Tax Harmonisation

HC Deb 09 December 1998 vol 322 cc381-429

Mr. Deputy Speaker (Mr. Micheal Lord)

We now come to the debate on tax harmonisation. Madam Speaker has selected the amendment in the name of the Prime Minister.

7.25 pm

Mr. Francis Maude (Horsham)

I beg to move,

That this House deplores the Government's attempts to be all things to all men on the issue of EU tax harmonisation; urges the Government to explain what confidence can be placed in Ministers' undertakings to use the veto, given the Chancellor's decision to sign up to the Party of European Socialists' "New European Way" document and given the EU Tax Commissioner's insistence that the UK is "fully on board" for progress towards tax harmonisation; asks the Government to place in the Library the list of 85 instances of alleged "harmful tax competition" identified by the Code of Conduct Working Group chaired by the Financial Secretary, ten of which are believed to relate to the UK; and urges the Government to make a clear statement of its policy towards EU tax harmonisation. The House will wish to join me in expressing sympathy to the Chancellor and his family on their recent bereavement, which is the reason for his absence. We all want to send our condolences to him on that sad event.

The issue that we are discussing tonight sums up so much of what is wrong with the Government. On issue after issue, they try to have it both ways. In Europe, Ministers signed "The New European Way" and Commissioner Monti said that the United Kingdom is fully on board for the Commission's tax proposals, but those Ministers come back here and talk tough about using the veto. It is significant that such talk is always surrounded by weasel words that give them a let out for later.

The Government are starting to find that they cannot fool all of the people all the time. Sooner or later, decisions have to be made. Many of the tax harmonisation issues will come to a head in the next six months, so the Government need to make a clear statement of where they stand. They have an opportunity to do so today. The time for weasel words is over.

Mr. Tony McNulty (Harrow, East)

Sit down then.

Mr. Maude

I suspect that that comment is the peak of wit from those on the Government Benches. Judges used to ask, "Is that your best point?"; I suspect that it probably was.

I ask the Chief Secretary to address the chief issues and to have another crack at answering the question that we asked him last week, which he signally failed to answer: do the Government believe that the single currency requires tax harmonisation? It is not compulsory to believe that; plenty of people do not. Last week, however, the Chief Secretary provided two answers. First, he shook his head and then he nodded it. One can select the answer that one thinks is most appropriate. Let us see whether he can do any better today. I am watching him very carefully and he is not moving at all. He has had a week to think about the question, so when he makes his speech, he should answer it. The Minister's colleagues on the continent think that economic and monetary union requires a degree of tax harmonisation. The German Finance Minister, Mr. Lafontaine, has said that the unified currency area needs a fair and equal tax framework.

Several hon. Members

rose—

Mr. Maude

I do not know whether Labour Members have the same list of interventions as they had last week, but on this occasion they have not done us the courtesy of supplying it in advance. Perhaps we can hear the first one now.

Mr. James Plaskitt (Warwick and Leamington)

How assiduous was the right hon. Gentleman in his campaign against tax harmonisation in 1992 when the Conservative Government signed up for minimum duty rates for alcohol, tobacco and fuel?

Mr. Maude

We always accepted that there was a case for minimal tax harmonisation. [Interruption.] Labour Members think that they have hit on something incredibly novel and miraculous, but it is perfectly well known that there was a case for minimal tax harmonisation for the development of the single market. We agreed to minimal movements, and that is simply a matter of history. Labour Members cannot wriggle away from the question that they now face; they are now the Government. The issue under consideration is a further programme of severe tax harmonisation in Europe. They have to answer the question. Do they support tax harmonisation or not? We are getting two different answers in two different places. They talk to their colleagues on the continent and clearly encourage them to believe that they are signed up to it; they then come back here and say something different.

If Labour Members spent any time talking to business men—now that the Paymaster General seems to be on his way out, there may be fewer opportunities for them to do so—they would find that business men are getting worried about the whole process. Because of the social chapter, they have already seen a levelling up of social and employment regulation, which has whittled away Britain's comparative advantage. Business men are beginning to see what would happen under the provisions to which the Government are committing themselves across the channel—they see the prospect of a levelling up of our taxation, which means the removal of exactly the things that have given Britain a comparative advantage in attracting investment.

Mr. Tom Levitt (High Peak)

Does the right hon. Gentleman accept that the two instances of tax harmonisation that we have seen—the signing up to the abolition of duty free and the imposition of value added tax on fuel—took place under his Government?

Mr. Maude

The issues today—[Laughter.] The reality is that the Government cannot get to grips with the fact that they are now in power. They have custody of those matters and have to come clean with the country on what they are planning to do. It will not do to keep on using weasel words and failing to answer questions.

Mr. Ian Stewart (Eccles)

Will the right hon. Gentleman give way?

Mr. Maude

No, I shall continue. I suspect that Labour Members are simply reading from the same hymn sheet. We now know that when one gives way to one Labour Back Bencher, one might as well give way to all of them as they all read from one list. We can take one as proxy for them all because they are clearly too stupid to think up questions for themselves.

Mrs. Angela Browning (Tiverton and Honiton)

I am grateful to my right hon. Friend for giving way—look, no list. Will he confirm that the reason that there was an agreement on duty free at the time by the previous Conservative Government was that it was conditional on the Commission's making a detailed analysis of how it would affect individual countries and on its then coming forward with a report? We have never had that report—the Commission failed in its duty.

Mr. Maude

There was not only a commitment to supply an economic impact report of the effects of abolition of duty free on various countries but a commitment to bring forward proposals for a successor regime. That has not been done. The Government have only just cottoned on to that, and I shall have something to say about that later.

Let us hear from the Chief Secretary whether he agrees with the German Finance Minister that the unified currency area needs a fair and equal tax framework". Does he agree with the Austrian Finance Minister, who said that economic and monetary union will make it imperative to start co-ordinating the sphere of taxation. The social democrat governments"— that is rather chilling— will also have to look at harmonising prices and wage policy"? That is what some of the Chief Secretary's joint signatories to the "The New European Way" say, but we have not heard what the Chief Secretary and the Chancellor say. Let us hear it tonight.

We also need to hear about a related matter. Do the Government seriously believe in tax competition? We heard the Prime Minister claim that he believes in it—he said so today. One wonders whether he has read the excellent recent paper by Mr. Marsden called "Is Tax Competition Harmful?", an issue that should be exercising the Financial Secretary at this time.

Mr. Marsden points out that, while the European Union is tackling cartels and encouraging competition in other parts of the economy, the reverse is true in the case of taxation. He shows that low tax economies consistently out-perform higher tax economies. What does the Chief Secretary think? Does he agree?

If the Chief Secretary genuinely believes in tax competition, as the Prime Minister today claimed that he did, why, in the one sphere where convergence would benefit Britain—excise duties, which were mentioned earlier—has he reversed the gradual convergence of British levels of excise duty with those of our continental trading partners? He has not only abandoned it but reversed it, so the gap is widening to Britain's disadvantage.

As we are talking about tax competition, it is good that the Financial Secretary is responding to the debate. She has been a somewhat elusive figure recently. The Government have gone a bit quiet about it now but, a few months ago, they were boasting about the fact that the Financial Secretary had been selected to chair the working group on the code of conduct on harmful tax competition. The Government thought that that was a great triumph for Britain. They were bragging about it and saying that it was great news for us. They have gone a bit quieter recently because it has turned out to be rather controversial and, for the Financial Secretary, rather embarrassing.

The Financial Secretary's group, we read, has identified 85 instances of harmful tax competition and 10 are said to relate to Britain. It would be lovely to hear her confirm or deny that. Those 10 items include tax breaks for the film industry, which were introduced by the Financial Secretary herself last year. Will she now publish the list of 85 instances of harmful tax competition? Is she prepared to publish it today so that the House can find out whether 10 such measures have been identified by her own working group? What is the Government's response? Is the Financial Secretary going to defend the very measures that she introduced last year but the group that she chairs has this year identified as being unacceptable? The country wants to know.

The Government spent a great deal of time last year boasting about what a wonderful scheme it was, about the jobs and investment that it would bring and the fact that it would revitalise the film industry in this country, but now the Financial Secretary says that it has to be scrapped. It was a bit short lived—what about all the long-termism that she has mentioned?

Mr. Paul Marsden (Shrewsbury and Atcham)

rose—

Mr. Maude

This has turned into a short debate, which is a pity because it is on such an important subject. I must continue.

Will the Government publish an assessment of the impact of the removal of the 10 measures on jobs and investment? The film industry is important and we want to know about it, but what about shipping? What about the tax relief on reinvestment in ships, which the Labour party supported enthusiastically when it was introduced? That is apparently on the list and has to go.

The Financial Secretary must have been able to organise an assessment because she has been chairing the committee that has identified the problem. While she was doing that wearing one hat, presumably her officials in the Treasury could have been making an assessment of the impact on jobs and investment. The House wants to know.

Mr. Oliver Letwin (West Dorset)

Does my right hon. Friend agree that it would also be useful if the Financial Secretary told the House why she told European Standing Committee B only a few months ago that the very committee that she was chairing would have no effect on domestic tax legislation? [Interruption.]

Mr. Maude

We hear from the Financial Secretary that it is apparently true that there will be no effect on Britain. I take that as a refutation of the suggestion that any of the 10 measures in question affect Britain. Will she confirm that?

The Financial Secretary to the Treasury (Dawn Primarolo)

I shall speak later.

Mr. Maude

We shall be looking for a definitive answer then. From a sedentary position, she confirmed that what she said last year was absolutely true, so none of this affects Britain at all. Let us hear a definitive answer.

While we are on the subject of harmful tax competition, as it is called by the Labour Government and their European partners—

Mrs. Anne Campbell (Cambridge)

rose—

Mr. Maude

I must continue. I cheerfully gave way to my hon. Friend the Member for West Dorset (Mr. Letwin) because I know that he is capable of thinking up intelligent remarks for himself. We now know that Labour Members intervene only when comments have been handed out in written form beforehand.

Let us put paid to the idea that the Prime Minister again tried to put about at Question Time today, suggesting that the code of conduct on so-called harmful tax competition was produced under the previous Government. That is absolute rubbish—it was blocked when the previous Government were in office. It was signed up to by this Government. This Government thought that it was a great idea, and they signed up to it in December last year. Indeed, in announcing the decision, their press release said that Britain had signed up to the code of conduct "for the first time". They are condemned by their own mouth. Once again, the Prime Minister has given the House a misleading impression.

Mr. Ian Stewart

Will the right hon. Gentleman give way?

Mr. Maude

No, I shall continue. Giving way to the hon. Gentleman is very tempting, but I shall resist the temptation on this occasion.

The Chief Secretary to the Treasury (Mr. Stephen Byers)

rose—

Mr. Maude

I shall give way to the right hon. Gentleman.

Mr. Byers

It must be recorded that the group on the code of conduct was first discussed during the United Kingdom presidency of the European Union. Will the right hon. Gentleman confirm that that was in November 1992, when the Conservatives were in office, and that they did nothing to block the proposal?

Mr. Maude

The proposal may have been discussed, but it was blocked while the Conservatives were in power. It was not signed until this Government were in office. They are condemned by the boast in their press release. It is very generous of them to want to share the credit, even though they tried to take it all for themselves when they announced the decision.

Mr. Byers

Once again, for the record, I refer to the ECOFIN meeting of 23 November 1992 and the agreement signed by the then Conservative Government. It was agreed that "the above criteria", which lists potential harmful tax matters, should be applied to the consideration of whether issues merit action and the level at which identified problems might be resolved, including those measures which are best taken on the basis of voluntary co-operative action. That is what the Conservatives agreed to during their EU presidency in 1992.

Mr. Maude

The more that the right hon. Gentleman reads out, the more it confirms the point. The Conservatives were committed to nothing in the nature of what this Government have signed up to. Britain signed up to such a damaging measure only when this Government came into office. They were then unwise enough to put the Financial Secretary in charge, with the result that the issue has come straight back like a boomerang, in condemnation of some of their very favourite measures.

Will the Chief Secretary spare us the weasel words that we have heard from him and his colleagues—[Interruption.] We have heard so much equivocation and qualification.

Mr. Christopher Leslie (Shipley)

Will the right hon. Gentleman give way?

Mr. Maude

I will not give way to the hon. Gentleman.

On this and related subjects, we need some straight answers. Last week, the Chief Secretary said: If necessary, we will be prepared to use our veto to protect the national interest. That was a fudge. He cannot say when he will use the veto, what he is in favour of, or what he is against. He also said: if the draft directive on the withholding tax remains in its present form, we will veto that directive."—[Official Report, 1 December 1998; Vol. 321, c. 697–99.] The directive will clearly not remain precisely in its present form. Will he veto the withholding tax? It is a very simple question. He cannot seek refuge, as he always does, in the qualification and equivocation that we have so much come to expect from the Government.

Will the Chief Secretary explain why, so very recently, but before all this subject became so controversial and uncomfortable for the Government, he and his colleagues were prepared to sign up to what amounted to a clear commitment in "The New European Way", which was launched with so much bragging, boasting and razzmatazz? We are told that that great document was drafted by the Chancellor's team in the Treasury. It is not for us to say whether its authorship, like another famous document, is "all Balls". The document states: We must make further progress in tax and benefit reform … by co-ordinating savings and corporate taxation". We now know from what Mr. Lafontaine set out yesterday that, in Labour's lexicon, co-ordination of taxation and harmonisation of taxation are the same thing. The Government find co-ordination much less embarrassing to talk about—but the commitment is there.

Mr. William Cash (Stone)

Will my right hon. Friend give way?

Mr. Maude

If my hon. Friend will forgive me, I shall continue.

Will the Chief Secretary explain—he has utterly failed to do so—why the Prime Minister, in his address to the French National Assembly earlier this year, was explicit in committing the Government to protecting the veto only in respect of personal taxation? Does the Chief Secretary accept that that shows that everything else is negotiable?

A few months later, the report of the Labour party's national policy forum on Europe, which was presented to the Labour party conference and formally adopted as party policy, narrowed down the area of tax policy even more. It talked of member states retaining control over only "personal tax rates". Today, the joint letter signed by the Prime Minister and Chancellor Schröder narrowed it down even more. That great document was supposed to get the Prime Minister out of the hole in which he has found himself on this issue—yet, it makes matters worse. It says: At no time have we considered measures to harmonise personal income tax". The weaselling continues. First, the Prime Minister is protecting personal taxes, then personal tax rates. Now personal income tax is all that is being protected. Does not the Chief Secretary understand that the more that the Government narrow down the areas of tax policy to which they attach importance, the greater the suspicion that everything else is negotiable?

Mr. Cash

Will my right hon. Friend give way?

Mr. Maude

No; I have given way several times and this is a short debate.

Why cannot the Chief Secretary say, as he has apparently been ready to say about the budget rebate, that such matters are simply not negotiable? Does he not understand that the rebate on which he stands so proudly was negotiated only because the Prime Minister of the day was ready to fight for it?

Today, I hope that the Chief Secretary will give some straight answers to the questions that he failed to answer last week. Will he use the veto to protect Britain's rates of stamp duty on house purchases? Will he use the veto to protect Britain's VAT rates? Will he use the veto to protect jobs in the City of London from the imposition of the withholding tax? Will he say no to the equally damaging fudge on exchange of information, which further analysis makes increasingly clear would pile up extra transaction costs and drive business out of the UK?

What assurance can the Chief Secretary give that our veto on tax will remain? Does he agree with the German Finance Minister, who clearly thinks that it should go? He said: It is my personal view that we eventually must go to qualified majority voting on the sensitive issue of taxes". That was not just a personal view after all, because the German Chancellor agrees. He said:

I must stress that the finance minister has the backing of the Government when he demands steps in this direction. The Finnish Government, who will take over the EU presidency in July, have put moving to QMV on tax matters high on the agenda. They say:

Majority voting on taxation is not a question of if but of when". Until the whistle was blown on them, the Government were merrily proceeding down the path of ever greater tax harmonisation. Why should they have committed themselves to protecting only such a narrow range of taxes from majority voting if they were not really saying, with a nudge and a wink, that everything else was negotiable? Why did the Prime Minister refer just to personal taxes when he spoke in the French National Assembly—as if that was not sending the clearest signal possible that the rest was open to negotiation?

