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European Financial Services Proposals

Part of Oral Answers to Questions — Foreign and Commonwealth Office – in the House of Commons at 4:22 pm on 1st December 2009.

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Photo of Sarah McCarthy-Fry Sarah McCarthy-Fry Parliamentary Secretary, HM Treasury 4:22 pm, 1st December 2009

I think that the hon. Gentleman probably knows the answer. I have not had discussions with legal practitioners, but my noble Friend Lord Myners, who leads on this policy matter in the other place, certainly has done so, and I have read all the briefings.

Many members of the European Scrutiny Committee have raised concerns about the fiscal safeguard clause in the proposals. I would like to stress that this is a mechanism that in practice should never be used. The legislation clearly states that ESAs are required to ensure that their decisions do not impinge on member states' fiscal responsibilities. However, alongside that, a process has been set out in the legislation for member states to opt out of a decision made by an ESA, if they believe that it would have a fiscal consequence. We need to ensure that that process is not open to abuse, and that it provides the right protections. The Commission's proposal requires a member state to secure a qualified majority vote in support in Council, in cases in which the ESA decides to uphold its decision, despite the member state raising a fiscal case against it. We are not convinced that the balance is right, or that it provides sufficient assurance to member states. We are therefore working with EU member states, many of which share our concerns, to improve the safeguard clause.

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