Welfare in the State of Art

Debates in the House of Lords are renowned for their quality but not necessarily for packing a punch sufficient to hit the Government into action. However, with the new Minister for the Arts operating from the House of Lords it is anticipated by many that debates there on the arts may now have a greater impact on him and his Government’s thinking for the currency of the present Parliament.

It is with great anticipation, therefore, that we look forward to the effects of a debate held in the Lords on November 16, 1983, when Earl Haig raised this hare:

‘To ask her Majesty’s Government whether they will consider tax legislation as an incentive to relieve the financial hardship suffered by many living artists at a time of recession and to promote the sales of contemporary art’.

Readers will be able to refer to Artnotes in this issue for a brief report of the debate; this piece deals with issues which it is anticipated at the time of writing will have been raised there in order to underline the importance of the debate and remind readers that debate alone does not get things done. Whether one’s concern is to support the arts in general or is in making, marketing, selling, commissioning, exhibiting, collecting, administering or servicing the visual arts in particular, concerted pressure from all quarters is continually required in order to prove the need for change.

Before exploring who could be lobbied, let us first examine what could be done. Earl Haig’s question is in two parts; legislation a) to relieve financial hardship suffered by many living artists, and b) to promote the sales of contemporary art – neatly pre-supposing that legislation is in fact necessary. A hard-pressed Government might well respond by querying the need for legislation and might ask. Quite reasonably, its own questions. First, what is the current state of play for the makers and in the art market-place, and are there any urgent unmet needs? Second, what are the best solutions? Finally, should this involve Government? To succeed, there must be good answers; so let us explore some possibilities, though not in any way exhaustively.

THE MAKERS: UNMET NEEDS?

1. The Art Schools
By no means exclusively responsible for providing the nation with artists, they have a vital role to play and, in Government terms, are a major consideration when considering state support for the visual arts. There are at least three areas of immediate concern: technical resources; teaching personnel; professional studies.

a) Technical Resources
As we race towards the 21st century, students need to be able to explore visual art in relation to modern technological innovations – as well as pursuing the study of traditional media for visual expression. To mention video, film, lasers, holography, xerography and revolutions in photographic technology is to skim merely the surface; complex modern printmaking processes have moved drastically away from their straightforward origins; and materials exist today for sculptors undreamed of even thirty years ago. The clear and obvious need for our art schools to be able to provide adequate resources for students is urgent and, as recent experiences show, largely unmet.

b) Teaching Personnel
The effect of recent draconian cutbacks in art school teaching staff is well documented and universally deplored.

Two serious results, particularly through the virtual elimination of part-time posts, are worth noting. First, the denial to students of a unique facet of British art school teaching, namely the opportunity for a meaningful dialogue in the formative years of training with professional practitioners visiting the schools on an ad hoc basis, through which students had direct experience of the hard edges of professional life. That has all but gone, and students are left with an arguably less valuable dialogue with full-time staff who, in the main, no longer have time or energy to do their own work and thus merely bring memories of professional practice. The long-term effects of this loss cannot presently be measured, but must be extremely serious. Second, there is the loss to those part-timers of a vital source of funds to support (in many cases entirely) meagre income. A curious double act of vandalism at a stroke.

c) Professional Studies
Related in part to the loss of the input of professional practitioners as part-time teachers, and in part a necessary innovation in any event for the future survival of the graduate, is the need for art schools to develop and introduce professional studies courses/units. Some schools have managed to do so despite the lack of sufficient cash, and experiences prove the need to be great.

The need is this: in addition to the traditional study of the creative and technical processes, students need to be equipped for survival after leaving art school, whether to start private practice or to put their training to other uses, and in particular they should learn how to organise and establish themselves in business, efficiently dealing with record-keeping, accounts, taxation, national insurance, product planning and costing, marketing, advertising, exhibiting, negotiating commissions, grants, bursaries, import and export, finding and maintaining a studio, social security and supplementary benefits, and so on. Without education and training in such matters, and especially now without visiting practitioners, students are leaving college with only luck and nous to guide them. Surely Government would recognise one simple point: that the expenditure of thousands of pounds in putting one art student through college only to spend further thousands in supporting them on supplementary benefit is myopic. Much could be done to promote, support and advance this move, already begun by schools lucky or devious enough to acquire the necessary resources. Moreover, it is usually those schools which are also somehow providing students (particularly in the more commercially applicable fields) with commissions from sponsorship by, and secondments to, commercial ventures outside the school. All arguably should receive encouragement and finance.

2. The Practitioners
a) Part-time Teaching
The need for increases rather than cuts in part-time teaching posts has been discussed above.

b) Supplementary Benefit
It is equally important for Government to arrange for practitioners to claim supplementary benefits when necessary.

