EU: Financial Transaction Tax (EUC Report)

Lord Vallance of Tummel Excerpts

Tuesday 17th December 2013 Grand Committee

[Lord Vallance of Tummel (LD)]

My Lords, I simply want to reinforce one specific point that has just been made by the noble Lord, Lord Harrison. Our report raises an important issue concerning the deployment of the enhanced co-operation procedure itself. The FTT case is only the third time the procedure has been used since it came into being in 1999, but it could well become more commonplace in a future where different groups of EU nations wish to take different courses, or proceed more quickly than others.

In the FTT case, the use of the procedure has left a bad taste in the mouth. When it was put to the vote last January, I imagine that, in abstaining, our Government naively assumed that the terms of the tax to be adopted would mirror those the Commission had already put forward and which had failed to find favour with many states, including the UK. But as the noble Lord, Lord Harrison, has said, the proposal the Commission advanced only three weeks later was significantly different, not least in its assertion of the twin principles of “deemed establishment” and “issuance”. That combination of principles could clearly have a major impact on financial institutions in non-participating and third-party countries which could not have been foreseen at the time of the vote.

It seems unlikely that the Commission was entirely unaware of the principles and their potential impact when the vote took place. Was this a matter of oversight or deviousness on the part of the Commission and sponsoring countries? Who knows? However, one can imagine that had the boot been on the other foot and a principal sponsor had been the UK, tales of Albion’s traditional perfidy would have been doing the rounds in the corridors of Brussels. This has not been one of the European Union’s finest hours and I say so sadly, as a strong supporter.

As to the lessons for the future, whatever the outcome of the FTT proposal, the enhanced co-operation procedure needs to be tidied up, made more robust and be seen to be fair. Put simply, all significant cards need to be face-up on the table when a vote is taken to adopt it. Ideally, a fully fledged scheme should be worked up and open to scrutiny before a vote is taken, accompanied by a thorough impact assessment that distinguishes between participating and non-participating countries, and with an analysis of any extra-territorial consequences. Without a reformed approach along these lines, what could be a useful and effective procedure will simply fall into disrepute. That is not in the interests of the European Union or its member states and I hope that, when the dust has settled on the specific FTT issue, the Government will take the initiative in calling for reform of the enhanced co-operation procedure itself.