European Council

George Eustice Excerpts

Thursday 8th December 2011 Westminster Hall

[Kelvin Hopkins]

I thank the hon. Gentleman for his intervention. Indeed, he is absolutely right, and the Soviet Union is the best example. Many currencies were created after the break-up of the Soviet Union. When Slovakia broke away from the Czech Republic, it created a currency and that was not a problem. I am sure that both economies—certainly Slovakia’s—benefited from that.

From time to time, we have had to adjust the parity of our currency in relation to other currencies. That has been necessary and beneficial. The Bretton Woods settlement made provision for that in 1944; in fact, Bretton Woods wanted to go further. Keynes and others suggest that some countries ought to be required to revalue if they have a very large trade surplus, as indeed one major country in Europe has with the rest of Europe at the moment. Such countries ought to be required to get some balance within the international economy.

[George Eustice (Camborne and Redruth) (Con)]

I congratulate the hon. Gentleman on all the work that he has done over the years to keep Britain out of the euro. Does he agree that a big advantage to a country having its own currency is the ability to act and make decisions? Britain’s experience during the past 10 years has shown that the ability to act is far more important than having a seat at a table where people squabble and cannot agree.

[Kelvin Hopkins]

The essence of democracy must be elected Governments in nation states. Internationalism is not about getting rid of national Governments and international boundaries; it is about working in close co-operation with other countries. We can continue to be internationalist, while retaining our economic independence. That is the way forward.

I shall finish on this note. Things are changing. John Rentoul is a journalist who supported the European idea through decades. Two weeks ago, he wrote in The Independent on Sunday that he has to admit that Peter Shore and Bryan Gould were right to say that the euro would not work. I was friendly with both those great people, and when Bryan Gould was around, I was friendly with him, too. That is a sign that things are changing and that even those who have been what some people unkindly call Eurofanatics are changing their views.

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[Andrea Leadsom]

I thank my hon. Friend. In truth, right now, I genuinely believe that the Prime Minister has to focus his effort on creating the best solution for Britain, and that is what he is doing. As for all the demands for referendums, the fact that I am confused about what my hon. Friend has been saying, although I am quite close to these issues, demonstrates that other people will doubtless also be confused. The demands are seen as our party, at least, trying to cause trouble for the Prime Minister. For that reason alone, now is the time to get behind the Prime Minister, who has promised the British people that he will defend our interests.

Let me come to why defending the City is the key priority at the moment. People talk about renegotiating EU directives that have already been implemented, but as we have found as part of the Fresh Start project work, that is real spaghetti; it is extraordinarily difficult to unwind existing, implemented policies. I am a very practical person, and the best approach in terms of doability is to look at what has not yet been implemented and what the biggest threat to Britain is. On those two counts, there is no doubt that we should focus on financial services.

Financial services account for 11% of Britain’s tax take each year—about £50 billion. It employs nearly 2 million people; it is our biggest export; and it creates a huge positive trade surplus. Given that we have a big overall trade deficit, we would be looking at a far worse trade balance without financial services. Added to that is the fact that the potential for the future growth of financial services is all outside the eurozone; it is in the BRIC countries—Brazil, Russia, India and China—and America and Asia. That is where the potential lies. Yet, before the financial crisis, Britain was in a strong position in creating an EU financial services single market. We were influential. That was all about deregulation, open access to markets, growth and jobs. Britain did very well out of that and so, by the way, did the rest of Europe. Other eurozone countries did extraordinarily well, because the City was the entry-point to European financial services markets. That benefited us all.

Since the financial crisis, however, the agenda has changed. Britain has rightly changed its regulatory environment by greatly increasing controls, the closeness of supervision and the requirements for capital, liquidity and so on. The EU’s goal has been more to ban what it does not like: “Let’s reduce financial activity; we will constrain, prevent and reduce what is going on.” Nowhere in the EU treaties is there any talk of prudential decisions that the EU might make that would go against the fundamental commitment to single markets and growth opportunities, so the 49 EU directives and other proposals on financial services coming down the track are already in breach of the spirit of the EU treaties, which are all about creating better markets and more access.

I want to mention a couple of those matters in particular. First, on the financial transactions tax, people may think, “They will never do it; it would be cutting off their nose to spite their face and the business will simply go elsewhere.” Actually, however, I think many people in the EU are determined to do it, because they do not want the business. They think that Anglo-Saxon light-touch regulation and the success of financial services are partly to blame for the eurozone crisis. They are quite wrong, but that is where they lay the blame, so they would consider a financial transactions tax that would drive business abroad to be a good thing. To anyone who thinks, “They would not do it,” I would say that they would if they had the opportunity. Of course, that would be disastrous for Britain. It would not be a tax on bankers; it would be a tax on pensioners, investors and savers, because it would go straight to the bottom line of every investment portfolio. If anyone said that it would serve bankers right, I would reply that it would affect not bankers but savers. I could not support that.

Secondly, a slightly unbelievable idea has been proposed in the eurozone that a clearing house with more than 5% of its turnover denominated in euros should relocate to the eurozone. That would be daylight robbery and steal our business, and I am glad that the British Government are already challenging it in the European Court of Justice. Where in the single market treaties, which are all about growth and jobs, does that appear? How would it support British growth and jobs? It would not. I am extremely concerned about the tone and extent of EU directives coming down the track. They are not yet implemented; but unfortunately, under QMV, they could be implemented without Britain’s say-so.

[George Eustice]

I agree with my hon. Friend that the Prime Minister is right to prioritise the financial services directives in the negotiations. Is she aware that Open Europe has today published a poll of City institutions showing that more than 60% of them believe that the burden of regulation coming down the tracks from the European Union outweighs the benefits of the single market?

[Andrea Leadsom]

I have not seen the poll—I have been looking forward to seeing it—and I am not surprised by what my hon. Friend says. Although, as I have said, the treaties are all about expanding markets, growth and opportunities, some of the unintended consequences of EU policies have been the complete opposite of that, and never more so than in financial services. I think that a deliberate attempt has been made to reduce financial services activity in the eurozone.

Financial services should be the top priority for the Prime Minister. He has been clear about drawing a marker in the sand to the effect that Britain wants a secure legal agreement that, in the event that financial services legislation is against Britain’s best interest, we can prevent it from being imposed on us.