A minority of British people would count themselves as unreserved supporters of the European Parliament.
In truth, I suspect many of us privately – and perhaps not quite so privately – doubt whether such an institution is capable of functioning effectively as a pan-European legislature. This makes it all the more difficult to raise much enthusiasm in advance of the vote on 4 June. But this set of European elections matter more than most.
As the world around us changes rapidly with the unravelling of the global financial system, where the UK goes from here and which path we take to recovery will be influenced in large part by the European Union. Legislation being put forward right now is more than ever shaping how the British economy will look in the years ahead. It is crucial that we make that legislation work for us amidst the competing interests of Member states.
Over the years I have repeatedly heard from service specialists and business associations alike tales of woe about the government’s failure to stand up for the City of London’s interests in Brussels and Strasbourg. But the onslaught of the credit crunch is providing a ready excuse for French and German politicians in particular to undermine London’s position as a world leader in financial services.
The City of London has fewer friends today, for sure. But we should not forget the City’s ongoing importance as a key element of the UK economy and let the credit crunch give carte blanche to those who have always been keen to berate a financial services sector which is one of the very few global market leaders that our nation can boast.
Not only is there an enthusiasm to ‘repatriate’ some of the banking and financial services business from the City of London to other continental financial centres but there is emerging a more ideological push against the City by those who bemoan the failure (as they see it) of the ‘Anglo-Saxon economic model’.
Just last week, for example, proposals were unveiled by the European Commission to crack down on the private equity and venture capital industry. Under draft legislation, a new disclosure regime, minimum capital requirements and limits on leverage for funds managing assets worth more than €100 million have been proposed. The initial draft had put the ceiling at €250 million but this was lowered dramatically as a result of the influence of French, German and socialists in the European Parliament in the final days of negotiation.
The UK parliament already regulates funds and the industry has historically low levels of leverage. Given such low levels, the Turner Report and even the EU Commission have concluded it is not a sector that presents a systemic risk to economic stability. Since the hedge fund industry is overwhelmingly concentrated in the UK, it is hard not to see these recent proposals as a targeted attack on our national economic interests. Knowing that it is currently politically difficult in the extreme to defend vigorously the interests of such an industry, there is a significant danger that our national government will not have the courage to take on Brussels and the influence of continental politicians, who have little understanding of wealth management nor its importance to our wider economy.
We need to have in the European Parliament MEPs who are willing and able to make the case on our behalf and ensure that new regulations and directives in the financial services sphere put British interests first. Granted, all too often banks have dangled in front of the UK government the prospect of their relocation to stave off further regulation or tax. But let us be clear. Currently Banks globally face deep internal and political pressure to reform, making the need to keep the City an attractive base a seemingly less pressing issue.
Fifty-seven per cent of the European private equity industry, on the other hand, is concentrated in Britain. President Obama has already identified hedge funds as the future. If we stifle that industry at home we shall simply be handing our competitors in the US and Far East a further advantage over an EU that will become increasingly important in any new landscape that emerges.
This is one of the reasons why the forthcoming European elections matter so much to the future of Britain.