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Lord Hunt of Wirral: My Lords, I must rise to defend the noble and learned Lord the Lord Chancellor from the strictures of the government Deputy Chief Whip, who criticised the fact that he did not stay or dally for a few moments. I know that the noble and learned Lord will have extensive further duties to perform and I believe that the noble Lord was being very unfair. Otherwise, I accept his guidance. I am very grateful for his response and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 62 to 68 not moved.]

Schedule 18 [Schedule 2A to Insolvency Act 1986]:

Lord Hunt of Wirral moved Amendment No. 69:

"(a) it involves the grant of a security interest by a party to the arrangement to another party to the arrangement (whether as principal, agent or trustee), or"

The noble Lord said: My Lords, Amendment No. 70 was debated in Committee and on Report, and Amendments Nos. 69 and 71 are in the alternative and designed to achieve a similar aim. On Report, I had the opportunity to emphasise the great significance of this amendment for the structured finance market in the United Kingdom. The non-political, technical and, I would contend, sensible nature of the amendments makes it very difficult to understand why the Government should be so opposed to them. However,

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the Minister suggested on Report that if a further meeting was necessary to discuss this or similar amendments with city lawyers, one could be held.

I understand that last week such a meeting was held between members of the City of London Law Society and officials within the Department of Trade and Industry to discuss the scope and reasoning behind these amendments. I understand that the meeting was very helpful to all sides, with the result that progress appears to have been made. I hope that the Government can give some reassurance in response to these amendments. I beg to move.

The Deputy Chairman of Committees (Baroness Turner of Camden): My Lords, I must tell your Lordships that if Amendment No. 69 is carried, I cannot call Amendment No. 70 by reason of pre-emption.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Hunt, for tabling these amendments so that I have an opportunity to explain the Government's intentions. I am also grateful to the City of London Law Society for being able to meet, at short notice, with officials to discuss the matter, as the noble Lord said.

On further clarification from the City of London Law Society it is clear that its concern lies in the fact that while paragraph 1(1)(a) currently provides an exemption for traditional capital market structures, there are in fact transactions at large in the market which utilise other structures, which will not be exempt.

We should like the opportunity to reflect further on the issues raised and to take soundings from other interested parties—for example, investment bankers—who have so far remained silent. We shall need to consider whether a broader definition of a capital market arrangement would open up the possibility of "normal corporate lending" being able to mould itself into a capital market arrangement. Also we need to consider the impact of such an amendment on other legislation; specifically, the new moratorium company voluntary arrangement procedure introduced by Section 1 of the Insolvency Act 2000, which includes the same wording for this provision.

We believe that further consideration is needed on this matter and that it would not be appropriate to rush through this amendment at this late stage. We have the power in Clause 249 to make an amendment if it is deemed appropriate following the further consideration I have outlined. I hope that on that basis the noble Lord, Lord Hunt, will be able to withdraw his amendment.

Lord Hunt of Wirral: My Lords, I am grateful to the Minister for that positive response and reassurance. I readily join him in thanking those who have done so much hard work in such a short time on this important issue. I accept his assurances.

I am grateful to the noble Lord, Lord McIntosh of Haringey, and his colleagues for having sought with these Benches to try and improve the wording of the

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Bill. Naturally we are hopeful that the amendments made in this place will not be challenged in another place. These may be my final words on the Enterprise Bill; therefore I want to thank the noble Lord. In view of the comments he has made, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Amendments Nos. 70 and 71 not moved.]

Schedule 20 [Schedule 4A to Insolvency Act 1986]:

[Amendments Nos. 72 and 73 not moved.]

Schedule 24 [Transitional and transitory provisions and savings]:

Lord McIntosh of Haringey moved Amendment No. 74:

    Page 340, line 43, at end insert—


22 Any provision made by any of paragraphs 1 to 21 shall not apply if, and to the extent that, an order under section 275(2) makes alternative provision or provides for it not to apply."

On Question, amendment agreed to.

Schedule 26 [Repeals and revocations]:

[Amendment No. 75 not moved.]

Lord McIntosh of Haringey: My Lords, I beg to move that this Bill do now pass. I should respond to the kind words of the noble Lord, Lord Hunt. I should have done so on moving an amendment in order to avoid debate. I am grateful to him and all other colleagues who have taken part in the deliberations on the Bill.

Moved, That the Bill do now pass.—(Lord McIntosh of Haringey.)

On Question, Bill passed, and returned to the Commons with amendments.

Heritage Assets

7.45 p.m.

Lord Freyberg rose to ask Her Majesty's Government what is their policy on classification, publication, valuation, retention and disposal of antique and heritage assets (operational and non-operational) held by government departments, and also those same items held outside the United Kingdom.

The noble Lord said: My Lords, before getting started, I should like to repeat what the noble Lord, Lord Peyton, said last Thursday. He said how fortunate we are to have a Minister in the form of the noble Lord, Lord McIntosh. He has been speaking this afternoon and has continued to do so this evening.

