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beneficial to the education of the 93 per cent. of children who are in the state sector about whom we should be concerned. We should far prefer the energy of the Minister and of the Secretary of State, whom I see in his place, being directed to providing improvements in the state education system which has been so badly neglected in recent years. There are crumbling schools and teacher morale is low. Many concerns have been expressed not only by members of the teaching profession, by governors and by parents, but by Opposition Members. We will not support the regulations.6.50 pm
Mr. David Lidington (Aylesbury) : I am grateful for the opportunity to make a few remarks in support of the regulations. I confess that I was not surprised to hear the hon. Member for Bath (Mr. Foster) attack the assisted places scheme and the regulations. The continuing hostility of his party is not a cause for amazement. I had the opportunity of a council free place at a direct grant school. I remember that Mrs. Shirley Williams, the then Secretary of State for Education and Science and the spiritual and philosophical grandmother of the Front-Bench spokesmen of the Labour and Liberal Democrat parties, put the knife into the direct grant scheme in the 1970s. As with so many of the education reforms introduced by the Labour Government, she kicked away the ladders of opportunity up which so many Opposition Members had managed to ascend.
I am delighted to speak in support of the order. There are three reasons why the House should give the order its wholehearted support. First, as my hon. Friend the Minister mentioned, the assisted places scheme increases the choice of education available to parents on middling and low incomes. As has been mentioned, approximately one third of parents whose children receive assisted places get those places free. MORI research shows that the average income of the typical family benefiting from the assisted places scheme is about £10,000 per year. The average family benefiting from the scheme gains about two thirds of the average national household income. There is firm evidence that the scheme benefits the families and children for whom it was designed.
Secondly, in the context of the Government's broader schools policy, the assisted places scheme adds to the diversity of educational provision within the state sector. It provides an element of competition which we should welcome and not condemn. When Opposition Members complain because parents choose to send their children to independent schools through the assisted places scheme, they ask the wrong questions.
The question that the House should ask and the question which should be posed to local education authorities, to head teachers and to other members of the teaching profession, is why individual parents opt for places under the scheme rather than for the places available to them in neighbourhood schools.
I have the good fortune to live in and to represent part of Buckinghamshire. I know that our system, in which we still have both grammar and upper schools, formerly secondary modern schools-- [Laughter.] --is such that on the whole we produce schools of fine quality to which parents wish to send their children. In response to the laughter from Opposition Members, I should point out that I meet parents who explain to me that not only the
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grammar schools in Buckinghamshire, but the good upper schools are over-subscribed and have a queue of parents waiting to send their children to them. If one has a good, dedicated teaching force and a supportive local education authority rather than one which seeks to import once modish and now outdated education philosophies, one can produce in grammar and upper schools alike a quality of education from which parents will be pleased for their children to benefit. Thirdly, the assisted places scheme helps to break down the barriers of class and social background. I should have thought that all hon. Members would have that objective in common. I am especially pleased that regulation 7 improves and strengthens the scheme to make it easier for schools to give help to parents of relatively modest means so that the independent schools taking part in the scheme can continue their work of reaching out beyond the category of parents who can afford to pay the full fees.I find it surprising that the Labour party and the Liberal Democrats continually snipe at the independent sector for its alleged exclusivity.
Mr. Don Foster indicated dissent .
Mr. Lidington : I am delighted to see the hon. Member for Bath shaking his head. I should be delighted if the Liberal Democrats are gradually coming towards the Conservative party's position. Only a short time ago, the Liberal Democrats said that the charitable status of independent schools needed to be thoroughly and critically reviewed. In my constituency, the Liberal Democrats at local level still display hostility not only to the assisted places scheme, but to any selection within the state system of secondary education, even if their national spokespeople now choose to keep quiet about that objective.
The assisted places scheme promotes opportunity. I hope that the Government will take on board the point raised by my hon. Friend the Member for Dartford (Mr. Dunn) about encouraging public schools further to get involved in the provision of education opportunities for people other than the academically gifted. My hon. Friend's suggestion about children with special educational needs was valuable and I trust that the Government will take it on board.
