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7.15 pm

Lord Stoddart of Swindon: I support both amendments. Before I came into the Chamber, I looked up in the Shorter Oxford English Dictionarythe definition of “xenophobia”. Volume 2 defines it as follows:

That is all. Are we now to be told by the European Union that we must not have an antipathy to something or to some people? Are we not allowed to dislike other people, even if it is in a way that is perhaps a little extreme? This really is going too far.

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The noble Lord, Lord Pearson, showed quite clearly in his opening remarks how such a policy could affect us if it were adopted under the rules of the Lisbon treaty. It could very easily enter our law, which would be against everything that this country has stood for over a long period—although, as a result of some of the legislation which has been enacted during the past couple of decades, people now say to themselves, “Oops, I should not have said that”, after saying something which is perhaps not politically correct. We should not tolerate that in a free society. One can understand why people on the Continent—in Germany, Austria, France and places such as that—might need legislation about holocaust denial and xenophobia: they have to assuage their consciences for the wars and murders that have taken place over a long period. We do not happen to have to assuage our consciences in that way. Therefore, we do not need to put people in this country at risk as a result of a law against xenophobia.

As far as taxation is concerned, the Government will of course reply, “We have no intention of imposing or allowing the EU to impose, or have any say in, direct taxation”. Well, ask the European Parliament about that, because it, as I understand it, believes that the institutions of the European Union should have the power to raise direct tax for the financing of the European Union. The matter is on the agenda already. Moreover, many policies now enacted by the European Union have implications for our direct taxation. I do not want to give a great list of them, but the one about which people are very concerned at the moment is the cost of the landfill directive, which directs the Government of this and all other member countries to reduce their amount of landfill by 2016. The result has been impositions by local authorities through bin taxes and so on, which are direct taxes on the people of this country.

I do not want to detain the Committee any longer. But I believe that we have to be on our guard that the taxation which is already dictated by the European Union should not extend any further at all. The noble Baroness from the Opposition Benches listed a number of ways in which, perhaps without our realising what is happening, there could be implications for direct tax. I therefore support these two amendments.

Lord Williamson of Horton: I recall that I made a declaration of interest at the beginning of the Committee stage. I intervene briefly on Amendment No. 129 on xenophobia. I think that I have always been very careful and courteous in my interventions during this long Committee stage, but I am inclined to say that this amendment verges a little on the bizarre. The suggestion here that an offence will be created does not seem to me among the more probable events which may result from the ratification of the treaty of Lisbon. If that is the case, as I believe it is, I think that we should abstain from inserting new clauses. We are in the period of discussion in the Committee where we insert new clauses, some of merit and some of less merit. This clause is certainly among the least probable results of the treaty process.

Lord Wallace of Saltaire: I was chair of the justice and home affairs sub-committee of the Lords EU Committee when the Amsterdam treaty was ratified.

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We conducted an inquiry on Article 13 of the Amsterdam treaty, which was the clause that introduced into the European Union much stricter rules against racism, xenophobia and a range of other activities. During that inquiry we discovered that the coalition that had got that on to the EU agenda and into the Amsterdam treaty had been substantially led by British non-governmental organisations. We took evidence from a range of bodies. I remember the CBI saying how strongly it supported this addition to the EU treaty on the grounds that British banks and companies, which increasingly employ bright young Asians, had discovered that in some other financial centres in the European Union, these bright young Asian employees were suffering various forms of discrimination.

Once again we have had a debate in which it has been assumed that it is those people over there who are imposing something on us when actually this was substantially a British initiative. Incidentally, we and the Irish—for solid and painful reasons concerned with a rather different history than the one which the noble Lord, Lord Stoddart, suggests—have some of the strongest anti-discrimination laws in the European Union. We have had to develop them because of Protestant discrimination against Catholics in Northern Ireland and elsewhere. It is not true that we have not discriminated at all in this country. The painful implications of the treaty of Amsterdam have been felt in countries such as Austria, Italy and Germany, where the rules against discrimination are much weaker. I just wish to set the record straight on that. This is not an attack by those wicked people in Brussels on pure Englishmen. It is something with which we, as in so many other areas, had a great deal to do.

