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Primarolo, Dawn

Purchase, Ken

Quin, Ms Joyce

Radice, Giles

Randall, Stuart

Raynsford, Nick

Reid, Dr John

Robinson, Geoffrey (Co'try NW)

Roche, Mrs. Barbara

Rooney, Terry

Ross, William (E Londonderry)

Rowlands, Ted

Ruddock, Joan

Sedgemore, Brian

Sheldon, Rt Hon Robert

Shepherd, Richard (Aldridge)

Shore, Rt Hon Peter

Short, Clare

Simpson, Alan

Skeet, Sir Trevor

Skinner, Dennis

Smith, Andrew (Oxford E)

Smith, C. (Isl'ton S & F'sbury)

Smith, Rt Hon John (M'kl'ds E)

Smith, Llew (Blaenau Gwent)

Soley, Clive

Spearing, Nigel

Spellar, John

Spicer, Michael (S Worcs)

Squire, Rachel (Dunfermline W)

Stevenson, George

Strang, Dr. Gavin

Straw, Jack

Sweeney, Walter

Tapsell, Sir Peter

Taylor, Mrs Ann (Dewsbury)

Taylor, Sir Teddy (Southend, E)

Thompson, Jack (Wansbeck)

Trimble, David

Walker, Rt Hon Sir Harold

Walley, Joan

Wardell, Gareth (Gower)

Wareing, Robert N

Watson, Mike

Wicks, Malcolm

Wilkinson, John

Williams, Rt Hon Alan (Sw'n W)

Williams, Alan W (Carmarthen)

Wilson, Brian

Winnick, David

Winterton, Mrs Ann (Congleton)

Winterton, Nicholas (Macc'f'ld)

Wise, Audrey

Worthington, Tony

Wright, Dr Tony

Young, David (Bolton SE)

Tellers for the Noes :

Mr. Peter Kilfoyle and

Mr. Alan Meale.

Question accordingly agreed to.

Question again proposed, That the amendment be made.

Mr. Spicer : Before the interruption I was engaged in a brief--and I mean brief--intervention.

The Chairman : Order. I must ask hon. Members who are leaving the Chamber to do so quietly, and I hope that those staying will listen to the debate.

Mr. Spicer : As you, Mr. Morris, have ruled, this is a very tightly drawn debate on VAT harmonisation. I want to have article 99 removed. So, according to its amendment, does the Labour party. But it has now decided otherwise.

Sir John Cope : The amendment does not seek the removal of article 99 ; its purpose is simply to avoid the alteration to article 99 that the treaty makes, and that concerns only the economic and social committee.

Mr. Spicer : My right hon. Friend is, of course, absolutely right, and if what he has indicated were achieved, it would be helpful from my point of view. I concede that this is part of the existing treaty. The problem is that it is the thin edge of the wedge. The problem concerns the context of the Maastricht treaty. Someone said earlier in the debate that this was all in the Single European Act. Article 99 is not a bad example of the kind of text that might help us if we were to look at it in isolation. The words of the existing treaty are in some cases identical to those of the proposed treaty. But the words have to be looked at in context if the differences in their significance as between treaties are to become apparent.

In this case the context is the concept of a single currency. That is the core of the Maastricht treaty. We have been told that the pillars are there, that we are taking an important step forward in claiming back national sovereignty. But looking at things on an inter-governmental basis is not a great new backward step, as is obvious if one considers the context of the treaty and its new objectives. This was pointed out very well by my hon. Friend the Member for Chingford (Mr. Duncan-Smith).

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The new objectives of the Maastricht treaty must be related in the way that the European Court of Justice will undoubtedly relate them. Under Roman law--alien law--which is what we are going to have, it is the context of words, rather than the pure text, that has to be considered.

This is a learning process, but, in the past, British negotiators made the mistake of looking simply at the text of the main treaty and not considering the context. That was a very serious mistake. In some respects, the new law will supersede our domestic law. The context and objectives will be taken fully into account in a way that does not apply in British law. This is one of the fundamental problems that we face as we approach the treaty. The entire treaty, its context and objectives have to be taken into account. In this case we must consider the question of harmonisation in the context of a single currency, which, in my view, will lead to a single taxation system.

Mrs. Gorman : Before my hon. Friend leaves the discussion on VAT, I hope that he will apply his mind to its effect on small businesses. After all, one of the supposed desires of the Common Market is that small business shall flourish, yet VAT, being the most hated tax that the small business man has ever had the misfortune to have to collect for Government, has had a profoundly adverse effect on that objective. Would my hon. Friend like to apply a few of his thoughts to the effect of VAT on business and on the spirit of enterprise?

