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8 Nov 2005 : Column 55WH—continued

8 Nov 2005 : Column 56WH

Artists' Resale Rights

12.58 pm

Chris Bryant (Rhondda) (Lab): I am delighted to be able to begin the debate rather early. The artist's resale right has barely been discussed in the House over the last few years, but it will radically alter parts of the British art market. It is a great shame that, until now, we have not had a full opportunity to debate the matter. Indeed, when the Government eventually bring forward their measure, it will probably be in the form of a statutory instrument, which will be debated for an hour and a half in a Committee Room, with no opportunity to amend it. That often happens with European legislation as we incorporate it into British law. I hope that, one day, there will be a half-way house—a third way—between primary and secondary legislation so that we do not have to go through the full three readings process for European legislation, but have a fuller means of exploring issues.

I support the concept of an artist's resale right, although I understand that others disagree. It is important to set the artist's resale right within the broader context of the art market in the UK. The Government estimated in 2001 that, as of 1999, the UK art market was worth £3,467 million. In France, for the same year, it was estimated that their total art market was worth about £2,115 million. It is probable that, since those figures were arrived at, the British art market has grown somewhat. Latest estimates put the worth of the market in the region of £4.5 billion. Therefore it makes up a significant part of the British economy. It is also a significant employer. There are about 9,500 art dealers and 750 auction houses. Last year's labour force survey suggested that there are 148,700 artists in the United Kingdom, although that figure probably includes commercial artists and graphic designers. A more conservative estimate is that the UK has 85,000 to 90,000 working artists.

Many of those artists are partly employed and partly self-employed. The art industry drives many other industries, such as the newspaper and magazine industry, the graphic design industry and a whole series of others. The pure artist—the person whom we might identify with an easel and brush—is still instrumental in ensuring the creative innovation of British industry.

It is important that we bear down on some important misconceptions early on in this debate. The first misconception is shared by many people; namely, that artists are wealthy. It is all too easy to see Tracey Emin sell her unmade bed for £150,000 or her slippers for £5,500 and think that artists are doing pretty well.

Incidentally, Sarah Lucas, another artist who sold her unmade bed as a work of art, once viewed my flat in the east end of London. She offered me less for the flat than she would probably have offered for the bed, had I left it unmade before she came to view it.

In February, Lucien Freud's portrait of Kate Moss fetched £3.9 million at Christie's. Damien Hirst's pickled shark fetched £6.5 million. It is therefore easy for the general public to think that British artists are doing pretty well. Those examples are the tip of a formaldehyde iceberg—they represent one tenth of 1 per cent. of UK art sales. The artists who are coining it are a very small minority. In fact, average contemporary art
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sale prices in 2002—the most recent year for which figures are available—were £382 for a painting or drawing, £198 for a photographic print, £293 for a sculpture and £163 for a limited-edition print. It is good to know that art is accessible to more people in terms of cost than people might think from the figures paid for Damien Hirst pieces. The truth is that half of all drawings and watercolours sold in the UK in 2002 sold for less than £500. Some 43.8 per cent. of all art sales in the UK are for less than €1,000.

During my speech, I shall switch between euros and   pounds with rather unnecessary frequency. For that I apologise, Mr. Cummings. The European directive speaks about sale prices in euros, and the Government will end up speaking about sale prices in euros on the matter, so I must sometimes refer to prices in euros, because I have not converted all my figures from pounds to euros. An aspiration may be contained therein for the future of the British economy.

Many artists, even ones who are relatively well known and who may have been established for several years, earn extremely small amounts of money from the sale of   their work. Forty per cent. of artists in the United Kingdom earn less than £5,000 per annum. That is below the minimum wage. Many are half employed and half self-employed, so that figure is not regularly in the public domain. None the less, we should bear it in mind.