I was interested in what the noble Baroness, Lady Noakes, said on taxation. Earlier today we were discussing another dimension of international tax law and the question of tax havens. In answering me the Minister praised the work of the OECD—the OECD, not the EU—on getting at the problem of offshore financial centres and tightening controls against the misuse of offshore financial centres. We are all familiar with the internationalisation of the economy and of companies, with the constant battle between clever accounting companies—the noble Baroness, Lady Noakes, will be familiar with those—advising companies and banks on how to avoid national taxation and Governments trying to maintain their tax base.

Baroness Noakes: I hope there was no misunderstanding about what I was saying. I was making no case for tax evasion at all. It has nothing to do with tax havens. It is question of whether there is an EU ability to change UK tax law. It is a very narrow point but a very powerful point which I think is relevant to the Bill.

Lord Wallace of Saltaire: I fully understand that and I accept the distinction. Part of the problem is that as companies operate more across the single market, the opportunities for using the national laws of one country to get around the national laws of another become stronger. If one accepts that tax competition allows some Governments to undercut others beyond a certain degree then we will in time have some problems inside the European Union.

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We must address the tax base. The integration of the European economy has certain implications not for the harmonisation of tax rates but for the agreement of rules of the tax base. I recall that the Leader of the Conservative Party, David Cameron, made a speech the other week in which he talked about formal regular contributions within NATO which would be taxation on member Governments of NATO to contribute to common NATO operations abroad. That is taking us down another road towards shared contributions within international organisations. That is partly because we are now doing more together. The world does not stand still and the idea that somehow problems of tax avoidance and tax evasion can be dealt with entirely at the national level in the global economy is an illusion.

Lord Tomlinson: I do not propose to deal with Amendment No. 129, because its inadequacies have already been adequately dealt with by the noble Lord, Lord Williamson, and another noble Lord—I have forgotten who. They are clear. I want to speak briefly to Amendment No. 130. The noble Baroness made an interesting speech in which she took us through a series of hypotheses of what might be the position if the powers of the European Court of Justice continue to be used in the way that they are, but those examples are not in any way relevant to the hypothesis put forward in Amendment No. 130, which deals exclusively with direct taxation. There is a real debate to be had about indirect taxation: in particular, as I have said before in your Lordships’ House, the indirect taxation that we have through the own-resources decision is increasingly budgetarily irrelevant. It is reducing less and less resource and it is increasingly fraud prone. There needs to be a serious taxation discussion about the role of the own-resources decision and how it needs to be replaced.

Amendment No.130 deals with direct taxation. When the Minister replies to this brief debate, I hope that he will confirm that any of the changes suggested in the amendment of the noble Lord, Lord Pearson, are not possible without harmonisation methods to bring them about, and that requires unanimous support in the Council of Ministers. We are all clear—

Lord Pearson of Rannoch: May I—

Lord Tomlinson: As I said last week, I am not in the habit of giving way in these debates. The noble Lord, Lord Pearson, has turned this far too often into an inquisition of the other Members of the Committee. I am making a brief speech and I will not interrupt him either.

As I was saying, my right honourable friend the Prime Minister has made it very clear that questions of direct taxation are issues on which the British Government will not give their assent. I look to the Minister to confirm that—that the harmonisation and acquisition in it would not be forthcoming from the British Government.

7.30 pm

Lord Brittan of Spennithorne: Although I respect the thinking behind the comments of my noble friend Lady Noakes, I do not agree with the amendment

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proposed. I am familiar with the line of cases to which she refers, which have impinged on the tax base. However, I think that she does less than justice to the European Court of Justice in failing to observe that the reason for that encroachment is to achieve an important European objective that we share—that is, the freedom of establishment and the freedom of movement of goods, persons and corporations across the European Union. Whether that balance is right or wrong can be argued about, but it is not just a wilful tax grab that is taking place; it has been an attempt to protect an important part of the European single market. Noble Lords may think that it goes too far or not far enough, but that is the motivation behind it, and to fail to refer to that seems to me to verge on the misleading.

