House of Commons Hansard Debates for 1 Dec 1999 (pt 11)

Ms Rachel Squire (Dunfermline, West): I thank the hon. Gentleman for giving way. Although I disagree with much of what he says, I welcome the fact that the points are being made in the Chamber. Will the shadow Foreign Secretary give an assurance that he will not follow the example of the shadow Defence Secretary, the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith), and cross the Atlantic to give evidence to a Congressional Committee that attacks the policies of this Government?

Mr. Maples: The committee was not attacking what the Foreign Secretary says the Government's policy is. He says that it is no threat to NATO. I will give no such undertaking. The matter is so serious and the Government are making such a serious mistake, with the fundamental security interests of the country at stake, that we are right to do everything that we can to stop them.

The Foreign Secretary and the Defence Secretary may be able to kid their Back Benchers, the public and us, but I hope that they are not kidding themselves. What they are doing is extremely serious. If I am right and the Foreign

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Secretary is wrong, the country will pay a high price for that mistake. If he studies what some of his European counterparts are saying, he will find that their view of where matters are going is different from his.

It was reported in The New York Times that, after the summit, the French Foreign Minister acknowledged that

"France was out in front of some of its allies in arguing that a European reaction force should be able to operate with complete autonomy even if it was put together from units that formally belonged to the alliance."

That is new.

In the same article, the French Defence Minister is reported as speaking to his European colleagues in Brussels about the need for stronger European defences. The article continues:

"Richard said not a word about the relationship that a European military staff would have to NATO."

As the Frankfurter Allgemeine pointed out, the real question is whether the European countries are ready to spend the billions of dollars that it would take for them to catch up with the United States. Clearly, they are not prepared to do so.

There has been no explanation from the Foreign Secretary or the Prime Minister why, a year ago, they did a 180 deg flip-flop on the subject. If they had gone into the election setting out their present view of the role of the European Union, that would have made sense, but they have done a 180 deg U-turn, with no explanation at all.

Why did the position change so radically between Amsterdam and St. Malo? We have never had an explanation for that. We suspect that it is all because the Prime Minister was worried about Britain not being in the first round of the euro, and the kind of reception that he would get at the summit. Indeed, we know that that is the reason because, if there were a better reason, we would have heard about it from the Foreign Secretary today, or after the St. Malo summit. The hon. Member for Dunfermline, West (Ms Squire) criticised my hon. Friend the Member for Chingford and Woodford Green (Mr. Duncan Smith) for giving evidence to Congress, but we find it appalling that the Government are prepared to sell out Britain's long-term security interests for a weekend's headlines--for a weekend's public relations. The country's interests ought to be more important than that. We shall fight the Government's policy all the way.

The Foreign Secretary was radically wrong in the cold war. He was a supporter of unilateral nuclear disarmament and he has been proved to be wrong. His judgment is no better now. He has allowed himself to be the tool of an anti-American lobby, to which many in France and many in his party have long belonged. If the policies that he is pursuing damage NATO and our security, this country, whose interests and security he seems so little to understand, will have paid an extremely high price.

Mr. Donald Anderson: Is the hon. Gentleman aware that the riposte to the evidence of the hon. Member for Chingford and Woodford Green (Mr. Duncan Smith) to the Congressional Committee was given by Elmer Brock, who was the leading member of the Christian Democrat Union in Germany--a party that one would assume to be related to the same political family as his own? Does not

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the fact that that riposte was given by a Conservative from Germany reflect the almost total isolation of the hon. Gentleman's party in this field, as in all European fields?

Mr. Maples: I shall never feel isolated while the United States is on my side. My hon. Friends and I know Elmer Brock well; we share some of his views, but not the one that the hon. Gentleman mentioned.

I want to consider other matters that will be raised in Helsinki, if only at the margins. It is time to kill off the withholding tax; the Government should have done that a long time ago. It would have done better for the City and our relations with European Union partners if the Government had said from the start that they would not tolerate the tax and that they would veto it. Instead, a great deal of damage has been done. The Treasury's paper on the withholding tax, which was published in September, states:

"The proposed directive is already having an impact on the market . . . Swiss bankers have been reporting unprecedented capital inflows since the Spring of last year."

The uncertainty is causing enormous damage. We handled the matter by saying that we would not tolerate it and that we would not even discuss it. However, the Chancellor and the Foreign Secretary have given supporters of the tax a little hope and, consequently, a messy compromise will be proposed. [Interruption.] Why do the Government continue to negotiate about it? It has been said that we will have a withholding tax if the eurobond market can be accommodated. It should have been made clear that the European Union has no role in setting individual countries' tax policies and that we would use our veto. If there is an opportunity to kill off the withholding tax at Helsinki, we should take it because that would be better not only for the bond market but for our relations with our European partners.

It is ridiculous for the German Finance Minister to blame the weakness of the euro on the lack of a joint approach to the withholding tax. Its weakness is due to all sorts of other reasons, which may prove to be temporary. The euro may bounce back.

Mr. MacShane: Ah!

Mr. Maples: Currency values go up and down. It is not surprising that a new currency is initially weak.

The drive for harmonisation will not stop with the withholding tax. We will be told that our corporation tax rate is unfairly low, and we will be asked to increase that to meet standards in Europe. The Foreign Secretary shakes his head complacently. However, time and again, Conservative Members have witnessed initiatives, which began by being small and specific, becoming wider and general. For example, the social chapter began as a social charter--a series of aspirations that were not intended to have legislative effect--but where are we now? The working time directive costs £2 billion.

I want to consider droit de suite, which is the effective tax on art sales that the European Union wants to impose on everyone. It may succeed in doing that, because the proposal is subject to qualified majority voting. It is a classic example of a European Union directive that will simply increase business costs and drive business abroad.

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One or two countries have that ball and chain round their ankles, and they are trying to use the European Union to shackle everyone else.

To give it its due, the Department of Culture, Media and Sport has fought hard. Ministers have pointed out in parliamentary answers that £750 million of sales a year could be lost and that many jobs could be put at risk. No one gains from this beggar-my-neighbour policy. I hope that the Government's attempts to prevent its adoption are successful. However, if the new relationship with the European Union and the good will that has been bought at the heavy price of true British interests is not good enough to stop the directive, which uniquely damages Britain, or to allow the Foreign Secretary to tell our partners that it is important to stop it because many jobs in London are at stake and businesses will be driven to Zurich or New York, the relationship has not beenworth it.

The single market will also be considered in Helsinki. An enormous amount of work remains to be done. The Commission's primary task for the next two or three years should be to concentrate on opening the markets in telecoms, utilities, airlines and financial services. There are too many blocks in the single market's way.