EU: Financial Regulation (EUC Report)

Lord Davies of Oldham Excerpts

Tuesday 7th July 2015 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, the House has long appreciated the chairmanship by my noble friend Lord Harrison of this committee and the series of reports which have been of great use to noble Lords in informing us on crucial economic issues. I thought that I had a straightforward job this evening, which was to welcome certain parts of the full report—I have some reservations, of course—and to congratulate my noble friend on his chairmanship and on producing it. Now I am absolutely astounded as to how on earth he manages to sustain calmness in a committee which it seems has at least one representative, and probably two, who ought to have written a minority report saying that they would never have started from here and they largely do not agree with anything to do with regulation. In fact, they do not even think that the financial crisis was caused in this manner and therefore a totally different subject ought to have been tackled. I am afraid that the House can scarcely be expected to indulge in such a wide-ranging debate, and indeed I have not come armed to tackle that position—except to say to the noble Lord, Lord Flight, and to a certain extent the noble Earl, Lord Caithness, that they must recognise that this report is on the post-crisis EU regulatory framework. What crisis do they think the report is referring to?

Surely we are dealing with the financial crisis which affected the whole of the western world and caused repercussions much wider than that. It is only right that the European Community, in the same way as successive British Governments, should have set about the task of bringing in regulation against circumstances which the noble Lord, Lord Flight, must recognise. The morality that he thinks is held in a handshake of agreement between gentlemen in the City just does not hold in the present day. In fact, the attitude where such trust was held at the time clearly led to circumstances in which people could betray it in such a way that whole economies in Europe and, I might add, most of the western world and the United States, crashed in the face of banks going down. That is the measure of the crisis, so it is not surprising that my noble friend Lord Harrison chaired a committee report on financial regulation. I do not think that the Minister should be asked to respond to a widespread debate on whether regulation is needed at all. I would have thought that we have enough evidence in that respect.

That is why the committee has examined the European supervisory agencies which oversee the regulatory framework and has found a great deal of their work to be satisfactory, but has also made it clear—not just on this occasion but in the past as well—that these bodies will need considerable resources to carry out their tasks properly. That is a recommendation in the report. I do not know whether the two noble Lords have dissented from that position, but the nature of their contributions to the debate suggest that they actually have. However, the report from the committee addresses itself to that issue, and that is what is before the House today.

We know, as my noble friend Lord Harrison said, that there are areas of proper disagreement. We recognise that the financial transaction tax is an issue of considerable disagreement both in our economic, financial and political circles and, of course, in certain parts of Europe. Certainly, the current proposal is not acceptable to many. As my noble friend Lord Harrison indicated, the committee wondered what progress had been made on the financial transaction tax. We are not quite sure where the discussions on that very significant issue are. There is clearly a considerable body of opinion, not just in Europe or in the United Kingdom. My own party has a real interest in a financial transaction tax. The United States, too, is interested in the way in which Governments can receive necessary resources from a very wealthy section of their economy which, of course, looks as if it could afford further levels of taxation.

We have a real interest in these European issues. If one thing stands out from the crisis facing Greece at present it is the question of financial regulation. That has an impact on the UK, too. We cannot shy away from the issue. We had a Statement earlier this week showing the Government’s proper concern about the situation in Greece. Why was that Statement made? It was because the UK has a very real interest in the success or failure of economies in Europe. If the Greek crisis goes to its worst position, we are conscious of the fact that there will be an impact on the British economy. As for our citizens, it must be recognised that we are effectively sending out emergency messages to so many of our people who either live in Greece or may be travelling to Greece on holiday. They are at risk because of the crisis. That is why we need to look at these issues, and why we should be grateful to my noble friend Lord Harrison and his committee.

We do not need to get sidetracked today into whether there needs to be regulation from Europe on the financial sector. The report also emphasised the fact that we have a prominent figure who is central to the success of European initiatives in this respect. I am referring to the noble Lord, Lord Hill, whom we all valued for his contribution here as Leader of the House. He is in the Commission, involved in the crucial area of financial and economic matters. Of course, therefore, we hope that he will be able to use influence to give guidance in circumstances where we all recognise that a great deal needs to be traded.

There is a whole other dimension to the report on which there may be some disagreement, but I hope that the Minister will address himself to it. The report says:

“One of the overriding concerns of our witnesses was that the legislative framework had been focused too much on stability rather than growth”.

I am not surprised that there is an emphasis on stability when absolute chaos descended upon us all for a number of months during the financial crisis. It is also clear that we will need action and regulation that promote growth, too. That was put to the committee. I hope that the Minister will address that matter as well. In addition, there was the issue of the capital markets union. We hope that there will be a constructive response to the ideas implicit in that.

The wider issue is quite clear: in the coming months and years we need to ensure that the United Kingdom’s voice is used essentially to help to create a post-crisis framework that guarantees, as far as we are able, that nothing like the circumstances that we went through in the last decade affects our country, Europe and the wider world again. We have to be a constructive and active member of negotiations.

I recognise that the Minister will not accept every point in the report. Nevertheless, the Government’s response to the report is extraordinarily welcoming. In fact, I have great difficulty recalling a report where so many commendations were made on the salient conclusions reached by it. Yet, here we are being sidetracked into a debate as if the report has no real credibility at all. I think that it does and that the Government recognise that it does. I therefore hope that the Minister will respond to the salient and constructive points in the report, rather than being sidetracked into what I regard as a minority viewpoint expressed by noble Lords. They certainly have every entitlement to their views, but this is not the occasion on which they should have been expressed in quite that manner.