David Cameron should do more to protect the City of London from a raft of potentially-damaging new EU regulations, a think tank has urged.
Open Europe has called on the prime minister to secure a better deal for Britain at this week’s EU summit and in the future to ensure the safety of economic benefits the financial services sector offers to Europe and the UK. The City contributed £53.4bn in tax last year, around 11 per cent of the country’s total revenue, while there was also a £35.2bn trade surplus last year.
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However, some 49 EU proposals are currently in the pipeline and many of these could restrict the financial sector, the think tank said. The financial crisis has prompted a number of justified regulatory changes, but few of them are constructed to encourage greater trade in the sector and facilitate growth.
Open Europe’s report, Continental Shift: Safeguarding the UK’s financial trade in a changing Europe, outlines a few of the specific proposals which could undermine the City of London. The European Central Bank’s (ECB) call for London clearing houses to be relocated to the eurozone is “the most conspicuous example of a change in the eurozone v EU-wide relationship”. More clearing houses are located in London than any other EU capital, the report says.
The proposed EU-wide financial transactions tax, dubbed a ‘Tobin tax’, is “potentially one of the most harmful proposals for the City of London ever to come out of Brussels”. The report also hits out at regulatory rules on insurance and pension funds, quoting CBI director-general John Cridland, who described them as “shockingly bad”.
The report also notes that future opportunities for growth in Europe will be limited for UK financial sector firms, while opportunities elsewhere in the world are on the increase.
Cameron should use future EU Treaty changes to insert a ‘single market protocol’ to commit the EU to growth, trade and proportional financial rules. But it says the best option would be for the UK to seek an “emergency brake” which would give London the right to block protectionist or disproportionate EU financial regulation.
Open Europe director Mats Persson said: “While the eurozone crisis should not be used for political point scoring, given financial services’ importance to UK growth and tax revenues, and the benefits to Europe of a vibrant financial market, David Cameron would be right to use EU Treaty changes to ask for an emergency brake to halt regulation that could harm the financial sector and wider economy. Clearly, financial markets need to be properly regulated but Cameron must seek safeguards that protect the City of London from growth-destroying measures, enabling it to compete in Europe and, increasingly, across the globe.”
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