The recent concern over the sale of Privy Council silver on 29th October 2001 has drawn attention to the huge quantity of antiques and heritage items owned by the various government departments. Subsequent Written Questions have highlighted their lack of classification and curatorial care, along with the absence of proper and responsible procedures for selling or disposing of them.

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Equally worrying, a new 6 per cent capital charge on every asset held by government departments is due to be levied from January 2003, which can only have the effect of encouraging departments to get rid of more valuable objects—which often means historic—for instant economic relief rather than as a properly thought-out decision. Unless this policy is reversed or these effects ameliorated, this change in accounting procedures is likely to have a destructive effect.

Since taking an interest in this subject, I have come up against a series of related problems. First, there is poor and inconsistent knowledge as to each department's assets; some possess detailed lists while others appear to have only a general idea. This inevitably raises the question of what has been disposed of already.

Secondly, for many years now there has been no curatorial input for thousands of often important works of art, raising questions about both condition and documentation. And finally, there is a lack of guidelines, both for classification—which determines whether an item is subject to the capital charge or whether it can be sold—and for disposal of historic assets. Who, for example, is responsible for identifying objects to be sold? And why up until now have there been no cross-departmental guidelines on this matter? Can the Minister confirm that new guidelines are now in place, and can he explain what they are?

Although there is a cultural property unit at the DCMS, this was not, I believe, consulted when the Treasury decided to dispose of its silver. Similarly, the Foreign and Commonwealth Office last month announced in a Written Answer that it is disposing of,

    "a small number of antique and reproduction pieces ... [that] ... are not considered to be historically important to the FCO".—[Official Report, 24/9/02; col. WA 179.]

Those will be replaced with modern furniture, a potentially costly exercise. But who has decided that they are not historically important to the Foreign and Commonwealth Office? One hopes it is not the same people who decided that the Treasury silver was not historically important because it was not of the same stature as,

    "Stonehenge and Nelson's Column".

This was the Answer I was given to a Written Question on 23rd July 2002.

In fact, I believe that the DCMS's cultural property unit is the right sort of body to consult when it comes to the first stage of disposing of antique or heritage assets. It would be in a position to approach the relevant expert, who could make a transparent assessment of the object's importance in a historical context. Is such a consultation part of the new guidelines?

Since 1997, departments have been encouraged to get rid of so-called "surplus" assets to such a degree that in 1999-2000 alone some £1.3 billion was raised. I am not qualified to assess the prudence of individual sales of buildings and land, but I do know that getting rid of the historic, cultural and political assets owned by departments of state will diminish them and that

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once lost they can never be replaced. Sometimes works of art are not important but are historically appropriate and have become part of the fabric of the building. It seems irresponsible to get rid of these things for no real reason other than to meet the criteria of an accounting manual.

The danger of imposing the capital charge is that departments may be rushed into selling assets without proper assessment. In addition, the demand by resource accounting and budgeting that every asset be valued will impose an enormous burden on departments, rather than helping to save money—the reason that the capital charge was levied in the first place.

I should explain that works of art in government departments are classified into three types. The first two are operational and non-operational heritage assets, which are recognised as having special cultural or historical associations, and are not lightly disposed of, which range from tables and chairs in everyday use—operational assets—to paintings and sculptures: non-operational assets. The third category is antiques, which are not considered to have special cultural or historical associations with the relevant departments.

Of the three types, only non-operational heritage assets can be exempt from the new charge—and only if they meet the resource accounting manual's definition of a heritage asset. The department can assert that valuing them would be too costly. But here comes the arbitrary bit; namely, how the classification is made. At present, that is in the hands of the department itself. A Written Answer revealed that,

    "the entity holding the asset"—

the department—

    "is solely competent to decide which are heritage assets ... they are free, but not obliged, to seek expert independent advice".—[Official Report, 11/4/02; WA 114.]

Worryingly, there is no consistency between departments about what constitutes a heritage asset and what is simply an antique. Items of historical value among the Privy Council silver, such as the 12 candlesticks valued at £600,000 and a set of three inkstands valued at £450,000 and made especially for the Privy Council in the reign of William of Orange, were categorised simply as antiques by the Treasury, whereas an apparently undistinguished mid-19th century oak bookcase in the Supreme Court Circuit Office, valued at £1,410, is treated as a heritage asset by the Lord Chancellor's Department. Surely, the only reason for classifying historically important works of silver as antiques would be to facilitate a sale?

The sale of the Treasury silver is still baffling. Was the Treasury trying to set a good example in realising valuable but non-operational assets? If so, why was it so secretive about the sale? By shying away from publicity, it risked selling the silver at a far lower rate than it merited. In fact, had the media not alerted us to it, would any of us have known anything about it at all?

Worryingly, in that instance, the Treasury chose as its expert advisers and valuers the saleroom that was later contracted to sell the silver. That strikes me as a

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conflict of interest. To prevent such a fiasco ever happening again, it is imperative that a proper set of guidelines be laid down. Alas, the continuing saga of the Treasury silver confirms that something is wrong with the system. The charge will only add to the confusion.

