Negative attitudes and a lack of “hard graft” are fuelling a decline in the UK’s influence in Brussels, according to peers.
The implications of regulatory reforms on the British financial sector are “immense” but the ability to control the changes is continuing to diminish, they warned in a critical report.
It identified a number of causes for the UK’s fading clout, including an “occasionally unhelpful tone” in dealings with the European Union.
Uncertainty over the UK’s future within the EU and a perception of growing UK antipathy to Brussels are also contributing to problem, the House of Lords EU sub-committee on economic and financial affairs found.
It criticised an “insufficient commitment to the hard graft” of lobbying, negotiation and alliance-building and pointed out that these were areas that EU powerhouse Germany was a master at.
Labour has frequently criticised Prime Minister David Cameron, who has promised an in/out referendum on membership if the Conservatives win at the general election, for presiding over “the most significant decline in British influence in Europe for a generation”.
The cross-party committee of peers urged the government to “act urgently” to bolster the UK’s influence and warned failing to halt the decline would be a dereliction of the duty to protect UK interests.
Committee chairman Lord Harrison said: “The committee regrets the fact that the UK’s influence over EU financial regulation is diminishing. We urge the government to do all it can to restore the influence the UK once had in Brussels, and to keep our place at the front and centre of the debate.
“The City of London is a prized asset not only for the UK but for the EU as a whole. Yet the UK, for all its expertise, risks being side-lined. As we say in the report, there can be no excuse for a failure to act.”
The post-crisis EU financial regulatory framework report looked at how European institutions have attempted to tighten up regulation of the financial sector since the 2008 crash and found that changes have been “commendable, even impressive”.
But it warned sector watchdogs that the European Supervisory Authorities (ESAs) have structural weaknesses that need to be tackled, including a lack of authority and funding. They also do not have the resources to protect consumers, peers said.
Lord Harrison added: “The committee found that the efforts of the main players, such as the European Commission and the European Parliament, were admirable and in many cases transformed the regulatory landscape for the better. With some exceptions like the bank bonus rules and the ghastly Financial Transaction Tax, the bulk of the EU’s proposals were necessary and proportionate.
“However, the ESAs, the all-important supervisory watchdogs, need to be better equipped to do their job – they need more power, more resources and an effective legal basis on which to take action. Without these improvements, the risks of another financial crisis are greater.”