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Baroness Symons of Vernham Dean: My Lords, in making such a highly persuasive argument, I think that the noble Lord must also acknowledge that Britain has one of the most restrictive and transparent arms export licensing systems of any country anywhere in the world. This Government have made strategic exports more accountable than has almost any other country. Further, in 1997 we introduced the publication of an annual report on strategic exports, which was entirely the right thing to do. We are clear, we are transparent, and I hope that the noble Lord will acknowledge that the policy introduced by this Government has been very successful.

Lord Howell of Guildford: My Lords, is not the real and most serious problem the one mentioned by the noble Lord, Lord Judd, in his reference to "end-use"? Presumably we do want to provide arms to governments who are fighting terrorism; that is the global task of the age. However, difficulties arise when some of those weapons get out of the hands of governments and into the hands of terrorist groups and other undesirable organisations. Is this not a question of the need to concentrate more closely on monitoring end use and introducing systems for such monitoring? Further, while we are on this subject, can the noble Baroness reassure noble Lords that no arms are going to the illegal regime in Zimbabwe after the

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embargo we placed on them in 2000, and that no arms are reaching the Mugabe regime through the back door?

Baroness Symons of Vernham Dean: My Lords, it is because the Government believe that the point made by my noble friend Lord Judd and reinforced by the noble Lord, Lord Howell of Guildford, is entirely right that they carefully assess the possible risk of diversion before a decision is made as regards any export licence application. We understand the importance of ensuring that UK equipment does not end up in the hands of undesirable end-users. I am sure that the noble Lord will be pleased to hear that the Government are committed to carrying out end-use monitoring where it will genuinely add value to our efforts to minimise the risk of misuse and diversion.

Turning to the question of Zimbabwe, of course there are no arms export licences granted to that country. Whether arms get in by the back door may be an entirely different question. I shall check to see whether any information is available on that point and write to the noble Lord.

Lord Clinton-Davis: My Lords, does my noble friend agree that, as I know myself, the role of individual Ministers is extremely important? As my noble friend mentioned in a previous answer, these issues are not dealt with entirely by officials. I repeat: the role played by individual Ministers is supremely important because they have the ultimate weapon of resignation.

Baroness Symons of Vernham Dean: My Lords, I mentioned earlier that I am the Minister responsible and I have listened carefully to the words of my noble friend. Of course the role of Ministers is very important in this area, but it would be entirely misleading to suggest to noble Lords that Ministers take every single decision on arms exports. Most of those decisions are devolved under criteria which are published for all to see and are well understood by the four Whitehall departments I listed in my earlier response. These decisions are devolved to civil servants. Where cases raise issues of doubt or sensitivity—noble Lords have heard reference to at least two countries this afternoon which are extremely sensitive—those decisions are referred to the appropriate Ministers.

The Lord Bishop of Guildford: My Lords, does the Minister accept that one of the problems we face in this field is that yesterday's allies can sometimes turn into today's terrorists? In the uncertain world in which we live, it is possible for weapons that were supplied under one regime to be used in an entirely different context by another generation. Does she further accept that not only is there a moral reason for imposing the highest possible levels of restriction in this field, but a reason of self-interest as well?

Baroness Symons of Vernham Dean: My Lords, I acknowledge that there is a risk. However, if one takes the argument of the right reverend Prelate to its logical

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conclusion, we simply would not be able to have any kind of trade in anything on the military list. The right reverend Prelate may espouse that position—if he does, it is entirely noble—but it is not the position of Her Majesty's Government. We consider particularly whether there is a real risk of internal repression, external aggression or the fuelling of regional conflicts. We do so painstakingly in a number of departments, and I hope that I have been able to reassure your Lordships that we do so transparently.

Compensation Payments: VAT

3 p.m.

Baroness Blatch asked Her Majesty's Government:

    Whether compensation payments made by government to individuals are subject to VAT.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey): My Lords, compensation is subject to VAT only in the specific circumstances where something is done in return for the compensation and the recipient is a VAT-registered business.

Baroness Blatch: My Lords, I am grateful to the Minister for that Answer. As the Government are recipients of VAT, does he agree that it is very unsatisfactory that compensation cannot be paid ex-VAT in order to stop the incredibly expensive paper chase? In 1997, two successful claims were made, and compensation received, under the Firearms (Amendment) Act. The two companies involved were both paid for the same kind of reasons but, more than six years later, through a tribunal system—which has been extremely costly—one company has been told that VAT is not due to be paid on the amount of compensation it received and the other company is still waiting, having paid the VAT some five and half years ago. Does the Minister agree that this is a very unsatisfactory state of affairs?

Lord McIntosh of Haringey: My Lords, I am grateful to the noble Baroness, Lady Blatch, for giving me the detail contained in her supplementary question. As regards the firearms issue, under European Community VAT law, compulsory purchase—to which this relates—results in the supply of property. The Court of Appeal has twice found that this applies to guns for which compensation was paid after Dunblane. The Customs and Excise issues guidance to all government departments and those who might pay compensation that if VAT is payable it should be reflected in the level of compensation. In other words, if £1,000 is due, £1,175 should be paid. If the noble Baroness gives me details of the cases to which she has referred, I shall look into them and write to her about them.