Unlike every other citizen of the welfare state available for full-time employment and without sufficient income, the artist has no right to receive supplementary benefit as an ‘artist’- unless prepared to register as a labourer or other ‘worker’. Those with degrees or other academic or professional qualifications can join the elite on the Professional and Executive Register of unemployed and, thereby, receive benefits. But this device is far from satisfactory and leaves out the practitioner without recognised academic qualifications, of whom there are many. In addition, those fortunate enough to be allowed to register and receive benefits have an exceedingly difficult time, and a dilemma arises when they do receive some income from sales, commissions, grants and awards while claiming benefits. Do they declare their receipts and risk prosecution for having defrauded the state by ‘working’ while claiming benefits; or do they dishonestly not disclose their receipts and risk prosecution at a later stage anyway? This problem is great, and is largely ignored, yet it exists not only as part of an increasing ‘black economy’ but also as a continual diminution of the integrity and status of all practitioners.

c) Income Tax
A similar problem of status exists with the artist and the Inland Revenue. Tax Inspectors find it understandably difficult, if not impossible, to spot the ‘genuine’ practitioner from the lobbyist’, for the purposes of assessment of income tax. The Inspector’s discretion, though appealable at what can be great cost to the practitioner, is absolute; and the burden is on the artist to convince the Inspector in every case.

Hobbyist or practitioner? The latter are required to prove that their work is carried out with a view to profit, despite the fact that the practice may run at a loss most of the time. The former are those who fail in their arguments or simply do not put them forward. This results in hobbyists not being allowed to offset expenditure against income, thus reducing their liability to pay income tax: the genuine practitioner can. Experience shows that not all Tax Inspectors adopt a consistent approach in determining who is to be treated as a professional artist. The need is for uniformity of approach.

Furthermore, for those lucky enough to be recognised as genuine by their Inspectors, there is a further problem. Not all Inspectors adopt a consistent approach in determining what expenditure is allowable. Again, experience shows that Inspectors exercise their discretion so differently that greater financial hardship is suffered by many who, with a different Inspector (or the same one adopting a uniform approach), might otherwise receive a lower assessment for income tax. The need is for uniformity of approach.

THE MARKET PLACE: UNMET NEEDS?

1. Sales
a) VAT
A pain in the Arts. It is arguably inappropriate that this tax on the provision to the community of commercial goods and services should be applied to the provision to the community of the fine arts.

Other so-called civilised societies abroad, including European States, do not do so. To continue to bring the works of living artists within the VAT scheme has a number of negative and harmful consequences. It disadvantages the British market place as against markets in countries where VAT (or its equivalent) is inapplicable for such sales. It depresses the market place for dealers and those practitioners (albeit the so-called well heeled) who have to charge the tax. For those practitioners (the non well-heeled) who must not charge the tax, they are disadvantaged as against their colleagues (the well-heeled) who can offset the VAT they have paid for their purchases of materials and services i.e. the well-heeled pay VAT on materials but offset that VAT paid against the VAT received from their own sales; the rest pay VAT on materials but receive no VAT from their own sales. In addition, the non-VAT-registered (the non-well-heeled) are denied the benefits gained by their better-off colleagues (the VAT-registered) from holding the VAT they have received and, thereby, easing their cash flow until their quarterly returns are made.

Finally, and perhaps more insidious, are the effects for some practitioners (the non-VAT- registered) of the Customs and Excise requiring certain dealers to charge VAT on all safest whether or not the artist is VAT-registered. This is done sometimes to facilitate the keeping of VAT records and the making of returns in the case of a dealer selling the works of both VAT-registered and non-VAT-registered artists. Sadly, this not only results in serious confusion for non-VAT-registered artists, but also can depress their markets by raising their prices (or lowering their profit margin) to unacceptable levels. (For those who are now completely lost. The comments above presume the reader to have a rough idea of how VAT is supposed to work in the visual arts. Further enlightenment is contained in Art Monthly: Nos. 24. 29 and 31 of 1979; and 67 of 1983).

b) Re-Sale Royalties: droit de suite
The EEC threatens to press the UK Government to introduce this legislation which would give living artists a small percentage (say 1%) of the profit made on re-sale of their works. France, Germany and Italy have the law (as does California, since 1979).

Some argue that its introduction here would depress the art market by adding the 1% to the purchase price: some see the market as bearing the minimal strain; others argue that VAT on the sales of living artists’ works should be abolished to become the Re-sale Royalty to be utilised as a fund for the benefit of all artists. The Whitford Committee Report to the Government on Copyright and related matters in fact came down in favour of its introduction into our law in principle, but felt unable to recommend its implementation because of the inherent complexities of administering the royalty scheme. However, that is not a real problem: see ‘Solutions’ below.

c) Tax Incentives
Unlike the U.S. and certain European countries, the U.K. Government provides few real tax incentives to encourage purchasers, be they private or corporate. Our current tax system only allows companies or self-employed purchasers of artworks to use such purchases to reduce their profits before tax, and only in very limited circumstances. Normally, they have to show that the purchase was wholly and exclusively made for their business. Private individuals who are not self-employed do not even have that incentive to buy works. This is quite unlike some foreign tax schemes where incentives exist to encourage purchases of artworks to be made instead of paying tax, within certain limits.

