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Lord Peston: Perhaps I may intervene briefly. I say to my noble friend Lord Bruce of Donington that I must admit I did not know that this amendment was to do with the correct definition of GNP or GDP. Having lectured on the subject for more years than I care to reflect on, I can only say that I have never had the slightest difficulty in knowing what either of the terms means or how to produce a consistent set of national accounts; and I cannot believe that the future of the European Community depends on matters of that sort. However, that is not the main reason for my intervention.

My noble friend Lord Stoddart of Swindon referred to the imposition of VAT on domestic fuel. I wonder whether the noble Lord, Lord Henley, when he replies, will agree that the decision to levy VAT on domestic fuel was taken by the previous Chancellor of the Exchequer, presumably in agreement with the Prime Minister. The decision was to levy VAT at the full rate in two stages. The current Chancellor of the Exchequer confirmed that decision. Again, the decision was taken by the Chancellor of the Exchequer and, I assume, again in agreement with the Prime Minister. The other place then got rid of the second tranche of that increase, precisely as would happen in the normal workings of our government and as has happened traditionally for a great many years.

Will the Minister therefore confirm that the decision was not taken by the European Community—that it was not taken by the Commission; that it did not instruct the Chancellor of the Exchequer to do that; and that the Chancellor of the Exchequer was at no time under pressure to do it? It is vitally important that we confirm that the Chancellor of the Exchequer in this country is still the person who leads us —together with the First Lord of the Treasury, who is of course the Prime Minister—in taxation matters of this kind. It is certainly news to me that this tax was levied because of the European Commission. I hope that the Minister can

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confirm that it was the Chancellor. Obviously I have a political reason for pressing that point: I wish to make it very clear now and in future that this loathsome tax was one that was decided upon by this Government, and is not a tax that was put on by the Commission. It is very important for the noble Lord, Lord Henley, for once to rebut the view expressed by my noble friend.

The Earl of Onslow: Perhaps I may interrupt the noble Lord on this point. Am I not also right in that, had the tax been put on, and had there been a Labour Government, they could not have taken it off? That is the fundamental taxation point. It is no good rabbiting on about how evil the tax is, blah, blah, blah, and then complaining that it is the European Community that levied it. If you cannot take it off, you are still hidebound by an outside authority which has taken away substantial taxation powers—historical powers which have been attributed and got by the Parliaments of this kingdom for a long time. That is the core of the rot that has set in.

Lord Peston: I hesitate to intervene a second time, but that was not the point that was made by my noble friend Lord Stoddart of Swindon. I hope that the noble Earl will recognise that it was Members in another place—and in particular some of his friends in the other place—who prevented the second tranche of that tax being levied, and who could, if they had so wanted, have prevented the first tranche being levied. He simply cannot get off the hook that it was the Government who levied the tax and not the European Commission. It is vitally important to remember what this Government did. But it is equally worth remembering what the noble Lord's friends in another place also managed to do.

Lord Henley: I start by thanking my noble friend Lord Cockfield for his intervention. I have a sneaking suspicion that it would have been convenient for the House if the noble Lord, Lord Stoddart, had intervened after the intervention of my noble friend Lord Cockfield, who gave a perfectly clear explanation of what we are talking about here, and withdrawn his amendment. However, I have a sneaking feeling that the noble Lord, Lord Stoddart of Swindon, knew all along that this has absolutely nothing whatsoever to do with the rate of VAT that is levied on goods and services.

Like the fat boy in Pickwick Papers, the noble Lord likes to make our flesh creep with stories about VAT and scares of that sort. The noble Lord knows perfectly well that any decisions of that sort that actually went to the Council of Ministers would require unanimity, just as any changes to the rebate negotiated by my noble friend Lady Thatcher in 1984 would also require unanimity. The noble Lord implied that we caved in on every occasion. I stress again to the noble Lord that it was a Conservative Government who arranged that rebate and we have no intention of caving in on that in the future.

I can also confirm that it is obviously my right honourable friend the Chancellor of the Exchequer who is the one who makes decisions, which then obviously have to go to another place, about levels of taxation, levels of VAT. As I said, this amendment and the clause with which we are dealing has absolutely nothing to do

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with the rate of VAT that is levied on goods and services. It relates solely to the formulae used to calculate own resources. The VAT-based own resource does not flow directly from the amount of tax that is collected but is a wholly separate calculation, as my noble friend Lord Cockfield stressed, based on member states' VAT bases which for this purpose alone are subject to statistical judgment to ensure the same coverage of all goods and services in all member states.

The noble Lord, Lord Bruce, asked for details—although I do not believe he really wanted that detailed an explanation —of just how that would work. I do not believe that it would assist the House if I gave the noble Lord the detailed explanation that he requires at the moment. But I can assure him—I am sure that he has the papers—that Her Majesty's Treasury did supply the committee with papers on 15th July and 26th September explaining the detail behind the United Kingdom's gross contributions and the calculations of the United Kingdom's abatement. I am sure that the noble Lord, if he has not already done so, will study those papers with the extraordinary detail that he normally devotes to these matters.