I do not pretend that the scheme of itself provides a complete or anywhere near complete answer to the challenges facing our education sytem. However, I believe that it is a valuable contribution to the promotion of excellence and quality in our system of state education. The regulations will have my wholehearted support.
6.58 pm
Mr. Bill Etherington (Sunderland, North) : Many hon. Members have spoken with great knowledge of the education system. Many hon. Members have been teachers or administrators of the education system. I will turn to the parents' viewpoint of education. I do not pretend to be an expert on education, but I know quite a lot about being a parent. Many jibes are thrown at the Opposition about the Labour party being opposed to the independent sector, but it is not true. The Labour party is opposed to the subsidisation of the independent sector, whether through favourable taxation or the assisted places scheme.
It is all very well the Government talking about choice, free enterprise and competition. I had no choice as a parent in 1983 when my 13-year-old daughter was
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prevented from going to the split-site comprehensive school that she was attending because it had to close due to lack of resources. At a time when school governors have to decide whether to replace a teacher or repair the fabric of the building, it does not bode well to be told that the Government can spare £80 million to prop up the private sector.I am a great believer in parents being able to choose to send their children to a private school if they can afford it. That applies to only a small percentage of the population. What I find objectionable is that those who are less well off have to subsidise the better-off through taxation so that they latter can send their children to private schools.
If we are to talk about competition and free market forces, let us see independent schools operate under that stricture. Let us see the end of tax relief and of the assisted places scheme. If there is money to spare, I assure everyone concerned that it is badly needed in the state sector. If the Government do not believe that, they should get out and talk to some of the poorer parents who do not want to send their children to private schools but to decent state schools. It is the Government's duty to provide the greatest good for the greatest number and to start putting resources into those schools.
7.2 pm
Mr. Forth : Listening to this brief debate, one would have thought that we had not just had a general election in which page 18 of the Conservative manifesto said :
"We will maintain the assisted places scheme, which gives access to independent education to many families who could not otherwise afford it."
That was a clear statement by the party that won the election. It is sad that so many hon. Members should have taken this occasion to re-run the tired Opposition arguments to which we have had to listen and to which, no doubt, my hon. Friend the Member for Dartford (Mr. Dunn) had to listen in the distinguished years in which he occupied my present position.
The assisted places scheme is now established. As my hon. Friend the Member for Portsmouth, North (Mr. Griffiths) pointed out, many parents of modest means throughout the land, in his constituency and others, look to such a scheme to give their children opportunities that would otherwise be denied to them. The whole spirit in which Conservative Members have approached the debate is so different from that of the Opposition that it epitomises the differences in attitude. The Opposition's attitude is carping and bitter whereas we constantly emphasise choice and diversity and the desire, through a relatively modest scheme, to give the maximum number of parents an opportunity to have access to schools to which they would like their children to go.
The hon. Member for Wallsend (Mr. Byers) seemed to be mystified about how any sensible parents would want their child to go to such a school or how they could make that choice without information. He then answered his own question by revealing that a large proportion of parents whose children go to assisted places scheme schools had gone to schools in the independent sector. What better recommendation could there be than that people with first-hand experience of the benefits of the independent sector should want their children to go--in this case, through the assisted places scheme--to similar schools? The hon. Gentleman provided the answer to his
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own question. If he studies his speech in Hansard tomorrow, as is traditional, he will see that what I say is correct.Two or three Opposition Members asked me what limit we have set on the fees increase for this year. The figure is 7.5 per cent., which is based on the increase that the maintained sector will receive this year. We want parity of treatment and I hope that that meets with the approval of the Opposition. It is straightforward.
I was asked several times how we can ensure quality in that sector. There are a number of ways of doing so. I have already suggested endorsement by parents. Others might be the examination results that those schools achieve, despite the fact that--I do not conceal it or dissent from it--the schools select in any case. Nevertheless, they then produce such consistently good and outstanding examination results that that in itself shows the sector's success.
Ms Armstrong indicated dissent.
