Export of Works of Art

HL Deb 19 February 2003 vol 644 cc1141-67

3.20 p.m.

Lord Strabolgi rose to call attention to the 48th Report of the Reviewing Committee on the Export of Works of Art 2001–2002 (Cm 5662); and to move for Papers.

The noble Lord said: My Lords, I am glad to initiate this debate and I suggest that it is particularly apposite as this is the 50th year of the reviewing committee, which was set up following the Waverley report on the flow of works of art abroad. The criteria under which the committee works have stood the test of time. There are some who want a complete embargo on the export of all art works, but that would surely be unfair to owners if a world price could not be established. Our system, whereby a temporary deferral is placed on the work in question to enable us to find the funds to match the auction price, is the best. If funds are not forthcoming after a few months, the deferral is lifted and the work goes overseas.

A great many works of art have been retained by that method. Those have mostly been the lower-priced items, which are nevertheless an important part of our national heritage. The problem arises, and has become particularly acute recently, with the more expensive items—those worth more than £1 million. The value of major masterpieces has risen to astronomical levels in recent years. Indeed, the director of the National Art Collections Fund has said that we may soon expect the first £100 million painting. That makes for a difficult situation, especially if the item is part of our historic heritage.

The Government have done something to ease the situation. The Treasury has agreed that the total amount allocated for the acceptance of art works against tax—known as the "in lieu" system—can be raised to £20 million in any one financial year. By that method, the National Gallery was able to acquire the charming little Cimabue that had recently been identified in a house in Suffolk. It is the first Cimabue to enter the collection and fills an important gap.

On the other hand, the funds made available to the Heritage Lottery Fund have been reduced by other calls being made on lottery funds. The National Heritage Memorial Fund, which is a fund of last resort, is the subject of an inquiry into its future by the department and its funds are continually being reduced. Perhaps my noble friend Lady Blackstone will tell us when we may expect the result of that report when she replies to the debate.

The Waverley report reminds us that that fund was established in memory of those people in the Armed Services and civilians who gave their lives in the Second World War. Many older members of the population will consider it disrespectful to their memory if the fund is wound up or merged with the Heritage Lottery Fund. Indeed, the report states that the fund should be replenished to the earlier level of £12 million. I am glad to say that the ceiling for the "douceur", whereby owners who offer a work of art to a gallery are allowed some reduction in inheritance tax, is being increased to £20 million.

The NACF, through the generosity of its members, has been a great help in retaining items that would otherwise have gone abroad. The Resource/Victoria and Albert Museum Purchase Grant Fund assists with the purchase of items costing less than £300,000, but which are important to our heritage, which are given to the collections of non-national museums and galleries. The fund is provided by the Council for Museums, Archives and Libraries.

Why cannot we adopt the American system whereby a donor of a work of art to a museum is excused tax—even, in some cases, being able to keep it in his own home until after his death? That has enormously enriched American museums. I have been trying for years to persuade successive governments to adopt a similar system, but the Treasury will not budge.

The report admits that there has been only limited success in retaining the most expensive works of art. After the deferral period, those are invariably exported—usually to the United States. Can we possibly compete with American museums, notably the Getty Museum of California, which has bought the enchanting Raphael, "Madonna of the Pinks", from Alnwick Castle, which had recently been on loan to the National Gallery? That highly important painting would cost £34.8 million if we were to match the price offered by the Getty.

It has been starred by the reviewing committee and it is at present under a temporary deferral. I understand that my noble friend the Minister is willing to extend the deferral for a further six months to enable matching funds to be raised. I hope that we shall be successful, although that is a huge sum to raise and one can think of so many other demands on the public purse. Could we not have a public subscription? I remember that that happened in the late 1950s to retain the large and highly important Leonardo cartoon, which is now in the National Gallery.

The sale of the Raphael will help to improve the gardens at Alnwick. As Sacheverell Sitwell said, our country houses are one of the greatest contributions to our national culture. At present, their owners are having a difficult time following the outbreak of foot and mouth and because visitor numbers are much reduced due to the crisis. It is important that those beautiful houses should be preserved. If the sale of a very expensive work of art helps towards that end, it is surely justified. They may be lost to the country, but they are not lost to civilisation. They go to the United States, with its wonderful museums, where they will be equally well looked after and seen and appreciated by many people.

I would make an exception for items that are an integral part of our national heritage, such as the fine Reynolds full-length portrait of Omai, the notable from Tahiti, who was brought back by Joseph Banks from Captain Cook's first voyage and became popular in 18th century society. That is a fine portrait and every effort ought to be made to keep it. I understand that it is valued at about £12 million, which is surely an attainable sum. Every effort should also be made to help the Tate Gallery to acquire it. My Lords, I beg to move for Papers.

3.28 p.m.

Lord Renfrew of Kaimsthorn

My Lords, once again it is to the noble Lord, Lord Strabolgi, that we owe the opportunity to debate the annual report of the Reviewing Committee on the Export of Works of Art. What a pleasure it is to hear the noble Lord introducing the debate in his usual effective way. I believe that he is now the oldest of the hereditary Peers who sit in your Lordships' House. We hope that he will be doing so and speaking so effectively for many years to come.

The reviewing committee serves several important functions, among which are, first, the creation of a breathing space, by the deferral of an export licence for a work of art brought before it; and, secondly, the formation of a record of the major works of art satisfying the Waverley criteria that leave Britain—in most cases, never to return. The reviewing committee performs both functions impeccably. But, as it says, virtually all the really expensive items that come before us go abroad as a result of lack of funds". The noble Lord, Lord Strabolgi, made that point well, and I shall return to it in a moment.

It was in a debate initiated by the noble Lord, Lord Freyberg, in May 2000 on the 45th report that we last had the opportunity of debating the issues. The noble Lord is the youngest hereditary Peer in your Lordships' House. We wish him at least the 56 years—if my computation is correct—that would enable him to attain the current age of the noble Lord, Lord Strabolgi, and many more besides. In that debate, I questioned whether the committee was giving sufficient attention, under its obligation to supervise the export system generally, to the export of illicitly traded antiquities that had entered this country in recent years.

Those issues are fully discussed in the present report in its reference to the advisory panel on illicit trade. I note the reviewing committee's view that the advisory panel or its sub-committee, which contain all the necessary expertise, should continue in existence at least until the original recommendations have been implemented. As a member of the advisory panel, that is a welcome comment. It places the responsibility for considering such matters squarely within the scope of the advisory panel. It is helpful that a member of the reviewing committee—currently, Professor Rosemary Cramp—sits on the sub-committee. I hope that the Minister in her reply will feel able to accept the reviewing committee's view.

I note the reviewing committee's support for the first outstanding recommendation of the advisory panel; namely, the proposal for a new criminal offence, dishonestly to import, deal in or be in possession of any cultural object knowing or believing that the object was stolen or illegally excavated, or removed from any monument or wreck contrary to local law which was supported by the Government and, I am happy to say, the Conservative Party and the Liberal Democrats. It was encouraging, therefore, that the proposal was embodied in a Private Member's Bill, the dealing in Cultural Objects (Offences) Bill, drafted with the assistance of the advisory panel and brought before another place by Richard Allan MP on Friday 7th February. It will have disappointed everyone concerned with heritage issues that the unusually extensive discussion accorded to the two Bills dealt with earlier that day effectively scuppered progress on the dealing in Cultural Objects (Offences) Bill. Many of us consider the legislation urgently necessary for the protection of the heritage internationally as well as nationally.

Discussions on the matter continue in this House, in its corridors, and in another place. I shall not comment further now, except to say that, first, the Bill is needed; secondly, it is supposed to have all-party support; and, thirdly, noble Lords can expect to hear more on the matter soon.

