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We also need to consider enforcement. It would be relatively easy for unscrupulous agencies to get around the requirement in this amendment by ensuring that, where large groups of young workers were supplied, no more than 29 were under 18, by topping up the group with 18 year-olds, or by including in it at least one worker over the age of 18 to act as the “responsible person”. Those measures would seem to achieve the noble Lord’s intentions but they could, in practice, be swiftly ignored.

I am grateful to the noble Lord for drawing attention to the reference suggested by the noble Baroness, Lady Gardner, of that Australian phrase, “a go-to person”. The noble Lord referred to it having to be a succinct phrase, which is why the Australians won the Ashes. I remind the noble Lord that they are not as good at rugby. However, a go-to person would be impractical; if they were there and doing the job as best they could and an unfortunate situation arose, would they get sued? Who would get sued and who would get prosecuted? How would the facts arise, when most witnesses would have a vested interest in not co-operating? Who, ultimately, would employ the go-to person and would that mean such a person would actually turn up to do the job? Although this is an excellent idea, I am afraid that it would fail completely in practice and not achieve the successful prosecutions that the noble Lord properly requires.

The Government share the noble Lord’s concern that young people under the age of 18 may, when working away from home, come under all kinds of pressures. He recited those in graphic detail: I am grateful to him for that alarmism. There are pressures of a sexual nature; there are those who use illegal drugs or consume excessive quantities of alcohol. However, such matters go beyond the scope of employment legislation, which is what we are here to discuss. In fact, I believe that what the noble Lord, Lord James, suggested goes beyond the scope of the very amendment that he has put before us. No matter how reprehensible or disgusting we find all the situations to which he quite properly referred, and no matter how much we may read of them in the newspapers and thank heavens that it is not our child who is involved, this Bill is not the place to deal with them.

Indeed, it is difficult to see what place there would be in the framework to deal seamlessly with this issue. The line between moral conduct and the implication of the law has always been difficult to draw; this is no different. I understand his frustration regarding the

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Manchester United Christmas party; as he is mentioning them by name today, I am sure that we wish both Manchester United and Chelsea—and I say this with complete neutrality, because Aston Villa is the best football club in the world—the very best of luck on Wednesday.

I would like the facts of the case to come out before we pass judgment. As I understand it—and I, too, have only read newspaper reports—many of the young women who attended the party were not the employees of anyone involved with the party. They were the employees of shops and other businesses in Manchester who were invited to the party; they were told that there would be champagne and that there would be a room available, and they turned up. I am not for one moment suggesting that what happened after that is in any way acceptable—indeed, it is completely disgusting—but, nevertheless, it would be difficult to frame employment legislation, which is what we are here to do, to cover a situation where totally uninterested third parties turn up at a party. The consequence of their actions is dreadful to contemplate—nevertheless, it is not the basis of this proposed legislation.

The Government aim to ensure that serious sexual offences are treated as a priority in all local areas and that all local agencies use all the tools available to focus on tackling sexual exploitation, especially sexual exploitation of the young. Very tough penalties are currently in force. If these should be more rigorously implemented, that would be the subject for another debate. I thank the noble Lord, Lord James of Blackheath, for raising this important issue but, in the light of my response, I hope he feels that he can withdraw his amendment. This is not the place to deal with his justifiable observation.

Lord James of Blackheath: My Lords, I thank the Minister for that response. I think he said twice that the Government recognise and support the principle but he said three times that it is too difficult to do anything about it. I used to have a boss at Ford Motor Company who had three files on his desk—“In”, “Out” and “Too Hard”. I wonder what the state of the Minister’s desk is if he thinks this issue is “too hard”.

