Cultural Heritage: Tax Concessions

HL Deb 24 April 1985 vol 462 cc1184-211

7.13 p.m.

Lord Fanshawe of Richmond rose to ask Her Majesty's Government whether, in view of the protection which they provided for the contents of Kedleston, Nostell Priory and Weston Park, they have any further plans to save more of our cultural heritage by taking action to make the "in lieu" provisions more effective and attractive, thereby providing further encouragement to museums and galleries.

The noble Lord said: My Lords, I beg to ask the Question standing in my name on the Order Paper. I am particularly glad this evening that my noble friend Lord Teynham will be making his maiden speech and I look forward to hearing his words. He and I, as small boys aged 9 together, spent our time breaking up the heritage and I am rather glad that perhaps tonight we are both trying to save it.

I regret having missed the recent debate on 6th March as I was abroad at the time, but having now carefully read Hansard, I should like to restrict my remarks to one problem concerning our public museums and galleries; namely, the use made of the statutory provisions whereby works of art are accepted by the state in lieu of capital tax liabilities. However, before embarking on this subject, I want to join other noble Lords who took part in the debate on 6th March in congratulating the Government, and in particular my noble friend on the Front Bench, on that most enlightened subvention of £25 million to save Kedleston Hall, Nostell Priory and Weston Park. I wish the National Heritage Memorial Fund trustees every good fortune in a speedy resolution to all the remaining problems associated with and related to these three incomparable historic houses and their marvellous contents.

There has I think been some criticism that the Government failed to resort to saving these houses, at least in part, by means of the "in lieu" procedures. I am convinced, however, that in these instances the Government were right in providing a special cash grant. Having, I hope, given credit where credit is due, I must now voice my concern that the operation of the acceptance of works of art in lieu of capital transfer tax to benefit our public museums and galleries is in desperate need of reform. It appears to many that it is being emasculated in administrative practice.

Several years ago, Parliament wisely decided to alter a vital aspect of the long-standing system for funding the arts and the heritage by setting up the National Heritage Memorial Fund. This reform was welcomed by all political parties and the nation has benefited immeasurably. Sadly, however, acceptances in lieu of tax which are equally important, if not in some cases more important, for saving the heritage have not been significantly changed or re-examined in the light of present circumstances and brought up to date. I should like to ask my noble friend tonight: is the Treasury actively discouraging the use of this far-sighted measure?

Acceptances in lieu of capital taxes involve no expenditure whatever of public moneys, since public expenditure occurs only when cash leaves the public sector and enters into the private sector. A certain unpredictable amount of cash is of course forgone by the Exechequer every time works of art are accepted as payment in kind. There is, however, a finite and relatively small number of works of art which qualify for acceptance in lieu, and it is obviously impossible to know in advance how many and how valuable these may be in any one year, since deaths of owners, happily, cannot be foreseen. Thus in some years a very small loss of cash to the revenue may occur, but in other years a much larger amount would be involved owing to pure chance.

At the present time, the Government appear to be limited to an overall and quite unrealistic £2 million, the amount of tax forgone during one year through acceptances of works of art by all our public museums and galleries under the auspices of the Office of Arts and Libraries. This takes into account the fabric of pre-eminent historic houses and their surrounding land. Admittedly, the Government can justifiably claim that special cases can be dealt with separately—as recently occurred with Calke Abbey—but this is not, in truth, a practical or very satisfactory course to adopt in general.

What is my evidence? I am not alone in the comments that I am making this evening, because in our national newspapers during the past few weeks there have been a whole range of comments made. The Daily Telegraph on 3rd April under the heading, "Tate spends £1 m on painting Gowrie rejected" stated: The Tate has paid more than £1 million for Giorgio de Chirico's surrealist painting 'The Uncertainty of the Poet'. It went on to say: The de Chirico was offered by the trustees in lieu of tax, but the painting, valued at £3 million, was refused by the Earl of Gowrie, Arts Minister. A Tate spokesman said: 'When such a work is refused, it suggests that the acceptance in lieu scheme is not working properly. This is a book-keeping exercise, and no public expenditure is involved, and the financial transaction is a notional one'.

Lady Elton, who is a kinswoman of one of my noble friends who is a Minister in this House, wrote a very interesting letter to The Times on 10th April in which she said: Any ceiling on what can be accepted annually in lieu of CTT (capital transfer tax) adds a desperate hazard to those who are preparing to die responsibly by instructing their executors to offer works of art or pre-eminent collections in lieu. Many of them are intending to benefit the National Trust by securing for it the goods, chattels and pictures which keep its houses alive, and enhance regional properties by the acquisition of collections inherently necessary to them. Any one death, or two, could well exceed the new ceiling. Executors will be faced with two options, one of which is to sell on the open market, and the second, chillingly unpalatable, is to queue for the next two years, at six per cent. a year, waiting for a slot in a fiscal year of low mortality and high-mindedness. I think that is fairly expressive and indicates the feeling held generally and not just by individuals like myself who are not experts in this field.

Recently four leading museum directors were reported in the Daily Telegraph also as saying, that the system whereby works of art and historic buildings can be offered in lieu of tax liability is 'no longer workable'. My Lords, who were these eminent people? They were: Sir David Wilson, Director of the British Museum; Sir Roy Strong, Director of the Victoria and Albert Museum; Sir Michael Levy, Director of the National Gallery; and Professor Alan Bowness, Director of the Tate Gallery. They all say that, this procedure is endangering a scheme which has proved to be 'very much in the public interest'".

Your Lordships will see from what I have said already that these quotations indicate that owners, their agents, lawyers and accountants, would not even consider resorting to "acceptances in lieu" when the overall value of works of art to be accepted is so restricted. In addition, bureaucratic delays in the past have been interminable, with interest charges mounting daily. Although the works of art accepted are themselves exempted from all capital tax, the Treasury claws back 75 per cent. of the tax which would have been payable if they had not been exempted.

This practice leaves far too little incentive. The recent Select Committee in another place felt very strongly on this point and recommended a 25 per cent. deduction by the revenue. As I mentioned in my speech in the previous debate on 15th May last year, 50 per cent. may appear rather parsimonious when one recalls that the French authorities deduct nothing at all from tax debtors who satisfy their fiscal obligations by paying their tax in kind rather than cash.

I now want to stress another point which may perhaps have escaped Treasury notice. It is a psychological one. I understand that there are some owners who would prefer that their inheritance should not be sold, even to a museum, in order to provide cash for their tax debts. They would prefer non-commercialisation by way of "in lieu" if the system were properly administered. This is all too understandable when one considers how many people nowadays are forced to part with their family heirlooms.

The Goverment, however, are to be congratulated on their decision announced in answer to my question before Easter to transfer the administration of the "in lieu" system to that appropriate and knowledgeable body, the Museums and Galleries Commission. But commissioners by themselves cannot work miracles without Government understanding and help. I therefore ask my noble friend as a matter of urgency to look into how the commissioners can be enabled to fulfil their new duties effectively in order that as a result they can help our public institutions up and down the country.

Too many offers of important works of art in lieu have in the recent past been turned down by the Government despite their aesthetic importance. Thus radical reform of the operation of the system by the Government, advised by the Museums and Galleries Commission, is now of great importance. So will my noble friend tonight give me an assurance that he will take a new initiative in this complex matter? The so-called Getty factor ought not to be discounted, and the recent devaluation of sterling against the United States dollar, although there has been a slight recovery in the past 10 days, in which works of art are valued internationally, underlines the seriousness of the situation. I repeat, the expenditure of public moneys is not involved when a work of art is accepted in discharge of a tax liability. Therefore let us get our priorities right and make full use of "in lieu" in order to help retain the very essence of our cultural past.

Finally, since "acceptance in lieu" is of cardinal importance to both owners and museums alike, may I have the firm assurance of my noble friend the Minister that it is not the Government's intention to abolish these provisions? I hope that instead he will follow the ideas that I have set forward today and take steps to make them more attractive and effective.