The second misconception that I wish to abolish is that the artist's resale right will destroy the art market in the United Kingdom. When I was a member of the Select Committee on Culture, Media and Sport in the   previous Parliament, we did a report on the British art market. Some of the outlandish remarks made by both the auction houses and the dealers suggested that the resale right would be the end of the British art market. No, it will not. For a start, the Government have managed to secure a whole series of exemptions, which will mean that the Commission's original proposals for an artist's resale right will not be as onerous as people first thought.

For a start, there will be a cap of €12,500 on the amount of royalty that an artist can earn from a work of art, so there is little likelihood of someone choosing to sell a British work of art in the United States or in Switzerland. That was one of the arguments advanced by the auction houses; that someone wanting to sell a Damien Hirst would decide to sell it in Switzerland or the US, where there is no artist's resale right. I do not believe that to be true, although people sometimes have a nexus of different reasons for believing that a work of art will sell best in a particular country. The owner of a work of art may choose to sell a £6.9 million work in the place where it is likely to achieve its highest price. That may be the US, but the €12,500 cap is unlikely to be the major factor that determines whether an owner sells the   work in this country or elsewhere.

The second exemption that the Government have secured is that no royalty will be payable when art galleries buy a work directly from the artist and resell it within three years for less than €10,000. Again, that is because a large part of the British art market is selling works of art for considerably less than €10,000, which is roughly £6,500. That ensures that the impact on the high end of the art market will be pretty minimal.
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Significantly, the Government secured a derogation, which member states can implement, whereby the right will not apply to deceased artists' estates until 2010.

My concern is for the artists who are arriving on the art scene today, particularly for struggling artists whose income stream is difficult at the best of times, and not primarily for the estates of those who have already died. This row has already gone on in France, Germany and Italy. The derogation, however, gives the Government an opportunity before 2010 to review how the artist's resale right has worked in operation in the UK before going back to the Commission and discussing further possible changes to the resale right in the future.

The most important reason why the artist's resale right will not destroy the art market in the UK is that only about 2 per cent. of the total value of the UK art market—a tiny fraction—relates to the resale of the works of living artists. Even if all the works by deceased artists were included—only another 8 per cent.—that would be only a tenth of the whole art market in the UK, so I suggest that some of the comments of the galleries and the auction houses have been exaggerations.

The third misconception is that a strong UK art market depends primarily on a wholly unregulated market. I shall not talk about the regulation of auction houses because we know all about the problems that the auctions houses have got into over unfair trading in the   past few years. More important, the strength of the UK art market relies on the vibrancy, innovation, imaginative quality and strength of the artists' community that underlies it. In other words, it relies on the artists who are making new works of art.

It is not good enough for us to rely simply on selling Eduardo Paolozzis and Francis Bacons—the great British artists of the recent past. We must have a modern, contemporary art culture if we are to have a   strong art market. We will have strengthened the whole of the British art market rather than weakened it if we can ensure a stream of income to artists who are alive today.

The artist's resale right is likely to clean up some of the dodgy cash-based transactions of some of the UK art dealers about which witnesses told the Culture, Media and Sport Committee last year. That is because artists, who have a financial interest in the resale of their works and will be following their fate with a keen eye when they appear for resale at dealers and auction houses. Furthermore, dealers will have to produce an audit trail and invoices for works of art by contemporary artists. I   suspect, therefore, that some of the less savoury practices in the art market will be cleaned up.

The Government issued a consultation paper earlier in the year, suggesting that derogations would enable them to introduce a threshold of anything up to €3,000. That is the point at which the artist's resale right would kick in and it would be in line with the European directive. However, I believe that we should apply the simple principle of helping as many artists as possible without making the royalty too bureaucratically burdensome to apply. The €3,000 threshold is too high to help the vast majority of artists. The threshold is set at €50 in Germany, €150 in Spain, €200 in France and €1,000 in Italy and Ireland. With the Government suggesting that it should be €3,000, we are sticking out like a sore thumb.
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Lowering the threshold will not drive sales abroad. The honest truth is that the royalty on a work that resells in the UK for €1,000 would come in at the princely sum of £27—far less than the cost of packing, shipping or insuring the work, let alone the cost of the complex legal arrangements that may have to be made for it to be sold in the United States of America or Switzerland. We should therefore lower the threshold from €3,000 to €1,000.

