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Mr. Hands: My hon. Friend makes an interesting point. He is right: it is not exactly the same. The easiest thing for me to do is to refer him to the lengthy debate that was held on this very point during the consideration of last year’s Finance Bill by the Committee of the whole House.
It would also be helpful to get clarification from the Minister about cases where an MEP gives up his or her position voluntarily to take on office in a national Government. The Government do not appear to be particularly expert at these provisions. Indeed, my hon. Friend the Member for Rayleigh (Mr. Francois) drew attention to the case of an MEP who was appointed Europe Minister recently, rather embarrassingly in the course of the Prime Minister’s press conference, the day after the European elections. He pointed out that she would be unable to take on the role unless she first stood down as an MEP. That seemed to be news both to the MEP and the Government, despite the fact that anyone familiar with the European Parliament will know that MEPs come in and out of national Government quite often in other countries, requiring them to step down.
Returning to clause 56, what will be the tax status of the severance arrangement for that particular MEP who is now, or maybe is not or perhaps soon is the Europe Minister or is perhaps just the acting Europe Minister? I am still not sure of her status. I think the public have a right to know, not least because she is listed on the No. 10 website as being a recipient of a full ministerial salary, unlike many of her Lords colleagues, or soon-to-be colleagues, who have also been appointed to the Government and/or attend Cabinet.
I have asked the Minister a number of questions during this short debate on MEPs’ pay arrangements. I shall summarise them again. [Interruption.] I have eight questions. First, is the assumption correct that the tax for the benefit of the Communities is the one derived from the 1986 Council regulation? Secondly, which part of the EU does the tax raising and where does the tax go? Thirdly, have there been cases since 1968 where someone has been paid by the EU Commission or the EIB and has been taxed twice because of the lack of this clause? Is the clause absolutely necessary?
Fourthly, the Minister will need to explain the obscure coefficients I mentioned earlier when referring to the EIB website to try to see whether we really are comparing like with like on these matters. Fifthly, which tax regime will apply post-2009 to MEPs’ pensions and transition payments? Sixthly, are MEPs as a class of persons now, or were they ever previously, exempted from national income taxes raised in Belgium, France or any other country where they declared themselves to be resident? Seventhly, what about a UK-resident but non-domiciled MEP, like the UKIP MEP I mentioned earlier? I cannot say with any degree of certainty that that is her status—I have made a number of inferences—but I would be grateful for an explanation of how that sort of person is, or might be, treated under clause 56. Finally, what will be the tax treatment of any severance package of an MEP who steps down voluntarily under the new statute, and how will that compare with the existing arrangements?
We do not, of course, oppose the clause. It would not be right for MEPs to be taxed on their full salaries and other entitlements in their entireties by two separate tax authorities. However, we have many questions and seek a number of clarifications on the whole matter.
Mr. Jeremy Browne: Thank you for giving me the opportunity to make the main speech on the clause, Mr. Atkinson. I also support the Government’s intentions, although I may express my support in different terms. I congratulate the hon. Member for Hammersmith and Fulham on his customary rigour in seeking ministerial clarity on some individual cases, as well as on the broad principles under discussion.
I wish to make three brief points. First, I see the logic behind all MEPs being paid the same, although some may feel that it is another step down the path towards an EU Parliament that assumes a national profile, rather than one that is an amalgamation of different nation states. Similarly, I see the merit and wisdom of UK MPs being paid the same, regardless of their individual contributions to our deliberations. I am comfortable with that broad principle.
Secondly, I see the logic of phasing in the arrangements. I am willing to be corrected, but I vaguely remember the Conservative party leader, the right hon. Member for Witney (Mr. Cameron), recently talking about closing the existing parliamentary pension scheme to new entrants. If he did make that point, it would similarly involve a phasing, interim arrangement whereby existing MPs would continue to benefit from the current system, rather than a blanket arrangement whereby all MPs, regardless of the length of their service, were required to switch over to the new arrangement. In that context, I see some sense in applying interim arrangements to the European Parliament as well.
Thirdly, I see the sense in taxing MEPs at the same rate as their constituents. Of course, there is a slight difference in that the provision should very much apply to us in this House, because we set the rates of taxation for our constituents, which is not true of MEPs. Nevertheless, I see the sense in MEPs paying the same rates of taxation, whether they be higher or lower than at present, as the people they represent. However, under the salary level, MEPs would not, as was perhaps inferred by the hon. Member for Hammersmith and Fulham, be eligible to pay the 50 per cent. rate on their income unless there was a massive change in the rate of exchange between sterling and the euro. That causes some difficulty, as we have seen in trying to work out whether football transfers have broken records, because the pound is at such a weak level that it affects comparisons between the UK and the eurozone. However, seeing as the dominant EU currency is the euro, it seems logical to pay MEPs at the euro rate rather than at, for example, the Danish krone rate, or at a more significant currency rate, such as sterling.
Mr. Hands: I am trying to follow the hon. Gentleman’s argument. We all know that the Liberal Democrats’ policy is to join the euro at the earliest possible opportunity. I wonder how he feels about national parliamentarians who are elected by a country but who are paid directly by the EU, rather than by their national taxpayers. Will that have an impact on whether they view their duties as being to their home country or to the EU?
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Mr. Hands: I certainly agree with part of the thrust of the hon. Gentleman’s argument: that MEPs have a responsibility to their constituents and also to look at the wider picture, in the same way as debating the clause in Committee is beyond our remit in relation to our constituents in Taunton and in Hammersmith and Fulham. I wonder what his view is on the change of who is making the payments. Does he feel that the fact that Europe is paying UK MEPs, rather than the UK Exchequer, will make no difference to how they view their loyalties, or that that will make some tangible difference?
