Examination of Witnesses (Questions 20
- 39)
TUESDAY 28 MARCH 2000
MR KEITH
VAZ, MP AND
MR MARK
LYALL GRANT
20. May I press you. I would like to identify
those taxes that in the terms of the Prime Minister are part of
the hidden subsidies which need to be removed. What are these
taxes? Can you name the specific taxes that we are talking about?
(Mr Lyall Grant) Perhaps I can add to that, Mr Chairman.
The tax package is made up of three separate items. There is what
is called the Withholding or Savings Tax Directive and then there
is the Taxation on Interest and Royalties Directive, which is
such an example as you have mentioned where we think co-ordination
to cut out double taxation between EU Member States is a sensible
idea.
21. Interest?
(Mr Lyall Grant) Taxation on interest and royalties.
It is taxation between a head company and a subsidiary company
in another Member State. The third element is a Code of Conduct
on unfair taxation which is being looked at in a group chaired
by Dawn Primarolo from the Treasury. Those three elements make
up the tax package and we are in favour of two elements of that
package, the interest and royalties and the Code of Conduct. We
have difficulties with the Draft Directive on the withholding
tax, as you know, as it is currently phrased. The key point about
those three elements is that they ought to be agreed by unanimity.
The Government does not say we do not want any tax harmonisation
or any tax co-ordination. What we do say is if there is going
to be some form of tax co-ordination it has to be by unanimity;
it should not be by qualified majority voting.
22. Once one agrees that these two areas are
by unanimity to be a part of the European Union from then on they
are QMV and any alteration or amendment in that area would be
subject to qualified majority voting?
(Mr Lyall Grant) They would all be subject to unanimity.
23. Any subsequent changes would remain subject
to unanimity.
(Mr Lyall Grant) That is correct.
Sir John Stanley
24. I would just like to pursue Mr Rowlands'
point with just one further question. Do we understand therefore
that there is no tax that this Government is prepared to see settled
by a QMV process in the European Union?
(Mr Vaz) Yes, that is exactly what I said in the House
during the last questions.
25. Including withholding tax?
(Mr Vaz) Yes. Yes means yes.
Dr Starkey
26. Can I ask a question about some non-treaty
reform. Do you accept the recommendations that have been made
by a report that is suggesting that the significant package of
non-treaty reform should be agreed at the end of the IGC?
(Mr Vaz) I think we need to look, Dr Starkey, at what
is left at the end of the IGC. What we are very keen not to do
is to burden the agenda to such an extent that we do not deal
with the leftovers from Amsterdam. These are the core issues that
we have to get completed. There is a view which fewer countries
are now pursuing that there will be this huge amount of time left
over which will allow us to discuss everything under the sun.
This simply will not happen. We need to look at the IGC process.
Frankly, I think the Feira conference is a good time to assess
the progress of it and by then we will know what the scope is.
There are other countries that want to put other things in but
at the moment I think our position must remain to get a full discussion
and agreement on the three issues which are substantial issues.
These are not minor issues, they are substantial issues, and when
that is completed then we will see if there is any scope available.
My view and the Government's view is that there is no scope available
for any major discussions.
27. There is one area where this Committee has
had considerable concern which is difficulties in the administration
of EU budgetary payments to NGOs and other organisations and indeed
also the problems that there have been with the TACIS and PHARE
technical assistance programmes. I think in almost every investigation
that we have done recently this problem has recurred about the
inefficiency of the TACIS programme in particular. There is not
anything at present on the IGC agenda to address these administrative
weaknesses. Would it not be a good idea to resolve these sort
of problems with some urgency to make sure that the current functioning
of the EU is as efficient and as effective as possible? Another
example is Kosovo where there was a health NGO which had been
given six weeks to produce drugs for Kosovo relabelled in all
the languages and distribute them and it had taken more than six
weeks to get the money out of the EU.