On 12th July, it was announced that the Treasury had agreed to transfer the items concerned—the silver withdrawn from auction—to the Department for Culture, Media and Sport. Although the DCMS is loaning the silver to the Victoria and Albert Museum, it will still be charged £6,000 per year because the silver has not been reclassified as a non-operational heritage asset. In other words, even objects loaned to museums are now subject to the capital charge. Meanwhile, the Treasury will be required to pay £72,000 a year—6 per cent of £1.2 million—to retain the rest of its silver collection.

The only satisfactory solution would be for all heritage assets to be permanently exempt from the charge and for antiques to be exempt to allow a proper assessment to be made of what departments hold. For an inventory to have any validity, it must compiled by an independent expert. Precedents already exist in resource accounting and budget's current exemptions: no assets that have been donated are liable for the charge, nor are national museums and gallery collections nor certain other non-operational heritage assets. Exemption from the capital charge would not only remove a major incentive for departments to dispose of their heritage objects, it would bring the treatment of their works of art into line with those held in collections of national museums and galleries.

The absence of a useful cross-departmental policy on works of art is a comparatively new problem. Until the late 1980s, government buildings came under the control of the Department of the Environment, while their furnishings were looked after by Crown Suppliers. Cleaning contracts required specification on how works of art were to be treated. However, Crown Suppliers was disbanded under the noble Baroness, Lady Thatcher, and the task of dealing with furnishing in departments fell to accommodation officers, who were expected to buy in outside expertise and services as required. Contracts respecting works of art should be reinstated.

Professional curators look after everything historic in the Palace of Westminster and in the Government Art Collection, but no similar provision exists to oversee the rest of the Government's heritage objects. Will the Government consider extending the remit of the Government Art Collection, where specialist expertise and inventories already exist? The Government Art Collection works across all departments and has relevant experience in tracking, conserving and maintaining works. It would be relatively straightforward to add additional applied art posts.

Until that expertise is in place, departments will remain unable to look after their assets in an appropriate way, however good their intentions. I urge the Government to put their house in order so that

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future generations can enjoy some of the good things that previous generations of government have passed down to us.

7.56 p.m.

Lord Strabolgi: My Lords, we are grateful to the noble Lord, Lord Freyburg, for initiating this short debate. I agree with every word he said. I also congratulate him, together with the National Art Collections Fund and the Silver Trust, on ensuring that that silver has been saved. There was a public outcry that has made the Government think twice, but we face great problems in future, which I shall endeavour briefly to describe.

The Privy Council silver, which the Treasury was going to sell at Bonhams, is, happily, now on long-term loan to the Victoria and Albert Museum. The Treasury has transferred the silver to the Department for Culture, Media and Sport—I shall have more to say about that later. It was important 17th century silver, which is rare by any account, but which also carried the royal arms of William and Mary and Queen Anne. The silver is of heritage value and belongs to the nation, not to the Treasury. The Treasury had no business selling it without asking anyone.

Why did the Treasury want to sell? It was hoist with its own petard, because that was the result of its own accounting scheme, called resource accounting and budgeting. That means that departments must pay a capital charge of 6 per cent on every asset that they hold. That insensitive scheme requires every public asset to pay its way. No account is taken of the life-enhancing value of a work of art. Everything must be viewed in cold accounting terms.

The decision to transfer the silver to the DCMS will cost that department £6,000 a year. Departments must surely have every inducement to sell to escape that tax. What will happen if many more assets are transferred to the DCMS, which will have to pay enormous sums in tax? I understand that the Treasury retains silver that has been valued at £72,000. It will have to pay 6 per cent of that to itself, which is ridiculous.

I am glad to see that my noble friend Lord McIntosh of Haringey is to reply; it will be like old times. However, I must ask him who is responsible for identifying objects to be sold? Who decides whether an object is of heritage value or is an antique? Objects of heritage value can, apparently, be sold, provided that they are not too valuable; antiques can be sold with impunity. Will departments call in outside experts before decisions are made? Departments lack the curatorial experience to look after the national heritage items that they own. The officials concerned may have expertise and be efficient in other directions, but they are not art experts.

One solution to the mess would be to use the in lieu system, whereby government departments could be excused tax, if the object were on loan to a museum or could be seen by the public, in the same way as private collections are treated for inheritance tax. I hope that my noble friend will let us have his views on that suggestion.

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8.1 p.m.

Lord Renfrew of Kaimsthorn: My Lords, we are once again indebted to the noble Lord, Lord Freyberg, for bringing to the attention of the House an important heritage issue. I apologise to him and to the House for arriving a little late. He kindly gave me advance sight of a draft of his speech, so I know its content.