Before moving on to the central problem, I draw attention to an important statement by the reviewing committee: While we have expressed surprise that so few archaeological artefacts (which are zero-rated for licensing purposes) ever come before us, it is not clear to what extent, if at all, there are further breaches of the export licensing rules". Does that not reflect an extraordinary and disquieting state of affairs? Does it not suggest that things are not working as well as they ought—although, certainly, through no fault of the reviewing committee? Why are licences not being applied for? Can the Minister explain that circumstance? If not, will she invite the advisory panel to explore the matter further?

The main problem arising from the report, which it puts plainly, is that the most expensive works, thus in some cases the best ones, now get exported anyway. The noble Lord, Lord Strabolgi, dealt with that point effectively. The reviewing committee can put an export stop on them for three months, or even longer, but if the money cannot be raised, away they go.

I am no more convinced than the noble Lord, Lord Strabolgi, that every work of art should be retained in this country just because it has been here for 50 years. But the attrition to the nation's store of works of art continues, despite the good efforts of the Heritage Lottery Fund. Moreover, the report emphasises the attrition suffered by the National Heritage Memorial Fund, to which the noble Lord, Lord Strabolgi, referred, and suggests that the Government should find Treasury resources to restore the fund to its £12 million level and to reinstate its annual grant of £ 12 million per year. The grant has recently fallen to £5 million per year in cash terms—the diminution is naturally more extensive in real terms. But the problem is wider. Is the Minister aware that the Historic Houses Association estimates that 26 per cent of capital repairs at historic houses are funded each year by sales of works of art, representing this year £17 million of sales of artworks? Can that situation be allowed to continue?

I have the privilege of sitting on the committee of the National Art Collections Fund. I am sure that noble Lords are already aware that this is the centenary year of the art fund. They may not know, however, that the gross value of the works considered by the art fund at its most recent monthly meeting just 10 days ago was over £73 million. That includes £34.8 million for Raphael's "Madonna of the Pinks" and £12.5 million necessary to prevent the export of Sir Joshua Reynolds's "Portrait of Omai", to which the noble Lord, Lord Strabolgi, referred.

But the identity of the new owner of the Reynolds portrait has not been revealed. He, she or they have declined to permit public exhibition for the purposes of an appeal. Can the Minister confirm those disquieting facts? Does she not feel that the law might be changed to ensure that, when an export stop is granted, the identity of the applicant for export licence is revealed, and the object is made available for public display during the stop? Otherwise we will have an anomalous and unsatisfactory situation.

The Art Fund has done its best by offering a grant towards both paintings, but given that the annual total that it could offer to museums and galleries last year was around £5.6 million, it is clear that its resources are limited. Attention will now be focused on the Heritage Lottery Fund. It is a matter for grave concern that museum and gallery purchasing funds have suffered so much attrition in recent years, not least during the tenure of the present Government, that more and more claims are set at the door of the Heritage Lottery Fund. At the same time, the National Heritage Memorial fund has not been restored to its former levels. As a former trustee of the British Museum, I remind noble Lords that, like other national museums and galleries, the purchasing funds that it can make available for works, whether or not they are intended, or likely, to be exported, are now derisory. The situation is grave.

The nation cannot be expected to keep all the treasures that the owners of stately homes may feel constrained to sell. But is it doing enough to ensure that we can keep a significant proportion of them? That is the question that the report of the reviewing committee poses effectively, with full documentation. The answer is clearly no. We are grateful to the reviewing committee both for its excellent work and for its candour.

3.38 p.m.

Lord Beaumont of Whitley

My Lords, when I put down a Question on this subject for Answer on 22nd January this year, it was drawn to my attention that the noble Lord, Lord Strabolgi, had submitted this Motion for the ballot. We agreed that we should both go ahead with our submissions. I did not get a satisfactory reply to my Question, so I am all the more glad that the noble Lord was successful in the ballot and has initiated this debate today.

The problem is simple: the rich get richer, and the poor get poorer all over the world. That applies nationally and globally. Globally speaking, it means that there are many rich countries that can outbid Britain for works of art in a public auction.

One possible solution might be for the Government to provide more and more money, but, as we were reminded yesterday in the debate on hospital care and discharging, priorities are the grammar of politics. No one should accuse the Government of philistinism for refusing to pay the ridiculous sums demanded in the global market for works of art. The second solution, on which, I think, the noble Lord, Lord Strabolgi, and I agree, is that the Waverley terms, which are too wide, should be narrowed. There is no reason why "The Three Graces", for instance, should be regarded as a national treasure, although I accept that, had it remained in its original place, there might have been a case for keeping it. On the other hand, there is every reason to keep the portrait of Arkwright by Joseph Wright of Derby. I read in today's paper that it is the latest work to be considered for retention. If we did not spend our time trying to raise immense amounts of money for works of art that are, by nature, cosmopolitan, we would have more money to spend on works of art that are very much part of our heritage and history. We really should try to keep such works.

When answering my Question the other day, the noble Lord, Lord Davies of Oldham, said that the arguments against such an approach—of which, lie implied, he approved—were that there would be damage to the market and problems with enforcement. There will always be problems with enforcement of the laws that we pass. It is not beyond our powers to devise methods of keeping the real treasures of this country here to the benefit, first of all, of our nationals. I am not certain what is meant by damage to the market. The immense sums that are made by the big auction houses are not part of a market that anyone would think of as normal. They are quite beyond that. I should be grateful if the Minister could say what damage would be done to the market merely by restricting the Waverley criteria to cover works that really are part of our heritage. Perhaps, we should go on to make it illegal to export such works. We must keep that part of our heritage.

The noble Lord, Lord Renfrew of Kaimsthorn, is a great campaigner in the field, and we all respect him. He talked about the attrition of the stock of works of art that we have in this country. There is no attrition of works of art in this country; good contemporary art is created all the time. Anything that we lose is balanced, in some respects, by what we gain by having a living artistic heritage. That is not to say that I think that all the modern art being produced is worthy of inclusion in that category, but some is. It is interesting that there is a big exhibition of the works of Graham Sutherland coming up. He is undoubtedly one of our first-rate artists. There are many other artists painting today—not always those looked up to by the Serota tendency—who are very good We should value them, and, if we have money to spare, we should spend it on them.

In the mean time, we must take every possible step to preserve our real heritage. If we cut our cloth to suit our purse, we will be able to do that effectively. It is a worthwhile debate, and I hope that we will get some cheerful thoughts from the Minister and some constructive suggestions.

3.46 p.m.

Lord Freyberg

My Lords, we are all indebted to the noble Lord, Lord Strabolgi, for initiating the debate and for introducing this important subject so forcefully.

As the noble Lord, Lord Strabolgi, said, the Reviewing Committee on the Export of Works of Art is in its 50th year. It is to be commended for the work that it does in highlighting exceptional items that are in the process of being exported and providing a stay of execution of some months. However, it is left to other bodies such as the museums that want the artwork, the Heritage Lottery Fund, the National Heritage Memorial Fund and the splendid National Art Collections Fund—now, as the noble Lord, Lord Renfrew of Kaimsthorn, said, in its centenary year—to try to raise the increasingly large sums of money that will prevent the works from leaving Britain.

Alas, it is ever more of a battle to keep even a few major works of art here. As other noble Lords said, the committee's recent report in 2001–02 declared that the most expensive objects on which they put export stops are "invariably exported" after the deferral period. That might indicate that the committee is, in some respects, failing in the purpose for which it was set up; namely, to protect for Britain items of, outstanding historical, aesthetic or scholarly importance that would otherwise have been exported. That would not be altogether fair, however, as the committee continues to perform an invaluable role both with regard to retaining less expensive items and in drawing museums' attention to important objects that they might otherwise not have known about.

