Meanwhile, our European government fumbles the big issues

 

        Yesterday’s democratic frenzy over how to pay for university places got plenty of air time. There has been precious little all week for the huge changes being contemplated in Brussels for banks, government bonds, state borrowing,levels of state spending and economic government.

          The Economic and Financial Afairs Council which met on Tuesday had before it a large agenda. They reported progress on:

1. Possible Treaty amendments, regulations and directives to strengthen economic governance by the EU over member states.

2. Tougher capital adequacy regulations for EU banks.

3. A strengthened supervisory regime for all financial institutions in the EU.

4. A system of bank levies to raise money for “resolution” funds in each mamber state, money to enable regulators to put risky banks into a kind of adminsitration

5. A draft directive over savings taxation to tackle tax fraud

6. Possible measures to limit “harmful” business tax competition.

7. A general plan for “crisis management in the financial sector”, which includes more intervention before a bank gets into difficulties and stronger powers to appoint temporary management, demand asset sales, or change personnel at individual banks to prevent a crisis the regulators think likely.

Whilst they did not report progress on it, they doubtless also debated the issue of EU sovereign bonds to replace some national state debt. They did finalise the proposals for the Irish loan.

None of this was reported back to the UK Parliament in an oral statement or debate, yet all of it is fundamental to our economic futures.

The EU is very clearly using tax fraud and tax competition as reasons to encroach more into the formerly reserved area of taxation. They reaffirmed a minimum 15% VAT rate as a reminder that VAT is a European tax.

The EU is right that it needs more control over spending, debt and deficits for Euroland member states. The weaker states are now making claims on the stronger, and need more transfers from them. There is every reason to move swiftly to a common policy. There is equally no reason why the UK or any other non Euro member should have anything to do with any of this.

It is also clear that Euroland member states need to take a close interest in the methods of bank and financial regulation in each other’s countries. If banks go wrong in one place that can have serious knock on effects in others where they share the same debt risks and interest rates through the evolving common system. Again there is no reason why the UK should be part of this common framework. It is big enough to have its own, and needs its own to guarantee the solvency of its own institutions and to reassure the world of its security as a major world financial centre.

The new resolution regime is reminiscent of the UK interest in living wills for banks. It may be sensible. What is not sensible is for the UK to bind itself to the wheel of EU led regulation and bank levies, when the UK may have good reason or need to make its own judgements in these crucial areas.

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33 Comments

  1. lifelogic
    Posted December 10, 2010 at 7:45 am | Permalink

    Spot on – why is no one, other than you, bringing this to the public’s attention? Is it because Cameron does not want anyone banging on about Europe when he would rather distract people with PR on more minor issues.

    He has, I assume, already decided to cave in and watch any remaining democracy and the city of London slowly drift off into the sunset.

    • lifelogic
      Posted December 10, 2010 at 9:43 am | Permalink

      Very sad to see the appalling attack on Price Charles and his wife and their Rolls.

      I was however rather surprised, in view of his well known green religion agenda, that he had not chosen walk or take the tube. I suppose then he might have been “kettled” for several hours and perhaps hit on the head with a truncheon had he had the temerity to ask to be released.

    • Mike Stallard
      Posted December 10, 2010 at 8:08 pm | Permalink

      This is scandalous. Where is the sacred, free and democratic Press? What is going on in Parliament?
      Behind closed doors, all sorts of deals go on which we know nothing about and which we can do nothing about.
      Sooner or later this is going to end in tears.

  2. norman
    Posted December 10, 2010 at 8:11 am | Permalink

    It’s wise that Parliament ignores the EU and instead concentrates on areas like Higher Education. After all, why should you all be wasting your time on matters you cannot influence, have no control over, and, as you have said time after time on this side, a majority of sitting MP’s are perfectly happy with?

    Far better to stick to the crumbs the EU still leaves MP’s to decide. Up in Scotland we’re already used to this situation with our useless talking shop of a Parliament (farcically shown up for what it is this week by the cold weather – our Parliament is also the most pro-climate change, which is another delicious morsel for us lovers of farce), you lot down in England will have to learn to accept the new reality too. Best not to rock the boat too much while it’s happening, instead concentrate on securing a comfortable berth at the dinner table.

    This post directed at MP’s in general, not John Redwood, one of the few who is standing up for Britain.

  3. alan jutson
    Posted December 10, 2010 at 9:12 am | Permalink

    How on earth did we let ourselves get into this mess (yes I know, Edward Heath), but continue to sleepwalk further into it with every day that passes.

    One day perhaps we may wake up from this nightmare, and realise we can, and should, remove ourselves from its clutches.

