Financial Services (Hansard, 5 December 1990)

§ 3. Mr. Dunnachie
To ask the Secretary of State for Trade and Industry what steps he is taking to ensure that the United Kingdom financial services sector is able to compete fairly in the single European market.

§ The Minister for Corporate Affairs (Mr. John Redwood)
The financial services industry in the United Kingdom is a great success and I am sure that it will do extremely well from the wider European market that is now being constructed and in which we are participating fully with our partners. The Government are doing their bit by negotiating constructively on a number of measures to create the right framework for the wider industry. At the moment, we are negotiating on the financial services directive and the complementary capital adequacy directive. We are also working closely with the Commission to get passport directives on both life and non-life insurance.

§ Mr. Dunnachie
We welcome the single European market, but we and others in the insurance industry worry about the unfair competition facing our companies from the German, Italian and French conglomerates. What is the Minister doing to ensure a level playing field for our British companies?

§ Mr. Redwood
Of course we want a level playing field for all companies in the European Community. That is the purpose of negotiating fair rules of conduct, such as those in the directives that the Commission is now proposing. The hon. Gentleman can rest assured that the Government will battle hard to get a fair deal for our companies and for customers throughout the Community. If only Opposition Members had equal dedication to the purpose of creating an open and liberal market in Europe, that would make it even easier for us.

§ Sir Robert McCrindle
Could my hon. Friend give us a little more information about the progress that is being made with the capital adequacy directive? Are we any closer to achieving the position in which small to medium-sized financial intermediaries in this country will be allowed to continue to provide the service that they provide at the moment, bearing in mind the fact that the position in other European Community countries is very different from that which has always prevailed in the United Kingdom?

§ Mr. Redwood
My hon. Friend is quite right. It is important for this country and for the European market as a whole that there should be a fair regime allowing independent financial advisers to carry out their important work. The United Kingdom Government have worked closely with the Commission to identify different categories of adviser for capital adequacy purposes, but we believe that their capital requirements should be related to the risks that they are running.
Under the current draft, investment advisers will not be required to provide any capital for that purpose, but will still gain access to the passport. We are now working on the question of how much capital those advisers should have who also handle client money and arrange deals for clients. That is still an issue of contention in Community negotiations. My hon. Friend can rest assured that we wish 290 to see a flourishing independent financial advisory sector in this country and that we do not wish the directives to damage it.

§ Ms. Mowlam
The Minister just said that he is keen that British competitiveness should be enhanced in the single market, so I am sure that he agrees that it will be enhanced if his Department acts swiftly and efficiently when dealing with fraud when it is based in the City. In that context, what has the Minister done about the problems and financial difficulties at Hamilton House, which have now been with us for over three years? More specifically, when did his Department last receive communications from the regulators on this issue and what did the Department do?

§ Mr. Redwood
I do not intend to go into the details of individual cases across the Floor of the House in such sensitive issues. The hon. Lady knows that we are keen to pursue fraud and malpractice wherever it may be. It was this Government who introduced powerful new laws and regulations to do so and we have brought a number of cases to court for that purpose. We are seeing again today that Opposition Members are interested only in fraud and malpractice. That is not the way to represent the United Kingdom's financial services industry to the wider Europe.

§ Mr. Dunn
Will my hon. Friend confirm that some European Community member states impose controls and restrictions on cross-border insurance services which are not necessarily in the interests of the policy holders and which, in the end, only reduce competition and increase prices?

§ Mr. Redwood
As my hon. Friend says, there are a number of barriers in the insurance market. One of the points we are trying to get across in the early discussions on the possible directives is that there is no need to regulate product specification.
The important thing is to regulate the solvency of companies and the fit and proper nature of those running them in carrying out the business. I hope that we have success in persuading our colleagues in Europe, because it is in the interests of all forward-thinking companies and customers in the wider Europe that maximum choice and competition is offered.