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Mr. Ron Davies (Caerphilly): The fact is that the present Government privatised the Severn bridge crossings. Is the Minister now suggesting that we should nationalise them?
Mr. Oppenheim: I will make two points in response to the hon. Gentleman. First, having been given a clear opportunity to give a commitment on behalf of the Labour party to abolish tolls on the bridge, he failed to do so. He then accused us of privatising a bridge when what we have actually done is build a bridge by means of something called the private finance initiative. I suggest that he refer to his good friend the shadow Chancellor, and ask what is official new Labour policy on the PFI. Is this one of the old redoubts of old, unreconstructed stakhanovite Labour? I do not know.
I shall move to an area in which I hope there is more cross-party agreement. Tolls are not taxed in the United Kingdom. They have never been taxed, and we do not intend to tax them. The hon. Gentleman said that we would shed crocodile tears and pocket a nice little earner if they are taxed. If they were taxed, the Government would have some of the proceeds, but they would not be pocketed; they would go into hospitals and schools. [Interruption.] Opposition Members guffaw. I do not know where they think the money goes. Who builds the hospitals and accounts for the 70 per cent. increase in NHS spending in real terms since we have been in power?
I emphasise and doubly underline for the benefit of the hon. Gentleman and his constituents and everyone in Wales that we do not intend to tax tolls. We have consistently maintained that position throughout our disagreement with the European Commission on the issue.
I shall deal with a little of the background to the issue. Since VAT was introduced in 1973, we have viewed the large tolled crossings as activities undertaken by the state. European Union legislation accepts that the public activities of the state and of regional and local governments are not subject to VAT. Tolls charged on smaller private crossings are also exempted from VAT, but under a different provision. The European Commission disagrees, claiming that we should tax tolls in the same way that most services for payment are taxed.
To put it mildly, this is a very complicated EU legal issue of the type that would have been familiar to any of the priestly clerks who operated towards the end of the Byzantine empire. The United Kingdom is not alone in relieving tolls from VAT. France, the Netherlands, Greece and Eire do that. However, other member states with tolled roads add VAT to the toll charge.
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The United Kingdom has strong and compelling arguments, to which the Commission has not given sufficient weight. The major tolled crossings are owned and controlled by the relevant Secretary of State, and they exist and operate under Acts of Parliament. They are in every sense an activity of the state, but the Secretary of State empowers local authorities and other bodies to run the crossings.
A comparison with the normal activities of local government might be helpful; refuse collection is an example. Councils are required by law to maintain environmental and public health standards. One requirement is to clean the streets and remove the refuse, and council tax is levied to pay for that. There is no dispute with the Commission that council tax is VAT-free. It is therefore eminently sensible that providing and maintaining tolled crossings should, by the same token, be VAT-free.
The Commission first raised this issue some 10 years ago, and in 1989 it announced its intention to pursue infraction cases against the United Kingdom, France and the other member states through the European Court of Justice. However, until July this year, nothing further happened. Then the Commission suddenly announced its renewed intention to deliver its complaint and legal arguments to the European Court of Justice and thus commence infraction proceedings. To put it mildly, that is a somewhat odd way to operate. When that happens, the UK and other member states will be able to respond formally to those arguments and later defend their position before the European court.
It is a lengthy process, and a formal hearing is unlikely to take place for about a year. We wish to use the time to take legal advice on the Commission's latest arguments and prepare the UK's defence. Furthermore, if there is any area in which the EC directive as it stands does not support the UK's position, we shall certainly do our best to influence the matter and change the relevant directive.
It is important that the VAT system creates a level playing field and does not discriminate between public services, whether they are publicly or privately provided. It is important that reliefs are not given indiscriminately, not just in relation to tolls but in all areas.
The Government support the concept of the Commission ensuring that there is a level playing field so that United Kingdom businesses can compete in the single market. It is also right for the European Court of Justice to examine the legal issues where there is a dispute. It is not acceptable, however, that, since 1989, the Commission has prevaricated, and that, instead of approaching the United Kingdom Government again to discuss the issues, it issued merely a press release announcing its intention to pursue cases through the European Court of Justice.
The Government find it particularly concerning that, last year, Neil Kinnock, as European Commissioner for Transport, referred to the tolls issue, which received much media attention. He said:
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Sir John Cope (Northavon)
rose--
Mr. Deputy Speaker (Sir Geoffrey Lofthouse):
Order. Has the right hon. Gentleman informed the hon. Member for Newport, East (Mr. Hughes) that he wishes to speak?
Sir John Cope:
No, but as a few minutes remain, I wanted to support the hon. Member for Newport, East (Mr. Hughes)--
Mr. Deputy Speaker:
Order. If the hon. Member for Newport, East has no objections, the right hon. Member for Northavon may continue.
Sir John Cope:
I want to support the hon. Member for Newport, East and my hon. Friend the Minister in relation to the arguments about VAT. In my constituency, I have half of both the Severn bridges into Wales. As it happens, not so long ago, I had responsibility for VAT in the Treasury. Of course, the person who should be responding to the debate is not my hon. Friend the Minister, but Commissioner Neil Kinnock and his colleagues in the European Community, because it is they who have raised the possibility of VAT being charged.
Over many years, I have worked alongside the hon. Member for Newport, East in connection with the bridges. Neither of the bridges would have been built if it had not been for the tolls. The Labour Government supported the tolls on the old Severn bridge just as much as the Conservative Government, and benefited from them. A former Labour Treasury Minister is present who can verify that, if needs be.
It is not right that the European Commission and the European Union should dictate to Britain--or France and the other countries concerned--whether we should impose VAT on the bridges. From the start, we have not done so. We have the right to continue to zero-rate tolls and to exclude them from the VAT system if we wish. I am glad to have my hon. Friend the Minister's assurance that we will fight any court case as vigorously as we can.
Question put and agreed to.
"if tolls are levied for the use of a motorway or a bridge, VAT should be levied as well."
As my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory), the former Paymaster General, has publicly said, that is simply not so. It would have been Adjourned accordingly at three minutes to Eleven o'clock.
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