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9.34 pm
Mr. William Cash (Stone): In the few minutes available, I shall address the reasons why tax co-ordination follows the Maastricht treaty, as it does in essence. The framework for co-ordination of economic policy is clearly laid down in articles 130, 103, 2, 2a, and so on, and title VII of the treaty lays down the parameters within which it is intended to go, which is why I opposed it so strongly. The statements of Oskar Lafontaine and Gerhard Schroder must be weighed against the remarks of Joschka Fischer, the German Foreign Minister, who has called for the decisive task of our time: the creation of a single state and an international entity in international law.
If one combines those two things, and throws in the costs that are inherent in the things that I shall now list, it becomes clear that not only will it be necessary to co-ordinate a tax policy, but it will be very expensive, and it will cost the British people an arm and a leg. I shall give the House the list.
First, pension liabilities. People will not be able to receive pensions unless the money is found from the other countries in the European Union. In the United Kingdom, we have about £820 billion of privately funded pensions. In Germany, the figure is about £250 billion. As one considers each country in turn, the relevant figure decreases. The money simply is not there. If those countries are to provide public pensions, under the "new way" arrangements, with all the socialism that is now coming in through the back door, they will have to raise massive amounts of tax.
Secondly, cohesion funds. There will be an attempt to create the convergence that does not exist at the moment; that will cost an enormous amount of money.
Thirdly, German and European unemployment is still running at massive levels. That unemployment must be funded.
Fourthly, the Germans want their money back, and if it is given back in the form of a rebate to Germany--which is what Germany is insisting on--inevitably, the burden will fall on other people. Germany is asking for as much as £6 billion.
Fifthly, there is the whole "new European way" and the Keynesian growth policies that go with it--back to the 1960s, as my right hon. Friend the Member for Charnwood (Mr. Dorrell) said.
Sixthly, there are German tax levels. The other day, Joseph Joffe, a columnist for Suddeutsche Zeitung Magazin, said in the Sunday Telegraph that the reason that the Germans want to Germanise economic and monetary union is to raise the taxes of other countries to German levels, so that capital will not fly out of Germany into Holland and Britain, where taxes are low.
Then there are the issues of enlargement, the black economy and fraud.
When one combines all those factors and throws in the fact that our economic and political philosophy is completely different from that of other socialist policy makers in Europe, one appreciates that the question whether there will be tax harmonisation is not simply an invention--a fantasy. It is based on the Maastricht treaty, which creates co-ordination of economic policy making. Moreover, one has the drive of each of the instances that I have given, towards the necessity to raise the money if the member states are to achieve the policy of the single state that they are aiming at. It is all extremely simple.
There is one last factor--the European Court of Justice. The European Court of Justice is already effectively bypassing the rules that have been laid down, and which were mentioned by the Chief Secretary. According to Professor Franz Vanistendael of Leuven university,
Mr. John Whittingdale (Maldon and East Chelmsford):
This has been a short but important debate. It has also been a highly revealing one. The Government have been telling us for months that reports that Europe wanted to harmonise taxes were scaremongering. Only last week the Foreign Secretary talked about
My right hon. Friend the Member for Horsham (Mr. Maude) is absolutely right. It is theoretically possible to have a single currency without common taxation. However, that is not the intention of the European Union. Three years ago, the president of the Bundesbank said:
We were told, "Never mind, we have a veto. Any change to taxation can be done only on the basis of unanimity, and nobody wants to change that." A few days after that was said, the German Finance Minister announced that it was his view that we should have qualified majority voting on taxation and that the veto should be scrapped. We were told, "That does not matter because it is only a personal view." The Chief Secretary said just that in the debate which took place a week ago. The Prime Minister's official spokesman said that the idea was a non-starter, that it did not represent anyone's official policy and that it had
Within a matter of hours the French Finance Minister said that he supported Mr. Lafontaine, while the German Chancellor said that it was the official policy of the German Government. The next day, the Finns said that extending majority voting to taxation would be high on the agenda of their presidency.
The Chief Secretary has told us this evening that that is not the view of the Finnish Finance Minister. The Finnish version of Alastair Campbell has said:
The Government use tough language for domestic consumption. The Chancellor of the Exchequer is only too happy to bolster his macho image by talking about using the veto. Tax harmonisation, an end to zero rates of value added tax, a withholding tax and a cut in the British rebate--we are told that decisions on all those things can and will be vetoed. However, as my right hon. Friend the Member for Charnwood (Mr. Dorrell) said, the Government are trying to have it both ways because that is not what is being said on the continent. There, they are happy to sign up to greater co-ordination of taxes and an end to so-called harmful tax competition. When the Financial Secretary to the Treasury replies, I hope she will try to square what the Government have been saying with the words in the document to which they signed up, "The New European Way".