We must have proper measures to enable us to prevent the few really major and expensive works of art from slipping through our fingers. Given the spiralling cost, allied to the relatively puny buying power of museums, the Government's current range of options for keeping exceptional items in this country is no longer adequate. A current example is Joshua Reynolds's "Portrait of Omai", which the Tate would passionately like to have in its collection. The export stop is due to run out next month, and the Tate has, so far, been unable to raise the £12.5 million required. There is a serious threat that the painting will be lost to Britain for ever. The Tate's director, Sir Nicholas Serota, revealed that, before the picture was sold at Sotheby's in November 2001, he had negotiated—and failed—to buy "Omai" in a deal that would have written off tax for the family selling it.

Whatever the details of the case, there is a strong argument for introducing more generous tax benefits to encourage private treaty sales and acceptance in lieu schemes. Such measures are designed as an incentive to encourage the sale and gift of works of art to galleries or museums by reducing the seller's capital gains tax. At present, the sweetener, or douceur, to encourage an owner to give or sell is 30 per cent, a reduction of 10 per cent on the usual 40 per cent capital gains tax. The committee's report draws attention to the fact that that is a less attractive incentive than it used to be because of lower tax rates and suggests amending it accordingly to make it a tempting option once more.

With the same aim in mind, and like the noble Lord, Lord Strabolgi, I should like to draw the Government's attention to the possible introduction of gift aid in kind, another tax option that would encourage the gift of art work to museums and galleries. It would do that by allowing a donor to deduct the "fair market value" of an item from his taxable income. It is designed to give an owner greater financial advantage than if he were to sell an item at auction, which is not the case at present. As things currently stand, items which are sold at auction have a far greater likelihood of being sold abroad.

Gift aid in kind exists in a number of countries, among them the United States, Ireland and Australia. Britain is rare in not having such a scheme. Introducing one would be a logical continuation of the Government's recent extension of income tax relief to include gifts of shares, land or building to charities, as illustrated in the Finance Act 2001, and would also go some way towards making up for our museums' practically non-existent purchasing power. For example, the Tate has less set aside for acquisitions now than it had 20 years ago; as the noble Lord, Lord Renfrew, mentioned, the British Museum's notional acquisition allocation is clown to £100,000; and the position of regional museums and galleries is even worse.

It is worth pointing out, however, that for a gift aid in kind scheme to have a successful take-up, it must be seen to have real advantages to the vendor. For example, in Australia tax relief under gift aid in kind can be spread over several years, while in Ireland it can be applied to any form of taxation—income, CGT or inheritance.

Ultimately, it is clear that our institutions can no longer afford to pay market prices for major masterpieces. Instead, through gift aid in kind and other schemes we must devise tax incentives which make it attractive for individuals to donate works of art to museums rather than selling them to the highest bidder. The extension of tax relief through gift aid in kind would do just that. I hope that the Government will seriously consider such a practical and desirable option.

3.52 p.m.

Lord Sheldon

My Lords, my noble friend Lord Strabolgi is right to introduce the debate today because a number of new factors are involved. The most important is the increasing value in and price charged for so many of the great works of art. We can deal with the more moderate charges, but we are threatened by the big ones. The noble Lord, Lord Renfrew, is right in saying that we have a breathing space in which to provide records of works of art. I notice that he was a member of the advisory panel, a position of great responsibility and interest. I am sure he is as worried as most of us about the way in which matters have developed.

The noble Lord, Lord Renfrew, made a valuable suggestion; that exports are halted for a period during which the identity of the purchaser should become known. That is important because we have a national interest in some items. We would have the opportunity of discovering where the work was going and how it was to be treated. The noble Lord also mentioned the derisory purchasing funds; he is right.

The noble Lord, Lord Freyberg, pointed out the present battle to save just a few works of art of exceptional interest and value. The noble Lord, Lord Strabolgi, is to be acknowledged for introducing a timely debate as the spiralling costs and our puny buying power take effect.

We have of course the Waverley criteria. They are broadly right, although one or two could be improved upon. First, we must ask whether the work of art is so closely connected with our history and national life that its departure would be a misfortune. That is an obvious question. We can all agree that it is a proper test to apply.

The second question is not so strong. Is the work of art of outstanding aesthetic importance? It is an essential question but other countries and purchasers may have legitimate claims which must be taken into account. It is not therefore such an absolute test.

The third question was mentioned by the noble Lord, Lord Beaumont. Is it of outstanding significance to the study of some particular branch of art, learning or history? Other countries may not only have claims, those claims may be superior in that respect. So we need to see the Waverley criteria as providing a little less certainty than applied previously.

I have no difficulty in defending the works of art we acquired in the past. We were fortunate in admiring those items and at the same time had the means to acquire them. There is often no link between the works of art we acquired from the past and the country, with its inhabitants, within the borders we see today. Those borders and populations have changed and appreciation of the works has changed. That appreciation was more limited in many countries. Our action saved many works of art to the benefit of everyone.

The United Kingdom's Export Reviewing Committee has warned us. The committee was set up to protect Britain's heritage by offering museums and galleries the chance to buy major art works which otherwise would have been exported. In its annual report, it states: Through a lack of funding, the system has failed totally to achieve this objective". The latest figures confirm that although many of the less expensive items are successfully acquired by public collections, the very costly ones—the subject of today's debate—are those most under threat and are only occasionally saved. In 2001–02, export licences on 31 objects were deferred to allow the United Kingdom buyers to match the price. Of those, 14 were photographs by Lewis Carroll. The total value of those deferred items was £19 million. United Kingdom institutions succeeded in buying 20 of the objects, including 11 of the photographs, but those were worth just £3.1 million. The funds we have available are therefore wholly inadequate to deal with items coming on the market today.

Among the masterpieces which went abroad were Michelangelo's drawing "The Risen Christ", for £8.3 million to an American client of Munich dealer Katrin Bellinger; Parry's "Portrait of Sir Joseph Banks with Omai and Dr Solander", for £1.8 million to the National Gallery of Australia; and a pair of George III tables from Hagley Hall for £1.2 million to the dealer Mallett in New York. Two major items were saved: a pair of Italian paintings attributed to Hispanus which went to the Ashmolean Museum; and Barocci's drawing "Study for the Institutions of the Eucharist" to the Fitzwilliam Museum for £0.9 million.

The problem, as the reviewing committee points out, is that our institutions find it too difficult to raise the necessary funds for costly items which meet the Waverley criteria of importance. As the committee comments, Some might ask whether it is in fact worth the candle to retain the system, given the limited success in saving objects, notably the very expensive objects, which are now invariably exported after the deferral period. Such disillusionment is very understandable and will inevitably increase if steps are not taken to remedy the situation". So unless we change the way in which we have been conducting our affairs we are going to see a loss of important parts of our national heritage as sales of works of art are likely to increase. There are new players on the international art-buying scene. This is partly due to the very large fortunes we have seen accumulated in recent years. A number of very wealthy persons have discovered an enthusiasm for works of art. I do not blame them for that—in fact, I congratulate them—but they have an effect. I welcome their interest but I hope that they turn their enthusiasm towards encouraging new artists, who could add to our artistic capital, and assisting galleries to purchase their work. In fairness, a few do so already. I hope to see this limited spirit emulated more widely.

The reviewing committee believes that the Government can help generally and argues for five reforms. Gift aid, which has recently been extended to gifts of shares and buildings, should be applicable to works of art and the tax treatment of private treaty sales, which is now much less attractive as a result of lower tax rates, should be increased.

