HC Deb 10 December 2002 vol 396 cc258-60W
Mr. Hood

To ask the Chancellor of the Exchequer what the outcome was of the ECOFIN Council held on 3 December; what the Government's stance was on the issues discussed, including its voting record; and if he will make a statement. [85860]

Mr. Gordon Brown

I attended the ECOFIN meeting on 3 December. ECOFIN discussed a Presidency proposal on the taxation of savings. The proposal confirmed the agreement at the Feira European Council that the ultimate objective of the EU should be exchange of information on as wide a basis as possible. And it confirmed the rejection at Feira of an EU-wide withholding tax, which would have had severe implications for the London bond market.

ECOFIN discussed the Commission's negotiations with the third countries named in the Feira conclusions, and in particular the negotiations with Switzerland. The Presidency proposed that Switzerland should implement the OECD standard of exchange of information on request, and that the Commission should hold further discussions with them on this. The ultimate objective would be automatic exchange of information.

Under the Presidency proposal, Switzerland would be required to apply a withholding tax until moving to automatic exchange of information. The rate would be 20 per cent. for the three years from 2004 and 35 per cent. thereafter. Austria, Luxembourg and Belgium would be required to apply a similar rate of withholding tax until Switzerland move to the OECD standard of exchange of information on request, at which point they would have to move to automatic exchange of information. Austria, Luxembourg and Belgium would have to apply the OECD standard of exchange on request from no later than 2011. The other 12 member states would apply automatic exchange of information from 2004 as agreed at the Feira European Council.

I gave a report on our discussions with Jersey, Guernsey, the Isle of Man and the overseas territories in the Caribbean. I made clear that automatic exchange of information would apply in all the territories.

The Commission will hold further discussions with Switzerland, and the Presidency expect to hold a further meeting of ECOFIN later this month.

The Paymaster General (in her capacity as Chair of the Code of Conduct Group) presented the Code of Conduct Group's report on the rollback of harmful tax measures. The Presidency indicated that the Group's report, along with the third component of the tax package, the directive on interest and royalties, would be considered at the additional ECOFIN meeting later this month.

The Presidency invited Ministers to reach political agreement on the draft directive on energy taxation. As a number of other member states continued to have reservations with the text, the Presidency concluded that agreement was not possible at this stage and there would be a further discussion at the additional ECOFIN meeting later this month. The draft directive on VAT administrative co-operation will also be considered at the additional ECOFIN and I stressed that the UK was prepared to be constructive in reaching agreement on this. Ministers discussed a number of financial services issues. ECOFIN adopted conclusions on implementing streamlined legislative procedures (the so-called "Lamfalussy model") across the financial services sector. There was a discussion on whether the new procedures should be implemented immediately or delayed pending further discussions with the European Parliament. The Presidency called a vote to decide this. There was a simple majority in favour of immediate implementation, which the UK supported.

The Commission presented its proposal for a revised directive on investment services. I expressed UK disappointment at the Commission's late amendment to the text on pre-trade transparency. This change would be anti-competitive and would deliver a poor deal for the retail investor. I also stressed that late changes such as this, which flew in the face of consultation results, were likely to undermine market confidence in the consultation process and the Lamfalussy arrangements.

Ministers noted Commission reports on corporate governance and progress on the Financial Services Action Plan and efficiency and integration indicators.

ECOFIN noted the President of the European Court of Auditors presentation of the Court's annual report for 2001 and adopted conclusions on the streamlining of economic policy co-ordination processes and on the use of structural reform indicators.

Under any other business, Commissioner Solbes gave an oral presentation on the Commission Communication on strengthening economic policy co-ordination, which Ministers noted.