Lowering the threshold to €1,000, as opposed to the German or French levels of €50 or €200, would also be proportionate, because that would not impose too heavy a bureaucratic administrative burden on industry. It is estimated that lowering the threshold will bring an extra 72 per cent. of British artists into the scheme. I   simply ask the Minister—I hope that he will reply in what, for me, is an optimistic way—whether it would not be right to support the many, rather than just the few.

A classic instance that springs to mind relates to my constituency. A Conservative Member recently asked me what this debate would be about, and when I told him, he said, "I am sure that they talk of nothing else in   the Rhondda but the artist's resale right." Well, the Rhondda group of artists comprised Glyn Morgan from Pontypridd, who was born in 1926 and who is still alive; Charles Burton, from Treherbert, who was born in 1929 and who is also still alive; and, perhaps most notably, Ernest Zobole, who died in 1999 and who was from Ystrad in the Rhondda. The group was very active; indeed, the two remaining members are still active. However, the vast majority of their works of art would not be caught by the €3,000 threshold, but only by the €1,000 threshold.

I want the Government—preferably this afternoon, and certainly soon—to say that the work of artists such as Charles Burton, Glyn Morgan and Ernest Zobole will be subject to royalty rights under the artist's resale right because the threshold will be lowered to €1,000. The Minister might like to know that Charles Burton's work "Rhondda Bridge" is currently for sale for £1,650 at the   Martin Tinney Gallery in Cardiff. I am sure that the family will be delighted to have some artist's resale rights if it is sold.

Let me now say a couple of words about the legislative process. The Select Committee made recommendations earlier this year. We thought that the threshold should be lowered to €1,000. The Government responded in the summer, saying that it welcomed

I hope that the Committee's views will help the Government's assessment in the direction of €1,000.

Legislators tend to do remarkably little for visual artists. The nature of their work as painters, sculptors, potters or photographers means, quite often, that they work alone. Unlike singers, authors, musicians and composers, they have had few organisations to fight their corner. Remarkably little has been done to secure their economic and moral rights as artists since Michelangelo completed first the ceiling and then "The Last Judgment" in the Sistine chapel in 1541. The innovation of droit de
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suite is perhaps a fait accompli, but it was first introduced in France in only 1920 for auction houses alone. It was a vital step, and I hope that we shall enact it as a fully progressive measure, helping the many and not just the few, as soon as possible.

1.15 pm

Mr. Hugo Swire (East Devon) (Con): I am most grateful to the hon. Member for Rhondda (Chris   Bryant) for having secured this debate and for allowing me in on it, and to the Minister for agreeing to that.

It is worth making a couple of points. The hon. Gentleman spoke about some of the concessions obtained by the British Government during negotiations. It should be pointed out that one of the principal concessions was when they tried to stop the implementation of a lower threshold. The hon. Gentleman is arguing against everything that the Government have succeeded in doing over a period of five years.

The Design and Artists Copyright Society has mounted an extensive lobbying campaign, and not an unsuccessful one, it would appear. Quite frankly, however, there is nothing to change anyone's mind. Lord Sainsbury of Turville reminded the Select Committee on Culture, Media and Sport, of which the   hon. Gentleman was then a member, that the administrative costs of imposing the limit of below €3,000 become an absurdly high proportion of the actual payments to artists. That is the seminal point, and nothing I have heard this afternoon has led me to change my mind.

The British Art Market Foundation has estimated that the total collection and distribution costs involved if the levy were extended to sales of €1,000, as suggested by the hon. Gentleman, would come to more than twice the amount received by the artist. The Government have made much of their policy of reducing the burden of costs and administration on business, and it would be entirely consistent were the Minister to resist the hon. Gentleman's cause.