Ministers should assist and encourage the National Heritage Memorial Fund and the Heritage Lottery Fund to give preferential treatment to Waverley items threatened with export. Some members of the reviewing committee even felt that they should set aside a proportion of their money for such use, although the two funds have resisted calls to give priority to Waverley objects. The Government should also restore grant-in-aid to the National Heritage Memorial Fund to its earlier level of £12 million a year, up from the present £5 million. The use of special Exchequer grants for Waverley items should be reactivated "as a last resort". These grants were ended many years ago.

The noble Lord, Lord Renfrew, referred to the need to stop exports and to identify and display proposed purchases. We need to assist universities and museums with acquisitions. VAT exemption, which has been referred to, should be extended to include these institutions.

The Government's response to the problem of funding of Waverley items is likely to be given following the publication of the quinquennial review into the export reviewing committee and is expected soon.

What we need in the light of the limited resources we are bringing to the saving of works of art is the retention of important works where exchanges can be made. I have no objection to making exchanges in areas where we have a sufficiency of examples, some of which we can perhaps sell off. There are, however, areas where our national heritage is quite inadequate and we have gaps in our collections. We can perhaps deal in a sensible way with the areas where we have gaps and where we are well endowed.

The situation should not be described by the phrase "what we have we hold"—we are more enlightened than that. There is need to recognise the wishes of those who have made donations of artistic objects. People have genuinely made donations and expect them to be confirmed and to endure. They are entitled to have their intentions respected, if only to ensure that future donors can expect to see their wishes implemented and the conditions on which we accepted their donations honoured. That is an important aspect of our work.

Following recommendations from the reviewing committee, temporary bars were placed on the export of 34 objects, including paintings. Of these, 20 items, valued at £2.7 million, were purchased by institutions in the United Kingdom. The report of the reviewing committee comments on matters of policy regarding the operation of export control.

There are a number of aspects that go wider. For example, in Tibet there were 6,000 monasteries, almost all of which have been destroyed. Ninety-eight per cent of its works of art have been destroyed. The medical library of Lhasa—more than 1,000 years of uninterrupted history—has been destroyed. There is no record now of anything that was there. The Dalai Lama has declared again and again that he is delighted that the West buys Buddhist works because it is a means of retaining them. One should not forget that generally the source nations do not have the expertise, the structures, the laboratories, the museums or the scientists to care for, to restore, to publish and to exhibit the works found in their countries. We should be assisting countries such as Tibet. Our taking of some of those objects is no disadvantage to the countries or to the objects concerned.

It is most important that we should come to a turning point in our dealings with these matters. There was a similar period in 1977 when I was Financial Secretary to the Treasury. We were introducing a capital gains tax which would have had a most damaging effect on our heritage, country houses in particular. The situation was so serious that we felt that, however important the decisions we had made to introduce the new capital transfer tax, nothing was more important than the preservation of our heritage. So we changed the legislation to deal with that objective. This, incidentally, led to the emergence of the All-Party Parliamentary Arts and Heritage Group, of which I am currently the joint president.

We are now in a similar situation. The position is so dire that we have to look at matters we have never before considered. My noble friend Lady Blackstone is aware that we must reconsider the whole task of retaining important works of art. The difficulty that we have known for a long time has dramatically increased and a new response is inescapable.

4.6 p.m.

Lord Brooke of Sutton Mandeville

My Lords, it is a great pleasure to follow the noble Lord, Lord Sheldon, who has been a distinguished officer of the All-Party Parliamentary Arts and Heritage Group. I can recall seeing the Chinese warriors at Sian in his company more than 20 years ago, shortly after the archaeologists had discovered them.

I add one small footnote to his remarks about the monasteries in Tibet. As so often happens in human affairs, the Mongol invasion of Hungary in the 1340s was interrupted by news that the ruler had died in Mongolia. And so, having reached half-way across Hungary, the invaders retreated rapidly to ensure that they were present when the succession was determined. As a result, eastern Hungary has no medieval remains of any kind because the Mongols totally destroyed them, whereas western Hungary, with an extraordinary fault line down the middle, is well supplied.

It is a pleasure to congratulate the noble Lord, Lord Strabolgi, on creating the opportunity for the debate and on introducing it so ably. It is felicitous that we meet on the opening day of the stunning Titian exhibition at the National Gallery, which is adorned by the picture of the "Death of Actaeon", which is referred to in paragraph 52 of the report as one of the highlights of the Waverley era.

I should get my declaration of interests off my chest early in my speech as they relate to most of the matters I shall speak to. I am president both of the British Antique Dealers Association and the British Art Market Federation, interests which are separately inscribed in the register of interests. I am a patron of the Coram Foundation, the interests of which arise in paragraph 18 of the report, and, on a de minimis basis—nothing like as distinguished as my noble friend Lord Renfrew who serves on the board—I have been a life member of the National Art Collections Fund since 1975 and its recent long-serving chairman, Sir Nicholas Goodison, is my oldest friend.

I can add a small, poignant, personal footnote to the significant case in the report relating to the Charles Dodgson archive, the photographs, in that although he did not take a photograph of my paternal grandmother, he did write her a number of letters, the value of which, being a small girl, she did not appreciate. And so, in her own childhood, they were lost to what we might call the Lewis Carroll archive.

Escaping less early than I would wish from the personal impedimenta which we properly declare, it is a pleasure to move on to pay tribute to the great John Anderson, in his thin disguise as Viscount Waverley, as the fons et origo of the system of export control of works of art, the 50th anniversary of which we celebrate this year. He was a most distinguished public servant, and it is no surprise that the fruits of this particular aspect of his career should have stood the test of time so well.

The key index of that success is the balance he achieved between the sense on the part of the owners that they feel the system is broadly even-handed and the crucial support given to it by the UK art market itself. I shall return to this balance later, but I add to my tributes at this stage those who have served on the Waverley committee through the past half century and, indeed, those who have served them.

Before coming to the crux of the Quinquennial Review, however, perhaps I may address some of the issues that the present committee has highlighted in its report and to which other noble Lords have referred.

Paragraph 9 of the report alludes to the 8,700 licence applications in the particular year, covering 23,000 individual items, of which 10,000 were referred to the Department for Culture, Media and Sport's expert advisers. The latter, too, deserve praise. There is similar respect for the department's own Licensing Unit—I speak from within the trade—but there remains an undercurrent of unease about the overload on it, and the fact that when, for instance, in the case of visitors in this country, a rapid turn-round in a decision may be desirable, the overload can cause delays. This hazard is thrown into further focus by the effect of the strength of sterling on the EU's regulation on the export of cultural goods, where the need for countries outside the euro-zone to convert their limits into national currencies—the UK threshold, of course, fell at the start of 2002—has increased pressure on the Licensing Unit, because the number of applications grows as the threshold falls. The principle of a triennial review of the thresholds—this regulation was introduced during my time as a Minister at the former Department of National Heritage—has been honoured less scrupulously in Brussels than the Cabinet Office's admirable insistence on Quinquennial Reviews of non-departmental public bodies.

Secondly, I am happy to praise Ministers in the Department for Culture, Media and Sport under the present administrations for their success in increasing the level of in lieu gifts and I salute the Treasury's cooperation in that.

Thirdly, I strongly support the report's urging that the National Heritage Memorial Fund not only be retained as a supporter of last resort—which was central to its original heritage creation—but also that its funding be topped up to an annual level of £12 million. I am content to be criticised because that level fell during my period in office, although I can plead that those were the days when we did not know with precision how the relationship with the Heritage Lottery Fund would work out, since the lottery would be serving some of the same purposes.

