House of Commons Hansard Debates for 9 Dec 1998 (pt 40)

Mr. Winnick: On a point of order, Mr. Deputy Speaker. In view of the excellent decision on Pinochet, which has delighted all those who believe in the rule of international law, is the matter still sub judice? Has anything changed? If it is no longer sub judice, we would

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like to have the opportunity to congratulate the Home Secretary on a decision that we believe to be absolutely right.

Sir Patrick Cormack (South Staffordshire): Further to that point of order, Mr. Deputy Speaker. In view of the possibly irreparable damage that has been done to our relations with a friendly democratic country, will the Foreign Secretary come to the House and make a statement?

Mr. Deputy Speaker (Mr. Michael Lord): Order. The matter is still sub judice and this is not the time to discuss it.

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Tax Harmonisation

Mr. Deputy Speaker (Mr. Micheal Lord): We now come to the debate on tax harmonisation. Madam Speaker has selected the amendment in the name of the Prime Minister.

7.25 pm

Mr. Francis Maude (Horsham): I beg to move,

That this House deplores the Government's attempts to be all things to all men on the issue of EU tax harmonisation; urges the Government to explain what confidence can be placed in Ministers' undertakings to use the veto, given the Chancellor's decision to sign up to the Party of European Socialists' "New European Way" document and given the EU Tax Commissioner's insistence that the UK is "fully on board" for progress towards tax harmonisation; asks the Government to place in the Library the list of 85 instances of alleged "harmful tax competition" identified by the Code of Conduct Working Group chaired by the Financial Secretary, ten of which are believed to relate to the UK; and urges the Government to make a clear statement of its policy towards EU tax harmonisation.

The House will wish to join me in expressing sympathy to the Chancellor and his family on their recent bereavement, which is the reason for his absence. We all want to send our condolences to him on that sad event.

The issue that we are discussing tonight sums up so much of what is wrong with the Government. On issue after issue, they try to have it both ways. In Europe, Ministers signed "The New European Way" and Commissioner Monti said that the United Kingdom is fully on board for the Commission's tax proposals, but those Ministers come back here and talk tough about using the veto. It is significant that such talk is always surrounded by weasel words that give them a let out for later.

The Government are starting to find that they cannot fool all of the people all the time. Sooner or later, decisions have to be made. Many of the tax harmonisation issues will come to a head in the next six months, so the Government need to make a clear statement of where they stand. They have an opportunity to do so today. The time for weasel words is over.

Mr. Tony McNulty (Harrow, East): Sit down then.

Mr. Maude: I suspect that that comment is the peak of wit from those on the Government Benches. Judges used to ask, "Is that your best point?"; I suspect that it probably was.

I ask the Chief Secretary to address the chief issues and to have another crack at answering the question that we asked him last week, which he signally failed to answer: do the Government believe that the single currency requires tax harmonisation? It is not compulsory to believe that; plenty of people do not. Last week, however, the Chief Secretary provided two answers. First, he shook his head and then he nodded it. One can select the answer that one thinks is most appropriate. Let us see whether he can do any better today. I am watching him very carefully and he is not moving at all. He has had a week to think about the question, so when he makes his speech, he should answer it.

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The Minister's colleagues on the continent think that economic and monetary union requires a degree of tax harmonisation. The German Finance Minister, Mr. Lafontaine, has said that the unified currency area needs a fair and equal tax framework.

Several hon. Members rose--

Mr. Maude: I do not know whether Labour Members have the same list of interventions as they had last week, but on this occasion they have not done us the courtesy of supplying it in advance. Perhaps we can hear the first one now.

Mr. James Plaskitt (Warwick and Leamington): How assiduous was the right hon. Gentleman in his campaign against tax harmonisation in 1992 when the Conservative Government signed up for minimum duty rates for alcohol, tobacco and fuel?