Mr. Spicer : I am extremely interested in that intervention by my hon. Friend, and I think that the whole Committee will be interested in it. If we compare our system of VAT with indirect taxation systems in other countries outside Europe, we see that my hon. Friend's point is a very important one. I have heard it argued that this is the real deterrent to capitalism, to innovation and to new business. But although it is a fundamental point that my hon. Friend has raised, and although it is important for it to be laid before the Committee, it is not the point that I was speaking about.

Mr. Marlow : The amendment does not talk about VAT ; it talks about turnover tax. My hon. Friend the Member for Billericay (Mrs. Gorman) has said what a pestilence VAT is. We used to have purchase tax. Is it the understanding of my hon. Friend the Member for Worcestershire, South (Mr. Spicer) that, should we wish to at a later stage, within this amendment we could go back to purchase tax? Or are we stuck with VAT?

Mr. Spicer : One of the thrusts of my argument is that Governments should be able to decide these things. I would disagree with most of the things that are said by Opposition Members about taxation. I am sure that they would be in favour of greater direct taxation, whereas, on the whole, most Conservative Members would favour greater indirect taxation in some form, although the points made against VAT are good ones. What I suspect is common to hon. Members on both sides who are worried about the treaty is that we believe that the House and our Government should determine these priorities. That is what lies at the root of my concern about the treaty when it is seen in its full context--and this particular article about harmonisation must be seen in a wider context.

We are moving towards a centralised form of federal taxation. If the single currency is to mean anything, it must

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mean a single price system, accompanied, because the economies will not have converged--we will certainly not find the Greek economy converging with the German economy in time for any of these things to happen--by unequal wages. There will be, because it is structured into this treaty--this article is part of the process of centralisation--an automatic move towards a central taxation and expenditure system. It is my fundamental concern about the treaty. The instruments associated with it are undemocratic. The central instrument associated with it is to be the central bank--

The First Deputy Chairman of Ways and Means (Mr. Geoffrey Lofthouse) : Order. The hon. Gentleman is quite aware, because the Chairman drew it to the Committee's attention earlier, that this is an amendment about indirect taxation, and the hon. Gentleman tends to stray from it. I hope that he will get back to the amendment.

Mr. Spicer : I understand that, Mr. Lofthouse, but the instrument associated with this particular amendment is the central bank, and it is ironic, on the day after--

The First Deputy Chairman : Order. The central bank can be debated in other amendments later on, when no doubt the hon. Member will have an opportunity to catch the Chairman's eye or mine.

Mr. Spicer : I understand that, Mr. Lofthouse, and I will not stray on this, but I beg you to accept the point that I am trying to make, which is that these textual points must be seen, are rightly seen and will be seen by the European Court in their wider context. One cannot debate these individual textual matters other than in their proper context. That is precisely the way in which the court will judge these matters. So it is very difficult and restrictive, and against the spirit of the new age and the new law that we are to have in this country.

Mr. Ian Taylor : May I help my hon. Friend back to his central point, which is to address this particular amendment? The reality is that VAT is still to be levied by the national Governments. Harmonisation is a single-market factor, which can be discussed in that context. He is talking about the resources of the Community. This question was dealt with effectively at the Edinburgh summit and the new budget arrangements now last through almost to the end of this century. That rebuts the point about centralised taxation ; it is off the point of this amendment, which is entirely to do with what we have already confirmed in the House in the Single European Act, with the exception that now we are also to discuss with the economic and social council.

The First Deputy Chairman : Order. I hope that the hon. Gentleman will now accept that what we are discussing is indirect taxation, and will stick to it. If not, I shall have to rule him out of order.

Mr. Spicer : I understand and I am very grateful for the intervention of my hon. Friend the Member for Esher. For a very short time he was out of the Chamber when I addressed a point that he raised earlier in this context. His argument--which he has just repeated--it is that we should reject this amendment because it is already in the treaty. I am glad to be able to tell him that I do not accept that point. Just because it is in the existing treaty, that is

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no reason for not taking the advice of Opposition Members and others who have made the point during the debate that one should learn by experience and by one's mistakes. Part of the argument for accepting this amendment is precisely that we have been able to learn by our mistakes. You would call me to order for repetition, Mr. Lofthouse, if I went over the arguments with which I supported that point, but my hon. Friend will be able to look at the record tomorrow and see how I developed my argument.

