HC Deb 28 January 1993 vol 217 cc1263-86
Spearing

I should like to speak to two of the amendments in the group tabled by my right hon. Friend the Member for Bethnal Green and Stepney (Mr. Shore) and others. The first relates to the derogations on VAT —[Interruption.]

Mr. John Wilkinson (Ruislip-Northwood)

On a point of order, Mr. Lofthouse. Is it in order for hon. Members to chat across the Chamber?

The First Deputy Chairman

I have not heard anything untoward.

Mr. Spearing

Amendment No. 422, which refers to article 99, provides that it should not apply to the ending of derogations permitting zero-rating of VAT". Amendment No. 423, which refers to the same article, provides that there should be no further harmonisation in respect of excise or other internal taxes. Although I may be a little technical, Mr. Lofthouse, I hope to be in order because my remarks will be entirely related to both those taxes.

Before we discuss the merits of those taxes, it is important to explain a little about the history of VAT and its operation. Most Conservative Members entered this House at a time when they were already paying VAT. However, some of us remember the debates about the merits of VAT, which the Government of the day told us had nothing to do with entry to the Common Market, as it was then called.

There were heated debates on value added tax, especially on children's shoes—which are currently derogated from the sixth VAT directive. Indeed, the exchanges in those debates were even more heated than those to which we have just listened. The then hon. Member for Finchley—now Baroness Thatcher—was inveigled into the Lobby to vote against an amendment tabled by shadow Treasury Ministers to exempt children's shoes from domestic VAT. Such was the pressure on Conservative Members that even the noble Lady voted against derogation at that time.

That sixth directive was introduced in 1979 by a previous Labour Administration, interestingly enough under the signature of John Silkin, the then Agriculture Minister. One of the technicalities of the sixth directive was that it was passed not at a meeting of the Finance Council —no doubt the sort of meeting that the Paymaster General is used to attending—but at a meeting of the Agriculture Council. That directive, on which all these matters rest, was passed by the Agriculture Council. I have explained that as a point of information for the Committee because it shows the degree to which these matters are constitutionally complicated within the EC.

The sixth directive is still in force and it was referred to in exchanges between the Front-Bench spokesmen earlier. The Paymaster General reminded us that we are now in the third or fourth amendment to the sixth directive, which will last to 1996. Then, the whole matter is open to renegotiation. If I am wrong on that point, I am sure that the right hon. Gentleman will correct me. He knows that there are so many complications in these matters that those of us who observe from the outside are not always absolutely right.

Sir John Cope

Technically, the hon. Gentleman did not express the matter quite correctly, but I do not think that the differences between the way that he put it and the facts of the matter are likely to be material to his argument.

Mr. Spearing

I am grateful to the right hon. Gentleman. Translation of these complicated matters is important for those who are listening to us or who may read our words. I shall try to use non-technical language.

The imposition of the sixth directive, which Britain is still under in its present guise, has not always been open.

Hon. Members will remember that, about half a dozen Budgets ago, the noble Lord Lawson, then the Chancellor of the Exchequer, introduced a Budget with a great mystery in it which related to VAT on building repairs. There was enormous concern about it on the Government Benches and particularly among charities and churches. Estimates of all sorts, including housing estimates, were put under question. No one could discover what that imposition of VAT on building repairs, which were hitherto exempt, was about.

The Select Committee on European Legislation took evidence from a predecessor of the Paymaster General, the right hon. Member for City of London and Westminster, South (Mr. Brooke), and we asked him about the imposition of VAT on building repairs. In a note to us afterwards, he agreed that that was due to some correspondence that he had had with the Commission, and pointed out that, under the sixth VAT directive, Britain was under an obligation to charge VAT on building repairs.

That was done subfusc, it was not publicised in any way and it came out only in a footnote to the evidence given by the right hon. Gentleman. I pay tribute to some of his work on the Finance Council. The Paymaster General will know something of that. The right hon. Member for City of London and Westminster, South did some sterling work and he admitted that as a fact.

No one in Britain at the time, or perhaps since, was aware that the imposition of that controversial tax was a direct result of the treaty and of letters passing between the Commission and the Treasury, making the Treasury change Britain's taxes without admitting the origin of the new tax.

That matter was not as open as matters are after the Budget when we go to the Vote Office to collect reams of paper with all sorts of details. Millions of pounds must have been paid then and since. There are similar incidents in relation to spectacles and construction. I think that I am right in saying that VAT has now been levied not just on repairs but on new construction as well. Subject to anything that the Paymaster General says, I believe that they stem from the same source.

Mr. Tim Smith

Was not VAT imposed on new construction following infraction proceedings against the United Kingdom in the European Court, introduced in the 1988 Budget and implemented in the 1989 Finance Act? I should have thought that that was all straightforward and above board.

Mr. Spearing

It was not done subfusc and secretly. If it was done on that occasion, as the hon. Gentleman correctly, I think, reminds me, it was done as a result of a court action. But the origin of that tax and its enforcement was the same place. One tax was completely secret, one was completely open. But there can be no doubt that their imposition was against the wishes of the Treasury which fought it in the court, lost and had to come to the House and admit that that was what they were having to do. I see that the hon. Gentleman nods and I thank him for his correction. As I said earlier, I want to deal with these complicated matters in language that those outside can understand and so understand clearly what is at stake in this debate and in this treaty.

Sir Teddy Taylor

Is the hon. Gentleman aware that, as a result of those wonderful infraction proceedings moved against the United Kingdom, the Avenue baptist church of Southend, a worthy organisation, having just raised more than £300,000 to extend the church premises for youth and other work for recreation, has been advised that it will now have to pay £65,000 in VAT? Is not that a matter of real concern? What good does it do for anyone, and what good does it do for our democracy, when we have simply to say to the Avenue baptist church, "I am terribly sorry, you may have raised all that money, but you will have to pay £65,000 to the Government because of infraction proceedings"? Surely it makes us look stupid to do something that is basically wrong and against all that is good in society.

11 pm

Mr. Spearing

I am grateful to my hon. Friend and to the hon. Member for Beaconsfield for emphasising that point, because references to the court have been made in recent debates—particularly in relation to coal, which I must not mention in this context; unless, of course, heating will be subject to VAT. In some parts of the Community, VAT is imposed on not just industrial heating—when it can be passed on as part of the VAT chain—but the heating of domestic premises. Coal and oil are very relevant in that respect.

My hon. Friend the Member for Bradford, South (Mr. Cryer) is right. The court may think differently about certain cases. Is that consistent? It may be helpful in certain cases, but in others it may not. It certainly was not in the case of the construction industry, when the court ended the most effective derogation that we had at that time.

Mr. Leighton

When VAT was imposed on various forms of construction against the wish of everyone in this country, was that done at the same time that VAT was levied on health and safety boots and helmets for British

Mr. Spearing

My hon. Friend reminds me of that package, but I am not sure that was done at the same time. It was certainly at about the same period—and there was also shock, horror over a measure concerning spectacles. I distinctly remember a wave of two or three judgments coming to the notice of the House, and embarrassed Ministers at the Dispatch Box facing enraged right hon. and hon. Members in all parts of the House. We could experience that again and again and again, for reasons that I will state—and I suggest that the Financial Secretary cannot deny the possibility that the loss of derogation will continue. No one can prove that that will happen, but I shall explain why I believe that is very much on the cards.

Passing amendment No. 422 would put a stopper on all that. The Committee will have grasped by now, because the Chair made it clear, that this debate enables us to put a filter or stopper on any of the additional obligations that the treaty places on the House, the nation, Her Majesty's Government, and Her Majesty herself—who will no doubt become a citizen of the European union, as will any future British monarch. Amendment No. 422 would stop the future loss of derogations that we have gained and take it out of the ring in negotiations.

After the phase of derogational loss by a letter of infraction and court procedure, we saw the coming of the single market. Lady Thatcher sent a technician, Lord Cockfield, to Brussels, and he went about his work with a real will. Under the Single European Act he had been given the task of creating the single market by 1 January 1993. We had a long list of 295 regulations and vast numbers of suggestions and papers. Among them was a stringent proposal for harmonising VAT and excise duties.

During one of my visits to Brussels as a member of the Select Committee, I discussed those proposals with officials. The proposal for VAT was contemplated with some horror as many of the countries in the Community put VAT on food, water, public transport, heating and, above all, newspapers, books and magazines. Lord Cockfield said that if we were to have a single market we would have to harmonise all that.

