HC Deb 28 April 1977 vol 930 cc1650-9

Motion made, and Question proposed, That the Resolution of the House of 4th April 1977 (Value added tax) shall have effect as if for the words 'so as to give effect to Community obligations' there were substituted the words' as required by the draft Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes copies of which were deposited in the Library of the House on 1st April 1977'.—[Mr. Coleman.]

11.16 p.m.

Mr. Nigel Spearing (Newham, South)

I had hoped that my right hon. Friend the Financial Secretary to the Treasury would speak on this motion, because during his winding-up speech on the Finance Bill I indicated that I hoped and expected that he would do so.

I apologise to hon. Members who are waiting for the important Rhodesia debate, but we have had a few procedural surprises already tonight and we may have more surprises in financial terms if we reach Rhodesia. It was not until fairly late this evening that I glanced at the second order, under the heading "Ways and Means," which I think most hon. Members would have thought "gobbledegook" if they had read it.

It took a little time to make inquiries about what the motion contained, but I think it right that I should draw the House's attention to it, particularly since it has not been explained, however briefly, by my right hon. Friend.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

I realised that my hon. Friend wanted to speak on this. I thought that he wished to ask me one or two questions on the Ways and Means Resolution, purely to help the House. I thought that I had indicated that in my closing remarks in the Finance Bill Second Reading debate. If he wished me to rise and explain it, I should have been happy to do so. I thought that my hon. Friend only wanted to put a few questions to me.

Mr. Spearing

I do not think it is as simple as that to some of my hon. Friends. I think it wrong that the House should take almost "on the nod" a motion that it does not understand. Perhaps the interpretation that I have managed to glean is incorrect. If it is. I hope that my right hon. Friend will say so.

In effect, we are asked to substitute a new form of words for the Budget Resolution passed on 31st March. We are asked to delete the words "Community obligations" passed by the House by Resolution No. 14 on 4th April and substitute the words as required by the draft Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes, copies of which were deposited in the Library of the House on 1st April 1977. We are being asked to substitute a general obligation, which was recognised by the House, for something particular, namely, the Sixth Council Directive, to which my right hon. Friend the Financial Secretary referred. My right hon. Friend may be able to point out that there is nothing in the Sixth Council Directive that was not always known to the public and to her Members. Even if that were so, it is a matter of fundamental importance to the House that the Government should now seek to substitute a particular financial obligation for a resolution which was written in general terms and which was passed after the Budget. This matter is worth at least a short debate, since political power in the modern world is the power to tax.

What is the Sixth Directive? My right hon. Friend spoke of it as though it were the evening paper, as though it were something that everyone knew of. That directive is R /715/77, but that fact is not stated on the Order Paper. It relates to the harmonisation of VAT throughout the Community. This 95-page document is highly complex and it seeks to insert into the Finance Bill certain obligations.

The Budget Resolution to which it relates appeared in Hansard, under the heading "14. Value added tax", as follows: That the enactments relating to value added tax may be amended so as to give effect to Community obligations, and that charges to that tax may be imposed by other amendments not affecting the rates at which the tax is chargeable or the treatment, for purposes of the tax, of goods or services of any specified description."—[Official Report, 4th April 1977; Vol. 929, c. 1013.] Perhaps the rates of tax cannot be changed. If this is a question of harmonising the articles upon which the tax can be charged it may be possible to change the tax on a particular article.

Mr. Robert Sheldon

indicated dissent.

Mr. Spearing

My right hon. Friend has indicated that that is not the case. Even if that is so, however, it may be that on the occasion of some future Budget a resolution similar to the one I have read out could be passed very quickly in the wake of a heavy vote and could go unnoticed. Such a resolution could go undehated, and we could find in Committee on the Finance Bill that there was an obligation to tax which was not even debated or known of by the House.

The document in question was not available in the House on 31st March but was placed in the Library on 1st April. Was it referred to the Scrutiny Committee? If not, why not? Is financial legislation in this case, as in other cases, treated differently? If it is, is there not a case for a proper scrutiny procedure for such matters?

The other curious factor is that there are no copies of the document in the Vote Office. It was not until the Order Paper was printed this morning that anyone could know that it was in the Library. It appears that we have uncovered yet another pipeline of EEC obligations to be imposed on the House and the nation. I am not saying that the effects of the document are hypertoxic. We shall hear from my right hon. Friend on that score. It is stated in the document—and this is an obligation—that Whereas account should be taken of the objective of abolishing the imposition of tax on the importation and the remission of tax on exportation in trade between Member States, and whereas it should be ensured that the common system of turnover taxes is nondiscriminatory as regards the origin of goods and services, so that a common market permitting fair competition and resembling a real internal market may ultimately be achieved". That is not surprising if one knows about the Common Market.

If there is nothing toxic in this pipe, that does not mean that there will be nothing toxic in a future pipeline. There may be something toxic. When there are 80 pages to consider in two hours, I defy any Treasury Minister to know for certain.