Mr. Maude: We always accepted that there was a case for minimal tax harmonisation. [Interruption.] Labour Members think that they have hit on something incredibly novel and miraculous, but it is perfectly well known that there was a case for minimal tax harmonisation for the development of the single market. We agreed to minimal movements, and that is simply a matter of history. Labour Members cannot wriggle away from the question that they now face; they are now the Government. The issue under consideration is a further programme of severe tax harmonisation in Europe. They have to answer the question. Do they support tax harmonisation or not? We are getting two different answers in two different places. They talk to their colleagues on the continent and clearly encourage them to believe that they are signed up to it; they then come back here and say something different.

If Labour Members spent any time talking to business men--now that the Paymaster General seems to be on his way out, there may be fewer opportunities for them to do so--they would find that business men are getting worried about the whole process. Because of the social chapter, they have already seen a levelling up of social and employment regulation, which has whittled away Britain's comparative advantage. Business men are beginning to see what would happen under the provisions to which the Government are committing themselves across the channel--they see the prospect of a levelling up of our taxation, which means the removal of exactly the things that have given Britain a comparative advantage in attracting investment.

Mr. Tom Levitt (High Peak): Does the right hon. Gentleman accept that the two instances of tax harmonisation that we have seen--the signing up to the abolition of duty free and the imposition of value added tax on fuel--took place under his Government?

Mr. Maude: The issues today--[Laughter.] The reality is that the Government cannot get to grips with the fact that they are now in power. They have custody of those matters and have to come clean with the country on what they are planning to do. It will not do to keep on using weasel words and failing to answer questions.

Mr. Ian Stewart (Eccles): Will the right hon. Gentleman give way?

Mr. Maude: No, I shall continue. I suspect that Labour Members are simply reading from the same hymn sheet.

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We now know that when one gives way to one Labour Back Bencher, one might as well give way to all of them as they all read from one list. We can take one as proxy for them all because they are clearly too stupid to think up questions for themselves.

Mrs. Angela Browning (Tiverton and Honiton): I am grateful to my right hon. Friend for giving way--look, no list. Will he confirm that the reason that there was an agreement on duty free at the time by the previous Conservative Government was that it was conditional on the Commission's making a detailed analysis of how it would affect individual countries and on its then coming forward with a report? We have never had that report--the Commission failed in its duty.

Mr. Maude: There was not only a commitment to supply an economic impact report of the effects of abolition of duty free on various countries but a commitment to bring forward proposals for a successor regime. That has not been done. The Government have only just cottoned on to that, and I shall have something to say about that later.

Let us hear from the Chief Secretary whether he agrees with the German Finance Minister that the

"unified currency area needs a fair and equal tax framework".

Does he agree with the Austrian Finance Minister, who said that economic and monetary union will

"make it imperative to start co-ordinating the sphere of taxation. The social democrat governments"--

that is rather chilling--

"will also have to look at harmonising prices and wage policy"?

That is what some of the Chief Secretary's joint signatories to the "The New European Way" say, but we have not heard what the Chief Secretary and the Chancellor say. Let us hear it tonight.

We also need to hear about a related matter. Do the Government seriously believe in tax competition? We heard the Prime Minister claim that he believes in it--he said so today. One wonders whether he has read the excellent recent paper by Mr. Marsden called "Is Tax Competition Harmful?", an issue that should be exercising the Financial Secretary at this time.

Mr. Marsden points out that, while the European Union is tackling cartels and encouraging competition in other parts of the economy, the reverse is true in the case of taxation. He shows that low tax economies consistently out-perform higher tax economies. What does the Chief Secretary think? Does he agree?

If the Chief Secretary genuinely believes in tax competition, as the Prime Minister today claimed that he did, why, in the one sphere where convergence would benefit Britain--excise duties, which were mentioned earlier--has he reversed the gradual convergence of British levels of excise duty with those of our continental trading partners? He has not only abandoned it but reversed it, so the gap is widening to Britain's disadvantage.

As we are talking about tax competition, it is good that the Financial Secretary is responding to the debate. She has been a somewhat elusive figure recently. The Government have gone a bit quiet about it now but, a few

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