In an earlier debate today, the Paymaster General very neatly made the point that harmony was sometimes more attractive than unison.

Sir John Cope

I said that they were different and tried not to take sides about which was more attractive in the musical sense. Later I was taken to task about which was more attractive in chapels. I made the point that they were different musically, but certainly in taxation harmony is more desirable than complete unanimity.

Mr. Spearing

I shall return to that later, as it is a helpful analogy, even in the unlikely sphere of finance.

Lord Cockfield produced a drastic proposal for the harmonisation of excise duty. There may have been some advantages to some countries involving petrol and diesel oil, but the biggest change affected alcohol. We all know the level of taxation on alcohol in certain of our continental neighbours. They are quite entitled to that and I do not blame them. They have different traditions, climates, crops, methods of farming and so on. As long as we do not have to pay for their surpluses, good luck to them. However, the duty they place on alcohol per degree proof is extremely low.

I was talking to an official in the Berlaymont building and I said, "Don't you realise what you are proposing? Our Exchequer gets something like £3,000 million a year from alcohol duty. If it were reduced to about £700 million, the effect would be enormous, not just on the Exchequer, because taxes would have to be raised elsewhere; we would have to raise income tax or increase VAT on a whole range of things. Perhaps you do not realise that in the traditions of our country that particular taxation has a social side."

He replied, "The social side does not matter. That is for the social and economic committee and the Social Council." At that stage, at least at the official level, there was a lack of recognition that in Britain the excise duty has a multiple objective which, at least in principle, has the agreement of many people.

Most people in the Community found that the Cockfield medicine was a bit too strong and after a couple of years the proposal was withdrawn.

We have before us a proposal for two broad bands of VAT. One is for necessities, with a rate of 3 to 5 per cent., and the other is for a standard VAT target of between 12 and 20 per cent. At the stage when our rate was 15 per cent., we were in the middle and we regarded the position as satisfactory, as the Chancellor of the day did not have to increase the rate in the Budget. Now, with the rate at 17.5 per cent., he has less of a range within which to operate, but I must not try to anticipate his Budget.

In the proposals negotiated at that stage, we kept those derogations. But, as the Paymaster General agrees, they continue only until 1996. "Everything will be all right on the night," say the Government, "because the decision must be unanimous. Article 99 requires unanimity, which gives us a lock on the door," which the Home Secretary was keen to call a double lock.

If that lock is unlocked and the Government of the day pass through the door—nobody can be sure of the type of Administration who will be in office in 1996; I hope it will be the Labour party—they will face a dilemma. Whatever the reason for passing through the door, once they are through it, the door will be locked. Whatever the issue that led to our passing the lock—or passing the second lock to which the Home Secretary referred—no Government of their own volition will be able to change the position existing then.

It can be changed, but not just by a majority vote by friends who may agree with us. Remember, the people about whom we are speaking when we talk of "us" will not be us. They will be here 20, 30, 40—goodness knows how many—years in the future. We are legislating for people yet unborn who have not had a chance to vote. They will not be able to change the position.

Some people are inclined to say of us that we cannot achieve change, that we are like putty, that we come here to play and achieve little. I try to persuade them otherwise. Up to at least 1973 we could do something about legislation. Indeed, I had the privilege of making the last speech from the Back Benches on the European Communities Act 1972. No longer can we say, "Change the party, change the policy, go to your MP and get him to change it in Parliament."

Doors have been locked behind us one after another during the last 20 years. The occasions when we can make such statements to the rising generation in defence of representative democracy are growing fewer and fewer, just as their discontent is growing greater and greater, particularly in matters of taxation. That makes the amendment especially important. The position is not, as the Financial Secretary recently assured me, fully safeguarded. It is safeguarded only until 1996, after which it will be up for grabs.

Mr. Dalyell

Is my hon. Friend aware that I find the rising generation in my constituency very pro-European?

Mr. Spearing

Can I take this to the tax issue? I am not sure that they are very keen on European taxes, because, I suggest to my hon. Friend the Member for Linlithgow (Mr. Dalyell), I do not think the rising generation in Linlithgow, Newham, Stepney, Beaconsfield, Aldridge-Brownhills, or in Harrow—and I see that the hon. Member for Harrow, East (Mr. Dykes) is not here now —know very much about EEC taxation.

The bulk of EEC taxation is in VAT-related charges. I have one more point on 1996, but before that I give way.

11.15 pm
Mr. Cryer

Will my hon. Friend accept that whatever part of the country one visits, if one discusses the Common Market, as soon as one gets on to the common agricultural policy, which is a form of taxation amounting to £17 a week for every family in this country, people very quickly become disillusioned about the Common Market if they were not already?

Mr. Spearing

My hon. Friend has a good point because taxation of food was only introduced in this country in 1973, after we joined the Community.

Mr. Llew Smith

My hon. Friend mentioned parliamentary democracy. Listening to him, it seems to have little relevance to the taxation issue that we are discussing. I was listening to him and some other hon. Members some weeks ago when they seemed to imply that there was little democracy in terms of the regions and some weeks before that I heard some hon. Members saying that there was little parliamentary democracy about the central banks.

The First Deputy Chairman

Order. The hon. Member has been sitting here for some time and he will have heard me rule an hon. Member out of order for speaking about the central banks. This is about indirect taxation and he must stick to that.

Mr. Smith

I am responding to the point which my hon. Friend made about the importance of parliamentary democracy. I was going to make the point that I represent an area which is famous for Chartism and recently celebrated the history of the Chartist struggle for the right to vote.

The First Deputy Chairman

The hon. Member may wish to do so, but that is nothing to do with this amendment.

Mr. Spearing

Taxation and representation go together. If the Chartists were not very keen on taxation, they were keen on representation.

That brings me to the other point about 1996, and the fundamental change that is almost bound to come then in some form or other. We have been told by the Home Secretary and the Paymaster General about the double lock. They said that it was a unanimous lock, and that we could do something about it. Indeed previous Ministers, including Baroness Thatcher, often said that it was unanimous and was therefore okay, implying that we had to get agreement before there would be any change, and she or the Minister in a Department would not budge on anything because it had to be unanimous. It was a sort of black ball in reverse. If one did not get agreement, stationary would be the position. That is the implication we have had, time and again, even at the time of the referendum. No British Minister in Brussels—

Mr. Quentin Davies

The hon. Member is always well informed on European Community matters and I listen to him with great interest, but I do not share his Doomsday fears about British democracy. [Interruption.] If the hon. Member can think of nothing better than personal insults, it shows a tremendous bankruptcy of ideas.

To return to the hon. Member for Newham, South (Mr. Spearing), he accepts the principle of the single market and of the free movement of goods within that single market, I think. Does he not acknowledge that inevitably, if one has a single market of that kind, the extent to which member states' indirect taxation rates can vary is necessarily constrained and that that is necessary for economic reasons? Otherwise there is price arbitrage created by consumers and we are already facing an element of that with the tobacco and alcohol purchases across the continent. If the hon. Gentleman wants a single market, as I believe he does, will he acknowledge that a de facto move towards greater equality of indirect taxation is inevitable?

Mr. Spearing

I will reply to the hon. Gentleman's main thesis when I have completed the next section of my argument, which concerns the importance of VAT within the financial structure of the Community. I think that you will agree, Mr. Lofthouse, that that is central to our consideration, and additional to the points that I have already made. I must, however, make one factual point now: I do not think that I have ever gone on record as being in favour of the single market. [Interruption.] Well, I must have expressed my opinions in a very muted way. I am glad to say that the reason for that no longer exists, and I can now be absolutely frank.

I have never been in favour of the European Community, as set out in the treaty of Rome; I am in favour of a real European community, which is not in the treaty of Rome. That is a long-standing belief of mine, which I shall be happy to debate with anyone at any time, especially in the constituency of the hon. Member for Stamford and Spalding (Mr. Davies). Of course the hon. Gentleman is not too worried about the demise of democracy, which is already proceeding apace in this country, mainly because of the European Communities Act 1972.

Mr. Michael Spicer

On a point of order, Mr. Lofthouse. About half an hour ago, in another point of order, the hon. Member for Norwood (Mr. Fraser) asked you to take into account the fact that he was never called. I think that he added that I was often called—although I have been called only three times in about 11 debates. Should it not also be taken into account that the hon. Gentleman is usually not present? I have just looked across at the Opposition Benches, and noted that he is not present now.

