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Banking Union and Economic and Monetary Union

Part of Free School Meals (Children Over the Age of 16) – in the House of Commons at 4:59 pm on 6th November 2012.

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Photo of Greg Clark Greg Clark The Financial Secretary to the Treasury 4:59 pm, 6th November 2012

I beg to move,

That this House
takes note of European Union Documents No. 13682/12, a draft Regulation amending Regulation (EC) No. 1093/2010 establishing a European Supervisory Authority (European Banking Authority) as regards its interaction with Council Regulation (EU) No…/…
conferring specific tasks on the European Central 5 Bank concerning policies relating to the prudential supervision of credit institutions, No. 13683/12, a draft Regulation conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, No. 13854/12, Commission Communication: A roadmap towards a Banking Union, and an unnumbered Explanatory Memorandum: Towards a Genuine Economic and 10 Monetary Union: Interim report;
and welcomes the Government’s decision to remain outside the new supervisory arrangements while protecting the single market in financial services.

I welcome these debates. The subject matter of today’s debate is, if anything, even more important than what we discussed last week. It is essential that proposed developments in the EU are robustly scrutinised by this Parliament. I am grateful for all the work done by the European Scrutiny Committee and its equivalent Committee in the House of Lords, as they applied their attention to the 1,100 European documents that were referred to them last year.

One theme we will come on to is how we can strengthen the scrutiny of sovereign national Parliaments over the institutions and policies of the EU. I believe that that is essential. It is principally Members of this House and our colleagues in the other place who will search for assurance that our national interest is not being blown away by a Zeitgeist that is capable of carrying people along in the wrong direction.

This week is a particularly appropriate one in which to recall the value of that questioning voice. It was 15 years ago on 10 November 1997 when the then Leader of the Opposition first stood out against all fashionable opinion at the time and, in a speech to the Confederation of British Industry conference, committed my party to oppose joining the proposed euro. I had a hand in preparing that speech, and I recall one of the lines that I was proud made the cut. It said:

“if the nightmare of our experience in the ERM teaches us anything, it is not to steer by the siren voices of a supposed consensus, but to exercise the independent judgement of a cool head.”

Of course, the two people responsible for that decision and that speech are now our Foreign Secretary and our Chancellor of the Exchequer. They were excoriated at the time for declaring on that day that they intended

“to campaign against British membership of the single currency at the next general election”.

I believe that this caused the brand-new Labour Government of the day to hesitate, and by missing the moment, they spared Britain from a disastrous fate.

Fifteen years on, the documents that we are considering today are a direct consequence of the creation of the euro and, in particular, of the failure to address from the outset some of the inevitable factors. Now, as then, it is imperative that the United Kingdom exercises the independent judgment of a cool head to determine whether the new policies being proposed are consistent with the interests of our own economy.

Let me deal first with the proposals on banking union. The first thing to say is that we and the EU need to tread particularly carefully on matters that affect financial services. The financial services industry, including banking, is not evenly distributed across all member states of the EU. The United Kingdom has a vastly greater strength in the conduct of, and international trade in, financial services than any other member state. Financial services and related areas employ more than 2 million people in this country—two thirds of them outside London—and contribute £1 out of every £8 of Government revenue. That is about £1,000 for every man, woman and child in this country.

We have a £37 billion trade surplus in financial services and Britain accounts for 61% of the whole of the EU’s exports of financial services. Commissioner Barnier said last month:

“It is in our general interest in Europe to have the biggest financial centre in the world. A strong City is good not only for Britain but for Europe.”

That is a welcome recognition. We will never jeopardise an industry of such particular importance to the United Kingdom.

In scrutinising these proposals, we need to have a clear fact in mind. People do not need banking union because they are part of a single market. The appetite for banking union arises solely because of the problems of the single currency. However, although banking union is primarily a matter for members of the eurozone, it strongly engages Britain’s interests in two ways.