Motion to Take Note
My Lords, I am delighted to have the opportunity to introduce this debate on the report of the European Union Committee entitled MiFID II: Getting it Right for the City and EU Financial Services Industry. This report was based on work undertaken by the Sub-Committee on Economic and Financial Affairs, which I have the honour to chair. The report was published in July 2012, and was based on evidence received from a number of practitioners and experts in the operation of financial markets. The committee was also assisted in its work by Professor lain MacNeil, Alexander Stone Chair of Commercial Law at the University of Glasgow, who acted as specialist adviser for the inquiry. I thank him and all the witnesses who contributed so richly to this report.
This proposal for a directive and regulation on markets in financial instruments is a complex legislative package, as our seven-page glossary indicates, but it is also extremely important. The original MiFID package, which came into effect in November 2007, is the foundation of the EU regulatory framework for investment firms. These firms encompass a wide range of activity such as global investment banks trading complex securities, fund managers investing pension funds, stock-broking firms and small high street financial advisers providing financial advice to the general public. The Commission’s objectives were to open up trading in securities to competition, to apply equivalent regulatory rules to different market models which perform similar functions and to enhance, standardise and harmonise investor protection across the European Union.
The new proposal, known as MiFID II, seeks to respond to deficiencies in the MiFID I regime exposed by the recent financial crisis. It focuses in particular on addressing problems that have arisen from the expansion in over-the-counter (OTC) trading, including the transparency of such trading. It seeks to shift trading from the more opaque OTC market to more transparent organised markets, in line with the September 2009 G20 commitment to tackle the less regulated and more opaque parts of the financial system by the end of 2012.
The committee’s starting point was to ask whether a review of MiFID I was even necessary. We found that it was, particularly given the technological advances that had taken place since it came into force. Some witnesses told us that the Commission’s proposals were a “good starting point” for negotiations. However, we warned of the damage that would be created by hastily or poorly drafted legislation. These concerns were heightened by the evidence we heard that, while some of the proposals were based on sound principles, there were significant flaws in the Commission’s draft. We identified six such central flaws.
First, we warned that the proposal for a new category of organised trading facility risked creating an overly complex regulatory framework which did not distinguish clearly between organised venues and OTC. We feared that the implications of the proposal had not been fully assessed. We were particularly concerned about the proposal for a ban on “own capital”—that is, the ability of the trader to use his or her own resources to trade on other people’s behalf—and the amount of detail left to delegated acts.
Secondly, while the post-trade transparency provisions held much merit, the pre-trade transparency proposals did not take into account the markedly different characteristics of each sector of the market, particularly in terms of liquidity. The requirement for disclosure could compromise the ability for competition to flourish. We warned against a one-size-fits-all approach to transparency that could have a negative impact on bond markets. We called for a more flexible approach that, while recognising the benefits of transparency, would allow the market to operate effectively.
Thirdly, the Commission also proposed to regulate algorithmic and high-frequency trading. HFT remains a deeply controversial activity and there is a wide spectrum of views about its utility. We recognised the case for circuit breakers, but were concerned that the scope of the proposals was too broad and did not adequately differentiate between algorithmic trading and high-frequency trading. In particular, we warned that the proposal to require algorithmic trading strategies to be in place throughout the trading day was likely to have a detrimental effect on financial markets.
Fourthly, the Commission’s proposals on third country access were deeply flawed. They created a risk that third country firms could find themselves locked out of EU markets, creating the spectre of regulatory retaliation. Such effects could have a particularly damaging effect on the City of London. At the very least, lengthy transitional regimes for existing third country firms were required.
Fifthly, the Commission proposed a number of steps to strengthen investor protection and corporate governance, yet the proposal to restrict the ban on inducements to independent advisers was in our view unworkable, since advisers would simply take steps to avoid being classified as independent. Likewise, the Commission’s proposals on corporate governance were overly prescriptive and did not take account of the diverse size, capacity and business models of the range of market participants.
Finally, we found that, while the European Securities and Markets Authority had a vital role to play in co-ordinating regulation of financial markets across the European Union, there was less consensus about the degree to which it should engage in direct regulation of the financial markets, as suggested in the Commission’s proposals for ESMA to take on product intervention powers. In the light of these flaws, we urged the UK Government, the Commission, the Council and indeed the European Parliament to take all the steps necessary to ensure that the legislation was fit for purpose before it came into force.
What has happened in the nine months since our report was published? The Government’s response, received in October, expressed sympathy with many of the points raised in our report, and we are grateful to the Financial Secretary to the Treasury, the right honourable Greg Clark MP, for keeping us updated on negotiations in the months since. We are aware that negotiations have moved forward, and that significant amendments have been advanced. For instance, progress has been made in Council on improving the provisions on third country access, although we understand that the European Parliament continues to take a contrary view. Perhaps the Minister might tell us a bit more about that. We are grateful to City UK for sending us extra material that will be valuable to us in our thoughts on third country access.
What update can the Minister give us on the progress of negotiations in relation to the six areas of concern that I have identified? What is his understanding of the European Parliament’s position on these issues? To what degree does he believe that the concerns that we raised, and which the Government have said that they share, will be addressed in the redrafted legislation? In relation to HFT, what is his assessment of the findings of the Foresight project, published in October 2012? On a personal note, I am still considerably worried about HFT, although the Foresight group took a much more relaxed view. What is the Minister’s view?
It has also become clear from the Minister’s correspondence that the timetable for agreement had been pushed back, with the scheduled agreement in Council repeatedly postponed. We understand that the Irish presidency decided not to take MiFID to general approach at ECOFIN on 5 March because a number of issues remained open. Which issues remain contentious, and what update can the Minister give us on when agreement on the package will be sought?
MiFID II’s impact on European financial markets, not least the City of London, will be considerable. The Government and their European partners must do all that they can to ensure that the financial markets, and the economies that rely on them, are strengthened rather than undermined by these provisions. However, MiFID II must not be viewed in isolation. There are other pressing issues whose impact on the City, the UK and the EU as a whole are just as great, if not greater.
Last year my sub-committee also conducted an inquiry into the Commission proposals for a financial transaction tax. Contrary to the opinion of many so-called experts, the idea has not died but remains very much alive, in the form of a proposal by 11 European Union member states to introduce a tax under the enhanced co-operation procedure. Only last week, witnesses to my sub-committee told us that the political will in the EU behind this proposal had been underestimated. Indeed, I recall that the CBI spokesman Richard Woolhouse told us that there were now stirrings of recognition in the City that the FTT in its enhanced form could indeed come about.
