Banking Union and Economic and Monetary Union

David Lidington Excerpts

Tuesday 6th November 2012 Commons Chamber

[The Minister for Europe (Mr David Lidington)]

I think that what has united all my hon. Friends who have spoken tonight is their justified anxiety to safeguard a vital strategic interest of the United Kingdom, namely our financial services industry. Let us never forget that most of the jobs in financial services in the United Kingdom are outside London, and that when we talk of the City we are also talking about firms that employ thousands of people in Scotland, Wales, Northern Ireland and the northern and midland cities of England.

The City has thrived through a single market in European financial services. Roughly a third of its business is in Europe, and we should be proud of the fact that it is not just a strategic asset for the UK. The presence in London of a global financial services centre is an asset for Europe as a whole, and we should be prepared to shout loudly about that: about the millions of French workers whose savings are invested through London funds, about the energy companies throughout Europe whose exposure to dollar exchange rates is hedged by funds in London, and about the projects involving privatisation and public-private partnerships in eastern and central Europe that look to London for both expertise and capital. We are standing up for the interests of the British people and, indeed, those of citizens throughout Europe in defending the interests of the financial services sector.

For a single market, we need a common rule book, and we need the EBA to help with the enforcement of common rules. I felt that there was a lot of common ground between the views of my hon. Friend the Member for South Northamptonshire (Andrea Leadsom) and the Government’s position. We do indeed believe that, in negotiating free trade arrangements with the rest of the world, the EU should ensure that services constitute one of the key dossiers, and that is what we are pressing for in every free trade agreement negotiation. I also agreed with the strictures expressed by my hon. Friend the Member for Northampton South (Mr Binley) about the financial transaction tax. We could not have made it clearer that we will not accept such a tax on a European level. If other countries are so foolish as to implement it, that is a matter for them.

We are faced with the reality that our friends in the eurozone are committed to a single currency. We respect their decision and want that currency union to be stable, which must involve a banking union. The package of measures that we have before us groups together some elements on a single market treaty base which will be determined by qualified majority, along with, critically, a key measure which, under article 127(6) of the Lisbon treaty, requires the establishment of a single supervisory mechanism in the European Central Bank that requires unanimity. We have always seen those different elements as a package. I must tell my hon. Friend the Member for Basildon and Billericay (Mr Baron) that we could not have been clearer about the fact that we will not agree to a measure to establish the single supervisory mechanism under article 127 unless the package overall protects our interests.

In his opening speech, my right hon. Friend the Financial Secretary said that we would insist that the proposed changes in the EBA were not acceptable, and would require full protection for the UK and the other non-eurozone members’ positions within the EBA. The documents that we have here are draft texts which do not represent the final position. If they were to represent the final position, we would not agree to them in their current form.

I agree with my hon. Friend the Member for Braintree (Mr Newmark) that the amendment, although well intentioned, misses the point. We are not going to agree to something that is unlawful, and neither is Germany. I ask the House to have confidence in the Government’s determination to defend and advance the interests of the United Kingdom, and in particular to safeguard our financial services sector. I also ask the House to contrast that with the view of Labour’s Front-Bench team, the logic of which was not simply to be in the room, not simply to take part in negotiations, but to follow it through to join—