Examination of witnesses (Questions 60-79)
WEDNESDAY 2 MAY 2001
DAWN PRIMAROLO
MP, MISS MELANIE
JOHNSON MP, MR
IVAN ROGERS,
MR PETER
CURWEN AND
MR RICHARD
BROWN
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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