That there is such a programme of tax harmonisation in the EU is now beyond question. That the Government have given the impression that they will go along with much of it is utterly clear. When Commissioner Monti and Mr. Strauss-Kahn claimed that Britain is "on board" for the EU's tax proposals, and when Mr. Strauss-Kahn said that he was confident that Britain would be signed up to tax harmonisation by the middle of next year, were they running scare stories? Were such claims the tools that The Sun used to generate scare stories in this country? That is absurd. In fact, Commissioner Monti and Mr. Strauss-Kahn have let the cat out of the bag.

I wonder whether Ministers understand—

Mr. Bill Rammell (Harlow)

Will the right hon. Gentleman give way?

Mr. Maude

No, I shall not give way.

I wonder whether Ministers understand how offensive it is to people, and how demeaning it is, that the Government have had to beg our European partners to moderate their language—"Not in front of the children, because it will upset them"—as though the German Ministers' honesty and openness in this matter threatened to upset the concerted deception that the Government have maintained.

As so often, the Government have been trying to be all things to all men, but it is decision time. Let us for once have clear answers to simple questions. I commend the motion to the House.

7.50 pm

The Chief Secretary to the Treasury (Mr. Stephen Byers)

I beg to move, To leave out from "House" to the end of the Question, and to add instead thereof:

recalls that the last Government's record on tax was one of broken promises, that it raised taxes 22 times having promised to cut taxes, including putting VAT on domestic fuel and power having specifically promised not to do so, and further that it tried to raise VAT on fuel to 17.5 per cent.; welcomes the fact that this Government has kept all of its promises on taxation, including its promises not to raise the basic or top rates of income tax and cutting VAT on fuel to 5 per cent.; and further welcomes the Government's approach to taxation at an international level, favouring fair tax competition, supporting concerted action at European level, including through the EU Code of Conduct Group, to deal with discriminatory and unfair tax practices that distort real competition, stating that it will not support measures that are not in Britain's national economic interest or that damage British business, harm investment and jobs, or damage Europe's competitiveness, and reiterating that it will retain the veto on tax issues and that decisions on tax will remain subject to unanimity. At the start of this debate, in which my right hon. Friend the Chancellor of the Exchequer was to have led for the Government, I associate myself with the remarks made by the shadow Chancellor; I am sure that the whole House wishes to express its condolences to my right hon. Friend and the rest of his family.

In tonight's debate, I shall set out the Government's position on taxation, not just in relation to Europe but on domestic taxation. I shall specifically address the issues of tax harmonisation and of unfair tax practices, including tax abuse and evasion. I know that the issue of tax evasion and tax havens excites Conservative Members; they have been raising it indirectly, in one way or another for a long time. I can understand their personal interest, because of course—

Mr. Nick Gibb (Bognor Regis and Littlehampton)

What about the Paymaster General? Where is he?

Mr. Byers

There we have a good example. It is of personal interest to members of the Conservative party, because the present Treasurer of the Conservative party, Michael Ashcroft, has for many years been a tax exile, preferring to pay his taxes in Belize rather than Bristol.

The real issue that the Conservative party needs to address is why the party's latest accounts show a cash donation of £1 million by a connected party of Michael Ashcroft. No identity is disclosed. Why the secrecy? The only logical conclusion is that the donor, whether a company or an individual, is registered in a tax haven, and does not pay a penny in taxes in the United Kingdom. In my view, our democratic process must not be for sale to the highest bidder. I hope that the Tory party will come clean on that donation. We challenge the Leader of the Opposition to disclose the detail.

I want to place on the record tonight our position in relation to domestic taxation and on the issues in relation to Europe that were raised by the shadow Chancellor in his opening speech.

In place of the old spending philosophy, which sought to justify a policy of irresponsible tax and spend, this Government take a different, and principled, approach to public spending. Today—unlike 20 years ago—no national Government can set tax, spending and borrowing policies in isolation. They do so in a competitive global economy, within which we must justify policies for expenditure and taxation not just to our electorate but to a wider audience.

Mrs. Browning

Will the right hon. Gentleman give way?

Mr. Byers

May I make some progress? Then I shall give way to the hon. Lady.

Today, an irresponsible approach to tax, spending and borrowing—which is, in any case, the wrong approach—will be swiftly punished by financial markets. By contrast, a Government who take a prudent and sensible approach will enjoy the benefits in lower long-term interest rates and higher investment, which flow from the benefits of credibility.

The Government believe that efficiency and value for money in public spending are of central importance. Every penny spent must be justified by its objectives, priorities and efficiency. The Government have a responsibility to the public to use public money as efficiently as possible; and when, shortly, we publish the new public service agreements, we shall show exactly what the public can expect to get from the additional money that is being put into those services.

Mr. Crispin Blunt (Reigate)

Will the right hon. Gentleman give way?

Mr. Byers

I shall give way to the hon. Member for Tiverton and Honiton (Mrs. Browning) first.

Mrs. Browning

The right hon. Gentleman has moved on, but before he moves too far from his point about Michael Ashcroft, may I ask him whether he and his colleagues understand a fundamental point about the difference between someone like Michael Ashcroft and the present Paymaster General when it comes to overseas funds? Michael Ashcroft is a private citizen. The Paymaster General, who also has offshore trusts, currently presides over a policy that deprives some of my constituents—some of the poorest pensioners in the land—of £75 a year. That is the difference.

Mr. Deputy Speaker

Order. Before the Minister responds, I think it would be a good idea if we returned to the subject of tax harmonisation.

Mr. Byers

I shall certainly do so, Mr. Deputy Speaker, but first I shall point out to the hon. Lady that it was the Leader of the Opposition who said that there would be no secrecy as regards Conservative party accounts. I want to move on to the issues that I know are energising Conservative Members, because they want to get away from the fact that a secret £1 million donation in their accounts has been revealed; and I want to rush to address the issues that were raised by the shadow Chancellor.

The reality—

Mr. Blunt

rose—

Mr. Byers

I shall give way to the hon. Member for Reigate (Mr. Blunt) if he wants to intervene now.

Mr. Blunt

The right hon. Gentleman introduced his remarks with talk about the fiscal rectitude that the Government were going to adopt on public expenditure. The Economic Secretary has been unable to give me an answer as to how long the economic cycle is. As that is rather germane to balancing the books over the economic cycle, how long is the economic cycle?

Mr. Byers

I thought that there was going to be a question about tax harmonisation so that we could satisfy the shadow Chancellor and his Front-Bench colleagues.

I want to address the issue of taxation. Let me start by saying clearly what our manifesto pledge was. We said that the principle of a tax system must be to encourage work. We said clearly in our manifesto that the whole purpose of a tax system must be to encourage work and reward effort. We stated: we are pledged not to raise the basic or top rates of income tax throughout the next Parliament. We have kept that promise, and will continue to do so throughout this Parliament. We have not raised, and we shall not raise, the top or basic rates of income tax throughout this Parliament.

We also said in our manifesto that we would reduce the high marginal rates at the bottom end of the earning scale". We have kept that promise, too. As a result of the introduction of the working families tax credit—now opposed by the Opposition—national insurance reform and Britain's first-ever national minimum wage, the Government can give two very specific guarantees, on which we shall deliver. For families and their children, in a family where someone works full time, there is now a guaranteed income of at least £190 a week. To the same working family, we give a second guarantee: that no income tax will be paid on earnings below £220 a week. [Interruption.]

For the benefit of the shadow Chancellor, I am moving the amendment standing in the Prime Minister's name, and I am speaking to the amendment, which is in order because it has been accepted by the House authorities. I am making my own speech. The hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) may not like it, but I am placing on record the appalling tax record of the previous Conservative Government. I want to remind Opposition Members of their record, and of the contrast that is now exposed—

Mr. Owen Paterson (North Shropshire)

Will the right hon. Gentleman give way?

Mr. Byers

In a second.

This Government, by contrast with the previous Government, can be trusted by the British people on tax. If we make manifesto commitments on tax, those commitments will be met. That contrasts starkly with the Conservative Government's approach. That is why we shall meet the pledge in our manifesto:

We renew our pledge not to extend VAT to food, children's clothes, books and newspapers and public transport fares", and why we shall deliver on that promise.

We made a further commitment on VAT at the last election: We will cut VAT on fuel to five per cent, the lowest level allowed. In the very first Budget after the election, we moved immediately to do precisely that. That is why we shall take no lectures from the Conservative party on tax.

In the 1992 general election, the Tories promised time and again that they would cut taxes. After that election, they broke that promise 22 times. That is why the British people will never trust the Tories on tax again. There can be—

Mr. Paterson

Will the Minister give way?

Mr. Byers

I shall give way in a moment.

There can be no clearer demonstration than the Tories' approach to value added tax of the fact that they break their promises. In 1979, the Conservatives promised not to increase VAT. In the Budget following that promise, they doubled it. In 1991, the British people were made to suffer the consequences of the Tories' failure on the poll tax in an increase in VAT rates.

Mr. Paterson

We heard all this during the general election. Will the Minister address himself to the actions that he and the Government have taken since they came to power on one area of tax which it rests entirely in the Government's hands to decide—fuel duties and vehicle excise duty? In that area, we now have taxes so high that it costs £252 more to fill up a truck in Britain than in France, and VED is six times as high here as it is in France. What is that doing to jobs and prosperity in a strategic industry such as road haulage?

Mr. Byers

The hon. Gentleman's intervention came very close to an argument in favour of harmonisation of taxes with Europe. That is an interesting approach.

I can understand why Conservative Members feel uncomfortable about having their manifesto pledges broken time and time again. I understand that it is not pleasant for them to have those matters drawn to their attention. However, we continue to remind them because it is the truth and it is why the British people do not trust the Tories on taxes.

It is interesting to look through the record, including the record of the time when the shadow Chancellor of the Exchequer was a Treasury Minister. Many steps were taken then which led to the harmonisation of taxes. Which party justified a European directive stating we are committed to the harmonisation of indirect taxes"? It was, of course, the Conservative party when in government. It was a former Chancellor of the Exchequer who said that in 1992. Which party signed at least 18 taxation directives while it was in government? Once again, it was the Conservative party.

That is the same Conservative party that now criticises and makes dire warnings about VAT being imposed from Europe and the same Conservative party that did not match our pledge on VAT. The Conservative party's manifesto did not even mention VAT. Let us not forget that the Conservative Government signed up to a minimum rate of VAT across Europe.

Mr. John Butterfill (Bournemouth, West)

Will the Minister give way?

Mr. Byers

I want to make some progress.

It was the Conservative party that signed up to extending qualified majority voting into 42 new areas while it was in government. That was done in the Single European Act 1985 and during the Maastricht treaty.

Mr. Andrew Tyrie (Chichester)

Will the Minister give way?

Mr. Byers

No. I should make some progress.

The Conservatives are the party that signed the Maastricht treaty, and the person who signed it was the present shadow Chancellor. That is the reality. The Conservatives attack what they once supported and deplore what they once agreed. They disown what they were once proud of and complain about promises when the fact is that we have kept ours and they have broken theirs.

Mr. Cash

Will the Minister give way?

Mr. Byers

As the shadow Chancellor would not give way to the hon. Gentleman, I am prepared to do so.

Mr. Cash

Does the Minister agree that, under the Maastricht treaty—under, I think, articles 103, 130 and various others—it is clear that it is intended to co-ordinate economic policy? How can the right hon. Gentleman deny—it is the burden of his argument, as far as I understand it—that the proposals for tax harmonisation do not flow from the Maastricht treaty? What will he do about it?

Mr. Byers

I must begin by thanking the hon. Gentleman for all the support that he gave us during the general election campaign, which was gratefully received. I am coming on, in literally 30 seconds, to address the issues relating to Europe in which I know the hon. Gentleman so likes to engage.

I move on to taxation in Europe. The arguments on issues concerning Europe should be based on common sense and not on narrow partisan politics. I want to take up some of the issues that have been raised concerning tax harmonisation. There has been a good deal of scaremongering, which we have heard this evening and over the past few weeks. I want to set out the principles that underpin the Government's approach. Our way forward for Europe is the promotion of employment, economic reforms and competitive markets, not tax harmonisation. The Government have made it clear that we shall not support any action at European level that will threaten jobs or the competitive position of British business. So any tax proposals will need to pass that fundamental test.

Mr. Tyrie

rose—

Mr. Byers

No. I want to make some progress.

Questions of tax require a unanimous decision, so there is no question of tax changes that we do not support being imposed on us from Brussels. We are in favour of tax competition. We are in favour also of national Governments retaining control of taxation. Let us be clear: for the United Kingdom, that means taxation being decided when a British Chancellor of the Exchequer presents a Budget to this House.

Mr. John Bercow (Buckingham)

rose—

Mr. Byers

No. I want to make some progress.

We are also in favour of concerted action at European level to deal with unfair tax practices that distort real competition, to close tax loopholes and to cease unfair state aids and unfair tax breaks. The test always has to be whether in a particular instance the proposal delivers economic or financial benefits for the United Kingdom. If it does not, we shall oppose it and argue our case. The United Kingdom will not sign up to anything that is not in the national interest, that raises business costs, that harms investment and jobs or damages the competitive position of Europe.

I must give way to the hon. Member for Buckingham (Mr. Bercow) because I did not do so last time.

Mr. Bercow

If the right hon. Gentleman is in favour of tax competition, will he explain to the House why the Financial Secretary is prepared to relinquish up to 10 tax reliefs which work to the competitive advantage of the United Kingdom?

Mr. Byers

We certainly will not be doing that. I shall talk shortly about the group on the code of conduct. There has been much play about the 10 directives that will affect people in Britain. These are the 10 issues that are being discussed within the group. To give right hon. and hon. Members a taste of what is to come, of the 10 directives, five refer specifically to Gibraltar. They come to us as a member state of the European Union. I shall deal with the relevant five directives in the relevant part of my speech.

We shall retain the veto on tax issues. If necessary, we shall be prepared to use our veto to protect the national interest. The Government are clear that decisions on tax will remain subject to the agreement of all member states.

The shadow Chancellor referred to the position of the Finnish presidency and said that it would want to raise the question of all-state agreement. I should draw to the right hon. Gentleman's attention the statement made on 4 December by the Finnish tax Minister, who said that Finland's position is that unanimous decisions will make sure a small country can get its voice heard. Our position has not changed on that. I think that we can see that Finland will not use its presidency to argue that what is at present a requirement for all member states to agree will be changed. So we shall retain the veto on tax issues. If necessary, we shall be prepared to use that veto in the national interest.

The Government's approach to Europe is clear. It is far better to be there shaping and engaging in the debates than sitting powerless on the sidelines. If and when draft Commission proposals come forward, the Government will discuss them constructively. However, we shall always judge them by what is in Britain's national economic interest.

In our discussions on tax in Europe, it is important to remember that we are not alone in our approach. Not only Britain but many other member states oppose the harmonisation of tax rates. Last Wednesday the Italian Finance Minister told the Financial Times that harmonisation of corporation tax would be untimely, questionable and, above all, hardly feasible and that it would be

wrong in any event. On the same day the Prime Minister of Spain spoke out against what he called the "dumbing down" of tax harmonisation and opposed a single rate of direct tax because it would be a recipe for inefficiency. There is no majority for the harmonisation of tax rates in Europe, never mind the unanimous agreement that would be required for action. Nor will the need for all-member agreement change. That would require all states of the EU to agree on a change to qualified majority voting on tax, and most member states will not agree to that.

Mr. Stephen Dorrell (Charnwood)

The Chief Secretary has laid considerable stress on his claim that the Government support tax competition as a principle. Why did the Chancellor sign the document produced by the group of European socialist parties, titled "The New European Way", one of the principal purposes of which was to prepare the way for greater tax harmonisation? Why did the Chancellor sign a document that commits the Government to a policy that the Chief Secretary now says they oppose?

