§ 3.8 p.m.
§ Lord Hodgson of Astley Abbottsasked Her Majesty's Government: What is now their policy on the draft Investment Services Directive, following the outcome of the meeting in Brussels on 7th October,
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Lord Mclntosh of Haringey)My Lords, the Government voted against the presidency text for a Council common position on the proposed Investment Services Directive at ECOFIN on 7th October. The Government will continue to work to improve the 766 proposed directive, including working through the European Parliament and with the financial sector and other member states.
§ Lord Hodgson of Astley AbbottsMy Lords, I am very grateful to the Minister for his reply. I begin by congratulating him on his attempt to make a silk purse out of a sow's ear. However, on reflection, does he recognise that the meeting was a stitch-up, which the Government fell for? It was a stitch-up between the smaller European financial sectors to gang up at the expense of the City of London. Does the Minister further recognise that, as a result, there will be a considerable cost to the people of Britain, both in terms of the higher cost to British industry in raising funds and to private individuals in buying and selling shares? Finally, will the Minister comment on the remarks in thefinancial Times, which described the results of the meeting as "scandalous", "retrograde" and,
a shot in the foot"?
Lord Mclntosh of HaringeyMy Lords, as I am required to do so, I shall answer the first two questions. I have not attempted to conceal the fact that this was a defeat for the Government. We would have wanted this matter not to have been pressed to a vote by the Italian presidency. We think it was a mistake for them to do so. We believe that there was room for compromise and for agreed solution, which would have been better for financial markets in this country. There is no disguising that fact.
However, this is not entirely the end of the matter. Under the co-decision procedure, the European Parliament can push for amendments to the Council, a common position. There is some hope that it might do so in the light of the fact that the first reading in the European Parliament produced a text which was better than the presidency text adopted by a majority vote last week.
§ Lord Woolmer of LeedsMy Lords, while agreeing that it is important that the outstanding directives are not rushed through without proper and careful consultation, is the Minister aware of the reported views of the chairman of the Financial Services Authority that the timetable for implementation of the huge amount of legislation involved is unrealistic, will impose very substantial costs and raise major difficulties in the industry? Will he raise that at ECOFIN in November and seek to ensure that revised guidance is provided to the Committee of European Securities Regulators when they seek to implement the single market financial regulations?
Lord Mclntosh of HaringeyMy Lords, I pay tribute to the work of my noble friend as chairman of the sub-committee carrying out an inquiry into the EU Financial Services Action Plan? Yes, he is right: Callum McCarthy expressed the view that there are too many of these directives going through to be assimilated. We have considerable sympathy with that view and continue to express it to our colleagues in the 767 European Union. But they are not all as threatening as the noble Lord, Lord Woolmer, thinks. For example, the prospective directive, on which the noble Lord, Lord Hodgson, expressed grave doubts in an important debate in this House two years ago, and which removes barriers to integration in European social securities markets, is now approaching conclusion on a basis which is very acceptable to this country and has been improved by the action of the British Government.
§ Lord Lawson of BlabyMy Lords, the Minister has clearly agreed that this is a very serious matter indeed. He called it a defeat for the Government. It was not the Government's fault but it was a big defeat. Did the Government consider invoking the so-called "Luxembourg compromise" on this matter? Indeed, what is the Government's position on the Luxembourg compromise?
Lord Mclntosh of HaringeyMy Lords, we have always supported the Luxembourg compromise. There are powers which the presidency has and which, unwisely in this case, the Italian presidency used to force a matter to a vote, in our view prematurely. But I do not think we would have been helped by the Luxembourg compromise.
§ Lord TomlinsonMy Lords, does my noble friend not agree that the Investment Services Directive is a salutary example to many Members of this House of why they should not have a knee-jerk reaction to the proposal from the Convention on the Future of Europe about extending co-decision powers to the European Parliament? This is one case where we shall depend on it, and perhaps people should be a little more cautious about attacking such extensions in future.
Lord Mclntosh of HaringeyMy Lords, I am reluctant to generalise from the Question which is specifically about the Investment Services Directive. The Investment Services Directive has many positive features, many of which have been introduced as a result of pressure from this Government. However, we remain unhappy about Article 25 on pre-trade transparency and the provision in the directive for the treatment of execution-only business. So, we do have concerns but I do not think it would be appropriate in answer to this Question to seek to address the wider questions raised by the noble Lord, Lord Tomlinson.
§ Lord NewbyMy Lords, does the Minister accept that the Government were taken by surprise by the Italian proposals on this directive and were outmanoeuvred in the Council? Can we have an assurance from the Minister that in all future discussions and measures under the Financial Services 768 Action Plan the Government will give these issues top priority at both ministerial and official level? Such a priority was seriously lacking in this case.
Lord Mclntosh of HaringeyMy Lords. I do not accept that there was a lack of priority given to this issue by the Government. Certainly, I assure the noble Lord, Lord Newby, that we shall give these matters top priority. However, I believe that the phrases "outmanoeuvred" and "taken by surprise" are not appropriate here. The point is that any presidency, and in this case the Italian presidency, has the power to force the matter to a vote. Normally, sensible presidencies do not do that; they seek a compromise which is acceptable towards all parties and pay attention to the fact that the United Kingdom has, rightly, the largest financial services market in the European Union, and that should be given priority.
§ Lord Jenkin of RodingMy Lords, has the Minister noticed the appeals that were made by some of the trade associations, reported in the Financial Times, that part of the problem could be averted if officials would avoid gold-plating regulations and interpreting them a great deal more strictly than in other member countries in the European Union?
Lord Mclntosh of HaringeyMy Lords. I have seen those reports. I do not think that that criticism applies in this case. The financial services industry in this country is not unanimous in its views on any defects in the Investment Services Directive. Yes, the larger investment banks are opposed to it, but some other banks and smaller financial houses are not so opposed. I do not think that the criticism raised by the noble Lord, Lord Jenkin, is appropriate in this case.