The First Deputy Chairman

I have already ruled on that point of order. As I said then, the Chair takes everything into consideration.

Mr. Spearing

The hon. Member for Stamford and Spalding is here, however—which reminds me of a conversation that I had with an eminent banker. No doubt the hon. Gentleman, who I believe is also a banker, is not too worried about the demise of democracy, as some of my hon. Friends and I see it. In the Maastricht treaty, taxation and banking are closely related, and we seem now to have a Government of bankers, by bankers, for bankers.

Was not the Prime Minister a banker? And the Secretary of State for Transport? They, and the hon. Member for Stamford and Spalding, are not too worried, because the treaty favours bankers. The hon. Gentleman is a thorough believer in the conspiracy theory of history. I am not; I believe that people who occupy a privileged position through statute in their own nation will always seek to extend that advantage.

Mr. Richard Shepherd

The hon. Gentleman is dealing very gently with my hon. Friend the Member for Stamford and Spalding (Mr. Davies). The whole basis of this part of the treaty is the subject of our debate. The hon. Gentleman accepted the contentions of the article, expressed in the form of an assertion by my hon. Friend, as if they were fact; in truth, they are false coinage.

We are discussing why it is necessary for a common market to require harmonisation of tax levels. No economic theory asserts, as has my hon. Friend, that such harmonisation is a prerequisite to the achievement of a market: we have seen that in the United States and elsewhere. So please bash him down!

Mr. Spearing

I love bashing bankers, and I have done so on occasion; but one must deal with other hon. Members on an equal basis, without having one's cheque book handy or one's mortgage around one's neck. However, I thank the hon. Gentleman for his intervention. I told the hon. Member for Stamford and Spalding that I would deal with his point at the end of my speech. I said that, in the meantime, I would deal with two other matters —what will happen in 1966; and the part that VAT plays in the financial structure of the Community.

Following some refreshing exchanges, I come now to the question of what will happen in 1996. I have referred to the oft-repeated remark of the noble Baroness Lady Thatcher and her Ministers that everything would be all right on the night because we had the veto. But what happens in practice? Conservative Members have memories, and two of my hon. Friends who were Ministers know what went on.

Mr. Cryer

Three.

Mr. Spearing

Yes, three. I do not always associate my hon. Friend the Member for Bradford, South with these things. I am sure that if I have got this wrong, the three former Ministers will put me right. My right hon. Friend the Member for Chesterfield (Mr. Benn) not only agrees with what I am about to say but has related spicy anecdotes to back it up.

It is not simply a question of the Council of Ministers sitting round a table; it is also a question of the pyramid of officials in the various offices, including the committee of permanent representatives, a reference to which, incidentally, appears somewhere in the treaty. Certainly there are now more committees of officials. What do they do? And what does the Foreign Office do? The internal department of the Foreign Office and the Prime Minister's office are co-ordinating all the time.

Mr. Cryer

Four Ministers.

Mr. Spearing

Yes, four Ministers. They know all about it.

What happens when important negotiations take place? Do they confine themselves to the narrow issues involved, as, under our procedures, we attempt to do? Members of the House of Commons are able, individually and collectively, to separate issues from one another. Of course, there have to be deals in respect of certain matters. I do not know how far common sense extends, but it is at least apparent. But what happens when there is to be a big Community deal on finance? Are such things as airport slots and agriculture entirely irrelevant? Of course not. When representatives get round a table at Holyrood or the Champs Elysées, these things come together.

Let me give an extraordinary example relating to finance and taxation. The rebates negotiated by the then right hon. Member for Finchley, Mrs. Thatcher, at Fontainebleau about 10 years ago were presented as a great triumph for her. A short time previously the Heads of Government met at Stuttgart and issued a solemn declaration on European union. When these matters come up for debate in 1996, other issues will be on the table. Is the Minister to tell us that the continued derogations for which his successor will fight will be isolated and considered purely on the merits of taxation policy? Are we to be told that that Minister will not deal with some other treaty that is up for renewal at that time? In fact, he will have to deal with an across-the-board package. Nobody can pretend that there will not be a range of considerations involved in some sort of deal. Taxation, because it is money, will play a very important part.

It would be a matter of what is possible. If any hon. Gentleman of any party, who is in a position of ministerial responsibility at that time, thinks that he can get away with a certain derogation on something that will not raise the ire of the populace as much as something else might, he may as well deal that card in order to get something else. That is the way that finance and other matters in the Community work, and everybody knows it.

11.30 pm

That brings me to the question of VAT within the Community itself. There was a time when everybody thought that 1 per cent. of what was spent in VAT went to the Community; some people still think that. Do hon. Members remember the ceiling that Lady Thatcher came up against, and instead we had an intergovernmental agreement to raise the money? It is no such thing: it is 1 per cent. of a VAT assessment. The assessment is not the amount that we get; it is an assessment by the Commission and the finance officers of the Community of the VAT-able turnover of the country. They say that we should pay across 1 per cent. of that figure. If we do not put VAT on some of the derogated items, as we do not, we have to make up through some other form of internal transfer the money that we have received in the Exchequer through VAT. In other words, VAT as an income and as a tax is not directly linked with the VAT assessment made by the Community, but the amount of money that we can raise and devote to that end is.

My hon. Friend the Member for Linlithgow, if I may have his attention for a moment, asked about his young people there. I wonder whether they know how much of their equivalent of VAT goes to the EC. I can tell them: about £4,000 million a year, in 1991 values, went to the EC in 1992. In broad terms—the Paymaster General may be able to confirm this when he replies, as I hope he will—it is somewhere between 10 and 12 per cent. of the VAT take. It varies up and down, according to the basket of the ecu and the level of sterling. I assume that what has happened is that, as sterling has gone out of the exchange rate mechanism and we have rather less, the amount that we are having to put across in our VAT contribution to the Community will be rather less than it once was. But in 1992 it was around £4,000 million. I will quote all figures in 1991 values, for reasons that I will make plain in a minute.

Sir John Cope

I did not want to interrupt the flow of what the hon. Gentleman was saying, but the net contribution to the European Community in recent years has been about £2,000 million. The hon. Gentleman should compare that with the yield of value added tax in this country which, last year, was just over £35,000 million. He was drawing attention to one part of the way in which the contribution of member states to the Community is calculated, the so-called third resource, which is done on what, to use shorthand, I would describe as a kind of artificial VAT base, that is, one which is calculated, as he indicates, on the same basis for each of the countries. An adjustment is done to the figures to make sure that it is done on the same basis for each country.

Mr. Spearing

I am very grateful to the Paymaster General who, like his predecessors—and I must say that —has been a rather different order of Minister in these matters, perhaps because finance is an exact mathematical matter and it is less easy to change the nuances in financial matters than it is in others. I am grateful to him because that is what I was coming to.

When we completed the transition period and had the full finance going, VAT contributed, I think the right hon. Gentleman will agree, about one third of our contributions to the EEC. At that time Customs levies were the biggest resource that we paid over, but he will also agree, I think, that the net figure, which he correctly quoted, is a result of what is paid over compared to what is coming back, adjusted by the Berlaymont abatement.

I am coming to that, because I think the figures ought to be advertised, particularly the VAT ones, since they are not generally realised, even by the strongest critics of the European Community and its finances. They really are quite startling.

I will take the 1972 figures, again quoting in 1971 values. I have had these calculated by the Library, which has also provided me with a wonderful graph, which puts it all even more simply than words, but I cannot show it visually.

The figures show that £4,000 million went to the EEC from VAT and £1,600 million from Customs, and from the gross national product—the fourth resource, I think—broadly £1,100 million, making a total contribution of £7,000 million. That was our 1972 contribution to the EEC. But the receipts—and of course the bulk of those were in the agricultural fund—amounted to only £2,900 million: less than half our contribution; indeed, only three quarters of the VAT-related contribution. That was all we got back. There was a deficit, therefore, of £4.2 billion. That was our imbalance. We were net contributors, after the rebate, of £4.2 billion.

It is true—and Treasury Ministers always mention it —that that was after the rebate, but the rebate, of course, if I am correct, is also on leasehold. The rebate has been successfully maintained, but it is coming up again, if not in 1996, not very long afterwards.

