The Rt. Hon. Dr Vince Cable MP
Secretary of State for Business, Innovation & Skills
1 Victoria Street
London SW1H 0ET
11 December 2011
Dear Vince
European Council of 8 & 9 December 2011: adverse impact on British Business
I am writing to you with regard to the European Council that took place on 8 and 9 December 2011 (the “December 2011 European Council”).
In your speech to the European Parliament on 30 September 2011 you said: “the new British coalition Government believes that positive engagement with the European Union is an essential part of our economic and political relations.”
You ended the speech by saying: “we all recognize that our economic fate is inextricably linked with the rest of Europe. We want Europe to work; to put aside all quarrels; and make common cause to deal with the massive economic problems which we now face.”
Clearly the Government failed to make common cause with other EU member states at the December 2011 European Council. Consequently many British businesses are now asking how the government – having entered a negotiation with 27 other countries – finds itself in a minority of just one.
Business leaders I have spoken to question whether the approach adopted in the lead up to and during the December 2011 European Council was in the best interests of British business given that a substantial number of their orders come from EU member states. And even the Deputy Prime Minister himself has stated today that British business may be in a worse position as a result of the outcome of the December 2011 European Council.
On 9 December 2011 the Prime Minister said he would not agree to a revision of the Lisbon Treaty (“Treaty change”) to allow for the measures which were subsequently agreed to by 23 other member states of the EU in an intergovernmental agreement (the “Intergovernmental Agreement”). He said he would not agree to Treaty change because to do so would adversely impact on British business and the City of London in particular. I note that in the July 2010 list of Ministerial Responsibilities it states that you have a “particular focus on business and banking issues”. The Deputy Prime Minister has said that he was not consulted during the December 2011 European Council on this decision the Prime Minister took overnight on 8/9 December ; is it also the case that despite your Ministerial responsibilities, you were also not consulted on this decision?
There are many unanswered questions which British business needs answers to in order to plan for the long term – lack of certainty is a large obstacle for many companies. Full details of the European Council negotiations have not been released, so I would be grateful if you could answer the following questions to increase business certainty:
Continued Eurozone instability and the lack of growth
1. The principal concern of British business is that stability is brought to bear on the Eurozone, which has huge implications for business confidence and the receipt of orders from the continent. Please explain whether you believe:
a. the negotiating stance of the Government furthered this goal at the December 2011 European Council and, if so, how?
b. the December 2011 European Council furthered this goal and, if so, how?
2. The other principal concern of British business is that the EU adopt a credible plan for growth. Please explain whether you believe:
a. the negotiating stance of the Government furthered this goal at the December 2011 European Council and, if so, how?
b. the December 2011 European Council furthered this goal and, if so, how?
Financial Transaction Tax
3. By agreeing to Treaty change, it has been suggested that the UK was being asked to give up its veto in relation to the implementation of a Financial Transaction Tax. To clarify the position, please confirm the following:
a. before the December 2011 European Council, a Financial Transaction Tax could only be entered into by a unanimous vote by all member states of the EU;
b. after the December 2011 European Council, it is still the case that a Financial Transaction Tax can only be entered into by a unanimous vote by all member states of the EU; and,
c. as an EU member state falling outside the Eurozone, in the course of the December 2011 European Council negotiations the British Government was not asked to cede control over its powers of taxation to the European Union.
Financial Services Regulation
4. The Prime Minister reportedly refused to agree to Treaty change after other member states rejected the protocol document he tabled which purported to protect the City (the “Protocol”). To clarify the position, please confirm the following:
a. EU wide financial services regulation is settled by qualified majority voting (“QMV”) – that was the case before and after the December 2011 European Council;
b. the ability of the Government to protect the City from adverse EU wide financial services regulation depends on its ability to marshal a voting majority against proposed measures on the European Council – that was the case before and after the December 2011 European Council;
c. the Government has never lost a QMV vote on financial services regulation since the formation of the Single Market in 1986; and,
d. the now isolated position of the Government on the European Council makes it more not less likely that the Government will lose future votes on EU wide financial services regulation at European Council level.
The Government’s failed draft Protocol
5. The Protocol sought to provide that the following matters currently decided by QMV be subject to unanimity and the possible exercise of a veto by any member state: any transfer of power from a national regulator to an EU regulator on financial services; the ability of national authorities to set higher capital requirements on their banks; that the European Banking Authority remain in London; and that the European Central Bank be prevented from requiring euro-denominated transactions take place within the eurozone. Please confirm the following:
a. before the December 2011 European Council all of these matters were subject to QMV;
b. after the December 2011 European Council all of these matters are still subject to QMV; and,
c. any attempt by the Government to oppose future votes on these matters by marshalling a majority on the European Council is now compromised by its isolated position and lack of allies on the European Council.
Protection of the Common Market and inward investment
6. There are grave concerns amongst British businesses that the UK’s absence from discussions relating to matters the subject of the Intergovernmental Agreement will compromise the UK’s ability to safeguard the Common Market in the interests of our economy and British businesses. What assurances can you give British business that this will not be the case?
7. Many global corporations choose to site their European headquarters and/or operations in the UK, creating thousands of jobs, because of our status as a leading member of the EU. Do you believe the UK’s now isolated stance makes it more or less likely that global corporations will continue to choose to site their European headquarters and/or operations in the UK in the future?
I look forward to receiving your response to each of my questions by return given their urgent and pressing importance to the future of our economy, to increase certainty for British business and enable our firms and companies to plan ahead.
Yours sincerely,
Chuka Umunna MP
Shadow Secretary of State for Business, Innovation & Skills