theatre. They are moving and persuasive and record a passionate relationship with theatregoers as opposed to local authority arts sub-committees. We could take an important step towards helping local theatres, museums, galleries and craft centres by giving fiscal support to their friends and patrons. Tax reliefs would result in more money becoming available to the arts overall. Whereas a grant is a single payment, a tax relief materialises only as other money is given.

More money is needed for the arts. Our museums, theatres and gallieries are chronically underfunded. As the Government frankly, but with an unnecessary air of gloomy finality, admitted in the Office of Arts and Libraries' reply to the Select Committee report: it is unlikely that any Government will find itself able to provide the arts with the level of public funding which would enable all artists and arts organisations to fulfil all their hopes and ambitions. Following the Priestley report and its acceptance, public support even for the Royal Opera House and the Royal Shakespeare company has begun to erode again. The cost of maintaining artistic establishments of the highest calibre by world standards, such as the Royal Opera House and the RSC, is determined in large measure by the purchasing power of the wealthiest countries. The cost to our great museums and galleries of maintaining and updating their collections can only rise as masterpieces become more scarce and as new sources of wealth enter the market.

Sponsorship has recently come to the rescue to a considerable extent encouraged with admirable vigour and enthusiasm by my noble Friend. The Government's will and capacity to stimulate sponsorship by matching grants will, however, reach its ceiling, perhaps before long, and businesses' will and capacity to sponsor will also reach saturation point. There are limits to how much can be achieved by treating the arts as an adjunct of public relations. Officials at the Inland Revenue are not alone in being sceptical about that. In the meantime, it is pleasant to think of those officials attending concerts and exhibitions to verify that business patronage is, in the formula, wholly and exclusively for the purpose of trade", but it is a fairly cumbrous way in which to proceed.

Other countries are increasingly allowing individuals and firms to offset some proportion of their pre-tax income against donations to the arts. In the United States the system has been established for as long as there has been income tax with the result that people and corporations give generously to the arts. It is an important and healthy fact that more than 80 per cent. of the support for the arts comes from private individuals who are encouraged to give through income tax concessions. It is well established in Germany that people can set off part of their tax liability by making donations to the arts. Similar arrangements have been established in Italy and France, and I have a leaflet from Australia which was published earlier this year, setting out with admirable clarity and succinctness the rules governing taxation incentives for the arts.

The arts in this country are admired by every other country and it is unimaginable that we should allow the arts to starve. The Government are not quite so severely economically minded in this or other areas as they make out. The Government have been praised for allocating a once-for-all sum of £3.5 million plus £4.1 million annually for the Priestley recommendations, £8 million for Calke abbey and £25 million for Kedleston hall, Weston park and Nostell priory. The Government must find the money. Sensible limits have to be set on the concessions allowed, taking account of the condition of the economy and the Exchequer, but our regular support for the arts must be improved. That improvement can only be provided on a significant scale by tax concessions. I suspect that that view is supported by the Arts Council.

In a thoughtful lecture on the political economy of the arts in March, Sir William Rees-Mogg said: looking to the future, I am not sure that I would not prefer cutting out taxes on the arts to raising subsidy in real terms … I would prefer to reduce our clients' dependence on the Arts Council by cutting taxes on arts rather than by increasing subsidy—and I welcome tax cuts for the unsubsidised arts. In the debate initiated by my hon. Friend the Member for Mid-Sussex on the Finance Bill last year, my right hon. and learned Friend the Chief Secretary said: this Administration will always be astute to see that the tax system is sensitive to the preservation of this country's remarkable cultural heritage." — [Official Report. 11 July 1984; Vol. 63, c. 1261.] That remark is justified by the Government's record. Relief from capital transfer tax has been introduced on gifts to charities and the minimum period for convenants has been reduced to four years. In this Finance Bill higher rate tax relief on covenants has been doubled and a valuable concession has been introduced for heritage land. The Government have enlarged the scope for private tax concessions on donations, but it would not be unrealistic to say that there is a palpable reluctance on the part of Treasury Ministers to embrace that policy.

In the debate last July my right hon. and learned Friend the Chief Secretary observed that the cost of the American system in tax forgone was about $9.6 billion per year. I suspect that he was making more of that than he should have done. In America, the share of total philanthropic giving attracting tax relief which goes to the arts and humanities is 6.3 per cent. according to the 1983 annual report of the American Association of Fund-Raising Counsel.

In the Office of Arts and Libraries' reply to the Select Committee the Government raised the further objection that to exempt companies and individuals from tax in respect of donations to the arts would be a concession which it would be difficult and inequitable to confine to the arts. That is not an impressive point. The arts are qualitatively distinct from other areas of our national life in which tax concessions also exist or are urged, having nothing in common with housing, pensions and so forth, and can be treated distinctly. The Government are in charge and are quite used to making administrative distinctions of that kind.