2. Commissions
a) VAT
VAT is chargeable by artists commissioned to provide their services, as well as their artworks, and this includes commissions – when their fees or sales exceed the quarterly or- yearly limits for VAT registration (£6,000 or more income per quarter).

This can unduly depress the markets of artists who are normally below the registration limits by pushing their commission fee up by 15% (or by reducing their profit margin). It also inappropriately brings into the scheme those practitioners who would otherwise not be VAT-registered but who achieve a large one off commission i.e. the profit may be marginal but is often swallowed by the requirement to pay 15% of the total fee to the Customs and Excise as VAT, when in truth the profit element on its own should not attract VAT because it is below the registration limit. When public funds in particular are increasingly used to pay large commissions it is illogical, unfair and counter-productive to cause so much damage in order to retrieve 15% of that which has been paid out.

b) Tax Incentives
The same needs apply as for sales (discussed above).

3. Exhibitions
a) Tax Incentives
Similar needs apply as for sales (discussed above) in order to promote, encourage and advance the private sponsorship of exhibitions, exhibiting organisations and venues.

b) Charity Law
Hundreds of arts and artists’ organisations which exist or need to exist exclusively to provide administrative support for the visual arts, especially exhibitions, and which can genuinely be described as charitable (i.e. non-profit distributing for the benefit of the public), still have no legal right to be registered as charities.

The need for reform is well documented, proven and long overdue. If arts organisations which provide ‘support for the arts for the public benefit’ were allowed to be registered charities, the benefits for the arts and the public could be enormous. And. in many cases, this would shift the burden of grant-aid from the shoulders of the Arts Council and other public funding bodies in whole or in part, and for all time.

4. Commercial Applications
Visual arts practitioners have played an enormous part in promoting and advancing the use and standards of visual images in the commercial life of this country: in the fields of design, advertising, marketing, promotion, packaging and distribution – a growth area world-wide, but especially in the U.K.; in video in particular and in film generally.

However, there is a real problem: copyright. Experience has shown that each year thousands of visual artworks are applied commercially without the artist’s prior authorisation at best or, at worst, without acknowledgement or payment of a fee. The copyright law offers protection, but how is it to be enforced? Artists only enforce their rights when they themselves became aware that their copyright has been infringed, and only then if they can find a lawyer they can afford to pay to act for them. No body is policing this vast area of unlawful and illegal activity.

There is a proven unmet need for a body to monitor all visual images, to enforce artists’ copyrights by authorising uses and preventing abuses, and to collect and distribute royalties. No such organisation does this work in this country.

THE MAKERS: SOLUTIONS TO UNMET NEEDS?

1. The Art Schools
a) Technical Resources
Rather than cutting back resources. Government should seriously consider the need to return to realistic levels of funding and make more money, not less, available.

b) Teaching Personnel
Similarly, cut-backs should be reversed and further resources made available to enable sufficient levels of experienced practitioners to be appointed to carry out this work.

c) Professional Studies
Again, more money. Further, or alternatively, Government might consider pressing or even requiring the degree/diploma-giving bodies as a matter of policy to promote in the art schools the introduction of professional studies courses/units; and simply rely on the schools to use slender existing, but dwindling, resources to execute that policy.

2. The Practitioners
a) Part-time Teaching
Reverse cut-backs; make more money available.

b) Supplementary Benefits
Either a change in the law and/or in the regulations and guidelines issued by the DHSS are necessary to remove the anomalies and difficulties experienced by practitioners.

c) Income Tax
Uniformity of approach by Inspectors in recognising genuine practitioners might be achieved by the drawing up of standard guidelines for their use.
This could be done in consultation with relevant and appropriate arts and artists’ bodies, including the Arts Councils and RAAs. Similarly, standard guidelines might be created to achieve a standard approach by Inspectors when determining tax deductible expenditure.

THE MARKET-PLACE: SOLUTIONS TO UNMET NEEDS?

1. Sales
a) VAT
Either zero-rate the provision of services or artworks by living artists, thus still enabling those VAT-registered to claim back any VAT they have paid for materials and services; or take such sales and services out of the VAT scheme, thus denying those VAT-registered that opportunity and so equating them with non-VAT-registered colleagues.