Mr. Forth : If the hon. Lady does not believe me, I shall send her some figures that will illustrate the point extremely well. My hon. Friend the Member for Dartford asked an important question about children with special educational needs. There are encouraging signs that many independent schools are now providing facilities for children with dyslexia or other special educational needs. Provision is growing. That shows that the independent sector is keen to play a full and rounded part in our education system and that it does not wish to be perceived as elitist, as many Opposition Members still portray it. The sector still has not gone far enough, but it is showing good signs, which we wish to encourage.
My hon. Friend the Member for Portsmouth, North asked whether we expected to give further funds to the scheme. It is true that we are already making further funds available. We must strike a balance, as must any
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Government Department in that matter. Part of the increase is accounted for by the fees increase to which I referred, although we have effectively capped that. An important element of the increase is our desire to see more and more children having access, through the scheme, to the independent education of their choice. That was endorsed in the election on the basis of our manifesto, and it is enjoying increasing support through parents' choice.The hon. Member for Bath (Mr. Foster) cannot have it both ways. I should think that his constituents will be interested to hear his apparent opposition to and doubts about the scheme. I suspect that they may also be interested in his views about grant-maintained schools, to which I gather he is also hostile. How he squares that with the great former Liberal principles of maximum choice for the individual in society is for him to answer. Somehow, the move from Liberal to Liberal Democrat seems to have removed almost all the classical elements of liberalism at its best and introduced something more akin to latter-day socialism, which we used to associate with the good old Labour party. That, too, seems to have got lost, but I shall leave it to Opposition Members to sort it out among themselves.
This is an important annual occasion for the House to consider whether this well established scheme, so recently endorsed by the electorate again, and explicitly so, as a result of our manifesto commitment, should be given modest but realistic additional resources to enable an increasing number of parents and children to have the choice and diversity that it provides. We are convinced that it was right to introduce the scheme, that it is well founded and properly funded. We are pledged to continue that. The regulations endorse that, and I ask the House to support them.
Question put and agreed to.
Resolved,
That the draft Education (Assisted Places) (Amendment) Regulations 1992, which were laid before this House on 3rd July, be approved.
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Value Added Tax (Cars)
7.8 pm
The Paymaster General (Sir John Cope) : I beg to move, That the Value Added Tax (Cars) (Amendment) (No. 2) Order 1992 (S.I., 1992, No. 1654), dated 9th July 1992, a copy of which was laid before this House on 9th July, be approved.
As the first motion on value added tax is of smaller account than the second, it will be helpful to the House to take them separately. The House will know that, in general, cars are not allowable as VAT inputs by businesses. However, my right hon. Friend the Chancellor of the Exchequer announced in his Budget that, from 1 August, private taxi operators, car hire firms and driving schools will be able to recover VAT on their purchases of new cars. That was provided for in the Value Added Tax (Cars) (Amendment) Order, SI 627.
That order provided the new relief for those taxi firms and driving schools operated by self-employed drivers and instructors, because otherwise they would have been unfairly penalised. It granted relief on cars to be let on hire on condition that they were used as taxis, or for self-drive hire or driving school cars. It did not extend relief to purchases by leasing companies. Since the order was made, we have learnt that some leasing businesses intend to execute leasing arrangements, including a clause restricting the use of leased cars to one of the uses that qualify for relief, thereby, in their view, entitling them to recover input tax. Such terms would not have commercial validity or rationale, and the lessors would have no interest in enforcing the restrictions or any way in which to do so. We therefore thought it right to introduce the order to clarify the previous one, thus avoiding uncertainty. The order makes it clear that such a scheme would not succeed in avoiding tax. I support the order and commend it to the House.
7.12 pm
Dr. John Marek (Wrexham) : I welcome the Paymaster General's explanation of why SI 627 has been superseded by SI 1654, and in general I agree with what he said.
Sir John Cope : Not superseded, but supplemented.
