BY one estimate, today’s strikes will cost London £50m. That is hugely expensive for an exercise in grandstanding by politically motivated militants – and it fails to quantify intangible costs such as stress, inconvenience and general misery. Anyway, if you are reading this in a print copy of City A.M., congratulations – you’ve made it and defied the chaos.
It is a shame nobody has costed an even greater threat to London’s competitiveness: the huge changes in the governance of the City currently being thrashed out in Brussels. Open Europe, the think tank, has published a useful critique of the new rules, shedding light on the extent of the transfer of power away from the FSA, the Bank of England and the Treasury; it comes as politicians are meeting in Brussels today to work out a European-wide bank levy.
The three EU supervisors will be given binding powers over national bodies in seven broad areas – in three of these, the EU bodies will have the power to address firms directly if national regulators don’t comply. The supervisors will be allowed to interpret, apply and enforce provisions in over 20 EU laws, with additional ones soon set to fall under their authority. Day-to-day supervision will remain with national authorities.
As the Open Europe report reminds us, the voting system will be heavily biased against the UK. Decisions within the supervisors will usually be taken by simple majority; in a few cases, qualified majority voting (QMV) will be used. The UK will only have 3.7 per cent of the votes within the supervisors under the former system and 8.4 per cent under QMV – despite being home to 36 per cent of the EU’s wholesale finance. Germany and France, which host 13 per cent and 11 per cent of the EU market, will have the same voting power as the UK. Poland’s 0.3 per cent of the EU market translates into the same voting weight as the UK under simple majority, and only marginally less under QMV.
Michel Barnier, the internal market commissioner, said that this power grab by Brussels is in fact only “a first step”. “Review clauses” will boost the supervisors’ power in future. These can also be bolstered through new directives or changes to existing ones. Several proposals could do this – the European Securities and Markets Authority could be given the final say over bans on short-selling and the clearing of derivatives. The Commission wants an EU-wide deposit insurance scheme.
One of the problems with Gordon Brown’s idiotic tripartite regulatory system was that powers and responsibility were divided; it is absurd, therefore, that the coalition is willing to sign up to a similarly fudged solution on a European level. Nobody will be in charge. Worse, EU regulators will take decisions but it will be national taxpayers, not Brussels, that foot the bill. Countries won’t have a veto over decisions by the supervisors – they will only be able to appeal those with a “significant or material” impact on public spending. But supervisors’ decisions will only be overturnable by a majority vote in the Council of Ministers. So one can easily imagine everybody ganging up on the UK to punish the dreaded City.
Countries could have to bail out a bank against their will, saddling taxpayers with a huge bill. EU regulations are harder to understand or quantify than a tube strike – but their long-term impact will be immeasurably more costly for London’s economy.