The Government need not fear some enormous, open-ended cost. The net outcome for the Exchequer would be at worst little loss and possibly even a gain. The performing arts and many other arts and heritage activities are relatively labour-intensive. The effect of the tax concessions would be to increase employment in that area so that the Government would save the cost of unemployment benefit and would instead receive income tax and national insurance contributions as well as VAT and other revenue from the resulting higher level of activity.

It is a vulgar solecism and pardonable, if at all, only in a Finance Bill debate at an obscure hour of the morning, to justify support for the arts in terms of benefits to tourism. As we are talking in a financial context, however, it is perhaps fair to observe that tourism can be expected to be a significant source of earnings for this country and therefore of tax revenue. I know that my right hon. Friend the Minister of State values the arts for their own sake but I appeal to him in his ministerial capacity.

My right hon. Friend may also be worried in his ministerial capacity about some of the abuses of tax relief for the arts which have caused concern in the United States. He will, however, have noted that the thrust of the present United States Administration's approach is not to attack the principle of relief for the arts but to tackle the abuses. Overall, the American system has worked wonderfully well as a civilised and enriching influence for donors and the wider public alike, and it would be for us to develop a system suited to the specific circumstances of this country.

I recognise that a major departure of principle would be involved in acceding to my proposal and I do not ask my right hon. Friend to do so today. However, in a period in which the Government are giving fundamental consideration to the pattern of taxation in this country I urge them to give further constructive consideration to the question of tax relief for the arts with a view to including options for consideration in the Green Paper on personal taxation that my right hon. Friend the Chancellor has promised.

Mr. Terry Davis

I agree with the hon. Member for Stratford-on-Avon (Mr. Howarth) that it is a late hour to initiate a debate on financial arrangements for the arts. I also agree with him about the importance of the arts, but I cannot agree with the thrust of his argument about what he would describe as desirable financial arrangements for artistic activity in this country.

I do not believe that the hon. Gentleman made it clear in his speech that there are already some tax subsidies for the arts in the sense that tax relief can be given on covenants in favour of charities involved in artistic activities of the kind that he described.

Mr. Alan Howarth

I said that the value of existing tax concessions was about £15 million per year. That figure certainly includes relief on covenants.

Mr. Davis

The hon. Gentleman should not be so sensitive. I did not say that he did not mention it. I said that he did not make it clear. He did not put proper emphasis on the fact that there is already subsidy from taxation in the tax relief allowed on covenants. He now proposes that there be tax relief for one-off donations to artistic charities.

In his useful analysis of existing financial arrangements for the arts, the hon. Gentleman welcomed the increase in Arts Council grants. That, at least, is progress, as I believe that I recall him criticising the financial grant to the Arts Council in a previous debate on public expenditure and even calling for a reduction in public expenditure through the Arts Council.

Mr. Howarth

It is useful to clarify what happened in that debate. The hon. Gentleman will recall that the debate was cut short by a timetable. I was developing the point that in my view there was merit in moving to a different balance between direct grant for the arts and state support for the arts by way of fiscal concessions of the kind for which I have argued today. I certainly did not suggest wholesale withdrawal of state support for the arts as the hon. Gentleman perhaps supposes.

Mr. Davis

The debate was not cut short by a timetable. I am prepared to accept that the hon. Gentleman may have felt that he was under some pressure from the Patronage Secretary and other close colleagues to cut short his remarks, but he cannot complain that he was cut short by the Opposition and there was certainly no timetable. Nevertheless, I am glad that the hon. Gentleman has had the opportunity to clarify his position, which I am sure will be of interest in his constituency of Stratford-on-Avon, which is so dependent on the Royal Shakespeare theatre as the basis for a great deal of its tourism.

The hon. Gentleman cannot deny that in a previous debate he criticised the amount of expenditure by the Arm Council, but today he has welcomed increased expenditure by the Arts Council. He may argue that on that earlier occasion he would have gone on to argue that the reduction in Arts Council expenditure that he sought should be compensated by private expenditure encouraged by tax concessions, but that does not justify his arguing on that occasion for a reduction in expenditure by the Arts Council and then welcoming an increase on this occasion. The hon. Gentleman is trying to have it both ways. He cannot have his cake and eat it as well.

2.30 am

It is also somewhat ironic that the hon. Gentleman should then touch on the second source of finance for the arts — local government. The amount of funds made available by local government for the arts is under serious threat as a result of the government's policies, which he supports. They are under threat from the abolition of the metropolitan county councils. I at least have received many representations from bodies interested in the arts in the west midlands, about their fears for the funding of arts there as a result of the abolition of the West Midlands county council. Others have received representations from other bodies that are concerned about the arts in other metropolitan counties. Rate capping and everything that goes with it is putting pressure on funding for the arts from the district councils.