On Channel 4 News at 7 o'clock on 17th April last my noble friend the Minister was interviewed by a Mr. Sissons, whose first question was: Why isn't the tax system—and I am thinking of the death duties provisions—used more effectively in this country to make it more attractive to build up the arts? My noble friend the Minister replied: I haven't yet succeeded in persuading the Treasury to change the acceptance in lieu. Roughly, you can take a work of art in settlement of tax bills without this being 'on vote' expenditure which is technical, but which creates problems for my museums and for my own budgets and that is certainly a failure, and the only thing to do with a failure is to keep on trying until you get it right. In his most laudable battle with the Treasury my noble friend will I hope receive ammunition from this House tonight.

7.25 p.m.

Lord Teynham

My Lords, in rising to speak in this House for the first time, I would ask for your Lordships' patience. In return I shall do my best not to be controversial, but simply to support the case of my noble friend Lord Fanshawe of Richmond as strongly and as far as I am able to do this, without incurring the disapproval of either my noble friend the Minister or of anyone else.

In considering the number of "in lieu" transactions that may have occurred already, or which are ever likely to occur at different times, care should of course be taken to notice the changing force and nature of the combination of various factors to which this particular provision always relates. There is the changing level of capital transfer tax in general, the specific percentage of douceur that applies to an exchange, and the calculation which the owner makes between net proceeds after tax, which might well result from a sale on the open market, compared with net proceeds after tax resulting from a deal with the Government. And there is clearly also the part which the changing role of capital gains tax plays in this calculation.

Furthermore, whatever may be the potential impact of taxation itself at a given time and however much this potential impact changes over the years, it might still not succeed in having any effect at all, provided that owners can always remain in good health. And although the latter is perhaps an example of Government doing one thing and the Almighty doing another, there is nothing particularly unusual in that. Both parties may still be on the best of terms with one another.

But just because the purpose of the "in lieu" provision is to help save works for the nation, and because it may have already contributed to a certain pattern of results, that does not have to mean that special status and importance should always be attached to it. Nor does it follow that just because the Government have lowered the ceiling in this tax year below £2 milllion, that at the same time they might not be in the process of using compensatory methods or of discovering better ways in general to protect our cultural heritage.

The question therefore that should perhaps be asked is this: if the Government are now considering for the future the best formula of methods and provisions to protect our cultural heritage, what are the particular benefits, if any, which the "in lieu" provision has to offer? First, there is the problem of works leaving the country. In a previous debate, and in order to allay fears that the country seemed rather hard up, my noble friend the Minister gave the reassurance that the Government were still definitely richer than the Getty collection. And from this reassurance it is good to know that if your Lordships' House and another place ever reach the open market, Her Majesty's Government will be the highest bidder! And although we do not want works to go out of the country in the first place, it is also realised increasingly how fortunate we are in the Getty fund and in other large foreign endowments, not only for the devotion and care which they bring to their collections but also for their interest in countries from whom they acquire, and for their potential willingness, if encouraged, to co-operate with and invest in different national ventures.

But clearly we should try to keep things here if we can. In this respect the "in lieu" provision has two particular advantages which are surely very hard to rival. It can shield the Government and the nation from the market, let alone the full force of the market, without being unfair to the owner. From his point of view, on the other hand, and secondly, it can give to the works in his possession a unique value provided he is able to have confidence in the provisions' continuation and extension by the Government. In fact, the greater his confidence is able to be, as a result of Government action, the less likely he is to sell—at least on the open market—in the intervals between successive ownerships.

Then there is the separate need to encourage museums and galleries. Here it is worth noting the distinction between purchases and bequests. From 1822 until 1922 the National Gallery acquired 2,863 works, of which only 701 were purchases and the balance were bequeathed. Apart from its financial merits, encouragement of museums and galleries through bequests has thus been a traditional practice. And although taxation arrangements introduced early this century have altered the scope of that 19th century practice, they still do not preclude related options.

The present examples of either private treaty sales or of acquisitions through the "in lieu" provision are not the same as ordinary purchases, nor the same as ordinary bequests—but at least they constitute a far more satisfactory route for the nation to provide museums and galleries than the alternative of purchases. Through them there is greater flexibility for the Government to assist a wide range of museums and galleries in the country rather than just the principal ones. On the latter point in particular, even without experiences such as that recently of the Chatsworth drawings, surely it would be best for the Government to consult a far wider range of institutions than are at present consulted in connection with private treaty sales or with "in lieu" acquisitions.

Other aspects which have to be balanced include whether certain incentives given to individuals or groups connected with the national heritage operate too much at the expense of the living arts; or thinking of the "in lieu" provision not so much as a measure to protect heritage but more as an opportunity for rich men to have a wider choice in how they pay tax, does it operate too much at the expense of other taxpayers?

Regarding the allegation that the living arts suffer, they would only do so if the cost of looking after our national heritage becomes more expensive. The essence of the case for the "in lieu" provision is that it can make that task cheaper. It should also be borne in mind that some of the finest British collections include modern works and those of living artists—as in the case of the collections of Roland Penrose, Douglas Cooper and the late Lord Clark.

The allegation that the choice given to rich men to pay tax in kind works against the interests of other taxpayers perhaps reflects confusion between the "in lieu" provision and capital transfer tax itself. If he were able to pay less capital transfer tax or less tax in general than anyone else, this certainly would be unfair. But while that is not the position it might be pointed out that, conversely, we could do well to adopt the system operating in France, where payment of succession taxes in kind is possible as a general option and where no percentage of the agreed value of the object surrendered to the state is withheld for the purpose of discharging the tax.

It is often tempting to attach too much importance to some legislative provision or other designed to help particular sectors of the economy or particular aspects of the national interest. But there are many good reasons for believing that the "in lieu" provisions should now be made more effective and attractive—as the Question put by my noble friend Lord Fanshawe implies. This can make the effort to save more of our cultural heritage cheaper and easier, without setting up unfairness or tax anomalies; and in benefiting a wide range of British museums and galleries it then also benefits their communities and towns.

7.34 p.m.

Lord Annan

My Lords, what a lucky man I am to be called now and to be able to be the first to congratulate the noble Lord, Lord Teynham, on his maiden speech. It was forceful, cogent and extremely well informed. It is perfectly clear that we are going to hear from him to great advantage many times in the future. My mind went back this evening to a notable occasion when the late Lord Vaizey analysed at some length and with extreme clarity the whole of the "in lieu" provision. The point he made then was that this provision had one great advantage; it meant that the Government or the Minister concerned did not have to ask for or spend Government money. All that happened was that revenue was reduced, and that process was one that nobody would observe—whereas if one had to go to Parliament and ask for more money, clearly it was (a), going to make the Minister unpopular and (b), perhaps even bring the Government into controversial waters.

The late Lord Vaizey, in his speech, seemed to think that Parliament had spoken with such force on this matter that the Treasury really had no role to play at all except to carry out the "in lieu" provisions; and therefore that any Minister who failed to accept an object in lieu was thwarting the will of Parliament and would very soon find himself stepping into a barge on the Thames in which he would be taken from the Houses of Parliament to the Tower of London and possibly there made to test the sharpness of the axe.

In fact, I do not believe that such an argument is sustainable and so I am certainly not going to suggest that the noble Earl should this evening be impeached. But it is a fact that Parliament's will is in a sense being thwarted and frustrated by the Treasury.

I am not intervening tonight simply to press the claims of the National Gallery, because it is more often the municipal museums which benefit from "in lieu" acquisitions than the national museums and galleries. Municipal galleries have very low purchasing grants and the "in lieu" system is their major source of acquiring paintings and objects.

There is another group of people on whose behalf I want to intervene. They are the would-be donors. There are a large number of public-spirited men and women—a larger number than I suspect many people realise—who want the nation to benefit by their foresight, or by their ancestors' foresight, by giving their possessions in lieu of tax. Certainly they enjoy an advantage; certainly they might not do so well if they sold at auction. But that is not what animates them. They cannot afford to give their treasures to a particular museum or gallery but they want a particular treasure to go to the museum they designate because they believe that that is the right place for it. They have always wanted that treasure to go to that particular museum. That has been their intention, their dream. They are not a calculating bunch of opportunists; they are in a modest way idealists; men and women of genuine benevolence.

It is these people who are becoming more and more disillusioned. Why have the provision for 'in lieu' and then restrict its application? Why restrict its application so much that it becomes farcical? Would it not be better to abolish the provision altogether? That would at least be less hypocritical.

