HC Deb 03 July 1992 vol 210 cc751-2W
Mr. Burns

To ask the Chancellor of the Exchequer if he will make a statement on the outcome of the latest meeting of the European Community's Economic and Finance Council.

Mr. Lamont

[holding answer 2 July 1992]: The Economic and Finance Council of the European Community met in Luxembourg on 29 June and I represented the United Kingdom.

Substantial progress was made on two directives important to the completion of the single market in financial services. Political agreement was reached on some of the most contentious points of the investment services directive. The two which caused most concern to member states were the direct access by banks to stock exchanges and market transparency. On the former issue, Belgium, France and Italy were granted a short transitional period during which they would not be required to grant banks direct access to their exchanges, while Greece, Portugal and Spain will have a longer transitional period with a report from the Commission on whether it should be extended. The agreement on market transparency recognises the need to avoid damaging existing market structures, in particular the United Kingdom's quote-driven market making system.

A political agreement on a common position was reached on the capital adequacy directive. Among the main outstanding points resolved to my satisfaction were minimum levels of initial capital, the recognition of partnership capital and comitology procedures. The treatment of commodities trading and index-linked and low coupon bonds was not finalised in the present directive, but will be the subject of new proposals from the Commission. It was agreed that the date of implementa-tion of the directive would coincide with the—as yet undecided—date of implementation of the investment services directive.

In a discussion of indirect taxes, the Council returned to the presidency package covering the eight draft directives on rates and structures for VAT and excise goods, and the draft seventh VAT directive on second-hand goods, including works of art.

I restated the United Kingdom's position that it is not necessary for the completion of the single market to have in place a permanent legally binding EC-wide minimum standard rate of VAT. I did, however, indicate that I could accept a Commission proposal for a time limited minimum rate of 15 per cent. with provision for a review no later than 31 December 1996, and provided that it formed part of an overall agreement which included a satisfactory solution to the minimum rate for spirits and the definition of intermediate alcohol products.

The Commission's proposal would have no practical effect on the United Kingdom's current standard rate of 17.5 per cent. It would be subject to review before the end of 1996. Some other member states, however, expressed anxiety about what could happen at the time of the review.

The presidency proposed that the minimum excise duty rate for spirits should be 600 ecu per hectolitre of pure alcohol, and that member states with a current rate of duty not exceeding 1,000 ecu should not he able to reduce their rates. However it was not possible to reach agreement—some member states, concerned about cross-border shopping, were still seeking a minimum rate higher than 600 ecu, while I reiterated that I was not prepared to agree to a minimum rate for spirits that would force any member state to put up its duty on spirits.

On the structure of alcohol duties, I indicated that I was prepared to consider a text that allowed intermediate products below 15 per cent. alcohol by volume to be taxed at a reduced rate, which could be equal to the wine rate of duty. This was not acceptable to two member states.

There was no discussion on mineral oils or tobacco products.

There was no substantive discussion of the presidency's latest proposals on the seventh VAT directive, but I renewed the United Kingdom's reserve on the proposed treatment of imports of works of art.

These draft directives will now be discussed further under our presidency.

The Council also briefly considered the present state of negotiations on the taxation of road transport and the proposed directive on the taxation of interest and royalties. It was agreed that both issues should be remitted to working groups for further discussion.