Dr. Marek : Yes, supplemented. I was looking at SI 1654, which states :
"Article 2(a) of the Value Added Tax (Cars) (Amendment) Order 1992 is hereby revoked"--
but it is then re-enacted in the provisions. How much will the original order and the new omnibus order cost the Revenue? It would be useful if the Paymaster General could give us an estimate. There is a lesson to be learned on how to legislate. The Government should not table statutory instruments and then find that they have faults. I am not saying that the Government are not acting properly but, as a result of consultation, they often realise that the original order is insufficient or flawed, and so have to table another one. The more openness in government--especially on non-controversial issues such as the order--the better.
I would welcome it if, when the Government were tabling such orders, they could be made available for consultation in the House or published by the Government, as the Government did with the new value added tax regulations in anticipation of our entry into the single market in 1993. Much of the relevant draft legislation was published in advance of the Finance Bill.
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The Opposition support the order, but it would be useful if the Paymaster General could tell us the cost. I see that a paper is being brandished, so I shall stay on my feet for another 10 seconds to allow it to reach the Paymaster General.7.15 pm
Mr. Bob Cryer (Bradford, South) : When it examined the statutory instrument, the Select Committee on Statutory Instruments thought that the explanatory memorandum provided by the Department was useful, and better than that on the original one. It was a much longer memorandum and we printed it in our third report, House of Commons Paper No. 52 for the 1992- 93 Session. Apendix 1 contains the full explanatory memorandum, which I hope will be of use to the House and users of the instrument.
We should remember that such legislation has to be applied by the user and has the force of law. The number of orders and instruments produced by the Government is now approaching 3,000 a year. We hope that the memorandum will assist in clarifying the instrument. SI 1654 blocks a loophole that the Revenue did not realise existed, and it is only a short order. The tatty draft order that we have does not give a price. Is the order replacing the previous one to be issued free of charge? The Government are partly responsible for ensuring that an order is as comprehensive as they want it to be. I do not blame the draftsman for the loophole as there are always smart alicks looking for such defects. That is why provisions sometimes have to be drafted in a complex way.
However, the Government do bear some responsibility and, as it is such a short order, it would be helpful if the Government issued it free rather than charging an additional sum. It should certainly be free to purchasers of the original 1992 order, which was an amending order, as was SI 959 which, in 1989, amended the original statutory instrument of 1980. As there are now three amending statutory instruments, will the Department consider producing a consolidated order? It may be of help to the user to have all the amendments in one document instead of having to purchase several at a time. It should be the primary concern of both the Government and the House to make legislation as clear and succinct as possible. I know that it is difficult, for the reasons that I mentioned. The Government should consider a consolidation provision at some stage. I hope that they will do so sooner rather than later.
Sir John Cope : The hon. Member for Wrexham (Dr. Marek) asked me about the cost of the order. The legislation stops a loophole and, as far as we know, there will be no extra cost. Indeed, it may save us money that we might otherwise have had to pay had the order not meant what we thought the original order meant. SI 1654 is for clarification.
The original order, SI 627, cost £50 million to produce. The hon. Member for Bradford, South (Mr. Cryer) explained that the Select Committee on Statutory Instruments had issued an explanatory memorandum. He was right to say that it would be useful to users of the order. He asked if we were to give away the order. That is most unlikely. It is a matter for the Stationery Office to decide, and it has to recover its costs. The original order cost only 65p, so it is not expensive, and we should recover the cost of producing such documents.
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Mr. Cryer : When the fault clearly lies with the Government, it is usual for them to issue a replacement order to purchasers of the original order. While it may not be fair to ascribe all blame to the Government, they should bear at least some of it. As the Paymaster General seems reluctant to show concern for the user from the Dispatch Box, perhaps he will consider the matter further after the debate. When the Joint Committee on Statutory Instruments finds that an instrument has to be amended as something is seriously wrong, it is common for the Government to issue a free replacement. Will the Paymaster General give consideration to the matter ?Sir John Cope : I shall consider the issue outlined by the hon. Member for Bradford, South. We do not consider that the original order, SI 627, did not fulfil our intentions. However, it seemed that there might be a challenge in the form of an avoidance scheme and, by issuing the clarifying order before either of them took effect, we avoid time and trouble for the Government and for others. The hon. Gentleman asked whether we had thought of producing a consolidating order. We are paying attention to that and will probably produce some VAT consolidating orders. However, we have not yet decided to do so. The hon. Gentleman's recommendation is sensible and we shall certainly consider it.