Mr. Byers

I do not know whether the right hon. Gentleman is relying on the Conservative research department brief, which has kindly been supplied to me. We seem to have a reciprocal agreement to exchange briefing notes between the official Opposition and the Government. If we co-ordinated it, perhaps we could save costs. Perhaps I should not say such things. 1 was pleased to take the right hon. Gentleman's intervention to get some balance in interventions from Conservative Members. We heard from an anti-European and have now heard from a pro-European—at least, I understand that that is the right hon. Gentleman's current position. The document that the Chancellor signed addressed issues not of tax harmonisation but of tax competition and if the right hon. Gentleman reads the document in detail, he will see that.

Mr. Dorrell

I was relying not on the Conservative research department but on the document provided in full on the internet. The Chief Secretary claims that it does not address tax harmonisation, but it addresses tax policy co-ordination—it is all in a word. A passage in the document specifically commits the signatories to greater tax policy co-ordination, but the Chief Secretary said that that is not Government policy. Did the Chancellor sign up in a fit of absent-mindedness? What is the Government's policy?

Mr. Byers

The policy is clear: we will judge every issue on its merits. We will exercise our veto over those that are not in the national interest, but we will not take the dogmatic approach of vetoing everything, as the Conservative Government did.

Mr. Bercow

rose—

Mr. Tyrie

rose—

Mr. Nick St. Aubyn (Guildford)

rose—

Mr. Byers

I must make some progress, because I have probably taken longer than most hon. Members would wish me to so far.

Britain is not alone among member states in insisting that direct taxation is a matter for the national state. There is no proposal—nor any prospect of one—for the harmonisation of income tax in the European Union. No member state believes that there is a case for a European rate of corporation tax. Even the President of the Commission has said that income tax and corporation tax are sovereign national matters and will remain so. The right hon. Member for Horsham, and the motion before us, raise the issue of the code of conduct group. I shall take this opportunity to inform the House of some facts, so that we do not allow prejudice to get in the way. The formation of such a group was first discussed during the United Kingdom presidency in November 1992. The group does not deal with tax harmonisation. It considers those measures that may be discriminatory and create harmful tax practices.

Five measures in the United Kingdom tax system are on the list to be considered by the code of conduct group. Five other measures relate specifically to Gibraltar. The fact that a measure is discussed by the group does not necessarily mean that it thinks that they are harmful, or that any pressure will be put on the United Kingdom to change them. The United Kingdom will submit a robust defence of the five measures that the group will discuss, and we are confident that they do not constitute harmful tax practices. We are able to submit a robust defence because of the criteria to be applied.

A potentially harmful measure is one where the effective level of taxation is lower than the general level of taxation in the member states in question. For a measure to be harmful, it also has significantly to affect the location of business activity in the Community. For example, it can be argued that a measure confined to small businesses is not harmful.

Measures are to be scrutinised against the following five further criteria; whether the measure is directed only at non-resident companies; whether it is ring-fenced from the domestic market; whether there is no real economic activity associated with it; whether the rules for the determination of profits are consistent with those of the OECD; and whether the measure is transparent.

As for the more general work of the code of conduct group, we have made it clear that we support fair tax competition and will not agree to any measures that will harm United Kingdom businesses and jobs. However, we believe that it is right to take action to tackle harmful tax practices, and that is what we intend to do.

As I said earlier, the Government believe that our approach to Europe should be based on common sense, putting reason before dogma. The test has to be whether proposals deliver economic or financial benefits to the United Kingdom. That is the Labour Government's principled position on Europe, which puts the national interest first, and it is worth contrasting that with the Conservative party's position. It has ruled out membership of monetary union for 10 years. Even if it were to be in Britain's national economic interest to join before then, it would not matter because joining has been ruled out for at least 10 years.

I remind the House of the comments made by the right hon. Member for Horsham when he was interviewed by The Observer. He was asked whether what he was saying was that, even if the single currency were a success, he could not use that to decide whether or not to join. The right hon. Gentleman replied, "Absolutely." That is another example of personal political positioning.

The events of the past few weeks have revealed the modern Tory party as anti-Europe, backward looking and with no vision of the future that lies ahead for our country. A serious debate is under way in Europe about its direction. This Government's modernisation and reform agenda applies not only to the United Kingdom but to Europe. The Tories failed in Europe because they stood on the sidelines and resorted to foghorn diplomacy. We will engage our European partners, shape the debate and ensure throughout that we act in our national interest. The reforms necessary in Europe are not in conflict with our national interest and, indeed, the two often complement each other. That is the way forward, that will be our course of action, and I commend the amendment to the House.

8.18 pm

Mr. Malcolm Bruce (Gordon)

I extend the condolences of my hon. Friends and myself to the Chancellor of the Exchequer on the loss of his father, who was a constituent of mine. I am sure that the Chancellor is in the village of Insch with his mother and brothers, and our thoughts are with them. Mr. Brown senior was a well-known, well-liked and well-respected figure in the community and he will be missed.

When I read the Conservative motion, I thought that it was sensible, but I am concerned by the way in which the argument has stacked up, which reveals two things. First, the Conservatives in government understood the practicalities of trying to secure co-operation on tax matters by voluntary agreement, but in opposition they have sought to turn that constructive approach into an anti-European rant. They are deliberately and mischievously failing to distinguish between voluntary co-operation for tax co-ordination—good—and the imposition of harmonised tax rates against our will—bad. Those are two quite different propositions. Yet Conservatives deliberately blur and mix them, so that people are not quite sure what is being addressed. Ultimately, it is not possible to support the motion because of the spirit behind it.

Liberal Democrats strongly believe that taxation is, and should remain, a national matter, and that we should be prepared to use our veto in the national interest. At the same time, if we can co-ordinate tax matters better with our European partners by agreement, that is all to the good. In doing so, we may be able to advance our national interest.

Why should we co-operate? On environmental issues, environmental taxes may well be more effective if they are agreed on a European basis. If we can plug tax loopholes—many of which are cynically exploited by financial institutions and accountants, many of whom are in the Conservative party—and argue for fairer duty levels on things such as our home-produced whisky, which suffers discrimination in some areas, that would be to our advantage, too. It is silly of the Tories to imply that such issues are neither to be looked at nor discussed.

Mr. Plaskitt

The hon. Gentleman raises the important matter of environmental taxes. As Liberal Democrats are in favour of £29 billion worth of new environmental taxes, will he take this opportunity to spell out to the British public what they are?

Mr. Bruce

I am not prepared to answer that question. If Labour Members intend to intervene with lists of questions, they had better get the brief right. This matter pops up in every debate. We shall continue to send hon. Members copies of our document. If they read it, they will stop asking silly questions.

We have some concerns about the issue that is currently being debated throughout Europe. We are in favour of co-operation but we oppose harmonisation. The Government must make the distinction clear. We should be seeking to build a liberal Europe. That is a good word. Such a Europe would not have unnecessary centralisation on these issues.

We certainly do not want a socialist Europe full of conformity, control and centralisation. Therefore, tax competition is the right discipline because it will limit tax variation of its own accord. It will ensure that European tax levels, although variable throughout the EU, will take full account, and will have to take full account, of competitive pressures in the wider world—a point which, to be fair, was clearly acknowledged by the Chief Secretary.

I am confused by the Government's position on duty-free goods. A leading article in the Financial Times today argued that there was a smack of cynicism and opportunism in the Government's about-face on the issue. Duty-free goods must ultimately go. They cannot be justified on economic grounds. They undermine many small businesses in Britain and erode our tax base, as many will testify.

The real question is whether it is wise of the Government to express what I would suggest is synthetic opposition to getting rid of duty-free goods when the issue has already been dealt with and when there is unlikely to be a fundamental change of conclusion. The Government's position is unclear and inconsistent.

The third issue raised by the Opposition motion is what constitutes harmful tax competition. If we are talking about back-door subsidies of one kind or another, there can be a genuine debate about whether such subsidies should be eliminated by agreement, or whether each nation should be left to decide whether a subsidy is of benefit. That certainly should not be imposed on us. There are not more subsidies because, in a single competitive market, each nation ultimately has to determine that, in the long term, they are not in their economic interests.

There are those in the Irish Republic who are not entirely convinced that low corporation taxes have brought all the benefits that, on the face of it, appear to have been attracted. Businesses have located in Ireland to take advantage of the low tax rates, but they have repatriated the money. Ireland's GDP has been inflated to a level whereby it does not qualify for the cohesion funds which have been so important to the Irish economy. Most Irish citizens are not aware of the trickle-down effect of this wealth because it is not trickling down to the citizens. The Irish may want to reflect on whether that policy is in their long-term interests. We should allow market discipline and co-operation to be the way in which such anomalies are addressed, not central diktat.

We must be careful how we proceed because there may be measures which, for example, could help to promote employment in areas of high unemployment. They may be targeted and time limited to be of benefit, and it would be foolish to put ourselves in a situation where we never can agree measures to deal with special problems in special circumstances. Therefore, I urge the Financial Secretary not to give up tax breaks unless there is a clear case for doing so. I hope that when she replies she will make it clear that that would be her position.

In addition, when the Financial Secretary replies, some of us would like to know exactly where we are with tax relief on dividends for non-tax paying pensioners. That matter was on the Paymaster General's desk. He gave an undertaking to the House that it would be dealt with, but we now understand that it is on the Financial Secretary's desk. We would like to know whether she will deal with it and when she will make an announcement, preferably before the measure comes into effect.

My fourth point relates to the single currency. Today, the Prime Minister claimed to be engaging with Europe in order to promote our interests. That has been echoed by the Chief Secretary. The truth is that the decision to stay out of the single currency could make it more difficult in future for us to shape the European agenda and to serve our and other members' interests on tax policy and budgetary issues. That could be a real problem to which the Government to date seem not to have an answer.

The Chief Secretary made a powerful statement to the effect that we will engage in Europe, argue our case and present a robust argument in favour of the British national interest. Unfortunately, there will be no British representative in the decision-making body of the European central bank. There will be no British representative in the Euro X committee of financial Ministers for the co-ordination of economic policy. Empty chairs cannot negotiate, and that is a danger which the Government have not addressed.

My final point relates to the specific working of the single currency in the context of this debate. It is our absolute belief that a single currency will work effectively only if there is sufficient fiscal flexibility and subsidiarity. The argument being put forward by, for example, Oskar Lafontaine, that a single currency requires the co-ordination of taxation, is 180 degrees wrong. A single currency requires member states to be able to adjust their tax policy to take account of differentials within those member states. With a common exchange and a common interest rate, that flexibility must be maintained.

My challenge to the Government is to be clear about that and to enable us to give a lead. As the Chief Secretary said, there is no unanimity on this—indeed, there is barely a majority—and countries such as Spain, Sweden, Denmark and Italy are anxious to have Britain inside the euro single currency arguing that case robustly and ensuring, at the end of the day, that, although Germany may be the biggest member of the EU, it cannot impose tax uniformity, however much its Finance Minister wishes to do so, against the wishes of the majority or against the wishes of any one member determined to argue the case.

Mr. St. Aubyn

The hon. Gentleman agrees that fiscal policy will be needed to offset inappropriate monetary policy within a single currency. Will he confirm that, in Britain, current research shows that a change in fiscal policy will be required of the order of a 5p increase in taxation, or up to £10 billion taken out in taxation from the economy?

Mr. Bruce

That is arrant nonsense. The whole point about fiscal flexibility is that we can make our own decisions. We need to pursue an economic policy to ensure co-ordination and convergence, something that my party has consistently argued, but it is absolute nonsense to say that anybody can require us to alter our tax regime against our wishes and regardless of our own interest.

The Germans in particular are concerned that we have a flexible economy and a low-tax base, and that that affects our competitiveness to their disadvantage. They have problems, but the message to Mr. Lafontaine is, "Don't expect Europe to solve Germany's problems." Let Germany solve its own problems and recognise that tax policy should remain completely a matter for national interests and national Governments.

Once that is established, it may be possible to co-ordinate the policies that are necessary to enable this country to join the single currency early rather than late, and not to be in the absurd position of the Conservative party, which will not join even if it is in the national interest to do so. Indeed, the Conservative party has put itself increasingly in a situation in which even our continued membership of the European Union would be in question if we had no intention of joining at any time in the foreseeable future.

We must be upfront as a United Kingdom clearly pursuing a liberal agenda for Europe and rejecting the notion of a socialist Europe with controls, centralisation and diktat. I suspect that the Chancellor has reason to regret the fact that the document that flew around the socialist circles of Europe was initiated in his office. It is not surprising that he has tried to distance himself from it. I say to him and his team, "Don't apologise. Distance yourselves from it, strike the right balance and recognise that Britain can win this intellectual argument—if only the Government engage in it robustly enough."

8.32 pm

Mr. Bill Rammell (Harlow)

I welcome the opportunity to contribute to the debate, because in the past two or three weeks we have lived through one of the most hysterical periods in respect of tax harmonisation that this country has experienced for an awfully long time. To get an impression of how far we are from the reality of the European debate, it is instructive to look at newspapers from France and Germany. They have been focusing not on tax harmonisation, but on splits and debates in the Franco-German alliance in a way wholly unrelated to the discussion in this country.

There has been the kind of relentless press campaign that this country has not seen for a long time, with complete and utter fabrications about tax harmonisation. One day last week, The Sun even led its front page with the bold statement that zero-rating of value added tax on children's clothes and on food would go if Britain joined the single currency. There is no such proposal. We have to ask those newspapers, and Conservative politicians who support that disingenuous campaign, why they are doing that and why they are so intent on using extreme exaggeration that is not justified in any basis of fact to put their arguments.

We need to be clear about why the Conservative party has initiated tonight's debate. In trying to get the discussion about tax harmonisation and tax issues going, it hopes that the electorate will forget its record on taxation in government. The charges for its period in office are clear. First, the burden of taxation was shifted in an unfair direction. The only people who were paying less tax at the end of 18 years of Conservative government than they were in 1979 were those earning more than £70,000 a year, and only because everyone else was paying more.

Secondly, the Conservatives in government did something in respect of VAT that they said categorically in opposition that they would not do. It is hardly surprising, therefore, that on many tax issues, and especially on the issue of tax harmonisation, they attempt to muddy the waters and pretend, "Yes, we were dishonest and misled you, but isn't that what all politicians are like and isn't that what is likely to come through the back door via Europe?"

Let us deal with the substance of the allegations about tax harmonisation and look at the facts. Nothing in the Maastricht treaty or the essence of the single currency means that we have to have tax rates set in Brussels or harmonised taxation rates. The key reference in the Maastricht treaty is to sensible budget deficits—no more than 3 per cent. of gross domestic product. That leaves any democratically elected Government the option of a deficit that is either high tax, high spend and sensible or low tax and low spend. To pretend otherwise is simply not justifiable.

In general, when the European Union talks of tax harmonisation—there is a problem of language and translation—it is not talking about harmonising tax rates. It is talking about eliminating special tax breaks, which distort the market, and it is right to do so. In Britain, we should have no problem with that. Britain has a lot to gain from the elimination of tax breaks that provide unfair advantage to the industries of other countries, and of distortions in the single market.

On many occasions, we have heard Euro-sceptic Conservative Members rightly criticise what they perceive to be unfair state subsidies in other EU countries. A mechanism to tackle that should be supported.

Mr. Bercow

Given that the word "co-ordinate" is defined as to place or class in the same order, rank, or division", at page 898 of the "Oxford English Dictionary", how is it to be distinguished in meaning from the word "harmonise"?

Mr. Rammell

I have not referred to page 898 as closely as has the hon. Gentleman. I would ask him to give the House a justification that takes his case forward and makes clear how any of the proposals on the table will take away the right of the British Government to set our tax rates. Nothing in the debate enables him to make that case.

I go further on the European situation: there are no European Union provisions for harmonisation of income tax rates, and no one has suggested that we should have that. There is no EU proposal to harmonise corporation tax rates. The hon. Gentleman and his hon. Friends will refer to Oskar Lafontaine. The most interesting revelation of the past few days is that his views do not even appear to be those of the German Government, let alone views that will win support across the EU.

The press has commented particularly on talk about the co-ordination and harmonisation of VAT rates. There have been co-ordinated VAT rates in this country and in Europe since 1977—more than 21 years. The idea that this is some new-fangled European wheeze to take away the powers for us to set our VAT rates simply does not bear any form of scrutiny.

