Brown planning to impose tax on museums

Museums and galleries are in secret negotiations with the Treasury over a proposal to charge them at least £90m a year tax on the value of their historic premises.

The plan, intended to force all government-funded bodies to make the most cost-effective use of resources, could plunge into financial crisis such institutions as the British Museum, the Tate, the British Library and the Victoria and Albert.

With so many national museums and galleries occupying spectacular buildings in prime locations, the fear is that the effect of an annual 6 per cent charge on land, buildings and fixed assets could be disastrous. Based on the Government's valuation of national assets published last year, it would cost the British Museum alone £20.6m. The Tate would be liable for £15.5m, while the National Museums & Galleries on Merseyside would have to pay £4.6m and the Royal Armouries in Leeds £2.9m.

The Treasury has agreed one-off grants to cover the charges levied in 2003-04, the first year of implementation, and has promised that the cost will be taken into account in future spending rounds.

But the organisations affected have been given no guarantees on later years and will have to apply for funding to meet the extra expense in the same way that they seek grants for maintenance and staffing. They fear that the long-term effect will be a substantial cut in their resources.

There are also concerns over what will happen when the value of land and buildings increases. The British Library, for example, is sitting on a £450m site at St Pancras which will soar in value when the Eurostar terminal is developed next door.

A confidential report written by the National Museum Directors' Conference warns: "There is a possibility that, to meet increased capital charges arising from movement in valuation, an organisation could become insolvent or have insufficient cash to meet short-term commitments."

While the Treasury is adamant that the introduction of the charge is "simply an accounting exercise" and claims that museums and galleries have nothing to fear, the art world has been shaken.

A senior insider in the museum world said: "It has been done as a way of encouraging the Ministry of Defence to sell off housing and look for cheaper solutions. But with museums and galleries, it's a rental on buildings that in our view are inalienable.

"It would be cheaper for any of the London museums to move to Milton Keynes. But it's a false accounting exercise, because we're here to stay.

"The Treasury treats everything as saleable and has no sense that there are parts of our national heritage that should remain as such."

Martin Bailey, of The Art Newspaper, a respected academic publication, said: "While a capital charge system may be appropriate for most public bodies, museums and galleries are in a rather different position. The British Museum, for example, could not simply decide that Bloomsbury is too expensive and decamp to Bradford or Bristol."

Museum directors have also been frustrated by the refusal of senior staff at the Department of Culture and at the Treasury to meet them over the issue. Their report notes: "Progress is either slow or non-existent, being left to middle-ranking civil servants."

A spokesman for the Treasury said museums and galleries were only being put in the same situation as all other government-funded bodies.