Examination of Witnesses (Questions 40-59)
8 MARCH 2005
MR ANTHONY
BROWNE, SIR
TOM LIGHTON,
DR IAIN
ROBERTSON AND
MS JOANNA
CAVE
Q40 Derek Wyatt: I made a mistake, I
think France is 15 euros?
Ms Cave: Yes.
Q41 Derek Wyatt: But Germany is 50?
Ms Cave: Correct.
Q42 Derek Wyatt: Where would you like
the British rule to draw a line?
Ms Cave: As you know Member States
have the option to reduce the threshold from the offered maximum
of 3,000 euros. We feel that is prohibitively high—high
because it will exclude a huge number of different types of artists,
such as photographers, crafts makers and illustrators whose works
just do not command the same sorts of prices that paintings and
sculpture sell for. We are suggesting lowering the threshold to
1,000 euros which will benefit a much broader range of artists,
and will also deliver the objective that the Commission has highlighted
in encouraging younger artists, or those at the beginning of their
career, where their values have not achieved high levels. If the
UK opts for a thousand euros it will still have the highest threshold
out of all the Member States.
Q43 Derek Wyatt: What is the purpose
of Germany and France being so low?
Ms Cave: They have had the right
for much longer. France has had it since 1921 and Germany has
had it since 1960. I would imagine the thresholds have remained
the same for a much longer period of time. They are obviously
keen to maintain that because it will have an adverse effect on
their artists if they increase it; and they already perceive that
the changes in the Directive will reduce income for their artists
anyway. I think they are very keen to keep their thresholds.
Q44 Derek Wyatt: There was a comment
in the evidence from the Arts Council, just previous to you, saying
there were issues over digital art and 3D art. Could that be incorporated;
could we amend it, given it is now up for consultation?
Ms Cave: I am at risk of speaking
for the Government here, which I should not really do, but the
draft statutory instrument has borrowed the definition of a qualifying
artistic work from the Copyright Designs and Patents Act 1988
and, unfortunately, that piece of legislation does not include
video art. I should say, however, that videos are protected as
original film works under that Act. Artists who make installations,
for example, and film them do qualify for royalty income as directors
and producers of a film; but the Arts Council are quite right
to say that that is rather anomalous and does not fit with modern
practice; but I think the point needs to be addressed through
that piece of legislation, rather than this Directive which has
borrowed the definition in full from existing UK law.
Q45 Derek Wyatt: Dr Robertson, I commend
you on your work on the British Council, and I am bound to say
that as chairman of the all-party group—I think the British
Council is one of our great unsung heroes overseas. It was mentioned
just now that we really need help to get artists actually overseas,
in the sense of selling their work. Do you see that the British
Council could do something like that?
Dr Robertson: It has done quite
a lot actually—Henry Moore being the great example.
Q46 Derek Wyatt: I was thinking of younger
artists.
Dr Robertson: It continues to
do sterling work on behalf of a number of artists. I think it
is doing more than most national overseas cultural promotion organisations
such as the Goethe Institute and Institute Francais. As to doing
more—this depends on how we define contemporary art. At
present we are talking about a very, very narrow definition of
contemporary art here. There is art which is made which bears
no relationship to the art which is supported by the Arts and
British Councils actually—which does not get any airing
at all. We should be addressing a slightly larger definition of
the term "contemporary"; by which I mean extremely well-painted
landscapes, extremely well-painted figurative paintings and that
whole tradition, which seems to have died. To that end, the British
Council could start finding overseas exhibitions or creating overseas
shows for a much greater community of artists rather than just
relying or two stars—which mirrors the star system in the
art market. You will get an artist, like Antony Gormley, who will
get numerous appearances overseas and only two or three individuals
benefit—his dealer, the intermediary Antony Gormley and
owners of Antony Gormley's work. I think they could be a little
more pluralistic in their shows. Otherwise I think they are doing
a relatively good job. Could I add one other point to what has
been mentioned before: if the droit de suite tax comes
into effect, and there is a hike on the level of EU import tax
for art entering the EU from outside, the Eurozone will be dangerously
uncompetitive; could we not reduce the VAT at a national level
on works of art sold from its current levels which are 17.5%?
That would at least ameliorate some of the damage which has been
done by the other taxes.