Further, or alternatively, all artists (whether or not providing services or artworks to generate a VAT-registerable turnover) could be brought within the VAT scheme, thus avoiding the unfair anomalies discussed above – and also enabling all artists to claim back the VAT they have paid out (if zero-rating were introduced) or to offset it against VAT received from purchasers (if zero-rating were not introduced). But at least do something to ensure that all artists are treated fairly.

b) Re-Sale Royalties: droit de suite
The introduction of such a law, possibly in conjunction with the VAT reforms (or abolition) discussed above, should be seriously considered: a properly constructed legal framework coupled with support for an independent organisation administering the scheme could well relieve financial hardship for many, or at least provide a much-needed source of further funds for the visual arts in general.

c) Tax Incentives
Legislation giving incentives to purchasers could give a great boost to the market-place. The State would thereby give the opportunity to all artists of achieving sales – and not simply to the few favoured by the Arts Council and RAAs through their grants, awards, bursaries, purchases, etc.

2. Commissions
a) VAT
VAT reforms should include measures to deal with the unfair situation created when VAT effectively swallows any genuine profit practitioners may derive from large, one-off commissions (which take them into the VAT-registration limits when they otherwise would not be registered and therefore not be required to charge VAT).

b) Tax Incentives
Legislation giving tax incentives to boost commissions would, thereby, give all artists the benefit of state support (i.e. by the State creating a responsive market-place) instead of the favoured few in receipt of grants, awards and so on.

c) % For Art Legislation
Government should seriously consider the introduction of legislation requiring a small percentage (say 1%) of the costs of all publicly-funded building maintenance projects to be spent on a visual arts element of the project.

Such monies could be applied, for example, to commission practitioners to work on the scheme with the architect and building team from the outset: to create a space/place as an integral part of the project: to produce a piece of work for the project: to apply decorative artwork to the project; and so on. Not only would this measure provide jobs for the boys and girls (and why not?): it just might contribute to the improvement of our environment. States in Europe and the USA have already introduced such measures.

3. Exhibitions
a) Tax Incentives
Again, legislation to encourage sponsors would boost the market-place and, thereby, benefit all artists, exhibition organisers and venues.

b) Charity Law
Not just in the visual arts, but right across the arts, a ‘support for the arts for the public benefit’ charitable category is much needed. The benefits would be long-term and far-reaching: 50% mandatory rates relief on arts buildings; exemption from tax: eligibility to receive grants and awards from other charities; receipt of tax paid by covenantors, and so on.

4. Commercial Applications
Legislation is not needed for the establishment of an artists’ copyright agency, because the Design and Artists’ Copyright Society (DACS) is about to commence its operation, and will enforce and collect royalties and licence fees for practitioners.

Assistance could be given to this independent non-profit distributing arts charity (sic) by making seeding funds available to ensure that this much-needed and long overdue organisation succeeds. And. of course, the re-sale royalty right – if introduced – could be administered by such a Society, which would solve one of the principle arguments against its present implementation in this country.

EPILOGUE
The ACGB’s Royal Charter requires the Council (amongst other things) to promote, maintain and advance support for the arts; it does so not for the Government, but at arms length from Government, with public funds for the public benefit. None of the solutions to unmet needs discussed here is within the Council’s brief.

It can and does provide an essential service for the visual arts by ensuring that exhibition venues continue to operate; exhibitions can be mounted and some toured; works are commissioned and bought; grants and awards are given: and that the public and the visual arts community receives education, training, information and even advice regarding the visual arts. Their resources are inevitably limited and their choices for favour understandably result in dissatisfaction and criticism – both of criteria for favour, and of the favoured themselves. But neither the Council, nor in their turn the RAAs, nor any other publicly-funded support body can do what is also urgently needed to stimulate the market-place for all practitioners, including the experimental, the part-timers and those whose work does not involve selling objects.

This century has seen the virtual disappearance of private patronage of the arts in this country. If they are to survive to provide an essential element in the current and future health of these Islands, they must of necessity be effectively and realistically supported – and across the board. Hand-outs to the favoured few cannot be the sole solution, desirable though they be; and knocking the ACGB and RAAs is no solution either. In an ideal world the market place would naturally support the arts, the State being one facet; but reality is not so. In the cold light of 1984 only the State could possibly create a market-place in which all the arts can be enabled to flourish, and the visual arts especially.

Who is going to achieve change? Not the Arts Council, not the RAAs, not the artists groups, not the arts organisations, not the art schools, not the dealers and collectors; not any one of these alone. Government will only shift if it hears very loud and unanimous voices.

Have a good Christmas and a vocal New Year.

© Henry Lydiate 1983

 

 

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This article is from the Artlaw Archive of Henry Lydiate's columns published in Art Monthly since 1976, and may contain out of date material. The article is for information only, and not for the purpose of providing legal advice. Readers should consult a solicitor for legal advice on specific matters. Artists can get free online legal information from Artquest.