Perhaps your Lordships will allow me to cite a specific case, and I have the permission of the person concerned to do so. The eminent collector and connoisseur Mr. Denis Mahon has a collection of paintings. Many of them are seventeeth century baroque paintings—a genre in which our country's collections are particularly weak. Mr. Mahon wishes to bequeath this collection of paintings to a number of institutions in our country. Every gallery has been selected with care; every painting is to go to the place which is most appropriate. In fact, Mr. Mahon's planning is a real labour of love and it is clear that he really enjoys it.

I know that the noble Earl has been in correspondence with Mr.Mahon over this matter. I have to say that Mr. Mahon is deeply troubled over the present situation and wonders whether he will be able to dispose of his paintings as he wishes. He will certainly be unable to do so if the sum allocated by the Treasury to the Office of Arts and Libraries for objets d'art remains at £1 million.

Mr. Mahon has made it very clear to me that he is not calling for any special privilege for himself. He most emphatically does not want special treatment. What he wants is that every bona fide and important potential donor should have the same opportunity as himself—no more, no less. I must ask the noble Earl, what hope can I hold out to him?

Our country has a record of not being very skilful or tactful in its handling of potential benefactors. Long before the Second World War, Mr. Chester Beatty approached the Government to ask if he could donate his collection to the nation in lieu of capital transfer tax. He was refused by the Treasury. He left England for Eire and his collection went to Dublin.

Then there was Mr. Gulbenkian. He, too, with his enormous admiration for the British people, hoped to negotiate a settlement for his collection. That, too, was refused, and the collection went to Portugal. So did his foundation because of difficulties unnecessarily created.

Then there was Mr. Getty. In that case, too, so it is said, there was a chance that his matchless fortune, or at any rate a large part of it, might have come to this country where he chose to live and where he died. However, the foundation was set up in California. I could cite other examples of such self-inflicted wounds.

My Lords, how much more sensible the French are in these matters. How much more flexible; how much more wordly wise and shrewd, and how much more their bureaucrats and ministers appreciate the gains to French culture of being liberal, wide-eyed but heavy lidded, of not straining at gnats and of being willing to swallow a camel—in short, of being splendidly cynical. How much better, as Uncle Toby said in Tristram Shandy, they order these matters in France.

The French authorities are perfectly willing to do deals. For instance, it is forbidden to export a work of art in France; that is to say, it is forbidden unless some clear countervailing benefit would accrue to the French nation were the work of art to be exported. And then suddenly, miraculously, it is found not to be forbidden to export that particular work of art. Unfair, my Lords? Devious, my Lords? Unscrupulous, shifty, downright immoral? Possibly, my Lords. But how expeditious and sensible.

Will the noble Earl ask the French authorities—informally, of course I do not mean for public repetition—how their system works in practice? And when he has done so, could he not appeal to the more Machiavellian side of his right honourable friend the Chancellor of the Exchequer?

It is the inflexibility of the Treasury which is our undoing. Gone are the days of Maynard Keynes's beneficent wartime influence in the Treasury where works of art were concerned. In those days, and thereafter in the 1950s, the Treasury was still guided by officials such as Sir Denis Proctor or Sir Edward Playfair, who had learned as undergraduates at Kings College, Cambridge, the value of the arts and bent the Treasury rules in their favour.

Having said that, my Lords, I am bound to admit that someone such as myself who has been a Vice-Chancellor must have some understanding of the Treasury mind and of the dilemma which faces the noble Earl. After our debate on the arts in March, the noble Earl, Lord Gowrie, said a bit wryly that the vegetables hurled at him during the debate rather outnumbered the bouquets. Indeed, my old friend, Lord Hutchinson of Lullington, hurled bag after bag of tomatoes at him. His speech combined the sarcasm of Carson with the wit of Birkett, and by common consent was the oratorical triumph of the evening. Since he came to my defence, I was naturally grateful to the noble Lord, Lord Hutchinson, for his support.

Last night, when I was at Cambridge, an enormous bag of tomatoes was pressed into my hand by the director of the Fitzwilliam Museum, consisting of examples of works of art offered in lieu which had been refused. But I shall not hurl them. The noble Earl, Lord Gowrie, cares as much for the arts as the director. Indeed, as I listened to the speech of the noble Lord, Lord Hutchinson, I reflected that, even if I possessed his forensic art, which I assuredly do not, I could not have made a speech like his. It was the speech of someone who has never had to run an organisation. Weak as the powers of a Vice-Chancellor are, any chief executive knows that one has to cut one's coat according to the length of cloth the Treasury has decreed.

There will be those who will say, as Lord Hutchinson did, that the arts more than anything else give meaning to life and therefore they must never be cut, only further reinforced. Others may say that whatever needs are identified in our society those needs must be met at once. That great-hearted man, the noble Lord, Lord Molloy, often gives me at Question Time the impression of saying just that, and, if he were Chancellor of the Exchequer, we should rejoice for a fortnight and be bankrupt within a month. So I asked myself, "If you are in earnest about 'in lieu', what suggestion can you make which does not echo the stale old plea 'give us more money'?"

My Lords, what I say now I am saying only for myself. In no way should I be taken as speaking on behalf of the Trustees of the National Gallery, still less of its director; I have not consulted any of them. But I wonder if the noble Earl has considered saying this to the directors of national museums and galleries who recently wrote to him on "in lieu". He might ask if they value "in lieu" acquisitions so highly that they would agree to the Office of Arts and Libraries withholding each year £1 million or so of the purchase grant of the major institutions such as the national museums and galleries, or the National Trust or the National Heritage Fund? That nest egg thus created would then be available to finance "in lieu" purchases. If no "in lieu" offers were forthcoming during the year, the Minister would return the million to the institutions concerned before the end of the financial year and they would be free to use it and carry it forward to the next year.

The purpose of this manoeuvre would be that it would give priority to "in lieu" purchases. The institutions would have less money each year to purchase on the open market, but the Government would have more money to reimburse the Inland Revenue for its reduction in income. Now, I do not like such a scheme. Nor, so I would guess, would the directors of the national museums and galleries. Anything which reduces the freedom of an institution to do what it will with its grant must be disliked by its director and trustees. What advantages, then, are there in such a scheme?

I suppose the main advantage is that it does something to protect the heritage. It gives encouragement instead of discouragement to those who wish to give treasures in lieu. It does not reduce the amount of purchase grant. All it does is to earmark part of it. But the disadvantage would be that the nest egg provided by one institution might be used to benefit another institution.

In suggesting that the Minister might consult galleries and museums on these lines I feel rather like a prep school boy currying favour with matron, but I hope that the noble Earl the Minister will accept that this is an honest suggestion of a way to test opinion if he is unable to give us better news tonight. But for my part, I hope he will stress to his colleagues in Cabinet the inestimably superior approach to these matters by the French. The French are superior to us because, unlike the British, they never apologise for their own culture. They are proud of it. They boast of it. When a Frenchman sees those stirring words on the Arc de Triomphe, "A Toutes les Gloires de la France" he does not remember just the French victories on the field of battle; he is brought up to remember France's triumphs in the arts.

7.50 p.m.

Lord Cottesloe

My Lords, I should like first to say with what pleasure and interest I listened to the quite admirable maiden speech of the noble Lord, Lord Teynham. It encouraged me to think that we may hope to hear him many times in the future.

I am very glad that my noble friend Lord Fanshawe has asked this Question. The subject is a matter of great concern to all those who are interested in our heritage of historic houses and the collections that they contain. The situation has changed so much and so unhappily in the past two years that rather drastic action is called for. We must first, of course, rejoice that the Government have found the special funds that are needed if the three splendid houses which are named in the Question are to be looked after for the nation and their superb contents saved from dispersal. Nostell Priory, in particular, with its unique contents of Thomas Chippendale's furnishings, would be quite irreplaceable.