The strange case of the Privy Council silver is one of those curiosities of government administration which it would be difficult to invent. That a government department, under Treasury instructions, should invite a well known auctioneer and saleroom to value items that are clearly a significant part of Britain's cultural and historic heritage and then set out to offer them for sale through the same saleroom, without, so far as is known, seeking the advice of the Department for Culture, Media and Sport, its cultural property unit, any of the national museums or, so far as is known, of any qualified curator or heritage expert is astonishing. It brings to mind Harold Macmillan's dictum about the nation selling the family silver.

Can we please be told why the Privy Council silver, now on loan to the Victoria and Albert Museum, is subject to a 6 per cent levy, reputedly the sum of £6,000 per annum, paid by the Department for Culture, Media and Sport to the Treasury, while the Government Art Collection Fund—I think that this is correct—is not subject to such a charge? The Minister may reply that the Government Art Collection has been placed in the notional category of non-operational heritage assets. That sounds appropriate. Under the Treasury's resource accounting guidelines, that is the only category that can be exempted from the 6 per cent capital charge. However, if the objects are used to furnish ministerial offices and embassies overseas, in what sense are they less operational than the William and Mary candlesticks of the Privy Council sitting in a glass case in the Victoria and Albert Museum? Such strange notional accounting procedures do not make sense.

Could we have an assurance that any historical items or moveable heritage items that the Government propose to sell will be considered first by the cultural property unit of the DCMS? If the items are considered important by the cultural property unit, they should be placed before an appropriate body, such as the Reviewing Committee on the Export of Works of Art, on which there are experts enough to avoid such foolish mistakes.

But now, my Lords, I turn to a piece of news that seems to me to be of a graver order altogether. I learnt this month through the Council for British Archaeology that the Ministry of Defence had entered into a commercial treasure-hunting contract with an American underwater salvage company to recover and sell—yes, sell—bullion, coins and other antiquities to be raised from the late 17th-century wreck of HMS "Sussex", which lies in deep water off Gibraltar. The president of the Council for British Archaeology has stated that it contravenes UK commitments to international conventions, as well as the basic principles of the Government's heritage policy. The

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director of the Council for British Archaeology called it a blatant piece of heritage stripping. It is clear that the matter falls within the terms of the Question asked by the noble Lord, Lord Freyberg. Clearly, antiquities and valuables from HMS "Sussex" are the property of Her Majesty's Government, as the contract or agreement acknowledges. The noble Lord's Question refers explicitly to heritage assets overseas.

I found it difficult to imagine that the Government would undertake a treasure hunt involving the plundering of a historic wreck for straight commercial gain in a way that UNESCO and national governments have worked to prevent. So, I looked up the note of the agreement on the website of Odyssey Marine Exploration Inc. of Tampa, Florida. The website address is Can the noble Lord, Lord McIntosh, confirm the status of the published document and place a copy in the Library? Will the noble Lord confirm that the British Government have entered into a commercial contract with Odyssey Marine Exploration Inc. of Tampa, Florida, with the following sharing arrangements:

    "Odyssey and the Government have agreed upon the following sharing arrangements with respect to the aggregate amount of the appraised values and/or selling prices of the artefacts, net of agreed selling expenses.

    Range i $0-45 million: Government 20%; Odyssey 80%

    ii $45 to 500 million: Government 50%; Odyssey 50%

    iii above $500 million: Government 60%; Odyssey 40%"?

Is the noble Lord aware of Article 2, subsection 7, of the UNESCO Convention on the Protection of the Underwater Cultural Heritage, to which the Government subscribe in principle, although they have not signed it, for various detailed reasons? It states:

    "Underwater cultural heritage shall not be commercially exploited".

As the Government are on record as supporting the principles underlying that convention, can the noble Lord explain the apparent disparity? Why, before taking steps to recover heritage materials from a historic wreck, have the Government not openly and publicly discussed these matters with the heritage community? Has the Ministry of Defence or the Department for Culture, Media and Sport made any public announcement about a new underwater archaeology policy? Why did archaeologists and undersea specialists learn about it only from the protests of the Council for British Archaeology and the website of Odyssey Marine Explorations Inc of Tampa, Florida?

At a time when the historic wrecks of the world are being plundered by all kinds of piratical and shady companies, why do the Government give every appearance of behaving in the same way? How would such a procedure, practised off Gibraltar, differ from the straight looting of historic wrecks for commercial gain, against which Parliament recently legislated, when those wrecks are in British territorial waters? How could such a procedure be other than in direct contravention of the Valletta convention—the Council of Europe's European Convention on the Protection of the Archaeological Heritage—which, he

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will recall, deals with material remains, whether situated on land or under water. That convention was signed in 1992 by the UK Government and subsequently ratified.

The circumstances suggest what I dare to call maladministration of the first order, not only flying in the face of the Government's policy on care for the heritage, but seemingly contravening international law to which the Government are a party. One is puzzled as to why clause 12 of the published agreement, whose accuracy I have invited the noble Lord to confirm, states:

    "The Agreement contains a confidentiality clause governing the release of information concerning the Agreement and all documents relating to its execution".