(Mr Vaz) That is not within the scope of the IGC,
as you correctly identified Dr Starkey, but I think one must not
regard the discussions in the IGC as the only thing happening
in the European Union at this time concerning reform. The reforms
that have been set out by Neil Kinnock and Romano Prodi on the
way in which the European Union and Commission operate are reforms
that can actually look at the financial and administrative details
you have just mentioned and are not something that we are going
to discuss within the scope of these meetings. There is no reason
why they cannot be addressed by the so-called Kinnock reforms
and I am sure they will be looked at it.
28. Will you be keeping under review whether
they are adequately addressed by that mechanism and, if not, would
you maybe look again?
(Mr Vaz) If we were not keeping them under review
we certainly will be now you have raised them at this Committee.
Mr Wilshire
29. I want to go back for a moment to qualified
majority voting because I do not think we can reasonably leave
it where we did. Knowing the Minister's enthusiasm for modern
technology I had a look at the Labour Party's website on this
matter and it says there that "we shall defend our veto in
every area where it is the British interest to do so." There
we have a very clear Government statement of when it is in our
interest. I am nervous because having made that statement the
Government has then abandoned it in 15 areas already. I do not
think the answer Sir David got goes far enough. Sir David, Minister,
recited to you the six areas of principle where you have said
no concessions, but if you go back to adapting the institutions
to make a success of the enlargement, if you go back to the document
produced by the Commission, I have found at least 22, in my judgment,
issues which fall outside your six areas of principle and what
I would like to know is whether you agree with me that those items
fall outside. If you are saying, "We are going to listen
and then decide", if they are within your six surely you
are not going to listen before you decide because you have made
your mind up? There are 22 areas which fall outside. Chairman,
you will not let me read out 22 one by one, but if I give you
that list of 22 will you confirm to this Committee that my judgment
is correct that they do not fall within your six areas?
(Mr Vaz) Mr Wilshire, first of all I have not had
the pleasure of looking at the Labour Party's website but I certainly
will do so after this meeting.
Mr Wilshire: It is a fascinating place to go.
Mr Mackinlay: You both need to get a life!
Mr Wilshire
30. It is in the fiction section, Minister,
if you really want to know where to look for it.
(Mr Vaz) I can only repeat what I, the Foreign Secretary
and the Prime Minister have said on many, many occasions. I know
it is boring but I am going to have to repeat it again and that
is we will examine qualified majority voting on a case-by-case
basis. I have not said at the Committee today or at any other
stage that in all other areas other than the six areas I have
mentioned we will get qualified majority voting. What I have said
is that we will look at the situation and look at each area on
a case-by-case basis and have a discussion. It is not this Government
that extended qualified majority voting a record time; it was
the previous Government that extended it 42 times under the Single
European Act and the Maastricht Treaty and it was the Shadow Foreign
Secretary of course who signed the Maastricht Treaty. So we are
very conscious that these are issues that need to be looked at
very carefully. I cannot negotiate the terms of reference of each
area at this Committee today, you would not expect me to. Reciting
22 areas and me saying yes or no to them is not going to get us
very far because we will start that procedure when we discuss
these matters.
31. I heard what the Minister said but that
is not what I asked him. Two things that arise from what he has
just said, Chairman. First of all, you are saying that you are
prepared to consider all matters put before you but at the same
time you are saying there are six areas where you are not prepared
to. Can we be clear. If a proposal to extend QMV falls within
one of those six categories are you saying you are still prepared
to consider it or are you going to say, no, on principle we are
not prepared to consider it? Which is it?
(Mr Vaz) We will do what every Government has done
on these matters and that is look at what is in the national interest.
What we have set out in the IGC White Paper of 15 February is
a clear statement about six core areas which are matters of concern
and have been raised on a number of occasions, indeed they have
been raised today within a few minutes of this evidence session
beginning. What I have said is that in all the other areas, Mr
Wilshire, we will examine QMV on a case by case basis. We have
no fear about the QMV. If you look at the figures, Mr Wilshire,
last year we were on the losing side only three times and in the
year before we were on the losing side twice on QMV. QMV benefits
the national interest. In all those other areas we will look at
it on a case by case basis. I am not going to tell you today whether
we have made a decision on them because the negotiations and discussions
have not even begun.