The biggest single measure of tax harmonisation throughout Europe was introduced in 1991, as a result of the Conservative Government's decision to agree to a standard rate of VAT of 15 per cent. It was also agreed that, once introduced, that rate could not be reduced to less than 5 per cent. When the Labour Government came to power and wanted to reduce VAT on fuel, they could reduce it only to 5 per cent. and not to zero because of that tax-harmonising decision made by the Conservative Government. The Conservative party in government had already sold the pass.

There has been much misinformation about the withholding tax, the aim of which is to prevent tax evasion. The Government are rightly supporting that. The withholding tax concerns only cross-border income from investments in one member state to those resident in another. It has no impact on domestic savings taxation, but one would not have known that from the comments of Conservative Members and the newspapers in the past few weeks.

It has been argued that, if we sign up to a single currency, we will automatically have to sign up to harmonised tax rates. That is not the position in the United States of America. It has a single currency, but the individual states have differing tax rates. That deals with that argument.

Mr. Shaun Woodward (Witney)

Is the hon. Gentleman saying that he would not use the veto on the withholding tax? If so, what does he believe the impact of the imposition of the tax would be on the bond market in London?

Mr. Rammell

I support the Government's position. There is concern about the euro bond market. If the withholding tax provision takes the form of an exchange of information, we can live with that. If it would damage the euro bond market, it would have to be agreed by unanimity and the veto would be available to us. I shall deal with the arguments about the manner and circumstances in which we use the veto, because that is pertinent to the discussion.

We should bear in mind the fact that the majority of Governments of the European Union, the European Central bank and the European Commission take the view that fair tax competition is a good thing. From the comments of Conservative Members and newspaper articles in the past few weeks, one does not get the impression that the majority view in the European Union is that fair tax competition is a good thing, and that taxes as a percentage of gross domestic product must be cut to make the EU more competitive. That is the stated aim of the ECB, and it is what the European Commission and the majority of elected Governments throughout the European Union are saying. They are hardly the views of a European Union that is about to harmonise our taxes and jack up our tax rates through some back-door mechanism.

It has also been argued—we heard the argument again this evening—that what the Government are saying is all very well, but we must listen to the detail and to what Oskar Lafontaine and this or that politician in Europe are saying. We should treat such comments with caution. Even within one Government and in one nation state there will always be a difference of views. Proposals will be talked up but will go nowhere, and kites will be flown that do not stay up.

The European Union has 15 different elected Governments, a Commission, a Central bank and a Parliament, so different proposals will be made and different views will be expressed. Just because ideas have been floated does not mean that there will be a change of policy. Over the years, the European Council table in Brussels has been littered with tax proposals that have died the death, such as the carbon tax proposals and the proposals for VAT on passenger transport, which were withdrawn in 1996.

It is not grown up or sensible government and politics to pretend that certain discussions will never take place or that no views will ever be expressed with which we are not comfortable. We should have a grown-up and mature debate on those issues, not the hysteria that we have seen in recent weeks every time such a suggestion has been made.

An article in the Financial Times this morning hit the nail on the head. It said: Tax issues are portrayed in black and white. In reality, governments opposed to one proposal often agree on other matters and there are inconsistencies within member states, notably in Germany. That is the reality of the situation, and it should be brought out in the debate.

We are trying to refute the propaganda onslaught from the Conservative party about there being a major campaign to harmonise taxes, but people need not listen to Labour Members or to the Government. Conservative Members in particular should note what the right hon. and learned Member for Rushcliffe (Mr. Clarke) said last week. Commenting on tax harmonisation, he said that the United Kingdom could well benefit from changes … I always vetoed the savings tax which the Germans were very keen on … Gordon Brown sounded exactly like I did when I rejected scare stories about tax harmonisation". The right hon. and learned Gentleman said that The Daily Telegraph and the Daily Mail had gone over the top on the basis of

foolish remarks by Oskar Lafontaine. That is what a senior and respected Conservative politician—a former Chancellor of the Exchequer—is saying. It would be helpful to hear from the Opposition spokesman who will wind up the debate whether the Conservative party considers that the right hon. and learned Member for Rushcliffe was being naive, whether he was making a deliberate attempt to mislead, or whether he was talking decent common sense and trying to bring people back to the facts.

There will always be a debate in Europe—in the European Union—about the way in which we wish to go forward, about the nature of the single currency, about whether we should join and about when we should join; but we should engage in that debate in a constructive, mature, reflective way. That is simply not happening at present. I believe that the country's only chance of economic success in the future lies in its being part of the European Union. We must seize the opportunities that exist, we must engage constructively in debate, and we must work together. There are circumstances in which we can achieve more together than we can alone: we should reject the isolationism—the retreat into the past, and into unreality—proposed by the Opposition.

We will preserve the country's economic interest. We must secure the best for Britain, but that will mean working with our partners in the European Union, rather than constantly rubbishing and rejecting them as Opposition Members do.

8.47 pm

Mr. Stephen Dorrell (Charnwood)

The hon. Member for Harlow (Mr. Rammell) said that a debate was going on in Europe. At the end of his speech, the Chief Secretary to the Treasury also referred to a debate in Europe—a debate about the shape of the Europe in which we want to live in future.

My right hon. and hon. Friends were right to table the motion. The Government must be much clearer—much straighter with the House, and with the British people—about where they stand in that debate about the future shape of the continent. The truth is that they are trying to have it both ways. The Chancellor of the Exchequer has signed up to the "New European Way" document, about which I shall have more to say shortly. While trying to cuddle up to the Party of European Socialists on the continent, the Government are also seeking to retain the endorsement of the Daily Mail.

It is not surprising that, when Ministers are speaking on the one hand to Mr. Lafontaine and Mr. Jospin and on the other hand to Mr. Dacre, they find that they have no words to cover the case; but the fudge that the Government are using to deal with the two audiences that they seek to satisfy is wearing thin. It is not a question of Europe, in or out; it is not a question whether we should engage in the argument on the continent about the future shape of Europe.

The Prime Minister was right this afternoon to stress the importance of Britain's engaging in the argument about the future shape of Europe, because our essential national interests are tied up in the conclusion that is reached in that debate. In truth, the debate is much more uncomfortable for the Prime Minister and for new Labour, because it is about Europe left or right, not Europe right or wrong.

One cannot help feeling a sneaking sympathy for the Prime Minister, in a sense. From his point of view, it is rotten luck that he should have spent so many years and so much effort in an attempt to suppress the voice of the old left in his party. He has seen off the old high-spend, high-tax forces in his party, and consigned them, more or less, to silent oblivion; then up pops the Party of European Socialists, reviving all the ideas that he thought that he had quelled in his own party.

It is not surprising that Ministers feel a certain embarrassment. Just at the moment when they thought that they had put all that to bed, suddenly the people on the continent whom they had been proud to regard as their friends—the new European left—start sending back across the channel all the arguments that are so inconvenient within the domestic argument for new Labour and the Labour party.

In an intervention, I quizzed the Chief Secretary on "The New European Way." I did not rely on selected excerpts. I enjoyed reading the document from beginning to end. I emphasise the point. My quarrel is not, by and large, with the European Commission. It is with the Party of European Socialists, and the vision of the future that is set out in the document.

I enjoyed reading "The New European Way" from beginning to end. It was a bit like a trip down memory lane. I quote one or two excerpts to which the Chief Secretary might not have had his attention drawn by the Conservative research department, because it draws some of the colour of the document: For the European Socialists and Social Democrats, pursuing macroeconomic policies in the interest of Europe's citizens has several aspects". It then makes several unexceptional comments, until it comes to this masterpiece of an art that I thought was dead—the art of drawing up a composite motion. It says that, for the European Socialists—how the Prime Minister must have hated association with that word "socialists"—one of those aspects is a commitment to an increase of disposable incomes"— the next bit was inserted presumably by the Chancellor of the Exchequer or Mr. Ed Balls— that is compatible with price stability"— end of insert—

so as to stabilise consumer expectations and macroeconomic demand, given an EU-import and export GDP share of only around 8 per cent. The last bit, I suspect, was composited by the Greeks, but the key burden of that passage is that here is the voice, which has been given crisper and more grammatical form by Mr. Lafontaine, of people on the continent who still believe that it is important to maintain total aggregate demand as the key to delivering stable planning of the economy.

Those are the arguments of 25 years ago, and they are in the document that was signed by the British Chancellor of the Exchequer—small wonder that Ministers find themselves uncomfortable when asked whether he signed the document in a fit of absence of mind.

In particular, the Chancellor and the Prime Minister, who is known to hate that word "socialist", are embarrassed by the fact that they are associated with the document, but some people on the continent have made that case in the Party of European Socialists for a clear reason. Mr. Lafontaine is not embarrassed by the use of the word "socialist", and he is certainly not embarrassed by association with some of those ideas, because behind those commitments is a clear agenda.

Despite what the Chief Secretary says about his commitment to tax competition, the agenda is to reduce tax competition to make it easier to raise taxes and to go back to high-tax, high-spend policies. That is why "The New European Way" is dangerous, and why the Government, if they want to be taken seriously when they say that they are in favour of tax competition and divorced from the old ways of 20 years ago, should not have signed the document, but should, as the hon. Member for Gordon (Mr. Bruce), the Liberal Democrat spokesman, said, take the opportunity to distance themselves, as a Government and as a party, from ideas that the Prime Minister would prefer us to believe had been left behind long ago by the British Labour party. That is why I believe that hon. Members and those who follow these affairs outside the House are entitled to know whether the Government are for or against the ideas in the document. Do the Prime Minister and the Chancellor agree with the ideas that are set out by the European Socialists, or do they want us to believe that, although they have signed its document, they prefer the policies of the European centre right?

The Chief Secretary and the hon. Member for Harlow (Mr. Rammell) were right. A debate is going on, and there is a choice to be made between the route of the Party of European Socialists and that of the European centre right. Indeed, that alternative view of the way forward—the ideas of the European centre right—is a much more attractive view for Europe as a whole, and for Britain as part of Europe.

I do not agree with Mr. Lafontaine that a single currency leads inevitably to a single tax-and-spend policy, and I do not understand why the fact that he associates himself with that view should make it attractive elsewhere in this country. Furthermore, not only do I advance that point of view, but I remind the House that the separation between the single currency and tax-and-spend policy is not merely an expression of a point of view; it is set out in the Maastricht treaty, which separates fiscal from monetary policy, and establishes a separate line of responsibility for each.

That is one aspect of the programme of the European centre right which the Prime Minister has to decide whether he favours or is against; tax competition is the second aspect. The Chief Secretary said at the Dispatch Box that he was in favour, and I am delighted to hear it. However, "The New European Way" makes it abundantly plain that the European left is not in favour. Ironically, the argument for tax competition is clearly set out in the document, but it is applied not to Governments but to the private sector.

On competition as a policy for the private sector, the document states: With a single currency greater price transparency will increase the scope for cross-border competition. It will make it easier for consumers to compare prices and shop around. Firms will come under pressure to compete on quality, value for money and innovation. Firms will tend to avoid increased competition by price cartels or mergers. That is why we need policies that offer fair competition in product markets through attacking cartels, monopolies and vested interests. I completely agree. However, I do not agree with the distinction that the document draws between the argument for competition that the European Socialists think should apply to the private sector and that for protection against competition, which they think should apply to the public sector.

On tax harmonisation in the public sector—it is striking that the authors recognise that economic and monetary union will increase the pressure of competition—the document states: Economic and monetary union will intensify the potential for tax competition. Therefore,"— in other words, because of that increased tax competition—

further efforts will have to be undertaken to avoid harmful tax competition among the member states. I wholly disagree with that proposition. The Chief Secretary sought to persuade us that he disagreed, too, but the choice is there. Either the Government follow the document produced by the European Socialists, or they follow the doctrine of the European centre right, which is in favour of tax competition as an essential discipline on Governments for the same reasons that it is an essential discipline on the private sector.

It is not part of my view that sensible technical co-ordination of tax policy has no place. It would be absurd for me to argue that. I was a Treasury Minister, and I followed my right hon. Friend the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), as Financial Secretary. As Ministers, both he and I were responsible for a succession of minor technical alignments of tax policy.

One is on the table from the Commission at the moment—the taxation of interest and royalty payments between associated companies. Ironically, it builds directly on an earlier directive on the taxation of such payments on wholly owned subsidiaries, which was passed under the previous Government. That is an example of a dry form of tax policy that offers an opportunity for sensible co-ordination.

I am not against that, but I strongly favour a tilt of policy throughout Europe in favour of tax competition between countries, for exactly the same reasons that I am in favour of private sector companies competing with one another. That sort of competition—by a comparison between the performances of individual Governments throughout Europe—is one of the best guarantees that can be provided that Governments will deliver good-value services.

It is right in principle for tax policy to be the responsibility of directly elected national Parliaments. The responsibility of the member state in Europe for tax policy is not merely an expression of view: it is there in the treaties, and to change it, the Party of European Socialists would need not only to change the balance of power in the Council of Ministers but to deliver a treaty amendment.

When we are faced with the document, bearing the Chancellor's signature, the central question, which only the Prime Minister, the Chancellor and the Government can answer, is: which side are the Government on? Are they on the side of the Party of European Socialists, with Mr. Lafontaine and Mr. Jospin, in favour of a cartel of socialists protecting high taxes; or on the side of the centre right, with a commitment to an open, competitive marketplace as the best discipline on Governments, for the same reason that it is the best discipline on companies?

9.1 pm

Mrs. Anne Campbell (Cambridge)

We are all aware that the Tory party is against further European integration, but it was not until this evening that it became clear to me how far it had moved. The hon. Member for Stone (Mr. Cash), who was on the extreme Euro-sceptic wing in the previous Parliament, must be bewildered at the speed at which the rest of his party has caught up with him.

Every disagreement, every remark by a Minister from another European country, regardless of whether the Government agree with it, and every rumour that appears in the press, is used to further the Tory agenda. The Tories make no attempt to make a sensible argument against European integration, but merely use crude scare tactics to try to convince the British people that they will suffer catastrophic tax rises if we continue to talk to our European partners. Their whole agenda is obviously nonsense, and I do not believe that the British people will be taken in.

Our debate this evening is not about what is best for the United Kingdom, the British people or British business: it is simply about the dreadful state of the Tory party. That party is utterly demoralised by its disintegration in the House of Lords, and dismayed by the abysmal performance of its leader in the House of Commons, and it does not have the faintest idea how to be an effective Opposition.

I confess myself amazed that the Tory party would dare to raise the subject of tax, in the light of the previous Government's 22 tax rises, the abortive attempt to impose 17.5 per cent. VAT on fuel, and all the broken promises. It appears to think that the people of this country have extremely short memories.

Mr. Desmond Swayne (New Forest, West)

Will the hon. Lady give way?

Mrs. Campbell

No, because I have only a short time, and others want to speak. I am sure that the hon. Gentleman will get an opportunity to speak if he catches the Deputy Speaker's eye.

Time and again, the right hon. Member for Huntingdon (Mr. Major), the previous Prime Minister, told the electorate that tax would be cut, but the reality was that the Tories did the very opposite of what they had promised: they increased taxes. The 22 new Tory taxes cost a typical family more than £2,000 extra. As if that were not enough, just before the 1992 general election, on 17 March, the right hon. Gentleman said: we have no need and no plans to extend the scope of VAT. Earlier that year, he promised that there would be no VAT increase.

That seemed clear. Many people were taken in by the promise from what appeared to be Honest John, but the Tories imposed VAT on fuel at 8 per cent. A massive popular campaign helped the then Labour Opposition to defeat that unfair tax. It would have hit hardest those on low incomes and elderly people, who need to keep their homes warm.

How can anyone ever trust the Conservative party again? The party that keeps its promises is the Labour party, and I am proud to belong to a party which has kept its promises on tax—

Mr. St. Aubyn

On a point of order, Mr. Deputy Speaker.

Mr. Deputy Speaker (Mr. Michael J. Martin)

Order. I hope that it is a point of order. Many hon. Members will not be called for this debate.

Mr. St. Aubyn

Mr. Deputy Speaker, are the hon. Lady's comments germane to a debate about tax harmonisation?