Do the Government share the complacency we identified? What steps are they taking to ensure that a full and effective analysis of the effects of such a tax on the UK will be conducted? The Minister might like to know that, this afternoon, I talked about this with Mr Lidington, our Minister for Europe, and I tried to sound the alarm bells. As an expert on the City, he will know of some of the new elements introduced in the issuance principle which mean that those trading in, for example, Volkswagen shares in two non-participating countries could be subject to the tax. London could have a much greater responsibility in terms of collecting the tax, perhaps for participating countries.
The euro area crisis has not, of course, gone away. In February, my sub-committee wrote to the Financial Secretary to the Treasury, reporting on the assertions of some experts that the worst of the crisis was over. We were sceptical. We warned that,
“the biggest enemy in the current climate is complacency, whether it be that of European leaders that the euro area has definitively turned a corner, or whether it be that of observers in the UK that the implications of these developments for the United Kingdom can be safely ignored. Positive signs of progress there may have been, but there remains a long way to go before the euro area crisis can be judged to have come to an end”.
I regret to say that recent developments in Italy and, more particularly, in Cyprus have borne out our judgment. The inconclusive Italian election results were a clear demonstration of the political and social pressures to which the euro area crisis is giving rise. More alarming still is the crisis over the Cypriot bailout. The way in which this issue has threatened to spin the entire currency zone back into crisis mode is a clear demonstration of the perils of complacency.
These issues demonstrate the vital importance of the UK Government remaining at the heart of EU discussions, whether it be on the euro area crisis, proposals for a financial transaction tax, or the MiFID II package. The Government may not agree with all the proposals, nor wish to participate in them, but the UK is not immune to the effects that overspill on to us. On MiFID II, as on all these issues, the Government must remain at the negotiating table, ensuring the best possible outcome not only for the City and the UK, but for the EU as a whole. We need to find friends in Europe to be able to do that important and sometimes desperate task. I beg to move.
My Lords, the noble Lord, Lord Harrison, made reference to the technical advances mentioned in our report, and the problem is that, as we all know, technology moves on. I am absolutely sure there is going to be another financial crisis, possibly as big as the one we have just seen; I am absolutely convinced that we cannot anticipate today what it is going to be. One of the weaknesses of regulation and moves such as those that have been made by the EU is that they definitely involve closing the stable door. You can always guarantee that the next financial crisis will be different from the ones we have seen in the past. I suspect that, if we are looking for a solution to this, we have to look to very agile national supervisors, because I do not think that the EU is in a position to stop this sort of thing happening in future.
I would like to move on to the slightly wider issues which the noble Lord, Lord Harrison, touched on, namely the financial transfer tax. Students of the Bible will remember that the Pharisee used to get up in the morning and say, “Thank God I’m not like other men”. I get up every morning saying, “Thank God I’m not a Europhile”. If I were, I would feel that the European Union was letting me down extremely badly. Its attempt to deal with a financial crisis has been so ham-fisted that it really makes one doubt its capacity to run anything at all.
The reality is that the financial transfer tax will be incredibly damaging to the eurozone and the financial institutions within it. It will reduce liquidity in eurozone companies; clearly, if you are going to tax transactions in shares, people will just not buy and sell those shares as much as they otherwise would. It will make it attractive for a number of them to relocate to markets elsewhere in the world where they do not have to pay the tax, and it will make it much more difficult for the EU to raise money. It defies all credibility that it should want to do this.
Mr Bergmann, the deputy to the Commissioner who deals with all this in Brussels, came to see our committee and said that when 11 countries entered into this agreement, they would set an example to others that would then follow. If you believe that, you will believe anything. The fact is that the United States would never follow down the road of having a financial transfer tax, and I very much doubt that Hong Kong or Tokyo would either. There is therefore never going to be a global financial tax; all that you might ever have is one or two more countries within the EU joining in with it.
One of the issues that came up during our discussions on this today was the big question of whether companies in the City of London would be forced to collect the tax on behalf of the European countries that were involved in the shares that were being traded. We were left completely confused because Mr Bergmann told us categorically that there would be no question of City firms collecting this tax, but on the other hand it seems that there is serious evidence that the plan is that it should be collected on behalf of other Governments. I know that the Minister cannot reply on that now, but it would be nice if he could search that out for us and try to get a definitive reply on where we stand on it; it is a fundamental question for the City of London.
Another reason why I am glad I am not a Europhile is the whole management of the economic crisis, which has been absolutely abysmal. It is now more than 12 months ago that my right honourable friend the Prime Minister said that what Europe should do was get a big bazooka to solve the problems facing the eurozone. Chancellor Merkel was adamant: she was not going to expose the German taxpayer to picking up all the liabilities of the Club Med countries and the others that the Germans consider have not got their act together at all. A year to 18 months later, that is precisely what happened: the ECB got authorisation from the Germans to buy bonds in the secondary market across the whole of the eurozone. The result was that the crisis that there had been in funding government debt across the eurozone was completely stabilised overnight. It is quite interesting that to date the ECB has not had to buy any bonds in the secondary market of the eurozone, yet that stability has been brought about.
So what has happened in the mean time in the intervening 12 to 18 months? Chronic insecurity has spread across the whole of the eurozone, and people who might have made investment decisions have sat on their hands and done nothing. The result is that we have seen a much severer recession in the eurozone than we would have seen if that decision had been taken earlier. No doubt there were a whole mass of political reasons in Germany as to why Chancellor Merkel could not move quicker, but the fact remains that if that nettle had been grasped earlier, the eurozone would not have had as severe a recession as it has seen just recently. That recession has even spread as far as Germany as well. It is quite possible that Germany may pull out of it quite quickly but the fact is that the inactivity by Germany actually put that country into recession, which it has not seen for quite some time.
Now of course we see the Cyprus crisis being dealt with on the basis that the Cypriots themselves should pay a very serious price for the trouble that their country has got itself into. An amazing scheme was originally produced that said that all deposit-holders in banks in Cyprus should pay a tax. It had to be described as a tax because, as everybody knows, the EU has been working for some time on a deposit insurance scheme that means that people holding up to £100,000 in a bank will have that money secured. Somehow, when the whole country goes bust, your deposits are at risk, but if your bank goes bust your savings are secure. Come on—people are not going to sit there and say, “This raid on my savings is quite legitimate because it is a tax”. That decision has now been reversed and we are going to see deposit-holders above €100,000 maybe being taxed at 40% on their holdings.