    • lifelogic
      Posted December 10, 2010 at 12:28 pm | Permalink

      The majority of people in the UK and many EU countries too have already woken up to the EU disaster/racket but they are powerless to do anything about it as the last vestiges of democracy have nearly gone already.

      • BobE
        Posted December 10, 2010 at 2:06 pm | Permalink

        By next spring its just possible that the Euro will collapse. With luck that will break the union apart, at least into smaller groups. That seems to be the only hope to end this madness.

        • lifelogic
          Posted December 10, 2010 at 8:26 pm | Permalink

          I find it difficult to share your optimism – we can but hope.

  4. Hugh
    Posted December 10, 2010 at 9:41 am | Permalink

    You refer in the last couple of lines to the “wheel”, my brain keeps replacing this word with “rack” as in mediaeval torture.

  5. Acorn
    Posted December 10, 2010 at 10:37 am | Permalink

    It make sense that the Euro 16 should have a common fiscal and monetary structure. Just like a large international corporation, would arrange its own treasury system across its group member companies. The Euro 16 would then become a “sovereign” entity of significant status at the likes of the IMF; World Bank; BIS; WTO and the UN etc.

    There are at least four candidate countries to join the Eurozone. So; what is the point of being in the EU, if you are not in the Euro? The UK and Denmark have Maasticht opt-outs. Sweden avoids joining the ERM2, so has a de-facto opt-out.

    Is it worth staying in the EU just for the trade arrangements; because we have become too dependant on the EU for our exports? I think we have to decide if we are to commit to this emerging EU “sovereign” state; or, get the hell out of it. My bum is getting sore sitting on the fence.

    • Denis Cooper
      Posted December 10, 2010 at 3:06 pm | Permalink

      There are 9 non-eurozone EU countries with a legal obligation to eventually join the euro written into their accession treaties, including Sweden as its government very well knows. That will become 8 on January 1st when Estonia fulfills that legal obligation, but probably go back up to 9 next summer when Croatia joins the EU with the same requirement written into its Act of Accession. God knows why the UK government ever allowed that to become the standard for all new EU member states, and what would Hague propose to do about Turkey if he got his way and it was allowed to join the EU? The UK and Denmark are the only EU member states which are free from that legal obligation, by virtue of treaty “opt-outs”.

  6. StrongholdBarricades
    Posted December 10, 2010 at 10:41 am | Permalink

    Maybe not directly related to the mess in the EU, but today’s news brings Barclays pronouncement on the state of the British £ for next year.

    Bearing in mind the current balance of payments, how is the UK going to ensure that it doesn’t lose out in the competition stakes to Euroland as the current issues there are camouflaging a Euro devaluation?

    • A David H
      Posted December 11, 2010 at 3:44 pm | Permalink

      I seem to recall that when the GBP devalued by about 15% against the euro, we were told that our contributions to the EU would increase to compensate. Presumably, it would follow that any devaluation of the euro would result in reduced contributions from us. Does anyone know if this true?

  7. Samuel Finch
    Posted December 10, 2010 at 11:39 am | Permalink

    The absence of public debate surrounding this European summit stands in marked contrast to recent events in Westminster. The opacity of European decision making and Europe’s lack of accountability to either parliament or the public is increasingly worrying. The prospect of democratic reform is regrettably remote in view of the dogmatic centralism of Europe’s institutions.

  8. Denis Cooper
    Posted December 10, 2010 at 12:08 pm | Permalink

    I don’t believe that the UK will be strong enough to stand aside from the euro in the long term, if the eurozone continues to both widen and deepen.

    We should have learnt this lesson by now, that a strategy of allowing or encouraging widening does not prevent deepening but instead makes deepening more necessary.

    With every additional country which is absorbed into the eurozone the case for the UK to remain outside is further weakened; our “opt-out” is regarded as also being an “opt-in”, as Margot Wallström* put it, and over time there will be mounting pressure from both inside and outside the EU for the UK to fall into line with the EU norm in this as in all other respects.

    How can we defend our national interests against this threat? Not by passively allowing the threat to grow stronger year by year until it finally overwhelms us, and even less by actively helping that process along, but rather by using one of our few remaining vetoes, the veto on treaty change, to insist on a substantial quid pro quo for the treaty changes which will be needed to consolidate the eurozone.

    The government should go into the negotiations with a list of demands designed to protect our national interests, among which should be –

    The creation of a mechanism for a country to make an orderly withdrawal from the eurozone. Some may wish to withdraw, rather than become subject to the much greater central EU economic government which is planned.