Let us be clear, co-ordination of taxes is harmonisation, as Mr. Lafontaine has helpfully made clear. When the other countries in Europe talk about ending harmful tax competition, they are talking about getting rid of Britain's low-tax environment, which has been a magnet for jobs and investment for countries throughout the world.
What about the Liberals? The hon. Member for Gordon (Mr. Bruce) told us that, in his view, taxation is a national matter and that we have a veto which we should be prepared to use. That point was repeated by the hon. Member for Twickenham (Dr. Cable). The Liberal party, too, is happy to talk tough at home, as we heard this evening; however, a few weeks ago, in European Standing Committee B, the hon. Member for Twickenham gave a very different account of Liberal policy. He said that there must be a more satisfactory basis for funding the European Union and that an international income tax was a better option. He said that it would make sense if energy taxes were harmonised from the outset. As for the British rebate, he said that it was politically difficult to perpetuate the idea that Britain is uniquely disadvantaged or that it needs special treatment.
The Government say one thing in the United Kingdom and another on the continent. The Liberals appear to say one thing in the Chamber and another in Committee when they hope that no one is listening.
There is no doubt that there is a European agenda for harmonisation of tax. The Prime Minister has proudly produced today a joint statement that he and the German Chancellor have signed. It says that they are opposed to the harmonisation of personal taxes and to a unified system of corporate taxation, but that does not mean that there will be no harmonisation of corporate taxation. Indeed, the document explicitly leaves the door open for harmonised corporate taxation. That is hardly surprising, as Germany is on record as saying that it is high on its list of political priorities. What about all the other taxes? The statement does not mention VAT, taxes on savings or capital taxation. Clearly, they are now all on the agenda in the Government's eyes.
We know that the withholding tax is under discussion. Despite more tough talk from the Chancellor, this Government agreed at ECOFIN in December last year that a Community-wide withholding tax should be introduced. The proposal that the Commission has now brought forward, as instructed, would put at risk thousands of jobs. It would fatally undermine the City of London as an international financial centre. As my right hon. Friend the Member for Fareham (Sir P. Lloyd) said, it would drive the euro bond market out of London and
out of reach of the Commission to Zurich or New York. The Chancellor told us that he will not accept the withholding tax and said that he favoured the provision of information instead. That will suit the Commission fine, and the Chancellor will not need to use the veto on that because it is allowed for in the directive. However, it will not suit the City. For many, the compulsory provision of information would be worse than the withholding tax. It would add to the cost of doing business in London and its effect would be the same--it would drive business overseas. The Government should make it clear that neither a withholding tax nor the compulsory provision of information is acceptable and that any such proposal will be vetoed by the United Kingdom.
"Increasingly the European Court of Justice is applying the non-discrimination principle, that has fully been accepted . . . in the area of indirect taxation, to the area of income tax."
The reality is that the Court is running a policy that will lead to harmonisation or co-ordination of taxes--I do not care which word is used. The fact is, it will come in unless it is stopped.
"exploding myths and mischief that have been peddled as facts."
This evening the hon. Member for Harlow (Mr. Rammell) talked about an hysterical period and the hon. Member for Cambridge (Mrs. Campbell) referred to very crude scare tactics. At the same time, however, other European Governments have made no secret of their wish to move towards a system of common European taxation. They see it as an integral part of economic and monetary union and they cannot understand why that has come as such a surprise.
"A European currency will lead to member nations transferring their sovereignty over financial and wage policies as well as in monetary affairs. It is an illusion to think that states can hold on to their autonomy over taxation policies."
Since then, there has been a procession of Finance Ministers, central bankers, Commission officials and Heads of Government all reiterating the same message, so that barely a day passes without another European politician spelling it out. Not even the Government can maintain the pretence that this is not happening or that it is not a central priority for many other European states.
"a cat's chance in hell"
of being adopted.
"Majority voting on taxation is not a question of if but when."
If the Finnish Government are anything like this Government, we know who is pulling the strings. So much for myths and mischief. What the Government said was irresponsible fantasy a few weeks ago is now, according to the Prime Minister, a debate in which we must be engaged.
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