Mr. Skinner : Would it be fair to argue that if, for instance, we managed to rid ourselves of the yoke of the Maastricht treaty and some of the other things connected to the Common Market, this Parliament or another one would be able to levy taxation as it thought fit? There have been references to purchase tax. I would argue that it would be better to have a range of purchase tax rates than to have VAT. That is why I voted against VAT. That is why every Labour Member in the House at that time voted against it. So, in this new regime, assuming that we smash the Maastricht treaty, which is what we are here to do today--it may be that the Chair and others are not in that game, but we are--

The First Deputy Chairman : Order. The Chair is in no game, only to chair this debate quite impartially. I hope that the hon. Gentleman accepts that.

Mr. Skinner : All I want to emphasise is that I want to be able to hear statements from any part of the Committee in favour of getting back to purchase tax. If we did get back to purchase tax, it would mean that the Bank of England, as opposed to a central bank, would have a say in the matter. That means that, if we do not get back to purchase tax and controlling matters in the House, it follows that we cannot talk about VAT unless we talk about the central bank, which is the idea within the Maastricht treaty. That is the point that I am making.

Mr. Spicer : The hon. Member for Bolsover (Mr. Skinner) has made his point very clearly and it is one with which I agree. One of the reasons why the media will be turned on to what he has just said and why everybody will be writing about it tomorrow morning is that what he says in the Chamber matters still. The fact that he believes in purchase tax matters. Through the Executive, our Parliament still largely determines what form of taxation we have. The hon. Member for Bolsover is right to say that article 99 is a part of the process of losing control of our taxation system. Control of that system is a central aspect of a nation's sovereignty. I shall not stray too far, because I see that you are looking restless, Mr. Lofthouse, but in years gone by and on both sides of the Atlantic, taxation was considered to be the principal element of sovereignty to be fought for.

10.30 pm

Mr. Cash : Will my hon. Friend give way?

Mr. Spicer : Before I give way, may I say, Mr. Lofthouse, that I am trying to bring my remarks to a close.

Mr. Cash : My hon. Friend has extensive experience of the United States. Does he agree that the experience of harmonisation of VAT across Europe would not correspond to the position in the United States where there is a different sales tax in each state? Even according to the

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objectives of the federalists in all parties, the proposed harmonisation will not work. I and my colleagues seek to ensure that we have our own system.

Mr. Spicer : All that I can say in response is that, at least at the moment, we are able to determine these matters. Some people want a purchase tax--indeed, I am coming to the view that there are great inadequacies in the VAT system, and the idea that it be harmonised for ever is disturbing for the reasons outlined by my hon. Friend the Member for Billericay (Mrs. Gorman). There is no question but that the proposals contain highly bureau- cratic elements which will greatly disadvantage the smaller companies.

Mr. Nicholas Winterton : I want to come straight to the specifics of indirect taxation and VAT. I am sure that my hon. Friend will agree that in Europe there is already tremendous pressure for the harmonisation of VAT and for us to abolish our zero rate by including items that are currently zero-rated among those covered by this country's standard rate. As an example, the inclusion of domestic heating oil would mean a huge additional impost on thousands of families in this country. It would inevitably increase wage demands and inflation. There is a great difference between various countries--the need for heating oil in Spain, Italy, Greece and Portugal is very much less than in north European countries. Such an impost, because of the culture of this country, would be intolerable. For that reason, harmonisation of indirect taxes would be a massive disadvantage to our people.

Mr. Spicer : That was a useful intervention. It enables me to say that on 27 July when we secured a great victory and managed to safeguard zero rating, we also conceded the principle of harmonisation at ministerial level. That is one of the problems. My hon. Friend the Member for Macclesfield (Mr. Winterton) is correct to say that there are exemptions that it would be extremely difficult--

Mr. Skinner : On a point of order, Mr. Lofthouse. At 10 pm we voted on whether to carry on, and we voted in favour. One of the reasons that the vote was carried was that the Liberal Democrats voted in favour but they have now gone missing. It is a scandal that people vote to continue beyond 10 pm but do not have the guts to stay no wonder they are called Captain Mainwaring's army.

The First Deputy Chairman : Order. That is not a matter for the Chair, and the hon. Gentleman well knows it.

Mr. Marlow : Further to that point of order, Mr. Lofthouse.

The First Deputy Chairman : Order. I cannot take further comments on a point of order that never was. I call Mr. Michael Spicer. Mr. Spicer rose --

Mr. Marlow rose --

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