§ 4. Mr. Shaun Woodward (Witney)What measures he is taking to protect the UK financial services industry from the proposed provisions of the EU directive on the taxation of savings income. [56861]
§ The Financial Secretary to the Treasury (Dawn Primarolo)The Government are taking an active part in discussions on the draft directive. We have made it clear on a number of occasions that we will not agree to any course of action that would seriously damage the United Kingdom and other European financial markets.
§ Mr. WoodwardGiven that the Government are in such a decisive frame of mind this afternoon and that the Chancellor has spent the entire week lecturing the House about the importance of stability, the opportunity occurs now for the Government to tell the House their proposals on withholding tax. Given the experience of the withholding tax in Germany, the United States and Japan, where serious damage was done to domestic bond markets, and given the report produced for the Corporation of London by Professor Dale, which concludes that the European capital market would suffer a serious capital disadvantage if the tax were imposed, will the Financial Secretary take this opportunity to reassure the City on exactly what the Prime Minister promised he would do, namely, use the veto when that 1000 was possible, and tell the House in a moment of decisiveness—yes or no—whether in three weeks' time that veto will be used?
§ Dawn PrimaroloThe report by Professor Richard Dale of Southampton university was reported yesterday in the press. It is a rather limited report. We have now received a copy, and of course we are interested in studying the conclusions. We have made it clear that we would not accept a solution that obliged the United Kingdom to withhold tax, although we would be attracted to action based on the principle of exchange of information—as were the Conservative Government when, in May, June and December 1989, they agreed the conclusions of the Economic and Financial Council, that the way forward was an exchange of information.
§ Ms Diane Abbott (Hackney, North and Stoke Newington)The Financial Secretary will know that Labour Members are confident that the Government will do everything in their power to protect the financial services industry. She will also be aware that the pensions and salaries scandals of the 1980s revealed many structural problems in the financial services industry, including dependence on bonus-driven sales, the lack of transparency and the lack of training. Does she agree that it would be very wrong to divest swathes of pension and sickness provision to the private pensions industry without doing something about financial services regulation to address the structural problems that the pensions mis-selling revealed?
§ Dawn PrimaroloThe Government are addressing the issues that my hon. Friend has identified through the Financial Services Bill, which my hon. Friend the Economic Secretary will help to steer through the House. The Government are in favour of taking effective international action against tax evasion, which I hope Conservative Members will support. Discussions on the directive are about addressing that issue.
§ Mr. Nick Gibb (Bognor Regis and Littlehampton)In a written answer last week, the Financial Secretary was robust in rejecting any European Union proposal to harmonise income tax rates. She made it absolutely clear that income tax was firmly a matter for national Governments, and we welcome that. Why was she not prepared to give the same firm undertaking about EU proposals to harmonise corporation tax rates? Will the Government veto any such proposal on corporation tax—yes or no?
§ Dawn PrimaroloI welcome the hon. Gentleman to the Dispatch Box. The directive on taxation of savings is not about corporation tax rates but about effective ways to prevent avoidance of taxation. He knows that any change requires a unanimous vote. The Government have made it absolutely clear that we intend to maintain for this House decisions on taxation.