Sir John Cope

All this has nothing to do with article 99, or the amendment, or anything that we have been discussing this evening. It has to do with the contribution to the European Community. However, the hon. Gentleman will no doubt be pleased to learn that at the Edinburgh summit a short while before Christmas the United Kingdom abatement was extended to the end of the century. Thereafter, of course, another decision will require to be made.

He may also like to know that the third resource, the VAT resource, was reduced in its importance by various extra restrictions, which it would be improper of me to go into at this point. But if he consults the evidence that I gave only yesterday to the Treasury and Civil Service Committee, when it is published in due course, he will see some more details. The proportion of the Community contribution which is to come from the VAT resource in future will reduce over the period of the financial perspective—that is to say, between now and 1999.

Mr. Spearing

I am grateful to the Paymaster General for giving us that information. I said that I knew that it was some time in the future. He has now told us that our VAT-related contributions will be going down, but of course the amounts may well be rather big. I was rather surprised, his having agreed with me the net figure of £2.4 billion after abatement, which he mentioned himself a little while ago, at his reaction to my going through the figures, because it is not possible to find them very easily.

Mr. Leighton

Is my hon. Friend saying that we are sending vast amounts of taxpayers' money to Brussels, where they are translated into 11 languages, as it were, and that a small proportion of them is returned to us? Surely we are subsidising countries that are much richer than the United Kingdom. Is this true?

Mr. Spearing

I shall not go down that road, Mr. Lofthouse, because if I were in your position I would pull myself up. I say only that this year about a third of what we contributed was paid back. That is without the Fontainebleau arrangement.

The hon. Member for Stamford and Spalding has challenged me by saying, "You can't have a proper and common single market without a single system of taxation." I think that that was the burden of his remarks.

Mr. Quentin Davies

With respect, that is not what I said. I was not suggesting that any formal harmonisation was required. I said that if we agree that there should be a free exchange of goods across frontiers without controls and restrictions and that my constituents and the hon. Gentleman's, for example, should be able to go to France, Belgium or Germany to make their personal purchases and bring them back to the United Kingdom—I thought that he agreed with that liberal development, but perhaps he does not—we must agree also that the corollary of such a single market is that the scope within which individual member states can vary their rates of indirect taxation must, de facto, be reduced by market pressures. People will not cross the channel or drive hundreds of miles to save 1 or 2 per cent. on the price of goods, so some variation in indirect taxation will be possible and sustainable. That is what happens in the United States. On the other hand, people will travel long distances to save themselves 10, 15, 20 or 25 per cent. There is that market constraint. That is what I was talking about. That is very different from formal and deliberate harmonisation, which I do not believe is necessary.

Mr. Spearing

But article 99 says that it is necessary, and that is something which the hon. Gentleman clearly supports. However, I do not agree—I was grateful for the intervention of the hon. Member for Aldridge-Brownhills (Mr. Shepherd) earlier—with the hon. Gentleman's premise. Instead, I believe in common sense in the face of article 99 and variations in VAT or excise duty. It is in that light that the amendments are designed to protect the people of the United Kingdom, and that protection could he forthcoming. The acceptance of the amendments would mean that the Government would be instructed by Parliament to say, "We shall go along with article 99 as long as it means that we do not have to have any more derogation losses on VAT. We shall go along with article 99 as long as there is no further harmonisation of excise."

It is not necessary to take these matters to the degree of a mathematical level table. The Community has said, "We shall get as reasonably close as we can to a unified system on the basis that it is a mechanism that does not distort the market very much in practice." In other words, it is willing to make a compromise. That is the position that the Community has reached.

That brings me to harmony. It is said that we can achieve what are considered to be the benefits of a single market without frontiers and barriers—I happen to think that such benefits do not exist—by bringing together different notes to produce the whole. It is said that there is no need for that to happen in unison. In other words, we do not have to lose our derogations from VAT on necessary items and we do not have to put up with the harmonisation of excise duties. That is why I hope that my right hon. and hon. Friends will support the amendments.

11.45 pm
Mr. Tim Smith: (Beaconsfield)

It would be nice to be able to say that this has been an illuminating debate, but I fear that there has been some obfuscation—some deliberate and some voluntary. However, the hon. Member for Newham, South (Mr. Spearing) gave us an illuminating account of the history of value added tax in the European Community.

Article 99, as amended by the treaty, makes no significant difference to that article as it appears in the Single European Act. It merely adds consultation with the Economic and Social Committee. If one reads the reports of the debates on this subject in 1986, one finds that the fears expressed then are similar to those being expressed now. The only substantial change in VAT since 1986 arises from the infraction proceedings to which I referred earlier.

Those proceedings were based on the sixth EC VAT directive of 1977, which the hon. Gentleman rightly mentioned. That directive was agreed by the previous Labour Government, and the hon. Gentleman told us that it was agreed by the Minister of Agriculture, Fisheries and Food. I was not aware of that, but it could explain a great deal. It is that directive with which we have to deal, and it is based on the original article 99 of the treaty of Rome.

Even with the Single European Act, article 17 of which amended the original article 99, there has been very little change to the treaty of Rome. Therefore, in many ways, this debate is irrelevant, because the Maastricht treaty makes no substantial change to the arrangements of indirect tax harmonisation.

My hon. Friend the Member for Worcestershire, South (Mr. Spicer)—

Mr. Wilkinson

Just because the provisions in the proposed treaty on European union differ only in minute detail from those already enacted in the Single European Act is no reason not to examine them critically or to draw sensible conclusions, especially as my right hon. Friend the Chancellor of the Exchequer consciously forwent the perfectly sensible, independent option of lowering VAT, if necessary below 15 per cent., in favour of adopting a European directive requiring a minimum level of 15 per cent. That was the first instance in recent days of the potential damage to the Treasury's independence which the provision encapsulates.

Mr. Smith

I was about to say that my hon. Friend the Member for Worcestershire, South had made that very point, that it was perfectly legitimate to scrutinise these issues again. He was straightforward in saying that he had previously got it wrong—he had voted for the Single European Act and article 99 as amended by article 17 of the Single European Act, but he was now worried about what might happen in the future.

I think that my hon. Friend the Member for Ruislip-Northwood (Mr. Wilkinson) is in the same position, and I do not dispute the fact that it is perfectly legitimate to scrutinise the proposals again. My point is that similar fears were expressed in 1986, and the only substantial change which has taken place since is that to which I referred.

Mr. Cash

Answer his point.

Mr. Smith

If my hon. Friend the Member for Stafford (Mr. Cash) will be a little patient, I shall come to that.

Dr. Norman A. Godman (Greenock and Port Glasgow)

Address the Chair.

Mr. Smith

I apologise, Mr. Lofthouse.

My hon. Friend the Member for Ruislip-Northwood referred to the recent agreement reached by the Council of Ministers on a minimum standard rate of VAT of 15 per cent., but that does not arise from the Maastricht treaty. It has nothing to do with the treaty but arises from the existing article 99. I read the record of the debates that took place then. We should remember that article 99 is subject to unanimity. During the Second Reading of the European Communities (Amendment) Act 1986, my hon. Friend the Member for Stafford said: We tend to exaggerate the dangers of majority voting. We live in a global economy but have to keep our interests ahead of other people's. We must have regard to our own interests while working in the EC."—[Official Report, 23 April 1986; Vol. 96, c. 378.] I am sorry that he does not feel the same now. Very little has changed in the intervening period—all that has changed in relation to VAT is the decision of the European Court.

Mr. Cash

I do not depart from one word of what I said then, and I repeat it. There are a tremendous number of benefits to be derived from the single market, but the difficulty is the way in which it is being manipulated, and the Commission's complete failure to subscribe to the rules, so that we frequently operate on illegal treaty bases. That throws up considerable doubt, which the Select Committee on Trade and Industry is now investigating.

The First Deputy Chairman

Order. That is in no way concerned with direct taxation.

Mr. Smith

To return to the subject of indirect taxation, when the hon. Member for Oxford, East (Mr. Smith) moved the amendment, which would have no significant effect—

Mr. Marlow

Will my hon. Friend give way?

Mr. Smith

I think that I had better press on.

Mr. Marlow

May I make a brief but important point? My hon. Friend says that all that stuff about indirect taxation and VAT has to be decided by unanimity. We all know that our right hon. Friend the Chancellor of the Exchequer did not want to agree a minimum rate of VAT at 15 per cent. Yet, despite the fact that he did not want to agree, and despite the requirement for unanimity, that rate was agreed.

