Memorandum submitted by Farrer & Co,
Lincoln's Inn Fields
Issues flowing from the first of the issues
to be examined:
— Funding, with particular reference
to the adequacy of the budget for museums, galleries and archives,
and the impact of the London 2012 Olympics on Lottery funding
for their sector:
1. BACKGROUND
(1) It is widely perceived in the light
of anticipated future economic conditions and decline in Lottery
receipts (whether flowing from the London 2012 Olympics or otherwise),
that over the next decade funds available towards the acquisition
by UK public collections of chattels of heritage importance ("heritage
chattels") coming on the market will prove inadequate. In
such event further outflows of major heritage chattels from this
country are to be feared. A scenario of this kind is likely to
be exacerbated by the continuing escalation of values in an international
market avid for works of art of the highest standard and provenance.
Baring some international disaster the appetite of foreign institutional
and individual collectors for such objects, the supply of which
is finite, is most unlikely to diminish.
(2) Such realities were recognised when
in his Budget Statement in April 2003 the Chancellor of the Exchequer,
announced the process, which became "the Goodison Review",
of initiating a study "to review the effectiveness and efficiency
of support to regional and national museums and galleries to help
them acquire works of art and culture of distinction that might
otherwise be sold abroad and to make these items accessible to
the publiç.
(3) As a result Sir Nicholas Goodison carried
out a wide ranging review for the present Government which addressed
not only questions of direct funding for acquisitions, whether
via the National Heritage Memorial Fund or the Heritage Lottery
Fund or otherwise, but also more indirect means of securing the
retention in this country of heritage chattels.
If it is accepted (as it appears it must be)
that direct funding for acquisitions at an acceptable level is
unlikely to be available in the foreseeable future, it would seem
even more essential for Government to review sympathetically the
second raft of issues considered by Sir Nicholas. Effectively
this boils down to tax incentives and export controls.
2. TAX INCENTIVES
(1) Such issues were explored in depth in
the paper submitted by the Goodison Review Group on 18 January
2006 in the context of your Committee's recent inquiry and Third
Report, Protecting and Preserving our Heritage (HC 912). The Group's
paper in evidence was printed in HC 912-II, Session 2005-06 as
Ev 155.
(2) Detailed proposals were put forward
by the Group in evidence in regard to the modification and extension
of existing incentives designed first to encourage private owners
to retain heritage chattels, and secondly, should a sale become
inevitable, to persuade them to dispose of the artefact in question
in favour of a public collection. Three possible areas for reform,
building on observations made by Sir Nicholas in his Review, were
addressed by the Group:
(1) To reform the system of conditional exemption
from capital taxation of heritage chattels.
The Group's paper contained an Appendix
summarising a survey conducted among firms of solicitors known
to advise clients owning heritage chattels. This showed that the
option of conditional exemption in its present form, was no longer
perceived by such advisers to be in the interest of owners. Such
a perception must over a period of years, on new deaths and other
taxable events arising, seriously erode the effectiveness of conditional
exemption as an alternative to disposal of heritage chattels by
private owners.
The Group put forward in its Paper
A, revisions to the current exemption dispensation, designed both
to ensure that proper access to exempted items should continue
to be afforded to the public, but at the same time to go some
way towards allaying some of the justified reservations of owners
and their advisers in regard to present procedures.
(2) To ensure that Her Majesty's Revenue
and Customs is instructed by the Treasury to take a less restrictive
attitude in exercising the very wide discretions vested in it
when administering the acceptance in lieu of tax and private treaty
sale dispensations.
Such a relaxation would be some tangible
indication of the Government's desire to encourage both owners
and public collections to make use of these incentives (see Paper
B1 with the Groups' submission).
(3) To extend the acceptance in lieu of tax
arrangement into the realms of the settlement of income tax and
capital gains tax debts. Full and detailed proposals in this respect
were contained in paper B2 submitted by the Group.
Farrer & Co wholeheartedly support all these
proposals for reform, none of which would call for direct funding.
They draw attention to the fact that not a single recommendation
of any substance made by Sir Nicholas in his review in the field
of direct taxation has been implemented. Depressingly, the extension
of acceptance of lieu of tax into the realms of income tax and
capital gains tax noted in paragraph (3) above was vetoed personally
by the Chancellor of the Exchequer, following clear indications
that it found favour with other Treasury Ministers and Senior
Treasury officials. Even more depressingly there are recent indications
that far from being relaxed, administrative discretion relating
to negotiated sales to public collections (see paragraph (2) above)
is being exercised by officialdom in a yet more restrictive manor.