However, there are many more houses and collections of irreplaceable importance that are at risk, and large emergency grants to save them cannot be relied upon. The whole system is in urgent need of a new look. The first line of defence, it is clear, must be the "in lieu" system of acceptance by the Treasury of real property and chattels in satisfaction of tax. This system is vitiated by the convention that any such acceptance is, by definition, national expenditure. In effect, the Treasury not only obtains property but is paid for it as well. The sooner that convention is done away with, the better. It limits the amount that can be accepted in any given period in a way that is very unfortunate.

As regards chattels—pictures, furniture and the like—the whole system of control over the export of works of art that was established in 1950 by the Waverley Committee, and which has worked well, on the whole, for a quarter of a century, has broken down, defeated by violent inflation. This system was designed on the basis, first, that it should be fair to owners and to the trade; and, secondly, that being a licensing system it could only be fully effective, as Lord Waverley himself put it, if it was applied to a limited number of objects of high importance—that the more the field widened the less effective and more irksome the control would become.

A factor that has tended to defeat that system has been the anomaly of VAT, which is applied to purchases for the home market but not to exports, and so gives an advantage to foreign buyers. Rectification of that anomaly is long overdue, and I hope that the Minister will tell the House that the Government will take that on board.

The criteria of national importance for the purposes of control, which served well for more than 20 years, now needs looking at again. There are age limits. Originally, nothing fell within this control that was less than 100 years old or had been in this country for less than 50 years. I believe that in recent years there has been some change in these parameters that has widened and weakened the control. But the main parameters of the control—the criteria of national importance—now need looking at again in the light of modern conditions.

They were: first, is the object so closely bound up with our national history and life that its removal would be a misfortune? That is fair enough. Secondly, is it of outstanding aesthetic importance? Now that travel about the globe is so much easier and more rapid, we may be doubtful how far that criterion is still valid. Nowadays the location of an object of special beauty is surely less important than the context in which it can be seen and appreciated. Thirdly, is it of special importance, in itself or as part of a group, for purposes of study and research? That criterion is no doubt still valid, but it may well operate against the retention of an object in this country. For example, if there was the new discovery of an important collection of Boswell papers, the right place for that collection would not be the British Museum but Yale University, where the bulk of the Boswell papers are already and where anyone wishing to study them must go to do so.

For all those reasons, and not merely for the reason that there is now astronomical inflation in the arts markets of the world, I believe that there is an urgent need for a new look, for a new Waverley Committee to examine the whole field of the national heritage of works of art of all kinds and the extent to which, and the way in which, control over them should now operate. I hope that my noble friend on the Front Bench will tell the House that the Government will set up such a committee to examine the whole matter in the light of today's conditions.

7.57 p.m.

Lord Charteris of Amisfield

My Lords, I should like first to add my congratulations to those which have already been expressed to the noble Lord, Lord Teynham, for his excellent and enjoyable maiden speech. I hope we shall have many more speeches from him.

We should all be extremely grateful to the noble Lord, Lord Fanshawe, for having once again initiated a most interesting and constructive debate on Heritage matters by means of an Unstarred Question. However, I make one comment on the actual wording of the noble Lord's Question in case a misapprehension is created which I know he does not intend. He refers to: the protection which [Her Majesty's Government] provided for the contents of Kedleston, Nostell Priory and Weston Park". In providing the £25 million for the National Heritage Memorial Fund the Government have, by an admirable act of statesmanship, put the fund in the position of being able to negotiate realistically to the end that those three notable country houses and their contents shall remain intact for the enjoyment of the people. "Protection", however, has not yet by any means been achieved. The way forward is by no means clear and certain. As the first Duke of Wellington said, therefore, "Don't holla till you're out of the wood". We are still very much in the wood, and it is full of briar patches.

Noble Lords who have already spoken have emphasised how serious is the position in respect of the paucity of the "acceptance in lieu" provisions. I hope I may be allowed to give some illustrations from the experience of the National Heritage Memorial Fund to show just how inadequate the £2 million set aside for 1985–86 is likely to prove. At 1984–85 prices the £2 million would look after between one-third and one-quarter of one important oil painting by Turner. It would buy one painting by Wright of Derby, leaving £½ million over for two or three deuxième cru old master drawings; and it would amount to only one-quarter of what the National Heritage Memorial Fund had to fork out to save Belton and its contents.

The pity of it is that the AIL system has so far, at least I think up to a few months ago, done an excellent job for the defence of the heritage. Partly because of it, and in spite of stiff taxation, our country houses remain treasure houses in the real sense of the word.

That has been brought home to me recently in a compelling way. Because of the sad death recently of Lord Howard of Henderskelfe, I find myself chairman of the Committee of Honour for the "Treasure Houses of Britain Exhibition" which is to be mounted in the National Galleries of Art in Washington in November. I have recently been in Washington—as it were, a chairman in search of a role. It is possible that I have found a role, and I have certainly learned something of what will be the scope and magnificence of this exhibition. A great part of the National Galleries of Art will be filled with pictures, furniture, silver and sculpture of the highest quality, all of which will have come from houses still in private ownership or in the ownership of the National Trust or the National Trust for Scotland.

The creation of "the country house"—the gathering together and the creation of its contents and the life that was lived in it—is arguably Britain's greatest contribution to civilisation. This exhibition will be like the tip of an iceberg. It will give an indication—an indication certainly of enormous quality and distinction, but an indication only—of the treasures which will not be seen but which remain in private ownership in Britain.

The exhibition is not an antique dealers' fair. Still less is it a bargain basement sale. I hope that it will give a powerful boost to tourism in this country. I suspect, however, that it will also whet some appetites on both sides of the Atlantic. These country houses are valuable to Britain's economy because they draw tourists, and of course the drawing power that they have depends upon their being country houses and not museums. I must say here that I think that many of the French chateaux are rather museums.

I fear that the existence of our country houses will be threatened and the disintegration of some made certain if the wholly inadequate provision for AIL is not greatly improved. It is particularly unfortunate that the Treasury has elected to reduce the AIL provision in real terms just as the top has blown off the art market. At the very time when hard-pressed owners will be tempted to sell and rich foreigners will be spurred on to buy, the defences against our treasures leaving this country are being not strengthened but reduced.

Because of the shortage of acceptances-in-lieu money, increased demands for financial assistance with private treaty sales are already being made on the limited resoiurces of the National Heritage Memorial Fund and the local museums' purchase funds. What makes it particularly provoking is that funds allocated for AIL, whatever anyone may say, are awfully like Mickey Mouse money. I recognise that the Government cannot use an art acquired in lieu of tax to build roads, but surely the acquisition of works of art in that way generally adds to the nation's wealth; and the nation's wealth will certainly be depleted unless more satisfactory arrangements are made for acceptances in lieu of capital taxes.

The noble Earl the Minister for the Arts is an enlightened and cultivated man, and one who understands the true value of works of art to this country. I urge him, therefore, to recall his experiences in passage football at Eton when he was a boy and to use that boot on the foot which is in the Treasury to knock the thing about, either to get the AIL provision massively increased (which ought to be easy because of its Mickey Mouse characteristics) or so to reform the acceptance-in-lieu procedure that the notional reimbursement to Treasury by heritage departments of the value of works of art and property accepted is abolished. The value of the amount accepted could quite simply be controlled by setting a ceiling to it. I am quite certain that the Minister will have massive support in this House for the efforts which I am sure he is making to this end.

8.5 p.m.

Lord Saint Levan

My Lords, I should like to congratulate my noble friend Lord Teynham on his maiden speech. This is only the second time that I have addressed your Lordships and I intend to do so for only a short time.

I am the owner of an art collection on permanent loan to the National Trust and am in exactly the same position as the late Lord Saint Oswald and Nostell Priory. The problem is that not only do we have to pay considerable capital grants tax on works of art that will not get exemption because they are not pre-eminent enough, but also we are in a very difficult position because we have to negotiate over a long period of time. My father died over six years ago and I still do not have a clearance certificate from the capital taxes office and I cannot spend one single penny of my father's money.

I am also the president of the friends of a municipal art gallery in the South-West. How lucky we are in the South-West to have such marvellous works of art and such famous artists! But we have not yet had one single work of art given to us under the new provisions. I wonder whether the Minister will consider whether the pre-eminence rules could be slightly lessened so that municipal museums can acquire works of art rather more in the middle range.

