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Mr. Deputy Speaker: Mr. Oliver Letwin.
Mr. Letwin: Thank you, Mr. Deputy Speaker. I was going to try to intervene on the Minister, but she finished before I could. I want to ask--
Mr. Deputy Speaker: Order. I apologise. I had not realised that the hon. Gentleman had already spoken. I called the Minister on the understanding that she was winding up the debate, so we must now put the Question.
Question put and agreed to.
Resolved,
That provision may be made in the Finance Bill amending section 1 of the Customs and Excise Management Act 1979 as respects stores.
5 Jul 1999 : Column 661
Motion made, and Question proposed, pursuant to Standing Order No.52 (1) (b),
That provision may be made in the Finance Bill amending section 21 of the Value Added Tax Act 1994.--[Dawn Primarolo.]
4.54 pm
Mr. Nick St. Aubyn (Guildford): It is unusual for the House to discuss so many Ways and Means motions. That says a lot about the Treasury's lack of organisation. In the case of this particular motion, it has been known for a long time that certain provisions would have to be made in respect of the art market if the Government failed in their attempt to negotiate a better deal with our European partners. The fact that the motion has been tabled now raises the question of why it was not tabled earlier in the Bill's passage, so that we could have had a proper and detailed debate in Committee on the terms of the new clause that the motion is intended to support.
Mr. Fabricant: Does my hon. Friend agree that there is a real difficulty under the terms of the Ways and Means motion in calculating the additional revenues that will accrue to the Government? Does he also agree that, far from raising funds, the measure would diminish the funds raised by the state by causing a deterioration of the art market in the United Kingdom, in which case, one has to ask why a Ways and Means motion has been tabled?
Mr. St. Aubyn: I am grateful to my hon. Friend for bringing me to my next point, which is to question whether a Ways and Means motion is required. It is known that, when VAT at 2.5 per cent. was introduced on works of art, the volume of international sales conducted in London fell by 40 per cent. If that volume were to fall by a further 40 per cent. when the duty doubles to 5 per cent., which is the effect of the measure that we shall debate later this evening, the amount of revenue raised would go down, not up. Indeed, it has been intimated by those who know a great deal about that market that the level of sales will collapse to almost nothing, so there will be a serious shortfall in the amount that the Government expect to raise. Therefore, a pertinent question for the Paymaster General is, will she confirm how much money is being raised now from the current provision, and how much more or less is expected to be raised once the new provision has been implemented?
I raised the issue of the future of the art market and the tax threat with the Prime Minister in the House a few months ago. I was told that his Government would use all the means at their disposal to ensure the right outcome. I was given to understand that the Government were prepared to use the Luxembourg compromise to force our partners in Europe to think more clearly about an issue wherein they have nothing to gain and we have everything to lose. Why have the Government failed to allow the House a debate on that subject until now? Why have they not been prepared to invoke the Luxembourg compromise in this respect?
In the papers the other day, we read the spin about the Government having saved the art market from a new tax: we were told that the Government's negotiations had averted a tax called droit de suite, which would certainly have been another nail in the coffin of international art sales in London. Why did the Government claim to have
saved the art market from a new tax only a few days before introducing a measure to double an existing tax on the art market in this country?
We need to know why there are spurious definitions in the new clause, and what effect any relaxation of those definitions would have on the revenue to be collected under the Ways and Means measure. Why are limited editions acceptable, provided there are no more than eight--
Mr. Deputy Speaker:
Order. The hon. Gentleman is now straying into the territory of the new clause. If, when we come to debate the new clause, he is fortunate enough to catch my eye, he might be able to explore such points at that time, but I would suggest that he does not do so now.
Mr. Fabricant:
On a point of order, Mr. Deputy Speaker. I understand from my hon. Friend's arguments and the views expressed by others that the art market is to be diminished, so tax revenue will be reduced. Therefore, is it in order for us to debate a Ways and Means motion, which is primarily used to increase revenues?
Mr. Deputy Speaker:
There is nothing out of order about a Ways and Means motion in such circumstances. However, hon. Members will help the Chair if they try to maintain a strict distinction between the debate on the Ways and Means motion and the debate that they will have later on the new clause in the Bill to which it refers.
Mr. St. Aubyn:
I am grateful to you, Mr. Deputy Speaker. However, I understood that during a debate on a Ways and Means resolution, we could ask Treasury Ministers exactly what sums they expect to raise. I ask them what is their estimate of the revenue to be raised in respect of limited editions under the various categories listed. Have they given any thought to how much revenue they might lose if the definitions were rather more relaxed? They seem absurdly tight at the moment.
Of all the definitions and restrictions, perhaps the most significant is that which relates to works of art imported into the EU or the UK and then exported outside the EU within 12 months. What is the impact of that provision on the revenue to be raised? What would be the impact if that period were extended to 24 or 36 months? Surely works of art of the kind that we are considering in this debate are typically held by collectors for long periods.
If the intention of the measure is to exempt certain categories to help the international art market in London, surely it would be reasonable for the exemption to last for a period longer than 12 months that would take into account the very long time that it sometimes takes to negotiate the sale of a work of art. Such works of art could then still come through London; otherwise, sales will be lost to centres outside the European Union, such as Geneva and New York.
The estimate that I gave the Prime Minister, with which he agreed, was that 5,000 jobs in our economy--mostly in London, but throughout the UK--are at risk because of this measure. Why, at this late stage, are the Government trying to spring on the House a proposal that will probably cost this country 5,000 jobs without giving us a proper
chance to consider it and without sticking to the assurances that were given in the House only a few months ago?
Mr. Fabricant:
When the Prime Minister revealingly agreed with my hon. Friend that there could be a loss of 5,000 jobs in the industry, did he give an estimate of the money that will be lost to the UK in trade and revenue, which is relevant to the Ways and Means resolution? If he did not, will my hon. Friend do so?
Mr. St. Aubyn:
That is a matter best left to the experts. I have seen estimates, but I have learned during the proceedings on the Finance Bill that it is safer for us to ask the Government for their officials' professional estimates than to come up with our own. My hon. Friend asks a pertinent question, and I expect the Paymaster General to have the answer. However, there can be no doubt that a loss of 5,000 jobs is very serious for our economy, particularly as some of those jobs are very well paid and extend beyond the art market to the tourist industry. Many people who come to London to buy international works of art also visit places of historic interest, stay in London hotels and fructify the city's economy. All that will be jeopardised by the proposal.
Mr. Geoffrey Clifton-Brown (Cotswold):
I listened with care to the answer that the Prime Minister gave my hon. Friend during Prime Minister's questions, and the right hon. Gentleman gave the House a clear impression that he would use all his personal authority to prevent this increase in VAT. Does not my hon. Friend think that the Prime Minister's authority in negotiating in Europe has been severely dented by the necessity to bring this Ways and Means resolution before the House?
Mr. St. Aubyn:
I am grateful to my hon. Friend. We have heard time and again how the Government, by engaging in what they regard as a more positive way with our European partners, would somehow deliver great concessions and achieve what we were unable to achieve when we were in government. Surely, this is a test case for that so-called new approach to dealing with the European Union, and the tabling of this Ways and Means resolution is an admission by the Government that their policy towards Europe has failed. No one in the European Union will gain from this increase in taxation, and our market will lose. Everyone agrees with that.
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