Does that not point to many sections of the treaty which require decisions to be made by unanimity but on which, despite the fact that the Committee is told that we shall have safeguards and that there will be no majority voting, the Government will be pressured into making decisions that they do not want to make?

Mr. Smith

Unanimity means that, if the Government take the view that our vital national interests are at stake, they will not make the concession that other members of the Council are making. In this particular case—

Mrs. Gorman

Will my hon. Friend give way?

Mr. Smith

I am trying to answer the question asked by my hon. Friend the Member for Northampton, North (Mr. Marlow), and I am only halfway through doing so —[HON. MEMBERS: "Oh."] But I will give way to my hon. Friend the Member for Billericay (Mrs. Gorman) in due course.

What was the question that my hon. Friend the Member for Northampton, North asked about? Oh yes, it was about unanimity. If the Government thought that our vital national interests were at stake, of course they would use what is effectively a veto. But in this particular case, our standard rate of VAT is 17.5 per cent., and I do not believe that the Government have any intention of greatly reducing it, so there is no practical effect.

Mrs. Gorman

Will my hon. Friend explain to me how the Chancellor's decision on the 15 per cent. base rate could possibly help this country, when, as a result of it, the horse racing industry, for example, is decamping to Ireland, where the rate is 2.5 per cent.? Why does unanimity appear to apply to us but not to our competitors?

Mr. Smith

My hon. Friend has my total sympathy; I agree with her. It is not our Government but the Irish Government who are at fault, and the matter should be dealt with by the European Commission. The hon. Member for Oxford, East referred to that matter, among other things. It is important, but it does not arise directly from the amendment, which the hon. Member for Oxford, East said was a probing amendment—[Laughter.] That is what the hon. Gentleman said, and the amendment has enabled us to have a useful debate. But now we should agree to throw it out so that we can have article 99, as amended, in the treaty. I am sure that the hon. Gentleman would agree to that.

Mr. Denzil Davies (Llanelli)

My hon. Friend the Member for Newham, South (Mr. Spearing) made a marvellous speech which showed a complete grasp of the technicalities of VAT, but I must correct him on one matter—not only for myself but on behalf of my right hon. Friend the Member for Ashton-under-Lyne (Mr. Sheldon), who chaired those wretched meetings which finally arrived at the sixth directive. Perhaps we were all in the agriculture Committee—I do not know. Brussels is a funny place at 3 o'clock in the morning, and one sometimes does not know exactly which Committee one is in. Perhaps one final comma was approved at the end of the day by John Silkin in the agriculture Committee. I assure the Committee that we had night after night of discussion on that wretched VAT directive.

We have also heard about a purchase tax. It is perfectly in order, Mr. Lofthouse, to discuss indirect taxation. The article mentions turnover tax, which is probably VAT, and goes on to mention other forms of indirect taxation. I tend to agree with hon. Members who feel that VAT is not the best form of indirect taxation for the European Community. Some time ago Treasury civil servants were asked by the Japanese Government to go out to Japan to advise the Japanese Government on whether to introduce the kind of VAT that operates in the Community. I am told—this is all hearsay—that those civil servants had to consult Ministers on whether to go. Treasury Ministers were apparently enthusiastic that the permanent secretary to the Treasury should go to Japan. Some Ministers believed that one way of stopping the Japanese economic miracle in its tracks would be to export this crazy tax—which was invented by a French tax inspector and a German philosopher a long time ago.

The Japanese, clever people that they are, did not fall for it. They have no intention of introducing VAT; nor has the United States—

Mr. Richard Shepherd

It is too regressive.

Mr. Davies

Precisely. The pass was sold on this one. The Labour party voted against it in 1972, but the pass was sold. The tax is convenient for the EEC, but it will put Europe at a disadvantage in the competition that it faces and will face from Japan and other Asian countries, and from the United States.

So much for the history. We are saddled with the tax now, even though it is bureaucratic and rather inflexible.

I, like many other Members, have some dificulty with article 99. Either it is terribly important, or it is not important at all. My problem is with the words within the time limit laid down in Article 7a". As has been said, article 99 of the Maastricht treaty is not really different from article 99 in the treaty of Rome—except that that talking shop, EcoSoc, as we used to call it, has been incorporated in the new article 99. That is fine; if it wants to discuss these matters, no one objects.

Meanwhile, article 8a, in which the time limit is supposed to have been laid down, has become article 7a. The treaty of Rome used a capital "A"; this treaty uses a little "a". I suppose that lawyers would call that "de minimis", but we should not worry unduly about it.

At all events, article 8a—now 7a—gives the time limit as 31 December 1992, by which time all the harmonisation was to be carried out to ensure the establishment and the functioning of the internal market. As far as I can tell, once we have reached 31 December 1992, the article becomes defunct. Perhaps the Paymaster General will be able to tell me that I am wrong. Unless I am greatly mistaken in my interpretation, however, the article should not be included at all. It seems that the clever guys who drafted it have made a mistake—

Mr. Wilkinson

Will the right hon. Gentleman, who has one of the best legal minds in the House, elicit from the Financial Secretary a definitive answer to this important question? It will be germane to the whole debate on these amendments. Will he ensure that the Financial Secretary replies soon, and specifically?

Mr. Davies

The Paymaster General and not the Financial Secretary will no doubt reply to the debate. If we are right we can all go home and need not have this nice debate about VAT and unanimity or about the future of democracy or anything else. Perhaps I should move to another issue.

12 midnight

Sir John Cope

I can explain now rather than leave it until later. The passing of the deadline does not in any way invalidate—it would be wrong if it did the measures already passed, starting with the sixth directive and others which are based on article 99. Therefore, that article needs to continue after the deadline. The single market must continue to function effectively. There is case law to show that the passing of a deadline in a treaty article of this kind does not remove the obligation on Community institutions to take action which is prescribed within the deadline. I would not be surprised if in future hon. Members and people elsewhere in the Community draw attention to matters of indirect taxation which need to be based on article 99.

Mr. Davies

The Paymaster General has given the game away. He said that the obligation is to carry out the orders of the article within the deadline. I do not know what happened to the obligation, but the deadline has passed.

Sir John Cope

I have just explained to the right hon. Gentleman that the obligation does not end with the passing of the deadline: it continues and, as I said, there is case law to that effect. We and the other members of the Community have done our best to put the system in place. It is largely in place, but corrections and refinements may need to be made in future, and we need the treaty base to do that.

Mr. Davies

The obligation was to do something within the deadline, and the deadline was 31 December 1992. The Paymaster General can cite as many precedents as he likes, but that deadline has passed and the obligation can no longer exist.

Sir John Cope

The obligation remains. The primary obligation was to achieve as much as we could by the deadline. As I have already explained, there are perfectly good precedents, case law and all the rest of it, which the right hon. Gentleman can look up if he wishes, to continue the obligation insofar as it has not been fulfilled by the deadline, should that be necessary. In addition, article 99 is needed because it is the basis of the sixth and other directives. The right hon. Gentleman is not being as sharp as usual on legal matters.

Mr. Davies

The right hon. Gentleman cannot get away with that. We all know that the sixth directive exists and that steps can be taken without any of these measures because countries can get together and agree to amend the sixth directive and to harmonise. I do not care what case law says because there is no need to go to case law. The document states in clear language that the obligation is to do something by 31 December 1992. That deadline has passed and, as the condition precedent for the obligation is that the actions have to be completed by 31 December 1992, the obligation no longer exists.

Mr. Nicholas Winterton

On a point of order, Dame Janet. You will have heard the exchange between the right hon. Gentleman and the Paymaster General, who has said that there are precedents for what is being done. Does the Minister not have an obligation, in this case if nowhere else, to present the precedents to the Committee, failing which may I ask you to suspend the sitting?

The Second Deputy Chairman

That is not a point of order for the Chair, although it would make an intervention.

Mr. Davies

I do not want to labour the point. As I understand it, the article was incorporated into the Single European Act and provided for certain things to be done by the date when the internal market came into operation on 1 January 1993. It makes perfect sense against that background. It was inserted into the treaty of Rome because the Single European Act was inserted into the treaty of Rome. Then, someone did not get it quite right, so somebody else said, "We must put EcoSoc in there." Nobody really noticed that it was defunct because 31 December had gone.

