Select Committee on Treasury Minutes of Evidence

Examination of witnesses (Questions 60-79)



  60. Does the Government see the creation of a single European clearance and settlement system as being a precondition for that single financial market you have been referring to?
  (Miss Johnson) No.

  61. You do not?
  (Miss Johnson) No.

  62. It is Government policy that we could have a single European financial market and continue to operate with a number of different, separate and, maybe in some respects, competing clearance and settlement systems?
  (Miss Johnson) I can write to you further on this but I think I am right in saying we have not taken a firm view on this matter. Indeed it is not the focus of our energies in this matter. You seem to take it the Lamfalussy Report is already done and dusted. Obviously whilst we have made good progress on it, there are issues still to be resolved and we want to see those issues progressed.

  63. The Lamfalussy Report dusted but not done?
  (Miss Johnson) It is a matter for the markets to take a view on, well, the market does not have a view, but for the market to resolve the issue of the future form of clearance and settlement arrangements across Europe.

  64. The Lamfalussy Report goes a tad—an imperial measure I am thinking of, the tad.
  (Dawn Primarolo) What is it in metric?
  (Miss Johnson) It is a very good measure.

  65. Yes. The Report goes further than that, it says ". . . in the event of market failure to produce a single European clearance and settlement system, public orientation . . ." I think that is the phrase of the Lamfalussy Report ". . . may be required". Is that the policy of the Government?
  (Miss Johnson) I am not sure what the words "public orientation" mean.

  66. You have had the opportunity of participating in the reports to discuss the Lamfalussy Report. You have had a better opportunity than me.
  (Miss Johnson) You are picking out two words out of context. They are not words that immediately spring to my mind. What we are keen to do is to see consultation going on about the decision making process that takes it closer to the market participants and the end users and to see a more democratic system than the existing system. I do not have a view about the particular phrase which you have just raised with me.

  67. Taking firstly the European Securities Regulators Committee, as proposed by Lamfalussy, which will be implemented.
  (Miss Johnson) Yes.

  68. There is a danger of remoteness from scrutiny and from openness and democratic transparency of the workings of such a committee. Would it be your view that the Financial Services Authority—who presumably would be present on this European Securities Regulators Committee—should be accountable to Parliament in some way for what it does there?
  (Miss Johnson) One of the things the Committee needs to do is it will need to maintain the confidence of the European Securities market, that is quite important, because one of the whole purposes of having any form of financial services regulation is to ensure that it provides confidence both about the market and within the market. Therefore, we see that as being very complementary to what is going on in the UK at the moment. I do not agree with you at all that there is some kind of lack of transparency or accountability in all this. The fourfold structure which Lamfalussy has proposed allows, in my view, and in the view of the Government, appropriate decision making and rule making and legislative, if you will, in general terms, functions to be exercised at the right and appropriate levels. With good communication and good relationships between those models this should ensure the right kind of framework operated in the right way, as I say, to enhance the development of the single market in securities and ultimately more widely in financial services.

  69. I think you would have to agree that it is a complex structure and involves the creation of two new European wide bodies: the European Securities Regulators Committee, and I confess myself to be a little disappointed that you did not visualise the Financial Services Authority reporting to Parliament, possibly through this Committee, what it does there but turning to the—
  (Miss Johnson) Can I just be clear, the Financial Services Authority certainly does produce an annual report and through mechanisms such as coming before the Treasury Select Committee is certainly accountable to this House. I would not want to suggest anything different. It is accountable for all its activities, whatever those activities may be. It can be called to account by this House and certainly by this Committee in particular.

  70. I will take that reply as being an encouragement that our successors on this Committee should indeed do just that. The European Securities Committee, which of course will be a ministerial body, how do you visualise that reporting to Parliament?
  (Miss Johnson) I do not think it is resolved that it is necessarily a ministerial committee. The report suggests it could either be junior ministerial or at official level, that is not yet resolved. Indeed, given the different structures of ministers and officials in different EU countries anyway, sometimes those who would be classified as officials in some countries are effectively graded as ministers in others, so it is not necessarily a very clear cut set of distinctions.

