EU: Financial Transaction Tax (EUC Report)

Debate between Lord Newby and Viscount Brookeborough

Tuesday 17th December 2013 Grand Committee

[Lord Newby]

My Lords, I completely agree with it.

[Viscount Brookeborough]

Perhaps I may ask a simple question. I think the Minister said that the majority of politicians in Europe wanted this tax and therefore it would be difficult. Can he explain how 11 out of the total of the member states comes out as a majority?

[Lord Newby]

I apologise if I said that. What I meant to say was that there was not a qualified majority against the proposal. There was not a sufficient weight to prevent the proposal going through. I think that that was borne out by what happened at the relevant Council meeting.

EUC Report: MiFID II

Debate between Lord Newby and Viscount Brookeborough

Tuesday 26th March 2013 Grand Committee

[Lord Newby]

My Lords, I am conscious of the time. Much as I would like to go on until eight o’clock on this subject, I think that we are going to have to return to it.

I shall turn to some of the other points that have been made in the debate. I would say to the noble Viscount, Lord Brookeborough, that one person’s harmonisation is another person’s single market rules. Sometimes harmonisation works very much to the benefit of the UK and sometimes it does not. We have to take this on a case-by-case basis, but let us remember that by common consent the single market has been very beneficial to the UK. If we can, we want to strengthen it even if, as inevitably will be the case, some of that strengthening includes common rules.

[Viscount Brookeborough]

I did not say that harmonisation was not a good thing, rather I looked at the way this tax is being brought forward. They were talking about harmonisation before they started raising the money. They did not like to talk about why they were raising the money and doing it only over a certain number of countries.

[Lord Newby]

I am grateful to the noble Viscount for that clarification. The noble Lord, Lord Kerr, asked about the benefit of the EU to the City as a whole, and both whether the Government recognise that and whether are doing anything to promote it. There is no doubt in my mind, having watched the Government in action, that they absolutely understand the role of the City and how having a strong financial services sector is immensely valuable to the UK and to the EU. The Government themselves are working very hard, as noble Lords have said, on this directive and others to make sure that we end up with proposals which are compatible with the ongoing success of the City.

One of the frustrations I felt before I was a Minister and which, to a lesser extent, I still feel, is that the City is not always its own best advocate. Although things have improved considerably with the formation of TheCityUK, and there is now a much wider recognition that the financial services sector needs to get its act together, as it were, to promote itself, there is still some way to go. Although the UK Government are active in the Council and in the European Parliament, they need the UK financial services sector to be independently active in those institutions as well. There was a period when a lot of senior people in the City felt so battered with the experience that they had following 2008 that they were not willing to put their heads above the parapet and make the arguments. I think that that phase is over, to a certain extent at least, and the Government are encouraging them very much to do that. I am very grateful to the noble Lord, Lord Kerr, for quoting Lord Thomson of Monifieth. He, of course, was from that great tradition of canny Scots who could fully understand the benefits of engaging with the EU.

I will make just two points before I finish in response to the noble Lord, Lord Liddle. First, he talked about asymmetries. There are a number of asymmetries. Looking at the future of this directive, we are talking about the possibility of making considerable progress while Ireland still has the presidency. However, the amount of financial services expertise which Lithuania is going to bring to the party in the second half of the year is relatively limited. It is a terrible burden on the officials and Ministers from small member states who have to grapple with what, by common consent and as anybody who has read the report knows, is an immensely technical subject. Virtually the only people other than members of your Lordships’ committee who understand it are the people who work in it every day. The truth is that there are not many of them in small member states, which is an asymmetry. Clearly, there is also an asymmetry between the Commission and the UK. There is one asymmetry that we can benefit from by using our expertise. I was extremely interested that, despite the fact that we are not in the euro, a group of Treasury officials went to Cyprus at the weekend in order to help sort out that problem. It will be very interesting when they get back to see what they have learnt from it.

The final point is about how we exercise influence in an environment where we are not part of the euro-in group. In my view, the model—which I have seen in operation—is that adopted by my colleague in another place, Ed Davey, when he was in BIS, who established something called the “like-minded growth group” for promoting the single market. At every point, Mr Davey carried in his pocket a little laminated piece of paper which showed the voting strength of every member of the 27, and he was forever working out how you got that qualified majority or majority. He worked very hard, and succeeded, at getting a majority of member states, both euro-ins and euro-outs, to co-operate to promote the single market. That is a model that I think is still pursued within BIS. We have got to, as the noble Lord, Lord Kerr, said, be very active working out where we can form alliances, which we can do on many things. One of the ironies about the current financial circumstances is that we, as a euro-out, have much more in common with some of the northern European countries that are trying to impose fiscal discipline. For good or ill, we are now something of an expert on that in this country and we need to make the most of it. There are no permanent alliances; you have to rebuild and refresh them. One of the challenges for the Government—or any Government—is to do that as best they may.

Finally, reverting to the splendid report that we have been discussing this afternoon, the Government welcome it and agree with all the points it raises. We accept, as I have attempted to explain, that the devil is in the detail. The Government will continue to negotiate carefully so that MiFID II does, indeed, get it right for the City and, most importantly, for the users of financial services.