Would the Minister explain how such secrecy conforms with the principles of transparency which the Government affect to support?

I have the greatest respect for the noble Lord, Lord McIntosh of Haringey. We are fortunate indeed that he is representing the Government today and I acknowledge that he has undertaken a long stint as he was representing the Government in the earlier proceedings before the House. He is exceedingly well informed about cultural matters—I dare say better informed than any other Treasury spokesman—and he knows the Treasury better than any Minister in the Department for Culture, Media and Sport. He is therefore in an excellent position to unravel these mysteries for us.

One suspects that this extraordinary gaff by the Ministry of Defence comes from the same Treasury mindset which nearly led to the sale of the Privy Council silver and which now insists on those weird accounting procedures that we have been discussing. These incidents might suggest that we are in thrall to a Government who know the price of everything and the value of nothing.

Is the noble Lord in a position to give an assurance that the Government will try to formulate a coherent policy on the application or, better, non-application of resource accounting and budgeting to Britain's cultural assets? Will he also seek to ensure that the Government do not give the green light to the world-wide looting of the underwater cultural heritage by undertaking what on current information looks like a commercial treasure hunt?

8.11 p.m.

Viscount Falkland: My Lords, the House will be grateful to the noble Lord, Lord Freyberg, for introducing the debate. As has been mentioned by several noble Lords, the noble Lord introduced into this House that which had been revealed in two leading newspapers about the Privy Council silver. However, I shall not add to what has been said.

Today we are talking about part of the Treasury's balance-sheet mentality as applied to the resource accounting and budgeting procedures which were introduced when the MoD had items which needed to

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be listed, valued and sold where appropriate. Many of the procedures, principally depreciation, do not concern us.

All such assets, whether those we are debating today or others, are contained in a weighty tome called the National Asset Register. The noble Lord, Lord McIntosh, will be familiar with it, but I saw it for the first time only today. It is dated 2001, the previous one being dated 1997. Presumably it is published every four years or so.

I first read the foreword to the 1997 register, signed by the Chief Secretary to the Treasury, which contained the confident and breezy sentence:

    "The National Asset Register is an international landmark in transparency and accountability in Government. For the first time anywhere in the world, Government and the public have a complete picture of the country's assets".

The writer of that may be needed in all kinds of areas, tourism not least. However, the tome is interesting because the relevant items are grouped under the heading "Antiques". The noble Lord, Lord Freyberg, has dealt with many items which are not relevant.

I randomly turned up one page of the register which came under the Chancellor's department and dealt with "Antique Assets", amounting to five lines, and "Library Legal Collection". The five lines begin:

    "The Department's inventory includes around 250 items of furniture; fittings and artefacts classified as antiques. W & F C Bonhams & Sons undertook the valuation of the antiques on 31 March 2000. This valuation was based on market value".

The name of Bonhams has come up since the beginning of the story and I am not sure why. Were Bonhams appointed by some open and transparent procedure? Why not other auctioneers? Should we not be told?

Silver, pictures and items which have come into the possession of government departments, likely, we are told, to be charged annually a capital amount of 6 per cent, do not have a clearly listed provenance in the asset register. Do those in the Chancellor's department know what they have? Can they tell us accurately what the 250 items are? One thing we do know is that they are de facto owned by the nation. They are mainly items that have been commissioned over hundreds of years—for instance, the silver—for various purposes, or given as gifts by foreign governments. Where is the inventory in the departments? Should it not be available for public scrutiny? On the face of it, the whole thing is very unsatisfactory, but I dare say that the noble Lord, although he has had a heavy day, will be able to enlighten us.

The valuation idea is also curious. One can value furniture, fittings and so forth and use normal accounting procedures to depreciate them where possible, but let us take, for example, an elaborate pen made of gold and silver which has been used to sign a famous treaty; let us say the Treaty of Utrecht, which now has a great deal to do with Gibraltar. Is that listed as a gold and silver pen valued for its gold and silver and age, or is its context taken into account; its historical importance used for signing such a treaty? We do not know.

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The problem about the whole issue is that we just do not know. And looking at the asset register, it appears that the departments of state do not know. Certainly the Treasury does not know. So how does it know that it is worth doing this exercise in the first place? What will be the cost of the 6 per cent it is about to levy on all the items valued by Bonhams? There are a number of questions to be answered.

The Government have been rightly keen on assets, treasures and so forth held by the national galleries and museums. Indeed, they have insisted that there is online and other public access. Why do we not have a system whereby some of these items, which may be of greater importance than we now realise, come under scrutiny so that they may go online and be available to public access? It is a very muddled picture.

Furthermore, I see from looking through the papers that many of these antiques in government departments, about which we know little except for an overall number in the example of the Chancellor's department, are under the care of a person, male or female, who is described as a facilities manager. I do not know what a facilities manager is; I doubt whether many noble Lords do. What does a facilities manager do? What are his or her qualifications? As we know that the keeping of many of these items has been contracted out to cleaning agencies—and I have been told that many of the silver items are cleaned with Brasso—an extraordinary lack of expertise and care appears to be given to these items about which we know so little.

