Cameron uses UK veto - what will it mean for us and Europe (and the rest of the world)?

[Callisto]

Just that.

I'm glad that DC had the balls to use the veto - the treaty being discussed would not have been good for Britain and could have been bad. However, the Asian markets have already responded by falling and I'm guessing that that US and Euro markets will fall too. So, are there any economists (or otherwise) out there who can throw some light on what may happen next?

The financial services sector in the UK is the largest single contributor of tax in the uk economy c11% of the total tax take.
217.154.230.218/NR/rdonlyres/68F49A7E-8255-415B-99A8-1A8273D568D9/0/TotalTax3_FinalForWeb.pdf

A European financial transaction tax would have a massively disproportionate impact on the UK economy compared with the rest of the EU and clearly would leave us in an uncompetative position compared to Asia and the US.

I work in the City and, whilst I can understand some of the reactions to the financial crisis you can't really blame the bankers for the fact that the Greek economy has been unstable for years nor for the fact that Greece was allowed into the Euro despite not having met the economic criteria.

In the long run we do need to rebalance our economy so it's not so reliant upon banking. It's never a good idea to have so many eggs in one basket.

So over time, if we invest wisely in other areas such as green energy or high end manufacturing then seeing the City reduce in size wouldn't be the end of the world.

But if I understand correctly, Europe wanted a financial tax, 80% of which would be paid from the UK. And this pot of money would be used to cover a stability fund for a currency we're not part of, said it wasn't a good idea in the first place and would threaten thousands of our jobs as banks quickly move to more welcoming environments like Hong Kong.

I'm glad he vetoed it but like I say, longer term something has to be done to ensure we are not held to ransom because we're so reliant upon the City.

I believe I read that 50% of UK trade is with Europe. That means 50% of trade comes from elsewhere. Europe is beleagured and many of its economies are really suffering. I think we are missing the point that perhaps the UK should be turning its attention to more stable markets in the rest of the world with which to trade. I know it's easier said than done but this surely would help us boost our GDP as long as we can remain competitive in some areas. (Don't ask me which ones - luxury goods?!)

Just to add to the discussion regarding financial services... Another little fact I picked up recently (gawd knows where) is that 25% of UK income tax revenue comes from those working in the financial services sector. Though this is no excuse for a lack of regulation and a 'them vs us' attitude, we must try and ensre that a major source of income for our government is protected in these times where other forms of government revenue are shrinking.

Just read Chazs' post - sorry about the cross-posting. Think the fact that your stats are bound in something make them more trustworthy than my memory! Especially as I'm an ex-PwC'er and know how pedantic they can be on stats!

Totally agree that the UK needs to develop other industries so that it is not so reliant on financial services for revenue. But, there's a difference between improving and developing other industries so that they're more important and make a contribution vs. repeatedly trying to bash down the biggest industry (difference between raising everything up to the higher standard vs bashing everything down to the lowest standard; the UK seems particularly keen on doing the latter in many things)

Abs - so do you therefore agree with the veto?

I think that it is a good time to invest in UK manufacturing to take advantage of the ever-growing middle classes of Asia. There is less and less Asian cheap labour, meaning manufacturing costs will go up, which means that UK (and US) manufacturing business will become more competative again. Coupled to the fact that, often, Chinese made goods are shite, this gives us the edge. It does need investment, but could start to replace that 50% of trade with the EU. We desperately need to invest in infrastructure too, including nuclear, so that we have decent transport links and energy security. Both of which will make UK plc the place to invest.

Popsandpip - good post. One of our biggest exports is in fact whisky. It is huge. Other industries like high end manufacturing and engineering could make headway if some of our brighter students were well paid and went into it and the economy was not so skewed to financial services.

Also if we restablished our trading links with the old Commonwealth we could import a lot of things, especially food products, for much lower prices than we currently do and be better able to trade with those countries if we got rid of import tariffs designed to protect EU firms.

My personal view is we should leave the EU but stay firmly linked to Europe and instead opt in to the Schengen Area like Norway and Iceland. We would not be an EU member but still closely tied. This would give us the advantages of free trade and common passport area but not have to go along with EU law and treaties unless they were to our advantage. Best of both worlds in my view.

Abs. I agree.

And it's not just manufacturing we should be looking at. We also need to take a long look at ourselves and think how come we don't have a Google/Facebook/Amazon/Apple type company in our economy?

Especially Apple. I mean they are a small employer with a few paltry few hundred stores worldwide. Yet they are the largest, most profitable IT firm bar none. We need more companies like Apple who innovate and create new markets.

If we were the country we once were in terms of output and manufacturing this would have been a good outcome. But whether we want to believe it or not we aren't. And this is going to lead to huge disincentive for members to trade with us without huge new taxes. We are not exactly popular around the world so all the talk about us looking elsewhere for economic allies is empty.

Re Cameron and Europe

it is ALWAYS better be inside the tent pissing out
sadly we are now outside a closed tent pissing in

I'm not sure what the right answer (have not yet taken the cover off this weeks economist)
but I DO know that DC pandering to yahoo backbenchers is never a good idea

it is ALWAYS better be inside the tent pissing out

True, but only if you know that the tent is not going to be ripped apart in an ensuing storm or collapse and bury you......