Mr. Cash

The right hon. Gentleman is making a brilliant speech and raising many practical points. Has he noticed that article 99 merely provides that we should carry out that form of indirect taxation to the extent that such harmonisation is necessary to assist the internal market? Therefore, the arrangements being proposed by the Government are not necessary. Not only is the right hon. Gentleman right about the fact that the obligation had to be fulfilled by 31 December 1992, but it is not necessary anyway to go down this route to achieve the Government's objectives.

Mr. Davies

I agree that to some extent what is necessary is a subjective matter.

My hon. Friend the Member for Oxford, East (Mr. Smith) was terrified of even considering a vote on the amendment because he said that it was a wrecking amendment. Apparently, the whole of the Maastricht treaty would be destroyed if the Committee dared to remove this wretched article 99, which does not mean anything anyway. Terrible things would happen and the whole of western Europe would collapse. My hon. Friend began to sound like the Minister of State, Foreign and Commonwealth Office discussing the social chapter yesterday. "It is terrible", he said, "we shall have to have a conference." Of course, it might last only 30 seconds.

I am becoming worried about the Con-Lab pact; my hon. Friends are sounding more and more like Ministers. That is extremely worrying for Back Benchers. I ask my hon. Friend the Member for Oxford, East to go for a vote on the amendment this time. The whole of Europe will not collapse. Mr. Kohl will not be on the doorstep of No. 10 tomorrow morning berating the Prime Minister about it. They will call an intergovernmental conference, it will last 30 seconds and they will sort it out. It is not really important, so why suggest that it will wreck the treaty?

Let us suppose that the matter is important. I do not believe that it is, but the Paymaster General has a large brief and he believes that it is important. He has spent a great deal of time going back and fro to Brussels to discuss these wretched VAT directives. He has to believe it to be important. How on earth could he do his job if he did not?

Sir John Cope

I assure the right hon. Gentleman that I would not have taken the job if I did not believe it to be important, and I do. It was necessary to create the single market and now it is necessary to ensure that it functions effectively. Article 99 is all about it functioning effectively and we need to retain it to ensure that it continues to do so, especially with regard to the matters that we are discussing.

The right hon. Gentleman did not correctly understand some of the remarks made earlier by his hon. Friend the Member for Oxford, East (Mr. Smith) and by some Conservative Members, including myself. If the amendment were carried, it would not remove article 99 from the treaty. Its only effect would be to insert EcoSoc into our deliberations, which a few minutes ago the right hon. Gentleman said he would be happy to accept.

Mr. Davies

I understand that and I pay tribute to the right hon. Gentleman. I do not want to sound patronising, but he is an excellent Minister. He understands VAT. He is an excellent accountant. His law is a bit weak, but he is a good accountant. I am sure that he works hard. Customs and Excise has done well in trying to put into operation some of the complicated rules that have arisen.

Mr. Michael Spicer

My right hon. Friend the Paymaster General has said that the amendment will not remove article 99, but the amendment says that it will.

Mr. Davies

The Paymaster General did not mean that.

Mr. Spicer

That is why I am asking. I am sure that the right hon. Member for Llanelli (Mr. Davies) can give a good interpretation of what my right hon. Friend meant. But he said twice that the amendment will not remove article 99 when it says that it will. I do not understand the point that he is getting at.

Mr. Davies

The Paymaster General meant that if we remove the present article 99 we shall still have the old article 99, but EcoSoc will not be in it; it will be either article 8a or article 7a—I am not sure.

We have also discussed the binding obligation of the directive whereby we are now apparently not allowed to reduce VAT below 15 per cent. That may be the only time that a British Government have agreed to a binding directive—it may be only until 1996, although that is not clear either—denying the House the opportunity to reduce a major tax below a certain level. That is a substantial derogation from the sovereignty of the House.

In theory, we could reduce the tax below 15 per cent. in a Finance Bill, but any importer, exporter or business man in Britain who suffered damage as a result of that would be able to take the British Government to court and eventually the case would wind its way up to the European Court and the British Government would lose. An action was recently brought against the Italian Government for not carrying out a directive on redundancy payments and the Italian Government lost. Therefore, we have lost our sovereignty, certainly until 1996.

Mrs. Gorman

Is the right hon. Gentleman aware that there is an attempt to eliminate VAT between countries —to have a zero rate? However, the complications are such that the directive comprises 650 pages of closely typed instructions which business men on both sides of the transaction are supposed to read and understand. Does the right hon. Gentleman think that that will help or hinder matters?

Mr. Davies

That makes it more complicated. That is part of the Government's problem. That is why Lord Cockfield or the Commission later suggested that the tax should be charged at the point of production.

That binding directive is a major derogation from the sovereignty of the House. During the passage of the European Communities Act 1972, we were told that all taxation directives would have to be passed in the House through a Finance Bill, but even if we do that through a Finance Bill, it still does not mean that we have any real power. If a Finance Bill contradicts a directive, we can be taken to court. I do not think that a Finance Bill is even necessary. The detail of the directives is lifted in detail into the Finance Bill. Anyone practising in the VAT sector now has to look at the directive itself because the courts construe the directive.

Mr. Nicholas Winterton

Is not the right hon. Gentleman highlighting the totally unsatisfactory nature of the European Community processes inasmuch as the Council of Ministers will agree something which merely has to be ratified by the House. He referred to the minimum rate of VAT. The House never debated that with the opportunity to reverse it. The Government of the day, with its supporters here in a majority, would have said that we were letting them down if we went back on what they had agreed in a nice cosy little Council of Ministers. This place is becoming irrelevant. The British people no longer have a Parliament of their own.

12.15 am
Mr. Davies

We shall be told that this is a wrecking exercise. Perhaps the Paymaster General can advise the Committee whether this legally binding directive, which will prevent Britain from reducing VAT below 15 per cent. and from taking other action, will appear in this year's Finance Bill. I know that the right hon. Gentleman is in purdah, but perhaps he can say whether it is likely that the directive will be incorporated in a Finance Bill.

Sir John Cope

No.

Mr. Davies

Will the House be able to debate and amend a directive which will be legally binding?—[HON. MEMBERS: "No."] So the hon. Member for Macclesfield (Mr. Winterton) is right. We cannot amend much of the Bill either, because when we attempt to do so Members on both Front Benches say that we are trying to wreck the Bill. The Committee can debate but not amend a rule which will continue to exist until at least 1996, that VAT shall not be reduced below 15 per cent. That is a further derogation from the power of Parliament to make changes.

I have totted up those derogations. Under monetary union, we shall have no control over interest rates. Neither shall we have any control over public expenditure—and now taxation. Those are all matters over which Parliament and the Government will have little control. That may have one good effect—we shall not need as many Treasury Ministers. Once we reach 1996, we shall not need four or five Treasury Ministers, though we shall need a Paymaster General to write the cheques.

Mr. Richard Shepherd

The right hon. Gentleman is right. We must see this in the context of the Government and their allies—members of the Labour Front Bench—being intent on building a European state with all the attributes, taxation and absolute rights which will enable it to determine such matters. That is all that the Bill is about. It is a major step on the way to acquiescence by the British people, through their leadership, in accepting new institutions and national arrangements—the Eurofed.

Mr Davies

It is a Eurofed which will not even have the virtues of a federal system. I do not want to be out of order and to prolong the debate on that ground, but we are transferring powers to non-democratic bodies having no Executive recognised by the people.

Mrs. Gorman

Will the right hon. Gentleman give the Committee the benefit of his extremely intelligent analysis? He will recall that the Government of the day used VAT for their own convenience, whacking on 2.5 per cent. to mitigate the effects of the community charge. That is a very cynical use of a tax which we were given to understand was meant to be imposed on services and goods, but which is apparently used sometimes for the benefit or convenience of contributing nations in dealing with their domestic difficulties.

Mr. Davies

That is something like hypothecation, is it not? The Paymaster General was not listening, but the Treasury does not like hypothecation—so in effect it hypothecated 2.5 per cent. for local taxes.

