Commentary: Lamont plays to the Brussels rules
Wednesday 01 July 1992
At first the row between Britain and the rest over VAT is like one of those disputes among medieval theologians. Nothing would actually have forced Britain to change the way it raises VAT. The standard rate of 17 1/2 per cent would remain, and so would the right to retain politically sensitive zero rates.
All Britain's partners wanted was to make it illegal for an EC country to cut its standard rate below 15 per cent. The sensible reason for this proposal is simply fear of 'fiscal dumping', in which countries in a borderless Europe would try to attract customers from their neighbours by charging less VAT. The result would be plunging state revenues and soaring deficits. The new minimum rate also helps EC member states to do what many of them need to do anyway, which is to raise more tax.
Happily, the Chancellor, Norman Lamont, has climbed down from what always appeared a quixotic position, namely that any minimum tax rate was an
unwonted interference in the sovereign rights of nation states. Forced to choose between a duff issue of principle and practical questions such as the discriminatory treatment of whisky, a subject close to any Scots Chancellor's heart, he went for the expedient deal. Although nothing was finally agreed, there should be a deal on 13 July.
Mr Lamont has made real progress elsewhere. Drafts of the capital adequacy directive, which sets minimum capital requirements for investment firms, had seriously threatened many of London's independent stockbrokers, who would have been at a disadvantage compared with the Continental style of bank-owned firms. But the version that has been agreed, setting the minimum at ecu50,000 for firms that do not hold clients' money, is reasonable.
There was also relief in the City yesterday about the investment services directive, which once looked as if it could kill off London's huge foreign exchange and Eurobond markets. The disclosure requirements had threatened to alert a market-maker's rivals whenever it took a
large position in a stock, but they are now acceptable to the professionals.
Only the insurance directive failed to create enthusiasm, mainly because there is a great difference between passing laws and changing cultures. It will be years before UK insurers crack the Continental market - but, given their recent track record, that may be no bad thing.
Emergency landing at Heathrow sparks further controversy over London airport capacity
Unrest may spread across Europe, warns Red Cross chief
French government seeks to ban extreme right-wing group
BNP and EDL accused of attempt to fuel racial hatred after Woolwich terror attack
You want to get an Eton scholarship? All you need to do is answer four (not so simple) questions
- 1 What, let gays get married? We must be bonkers
- 2 Rocky Horror star Tim Curry 'suffers major stroke'
- 3 Exclusive: How MI5 blackmails British Muslims
- 4 Lord of the Sings: Sir Christopher Lee, 91, to release heavy metal album
- 5 Exclusive: Woolwich killings suspect Michael Adebolajo was inspired by cleric banned from UK after urging followers to behead enemies of Islam
BMF is the UK’s biggest and best loved outdoor fitness classes
Find out what The Independent's resident travel expert has to say about one of the most beautiful small cities in the world
Nook is donating eReaders to volunteers at high-need schools and participating in exclusive events throughout the campaign.
Get the latest on The Evening Standard's campaign to get London's children reading.
Win anything from gadgets to five-star holidays on our competitions and offers page.