European Affairs

My hon. Friend is absolutely right. There are areas where we need to have co-operation between member states on an intergovernmental basis—for instance, the fiscal stimulus has been helpful and we have loosened the bonds of the growth pact—but there are also areas where we have to co-operate on a more co-ordinated and enforced basis. I shall come to the issue of regulation shortly, and I suspect my hon. Friend and I will disagree on it. Thirdly, we have learned during this international crisis that properly calibrated national regulation of financial markets is a vital protection against economic crisis, but national regulation alone cannot be sufficient. That is why the Prime Minister argued forcefully and successfully earlier this year at the G20 for enhanced global co-ordination, including through improved capital standards, increased oversight of systemically important financial institutions and the agreement of international compensation standards. It is vital that this be done on an international basis; otherwise, there is a danger that some countries will compete in the bargain basement of regulation, which does no favours to any economy in the world. That is also why we wholeheartedly support the agreement reached at the meeting of European Finance Ministers yesterday on the setting up of three new European financial regulators. The new European systemic risk board will provide a much-needed Europe-wide early warning system on financial risk. These proposals pose no threat to our fiscal autonomy. Let me add that we believe that these bodies will work in the City's interests, not against them. The UK is proud of its robust financial services industry, and Europe derives significant benefits from it. London is the only city that can compete with New York as a financial centre, and I know that Europe knows that its success is integral to European economic prosperity. There are some people who refuse to acknowledge that the regulation of financial markets, on a national or international basis, is important. Indeed, the right hon. Member for Wokingham (Mr. Redwood) announced only a couple of years ago that""we see no need to continue to regulate the provision of mortgage finance"." He added:""In Financial Services we should allow people to buy and sell products that are not regulated"." I believe that would be an act of gross folly. The shadow Chancellor, the hon. Member for Tatton (Mr. Osborne), added for good measure that this is""how we liberate our economy to compete with the likes of India and China. Cut Government regulation"." It is clear that the Conservatives have learned absolutely nothing about financial regulation.