It is terribly important for us in the South-West to get works of art to make up a collection which will be formed over a period of 20 or 30 years ahead. We want to buy works of art by artists who have perhaps not yet reached as high a price in the art market as they will in future. I therefore ask the Minister whether he will consider that. I am particularly pleased that the Plymouth Art Gallery has acquired a picture by Roger Hilton which is absolutely essential to any museum which wants to have a collection of contemporary art in the South-West.

These considerable tax problems are making it impossible for us to do very much. There are also legal problems. So many works of art in historic houses are held on a strict settlement, perfectly properly. How can one be sure that future generations will be responsible, maintain them and spend the money on insurance? But there is no legal power so far as I know for the tenant for life of strict settlement works of art to give the works of art to a museum, an art gallery or even the National Trust. I wish that I could have the power to give to the National Trust some of the works of art that I now hold as a tenant for life on a strict settlement.

8.9 p.m.

The Earl of Perth

My Lords, I do not know whether it was plotted or good fortune on the part of the noble Lords, Lord Fanshawe and Lord Annan, that we have this debate at this moment. Yesterday we saw the report of the National Gallery. It seems to me that what we have learnt from that reinforces all that we have been talking about tonight.

The other day in this House the noble Lord, Lord Young, gave some statistics which I found quite remarkable. He told us that the number of people employed in libraries, museums and galleries in this country amounted to over 350,000. Employment in the tourist trade in this country amounts to over 1 million people. Of course, the two are interconnected. I would include in the interconnection the position of the great historic houses—as the noble Lord, Lord Charteris, mentioned—which are also open and helped on the contents of their works of art by various means. The point I am trying to make here is that we all want measures to increase employment. One of the things I have always been told is to build on a growth industry. Tourism, which takes in the broad spectrum of museums, galleries and historic houses, is a growth industry.

I suggest to the noble Minister that one of the arguments he can use in trying to do what all your Lordships have asked for today is to say this should help on the employment side. It may be said, "Very well, but the Government have already given very great help and consideration recently in the grant which the noble Lord, Lord Charteris, referred to and which is in the actual text of the Motion tonight". Very well; but it is slightly worrying. I understand it when the noble Lord, Lord Charteris, says that it is not yet in the bag. All right; in certain respects they are doing noble work, and it is surely the Minister who has helped there.

What is the point of giving on the one hand and spoiling the whole thing by taking it away on the other? Surely this is what is happening in the Treasury's restrictions about the "in lieu" provisions. No only has it done that but it has reduced the grants to various galleries throughout the country. I suppose it will be said that the Government hope in this way to persuade or to force—whatever is the right word to use—private sources to the rescue. In some respects they have been incredibly successful. I refer, of course, to that tremendous gift promised by the Sainsbury family for the National Gallery. All the same, I must press the Government to recognise that they cannot expect that to happen all the time; they really have a critical role to play at this moment.

Here we have the "in lieu" which had been sanctioned by Parliament, and yet we have heard from the noble Lord, Lord Annan, how there is a danger of going to the Tower because of the way it has been used. I understand that it is difficult for the Treasury to be totally open-handed, to give a blank cheque on this question of "in lieu". While it is true that cash does not necessarily pass, it is cash forgone; it is not cash needed but it is cash forgone. There must be some limit. Goodness; £2 million with prices as they are today—it is tragic that it should even be thought about! What happens? All the museums and galleries have to fight for it. That is not a very good thing for this limited source. I would say it is a nonsense.

Today I was talking with a noble Duke about this whole debate, and he ought to know about it. He preferred to use the words, "It is crazy." Whether it is a nonsense or whether it is crazy, it is very unwise; it is a great danger to the country's heritage. It has to be changed; it has to be changed for all the reasons that your Lordships have given. In particular, I had in mind what the noble Lord, Lord Annan, said about would-be donors. As the system is today we get museum directors up and down the country who establish special relationships with collectors or with those who have special works of art which they think might be suitable for their museum or gallery, and the collector wants to be able to help and the museum director ditto. What happens in practice? If this absurd level is insisted upon, that system breaks up and the relationship between potential donors and museums is upset. It is not only the potential donors; it is also others such as executors. The executors who know in general what might have been the wish of somebody, who want to offer the works, cannot do it. It is placing executors in a very awkward position.

Let us take the case of Ben Nicholson, that great British artist who died the other day. What had the executors to do? They know what they would like to do. They have tried very hard to get first in the queue this year, I gather. Whether they will succeed, I do not know. If they do not, are they not perhaps derelict of their duty in not offering it out to anybody who will buy? Is it really reasonable to place executors or those who want to do proper things in this sort of position? It puts them in a highly embarrassing and awkward position. I do not think that is fair and it certainly is not to the advantage of the country.

I have just given an example of an artist, but it is not only living artists; it is the sculptors, the writers of music and the authors. I believe it is true to say that in this country we do not have one manuscript of Evelyn Waugh. Maybe the last one of Vile Bodies may come to us. The review committee may want to stop it, and perhaps the country will come to our rescue in the sense of funds being available, but is not that a shocking thing? We really should be trying, whenever we can, to get the living artists of today who are going to die—as we all do—and make sure that some of their work is available through the "in lieu" process.

I understand, as I said before, that we cannot expect a blank cheque; but what are we to do? The Review Committee on the Export of Works of Art tells us every year in its report what has been accepted in lieu. Very interesting reading it makes. If you look at the report for 1979–80, there was approximately £2 million in cash; there is a long rigmarole which I do not quite understand. When one looks at the objects that were saved all over the country, not just for the national museums in London, one realises what a tremendously important concession—if that is the right word to use—or method of saving works this represents.

What are we to do? I suggest that there is a good deal of muddle at the present time on how this system operates. From all the noble Lords I have heard tonight—Lord Teynham who made that fine maiden speech, and others—one gets the feeling that perhaps we are in a bit of a muddle about it all. We ought to have a look at it to see how best it can operate. I thought a good deal about who should be asked to operate it. The national heritage fund? No. The Review Committee for the Export of Works of Art? Although it appears in its report, no. The museums and galleries? Possibly. But I think on balance the right thing is for a special body to be set up to operate and make an annual report to Parliament on what they are up to. My request to the noble Minister who is to reply is that he considers very carefully whether and how we should do this. After all, when one has heard the noble Lord, Lord Saint Levan, say that after six years they are still struggling on these issues, something is wrong.

I finish by saying that I hope that as a result of today's debate, and as the outcome of all the pressures that the Minister for the Arts has put and will put on his colleagues, he can get this so-called ceiling of £1 million or £2 million (I am not clear which it is) left out of it. It should be put on to a proper basis, with, if you like, a £5 million or £10 million figure, taking into account all that has happened in the way of rising prices in the last few years. I hope that doing this will help him to appreciate what I started off by saying: namely, that this is not a special class interest for which we are pleading; we are pleading for employment in the country.

8.21 p.m.

Baroness Airey of Abingdon

My Lords, I join other noble Lords in thanking my noble friend Lord Fanshawe for having introduced this debate at such an auspicious moment. Perhaps I may also, with other noble Lords, congratulate my noble friend Lord Teynham on his very excellent maiden speech.

There is an old music hall song which goes, Don't put your daughter on the stage, Mrs. Worthington but today, Mrs. Worthington, if it were the case of a young woman who was to inherit a beautiful old manor house, I would say this. Maybe her ancestors fought at Crécy, at Waterloo or at Calais. Maybe in the 18th century, with discerning taste, they bought beautiful treasures to fill their small but jewel-like house. Your daughter will be a slave. I suspect she will be a willing slave because she loves that beautiful house. However, with today's prices, she will have the great temptation to sell it up. What a change in her life and that of her children there would be if she should sell it up. But what a loss to the nation!

Who will want to look at a house denuded of all its treasures and, eventually, of its original owners? This country is stiff with beautiful manor houses. The other day I discovered one by chance. I shall never forget the experience. I went up a long road, which could not really boast of being a drive because it was so rough. I had been asked by mutual friends to lunch there. When we went inside I found that we were to lunch in the kitchen in an extremely humble way, though I must admit the wine was very good.