I can also assure the noble Lord, Lord Bruce, that work is going on to harmonise the methods of calculating member states' GNP. I note the points that were made by the noble Lord, Lord Peston. I am sure that noble Lords will remember his expertise in trying to come to a detailed and harmonised method of calculating such figures, which the noble Lord assures us is a matter of considerable ease.

The amendment requires the Government to produce further supplementary reports on the operation of the VAT resource. It might be worth my turning some little attention to that one particular point. Even if the noble Lord, Lord Stoddart, did not address that point, certainly my noble friend Lord Cockfield did.

I can assure the noble Lord that in another place it was suggested that information on the Community budget appears in too many reports and documents and may not be in the most user-friendly presentation. As a result of that and a as a result of those representations, my honourable friend the Paymaster General in another place at Committee stage—I refer the noble Lord to the comments that he makes at cols. 372 and 413 of Hansard on 7th December—undertook to expand and improve the annual statement of the Community budget. The noble Lord will be familiar with the annual statement that comes out in the spring of each year. I have before me the one for March 1994. That statement already provides for the amounts that are paid by each member state under the VAT-based own resource. I refer the noble Lord to Table 2 on page 9 of the annual statement which sets out each member state's VAT contributions in each year from 1991 to 1994.

I trust therefore that the noble Lord will agree that the inclusion in the Bill of an obligation on the Government to provide a report on the operation of VAT own resource would add very little indeed, if anything, to the information that the House will receive, bearing in mind the assurances and guarantees that my right honourable

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friend made in another place. I hope therefore that on this occasion the noble Lord will feel able to withdraw his amendment.

Lord Hamilton of Dalzell: Before my noble friend sits down, I wonder whether he will answer what to him is probably a rather simplistic question. I have found in various aspects of my life, in dealing with charities and listed buildings, that I have come up against the Treasury. The Treasury has written to me and said that much as they regret having to charge this tax, it is subject to a VAT directive and therefore nothing can be done about the matter. That seems to me to run somewhat counter to what my noble friend has been saying; namely, that VAT is a purely national tax levied by national processes.

Lord Henley: I can assure my noble friend that what he is discussing has nothing whatever to do with the Bill before the Committee on this occasion. It is true that the standard rate of VAT can be no lower than 15 per cent. The extent of zero-rating and reduced-rate VAT is certainly limited. As regards the decision as to where my right honourable friend wishes to put VAT, the noble Lord, Lord Peston, stressed that point in relation to VAT on fuel. We might disagree on the merits or otherwise of it but it was the decision of my right honourable friend the former Chancellor, confirmed by my right honourable friend the present Chancellor, to levy that particular duty, which, sadly, was not agreed to by another place.

6 p.m.

Lord Stoddart of Swindon: If we needed any justification for having a Committee stage on this Bill, the present discussion has just shown it. Many noble Lords, including myself, have learned much and been put right by the noble Lord, Lord Cockfield, and others. We now understand a lot more about VAT—how it is levied, the basis upon which it is levied and indeed the limitation, if there is one, on the ability of the European Community to impose taxation of a particular kind on the British people and indeed the British Parliament. So this Committee stage has been very useful. I hope that my noble friend the Leader of the Opposition will accept that it has been a useful exercise.

I must say to my noble friend Lord Bruce that I do not like being too fair to the Government. But in fact the Government raised no objection to a Committee stage. They were perfectly amenable to it all the way along. I have heard no criticism at all from them and that is to their credit. We cannot give them much credit but when credit is due, I believe in giving it. I give the Government credit on this particular issue. Indeed, the Government Benches are almost full. It is remarkable. I congratulate them.

I also accept the points made by the noble Lord, Lord Cockfield, that the European Community cannot fix the amount of tax nor, at this stage, fix the base on which the tax is levied. What he said was interesting in more than one respect. He was absolutely right to say that people simply do not understand what is coming out of the European Community. There is so much gobbledegook in so many languages that even Members

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of Parliament do not understand what is being said, let alone the general electorate. That is simply not good enough. I was glad to hear from the noble Lord, Lord Henley, that the Government are to make some attempt to ensure that not only Members of Parliament but people generally understand what is being proposed and done in the European Community.

My noble friend Lord Peston took to task my noble friend Lord Bruce about his contribution. He said that he did not know what GNP had to do with the matter. I shall tell him. The Court of Auditors drew attention to the problem in 1993. The 1993 Court of Auditors' report found that Germany had not included the former East Germany in its calculations of its GNP and that some countries were still using 1970s data. The Court of Auditors described some of the information provided to the Commission by member states as "unreliable". In those circumstances, I believe that the points raised by my noble friend Lord Bruce were very relevant and of use to the Committee.

My noble friend also asked what on earth VAT on fuel had to do with the Commission—or the Council of Ministers, because that is the body that makes the final decisions and one has to accept that. The fact of the matter is that the proposal to put VAT on fuel is included in the sixth directive. So it is already a directive of the EC that VAT should be levied on domestic fuel, as well as on a range of other items. The question is when it comes into operation, not whether it does so.

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