The reality is that we have got ourselves into a muddle that reflects a certain casualness—which, I am afraid, occurs in British life—in relation to our history and the treasures which have emerged from it and which now lie in government departments. These departments must be in a terrible fix in regard to how they will get rid of items in order to reduce the 6 per cent capital charge. Presumably they must be thinking how they can sell them—through Bonhams presumably. That was the way the silver was intended to go until the livelier newspapers and the noble Lord spotted it. We are now promised an almost satisfactory result.

I shall not go on. The Minister will, in his usual doughty way, produce some persuasive answers. I am sure that he is sympathetic with what I say, even though he may not be allowed to say so. He takes a sharp intake of breath but, after all, the Treasury is the Brigade of Guards of government departments. It looks down the slanted peak of its cap at the lesser departments of state, such as the Department for Culture, Media and Sport, and the Minister may find himself in a difficult position.

However, no one knows about the history or the importance of all these items. It is time that systems were put in place to find out what they are, where they are, how much they are worth and whether they should or should not be sold. This is an unbelievable muddle. I am sure that a situation such as this occurs in very few advanced countries in the world. It makes us look ridiculous.

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8.21 p.m.

Lord Luke: My Lords, I first declare an interest in that I am a dealer in watercolours—with no connection whatever to the current debate. I thank the noble Lord, Lord Freyberg, for initiating this short debate, which has allowed us to revisit this important and interesting subject. I am also grateful to the Library of your Lordships' House and to the National Art Collections Fund for their briefs, which I, too, have seen. The speeches of all noble Lords have been interesting. As the noble Lord, Lord Strabolgi, said, I agree with everything that has been said so far and I shall not repeat the points that have been made.

It is quite clear that the United Kingdom Government and their various departments are in reality one vast museum—a museum with many branches, some efficient and effective, some, sadly, not. I recently read—or at least glanced through—the National Asset Register mentioned by the noble Viscount, Lord Falkland. To give your Lordships some idea of the size of it, here it is: it is like a telephone directory. It is said to be a thorough inventory of all the assets held by government departments on our behalf. Again paraphrasing what the noble Viscount, Lord Falkland, said, it is not at all thorough, certainly in regard to works of art. It is merely a broad assessment of quantities of objects and their overall value in some departments, with no attention to individual items.

The noble Lord, Lord Freyberg, told us that there are three categories into which works of art are classified—heritage operational, heritage non-operational, and antiques with no discernible heritage provenance. The question of which are liable to the capital levy is quite extraordinary, and I can quite understand the urge of some departments to sell some of their assets which are subject to this charge—and to sell them quickly, too. It is quite mad. But, as is so often the case with this Government, I believe that it was a good initial idea for accounting reasons, but badly thought through and, sadly, indifferently carried out.

Perhaps I may ask the Minister one or two questions. Is there any jewellery in the Government's assets? I believe that there must be, but where I do not know. Is there any jewellery? If there is, is it antique, heritage operational, and heritage non-operational all at the same time? It must be, if one thinks about it.

What about HMS "Victory"? She does not belong to a museum or any establishment like that; she is still commissioned in the Royal Navy. She must therefore be operational. But, at the same time, she is not suitable for launching against Iraq. Therefore, she is also non-operational. She is also, most definitely, an immensely valuable antique.

Really effective guidelines must now be laid down and real valuations of every single heritable item must be carried out by independent experts. I may be being silly, but I do not understand how items can be properly insured unless they are first valued—or perhaps they are not insured? The Minister shakes his head, so perhaps I am being silly.

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It has been suggested that the Government Art Collection, which is properly inventoried, curated and administered by the Foreign and Commonwealth Office, should be made the vehicle for looking after all government works of art. What does the Minister think of that suggestion, which has been made twice today? After all, it already has £31 million-worth of items to look after; or it may be that the DCMS, with its cultural property division, would be more appropriate. I understand that the Government are thinking of this.

The noble Viscount, Lord Falkland, referred to the Chancellor of the Exchequer's department, which has a small but proper inventory of 250 items. I understand that it is regularly revalued every five years. This sounds much more efficient. Presumably it is revalued for insurance purposes—but perhaps not. If they are not insured, why are they revalued? For possible sale? Why should not other departments perform in the same efficient way?

A large proportion of works of art belonging to the Government adorn public buildings. It is right and proper that this should be so as such buildings are often visited by important foreign visitors, who sometimes need to be impressed, and by at least some members of the public.

There are 11,500 items in the Government Art Collection, most of which are distributed in 471 sites across the world, but I understand that many are in storage. Perhaps an establishment should be set up where those items that are not being looked at could be accommodated in such a way that the general public could have access to them. After all, we can see what has been achieved with the Royal Collection at Buckingham Palace.