Lord Saatchi: My Lords, is there not something about these cases which brings to mind the costly

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merry-go-round that the Government have made of the entire tax system, in which people first pay tax to the Government and then have to fill in a complicated form in order to claim a benefit or a credit from the Government?

Lord McIntosh of Haringey: No, my Lords, nothing brings that to mind. If the noble Lord, Lord Saatchi, wishes to introduce amendments to his Taxation (Information) Bill, with which we shall be dealing next, to make that point, he is fully at liberty to do so.

Taxation (Information) Bill [HL]

Lord Saatchi: My Lords, I beg to move that this Bill be committed to a Committee of the Whole House.

Moved, That the Bill be committed to a Committee of the Whole House.—(Lord Saatchi.)

On Question, Motion agreed to.

European Union (Accessions) Bill

3.3 p.m.

Report received.

Clause 2 [Freedom of movement for workers]:

Lord Howell of Guildford moved the amendment:

    Page 2, line 39, at end insert—

"( ) In each of the first seven years after commencement of this Act, the Secretary of State shall publish and lay before both Houses of Parliament an annual report which shall set out the results of the monitoring of the regulations made under this Act, including details of—
(a) the effect of the regulations on labour movement; and
(b) the broader economic conditions governing the relationship between the United Kingdom and the accession states, focusing in particular on trade flows and investment."

The noble Lord said: My Lords, the amendment is two-sided. It seeks to ensure that Parliament is kept fully informed of the results of the monitoring of the progress of the Bill and the treaty—that is to say, the monitoring of the interests of the United Kingdom and the progress of our relations with the accession states as they continue to emerge from their weak state in the past under the tyranny of communism into fully-fledged members of the European Union.

In particular, we note in the Explanatory Notes that it is the Government's intention to monitor closely developments in the movement of workers, although not to place restrictions on them or to use the regulations in Clause 2. We wish to see monitoring of not only labour market developments but also of investment flows—who knows, there might even be migratory movements in the other direction—and our aim is to ensure that these matters are not forgotten. The discipline of reporting them to Parliament annually will ensure that this is so.

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So far as concerns labour movements into the United Kingdom, we have been assured that there are really no prospective problems. In my view, that is probably correct. The Government will monitor these matters closely but they do not propose to use any restrictions, although I gather a number of other EU member states do. The Home Office has informed us that between 5,000 and 13,000 migrant workers annually may come into the United Kingdom from the accession states. If they are skilled workers, that will be an obvious benefit. We need skilled workers and we welcome the contribution that they will make.

It is estimated that by 2010 we will have in this kingdom more than 12 million people above pensionable age. While I, for one, do not believe that pensionable age is a bar to work—indeed, I reject the whole concept of dependence over pensionable age—there is no doubt that if the newcomers are both skilled and younger they will help our economic growth and vitality, which at the moment, I am glad to say, continues to be considerable despite a heavy burden of restrictions and taxation. So we need to be carefully informed of what is happening on the inward side.

Another aspect of migrant worker movements relates to the Roma people. There are large numbers of these people in the accession states and even larger numbers in the potential accession states of the next round, notably in Bulgaria and Romania and, possibly, in Croatia. Unlike most working people in the accession states, these people will want to move. The mobility chances of most people in the accession states are rather low—they intend to stay where they are and to improve their lives—but the Roma people are mobile and will wish to move unless they are more effectively integrated into the countries where they presently reside. We should be kept informed about how their integration into those countries is progressing and, in particular, about what kind of assistance we can give, and how we can focus it, to be of help in encouraging the Roma people to stay where they are and to integrate into their communities. So that is one side of the purpose of the amendment.

On the other side, we wish to be kept informed of the help and encouragement we are giving to those countries which have survived the horrors of communism to grow into strong and prosperous European nations. The overall sums are not very large. The entire GDP of all the accession states adds up to 5 per cent of the GDP of the European Union and equals roughly the size of the economy of the Netherlands. It is not a massive addition to the European Union.

But it could grow considerably larger. Indeed, it may already be larger—these figures are always suspect—because there are also the grey and black economies which add considerable amounts to the GDP of the accession states. There is a huge inflow of remittances from people from these states, which are found are all over the world, including the United States and elsewhere in Europe. When we take account of the purchasing power for parity adjustment, it means the addition to the EU's GDP will be between 9 per cent and 10 per cent, not 5 per cent. In all probability, because these countries' costs are low,

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their education and skills are high, their dynamism and incentives are great, and they are not totally committed to the cobweb of regulations in the euro-zone, they will grow much faster from a lower base than the more ponderous economies at the centre of western Europe.

