The Chancellor of the Exchequer (Mr George Osborne)
The Economic and Financial Affairs Council was held in Brussels on 17 November 2010. The following items were discussed:
Directive and Regulation on VAT treatment of insurance and financial services
ECOFIN held an orientation debate on proposals to modernise the VAT exemption for financial services, reflecting market developments over the last 30 years. The Council agreed that discussions would continue at working group level, taking account of the views expressed by delegations.
Administrative Co-operation in the field of taxation
The presidency gave an update on negotiations on this directive, which aims to improve arrangements for exchange of information and bring the EU into line with OECD standards. The Council agreed that they would aim to reach political agreement on this issue at their December meeting.
Implementation of the 2009 budget
ECOFIN took note of the presentation by the Court of Auditors on its annual report on the management of the EU’s general budget. The Council called on all parties involved in the management of the EU budget to persist in their efforts to improve controls and to reduce margins of error in budgetary payments. The Government continued to press the case for value for money in the EU budget. The Council is expected to adopt the recommendation to discharge the budget at its meeting in February.
Follow-up to October European Council
The Council took note of the deliberations of the European Council. Ahead of the December ECOFIN, officials will prepare a report on the work of the economic taskforce. They will also take forward work on bank levies and on the how the impact of pension reforms should be accounted for in the implementation of the EU’s stability and growth pact.
Follow-up to the G20 Seoul Summit on 11-12 November
The Council discussed the follow-up to the G20 summit, including as regards the issues of macroeconomic imbalances and the reform of financial regulations.
Financing of measures against climate change
ECOFIN had a high-level discussion on the UN Secretary-General’s Advisory Group on Finance report, fast-start finance, and the green fund. The Council will further consider this issue at the December ECOFIN.
Pensions
The Council adopted conclusions on a report on pensions. The Government support this report, which emphasises the importance of fiscal sustainability and extending working lives.
EU statistics
The Council adopted conclusions on the annual report on EU statistics, which reviewed the progress made on statistical governance.
Other business
a) Baltic Sea Strategy
The Council took note of a presentation by the President of the European Investment Bank regarding the EIB’s contribution to the EU’s strategy for the Baltic sea region. The Government welcome the EIB’s work in the region, and support its intentions to extend the programme to the Danube region.
b) Representation of the Council at the G20 ministerial meetings
The Council discussed EU representation at G20 ministerial meetings. The Government do not see a need to change the existing arrangements, whereby the EU presidency represents the EU and the Commission is an observer.
c) Credit Rating Agencies
At the UK’s request, a statement was laid in the minutes of the Council outlining remaining concerns with an amending regulation for credit rating agencies. The Council took note of concerns expressed.
Meeting of the EU and EFTA Ministers of Finance and Economy
Ministers held a meeting with their European Free Trade Area counterparts. The meeting focused on the consolidation of Government budgets as well as on financial market regulation and supervision.
An extra Economic and Financial Affairs Council was held in Brussels on 28 November 2010.
Ministers unanimously agreed to grant financial assistance, in principle, in response to the Irish authorities’ request, in order to safeguard financial stability in the euro area and the EU as a whole.
Euro-area and EU financial support will be provided on the basis of a programme which has been negotiated with the Irish authorities by the Commission and the International Monetary Fund, in liaison with the European Central Bank.
The financial package of the programme will cover financing needs up to €85 billion, including €10 billion for immediate recapitalisation measures, €25 billion on a contingency basis for banking system supports, and €50 billion covering budget financing needs. Half of the banking support measures (€17½ billion) will be financed by an Irish contribution through the Treasury cash buffer and investments of the National Pension Reserve Fund. The remainder of the overall package should be shared equally (€ 22½ billion each) among:
the European Financial Stabilisation Mechanism (EFSM);
the European Financial Stability Facility (EFSF) together with bilateral loans from the UK, Denmark and Sweden; and
the IMF.
In principle, the UK’s bilateral loan is for £3¼ billion, and the rate of interest on the loan will be similar to the rates levied by the IMF and the euro area.
The main elements of policy conditionality will be enshrined in Council decisions to be formally adopted at the ECOFIN Council on 7 December.
The president of the Eurogroup made it clear that the UK will not be part of the permanent bail-out mechanism, and that the European financial stability mechanism, agreed under the previous Government in May, and of which we are part, will cease to exist when that permanent eurozone mechanism is put in place.