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Mr. Bercow: To support my right hon. Friend's argument, will he confirm that the European Parliament, with the active support of many of its Labour Members and in a self-important gesture, regularly seeks a direct relationship between the European Union and domestic taxpayers? Is that not part and parcel of the Parliament's bid to project its status from flyweight to heavyweight?

Mr. Redwood: My hon. Friend is absolutely right. European Union institutions are pushing out many tentacles to capture the powers that they need to have the

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full range of government control over British citizens and those elsewhere in the Union. I am sure that he is right to say that the Parliament would like to be involved in tax raising.

The most serious threat of tax raising comes from the work of the Commission that was put to the Council of Ministers and is nodded through when the British Government think that we are not watching or when they are asleep. They sometimes seem unaware of their own proposals, and they pretended to be so earlier in the debate when I challenged them.

Another tax that we know the European Union wishes to impose and could be covered under the measures in the Bill is the withholding tax on savings. The Government made much of fighting a battle to persuade the EU to downgrade, for the time being, its request for a direct tax to be imposed on people's savings held outside their country of origin within the EU and, instead, to put in place in complicated procedures for disclosure so that national Administrations could make sure that they had collected all the due tax.

I suspect, however, that the Government will be placed under enormous pressure to impose the whole withholding savings tax. The German Administration are keen to do that, and that would be very damaging to the offshore islands related to the United Kingdom under the Crown. I fear that the Government will not prove up to defending their position in the next four years. They gave more ground than they should have done in the past four years and they have never properly made the case in principle against the tax. They never seem to understand that it is a tax on enterprise, effort and prudence and that the tax would drive business outside the EU altogether.

The tax would not succeed in capturing business for Frankfurt at the expense of London, Luxembourg, Gibraltar or the Channel Islands. It would drive much business offshore from all those places if they were all brought under its provisions. The Chief Secretary remains silent on this point, because he is clearly unable to put categorically on the record that the Government will never go along with such measures. We have to assume that by negotiating, discussing and talking endlessly about those things, the Government are prepared to compromise, which means sacrificing a vital British national interest.

Mr. James Gray (North Wiltshire): The Government have not always been silent on the withholding tax. Does my right hon. Friend recall when no less a figure than the second person in the nation—the Deputy Prime Minister—was asked about it in the previous Parliament? Unfortunately, he did not answer yes or no because he did not know what it was.

Mr. Redwood: It was one of the few magic moments in that Parliament. The Deputy Prime Minister was, for once, at a loss for words when one of my hon. Friends asked a superb a question, which did all that it should by putting the Government on the spot and showing that they were hopeless. It resulted in a flurry of correspondence and press articles, which did much for the British people and their financial services industry by highlighting the dangers.

Dr. Palmer: The right hon. Gentleman presses Government Front Benchers for assurances. Would he

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press his Front Benchers for the same assurances if the right hon. and learned Member for Rushcliffe (Mr. Clarke) were to lead it?

Mr. Redwood: I can do better than that. I can assure the hon. Gentleman about all the items that I have raised with Front Benchers, who are admirably led by my right hon. Friend the Member for Richmond, Yorks (Mr. Hague).

Madam Deputy Speaker: Order. Once again, hon. Members are going wide of the mark

Mr. Redwood: You are right, Madam Deputy Speaker. I have been too generous, which is always my weakness in such matters.

The famous paragraph 16, which the Government did not mention, says that the Commission should undertake before 1 January 2006 a general review of the correction of budgetary imbalances granted to the United Kingdom, as well as the granting to Austria, Germany, the Netherlands and Sweden of the reduction in the financing of the budgetary imbalances in favour of the United Kingdom. We have a double whammy. Not only will the study consider new European taxes—of which there is an even longer list than I have given to the House—but it will go over the ground of the British budgetary contribution in the light of possible enlargement. That is most worrying because, once again, the Government have not been entirely open with the House. Instead, they have come here to say that they came, they saw, they conquered and that all was well because the budgetary rebate was safe in their hands. Yet we discover that there is another study, the only purpose of which is to wear down the UK.

Why did the British Government go along with the study? Why did they not say that the rebate has been negotiated—incidentally, by a far greater Prime Minister than we have today—and that the Prime Minister is sticking to it? Why did they not explain that we will veto any suggestion of changing the arrangements? The so-called windfall element—our just return under the excellent formula negotiated by previous Governments—has been partly given away. We discover from the infamous paragraph 16 that there is to be another study, and more pressure will be placed on the UK to find a formula that is so complicated that it will persuade some people that nothing damaging has been given away. However, when the consequences become apparent in a few years' time, we will undoubtedly find that we have lost out.