As the Minister rightly said, the circumstances of this issue are almost too important to ignore. He has reasonable grounds for being concerned as to how he should deal with it but, equally, he said we can start with the law. Why does not the department start with the law as it stands and try to apply that to the principle of the case at Manchester United, about which we have been talking openly? In that situation, they were not professional girls employed by any of the agencies concerned but we do not know whether they were recruited by the personnel executives of the agency or by its younger staff. The story is that a fee of £100 was paid to each girl for attendance, some £50 of which had to be given back to the recruiting agent as a thank you for the ticket, which then became quite a saleable commodity in and around the clubs of Manchester that night. In those circumstances, that would be a clear breach of the law because the agents had accepted a fee from the parties seeking the job. That is outlawed by the law confirmed on 17 December.

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The Minister could start with that and investigate the issue. If it turns out to be the case, he should start proceedings. He would then have some sympathy from us because he would be working on the law as it stands and trying to make it work. To do otherwise would bring it into disrepute. I accept that the Government are not going to do anything about it at this stage. But the circumstances are so important that the Minister should undertake to come back and tell us where and when it will be the right place to do something about it. On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 [Exclusion or expulsion from trade union for membership of political party]:

Lord Campbell of Alloway moved Amendment No. 31:

The noble Lord said: I shall speak also to Amendment No. 32. The amendment can be implemented at the discretion of the Government either in the Bill or by directions to the trade unions having legal effect. I have spoken to this procedural amendment to Clause 18 and to the ordained procedures with which it is concerned, the reasoning which it reflects, and the effect it would have on distorting the balance, if other safeguard amendments were to be carried, by a tight provision which, in effect, would destroy the substantial flexibility of these procedures.

At this hour of night I do not want to go into any further discussion. Little can be said until we know what the Minister is going to do—we are delighted to see him in his place—but I do not suppose he is going to tell us what he is going to do because I do not suppose he knows. In those circumstances, I leave the going to the Minister. I beg to move.

Lord Jones of Birmingham: My Lords, I am grateful to the noble Lord, Lord Campbell of Alloway, for his suggestion and for his proposal. I can answer him succinctly—yes, yes and yes. The Government are seeking to develop an amendment which will cover the amendments of the noble Lords, Lord Lester and Lord Campbell of Alloway. We are working on it but it is not yet ready to bring before your Lordships and it will take some time. But, on the basis that I can assure the noble Lord, Lord Campbell of Alloway, that his suggestions will be taken into account and that I will stay in touch to ensure that that happens, I hope he will feel able to withdraw his amendments. I am grateful to the noble Lord for what he has said.

Lord Campbell of Alloway: My Lords, with those kind assurances from the Minister, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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[Amendment No. 32 not moved.]

[Amendment No. 33 not moved.]

[Amendments Nos. 34, 34A and 35, as amendments to Amendment No. 33, not moved.]

[Amendment No. 36 not moved.]

[Amendment No. 37, as an amendment to Amendment No. 36, not moved.]

Lord Bach: My Lords, I beg to move that the House do adjourn during pleasure until 7 pm.

Moved accordingly, and, on Question, Motion agreed to.

[The Sitting was suspended from 6.58 to 7 pm.]

European Union (Amendment) Bill

Lord Bach: I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.

House in Committee accordingly.

[The DEPUTY CHAIRMAN OF COMMITTEES (Viscount Simon) in the Chair.]

Lord Pearson of Rannoch moved Amendment No. 129:

The noble Lord said: I shall also speak to Amendment No. 130. At the close of our last proceedings on 14 May the Government assured us that the new European Gendarmerie Force would not be used on British soil without the explicit consent of Parliament. The first of these two amendments attempts to make sure that after the EU acquires its own legal personality, and more generally as the EU project proceeds, British citizens will not fall foul of the EU crime of xenophobia for insulting it. We must remember the infamous EU arrest warrant which allows British citizens to be automatically extradited to any EU country purely on the say-so of a local magistrate, to stand trial under an alien system, perhaps after a long time on remand, and to face imprisonment for a list of some 32 crimes, one of which is xenophobia, which is not a crime here.