Some rather gilded cans of worms have emerged on this subject in recent years and have been re-emphasised during the debate, particularly in regard to underwater archaeology, an issue referred to by my noble friend Lord Renfrew. I look forward, as always, to hearing what the noble Lord, Lord McIntosh, has to say.

8.28 p.m.

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Lord, Lord Freyberg, and to all noble Lords who have taken part in this short debate. It had to come because the matter of heritage assets came to public attention more than a year ago. Although the solution that was found to the problem of the Treasury silver has met with general approval, it has raised the wider issues described, very properly, by the noble Lord, Lord Freyberg.

I shall first set out the position in regard to the subject of the Question,

    "classification, publication, valuation, retention and disposal of antique and heritage assets".

We have a good story to tell and I am pleased to have an opportunity to do so.

The Government have a clear and open policy in relation to the management of their assets, regardless of whether they are considered to be antique or

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heritage assets. When I say "regardless", I mean when they are and when they are not; I do not mean that we do not pay regard to them. The policy applies to assets owned by departments, whether held inside or outside the United Kingdom. That is not an issue so far as concerns this debate.

In recent years, with all party support, the Government have been making an effort to ensure that assets are managed effectively. This includes knowing for the first time what assets we have, publishing a full list of assets in the National Asset Register and preparing departmental balance sheets.

Within the overall system careful consideration has been given to the management of heritage assets. The Government are very concerned to ensure that such assets are carefully looked after, and I shall go on to explain what arrangements have been made.

There are, as has been said, two kinds of heritage asset: operational, which are used by departments in delivering services and treated in the same manner as other assets used in a similar way; and non-operational heritage assets, which have been clearly identified as such and are not subject to any additional charges as a result of the introduction of resource accounting and budgeting.

I do not know how much noble Lords wish me to say about resource accounting and budgeting. I do not know whether any noble Lords who are present took an active part in the Government Resources and Accounts Act 2000. I had the privilege of taking it through the House two and half years ago. Of all the Bills I have introduced in this House, it is the one of which I am most proud. It means that we are way ahead of other countries in the proper consideration of public finances. To over-simplify grossly, as the Treasury used to do, in old terms with cash accounting, £1 of revenue and £1 of capital, if added together, equalled £2. That would be utterly unacceptable in private business and it is now unacceptable to government. Over a period of some 10 years—this is a non-party matter—we have been moving to resource accounts rather than cash accounts. It is in the last financial year that resource accounts have come into their full application, although there are changes still to be made in the next year.

One of the implications of resource accounts is that if you are going to have capital amortised over a period of years, you have to have capital in a balance sheet, and you have to have assets valued and in a balance sheet. That is what resource accounting does, and that is what has now been applied to heritage assets.

What is a heritage asset? The term can be applied to a range of entities, from historic buildings and works of art to archaeological sites. I can tell the noble Lord, Lord Luke, that it certainly can be applied to jewellery. Whether there is any jewellery is not a question that I can answer off the cuff.

It is up to each department to determine whether a particular item is a heritage asset. To do this, departments are required to apply criteria laid down in the Resource Accounting Manual—the manual

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whereby government departments ensure that they are adhering to generally accepted accounting practice. It is the way in which private accounts are drawn up and it ensures that we have comparable accounting in the public sector.

The Resource Accounting Manual describes a heritage asset as something that is intended to be preserved in trust for future generations. That could be due to its cultural, historical or environmental associations. It goes on to point out that heritage assets typically display the following characteristics: their value in cultural, environmental or historical terms is unlikely to be fully reflected in any financial value derived from a market mechanism or price; in many cases they have restrictions or prohibitions on their sale; they are often irreplaceable and their value is likely to increase over time even if their physical condition deteriorates; their life is measured in hundreds of years; and they may require significant maintenance expenditure so that they can continue to be enjoyed by future generations.

Departments are required to review whether assets meet these criteria and this decision is subject to scrutiny by the National Audit Office.

The noble Lord, Lord Strabolgi, asked who decides whether an item is classified as a heritage asset. I hope that what I have set out in some detail is a good answer to that question. He asked who decides whether heritage assets should be sold. It is the responsibility of the departments concerned to decide whether to sell assets. Departments are aware that they need to take into account all aspects, not merely financial ones, when deciding whether to dispose of an asset. The Department for Culture, Media and Sport will advise about individual disposals.

The noble Lord, Lord Freyberg, raised the issue of publication. A full list of the Government's assets is published in the National Asset Register, which the noble Lord, Lord Luke, lifted with great difficulty and waved at us. This includes antiques, works of art and heritage assets held by departments. It also includes, where available, details of the value. Some items are grouped together in the register because it would be impracticable to list every item owned by the Government. For example, the Government Art Collection alone contains over 11,500 works.