On considering that sorry document, the conclusion must be that we are in a state of flux. The legislation is provisional and we could be a lot worse off than under the current settlement, which is vague and difficult to pin down. Article 3 of the Commission document sets out a formula, which is too long and complicated to include in Hansard, that amounts to a blank cheque. We still do not know how the formula will apply, so we have a massive bill without a clear price.

Article 8 of the document states that the Community's resources that are referred to in articles 21A and B shall be collected by the member state in accordance with national provisions imposed by law which shall, where appropriate, be adapted to meet the requirement of

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Community rules. The Commission shall examine at regular intervals the national provisions communicated to it by the member states, transmit to the member states the adjustments it deems necessary in order to ensure they comply with Community rules, and report to the budget authority.

In other words, we have not only this colossal bill and the uncertainty about how much it will be in future, the giveaway on another study of our rebate and the huge study on European taxes, but in certain areas, particularly customs duties and levies, we are giving away wholesale this Parliament's power to decide how and when taxes should be levied, because anything that we do is subject to the approval of the Brussels governing machine.

Labour Members have tried to widen the debate.

Mr. Andrew Miller (Ellesmere Port and Neston): You lot are doing that.

Mr. Redwood: I have not widened the debate at all. I have stuck rigidly to the Bill. I am the first person to have mentioned the crucial document that we are meant to be debating because, naturally, the Government wanted to sweep it under the carpet. In their wider remarks, they have said that peace and trade flow only from the European Union and that if we had not joined, or if a Government, not a Conservative one, pulled us out, they would in some way be dissipated or removed. That is clearly untrue. Switzerland and the United States of America trade extremely successfully with the European Union even though they are not members. Germany would want to sell her BMWs to the United Kingdom, whatever our status. I am not recommending withdrawal.

Madam Deputy Speaker: Order. I remind the right hon. Gentleman that he has said that he will not fall foul of the rule.

Mr. Redwood: Thank you, Madam Deputy Speaker.

I am not recommending withdrawal, but I think that Labour Members should correct the record when they have tried to make misleading points about our relationship with the European Community. Our position is that our relationship with the Community needs a thoroughgoing renegotiation, and the Government are unable to do that. We need to renegotiate the agriculture settlement, which is too dear and bad for customers and farmers, and mainly helps people in other countries. We need to renegotiate the regional and social funds, which are not well directed for British purposes.

I often go on holiday to Spain to enjoy the marvellous roads that my fellow taxpayers in Wokingham and I have generously paid for. Signs on all those roads, which carry the famous European logo with the 12 stars, or 12 apostles, tell me that they were lavishly paid for with European funds and that I was standing treat. It is a great sadness to me that I will not be going this year, so I will not get my money's worth. All those roads are being built with our money, and we do not get the benefit if we do not go on holiday. However, it would not be much of a holiday to have to put up with the air traffic controllers acting as they are at present.

The Government cannot to negotiate a decent deal on expenditure or on the protection of the rebate in perpetuity. There are difficulties with the detail of the

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rebate, as my hon. Friends have pointed out. I am sure that other colleagues will make that point if they catch your eye, Madam Deputy Speaker. The Government are selling the pass on the right of this House to have the sole charge of taxation, subject to the will of the British people in general elections. The Chief Secretary is scowling, but we have discovered in this debate that he cannot stand at the Dispatch Box and offer us the guarantees that we need.

Paragraph 16 of the Commission document is deeply worrying. We are on track for more European taxes, following the art tax that has already been imposed. We discovered last year at Budget time that the Government wanted to cut VAT on church maintenance and repairs; the Opposition wanted to support them. The Government were told by Brussels that they could not take that action, and they backed off. That was a harbinger of what will happen under this Government: more stealth taxes, more taxes from Brussels, more control of life from Brussels and the pass being well and truly sold.

I hope that my colleagues will stand up for the democratic right of this Parliament to be the only place that imposes taxation on the British people. I hope that they will stand up for the right of the British people to a tax rebate and a budget rebate from Brussels. I hope that they will stand up for the right to spend money on the things that we want, and not on what Brussels wants. I hope that they agree that this is a rotten Bill, delivered by a rotten Government who are trying to get it through the House before anyone notices it.

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