Mr. Deputy Speaker

I knew that it was not a point of order.

Mrs. Campbell

I know that the Opposition do not like to hear what I am saying, but it is extremely important that we continue to remind the electorate of the promises that were made and not kept.

The new Labour Government have cut VAT on fuel to 5 per cent. They have not raised the basic or top rates of income tax. They have not extended VAT to food, children's clothing, books, newspapers or public transport fares. I know that the Government will continue to keep their promises on tax.

The Conservative party is using scare tactics again when it pretends that the Government will give up their veto on matters of taxation. In 1997, the Labour party manifesto made it clear that we would retain the national veto over key matters of national interest such as taxation. My right hon. Friend the Chancellor has explained clearly that tax proposals require unanimity.

If the rules of the EU were to be changed so that tax proposals were no longer subject to a unanimous vote, that in itself would require a treaty change, and a treaty change cannot be achieved unless everyone agrees. The Government have made it clear that they will not agree, and there is no heart in the great majority of other European countries for change, either. So it simply will not happen. The Conservative Opposition are simply trying to create a crisis out of thin air.

The attitude of the Opposition on European issues shows that their election defeat in 1997 taught them nothing. Their approach of non-co-operation and non-negotiation was supposed to bring an early end to the beef ban. The previous Prime Minister remarked that the ban would be lifted by November. He certainly did not mean this November. He meant November two or even three years ago, when he was still in government.

The Conservative Government's attitude then was that, by bullying and not speaking to our European counterparts, and by refusing to address the arguments, they would win the day. In the event, the Europeans went ahead, and made policy without us. We were always on the outside, until the Labour Government came to power and showed what could be achieved with constructive dialogue and co-operation. That has always been the way to achieve results, and the Government have proved that it works.

The previous shadow Chancellor appeared to believe that entry into the single currency would require centralisation of tax and borrowing powers. He made that point in reply to my right hon. Friend the Chancellor, when my right hon. Friend explained the Government's policy to the House on 27 October 1997. The previous shadow Chancellor's view is mistaken, as is that of the present shadow Chancellor. It is easily seen to be a false proposition from the example of the United States, a country that has a single currency but different tax rates in different states. Tax harmonisation is not an inevitable consequence of a single currency.

I am not sure why we are debating this issue tonight. Tax harmonisation is never going to happen in Europe, so there seems little point in spending time and energy debating the issue. The important things to British people are jobs, high living standards and markets that are truly open and in which our businesses can compete.

On Monday morning, I was fortunate to attend one of my right hon. Friend the Chancellor's productivity roadshows, that held in the eastern region which was one of several roadshows that my right hon. Friend and his Ministers are holding around the country. I did not see any Opposition Members at the roadshow but the business people who were present warmly welcomed the Government's approach to productivity. They appreciate the reduction in corporation tax to its lowest-ever level, and the tax measures that have been proposed to encourage long-term investment and reward entrepreneurs. The huge increase in the science budget has come as a welcome surprise to research organisations and small firms. They all want the unique blend of low taxation and increased investment that the Government have put in place.

I do not believe that the people will be fooled or scared by Tory stories on tax. The Labour Government are earning people's respect and trust, whereas the Conservative party will never again be trusted on tax.

9.10 pm

Sir Peter Lloyd (Fareham)

Before I embark on my speech, I join other hon. Members in expressing my sympathy to the Chancellor on the loss of his father.

Although I am tempted to do so, I shall not follow up the rather individual interpretation of recent history presented by the hon. Member for Cambridge (Mrs. Campbell), other than to comment on her reference to the beef ban being lifted by new Labour. In fact, it was finally lifted under the Labour Government because they had continued the measures that were introduced by the previous Conservative Government. The Labour Government deserve some praise for sustaining the effort, but to pretend that the measures belong to them is to rewrite history.

Despite the protests of hon. Members, it is plain that the Government are in a quandary over Europe and tax—it is plain from the exchanges at Prime Minister's questions and from the Chief Secretary's speech this afternoon. I shall not dwell on the quotations, because I intend to speak only briefly, so as to allow others to speak and because the quotations have been bandied about often enough today and on previous occasions.

Like my right hon. Friend the Member for Charnwood (Mr. Dorrell), I can sympathise with the Government. They want to be at the heart of Europe; they want to engage positively; and they want to appear to the public to be doughty defenders of British interests—defenders who will not let taxes be pushed up by Brussels, and who will retain at Westminster all the power necessary to ensure that they can prevent it.

At the start, it is quite easy for the Government to square all that rhetorically—at least, it would be, if leading European figures refrained from speaking and spoiling the effect—by saying, "We shall co-ordinate our tax systems and co-operate in removing harmful tax competition, but, rely on us, we shall use our veto to protect British interests." However, when it comes to it, the practice will be far more difficult in the continuous horse trading that is how the European Union does business.

The Government will find that, in Europe, not only is it not possible to please everyone, but that it is all too easy to please no one at all. Trying to earn plaudits in Europe and at home will ensure that the Government become distrusted and derided at both ends. That was a lesson that the previous Government learned to their cost, and so will the present Government. I suspect that the Government will pay a high political price, but I fear that the British people will pay a higher economic and constitutional price, unless the Government listen to the Opposition.

It is theoretically possible to have a single currency without tax harmonisation, but I do not believe that that is what will happen in the EU. The very demands of launching the euro and the transparency it brings will put increasing strain on the different tax regimes of member countries. Each country's regime will have at least one feature that the others find objectionable. It is only to be expected that European politicians and officials—not least the German and French Finance Ministers, who are not inconsiderable people—who want an ever-closer union will perceive an overriding need for tax matters to be settled by majority voting.

That will fit in with their ideals, and with the practical problems that they believe must be resolved. The only surprise is that it has been mentioned so soon: they clearly have the bit between their teeth. If the Government apply for United Kingdom entry into the single currency, they may be sure that they will have to accept majority voting on this matter—that is, if they have not already conceded it by then.

There is another reason to expect Europe to move in that direction. It will be the only way that it can conceive of getting rid of harmful tax competition, which features far more in the mind of Europe than in that of the Government. The problem is that one country's benevolent, business-encouraging, job-creating tax arrangement is another country's imported unemployment—or, in other words, another country's harmful tax competition.

I do not believe that the rest of Europe will raise duties on wine and cigarettes to British levels in order to halt the United Kingdom's loss of trade and revenue to northern France. However, we will certainly be expected to begin to raise taxes on business and employment closer to European levels.

We can also be assured that those levels will not come down in the foreseeable future. The new Government in Germany are acting like old Labour, increasing public spending to fund job creation measures. I am not arguing the merits or otherwise of that approach; I am merely emphasising the fact that harmonising taxes will inevitably lead to rising taxes in the United Kingdom.

The most harmful and unjust tax arrangement from the point of view of other European financial centres is that which is vital to the success of the City of London. It is not surprising that they regard the withholding tax as a simple and fair Community arrangement. However, as my right hon. Friend the Member for Horsham (Mr. Maude) said, the tax will ensure not a more equitable sharing of financial business across the Community but the migration of that business to New York, Zurich and elsewhere beyond Europe's borders. The business will be lost to London and to Europe.

Opposition to tax harmonisation is in Britain's, as well as Europe's, best interests. Europe needs to become more competitive, particularly in light of the fall in the value of Asian currencies. If that is to happen, Europe must have effective internal competition. The single currency is supposed to promote that. However, if the EU is to be genuinely competitive, it will need competing tax regimes. If one EU tax regime is more successful in encouraging business and jobs, it should be copied voluntarily, because it works, rather than legislated out of existence as a threat or an anomaly.

The Chief Secretary recognised that argument in part of his speech. He accepted that international competition and its needs will shape the tax systems of countries across the world, but he failed to draw the appropriate conclusions. The hon. Member for Gordon (Mr. Bruce)— I hope that I followed him correctly—drew the same conclusion, and rightly challenged the Government to say where they stand on that issue.

The Opposition are concerned not about tax harmonisation that arises naturally and properly because certain tax measures are shown to be more efficient and effective in developing economies, but about enforced tax harmonisation. That should be resisted by the Government, and I hope that, in winding up, the Minister will confirm that that is their intention. Enforced tax harmonisation must be resisted, in the interests of Britain and of the wider Community.

9.19 pm

Mr. Christopher Leslie (Shipley)

Conservative Members have been skating on thin ice this evening, having called a debate about tax harmonisation, on which they face a dodgy dilemma. They are trying to throw accusations at the Government but they get very shaky and worried about Europe because it is the last subject that they want to discuss. Every Tory Member who has spoken this evening has given a slightly different version of how the future of Europe should develop. I hope that the hon. Member for Stone (Mr. Cash) will speak because I would like to hear his opinion.

Conservative Members are probably regretting the debate and thinking that it is a waste of an Opposition day. When the press was speculating last Wednesday that the Leader of the Opposition would raise the matter at Prime Minister's Question Time, the Tories made a big gaffe and he raised the issue of the House of Lords. Perhaps there is a greater need for harmonisation of Tory party efforts in the Commons and the Lords than there is for a debate on tax harmonisation.

The debate is a diversionary tactic to raise the spectre of Euro-federalism moving towards us and the evil arm of Europe reaching out to grab money from people's pockets. The Chief Secretary set out clearly Labour's policies and how the Government want tax policy to develop across Europe. We want to focus on reducing public sector borrowing levels and ensuring that there are no reckless spending plans, certainly in Britain. We want to ensure that there is wise, efficient prioritisation in public spending and that we take every opportunity to bear down on unnecessary tax and spending. We want to tax only to fund vital public services. That ethos needs to be spread across all European countries, and I am glad that the Government are leading the way in that.

Fairness in taxation has been mentioned by my hon. Friends. It is important that we focus on how the Government have led the way in Europe in showing that we can have fair taxation. The windfall levy on the privatised utilities is a clear example of redirecting money from areas that were not legitimate to spending that was vital for the nation's interests. The Government have been focusing on the national interest at all times.

Rewarding work and making work pay are fundamental aspects of the Government's tax strategy. I hope that they will lead the way in Europe also on the working families tax credit, which is just one example of the way in which the Government have demonstrated that the best option is to get people off benefit and into work. That is the context of the tax policy that we are discussing.

I was listening to the shadow Chancellor, the right hon. Member for Horsham (Mr. Maude), talking about harmonisation. It is a pity that he is not here now. I am dismayed that Conservative Members had the temerity to call this debate. I did some research. I took a leaf out of the hon. Member for Stone's book and delved into the Maastricht treaty. Article 99 provides that the Council can, for the first time, legitimately discuss tax harmonisation measures such as turnover taxes, excise duties and other forms of indirect taxation. Whose signature is at the bottom of the page? Why, it is that of the shadow Chancellor. I do not want to talk about facing both ways on this issue because it would probably be unparliamentary, but people must draw their own conclusions. As I said, I hope that the hon. Member for Stone will have an opportunity to speak.

We have been considering how the Tory party wants to scare people about taxation. It is no wonder that people are worried when newspapers build up those issues because the previous Government's record, which has already been set out, was one of making various promises before the election and breaking and discarding them afterwards. We have heard how VAT on fuel was one of the biggest betrayals by the previous Government. The Tory Government gave away our right to a zero rate of VAT on fuel. Conservative Members have the cheek to talk about tax harmonisation when they started the ball rolling. They are the ones who gave away our right to zero rate VAT on fuel. Some apologies are necessary, and a bit of contrition would not go amiss from the Opposition.

I am intrigued to note that there has been a reshuffle on the Conservative Front Bench. There has not been much news about the Tory Front Bench recently—I am not surprised about that—but the hon. Member for Sevenoaks (Mr. Fallon) used to be the Tory spokesman on tax matters. He has disappeared and has been replaced by a Back Bencher. I was wondering why that was—

Mr. John Whittingdale (Maldon and East Chelmsford)

On a point of information, my hon. Friend the Member for Sevenoaks (Mr. Fallon) unfortunately suffered a severe accident in the summer and is incapacitated. We all hope that he will return to the Front Bench very soon.

Mr. Leslie

I am sorry to hear that but glad to hear that the hon. Gentleman will be returning. I mentioned him because I wanted to read out an interesting comment that he made. He said: I favour the complete abolition of income tax—a tax on earnings—and its substitution by a purchase tax—a tax on spending."—[Official Report, 25 July 1983; Vol. 46, c. 840.] The Tory party ought to think again before it starts delving into VAT—on fuel or anything else. Indeed, the Library tells me that if we took the hon. Gentleman's advice, VAT would be at 40 per cent.

If we want to consider tax policy across Europe, we should take the opportunity afforded by Opposition days to find out exactly where the Tory party stands. Of course, looking both ways has been a feature of Tory Members' contributions all evening, but how on earth would the Tories square their claim about supposedly wanting to move towards a fairer public finance system with the most ridiculous and contradictory positions that they adopted in debates on the Finance Bill? They were always calling for more public expenditure on defence and to fight crime, yet the amendments that they tabled called for an astronomical reduction of £6 billion in public services.

The Tories' priorities included, for example, the reopening of the loophole of the foreign earnings deduction, which would have cost £300 million. Also as a priority they wanted to halve the rate of bingo duty, something that I look forward to reading in the next Tory manifesto. Another top priority was the abolition of capital gains tax, a commitment costing £1.3 billion. There is a black hole in their financial proposals, and they have no answers as to how they would fill it. Would they cut spending, increase the national debt or raise taxes? We know that their hidden agenda during the election was to put VAT on many items, and I suspect that we could find many more.

If we compare the performance of the Labour Government with that of the rabble who are the Opposition, it is clear that there is no contest, as my hon. Friend the Member for Harrow, East (Mr. McNulty) rightly points out. In our manifesto, we promised not only that we would retain the national veto over key matters of national interest such as taxation—this debate is a waste of time because we keep our manifesto promises—but that we would not increase income tax. Despite the Tories' scaremongering before the election, we have kept, and will keep, our promises. That is the difference between the Government and that lot over there.

The Tory party makes policy on the hoof, not knowing where it is going, while the Labour Government stick to the pledges in their manifesto—for example, fair taxation at all times—while always looking to invest in vital public services.

9.29 pm

Dr. Vincent Cable (Twickenham)

I shall be brief because I know that the hon. Member for Stone (Mr. Cash) also wants to speak.

Although there has been much rather tiresome political banter, the day has been useful because both the Prime Minister and the Chief Secretary have reiterated very forcefully and helpfully a complete commitment to the principle of tax competition. Moreover, they have made it clear that tax competition is not an obstacle to closer economic and, indeed, monetary union.

The hon. Member for Harlow (Mr. Rammell) helpfully mentioned the United States, which is much more highly integrated than Europe is—or, I suspect—will ever be because it is a political union. The United States has a great deal of tax diversity and tax competition. Indeed, it is mandated in the constitution. It is useful to reflect on how it manages the problems that are causing so much trouble for the European left.

There is much self-discipline on taxation. American states realise that there is no point in throwing vast amounts of public money in bribes to companies; it is self-defeating. The states therefore do not compete. There is no dive to the bottom in personal or business taxes in the United States. Moreover, there is a great deal of voluntary co-operation. There is something called a multi-state tax compact, in which American states that have problems co-operating simply negotiate bilateral agreements among themselves, thus dealing with many of the problems that are exercising Europe. That can take place in full monetary union. There is no reason why we in Europe should not follow that precedent.

I shall reiterate the two fundamental reasons why—even for my party, which is more unequivocally committed to the European Union than others—tax should remain a national responsibility. One is the principle of subsidiarity; that it is appropriate that the decision should be taken at the lowest-possible level. Indeed, one should repeat the premise, for which Lady Thatcher should claim great credit, of establishing through the single market not merely closer union but the principle of competition among standards—the mutual recognition of different standards as a way of deepening the EU in international trade and investment. It is perfectly possible to have deeper union and competition of product standards, of wages and, indeed, of taxation.

The second basic principle is the acceptance that, if monetary policy is surrendered, national states must have greater freedom to vary taxes and public expenditure. The two things go in opposite directions, and that is how Europe must deal with them. At the same time, there is an argument for co-operation in certain areas. One of those is the problem area of corporation tax. It would be quite wrong for a company operating in several states deliberately to manipulate one Government against another. That would amount effectively to the confiscation of public revenue. That is not tolerated in the United States and should not be in Europe, either.

