My Lords, the noble Lord's remarks indicated quite rightly that a lot of water has flowed under the bridge since those original days when it was in the Lamfalussy territory. Those were early days indeed, pre-crisis, before the world financial crisis started in 2007. I think that we are very grateful in this House not only for the debate today, initiated by the noble Lord, Lord Harrison, but for his chairmanship of this particular sub-committee. It has been going for some time and it has taken a long time, but all these complicated matters are bound to do so, as they do in the discussions between the member states. There is no need to criticise that severely, as the press often do. First of all they want it always to be done in a hurry, and then when it is done in a hurry they say that it was done wrongly and superficially and a lot of mistakes were made. These are very complex, technical matters of procedural co-operation, which take a long time to work out.
The noble Lord, Lord Roper, in this place has given excellent leadership in this matter, which is one of the most important subjects that we have discussed in the last 12 months, both on the European Union Select Committee and indeed in the particular sub-committee. The credit rating agencies report, too, has a place in this whole subject, and I will refer to that briefly in a moment. I, too, thank very much the noble Lord, Lord Kerr, for the very shrewd analysis that he gave and for the help that he gave us in framing those three excellent questions. I would like to be tagging along behind him, if he would allow me to do so, and also ask exactly those three questions, but couched probably in less elegant and precise Parnassian language than he is able to muster. There are indeed two procedural positions for the noble Lord, Lord Kerr; I call one Lord Kerr above the table, and the other Lord Kerr below the table. Both are equally valid, depending on the different circumstances of incredibly complex negotiations. His work as the secretary-I do not think the word "scribe" is adequate-of the convention on the constitution meant that he knew an awful lot about those various clauses that are now in the Lisbon treaty.
Once again it has been a period of education for people in this country about the need for us to really keep in step with the rest of the European Union on these matters and not to fall behind. That is not to say that in this case the particular sector that we are discussing is behind in any way. Indeed, the City of London is a leader in this field and all of us are very proud of the leading role that it plays in financial matters, investment business and banking. It is a leader not just for the United Kingdom, one has to stress, but for the whole of the European Union and, indeed, the whole of the world. The single market has mostly been developing with material things and retail rather than financial transactions so far, but now we are coming more and more into the field of financial transactions.
I suppose that one of the leading sectors in Germany would be the motor industry, a gigantic motor industry of which Mercedes and BMW are probably-I hope the Japanese will forgive me for saying-the two leading motor car manufacturers in the world. However, in no sense does that just belong to Germany. That belongs not only to the whole of Europe but the whole of the world. The effect of the German motor car production industry has huge ramifications in the whole world and indeed particularly in the European Union, not least in the new eastern European member states. When there are major sectors in each country, they belong to the whole Union, and the City of London does as well.
I declare my historical interest as a former member of the Stock Exchange from 1965 to 2000, a partner in a major institutional stock-broking firm in London for 10 years, from 1968 to 1978, and then, when politics was taking its sinister grip more and more, an associate of a very famous firm chaired by the then chairman of the Stock Exchange. One saw the attitudes there of the special feeling of apartheid and separation psychologically: the City was unique, nowhere else was like it, and how dare these continental chappies tell us what to do? That feeling persisted until quite recently.
Subsequently, the City began to realise that you do need Europe-wide regulation of all these matters, because if the City is a dominant market, the only way to make it really effective is to have the single rule book, as advocated in this excellent report-I agree with virtually all its contents-and have that imposed on all the others, which may be smaller market entities physically, although growing relatively much bigger all the time. Indeed, with the stock exchanges also merging together in other European capitals, they themselves become more significant. These things are international. I would say that the City of London is now populated mostly by originally non-British banks, and other investment institutions are often originally foreign-owned in the City and elsewhere. This is international. That feeling has now faded away. The general feeling in the City is much better and much more up to date. When one meets colleagues from yesteryear and colleagues nowadays at the rather nostalgic gatherings that we still have-City reunion dinners and lunches occasionally -usually nowadays they are dry, which I think is a very good idea because there is far too much to be discussed to have it over a glass of port, as was the norm in the old days. That feeling is now more modern and harmonised. There is a single market. Thank goodness we are the leaders; it provides a surplus for our non-trade, financial services balance that gives us an overall surplus on our current account. We have seen yet another increase in the trade deficit of this country because we always import far too much, particularly from other advanced countries.
The recent change in the Conservative Party took the clock back. The noble Lord, Lord Kerr, did not mention it; he referred only to the late-night summit discussions of
The sudden, last-minute request caused a crisis and once again there was a ratcheting up of that feeling among the other member states-rightly and understandably, but tragically and sadly for this country-that, "Britain isn't one of us; it's not a normative member of the Union; it always wants to stay on one side with exclusions, derogations and exceptions; it doesn't want to join the euro; its Prime Minister now says it will never join the euro"-although it has always been the official intention of this country to join the euro, which remains a strong currency despite the problems of one or two overindebted countries. That feeling caused major consternation and needs to be answered by the Government to reassure opinion not only in the other member states but here.
That feeds into the question of our national regulatory authorities rightly being the main agents of the new European structure of overall supervision under the ESA. They will have the power to guide the Europeans, some of whom will be relatively inexperienced in these matters. The situation is complicated by the fact that stock exchanges have only recently got together. That, too, is a very complicated matrix, against the bizarre background of the international debt crisis, which is not only in Europe but elsewhere. Japan is the most overindebted country in the world, with the highest debt ratio. International bond purchasers are now buying Japanese debt, so bizarre has the situation become. The second most overindebted country is the United States. The federal Government could be described as technically bankrupt, and most states are in the same position, although in most cases they can default.
Bringing the two aspects together will mean that we need new, strict and strong Europe-wide financial regulation for the markets, and the outlawing of certain practices that have certainly damaged industry. Speculative business, too, must be regulated properly. It is no good just saying that there must be a free market and a single rulebook that allows businesses to do what they like. They must be properly authorised and regulated. I have anxieties about folding back the FSA structure into the Treasury and the Bank of England. Their record over the years of controlling and supervising correctly and efficiently both the British economy and financial and banking matters has not been wonderful; I say that with sadness. We must get this right. The Government must recover from the mistake made on