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Common Consolidated Corporate Tax Base

This is of course about direct taxation, and I welcome the Government's limited stand against the draft directive, for the reasons given in the motion endorsing the European Scrutiny Committee's report on the points that the Minister has just summarised. I remain concerned, however, about one matter still hanging over the debate. The Minister might be able to guess what I am about to say. It goes back to a motion that was before a European Standing Committee which asserted, in the name of the Government, probably for the first time since 1640—I mentioned Pym and Hampden just now—that the British Government, as a sovereign Government, were only primarily responsible for direct taxation, whereas in fact our Parliament is exclusively responsible for it. That motion was put to a deferred Division in the House and passed, which is pretty alarming. I invite the Minister to be rather clearer than she was the last time I put this point to her, because it must be made absolutely clear that this House is exclusively responsibility for direct taxation. The Minister has been at pains to describe the context of this measure in the light of the questions of subsidiarity, but some Members might recall that it was on 27 April that I raised this matter with the Prime Minister, together with the proposed increase in the European budget and the Portuguese bail-out, not to mention prospective Greek bail-outs and whatever else. I said that we expected the answer to be no to each of those proposals. His reply referred only to the increase in the EU budget, and I hope—for reasons that have been expressed in interventions, including my own—that we are unequivocal in reserving to ourselves the absolute determination, and not merely the right, to say no to these proposals, because they infringe a number of important principles. I shall come to those in a moment. I want it on record that the coalition agreement states that there should be"““no further transfer of sovereignty or powers””" to the EU. Our Committee report looked at that and found it wanting in relation to the EU referendum Bill. The Government have also said that they would reject any proposal that"““might threaten or limit our ability to shape our own tax policy.””—[Official Report, House of Lords, 16 February 2011; Vol. 725, c. WA172.]" I have the greatest respect for the Minister, as she well knows, but she left out the next bit, which was the word ““but””. That word ““but”” is represented by Banquo's ghost, who is not sitting on the Liberal Democrat Front Bench tonight—[Interruption.] Ah! My hon. Friend the Member for Harwich and North Essex (Mr Jenkin) is there, acting as a surrogate, which is extremely unlikely in the circumstances, although I am delighted to see him and I hope that he will contribute to the debate at some point. I want to continue with the words that come after the word ““but””. They are that, ““under enhanced co-operation”” the coalition Government will"““engage in discussions to help shape a CCCTB that does not undermine the competitiveness of the EU or the UK””." Now that is a monumental exception, because it is obvious, for reasons that I shall explain, that the proposal will undermine the competitiveness of the EU and the UK ab initio—and the Government know it. It follows from that, as light follows day, that there is no reason for us not to put our foot down now and say no. We know that the Tax Commissioner is saying that this is going ahead under enhanced co-operation, and this it not something magicked out of the air, as he knows perfectly well that that is what Germany, France and other countries are intending to do. When I provide the figures on the number of member states engaged in the process, as I shall in a moment, perhaps matters will fall into place. The proposals before the European Scrutiny Committee are, for reasons set out in our conclusions, all profoundly objectionable, but the draft directive falls down particularly on four main issues: one, the sovereignty of this House; two, the insufficient legal base; three, an inadequate and unconvincing impact assessment; four, grounds of proportionality, making the doubling of tax regimes in the EU, the cost of establishing 27 new regimes and the apportionment formula excessively disadvantageous for certain member states. I add that the Oxford university centre for business taxation says in its policy briefing that"““it is unlikely that the introduction of the CCCTB would bring significant benefits to the EU in aggregate in terms of employment, GDP or efficiency, although some individual countries could benefit significantly.””" I make that point because, under the formula of Roland Vaubel of Mannheim university, it is well known that there is such a thing as regulatory collusion and that, by the clever use of certain majority voting systems, through negotiations in the case of unanimity as in this instance or by enhanced co-operation, it is possible to arrive at a point where some countries benefit to the disadvantage of others. The Oxford university think-tank has its finger on that issue. It is quite clear that the objective of this tax base—this is the important part that needs to be borne in mind on the big landscape—is to raise money to pay for the profligate, incompetent and failing European project. Countries such as Greece, Ireland and Portugal are either on the verge of or in danger of bankruptcy or are actually going bankrupt because of the systemic failure of economic policies. The stability and growth pact does not work: as I have said before, there is no stability, no growth and no pact. The creation of a