Clearly, it would be absurd to involve the thousands of small businesses that make up our successful art   market in a bureaucratic paper chase that would produce only tiny amounts of money for a small minority of artists. Interestingly enough, the hon. Gentleman will note that an independent survey commissioned by the Government found that the work of only 189 British artists was sold for more than €1,000 in auctions over a one-year period. That is worth noting.

Secondly, the Government have known the details of the resale right directive for more than five years. However, less than two months before it is due to be brought into effect the Government have not published their legislation. The artists' resale right has never been imposed on an art market the size of the UK's, which accounts for more than half the entire European art market. How can that market, which is so vital in this country for all artists of any sort, make the preparations needed if it does not have the details?

1.19 pm

The Parliamentary Under-Secretary of State for Trade and Industry (Barry Gardiner) : It is a great pleasure be here, Mr. Cummings. I think that it is the first time that I have served under your chairmanship.
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It is always interesting when we have an artistic debate. We have had colour and texture from my hon. Friend the Member for Rhondda (Chris Bryant), and style and form from the hon. Member for East Devon (Mr. Swire). We have been treated to some interesting byways of formaldehyde icebergs and dodgy dealers. However, the substance of our debate is crucial to the development of the art market in the UK, and I am delighted that my hon. Friend has highlighted that important issue. I congratulate him on securing the debate, which is especially significant as we are nearing the end of the process to reach a decision and implement the resale right in the UK.

The UK has a thriving and prosperous art market that makes a major contribution to the economy. In 2001, the UK art and antiques market was worth around £4.4 billion, split roughly 50:50 between auctioneers and dealers. With 25 per cent. of the world market total, the UK market is second only in size to the US and employs 28,000 full-time and 9,000 part-time staff. The Government are determined that it should continue to flourish.

Of course, there would be no art market without the creativity of artists, and the Government recognise the contribution that they make to the UK's cultural identity. Art, in all its forms, improves and enriches our daily lives. Visual art is an increasingly significant part of everything we do; it spans a huge range of activity from painting to photography. Art is one of the creative activities that, according to economic estimates produced in August last year, accounted for a significant 8 per cent. of the UK's gross domestic product in 2002.

As my hon. Friend the Member for Rhondda said, the majority of member states have indicated that they will adopt a threshold below €3,000—indeed €1,000 for many. However, other member states do not generally have as successful an art market as we do, which is why we need to consider the issue carefully before reaching a decision.

In implementing the directive on artists' resale rights, we must strike an appropriate balance between artists and those selling their work. We aim to introduce a workable scheme that will benefit artists without damaging the strong position of the UK art market. We are particularly concerned that the framework should minimise any risk that sales might be diverted to countries such as Switzerland and the USA where the right does not exist.

When negotiating the directive, the Government secured a significant number of concessions to reduce the risk of damage to the UK market. The first key concession is the imposition of a cap of €12,500 on the total royalty payable on any transaction. The original proposal contained no cap.

The second concession is the derogation under which the UK is entitled to delay the application of the resale right to works by deceased artists until 2010—that date can be extended to 2012. We intend to make full use of that derogation to allow the art market time to adjust to the introduction of the resale right. The UK will apply resale royalties only to the works of living artists from 2006. From 2010, resale royalties will have to be paid on sales of eligible works by deceased artists. The UK may, at this time, make a case to the Commission for the derogation to be extended to 2012.
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The final key concession is an obligation on the European Commission to enter negotiations to make compulsory the relevant article of the Berne convention—an important international convention that sets out the worldwide copyright framework. Such a change would require countries such as the USA and Switzerland to introduce the resale right. To date, such attempts have not succeeded: both countries have said that they do not intend to introduce the right at this time, and the World Intellectual Property Organisation does not consider it a priority. We will continue to press for the international adoption of a resale right, but without any great hope of that happening in the near future.

