Select Committee on European Union Twenty-Fourth Report

The position of the UK Government

82.  The Government have strongly opposed the Commission's proposal, which requires unanimity in the Council. Indeed they have said that they intend to vote against the proposal should it come to Council. As shown above, they have contested each of the specific grounds on which the Commission rests its case: competition, government revenues and the environment. In his oral evidence, the Minister laid particular stress on the negative impact of the proposal on the environment: "There would be a substantial shift from rail to road […] a 23 per cent shift of freight movements from rail […] an increase in the amount of CO2 emissions from lorries (Q34)." As was also shown above, on each of these specific points, the Government's evidence is broadly in line with the evidence submitted by independent experts.

83.  At the same time, alongside these specific objections, the Government have argued from the more general position of a "principled approach". The Government's principle here is that, when negotiating in the Council of Ministers, they will "only allow departures from the freedom of Member States to set tax rates and tax bases where there are strong and specific reasons to do so" (Q26). How then do the Government support the imposition of minimum rates of excise duty on fuel—and indeed an increase in minimum rates embodied in the Energy Tax Directive? Does this not also impinge on the freedom of Member States to set tax rates and tax bases?

84.  The Government's answer is that "on the challenge of global warming," they accept that there are "strong and specific reasons for acting across the EU" (Q26). The problem with this answer is that every "departure from the freedom of Member States to set tax rates and tax bases" is justified by appeal to "strong and specific reasons" but what constitutes "strong and specific reasons" is always open to challenge. Presumably, the Commission believes that there are "strong and specific reasons" to harmonise fuel duty across the EU. In this particular case, the Government are at one with the expert witnesses in challenging the reasons given by the Commission. The strength of the Government's position lies in the content of this challenge—not in the appeal to a general principle.

85.  In view of the developing EU-wide debate on the broader reform of transport taxation—and especially in view of the increasing EU-wide interest in the UK's own initiatives on such issues as user charges for lorries and congestion charging in London—it is unhelpful to approach this debate by proclaiming the principle of freedom of Member States to set tax rates. This freedom exists unless Member States agree to set it aside and the Government agree that there are sometimes "strong and specific reasons" to set it aside. Hence, the UK is not in disagreement with others on this point and nothing is gained by inventing a disagreement where none exists.

Key conclusion on the position of the UK Government

86  The Committee welcomes the Government's submission of specific arguments on the Commission's proposal on fuel duty and recommends that the Government frame its response to future proposals on transport tax reform on the basis of the specific merits and de-merits of each proposal.

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