Afterwards, my hosts, who were dedicated owners of this house, which belonged entirely to them, took me upstairs. My breath was absolutely taken away by the beautiful possessions. Then we went right up to what must have been the attics. There, there was the most wonderful collection of modern pictures. I think this comes a little in line with what my noble friend Lord Teynham said, that we must think of the future when we are thinking of the preservation of the arts.

The other day, I discovered this wonderful house. I should like to say to your Lordships that such houses really are the nation's capital; they are our investments. What is more, they make money in hard cash. The Treasure Houses of Britain exhibition, about which my noble friend Lord Charteris has spoken this evening, will give America a taste for the treats in store for the tourists who come to this country.

Stockbrokers sometimes advise their clients to invest in art. What better, with today's appreciation? I commend this to my noble friend the Minister. I beg him to speak to the Government on this matter and vastly increase what my other noble friend Lord Charteris has called the "Mickey Mouse" money used in lieu to enable the works of art to remain where they belong.

However, I speak this evening specifically for the smaller manor houses with less land and fewer resources. Their treasures should be accepted in lieu of the still penal taxes in return for access to the public. Thus they will be outposts of the museums and galleries, which are often short of space. I am sure that many of the curators of our great museums are suffering from this problem. In this way, the treasures will be owned by them but will be shown in their true setting.

I believe that the owners of these houses should be given every encouragement to stay on in their houses with continuity. I believe that visiting these "in lieu" aided houses will be of great benefit to the country. It will encourage tourists from abroad. There will also be the spin-off which has been referred to by other noble Lords this evening, of creating trade, and, most importantly, this will be a boon to employment. The nation will have a vast store of real property and worth. However, to achieve this, the owners should be allowed to feel that what they do is a benefit to everyone and we should applaud their courage in staying on.

8.26 p.m.

Lord Donaldson of Kingsbridge

My Lords, the noble Baroness has spoken so well on the smaller house problem, which is a very difficult one because it can run into money problems so very quickly. I shall not follow her because I do not know a great deal about that aspect. I wish to concentrate chiefly on the main topic which the noble Lord introduced, which is the chattels problem of the "in lieu" system. I am very glad that he has brought it up, because it is in a far worse state than I realised, being fairly remote from action at the moment. I have been very shocked by what I have discovered.

I was for three years Minister for the Arts—I am thankful to say not with the more terrible Treasury responsibilities which the present Minister has. When I was Minister, the system of protecting the heritage in the form of chattels worked jolly well. There were three stages. First of all, there was the "in lieu" system. I have not checked my figures, but I am pretty sure I am right in my recollection that it was understood with the Treasury that we in the Ministry of Arts would have a figure of £3 million (I think at one stage it was £3½ million) for chattels. I cannot remember what it was agreed that the environment should have, but it was something additional to that. Up to the stage of Mentmore, we never had to refuse anything. For the whole of the time I was there, there was never a refusal; there was never an excess of demand over the quota allowed.

When one looks back on 1979, 1978 and 1977 and thinks of £3 million, I do not know what that would be worth today. I have asked the Minister to have an answer to this, because I am not very good at calculations whereas he has people to help him. I hope we shall hear what the £1 million or £2 million at today's figure amounts to in relation to the figure we had then.

We have not had from this debate many solutions offered to this problem except the one we all want, which is a higher budget for the "in lieu". In my day, I had a very amenable Chief Secretary to the Treasury in the then right honourable gentleman Joel Barnett. Unlike the picture suggested by the noble Lord, Lord Fanshawe, of a Treasury unwilling to do this job, he was very willing and did everything that he could to help, within reason.

We never had a ceiling given to us. There was a budget figure. At any stage, this could have been discussed and would have been discussed. There was no question of doing what has unfortunately just been done, with someone saying that we have passed the limit and cannot go on with it. I do not know what has happened to make this wrong, except that the inflation of value has been so enormous that the whole problem is far less tractable. One would think, in an innocent way, that the way to overcome this would not be to reduce the limit but to increase it somewhat. That is, of course, the only solution that anyone has come up with during the whole debate.

It is perfectly clear that it is ridiculous to have a system of this kind which cannot do the job better than now. My remedy, as it always is, is to give them more. I know that this is not helpful to Government, but I am not trying to be helpful to Government. They have to sort themselves out. They are doing something very damaging indeed to the country which they are supposed to be governing. Do not let us pretend that they are not.

The second branch of protection was the Waverley system, to which the noble Lord, Lord Cottesloe, referred. That system, with one or two rows, also worked awfully well. On a number of occasions, preeminent articles were saved. On a number of others, the price could not be raised. It was, however, a perfectly fair and straightforward arrangement with which people in general were fairly content. The Annan solution—I am sorry that the noble Lord is not here—seems to me not at all the proposal to go for. If you want to increase something, it is never any good cutting. You have to face the fact that more money should be spent and that it was spent perfectly successfully 10 years ago. There should be no hesitation in saying that this must be done. If you take away the purchase grant, already cut in the case of the National Gallery, you are making things worse in order to make them better. That is very seldom effective.

The system has worked well until very recently. Of course, the explosion in prices has been getting worse all the time. It is clear that when you have a seven figure price for a picture, the sort of things that the Government are now talking about are in no way relevant. If the Government are not going to find money at a proper level, they should say so in clear terms. They will lose a lot of good will through it. I am sure that the noble Earl is fighting the battle as hard as he can. I give him credit for that. I am not here to defend him; he has to defend himself. This he has shown himself quite capable of doing. In our last debate there was powerful speech after powerful speech attacking the arts. In the newspapers one read of only one powerful speech: that of the noble Earl, saying aggressively and, with respect, wrongly, that everything in the garden was perfectly all right. One must not try for a single moment to defend the noble Earl. We want to urge him on. We want to use the prick of the gadfly, which was so effective with Zeus, or Jupiter, according to what I can recall of my classical education.

I want to talk, following some remarks of the noble Lord, Lord Annan, about the desirability of the "in lieu" system from the point of view of the donor. It seems to me desirable that works of art of pre-eminent quality should be acquired by our museums and galleries, or perhaps better still left in their stately homes and open to the public, when taxation and rising values make it impossible for the descendants of the man who collected them to keep them privately any longer. It is good that someone other than the Treasury should decide which to accept and where to allocate them. But there must be a budget figure in mind and the Minister may, on occasion, have to choose one or other of two offerings if he cannot afford both. I do not quarrel with that. I do not expect the Government to accept an open-ended demand. I expect them to accept a demand that makes sense in relation to the situation and to show flexibility in their top level; to pass things on to the following year when necessary, and that sort of thing. It is quite easy to do.

I do not think that we can expect to keep everything. Works of art have always changed hands and countries. They should not all be frozen in galleries. It is right and proper that there should be a trade in such things. It is a trade of considerable value to this country. The direct treaty system—the third of the matters I was talking about—is also working well. Noble Lords will know what it is. It is where a bargain is made with the Treasury over tax in return for selling direct to a national institution. That is a perfectly good procedure that works satisfactorily. It keeps the chattel away from public auction.

The late Lord Vaizey, as the noble Lord, Lord Annan, said, attacked the whole question of the reality of paying back the price of something you had got. He was, philosophically, perfectly right. It seems to me that once you are given an article in lieu of money owed and it is accepted, that is and must be the end of the matter. But it is also clear to me that you must have some system of control, particularly with the rise in prices. One can give a series of known pictures hanging on loan in galleries all over the country that one really could not afford to buy at all quickly under the "in lieu" system. In my view, Lord Vaizey was not entirely right. It is purely a question of bookkeeping and absolutely nothing else. It has no reality and no connection with reality at all; so I need not worry about it once we agree that there cannot be an open-ended commitment to buy everything all the time.

The really serious issue, as I believe the noble Earl will have to tell us, is that the difference between the figure that I had to work with, which operated perfectly well, and the figure with which he has to work, which is impossible in relation to the present amounts, is much too wide. Either this should be dropped, with the Government saying that they are beaten and they cannot manage it, or it should be done properly. The case for raising the limits seems absolutely unanswerable. When the nation acquires an asset, it acquires an asset. It is no good the Treasury going on as though it was increasing public spending incautiously. To swap inflationary cash for fast-rising eternal values may be frowned on by the Treasury. By ordinary citizens, it can be seen to be a very good investment indeed, although it is not possible to do too much at once. I hope, therefore, that the noble Earl will seize this opportunity to restore the confidence of the art world by doing something good for the arts and sound for the country.