What effect is this going to have on many of the other very unstable Club Med countries in the eurozone? Jeroen Dijsselbloem, who is the president of the Eurogroup, although I gather he has not been there for very long, came out with an incredible statement only yesterday, I think, saying that what had been done in Cyprus was a template for all the other countries in the eurozone. Can you imagine a more crass and stupid remark than to say that this was a template to be applied elsewhere? What it immediately does is put the frighteners on absolutely anybody—any company or any individual—who holds a bank account with money in it in any country such as Spain, Portugal, even Italy and certainly Greece. Greece is completely unstable. It is completely recognised that it is unsustainable as it is and that it cannot go on. The reason why nothing has been done about Greece is because German elections are coming up on 22 September. After that, they will want to restructure the whole debt of Greece. They will have to do it yet again and the Greeks will have to take another massive haircut. Any Greek who is standing around at that point with money in a Greek bank needs to have his head looked at. You are actually better off taking the money out and stuffing it under the mattress than you are leaving it in a bank account, where they can impose a tax on it.
This is absolute lunacy. Once again, I hate to say it, but this is why I am so glad that I am not a Europhile, because it strikes me that these people cannot run anything competently whatever. The choice for the future of the eurozone is quite simple. It can go mutual so that the rich countries have to guarantee all the poor ones, but the Germans are flatly refusing to do that and, if they do not, it is going to break up. As night follows day, the weak countries are going to go, and then eventually it will get to the centre and some of the stronger ones will go as well.
If the Germans did decide to underwrite all this, with some eurobond or something of that sort, then of course you have a future made up of fiscal transfers from the rich countries to the poor. We have seen a bit of that already with the so-called bailouts and so forth. They are bitterly resented by the Germans, who have to pay them; and because of the conditions with which they arrive in Greece, say, they are bitterly resented by the Greeks, who get the bailout.
With fiscal transfers, you will only have that continuing but writ large. This then of course encourages extremism in places such as Greece and very nasty parties start to crop up. If we go on like this, the whole of this system will just not work. The best thing that could possibly happen would be if the Germans pulled out of the eurozone and created, with other sensibly run countries within the eurozone, a strong currency which can actually survive. If we go on the way we are now, chaos beckons.
My Lords, as a member of Sub-Committee A, chaired by the noble Lord, Lord Harrison, I pay him due credit for producing this report on such a complex issue. I also commend the clerk and our policy adviser who have managed to produce a document that, although complicated, is just readable by those who are fairly fanatical about it.
During the past 25 years, I have served on several EU sub-committees, including those on agriculture, environment, industry and transport. Controversial and tricky subjects they may be, but they are nothing like as complicated as those that we are dealing with in Sub-Committee A on economic and financial affairs. As our chairman pointed out, although it may not have been in his draft, you have only to look at the glossary at the back to see what we all need—seven pages of unheard of and unspeakable letters and descriptions. I joined the committee only last year and, after attending my first meeting, I left feeling numb and as if my brain had been scrambled. The subject was incomprehensible and it took me a while to get my head around it. I am afraid that I still lag somewhat behind.
Simply put, MiFID II is about two things, regulation and transparency. The latter includes greater understanding of the markets by everyone; but, most importantly, it relates to those who invest, insure and trust others with their funds. There are perhaps two groups. First, there are the very large pension funds, corporate businesses and plcs, among others. Then there are individuals—Joe public. During the past 40 years, millions of people have become small shareholders, encouraged by government privatisations, including those of the rail industry and BT. In addition, availability of private health insurance and private pension plans have become the norm. Some of these people can afford brokers and have access and the ability to understand the working of the financial markets. However, the majority numerically are small investors—private individuals ranging from those in lower income groups to the wealthy.
I should like to consider them for a moment, especially those who use independent advisers rather than City brokers. It is most important that this is a reliable and easy-to-understand service for those who cannot afford anything else. For one moment, I will assume that Christian Krohn of the Association for Financial Markets in Europe was correct when he said that MiFID I provides adequate small-investor protection.
However, I should like to discuss the proposed ban on inducements and commissions to independent advisers alone. Guy Sears of the Investment Management Association questions the effect of the proposal, and I am inclined to agree and, indeed, report that we do not think that it is workable. In addition, I am not quite sure that the inducement/commission is important, providing that the product is genuine and the client knows that he or she may go elsewhere to compare prices and, most importantly, compare potential outcomes. Surely the commission is no more important to a client whether he or she is buying a financial product or a car. It is the results of the deal as a whole as they appear to him or her that count. When you buy a car, you decide on a product, shop around and get the best deal, which may include free servicing or whatever. You do not ask the salesman what his bonus is or what margin the garage is making. It may be that it remains a cheaper or better option to buy from him, even though his bonus and margin are higher than that of the garage next door. Banning inducements or declaring them in every case may upset the market—the only market available to the group of people of whom I am talking. It is a people’s market. If this market fails or becomes more difficult to access, where will ordinary citizens in the EU, including the majority of the 70 million individuals in the UK, be able to go for this service? We must be conscious of this. We know that the national pension schemes and provision of healthcare will be insufficient with our increasingly aged population. Our Government must focus on this and the future problems arising from it.
The problem with much financial services business is that it is so complicated and, unlike other businesses, takes place in the ether, rather than in the practical trading of normal products such as grain, mining products or manufactured products. Those involved work on, oblivious to the fact that the industry is incomprehensible to most people outside their world. Europe adds bureaucracy to this and thinks that “one size must fit all” means that Germany’s size is the one that must fit.
The magic word seems to be “harmonisation”—do it my way rather than compromise and use delegated regulations. Look at the financial transactions tax. We had Herr Bergmann, the director of the EU tax department, in front of our committee the other day. When asked what the main objectives of the FTT were, he said, first, harmonisation and, secondly, raising money. They are hiding behind the soundbite of harmonisation; it would be good for us all, they say. Surely the first objective of any tax before you can even think of harmonisation is to raise money. That is the next stage, papering over the cracks later on, but they have put it first because of the way that it sounds. The initial deal for the Cyprus bailout just demonstrates how confident and secure one of our nations feels to put such a proposal on the table. Next they will call for the harmonisation of this tax—and where next? Incidentally, as a colleague of mine said, the only people who have taken money out of the bank in that way were the IRA in Belfast. Charles Moore wrote in the Telegraph yesterday:
“Cyprus is only the first victim of a one-size-must-fit-all-policy that is made in Berlin”.
