Lord Wallace of Saltaire
My Lords, the European Union institutions all together employ approximately 55,000 people. EU staff are exempt from national income tax, a similar situation to that found in other international bodies. As in other international bodies, the EU deducts a proportion of salary as a form of extranational taxation, proceeds from which are returned to the EU budget. This is applied progressively, rising from an initial 8% to a 45% marginal rate for the highest-paid. In addition, there is now a special or solidarity levy, which last month was increased from a top rate of 5.5% to 6%; most officials pay an average of 2%. I should declare an interest. My wife was for five years the director of the Robert Schuman Centre in Florence, whose staff regulations were those of the European institutions. We have examined her payslips and established that an average of 28% of her gross salary was deducted in community tax each month.
Lord Flight
My Lords, would it not be more sensible for civil servants working for the EU to be taxed on the same basis as civil servants working, for example, for the Foreign Office; namely, for them to pay the rates of income tax applicable to the country where they are otherwise normally resident?
Lord Wallace of Saltaire
My Lords, we are now into the whole question about residency, non-residency and international organisations. It has been a common rule for international organisations that you do not pay national taxes but are given a degree of exemption. If we were to reclassify the European Union as not an international organisation but as rather like going to work in Manchester or Leeds, different processes would apply. As a former international banker, the noble Lord will be well aware of the many complexities of international taxation, expatriate allowances and the like.
Lord Tomlinson
Is the Minister as surprised as I am by the low number of European Union institution employees? How does that figure—I think he said 55,000—compare with a large-scale local authority in the United Kingdom?
Lord Wallace of Saltaire
My Lords, the figures I have are that Paris employs 50,000 people and Birmingham employs 60,000 people, so it is a relatively modest number. I am sure the noble Lord will admit that the inefficiencies of the Commission—in particular, the rather inadequate personnel policies, the relatively generous allowances and an expatriate allowance which, unlike the NATO expatriate allowance, does not phase out after a number of years and is rather more generous—are things that we should be looking at, particularly when all national budgets within the European Union are being squeezed.
Lord Dobbs
Will my noble friend help a confused man who has trouble with numbers? We have one European Union which has two parliaments, three presidents and dozens of employees who earn more than our Prime Minister. I understand that the second parliament in Strasbourg, over the course of the parliamentary cycle, costs our taxpayers €1.5 billion. Do any of those statistics make any sense to him?
Lord Wallace of Saltaire
My Lords, there are a number of built-in inefficiencies in every international organisation to which we belong. It is not two parliaments, it is two parliament buildings. The British Government and British Members of the European Parliament have campaigned for several years for a single seat for the European Parliament. If I were to go into the enormous costs of the UN having a base in Geneva as well as New York, we would note that the EU is not the only international organisation that suffers from these inefficiencies.
Lord Anderson of Swansea
My Lords, lest the Question be viewed as in any way anti-European Union, which I am sure is not the noble Lord’s intention, will the Minister confirm that the tax regime he mentioned not only applies to the United Nations but also to a number of other organisations based within the European Union, such as the OSCE and NATO in Brussels? It is general and in no way a feature of the European Union.
Lord Wallace of Saltaire
I have already said that this applies to a large range of other European and global organisations, of which there are a great number. That does not mean, however, that Her Majesty’s Government and their allies in like-minded Governments in the EU are not entirely correct to say that we should be squeezing more efficiency out of the EU institutions and that the Commission has grown rather complacent over the years.
Lord Pearson of Rannoch
My Lords, what is the average annual cost to the taxpayer of Members of your Lordships’ House and what is the average annual cost to the taxpayer of Members of the European Parliament, including all the latter’s special perks and allowances?
Lord Wallace of Saltaire
My Lords, it may surprise the noble Lord, but I do not have the exact figures to hand. Of course, any international parliament costs a great deal more because of the travel, dual residence and so on that are involved. Members of this House who also attend the Parliamentary Assembly of the Council of Europe or the NATO Assembly also cost rather more than the rest of us.
Lord Howell of Guildford
Does my noble friend have any figures on the European External Action Service? Has he noticed recent criticism that it is not performing very effectively? Does he have any measure of cost versus performance for that body?
Lord Wallace of Saltaire
My Lords, I do not have that. The European External Action Service is still very much in its early stages. It is now performing rather better than when it was originally established. Multinational operations take longer to get going than others—I am looking at various people here who have served in the European Commission—and have a level of built-in efficiency.
Lord Foulkes of Cumnock
Is the Minister aware that the European Union Committee on which I have the honour to serve is about to produce a report on the European External Action Service? I am sure that the noble Lord, Lord Howell, will read it with the greatest of interest?
Baroness Royall of Blaisdon
My Lords, I wish to place on record, and ask the noble Lord to accept, that although we on this side of the House are very pro-European, we, like the Government, seek reform of the institutions, including all the salary levels, and so on.
Lord Wallace of Saltaire
I thank the noble Baroness for that expression of consensus. She will know from her time working for EU institutions that the staff regulations and staff unions in Brussels have a certain element of the 1960s about them which requires a little modernisation.