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Lord McKenzie of Luton: My Lords, this is not a time-limited debate. I suggest that we hear from the noble Lord, Lord Dubs. There have been two speakers from the Conservative Benches so far.
8.45 pm
Lord Dubs: My Lords, I shall be brief and, in contrast to other speakers, support the Government.
The information that surprised and shocked me most was that 40 per cent of British artists earn less than £5,000 per annum. If we want flourishing art in our country, where we have, and encourage, creativity, we must look at the well-being of young artists. If this measure helps young artists, it is surely justified. After all, most artists have to sell their works of art cheaply at the start of their careers, before they have made any
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reputation for themselves. This measure is intended directly to help those artists start their careers and get a little bit more for the work that they have created.
I appreciate the issue of the threshold, about which the noble Lord, Lord Brooke of Sutton Mandeville, argued very strongly. On the other hand, some EU countries have set a much lower threshold. It is right that the Government seek to achieve a balance between the threshold and keeping bureaucracy to a minimum. It has been said that this will damage the British art market altogether. I am not convinced of that argument. If someone were to send a picture abroad to be sold—say, in New York—and then it were to be returned, there would be transport, handling and insurance costs, the gamble on the strength of the pound against the dollar, comparable rates of sales premiums—or they might not be comparable—and import VAT.
Import VAT is surely a significant factor in the equation: a tax on imports into the EU from non-EU countries, which is now 5 per cent across the EU. There is no import VAT for movements within the EU. It would therefore cost an EU buyer significantly more in import VAT to buy in New York than it would cost to pay resale royalties in London. If the buyer is a European national, they would be required to pay the 5 per cent import VAT on the value of the painting, or other work of art, to return it to the EU.
If the painting is valued at £1.4 million, for example, import VAT would be £70,000, compared with the maximum royalty payable of £8,500. The argument that works of art will be diverted from this country simply does not stand up in the face of those figures. Of course, there is a sliding scale. At a threshold of €1,000, an estimated 50 per cent of eligible artists will benefit.
I do not always agree with the Government, but I believe that they have got it right in this instance. They are bringing forward the measure in such a way that it will help many British artists.
Lord Luke: My Lords, I congratulate my noble friend Lord Brooke of Sutton Mandeville on securing this debate on an issue of such crucial importance to the art market. I join with my noble friend Lord Jopling in remarking on the brilliance of his speech.
This droit de suite directive has been described to me as the darkest cloud on the horizon for the international competitiveness of our art market—a statement with which I strongly concur. As a dealer in watercolours myself—I state that interest—I am also a lover of art and a Conservative. I have opposed this paradoxical directive from the very start. I strongly believe that it will be highly detrimental to the British art market, and will seriously damage that part of it which depends on imported goods.
The 5 per cent import VAT mentioned by the noble Lord, Lord Dubs, has already considerably damaged the British art market, in driving the very top of the market to, principally, New York, whereas we used to have almost a monopoly.
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I welcomed the general cross-party opposition to the original directive, and was somewhat surprised by the Select Committee's response to the issue. It was upsetting that Her Majesty's Government finally had to adopt the directive on 27 September 2001. However, it is more upsetting, now that we appear to have no option but to implement the directive, that this draft statutory instrument gold-plates the directive, rather than supporting most of the significant concessions secured by the Government during negotiations. As the Merits of Statutory Instruments Committee has highlighted twice in its report:
"the Regulations go beyond the minimum required by the Directive in two respects. These are: the minimum price threshold for a sale to be liable to resale royalty, which the Regulations set at 1,000 rather than 3,000 euros; and the provision made in the Regulations for joint liability of the seller and an art-market professional involved in the sale".
We have heard about that already.
The British Art Market Federation argued that considering the force of the British opposition, this gold-plating is particularly inappropriate and unnecessary and that it is inconsistent with stated government policy on EU directives. I look to the Minister to give firm assurances today that this will be altered. I suggest that the current draft SI is taken away and a new draft SI produced and published in its place.
As the House of Commons Select Committee pointed out in its report The Market for Art:
Britain currently leads Europe in the provision of services for the buying and selling of art. Our country has more than 50 per cent of the European art and antiques market and 25.3 per cent of the global market. It is a market made up of around 10,000 businesses that provides employment for more than 37,000 people. The UK art market is particularly dependent on cross-border trade. In this key respect, it is the only serious global competitor of the United States. This directive, and the subsequent SI that we are considering today, will materially reduce our competitiveness, encouraging the displacement of the market to the United States and Switzerland which, not surprisingly, have expressed no intention of following suit when the levy comes into force in Britain. This will cost our market millions in revenue and a significant number of jobs.