Q47 Derek Wyatt: I have noted that on
e-Bay there is quite a large section of auction art. You said
that if we deregulate too much the Sotheby's and Christies will
fly away; but will the net not become even more important?
Dr Robertson: You cannot sell
art on the net—Sotheby's completely failed in its attempt
to do just that.
Q48 Derek Wyatt: That might be Sotheby's
culture rather than e-Bay's?
Sir Tom Lighton: I think in six
years we have only made two sales directly as a result of the
Internet.
Q49 Derek Wyatt: What a challenge!
Sir Tom Lighton: It is a challenge.
However good digital photography is, there is no substitute for
seeing the actual object; and you also want to see the object
in the context of an exhibition.
Ms Cave: Can I say just for clarity
that the resale royalty would not apply in your example, because
it does not apply to transactions between private individuals.
Q50 Mr Doran: There is a bit of squabbling
about the virtues or otherwise droit de suite, but the
fact of the matter is that we have to implement it. How do we
do it cheaply, without massive bureaucracy, and making sure that
more money gets to artists?
Ms Cave: I think the answer to
that is drawing down the option for compulsory collective administration;
that delivers benefits to both sides. For the art market professionals
they will be able to remit all royalties and all information to
one place and not have to deal with lots and lots of individuals.
Do bear in mind, because this is international legislation, if
collective administration does not occur and all transactions
have to be dealt with individually that will also include all
international beneficiaries. It will be a myriad number of possible
relationships that each individual art trader would have to maintain.
We would advocate compulsory collective administration delivering
great benefits to the art market. It also delivers great benefits
for the artists, because it guarantees that all royalties that
are due would be paid. Not having compulsory collective administration
would leave the artists to have to find out that their work had
re-sold and we think that is going to be extremely difficult for
the vast majority. If one of your constituents in Aberdeen, for
example, had a piece of art change hands in a London gallery or
auction room I do not know how they would know that that had happened,
unless they are one of the rare few that does have an agent that
is keeping an eye. In the main, they have no idea. There is only
a three-year period in which an artist is entitled under the law
to obtain information about a resale, and the chances are they
would miss the fact that a resale had occurred and they would
not get their royalty.
Q51 Mr Doran: What do the others around
the table feel about that?
Mr Browne: You are right, it is
a formidable problem and never before has this right applied to
a market the size of the United Kingdom from scratch. We do view
that with some concern, particularly as the consultation process,
to which you referred, started only recently and, therefore, it
is clear we will not get a precise view of the legislation until
probably the summer and it will be a big problem. Lowering the
threshold below 3,000 euros—in other words, extending the
scope of this Directive—would simply exacerbate what is
already going to be a major problem. I think it is worth saying
that there were two prongs in the Government's sterling opposition
to the Directive: one was the worry that it would displace the
market; but the second, which is a crucial point, is its impact
on small and medium enterprises. What I think concerns our Federation
is that the smaller auction houses and the smaller dealers we
represent who would be conducting a large number of transactions
at the lower level—would simply have this administrative
cost imposed on them, which has been put (at various studies commissioned
by the DTI) at between £30-£40 per transaction. In terms
of potential benefits for the artists that Joanna refers to, balanced
against the enormous administrative costs and the added administrative
costs, it would simply make the whole situation far more complicated.
Q52 Mr Doran: So we need something centralised?
Mr Browne: We see some advantages
and some disadvantages in this. Clearly the more artists that
do a one-stop shop through the design and copyright side of it
the easier it becomes to make it work. Whether or not it should
be compulsory I think is more an issue for artists—as to
whether they want to be forced to use a monopoly collector. That
is more an issue for artists than for ourselves. We see some advantages
in dealing with an agency that represents as many artists as possible,
but whether it should be compulsory or not, I do not think we
have yet formed a view on.
Ms Cave: Could I just pick up
on that point. Compulsory collective administration would not
give them a monopoly, because the draft legislation makes it clear
that if more than one collecting agency existed they could co-exit
and both collect. There would be no issue of monopoly in that
arrangement.
Mr Browne: The advantage, it seems
to me, is in having one.
Ms Cave: There is only one at
the moment.
Q53 Mr Doran: I am interested in all
the comments about the impact this extra cost is likely to have.
I have taken an interest in auctions and am conscious that in
the 1970s, for example, Christie's and Sotheby's introduced the
buyers' premium which then was 10%—we survived that. The
buyers' premium is now 20% at Sotheby's and Christie's and we
have survived that. We are talking about a relatively small sum
of money because of the thresholds and because of the limits on
individual payments. Are you not being a little hysterical?