32. So there are no circumstances under which
this Government will agree to any exception if that falls within
the definition of your six, is that what you are saying to us?
(Mr Vaz) Yes.
33. Fine. So it would be possible to determine
very early on whether a proposal made by the Commission fell within
that category or not? That is all I am asking you to do, to say
do these 22 fall within those six or do they not, not whether
you support them or not. That is all I am asking you to say and
will you do that by supplying the list?
(Mr Vaz) I do not know because the first thing is
I have not read the source of your information, which is the Labour
Party's website, which I do not regard, I am afraid, splendid
though it must be, as the Ark of the Covenant of discussions on
the IGC.
34. But you have read the Commission's document.
(Mr Vaz) Indeed I have read the Commission's document.
35. So you know the 22 items.
(Mr Vaz) I have read many, many documents since I
became the Minister for Europe and the Commission produces many
documents on these areas. I can only give you the same answer—I
am sorry to be boring and pedantic—which is that we will
look at QMV on a case by case basis. We do not fear QMV in certain
areas for the simple reason, and I have given you one of them,
the European Court of Justice rules on procedures and appointments,
that it is good for Britain in some areas. We will do what is
in the national interests of this country. We are in Europe to
work with our colleagues but also to defend the national interest.
Mr Wilshire: Thank you, Chairman. I hope you
will supply the list and see what answer we get.
Ms Abbott: It is a great pleasure to have you
in front of us, Mr Vaz. We have counted your colleagues in and
we have counted them out and we expect to have you in front of
us for many years to come.
Chairman: That is just the lead in, wait for
it.
Ms Abbott
36. I want to ask you about Austria and whether
the measures taken against the Austrian Government are going to
have any effect on the workings of the IGC?
(Mr Vaz) Thank you very much for your very kind comments,
Ms Abbott. Can I repeat that I hope when I appear here you will
be on the Committee on those occasions also. The situation on
Austria is clear. We have said to Austria that we will judge the
Austrian Government by its actions and by its deeds. I have not
sensed any attempt by Austria to in any way endanger the process
of the IGC. Austria has made it clear through the statements of
its Chancellor, who was previously the Foreign Secretary of Austria,
that they support the enlargement process. I have no reason to
believe that position has changed.
37. So when on 31 January Portugal informed
the Austrian Government of a statement which had been agreed by
the Heads of State and Members of the EU that "... in the
event of a government being formed which involves the FPO..."
the following events will happen. "Governments of XIV Member
States will not promote or accept any bilateral official contacts
at policital level with an Austrian Government integrating the
FPO; There will be no support in favour of Austraian candidates
.... Austrian Ambassadors in EU capitals will only be received
at a technical level." What was the sense of all that?
(Mr Vaz) The point was that as far as Austria was
concerned, with a coalition partner espousing the views put forward
by Mr Haider, who was the leader of one of the partners, it was
important that the European Union set down certain benchmarks
over the way in which it should treat a country, not a people
but a country, a government, that had espoused the kinds of statements
that Mr Haider had. Those measures were important because it made
it clear to all that we would not tolerate the kind of language
that Mr Haider had used.
38. It was not about Mr Haider, it was about
his party, his party's platform. It was not about an individual,
it was always about the party's platform.
(Mr Vaz) You are absolutely right, Ms Abbott, but
they still remain part of the coalition.
39. Are you saying that this statement is a
dead letter, that it will have no effect on the workings of the
IGC?
(Mr Vaz) No. There are two different points here.
The statement is not a dead letter, it has been followed to the
letter. As Minister I am following the points that have been raised
and in no way has that affected the workings of the IGC because
Austria, in the statements that it has made, is committed to enlargement.
The IGC exists because of enlargement. If we were not enlarging
we would not be going through the IGC process.
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