In this respect there is attached as an Appendix to this paper
(not printed here) an article to be published in this month's
issue of the journal Art, Antiquity & Law by James
Carleton and Edward Manisty of Farrer & Co which draws attention
to current indications that long standing procedures enabling
independent museums and the owners from whom such museums have
acquired heritage chattels to enjoy the douceur and other
benefits of the private treaty sale dispensation, are under threat.
The expansion, rather than contraction, of this dispensation and
of the institutions able to benefit from the private treaty sale
dispensation was one of the issues explored by Sir Nicholas and
the Goodison Review Group - see paragraph C1 of paper B1 with
the Group's submission to your Committee.
3. EXPORT CONTROL
The system of control remains founded on
the conclusions of the Waverley Committee[15]
in its Report published over 50 years ago. The framework of control
envisaged in the Report has served the interests of this country
well and remains a model admired in other jurisdictions. Sir Nicholas
Goodison concluded in his Review that he would not "want
to change it".[16]
However, he also noted that given present funding difficulties
for public collections in making acquisitions, the existence of
control gave such collections little real chance of acquiring
"expensive objects". He went on to suggest useful but
narrow modifications to the ambit of control, designed to recognise
such realities.[17]
The Reviewing Committee on the Export of Works
of Art has consistently in recent years drawn attention to the
fact that the system of Waverley control can only achieve its
prime objective of preventing the depletion of our national heritage
if there is adequate funding for acquisitions available to public
collections.[18]
In the absence of adequate funding for acquisitions
the temptation is for Government to attempt to overturn Waverley
control, and to introduce some more restrictive framework of control,
perhaps including "listing" of objects. There must be
very real doubts whether this would be possible as a matter of
law in the light of the provisions of the Treaty of Rome and of
the First Protocol to the European Convention on Human Rights
as now applied by the Human Rights Act 1998. However, the legalities
of any such move are perhaps a side issue. The demise of a free
market in chattels operating from London—an essential adjunct
of which is the framework of Waverley control—would be highly
damaging to the art trade in this country and accordingly the
UK balance of payments, this putting aside the collateral damage
that any such move would do to the commercial interests of owners
of heritage chattels and their relationships with public collections.
Having said this, as was recognised in the Goodison
Review and elsewhere[19]
the Waverley system of control is becoming increasingly "frayed
at the edges". In recent years the original framework of
control has on occasion been departed from by ministerial decision,
the exercise of administrative discretion by the Department of
Culture Media and Sport and by the Reviewing Committee. This has
been against the background where the need for certainty and fairness
has been enhanced by legal developments since the time when the
Wavereley Committee reported. Such piecemeal reforms have not
been altogether happy in their operation.
Farrer & Co would like to suggest that the
time may have come to embark on a new "Waverley type"
enquiry to review the Waverley framework on a comprehensive basis
and to make recommendations concerning its modification to reflect
current conditions in the international market, 21st Century aspirations
of owners of heritage chattels and of public institutions seeking
to acquire such chattels on sale, and the law as it stands at
the present time.
It would be essential, as was the case in respect
of the Waverley Committee, that any such new committee was chaired
by a person of stature, assisted by a committee comprised of forward
thinking individuals drawn from public collections, owners of
heritage chattels, the art trade, bodies funding the acquisition
by public collections of heritage chattels, and the legal profession.
25 September 2006
15 The Export of Works of Art etc Report of a Committee
Appointed by the Chancellor of the Exchequer 1952. Back
16
Goodison Review para 7.1. Back
17
Ibid para 7.4. Back
18
See, for instance, the comments at pages 6-7 of the Reviewing
Committee Report for 2004-05. Back
19
See, for instance, the comments of the Director of the V&A
Museum, Mark Jones, at the NACF Centenary Conference (November
2003) Saving Art for the Nation: A Valid Approach to 21st Century
Collecting? at pp 91-93 of the published proceedings of the
Conference, and David Barrie, the Director of the NACF, in its
Art Quarterly Autumn 2006 pp 12-13. Back
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