Andrea Leadsom is the Member of Parliament for South Northamptonshire and a member of the Treasury Select Committee.
Ahead of the crucial European Council meetings, I agree with the Prime Minister's statements that the primary needs are to reach agreement to restore stability in the Eurozone and to defend and promote the UK’s national interest. Stability in the Eurozone is clearly in the UK’s national interest, as are protecting access to the single market and defending the financial services industry in the UK.
Although unpopular with voters for understandable reasons, the financial services industry employs nearly two million people, accounts for 10% of GDP, and generates over £50 billion in tax receipts annually in the UK. It is a vital national interest that must be protected. The UK is a gateway to the EU for financial services, but it is important that we also look to the faster growing markets of the BRIC countries and others around the world. We must not get tied down by EU legislation that would prevent our businesses accessing these markets.
Up until the credit crunch of 2008, EU policy on financial services was generally helpful to the City of London, expanding market access and liberalising financial markets across Europe. London was rightly seen by EU policy makers as a leader in the field and an asset to Europe. Since the crash, the response from UK and EU policy makers has been markedly different. EU policy is generally to restrict the activity of financial markets—the default reaction appears to be: if you don’t like it, ban it. UK policy is to improve regulation and supervision, going further in some cases, such as the Vickers report on banking, than currently allowed under EU law.
There are currently nearly 50 proposals under consideration by the European Union which threaten UK financial services. Some of the most damaging include a Financial Transactions Tax, a ban on some short-selling, and a proposal that transactions on euro-denominated financial products are cleared only in the eurozone.
While having a significant interest in financial services, the UK may well be out-voted on matters in the EU. From 2014, the UK will have only 12 per cent of the votes in the Council of Ministers and 10 per cent in the European Parliament, yet it accounts for 36 per cent of the EU's wholesale finance industry and enjoys a 61 per cent share of the EU's net exports of international transactions in financial services.
This week, I have hosted meetings of the cross party group for European Reform and the Fresh Start Project where we discussed the issue of Financial Services. One idea that is gaining support is to negotiate for the UK an 'emergency brake' on EU financial services legislation. This could take the form of a one-clause, UK-specific legal safeguard which would give the UK the ability to block the effects of potentially harmful EU legislation.
Germany has a strong desire to involve all 27 EU members in the treaty change required for closer fiscal union in the eurozone, and to use the institutions of the EU to implement this fiscal union. This gives the UK negotiating power at the European Council summit this week. I strongly encourage the Prime Minister to explore the limits of this negotiating power to secure the ‘emergency brake’ on financial services legislation that is so important to our national interest.