It is said that there must be unanimity. As many right hon. and hon. Members have argued, that may sound good in theory but in practice it is not so easy for a Minister or a Government to stand up against the 11 other member states. The Maastricht agreement had to be unanimous. The British Government had a veto, and if they had shown any courage and vetoed the treaty it would have collapsed completely. I do not believe that many other countries were too keen on it either, but the momentum carried it forward. That is a purely personal view—and no doubt an eccentric one. The agreement was not vetoed because the pressure was so great that one country could not really veto it. It will be the same with taxation. We cannot use the veto. It is like firing off a nuclear deterrent: once it has been used, the deterrent has failed. So I do not believe that the unanimity rule will be very helpful.

I predict that in 1996 we shall be moving gradually towards a system of VAT being collected at the point of production and not at the point of consumption. The Paymaster General said very little about it but, as I understand it, the British Government were opposed to proposals that VAT should be imposed at the point of production instead of at the point of consumption or importation. The German Government were in favour, of course, for the simple reason that Germany is a country of producers and Britain is a country of consumers.

Mr. Timothy Wood (Lords Commissioner to the Treasury)

rose in his place and claimed to move, That the Question be now put.

Question put, That the Question be now put:—

The Committee divided: Ayes 202, Noes 65.

Division No. 131] [12.20 am
AYES
Adley, Robert Douglas-Hamilton, Lord James
Ainsworth, Peter (East Surrey) Dover, Den
Alexander, Richard Duncan, Alan
Alison, Rt Hon Michael (Selby) Elletson, Harold
Amess, David Emery, Rt Hon Sir Peter
Ancram, Michael Evans, Jonathan (Brecon)
Arbuthnot, James Evans, Nigel (Ribble Valley)
Arnold, Jacques (Gravesham) Evans, Roger (Monmouth)
Arnold, Sir Thomas (Hazel Grv) Evennett, David
Ashby, David Faber, David
Atkinson, David (Bour'mouth E) Fabricant, Michael
Atkinson, Peter (Hexham) Fenner, Dame Peggy
Banks, Matthew (Southport) Field, Barry (Isle of Wight)
Banks, Robert (Harrogate) Fishburn, Dudley
Bates, Michael Forsyth, Michael (Stirling)
Bellingham, Henry Freeman, Roger
Beresford, Sir Paul French, Douglas
Blackburn, Dr John G. Garel-Jones, Rt Hon Tristan
Booth, Hartley Garnier, Edward
Boswell, Tim Gillan, Cheryl
Bottomley, Peter (Eltham) Goodlad, Rt Hon Alastair
Bottomley, Rt Hon Virginia Goodson-Wickes, Dr Charles
Bowden, Andrew Gorst, John
Bowis, John Greenway, John (Ryedale)
Brandreth, Gyles Hague, William
Brazier, Julian Hampson, Dr Keith
Brooke, Rt Hon Peter Hargreaves, Andrew
Brown, M. (Brigg & Cl'thorpes) Harris, David
Browning, Mrs. Angela Hawkins, Nick
Bruce, Ian (S Dorset) Hayes, Jerry
Burns, Simon Heald, Oliver
Burt, Alistair Heathcoat-Amory, David
Butler, Peter Hendry, Charles
Carrington, Matthew Hill, James (Southampton Test)
Channon, Rt Hon Paul Horam, John
Chaplin, Mrs Judith Hordern, Rt Hon Sir Peter
Chapman, Sydney Howard, Rt Hon Michael
Churchill, Mr Howarth, Alan (Strat'rd-on-A)
Clappison, James Howell, Rt Hon David (G'dford)
Clarke, Rt Hon Kenneth (Ruclif) Hughes Robert G. (Harrow W)
Clifton-Brown, Geoffrey Hunt, Rt Hon David (Wirral W)
Congdon, David Hunt, Sir John (Ravensbourne)
Conway, Derek Hunter, Andrew
Coombs, Simon (Swindon) Hurd, Rt Hon Douglas
Cope, Rt Hon Sir John Jack, Michael
Couchman, James Jackson, Robert (Wantage)
Currie, Mrs Edwina (S D'by'ire) Jones, Gwilym (Cardiff N)
Curry, David (Skipton & Ripon) Kennedy, Charles (Ross,C&S)
Dalyell, Tam Key, Robert
Davies, Quentin (Stamford) Kilfedder, Sir James
Davis, David (Boothferry) Kirkhope, Timothy
Day, Stephen Knight, Mrs Angela (Erewash)
Deva, Nirj Joseph Knight, Greg (Derby N)
Devlin, Tim Knox, David
Dorrell, Stephen Kynoch, George (Kincardine)
Lait, Mrs Jacqui Shaw, Sir Giles (Pudsey)
Leigh, Edward Shephard, Rt Hon Gillian
Lennox-Boyd, Mark Shepherd, Colin (Hereford)
Lidington, David Sims, Roger
Lightbown, David Smith, Tim (Beaconsfield)
Lilley, Rt Hon Peter Soames, Nicholas
Lloyd, Peter (Fareham) Spencer, Sir Derek
Luff, Peter Spicer, Sir James (W Dorset)
Lyell, Rt Hon Sir Nicholas Spink, Dr Robert
Macdonald, Calum Spring, Richard
MacGregor, Rt Hon John Sproat, Iain
MacKay, Andrew Squire, Robin (Hornchurch)
Maclean, David Stanley, Rt Hon Sir John
Maitland, Lady Olga Stephen, Michael
Mans, Keith Stern, Michael
Marland, Paul Streeter, Gary
Marshall, John (Hendon S) Sykes, John
Martin, David (Portsmouth S) Taylor, Ian (Esher)
Mellor, Rt Hon David Taylor, John M. (Solihull)
Merchant, Piers Temple-Morris, Peter
Milligan, Stephen Thomason, Roy
Mills, Iain Thompson, Patrick (Norwich N)
Mitchell, Sir David (Hants NW) Thurnham, Peter
Montgomery, Sir Fergus Townsend, Cyril D. (Bexl'yh'th)
Nelson, Anthony Trend, Michael
Neubert, Sir Michael Trotter, Neville
Newton, Rt Hon Tony Twinn, Dr Ian
Nicholls, Patrick Vaughan, Sir Gerard
Nicholson, David (Taunton) Viggers, Peter
Nicholson, Emma (Devon West) Waller, Gary
Norris, Steve Wardle, Charles (Bexhill)
Ottaway, Richard Waterson, Nigel
Paice, James Watts, John
Patnick, Irvine Wells, Bowen
Pattie, Rt Hon Sir Geoffrey Wheeler, Rt Hon Sir John
Pickles, Eric Whitney, Ray
Portillo, Rt Hon Michael Widdecombe, Ann
Rathbone, Tim Wiggin, Sir Jerry
Richards, Rod Wigley, Dafydd
Riddick, Graham Willetts, David
Robathan, Andrew Wolfson, Mark
Roberts, Rt Hon Sir Wyn Wood, Timothy
Robertson, Raymond (Ab'd'n S) Yeo, Tim
Robinson, Mark (Somerton) Young, Sir George (Acton)
Rowe, Andrew (Mid Kent)
Ryder, Rt Hon Richard Tellers for the Ayes:
Sackville, Tom Mr. Andrew Mitchell and
Sainsbury, Rt Hon Tim Mr. Nicholas Baker.
Shaw, David (Dover)
NOES
Abbott, Ms Diane Knapman, Roger
Banks, Tony (Newham NW) Lawrence, Sir Ivan
Barnes, Harry Leighton, Ron
Bennett, Andrew F. Livingstone, Ken
Betts, Clive Lord, Michael
Blair, Tony Loyden, Eddie
Brown, Gordon (Dunfermline E) McMaster, Gordon
Brown, N. (N'c'tle upon Tyne E) Mahon, Alice
Burden, Richard Marlow, Tony
Cann, Jamie Michael, Alun
Cash, William Michie, Bill (Sheffield Heeley)
Corbyn, Jeremy Miller, Andrew
Cryer, Bob Morgan, Rhodri
Cunningham, Dr John (C'p'l'nd) Murphy, Paul
Davies, Rt Hon Denzil (Llanelli) Pike, Peter L.
Davis, Terry (B'ham, H'dge H'l) Powell, Ray (Ogmore)
Dixon, Don Primarolo, Dawn
Enright, Derek Ross, William (E Londonderry)
Foster, Derek (B'p Auckland) Rowlands, Ted
Gill, Christopher Shepherd, Richard (Aldridge)
Godman, Dr Norman A. Shore, Rt Hon Peter
Gorman, Mrs Teresa Simpson, Alan
Grant, Bernie (Tottenham) Skinner, Dennis
Hall, Mike Smith, Andrew (Oxford E)
Heppell, John Smith, Llew (Blaenau Gwent)
Hughes, Kevin (Doncaster N) Spearing, Nigel
Jessel, Toby Spicer, Michael (S Worcs)
Jones, Lynne (B'ham S O) Sweeney, Walter
Kaufman, Rt Hon Gerald Taylor, Sir Teddy (Southend, E)
Vaz, Keith Wise, Audrey
Wareing, Robert N
Wilkinson, John Tellers for the Noes:
Wilson, Brian Mr. Alan Meale and
Winterton, Mrs Ann (Congleton) Dr. Tony Wright.
Winterton, Nicholas (Macc'f'ld)

Question accordingly agreed to.

