Howard Wheeldon writes: Oh to live in the US where defending the national interest will always be the highest priority in the land! Not so in Britain though as day by day our hapless government appears content to cede more Westminster control to the EU and to completely ignore the words national interest.
First things first though – a quick take on events at the Mansion House. Quite rightly, in challenging the view of Alistair Darling the Bank of England governor Mervyn King has significantly raised the stakes on the overall debate of bank regulation. Rare though it is for a BoE governor to seriously clash with government policy quite so publicly – if that is what you can call the scatterbrain policy approach of the incumbent government – in this case it is to be welcomed. However, whilst most will generally support the King view that the failed tripartite agreement lies at the heart of the UK regulatory problem, they may not necessarily agree with the governor that forcing banks to make a choice between consumer/retail banking and everything else is the right way to go. Amongst some other interesting remarks from the lips of the highly respected BoE governor was one that implied that if a commercial bank thinks it is too big to fail it is actually means it probably already too big and must be slimmed down! Many would take issue with this questioning who is to decide whether a bank is too big or for that matter, perhaps even too small? Meanwhile it seems that the tripartite strategy for UK regulation will regrettably live on with extraordinary powers to regulate banks left for now in the hands of the Financial Services Authority – as opposed to where they should be, in the hands of the Bank of England. Even so, one may hope that when the government presents its final plans to the Commons there will be significant improvements in lines of responsibility given to both the Bank and FSA in the new legislation that the government will shortly propose.
Arguing about who should control UK banking and financial sector regulation internally is one thing but giving away powers to the European Union quite another. Earlier, the House of Lords European Union Committee rightly in my view lambasted government failure to stand up for UK interests. The report they issued coincided with the likely reappointment of Jose Manuel Barroso as European Commission president for a second term and it exposes a timely reminder of the determination of Barossa to push forward plans for an EU wide financial and supervisory system in which EU members would in affect cede control of regulatory policy to the EU. Not surprisingly this appears to have the backing of France and Germany. But sadly, to all intents and purposes, it also appears to have the support of the UK government. At that point internal regulatory authorities would, it seems, become agents of the EU in which they would then be required to police the system domestically and to provide early warning of problems. Assuming Barosso manages to force ill considered reactionary legislation through Brussels the UK would be placed in a difficult predicament of automatically losing powers over domestic regulation of its banks and foreign banks that operate in the UK unless of course it decided to opt out. Ahead of signing up to the Lisbon Treaty the UK does still have powers to opt out of planned EU regulatory legislation, should it choose, but if my understanding is correct, if for instance Ireland votes to accept the Lisbon Treaty shortly as seems increasingly likely given the concessions it has won, Britain may then be faced with a difficult dilemma of either holding a referendum on the Treaty or automatically signing up. If the process stretches out and we assume a Conservative win at the next election, that could also mean that David Cameron could be faced with the possibility of holding a referendum very early on.
Meanwhile it seems that the British government is, apart from pushing forward immediate proposals for domestic regulatory reform from FSA chief, Lord Adair Turner and that have gone down like a hole in the head, content to wash its hands on future banking market regulatory policy and control preferring to hand the ultimate problem over to the EU. In doing so and in the certain knowledge that he has less than a year left at Number Ten the Prime Minister, a master of political disguise and past master of a say what you mean but never mean what you say politics appears determined that regulatory control of the City of London will eventually be ceded to Brussels. In itself this is appalling and probably irreversible. Even so, the fear of Brussels control is made all the worse by seeing little if any concern expressed by David Cameron. Clearly we all accept the need for improvements in cross border supervision and control of financial institutions in Europe and indeed, across the world. It is right that we also need better cross border supervision, more co-operation and some necessary enforcement but when it comes to the workings of the City of London we in Britain must ensure that Westminster retains overall regulatory control. Fail to halt the EU momentum now and we in Britain will end up not only with an over zealous regulatory regime but also the potential loss of the competitive base that has made the City of London the dominant global financial market powerhouse it is and rightly deserves to be. Fail now, cede further Westminster control to ill thought out proposals that create a further restrictive EU based legislative structure and we may as well bury what’s left of any remaining national sovereignty.
Before I move on to discuss concerns that the Tory Party has as yet failed to get its act together on the necessity of retaining Westminster supremacy on matters of financial and banking markets regulation let me just remind what it is that EU President Barroso is attempting to push through to create EU based regulatory legislation. Essentially this comprises the creation of three pan European watchdogs that will act to ensure that all EU nations implement whatever new base regulatory legislation appears on banks and banking market supervision. Yes, that means the creation of yet another EU board – this one to be called the European Systematic Risk Board. There are also plans for a European System of Financial Supervisors that would engulf or encapsulate existing national regulatory bodies such as the FSA. As I see it the Barroso proposals would mean that EU regulators would have the ability to veto and overrule all matters of national regulation and, as is the case now, the final authority for disputes to be resolved would be the European Court of Justice.
Back in November 2005 in a speech to the Centre for Policy Studies Tory leader David Cameron said that we must draw back powers – repatriate them – to govern market legislation, employment legislation and so on. He also said that it was imperative to regain competitiveness for the UK and that to achieve this required repatriation of powers [from the EU]. However, whilst I am reasonably assured that Tory Shadow Chancellor Osborne is opposed to passing over regulatory control of banks to the EU it seems that the Shadow Business Secretary, Ken Clarke, takes quite the opposite view playing for further discussion that essentially hides from an opinion that regulatory control should be ceded to the EU. Indeed, until I am hopefully proved wrong, I will continue to believe that Mr. Clarke’s view of discussion is merely playing for time on a probable belief that the longer the issue is discussed the more likely that Britain will be powerless to prevent ‘City of London’ regulation passing to the EU. Clearly, any forced ratification of Lisbon will play into Clarke’s hands. Clearly it is time for the Tories to come totally clean on the issue. Right now the line that HM’s Opposition Party is taking is not only confusing but it appears to be speaking with forked tongue.
With Mr. Brown having done little so far to provide any confidence that he will put the UK national interest first, protect the essence of Parliament by ensuring that the indisputable supremacy of Westminster is retained above that of the EU it seems that the government risks throwing the future of the City of London to the wolves by the back door. To do this risks the very future competitiveness of an industry that is so important to the UK economy that we just cannot allow regulatory control to be ceded to the EU. Meanwhile we must keep constantly reminding ourselves of just what we are potentially throwing away by potentially allowing French and German financial institutions such an easy ride. Failing to recognise the importance of this industry – of what it is now and of what it can probably soon again be in the future – a competitive and brilliant industry that can carry the flag of Britain around the financial market world whilst at the same time providing excellent returns for the British exchequer – is a message that somehow we must get through to our hapless politicians.