  71. In the event of it being what you describe as junior ministers, how will those junior ministers report to Parliament? In the event of it being officials, how will they report to Parliament on their work on the European Securities Committee, which will be laying down codes and rules and directives that the securities markets will be following across Europe?
  (Miss Johnson) I reiterate again that it is not necessarily junior ministers, it could be officials. I just make that point for the record since you, again, said junior ministers. The Commission will ask the new regulatory committee to draft implementing measures in accordance with framework directives and then the committee will act as a regulatory committee under the comitology procedure and will vote on whether to accept the implementing procedures or not. We actually think that the consultation and the transparency that is built into these processes are an improvement and they will take decision making much closer to the markets.

  72. As part of the European Commission's views about Lamfalussy it is said that there may be some matters which are particularly significant on which it may take a different view from what is described as the predominant view on the Securities Committee in order to inform its work on shaping directives. Can you give the Committee any guidance on what sorts of issues would be regarded as being so sensitive that a predominant view should be set aside?
  (Miss Johnson) No, I think that is very difficult at this stage. This clause was introduced in relation to concerns by just one Member State—Germany—and it is not entirely clear how that will work out in reality. I do not think that is a significant problem with the present arrangements. Can I just return to this question of transparency again because you were very interested in it, just to emphasise the fact that Lamfalussy himself, or the report, emphasises that the transparency will actually assist the scrutiny committees in evaluating how the Securities Committee has worked generally and in the identification of which specific measures are particularly significant and, therefore, should be individually scrutinised. As I say, that clarity and that transparency is going to help people to be involved in the right way and to get the right decisions at the right levels.

  73. How do you visualise this openness operating at the level of something like the European Securities Regulators Committee, or this proposed European Securities Committee? How will there be access to its work? Will it issue reports? Could people like myself, the press, the public, go and listen to the meetings? How will it report back to national parliaments as well as the European Parliament? These are all important issues.
  (Miss Johnson) Obviously we have mechanisms in the UK which are well understood. Indeed, I often appear before various committees, not only yourselves but other Committees in this House, to give accounts of various European dimensions of the Government's work and no doubt there would be those fora for discussing what arises in this context just as with a number of other policy areas.

  74. Will these committees be open? Will they publish minutes? Will there be voting records?
  (Miss Johnson) We have been in favour of transparency in a number of contexts and we will be arguing for transparency in this context but, as I say, that is already what the authors of the report themselves are arguing for. Exactly how that is to be manifested I am sure is some of the detail that is yet to be worked out because they are still very much at the stage of agreeing the overall, over arching proposals and it is probably unreasonable at this stage to think that the detail of the sort of thing you are now mentioning could reasonably be expected to be in place. I am sure there will be sensible discussion about this and, given the driving thrust of the report, we are optimistic that transparency and consultation will be very much to the fore.

  75. So it is certainly the wish of the British Government that there should be minutes, the presence of observers and things of that nature?
  (Miss Johnson) I have not said exactly what the mechanisms will be because I think we need to decide what is appropriate. We need to make sure that those produce a high degree of transparency. We have argued for it in other contexts, we have demonstrated it in the context of the Bank of England and the workings of the Monetary Policy Committee, and it is something that we would want to see in this context too.

Mr Ruffley

  76. Paymaster, I have a draft agenda dated 12 January which sets out what was to be discussed on 7 May, and I quote "Item No.6. Direct taxation: Communication on company taxation. Presentation by the Commission". I also have in my possession a draft agenda dated 27 April, again in relation to the 7 May Ecofin, where this does not appear at all. My question to you is did any Minister, any UK Government official or any other UK Government representative, ask for this to be removed?
  (Dawn Primarolo) No.

  77. Or ask any third party to seek its removal?
  (Dawn Primarolo) No.

  78. You can categorically confirm that?
  (Dawn Primarolo) Yes.

  79. Who removed it?
  (Dawn Primarolo) The Commission itself.

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