In conclusion, my impression after being on the committee for a year is that this area is highly complex and few people outside the City could begin to understand it. In other committees that I have sat on, witnesses invariably feel that they have the right answers. In our deliberations, however, our witnesses have said that they hope so, they do not know the full answer for sure or, “This will not necessarily stop a future crisis”. It is pretty unnerving to listen to experts in that frame of mind.
The City of London, one of the big three, is crucial to our nation. Our invisible earnings are such a high percentage of our GDP, yet my impression is that the City is too busy keeping up with the speed of its trading and recession management to look forward to the unintended consequences of developments in Brussels. Yet the Government seem far too relaxed and are doing little to fight London’s corner. In contrast, I am delighted to see that the Government are putting £2 million towards aerospace research and development at Bombardier in Belfast, but surely they must wake up and get cracking on the financial world and support it as they should. I have not asked specific questions but our chairman has done so, and I look forward to the answers.
Since this is the last report from the committee chaired by the noble Lord, Lord Harrison, to be debated this Session, I should start by paying tribute to him. I have learnt a great deal from serving on his committee. We have benefited from his huge experience, linguistic skills, total impartiality and unfailing good humour. One of the reasons why it has been rather a productive committee is that it has been extremely well chaired, and I thank him. I also thank our clerks, Rose Crabtree and Stuart Stonor, the latter a man of astonishingly fertile mind, deserving of congratulations on his output.
On the matter that we are discussing today, I thank the Government for maintaining a civilised dialogue with us. The government response to our report was a serious point-by-point reply, and at all stages the discussion with the Government has been informative. I hope that what we have said has proved helpful. I contrast the Government’s response with that of the Commission, which always replies to our reports but in this case sent a particularly deadpan response. The Government sent a very interesting and helpful one. Why am I saying this? To make a point, of course. On this matter, the Government have maintained a dialogue with us, but on the matter which has been raised by all previous speakers in this debate because it worries us the most, the financial transactions tax, there is a complete dialogue of the deaf with the Government. We are unable to persuade Mr Greg Clark to engage with us. Our correspondence with him is wholly unsatisfactory, and he has still to address the key point we raised in our report—a much larger and more substantive report than the MiFID report—exactly a year ago.
I would like to take advantage of this debate by putting six questions to the Government about the financial transactions tax. First, do the Government agree that the enhanced co-operation of 11, if implemented, will damage the European Union? Secondly, do they agree that the enhanced co-operation of 11, if implemented, will damage the London market? Thirdly, if so, why did the Government abstain at the January ECOFIN? Why did they not oppose the proposed enhanced co-operation? Fourthly, did they seek before then, and are they seeking now, to construct an alliance against the enhanced co-operation of 11 among our natural allies not participating in it—the Dutch, the Danes, the Swedes, the Poles, the Finns, the Irish and the Luxembourgers? It is not Britain against the rest; we have a majority on our side. Are we making use of that? Is there any active diplomacy?
Fifthly, did we seek and are we seeking legal advice on whether the conditions laid down in the treaty for permitting enhanced co-operation are met, given that these conditions include the need not to prejudice the interests of non-participating member states? Sixthly, why did the Prime Minister at the European Council this month merely take note of this pernicious proposal? According to its conclusions, the European Council noted it. I do not know how well briefed the Prime Minister was. Can the Minister confirm that the Prime Minister is fully briefed on the damage that the FTT proposal could do to the European Union and to the United Kingdom?
Now, to follow the example of the noble Lord, Lord Harrison, I am going to revert to my usual bonhomie and to the subject of this debate. MiFID II is the grandson of the original 1993 investment services directive, on which I was one of the negotiators. Our aim was and still is to create a single market in financial services, which is of course massively in the UK’s interests since the UK is the principal EU provider of such services; they are our largest export; and our share of the EU market has grown as the internal barriers have come down. That is what we hoped, and it is what has happened.
The particular purposes of MiFID II are to create greater competition in trading in securities in order to reduce costs for investors, to apply equivalent regulatory rules to different market models and to enhance and harmonise investor protection—all plainly worthy aims that are beneficial to the EU and the UK. However, the devil lies in the detail. As our report shows, and the Government have agreed with us, we need to be in there fighting. I believe that on this subject, unlike the financial transactions tax, the Government have been in there fighting and that UK negotiators have done very well. It is very important that UK negotiators have been present. Let us suppose for a moment that we were in the nightmare situation of Norway. Let us suppose that we were country members of the single market and we had to take the rules, written in Brussels in the sort of process that we are talking about today, from the fax machine when they had been completed with no say in what they said.
As I say, the Government have done well and the chances are that MiFID II is going to come out okay. However, I have a two-part question for the Government and a comment. My particular concern about MiFID was with the provisions for third-country access, as discussed by the noble Lord, Lord Harrison. The committee thought that they were deeply flawed, and the Government agreed. The proposal was that third-country firms would have to register with the European Securities and Markets Authority and could trade in the EU only if authorised to do so by ESMA, which would be required to certify that these third-country firms came from countries whose home-country jurisdiction imposed requirements equivalent to those in MiFID II and provided equivalent reciprocal recognition of EU firms. Try selling that on Wall Street. It would not fly there, and the effect would be to restrict third-country access into our markets, which would be damaging to them and to us. Clearly, this amounted to a significant risk of shrinking the EU market and hence the London market, since it is the premier location for third-country firms and their branches.
The Commission, which, as I have said, replied to our report, was a little bland on this point. It said:
“The Commission’s objective is to ensure that EU financial markets remain open but are safe for investors … The Commission’s proposal is, therefore, mindful of the need to achieve the correct balance between open access with minimal duplication of administrative and other requirements on the one hand and investor protection on the other hand”.
Yes, Sir Humphrey, I would have been proud of that 20 years ago. The fact is, though, that the balance was not correct. The Government have since told us in their helpful reply to our report that the requirements for equivalence and reciprocal access have been eliminated in Council discussion, one of the reasons why I feel like congratulating them. However, I need to ask a question: is that still the case? Is there a stake through the heart of these third-country provisions? Has the Commission dropped its emphasis on equivalence? If not, and if the Commission is still going on about it, will the right-minded, such as the UK Government, hold firm in Council?
