Protecting the UK? Don’t bank on it
David Cameron will no doubt be ruing the Eastleigh by-election result today, but wouldn't his time would be better spent looking at the damage the EU is doing to our country?
Perception is always in the mind of the beholder. While the press revels in the Tories’ discomfort over the Eastleigh by-election, Cameron continues to claim that the push down to third wasn’t a case for “lurching” to the right.
Now, this may be the case. It may be that Ukip has taken over as the protest vote that the Lib Dems so gainfully carried in the previous decade. Indeed it may be the case that Eastleigh was a reaction; a vote for a “non-political” party as it were. But events in Brussels this week demonstrate more than ever why there simply needs to be a strong eurosceptic party in the halls of Westminster.
This week the UK was outvoted on European proposals to cap bankers' bonuses. Annual bonuses will not be allowed to exceed a banker’s salary while bonuses of twice annual salary will be allowed if shareholders approve them.
The perception appears to be: “Good. Greedy bankers. Destroying the world economy. It reduces risk”. But, at least on the risk side, this is far from the case.
For a bank, bonuses are discretionary, that is to say, they are designed to be based on performance. To attract the best people for the job, European banks will now have to offer a higher base salary. This is a fixed cost. More capital will have to be diverted into paying the basic salary. With more fixed cost, risk actually increases not decreases.
In bad years, costs can be reduced through bonuses, or lack of, but with a fixed cost, i.e. higher salaries, the cost pressures on banks increase, and so too will the risk.
But there is a far more fundamental principle at issue here. How dare the European Union decide on what a private bank can do regarding income for workers and how dare the Council agree that what should be a national matter is decided on a supra-national basis.
Forget your anger at bankers for the minute. This is wage policy as carried out away from national competencies. The so-called lines in the sand, the so-called referendum lock is non-existent. It is a sham of the highest order. These people have seen fit to tell private companies what they can or cannot do when it comes to paying their own staff, not only in EU territories but also staff of European banks working outside the EU.
Of course there are issues with remuneration committees and shareholders – what appears to be a “scratch my back” mentality – over this, but it is essential in a country that prides itself on private commerce that a private company decides its pay policy through its board and shareholders. This is the fundamental issue at stake: a supra-national organisation is taking away the rights of private companies to set their own remuneration rates. If the UK government wants to restrict bonuses in RBS, fine; it is the major shareholder but that is where it should end.
If the UK government wants to change UK law, then it should put its case to Parliament rather than a meeting room of late-night coffee-drinkers in Brussels. The former is the correct process; the latter tends to result in agreements on bad law from party-listed, gravy-train politicians who vote on issues of dogma rather than what matters for European nations.
Keen readers will of course be aware that this turn of events is simply the latest in a long line of attacks from the EU on the UK financial service sector.
As a share of GDP, financial services account for 9.6 percent in the UK, contributing £63bn in tax with over £20bn coming from international firms. The latest figures available show that the UK had a €31.7bn global financial trade surplus in 2011 compared with £6.4bn in Germany. France had a deficit of £951m.
In relation to Europe, this grab is even more understandable. The UK has a £17.6bn financial trade surplus with the EU – £3.1bn with France and Netherlands and £2.8bn with Germany. Twice as many euros are traded in the UK than all other EU member states combined, and EU banks in the UK hold £1.4trn of assets. In addition, daily turnover of euro-denominated foreign exchange in the UK is £572bn – 40 percent of all global euro-denominated trading.
It is mind-boggling that UK politicians do nothing, and I mean nothing about this. The so-called referendum lock doesn’t apply because it comes under an existing directive; the economic damage to our economy doesn’t seem to bother them and the sheer invasion of property rights can, obviously, go swing as far as the EU is concerned.
Indeed, the determination of the EU to break up the UK financial sector is only surpassed by its ignorance of the effects on European financial companies. What do these idiots in Brussels think is going to happen? Where do they think the vast majority of business is going to go? How long before the likes of HSBC re-register outside Europe with the reduction in taxable income that will follow?
Forget perceptions that the greedy bankers are getting what they deserve. The reality of this action will be far more costly than a few less holidays for higher up folk in the square mile.
Simon Miller is a Contributing Editor to the Commentator
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