The noble Viscount, Lord Falkland, cast some scorn on the National Asset Register and on the claims made for it. I reject that. I am well advised that the National Asset Register is unique in providing the public with a list of the assets owned by central government. No other country in the world has access to a register of this kind. In addition, departments provide details of certain heritage assets in their balance sheet. If a heritage asset is not included on a balance sheet, a description of the asset must be included in the notes to the accounts.

The importance of the National Asset Register is not only, as I have said, as an essential element of resource accounting—proper accounting, as I would call it—in

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the public sector, but it incidentally provides an enormously valuable source of information on the heritage assets held by government in this country.

What about valuation? Clearly, the Government Resources and Accounts Act requires that there should be valuation. It states that a department's accounts must,

    "conform to generally accepted accounting practice subject to such adaptations as are necessary in the context of departmental accounts".

Financial Reporting Standard FRS15, "Tangible fixed assets", does not specifically single out heritage assets for differing treatment. However, the Government's Resource Accounting Manual contains specific information on the valuation of both operational and non-operational heritage assets. Operational heritage assets not only provide benefit from a heritage point of view, but are also used by departments for other activities and to deliver services. An example would be a building used both as offices and for ceremonial purposes. I guess that the Foreign Office would fall into that category. It is therefore proper that these should be valued, in line with generally accepted accounting practice, and appear on a department's balance sheets.

Non-operational assets are those which are retained only for their historical or cultural value and have no other use. It may be considered that it is not practical to value some assets. There may not be enough information, or there may be no similar items. Examples would be Stonehenge or Nelson's Column. Scorn was cast on that, but I reject that. It is still worth doing. Some assets have not been valued because it would not be practicable to do so because of the number of different items. But from 1st April 2000, departments have been required to record additions to collections on their balance sheet using the purchase price as a basis for valuation. That is best practice in the not-for-profit sector as laid down by the charities' Statement of Recommended Practice. The independent Financial Reporting Advisory Board has raised some questions about this which are being debated with the Accounting Standards Board.

I turn to retention and disposal. Government accounting requires departments to maintain a register of their assets and inventories of works of art are required to be maintained in line with advice provided by the Government Art Collection. With the introduction of full resource budgeting in 2003-04—I think I was a year in advance in what I said earlier—departments will be charged a cost of capital within their budgets to reflect the cost of holding assets. That is what caused so much disturbance among noble

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Lords. This is line with commercial accounting practice. It provides better incentives for departments to manage their assets more effectively and dispose of those that are no longer required. However, the point is that this is not a tax. To ensure that departments are neither better nor worse off by the introduction of this non-cash charge, they were included in the full resource budgets announced in the 2002 spending review settlement. In addition, no such cover is required for non-operational heritage, as it is charged at a nil rate.

The change does not force departments to sell assets. They must only consider whether they are still needed or whether funds would be better reinvested elsewhere. The fact that heritage assets are designated as such implies that they warrant special consideration when determining how, where and if they should be kept. Departments are aware that they must take into account considerations beyond the purely financial when determining their future. I hope that that answers a point raised by almost every speaker in this debate. There is no obligation on departments to sell, and there is no financial penalty in the form of the capital charge. It is an in-and-out calculation made for the purpose of resource accounting.

Clear rules are laid down in government accounting guidelines on how assets should be disposed of and the resulting receipts accounted for. The DCMS is happy to advise departments when they are considering the retention and disposal of heritage assets other than those in the Government Art Collection. I hope that the lesson from the case of the Treasury silver is, as everyone recognised, that because nobody had to account for the items of silver, they sat in a cupboard for many years. The snuffers and other items are now on display as part of the silver collection in Room 66 of the Victoria and Albert Museum.

I will not be able to respond to all the points made by the noble Lord, Lord Renfrew of Kaimsthorn, so I will write to him in detail. He rightly described the contents of the HMS "Sussex" agreements between the Ministry of Defence and Odyssey. It is not certain that what Odyssey has discovered is HMS "Sussex", and nothing that has been brought up confirms whether it is. Some cannon have been brought up. It is a very deep wreck—one mile deep. It cannot be accessed by divers; it is accessible only by robots at enormous expense. The wreck is in international waters, but it belongs to the Ministry of Defence, because the ship was going to India, where a ruler was to be bribed not to take part in the war of Spanish succession.

If we did not have such an agreement, what would happen? Odyssey would excavate by itself, and we would be unable to stop it unless we stationed a frigate on top of the wreck continuously. It would take the items back to its base in the United States, where it has

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legal advice that everything would belong to it. We have legal advice that we could challenge it, but we might not win in the United States courts. As part of the agreement, Odyssey has undertaken to excavate the gold coins with great care to avoid damaging anything else. If there were no agreement, someone else could scoop everything up and destroy the ship.

What is the better, or least bad, solution? Surely we should make a deal with someone who would follow best archaeological practice. There has been no secrecy; we have consulted the British Museum, the National Maritime Museum, the Mary Rose Trust, the Royal Naval Museum, English Heritage and the DCMS cultural property division.

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