John Redwood’s contribution to the debate on the Common Consolidated Corporate Tax Base, 11 May

Mr John Redwood (Wokingham) (Con): Tonight’s debate should be a vital one because, after all, it is about sovereignty; it is about power. The might of this House of Commons in its great years was based on one very simple proposition: that only a vote of the House of Commons could impose or remove a tax on the British people. It was that power which our predecessors fought for and achieved, and it was that power which was crucial to grant the supply to the Government, who could then choose how to spend it, on the advice and with the votes of the House of Commons.

We have been assured and reassured by countless Ministers of the Crown since we joined the European Economic Community in the 1970s that taxation was always a matter for unanimity; that we would always have a veto over any tax matter; and that there was no question of the European Union interfering and choosing taxes for us or running our tax system. Under the previous Labour Government tax was said to be a defensible red line, which they always told us they had always protected. Under previous Conservative Governments, Ministers could rightly then say that it was always a matter entirely for the jurisdiction and decision of this House of Commons.

Yet tonight, in this small and short debate, we are presented with a 102-page draft law which is a comprehensive new corporation tax system for the European Union, including the United Kingdom. Worse still, we have been warned in a friendly way by the Minister that if this country disagrees with it, a group of countries may go ahead under some other procedure and create it anyway, and they will then exert extraterritorial jurisdiction over the UK because they will try to bid our companies away from our system to their system. As my hon. Friend the Member for Amber Valley (Nigel Mills) has just said, tax advisers and accountants will be able to play all sorts of games under this complicated system so that companies that have some activities in Britain could be tempted into the European Union opt-in system. That would mean that the British Treasury and British Ministers would no longer have jurisdiction over them; we would get back only what the sharing formula ballowed, which the European Union would be in charge of.

I assume that it is because the Minister is worried about that eventuality that she has not come here with a straightforward proposal just to veto the whole thing.

My advice to the Government is that this should be the issue we fight over. This proposal is so outrageous, it is such a comprehensive violation of subsidiarity, as they call it, and it is such a U-turn from the proposition that a member state has control over its own tax affairs that surely we should veto it. If we vetoed it and other countries still wanted to go ahead as a lesser group than the European Union, we should follow things through and say that it therefore does not apply to the United Kingdom and we will not operate it in respect of companies that are properly domiciled here and should be taxed here under our rules. We should set the rules for organisations and companies undertaking activity in Britain, making money in Britain and employing people in Britain. If we cannot do that, what is the point of this House of Commons? I think the Minister is in a stronger position than perhaps her officials and advisers have suggested.

We have heard, I think rightly, from my hon. Friend the Member for Stone (Mr Cash) that the legal base is not correct. In order to justify all the statements that this is a matter for unanimity, it must come under that measure in the treaty that states that other proposals can be produced but that they require the unanimous consent of all member states. It must come under a unanimous base. Once it is a matter to be decided under a unanimous base, we can then save the European Union a lot of time, trouble and money because we can simply say that we do not wish to have a collective corporation tax system and that Britain is going to use her veto. For once, surely, the United Kingdom could have some influence over the agenda of the European Union and we could show that we mean it when we say that taxation is for national decision—that it is a matter for subsidiarity, in the EU’s language, or a matter of sovereignty, in my language.

I would like to ask my ministerial friend what the point was of this House solemnly legislating to maintain, uphold or reaffirm the sovereignty of the British Parliament if we cannot even choose our own corporation tax regime. What is the point of our going along with the negotiations to try to ameliorate, improve or abate the severity of this draft law if we are doing so in the spirit that we will end up with a law of sorts anyway? We will then hear from the Minister that instead of it being something that we have vetoed, it is something we have taken the worst out to make it a bit more tolerable so that we can go along with it. It will not be necessary for the other member states who want the measure to use a special procedure to get it, and there will be no need for us to say to them that we refuse to go along with it or comply with it.

Mr William Cash (Stone) (Con): Does my right hon. Friend recall the words of Chancellor Kohl, who, only 10 or 15 years ago, made it clear that, on the question of the speed of the convey, which is what this is all about, he would want the front of the convey to go ahead, led by Germany, and for the other Member states to be left in such a parlous condition that they would eventually, in his words, have to catch up?

Mr Redwood: My hon. Friend is quite right. That also explains why the European Union is so keen to try to get the Irish rate up, because if it is to have a common system such as this, it would not want a weak link. The EU would see a weak link as a state that dared to set a more realistic and lower rate in order to attract business.

Steve Baker (Wycombe) (Con): As ever, my right hon. Friend makes his points with incredible force. Does he not agree if the European Union follows the policies of bail-outs and political interference with business all the time, we will keep seeing measures like this one again and again until we head towards a single centralised economic system of government?

Mr Redwood: My hon. Friend is right. The EU believes that imposing more complex and higher taxes is the answer to the deficit problem, whereas the answer to the deficit problem is growth, more business, more activity and more jobs. Everything the EU does by way of higher tax rates, more regulation, more interference and more layers of government prevents that from happening. That is the Greek tragedy that we are witnessing as we debate today.

The latest figures on the Greek Government website imply that the Greek deficit got a lot bigger in the first part of this year because tax revenues plummeted, because the economy is in worse recession, and because spending has gone up, both because they are not controlling it and because spending goes up in a recession. That is the tragedy of the European model—of the bail-out model and of “extend and pretend”, whereby we extend the credit and pretend it will be all right. It is not going to be all right and that approach is causing disaster, unemployment and tragedy.

Thomas Docherty (Dunfermline and West Fife) (Lab): The right hon. Gentleman has mentioned several tragedies and I note with some interest that the Treasury team includes this Minister, the Economic Secretary, whose views on Europe are well known, the Chancellor, whose views are very well known, and the hon. Member for Chelsea and Fulham (Greg Hands), whose views are also very well known. Perhaps the real tragedy is that the Liberal Democrats in the Treasury team, who are not even here tonight, have forced this policy on the Government.

Mr Redwood: I am not sure I believe that. We have heard from the Minister that they are a happy and united team and that she is proud of the work she has brought to us. I am saying that I would like her to improve the work and to go back and make that happy team one that can perhaps make us happier. The simple answer is veto—she should say, “No, this cannot work. It is a dreadful constitutional intrusion on a country that desperately needs its own economic recovery to accelerate, that needs lower tax rates and greater tax simplification and that needs to promote economic growth.” My right hon. Friend the Chancellor is beginning to do that, but I think more measures are needed to secure the deal and make sure it works.

I am quite sure that this huge deal—the 102-page draft law—is not the way forward. My hon. Friend the Minister says that there is no proposal, but I regard a 102-page draft law as a very serious proposal. Experience has taught me never to underestimate the power and persuasion of the European Union when it wants to do something. I think that it is now on a great push to establish all the central powers it needs for the economic governance of a single-economy, single-country model, and that this is part of it along with the economic six-pack. My strong advice to my hon. Friend is that Britain can do better, Britain needs to say no and Britain needs to exempt herself from all this, as we are entitled to do, so that we keep a sovereign Parliament and a growing economy.