8.39 p.m.

Lord Strabolgi

My Lords, I am sure that we are grateful to the noble Lord, Lord Fanshawe, for tabling this Unstarred Question. The House has had an extremely interesting and useful short debate. I should like first to congratulate the noble Lord, Lord Teynham, for his excellent and knowledgeable maiden speech. I hope that we shall hear from him on many future occasions.

I am sorry that the noble Lord, Lord Annan, is not at present in his place because I should like to endorse and support all that the noble Lord said about Mr. Denis Mahon's endeavours to allow his collection to pass into the public domain. I have had the privilege of knowing Mr. Mahon for a great many years and I know how public spirited he is about-these matters. I hope that the noble Earl will take seriously the points and suggestions that Mr. Denis Mahon has put to him.

I must also join with the noble Lord, Lord Fanshawe, in congratulating the Government on stepping in to ensure that the three historic houses—Nostell Priory, Kedleston, and Weston Park—were saved for the nation. But I must ask the noble Earl the Minister what will happen to the contents? The Chippendale furniture at Nostell is worth several million pounds. What is to happen to the historic contents of Kedleston? Will they all be accepted in lieu? If so, the £2 million ceiling will have to be increased for a start. Perhaps I may clarify the question of whether it is £1 million or £2 million as I understand it, and if I am wrong perhaps the noble Lord will correct me. I understand that £1 million was given to Environment and £1 million to OAL, but they are interchangeable. However, so far as the noble Earl's department is concerned of course it is only £1 million.

I must also ask what financial arrangements are being made to provide for the working future of the houses.

Lord Charteris of Amisfield

My Lords, I should like to speak for a few moments on those three properties. Nostell Priory already belongs to the National Trust and the only thing that is of interest there is its contents; that is, the Chippendale furniture about which the noble Lord has spoken. As regards Weston Park, both the contents and the house are involved, and the same applies to Kedleston. Certainly so far as concerns the National Heritage Memorial Fund, we look upon the contents as being as important, possibly more important, than the houses themselves.

Lord Strabolgi

My Lords, I am very grateful to the noble Lord, Lord Charteris, for endorsing to a certain extent what I said about the contents. I should also like to ask the noble Earl—if I may have his attention for a moment—what is being done to provide for the working future of these houses. All in all, do the Government think that the £25 million will be sufficient?

The "in lieu" ceiling is proving very restrictive and I think it right to say—as has been said in this debate—that works of art are being lost to the nation. There is the case of the Merton Van der Weyden, which the Walker Gallery at Liverpool badly wanted and which qualified for acceptance in lieu as being pre-eminent. As your Lordships are aware, it used to hang for many years in the National Gallery. Yet the painting had to be declined because of the "in lieu" ceiling. How does this failure fit in with the Government's plans to help Liverpool in the cultural field? To help the Walker to acquire an important Flemish painting at no cost to the state would surely have been complementary to the exciting scheme for a "Tate of the North"; but once again this has come to nothing because of Treasury rigidity and shortsightedness.

The Renoir painting "La Pensée" which was shown in the recent Hayward Exhibition which was sponsored by IBM and which was so popular—I think probably the most popular exhibition we have ever had since the Van Gogh exhibition just after the war—was accepted in lieu at around £650,000. This is a charming but middle-ranking Renoir and yet it cost all of that large amount. Therefore, the £2 million is not going to go very far as the noble Earl, Lord Perth, said. The National Museum of Wales is having to buy two fine Flemish 16th century portraits for about £200,000, which they could have had for nothing—for nothing, my Lords—if the museum had been allowed to accept them under the "in lieu" system as payment of transfer tax. Similarly, as has been said in this debate by the noble Lord, Lord Fanshawe, the Tate has had to pay over £1 million from its grant for the Penrose de Chirico which it could have had for nothing and would have had for nothing if it had been a French museum.

I do not understand why there has to be this compensatory payment to the Treasury for the theoretical loss of tax. Tax allowances or concessions are allowed for a whole host of other reasons. Why not on acceptance of a major work of art by the nation? I doubt if many of our most treasured works of art would have passed to the nation if previous governments had been as restrictive as this one.

I do not agree with the noble Lord, Lord Annan, on some of the more pejorative adjectives he used to describe the French character. However, I do agree that the French are much more realistic about this problem, and I admire the diamond-hard determination with which they act in the best interests of France. As the noble Lord, Lord Annan, has said, in France the dation scheme allows works of art to be accepted by the nation in lieu of tax without any compensation from the arts budget. There is no limit to the works of art being offered under this system and the French patrimoine has been greatly enriched in consequence.

Here, as the noble Earl, Lord Perth, has said, all is rather a muddle. I note that administration of the "in lieu" scheme has now been passed by OAL to the Museums and Galleries Commission, although offers of heritage property in lieu of tax will continue to be made initially to the Capital Taxes Office. I am sure that this is a most useful decision although I do not think it really makes much difference who administers the scheme—although it probably saves the noble Earl and his department a certain amount of trouble—while the "in lieu" ceiling remains at this ludicrously low figure.

There are other matters to which I hope the Minister will direct his attention as a member of the Cabinet and as the Treasury spokesman in this House. At present, when an export licence is postponed or when there are sometimes lengthy negotiations with the Treasury, interest charges on the notional amount of CTT continue to accrue and these can be very heavy. Would it not be fairer if these were waived? Why should an owner who is trying to pass over his property to the state, be charged interest while the Treasury makes up its mind?

The other matter is the question of VAT charged on the buyer's premium at auction sales which can be heavy at times. At present—this is extraordinary but I understand it is fact—local authority museums are zero-rated but the national museums for some inexplicable reason, are not zero-rated for VAT. Foreign buyers, of coursee, to encourage them, are zero-rated. Therefore, our national collections are at a distinct disadvantage. It would be much fairer if our national museums were brought into line. I hope that the noble Earl is going to take this plea seriously, and that as the Arts Minister he is going to try to persuade his Cabinet colleague, the Chancellor of the Exchequer, to do something about this absurd anomaly. It would be a small, but minor concession and I cannot believe that the whole of our financial and social fabric would collapse if it were made.

Last week saw the sale of the Northampton Mantegna for over £8 million, a world record price for a painting. As we all know, the Mantegna was bought by the Getty Museum at Malibu, although it could have been sold to one of several other buyers as I understand that there was keen under-bidding. Although the painting cannot conceivably be regarded as part of our historic heritage, the National Gallery of Scotland is understandably keen to have it. May I ask the Minister what is the position about the Mantegna? If we are incapable of retaining it here, then the Mantegna will have to go to California where I am sure it will be well looked after and deeply appreciated as I was very glad to hear the noble Lord, Lord Teynham, say.

In fairness to Getty, there have of course been two recent occasions when the museum has not bid for a work of art which had a heritage interest in this country. These were the Pissarro painting of Sydenham in the National Gallery and the Joseph Wright painting, also in the National Gallery, of Mr. and Mrs. Coltman. After discussions with the NG in both cases the Getty decided not to bid.

Lord Annan

My Lords, may I intervene? Did I hear the noble Lord say that it was the National Gallery which was interested in purchasing the Mantegna? That is not so.

Lord Strabolgi

No, my Lords, I certainly would not have said that, I said the National Gallery of Scotland. I am sorry if the noble Lord did not understand me, but this is what I said. However, it is fair to say that the case of the Mantegna and the recent sale of top Old Master drawings from Chatsworth highlight the problem of the retention of important works of art in this country.

Here, I was in what the noble Lord, Lord Cottesloe, said, and also the noble Lord, Lord Donaldson, about the question of the Waverley criteria. It is now over 30 years since the Waverley committee's first report. The criteria have stood the test of time on the whole, although I think that the moment has surely come for the whole system to be reviewed. What we need, I suggest, is a fresh independent inquiry with recommendations on how to save the nation's heritage in the light of present circumstances.