So Talkin, are you suggesting we should have joined the Euro when it was first introduced?

And do you consider the following rule a price worth paying in order to piss out of the tent?

a requirement to submit their national budgets to the European Commission, which will have the power to request that they be revised

So basically parliament will have to get our budget "approved" by the European Commission. This is the very Europe whom hasn't had it's own accounts signed off for 16 years because of discrepencies. ( Source )

So if we want to spend more money on our pensioners or NHS then France & Germany get to decide if it's a good idea or not.

In fact, Cameron would have probably caved on that point if they'd have given us a opt out on any Tobin tax but they wouldn't even give us that.

So in short, they wanted us to give up the right to spend our own money as we see fit and we got nothing in return.

Non!, Nein!

OK, I have a theatrical background so to me it's a bit like putting on a show involving dancers and singers. The dancers don't need to be there when the singers discuss their parts, and vice versa. Eurozone lot are dancers and we're the singers. We can get on with singing while the dancers wrangle over whether they can afford new dance shoes.

niceguy2
Euro : absolutely not. Soros' speculations against the "snake" showed the fragility of the scheme and the fiddles needed to get Greece into it should never have been allowed.

My problem is that by using the veto he has given the rest of the EU countries the impetus they need to collaborate without reference to the UK

The banks have done a fantastic PR job on the Tobin tax.
The amount we are talking about is around 0.001 % of the value of traded transactions
so it does not include any deposits or withdrawals, just transactions where the banks are already taking a 2% cut
so it will cut the profit the bank makes by around 0.1%
Whooppeee doos
And why is London such a centre for the high risk end of the Financial Services industry (hedge funds, derivatives etc) ?
Because the SEC in New York has balls and jails people when they transgress. That and if they were in the US (where there is no 'non-dom' status) they would have to pay tax on all that they earn.

I really do not see what pensions and the NHS have to do with the EU.
The UK has to get its debt under control (after Broon said he'd abolished boom and bust) but the Germans and French both spend more on healthcare than the UK ....

And yes, the EU bureaucracy is a gravy train that should be FORCED to get its accounts in order - but then again it was having to rely on figures provided in part by the Greeks !!

So it's not 'ALWAYS' better to be inside the tent then yes?

And that's my point with regards to pensions & NHS. It's nothing to do with the EU. So why would we want to submit our spending plans to the EU for their approval? Do you send your monthly household budget to a group of your friends for their approval? Or do you spend how you see fit?

I completely agree that we have to get our debt under control. So joining a club of nations which essentially is disintegrating doesn't sound like the best way to do it.

Do I submit my spending plans for approval?

Well yes actually - I hand over around 30% of my net income and around 10% of all my expenditure to a bunch of bozos in London and hope that they spend it sensibly to provide the services I need and then (not having the vote) am pretty powerless when they cock up.

"a club of nations which is essentially disintegrating"
not sure the Belgians, Dutch, Poles, Austrians, Slovenians, Danes etc would like that description

Popsand I agree and not just on the economic tack but also on the cultural.

I've noticed that year on and year out we've become more euro senstive ie we need to be more euro friendly. All very nice but what about the rest of the world which, surely, is a bigger market.

My dh is italian - when I'm there I'm gobsmacked with the anti non euro stuff (media and talking to people) - surely this hinders us.

I don't know enough to know if he's done the right thing or not.

My mum reckons that;

The Eurozone is going to implode/collapse causing major problems for us.
She reckons that interest rates are going to have to shoot up soon.
She reckons there will be more cutbacks.
She says the next 10 years are going to be hell for people and that we're going to have to get used to a 1950s level of personal austerity. Not been able to afford new clothes, holidays, meals out, new TVs, etc.

I could not care one way or the other.

But I do care about the Olympic opening ceremony being double from 40 mil to 80 mil.

carocaro
DO NOT get me started on the Olympics : PERMANENT destruction in a historic Royal park so the TV companies can get horses jumping over the Meridian
www.nogoe2012.com/

I think they're all at sea in a storm without land in sight. If the storm abates, everyone will cheer. If not there will be a storm of blame. They all think they can control the uncontrollable. Look what happened to King Canute.

King Canute was trying to prove to obsequious courtiers that even he could not turn the tide. He KNEW he'd get his feet wet. He was FAR brighter than the common version of his story implies.

Listening to the news tonight
and picking up on what niceguy said, its only the Eurozone countries (that want 1:1 parity with Germany) that have to have Germany check their books.
AS Germany is the banker I see no problem with that.
Its called Due diligence. I make part of my living doing it.

My ignorance is infinite! I have only heard the common version of the King Canute story. If only diligence were more prominent.

What would have happened if the UK had joined the Euro? Any analysis on this anywhere? Are we just assuming it would have still all gone tits up and we;d be in more shit or would our involvement (and Sweden's and whoever else is not in who I can't be bothered to google just now) have changed anything?