I agree that things vary from sector to sector but one of the reasons why so many foreign-based banks are in London is because it is the financial centre of the single market.
The point is that the banking crisis has changed the way that we thought about the City. It has made regulation absolutely essential. The euro crisis has made banking union essential in order to break the link between sovereign debt and the fact that nation states have had to underwrite their banks. It raises difficult issues for us in the UK. As long as we see ourselves as being outside the single currency, the centre of the European financial market will be remote from the core of the banking union. There is also the block vote problem: if regulation is concentrated through the ECB, we could be outvoted.
The UK made a disastrous attempt in 2011 to try to tackle this problem of what to do. This was at that year's December summit, where a paper was circulated late at night without prior consultation with anyone. Full of complex detail, it had at the top the horrible word "unanimity". Basically it was asking for unanimity on questions of financial services. Not only was this tactically maladroit, it was strategically misguided. If the sincere wish of the British Government is to deepen the single market in the European Union, we cannot go around demanding unanimity on a specific UK interest, because every other member state will demand unanimity on an interest specific to it.
That is why the proposals of, for instance, the Fresh Start group are extremely worrying. They do not demand unanimity but in cases of financial services they do demand use of the Luxembourg compromise and they talk about emergency brakes. If you believe in the single market, you cannot put forward such things in the European Union. I should like to hear from the Government that they have no intention of pressing for the Luxembourg compromise or emergency brakes in this area. This would be so damaging to Britain's interests in pressing forward to the single market.
However, the Government achieved a notable success in December with the acceptance of the double majority principle. I agree with my noble friend Lord Davies of Stamford that, for protecting our position, this is a lot better than nothing. Yet I also agree with the noble Lord, Lord Kerr, who asks how robust this is and whether it will last.
First, this double majority applies only to the banking agency, which is about the implementing regulations, and not to ECOFIN, which draws up the legislation. So we do not have a special position there. Secondly, the noble Lord, Lord Hamilton, is right that the ECB will be the big player in this and the EBA a weakly staffed and resourced organisation. How do the Government intend to deal with that? Thirdly, there is the question of time limitation. How many euro-outs, which are actually banking union-ins, will there be? If there are a significant number of euro-outs who will be banking union-ins, how long do we think that this special double majority arrangement will last?
There are alternatives. I am not saying that this is what the Labour Party would propose but, as my noble friend Lord Davies said, we have not had from the Government a proper cost-benefit analysis of what the alternatives might be. Did they look at how, as a euro-out, we might be a member of the banking union and whether it could be made to work? Could we have built on the model of the European Systemic Risk Board, of which the president of the European Central Bank is chair and the Governor of the Bank of England is vice-chair? Could we have used that as an umbrella? The Government have a duty to look at all the possible alternatives here because this is an issue of such vital importance to the future of the City. The fear that a lot of us have is that for reasons of ideology and prejudice, the UK has opted for very much a second-best, possibly a third-best, solution that would be gravely damaging to our interests in the long run. I will be grateful to the Minister if he can deal with some of these points.