I would also remark in support of the committee's present plea that, ironically, the National Heritage Memorial Fund lost out by being transferred into the new heritage department in 1992, since the latter was much smaller than the DoE from which it was transferred and thus the largess to the National Heritage Memorial Fund, which used to fall off the back of a DoE lorry at the end of the financial year, when those in the department were anxious to make sure that they had spent the money that the Treasury had allowed them, was necessarily much larger than can be derived from whatever smaller residue remained in the DNH or DCMS coffers at their year end.

I think that the National Heritage Memorial Fund was a great idea, and I praise my noble friend Lord St John of Fawsley for it. I hope that it both survives and thrives as an independent entity. It is crucial to the funding of the larger heritage applications for which deferral is granted.

Fourthly, and in the final analysis, the scheme's success is measured in terms of how many objects referred to the committee are saved. There is a rare example of the hazard of a non-split infinitive in paragraph 55 of the report, which states: The figures in our successive reports have shown that, through a lack of funding, the system has failed totally to achieve this objective". A split infinitive would have indicated in that instance whether the failure was total or partial, although the context indicates that it was partial.

I felt constrained to look at the last decade's performance tables to see how my own two years of responsibility came out. They are, in fact, spread out over three years because I entered and left office in mid years. I am in the happy position to claim the two best years in the decade, but I must in all intellectual honesty acknowledge that the first of the three years—the year of transition when the Department of National Heritage was being set up—was comfortably the worst in the decade in this particular regard. Overall, therefore, my performance was perhaps an archdeacon's egg rather than a curate's one.

Finally and fifthly, I support all the committee's recommendations in paragraph 56, most of which figured in its submission to the Quinquennial Review, except the third, to which the Heritage Lottery Fund also took exception. That said, I quote from paragraph 56: Ministers should either direct or at least actively encourage Trustees of the NHMF and the HLF to give preferential treatment to Waverley items. Some respondents advocated that a proportion of these funds should be specifically set aside for such purchases. We would, of course, support such a proposal". My misgiving about this recommendation relates to its interference with the arm's length principle between the department and lottery distributors. The Labour Party in opposition was as anxious as the then Government to insist on additionality being precisely included in the National Lottery etc. Act and any increase in government's influence over the distributors is a slide backwards from that purity. I have still not got over hearing from Mr Frank Dobson about the New Opportunities Fund's cancer distributions in my constituency before I heard about them from the New Opportunities Fund, which suggested that he had had prior knowledge of what they would be.

I want in conclusion to dwell on the crucial conceptual issues that have surfaced in the Quinquennial Review, and I hark back to the balance to which I alluded earlier. The first relates to the prices quoted as being on offer from overseas buyers, often masked anonymously by Swiss or Liechtenstein companies. The representative of the British Art Market Federation on the review panel—the BAMF chairman, Mr Anthony Browne—made a constructive suggestion that affidavits should be required here relating to the evidence for these prices. I know that Mr Matthew Farrer, also on the panel, has made a valuable legal contribution to this potential solution.

There is the further issue of applicants being asked if they will accept a matching offer and saying that they will, but then withdrawing the application when a museum or gallery expresses an interest and has either raised the money or has certainly begun raising it. The suggested solution is the applicant signing a contract, subject, of course, to the views of Treasury Counsel and to ministerial endorsement.

The jury is still out on this issue. There is a dispute of sorts between those concerned about this and the art trade as to the precise number of abuses that occur. Certainly the art market is concerned that a system to prevent the limited abuses may complicate the system as a whole. There is a collateral issue about ministerial discretion being unfetterable until the end of the period of deferral that has been granted. Because the system being effective has in part derived from the art trade's support, I hope that the balance that has prevailed so far will lead to a balanced and proportionate resolution of this issue.

Such balance might be achieved by matching any contractual obligation, as suggested within the review, to a withdrawal of the Ridley Rules, so that the applicant can know where he is. If the outcome, whatever it may he, is to make the scheme less attractive to the art market, there is a risk of the support for the system receding. The market, which employs 40,000 people in this country, is already bruised in international trade by the European Union's determinations on droit de suite and VAT on art imports into the EU.

The Government have been very supportive—I say this with as much firmness as I can muster—of the market in these latter two matters, and I personally have considerable confidence that the Government will reach sensible conclusions on this issue too.

4.9 p.m.

Lord Armstrong of Ilminster

My Lords, perhaps I may intervene briefly in the gap and express my gratitude to the noble Lord, Lord Strabolgi, for introducing this Motion and raising this important subject in characteristically energetic terms.

I greatly regretted the fact that the noble Lord, Lord Beaumont of Whitley, wanted to exclude the Three Graces from the Waverley criteria, since I spent six months of my working life as chairman of the Victoria and Albert Museum raising the money to save them. So I do not accept his view.

We had the task of raising around £7.5 million. We did raise that sum—with much help from the National Heritage Memorial Fund, the National Art Collections Fund and the National Galleries of Scotland.

The day after the Victoria and Albert Museum acquired the Three Graces, I was walking through the museum to see how they had settled down in their new home. I was encouraged to see two elderly ladies, gazing with rapt adoration at the statues, and as I passed I heard one say to the other, "Aren't they beautiful? Worth every penny". That was 750 million pennies, my Lords.

The Victoria and Albert Museum was able to find £1.1 million towards the total, and no more, because of the limitations on funds available for purchase. At the beginning of my time as chairman, the government grant to the museum was earmarked three ways—for running costs, for building and maintenance and for purchases. The grant for purchases had remained at just over £1 million for many years at that time. Then, in a gesture of great magnanimity, the then Department of National Heritage—or it may have been its predecessor—decided to abolish the earmarking and liberate the whole of the grant for the trustees to use in whatever way they thought right. Unfortunately, when the grant was increased the next year, there was barely sufficient to cover running costs and building and maintenance, so we had no funds with which to increase the purchase grant. I suspect that that has remained the case. So for many years the museum's funds available for purchasing remained at the cash figure of £1.1 million at a time when art market prices were continuing to rise steeply.

It would be useful if the Minister could re-examine the possibility of increasing the funds available to the national museums for purchases as well as maintaining the necessary flow of funds for running costs and maintenance so that the museums would have rather more money available with which to decide about purchases before having to call on the National Heritage Memorial Fund, the Heritage Lottery Fund, the National Art Collections Fund and all the people whose generosity keeps a scanty flow of treasures in the national museums.

4.22 p.m.

Viscount Falkland

My Lords, we are all grateful to the noble Lord, Lord Strabolgi, for giving us this opportunity this afternoon. Apart from repeating the congratulations on the noble Lord's age, I am so glad to see him looking so well. I know that he has had a period of poor health and he is back looking his shining best.

This is an elegant document, beautifully written and presented. So far as I can see, it contains no hyperbole or unnecessary understatement. I see no level playing fields or sustainability, and nobody has flagged anything up. I have enjoyed reading it and will continue to enjoy reading it.

The report makes one over-riding point, saying on page 2 that virtually all the really expensive items that come before the reviewing committee go abroad as a result of a lack of funds. Various noble Lords have echoed that view. In the light of that, it is worth saying that all is not gloomy. On page 15, a section headed, "The Future of the Waverley System and the Committee" draws attention to the fact that only a small proportion of items of high value have, over the last decade, been retained in this country, despite the admirable efforts of various bodies, including the Heritage Lottery Fund, the National Heritage Memorial Fund and the National Art Collections Fund. But there has been a sense of despondency and a fear that, because of its failure to save more of the high value items, the system is in some way threatened. As the report says, such disillusionment is understandable and will no doubt increase. It goes on to say that the existence of this well structured and well operated system encourages owners of works of art and their advisers to give serious consideration to the tax advantages of the acceptance in lieu and private treaty sales. It reminds galleries and other that they may have overlooked mechanisms that are available to them.