Waverley reported long before the days of CTT. It was quite a different system then. May I ask the noble Earl the Minister in conclusion whether he will consider setting up a new committee to inquire into the problem of retaining Britain's works of art that remain in private hands and how best these can be kept in this country, because I think the time is now opportune for this?

8.52 p.m.

The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie)

My Lords, I should like to start by echoing other Members of your Lordships' House in congratulating my noble friend Lord Teynham on a remarkable maiden speech in what I earnestly hope will turn out to be a remarkable and historic debate. I looked up my noble friend in Dod and I saw that he spent some part of his distinguished career as agent to the Hatherop Estate in Gloucestershire. It so happens that part of that estate is a well-known girls' school. It also so happens that my first paid employment was as a junior master, or usher, in this well-known girls' school. I think of it most fondly, and I am glad to have had that somewhat tenuous connection with my noble friend.

On this serious and fascinating issue he did everything that a "maiden" should do. He was not directly controversial, he was extremely witty, and for my part I thought that nearly everything he said was simply right. I hope that my noble friend will address us often, and not least on subjects in my area of responsibility and interest. I can promise my noble friend that it is not part of the intention of Her Majesty's Government to "flog off" the House of Lords. He appeared to be rather anxious about that. Indeed, we have spent rather a considerable amount of money in repairing its ceiling. Unlike perhaps noble Lords opposite, it is also not our intention, if humanly possible, to drive many of the Members of this House into tax exile.

I should also like to congratulate my noble friend Lord Fanshawe for turning the spotlight on this very real issue and real anxiety about the resources which are needed to protect our heritage, and as to whether they are adequate. I was impressed, if I may respectfully say so to him, with the cogency of his case and its presentation. I do not pretend, any more than he does—or the many other noble Lords who spoke with considerable understanding of some of the real difficulties involved—that the problem is an easy one or that it is likely to vanish. But I am grateful for the considered praise which he and other speakers have given to the Government for their action to try to help the National Heritage Memorial Fund save Kedleston, Nostell Priory and Weston Park.

Even The Times newspaper which, to its credit, has campaigned vigorously on this issue—as indeed has its principal rival the Daily Telegraph—has admitted that we are on the right track in taking this step, and that it is an earnest of our good intentions for the future as well as a record to be proud of in the present. To find £25 million for the National Heritage Memorial Fund while public spending generally is under considerable restraint is a significant signal that the Government will not stand by when the contents, fabric and surroundings of great houses of the finest architectural and historic quality are at stake. We are well aware, as my noble friend Lord Young himself showed he is aware, of the immense economic importance of the heritage, as well of course of the living arts, to employment and the economy of this country.

Where Nostell Priory is concerned, the house is already in the possession of the National Trust. Chippendale is surely our foremost artist-craftsman, and here I wholly agree with my noble friend Lord Cottesloe. I hope that the National Heritage Memorial Fund will be successful in its efforts there as well. Having said this, I am not going to holler, as the noble Lord, Lord Charteris, put it, until he is out of the briar patch. I hope he will not take it amiss from me if I say that the Government have enormous confidence in the noble Lord, and I find it hard to imagine a situation where they were not prepared to take his advice.

Nevertheless, as the noble Lord, Lord Donaldson, with his practical experience, recognised, resources are limited and public expenditure cannot simply be stretched to meet whatever situation should arise. We do not print money. It is in this context that I shall examine the ideas put forward tonight for making the acceptance "in lieu" provisions more effective. I assure the House and my noble friend Lord Fanshawe, who also has been admirably persistent in putting this case, that I shall try to look positively and constructively at the ideas.

Acceptance in lieu is of course only one part of a complex of arrangements to assist the heritage. There are also the capital transfer tax concessions which are intended to encourage owners to retain works of art rather than put them on the market, and that might be something to give cheer to my noble friend Lady Airey. There are the attractive arrangements for private treaty sales to public museums which also benefit from tax concessions. There are the export control mechanisms.

The noble Lord, Lord Strabolgi, asked me about the Mantegna. There is a procedure of export control whereby the export reviewing committee makes recommendations to the Minister. It has not yet done so. I find it hard to imagine that it will not, but naturally to some degree I am in purdah until I am formally requested under the system as it operates. We have as well the direct help which the Government give to institutions through purchase grants and through the National Heritage Memorial Fund.

We must not talk ourselves into a state of panic. Taken together, these provisions have had a very considerable impact on the heritage and a very considerable impact in recent years. Anxieties are of course evident, and they have been evident in this debate, due to the recent startling changes in inernational prices. My brief says, "startling changes" but I have to say, as a former art dealer, that I have been predicting them for about 10 years. They simply happened a little later than I myself expected.

Even in the face of these changes, the recent record is still real and considerable. If we look again at recent achievements by all the means that I have outlined and we take the package as a whole, and if also we remember that good news is always less news than bad news, the list is remarkable and it is an indication of the Government's and the nation's commitment.

There was the £8 million for Calke Abbey, the £25 million that we have mentioned that has been given to the National Heritage Memorial Fund with a view to saving Kedleston, Nostell Priority's contents and Weston Park. There was the private treaty purchase by the Tate of the great de Chirico surrealist painting—and, while I understand the Tate Gallery's complaint about the "in lieu" aspect (as will, I think, become apparent), it must be said in fairness that the gallery did obtain that great picture at well below market price. There was the private treaty purchase by the National Gallery of the Jacopo Bassano from Weston Park and the Joseph Wright of Derby. Both these great paintings were mentioned in the debate.

There was the purchase for £1.8 million (after the export stop proceeded in the orthodox and usual way) by the Manchester City Art Gallery of the Sienese Crucifixion, thought to be by Duccio; there was the Hogarth acquired by the National Portrait Gallery for about £300,000; there were the Turner bird studies acquired by Leeds City Art Gallery for £200,000—a really excellent competitive price, if I may say so; and the acceptance in lieu at £1.75 million of the Godman collection of Islamic pottery for the British Museum. Then there was the painting mentioned in his speech by the noble Lord, Lord Strabolgi, Renoir's La Pensée, which was purchased for £600,000 for the Barber Institute in Birmingham.

These are all recent cases and they and many others were generously helped by the National Heritage Memorial Fund, to which I pay tribute. I pay tribute too, to the work of the noble Lord, Lord Charteris, and my noble friend Lady Airey, who sit on the Fund. I think that they are an indication that the arrangements for the heritage—while we must be ever-anxious and vigilant in attending to them—are working well. May I say to the noble Lord, Lord Donaldson, that the list I have just given is, frankly, not my idea of doing damage to the country. Indeed, if it is damage, let there be rather more of it; and if I am damaging in this respect, may I turn into a positive vandal. But, that said, I agreed with a great deal of the rest of what the noble Lord, Lord Donaldson, said.

Turning to AIL—acceptance in lieu—there has been no decrease in the Government's commitment to it. Indeed, an amount for acceptance in lieu of £2 million between these two departments—and they work very closely together—has been allocated. What has occurred is a substantial and worrying increase in the number of items on offer and in the value of items on offer. That international inflation, if you like, is not the fault of the Government. It is this which, coupled with the high and special cost of Calke Abbey, has caused us to turn some items away and to indicate that we shall be more highly selective in the coming year. Given the richness and variety of the national stock of major works of art, I believe that it is perfectly reasonable and logical for us to be selective.

However, that said, I accept that there is very strong feeling in this House and elsewhere that we should move away from the present arrangements which, I have to say, I have myself found unsatisfactory for a long time, not least because of the conversations I have had with Mr. Denis Mahon and others—and he was particularly mentioned tonight. I am also aware of our election manifesto commitment to examine ways of using the tax system to encourage further growth in private support of the arts and the heritage. It is not unfair to point out that some improvements in the tax system as it affects the arts have already been made by this Government; notably the reduction in the covenanting period, the reduction in levels of taxation generally and for capital transfer tax in particular, and the arrangements for index linking capital gains.

But I do now undertake to see whether further improvements are possible and I am therefore very glad to be able to tell my noble friend and the House—and just occasionally, therefore, it may be of advantage to have a toe in the Treasury water—that we shall be looking again at the arrangements whereby part of the cost of acceptance in lieu is met from Votes.