§ 11.12 a.m.
§ Lord Pearson of Rannochasked Her Majesty's Government:
Whether under European Union single market legislation the United Kingdom has potentially ceded control of direct taxation to the European Union.
§ The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord McIntosh of Haringey)No, my Lords. As the European Court of Justice repeatedly acknowledges, direct taxation is a matter of member states' competence. That competence must be exercised in accordance with Community law, which includes the provisions of the European Communities treaty and any legislation adopted by the Community. The Government successfully defended unanimity for EU tax measures at the Inter-Governmental Conference last June, and there will therefore be no change to the position under the new EU constitutional treaty.
§ Lord Pearson of RannochMy Lords, I thank the noble Lord for that reply, which reminds us of the Prime Minister's red herring in his negotiations on the constitution, when he assured us that he was keeping control of our borders. As we now discover, it has swum off into the tentacles of Brussels.
On taxation, first, can the noble Lord now estimate, perhaps to the nearest few billion, the loss to the Exchequer resulting from the EU's invasion of our corporation tax, which is a direct tax? Secondly, why should not the EU use the same or other clauses in the treaties—I am thinking particularly of Clauses 43 and 44 of the TEC—to bring the rest of our direct taxation system into line? Is this not already happening to Estonia and the other new countries of the European Union? Why not us?
§ Lord McIntosh of HaringeyMy Lords, if the noble Lord cares to table a Question about borders, that 900 Question will of course be answered. As for losses due to EU control of corporation tax, there is no such control on the part of the EU over that tax.
§ Lord TomlinsonMy Lords, does my noble friend agree that the statement from the noble Lord, Lord Pearson, is a totally unwarranted attack on the work of the noble Baroness, Lady Thatcher, and her excellent European Commissioner, the noble Lord, Lord Cockfield, in creating the European single market? That was work they did in the days when the Conservative Party was enthusiastically pro-European, as was shown in the degree to which it surrendered national vetoes in the Maastricht Treaty. Does my noble friend not further agree that the statement from the noble Lord, Lord Pearson, is merely him peddling yet again his usual brand of Euro-nonsense?
§ Lord McIntosh of HaringeyMy Lords, chat is a totally unjustified attack on the noble Lord, Lord Pearson, who does not, I understand, take the Conservative Whip.
§ Baroness Royall of BlaisdonMy Lords, does my noble friend agree that there is still huge potential to be exploited from our membership of the single market, especially by business? Can he estimate the benefits that have accrued to average families living in the United Kingdom as a result of our membership of the single market?
§ Lord McIntosh of HaringeyMy Lords, my noble friend's question is closely related to the role of the European Court of Justice. It has an essential role to play in maintaining the four fundamental freedoms: the right to free movement for workers; the freedom of establishment; the freedom to supply services; and the free movement of capital. As my noble friend Lady Royall has rightly implied. these are of huge benefit both to business and to individuals in this country.
§ Lord Howell of GuildfordMy Lords, I am grateful for all the praise for past Conservative efforts. II makes a slight change from the usual chorus from the Benches opposite. However, does the Minister recall, first, that a directive is coming up on 1 July this year to hannonise all tax treatment of savings income? Secondly, does he recall an article in the Economist last August—I am sure that he does because he is extremely well read—which pointed out that, whatever governments may be doing, the ECJ and the European courts are driving forward the harmonisation of all forms of taxation and will continue to do so? Moreover, under the proposed constitution, the European Court of Justice will move right into the driving seat. In the light of those points, would the Minister like to modify what he has just said?
§ Lord McIntosh of HaringeyMy Lords, I am afraid that, unusually for him, the noble Lord, Lord Howell, is confusing the perfectly legitimate provisions for enhanced co-operation between member states who choose to co-operate in tax matters and directives that 901 apply to all member states. Any legislation on direct taxes and any move towards qualified majority voting would need not only unanimity among the member states but ratification by parliaments.
§ Lord TaverneMy Lords, does not the emptiness of the Question asked by the noble Lord, Lord Pearson illustrate the fact that there really is no doubt whatever now that, on tax, unanimity must prevail? Should that not be accepted in all parts of the House?
§ Lord McIntosh of HaringeyMy Lords, this is called bracketing, in artillery terms. We have the noble Lord, Lord Pearson, who wants us to have nothing to do with the European Union and the noble Lord, Lord Taverne, who represents the federalist view.
§ Lord McIntosh of HaringeyIf the noble Lord is saying that taxation should be a Community matter—I apologise if I have misunderstood him.
§ Lord TaverneMy Lords, I was saying that, surely, there should be agreement that, on taxation, sovereignty is not being infringed; the rule of unanimity must apply. That is not exactly a federalist viewpoint.
§ Lord McIntosh of HaringeyMy Lords, I apologise deeply for having misunderstood the noble Lord. Of course, he is right to point out that co-operation in dealing with harmful tax differences is valuable. He is entirely right to say that the unanimity rule must apply.
§ Lord Pearson of RannochMy Lords, since we have a few minutes on the clock, would the Minister be good enough to answer the question I put to him about corporation tax? I did not ask him whether the European Union already controlled it, but whether the Commission and the European Court of Justice had already invaded it.
In his answer to my noble friend Lady Noakes on 20 October last, the noble Lord agreed about that situation, but said that he could not estimate the damage to the economy at that time. I have asked him whether he can now estimate the damage done to the British economy by some 100 judgments in the European Court of Justice against national exchequers and in favour of international business. To the nearest few billion, what sums are we talking about, and how is the Treasury going to replenish that black hole?
§ Lord McIntosh of HaringeyMy Lords, as last October, I deny that there is a black hole. There is no question of estimating losses to the Treasury. The role of the European Court of Justice is unchanged; it is in interpreting European Union law, not in legislating.