We should not forget that, although everybody seems to be operating on the assumption that we have a highly competitive corporation tax rate, the UK's rate is higher than in most parts of Europe once all the various allowances are added. The way to deal with corporation tax is to acknowledge the many very damaging and distorting state aids. The previous Government—as well as the present one—accepted that we must intervene to create a single market to co-ordinate policies on corporation tax and state aids.

The right hon. Member for Charnwood (Mr. Dorrell) made a valuable point, although it was somewhat ideologically put. A genuine problem is arising in Europe as a result of the some of the demands of parts of the European left. I was alarmed to read in the paper this morning that the German socialist party is not only demanding tax harmonisation but opposing something that it calls "wage dumping". It seems to regard as wholly wrong in principle the fact that countries with different wage levels should compete. That is gross economic illiteracy. I hope that the Government—everything that they have said today on this subject is absolutely right—will show the same degree of courage in facing the loony left in Europe as they did toward their own party.

9.34 pm

Mr. William Cash (Stone)

In the few minutes available, I shall address the reasons why tax co-ordination follows the Maastricht treaty, as it does in essence. The framework for co-ordination of economic policy is clearly laid down in articles 130, 103, 2, 2a, and so on, and title VII of the treaty lays down the parameters within which it is intended to go, which is why I opposed it so strongly. The statements of Oskar Lafontaine and Gerhard Schroder must be weighed against the remarks of Joschka Fischer, the German Foreign Minister, who has called for the decisive task of our time: the creation of a single state and an international entity in international law.

If one combines those two things, and throws in the costs that are inherent in the things that I shall now list, it becomes clear that not only will it be necessary to co-ordinate a tax policy, but it will be very expensive, and it will cost the British people an arm and a leg. I shall give the House the list.

First, pension liabilities. People will not be able to receive pensions unless the money is found from the other countries in the European Union. In the United Kingdom, we have about £820 billion of privately funded pensions. In Germany, the figure is about £250 billion. As one considers each country in turn, the relevant figure decreases. The money simply is not there. If those countries are to provide public pensions, under the "new way" arrangements, with all the socialism that is now coming in through the back door, they will have to raise massive amounts of tax.

Secondly, cohesion funds. There will be an attempt to create the convergence that does not exist at the moment; that will cost an enormous amount of money.

Thirdly, German and European unemployment is still running at massive levels. That unemployment must be funded.

Fourthly, the Germans want their money back, and if it is given back in the form of a rebate to Germany—which is what Germany is insisting on—inevitably, the burden will fall on other people. Germany is asking for as much as £6 billion.

Fifthly, there is the whole "new European way" and the Keynesian growth policies that go with it—back to the 1960s, as my right hon. Friend the Member for Charnwood (Mr. Dorrell) said.

Sixthly, there are German tax levels. The other day, Joseph Joffe, a columnist for Siiddeutsche Zeitung Magazin, said in the Sunday Telegraph that the reason that the Germans want to Germanise economic and monetary union is to raise the taxes of other countries to German levels, so that capital will not fly out of Germany into Holland and Britain, where taxes are low.

Then there are the issues of enlargement, the black economy and fraud.

When one combines all those factors and throws in the fact that our economic and political philosophy is completely different from that of other socialist policy makers in Europe, one appreciates that the question whether there will be tax harmonisation is not simply an invention—a fantasy. It is based on the Maastricht treaty, which creates co-ordination of economic policy making. Moreover, one has the drive of each of the instances that I have given, towards the necessity to raise the money if the member states are to achieve the policy of the single state that they are aiming at. It is all extremely simple.

There is one last factor—the European Court of Justice. The European Court of Justice is already effectively bypassing the rules that have been laid down, and which were mentioned by the Chief Secretary. According to Professor Franz Vanistendael of Leuven university, Increasingly the European Court of Justice is applying the non-discrimination principle, that has fully been accepted … in the area of indirect taxation, to the area of income tax. The reality is that the Court is running a policy that will lead to harmonisation or co-ordination of taxes—I do not care which word is used. The fact is, it will come in unless it is stopped.

At Prime Minister's questions on Wednesday 2 December 1998, I asked the Prime Minister whether he "can and will" guarantee to veto all this; he did not answer. Nor did he answer when I asked him whether he was going to tell the truth to the British people in a White Paper. He cannot, because he dare not.

9.39 pm

Mr. John Whittingdale (Maldon and East Chelmsford)

This has been a short but important debate. It has also been a highly revealing one. The Government have been telling us for months that reports that Europe wanted to harmonise taxes were scaremongering. Only last week the Foreign Secretary talked about exploding myths and mischief that have been peddled as facts. This evening the hon. Member for Harlow (Mr. Rammell) talked about an hysterical period and the hon. Member for Cambridge (Mrs. Campbell) referred to very crude scare tactics. At the same time, however, other European Governments have made no secret of their wish to move towards a system of common European taxation. They see it as an integral part of economic and monetary union and they cannot understand why that has come as such a surprise.

My right hon. Friend the Member for Horsham (Mr. Maude) is absolutely right. It is theoretically possible to have a single currency without common taxation. However, that is not the intention of the European Union. Three years ago, the president of the Bundesbank said: A European currency will lead to member nations transferring their sovereignty over financial and wage policies as well as in monetary affairs. It is an illusion to think that states can hold on to their autonomy over taxation policies. Since then, there has been a procession of Finance Ministers, central bankers, Commission officials and Heads of Government all reiterating the same message, so that barely a day passes without another European politician spelling it out. Not even the Government can maintain the pretence that this is not happening or that it is not a central priority for many other European states.

We were told, "Never mind, we have a veto. Any change to taxation can be done only on the basis of unanimity, and nobody wants to change that." A few days after that was said, the German Finance Minister announced that it was his view that we should have qualified majority voting on taxation and that the veto should be scrapped. We were told, "That does not matter because it is only a personal view." The Chief Secretary said just that in the debate which took place a week ago. The Prime Minister's official spokesman said that the idea was a non-starter, that it did not represent anyone's official policy and that it had a cat's chance in hell of being adopted.

Within a matter of hours the French Finance Minister said that he supported Mr. Lafontaine, while the German Chancellor said that it was the official policy of the German Government. The next day, the Finns said that extending majority voting to taxation would be high on the agenda of their presidency.

The Chief Secretary has told us this evening that that is not the view of the Finnish Finance Minister. The Finnish version of Alastair Campbell has said: Majority voting on taxation is not a question of if but when. If the Finnish Government are anything like this Government, we know who is pulling the strings. So much for myths and mischief. What the Government said was irresponsible fantasy a few weeks ago is now, according to the Prime Minister, a debate in which we must be engaged.

The Government use tough language for domestic consumption. The Chancellor of the Exchequer is only too happy to bolster his macho image by talking about using the veto. Tax harmonisation, an end to zero rates of value added tax, a withholding tax and a cut in the British rebate—we are told that decisions on all those things can and will be vetoed. However, as my right hon. Friend the Member for Charnwood (Mr. Dorrell) said, the Government are trying to have it both ways because that is not what is being said on the continent. There, they are happy to sign up to greater co-ordination of taxes and an end to so-called harmful tax competition. When the Financial Secretary to the Treasury replies, I hope she will try to square what the Government have been saying with the words in the document to which they signed up, "The New European Way".

Let us be clear, co-ordination of taxes is harmonisation, as Mr. Lafontaine has helpfully made clear. When the other countries in Europe talk about ending harmful tax competition, they are talking about getting rid of Britain's low-tax environment, which has been a magnet for jobs and investment for countries throughout the world.

What about the Liberals? The hon. Member for Gordon (Mr. Bruce) told us that, in his view, taxation is a national matter and that we have a veto which we should be prepared to use. That point was repeated by the hon. Member for Twickenham (Dr. Cable). The Liberal party, too, is happy to talk tough at home, as we heard this evening; however, a few weeks ago, in European Standing Committee B, the hon. Member for Twickenham gave a very different account of Liberal policy. He said that there must be a more satisfactory basis for funding the European Union and that an international income tax was a better option. He said that it would make sense if energy taxes were harmonised from the outset. As for the British rebate, he said that it was politically difficult to perpetuate the idea that Britain is uniquely disadvantaged or that it needs special treatment.

The Government say one thing in the United Kingdom and another on the continent. The Liberals appear to say one thing in the Chamber and another in Committee when they hope that no one is listening.

There is no doubt that there is a European agenda for harmonisation of tax. The Prime Minister has proudly produced today a joint statement that he and the German Chancellor have signed. It says that they are opposed to the harmonisation of personal taxes and to a unified system of corporate taxation, but that does not mean that there will be no harmonisation of corporate taxation. Indeed, the document explicitly leaves the door open for harmonised corporate taxation. That is hardly surprising, as Germany is on record as saying that it is high on its list of political priorities. What about all the other taxes? The statement does not mention VAT, taxes on savings or capital taxation. Clearly, they are now all on the agenda in the Government's eyes.

We know that the withholding tax is under discussion. Despite more tough talk from the Chancellor, this Government agreed at ECOFIN in December last year that a Community-wide withholding tax should be introduced. The proposal that the Commission has now brought forward, as instructed, would put at risk thousands of jobs. It would fatally undermine the City of London as an international financial centre. As my right hon. Friend the Member for Fareham (Sir P. Lloyd) said, it would drive the euro bond market out of London and out of reach of the Commission to Zurich or New York. The Chancellor told us that he will not accept the withholding tax and said that he favoured the provision of information instead. That will suit the Commission fine, and the Chancellor will not need to use the veto on that because it is allowed for in the directive. However, it will not suit the City. For many, the compulsory provision of information would be worse than the withholding tax. It would add to the cost of doing business in London and its effect would be the same—it would drive business overseas. The Government should make it clear that neither a withholding tax nor the compulsory provision of information is acceptable and that any such proposal will be vetoed by the United Kingdom.

Another outcome of the ECOFIN meeting last December was the establishment of the code of conduct group, under the chairmanship of the Financial Secretary. We were told at the time that it was a great triumph for Britain and the Chancellor said that it would put us at the heart of the debate. What has it achieved? It has produced a list of 85 so-called harmful tax measures, although we are not allowed to know what those measures are. We are told that the Government are not prepared to place the document in the Library. I hope that the Financial Secretary will now say that she will do so, so that we can read it. We know that one of the measures on the list is the tax relief given to the British film industry. That relief was introduced by this Government, who trumpeted it at the time, and was welcomed by the industry. It has helped to attract more investment to film. I talked to the producer of "Waking Ned", a British film that is having considerable success. He told me that tax relief was a vital factor in helping him to raise the equity investment that he needed. However, according to the Financial Secretary's committee, it is a harmful tax measure and a distortion that must be removed.

Nothing that the Government have said this evening has done anything to reassure us. For all their tough talk, every sentence is hedged with qualifications and escape clauses. They have turned weasel words into an art form and the strong smell of fudge already surrounds the entire issue. The Prime Minister once said that he would never allow this country to be isolated or left behind in Europe. However, leadership sometimes requires one to be isolated and, on this issue, we are prepared to be isolated in Europe. If the Government's pledges mean anything, they should make it clear now that they will say no to harmonisation.

9.49 pm

The Financial Secretary to the Treasury (Dawn Primarolo)

I thank hon. Members for their condolences to my right hon. Friend the Chancellor and his family on the sad death of his father. I am sure that all hon. Members will share those sentiments.

In addition to dwelling on phrases such as "weasel words" and "fudge", and every other catch-phrase that is in the Tory party's brief for today, the hon. Member for Maldon and East Chelmsford (Mr. Whittingdale) talked about illusion and isolation.

The illusion is that Conservative Members do not want to understand, and do not believe, what is going on both in the debate here in the United Kingdom and in Europe. When the hon. Gentleman said that the Conservative party is happy to be isolated, we know that it is because it is completely isolated—isolated from the other place, from the electorate and from reality, it would appear from the contributions that we have heard today.

Let us be clear about the Government's position. Britain's way forward for Europe is the promotion of employment, economic reforms and competitive markets. The Government will not support any action that will threaten jobs or the competitive position of British business. That is nice and clear.

Tax matters coming before the Council, of course, require unanimous decisions. There is no question of tax changes being imposed on us, as was suggested by the right hon. Member for Fareham (Sir P. Lloyd). That suggestion is preposterous. Tax requires unanimity. Unanimity means all of the member states, including the United Kingdom.

If a proposal does not meet the test of national interest, we will oppose it and argue our case. If necessary, as my right hon. Friend the Chief Secretary said, and as my right hon. Friend the Chancellor has said before, we will be prepared to use the veto.

Mr. Swayne

Will the hon. Lady give way?

Dawn Primarolo

I shall not give way at this moment. I have only 10 minutes to answer all the accusations that have been made against the Government and, out of respect to the House, I should try to do that before any more accusations are made.

The Government believe that fair tax competition is a good thing. We support action to tackle unfair tax practices which distort competition in European economies.

I have the published conclusions from ECOFIN in November 1992, which met under the United Kingdom presidency with the then Chancellor of the Exchequer, now Lord Lamont, in the chair. It states: The Council endorses the concern expressed … about the effects of special tax arrangements designed to attract internationally mobile capital … resulting in the loss of revenue … and unfair competition; and believes that consideration is urgently needed of possible remedies to this problem". Therefore, let us be clear tonight that it was the Conservative party that initiated the process that led to the code of conduct.

Now I briefly remind the House how we will apply our principles as spelt out by my right hon. Friend the Chief Secretary to the three specific areas raised in today's debate by the Opposition.

All European VAT matters are subject to agreement by all member states.

Mr. Bruce Grocott (Telford)

Say it again, Dawn.

Dawn Primarolo

All member states.

We will honour our manifesto pledge on VAT. VAT on food, children's clothes, books, newspapers and public transport fares will remain zero rated. I remind the House that it was the Conservative party that agreed to a minimum VAT rate of 15 per cent. and an illustrious cast of Conservative Members endorsed that. On 2 July 1992, the then Chancellor of the Exchequer said that the Government were committed to the harmonisation of indirect taxes in as far as that was necessary for the internal market.

The right hon. Member for Hitchin and Harpenden (Mr. Lilley), that well-known pro-European, signed an explanatory memorandum to the House explaining why we should have the minimum rate—not a minimalist rate, or whatever it was the shadow Chancellor wanted to call it, not nearly a minimum rate, but a minimum rate. That, too, was endorsed by the right hon. Member for South-West Norfolk (Mrs. Shephard). That well-known champion of Europe, the right hon. Member for Wells (Mr. Heathcoat-Amory), also signed the same memorandum when it came before the House. The right hon. Member for Horsham (Mr. Maude) said, "Let's be minimalist about this." Conservative Members have been minimalist about the truth—nothing else.

There are no Community proposals on the table for corporation tax harmonisation. The Government will not sign up to anything that is not in Britain's national economic interest or that raises business costs and harms investment.

Mrs. Browning

rose—

Dawn Primarolo

I will not give way to the hon. Lady. As a Minister in the previous Government, she knows what their policy was, although she has amnesia now. She is suffering under the same illusion and has forgotten their policy.

There is no evidence that we need harmonisation, nor is it clear what would be the benefits of launching into such an enormous project. With such widely varying corporation tax rates across Europe, we believe that tax harmonisation is a non-starter. There have been many quotes—from the Italian and Finnish Finance Ministers, the Spanish Prime Minister and even the French Prime Minister—making it clear that harmonisation of corporation tax rates is not on the agenda.

The rationale behind the withholding tax is prevention of tax evasion. I hope that that is a principle with which all parties in the House, even the Conservatives, can agree. The Government are committed to effective international action to prevent tax evasion and to protecting the competitiveness of the United Kingdom and European financial services industries. In particular, we have said that any future directive must exclude the eurobond market. The proposals as currently drafted are unacceptable. Any decision requires unanimity. I remind hon. Members that that means that everybody must be in favour, so the proposals cannot be changed unless their present form is improved.