The third source of funding for the arts that the hon. Gentleman mentioned is the one source that finds favour with him. He argues that state funding for the arts is a bad thing. He seems to think that private funding is a good thing because, if the funds come from private sources, the arts will not be "politicised". That is the word that he used.

Mr. Alan Howarth

rose—

Mr. Davis

I am happy to give way. The hon. Gentleman should make his position clear.

Mr. Howarth

I am immensely grateful to the hon. Gentleman. My argument was that state support for the arts should come from three sources — direct grants through the Arts Council, local authority expenditure and fiscal concessions. Those are three different varieties of positive state support for the arts.

Mr. Davis

The hon. Gentleman told us that the advantage of his third source was that the arts would not be politicised, as happened with state support. Those are the words that he used, and we shall read them tomorrow in Hansard. He referred specifically to politicisation of the arts, as happens with state support. Now he is arguing that there should be three sources of state support.

Mr. Howarth

I am grateful to the hon. Gentleman for giving way. I am anxious not to be misrepresented. My observation was that when the state is trying to determine the total amount of money that should be available for the arts, it brings the arts into a political arena with the unfortunate consequences that I described. The attraction of having fiscal reliefs for the arts is that no one can know what the total will be, and therefore no one can complain that the Government have been too parsimonious, too mean, or have not given enough.

Mr. Davis

The hon. Gentleman can wriggle as much as he likes. He complained that state funding for the arts leads to politicisation. Via a long-drawn out route no doubt he will tell us, but that was the phrase that he used. He cannot get away from it. He had written it down carefully in the notes that he read, and we shall make sure equally carefully that it is written down in Hansard tomorrow.

As an expert opinion to support his point of view, the hon. Gentleman referred to an address given by Sir William Rees-Mogg. All parties in the Opposition do not regard Sir William Rees-Mogg as an independent political commentator on our scene. We do not take his views as in any sense independent. Certainly in the Labour party, and, I suspect in other parties in the Opposition, we would view with some apprehension the possibility of politicisation of the arts as a result of private sponsorship. I would not expect businesses in the City of London to provide funds for artistic endeavours that tended to criticise the establishment, particularly the economic system. To argue that state support leads to politicisation, but private funding encouraged by tax relief does not, is a serious mistake in a discussion of the arrangements for funding the arts.

I do not agree that all great patronage is private patronage. I hope that the hon. Gentleman will agree that I am quoting him correctly this time, because I wrote down those words as he said them, too. He referred to developments on the continent. My impression of what happens abroad is affected by my experience in the United States of America and the continent of Europe. I have a distinct impression that in other western European countries there is a great deal more state funding of the arts than in this country. Many European theatres, opera companies, museums and art galleries, which have given me great pleasure, are funded by state funds, either local or national. I should tell the hon. Gentleman that I have great respect for the National Theatre and the Royal Shakespeare Theatre. I do not yield to him in my respect for the latter, and I speak as someone who was brought up and lived for most of his life in the west midlands. The Royal Shakespeare Theatre depends upon a subsidy from the Government, through the Arts Council, and to argue that all great patronage is private patronage is certainly nonsense in Stratford-on-Avon, where I used to live.

On occasion, I have derived great pleasure from performances by visiting artistes from the Soviet Union. I have no great admiration for the system in the USSR, but I recognise that it has achieved high levels of performance in artistic activity. One cannot argue that all great patronage is private patronage when one considers what has been achieved in the Soviet Union, much as I dislike its economic system and lack of civil liberties. I do not agree with the thrust of the hon. Gentleman's arguments.

The hon. Gentleman argued that, in some way, funds for the arts are different from funds for other activities. Again, I cannot agree with him. It is inconsistent to argue that there should be special arrangements for donations by businesses or individuals to the arts but that those arrangements should not apply to donations by those same businesses and individuals to sporting activities, or to charities engaged in looking after the welfare of the disabled, children or the elderly. Many hon. Members would argue that such tax relief should be given on donations to charities engaged in animal welfare and other activities which we favour. I do not understand why the hon. Gentleman singled out the arts from all the charities that we would wish to support.

The hon. Gentleman argued that expenditure on the arts is labour-intensive, and that tax relief on donations to the arts would reduce unemployment. Those are strange comments from an hon. Member who, earlier this evening, voted against a much smaller amount of money being used to provide tax relief for workplace nurseries.

Mr. Barney Hayhoe

My hon. Friend the Member for Stratford-on-Avon (Mr. Howarth) asked me at the end of a wide-ranging speech for an assurance that the Government would give further constructive consideration to these matters. I gladly give him that assurance.

Mr. Alan Howarth

I am grateful to my right hon. Friend. That being so, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

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