§ 3.30 p.m.
§ Baroness Blatchasked Her Majesty's Government:
Whether they will reject any proposal for a European Union-wide withholding tax.
§ Lord McIntosh of HaringeyMy Lords, there can be no agreement to the draft directive on the taxation of savings as long as it risks damaging the competitiveness of European Union financial markets.
§ Baroness BlatchMy Lords, I am grateful for that reply and wonder whether the noble Lord will accept my warmest congratulations that on this issue, and in the British interest, the Government are prepared to stand isolated in Europe. Does he, on behalf of the Government, agree with Hans Eichel who says that the United Kingdom's refusal to accept a withholding tax in Europe is undermining the euro?
§ Lord McIntosh of HaringeyMy Lords, Her Majesty's Government disagree with Herr Eichel. We understand that Germany has particular problems with its citizens who use overseas investments to evade legitimate German tax. That may be an explanation of his statement, but it does not excuse what he said.
Lord Bruce of DoningtonMy Lords, while expressing complete support for my noble friend's robust attitude to this issue, I ask him whether he will assure us that the Government as a whole have fully taken into account the recent speech of the President of the Commission addressed in impertinent and most insulting terms to the United Kingdom and that they will resist the endeavours which he has avowed personally to make in order to have the unanimity vote abolished.
§ Lord McIntosh of HaringeyMy Lords, I shall not participate in a personal attack on the President of the European Commission. The unanimity rule is not at issue when considering the withholding tax. There is a unanimity rule and we intend to adhere to it.
§ Lord SaatchiMy Lords, I cannot see from this angle and would like to know whether the Minister really has a ball and chain around his leg. We, who know him well, know that he should not be described as having a ball and chain and we want to dissociate ourselves from that remark.
In order to avoid such remarks by the German Chancellor, will he try to persuade the Prime Minister not to be such a flirt? Why in October 1998 did the Prime Minister sign the document published by the Party of European Socialists entitled The New European Way? Why did he then say that he would 915 make efforts to avoid harmful tax competition? Why did he say that he would be aiming to co-ordinate savings and corporate taxation?
§ Lord SaatchiMy Lords, why on Monday did he tell the Finnish Finance Minister that he had no ideological objections to tax harmonisation? Could the Minister tell us that?
§ Lord McIntosh of HaringeyMy Lords, I have no objection to the noble Lord, Lord Saatchi, reading as long as he continues to read the words of the Prime Minister. That seems entirely legitimate. The Prime Minister's speeches, from which the noble Lord has given a selective summary, cover a much wider range of issues than the withholding tax. We have always said that there are virtues in measures to restrain harmful tax competition and that is the basis on which the Prime Minister and the Government were and are prepared to co-operate. However, we are not prepared to co-operate on a withholding tax which will damage British and other European financial markets.
§ Baroness Sharp of GuildfordMy Lords, given that the Minister has rightly pointed out that part of the problem springs from tax evasion in relation to German investments, can he say what efforts the Government are making to put pressure on the German, Swiss and Luxembourg Governments to move away from their strict banking secrecy laws? Furthermore, what are the Government doing about money laundering in some of the tax havens which are Crown territories?
§ Lord McIntosh of HaringeyMy Lords, the Government have taken an active part in urging those countries which retain what we consider to be outdated banking secrecy laws not to do so. We believe that such laws are a significant cause of the abuses suffered by some EU member states. As regards securities outside Europe, that is a matter for another forum.
§ Lord Stoddart of SwindonMy Lords, is my noble friend aware that. I am most happy to be able to congratulate him and the Government on their stance relating to the withholding tax? I sincerely hope that they will stick to it and not give way at the last moment, as has so often happened in the past. Will my noble friend confirm that in September last year the Government indicated that even the threat of a withholding tax was resulting in a flow of money away from the EU, particularly from London? Finally, I assure my noble friend that, if the Government continue to resist a withholding tax, they will have the support not only of this House but of the people of this country?
§ Lord McIntosh of HaringeyMy Lords, I do not know whether that is a threat or a promise!