Andrea Leadsom is MP for South Northamptonshire.
Contrary to much of last week's media, the prime minister did not return from the latest EU summit in shame. As sensible Labour MPs like Kate Hoey made clear, there is nothing shameful about standing up for important British interests. And there is no doubt that, while it may not be popular, financial services is a core industry that is vital to our economy.
The sector employs almost two million people, is this country's most successful export, and is worth around £50 billion to the Exchequer – some 11 per cent of total tax take. Chancellor Merkel would rightly be pilloried if she stood by while the EU carried out an assault on the automotive industry. If David Cameron had any concerns about standing alone, he shouldn't have – he was right to use his veto and in his position, any decent political leader would have done the same.
It has been pointed out that the UK can exercise a veto on the imposition of a Financial Transactions Tax. First, that is no cause for complacency. We thought we had an opt-out from the Working Time Directive but it was imposed on us via health and safety legislation – so there is much to be said for drawing a line in the sand. And anyway, the FTT is just one proposal of many. Another, astonishingly, is a proposal that trade in euro-denominated products should be relocated to the eurozone – blatant in its attempt to steal business from London…
In fact there are now 49 directives and measures coming from the EU that are principally focused on restricting or even banning financial activity rather than smart regulation. These measures would seriously harm Britain's current interests, but would also restrict our ability to compete in the fast growing markets in Brazil, India, China and elsewhere in Asia. It is in these markets that our growth prospects lie, and we cannot afford to let poor EU legislation hold us back.
It is clear that British businesses are very concerned about the impact of the EU – a recent ComRes poll for Open Europe found that 62 per cent of UK financial firms expect the cost of EU regulation to outweigh the benefits of the single market over the next five years and that 68 per cent believe our government should take back more control over regulations.
The shockingly weak tri-partite regulatory regime that was brought in by the last government has been addressed by the Coalition and huge efforts have been made to ensure our banking system is robust. There is a long road ahead before the financial sector will be popular again, but Nicolas Sarkozy was blatantly seeking to cause trouble when he claimed that it was financial deregulation that caused the Eurozone crisis… better for EU leaders to face up to the truth that it was their own excessive borrowing and overspending that got them into this mess. Trying to punish one of the EU's most successful exports – finance – would be a real 'own goal'.
So the Prime Minister was right last week – but where do we go from here?
There is a real risk that greater fiscal union in the eurozone will only paper over the cracks; last Thursday saw Moody's downgrade France's three biggest banks. If Germany and northern countries really are to compensate for weaknesses elsewhere and the eurozone is to be seen as a single sovereign credit risk, that has to involve a credible lender of last resort which can act as an underwriter. As things stand, there is no proposal at the eurozone level to print money and inflate the debt away. The single currency has no backstop.
The French president wants a treaty within a treaty, but how realistic a goal is this? EU institutions such as the Parliament, the Commission and the European Court of Justice exist for all members, most of whom have helped pay for them for many years – a select group cannot now co-opt them as their own. Creating new structures would take a longer period of time than the markets will tolerate.
A major concern for Britain is that financial services regulation comes under the qualified majority voting system and that by 2012 we will enjoy only 10 per cent of votes in the European Parliament. This is a huge problem given that Britain accounts for 60 per cent of the EU's net exports of international financial services transactions.
And British financial services are not alone in being threatened by the EU. Manufacturing, construction and pharmaceuticals are just some of the other industries where growth may be inhibited by bureaucrats. There is even a proposal to implement EU taxes including an "EU VAT" that HM Treasury says might raise standard-rate VAT to 21 per cent.
A determination to stand up for Britain may not be popular in some circles – but it has never been more necessary.