Public Banking Enquiry

David Cameron has today called for a public inquiry and investigation into the problems with the regulatory framework that led, in part, to the recent banking collapse and economic crisis.

An intelligent move by Mr Cameron, though it did take him some considerable time to get around to it seeing as others had been asking for an inquiry months ago.

However, even if Mr Cameron does get the inquiry he wants, the report may not come soon enough. Already, the great and the good in Europe are pressing ahead with plans to pass the regulation of all financial markets and hedge funds onto the European Union’s undemocratic institutions.

Although it was entirely predictable that the EU would use the financial crisis (which they played their part in creating) as a means to further their process of political integration and ever closer union, it would have been helpful if, just for once, they ignored their political project and attempted to understand the causes of the regulatory problem they are supposedly trying to solve before legislating to correct it in the way they are now.

Parliamentary Representation

On her blog last week, Zehra Zaidi highlighted recently proposed plans by David Cameron, in an interview with the Financial Times, to cut the number of MPs in the House of Commons.

The FT article briefly notes that Cameron wishes to cut the size of the Commons by at least ten per cent, which in real terms would account for around sixty MPs and could lead to the axing of a number of safe Labour seats.

In spite of the supposed independence of the Boundaries and Electoral Commissions, as Zehra Zaidi rightly remarks, Labour has helped create a substantial imbalance within the system over the past ten years – which of course has been to their benefit.

Therefore, as all political parties that obtain power attempt, in some way or other, to use the system to garner electoral benefits, it’s not that surprising that the Conservatives have now said they will try to rebalance the system if elected.

Click here to continue reading the article…

A Taxing Problem

David Cameron has called on the Government to allow small and medium-sized businesses to defer their VAT bills for up to six months due to the pressure they are coming under in the current banking credit crisis.

Despite the fact that our Westminster Labour Administration would not be particularly favourable to such a plan – at face value it sounds like a good idea, doesn’t it? Well sadly it’s not – and here’s why, as Dr Richard North kindly explains:

There are, however, just one or two tiny little problems with this idea. VAT is, of course, an EU tax, implemented via the VAT 6th Directive. A payment holiday on VAT would amount to a de facto reduction in the rate of tax, which is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

That, though, might be the least of Mr Cameron’s tiny little problems. Member states are required under EU law to collect VAT, a proportion of which goes to the EU coffers – known as the ‘own resource’. Collection procedures are also defined by EU law, requiring the imposition of penalties on late payment – typically one percent per month. Changing these procedures unilaterally, guess what, is not permissible without the unanimous approval of all 27 EU member states, following a proposal to that effect from the Commission – which it not required to deliver.

Under certain circumstances, member states are entitled to adopt a simplified procedure for charging VAT, under Directive 2006/69/EC, but that does not include any provision for delaying tax payments. To the contrary, the Directive allows special provisions to enable member states to “prevent distortion of competition,” which rather shows where EU priorities lie.

If these hurdles were somehow to be overcome, however, unilateral action by the UK in offering a tax holiday would certainly be considered a ‘distortion of competition’ under Single Market rules. At the very least, Commission permission would have to be given, which will not necessarily be forthcoming.

And, since Mr Cameron’s proposals affect only small and medium-sized businesses, larger firms might be moved to complain. A company like McDonalds, for instance, would have a just complaint. It regards itself as a ‘group of small businesses’ under one banner. Fighting as it does for market share in competition with other high street outlets, it could argue that different rules on payment would most certainly distort competition.

There is also the matter of state aid. Broad-brush aid – which includes tax-breaks of any form, directed at one sector rather than applied uniformly – would most likely be considered illegal. At the very least, Commission approval would be required, which might not be forthcoming.

Then there is one other tiny little detail. Numerous studies – not least this one – have drawn attention to the danger of deferred VAT payments, making the system even more vulnerable to fraud. This is already a massive problem. Would Mr Cameron want to add to that problem?

David Cameron is calling for something which is practically unachievable. I’m just passing on this important message in case anyone is reading…

Quote Of The Month

The insults have been flying thick and fast on ConservativeHome in the past few days since its editor Tim Montgomerie attempted to take a recent Peter Hitchens Mail on Sunday column, which attacked the Conservative party, to task.

Well, unsurprisingly Tim’s efforts at actually rebutting Peter’s article were somewhat poor to say the least. Again unsurprisingly Mr Hitchens took the opportunity to reply to Tim’s criticisms – and he did so in stunning fashion.

It is worth reading both pieces and the comments in the section below each one. Take note of the fact that those that disagree with Peter generally do not argue against his points but just personally attack him and then dismiss him. Very telling I think.

Anyway, here is my favourite comment from Hitchens’ reply. It’s perhaps just as good as his previous statement that ‘you can’t be in Europe and not run by Europe any more than you can be in Wormwood Scrubs and not run by Wormwood Scrubs’:

In my view, the word ‘Eurosceptic’ means ‘a person who adopts anti-EU rhetoric in opposition, and then surrenders to the EU in government’. This is inevitable. You cannot be in the EU and not run by it, any more than you can be a little bit pregnant. If you don’t like being run by it, you must leave, as all serious students of the subject long ago realised. I don’t think there’s any serious dispute about which side of this fence Mr Cameron is on.

If Tim at ConservativeHome started to regularly post more critical articles (which ConHome’s sycophantic pages currently lack,) in a similar thoughtful vein to Peter’s piece then I might actually be tempted to started visiting and commenting on the site again. Just imagine it – reasoned, reasonable discussion rather than mindless wittering and blind allegiance.