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European Financial Services Proposals

Part of Oral Answers to Questions — Foreign and Commonwealth Office – in the House of Commons at 6:12 pm on 1st December 2009.

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Photo of Michael Fallon Michael Fallon Chair, Treasury Sub-Committee 6:12 pm, 1st December 2009

My hon. Friend makes his point, again, extremely powerfully.

I still think that the Commission is the wrong body for the task, and I am somewhat encouraged that in evidence to us, Lord Myners said:

"I cannot conceive of a situation in which the Commission would be the natural body to be able to formulate a view on what constituted an emergency situation."

Given that those are the words of the Financial Services Secretary in evidence to the Committee, I assume that that must be a red line for the Chancellor tomorrow. We need to remove any suggestion that the Commission should declare an emergency situation, and ensure that our interests are properly protected.

My final point is one that has been touched on by hon. Members on both sides of the House-the fiscal safeguard. In the conclusions of the European Council in June, the Council was emphatic, and the Prime Minister repeated the exact wording here in the House, that these arrangements

"should not impinge in any way on the fiscal responsibilities of Member States."-[ Hansard, 23 June 2009; Vol. 494, c. 661.]

However, we now see in the drafts for all three authorities that if a member state feels that its fiscal responsibilities may be impinged by the powers that are exercised, under articles 10 or 11 it can appeal only to a majority vote of the Council. That is no safeguard at all, when the United Kingdom or another member state can be outvoted after a discussion as to what constitutes an impingement. That is not satisfactory.

We know that the proposal is not satisfactory because in its justification of the power, the Commission argues that the appeal power should be exercised sparingly. It may be that the Commission does not want any dispute to arise and hopes that such a dispute will never arise. It does not want the power of appeal to a majority vote to be exercised under normal circumstances.

The other great weakness of the fiscal safeguard is that it extends only to action under articles 10 and 11. It does not extend to article 21 powers, after a warning by the systemic risk board, which may follow from the declaration of an emergency situation by the Commission. All parties in the Select Committee were very clear, as has already been read out to the House, that the veto must be available and must be absolute. I appeal to the Minister to reassure the House that standing behind that veto and ensuring that we are not put in the position of relying on a majority vote will be one of the red lines in Brussels tomorrow.

I fear for the consequences of these proposals if they go through in anything like their current form. I see a recipe either for endless conflict between the new European supervisors and our own domestic supervisor, the Financial Services Authority, or for the Financial Services Authority to be treated simply as a consultative body-one of the parish councils of Europe, its opinion asked for and then ignored.

It is bad enough that, through the neglect of its European policy, we have ended up with the future regulation of the City of London now in the hands of a French Commissioner. That will be extended by these proposals so that we are in the hands not only of a French Commissioner, but of a band of supranational authorities. That will be very damaging to London, to the United Kingdom and to the European Union, of which London is such an important financial centre.

I am depressed by the attitude of the Minister and the Government. Throughout the evolution of these proposals, they have been silent, lackadaisical and complacent. The red lines have kept shifting. The Minister did not mention red lines today. She had to be challenged each time to get out of her what the red lines might be. It was an ill omen that the Government have conceded all three of the top economic jobs to non-British nationals. We need, above all, a Minister who will stand up for British interests in Brussels. If this Minister cannot and this Government will not, they should make way for somebody who will.

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