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10 Dec 2002 : Column 191—continued

Lady Hermon: The hon. Gentleman may have the good fortune to serve on the Standing Committee that considers the Bill, so may I help him with some additional information? The tallest building in Gibraltar is known as Ballymena house—not Paisley house or Trimble house—which, as the hon. Gentleman

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will know, is a well known town in County Antrim. The Gibraltar Government's principal representative in the United Kingdom is a gentleman who was born during the war and was evacuated to Northern Ireland.

Mr. McCabe: With every seductive statement, I am more and more persuaded by the hon. Lady's case, and I totally agree that we should treat it seriously.

I said earlier that I was not in love with the Gibraltarians, which obviously caused some distress to the hon. Member for Romford (Mr. Rosindell). Let me flesh out what I am saying. If the Gibraltarians want to sign up to the European Parliament and be represented in it, should they not agree to sign up in total? Why should they be exempted from the Community customs area or the common agricultural policy?

Mr. Hoyle: My hon. Friend is making a very interesting statement, but I am sure that he will recognise that countries such as Spain, Holland and France also have overseas territories with completely different fiscal regimes from that in the EU, so we will not be creating something new, but copying a right that already exists in the EU.

Mr. McCabe: That is absolutely right. I was brought up in a regime that said, XNo taxation without representation." I would equally turn that on its head and say, XIf you want representation, you should be prepared to co-operate with the tax regimes that other people are subject to." I take a rather different view from that of the hon. Member for Stone, who referred to inhibiting Gibraltar's tax regime. I do not know why Gibraltarians should be exempted from the Community customs area, the CAP or the VAT regime. They are less than enthusiastic about signing up to the EU tax code of conduct or the OECD's harmful tax competition code, which, I presume, the hon. Gentleman had in mind.

In fact, the Gibraltar Government said that they will not implement or comply with any voluntary code. I am sure that most hon. Members know that the OECD code, which is voluntary, deals with harmful competition. What is the point of being part of the EU and asking to be represented in it if people do not intend to co-operate with its main tenets, one of which involves avoiding harmful, unfair or unreasonable competition?

In addition, one of the things that I do not love about Gibraltarians is that they continue to enjoy mortgage interest tax relief when no taxpayer in this country is given that benefit. Of course they pay no capital gains tax. In fact, it is the perfect place to go when people want to stash away lots of money. I want to mention another thing that I do not like. I believe that representation should engender fairness and equality. I am happy—

Simon Hughes: Before the hon. Gentleman gets carried away and becomes too happy, may I ask him whether he remembers how much the United Kingdom Government subsidise Gibraltar? The answer is nothing. If he believes in devolution in the United Kingdom, as I hope he does, surely he also accepts that Gibraltar's domestic policies, including those on tax, should be determined by the Government of Gibraltar, not by the Government of the United Kingdom.

Mr. McCabe: I was happy until I took that intervention. I think that the hon. Gentleman refers to

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direct subsidy. I accept what he says about that, but it could be argued that Britain contributes to Gibraltar's economy in a number of ways. I certainly accept that the Gibraltarians are entitled to set their own tax rates, but if people sign up to and demand representation in a club, it is reasonable to expect them to abide by the same rules as the other members of that club. Hitherto, the people of Gibraltar have shown enthusiasm only for the benefits that they will derive, but none of the costs that they might be obliged to pay.

Simon Hughes: I do not want to distract the hon. Gentleman from the main thrust of his argument, but some taxes have EU-wide implications, such as VAT, the money collected from which goes into the EU-wide kitty. I understand that there is a case for everybody who has representation paying into that kitty. Capital gains tax, however, has no EU-wide obligation. It is entirely a domestic matter. I assume that he, like us, believes that such issues should continue to be left to domestic Governments to determine and should not be imposed by the EU.

Mr. McCabe: If I did not make it clear earlier, let me make it clear now: I was making a specific point about European tax obligations. In passing, I referred to the differences between the experiences of taxpayers here and taxpayers in Gibraltar. I hope that that is sufficiently clear.

