Juncker’s new EU financial services tsar would be disastrous for the City
The prevailing winds of politics have not been kind to the City or the wider financial world of late. Politicians, often with one eye on the next election and tempted to kowtow to “banker bashing” sentiments, have paraded their credentials by legislating against the unruly financiers who “caused the financial crisis”. But if you think the rhetoric has been bad in Britain, it has been far worse on the Continent. The amount of EU-inspired financial regulation has risen in recent years, and there is yet more under consideration in the committee rooms of Brussels.
Not many would argue that we do not need sensible regulations, but the motivation behind them and where these rules come from is vitally important. Regulations often not only distil the politics of the day, but also the cultural attitudes of those drafting and implementing them. With that in mind, proposals from the incoming EU Commission president Jean-Claude Juncker to create a new, all-powerful EU financial services tsar would represent a disaster for Britain. Any suggestion that we should acquiesce to this should be rejected outright.
The endless creation of new EU rules and regulations has not gone unnoticed. Some have complained of drowning under a mountain of new diktats, and of measures apparently designed to undermine Britain’s competitiveness as a global financial centre. For an industry that once benefited from the liberalisation and expanding customer base that the Single Market has brought, this is not simply a dislike of any regulation. It’s a recognition that the tone, direction and volume of new rules are not helping Britain’s businesses, nor her taxpayers.
Since 2008, UK financial legislation has focused on increasing the quality of supervision and strengthening market incentives. At the EU level, however, the focus has been on extending the scope of regulation, curtailing specific behaviours, and protecting the integrity of the Eurozone. As Business for Britain’s own research has shown, these divergent approaches mean that British interests in EU financial regulation risk being systematically over-ruled in favour of those of the Eurozone. And that also puts at risk London’s position as the financial capital of the world, a problem a new EU financial tsar, appointed from a Eurozone member state, would only compound.
The creation of an EU financial services commissioner with authority over the City should be seen for what it is, a call for Britain to accept flagrant economic self-harm. Some have argued that the new post would result in the splitting of the internal market directorate, and that this would vastly increase the chances of the British commission candidate Lord Hill being given the coveted, but now reduced, internal market commissioner post. This is not only short sighted, but also a highly risky approach given our poor recent track record in securing support for EU appointments from other member states.
Westminster should be doing all it can to block this proposal, not trying to horse trade over what we can get in return for selling the City down the river. Such short-sighted shenanigans have got us into many of the EU messes we find ourselves in today.
Britain has already had to drag the EU to the courts over a number of issues relating to the financial services sector – from the cap on bonuses to the financial transaction tax. With a new financial tsar, it’s not hard to see how Britain could be faced with even more regulations and more battles to fight in the European Court of Justice. There are too many on the Continent who look on with jealousy at the success of financial services in the UK, and the £65bn cheque they write to the taxman each year.
Yet despite this gloomy news, the recent intervention by Boris Johnson over Britain’s future in the EU should give business hope. Boris has always been a robust advocate for London, but this week’s report from his trusted economic adviser Dr Gerard Lyons should only help the case for securing a new deal from the EU. Both Boris and Lyons understand the City. They are right to highlight the benefits of remaining in a genuinely reformed EU, but also to point out that, with a decent trade deal, the prospect of us leaving an unreformed EU should not be feared. What is clear is that the status quo really won’t do, and neither will further moves to legislate the City out of existence from Brussels.
The City has made a significant contribution to Britain’s economic success. The importance of ensuring that it is always sensibly regulated, and controlled by the British people rather than the EU, is paramount.