two-tier Europe will merely exacerbate these problems, as was noted when we debated the European Union Bill, and will lead to ever-greater German domination over the European economy. The economic predominance of Germany in east and central Europe might be a good thing from its point of view, but we now have a transfer Union and a massive redistribution of resources. What we are also witnessing as a result of the failure of this project are riots and protests as Germany repatriates its profits at the expense of cheap labour unit costs from the countries in which it has put investment in the centre of Europe, as Portugal, Greece and even Ireland have found to their cost. The pumping of money supports not so much the member states as the French and German banks, which have lent money indiscriminately to suit themselves—and we are expected to engage in the bail-out procedure, the covert mechanism for which is the stability mechanism, coming into effect in 2013. As the European Scrutiny Committee insists, this whole proposal is in breach of the principle of subsidiarity. I remind the House that this principle is intended to ensure that decisions are taken as closely as possible to the citizen. Direct taxation is such a policy. The national Parliaments are able to use the procedure under the treaties to challenge breaches of subsidiarity. At present, there are only six countries whose parliamentary Chambers propose to, or have, issued a reasoned opinion. We have, but, interestingly enough, the House of Lords has not. I think that we should note that. In passing the motion, the House will challenge the breach of subsidiarity. I suspect that the Minister has figures that are even more up to date than mine, but as far as I know, of the 27 member states, the five that are on our side are Ireland, Malta, Netherlands, Poland and Sweden. I am told that Cyprus, Greece, Hungary and Slovenia have no plans even to scrutinise the proposal, that those yet to decide include Austria, Bulgaria, the Czech Republic—the lower chamber and the senate—Denmark, Estonia, France, Lithuania, and Luxembourg; that Romania, Portugal, Italy and Spain believe that the draft directive complies with the principle of subsidiarity; and that the German Bundesrat is considering it only on the basis of content. The picture is very uncertain. There is no guarantee that the accumulated number of reasoned opinions will be sufficient to meet the threshold requiring the European Commission to review the proposal, and because that will be known somewhat in advance, the tax commissioner will say that he has already received a demand to proceed with enhanced co-operation. We have a serious problem on our hands; however, we have another card up our sleeve. Unbeknown to some, although I am more than happy to share the information with the House, under article 8 of protocol 2 the United Kingdom Parliament can go to the European Court of Justice, which has jurisdiction to determine our claim as the House of Commons—which is regarded as a separate Chamber—that the principle of subsidiarity has been breached. That gives us the basis for a challenge. I believe that if the Government are not prepared to say no—which, for the reasons that I have already given, I think that they should have done already—the House of Commons should take the matter to the European Court of Justice; but would it not save an enormous amount of time and trouble if we simply recognised that the House is sovereign, that it has the right to take the action that it has taken, that the European Scrutiny Committee has done its job at this stage in the proceedings, and that the Minister is profoundly on our side of the equation? I know her sentiments, and I also know her Parliamentary Private Secretary. He was a member of the European Scrutiny Committee with me for years. He would be jumping about all over the place about this if he were still a member of the Committee, and agreeing with every word that I am saying. Leaving aside the attack on Thatcherism, of all things, by the Deputy Prime Minister immediately after the disastrous showing of the Liberal Democrats in the polls, which is probably why no Liberal Democrat Members are present today—and, for that matter, the let-out that they have been given in the coalition agreement, which I think I have now shot to pieces—I would say that there is every reason for the Liberal Democrats to back down and not veto our Conservative party veto simply because of the coalition arrangement, and for the Prime Minister to do what I asked him to do at Prime Minister's Question Time only a few weeks ago and say ““No, no, no.”” That would save a great deal of time and argument. The UK corporate tax director of a major European bank has said that this proposal would increase our corporation tax and drive investment away, reduce our GDP by £73 billion over 10 years, increase the administrative burden, and lose the UK an estimated total of £58 billion, again over 10 years. We know that Mr Sarkozy and Ms Merkel are in favour of the competitiveness pact, which affects us although it is presented as a eurozone matter. I believe profoundly that, whether the proposal involves enhanced co-operation, the creation of a two-tier system, or whatever other means or machinations may be produced by the Faustian pact that is being devised in Europe, we should put our foot down, lead from the front, and say no. I am prepared to admit that the opportunity to do that exists, but I want to hear it from the Prime Minister's own lips. He will then be able to enjoy as much success in this context as he, and we, enjoyed in the context of the alternative vote the other day, when the Liberal Democrats got their come-uppance.