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Mr. John Townend (East Yorkshire): As a spokesman for probably the most Europhile party in the House of Commons, does the right hon. Gentleman accept that it is appalling that a British industry of this size should be destroyed or, at best, severely undermined, and there is nothing we can do about it? Have we not transferred too much sovereignty, if we are putting people's jobs and industry at such risk?

Mr. Maclennan: I do not see the necessity for that intervention. The thrust of my remarks is criticism of what is proposed, and I feel that the hon. Gentleman's added emphasis would be more appropriately deployed in his own speech.

I am wholly opposed to this development. I do not think that the droit de suite is a practical or sensible way to try to assist young artists, or that the House need trouble itself with those who are already well established. The scheme has been relatively ineffective in the countries where it already operates; it has been hard to police, and I understand that a number of the companies involved have gone bankrupt. I think that the European Union is foolish to try to translate the scheme from one or two countries to all EU countries. This is not a suitable area for harmonisation, and the proposal should be resisted for that reason.

10.1 am

Sir Peter Lloyd (Fareham): I congratulate my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) on securing the debate, and on making his case so thoroughly, wittily and cogently. I would like to say that his speech was also timely, but I fear that the die is cast--although I hope it is not. We shall soon see.

The British art market is of world significance, second only to that of New York. It gives employment to upwards of 40,000 people, in supporting professions and skills. My right hon. Friend's speech showed what disaster the ending of the derogation, the doubling of value added tax to 5 per cent. and the imposition of the droit de suite will bring in their train. We know that those developments will be disastrous. When VAT was first imposed at 2.5 per

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cent. in 1994, business from non-EU countries fell sharply. It is not that 5 per cent. is high as such things go; but the international art business can easily migrate to where the tax regime is favourable. Why should anyone continue to buy, sell and auction in London when it can be done far less expensively and with much less red tape in New York or Zurich?

If the business lost to the United Kingdom were, as a result, distributed more evenly around the EU, there would be some logic in the EU's plans, but the rest of the EU will gain nothing--except, perhaps, a little more VAT, at the expense of jobs and the income tax that those jobs provide in the UK. The planned levy--the droit de suite--on modern art sales, to enable the artist or, in most cases, the artist's heirs to benefit from the artist's continuing popularity and every successive sale of his work, will have a similar effect, driving business out of London and out of the EU. Switzerland and the United States have no such levy, and buyers will go where they do not have to pay it.

If the levy really did help and encourage struggling artists, there would be some sense in it, but in France--where, as my right hon. Friend observed, there has long been such a levy--the money goes largely to the estates of rich and successful artists after they are dead. It is of little assistance to struggling artists with no early resale expectation, whose resale potential, such as it is, will no doubt be discounted in the prices that they are currently obtaining. It will generally be of use to them only after they have become rich and successful--by which time they will probably have died.

If those two measures are implemented, they will make nonsense of the argument that the EU's central mission is to achieve a world-competitive European economy. They will destroy London, which has already been damaged by the original imposition of VAT in 1994, as an internationally competitive art market.

Mr. David Davis (Haltemprice and Howden): My right hon. Friend has spoken of the vital importance of the industry to the United Kingdom, and the damage that could be done to it. The Luxembourg convention, which exists for qualified majority voting procedures, is designed to protect countries' vital national interests. Should it be invoked in this instance? Should Britain make the point that the industry is a vital national interest, and ask the EU to drop the qualified majority voting approach? France did that twice while I was a Minister.

Sir Peter Lloyd: The industry is certainly a vital national interest, and one that is particular to this country, although it benefits the whole of Europe. It is this country that receives the trade that benefits the rest of the European Community. I shall say more about that, and I hope that the Minister will be able to tell us more than we already know.

The European Union presents itself as wholly respectful of, and encouraging to, the special character and skills of member countries. My right hon. Friend the Member for Haltemprice and Howden (Mr. Davis) implied as much in his intervention. It is extraordinary that, in this case, the EU appears to be intent on annihilating a particularly successful aspect of British cultural and commercial life for the sake of the hobgoblin of bureaucratic consistency. It seems that the European Commission may again be

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teaching us the lesson that, in the EU, a derogation--however justified in common sense--is seldom a final victory for common sense. All too often, it is a defeat for common sense temporarily postponed.

I understand that the Commission was going to review the issue thoroughly by the end of last year, but that has not happened. Certainly, no review has been published. I hope that the Minister will tell us that a review is on its way. I hope that he will be able to convince the House that I am too pessimistic, and possibly too cynical, and that the Commission is thinking again, and will come up with constructive proposals that enable the London art market to survive and flourish. Failing that, if the Commission has not yet seen the light, I hope that the Government have at least brought together a blocking minority of fellow member countries that have seen the light, or that they are considering invoking the Luxembourg compromise.

If the Government are serious about protecting British interests in Europe--as they say they are--and, in this instance, protecting the overall long-term interests of Europe, they will already be taking such action. I am sure that the Minister will want to let us know what is happening.

Mr. Steen: Might not the Government also consider asking the Commission to pursue the fiche d'impact? I believe that European law obliges the Commission to pursue it in the case of all directives or rules and regulations that have an impact on European countries. It has to conduct a study to show the effect that a directive, or rules and regulations, would have on employment or trade in all European nations. Should the Government try to persuade the Commission that it should not proceed with this arrangement until it has carried out a fiche d'impact? I believe that, if the Government have not done so, they should.

Sir Peter Lloyd: There are a number of things that the Government could do. I am happy to serve as the vehicle for my hon. Friend's question to the Minister, and I look forward to the Minister's answer.

10.9 am

Mrs. Virginia Bottomley (South-West Surrey): My first objective is to strengthen the Minister's determination to fight this case. Secondly, I want to congratulate my right hon. Friend the Member for Cities of London and Westminster (Mr. Brooke) on his eloquent and effective speech, in which, as ever, he deployed all his skills. Not only is he, like me, a former Secretary of State for what used to be National Heritage; he is a former Treasury Minister, and a former Whip. His skill in that last regard can be seen from the fact that he has been able to produce so many hon. Members for today's debate. Thirdly, I intend to make the shortest of this morning's speeches.

When I was Secretary of State for National Heritage, I was inevitably overwhelmed by people who were looking for cash handouts. Supporting arts, sport and heritage is part of the Government's responsibility--the national lottery makes it easier--but it is also to create a climate in which successful cultural industries can flourish.

The British art market is one such formidably successful industry. It is not looking for cash handouts,

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but it needs a regulatory system that respects its independence and effectiveness. Above all, it needs Ministers who will fight its cause. I pay tribute to my colleagues in the Department of Trade and Industry and in the Treasury during my time in office, who were part of that determined campaign.

As has been said, we face an extremely serious position. The industry is not only an enormous cultural asset, but a great commercial contributor--it provides up to 50,000 jobs. Many businesses are involved--not just the great four of Sotheby's, Bonham, Phillips and Christie's, but many other smaller and expert industries, restorers, valuers, dealers and galleries, which in themselves feed further into the tourism industry, which has become so important.

Two issues have no logic or sense. It has been made clear that the imposition of the 5 per cent. VAT on imports would simply benefit New York, Switzerland or the far east. The droit de suite would bring precious little benefit to young artists, and there are many other ways to assist them.

At a time when there is growing hostility to the idea of a Europe led by ideology, it is enormously important for the Government to act now on the basis of the evidence and of pragmatism to safeguard an industry that is vital to Britain and to our people.

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