The concessions dictated by the final form of the directive are crucial. However, other matters about which we have heard today are also critical to the impact of the directive in the UK. To make certain that we maximise the value to artists without undermining the art market, it will be necessary to make the right decisions on two matters on which the directive permits us some flexibility. Today's debate has allowed us to explore those issues in some detail and has given me an opportunity to set out some of the relevant factors that the Government are carefully considering.

The first important decision concerns the collective management of resale royalties. The directive allows members states to provide for collective management of resale royalties and to make such management compulsory. The arguments for collective management are threefold: it will secure greater compliance, it is   generally considered to be relatively secure and it is more efficient, particularly through the lowering of administrative costs. Evidence submitted before and   during consultation indicates that costs will be significantly reduced if the right is collectively managed. The main argument against compulsory collective management is that it removes the artist's choice to administer the right independently. Independent collection may be preferable for some artists who have strong links with particular galleries that sell their works. Compulsory collective management of rights does not generally apply in UK copyright law. We would therefore also need to be sure that such a requirement for artists' resale rights would not set an unwelcome precedent in any other area.

The second crucial decision is whether the UK should   adopt a threshold of €3,000 or lower for the payment of royalties. Setting the threshold lower would considerably increase the number of artists who would   benefit from the introduction of resale right. A recent study found that 37 per cent. of artists earn less than £5,000 per year, which means that almost 50 per cent. of all artists and visual creators fail to earn a reasonable living from their art. That percentage is significantly higher among certain groups, for example painters and sculptors. That is part of the background to the decision made in 2003 by the Arts Council of England to give more priority to assisting individuals. That new policy showed a marked shift away from the Arts Council's earlier policy of awarding grant funding to arts institutions.

The position of some artists at the lower end of the income scale is still not secure. That is why many artists are watching very closely to see what decision we make on the threshold. Our decision could make a real difference to their incomes and livelihoods. However, we
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must be sure that the decision on the threshold does not increase the number of sales at risk of diversion to overseas markets. We have had some very helpful information from stakeholders to help us to determine whether sales of artworks below the €3,000 threshold might be diverted to other countries. Indeed, the consensus is that the lower threshold of €1,000 will not significantly damage the art market by driving sales abroad. We believe that the costs of relocating a sale overseas will generally outweigh any royalty payable under artists' resale rights.

It may be helpful if I give an example. A work of art sold for €1,000— approximately £700—will generate a royalty for the artist of about £28 if the resale right is at a rate of 4 per cent. That figure will generally be far less than the cost of packing, shipping and insuring the work in order to sell it in another country. We must consider the fact that royalty payments on works selling for less than €3,000 would be very small. The £28 on a €1,000 sale may not make an enormous difference to an artist. Against that we must weigh the administrative burden placed on dealers and auctioneers to process the payments. The administration cost to businesses may be significant compared with the benefit to the individual artist. In particular, we must consider the impact on smaller dealers and auction houses.

We have recently received up-to-date information on the number of artists who would benefit and the costs of administration. Those figures are being analysed to assess the balance between the costs and the benefits that have been so ably presented to us by my hon. Friend the   Member for Rhondda and the hon. Member for   East Devon. Both decisions are being made in the light of the helpful responses to the Government's public consultation exercise on draft implementing regulations, which was undertaken earlier this year.

The formal consultation process has been supplemented by a number of informative discussions with the art trade and those representing artists. Today's debate has been a useful additional opportunity to hear some of the views that we know must inform our decisions. We expect the draft regulation setting out our proposed framework for artists' resale rights in the UK to be laid before Parliament in the very near future. As this is an entirely new concept in the UK, and resale right has never before been applied to a market as large as the UK, we will monitor its impact following introduction. We will commission further research to compare with that undertaken before the right is in place. That will provide us with information to feed into the commission's review of the directive, which is scheduled to take place in 2009.

I shall conclude by repeating my earlier assurances—

Mr. John Cummings (in the Chair): Order. We have to move on to the next debate.

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