Up­roar as Ham­mond lets EU set rules for City

Busi­ness chiefs tell Chan­cel­lor to de­mand a bet­ter deal

Daily Mail - - News - By James Bur­ton Bank­ing Cor­re­spon­dent

‘Re­gret­table and frus­trat­ing’

BUSI­NESS lead­ers have at­tacked the Chan­cel­lor’s U-turn on a pledge to give the City con­trol over its own rules af­ter Brexit.

They say fi­nan­cial in­sti­tu­tions will end up tak­ing rules from Brus­sels – rather than set­ting down gold-stan­dard reg­u­la­tions for the rest of the world to fol­low.

Philip Ham­mond promised in March that the UK would not be a rule-taker af­ter it leaves the EU. He said in a speech: ‘The UK can­not sim­ply be­come au­to­mat­i­cally be­come a rule-taker.’

He backed a deal that would see the UK and EU agree­ing on ‘mu­tual recog­ni­tion’ – a close trad­ing part­ner­ship where both sides recog­nise the high stan­dard of rules they in­de­pen­dently put in place.

The City is widely re­garded as hav­ing one of the world’s most rig­or­ous rule­books for fi­nance houses.

But this week it was re­vealed that the UK would not be pur­su­ing the mu­tual recog­ni­tion model. In­stead, the UK wants ‘equiv­a­lence’, un­der which it is up to the EU to de­cide whether the rules in the UK meet its stan­dards.

It would es­sen­tially mean that UK firms have to fol­low guide­lines set by Brus­sels if they want to op­er­ate in the EU. In his speech Mr Ham­mond had said equiv­a­lence ‘would be wholly inad­e­quate’.

Huw Evans, di­rec­tor gen­eral of the As­so­ci­a­tion of Bri­tish In­sur­ers, said: ‘What­ever the fi­nal out­come, the in­sur­ance in­dus­try is too im­por­tant to be a rule-taker. Hav­ing to com­ply with fi­nan­cial reg­u­la­tions we have no say over would be the worst pos­si­ble sce­nario for our world-lead­ing in­sur­ance sec­tor, so we will look to the Govern­ment to ne­go­ti­ate a bet­ter out­come than this.’

Brex­i­teers said that as a global fi­nan­cial cen­tre, it would be mad­ness for Lon­don to de­pend on reg­u­la­tions set else­where.

The Chan­cel­lor was yesterday forced to de­fend his U-turn in an ar­ti­cle for the Fi­nan­cial Times. Mr Ham­mond said: ‘This is not about pri­ori­tis­ing goods over ser­vices. It is about un­lock­ing and ac­cel­er­at­ing talks with the EU – in­clud­ing on fi­nan­cial ser­vices.’

But the pro­pos­als – set out in a Brexit White Pa­per – were met with dis­ap­point­ment in the Square Mile.

Cather­ine McGuin­ness of the City of Lon­don Cor­po­ra­tion said: ‘This is a real blow for the fi­nan­cial and re­lated pro­fes­sional ser­vices sec­tor.

‘With looser trade ties to Europe, the fi­nan­cial and re­lated pro­fes­sional ser­vices sec­tor will be less able to cre­ate jobs, gen­er­ate tax and sup­port growth across the wider econ­omy. It’s that sim­ple.

‘The sec­tor has been clear since the referendum. Equiv­a­lence in its cur­rent form is not fit for pur­pose.’

Miles Celic, chief ex­ec­u­tive of TheCi­tyUK lobby group, said: ‘The over­rid­ing is­sue for fi­nan­cial and re­lated pro­fes­sional ser­vices firms is the abil­ity to con­tinue serv­ing cus­tomers and clients.

‘Mu­tual recog­ni­tion would have been the best way to achieve this. It’s there­fore re­gret­table and frus­trat­ing that this ap­proach has been dropped be­fore even mak­ing it to the ne­go­ti­at­ing ta­ble.

‘In hun­dreds of dis­cus­sions across the EU, the in­dus­try has never come across an unan­swer­able tech­ni­cal or com­mer­cial bar­rier to this ap­proach. The EU’s ob­jec­tions have al­ways been po­lit­i­cal.’

In the Fi­nan­cial Times ar­ti­cle, Mr Ham­mond tried to ad­dress these con­cerns by claim­ing that the Govern­ment wanted a deal which goes be­yond ex­ist­ing equiv­a­lence rules.

He also ar­gued that the Govern­ment’s pro­pos­als were more likely to be ac­cepted by the EU than the City’s favoured op­tion.

The Chan­cel­lor said: ‘We set out a re­al­is­tic frame­work that pro­vides suf­fi­cient sta­bil­ity and cer­tainty for the mar­ket to op­er­ate. This is less than mu­tual recog­ni­tion, but it is more than the EU’s equiv­a­lence regime. It is a model that pre­serves the sta­bil­ity, trans­parency and cer­tainty of the for­mer, while re­spect­ing the sovereignty of the lat­ter.’

Equiv­a­lence deals can be can­celled at just 30 days’ no­tice un­der ex­ist­ing EU rules – giv­ing Brus­sels the power to force other na­tions to ac­cept reg­u­la­tions they do not like – or risk be­ing frozen out.

It is feared that fi­nance firms would face red tape with no prospect of chal­leng­ing it.

THERESA May yesterday launched a charm of­fen­sive to woo rebel Euroscep­tics ahead of key votes next week.

Brex­i­teer MPs ar­rived for tea with the PM at Che­quers yesterday af­ter­noon shortly af­ter US Pres­i­dent Don­ald Trump left.

Mrs May is try­ing to con­vince them to back her plan for Bri­tain’s fu­ture re­la­tion­ship with the EU and vote with the Govern­ment on the cus­toms Bill.

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