Parliament will want to be kept informed and up to date on agricultural reform implications. The cost of accession states has been estimated to be an additional 22 billion euros in agricultural subsidies by 2007. They will make a small offsetting contribution, but this is bound to have an impact on the overall EU budget and our own budget contributions.

There is also the flow of foreign investment—FDI, so-called—into these countries. All these states are now attracting a considerable inward flow of investment. One thinks of the vast investment by Volkswagen in the Skoda works in the Czech Republic. Most investment is either German or Dutch—the UK content is very low indeed. It would be very valuable for Parliament to be kept informed on how, as we hope will be the case, the UK content rises as we begin to realise the enormous potential of these countries and their very dynamic workforces.

We need to be kept up to date with the way in which these countries are thinking about the future of Europe. The general view seems to be that they will welcome deregulation, resist tax harmonisation—as we are being urged to do by the Chancellor, Mr Gordon Brown, in his various articles in the Wall Street Journal—and generally be on the side of the more flexible, less centralised and less socialised form of Europe.

Finally, Parliament needs to keep an eye on the next waves of accession after the accession states covered in the treaty and in the Bill. That wave will almost certainly include Bulgaria—which is proving to be a very successful economy but which started from a very low base—and Romania, which still has some difficulties. Both countries are aiming for a 2007 or 2008 entry. Alongside them comes Croatia, and we need to keep a watch on the situation there. Beyond that lies the prospect of Turkey's membership, which will bring in 70 million extra people, mostly Muslim. That will change the European Union out of all recognition from its present form. By 2015, we could have 600 million people in the European Union. Reports and information on these matters, which are vital for the future of this country, need to be kept before us.

To sum up the underlying theme of our amendment: we believe the UK need have no fears about this enlargement, but we need to be kept regularly informed about these vital developments in the interests of ourselves and of the accession states. I beg to move.

3.15 p.m.

Lord Wallace of Saltaire: My Lords, we on these Benches intended to give lukewarm support to the amendment on the grounds that it is difficult for us to stand against calls for further transparency and

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information. However, I am a little puzzled by the speech of the noble Lord, Lord Howell of Guildford—it did not seem to relate directly to the amendment.

I suspect that I am one of the few people in either Chamber who reads the six-monthly reports to both Houses of Parliament on EU development, which were introduced, I suspect, by the Labour opposition many years ago on much the same basis. These reports are not debated and are scarcely read, but people thought it would be a good idea to have them.

I am hesitant about the amendment; it suggests that we should be worried about labour movement from east to west, or so I take proposed paragraph (a) to imply. I was relieved, therefore, to hear the noble Lord, Lord Howell, suggest that we do not expect very much movement. Indeed, all the evidence from previous enlargements has been that when states join the European Union, people go back to their own country rather than leave it. The Spanish began to move back to Spain, the Portuguese back to Portugal and the Greeks back to Greece. So long as their domestic economies enlarge, they are likely to stay in their own country. The problem that we face with regard to migration to the European Union is from those countries that are further out—from Ukraine, Moldova and north Africa.

The question of the Roma is something else. When the noble Lord mentioned the Roma, I was thinking that when I worked on a farm as a student, most of the people picking potatoes and calabrese were Roma from across Europe. Such a situation is not entirely new. I also recall that a number of farms in Britain have not able to get their crops picked this last season because the toughening up of casual work permits has meant there are no longer enough people inside the country to pick the crops available. The Roma question is an important and sensitive one; we need to deal with it with the enlargement countries, and I suggest that it should not build up into another Daily Mail campaign against the dreadful Continent.

The noble Lord then mentioned the grey and black economies. As I understand it, the grey and black economies of Italy, Spain and Greece are, if anything, a higher proportion of the economy than they are in Poland, the Czech Republic and Hungary. These are all questions, incidentally, on which the European Commission provides regular reports which are easily accessible to those of us who are willing to wade through them. Of course, the statistics are provided by that superb outfit, Eurostat, of which the Conservatives are extremely strong supporters in their current form.

We hope that flows of investment will go to the new countries. Incidentally, I understand that the Italian investment flows are fairly large, and so are those of Germany, the Netherlands and Austria. I regret that more British investment does not go to those countries. We need more growth inside the European Union. We hope that these countries will grow 5, 6 and 7 per cent a year in the foreseeable future, and that that will help to lift the German economy out of the recession in which it has been stuck for the past three or four years.

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Given all of these factors, we on these Benches cannot support the amendment. We welcome regular reporting, but regular reporting is already provided by a range of functions. We do not think that we should be concerned about the "dangers" of emigration from the countries that are about to join. There is no evidence of that happening. I remember that in 1990 and 1991, a range of people and the British tabloid press suggested that the fall of the iron curtain would lead to millions and millions of people from eastern Europe coming to western Europe. The figure of 25 million appeared in several reports. It never happened, and it will not happen. Scare stories about immigration are something that we should all resist. Similarly, we hope, in terms of broad economic conditions, that these countries will grow, and we hope that they will help our economy to grow. On that basis, we on these Benches decline to support the amendment.

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