Whether that is right or wrong, the relevant point is not whether that intrusion into the British tax base is sensible or desirable; it is whether the treaty of Lisbon does anything to further that process or could be distorted so to do. Nothing that has been said so far leads me to believe that anything in the treaty that we are currently debating could conceivably have that effect. If that effect arises as a result of the Court decisions, the Court decisions are based on other premises and not this treaty—because the treaty has not come into existence. I see nothing in the treaty that would enable the Court to go further in the direction that my noble friend deplores. For that reason, this proposal is at best otiose and at worst misleading.

Lord Pearson of Rannoch: Could I ask the noble Lord, Lord Brittan—

Noble Lords: No, he has sat down.

Lord Stoddart of Swindon: This is Committee stage, and if the noble Lord, Lord Pearson, wants to speak again, he is perfectly entitled to do so.

Lord Pearson of Rannoch: I am afraid that that is correct. I have no doubt that I shall have to put the same question to the Minister, but perhaps I could do so by giving due warning on the comments of the noble Lords, Lord Tomlinson and Lord Brittan, both of whom said that direct tax could not be introduced under the Lisbon treaty or even under the provisions of the existing treaty. I have to mention again the provisions of the single market. If the Commission were to decide that direct tax could be introduced under single market provisions, that would be by qualified majority voting—that is how it could occur. No doubt the Minister will wish to deal with that in his reply. I thought that I would deal with the noble Lords, Lord Tomlinson and Lord Brittan, first.

Lord Bach: The noble Lord is quite wrong about direct taxation—but let me come to that in due course. I thank him for moving his amendment and all other noble Lords who have spoken in this debate. I particularly welcome the noble Baroness, Lady Noakes, to her place on the Front Bench in this debate. Her remarks have already been subject to a number of comments, both favourable and not so favourable. But I think that she is used to that.

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Amendment No. 129 would insert a clause stating that neither the Bill nor the treaty will create an offence of xenophobia for which a UK citizen could be prosecuted in the UK or elsewhere. The UK Government deplore racist and xenophobic behaviour and we already have tough national laws in this area. As such, we also support the fact that the prevention and combating of such conduct is one of the aims of the Union, as reflected in the general provisions of the JHA chapter of the treaty. We will continue to work with member states to prosecute those who break our laws in this area.

I shall give a short history lesson. The first EU measure on combating racism and xenophobia was adopted by the Council in 1996. That measure will be replaced by a new framework decision on combating racism and xenophobia, which, similarly, has been agreed by the Council on the basis of the existing treaties and is expected to be formally adopted this year. This new framework decision requires all member states to have in their laws basic offences and penalties for such conduct. We support this; it is important to make it clear that we will not tolerate such behaviour within Europe. In negotiating that instrument—and this is significant—we ensured that the UK’s domestic threshold for criminal liability in this field would apply. That means that for criminal liability to be triggered, any behaviour must be carried out in a manner likely to incite violence or hatred and must be threatening, abusive or insulting or likely to disturb the peace.

In terms of UK law, there are various relevant pieces of legislation: the Public Order Act 1986 contains a number of offences covering Acts intended or likely to start racial hatred. The Crime and Disorder Act 1998 introduced nine racially or religiously aggravated offences, which make available to courts higher penalties when there is evidence of racist or religious motivation or hostility in connection with an offence. Most recently, the Racial and Religious Hatred Act 2006 created an offence of incitement to racial hatred. That piece of legislation came into effect on 1 October 2007.

As for the extradition and prosecution of UK citizens in other member states under the framework decision on the European arrest warrant, to which the noble Lord referred in slightly disparaging terms, we will extradite to another member state individuals to be prosecuted in that member state for offences committed there. This could include an offence involving racism and xenophobia. Similarly, we would expect to be assisted by other member states in bringing to justice individuals who had committed offences under our rules in the UK—for instance, in this context, offences under the legislation that I mentioned a moment ago. Any new measures on racism and xenophobia proposed under the Lisbon treaty would be subject to the UK’s opt-in, which, as noble Lords are well aware, applies throughout the justice and home affairs chapter. We therefore have clear safeguards in this area, were a measure to be proposed that would not be in the UK’s national interest.