I fear that the EU’s new acquisition of legal personality confirms that it is well on its way to becoming a state. Indeed, it is hard to think of any attribute of a state which the EU does not already possess, or will not possess if the Lisbon treaty becomes law. It has its own flag and anthem, although they are without legal foundation. It has, or is acquiring, its own president, armed forces, foreign secretary, foreign policy, embassies, supreme court, judicial and criminal systems, police, border and asylum controls, not to mention its currency. If any noble Lord can tell me of an attribute of a state

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which the EU cannot, with the support of the court, acquire under this treaty, I would be very glad to hear from him.

Those of us who oppose the project of European integration are already often accused of being xenophobes, even in your Lordships’ House by otherwise perfectly civilised noble Lords, such as the noble Lord, Lord Wallace of Saltaire, and others whose blushes I will spare. Is it so far-fetched to think of such an accusation being made by our new masters in Brussels? I fear not.

The second amendment in this group, Amendment No. 130, seeks to prevent the EU levying or harmonising direct tax in the EU, so it also looks some way into the future, although the French are already saying they want to use their forthcoming EU presidency to harmonise corporation tax. The treaties are silent on direct tax, although they control VAT and indirect tax. That has not stopped the Commission and the Court imaginatively invading corporation tax based on other clauses in the treaty, particularly those covering the freedom of establishment of businesses throughout the EU. The Court has decided that UK companies, such as Marks & Spencer, Cadbury Schweppes and many others, are free to arrange their losses and tax in other EU countries in ways previously barred by the Treasury, which may mean the Treasury now owes a number of British companies quite a lot of money. It would be helpful if the Minister could bring your Lordships up to date with what the latest position is here. How much money have these decisions of the Luxembourg court cost Her Majesty’s Treasury?

There are also in the treaty all the provisions controlling the single market. I find it hard to see why, where the European Union wants to control direct tax, it could not use the single market provisions of the treaty to do so. Of course, if the Luxembourg court were to agree with that, there would not be anything we could do about it. I am advised that in Brussels they are thinking of using the social chapters of the treaty to introduce direct tax. Perhaps the Minister would like to comment on that, no doubt denying it strongly.

The longer-term necessity for the EU to harmonise and control national taxation lies deeper. The EU already has its own currency, as I mentioned, but it has no federal budget to speak of, and no currency zone in history has survived for long without the power to tax and distribute from its richer areas to poorer. One thinks here of the distributions from south to north in the United Kingdom and the federal budget in the United States. One remembers, too, the distributions from north to south in Italy and west to east in Germany, which the single currency with its single interest rate does not facilitate. We are already seeing strains in those and other euro economies. The euro was never an economic project. It was designed as the cement to hold the emerging megastate together, but it will probably need a substantial federal budget to do so as time goes on. This amendment seeks to warn your Lordships about this position and to prevent it happening. I beg to move.

Baroness Noakes: I would like to make a small contribution on the amendments tabled by the noble Lord, Lord Pearson, who I still regard as my noble friend. As noble Lords will probably be aware, I have

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not yet spoken during the proceedings on this Bill. It has been in the very capable hands of my noble friends Lord Howell and Lord Hunt. I have, of course, been following the progress of the Bill, if that is the correct word, and I feel honoured to be part of the Front Bench for the purposes of this evening. I shall not be expressing any views on Amendment No. 129 on xenophobia. I could not, however, let Amendment No. 130 on taxation pass without a brief comment. I have in the past spoken in your Lordships' House about the role of the EU, in particular the European Court of Justice, in relation to taxation, and that will be the focus of my remarks.

The founding treaty and all subsequent amendments seem clear: direct taxation is not an EU competence and ought to be the sole responsibility of member states. However, it is a fact that the European Court of Justice has been slowly but surely building a common European tax law under the guise, as the noble Lord, Lord Pearson, has explained, of freedom of establishment. This is a relatively recent phenomenon. There was only one direct tax case decided by the ECJ in the 1960s, none in the 1970s, four in the 1980s, 40 in the 1990s, but well over 60 by halfway through this decade. There is also a big tail of cases still to be decided. This is thus a problem that has emerged on this Government’s watch, yet they seem set on ignoring it.