Question put and agreed to.
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Value Added Tax (Payments on Account)
7.20 pm
The Paymaster General (Sir John Cope : I beg to move,
That the Value Added Tax (Payments on Account) (No. 2) Order 1992 (S.I., 1992, No. 1668), dated 13th July 1992, a copy of which was laid before the House on 13th July, be approved.
The order introduces a scheme of VAT payments on account for the largest VAT payers from later this year. Commissioners regulations will also be necessary, giving a little further detail on the operation of the scheme.
As the House knows, the instrument has had a long gestation period. In October 1991, my right hon. Friend the Chancellor of the Exchequer announced that postponed accounting was to be reintroduced on goods received from the rest of the European Community. About 90,000 businesses will gain a cash flow advantage from that change in 1992-93. To prevent an increase in the public sector borrowing requirement, my right hon. Friend the Chancellor decided that the largest VAT payers should account for VAT monthly, as happens in most of the Community, rather than quarterly. About 1,600 businesses will be affected, and they are those with a VAT liability in excess of £2 million in the year ending 31 March 1991.
Following wide consultation with representative bodies, my right hon. Friend the Chancellor announced in the Budget just before the election that he had decided to modify the original proposal so as to require monthly payments on account instead of monthly returns from the largest VAT payers. The traders will continue to submit VAT returns quarterly and their liability will be adjusted by the amount that they have paid on account in the two previous months. That will minimise the admistrative burden on businesses and avoid exposing them to extra penalties while still protecting the PSBR.
Customs and Excise issued a draft leaflet on Budget day and invited comments. As a result, we have made some changes which should be helpful to businesses. First, we intend to exclude from the scheme businesses for which, although the VAT liability in 1990-91 exceeded the £2 million threshold, the figure for the year immediately preceding and the year immediately following were below that level. That is intended to take account of exceptional transactions arising in 1990-91 which might otherwise mean that a smaller business would be unjustly caught in the net.
Secondly, we have allowed for payments to be reduced if the VAT liability falls to less than 80 per cent. of that in the reference year used to calculate the payments. That is more generous than the two thirds originally proposed by the Chancellor. A short time ago, I was able to announce that the selection criteria for inclusion in the scheme will be reviewed when some experience has been gained of its operation.
As hon. Members will be aware, there have been representations from several bodies to the effect that it was unfair to put the burden of payments on account on the largest VAT payers. They said that it would be fairer to target the businesses that would benefit most from the new postponed accounting arrangements, that is, those who import goods from Community member states. We have carefully considered that but have concluded that such a scheme would run an unacceptably high risk of challenge in the European Court. Accordingly, the Chancellor was unable to accept those proposals.
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In each VAT quarter, payments on account will be due by the last day of the second month and the last day of the third month and subsequently adjusted to the correct quarterly amount when the VAT return is sent in. Each payment will be one twelfth of the total VAT due, excluding the VAT on goods imported other than from member states in the reference year. For the first year, the reference year will be based on the 12 months ending in March, April or May 1992, depending on the VAT return cycle for the business in question. Provision is made for VAT periods of other than three months. I am glad that in Committee the hon. Member for Wrexham (Dr. Marek) and the right hon. Member for Berwick-upon- Tweed (Mr. Beith) gave some support to the changes that we have made since the Budget. However, the Chancellor has made it clear that it would be wrong for the Government and the taxpayer to stand the cost of the postponed accounting arrangements on the PSBR for this year. In response to issues raised by business in the consultation exercise carried out by Customs and Excise, the scheme allows substantial easement of the original terms proposed in October 1991.When the first version of the order was considered by the Statutory Instruments Committee, it thought, as hon. Members may have noted from the Committee's report, that some aspects of the order might be outside the vires provided. Therefore, last week we thought it right not to move the first order and to replace it with the second order, which the Statutory Instruments Committee considered yesterday. That is all documented in the Committee's report, and the order had been revised to take account of the Committee's comments.