I did not hear the noble Lord, Lord Pearson of Rannoch, say this, but if he has a concern for himself or for any others who feel as he does that expressing

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opinions against the EU, even in fairly robust terms, might lead to either his extradition or prosecution in another member state, I can reassure him that that is not the case.

I finish by saying that the Lisbon treaty sets out a closed list of areas of crime for which the Union can set minimum offences and penalties. That list does not include racism and xenophobia. Were the Union to decide to legislate further to set minimum offences and penalties on racism and xenophobia, the Council would have to agree, unanimously, to add those two matters to that list. The opt-in would apply to that decision to add to the list, as well as to any measure subsequently proposed on the basis of the inclusion of racism and xenophobia on the list. This is a consequence of the welcome greater clarity in this treaty as to where the Union has competence to legislate in this field.

Amendment No. 130 relates to direct taxation by EU institutions and harmonisation of direct tax rates across the EU. This amendment is unnecessary. With regard to the first part, there is no suggestion in the Lisbon treaty or elsewhere in the EU treaties that EU institutions should be able to impose a tax directly on EU citizens. So far as concerns the second part of the amendment, government policy on tax harmonisation is crystal clear: harmonisation of direct taxes is unnecessary and undesirable. Since we have ensured that decisions on tax matters must be taken by unanimity, we will be able to prevent any proposals that attempt to bring about such harmonisation.

In a word, the Government have a clear position on EU tax matters: decisions should be taken by unanimity and open, flexible and competitive national tax systems allied with renewed international co-operation, not tax harmonisation, are the right response to the challenge of a global economy. We have no intention of changing that position. Since unanimity is needed for any taxation measure, we believe that we will be able to maintain the position with our EU partners.

I briefly mention the role of the European Court of Justice in taxation matters. I agree with the noble Lord, Lord Brittan, whose experience of the matter is so much greater than mine. The ECJ, in very simple terms, is responsible for giving definitive interpretations of the treaties. In the field of indirect tax its ruling clarifies the large body of EU law on VAT and indirect taxation. For direct tax where, as I have just emphasised, policy rests with individual governments, the Court’s role is to ensure that national rules remain within the parameters set by or under the treaty, either in the small number of directives concerning direct tax or in the general principles laid down in the treaty. I repeat: the Government will defend resolutely the UK’s tax laws against challenge before the ECJ. On that basis, I hope the noble Lord will not press his amendments.

Lord Monson: Suppose an individual were publicly to set fire to the EU flag with a view to stirring up hatred against the European Union—not that I suggest for a moment that anybody should do so. Could he be prosecuted under existing laws in the United Kingdom for stirring up racial hatred or animosity? If not, might he be prosecuted as a consequence of some future EU directive?

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Lord Bach: He can certainly be prosecuted under UK criminal law for criminal damage, if for no other offence. I am not in a position to give a reply to the noble Lord, but my strong impression is, no, the individual could not be, but I will take away the noble Lord’s hypothetical case and write to him.

Lord Pearson of Rannoch: I am most grateful to all noble Lords who have spoken, and particularly to those who have supported the amendments. I will have to read Hansard, but I think that the Minister said there is no possibility of a British citizen being arrested under the charge of xenophobia for insulting the European Union, either here or in Europe, whether he is extradited and tried under the arrest warrant or in any other way. I think that that is what the noble Lord said about Amendment No. 129, in which case I am happy to withdraw that. As to Amendment No. 130—

Lord Stoddart of Swindon: Will the noble Lord give way? I am most obliged. Of course it is considered courteous in this House to give way if somebody challenges you, unlike in the House of Commons.

I am surprised that the noble Lord should be happy with the reply given by the Minister on xenophobia. Surely he would agree that xenophobia is quite different from racism. The question that the noble Lord, Lord Bach, really should answer is, if somebody expresses dislike of the French or perhaps even hatred of the Germans because of the war they caused in 1939, could they be extradited to another country where there is an offence of xenophobia?

7.45 pm

Lord Pearson of Rannoch: I thought it was perfectly clear under the present arrest warrant that that person can be so extradited. I am doing the Minister’s job for him, but I feel sure that he agrees. If he does not, this is his moment to say so.

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