Friday, 9 December 2011

Cameron's veto will feed demand for an EU referendum

Why should the EU be given the right to govern and tax (arguably out of existence) what is, in Europe at least, a predominantly British-based industry that makes a huge contribution to our economy?

That's the question critics of David Cameron's actions at the recent EU summit will have to answer, if they hope to make a case against the Prime Minister's use of Britain's veto.

In a remarkable move during the EU's latest bid to resolve the bloc's debt crisis, Nicolas Sarkozy and Angela Merkel have chosen to risk their ability to quickly implement measures that would increase eurozone fiscal discipline over an attempt to impose EU regulation and a transaction 'Tobin' tax on Britain's financial services industry.

Confronting Britain in this way and provoking use of our veto over a bid to gain control over, and income from, the majority of Europe's financial sector that is based in Britain is an extraordinary demonstration of misplaced priorities from the EU at a time when the urgency of eurozone restructuring is paramount.

If the EU is serious about finding quick solutions to the eurozone debt crisis, they would surely have dropped such intrusive demands to interfere in another country's affairs in order to use the far speedier existing treaty mechanisms available?

But instead of coming away from this latest summit with a deal to calm market fears of national defaults and the disintegration of the euro, the determination of the 'Merkozy' partnership to regulate Britain's financial services industry has introduced a delay of more than three months for replacement 'fiscal compact' structures to be planned.

UK industry

A look at how vital financial services are to the UK economy shows clearly why David Cameron had to resist this arrogant 'Merkozy' push to take over and tax the City.

Referencing a PriceWaterhouseCoopers report, a recent Open Europe study highlighted that in the 2009-10 tax year the UK financial services sector made a tax contribution of over £54 billion, or 11.2% of the government's income from all taxes during that year.

The industry also contributed a £35bn trade surplus in 2010, playing a critical role in Britain's trade balance and, according to TheCityUK - an independent membership body promoting the UK financial services sector - nearly 2 million jobs are at stake.

Euro greed

But it's also clear from the same Open Europe report why other EU leaders want to force Britain to concede to EU government in this area. The City hosts a huge proportion of European and indeed global activity in many financial markets.

It's home to the largest foreign exchange market in the world, the largest insurance market in Europe, dominates the private equity industry and around 80% of the European-based hedge fund assets are managed in the UK.

There is clearly little point in a European financial transactions tax, the proceeds of which EU institutions hope to pocket, and proposed regulation if the UK is excluded.

New structures

Unless the EU relents on its stubbornness over financial services, a separate deal outside the EU's architecture will now have to be established by the countries who wish to participate in the new eurozone 'fiscal compact'.

This will not just set down new rules imposing stronger EU controls over national budgets but also how to enforce them. No mean ambition.

Either other EU leaders will realise the scale of the task ahead of them in respect of putting together such an inter-governmental deal and will conclude that it was stupid to push Britain away over financial regulation.

Alternatively, the countries who have expressed a wish to participate in the new 'fiscal compact' will forge ahead regardless and the result will raise new questions about how that will affect the balance of power between Britain and the other 26 EU members.

Should such a new voting block, doubtless also working informally within the European Union institutions as well as outside, be willing to consistently out-vote Britain in a range other EU policy areas, this will only feed demands for a proper reconsideration and referendum on the totality of Britain's membership of the EU.

If it becomes clear that we have even less influence over EU law-making than is already the case, then there is no remaining reason why we should wish to accede to the rules that come out of the EU nor pay the billions of pounds every year that Britain contributes to the EU's budget.

Beneficially, the result of this latest summit could be that holding an 'in/out' EU referendum - such as the one demanded by the People's Pledge campaign - and forging a new, 'free trade plus voluntary co-operation' deal will start to look all the more appealing.

1 comment:

Colin Bullen said...

Following the events of the Brussels summit the apologists for the EU, particularly the BBC, who constantly harp about Britain being isolated know little of history else they would recall the 'splendid isolation' of the 19th Century and the fact that we stood alone in Europe in 1940 and yet prevailed.

No Eurorealist will be deceived by the Franco-German attempt to blame Britain for the fate that now awaits the Euro. The fools, who were too unintelligent to know what they were doing, and the knaves, who knew only too well, but did it anyway, that have constituted the majority of the political class in the UK and Europe for generations have, through their greed and stupidity, led their peoples into a trap. We now face two probable futures, one in which the collapse of the single currency leads to havoc in the economies of half the world, the other to the domination of Europe by Germany, something they failed to gain by force of arms. Of course the attempt to impose Germanic standards on southern Europe is doomed to fail so the second choice will eventually lead to the same result as the first. When combined with the ready made scapegoats provided by the free movement of labour the ground will be ready for nationalist parties to take power across Europe and later to war. So much for the EU bringing peace and prosperity.

For us in the UK it is time to withdraw from the whole mess, pull up the drawbridge, look to our defences and prepare for the worst. Now that we have taken the first step we should pursue matters to their logical conclusion by withdrawing from the EU and joining the approximately 150 countries outside that organisation thus leaving Europe isolated. Any subsequent regulations emanating from Brussels can be ignored or, if necessary reciprocated.