§ 6. Mr. John Greenway (Ryedale)
What assessment he has made of the potential impact of the proposed EU withholding tax. 
§ The Financial Secretary to the Treasury (Dawn Primarolo)
We have carefully examined the draft directive on taxation of savings, and consulted the City about its possible impact on the markets. My right hon. Friend the Chancellor has made it clear that, in its present form, the directive is unacceptable.
§ Mr. Greenway
I am grateful to the Financial Secretary for confirming what she said last night—that the EU withholding tax is unacceptable in its present form. In what form would a withholding tax be acceptable? Does she agree that any international action to protect UK interests, unless it is mounted on a global scale, will automatically mean the transfer of business and jobs not only from London but from all member states to America, Japan and Switzerland?
§ Dawn Primarolo
The Government have always made it clear that we are determined to protect the competitiveness of the European financial sector, and in particular the City of London. We favour—as, I hope, did the previous Government—effective international action against tax evasion. The solution that we prefer is the exchange of information, and the previous Government 471 were so keen on that that in 1988 they voted for a directive enshrining it. It was called the directive on capital movements.
§ Ms Diane Abbott (Hackney, North and Stoke Newington)
My hon. Friend will agree that the xenophobic tone of much media comment on European taxation matters is to be deplored. Does she also agree that, if a country is to proceed with economic and monetary union and complete monetary integration, a degree of fiscal integration follows, as night follows day? It is misleading the public to pretend that one can have monetary convergence with no effect on fiscal policy.
§ Dawn Primarolo
I am sorry that my hon. Friend missed the debate last night. I reiterate what I said then: monetary union does not equal harmonisation. It does not in the United States, and it will not in Europe. The Government have made it clear that harmonisation is not on the agenda for the foreseeable future.
§ Mr. David Heathcoat-Amory (Wells)
Is the Financial Secretary aware that it is strongly believed in the financial services industry that the Government are preparing a sell-out on the withholding tax? Does she understand that, even if we get rid of the compulsory 20 per cent. savings tax, the alternative is just as bad? The compulsory provision of information to overseas tax authorities would have the same effect, driving business right out of the European Union.
Instead of giving vague assurances about protecting the national interest, as defined by the Government, will the Financial Secretary for a change announce that she will simply veto this damaging directive, which will not only destroy an important and successful British industry but put at risk the thousands of jobs that depend on it?
§ Dawn Primarolo
The right hon. Gentleman may be having some difficulty with his hearing. I repeat that the exchange of information, which is the Government's preferred way to deal with that issue, is the way that we are proceeding in our negotiations. I repeat also that his Government agreed to a directive in 1988 that enshrined exchange of information. It was called the directive on capital movements. I know that the Tories like to forget quickly what they did in government, but the right hon. Gentleman's forecast did not happen then and will not happen in the future. This Government will defend the national interest and take decisions on the directive based on the national interest.