Pearson probes, HMG wriggles over the FTT

Lord Sassoon has given what looks like a pretty robust answer to UKIP peer, Lord Pearson's, question on the Financial Transaction Tax,

The Commission has put forward a proposal to introduce a financial transaction tax under Article 113 of the Treaty on the Functioning of the European Union. Proposals put forward under Article 113 require unanimity in the Council of Ministers, giving the UK Government a veto over any such proposal. The Government oppose a European financial transaction tax.

In addition, the Commission has put forward a proposal under Article 311 to use revenues from its proposed financial transaction tax to part-fund the EU budget. Article 311 also requires unanimity in the Council of Ministers, giving the UK Government a veto over any such proposal. The Government oppose any new taxes to fund the EU budget.

But hold on a moment. What has the Government committed itself to. At first reading it looks like they will veto the FTT proposal, and if so there would be much breathing out in relief in the City.

But have they? I don't think so. Take a look again at what they say, and you can see that it is no such guarantee.

Essentially Lord Sasoon has said,

"We oppose the tax, we have a veto".

or in other words,

"I want to go to Brighton, I have a car". 

That the Minister would like to go to Brighton, and that he has a car is of no importance, what we want to know is if he will use his car to go to Brighton.

By not specifying his use of a car to take him to Brighton, when it would be very easy to do given he is possesion of a fine pair of wheels, one must suspect that the Government has no intention of using it. What is more, from the way that they have behaved in the past, one must come to the conclusion that they might well to go to Littlehampton instead if their continental friemnds persuade them to.

Is our Tithe to Europe exempt from austerity measures?

Lord Vinson asked a question along these lines, the answer he gets back is interesting.,

To ask Her Majesty's Government whether they intend to make a proportional cut to the United Kingdom's European Union net contribution of approximately £7 billion a year as part of the overall reduction in government spending.

So far so clear. The answer however seems to want to be all things to all people,

The Commercial Secretary to the Treasury (Lord Sassoon): At a time of fiscal consolidation across many EU member states, the Government believe it is only fair the EU budget plays its part.
In 2005 the previous Government agreed to rising UK contributions to the EU budget over the period 2007-13. But to reflect today's realities we have repeatedly called for a freeze in the EU budget next year.
The Commission's initial proposal for the EU budget for the period 2014-20 is expected early next year. The Government expect the Commission's proposal to take account of fiscal consolidation efforts across member states. At the negotiation of the next EU budget, the Government will strongly defend the UK's national interests, and ensure the budget is focused on those areas where the EU adds value

So yes, the amount of money we send to Europe should be cut in line with the cuts across the UK public sector.

But, and here's the rub, what the Government has done is appealed to Brussels to recognise the situation. No more. Of course the reason why is simple, they have no power to set the amount. Brussels will set a tithe at the level that Brussels thinks it can get away with. No amount of 'expecting' is going to do it. Hard core negotiations with red lines in permanent marker might just. But there is no sign that this government, just like the last will apply such penmanship.

The only bright spot is if the amount is calculated in Euros, with the weakness of the Euro then the amount posted to Brussels will drop in real terms, but only if the pound goes higher. Possible of course but with downsides for our exporters.

So the real answer to Lord Vinson should be,

"We hope so, fingers crossed"