Secondly, as the noble Lord, Lord Harrison, said, what about the Parliament? Compared with my days in Brussels in the early 1990s, the Parliament has—rightly, in my view—much more power than it had then. Sadly, though, our Government have rather less influence than they had, which may be the inevitable consequence of the Conservative Party choosing to distance itself from the EPP in Brussels and Strasbourg, thus sharply reducing its chances of obtaining senior and influential positions in the Parliament, and of course removing a principal opportunity for influencing and alliance-building with like-minded Members of the Parliament. How confident are the Government that a good deal in Council—if it is a good deal, which I think it probably is—will not unravel in co-decision procedures with the Parliament? Are the Government acting on the first point that we made in our report when we said,
“we particularly urge the Government to ensure that they liaise with and pay due attention to the European Parliament in its consideration of the MiFID II proposals”?
Are we, in alliance with our friends in Council, lobbying hard in Strasbourg? Are Ministers going to Strasbourg specifically to talk about MiFID? Are all British MEPs, of whatever party, fully briefed on the importance of this directive for the City of London and the risks to us in the United Kingdom if it all goes wrong?
That is nearly all I want to say, but since the debate has ranged a little beyond MiFID, I will make one final point. As eurozone Ministers, along with those aspiring to join the eurozone, get together more and more closely—in the past fortnight they have been meeting a great deal—to discuss banking union, FTT, bail-outs and bail-ins for Cyprus, it becomes more important, as the noble Lord, Lord Harrison, pointed out, that we in the UK try even harder to stay alongside the debate or, ideally, at the heart of it, among the same people on the EU financial services legislation that is so important to this country. There will be caucusing among eurozone and eurozone-plus members. There is nothing we can do about it because it will happen informally. The Commission will try to prevent it. If in the end we wanted to go to the Court, we would obtain valueless rulings on our side. Caucusing is wrong but it will happen. And “les absents ont toujours tort”.
The best way of limiting the risk and mitigating the damage is to be as active as we can in making the European case for open markets. We should bring other countries’ Ministers, officials, European Parliament Members, journalists and opinion-formers to look at the City and understand the benefit that it represents for the EU as a whole—that of having a great global market on EU territory. This grows more important with every passing month and I hope that the Government, who I know do not agree with me on a number of things, agree with me on this and will try very hard.
I will say one last thing. Given the identity of the two speakers who are to follow me, I will quote from one of my heroes, Lord Thomson of Monifieth. George Thomson was one of our two initial commissioners. In 1999, talking about 1973 and the experience of going to Brussels with Christopher Soames, he wrote:
“I recall the remark of a wise Dutch Commissioner … ‘My dear George,’ he said, ‘there are now two countries in the Community who are stubborn about defending their national interests, France and Britain. But a word of advice … France always describes opposition to her position as a betrayal of Europe. Britain makes it appear as if Europe is betraying Britain. Not the best way to get results!’”.
It was not the best way then, and it is not the best way now.
My Lords, before I begin I should say that the think tank that I chair, Policy Network, has received funding from the City of London Corporation.
I will make three points in introducing what I have to say. First, I agree with the final point of the noble Lord, Lord Kerr, and with his tribute to my noble friend Lord Harrison and his fellow committee members—that should go on the record—for the excellent work that they do in bringing informed debate to the House.
Secondly, I will avoid the considerable temptation offered by the speech of the noble Lord, Lord Hamilton, to engage in the debate about the euro that he has so richly offered. I will just say—this is not meant to be a cruel point—that he has been making the same speech ever since I was privileged to join the House in 2010, and the euro has not collapsed yet. Even in what I agree was the mismanaged Cyprus crisis, the Cypriot Government decided that they would prefer to take the pain and stay in the euro rather than leave it.
They knew perfectly well what they were doing by signing up to the deal that they did. Perhaps I may make another aside. The idea that taxpayers should always pick up the bill for the irresponsibility of bankers is offensive. A lot of people in Cyprus have enjoyed the benefits of relatively high interest rates, which pensioners in Britain have not enjoyed over the past few years. The idea that they made these investments in a noble way that should be protected by the European taxpayer is, I think, offensive.
Thirdly, I agree with the noble Viscount, Lord Brookeborough, that the issues raised in this report are very complicated. I am certainly not in a position to talk about the details. Instead, I want to focus on the Government’s political strategy for handling these financial services questions. This is not a party point; it seems to me that as a nation we have a real difficulty here. A number of propositions form the approach on this side of the Room. The first is that we need a healthy financial services sector; I agree strongly with the noble Lord, Lord Hamilton, and the noble Viscount, Lord Brookeborough, on this. Yes, we need to rebalance our economy. My noble friend Lord Mandelson was right to say that we have had too much financial engineering and not enough real engineering, but the financial services sector is a huge overseas earner for us and we cannot do without it. It is a vital national interest where we have a comparative advantage. However, we have to acknowledge that things have gone wrong in the City in the recent past. Grave reputational damage has been done as the result of the LIBOR scandal and the scandals around mis-selling. Risks were taken that should never have been, and as a result we need to rethink the way we regulate the City.
The second proposition that should inform government policy on a national strategy in this area is that the City benefits hugely from being the financial centre of the European single market. The noble Lord, Lord Kerr, is right to say that what Britain achieved in the 1990s and the early 2000s—I was slightly involved in the 1999 Financial Services Action Plan—was tremendous. It opened up the market and ensured that London got a larger share of it. What happened, though, was that we had liberalisation without putting in place proper cross-country regulation, and we have to acknowledge that that was a UK mistake. It was a UK consensus that we should have light-touch regulation and we got it wrong. The Turner report that was published at the start of the financial crisis said that we have to choose between European regulation and being part of the European market or going back to national regulation, and that is basically right. I think that both the then Labour Government and the new Conservative/Lib Dem coalition have accepted that we are part of a properly regulated European single market in financial services.
However, the result of all this is that on the Continent there is now a great suspicion of UK motives in this field. I sense this an awful lot as I travel around to various meetings. Therefore, the third objective we have to set ourselves is to accept that we need re-regulation at the European level, but that it has to be done in a proportionate and sensible way. I have some sympathy with the remarks of the noble Lord, Lord Hamilton, about shutting the stable door and things moving on so that the new regulations will not cope with the new circumstances, but we must recognise that we have to put a national effort, as the noble Lord, Lord Kerr, said, into getting our regulatory strategy right.
