§ 6. Mr. John Wilkinson (Ruislip-Northwood)
What is his estimate of the additional revenue to be derived from the proposed increase in VAT on works of art imported into the UK from outside the EU in each of the first three years of operation. 
§ The Paymaster General (Dawn Primarolo)
In the first two full years, the amount of money collected from imposition of VAT at 5 per cent. on works of art will be £10 million. As the hon. Gentleman will know, the Government are not convinced of the case for raising VAT on art to 5 per cent.
§ Mr. Wilkinson
I am grateful to the hon. Lady for that answer. However, is it not the case that, in the first year after imposition of VAT at 2.5 per cent.—under the seventh directive of the European Union on imported antiques, works of art and collectables from outside the European Union—imports decreased by 40 per cent., from £1 billion to £600 million? Is she aware that the United Kingdom has 12,000 art dealers and 50,000 jobs in the trade, most of which are in London? She says that she is not convinced of the case for increasing the tax. How was it that she was unable—being such a good European—to persuade the European Commission not to waive the previously agreed derogation to 1 July? The tax, like so many European taxes, will destroy jobs. Is it not time that the Government cut the Gordian knot and did not harmonise tax with Europe?
§ Dawn Primarolo
I should first correct the hon. Gentleman. The unanimously agreed deal to which the previous Government signed up—the right hon. Member for Wells (Mr. Heathcoat-Amory), when a Minister, signed the explanatory memorandum—stated that we should apply VAT at 2.5 per cent., rising to 5 per cent. There was no vote on whether to increase the 2.5 per cent. to 5 per cent. The previous Government made the commitment to increase VAT to 5 per cent., and the increase was agreed unanimously.
Since the election of the current Government, we have been trying, working very closely with the art market, to persuade our European partners that VAT should remain at 2.5 per cent. We shall continue to negotiate on the matter, which is a darn sight more than the previous Government did for the art market—they sold the market down the river by agreeing to 5 per cent.
§ Mr. Tam Dalyell (Linlithgow)
Why are our European partners being so sticky about the issue, which affects a lot of jobs?
§ Dawn Primarolo
The issue is whether there is an unfair distribution between European art markets. The Government have put the case that the direct competition to the London market comes from New York, so anything that undermined the London market would be bad for all European markets. We are still trying to convince our partners to reopen the issue. Unfortunately, we cannot use the veto because the deal is signed and delivered. It cannot be reopened without unanimity.
§ Mr. David Heathcoat-Amory (Wells)
Is the Paymaster General aware that the British art market, which employs more than 50,000 people, faces a threat not only from the doubling of VAT, but from the European directive which will impose a compulsory resale levy, which will drive the market out of London—indeed, out of the European Union—to centres such as New York? If she really wants to stand up for British industry, why is she not standing up to the European Union, whether on the road haulage industry, which faces uncompetitive fuel duties, on the City of London, which faces a withholding tax that should have been vetoed months ago, or on the British art market, which is facing new threats to its existence? Why do the Government not stand up for British industry instead of pursuing their mission to be popular in Europe?
§ Dawn Primarolo
The right hon. Gentleman has a cheek: he defended the fuel duty escalator in the Chamber when he was a Minister in the previous Government. His Government failed to stand up to Europe when agreeing to allow 5 per cent. VAT on the art market immediately. I read his pamphlet on the art market with some interest. I acknowledge that he knows a considerable amount about the subject, but, if he knows so much, why did his Government do such a bad deal?