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The blizzard of Os

10 September 2015 By George Hay

George Osborne has found the right outlet for his political ambitions. The UK chancellor, a serious contender to succeed Prime Minister David Cameron, has a habit of proposing ideas inimical to his conservative political base. Witness, for example, July’s announcement of a national “living wage”. Making a big play to better protect the UK financial sector in Europe is a better way to spend his time.

Britain’s rules of engagement with the rest of the 28-state European Union are due an upgrade. The 19-member euro zone’s banking union means it votes as a bloc. Safeguards put in place in 2012 by the pan-EU European Banking Authority require a majority of votes from both “ins” and “outs”, but as more outs join the single currency, that system will reach a natural expiry date. Moreover, the problem extends beyond banking regulation.

Osborne could work with what’s already in place. He could push for any proposal to be defeated if three “outs” demur, as think tank Open Europe suggested on Sept. 10. Or he could make City protection part of reforms the United Kingdom wants from changes to the EU treaties. While this is tricky to get past big hitters like Germany ahead of a referendum, it could be agreed as part of a so-called post-dated cheque, where nations pledge to make changes when treaties are next reopened.

The UK is right to expend political capital on protecting the City. Controlling migration, its other key policy interest, is laden with emotion and complexity because of the ongoing European refugee crisis. And the threat of being marginalised on financial issues is real. The UK’s reluctant imposition of the European Union’s misguided cap on banker bonuses is a good example of what would increasingly happen if Britain lacked a tangible voice.

Osborne is wise to take a proactive role in heading up these negotiations. Fashioning a sustainable relationship between the City and Europe would constitute a welcome departure from political gimmickry. He no doubt realises it would also give him support for a future run at becoming prime minister.


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