Financial Crisis

Part of the debate – in the House of Commons at 3:56 pm on 20th January 2009.

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Photo of Philip Hammond Philip Hammond Shadow Chief Secretary to the Treasury 3:56 pm, 20th January 2009

The motion invites the House to take note of the Commission papers and to endorse the Government's response to them. Hon. Members will have noted that the Financial Secretary told us that the Chancellor has already gone to ECOFIN to discuss them, so people will draw their own conclusions about the Prime Minister's commitment to parliamentary government and how much our deliberations are valued.

There is much that we can agree on in the Commission paper: its analysis of the situation that we face; the focus on the need to deliver, at last, on the Lisbon agenda; the use of green taxes to drive demand for energy-efficient products; and, especially, the welcome commitment to open markets and free trade. However, if one reads these two documents together, one cannot avoid the impression that a significant part of the purpose in producing them is to claim ownership of the agenda—that instead of seeing a crisis for EU citizens, the Commission sees an opportunity to extend its competence and exaggerate the role that it has played. The Commission says:

"The EU was able to take collective action when the pressure on financial markets was at its most intense" and that this

"national action inside a set of clear EU principles" proved to be the right approach. I have to be fair to the Minister and say that the Government appear to be alert to this case of mission creep, because all they will allow in their response is that the Commission's document is

"a helpful contribution to the ongoing debate", while emphasising that the challenges are very different in the UK, the EU and the international community. That is "Yes Minister" speak for "We've read your document and we intend to ignore it." The Minister needs to be more robust, because the history of UK Ministers dealing with mission creep from the Commission is that unless they are very robust and clear in setting out their case, they tend to find that they get overruled in due course.

As the Minister said, the context of these issues is global. The problems that arise from this crisis must be dealt with by the world's major economies working together in the G7, the G8, the G20 and other institutions. Britain's focus must be multilateral and international, not merely regional. At least as far as the banking crisis at the heart of the current problems is concerned, London is not just another city within a member state of the European Union. It is a global financial capital in its own right, and on issues of financial regulation, the UK Government must protect the interests of London. Whether we like it or not, in the present circumstances, our private prosperity and the funding of our public services are heavily dependent on the prosperity of the financial markets based in the City of London, and will be for the foreseeable future. Of course, that means an enhanced system of financial regulation to replace the failed regime of 1997, but it must be a system that is designed for the challenges facing London and co-ordinated directly with the Governments of other major financial centres around the world, not one that is intermediated by the EU, the primary purpose of which is, quite properly, the internal regulation of financial services in the European market and not necessarily the promotion of London as Europe's principal financial centre.

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