Mr Browne: I do not think so.
Our Federation represents large numbers of auction houses—some
being the ones you have referred to, the international ones, and
others much, much smaller—and they have different terms
of sale. I am certainly not privy to their profit and loss accounts
or what their financial status is. The inescapable fact is that
this will be a charge that will apply on transactions here which
will not apply (at least for the foreseeable future) on transactions
in New York and Switzerland which are our principal international
competitors. The implication of what you say is, of course is
that it is open to a dealer acting as an agent, or an auction
house, to absorb the charge, the droit de suite levy, from
within his margin, to alter his margin or to do whatever he chooses.
It is equally open to him to pass that charge on to the seller,
buyer or whoever. I cannot predict what people will do, and no
doubt they will take a commercial and financially competitive
view on this. The plain fact is we are not being hysterical because—unlike,
for example, VAT, where import VAT is refunded on an object which
goes abroad, so if it comes in from outside and it then goes out
it has a neutral effect—this is an absolute disadvantage
for the market here by comparison with its overseas competitors.
Whether it makes people here less profitable or it makes it more
expensive for the seller, the charge exists here and that is the
point I am trying to make.
Ms Cave: No mention has been made
of the huge consideration that we feel the Commission gave to
this issue when they harmonised the Directive by imposing a cap
on the amount of royalties that an artist can earn. That is unprecedented
in rights' legislation; no other creator has to live with a cap
on their royalty earnings. Steps were specifically taken to protect
the art market to make sure the impact was not material, and in
full consideration of concerns about loss of sales. Do bear in
mind, in the Member States where it exists at the moment there
is no such cap so this will represent a massive, massive change.
To illustrate the point: Damien Hirst's formaldehyde shark sculpture
sold recently for £7 million in this country; had the right
existed in this new form when that resale took place Damien Hirst
would have earned only a maximum of 12,500 euros, about £9,000;
had that sale taken place in Germany last week where there is
no cap he would have earned £350,000. The imposition of the
cap has made a huge, huge difference to how this royalty is going
to work. On its own that is going to neutralise the concerns.
Q54 Mr Doran: It is in line with the
principle droit de suite which was to help struggling artists.
I do not think anybody could describe Damien Hirst as a "struggling
artist"!
Ms Cave: That might be true, although
of course he does not get anything out of Charles Saatchi's huge
profits on the £7 million sale.
Q55 Mr Doran: Can I ask one other question,
and it interests me because I have collected art all my life:
what is the value of contemporary art? The reason for asking the
question is, I went to an auction recently and bought two very
nice contemporary paintings by an artist whom I know and who exhibits
regularly in Aberdeen but there was not one jot of interest. The
gallery price on them was about £700 for the pair and I got
them for £20.
Mr Browne: It sounds like you
got a bargain!
Q56 Mr Doran: I am pleased with the bargain—I
love the paintings—but what is the value of contemporary
art?
Dr Robertson: The perceived value
of the willingness of somebody to pay.
Mr Browne: Could I pick up on
something Joanna Cave said in terms of this.
Q57 Mr Doran: The fact you are avoiding
the question tells me—
Mr Browne: No, I am not really
avoiding it!
Sir Tom Lighton: I cannot answer
your specific question but it does sound like you did extremely
well.