The code of conduct aims to tackle harmful tax competition and, by doing so, would create the preconditions for healthy competition. We are helping to protect British jobs which are threatened by unfair subsidies abroad. The code of conduct uses two specific key criteria to decide what is harmful. The first and most important is that a measure must significantly affect the location of business activities in the Community. The second specifies that the potentially harmful measure has an effective level of taxation lower than general levels of taxation in that member state.

Under the terms of the code—voted for in European Standing Committee B—five measures in the United Kingdom tax system are on the list of measures that could fall into that category. That does not mean that they are harmful, and the group has yet to reach its conclusions. We do not believe that those measures are harmful and we have submitted a robust defence of them to the group. We are confident that they do not constitute harmful tax measures because all five satisfy the criteria for not being harmful; they are proportionate in their target—[Interruption]

Mr. Deputy Speaker

Order. There is far too much conversation. It should be borne in mind that this is an Opposition Supply day.

Dawn Primarolo

This is obviously too hard for Conservative Members to follow, because I am telling them what is really going on instead of talking about their illusions.

The Government are pursuing a clear agenda in Europe. It is about shaping a better Europe, engaging in debate and making sure that our best interests are represented—interests that Conservative Members cannot even recognise.

Question put, That the original words stand part of the Question:—

The House divided: Ayes 140, Noes 359.

Division No. 21]	[9.59 pm
AYES
Ainsworth, Peter (E Surrey)	Faber, David
Amess, David	Fabricant, Michael
Ancram, Rt Hon Michael	Forth, Rt Hon Eric
Arbuthnot, Rt Hon James	Fowler, Rt Hon Sir Norman
Atkinson, David (Bour'mth E)	Fox, Dr Liam
Atkinson, Peter (Hexham)	Fraser, Christopher
Bercow, John	Gale, Roger
Beresford, Sir Paul	Garnier, Edward
Blunt, Crispin	Gibb, Nick
Body, Sir Richard	Gill, Christopher
Boswell, Tim	Gillan, Mrs Cheryl
Bottomley, Peter (Worthing W)	Gorman, Mrs Teresa
Bottomley, Rt Hon Mrs Virginia	Gray, James
Brady, Graham	Green, Damian
Brazier, Julian	Greenway, John
Brooke, Rt Hon Peter	Grieve, Dominic
Browning, Mrs Angela	Gummer, Rt Hon John
Burns, Simon	Hague, Rt Hon William
Butterfill, John	Hamilton, Rt Hon Sir Archie
Cash, William	Hammond, Philip
Chapman, Sir Sydney (Chipping Barnet)	Hawkins, Nick
	Hayes, John
Chope, Christopher	Heathcoat—Amory, Rt Hon David
Clappison, James	Heseltine, Rt Hon Michael
Clarke, Rt Hon Kenneth (Rushcliffe)	Hogg, Rt Hon Douglas
	Horam, John
Clifton—Brown, Geoffrey	Howard, Rt Hon Michael
Collins, Tim	Howarth, Gerald (Aldershot)
Colvin, Michael	Hunter, Andrew
Cormack, Sir Patrick	Jackson, Robert (Wantage)
Cran, James	Jenkin, Bernard
Davies, Quentin (Grantham)	Key, Robert
Davis, Rt Hon David (Haltemprice)	King, Rt Hon Tom (Bridgwater)
Donaldson, Jeffrey	Laing, Mrs Eleanor
Dorrell, Rt Hon Stephen	Lait, Mrs Jacqui
Duncan, Alan	Lansley, Andrew
Duncan Smith, Iain	Letwin, Oliver
Emery, Rt Hon Sir Peter	Lewis, Dr Julian (New Forest E)
Evans, Nigel	Lidington, David

Lilley, Rt Hon Peter	Soames, Nicholas
Lloyd, Rt Hon Sir Peter (Fareham)	Spelman, Mrs Caroline
Loughton, Tim	Spicer, Sir Michael
Lyell, Rt Hon Sir Nicholas	Spring, Richard
McIntosh, Miss Anne	Stanley, Rt Hon Sir John
MacKay, Rt Hon Andrew	Steen, Anthony
Maclean, Rt Hon David	Swayne, Desmond
McLoughlin, Patrick	Syms, Robert
Major, Rt Hon John	Tapsell, Sir Peter
Malins, Humfrey	Taylor, Ian (Esher & Walton)
Maples, John	Taylor, Rt Hon John D (Strangford)
Mates, Michael	Taylor, John M (Solihull)
Maude, Rt Hon Francis	Taylor, Sir Teddy
Mawhinney, Rt Hon Sir Brian	Tredinnick, David
May, Mrs Theresa	Trend, Michael
Moss, Malcolm	Tyrie, Andrew
Norman, Archie	Walter, Robert
Ottaway, Richard	Wardle, Charles
Page, Richard	Wells, Bowen
Paice, James	Whitney, Sir Raymond
Paterson, Owen	Whittingdale, John
Pickles, Eric	Widdecombe, Rt Hon Miss Ann
Prior, David	Wilkinson, John
Randall, John	Willetts, David
Redwood, Rt Hon John	Wilshire, David
Robathan, Andrew	Winterton, Mrs Ann (Congleton)
Robertson, Laurence (Tewk'b'ry)	Winterton, Nicholas (Macclesfield)
Roe, Mrs Marion (Broxbourne)	Woodward, Shaun
Ross, William (E Lond'y)	Yeo, Tim
Rowe, Andrew (Faversham)	Young, Rt Hon Sir George
Ruffley, David
St Aubyn, Nick	Tellers for the Ayes:
Shepherd, Richard	Mr. Stephen Day and
Simpson, Keith (Mid-Norfolk)	Mr. Nigel Waterson.

NOES
Abbott, Ms Diane	Bruce, Malcolm (Gordon)
Adams, Mrs lrene (Paisley N)	Burgon, Colin
Ainger, Nick	Burnett, John
Ainsworth, Robert (Cov'try NE)	Burstow, Paul
Allan, Richard	Butler, Mrs Christine
Anderson, Donald (Swansea E)	Byers, Rt Hon Stephen
Armstrong, Ms Hilary	Cable, Dr Vincent
Ashdown, Rt Hon Paddy	Caborn, Richard
Ashton, Joe	Campbell, Alan (Tynemouth)
Atherton, Ms Candy	Campbell, Mrs Anne (C'bridge)
Atkins, Charlotte	Campbell, Menzies (NE Fife)
Austin, John	Campbell, Ronnie (Blyth V)
Ballard, Jackie	Campbell—Savours, Dale
Barnes, Harry	Cann, Jamie
Barron, Kevin	Caplin, Ivor
Battle, John	Casale, Roger
Bayley, Hugh	Chapman, Ben (Wirral S)
Beard, Nigel	Chaytor, David
Begg, Miss Anne	Chidgey, David
Bell, Martin (Tatton)	Chisholm, Malcolm
Benn, Rt Hon Tony	Clark, Rt Hon Dr David (S Shields)
Bennett, Andrew F	Clark, Dr Lynda (Edinburgh Pentlands)
Benton, Joe
Bermingham, Gerald	Clark, Paul (Gillingham)
Berry, Roger	Clarke, Charles (Norwich S)
Betts, Clive	Clarke, Eric (Midlothian)
Blackman, Liz	Clarke, Rt Hon Tom (Coatbridge)
Blears, Ms Hazel	Clarke, Tony (Northampton S)
Blizzard, Bob	Clelland, David
Blunkett, Rt Hon David	Clwyd, Ann
Boateng, Paul	Cohen, Harry
Borrow, David	Coleman, Iain
Bradley, Keith (Withington)	Colman, Tony
Bradley, Peter (The Wrekin)	Connarty, Michael
Bradshaw, Ben	Cook, Frank (Stockton N)
Brand, Dr Peter	Cooper, Yvette
Breed, Colin	Corbyn, Jeremy
Brinton, Mrs Helen	Corston, Ms Jean
Brown, Russell (Dumfries)	Cranston, Ross
Browne, Desmond	Cryer, Mrs Ann (Keighley)

Cryer, John (Hornchurch)	Hopkins, Kelvin
Cummings, John	Howarth, Alan (Newport E)
Cunliffe, Lawrence	Howells, Dr Kim
Cunningham, Jim (Cov'try S)	Hoyle, Lindsay
Curtis—Thomas, Mrs Claire	Hughes, Kevin (Doncaster N)
Darvill, Keith	Humble, Mrs Joan
Davey, Edward (Kingston)	Hurst, Alan
Davey, Valerie (Bristol W)	Hutton, John
Davies, Rt Hon Denzil (Llanelli)	Illsley, Eric
Davis, Terry (B'ham Hodge H)	Ingram, Adam
Dawson, Hilton	Jackson, Ms Glenda (Hampstead)
Dean, Mrs Janet	Jackson, Helen (Hillsborough)
Denham, John	Johnson, Alan (Hull W & Hessle)
Dewar, Rt Hon Donald	Johnson, Miss Melanie (Welwyn Hatfield)
Dobbin, Jim
Donohoe, Brian H	Jones, Barry (Alyn & Deeside)
Doran, Frank	Jones, Mrs Fiona (Newark)
Dowd, Jim	Jones, Helen (Warrington N)
Drown, Ms Julia	Jones, Ms Jenny (Wolverh'ton SW)
Dunwoody, Mrs Gwyneth
Eagle, Angela (Wallasey)	Jones, Jon Owen (Cardiff C)
Eagle, Maria (L'pool Garston)	Jones, Dr Lynne (Selly Oak)
Edwards, Huw	Kaufman, Rt Hon Gerald
Ellman, Mrs Louise	Keeble, Ms Sally
Ennis, Jeff	Keen, Alan (Feltham & Heston)
Etherington, Bill	Keen, Ann (Brentford & Isleworth)
Fearn, Ronnie	Keetch, Paul
Fisher, Mark	Kemp, Fraser
Fitzpatrick, Jim	Khabra, Piara S
Flint, Caroline	Kidney, David
Flynn, Paul	Kilfoyle, Peter
Follett, Barbara	King, Andy (Rugby & Kenilworth)
Foster, Rt Hon Derek	King, Ms Oona (Bethnal Green)
Foster, Don (Bath)	Kumar, Dr Ashok
Foster, Michael Jabez (Hastings)	Ladyman, Dr Stephen
Foster, Michael J (Worcester)	Lawrence, Ms Jackie
Fyfe, Maria	Laxton, Bob
Gapes, Mike	Lepper, David
George, Andrew (St Ives)	Leslie, Christopher
George, Bruce (Walsall S)	Levitt, Tom
Gerrard, Neil	Lewis, Ivan (Bury S)
Gibson, Dr Ian	Linton, Martin
Gilroy, Mrs Linda	Livingstone, Ken
Godman, Dr Norman A	Livsey, Richard
Godsiff, Roger	Lock, David
Goggins, Paul	Love, Andrew
Golding, Mrs Llin	McAllion, John
Gorrie, Donald	McAvoy, Thomas
Griffiths, Jane (Reading E)	McCabe, Steve
Griffiths, Win (Bridgend)	McCafferty, Ms Chris
Grocott, Bruce	McCartney, Ian (Makerfield)
Grogan, John	McDonnell, John
Gunnell, John	McFall, John
Hain, Peter	McGuire, Mrs Anne
Hall, Mike (Weaver Vale)	McIsaac, Shona
Hall, Patrick (Bedford)	McKenna, Mrs Rosemary
Hamilton, Fabian (Leeds NE)	Mackinlay, Andrew
Hancock, Mike	McNulty, Tony
Hanson, David	MacShane, Denis
Harris, Dr Evan	Mactaggart, Fiona
Harvey, Nick	McWalter, Tony
Heal, Mrs Sylvia	McWilliam, John
Healey, John	Mahon, Mrs Alice
Heath, David (Somerton & Frome)	Mallaber, Judy
Henderson, Ivan (Harwich)	Marsden, Gordon (Blackpool S)
Hepburn, Stephen	Marsden, Paul (Shrewsbury)
Heppell, John	Marshall, David (Shettleston)
Hesford, Stephen	Marshall, Jim (Leicester S)
Hewitt, Ms Patricia	Marshall—Andrews, Robert
Hill, Keith	Martlew, Eric
Hinchliffe, David	Maxton, John
Hodge, Ms Margaret	Meacher, Rt Hon Michael
Hoey, Kate	Merron, Gillian
Home Robertson, John	Michael, Alun
Hood, Jimmy	Michie, Bill (Shef-ld Heeley)
Hope, Phil	Michie, Mrs Ray (Argyll & Bute)

Milburn, Alan	Skinner, Dennis
Miller, Andrew	Smith, Angela (Basildon)
Mitchell, Austin	Smith, Rt Hon Chris (Islington S)
Moffatt, Laura	Smith, Jacqui (Redditch)
Moore, Michael	Smith, John (Glamorgan)
Moran, Ms Margaret	Smith, Llew (Blaenau Gwent)
Morgan, Ms Julie (Cardiff N)	Smith, Sir Robert (W Ab'd'ns)
Morgan, Rhodri (Cardiff W)	Snape, Peter
Morley, Elliot	Soley, Clive
Morris, Ms Estelle (B'ham Yardley)	Southworth, Ms Helen
Morris, Rt Hon John (Aberavon)	Starkey, Dr Phyllis
Mudie, George	Steinberg, Gerry
Mullin, Chris	Stevenson, George
Murphy, Denis (Wansbeck)	Stewart, David (Inverness E)
Naysmith, Dr Doug	Stinchcombe, Paul
Norris, Dan	Stoate, Dr Howard
Oaten, Mark	Stott, Roger
O'Brien, Bill (Normanton)	Strang, Rt Hon Dr Gavin
O'Brien, Mike (N Warks)	Stringer, Graham
O'Hara, Eddie	Stuart, Ms Gisela
Olner, Bill	Stunell, Andrew
O'Neill, Martin	Sutcliffe, Gerry
Öpik, Lembit	Taylor, Rt Hon Mrs Ann (Dewsbury)
Organ, Mrs Diana
Osborne, Ms Sandra	Taylor, Ms Dari (Stockton S)
Palmer, Dr Nick	Taylor, David (NW Leics)
Pearson, Ian	Taylor, Matthew (Truro)
Pendry, Tom	Temple—Morris, Peter
Perham, Ms Linda	Thomas, Gareth (Clwyd W)
Pickthall, Colin	Thomas, Gareth R (Harrow W)
Pike, Peter L	Timms, Stephen
Plaskitt, James	Tipping, Paddy
Pollard, Kerry	Todd, Mark
Pope, Greg	Tonge, Dr Jenny
Pound, Stephen	Touhig, Don
Powell, Sir Raymond	Trickett, Jon
Prentice, Ms Bridget (Lewisham E)	Truswell, Paul
Prentice, Gordon (Pendle)	Turner, Dennis (Wolverh-ton SE)
Prescott, Rt Hon John	Turner, Dr Desmond (Kemptown)
Primarolo, Dawn	Turner, Dr George (NW Norfolk)
Quin, Ms Joyce	Twigg, Derek (Halton)
Quinn,Lawrie	Twigg, Stephen (Enfield)
Radice, Giles	Tyler, Paul
Rammell, Bill	Vaz, Keith
Rapson, Syd	Wallace, James
Raynsford, Nick	Walley, Ms Joan
Reed, Andrew (Loughborough)	Ward, Ms Claire
Rendel, David	Wareing, Robert N
Robertson, Rt Hon George (Hamilton S)	Watts, David
	Webb, Steve
Robinson, Geoffrey (Cov'try NW)	White, Brian
Rooney, Terry	Whitehead, Dr Alan
Ross, Ernie (Dundee W)	Wicks, Malcolm
	Williams, Rt Hon Alan (Swansea W)
Rowlands, Ted
Ruane, Chris	Williams, Alan W (E Carmarthen)
Ruddock, Ms Joan	Wills, Michael
Russell, Bob (Colchester)	Winnick, David
Russell, Ms Christine (Chester)	Winterton, Ms Rosie (Doncaster C)
Salter, Martin	Wise, Audrey
Sanders, Adrian	Wood, Mike
Sarwar, Mohammad	Wray, James
Savidge, Malcolm	Wright, Anthony D (Gt Yarmouth)
Shaw, Jonathan	Wright, Dr Tony (Cannock)
Sheerman, Barry	Wyatt, Derek
Sheldon, Rt Hon Robert
Shipley, Ms Debra	Tellers for the Noes:
Simpson, Alan (Nottingham S)	Mr. David Jamieson and
Singh, Marsha	Jane Kennedy.

