Taxation (Hansard, 16 January 1997)
HC Deb 16 January 1997 vol 288 cc442-4
5. Sir Ivan Lawrence

To ask the Chancellor of the Exchequer if he will make a statement on the level of taxation in (a) the United Kingdom and (b) the rest of the European Union. [9520]

Mr. Jack

The overall burden of taxation on the economy in the United Kingdom was 35.75 per cent of GDP in 1995–96. This represents one of the very lowest levels in Europe and is below that of France, Germany and Italy.

Sir Ivan Lawrence

Does my hon. Friend—whose honour Conservative Members very much welcome—agree that taxation must be a matter for member states, that our policy has enabled us to achieve lower personal and business taxation, details of which I invite him to give us, and that it is not in Britain's interests to give up that control?

Mr. Jack

I thank my hon. and learned Friend for his kind personal comments. On his last point, I hope that I can satisfy him by reminding him of what my right hon. and learned Friend the Chancellor said to the House of Lords in the EMU inquiry on 28 March 1996: I personally strongly take the view that taxation policies are decisions for the member states of the European Union and should remain so. I believe that to be a clear statement of our policy.

My hon. and learned Friend invited me to give the House information on tax on business as a percentage of GDP. In the United Kingdom it is 8 per cent., in Germany 9.4 per cent. and in France 16.8 per cent. At a personal level, in the United Kingdom it is 17 per cent., in Germany 27 per cent., in France 26 per cent. and in Italy 24 per cent., which clearly shows what an attractive place the United Kingdom is to do business and earn money, with tax at such a low percentage of GDP.

Mr. Spearing

Do not considerable disparities persist between VAT in different nations of the Community? For instance, do not France and Germany impose a minimum of 15 per cent. VAT on children's clothing, fuel and water?

Is the Minister aware that, under article 99 of the Maastricht treaty on European Union, such disparities must change? Has he not seen the document that has been sent to the presidency, and to Her Majesty's Government by the Commission, requiring or suggesting a further tranche of harmonisation, including decision by qualified majority voting and central collection and dispersion? Why did the Chancellor of the Exchequer, despite the conversation on Radio 4 this morning, make no reference to that?

The Exchequer Secretary to the Treasury, who is sitting next to the Chancellor, wrote a memorandum, which is publicly available in the Vote Office, describing that outrageous suggestion and signed it. Would it not have been better if the Chancellor had seen and signed it?

Mr. Jack

I do not know what to make of the hon. Gentleman's question. He accuses the Chancellor of not dealing with the central issue, but for once Radio 4's "Today" programme concentrated on asking the Chancellor about the excellent performance of the British economy. My right hon. and learned Friend offered good information about inflation, low interest rates and falling unemployment—the things that really matter in this country to those who are working and exporting to the rest of Europe.

Mr. Redwood

Will the Minister confirm that the British Government would veto any Franco-German proposal to make taxation a matter of common concern within the Community institutions? Will we stand against any compulsory increase in income tax to bring this country into line with France and Germany, and will he confirm that higher income tax would not be a price worth paying for a single currency?

Mr. Jack

That, I think, is a hypothetical question—[Interruption.]—for the very simple and straightforward reason that no such proposal as my right hon. Friend describes exists.

Mr. Mike O'Brien

Will the Minister confirm that the Chancellor has told the House: one of my options must be to extend the VAT base. The main candidates are food, children's clothes, transport, sewerage and newspapers."? Furthermore, he said: A powerful case for each of them can be made".—[Official Report, November 1993; Vol. 233, c. 940] In 1979 and in 1992 the Tories promised not to extend VAT: whereupon they doubled it and put it on fuel. How can anyone trust the Tories on VAT?

Mr. Jack

We started the day looking into the gutter and we have just had another example of the kind of gutter, negative politics that the Opposition told us they were not going to indulge in.

Let us look at the record. My right hon. and learned Friend has never made a secret of the fact that he favours a broad-based taxation system with low marginal rates—possibly an idea that the Opposition do not understand. Today they have completely fabricated a claim that we have some intention of levying VAT on food. Let us nail that right now, and remind the House that my right hon. and learned Friend has said: It has never crossed my mind to put VAT on food and it hasn't crossed my mind now. His policy and position are thus quite clear.

Sir Teddy Taylor

Will the Minister remind the Opposition that the sixth directive, which called for harmonisation of VAT, was agreed in 1977 when there happened to be a Labour Government? Does he agree that the real threat of VAT on food could arise only from a European Court challenge to a legal procedure that the Government have been using since 1 January—and that that could happen whether a Conservative or a Labour Government were in office?

Will the Minister finally agree that the late and much respected John Smith would never have indulged in the untruths and deviousness that we witnessed this morning?

Mr. Jack

I entirely agree with my hon. Friend's last point. The House will have taken careful note of his other points; but the greatest threat to our position in respect of Europe comes from the Opposition.