We face big problems here. There are some basic asymmetries that put us in a difficult position. We had very strong support from what you might call the northern liberals for the positions that we took in the 1990s and 2000s but I am not sure to what extent that support is as solid as it once was, which I think is one of the reasons why the coalition on the financial transaction tax that the noble Lord, Lord Kerr, wants has not occurred. There is an asymmetry of expertise. People complain about the bureaucracy of the Commission, but when you look at the thousands of people employed in the regulatory agencies in London and the dozens who are dealing with these matters in the Commission—a very small group of people covering a very wide brief—it is not surprising that sometimes the proposals that come forward are flawed in key respects. The Commission tries to listen and amend in the light of representations made to it.
Another major asymmetry, which is a very serious one, is that there are euro-ins and euro-outs. We are among the euro-outs, and that is the way it is going to be, but we have to recognise, as a euro-out, that financial regulation is fundamental to the financial stability of the eurozone. If they are going to do whatever it takes to stabilise the euro then they will be prepared in the eurozone to adopt whatever financial regulations they believe are necessary to stabilise their currency.
In this situation, the national strategy clearly has to be to go out of our way to win friends and influence people. That is where the Government—or perhaps only one part of the coalition—has got it so badly wrong. There is a difficult environment for us in the European Parliament. They think bankers are to blame for the crisis and that Britain is, in part, to blame because we pushed a deregulatory agenda. How do we deal with that? Not by going in with the Thatcher handbag, nor by doing what David Cameron did at the December 2011 European Council in circulating a paper—which, incidentally, has never been disclosed to Parliament, although we have seen it and know what is in it—that had “unanimity” written at the top and which, to anyone who looked at it, would look as though the British Government were basically seeking to reverse qualified majority voting on a large number of financial services questions. It was a disastrous strategy: how could you expect the eurozone to agree to surrender sovereignty over their currency to Britain through our having a veto over financial regulation? We have to argue from a position of qualified majority, and we have to win friends and base our position on reason and good argument.
I agree with the noble Lord, Lord Kerr, that we have to point out to people the advantages of London being the global centre of the single market and all that that brings. At the same time, though, we have to acknowledge the criticisms of the City that have been made and demonstrate that we are prepared to see them tackled. That is basically the question that I put to the Minister: how are the Government going to do that? What is their political strategy for dealing with these questions, which are of vital national importance, even though they are of great complexity and difficulty for many members of the committee?
My Lords, like other speakers, I congratulate the noble Lord, Lord Harrison, and his committee on producing such a comprehensive and thoughtful report on such a technical subject. I hope that noble Lords will forgive me if I start by dealing with some of the technical issues that the report covers before I get on to some of the broader issues that we have discussed.
As noble Lords have accepted, since it came into force in 2007, MiFID has had a major impact on how EU financial markets operate. This in turn has fed through to a significant impact on the wider economy. The directive has been instrumental in reducing barriers to trade in financial services and increasing competition in trading services. To build on these benefits, the Government agree with the committee that a review of MiFID I was necessary. The Commission’s proposals for a new directive and regulation broadly seek to address three areas where problems have arisen: negative side-effects resulting from the implementation of the original legislation; technological developments in how financial markets function; and issues exposed by the financial crisis.
There is much to welcome in the proposals. For instance, the creation of a new category of trading venue, called the organised trading facility, will capture virtually all organised multilateral trading. Another objective of the review—greater transparency in financial services—should help to protect investors and generally lead to greater efficiency in price formation. A policy of open access between trading venues and clearing houses will remove an important obstacle to competition, helping to create a more competitive single market in clearing and trading services. However, the policies contained in the MiFID review must be extremely carefully designed. The Government’s primary focus is ensuring that the measures contained in the review meet their objectives and do not damage competition or the efficiency of financial markets.
First, the Government share the committee’s concerns over the design of the organised trading facility. The Government continue to work hard in negotiations to try to ensure there is sufficient detail in primary legislation so that the proposals achieve their purpose.
Regarding the Commission’s proposal to extend the rules on market transparency to non-equity markets, the committee rightly notes that we must avoid a one-size-fits-all approach, as trading characteristics can differ significantly across asset classes. As the committee also observes, without proper understanding of these issues there could be an impact on liquidity and the cost of capital. The Government agree with both these points and continue to prioritise these issues in negotiations.
The proposals also increase transparency for so-called systematic internalisers. The Government believe that the systematic internaliser model has a role to play, but we acknowledge the committee’s comments that this category has not been heavily utilised and that some clarification of the purpose of the regime may be helpful.
As a consequence of recent technological advances in financial markets, the Commission has proposed new rules governing the operation of high-frequency trading. As the committee recommends, the Government’s position is that measures applied to algorithmic and high-frequency trading should be firmly grounded in evidence about its real impact. The Government note the welcome contribution that the Foresight report has made in this regard.
The Commission’s proposals also introduce an EU-wide third-country regime. This would harmonise the rules under which investment services can be provided by non-EU firms into the EU. Although we believe that there would be an economic rationale in extending the benefits of the single market to third-country firms, we fully agree with the committee’s comments on the global nature of financial markets. Our prime objective is to ensure that the UK, and indeed the entire EU, remains open to trade in financial services worldwide. The UK has worked hard in Council to amend the proposal and we believe that the current compromise will avoid the disadvantages and difficulties that the committee has identified.
While we support greater transparency in commodity markets, the Government agree with the committee that price volatility in these markets is dependent on a range of factors. In particular, in 2011, the G20 commodity study group was clear that fundamentals—in other words, supply and demand—have been driving commodity prices. The Commission’s proposed rules for commodity markets did not recognise this, placing undue emphasis on a particularly rigid regulatory regime. However, we are satisfied that the current compromise in Council provides for a suite of position management tools that will ensure that commodity derivatives markets are properly regulated throughout the EU.
Turning to the powers granted to ESMA under the MiFID review, the Government agree with the committee that ESMA has a strong coordinating role to play. However, it is important to ensure that powers assigned to EU agencies are in accordance with the treaties and relevant EU case law. The outcome of a legal challenge on certain powers conferred on ESMA in the regulation of short selling and certain aspects of credit default swaps will inform our long-term approach on this issue.
Finally, the Government believe that the Commission’s proposed measures to improve investor protection could be strengthened. However, there is considerable pressure from other member states to not implement an inducements ban at EU level. Therefore, the Government’s main objective in the remaining discussions is to ensure that the UK is still able to implement tougher measures domestically under the FSA’s retail distribution review.
The noble Viscount, Lord Brookeborough, talked about inducements. Our view is that the evidence suggests that inducements are being shown time and again to bias advice. Mis-selling, as we have seen many times in the UK, is an extremely serious issue and we must protect people against future scandals. It is relevant that research for the European Commission by Synovate suggests that as many as 57% of investment recommendations in Europe are unsuitable. We cannot ignore this very serious and ongoing issue.