I shall not weary the Committee with the cases that have been decided by the ECJ. They do not all involve the UK’s taxation system, but they have involved some of the largest companies within the UK: Cadbury Schweppes, British American Tobacco, Marks & Spencer and ICI. For these companies, it makes sound commercial sense to challenge UK tax law if they perceive advantage in so doing. I do not blame them in any degree, because they must try to do the best for their shareholders. If that involves using an EU weapon to challenge the basis of taxation set by our Parliament, it is obvious that they must do so.

These cases have created great uncertainty about the UK’s tax code. That is harmful in the context of a tax code which is the longest in the world and among the most complex. From the perspective of the UK Treasury, these cases, often decided against the Government, have created uncertainty about future tax receipts and involved complex Finance Bill provisions to overcome ECJ objections. Many billions of pounds of tax revenues have been, and probably still are, at stake. The noble Lord, Lord Pearson, asked how much decisions have cost. I would add: how much is still at risk?

I have talked about the cases brought by companies, but the Commission, too, can attack member states’ tax regimes. It has expressed a willingness to be “proactive” in this, which is a chilling prospect.

I cannot begin to understand why the Government have not fought strongly against the concept of the ECJ’s ability to overturn what our Parliament decides on tax. It ought to be in the interests of the Government, as the guardian of the UK’s finances, to do so.

It ought also to be in the interests of the Government to preserve the competitiveness of the UK and our ability to differentiate ourselves from the rest of the

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world, in which I include the rest of the EU. A part of any country’s competitiveness includes tax competitiveness, which is well accepted by all those organisations which draw up international league tables of competitiveness. I hope that there would be no argument in this Chamber that tax competition is good for society as a whole, since it works with the grain of global free markets and against those who try to erect barriers to trade.

Tax competition also provides a healthy check on the Governments’ ability to raise taxes too high. We are seeing the salutary effect of tax competition at the moment, as major UK corporates signal loud and clear to the Government that the UK tax system has gone too far and made the UK an uncompetitive environment for companies which hold significant interests overseas. The Government have taken their eye off the ball of tax competitiveness for the UK. My party, when we return to government, will strive to restore our tax competitiveness. We will need maximum freedoms, including freedoms within the EU, to achieve that.

The noble Lord, Lord Pearson, will appreciate that the picture I have painted requires a more comprehensive set of statutory defences against the incursions of the EU into the tax affairs of the UK than are provided by his amendment. His Amendment No. 130 is useful in ruling out the harmonisation of rates of direct taxation and the imposition of direct taxes, and I support it to that extent. It does not, however, deal with the most damaging problem of the ECJ’s ability to strike down our tax laws and interfere in the structure of our taxes. The amendment does not reinforce our precious freedoms to achieve tax competitiveness in the UK. I wish that his amendment had gone further.

I accept with weary resignation that the pass was sold long ago on indirect taxation, but noble Lords should be under no illusion about the role of the ECJ in relation to VAT. It is far from benign. But that is a topic for another day.

Lord Monson: Perhaps I may concentrate on Amendment No. 129. Xenophobia is a feeling, an emotion, like anger, anxiety and fear, to which it has some affiliation. Conversely, it is in the same league as joy, exhilaration and contentment. In other words, it is a thought, not a deed. Democracies have not hitherto had thought crimes on their statute books, nor have authoritarian regimes. Thought crimes are the preserve of totalitarian states. If by any chance some other EU states want, perhaps without realising the full enormity of what they are doing, to copy Stalin, Mao and Hitler in this regard, so be it, but we in this country should not contemplate it for one single moment.

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