7.26 pm
Dr. John Marek (Wrexham) : The order results from the Budget proposals in March. It replaces the original order No. 1510, and I again question this apparent waste of paper, time and money. I shall be interested to hear what my hon. Friend the Member for Bradford, South (Mr. Cryer) has to say about the Joint Committee's findings. Not much time was allowed for comments because people were given until the end of March following the Budget. It is unsatisfactory once again to have two orders, the first of which is not being proceeded with although it has been laid on the Table.
The instrument takes account of changes in the VAT rules which are to be implemented on 1 January 1993. The Opposition do not quibble with that, and will not force a Division. The order is clearly the result of protracted discussion with interested parties in various industries and in the House. It proposes that large traders with a VAT liability of more than £2 million in the year to 1 April 1991 would have to make monthly payments on account from, I think, the end of November. I am told that there are about 16,000 large companies to which the order will apply. Normal quarterly returns would be made. The on account figure is to be calculated by reference to actual payments in the year to March, April or May 1992, depending on the exact time of the quarterly return.
However, there are likely to be some problems. Traders over the £2 million limit might suddenly, as a result of the recession or some other unforeseen, or even foreseen, circumstance, fall below that threshold, thereby falling outside the scheme. But they will have to persuade
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Customs and Excise that they should come off the scheme. The original statutory instrument, 1510, paragraph 4, headed"Persons to whom this Order applies",
said :
"Save as the Commissioners may otherwise allow, a taxable person falls within this article if "
I shall not read the whole paragraph. The important phrase was "Save as the Commissioners may otherwise allow".
That seemed to allow the commissioners some discretion about whether a person should be taxable under the scheme.
The new statutory instrument, 1668, does not have those words. It is completely rewritten. My hon. Friend the Member for Bradford, South may wish to comment on that in due course. Has the ability of Customs to decide whether someone should be in the scheme disappeared as a result of the new statutory instrument?
If the percentage of VAT due is down to 80 per cent. or less, adjustments can be made to the monthly payments. That provision has been carried forward from the old statutory instrument to the new one. Paragraph 11 of statutory instrument 1668 says :
"with effect from the date of the written approval by the Commissioners of a written application by the taxable person to that effect, the lesser amount shall be substituted for the greater amount and the amount of each payment on account beginning with the first payment on account which falls to be made after the date of that approval shall, subject to article 10 above, equal one twelfth of that lesser amount."
But Customs has to be satisfied that the total amount of tax due is less than 80 per cent. There could be delays. If there are delays, can the Minister assure the House that they will be kept to a minimum and that the commissioners will act as expeditiously as possible? It clearly cannot be right for the commissioners to wait a month, perhaps because they are snowed up with other work, and to insist on certain traders paying sums on account which are clearly well above the sums that they would be paying if an up-do-date view were to be taken of their trading activities. That is a problem on which the House requires assurance.
As the Paymaster General said, domestic traders will be affected rather than traders who import and export, who will be able to take account of the postponed accounting system. The Paymaster General also said that there will be a review of the criteria for selection for inclusion in the scheme. Can he give some idea of the timing of that review? Clearly the sooner the consultation is undertaken and the decisions made by the Government, the better. One year, a trader may be above the £2 million threshold, and the next below it. The Government might want to increase the threshold to take account of inflation from time to time. That can lead to uncertainty for a trader which cannot be good for his business.
Therefore, I make a plea to the Government to get on with the review. No doubt it is right that there should be some experience of how the present system works, but it should not take a day longer than necessary. After that, I hope that, as a result of the review, there will be a generally accepted view of how the system should operate.
