Broad Economic Policy Guidelines

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Mr. Lidington: I accept what the Minister says about the national veto remaining over taxation, but the opening statement in the Council document concludes by saying that the Council ''hereby recommends'' the contents of the Council guidelines. Surely the Government, in agreeing to those recommendations, is putting its name to specific proposals that in the EU there should be greater efforts towards simplifying VAT systems and to introducing some framework for common energy taxation? What do the Government want to come out of those commitments?

Ruth Kelly: I am pleased that the hon. Gentleman took the opportunity to raise those issues, as I am about to comment on them. I re-emphasise that the Council is made up of democratically elected representatives who have the opportunity for full debate on those issues. The recommendations are non-binding and are made in the spirit of debate and learning from each other.

Let us take VAT systems as an example of the proposition made by the hon. Gentleman. My hon. Friend the Member for Broxtowe made some interesting comments on simplifying the framework and co-ordinating our approach to matters while leaving rates to national decisions. That is an appropriate way to tackle systems whose application in one country will create an impact in others. Global accounting standards come to mind. I do not think that the hon. Gentleman would argue about the

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legitimacy of setting standards at supranational level and I am sure that he would agree that it is desirable to set frameworks at European Union level.

The UK has a positive attitude towards measures to simplify VAT administration costs across the Community. We welcome changes that would reduce administration costs and thereby help British business. Of course we would not surrender our right to set VAT rates. We hold that dear, as the hon. Gentleman knows. He mentioned energy taxes and, again, we approach those in a spirit of co-operation. We would not accept any imposition from Brussels on our national sovereignty on those issues.

I emphasise that the energy products directive, which is currently under negotiation, would not force any increase in UK taxes. We would never agree to one that did. However, it might mean that other member states would choose to follow in our footsteps and implement some of the measures that we have already undertaken in the United Kingdom, such as the climate change levy and consideration of forms of emissions trading.

Dr. Palmer: Does my hon. Friend agree that there is a big difference between the imposed European policy and a co-ordinated European policy involving voluntary agreement on join action, especially in the energy market, in which there is already substantial transfer of energy between countries?

Ruth Kelly: My hon. Friend makes an important point. Of course, the energy products directive, for example, would require unanimity and we would have a veto. Therefore, that would be a clear example of a decision to engage in a co-operative fashion with other member states, rather than having anything imposed on us.

My hon. Friend the Member for Reading, East made a point, clearly and well, about regional economic divides, and about the Government's responsibility to try to tackle regional inequality and ensure that this country's regions have the opportunity to grow, develop and improve their productivity. We could then tap the potential of every individual in the country, not just those who happen to live in a prosperous region or area. As part of that process it is of course important to learn from best practice in other EU member states. I should dearly like that process to develop. The broad economic policy guidelines, as well as, for instance, the Cardiff process and the Luxembourg process on the labour market, are important elements of such learning from member states.

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The hon. Member for Ruislip-Northwood made some perhaps predictable economic points, although with interesting reference to the state of affairs in different countries. I see no parallel between countries with fixed exchange rates in other parts of the world and the situation here in the framework of the European Union. We should not spend too long wondering whether it is wise to travel to Brussels to learn from our European neighbours. It is essential to learn from best practice in the rest of the world, not just, of course, in the EU.

As usual, my hon. Friend the Member for Luton, North made an interesting contribution. He noted the deteriorating economic climate and the fact that budget deficits are increasing throughout the world. As I said, I do not want to get into a detailed discussion of the stability and growth pact, but I take note of the points that he made.

At times such as this, we must redouble our efforts to ensure that we have the most competitive and productive European economy, to boost growth and jobs and to push forward the European economic and structural agenda. We must ensure that we have a flexible economy that can respond to external shocks. The process before us is part of the programme to ensure that we translate previous agreements at European Councils into policies on the ground.

A prudent interpretation of the stability and growth pact will lead to sustainability in the economic cycle and to an important role for the development of public investment. That is particularly relevant to countries such as the UK, which have a legacy of chronic underinvestment, which we must rectify. The UK is tackling its historic legacy of underinvestment, but has ensured that net debt levels remain low. That is a sign of our commitment to prudent public finances and part of our general fiscal and economic framework. We are committed to a completely prudent economic approach.

To reiterate, the process before us is important, and I am happy to debate it. By promoting economic growth across Europe, we shall bring employment growth to Britain and, indeed, to other member states. We shall boost productivity, growth and the number of jobs. That is why I urge the Committee to support the motion.

Question put and agreed to.


    That the Committee takes note of European Union Documents Nos. 8261/01 and 9326/01 on the Broad Economic Policy Guidelines; and supports the Government's welcome for the publication of the Guidelines in giving operational content to the conclusions of the Lisbon and Stockholm summits, in reflecting the importance of structural reform in tackling successfully the challenges of globalisation and competitiveness, and in promoting employment and social inclusion.

        Committee rose at two minutes to One o'clock.

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The following Members attended the Committee:
Widdecombe, Miss Ann (Chairman)
Barrett, John
Cairns, David
Farrelly, Paul
Griffiths, Jane

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Hopkins, Mr.
Palmer, Dr.
Wilkinson, Mr.
Williams, Hywel

The following also attended, pursuant to Standing Order No. 119(5):

Kelly, Ruth (Economic Secretary to the Treasury)

Lidington, Mr. David (Aylesbury)

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Prepared 9 January 2002