Tuesday, 30 September 2008
David Cameron's emergency speech
Since just after 11.00am this morning I have been eagerly anticipating an analysis of David Cameron's emergency speech to the Conservative conference by Dr Richard North at EU Referendum. Followers of that blog will have already understood how the scope of the government to act in addressing financial problems, such as the current economic crisis, is limited by EU involvement in our regulatory system. Let me put it another way. In order for the UK government to regulate the UK economy in the interests of the people of the UK, it requires the permission or approval of the European Union.
It was a racing certainty that many people will have picked up on David Cameron's recognition that EU regulators need to be involved in determining the regulatory framework under which the UK economy will have to operate. But I wanted to see someone who understands the issues and EU involvement in more depth than me, address the points Cameron touched upon. Dr North did not disappoint and has done the matter justice on EU Referendum.
As an analysis it was worth waiting for. It is an essential read on a subject of great importance to all of us. There can be few better examples that underline the fact that as a member of the EU the UK is incapable of taking unilateral action on a huge number of issues. David Cameron clearly recognises that from his reference to Europe in his considered, perfectly measured and well delivered speech. The question is, if the Conservatives win the next election, for how long will they accept the dead hand of European bureaucracy getting in the way of the reform urgently needed in this country?
Posted by Tony Sharp at 16:10
Labels: Credit Crunch, David Cameron, Economy, EU, Nation State, Regulations
Tuesday, September 30, 2008The elephant emerges
While the fall-out from the financial crisis continued to rip through global banking system, the elephant made cameo appearances on the stage at the Conservative Party conference today, led by its keeper, David Cameron.
Blinking at its unaccustomed exposure to the light, in its first appearance it was still shrouded in its veils. Then, briefly, it was exposed in all its glory – but so fleetingly that few if any in the hall noticed it.
That first appearance needed a highly sophisticated sensor to penetrate the veils, as Cameron in an unscheduled speech referred to the need to "pass legislation to enable the Bank of England to rescue failing banks." That legislation, he said, is ready, it can be brought before Parliament on Monday and we will support it.
He was, of course, referring to the Banking Reform Bill, over which shadow chancellor George Osborne and the government have locked horns.
Little Georgie on the one hand, has consistently argued for a greater involvement of the Bank of England, even up to yesterday, when he told the conference that, "It's Conservatives who now want to give power to the Bank of England to call time on reckless borrowing."
Today, with the elephant by his side, Cameron acknowledged: "We have been arguing with the government over one aspect: who pulls the trigger to start the process of rescuing a bank." We argued, said the man, "that it should be the Bank of England; the government argued that it should be the FSA."
Then, deftly chopping off the legs of his shadow chancellor, Cameron declared, "In the end what matters is getting the legislation through quickly and so I can announce today that we are prepared to drop that objection to allow rapid and safe passage of the Bill - and we can return to this issue later."
In so doing, he recognised the primacy of the so-called "tripartite system" of regulation, the EU's preferred structure and conceded that he was abandoning attempts to change it.
Moving on, the Conservative leader spoke of the need to "pass further legislation to protect people's savings and deposits and ensure quick payout," and thence to breaking "the self-fulfilling cycle that is reducing banks' ability to lend." Thus, he said, as the elephant cast its veils to stand in full view unadorned, "So our regulatory authorities, together with the European regulators, need to address this difficult issue."
Cutting through the posturing of the weekend, he has finally doffed his cap to reality, hinting though not baldly stating that the power lies elsewhere. His terse, single sentence was just that – an admission that the UK cannot act unilaterally and must "address" issues "with the European regulators."
In so doing, Cameron and his merry men – if they ever get to take office – are going to find plenty of competition. Already, the "colleagues" are waking up to the opportunities afforded by another "beneficial crisis" and are muttering about additional regulation - at an EU level of course – to deal with "troubled banks".
EU financial services commissioner Charlie McCreevy is happily chirping away – most recently in an interview yesterday with RTE Radio in Dublin – that: "We have been for a long number of years trying to get some kind of European supervisory authority for those institutions that have cross-border reach," adding that, "It is particularly difficult to get agreement among member states who want to preserve control of supervision within their own member states."
The "plan" is inevitably couched in terms of "cross-border" institutions but, as the financial services industry becomes more diffuse in its ownership, that virtually encompasses every major bank in Europe. The fact that the Spanish bank Santander has bought UK banks including, Abbey National, Bradford & Bingley and Alliance & Leicester Plc, is but a case in point.
The ECB is also flexing its muscles, with Forbes noting that the Commission and those member states with the biggest financial centres - Britain, Germany and Luxembourg - have long resisted any idea of a single European financial regulator. But, it adds, "EU history shows such taboos can be broken in response to crisis."
Impinging directly on Cameron's concerns, and ambitions, the commission is therefore considering "giving" home-country authorities greater say "over how much total capital banks must hold to guard against losses," with the EU's Committee of European Banking Supervisors in London mediating disputes between regulators.
"The challenge ahead is to maintain this momentum to deliver the full principle of consolidated supervision," says the European Banking Federation in Brussels. The group, we are told, "strongly welcomes the planned amendments" to supervisory arrangements – thus pointing the way for the battles ahead.
And, just to underline the increasing dominance of the "elephant" in financial services, we learn via Reuters, that the EU commission has graciously received notification from the British authorities of their rescue package for mortgage lender Bradford & Bingley.
"The Commission intends to adopt a decision very, very quickly. I cannot give any comment on the substance of the measures in the plan," spokesman Jonathan Todd said.
The "elephant" is very firmly in charge.
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