I will say something about where we have got to in the negotiations. Our current expectation is that the Irish presidency will try to seek political agreement in May, although no firm schedule has yet been confirmed. There are still a few areas of outstanding disagreement. The main obstacles are the open access provisions, which Germany and a group of member states oppose, and the equity transparency regime, where France and some others want to see a uniform standard of transparency across all venues. On both these issues, the Government’s objective is to ensure that the regulatory framework does not impose unnecessary costs on the end users of financial services and supports growth in the real economy. We continue to work constructively on these high priority areas in Council, with the aim of reaching a compromise.
Questions were asked about the European Parliament and whether we are trying hard in both the Council and the Parliament. The Parliament compromise was agreed in September. As it stands, it is likely that the biggest difference between the Parliament and the Council will be the third-country regime. Although the Council has deleted much of the regime, Parliament has broadly opted to retain it, but with some positive amendments. However, in many other areas the Parliament and the Council texts are broadly aligned. We have been lobbying hard in Strasbourg and are working extremely hard in the Council to ensure that we get the best possible outcomes.
I turn to some of the broader comments which have been made. It is fair to say that they have occupied the bulk of this afternoon’s deliberations. There has been a lot of discussion about the financial transaction tax and where we are on it. The noble Lord, Lord Kerr, asked me six questions about that tax. As he knows, the proposals are relatively recent; some aspects of them are relatively unclear and the Treasury is, at the moment, analysing the proposals and seeking to understand them in greater detail.
I have tremendous respect for the noble Lord, but that is the kind of answer we have been getting for a year on the financial transactions tax. The Council made a decision in January, with the UK—absurdly, in my view—abstaining. The point of principle is whether we agree that they may go ahead with levying a tax among 11 countries but requiring the rest of us, including the UK, to collect the tax for them and send it to them. Do we agree to damage our market? Do we agree that they have the right to do that? The key question is whether our interests are adversely affected. If so, they do not have the right to do it. Why did we abstain?
We agree that they have the right to do it. The question which the noble Lord asked about whether this measure would damage the EU and the UK is not one to which there is a simple or straightforward answer. There are two completely different views about the impact of this tax on London. To a certain extent, we will not know, until it is implemented, which of these two views is correct. One view is that London will benefit significantly because we are out of it. If you look, for example, at what happened in Sweden, which had a transaction tax, the bond market collapsed totally and Sweden had to abolish it. If you take that view, a financial transaction tax is good for London.
Other people take a completely opposite view. The modalities of collecting the tax, and exactly how those will work, are clearly, from everything that the Commission has said, a work in progress. It is not, I believe, a unique suggestion within EU law and practice that member states will collect taxes that revert to other member states. I do not think it is a matter of principle; it will be a matter of practice and whether it is possible to put in place a practical solution.
Surely, the complacent school of thought that says all the business will flow to the United Kingdom, others will damage themselves and we stand to gain, does not still exist in Whitehall. Surely, Whitehall has now persuaded itself that putting more grit in the cogs of the London financial markets is a bad thing, as is trying to persuade two American banks doing a transaction in London that, according to an instrument which originated in Germany, we should collect from both banks not for the British Exchequer but to send the money to the Germans. Surely, Whitehall has decided that that scenario is mad because the American banks will not trade in London if we apply this absurd regime. Surely, Whitehall is clear that we are approaching a crossroads and that we do not know which road to take. What are we going to do? Are we going to sit at the crossroads?
We have to decide what to do on the balance of the evidence. Surely, the balance of the evidence is overwhelming that this measure is a bad thing for the EU and a bad thing for the UK. Eleven countries do not agree, but I guess that 15 or 16 other countries do agree with us. Are we trying to construct an alliance with them or have we, as the noble Lord, Liddle, said, such a pariah status that we cannot construct an alliance? I do not believe that. I still think that this situation could be remedied. Are we going to go to law? We need legal advice on who is right. I believe that if we could be damaged by this measure, and the chances are that we will be, it is not permitted under the treaty. Therefore, I do not understand why we abstained and I do not understand why the Prime Minister was silent.
My Lords, if I did not know the noble Lord better, that speech would seem to me to typify the attitude that gets us into difficulty. He asserts with absolute certainty that the French do not know what is best for them, the Germans do not know what is best for them and the other nine who have signed up to this tax do not know what is best for them as he believes that it will be very damaging.
I am sure that some people in any country will want to do virtually anything, but the question I was addressing was whether the 11 countries that have signed up to this tax can be dismissed as not knowing what is best for them, even though we are deeply sceptical about it and are not going to sign up to it. We have had a number of debates in your Lordships’ House about Greece, for example, in which some noble Lords seem to have known what is best for Greece. It is just that the Greeks have not agreed. We have to let other member states move forward with this within the rules because they are keen to do so.
Does my noble friend accept that at one stage the Germans were very much against this proposal and then they changed their mind? Was it that they did not know what was best for them originally and then they did know subsequently, or did they get it the other way round?
I think that my noble friend should ask them because I have not the faintest clue what was in their mind, but they have now formed a view. If the German Government have a settled view, even if I do not agree with it, I would not write it off as a mad one. I am sure that we will come back to the financial transaction tax, but it is not unreasonable to say that an extremely complicated tax using very difficult mechanisms to make it work should necessarily be capable of instant analysis in terms of how we are going to deal with it. We are looking at it. We have had the proposal for only a few weeks, and my right honourable friend Greg Clark, as the noble Lord, Lord Harrison, pointed out, is actually one of the better Ministers in any Government in terms of working with Parliament and, indeed, across the EU. I am sure that in due course he will come back with a full description of our response.
I am testing the Minister’s patience, but we are now past the point where we can affect it. The only question remaining for us is whether we can overturn it. After the January ECOFIN it is now up to those who participated in it to devise the tax as they think is best for them. We cannot affect that, but we will be obliged to collect it. I am not clear what we are working hard on at the moment. What are we trying to do? We are not in the room any more. I would say that we ought to try to derail this exercise by going to law. We need to mount a legal challenge. We must create a political alliance and mount a legal challenge.
My Lords, I am conscious of the time. Much as I would like to go on until eight o’clock on this subject, I think that we are going to have to return to it.