The Budget Resolution was passed by the House, although it was unknown by the House at the time. We now have requirements the direct purposes of which were not known until this debate. Even so, the words on the Order Paper do not give a clue about the matter. The document we have tonight was not printed in italics at the time of the Budget. That is another reason for supposing that this is not as clear and as open as we would want matters to be in the House.

Recently we have been discussing the powers of the House, not in relation to the Monarchy or another place but in relation to an unelected assembly and other institutions. It may be that this directive is not noxious, but the route is there and it has been uncovered. It should be advertised that it is there and can be used for future requirements. It is an underground route which has been heavily camouflaged until now. It was uncovered to a certain extent on Monday night, when we discussed the European Communities (Definition of Treaties) Order, and tonight we have uncovered a hidden channel whereby the powers of self-determination of the House are being eroded.

The obligations that we are being asked to undertake are not clear, and the House will not be aware of what it is doing. I submit that the procedures of the House are very good in respect of our own domestic Executive but very much failing in respect of the Executive over the water that some of us never wished to see but to which this House now has some obligation.

11.28 p.m.

Mr. J. Enoch Powell (Down, South)

I believe that it was wholly right that the hon. Member for Newham, South (Mr. Spearing) should ensure that the House did not pass the Ways and Means Resolution "on the nod". It has long been the custom—but a custom that is diminishing in intensity—of those who still audibly advocate our membership of the EEC to treat with levity the proposition that this country and its people are now taxed by an external authority outside the control of this House.

Here it is—on the Order Paper. And it is on the Order Paper in a particularly perceptible form, even more perceptible than the form of the resolution that we passed on 4th April. It may well be that the form of the resolution on 4th April was very general. The House simply gave the Government the power to write into the Finance Bill whatever was required under the heading of value added tax to give effect to our Community obligations. Then the Government discovered, or have discovered since 4th April, that there are not any relevant Community obligations as yet. We are still awaiting the pleasure and decision of our masters.

Therefore, we are now to pass an extraordinary Ways and Means Resolution that will authorise clauses in the Finance Bill which are not yet required by our Community obligations but which we anticipate will be so required. Therefore, we include in the definition of the Ways and Means Resolution a reference to a draft directive—a directive that does not yet have the force of Community law. I do not think that we could be more drastically reminded of the fact that in this respect already our taxation is an automatic rubber-stamping of taxation enacted by the European Economic Community.

Both these forms—both the very general form of the resolution of 4th April and the form now before us—give the House no information as to the nature of the licence or the outlines which the Ways and Means Resolution is drawing for clauses of the Finance Bill. You will recall, Mr. Deputy Speaker, particularly as Chairman of Ways and Means, that the House has been very jealous of the form of Ways and Means Resolutions. Many battles have been hard fought to restrict the right of the Government either to limit subsequent debate or to render subsequent debate unduly wide by the manner in which a resolution was drawn. But here is a Ways and Means Resolution—here was and is a Ways and Means Resolution—over which the House can have no influence, because of the power which we have surrendered, and we have surrendered it in the peculiarly sensitive area of taxation.

I think that the Financial Secretary said in the previous debate that if we had had time to get to our Hansards our eyes would have lighted upon a Written Answer—I dare not suggest to a "planted" Question—which would give us some particulars as to what lies behind this Ways and Means Resolution. But what I am sure the right hon. Gentleman will not say is that it is satisfactory for this House, as part of its budgetary procedure, to learn in a Written Answer on the day on which it is presented with the Ways and Means Resolution what lies behind that resolution.

The Financial Secretary has assured the House—I am sure correctly—that in this instance he is not finding himself obliged in the Finance Bill and in any amendments to the Bill to propose changes of the law which he would not voluntarily have proposed in any case. I understood him to say that, and I understood him also to say—I am sure that this is so—that at present the Community directives do not trench upon such vital matters as rates and the ambit of the value added tax. But there is nothing in the powers which we have surrendered which makes that limitation. It is a temporary, almost fortuitous, limitation. Therefore, in passing his Ways and Means Resolution tonight we are holding up the mirror to the real surrender of power over taxation which is implicit in our membership of the European Economic Community.

This is not an academic matter of detail, though I am sure that the House is indebted for the careful research which, in the short space of time available, the hon. Member for Newham, South was able to give to the matter and to place upon the record of the House, which is where it should be. It is a matter of principle and a reminder in principle that we have surrendered the power over taxation from this House to an external body which already has the ability to impose taxation upon the people of this realm, with which it is impossible for this House to interfere.

I believe that it would have been wrong if this Ways and Means Resolution had been passed without some such observations being made.

11.34 p.m.

Mr. Ronald Bell (Beaconsfield)

I should like also to refer to the extraordinary form of the Ways and Means Resolution. What puzzles and disturbs me is that it relates to the draft directive copies of which were deposited in the Library of the House and makes this the definition of the ambit of the resolution.