The report also says that it is particularly satisfying when an object returns to its original home. I hope that the House will bear with me if I give an example of the report's excellent prose. I congratulate whoever is responsible for the report's clever use of English. One passage refers to the two Georgian sphinxes, which I know quite well. I saw them when they were in Oxfordshire in Matthew Boulton's property, Soho House, outside Birmingham. They came up for sale and, happily, were returned to that location. They are admirable pieces of garden or park furniture. Let me demonstrate how good this report is in not only presenting information but subtly and effectively giving us some social history. It says on page 33: The sphinxes reflected an important facet of Matthew Boulton's discerning intellect and social aspirations, such sculpture being generally associated with the country seats of the nobility, rather than the residence of a manufacturer. Given the limited survival of such landscaped gardens, and particularly those that had been developed by the leading industrialists of this period, the sphinxes had wider significance in national terms, representing taste and aspirations ultimately derived from British aristocratic culture of the first half of the eighteenth century". I challenge anyone to write as good a social and cultural history as that in one small volume. It says a great deal, and shows the quality of the work.

The report's tone deplores the fact that moneys are unavailable. However, all those who are responsible—and I include the Department for Culture, Media and Sport—for trying to increase the amount of moneys available for saving treasures in this country are to be congratulated. I have particular regard for the work of the former Secretary of State, Chris Smith, who, vis-à-vis his arguments with the Treasury, did incredibly good work. Getting the VAT removed from our national museums and galleries was a sterling effort and shows that you do not give up with the Treasury. I know that it is daunting, but it is the job of those involved to persevere without being too daunted. The department does sterling work but it can be dispiriting when there is a change of mind in Treasury circles.

Before I rose to speak, my noble friend Lord Russell came into the Chamber for a moment and asked me in a loud whisper whether manuscripts and documents were included in these discussions and debates. I assured him that they were. There were concerns about whether a remarkable document relating to Henry VIII's divorce would be retained in this country. I hope it will be. My noble friend asked me to draw to your Lordships' attention that there was a statutory obligation for documents that were to be removed from this country to be photocopied by the British Library. Surprisingly, a number of scholars do not realise that the reserve photocopy collection is available there. In his research my noble friend often looks at original documents and the Photostats. If documents are removed from this country, there is that backstop. I am very glad to see my noble friend back with us after some very sad domestic happenings in his life and I am happy to be able to put that point to your Lordships.

I have one or two questions for the noble Baroness. She has already been asked about the National Heritage Memorial Fund grant, which was sadly reduced from £12 million to £5 million under the previous administration. That fund has been pretty well depleted now. There is an expectation that it will be increased to £5 million in the near future. Is there any intention or ability to get the fund up to its former levels?

I asked a supplementary question about Exchequer grants the other day. They have not been used for 20 years, but it is within the remit of the reviewing committee to press for Exchequer grants. In situations of particular importance, an Exchequer grant might be appropriate and available. Will the noble Baroness enlighten me on that point?

Having praised the document so highly, I am slightly anxious about future publications. I would be sad if I was not able to enjoy further reports. I shall read this report again and again, but I hope there is no intention to amalgamate it with any other reports in future or to make savings in that regard. Other noble Lords would also be extremely concerned if that were the case.

Has the department given attention to the worrying issue of valuations? It is up to the department to make sure that valuations are genuine and not spurious. There are always rogues in every occupation and art dealers are not exempt from the temptations of overvaluing. A certain amount of shrewd detective work is needed by the department. It is interesting work that I would love to do. It is very important for the integrity of the whole business that, as far as possible, proper valuations are done so that there is no skulduggery afoot. I say no more than that.

My closing remarks have nothing to do with the debate, but I have a couple of minutes and my comments will not take that long. When one is talking about money, it is irritating to see that there is £3.5 billion of undistributed lottery funds. The department has been pressed about that. The Secretary of State gave an undertaking that the money would be distributed in quicker order. That has not happened and the money is accruing interest. I intend to come back to the issue in a Starred Question or in some other way. I do not expect the Minister to answer the point today, but it is very irritating to know that there are such large sums lying around waiting to be distributed when there are works of art here that, in the scheme of things, are worth modest amounts—even Raphaels, Michelangelo drawings or the Omai.

4.35 p.m.

Lord Luke

My Lords, this has been a most stimulating debate, as are most debates in this House on the arts. We are all most grateful to the noble Lord, Lord Strabolgi, for giving us the opportunity to discuss the subject. The noble Lord had the doubtful privilege of saying some kind things about me after my maiden speech in your Lordships' House six and a half years ago, since when we have frequently spoken in the same debates. I am delighted that the noble Lord has lost none of his eloquence and ability, particularly to make complex issues sound simple.

I must state an interest, in that I deal in watercolours, none of which has ever met the Waverley criteria or is likely to do so.

It is undoubtedly true that most of us who care about our heritage support the principle of retaining in this country as much as possible of the corpus of notable works of art that has existed here, off and on, for 400 years, largely as a result of the good taste and acquisitive nature of those in a position to spend significant sums of money, as our economy grew ever stronger over that period.

Through the years, the availability of these funds has generally coincided with the existence of poor economic conditions in most of Europe, particularly in the weak city states into which Italy was divided for so long. Hence, over many years, there was a strong buyer's market, which we exploited. I am glad to say that England has never been ransacked, even during the Civil War, when the King's collection was dispersed abroad. I believe that it is largely in the Prado Museum in Madrid. Every other country in Europe has been ransacked several times. The quantity of works of art of significant standard in this country has been and still is very great.

However, over the past 100 years the tables have been turned and there has been a strong seller's market in Britain, due to high and progressive capital taxation and the understandable desire of owners and trustees of great houses—and many not so great—to remain put and repair roofs. That situation in turn has coincided with the availability of funds from the enormous economic growth in America, Japan and the Gulf.

Although it is encouraging to look at the successes in retention in the past year in this admirable report—I thoroughly agree with the noble Viscount, Lord Falkland, on the excellence of the report—it is also salutary to look at the failures, all of which are due to insufficient funding. No really important item has been retained. We must ask whether time should be wasted in deferring export licences for works of art whose intrinsic market value puts them completely out of reach of any realistic hope of retention.

Unless there is some way of persuading the great and good to spend much greater amounts than is the case at present, I am afraid that we are indulging ourselves in a series of forlorn hopes. Tax changes, gift aid and douceur have all been mentioned as ways of raising funds. I look forward to hearing the Minister's comments on those and any other fiscal incentives suggested.

It is good also that the Waverley criteria are once again being reviewed, as what may have been right 50 years ago could be, sadly, out of date. Indeed, the system could be said never to have worked at all in its primary aim, which was, and still is, the retention of really important works of art. However, in what might be called its secondary aim, the retention of significant works of art, it has worked quite well. As so many noble Lords said, it is all to do with money. Truly enormous efforts have been made over the past 50 years, and are even now being made, to raise funds, but it is so often not enough to achieve retention.

My noble friend Lord Brooke has a great expertise in these matters. I associate myself particularly with his apt words congratulating all those concerned with Waverley through the years and also those concerned with the National Heritage Memorial Fund and the Heritage Lottery Fund. I also note his words concerning the undesirability of anonymous applicants for licences, which was mentioned also by my noble friend Lord Renfrew. I think that that is a very apt point.

