Taxation (Hansard, 23 July 1993)

The Earl of Caithness
My Lords, the level of taxation in the United Kingdom is entirely a matter for Parliament to decide.

§ Lord Monson
My Lords, I thank the noble Earl for that not wholly unexpected reply. Does he agree that the day before yesterday his right honourable friend the Chancellor of the Exchequer hinted to the House of Commons Select Committee on the Treasury and the Civil Service that the VAT base might well be widened? That was clearly in response to the pressures exerted on him in Brussels on 12th July to lower our Budget deficit, in conformity with our prospective obligations under the Maastricht Treaty.
If and when this wretched treaty is ratified, does the noble Earl agree that under the provisions of Articles 104c and 109e, Her Majesty's Government will be legally obliged to submit to such pressures to raise taxes or slash public spending, or both, so as to reduce our deficit?

The Earl of Caithness
No, my Lords, I disagree fundamentally with the noble Lord. He takes one view. The true view is that the level of taxation in the United Kingdom is entirely a matter for Parliament.

Lord Bruce of Donington
My Lords, is the noble Earl aware that continuous pressure is exercised by the Commission and in ECOFIN, as the occasion arises, for Britain to increase her indirect taxes, particularly VAT, to become more in conformity with taxes on the continent? The pressure is continuous. Can the noble Earl give the House an assurance that pressure will continue to be resisted to the utmost, whatever is in the sixth directive? In order to make it quite clear, will the noble Earl agree that it is high time—as indeed the Prime Minister indicated at the meeting in Copenhagen—for the meetings of ECOFIN to be made public rather than to take place in secret?

The Earl of Caithness
My Lords, I certainly remember at the ECOFIN councils that I attended discussions about levels of VAT, not just in this country but throughout the other countries in the European Community. I can assure the noble Lord that the same robust stance is being taken now as was taken in my day.

§ Lord Harmar-Nicholls
My Lords, does the Minister agree that the level of taxation depends upon government commitment—whether it be to defence, social costs or Europe—and is decided on that basis however that taxation is inflicted, be it directly or indirectly?

The Earl of Caithness
My Lords, there are a number of factors, of which my noble friend mentioned some, that my right honourable friend the Chancellor of the Exchequer needs to take into account when setting his Budget and the level of taxation.

§ Lord Monkswell
My Lords, are we to gather from the Minister's Answer to an earlier Question that the Government intend to ratify the Maastricht Treaty, and then take no notice at all of its provisions?

The Earl of Caithness
My Lords, the noble Lord is wrong. That is not what I said.

§ Lord Marlesford
My Lords, is my noble friend aware that the rate of vehicle excise duty, despite the increase last year, still lags behind the inflation that has taken place over the years? Does he agree that, were it to be increased, that would not only produce useful extra taxation but, in so far as it discouraged the number of cars, would reduce the need for more public expenditure on projects such as the M.25, and would therefore strike a "double whammy" at the PSBR?

The Earl of Caithness
I am surprised that my noble friend did not go on to say that it would encourage more people to take to bicycles, which I believe is what was behind his question. I take note of what my noble friend says.

§ Lord Eatwell
My Lords, does the Minister recall that in an interview broadcast on the "Today" programme, the Chancellor of the Exchequer stated that it was the Government's objective to balance the budget? Can the Minister tell us why that is the 902 Government's objective? Can he also tell us by how much taxation will have to be increased to achieve that goal?

The Earl of Caithness
My Lords, I look forward to discussing these kinds of matters when we come to the Finance Bill, when I am sure the noble Lord will wish to take part in the debate. His question is considerably wider than that on the Order Paper.

§ Lord Richard
My Lords, will the Minister continue to reject the allegations that British taxation policy is somehow or other determined by pressure from other finance Ministers of the other countries inside the Community? Will he also take notice of the fact that., were the Government to put VAT on such items as children's clothing and public transport, as well as on domestic fuel, we would not accept any suggestion that that was due to anything other than the decision of the British Government?

The Earl of Caithness
My Lords, with regard to the noble Lord's first question: yes, let me reaffirm is nothing to do with pressure from the European Community countries. The level of taxation in the United Kingdom is a matter for Parliament to decide.

§ Lord Monson
My Lords, does the noble Earl deny that under Articles 104c and 109e of the Maastricht Treaty, the United Kingdom, like every other country, is obliged to do everything in its power to reduce the deficit to less than 3 per cent. of GDP before 1st January 1994; and that in practice that can only come about through higher taxation or slashed public spending?

The Earl of Caithness
My Lords, the noble Lord excludes growth in his calculations. As I said in the discussion that we had in this House not so many days ago on this particular matter, the objectives set out for the control of public expenditure and for running the economy are very similar to those of the Government.