Clause 18
Finance (No. 2) Bill
2:00 pm
Philip Dunne (Ludlow, Conservative)
I should like to comment on the clause. There appears to be an agreement on both sides of the House about the fact that this is a regrettable step forced upon the Government by the European Court. Despite the agreement that we should not be implementing the measure, the Paymaster General has ingeniously succeeded in blaming the previous Conservative Government and rubbished my hon. Friend’s amendment, even though she made it clear that she agrees with its substance. As has happened previously, we appear to have lost the battle but won the war.
The measure in the clause is seemingly innocuous. We have heard that the impact on the art market is likely to be minimal, but I fear that it could be more significant. As I said, I am not an expert, but I have done a little research and as I understand it some£3 billion to £4 billion-worth of transactions are made in the London art market every year. Most of that goes through Sotheby’s, Christie’s and Bonhams. It is a very mobile market. We are talking about works of art imported into this country to be put through those auction houses. Typically, the consignments of those works of art come from the United States or non-European vendors. They have the opportunity to keep the artworks in the United States and sell them in New York or send them to Switzerland. I suspect that the drip-drip nature of the obstacles to vendors selling their works in London is likely to encourage other markets, such as the one in Geneva.
Just to give hon. Members some idea of the scale of the consignment from overseas that would be affected by the measure, I understand that in January, at the impressionist art sale—which happens twice a year, seasonally, although I cannot tell what the other month is: it may be July—88 per cent. of the lots sold at Christie’s and 72 per cent. of the lots sold at Sotheby’s were bought by Europeans, who will now be caught by this increased rate of VAT. The vast bulk of the buying side of a market—there are always two sides to a market: the seller and the buyer—is based in Europe and will be subject to VAT. A large proportion of the sellers can choose whether they wish to use this market or one that is not caught by the increased charge. That is potentially significant. I do not know whether the Paymaster General had representations from the VAT specialists at Grant Thornton, but Paddy Behan was quoted as saying that he believes that this
“will have a major impact on the standing of UK auction houses.”
We have heard some relatively complacent remarks from the Paymaster General. I hope that she is right and the measure has a minor impact, but I am fearful that it may not. That is yet another example of the European Commission seeking to introduce creeping tax harmonisation through this measure—something that is regretted on both sides of the House—which we should resist at every level. I appreciate what the Paymaster General said—[Interruption.] If the hon. Member for Wirral, West (Stephen Hesford) wishes to intervene, I should be happy to let him. No; he is just making sedentary sniping remarks.