We should all be in favour of EU expansion. If there is a cost in terms of a reduction in our overall number of seats to accommodate our new partners, every sane person should recognise that that is the only way forward. As we are under an obligation to admit Gibraltar, I am happy to go along with that and to leave it to the good judgment of the Electoral Commission, which I hope will have heard the comments of the hon. Member for North Down. I am happy to leave it to the commission to make the decision.

5.46 pm

Mr. David Heath (Somerton and Frome): I share the pleasure of the Parliamentary Secretary at seeing the hon. Member for Stone (Mr. Cash) leading for the Conservatives. There was a real worry that the hon. Gentleman had somehow been parked in a siding for this Bill, and I am glad that that was not the case.

As has been explained, the Bill is in two distinct parts, both of which the Liberal Democrats welcome in broad terms: in the case of Gibraltar, because the measures are long overdue; in the case of the European Parliament, because the proposals move towards the necessary adjustments to allow for enlargement, although we would argue that other adjustments need to be made, and that the Bill does not go far enough in that respect. I have a slight quibble with the architecture of the Bill, as the two parts are the wrong way round. Part 2, which deals with Gibraltar, contains consequent amendments that have implications for part 1, although only in marginal terms. Given that one part is contingent on the other, I would have drafted the Bill the opposite way round. I shall follow my own logic by dealing with Gibraltar first.

The people of Gibraltar have been disfranchised in terms of the European election. As Gibraltar constitutes part of the territory of the European Union, and is

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subject to at least part of the acquis communautaire, it is disgraceful that it has been disfranchised for so long. That it was necessary for an individual citizen of Gibraltar, Mrs. Denise Matthews—whom I warmly commend—to take a case to the European Court of Human Rights to secure any Government interest in the matter, either from this Government or their predecessor, is deplorable. That it is has taken this Government nearly four years, since 18 February 1999, to legislate, all the while protesting the legal impossibilities of enfranchising the people of Gibraltar, is regrettable. Having said that, we now have a Bill that will do the job as far as the people of Gibraltar are concerned. That is to be welcomed, and I believe that it will be warmly welcomed in Gibraltar.

We have covered this territory many times before in debates. The hon. Member for Thurrock (Andrew Mackinlay), who is unfortunately not present tonight, led the charge with his private Member's Bill back in 1997. In 1999, the Foreign Affairs Committee, of which I was then a member, produced a report that was very stringent in its proposals, and made it clear that it felt that the Government were letting the people of Gibraltar down.

We also had a debate in 1998 in which I led for the Liberal Democrats. An amendment was tabled that would effectively have brought about the change in status of the franchise of the people of Gibraltar that we are debating now. Unfortunately the Government rejected it, but not before cogent arguments had been advanced on both sides. I remember arguing that the people of Gibraltar should form part of what was then the Devon and Cornwall European constituency—it has now been absorbed in the south-west region—on the ground that Gibraltar logically formed part of the western approaches. I do not take a dogmatic view of that. In the west country, we have experience of dealing with islands—for example, the Isles of Scilly—promontories and peninsulas, so there may be logic to my proposal. However, that is properly a matter for the Electoral Commission to determine.

Mr. Cash: Does the hon. Gentleman believe that the issue has something to do with the difficulties between Sir Francis Drake and the Spanish?

Mr. Heath: The hon. Gentleman may have a point. Indeed, it is perfectly possible to argue that the problems of Gibraltar go back to the treaty of Utrecht. The draftsmen's lack of foresight in working out future relationships in Europe and the possibility of Gibraltar being returned to the Spanish crown have dogged us ever since.

Simon Hughes: My hon. Friend makes the perfectly valid point that the Liberal Democrats do not have a view about the region or part of the United Kingdom to which Gibraltar should be linked. We believe that the Electoral Commission should come up with a recommendation. Bids have been made from those representing the capital city and there is logic to them. However, I am also sympathetic to the view that Northern Ireland and Scotland should be included as options. The reasons for not including them do not

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outweigh the fact that the Electoral Commission should have an entirely open choice. We can then all do our own bidding and lobby the commission.

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