Mr. Browne: My feeling is that it would almost certainly make no difference, but I have never served in the European Parliament and so have difficulty putting myself in the mindset of one of its Members and trying to decide what my primary motivation would be. I imagine that I would be highly motivated by the desire to serve the people in the region that elected me and consider the interests of the people in the country I came from. I would also be motivated by a desire to see the EU shaped in a way that conformed to my ideals and values. All those factors would be considerations that would rest with me, regardless of whose name was on the payslip I got at the end of each month.
Mr. Binley rose—
Mr. Browne: I give way to the hon. Gentleman.
The Chairman: Order. Before the hon. Gentleman intervenes, I say that the Chair is motivated by wishing to discuss clause 56. I think that we had perhaps better leave the motivations of MEPs to one side.
Mr. Binley: With respect, Mr. Atkinson, does not the hon. Gentleman recognise the old phrase, which I am sure most west country people would recognise, that he who pays the piper calls the tune? There is a symbolic aspect to this business that ought to be taken into account. One owes one’s loyalty to the person who hands out one’s pay packet. That is the point; will he recognise it?
Mr. Stuart rose—
Mr. Browne: However, I am always open to more conspiracy theories.
Mr. Stuart: Perhaps it is not surprising that the hon. Gentleman, as a Liberal Democrat, is not too worried about where the money comes from, but I put it to him that receiving one’s pay cheque from an organisation that never has its accounts signed off because they are subject to so many questions would undermine the confidence with which one served. If I were an MEP, I would wish to be paid by the Exchequer of this country.
Mr. Browne: All I can say is that I hope that Conservative MEPs, who will share the hon. Gentleman’s anxiety, will forgo their pay until they feel that the auditing arrangements within the EU are administered to a more satisfactory standard. That seems to be the logical inference.
I am extremely concerned about value for money, so I am concerned by all kinds of statements made by different parties in the House, but I do not wish you to think that I am straying from clause 56, Mr. Atkinson. The Conservative leadership could certainly pay their stamp duty, for example, which would be helpful to the Exchequer.
Dr. John Pugh (Southport) (LD): Is it not the case already that MEPs claim from the European Union for travelling expenses and other things? We know that certain prominent Conservatives made ample use of that fund.
Mr. Browne: That is my understanding. I have been shocked by the loose attitude that some Conservative MEPs have adopted towards value for money for the taxes that I pay in good faith hoping to see improvements in public services. That point is directly relevant to clause 56, Mr. Atkinson, and I am more than willing to take interventions on it. If you are not keen to expand to that conversation, I will move on to my concluding remarks.
One can only observe that the Conservatives are keen to talk in broad-brush principles and are keen on symbolism, but are less keen on value for money when it comes to Conservative MEPs. Everybody who sees the formation and the practical workings of the European Union and its Parliament in pragmatic and non-paranoid—that may be an accurate way to describe it—terms can see merit in an administrative system of this type. It is important that politicians who serve constituencies in the United Kingdom pay levels of taxation commensurate with those of other UK residents. On that basis, I, like the Conservative party, am an enthusiast for clause 56.
Mr. Bone: It is a great pleasure to follow the hon. Member for Taunton and my hon. Friend the Member for Hammersmith and Fulham, who made such an excellent but unfortunately short speech. I owe the Government Whip an apology because I was very annoyed at the last sitting that we could not continue into the evening as he had choked off debate on the clause. I now understand why—he had obviously anticipated a longer debate on it than I had.
My hon. Friend the Member for Hammersmith and Fulham was right in putting the Conservative Front-Bench position and saying that we would not vote against the clause. However, my leader, my right hon. Friend the Member for Witney, has shown great leadership in saying that Back-Bench Conservative Members do not have to follow the Whip in Committee, so do not be surprised if there is a Division, Mr. Atkinson.
The clause gives rise to a number of interesting points but I will try to keep entirely to the clause. It has opened up a lot of new ideas that I was not aware of. The Government are right that double taxation should not be allowed and, if a country is taxing a British citizen, that tax should be allowed against British tax. Unfortunately, we are not talking about another country; it is that thing called the European Union, which is supposed to be a Union of nation states so, by that definition, it cannot have tax-raising powers. Before we debated this, I thought that that was the position. Now I understand that it may not be the case.
Mr. Field: Without wishing to put too many cats among the proverbial pigeons, does my hon. Friend agree that if the EU were a tax-raising institution, it might spend less money, which might be a good thing?
Mr. Bone: I quite agree. The problem we have is that the Government are rightly trying to solve a problem for British citizens, who should not be taxed in two places and should get relief against it. That is what clause 56 does, and I agree with it. However, should we be allowing that taxation in the first place when it is not another country but this organisation that is imposing a tax on British citizens? Should not the Government fight this tooth and nail and tell the MEPs not to pay the tax because it is an outrage?
I hope that the Minister will be able to deal with the following technical point. The taxation that will be charged will be through self-assessment at the end of the year. I assume that MEPs receive their money in euros each month. How will that be converted into sterling for taxation purposes? Will it be done on a monthly basis when the money is remitted or at the end of the year when the tax is decided? That could be a significantly different tax charge. As I understand the clause, it will mean a loss of money to the Exchequer. I stand to be corrected, but it appears that there is a European tax charge that will go into the European Union’s coffers which will then be set against the tax that the MEPs would have paid. That difference will be a loss to the UK Exchequer. How much will that loss be?
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