As the BBC reports, "EU finance ministers are meeting in Brussels later to discuss hedge fund regulation." That regulation would be extremely bad news for Britain, for reasons set out in an article from TPA Chief Executive Matthew Elliott in the Sunday Telegraph:
"First of all, the new regulations would lead to an exodus of firms moving out of Britain and the European Union, as many decide that it is worth losing access to EU investors in return for avoiding the regulations that undermine their business models. An Open Europe survey suggests the industry contributes £5.3bn to the Exchequer each year. If part of the industry moves abroad then there will be tax hikes or deeper cuts in public spending for the rest of us.
The second point is that investors would have less choice over where to put their money, which means they wouldn't get the same returns. That includes pension funds. The rest of us will have to contribute more or accept a lower standard of living as pensioners.
Finally, there is a very real threat that the rest of the world wouldn't take kindly to this protectionism. The US in particular is extremely hostile to the idea that European investors won't be able to invest in US funds."
This is an absolutely key early test of the new Government's resolve in Europe. At the moment, it looks uncomfortably likely that they will roll over and blame the last Government for the huge damage this could do to Britain's interests instead of seriously opposing it. There is a majority for the legislation, as most European countries don't play host to a significant hedge fund industry so they can bash them for political reasons with us paying the economic price. That will be extremely bad news now as we need all the growth and as big a tax base as possible to get borrowing under control and deal with the fiscal crisis.
But that doesn't mean we are out of options. A ComRes poll for the TaxPayers' Alliance last year found that 72% of the public think that Britain should break EU rules if it is in the national interest. Pretty much everyone in British politics thinks these rules aren't in our national interest, so let's break them. Other countries wouldn't let the EU destroy one of their industries, thousands of jobs and billions in tax revenues like this. Dan Hannan, MEP and Direct Democracy campaigner, looks at the option of breaking the rules on his blog:
"How about this: why not ignore the directive altogether? Why not do
as the French did when they were told to admit British beef, or the
Italians are doing now when told to change their rules on media
ownership? Why not simply announce that this is a red line issue for us,
as agriculture is for France, and that we will not jeopardise our
recovery by condemning the City?
There is a chance that, faced with a flinty refusal to back down, the
rest of the EU might compromise. But if it doesn’t, if the directive is
driven through despite Britain’s citing of essential national
interests, we should simply announce our non-compliance.
If Brussels were to call our bluff and fine us, the highest sum that
could be levied, under European law, is 280 million euros a year. Split
this up among the affected funds and call it a “fee”, and it would be a
tiny fraction of the compliance costs. More important, non-application
of the AIFM directive would indicate that the new government is starting
as it intends to go on, placing the British interest before the claims
of our competitors."
To go further, they couldn't force us to pay the fine. We are net contributors to the EU budget so they can't really threaten us financially. They could take action on trade but as we are net importers from other member states they would be cutting off their nose to spite their face.
It looks like the politicians might roll over and then try to convince us they've done the best they can with a difficult hand. In reality, if these awful rules hurt Britain's economy then there will be a serious case to answer, it will be because our leaders put EU rules above our interests.