James Ashton: Our unknown man in Brussels has a key role now

What a turn-up. No sooner had Downing Street busied itself by briefing that landing the European Commission energy job might not be so bad after all than a Brit was parachuted into a coveted economic role in Brussels.

Lord Hill’s posting as commissioner for the financial services industry — or to give the portfolio its full title of financial stability, financial services and capital markets union — should have them dancing on the streets of the Square Mile.

Only the other day, a chief executive was remonstrating with me that if the Germans were allowed to stand up for their manufacturers and the French defend their farmers, then why couldn’t Britain do more to defend the City from endless rules and regulations that the bosses see as taking a knife to competitiveness?

This appointment is a start. Of course, the focus for the next few days is on saving the union with Scotland. And if Alex Salmond wins, the country he leaves behind is more likely to vote in 2017 to exit the EU because its politics will have lurched to the Right. But Hill has a chance now to demonstrate from the inside that remaining in Europe is the best for Britain — something which most business chiefs, at least, fervently believe in.

Just as Westminster leaders have decamped to Scotland to try to swing a No vote for independence, this new job also sends out a message loud and clear that the EU doesn’t want Britain to break away. David Cameron was braced for his man to be handed a junior role after leading the opposition to Jean-Claude Juncker’s selection as Commission President. Nor did he heed the Luxembourger’s call for more women to be sent to Brussels by member states. This is hardly a thank-you for the Prime Minister’s loyalty. