Notwithstanding the provisions in section 140 of and Schedule 25 to this Act (amending section 31 of the Inheritance Tax Act 1984 introducing a new higher threshold for chattels qualifying for heritage exemption), for those chattels which do not qualify as preeminent, the rate of tax will be based on the value at the date when the original heritage exemption was agreed between the owner and the Inland Revenue.—[Mr. Woodward.]
§ Brought up, and read the First time.
Mr. Deputy Speaker
With this it will be convenient to discuss the following: New clause 10—Lower corporation tax for art sales—'.—(1) This section applies to any company whose business consists primarily of the sale of objects, properties and assets (hereinafter referred to as a "qualifying sale of art") which (i) come within group 11 of Schedule 9 to the Value Added Tax Act 1984 and (ii) are effected by or through such company acting as a recognised agent (as defined in sub-paragraph (4) below) where such recognised agent is liable to account for any amount of corporation tax in respect of a quarterly period (hereinafter referred to as a "qualifying tax payment").(2) The recognised agent shall be deemed to have paid the full amount of his qualifying tax payment in respect of any quarterly period even though he deducted from that full amount a sum equivalent to 40 per cent. of the amount due (the "permitted deduction").(3) The amount of the permitted deduction shall be calculated for each quarterly payment period, and a permitted deduction may not be carried back or forward for offset in any other quarterly payment period.(4) For the purposes of this section, a recognised agent means any auctioneer or any person carrying on a trade of dealing in any description of moveable property, or of acting as an agent or intermediary in dealings in any description of moveable property. In respect of any qualifying sale of art there shall be not more than one recognised agent for the purposes of this section within any period of six months who in the event of dispute shall be determined by the Commissioners of the Inland Revenue.(5) This section shall come into effect on 1st October 1998.'.New clause 11—Corporation tax relief for art sales—'.—(1) This section applies to any sale of objects, properties and assets (hereinafter referred to as a "qualifying sale of art") which (i) is within Group 11 of Schedule 9 to the Value Added Tax Act 1984 and (ii) is effected by or through a recognised agent (as defined in sub-paragraph (4) below) where such recognised agent is liable to 234 account for any amount of Corporation Tax in respect of the quarterly period during which the sale takes place (hereinafter referred to as a "qualifying tax payment").(2) The recognised agent shall be deemed to have paid the full amount of his qualifying tax payment in respect of any quarterly period even though he deducted from that full amount a sum equivalent to 1¼ per cent. of the proceeds of the sale (the "permitted deduction") in respect of qualifying sales of art occurring in that period.(3) The amount of the permitted deduction shall be calculated for each quarterly payment period, and the amount of the permitted deduction shall not exceed the amount of the qualifying tax payment for the quarterly payment period to which it relates. A permitted deduction may not be carried back or forward for offset in any other quarterly payment period.(4) For the purposes of this section, a recognised agent means any auctioneer or any person carrying on a trade of dealing in any description of moveable property, or of acting as an agent or intermediary in dealings in any description of moveable property. In respect of any qualifying sale of art there shall be not more than one recognised agent for the purposes of this section within any period of six months who in the event of dispute shall be determined by the Commissioners of the Inland Revenue.(5) This section shall come into effect on 1st October 1998.'.Amendment No. 72, in clause 39, page 23, line 1, at beginning insert—'(1) Save as provided in subsection (2),'.Amendment No. 73, in page 23, line 6, at end insert—'(2) Sections 26 and 27 of the Taxes Act 1988 shall continue to have effect in respect of the estate and maintenance funds which cover heritage properties receiving an audited number of visitors of 5,000 or more per year.'.
§ Mr. Woodward
New clause 9 and amendments Nos. 72 and 73, which stand in my name, are obviously about heritage, tourism, access, fairness and a fair tax regime. The Bill is unfair and will damage our tourism and heritage business very much.
Sir Richard Eyre's report for the Government, published today, states:Every Government since the War has been committed in principle to the belief that the arts are important…and each Government is at some time obliged to ask itself how important".It is sad that, in the Bill, the Government pay no regard to the importance of our tourism industry or our heritage. At a time when we face the outcome of the comprehensive review of expenditure, Sir Richard Eyre says:Whatever the structural outcome, there must be a more positive and constructive approach to delivering arts policy objectives.The amendments attempt to make sense of a strategy for the arts and tourism that at best is muddled, and at worst—and more likely—is symbolic of the fact that the Department for Culture, Media and Sport is irrelevant in the eyes of the Government, and the Secretary of State has no weight in determining Government policy. The Treasury has won on every count. The purpose of the new clauses and amendments is to ask the Government at this late stage to recognise the considerable damage that will be caused to the arts and the tourism industry.
Amendments Nos. 72 and 73 seek recognition of the importance of heritage properties that attract an audited figure of 5,000 visitors a year. Despite the fact that millions of people enjoy access to those properties, clause 39 would almost certainly deprive many of those people of access to some of the buildings of greatest historical and architectural importance in our country.
235 This is not the place to rehearse the Government's thinking behind the clause, but I shall give the House an idea of the damage that will be done. The Historic Houses Association calculated that its 64 members who will be affected by the proposal face routine recurring repairs set off against income over the past five years of about £11.4 million. They will have major repairs set against income over the past five years of £6 million. The estimated additional tax that will be payable over the next five years, after the concession is withdrawn, is £8.7 million.
The Treasury is chasing a relatively small sum, but the damage that it will do to public access and to the tourism industry which feeds off access to those houses is considerable. The Historic Houses Association estimates that, every year, 2.7 million people visit the properties that will be affected, and an even greater number enjoy their parks and gardens. Those 2.7 million people will be disappointed so that the Treasury can meanly chase £1.7 million in taxation.
If one of those houses were handed over to the National Trust for it to look after, the cost to the public sector would be around £10 million a year. The problem with clause 39 is that it is certain that some of the 64 houses open to the public will be withdrawn from public access, because the owners will no longer be able to run the properties. The homes will go into the hands of people who may have a great deal of money and who can afford to run the houses without opening them to the public and without taking advantage of one estate election.
Although in their rhetoric the Government are committed to access, in practice they are removing it. The tourism industry, which is on the back of that business, will be brutally damaged. It is sad that, in the clause, the Government are showing that they do not care about the tourism industry. That is clearly summed up in the Culture, Media and Sport Select Committee report, which pointed out that the Secretary of State does not value tourism. The report recommended that tourism should be the lead responsibility of a Minister in the Department, yet there is no sign from the Government that they recognise the importance of that. The report goes on to say:We note the Department's commitment to enhance its influence within Whitehall and to highlight the economic and cultural importance of the sectors which it sponsors. However, a commitment is not an achievement and unfortunately the Department has not enhanced its influence in the way it says it would like to do.That is the point: the Secretary of State has totally failed the heritage and tourism industries. The purpose of amendments Nos. 72 and 73 is to try, at this late stage, to put right the considerable damage that is being done.
Last night, in a token effort to acknowledge the arts industry, the Prime Minister held a seminar at No. 10 Downing street in which many of the new Labour peers and others were invited to take part. The Secretary of State for Culture, Media and Sport told us today about the significance of the "arts summit", as it has been called. He told the Evening Standard that culture would bewritten into the core script".I am sorry, but, unless the hon. Lady shows willing and accepts the amendments and new clauses, it will expose the Prime Minister's meeting last night as mere rhetoric.
Referring to the Prime Minister, the Secretary of State told the Evening Standard: 236I think he really does care. The idea that he is uninterested in the arts is very wide of the mark.The proof of that statement lies in the Bill's clauses and in whether the hon. Lady will accept the amendments. The magazine Country Life recently said:Hidden in the Finance Bill, a Disaster for Heritage.[Interruption.] I am sorry that Government Back Benchers are unable to acknowledge with any sense of decorum a magazine such as Country Life. That shows rather ably and fitly what callous contempt they have for rural life, for country life, for heritage and for tourism. It demonstrates also how ineffective the Secretary of State has been in making a case on behalf of the arts.
The Government intend to treat the private owner in a callous manner that runs completely counter to what the Secretary of State said last year when he addressed a meeting of the Historic Houses Association and praised the role of the individual owner. The Government will resort to type by taxing those private owners whom, in their rhetoric, they value, but, in their practice, they wish to tax. The consequences will be a forced sale of houses and unemployment for the several thousand people who are directly engaged in running those houses and for the many tens of thousands of people who are in associated tourism sectors such as hotels, shops and cafes.
It is conspicuous that Labour Members did not speak up once in Committee on behalf of their constituents and others who work in sectors related to historic houses. Not once have Labour Members spoken on behalf of the tourism industry that is related to those houses. Labour Members have failed totally to stand up and protect the interests of their constituents. It is significant also that, despite these amendments, not one member of the Heritage team is present in the Chamber. If they had been told about it, those Ministers might have liked to attend. However, I am sure that they were not told, because the Treasury team simply does not care about tourism or culture in our country.
There is no coherent policy: the left hand is taking taxes while the right hand pretends that it cares. One solution in such cases is to conduct a review. However, I am afraid that the Secretary of State for Culture, Media and Sport will be rather disappointed by his latest review, the Eyre report. He will find that he will have to go to the Chancellor to ask for an extra £15 million subsidy for the Royal Opera house. From where will the money come? If that money is found, it will probably come from our heritage of historic houses and from arts sales. The Treasury is in charge of the Department for Culture, Media and Sport. The Treasury is vandalising our heritage, pilfering here and pilfering there; it is squandering a thousand years of history. Access will be lost.
The plundering extends not just to our houses. The purpose of new clause 9, which would result in an important change to the Bill, is to put right a bad and mean-spirited clause which will have far-reaching effects—far-reaching because 20,000 objects on the Victoria and Albert list, otherwise known as the register of conditionally exempt objects, will be affected by the clause.
Every major auction house in Britain reckons that the consequence of the clause will be a dramatic number of sales of some of the most important architectural, historic, 237 prized national assets, simply because the Treasury lighted on a report from the National Audit Office in 1993 which said that £1 billion had been lost in revenue during the previous 10 years because of the effects of the then current legislation. Labour in opposition regarded the area as a loophole for the rich, and it has moved in to grab the money.
Sadly, it is the public and those who work in the related industries who will suffer. It is a great shame that a Government who wish to kick into touch, by a review, everything that is a problem do not wish to take notice of those who have themselves conducted a review of the clause and those who are behind the thinking of the new clause—bodies such as the Museums and Galleries Commission, the National Trust and the Historic Houses Association, all of which feel that the new rules will severely damage Britain's arts, culture and heritage.
The Government are changing the rules. They are changing the rules so that, for example, the 70-year-old pensioner who has, until now, enjoyed the benefits of conditional exemption, will suddenly be told that she must open up her flat, or wherever else she may live, and give public access—that appointments will not do. It is ludicrous to expect a 70-year-old to open up what might be a small two-bedroomed flat to anyone who wishes to come by. Doubtless, if she did, the Home Secretary would be here in a few weeks telling us what a scandal it was. But the Treasury does not speak to any other Department. The Treasury here is on a smash-and-grab raid to hurt people and to rob them of their heritage, and to rob Britain of its heritage by this mean-spirited clause.
The purpose of new clause 9 is to recognise the damage, strain and stress that the retrospective nature of the breach of rules will cause. We are suggesting that the valuation should not be a current valuation but that, if the rules are to be changed underneath people's feet, the valuation should be based on the value of the item when it was inherited. During the past few years, the value of art objects has increased enormously. It is interesting that, again, the Treasury spots an opportunity, goes in, takes the highest value possible and extracts as much taxation on the back of that as possible.
It is interesting that auction houses such as Sotheby's and Christie's, which might benefit from the sales that will undoubtedly follow as a result of the legislation, say that we should not do this, that it is unfair. They say that their business is not only the sale of works of art but their management. A great deal of their time is devoted to caring for and preserving collections.
Unless the Government accept the new clause, the Bill will ruthlessly damage Britain's art and historic heritage. It is not by chance that the Museums and Galleries Commission made a last-minute plea to the Government to recognise the importance of flexibility. I am sorry that, unlike on amendments Nos. 72 and 73, it has not been possible to meet Ministers on the new clause.
I pay tribute to the Paymaster General because at least he—despite, I think, pressure from some of his colleagues not to have a meeting with regard to one estate election—was prepared to meet the Historic Houses Association and listen to its arguments, and I believe that he was persuaded that there was a real problem. Contrary to what we have heard from the Financial Secretary, I think that 238 he believes that there is a real prospect that damage will be done. I have to give him credit for listening, at the last minute.
Although the Financial Secretary will, sadly, not tell us that there will be significant changes to the Bill, she will have to acknowledge that, as a consequence of the debates in Committee and on the Floor of the House, the Inland Revenue should be asked to consider sympathetically the plight of the most affected houses. This is a sad day for the tourism business and for our country's heritage industry. I can only hope that, instead of showing brazen cheek and being unprepared to consider strong arguments from heritage bodies, she will have the grace at least to recognise the damage that the Bill will do if it is not amended.
§ Sir Patrick Cormack (South Staffordshire)
I shall speak briefly and, although I applaud what he said, in a slightly more conciliatory spirit than my hon. Friend the Member for Witney (Mr. Woodward). I declare two interests: first, I am chairman of the all-party arts and heritage group, which is the largest all-party group, and, secondly, I am a member of the Royal Commission on historical manuscripts.
When we last had a Labour Government, there was a proposal for a wealth tax. A number of hon. Members, from both sides of the House, were worried about the impact that that might have on heritage, so we formed the all-party arts and heritage group. We met Ministers, and the most helpful was the right hon. Member for Ashton-under-Lyne (Mr. Sheldon), who was then a Treasury Minister and is now the deputy chairman of the all-party group. He has been one of its most steadfast supporters, and has spoken to the Financial Secretary about these matters. Although he is not in the Chamber, I know that I speak for both of us when I say that I hope that the Government will respond positively, as did the previous Labour Government.
I also hope that the Government will realise that the Bill will do great damage to heritage properties if it is enacted unamended. With great force in a robust speech, my hon. Friend the Member for Witney suggested some of that damage, but I know from 28 years' experience in the House that hon. Members on both sides of the House share my love of and concern for our enduring heritage. I hope that the Financial Secretary's response will prove that she is of our number.
Enough of that—I want to say a few words about objects. My hon. Friend the Member for Witney discussed objects being seen without an appointment being necessary, which is the most important aspect of the changes. If heritage objects, which are often in small and vulnerable properties, could be seen without appointment by people who turned up and demanded to see them, and if they were listed in such a way that anyone would know where they were, a thieves charter would be created.
§ The Financial Secretary to the Treasury (Dawn Primarolo)
The hon. Gentleman is making an important point. I want to be sure, therefore, that he understands what the Government are trying to do. We are not saying that appointments to view objects should be abolished; we are saying that there should be a review of a system where there is appointment-only access to a certain category of object, even though some objects in that category should 239 not be viewed by appointment only. There will still be cases, however, where an appointment will be necessary for the very reasons that the hon. Gentleman has outlined: security, sensitivity and an object's fragility. That was made clear in Committee.
§ Sir Patrick Cormack
I am glad that the hon. Lady has sought to emphasise that on the Floor of the House.
The Historic Houses Association, which has been cited in evidence and with which I have had many conversations, as I know the hon. Lady has, is anxious to work with the Government as it worked with the previous Government. It knows that there are grounds for changing the current rules, but it is extremely concerned about the "by appointment" aspect. The Royal Commission on historical manuscripts is primarily concerned with historical manuscripts, which are among the most fragile of all objects, and I know that the commission and the Museums and Galleries Commission share the same concerns.
Although I am grateful for the assurance given at the Dispatch Box, which will, to a degree, reassure many people, the hon. Lady must recognise that the Bill is not entirely in line with what she said. I therefore ask her to look at the matter carefully. Next week, the right hon. Member for Ashton-under-Lyne and I will see the Minister for Arts and we shall discuss some of the heritage implications. The matter is crucial because, whatever else the Government do, they must not damage an all-party accord that has served our heritage well over the past quarter of a century or more.
My final plea to the hon. Lady is that she build on what has been achieved over the past quarter of a century, and does not damage or jeopardize it.
§ Mr. St. Aubyn
I wish to speak to new clauses Nos. 10 and 11. We have heard how the Government's deafness to my hon. Friends' pleas may lead to the sale of a great deal of art. I wish to outline proposals to deal with the problem for the London art market. The sales may be a last hurrah, unless we deal with a fundamental threat facing that market today.
More than 20,000 people are directly employed in the art market in this country, and its turnover is about £2 billion a year. Half that trade comprises works of art that enter the country and then leave it. More than £1 billion of art is imported and nearly £1 billion is exported. By far the largest sources for those imports are Switzerland and the United States, and those countries are also by far the largest markets for exports. Unless the problems that I am about to describe are addressed, at least half the art market, in London in particular—a world art market and undoubtedly the leading art market in Europe—will go not just outside this country but outside the European Union, back to Switzerland and the United States.
Christie's, one of the world's leading auction houses, recently acquired the Rockefeller Centre in New York. It is preparing for the fact that the London art market, where it has been since its foundation, may be about to leave its historic shores. The problem that faces Christie's is that of VAT harmonisation, and the purpose of the new clauses—I would welcome any suggestion that the Financial Secretary has to improve them—is to mitigate the effect of that threat on art houses and the art market in the UK.
240 Until five years ago, there was no VAT on imports of works of art. The change was introduced by the previous Government, after a great deal of pressure from our EU partners. A concessionary rate of 2.5 per cent. on the cost of those imports was agreed, but after five years it was agreed that that rate of VAT would rise to 5 per cent. In Switzerland and the United States, there is no import duty on such works of art.
We have evidence that, as a result of the imposition of a 2.5 per cent. rate of VAT, the amount of art coming into this country has reduced, and there is every indication from the art world that, if the duty goes up to 5 per cent., the market in the UK will be destroyed.
I am grateful to the British Art Market Federation, of which my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) is president, for the information that it has supplied on this serious issue. If the Government take no action, 10,000 jobs are at risk. In its report, the BAMF says:Markets take years to develop but can be lost very quickly.It is in no doubt that, if action is not taken, the Government will share responsibility for that.
It is highly fitting that we are debating this issue on 30 June, at the end of the UK presidency of the European Union. How much time did the Minister or any of her colleagues spend during the past six months addressing the problem of the real threat to the 10,000 jobs directly affected?
§ Mr. Love
The trend in the international art market in recent years has resulted in a major shift of focus from Europe to the United States. A number of the major companies that the hon. Gentleman mentioned are now under American ownership. How can he persuade us that it is that trend at work, and not a spurious problem in Europe?
§ Mr. St. Aubyn
The hon. Gentleman gives me an opportunity to declare an interest. It so happens that my brother-in-law is chairman of the fifth largest auction house in this country, Brooks auctioneers, which specialises in classic cars. It was the first London auction house to be started for 200 years, and it has established itself as a world leader in the field of classic cars. That company would undoubtedly like to retain London at the heart of its business, but it is being forced to open up in Switzerland and in the United States precisely because of the threat that affects not only classic works of art, but classic cars.
I am grateful to my brother-in-law for pointing out the example of Australia, which introduced a system of duty on imports that led to the complete collapse of its market. He tells me that non-EU buyers account for about 30 per cent. of sales in classic cars. That trade will move out of this country if the Government do not confront and deal with the issue of harmonisation.
What would be the effect of our new clause? We cannot change VAT rates in a Finance Bill debate. Without the will of the Government, we cannot change what has been agreed by other member states, although when the harmonisation deal was struck five years ago, it was agreed that the European Union would undertake an 241 investigation into the effects of harmonisation. We are now six months from the end of 1998, by which time, at the very latest, that study should have been carried out, and there is still no evidence that the EU is putting its mind to this issue. How much time and effort did the Minister and her colleagues give during our presidency to getting this study under way, so that the matter can be addressed by the EU?
We have had to react to the current situation. The Government's total inaction has put 10,000 jobs at risk. We must come up with a local solution to the problem. The local solution is to provide a form of tax rebate on corporation tax. No doubt the Minister will tell us that that would cost a great deal of money: in a full year, it may cost more than £10 million. I draw her attention to the study by the eminent economist Peter Oppenheimer, "VAT in the UK Art Trade", which pointed out the tremendous fiscal advantages to the UK Exchequer of increasing the market through the encouragement of imports. Since he undertook that study 11 years ago, we have seen the London market develop, strengthen and grow.
We are not talking about a case in which it may cost the Government £10 million in lost revenue to mitigate the effects on imports; we are talking about the loss of the entire market, the loss of all the VAT receipts and the loss of all the corporation tax. Furthermore, there are the indirect losses—the losses to London's tourist trade, its hotels and its major shops. When people visit an art market auction in London, they do so to enjoy themselves. They spend money, and fructify London's economy at the same time. If the Minister and her colleagues fail to accept and meet the challenge, they will not only damage the art market, but fail London—and far more than 10,000 jobs will be lost.
I do not pretend that the new clauses and amendments are perfect. As I have said, they constitute an attempt to raise an issue and ask Ministers key questions, and it is in that spirit that I seek answers.
§ Mr. Swayne
I shall be brief, but I wish to speak in favour of amendments Nos. 72 and 73. In doing so, I shall quote from a letter from my constituent Sir Edward Hulse, who farms at Breamore house near Fordingbridge and who opens the house to the public.
In the interests of brevity, I shall not read out the entire letter, but it begins with the heading "One Estate Election", and continues:The removal of this concession is particularly dangerous for the small house, (houses who have less than 50,000 visitors a year). In 1954 we had c. 40,000 visitors but now have c. 14,000. The competition has increased out of all proportion to the number of people requiring leisure…I estimate maintenance at £15,000 pa. There are of course times when this is exceeded. If One Estate Election is withdrawn maintenance would have to be reduced as less cash would be available. In my case at least £2,500 pa.I think that the House will agree that that is a staggering reduction in the amount of maintenance.
Sir Edward's letter continues:but if farm profits rose these would be partially used to catch up with the backlog of maintenance.It is, I think, a pious hope that farm profits would increase in this climate. That alone should be an argument for the Government to show some sympathy.
242 The letter goes on:I do find maintenance a major problem but it must be in the national interest"—in the national interest, that is, for Sir Edward to receive help. He writes:I admit this concession is helpful.He continues:There is a lot of talk about public access and we open on average five days a week (three in April and everyday in August). The point is this costs money particularly in April. Consideration would have to be given to reducing the season if we are to have less money available for maintenance. My first priority must be to the House".Sir Edward's second priority, he writes, must be his visitors.
In this age of fascination with the millennium, the 21st century and the age of "cool", we are perhaps less mindful of our heritage; but I am sure that we all agree on the importance of our link with the past. The most vital element in the maintenance of that link is the private owner. Indeed, the Secretary of State for Culture, Media and Sport said only recently:The private owner remains the most effective economic guardian of this sector.I believe that the private owner is undermined by clause 39, and that amendments Nos. 72 and 73 go some way towards remedying the situation.
The simple fact is that, if we treat listed buildings and country houses as ordinary businesses, they will become uneconomic. The ability to set maintenance costs against income is vital. It is nonsense to pretend that the money for maintenance could be found out of tax income.
As Sir Edward Hulse points out, opening the house to the public only barely covers the costs. What will be the consequences of the clause if it is unamended? Repairs will be put off, public access will be curtailed and restricted, contents will be sold, collections will be broken up and valuable works of art will be lost to the nation. Eventually, houses will be sold and the doors will be closed to the public. Far from removing one estate election, the Government need to extend it to all existing owners. That would be the proper way in which to end this anomaly.
§ Mr. Peter Brooke (Cities of London and Westminster)
The Whips kindly released me for this evening. I have returned from the engagement that I had with my constituents elsewhere because of the importance of the issues that my hon. Friends the Members for Witney (Mr. Woodward) and for Guildford (Mr. St. Aubyn) have relevantly and admirably raised in the debate.
I declare an interest, to which my hon. Friend the Member for Guildford has referred. I am president of the British Antique Dealers Association. As I record in the Register of Members' Interests, I receive an uncovenanted case of wine at Christmas, which is not in any sense part of any contract that I have with it. As my hon. Friend also said, I am president of the British Art Market Federation, which was created in the last year of the previous Government because they said that it would be much easier if they could deal with the art market as a whole, and not deal with 15 or 16 different parts. My hon. Friend the Member for South-West Hertfordshire (Mr. Page) was the Minister who engaged in that dialogue, and I am delighted to see him in the Chamber.
243 To deal with the matters relating to the British Art Market Federation, my hon. Friend the Member for Guildford has dealt with the state of the market cogently. I shall not rehearse those issues again, even though it is only early in the night, except to congratulate him warmly on the comprehensiveness with which he has set out the problems, of which I am certain the two Treasury Ministers who are present are vividly aware.
I acknowledge that the problems are created for us from elsewhere in the European Union—they are not totally under the control of this Government—but it is extremely important that Treasury Ministers fight strenuously and robustly on our behalf, otherwise the sad consequences to which my hon. Friend the Member for Guildford referred, are likely to come to pass.
As my hon. Friend the Member for Witney has said, the Government have got themselves into some difficulty with the arts in general, which the Prime Minister, who has been substantially responsible for that development, is seeking to repair. It has already, I fear, been commonplace in relevant circles that the Government do not care much for the heritage. I find that a disappointment, given my recollection—I was in the House at the time of the previous Government; indeed I have served on a Committee that considered the Finance Bill in the time of that Government.
I am sorry about the Government's policy, as it contradicts the tradition that had been observed by previous Labour Governments. The Treasury, particularly during the passage of Finance Bills, worked constructively with the heritage lobby in terms of its preservation. I am genuinely surprised that it should be through the Finance Bill that the Government should have launched the assault on the heritage, and there is no question but that there is an element of assault about it, although the Financial Secretary may be able to reassure us at a later date.
There was a major move of British works of art out of this country at the time of the Reformation because of what happened to the churches during that era. Happily, as the almighty is even-handed, in the earliest part of the 19th century, with the reign of Pugin and neo-Gothicism, much art came back into this country's churches, but the changes to taxes in the 1880s, particularly in relation to aspects of entail and inheritance tax, were responsible for major sales by British families in historic houses, and many works of art crossed the Atlantic during that period, which we can now admire in American museums. It is sad that the collections that were sold were not replenished with contemporary art in the late 19th century, or, indeed, in the 20th century. The collections of British historic houses are nothing like as impressive in terms of the art of the last 100 years as they are in terms of art from the five previous centuries.
I am not laying the blame for that at the Government's door, but they are threatening us with the deluge onto the art market to which my hon. Friend the Member for Witney referred. Like my hon. Friend the Member for South Staffordshire (Sir P. Cormack), he alluded to the potential threat of burglary. There have been relatively recent convictions of organised gangs which simply used "Who's Who?" as a way to identify houses around the country where there might be rich pickings. Some 244 exceptionally disagreeable violence was involved in the burglaries. That causes great anxiety to the owners of historic houses who fear that, under the Government's regulations, they may be under similar threat of burglary and violence because their details will be readily available.
§ Mr. Brooke
I will give way to the hon. Gentleman, not least because that will enable me to respond to something that he said earlier in an intervention.
§ Mr. Love
I have listened carefully to the right hon. Gentleman's reasonable remarks, as I did to those of the hon. Member for South Staffordshire (Sir P. Cormack), but I have not yet heard any criticism from the Opposition about conditional access agreements, or any recognition that things had to change.
§ Mr. Brooke
The hon. Gentleman intervened earlier on my hon. Friend the Member for Guildford who was explaining why tax changes in the European Union are threatening to move the art market out of Europe. I shall come back to the hon. Gentleman's most recent intervention in a moment. The hon. Gentleman said previously that a number of powerful houses had passed into American hands, but they did so because American investors could see the virtue and value of those houses. The present chief executive of Sotheby's learned her trade in these activities sitting in the offices in New Bond street, which was to the great good of Anglo-American trade.
§ Mr. Woodward
I am sure that my right hon. Friend agrees that it is terribly important that the record shows that no one is saying that there should not be some change. All the relevant bodies recognise the great importance of bringing regulations up to date, but the phrase that is consistently used is "a sledgehammer to crack a walnut".
§ Mr. Brooke
I am grateful to my hon. Friend. He has helped me to respond to the latest intervention by the hon. Member for Edmonton (Mr. Love).
Over the past five or 10 years, we have of course been aware of comments and, it is fair to say, criticisms about the existing arrangements. It is not for me to speak for the Opposition. Indeed, my name is not even attached to the new clause, and it is for my Front-Bench colleagues to respond. However, I have no difficulty in recognising the need for the intelligent interaction that there has been in the past.
The Financial Secretary said that these matters had been fully discussed in Committee. I must confess that I was disappointed and distressed to find how unavailable Ministers had been to talk to the Historic Houses Association.
§ Mr. Brooke
I shall gladly give way to the hon. Lady, but she has to stand by what is on the record from Committee.
§ Dawn Primarolo
What the right hon. Gentleman says is not true. The Historic Houses Association met 245 representatives from the Treasury, and it is as a result of that meeting that the abolition of the one estate election was delayed for three years. There was a meeting on 24 June, and the HHA said in its newsletter that it has no complaints about access to the Treasury or its Ministers. I shall return to that point when I reply to the debate.
§ Mr. Brooke
I am grateful to the hon. Lady for saying that, although there seemed to have been some difficulty in Committee for a Minister even to be available, except on a telephone. However, if she assures me on the matter, I shall of course take her words in good faith.
The whole purpose of my speaking in this debate was to say that I hope that the Government will do more than they have so far been able to do, to reassure not only the Historic Houses Association but those who have such properties across the country that the situation will not deteriorate sharply. As my hon. Friend the Member for Witney said, the Department for Culture, Media and Sport—which once upon a time was called the Department of National Heritage—has passed effectively into the hands of the Treasury. If the situation does deteriorate sharply and many notable works of art are put on the market, it will be very unfortunate if that flood reaches the market at precisely the moment that the Treasury has decided that the amount of money available to the national heritage memorial fund is to be reduced.
§ Mr. Heathcoat-Amory
My right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) has spoken with great authority on the subjects dealt with by the new clauses and amendments. I hope that the Financial Secretary will deal very seriously with the points that have been made.
I should like to support my hon. Friends on conditionally exempt heritage assets, and to endorse particularly the speeches by my hon. Friends the Members for Witney (Mr. Woodward) and for South Staffordshire (Sir P. Cormack). Although they differed in their tone, their message was the same: the current system works very well. Exemption from inheritance tax for those assets keeps them in private hands and relieves the state of a great deal of expenditure. If the assets were taken into public collections, they would have to be looked after, insured and secured at public expense.
The current system therefore saves the Exchequer a good deal of money, while allowing perfectly reasonable public access. I am not aware of any tide of discontent among connoisseurs or those interested in the arts and heritage who feel that the current system denies them the chance of looking at and studying those objects. I hope that the Government will at the very least implement the legislation with great sensitivity.
I congratulate my hon. Friend the Member for Guildford (Mr. St. Aubyn) on his extreme ingenuity not only in tabling a new clause on the second issue—VAT on art imports—but on the new clause being in order, as VAT is not usually debated during consideration of a Finance Bill. He and other hon. Members have drawn attention to the acute threat that will be faced by the British art market if, as planned, VAT on art imports is doubled next year. The industry employs more than 50,000 people. Although we are not supposing that the 246 industry will disappear—there will always be a domestic market for the exchange of works of art—the international market, on which London, but also very many provincial dealers, depend, will be gravely weakened if the VAT rate on imports is doubled.
Quite simply, art sent to London for sale will be diverted to other centres outside the European Union. Therefore, not only will the United Kingdom suffer, but the European Union as an institution will witness a decline in art sales. Such an action is also particularly stupid when we are trying to encourage repatriation to Europe and to the United Kingdom of works of art that were dispersed during previous waves of art exports, wars and revolutions.
When my noble friend Lord Cope was a Treasury Minister, he secured a review of such a tax threat before it took effect. I should like to ask the Minister what action the Government have taken to express the British Government's point of view to the Commission during the review period. Specifically, what discussions with other member states have been held during the British presidency?
We are supposed to have unparalleled influence in the European Union—that is what the Prime Minister tells us. We should like some evidence of that. What steps has he taken to defend a precious, almost unique national asset—the highly successful international market based in the United Kingdom which is threatened at best by erosion and at worst by a wholesale decampment to other non-EU centres such as Geneva and New York? Perhaps the Financial Secretary will bring us up to date on what the British Government are doing to protect our national interests in relation to the art market.
§ Dawn Primarolo
This has been an important debate, although some speeches have exaggerated somewhat the Government's attempts to secure public access to certain items of national heritage. Let me start by responding directly to the sentiments expressed by the hon. Member for South Staffordshire (Sir P. Cormack) as chairman of the all-party arts and heritage group, and the right hon. Member for Cities of London and Westminster (Mr. Brooke) in respect of balancing the need to secure public access to items of value and importance to our heritage with other interests. They acknowledged that the previous regime is not immune to criticism in respect of access by members of the public to particular items.
The Government propose that access by appointment only should be abolished and that access by appointment coupled with a measure of open access should remain. The maintenance and preservation needs of assets will remain key factors in deciding the level and type of access. That was made clear in Committee, and I make it clear again now.
The principle is that, with the conditional exemption, taxpayers' money will be provided to secure reasonable access to the items in question. That is what we are seeking to achieve. We are not talking about forcing anyone to do anything. The outrageous propositions that were made in Committee, and again this evening, about the likely outcome of our proposals are wrong, and amount to scaremongering. We would all wish to send a clear message from the House to that effect.
§ Dawn Primarolo
Let me finish responding to the point that the hon. Gentleman raised in his speech.
247 Some owners will be worried about what open or extended access might mean. Let me emphasise again to the hon. Gentleman before I take his intervention that our primary objective is certainly not to force people out of the exemption scheme or jeopardise security of assets. It is to ensure that the public have proper access to tax-exempt assets. The new arrangements do not affect the basic requirement that access has to be reasonable.
§ Mr. Woodward
Will the Financial Secretary clarify an issue on that point? Let us consider the case of a 70-year-old lady who lives on her own in her flat and has enjoyed conditional exemption for a particular antique. Currently, individuals may come to see that, object by appointment. Under the changes, viewing by appointment only will not suffice. The onus will now be put on the 70-year-old lady to ensure that the object can be made available to the public. If she is unable to find a library, museum or gallery that will take it, will the current by-appointment arrangements still stand, ensuring that the 70-year-old lady will not be required to open her house to the public?
§ 10 pm
§ Dawn Primarolo
I made it clear to the hon. Gentleman in Committee and shall make it clear again that access has to be reasonable. How it is decided will be the subject of the agreement reached between the Inland Revenue and the individual. If there is a dispute, the special commissioners will have the final say on whether access arrangements are reasonable. The hon. Gentleman knows that we have chosen our words to secure a balance between public access to an asset for which we are paying and the continued preservation of the item.
An owner will not be able to say that it is inconvenient for them ever to allow access to the item while requiring the conditional exemption. If taxpayers' money is taken for a conditional exemption, there must be a clear understanding that reasonable access to the item will be provided for the public. The fears about there being a flood of goods on to the market and a mass exodus of items will not materialise. We are not removing or applying any new tests to the assets that currently have the conditional exemption. We are ensuring that the access to which owners committed themselves when they accepted the arrangements for conditional exemption is reasonable and works.
§ Mr. Brooke
Will the Financial Secretary say a word about how she will monitor what happens? She says that my hon. Friend the Member for South Staffordshire (Sir P. Cormack) and I are exaggerating the potential. If we turn out to be right, how will she measure what is happening, and what will she do about it?
§ Dawn Primarolo
I did not include the right hon. Gentleman in my remarks about exaggeration. He and the Member for South Staffordshire made reasonable and measured contributions to this important debate. The Government have allowed a six-month period for negotiations with owners on access to assets. We have acknowledged that there are security issues and that there could be problems with the fragility of items such as manuscripts that would determine what might be considered reasonable access. We have agreed all the issues of access to an asset, but we have made it clear— 248 as, I think, the right hon. Member agrees—that if taxpayers' money is provided for conditional exemption to protect heritage and to give access to members of the public to enjoy that heritage, reasonable access must be available. Frankly, it is not in all cases at present.
There have been Adjournment debates and early-day motions on the matter, and repeated questions have been raised with me as the Minister. To my knowledge, at least two television programmes have been heavily critical of the scheme and have given specific examples where the current reasonable access arrangements are not in operation. As both the right hon. Member for Cities of London and Westminster and the hon. Member for South Staffordshire acknowledged, the scheme needs to be updated and improved.
