HL Deb 14 June 2000 vol 613 cc1633-6

2.43 p.m.

Lord Islwyn

asked Her Majesty's Government:

Whether they have any plans to introduce VAT on toll charges.

Lord McIntosh of Haringey

My Lords, the issue of whether to charge VAT on toll charges is presently the subject of proceedings before the European Court of Justice. HM Customs understands that the judgment of the court is not due until 12th September.

Lord Islwyn

My Lords, has the Minister noted the judgment of the Advocate General to the effect that, because the United Kingdom failed to impose VAT on tolls, it has as a result failed to meet its obligations under EC treaties? The Advocate General has ordered that the outstanding VAT should be paid retrospectively back to 1994, together with interest charges. Does the Minister appreciate that when I raised this issue a few years ago—I was concerned about the grave effects the imposition of such charges would have on the Severn bridges, the lifelines of Wales—I was told by the then Transport Commissioner, Mr Neil Kinnock, that the fears I was expressing were part of the Euro myth? Does the Minister agree that the reality is now a little different? Furthermore, is it not time for us to stand up to those faceless bureaucrats in Brussels?

Lord McIntosh of Haringey

My Lords, my noble friend uses language that I am more used to hearing from the Benches opposite. The Advocate General delivered his written opinion to the court on 27th January, but the final decision is before the court. We understand that it will be delivered on 12th September. My noble friend is right: the opinion of the Advocate General was that all toll charges should be subject to VAT, but that, because of delays in consideration of the matter by the Commission, arrears should be paid over a period of only four years rather than over the full period from the time the matter was first raised by the Commission.

Lord Renton

My Lords, do the Government believe in freedom of movement for workers, holidaymakers and tourists? Is the Minister aware that the imposition of these charges would mean interference with freedom of movement and would add to its cost?

Lord McIntosh of Haringey

My Lords, the only tax imposed in this country which is subject to European law is value added tax. Consistency between countries in the way in which value added tax is imposed is a matter of European directives, to which we have signed up in the form of primary legislation.

Lord Stoddart of Swindon

My Lords, is my noble friend aware that I could not possibly better the splendid denunciation by my noble friend Lord Islwyn of the faceless bureaucrats in Brussels? Is it true that the Government have merely expressed disappointment at the Advocate General's ruling? Would it not be better if they expressed outrage? Would it not dish the Commission, the Advocate General and the European Court if we used some of the new telephone licence money to abolish toll charges, not only on the Severn Bridge but on every other bridge and road in the United Kingdom?

Lord McIntosh of Haringey

My Lords, the Government have done a great deal better than object to the opinion of the Advocate General—it is an opinion, not a ruling; the final decision is with the Commission. The Government argued strongly before the European Court in November last year when the issue was before the court that VAT should not be charged on tolls. We did so on the basis that nearly all the tolls in this country are operated by local authorities as a statutory duty and, therefore, should not be, and never have been since 1973, subject to VAT. A difficulty arises with tolls such as those on the second Severn crossing which are privatised. The argument is much more difficult to sustain in those circumstances.

Lord Roberts of Conwy

My Lords, if the Government are faced with an adverse judgment in the European Court, will they consider lowering the charges, because traffic levels on the Severn crossing are rather higher than expected, and in view of the fact that, as the noble Lord, Lord Islwyn, said, this is Wales's lifeline?

Lord McIntosh of Haringey

My Lords, if the noble Lord refers to the second Severn crossing, the toll charges there have been a matter of agreement between the Government and Severn River Crossing plc. It is primarily a matter for the company to decide the charges in accordance with that agreement. A difficulty arises in relation to some crossings, in that there is a limit to the increase in charges, and that is true of both Dartford and the Severn. Any annual increase is restricted to the increase in the retail prices index. That may prove a difficulty which will have to be faced if and when the European Court of Justice finds against us.

Lord Berkeley

My Lords, do the French and Italian Governments pay VAT on the tolls on their motorways, some of which are privatised and some of which are state-owned? Are they, too, subject to the future ruling in the European Court? Secondly, if the Commission is proposing VAT on road tolls, is it proposing VAT on bus and train fares, Underground fares, air fares or any other kind of travel within the Community?

Lord McIntosh of Haringey

My Lords, the answer to the second question is no. The answer to the first is that the Commission's action before the European Court of Justice will relate to all those countries, including the UK, France, Holland, Ireland and Greece, which charge tolls on roads.

Lord Pearson of Rannoch

My Lords, in view of the European Court's record of agreement with the opinions of the Advocate General, can the Minister tell the House with what confidence he faces the prospect that on this occasion the court may disagree with the Advocate General?

Lord McIntosh of Haringey

No, my Lords, I have no insight into the minds of those at the European Court of Justice. As a matter of historical fact, the noble Lord is right. The court usually, if not always, agrees with the opinions of the Advocate General.

Lord Crickhowell

My Lords, is it right that other countries are also opposing this action in Europe? Is it not right that it would apply to the first Severn crossing as well as the second Severn crossing? The Minister referred only to the second Severn crossing; they run in tandem. Will the Minister be kind enough to place in the Library the detail of all those tolls in Europe where this practice is followed, and the way in which the VAT is applied? We can then see what is happening in other countries and what is proposed in this country.

Lord McIntosh of Haringey

My Lords, I can undertake to do that as regards this country, or to answer a Written Question if that would be more appropriate. I am doubtful whether we could collect the information for other European countries.

The Earl of Northesk

My Lords, presumably the Treasury has done some research on how much such charges would cost the UK taxpayer. Perhaps the Minister can share that information with us.

If the proposal is upheld by the ECJ do the Government intend that relevant local authorities should he forced to levy an additional 17.5 per cent on their bridge tolls?

Lord McIntosh of Haringey

My Lords, it is not a question of how much it would cost the taxpayer. If we take the issue literally, I assume that both local authorities and publicly and privately owned toll roads and bridges would wish, if they could, to increase their charges to cover the VAT so that it would cost the taxpayer nothing. Those are matters which will have to be dealt with on a case by case basis.

I am not sure whether it is clear to noble Lords who talk about the cost to this country, in particular to business and industry, that all commercial traffic and passenger vehicle traffic by business motorists would be able to recover their VAT by keeping their receipts and entering them in their VAT returns.

Lord Mackay of Ardbrecknish

My Lords, may I seek to be helpful to the Minister? Perhaps he can suggest to his right honourable friend the Chancellor of the Exchequer that additional charges resulting from a judgment of the European Court about VAT on the Forth road bridge used by many of his constituents would not go down very well in that part of Scotland.

Lord McIntosh of Haringey

My Lords, the spoon with which I have supped with the noble Lord does not grow any shorter! I am sure that the Chancellor of the Exchequer is well aware of these matters.