Capital Markets Union: A Welcome Start (EUC Report)

Lord Davies of Oldham Excerpts

Thursday 4th February 2016 Lords Chamber

[Lord Davies of Oldham (Lab)]

My Lords, I, too, express my appreciation for the work of my noble friend Lord Harrison in presenting the last of his significant reports on behalf of the committee. He is used to delayed government responses, which sometimes means that if the report is not entirely overtaken by developments, a substantial part of it has certainly led to action being taken that obliges the committee to consider further matters. We certainly had that experience today.

I am still trying to absorb the last contribution, from the noble Baroness, Lady Bowles. Although the noble Lord, Lord Hill, made such a favourable impression on the committee—and we would expect him to extend his duties so seriously and constructively—she must have destroyed any illusion that he can see an easy road ahead of him. That was ably demonstrated by the contributions to this debate about the formidable challenges that lie ahead. He, the community and all of us are just in the foothills of dealing with these problems; the greater heights are some distance away. The noble Lord indicated that he regarded this as a five-year project, but aspects of that verge on the optimistic. What is clear is that the committee is agreed on advances that can be made, and it believes that the noble Lord is eager to take advantage of any opportunity to progress the capital markets union.

We on these Benches totally endorse that objective. I sympathise with the Minister regarding the number of definitive and difficult questions that emerged from all sides in this debate. I can make his task easier in one respect: I will not present any significant area of disagreement. But reference was made to the issue of the culture of different institutions in different countries. By heavens, we all recognise what a challenge that is. The country expects us to change the culture of our own financial institutions but we are all in the foothills of that issue, too, in terms of the challenges it presents.

I assure the Minister that I will not disagree with him on any progressive steps that he indicates the Government support in promoting the capital markets union, but I have one obvious anxiety. The noble Lord, Lord Hill, appeared before the committee and his subsequent document presented a position of constructive endeavour, built on the fact that an awful lot of persuasion is needed and there are challenges from very different perspectives across Europe. He is not helped by the Government’s present position of threatening the Community, rather than co-operating with it. Of course, we will all support the Prime Minister in his attempt to get a yes response to the referendum—if that referendum duly takes place. But this report, consideration of it and all the contributions this afternoon have identified the difficulties in making progress while there are such obvious problems as far as the British attitude is concerned. I hope that when the committee reports again under its new chairman—the noble Baroness, Lady Falkner—it will do so in a climate of greater co-operation, in which the United Kingdom can put forward proposals that fit rather better with the grain of European thinking than its present stance.

Let us be clear: there is quite a challenge before us. What we seek to do—the European Community is well aware of this—is to foresee the way in which the European Union as an economic unity, as a trading bloc and as a single market will develop. But we tend to compare it with other units that are, largely, nation states. The United States, to which we compare ourselves, has a totally different framework of political institutions with which to deal with this issue. We must therefore recognise just how much more of a challenge it is for us than it is for the US.

We know what the targets are. We know that the success of the American economy is partly based on the fact that 80% of its finance is raised in capital markets and only 20% from its banks. The situation in the UK is almost the reverse of that. The challenge is one that the noble Lord, Lord Hill, has both the capability to recognise and—in due course, I hope—the competence to tackle.

The Minister has been offered no doubts today that this is a major challenge, and that action needs to be constructive and forthright. Thus far, time has passed with good intentions being expressed but relatively little achieved. The Minister has today been given some clear indications, largely from members of the committee, as he would expect, because they have developed their expertise as they have looked at these issues. They have asked questions which I hope he will set out to answer, because they are pertinent to the challenge before us. The Minister is not a member of the committee, any more than I am, but I hope he will recognise that the debate has identified clear issues relevant to the challenge of the capital markets union. Some progress has been made, and we are fortunate in the qualities of the Commissioner responsible for taking this forward in Brussels. He is very well known to us, and we know about his competence, his ability and his commitment. The Minister now needs to answer some of the forthright questions that have been asked this afternoon.