Of course, all these things start as drafts whether they later become regulations or directives. Certainly the Scrutiny Committee, of which I am a member, scrutinises 20 to 40 drafts each week. Those drafts often change considerably before they are approved by the Council of Ministers and become directives or regulations. What will happen if the draft Sixth Directive, a copy of which has been deposited in the Library and is the basis of this resolution, is changed before it becomes a directive? One cannot then refer to a copy of this changed directive that will subsequently have been deposited in the Library because the Ways and Means legislation refers to the copy of the draft directive that has already been deposited in the Library. That seems an odd situation. Perhaps the Financial Secretary will explain what will happen.

Will there then be a new financial resolution amending this and referring to the new draft that has been deposited in the Library? To go by reference to working papers deposited in the Library seems to be an undesirable way of operating.

I remember that on a previous occasion in relation to our own delegated legislation the House was ill content with a Statutory Instrument which proceeded by reference to the latest edition of the British Pharmacopoeia—whatever that might be. Certainly the Statutory Instruments Committee—and I believe that my memory is correct—took the view that that was not a satisfactory way of legislating by providing by law for subsequent editions of a non-parliamentary document. That seems to be almost what the financial resolution proposes to do.

I realise that a financial resolution is not the Finance Bill and is merely the constitutional groundwork for the Finance Bill, but it would nevertheless have to be amended if there was a change between the draft and the definitive legislation.

Mr. Spearing

The hon. Gentleman has uncovered an important point that I omitted to mention. Is it not that the resolution refers to the document deposited on 1st April, so the Finance Bill can refer only to the provision in the draft document of the number and sub-number—whatever it is—of 1st April. If that were changed before it was finally approved by the Council of Ministers, constitutionally and procedurally it would be impossible without another resolution coming forward—if that is technically possible—for it to be put in the Finance Bill. That is another complication of the EEC.

Mr. Bell

I am grateful. I could not have expressed myself clearly, but that is the point I hoped I was making.

Mr. George Cunningham (Islington, South and Finsbury)

Is that not the value of the resolution? As the resolution was originally drafted it would have been unclear, but at least it would have provided for a change in the situation also to be covered by the resolution passed on 4th April. Indeed, the resolution states that only the situation in the document in the Library will be covered.

Mr. Bell

The difficulty is that the Ways and Means Resolution, perhaps of necessity, proceeds by reference to a document in the Library. If that were the definitive draft, that would be that. I do not know what one could do if the EEC passed an amending directive. I suppose that one would have to come back to the House. The difficulty is that at the time of the presentation of the Finance Bill the actual directive is not available; only the draft is available and that can be changed. The Ways and Means Resolution must be passed today. Therefore, the House is put in this extraordinary position.

I imagine that we shall have a lot of this in future. It illustrates the general point made by the right hon. Member for Down, South (Mr. Powell) and the hon. Member for Newham, South (Mr. Spearing). I do not know whether the Financial Secretary can offer any consolation or whether he wishes to do so, but I fear that this is a portent of things to come. We shall have this system in ever-increasing degree and with increasing complexity and variety.

11.40 p.m.

The Financial Secretary to the Treasury (Mr. Robert Sheldon)

The earlier draft was considered by the Scrutiny Committee and was debated on the House. We are now dealing with a change in the Ways and Means Resolution No. 14 which was taken at the end of the Budget debate, a change which has arisen as a result of the Danish Government's reservations on their agreement to the directive.

Resolution No. 14 dealt with a Community obligation on the assumption that by the time we discussed Clause 13 and Schedule 6 it would be a Community obligation. However, as yet it remains a proposed Community obligation. I felt that, rather than put it in that form, I would provide the basic text to the House and talk about the draft directive so that all hon. Members could see what we were debating.

This is a matter on which Clause 13 and Schedule 6 will be dependent. The hon. and learned Member for Beaconsfield (Mr. Bell) asked whether the draft directive would be changed. The answer is "No". It is the draft embodied in Clause 13 and Schedule 6 that will be debated in Committee on the Finance Bill. That makes clear what the document is.

I dealt with it in my speech on the Budget, but among its more important aspects is the fact that it does not affect the practical working of the everyday matters of VAT for the vast majority of traders. These are essentially technical and minor matters that are consequential upon harmonisation.

There were two or three critical points with which we were concerned. We have obtained considerable concessions for the VAT system practised in this country.

Mr. Ronald Bell

The Ways and Means Resolution, as amended, says: as required by the draft Sixth Council Directive". That directive should, therefore, be changed before we reach the clauses in question, because they may not implement what is required by the Sixth Directive. What would the Financial Secretary do then?

Mr. Sheldon

It is not for me to complain about hon. Members being suspicious. I have often had suspicions in the past, but we are talking about a draft directive copies of which were put in the Library of the House on 1st April. There is clearly only one such draft directime. The hon. and learned Gentleman can be assured of that.

Question put and agreed to.

Resolved, That the Resolution of the House of 4th April 1977 (Value added tax) shall have effect as if for the words 'so as to give effect to Community obligations' there were substituted the words as required by the draft Sixth Council Directive on the harmonisation of the laws of the Member States relating to turnover taxes copies of which were deposited in the Library of the House on 1st April 1977'.