I shall turn to some of the other points that have been made in the debate. I would say to the noble Viscount, Lord Brookeborough, that one person’s harmonisation is another person’s single market rules. Sometimes harmonisation works very much to the benefit of the UK and sometimes it does not. We have to take this on a case-by-case basis, but let us remember that by common consent the single market has been very beneficial to the UK. If we can, we want to strengthen it even if, as inevitably will be the case, some of that strengthening includes common rules.
I did not say that harmonisation was not a good thing, rather I looked at the way this tax is being brought forward. They were talking about harmonisation before they started raising the money. They did not like to talk about why they were raising the money and doing it only over a certain number of countries.
I am grateful to the noble Viscount for that clarification. The noble Lord, Lord Kerr, asked about the benefit of the EU to the City as a whole, and both whether the Government recognise that and whether are doing anything to promote it. There is no doubt in my mind, having watched the Government in action, that they absolutely understand the role of the City and how having a strong financial services sector is immensely valuable to the UK and to the EU. The Government themselves are working very hard, as noble Lords have said, on this directive and others to make sure that we end up with proposals which are compatible with the ongoing success of the City.
One of the frustrations I felt before I was a Minister and which, to a lesser extent, I still feel, is that the City is not always its own best advocate. Although things have improved considerably with the formation of TheCityUK, and there is now a much wider recognition that the financial services sector needs to get its act together, as it were, to promote itself, there is still some way to go. Although the UK Government are active in the Council and in the European Parliament, they need the UK financial services sector to be independently active in those institutions as well. There was a period when a lot of senior people in the City felt so battered with the experience that they had following 2008 that they were not willing to put their heads above the parapet and make the arguments. I think that that phase is over, to a certain extent at least, and the Government are encouraging them very much to do that. I am very grateful to the noble Lord, Lord Kerr, for quoting Lord Thomson of Monifieth. He, of course, was from that great tradition of canny Scots who could fully understand the benefits of engaging with the EU.
I will make just two points before I finish in response to the noble Lord, Lord Liddle. First, he talked about asymmetries. There are a number of asymmetries. Looking at the future of this directive, we are talking about the possibility of making considerable progress while Ireland still has the presidency. However, the amount of financial services expertise which Lithuania is going to bring to the party in the second half of the year is relatively limited. It is a terrible burden on the officials and Ministers from small member states who have to grapple with what, by common consent and as anybody who has read the report knows, is an immensely technical subject. Virtually the only people other than members of your Lordships’ committee who understand it are the people who work in it every day. The truth is that there are not many of them in small member states, which is an asymmetry. Clearly, there is also an asymmetry between the Commission and the UK. There is one asymmetry that we can benefit from by using our expertise. I was extremely interested that, despite the fact that we are not in the euro, a group of Treasury officials went to Cyprus at the weekend in order to help sort out that problem. It will be very interesting when they get back to see what they have learnt from it.
The final point is about how we exercise influence in an environment where we are not part of the euro-in group. In my view, the model—which I have seen in operation—is that adopted by my colleague in another place, Ed Davey, when he was in BIS, who established something called the “like-minded growth group” for promoting the single market. At every point, Mr Davey carried in his pocket a little laminated piece of paper which showed the voting strength of every member of the 27, and he was forever working out how you got that qualified majority or majority. He worked very hard, and succeeded, at getting a majority of member states, both euro-ins and euro-outs, to co-operate to promote the single market. That is a model that I think is still pursued within BIS. We have got to, as the noble Lord, Lord Kerr, said, be very active working out where we can form alliances, which we can do on many things. One of the ironies about the current financial circumstances is that we, as a euro-out, have much more in common with some of the northern European countries that are trying to impose fiscal discipline. For good or ill, we are now something of an expert on that in this country and we need to make the most of it. There are no permanent alliances; you have to rebuild and refresh them. One of the challenges for the Government—or any Government—is to do that as best they may.
Finally, reverting to the splendid report that we have been discussing this afternoon, the Government welcome it and agree with all the points it raises. We accept, as I have attempted to explain, that the devil is in the detail. The Government will continue to negotiate carefully so that MiFID II does, indeed, get it right for the City and, most importantly, for the users of financial services.
My Lords, I am minded to say that never in the field of markets and financial instruments has there been so interesting, so sexy and so stimulating a debate as has taken place here this evening. I thank all who have participated in it, especially the two Front-Benchers, but also my colleagues such as the noble Viscount, Lord Brookeborough, and the noble Lord, Lord Kerr. I would particularly like to thank our officers, Rose Crabtree and Stuart Stonor, for the work that they do for us behind the scenes, which is very considerable.
I was going to end on a humorous note, saying that I wake up every morning and thank the Lord that the noble Lord, Lord Hamilton, is not like other men. That has been well demonstrated. In fact, he reminds me of the story that William Hazlitt tells in one of his essays about going for a walk with Coleridge. He says that he set off with Coleridge down a Somerset lane. He, Hazlitt, would walk in a straight line; Coleridge was forever diverting, off up on the left, off up on the right, forward and backward and then eventually coming back to join his friend Hazlitt. This debate has been a little bit like that. I began to puzzle why it strayed off the beaten path of MiFID in the way that it has. I think that it was for an important point, and I know that the Minister does not have the opportunity to come back.
I hope that the Minister takes away the intensity of feeling that those of us who were posted away to Committee Room 3 to look at some of these difficult and brain-tingling matters are getting with a greater and greater sense of urgency. This country is not recognising some of the real confrontation that is being borne in upon us by having adopted what I understand to be a negligible position—that of the head in the sand— where we say that these things can be decided by others, but we must progress and let them progress in the way they so wish, and it will not have an effect on us.
I will finish on this one point about Mr Bergmann, who was referred to several times this evening. It was quite clear to us that the defence that the Commission mounts—that this is wholly legitimate under subsidiarity and in other ways because it does not infringe the single market—is simply wrong. It does infringe the single market, and it infringes not the gang of 11 who are going forward, but the gang of 16, who are not participating. If we as the UK are not alert to that and if we are not very careful, we will lose our goose that lays a golden egg. In losing that golden egg of the City of London, we will lose it not just for the United Kingdom: we will also lose it for the European Union. That is why we must take such care. We are in conversation with the FST, Greg Clark, and I was in conversation with David Lidington this afternoon. I hope that the noble Lord, Lord Newby, will take it upon himself, with his deep knowledge of the City of London that he has demonstrated so often, to express the urgency and concern that has caused this debate on the narrow subject of MiFID to spill over into the other dossiers that are before us which cool and chill our hearts.
Committee adjourned at 7.10 pm.