    The removal of the legal obligation to eventually adopt the euro which was imposed on all the countries which joined the EU post-Maastricht. They should instead be offered at least the same kind of “opt-out” as the UK and Denmark.

    Strengthening of the UK’s “opt-out” so that it can no longer be regarded as also being an “opt-in”, preferably with an explicit treaty prohibition on the UK ever joining the euro even if a future government wanted to do that.

    * http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//TEXT+CRE+20070711+ITEM-005+DOC+XML+V0//EN

    Margot Wallström, Vice-President of the Commission:

    “First of all, on the Charter of Fundamental Rights, the European Commission does not like opt-outs. We would have preferred not to have any opt-outs. But what was the real political choice here? It was a weakened charter without legal force or a charter that is legally binding for the EU institutions with an opt-out, or preserving the full text of the charter. Then, I prefer to have a charter which is legally binding, and an opt-out is also an opt-in so this is not cast in stone.”

    • Simon
      Posted December 10, 2010 at 1:11 pm | Permalink

      It’s not up to economists , EU commission , members of parliament or big corporations to decide how far Britain should be absorbed into the EU .

      Only the British people have the right to decide whether they want to be governed by Westminster , Brussels , Washington , Mumbai etc .

      Same for the peoples of all the other countries in Europe .

      The EU has gone far to far to be negotiated with . Mid 20th century history shows that .

      • Denis Cooper
        Posted December 10, 2010 at 3:07 pm | Permalink

        But the British people have no means to enforce that right.

        • Simon
          Posted December 12, 2010 at 9:45 am | Permalink

          Sorry I misunderstood you .

          I was just trying to get accross that I’d rather be poor and governed from Westminister than affluent and governed from Brussels . Also that our elected representatives should act upon the peoples will rather than corporate lobby groups .

          I doubt the electorate will reach the level of enlightenment that the big parties are all the same and have all been subverted by a europhile agenda . Many of them still think the Conservative leadership is Eurosceptic .

          Just about the only way of enforcing our right is to dump the big 3 parties in the next election in favour of UKIP/BNP/Independents . Perhaps AV would help facilitate that .

          Even if that were to happen I have my doubts that the votes be tallied up honestly and the true result be reported by Pravda .

  9. Lindsay McDougall
    Posted December 10, 2010 at 12:21 pm | Permalink

    This is worth a PMQ from Mr Redwood. Please get the Prime Minister to confirm:
    (1) That the EFAC is to be condemned for its lack of transparency; and
    (2) That none of its agenda is relevant to the UK since we are not in the Euro zone.

    Of course it will embarrass the PM and put pressure on him to commit. That is the intention.

  10. BobE
    Posted December 10, 2010 at 2:13 pm | Permalink

    The 2011 Scottish Parliament election will be held on Thursday 5 May 2011 .
    Local government elections in certain parts of England will take place on 5 May 2011.
    The 2011 by-election in Oldham East and Saddleworth.

    These should be used to dethrone as many Lib Dems as possible.

  11. Johnny Zero
    Posted December 10, 2010 at 2:46 pm | Permalink

    It simply astonishes me that we have this uproar and riots over Student Fees and argument over an amount of some £2.9 Billion sterling. Last week unreported, certainly not debated in the Commons to my knowledge, the Government lent Ireland some £6 Billion and will lend even more, with Ireland in the Euro Zone too.

    These huge amounts of money going to other EU Countries and to the EU go undebated, whilst we all roar about tuition fees. Politics is a crazy business.

    • Winston's Black Dog
      Posted December 10, 2010 at 11:40 pm | Permalink

      Quite right.

      The money we are giving to bail out the Euro would more than fund tuition fees.

      It is a shame that students have not picked up on this fact as part of their protests and thus forced it into the media.

  12. electro-kevin
    Posted December 10, 2010 at 6:52 pm | Permalink

    ‘Our’ EU government ?

    • Winston's Black Dog
      Posted December 11, 2010 at 4:18 pm | Permalink

      Sadly yes in reality.

      80% of legislation emanates from Brussels and is rubber stamped by the pavlovian nodding dogs in Westminster who prefer to be called MPs.

      Even if one tries to argue that the sham European Parliament is democratic (it has never to my knowledege thrown out any thing the European Commission has proposed) the UK only has about 8% representation.

  13. electro-kevin
    Posted December 10, 2010 at 7:21 pm | Permalink

    I didn’t know where else to put this. It happened to me today and I’m still shaking from it:

    “If the brief can get me a Section 5 I’ll pay the fine and be chuffed. Just get me the section 5. I don’t want to go back inside.”