That is all we are seeking to achieve with the measures. We are being understanding and sensitive to the issues. Therefore, amendments Nos. 72 and 73 are unnecessary. In fact, it is unacceptable that we should give a further tax reduction to those who may now decide that they perhaps never wanted to provide reasonable access, and were never forced to do so. Now, faced with reasonable access, they no longer want the conditional exemption, and they say that they want a tax deduction as well. That is what the amendments would do. That is not acceptable to the Government, and I ask the House to reject the amendments.
I would say in addition to the right hon. Member for Cities of London and Westminster that, in moving to the new reasonable public access arrangements by agreement, there is no requirement for an asset to have a test or to be requalified. Therefore, there is no reason why people should be forced out of the conditional exemption scheme. If they choose to leave it, that is up to them, but they will not get additional tax help from the Government on the basis of the value of that asset, and therefore the taxes liable to be paid on it.
I wish to refer to the one estate election. I have a letter from the Historic Houses Association, dated 26 June 1998, which shows the positive relationship that exists between the HHA and the Government. The letter states:I read that further amendments…have been tabled by the Opposition, I imagine to be taken at Report stage of the Finance Bill. The Association would wish it to be on the record that these amendments have not been promoted by the HHA.The letter continues:On One Estate Election, whilst the Association's concerns also remain, they have been recorded both in writing to Ministers and at a meeting with the Paymaster General, for which the HHA was grateful.The HHA met officials after it was announced that we were to abolish the one estate election. As a result of its representations, the abolition was delayed for three years, to 2001.
My hon. Friend the Paymaster General met the association on 24 June. It was clear that, although about 700 farms and various other pieces of estate were covered by the one estate election, there was a question whether 60 or 70 houses could be in some difficulty. It was agreed that the HHA would go away, work on the proposals, discuss them with the Government and come back to the Government to see how we could make progress on the matter. The association entirely accepts that one estate election should be abolished, that the relief is not suitable and that it was never intended to be a heritage relief. 249 Therefore, we need to continue the discussions with the association. Given that the abolition of one estate election takes place in 2001, we have time to work with the association on that.
I turn now to new clauses 10 and 11 and the possible increase in VAT on the art market from 2.5 per cent. to 5 per cent. I share hon. Members' concerns about the possible impact of that change, particularly on the London art market. All hon. Members will want to ensure that we do all that we can to protect that valuable and important market.
I know that the right hon. Member for Wells (Mr. Heathcoat-Amory) is particularly knowledgeable on this subject because of his personal interest. He has recently written a number of articles about the importance of the art market. He reminded the House that, in 1994, his predecessor as Paymaster General negotiated with the European Union a derogation on the imposition of VAT on the art market. The rate is 2.5 per cent. and is due to rise to 5 per cent. by 1999.
The right hon. Gentleman also referred to the review process. The officials at Customs and Excise have been actively involved in meetings and correspondence with the Commission about the terms and scope of the review that is to take place. The Department has been working closely with representatives of the art market. As I am sure the House expects, the Government are determined to ensure that we properly represent and defend the interests of the London art market. We are actively pursuing this matter. The right hon. Gentleman will know that we have been arguing about the review's terms of reference, and I am sure that he accepts that it is crucial to get those right before we allow the review to commence. That has been the focus of our work, and we shall continue with that work.
I congratulate the hon. Member for Guildford (Mr. St. Aubyn) on his new clause, but it will not work. It is drafted very narrowly, and I am sure that he would not want to damage the art market that he says he wants to protect. In tabling the new clause, he has enabled the House to have an important debate and the Government to put on record the value that we continue to place on the art market. In the negotiations on the review, we shall pursue the best interests of the Government, the country and the London art market. If the hon. Gentleman will not withdraw his new clause, I must recommend that the House votes against it and new clause 11.
§ Mr. Woodward
I am grateful to the Financial Secretary for those comments and the spirit in which they were made. None the less, as the hon. Lady put on record a letter from the Historic Houses Association, it is important that the record also records the sequence of events.
The committee met on Tuesday 19 May. One month later, it wrote to the Chairman of the Culture, Media and Sport Committee, saying;Against the background of what we see as a clear case and compelling arguments, we are dismayed that to date the Paymaster General has not agreed to see us, that Chris Smith and his Ministers are not inclined to support our arguments, nor have our letters either been answered or acknowledged.250 The hon. Lady stands before the House and says how reasonable her Department and officials have been, and I make no criticism whatever of her officials, but it is important that she does not let other people take the blame for a matter that is effectively her responsibility.
We should give credit to the Paymaster General, who allowed a meeting—albeit only last week. As a result of the meeting, the Inland Revenue has agreed to discuss the problem of open houses over the coming months. It is crucial, however, that the Financial Secretary is not allowed to suggest that all this was always going to happen. That was certainly not the case when HHA representatives telephoned the Paymaster General's office and were told, despite what was said in Committee in May, that the office was too busy and that the matter should be dealt with on the telephone. It is only thanks to the Paymaster General's efforts that the meeting took place at all.
This evening several changes and clarifications of how access to the V and A list will operate have been offered. We are grateful to the Financial Secretary for having listened to our proposals, and for the fact that they are now being implemented. It is significant, though, that the Government are still unable to produce the guidelines necessary for all the heritage bodies concerned. We look forward to seeing them in due course. In the meantime, I beg to ask leave to withdraw the motion.
§ Motion and clause, by leave, withdrawn.