A further problem may arise as a result of the related rules on groups for companies that can be sold out of a large group. There seems to be an inability to leave the club. Will the commissioners have any power to ensure that such difficulties do not develop? That could easily be an important issue, particularly as the original statutory instrument seemed to give the commissioners the power to
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take a particular trader out of the scheme without having to give any reason, which is not the case in the new statutory instrument. A problem arises as a result of traders whose liability last year exceeded their liability this year. They will have an adverse cash flow to bear as a result of the proposal. Paragraph 11 provides that taxpayers may apply for a reduced payment if their total tax is likely to be below 80 per cent., but no other situation is covered. I have dealt with some of the difficulties that traders may have with regard to the 80 per cent. rule and the fact that there is no immediate way of ensuring that a trader falls out of the scheme's remit, except perhaps by waiting a year in order to demonstrate to the commissioners that his total tax revenue is below £2 million. That is too crude and it needs to be refined. It is a bit hard on traders, particularly domestic traders, for example in the service industries, who will not receive any corresponding cash flow benefits from the new intra-EC rules.Will the Paymaster General think ahead to 1996-97? If there is such an adverse effect on domestic traders when we move to an origin-based VAT system, can the situation be redressed in any way? For the sake of equity, there should be such redress. Will the Government bear in mind that domestic traders will have to bear extra costs as a result of this statutory instrument and any new legislation leading up to 1996-97, and if possible to redress the cost?
I am also advised that the Customs leaflet issued in 1992--I have not seen it so I could be wrong ; I usually check everything, but I have not been able to obtain the leaflet--contained some ambiguous statements. The statutory instrument will affect it and it will need to be rewritten and reprinted. Has the Paymaster General or his Department had any representations on that? If so, I hope that he will take them on board and will print a new and unambiguous leaflet so that traders know their position exactly.
I am concerned about the validity of the Government's proposals. This could be a serious point, depending on the Government's legal view. There is the problem that the Government have conceded the practical difficulties of submitting monthly returns, but the relative provisions of the sixth directive, article 22(5), may be read as restricting the ability of member states to deviate from the rule requiring payments one month after the VAT return period to the case where interim payments are required for every taxpayer. Are the Government satisfied that that proposal and the statutory instrument are permitted by the fifth directive? If they are not, will they seek an appropriate derogation? Article 22(5) of the sixth directive states :
"Every taxable person shall pay the net amount of the value added tax when submitting the regular return. Member States may, however, set a different date for the payment of that amount or may demand an interim payment."
If that provision applies to some, does it apply to all? I hope that the Paymaster General can say that there is no risk of infraction proceedings, or whatever, initiating in Brussels as a result of the statutory instrument. With those reservations, I hope that the order will be passed this evening.
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7.40 pmMr. Michael Stern (Bristol, North-West) : I commend my right hon. Friend the Paymaster General for his courage in introducing this statutory instrument today. I appreciate that there may be budgetary reasons for doing so before the summer recess, but I refer to my right hon. Friend's courage because the scheme that the measure introduces has come under considerable attack--and will continue to do so.
Some time ago, representatives of the 1,600 companies most affected were assured by my right hon. Friend the Chancellor of the Exchequer that, if an alternative were submitted, it would be considered. In his opening remarks, my right hon. Friend the Paymaster General dealt effectively with one alternative--to load the burden of the new impost on to importers. He did not refer, however, to a suggestion made by the companies most adversely affected by the order. I refer to the so-called Danish solution, which would negative at least part of the resultant adverse cash flow that companies fear will result from the order. Perhaps my right hon. Friend will explain why the Government decided to reject the Danish solution.
A more serious concern was touched on by the hon. Member for Wrexham (Dr. Marek)--the relationship between the order, the treaty of Rome, and the European Court. My right hon. Friend is aware that a legal opinion is winging its way to the Treasury, where it is expected to arrive on Friday-- from Mai tre Waelbroeck, who is regarded as an expert--to the effect that there is a serious risk that the order will provoke infraction proceedings under article 1 of the treaty on the grounds that it will distort competition, introduce tax neutrality, and discriminate against importers.
I have neither the knowledge nor the foresight to say whether that opinion has any validity, but given that copies will reach the Treasury as soon as they are available, it is legitimate to question my right hon. Friend as to the robustness of the Government's opinion that there is no risk of infraction proceedings under article 101. I shall be grateful if my right hon. Friend can provide reassurance on that point.
7.44 pm
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