HL Deb 08 December 2003 vol 655 cc543-5

2.46 p.m.

Lord Barnett

asked Her Majesty's Government: What is their policy in relation to the European Union's indirect tax harmonisation proposals.

The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)

My Lords, indirect taxation may be harmonised only to the extent necessary for the effective operation of the internal market, and tax measures may be decided only by unanimity.

Any change to unanimity on tax can itself be made only by unanimity. Tax matters are a key component of national sovereignty and vital to the social and economic well-being of the country. The Government have made it clear that tax must remain a matter for national governments.

Lord Barnett

My Lords, 1 appreciate that my noble friend has to answer in line with his Treasury brief, but perhaps I may ask him a personal question. I promise that I will not tell the Treasury. Does not he accept that, in a 25-member European Union, it makes a lot of sense and is helpful to trade to have at least some movement towards harmonisation of indirect taxation?

Lord McIntosh of Haringey

My Lords, I do not know that I have any personality left after six and half years. That is a sacrifice that one makes in the greater cause. But even as a person I do not agree with my noble friend. As I said in my previous Answer—some of the wording was my own—tax matters are a key component of national sovereignty. I remain to be convinced that the new members of the European Community take a different view.

Lord Harrison

My Lords, does my noble friend recognise that he is indeed right to say that some judicious measures of indirect taxation facilitate the working of the single European market and, therefore, help British Ministers to succeed in that regard? Does he agree that those who oppose the judicious, case-by-case selection of appropriate measures are in essence against the running of a market?

Lord McIntosh of Haringey

My Lords, we have always said that we were against measures that produced unfair tax competition. We have opposed such measures since the beginning.

However, I must tell my noble friend that those fighting for tax harmonisation have lost the support of the European Commission. First in June 2000 and then in its strategy document published in October this year, the Commission refers not to harmonisation but—in our view, rightly—to simplification, modernisation, close co-operation between tax authorities and the better application of existing rules. The battle for tax harmonisation, which we might at some stage have had to fight, no longer needs to be fought.

Lord Newby

My Lords, does the Minister welcome the recent decision reached by the French significantly to increase taxation on cigarettes for health reasons? That will also have the effect of reducing the incentive to smuggle cigarettes into the UK. Can the UK Government urge other EU member states which still have very low taxation on cigarettes to follow the French example?

Lord McIntosh of Haringey

My Lords, it is not for me to comment favourably or unfavourably on the tax policies of other member states, just as we would not wish them to comment on our policies. However, although I do not know the figures for tobacco, it is. worth saying that if we were to reduce our alcohol duties to the levels of those pertaining in France it would cost us £5 billion in revenue.

Baroness Wilcox

My Lords, Members on these Benches become worried when they hear a prestigious noble Lord, a former Chief Secretary to the Treasury, having to ask Ministers on his own Front Bench a Question such as this in the House. We, too, are worried that the Government may not stick to the line they are purporting; that is, that we shall be able to control our own tax affairs in this country. Perhaps I may ask one or two more questions for further edification. Do Her Majesty's Government agree that the UK's historically relatively low business taxes have helped UK businesses to be competitive in the global marketplace? Further, does the Minister share my view that tax competition between countries is important to enable countries to stimulate demand in times of poor economic growth?

Lord McIntosh of Haringey

My Lords, I fear that the noble Baroness, Lady Wilcox, will have to look for more important things to worry about than the Question tabled by my noble friend Lord Barnett. However, the answer to her first question is yes, while the answer to her second question is as I have already said: we are in favour of dealing effectively with unfair tax competition.

Lord Barnett

My Lords, does my noble friend agree that Members of the Opposition Front Bench seem to misunderstand the job of Chief Secretary to the Treasury? I was not suggesting for a moment that the Treasury should reduce the amount of tax revenue. What I sought to suggest, and what I thought would be perfectly sensible, would be to try to move towards some harmonisation of indirect tax rates with a view to being helpful to trade. I should have thought that even the Opposition would understand that.

Lord McIntosh of Haringey

My Lords, my noble friend Lord Barnett has gone some way to assuaging the concerns of the noble Baroness, Lady Wilcox, or at least I hope that he has. However, my response to his subsequent question has to be the same: yes of course there are advantages in harmonisation for the effective operation of the internal market. If that is what my noble friend means, then I agree with him.

Baroness Carnegy of Lour

My Lords, does the noble Lord agree that the noble Lord, Lord Barnett, is suggesting that VAT should be put on to children's clothes and on newspapers?

Lord McIntosh of Haringey

My Lords, I did not hear him say that.