I think that we must now look again fundamentally at the criteria. Is it right that we should try continually to buck the art market? Perhaps we should allow great art to be traded wherever world markets dictate. There is a case that we should make a real effort to retain a work of art only if it has a particularly British interest or connection. It is not as if there were not an enormous number of works of art in this country, representing virtually all countries and periods, still in private and particularly in public museums and art galleries and—sadly, and more significantly—in their cellars. Indeed, I should think that there is much to be said for spending any available funds to build extensions so that the viewing public can see what they have every right to see. We do not permit such museums and galleries to sell surplus stock, for obvious reasons. However, if those reasons were not there, and if such a procedure were allowed, it would surely transform the funding arrangements of museums and galleries and enable them to be at least self-sufficient.

I revert to the situation as at present. The noble Baroness has just issued an order deferring the export licence for Joseph Wright of Derby's great portrait of the Arkwright family. I agree with the comments of the noble Lord, Lord Beaumont of Whitley. It is a most important painting by a very important British artist, of one of the most important men in the Industrial Revolution. Surely there is a very strong case, from every point of view, for keeping that painting in Britain. We understand that the amount concerned is £1,200,000, a sum which must surely be attainable.

At the other end of the scale, however, is the exquisite Raphael, "The Madonna of the Pinks", something that any museum or art gallery curator would die for. We understand that the Getty has put in a large bid for it. It is undoubtedly one of the most important pictures in the world still in private hands. Yet, we have a wonderful selection of Raphaels in this country. We would have to raise between £32 million and £37 million to keep it here. Surely that is an example of another forlorn hope.

Surely the Henry VIII divorce treatise, mentioned by the noble Viscount, Lord Falkland, also should remain in this country. It is a priceless part of the story of that divorce and its very important effect on the religious history of this country. I hope that that will happen.

I tell my noble friend Lord Renfrew that we on these Benches concur that his Bill—Richard Allan's Bill in the House of Commons—is needed. We understand that there may be an opportunity for it to be debated in another place in early April. We very much hope that that is the case and that there will be an opportunity then to scrutinise the Bill properly. As I mentioned earlier, my noble friend said that, in his opinion, a work of art under deferral should and must be made available and visible to the general public—I agree with that—and that the buyer's name should be made known.

One could go on and on. I hope that I have made my point that, in effect, we as a nation can no longer afford to play in the premier league of the art market. We can, and must, stay in the first division. Like all noble Lords, I look forward to hearing the reply of the noble Baroness, Lady Blackstone.

4.46 p.m.

The Minister of State, Department for Culture, Media and Sport (Baroness Blackstone)

My Lords, I hugely welcome the opportunity provided by my noble friend Lord Strabolgi to pay tribute to the work of the Reviewing Committee on the Export of Works of Art. The report marks 50 years of the committee's life, an enormously important achievement which is to be celebrated this very evening. As the noble Viscount, Lord Falkland, said, the occasion has been marked by an extremely interesting and well-written report. I say to the noble Viscount that the committee gives great attention to the important issue of valuation. That is very much a part of its work.

Since 1952, the committee has used the Waverley criteria to advise Ministers whether time should be given to save an object from export because of its importance to the nation's culture. As the noble Lord, Lord Brooke of Sutton Mandeville, rightly said, the criteria have stood the test of time. The system we use is widely respected, balancing as it does the interests of owners, the art trade and public collections.

Several speakers—particularly the noble Lords, Lord Beaumont and Lord Luke—asked whether the Waverley criteria are still acceptable 50 years on. I think that the Waverley criteria recognise that it is not only objects produced in this country that can be of outstanding significance. Like the acceptance in lieu criteria, the Waverley criteria recognise the importance of the aesthetic worth of great works of art. I believe that that is right, and that we should not be entirely parochial in our approach, whatever position we might take on the Three Graces. The noble Lord, Lord Luke, thinks that we need to have a fundamental review of the criteria. I am afraid that I do not accept that.

As my noble friend Lord Strabolgi said, many items have been saved. Since 1952, 300 objects of all kinds—ranging from an Egyptian tomb relief, to the medieval Middleham Jewel, to photographs by Fox Talbot—representing the best of our heritage, have been saved. This achievement deserves our congratulations. I should like to thank all who have served on the reviewing committee in the past half century, and who have helped to make this possible.

Our art market has 25 per cent of the global total and is the second largest in the world. Its annual sales are worth nearly £4 billion. As such, it provides significant economic and cultural benefits to the UK, not least the provision of nearly 40,000 jobs. Our export controls do not distort that market, and do not interfere with owners' property rights by permanently prohibiting the export of works of art. The system is not so draconian that it leads to evasion. By comparison, other more prescriptive systems are less respected, and encourage illegal exports.

I do not agree entirely with the suggestions made by the noble Lord, Lord Beaumont, that we should make it illegal to export national heritage items. On previous occasions the suggestion of a list of national treasures that cannot be exported has been mooted and has always been rejected due to various disadvantages. It would distort our flourishing art market and probably interfere with the rights of owners to dispose of their property under the European Convention on Human Rights. It was last considered in detail by David Mellor when Secretary of State. He decided that it had far more disadvantages than advantages.

The consultation exercise that was part of the quinquennial review of the reviewing committee, and which spanned the full range of interests involved, has confirmed the widespread support for the fairness and balance of our export control system.

A number of noble Lords have mentioned funding issues. The committee itself suggests that the system has totally failed to achieve the objective of protecting our heritage through a lack of funding. That is an unnecessarily bleak judgment. In the past 10 years, half of all of the deferred items stayed in the UK, mainly in public collections, so they are accessible to the public to enjoy and to study, usually for free. It is as much for public institutions, or private individuals for that matter, to decide whether they want to purchase such objects, as it is for owners to decide whether to sell them. Of course, I accept that there is a problem in regard to the most expensive items.

Acquisitions of Waverley items draw on a variety of sources, some of them government funded. Since 1997–98, the Government have increased grant-in-aid to our national museums and galleries by over £60 million, a real increase of 17 per cent. Within those grants, they have the flexibility that they prefer to allocate their budget to meet their various priorities, including acquisitions. To the noble Lord, Lord Armstrong, I say that I believe that the system is accepted by the national museums and galleries. Purchases can also draw on self-generated income—currently around £100 million each year—and charitable donations, bequests, legacies and private sponsorship.

The Heritage Lottery Fund and the National Heritage Memorial Fund must balance requests for grants to buy Waverley items with other bids to support acquisitions and heritage projects. The reviewing committee report and the noble Lord, Lord Sheldon, ask that the Heritage Lottery Fund should give priority to the retention of Waverley items. There is a case for that, but there is also a strong case against it. I believe that a great many people would not accept the suggestion. I agree with the noble Lord, Lord Brooke of Sutton Mandeville, who said that the arm's length principle should apply.

Since 1995, the Heritage Lottery Fund and the National Heritage Memorial Fund have supported the purchase of 49 items out of the 90 deferred items with grants totalling £8.5 million. The NHMF operates as a fund of last resort, focusing on saving heritage that is under threat, including items that might be exported. I confirm to the noble Viscount, Lord Falkland, that the Government have increased grant-in-aid to the NHMF from £2 million in 1998–99 to £5 million in 2000–01 and have undertaken to maintain it at that level until 2006. Moreover, the money available for distribution to arts and heritage projects as a percentage of Lottery income has been guaranteed by Government at at least 16.6 per cent until 2009. Other important sources make valuable contributions to the purchase of export-stopped items, and in particular I pay tribute to the National Art Collections Fund, which has awarded £2.3 million since 1995.

To the noble Lord, Lord Strabolgi, I say that there is no current proposal to wind up the Heritage Lottery Fund or to reduce the proportion of Lottery funds given to the Heritage Lottery Fund. I cannot give a date for when the Lottery review will be complete, but I shall let the noble Lord know when that is clear.