Question accordingly negatived.

Question, That the proposed words be there added, put forthwith, pursuant to Standing Order No. 31 (Questions on amendments):—

The House divided: Ayes 316, Noes 161.

Division No. 22]	[10.13 pm
AYES
Abbott, Ms Diane	Davey, Valerie (Bristol W)
Adams, Mrs Irene (Paisley N)	Davies, Rt Hon Denzil (Llanelli)
Ainger, Nick	Davis, Terry (B'ham Hodge H)
Ainsworth, Robert (Cov'try NE)	Dawson, Hilton
Anderson, Donald (Swansea E)	Dean, Mrs Janet
Armstrong, Ms Hilary	Denham, John
Ashton, Joe	Dewar, Rt Hon Donald
Atherton, Ms Candy	Dobbin, Jim
Atkins, Charlotte	Donohoe, Brian H
Austin, John	Doran, Frank
Barnes, Harry	Dowd, Jim
Barron, Kevin	Drown, Ms Julia
Battle, John	Eagle, Angela (Wallasey)
Bayley, Hugh	Eagle, Maria (L'pool Garston)
Beard, Nigel	Edwards, Huw
Begg, Miss Anne	Ellman, Mrs Louise
Benn, Rt Hon Tony	Ennis, Jeff
Benton, Joe	Etherington, Bill
Bermingham, Gerald	Fisher, Mark
Berry, Roger	Fitzpatrick, Jim
Betts, Clive	Flint, Caroline
Blackman, Liz	Flynn, Paul
Blears, Ms Hazel	Follett, Barbara
Blizzard, Bob	Foster, Rt Hon Derek
Blunkett, Rt Hon David	Foster, Michael Jabez (Hastings)
Boateng, Paul	Foster, Michael J (Worcester)
Borrow, David	Fyfe, Maria
Bradley, Keith (Withington)	Gapes, Mike
Bradley, Peter (The Wrekin)	George, Bruce (Walsall S)
Bradshaw, Ben	Gerrard, Neil
Brinton, Mrs Helen	Gibson, Dr Ian
Brown, Russell (Dumfries)	Gilroy, Mrs Linda
Browne, Desmond	Godman, Dr Norman A
Burgon, Colin	Godsiff, Roger
Butler, Mrs Christine	Goggins, Paul
Byers, Rt Hon Stephen	Golding, Mrs Llin
Caborn, Richard	Griffiths, Jane (Reading E)
Campbell, Alan (Tynemouth)	Griffiths, Win (Bridgend)
Campbell, Mrs Anne (C'bridge)	Grocott, Bruce
Campbell, Ronnie (Blyth V)	Grogan, John
Campbell—Savours, Dale	Gunnell, John
Cann, Jamie	Hain, Peter
Caplin, Ivor	Hall, Mike (Weaver Vale)
Casale, Roger	Hall, Patrick (Bedford)
Chapman, Ben (Wirral S)	Hanson, David
Chaytor, David	Heal, Mrs Sylvia
Chisholm, Malcolm	Healey, John
Clark, Rt Hon Dr David (S Shields)	Henderson, Ivan (Harwich)
Clark, Dr Lynda (Edinburgh Pentlands)	Hepburn, Stephen
	Heppell, John
Clark, Paul (Gillingham)	Hesford, Stephen
Clarke, Charles (Norwich S)	Hewitt, Ms Patricia
Clarke, Eric (Midlothian)	Hill, Keith
Clarke, Rt Hon Tom (Coatbridge)	Hinchliffe, David
Clarke, Tony (Northampton S)	Hodge, Ms Margaret
Clelland, David	Hoey, Kate
Clwyd, Ann	Home Robertson, John
Cohen, Harry	Hood, Jimmy
Coleman, Iain	Hope, Phil
Colman, Tony	Hopkins, Kelvin
Connarty, Michael	Howarth, Alan (Newport E)
Cook, Frank (Stockton N)	Howells, Dr Kim
Cooper, Yvette	Hoyle, Lindsay
Corbyn, Jeremy	Hughes, Kevin (Doncaster N)
Corston, Ms Jean	Humble, Mrs Joan
Cranston, Ross	Hurst, Alan
Cryer, Mrs Ann (Keighley)	Hutton, John
Cryer, John (Hornchurch)	Illsley, Eric
Cummings, John	Ingram, Adam
Cunliffe, Lawrence	Jackson, Ms Glenda (Hampstead)
Cunningham, Jim (Cov'try S)	Jackson, Helen (Hillsborough)
Curtis—Thomas, Mrs Claire	Johnson, Alan (Hull W & Hessle)
Darvill, Keith	Johnson, Miss Melanie

(Welwyn Hatfield)	O'Hara, Eddie
Jones, Barry (Alyn & Deeside)	Olner, Bill
Jones, Mrs Fiona (Newark)	O'Neill, Martin
Jones, Helen (Warrington N)	Organ, Mrs Diana
Jones, Ms Jenny (Wolverh'ton SW)	Osborne, Ms Sandra
	Palmer, Dr Nick
Jones, Jon Owen (Cardiff C)	Pearson, Ian
Jones, Dr Lynne (Selly Oak)	Pendry, Tom
Kaufman, Rt Hon Gerald	Perham, Ms Linda
Keeble, Ms Sally	Pickthall, Colin
Keen, Alan (Feltham & Heston)	Pike, Peter L
Keen, Ann (Brentford & Isleworth)	Plaskitt, James
Kemp, Fraser	Pollard, Kerry
Khabra, Piara S	Pope, Greg
Kidney, David	Pound, Stephen
Kilfoyle, Peter	Powell, Sir Raymond
King, Andy (Rugby & Kenilworth)	Prentice, Ms Bridget (Lewisham E)
King, Ms Oona (Bethnal Green)	Prentice, Gordon (Pendle)
Kumar, Dr Ashok	Prescott, Rt Hon John
Ladyman, Dr Stephen	Primarolo, Dawn
Lawrence, Ms Jackie	Quin, Ms Joyce
Laxton, Bob	Quinn, Lawrie
Lepper, David	Radice, Giles
Leslie, Christopher	Rammell, Bill
Levitt, Tom	Rapson, Syd
Lewis, Ivan (Bury S)	Raynsford, Nick
Linton, Martin	Reed, Andrew (Loughborough)
Livingstone, Ken	Robertson, Rt Hon George (Hamilton S)
Lock, David
Love, Andrew	Robinson, Geoffrey (Cov'try NW)
McAllion, John	Rooney, Terry
McAvoy, Thomas	Ross, Ernie (Dundee W)
McCabe, Steve	Rowlands, Ted
McCafferty, Ms Chris	Ruane, Chris
McCartney, Ian (Makerfield)	Ruddock, Ms Joan
McDonnell, John	Russell, Ms Christine (Chester)
McFall, John	Salter, Martin
McGuire, Mrs Anne	Sarwar, Mohammad
McIsaac, Shona	Savidge, Malcolm
McKenna, Mrs Rosemary	Sheldon, Rt Hon Robert
Mackinlay, Andrew	Shipley, Ms Debra
McNulty, Tony	Simpson, Alan (Nottingham S)
MacShane, Denis	Singh, Marsha
Mactaggart, Fiona	Skinner, Dennis
McWalter, Tony	Smith, Angela (Basildon)
McWilliam, John	Smith, Rt Hon Chris (Islington S)
Mahon, Mrs Alice	Smith, Jacqui (Redditch)
Mallaber, Judy	Smith, John (Glamorgan)
Marsden, Gordon (Blackpool S)	Smith, Llew (Blaenau Gwent)
Marsden, Paul (Shrewsbury)	Snape, Peter
Marshall, David (Shettleston)	Soley, Clive
Marshall, Jim (Leicester S)	Southworth, Ms Helen
Marshall—Andrews, Robert	Starkey, Dr Phyllis
Martlew, Eric	Steinberg, Gerry
Maxton, John	Stevenson, George
Meacher, Rt Hon Michael	Stewart, David (Inverness E)
Merron, Gillian	Stinchcombe, Paul
Michael, Alun	Stoate, Dr Howard
Michie, Bill (Shef-ld Heeley)	Stott, Roger
Milburn, Alan	Strang, Rt Hon Dr Gavin
Miller, Andrew	Stringer, Graham
Mitchell, Austin	Stuart, Ms Gisela
Moffatt, Laura	Sutcliffe, Gerry
Moran, Ms Margaret	Taylor, Rt Hon Mrs Ann (Dewsbury)
Morgan, Ms Julie (Cardiff N)
Morgan, Rhodri (Cardiff W)	Taylor, Ms Dari (Stockton S)
Morley, Elliot	Taylor, David (NW Leics)
Morris, Ms Estelle (B'ham Yardley)	Temple—Morris, Peter
Morris, Rt Hon John (Aberavon)	Thomas, Gareth (Clwyd W)
Mudie, George	Thomas, Gareth R (Harrow W)
Mullin, Chris	Timms, Stephen
Murphy, Denis (Wansbeck)	Tipping, Paddy
Naysmith, Dr Doug	Todd, Mark
Norris, Dan	Touhig, Don
O'Brien, Bill (Normanton)	Trickett, Jon
O'Brien, Mike (N Warks)	Turner, Dennis (Wolverh'ton SE)

Turner, Dr Desmond (Kemptown)	Williams, Alan W (E Carmarthen)
Turner, Dr George (NW Norfolk)	Wills, Michael
Twigg, Derek (Halton)	Winnick, David
Twigg, Stephen (Enfield)	Winterton, Ms Rosie (Doncaster C)
Vaz, Keith	Wise, Audrey
Walley, Ms Joan	Wood, Mike
Ward, Ms Claire	Wray, James
Wareing, Robert N	Wright, Anthony D (Gt Yarmouth)
Watts, David	Wright, Dr Tony (Cannock)
White, Brian	Wyatt, Derek
Whitehead, Dr Alan
Wicks, Malcolm	Tellers for the Ayes:
Williams, Rt Hon Alan (Swansea W)	Mr. David Jamieson and
	Jane Kennedy.

NOES
Ainsworth, Peter (E Surrey)	Gillan, Mrs Cheryl
Allan, Richard	Gorman, Mrs Teresa
Amess, David	Gorrie, Donald
Ancram, Rt Hon Michael	Green, Damian
Arbuthnot, Rt Hon James	Greenway, John
Ashdown, Rt Hon Paddy	Grieve, Dominic
Atkinson, Peter (Hexham)	Hague, Rt Hon William
Ballard, Jackie	Hamilton, Rt Hon Sir Archie
Bercow, John	Hammond, Philip
Beresford, Sir Paul	Hancock, Mike
Blunt, Crispin	Harris, Dr Evan
Body, Sir Richard	Harvey, Nick
Boswell, Tim	Hawkins, Nick
Bottomley, Peter (Worthing W)	Hayes, John
Bottomley, Rt Hon Mrs Virginia	Heath, David (Somerton & Frome)
Brady, Graham	Heathcoat—Amory, Rt Hon David
Brand, Dr Peter	Hogg, Rt Hon Douglas
Brazier, Julian	Horam, John
Breed, Colin	Howarth, Gerald (Aldershot)
Brooke, Rt Hon Peter	Hunter, Andrew
Browning, Mrs Angela	Jackson, Robert (Wantage)
Bruce, Malcolm (Gordon)	Jenkin, Bernard
Burnett, John	Keetch, Paul
Burns, Simon	Key, Robert
Burstow, Paul	King, Rt Hon Tom (Bridgwater)
Butterfill, John	Laing, Mrs Eleanor
Cable, Dr Vincent	Lait, Mrs Jacqui
Campbell, Menzies (NE Fife)	Lansley, Andrew
Chapman, Sir Sydney (Chipping Barnet)	Letwin, Oliver
	Lewis, Dr Julian (New Forest E)
Chidgey, David	Lidington, David
Chope, Christopher	Lilley, Rt Hon Peter
Clappison, James	Livsey, Richard
Clifton—Brown, Geoffrey	Lloyd, Rt Hon Sir Peter (Fareham)
Collins, Tim	Llwyd, Elfyn
Colvin, Michael	Loughton, Tim
Cormack, Sir Patrick	Lyell, Rt Hon Sir Nicholas
Cran, James	MacKay, Rt Hon Andrew
Davey, Edward (Kingston)	Maclean, Rt Hon David
Davies, Quentin (Grantham)	McLoughlin, Patrick
Davis, Rt Hon David (Haltemprice)	Major, Rt Hon John
Donaldson, Jeffrey	Maples, John
Dorrell, Rt Hon Stephen	Mates, Michael
Duncan, Alan	Maude, Rt Hon Francis
Duncan Smith, Iain	Mawhinney, Rt Hon Sir Brian
Emery, Rt Hon Sir Peter	May, Mrs Theresa
Evans, Nigel	Michie, Mrs Ray (Argyll & Bute)
Faber, David	Moore, Michael
Fabricant, Michael	Morgan, Alasdair (Galloway)
Fearn, Ronnie	Oaten, Mark
Forth, Rt Hon Eric	Öpik, Lembit
Foster, Don (Bath)	Ottaway, Richard
Fowler, Rt Hon Sir Norman	Page, Richard
Fox, Dr Liam	Paice, James
Fraser, Christopher	Paterson, Owen
Gale, Roger	Pickles, Eric
Garnier, Edward	Prior, David
George, Andrew (St Ives)	Randall, John
Gibb, Nick	Redwood, Rt Hon John
Gill, Christopher	Rendel, David

Robathan, Andrew	Tonge, Dr Jenny
Robertson, Laurence (Tewk'b'ry)	Tredinnick, David
Roe, Mrs Marion (Broxbourne)	Trend, Michael
Rowe, Andrew (Faversham)	Tyler, Paul
Ruffley, David	Tyrie, Andrew
Russell, Bob (Colchester)	Wallace, James
St Aubyn, Nick	Walter, Robert
Sanders, Adrian	Wardle, Charles
Simpson, Keith (Mid-Norfolk)	Webb, Steve
Smith, Sir Robert (W Ab'd'ns)	Wells, Bowen
Soames, Nicholas	Whitney, Sir Raymond
Spelman, Mrs Caroline	Whittingdale, John
Spicer, Sir Michael	Widdecombe, Rt Hon Miss Ann
Spring, Richard	Wilkinson, John
Stanley, Rt Hon Sir John	Willetts, David
	Wilshire, David
Steen, Anthony	Winterton, Mrs Ann (Congleton)
Stunell, Andrew	Winterton, Nicholas (Macclesfield)
Swayne, Desmond	Yeo, Tim
Syms, Robert	Young, Rt Hon Sir George
Taylor, Ian (Esher & Walton)
Taylor, Rt Hon John D (Strangford)	Tellers for the Noes:
Taylor, John M (Solihull)	Mr. Stephen Day and
Taylor, Matthew (Truro)	Mr. Nigel Waterson.

Question accordingly agreed to.

MR. DEPUTY SPEAKER forthwith declared the main Question, as amended, to be agreed to.

Resolved, That this House recalls that the last Government's record on tax was one of broken promises, that it raised taxes 22 times having promised to cut taxes, including putting VAT on domestic fuel and power having specifically promised not to do so, and further that it tried to raise VAT on fuel to 17.5 per cent.; welcomes the fact that this Government has kept all of its promises on taxation, including its promises not to raise the basic or top rates of income tax and cutting VAT on fuel to 5 per cent.; and further welcomes the Government's approach to taxation at an international level, favouring fair tax competition, supporting concerted action at European level, including through the EU Code of Conduct Group, to deal with discriminatory and unfair tax practices that distort real competition, stating that it will not support measures that are not in Britain's national economic interest or that damage British business, harm investment and jobs, or damage Europe's competitiveness, and reiterating that it will retain the veto on tax issues and that decisions on tax will remain subject to unanimity.