Question put accordingly, That the amendment be made:—

The Committee divided: Ayes 39, Noes 196.

Division No. 132] [12.31 am
AYES
Abbott, Ms Diane Mahon, Alice
Banks, Tony (Newham NW) Marlow, Tony
Barnes, Harry Michie, Bill (Sheffield Heeley)
Bennett, Andrew F. Ross, William (E Londonderry)
Cann, Jamie Rowlands, Ted
Cash, William Shepherd, Richard (Aldridge)
Corbyn, Jeremy Shore, Rt Hon Peter
Davies, Rt Hon Denzil (Llanelli) Skinner, Dennis
Davis, Terry (B'ham, H'dge H'l) Smith, Llew (Blaenau Gwent)
Gill, Christopher Spearing, Nigel
Godman, Dr Norman A. Spicer, Michael (S Worcs)
Gorman, Mrs Teresa Sweeney, Walter
Grant, Bernie (Tottenham) Taylor, Sir Teddy (Southend, E)
Hall, Mike Wilkinson, John
Hughes, Kevin (Doncaster N) Winterton, Mrs Ann (Congleton)
Hunter, Andrew Winterton, Nicholas (Macc'f'ld)
Jessel, Toby Wise, Audrey
Knapman, Roger
Lawrence, Sir Ivan Tellers for the Ayes:
Leighton, Ron Mr. Bob Cryer and
Lord, Michael Mr. Alan Simpson.
Loyden, Eddie
NOES
Adley, Robert Cope, Rt Hon Sir John
Ainsworth, Peter (East Surrey) Couchman, James
Alexander, Richard Currie, Mrs Edwina (S D'by'ire)
Alison, Rt Hon Michael (Selby) Curry, David (Skipton & Ripon)
Amess, David Davies, Quentin (Stamford)
Ancram, Michael Davis, David (Boothferry)
Arbuthnot, James Day, Stephen
Arnold, Jacques (Gravesham) Deva, Nirj Joseph
Arnold, Sir Thomas (Hazel Grv) Devlin, Tim
Ashby, David Dorrell, Stephen
Atkinson, David (Bour'mouth E) Douglas-Hamilton, Lord James
Atkinson, Peter (Hexham) Dover, Den
Banks, Matthew (Southport) Duncan, Alan
Bates, Michael Elletson, Harold
Bellingham, Henry Emery, Rt Hon Sir Peter
Beresford, Sir Paul Evans, Jonathan (Brecon)
Blackburn, Dr John G. Evans, Nigel (Ribble Valley)
Booth, Hartley Evans, Roger (Monmouth)
Boswell, Tim Evennett, David
Bottomley, Peter (Eltham) Faber, David
Bottomley, Rt Hon Virginia Fabricant, Michael
Bowden, Andrew Fenner, Dame Peggy
Bowis, John Field, Barry (Isle of Wight)
Brandreth, Gyles Fishburn, Dudley
Brazier, Julian Forsyth, Michael (Stirling)
Brooke, Rt Hon Peter Freeman, Roger
Brown, M. (Brigg & Cl'thorpes) French, Douglas
Browning, Mrs. Angela Garel-Jones, Rt Hon Tristan
Burns, Simon Garnier, Edward
Burt, Alistair Gillan, Cheryl
Butler, Peter Goodlad, Rt Hon Alastair
Carrington, Matthew Goodson-Wickes, Dr Charles
Channon, Rt Hon Paul Gorst, John
Chaplin, Mrs Judith Greenway, John (Ryedale)
Chapman, Sydney Hague, William
Churchill, Mr Hampson, Dr Keith
Clappison, James Hargreaves, Andrew
Clarke, Rt Hon Kenneth (Ruclif) Harris, David
Clifton-Brown, Geoffrey Hawkins, Nick
Congdon, David Hayes, Jerry
Conway, Derek Heald, Oliver
Coombs, Simon (Swindon) Heathcoat-Amory, David
Hendry, Charles Robathan, Andrew
Hill, James (Southampton Test) Roberts, Rt Hon Sir Wyn
Horam, John Robertson, Raymond (Ab'd'n S)
Hordern, Rt Hon Sir Peter Robinson, Mark (Somerton)
Howarth, Alan (Strat'rd-on-A) Rowe, Andrew (Mid Kent)
Howell, Rt Hon David (G'dford) Ryder, Rt Hon Richard
Hughes Robert G. (Harrow W) Sackville, Tom
Hunt, Rt Hon David (Wirral W) Sainsbury, Rt Hon Tim
Hunt, Sir John (Ravensbourne) Shaw, David (Dover)
Hurd, Rt Hon Douglas Shaw, Sir Giles (Pudsey)
Jack, Michael Shephard, Rt Hon Gillian
Jackson, Robert (Wantage) Shepherd, Colin (Hereford)
Jones, Gwilym (Cardiff N) Sims, Roger
Kennedy, Charles (Ross,C&S) Smith, Tim (Beaconsfield)
Key, Robert Soames, Nicholas
Kilfedder, Sir James Spencer, Sir Derek
Kirkhope, Timothy Spicer, Sir James (W Dorset)
Knight, Mrs Angela (Erewash) Spink, Dr Robert
Knight, Greg (Derby N) Spring, Richard
Knox, David Sproat, Iain
Kynoch, George (Kincardine) Squire, Robin (Hornchurch)
Lait, Mrs Jacqui Stanley, Rt Hon Sir John
Leigh, Edward Stephen, Michael
Lennox-Boyd, Mark Stern, Michael
Lidington, David Streeter, Gary
Lightbown, David Sykes, John
Lilley, Rt Hon Peter Taylor, Ian (Esher)
Lloyd, Peter (Fareham) Taylor, John M. (Solihull)
Luff, Peter Taylor, Matthew (Truro)
Lyell, Rt Hon Sir Nicholas Temple-Morris, Peter
MacGregor, Rt Hon John Thomason, Roy
MacKay, Andrew Thompson, Patrick (Norwich N)
Maclean, David Thurnham, Peter
Maitland, Lady Olga Townsend, Cyril D. (Bexl'yh'th)
Mans, Keith Trend, Michael
Marland, Paul Trotter, Neville
Marshall, John (Hendon S) Twinn, Dr Ian
Martin, David (Portsmouth S) Vaughan, Sir Gerard
Merchant, Piers Viggers, Peter
Milligan, Stephen Waller, Gary
Mills, Iain Wardle, Charles (Bexhill)
Mitchell, Sir David (Hants NW) Waterson, Nigel
Montgomery, Sir Fergus Watts, John
Nelson, Anthony Wells, Bowen
Neubert, Sir Michael Wheeler, Rt Hon Sir John
Newton, Rt Hon Tony Whitney, Ray
Nicholls, Patrick Widdecombe, Ann
Nicholson, David (Taunton) Wiggin, Sir Jerry
Nicholson, Emma (Devon West) Wigley, Dafydd
Norris, Steve Willetts, David
Ottaway, Richard Wolfson, Mark
Paice, James Wood, Timothy
Patnick, Irvine Yeo, Tim
Pattie, Rt Hon Sir Geoffrey Young, Sir George (Acton)
Pickles, Eric
Portillo, Rt Hon Michael Tellers for the Noes:
Rathbone, Tim Mr. Andrew Mitchell and
Richards, Rod Mr. Nicholas Baker.
Riddick, Graham

Question accordingly negatived.

Mr. Timothy Wood (Lords Commissioner to the Treasury)

I beg to move, That the Chairman do report Progress and ask leave to sit again.

Question put and agreed to.

Committee report Progress; to sit again tomorrow.