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The levy’s introduction at the beginning of next year is inevitable, he advised the committee. “The question is finding a balance here between the rights of the artist and the rights of getting the payments.”

Even at their most optimistic level, the costs of administering the levy would swallow up a large slice of the money collected at the lower end.

The committee heard that the administration costs of Droit de Suite for those reselling the work of living artists would probably be between £30 and £40 per item. For an item selling at the bottom threshold of €3000, Droit de Suite would be €120, about £88. In other words, administration fees would take up just under half the benefit.

A call by supporters to reduce the threshold to €1000 would leave artists with far less. A work selling at that level would generate a Droit de Suite levy of €40, or about £29. With Lord Sainsbury advocating a more streamlined system of collection, the average administration cost per item could be reduced to £28 – leaving the artists with just £1.

Lord Sainsbury said: “There is the question of whether works of art which are under €3000 are included. We are inclined not to do that because we think at that point the administrative costs become an absurdly high proportion of the actual payments which will go to artists.”

With this question mark over how much artists would benefit, and the potential for damaging the UK art trade, British Art Market Federation chairman Anthony Browne told the committee that the measure’s introduction posed a “formidable problem”.

“Never before has Droit de Suite applied to a market the size of the United Kingdom,” he said. “We view that with some concern, particularly as the consultation process started only recently and, therefore, we will not get a precise view of the legislation probably until the summer.”

“It will be a big problem,” he added. An auctioneer would have to check which lots are liable to the charge, before making a payment to the collecting agency which would then likely take a 25 per cent cut before paying the artist their dues.

“This was as a result of various surveys that have been done,” said Mr Browne. “We do not know precisely because a good deal depends on the legislation, but these are the figures that have appeared in the impact assessments within various surveys done by the Department of Trade and Industry.”

Lord Sainsbury indicated that the DTI’s preferred method of collecting the Droit de Suite charge would be through a compulsory and collective system, rather than a voluntary scheme managed by individual artists themselves. This system would reduce the average administration cost to £28, he noted.

Joanna Cave, the chief executive of the Design and Artists Copyright Society, which has already had 52,000 artists sign up for them to collect the levy on their behalf, is also in favour of compulsory collective administration for the Droit de Suite.

“I think this will deliver benefits to both sides. Art market professionals will be able to remit all royalties and all information to one place and not have to deal with large numbers of individuals. If collective administration does not occur and all transactions have to be dealt with individually, that will also include all international beneficiaries.”

She argued that collective administration would deliver great benefits for the artists, because it guaranteed all royalties due would be paid. “Not having compulsory collective administration would leave the artists to have to find out that their work had re-sold and we think that is going to be extremely difficult for the vast majority.”

Ms Cave also argued for lowering the threshold to €1000, saying otherwise it would exclude a huge number of different types of artists, such as photographers, crafts makers and illustrators.

Mr Browne argued strongly that lowering this band would exacerbate what is already going to be a major problem for the art market. “The charge on smaller businesses is a cost that they will simply have to bear,” he said. “If the terms are extended to bring the value level down, I feel that it will either to impose an additional administrative cost and complication on the smaller business or, if they are not prepared to do it, there is nothing to stop them saying they simply will not sell those things because it is too expensive to do it.”

It was also clear from the Parliamentary committee session that the definition of “art” to which the Droit de Suite legislation will apply will have to be examined. There is a definition outlined in the European Union’s directive but, in Britain, the definition of art goes back to the Copyright and Patents Act of 1988.

Lord Sainsbury said: “We need to be very clear when we get to the statutory instrument what exactly is covered by Droit de Suite because it goes well outside the visual arts; it goes into jewellery, furniture, all sorts of things.”

“It is well worth looking at what is happening in other countries and learn lessons so that we do not get the definition too broad that it becomes unmanageable.”