This year there are many examples of objects being secured for communities that have a particular link with them, helped by vigorous local campaigns. Thomas Girtin's watercolour of Snowdonia was bought by the National Museums and Galleries of Wales. Birmingham Museums and Art Gallery bought a pair of carved sphinxes for Matthew Boulton's Soho house. The Kelso papers, a fascinating group of legal documents, have been returned to the Scottish Borders, and the archive of Walter Crane's designs was secured for Manchester, where he worked in the 1890s. Not only the London museums and galleries benefit.

I am especially keen that items acquired in that way should be distributed around the country. I am very pleased to note that, since the publication of the report, the National Museums and Galleries on Merseyside have purchased an astronomical clock made in Ormskirk in 1787, which will he placed on display shortly. It is fitting that it should join the museum's significant collection of clocks and watches made in the North West.

The future of some objects, including that clock, was still outstanding when the committee's report was published. We now have a fuller picture. Of the objects that I deferred from export on the committee's recommendation, 81 per cent remain in the UK, either as a result of purchase, or because their owners decided to keep them here. That cannot be seen as total failure.

In deciding whether an object meets one of the Waverley criteria, value is not an issue. It is quite possible for something of relatively low value to be of outstanding significance to a certain area of study, or to have an important connection with a particular region in the UK. Take, for example, a series of Middle Bronze Age axe heads from Dorset, now in Dorset County Museum, that were saved in 2001, none of which cost more than £300. They met the Waverley criteria, however, because of their archaeological significance for the study of cross-channel trade in the Middle Bronze Age.

As many speakers have said, it has always been the case that top quality works of art can reach dizzying values. That is truer today than in the past. Since the report's publication, I have placed temporary bars on Raphael's "The Madonna of the Pinks", valued at nearly £35 million, on Reynolds' "Portrait of Omai", valued at £12.5 million and on a drawing by Michelangelo, valued at £7.5 million. I did not extend the deferral period for the Michelangelo drawing, because no expressions of interest to purchase it were received. However, the National Gallery has applied to the Lottery and launched an appeal to buy the Raphael "Madonna" and the Tate Gallery hopes to acquire Reynolds' "Portrait of Omai".

The noble Lord, Lord Renfrew, has asked why the "Portrait of Omai" has not been made available for public display. That is a decision for the owner. However, it was taken into account when I decided upon the deferral period of nine months—longer than usual. This will provide a proper opportunity for fundraising, given the picture's unacceptable inaccessibility.

The noble Lord, Lord Sheldon, mentioned Parry's "Portrait of Sir Joseph Banks with Omai and Dr Solander", which he claimed had left the country. However, in fact, the export licence application has been withdrawn. If the owners want to export the work, they would have to reapply.

These cases certainly present a challenge for all the available sources of funding. In the case of the Raphael, the long-standing capital tax incentives offered by the private treaty system for a sale to a public collection may also be available to reduce considerably the sum which the National Gallery will need to match. But it will still be a lot of money. I wish it every success in its fundraising efforts.

The possibility of a special Exchequer grant has been raised. The noble Viscount, Lord Falkland, asked about that, not in relation to the Raphael in particular but more generally. But, as he said, this route has not been used since 1980. Moreover, any application would have to be considered in the context of other competing claims on the Government's Reserve, which is already heavily committed. Even when special Exchequer grants were occasionally made, they were never automatic, nor did they provide total funding for purchases. There has always been the expectation that institutions will raise some of the money themselves. When that route was last used there was no National Lottery. Of course, the Acceptance in Lieu Scheme—

Viscount Falkland

My Lords, I thank the noble Baroness for giving way. Was an application actually made for an Exchequer grant in the case of the Raphael or the Omai or has the reviewing committee given up?

Baroness Blackstone

My Lords, the reviewing committee does not make applications; it is for the gallery or museum that wishes to purchase a particular object of art to try to raise the money. I do not believe that an application has been made directly to the Treasury. As I said, an application has been made to the Lottery.

Of course, the Acceptance in Lieu Scheme brings pre-eminent objects into public ownership in lieu of inheritance tax. They are therefore saved for the nation before the point of export. Our sponsored galleries have acquired works in this way over the past five years with a tax value of almost £37 million. In the past year, for example, we announced the acceptance of works by Zoffany, Hogarth and Van Dyck, whose portrait of Sir William Killigrew was allocated to the Tate Gallery, and has been reunited there with the portrait of his wife. I am grateful to the noble Lord, Lord Brooke, for the remarks he made about the extra funding that is now available for the scheme.

Noble Lords have put forward some interesting ideas about how the tax system could be used further to support acquisitions and I am aware that different schemes are available in various countries overseas. However, in looking at any such proposals, we would need to be very clear that any schemes, for example to offset gifts against tax, could be justified in terms of the revenue forgone by the Exchequer. Moreover, they would need to be certain to bring about the donation of items of quality at reasonable value.

I believe that the noble Lord, Lord Renfrew, mentioned sales of works of art on the part of owners of historic houses to fund repairs. He and other noble Lords will probably be aware that my department has made a proposal to the Treasury as regards a scheme to help owners of historic houses to set the cost of their repairs against tax, provided that their houses are opened to the public.

The noble Lord, Lord Freyberg, mentioned the possibility of altering the rate of the douceur—the "sweetener" available to encourage owners to sell direct to an institution in this country. This is a suggestion that has been made before and in principle some flexibility in the douceur has long been available for private treaty sales but in practice has been very little used. We are, however, certainly ready to think about how it might be used rather more.

Since publication of the recommendations of the Culture Select Committee in July 2000 and the Illicit Trade Advisory Panel in December 2000, there has been progress on measures to combat the looting of archaeological sites and the unlawful trafficking in cultural property. As the noble Lords, Lord Renfrew and Lord Luke, said, we are disappointed that the Private Member's Bill, Dealing in Cultural Objects (Offences) Bill, which was introduced in another place on 7th February, was talked out. That was a useful measure which had all-party support. I certainly confirm the Government's strong support for it. Given their standard-setting role in the market for cultural objects, it is essential that museums should respond appropriately to the problems of the illicit trade. I believe that they are doing so.

The noble Lord, Lord Renfrew, also took up the committee's question about the export of archaeological artefacts from the UK without a licence, and I should be pleased for the advisory panel to examine that further.

I am running out of time but I believe that I have responded to most of the questions raised. I shall write to noble Lords to respond to any questions that I have not addressed. The noble Lord, Lord Brooke, mentioned the reviewing committee's quinquennial review. I expect the report of that review to reach me soon. Although it has taken rather longer than we originally envisaged, I know that much valuable work has been done in looking at a number of difficult issues, including those concerning valuations and option agreements, which the noble Lord mentioned. I look forward to considering the recommendations.

In conclusion, I do not share the pessimism expressed by some noble Lords about the committee's report. The report shows quite clearly that the majority of Waverley items were saved for the nation last year, and found homes in museums and galleries all over the UK. Thanks to our support for free admission, they can now be seen, without charge, by an ever widening group of people. The system is seen as fair by those who use it, and is respected internationally.

I accept that the higher priced items present a big challenge, not least to the Lottery. Difficult decisions have to be made as to whether to fight to raise the money needed to match the high prices that great works of art fetch at auction. Sometimes wealthy institutions abroad will win out. But the system allows our flourishing international art market to operate, at the same time as giving a chance to raise sufficient funds to retain items in this country. We should preserve it and celebrate the many successes which it has made possible.

5.8 p.m.

Lord Strabolgi

My Lords, we have had a very good debate on this important subject. I should like to thank my noble friend the Minister for her very detailed and reasoned reply and also to offer my grateful thanks to all noble Lords who took part in the debate who gave us the benefit of their special knowledge. I beg leave to withdraw the Motion.

Motion for Papers, by leave, withdrawn.