Mr Browne: Chairman, may I pick
up on one point. I noticed in the evidence that the Design and
Artists Copyright Society produced—and this came out in
the question of the diversion of sale—yes, the Government's
huge political effort is very, very important and, goodness me,
we are grateful for that because it will undoubtedly help in the
short-term to minimise the damage that this thing will do; but
it really is no good now trying to argue (as it seems DACS is
trying to do) that really this does not divert the market because
clearly the Commission thought it did, otherwise it would not
have introduced this Directive on internal market rules. The Directive,
I would remind you all, was introduced in order to remove a distortion
to the internal market. Either it distorts the market or it does
not. The Commission, although some people may not agree with it,
recognises the threat to the international competitiveness of
our art market, and in recital seven of the Directive, it specifically
makes reference to the need to open negotiations with the Americans
and Swiss. If these negotiations fail then I fear that we really
are heading (and we may be known for exaggeration from time to
time) for a disaster, because when this applies to the 80% of
the part of the market which it applies to, when it applies to
the work of deceased artists, Matisse, Picasso and so on, I really
fear it will be impossible for us to attract major works by these
artists into London unless we can use the breathing space that
the Government has got in terms of the derogation, to try and
see whether either international negotiations are successful;
but if they are not, then I think we should think again. Otherwise
we are going ahead knowingly sacrificing something which we are
very good at in this country for no very obvious gain. Paradoxically
not even the artists (nor their heirs in this case) are going
to gain in those circumstances, because if their works are sold
in New York or Switzerland they are not going to gain anything
either. It is a lose-lose situation for us: we will lose market
jobs in the art market; and I do not see that the handful of heirs
who gain from this would gain very much either. I am grateful
to you for examining this issue again and I hope you will come
back to it again, because I do believe that this should not just
be allowed to rest. We all say, "Well, the Government did
a very, very good job", which it did; having to cope with
qualified majority voting under internal market rules, it managed
to exact some very serious concessions and they are very important
to the market; but we really cannot let it rest here. It is a
huge experiment with the future of the market.
Ms Cave: Can I just say, first
of all, it is our belief that art sells where it is likely to
achieve the best price, and there are many considerations that
go into the decision about where to place a sale. As I have just
explained, the cap on royalty earnings will mean that no more
than £9,000 approximately can be paid out on any one resale.
In the research we have done, that always works out at less than
the costs of exporting, insuring and packing a piece of work to
send it somewhere else. I think also our market in the UK can
take comfort from what has happened in other countries, where
there has not been this big hysterical rush of art works from
Germany, France, Denmark and Sweden to other places. There is
a very good example which illustrates that. There was a very important
American collection of modern art which contained a large number
of 20th Century German works owned by an American collector, and
when he was deciding where in the world he wanted to sell this
collection he chose Cologne in Germany. Germany has the resale
right, it is uncapped, and it exists with a threshold of 50 euros
at a rate of 5% across the board. He is an American who could
have elected to sell that collection in the States where there
is no resale royalty but he chose to send the works to Cologne.
The reason he did that (and this took place in December 2004)
is that he was advised, "That is where you'd achieve the
best prices", and indeed he did. There was a Kurt Schwitters
from that sale which achieved a world record price
Chris Bryant: I think I am in favour
of the droit de suite and, in fact, I am more so now after
Mr Browne's last contribution, and it is partly because whenever
I have met a dealer or a collector they always seem wealthy and
whenever I have met an artist they seem poor. It seems to be part
of rectifying that imbalance in life, or perhaps that is a little
bit old Labour of me.
Chairman: I have bitten my tongue!
Q58 Chris Bryant: You are not biting
your tongue well enough, Chairman! The hyperbolic comments we
have had today about diversion seem to be undermined by the comments
we have just had. Let me just come to one specific point. Mr Browne,
you said that in the last round of contemporary art sales 50%
of it had obviously come from outside the country because of the
VAT listing. Apart from Sotheby's, Christies and Bonhams, does
it matter at all whether those are sold in this country or elsewhere?
Mr Browne: It matters to the auction
houses.
Sir Tom Lighton: A lot of what
this inquiry is about, as I understand it, is about how we help
the young emerging artists; it is not purely about droit de
suite; that is an important element of it and I think it firmly
links to it. As I said earlier, if there are no auction sales
of any significance in London there are a lot of young artists
of great talent who are showing in smaller galleries up the East
End of London, not just in the West End, and a lot of major museum
curators come in for the auctions and they go and visit those.
You may not believe it, but they do. They would lose that exposure
to those people, and they can be very significant in their career.
The other thing I would say is, my view on droit de suite
is obviously quite well known but I think most artists are probably
much, much more concerned with achieving the maximum number of
first sales, quite rightly. Whatever the merits or otherwise of
droit de suite their principal income is going to come
from the primary market. What they need is a very healthy primary
market. If they have a successful relationship with their particular
dealer or gallery that is what they are both trying to achieve.
Q59 Chris Bryant: Indeed it would be
fair to say, would it not, that for many living artists it is
not all that frequent to see many works of art coming up at auction?
Sir Tom Lighton: The other thing
you need to remember is, if you bought a painting for £10,000
and in a few years' time you resold it and it only sold for £6,000,
you still have to pay the droit de suite.
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