    He put the phone down and thereon followed the conversation between him and his mate. I was sat at the table on the train unable to move out from the window seat inconspicuously. They were both clearly hardened criminals and bragged about their time inside and their dodgy dealings to get by. Steroids seems to be the drug of choice for maximising profit in the well appointed prison gyms.

    The grim tales of violence would fill you with horror so I won’t repeat them here. Perhaps, “Whenever a girlfriend disses me I don’t get her. I scar her family members so that she has to look at them over the Christmas table and is reminded of me.” might give you a flavour.

    It was gut churning for me sitting among them being an ex copper and all that. Both were 36 and one had just that morning been released from a six-year sentence – there was not one shred of contrition or remorse from either but one thing did come through clearly:

    Neither wanted to go back to prison. They were both articulate and intelligent in their own ways and too long in the tooth to ever again want to breach bail conditions or commit an offence and be recalled to custody.

    One left and I got talking to the other. I did my best to make firm but friendly eye contact showing none of my fear (these guys were the real thing – fire and brimstone.)

    “80% of prisoners are recalls and I’m fed up with the pettyness. I don’t ever want to go back. I’m too old to be doing this and I need to get to see my probation officer – I’m two hours late.”

    Prison IS working.

    I would normally have helped someone making their connection (even a steroid bloated jailbird) but what he’d been saying made my flesh crawl and I wasn’t going to be his bitch. And as he was late I’m not entirely convinced that he’s learned his lesson.

    Does Kenneth Clark really know what he’s doing ?

    Why not give some of our youth gainful employment as prison officers and border guards ?

    Cuts in these areas are like telling your mechanic to skip the brake replacement during your car service just to save a few quid.

  14. Kenneth
    Posted December 10, 2010 at 7:36 pm | Permalink

    “There has been precious little all week for the huge changes being contemplated in Brussels for banks, government bonds, state borrowing,levels of state spending and economic government.”

    Absolutely.

    However, European issues did get one mention: the BBC featured Gordon’s Brown’s worries about the Euro.

    Seems that Gordon Brown’s rehabilitation is more important to the BBC than the future of our country.

  15. Jose
    Posted December 10, 2010 at 8:03 pm | Permalink

    Dealing with the EU should be relatively easy but for some reason we seem to have leaders who all lose their cojones when facing the Europeans!
    Cameron should choose his ‘disagreement’ with the EU very carefully, no need just to be negative but when the Commission or the EU want something of substance then the answer should be a straightforward ‘NO’. He should do this to remind the EU that the UK is not just to be taken for granted (as the case has been recently) but also to let the taxpayers know that he is on their side.
    Remember the French and the Germans, they are ‘excellent’ Europeans just so long as it suits their national interests; the UK should adopt a similar approach.

  16. Mike Stallard
    Posted December 10, 2010 at 8:10 pm | Permalink

    OK so there is the Eurosceptic Right which is never allowed onto Newsnight etc etc.
    But why isn’t the freedom loving Left squawking about the scandal of how decisions are made in the EU?
    I just do not know. Do you?

  17. pete
    Posted December 10, 2010 at 10:17 pm | Permalink

    Look on the bright side – out of all the mess ups gordon brown did, the one thing he did do right was stay out of the Euro.

    As many people have said, most of the things being passed affect Euro land so let them get on with it.

    I never understood (and I’m no economist) how you can have over a dozen economies with their own economic policy and one currency – it jst doesn’t make sense.

  18. Winston's Black Dog
    Posted December 10, 2010 at 11:37 pm | Permalink

    It is my understanding that the reason 5% VAT is levied on gas and electricity bills is because of orders from our Government in EU HQ Brussels.

    If a minimum VAT level of 15% has been imposed have we to look forward to a resulting increase in our utility bills whilst Cameron, Hague et al sqirm and deny any EU influence?

  19. Richard1
    Posted December 11, 2010 at 10:07 pm | Permalink

    Will you be publishing a review of Gordon Brown’s new book?

  20. David Lodge
    Posted December 12, 2010 at 1:55 am | Permalink

    Indeed so Mr. Redwood, and I fancy that the general tenor of anger and frustration finding its way on to the blogs and letters columns will not have escaped your notice. This is the angriest I have seen our people in my 50-odd years of observing the political scene. My own feeling is that the Coalition will self-destruct and Mr. Cameron – whose thirst for power seems unbounded – will be obliged to accommodate the traditional wing of his party. The civil disturbance which is bound to happen when the cuts and interest rate rises occur will force his (or a replacement leader’s) hand Gloomy, what?

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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