Research in countries that are already enforcing the droit de suite has shown that the benefit to artists has been virtually insignificant, as did the Patent Office's initial compliance cost assessment in 1996, Market Tracking International's report in 1999 and the Patent Office study in 2003.
Will the Minister explain clearly to the House why the threshold below which the droit de suite royalty is not payable has not been set at €3,000? I believe that there is an error in the evidence that the Design and Artists Copyright Society gave to the Select Committee. On the one hand, Her Majesty's Government say that they want to help struggling
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artists, but on the other, they put forward an SI that will work against them. That is a paradox I cannot condone or, indeed, understand.
The most significant concession gained by Her Majesty's Government in the negotiations was the permitted derogation by which the introduction of the directive for those entitled to royalty for up to 70 years after the artist's death can be delayed until at least 1 January 2010. Why have Her Majesty's Government not taken advantage of that provision and extended the date of derogation until 2012? That could have been one occasion where gold-plating would have been worth while.
Finally, why have Government continued to go down the gold-plating path, particularly as there are very few examples in UK copyright law of such a system? Indeed, the Merits of Statutory Instruments Committee suggested that it may have been more appropriate to adhere to the minimum requirements on these points in the initial implementation of the directive.
I find myself in the unusual position of supporting the issues that the Government fought for, but not the recommendations of the Select Committee or the SI as we see it in front of us today. I hope that the Minister will not disappoint me and will provide assurances that the gold-plating of this proposed regulation will be removed and that Her Majesty's Government will now implement all the concessions they gained in negotiations. That is the only way we can make sure that our art market remains one of the strongest in the world.
Lord Willoughby de Broke: My Lords, when the Minister started his speech and talked about concessions, I thought he was going to come clean with the House and explain the massive concessions he has made in agreeing to this regulation and this directive. But the truth is that this is yet another massive cave-in to the European Union at the expense of Britain's true interests.
What is so depressing about the whole saga, which, as my noble friend Lord Brooke says, has been dragging on for up to 10 years, is that this Government earlier recognised the damage that the directive could cause to the London art market and fought London's corner very hard indeed. The Government then recognised the importance of the art market to London. London has, I believe, 24 per cent of the world's art auction market—far more than the rest of the European Union put together, and 40 per cent of the total British art market is imported specifically for sale here in Britain. But this whole sorry saga shows that the much-vaunted strong voice in Europe is nothing more than what the Times yesterday called in its leader the "bleat and retreat".
The Government were always against the directive. I understand that the Prime Minister personally got involved in trying to stop it being put into law, and, at one point, threatened to use the veto. But, in the wonderful world of the EU social model, one country's competitive advantage is another country's
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competitive disadvantage and must be, therefore, harmonised—that is to say, eliminated—and hang the economic and social consequences.
This directive was subject to the qualified majority voting procedure, as outlined by my noble friend Lord Brooke. To stop it the Government needed to find enough allies, which they did, but unfortunately that blocking minority alliance failed to hold, and here we are this evening passing the regulation into law. What price our much-vaunted seat at the top table? It is more like a high chair in the corner, of absolutely no consequence.
The Times leader that I mentioned earlier ended by saying that Parliament,
"which tends to let EU-based regulations slip through, must act to protect Britain's status as a global centre for artists and art".
I have news for the Times: Parliament cannot change so much as a comma or syllable of these regulations. To do so would be contrary to EU law, which is supreme—so much for our parliamentary sovereignty and democracy.
The final pathetic note in this sorry story was struck by members of the London Assembly the other day when they proposed that their mayor, Ken Livingstone, should try to persuade New York and Zurich art markets to introduce the droit de suite there. I imagine that that was just before they went down to the garden to talk to the fairies about what they wanted for breakfast.
This again demonstrates with complete clarity that when it comes to European legislation neither this place nor the other place has any role to play whatever. We have no power, the powers lie in Brussels; and shame on us for agreeing to that.
If my noble friend Lord Brooke decides to vote tonight on this amendment, I will be the first to vote in his Lobby.
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