UK Resolute On Convention 'Red Line' Issues

by Ulrika Lomas, Tax-News.com, Brussels

10 September 2003

The British government is determined to vigorously defend its 'red line' issues in relation to the European Constitution, which is due to be debated at the inter-governmental conference in Rome next month, not least with regard to retaining its national veto on taxation matters.

Speaking to The Times this week as the government prepared to release its White Paper outlining the nation's negotiating position at the IGC, Peter Hain, Leader of the House of Commons and the UK government's representative at the year long Convention on the Future of Europe, stressed the importance that Prime Minister Tony Blair attached to the Constitution. "He said it was more important than Iraq, which rather startled people round the table, in the sense that the European issue would be with us for generations."

Mr Hain went on to summarize five key areas, the government's so-called 'red line' issues, where the UK will steadfastly remain unmoved. The most notable of these was the issue of cross-border taxation.

“You might say it was sensible to have the Brussels Commission able to stop cross-border tax fraud," said Hain. "Say a member state, perhaps a newer member state, doesn’t have quite the standards of anti-fraud measures in place that a country like ours does. That sounds very plausible but actually it would allow the Commission and the European Parliament a back door into our tax system. We are not alone in this.”

Another of the red line issues concerns the possible linkage of social security benefits. "You might say it makes sense to have portability of benefits in order to create or increase labour mobility. But the problem for us is that our benefits system is integrated through the employment tax credit, the child tax credit, the soon-to-come pension tax credit. But once you start, you could then effectively let the Commission in our tax system, which is what we don’t want."

To what extent Britain, and for that matter, several other member states who have voiced objections to certain articles of the draft constitution, will get their way is unclear. However, President of the European Convention, Valery Giscard d'Estaing, has warned members that the constitution will ultimately be doomed if national governments are allowed to hack away the bits of the draft that they find unpalatable.

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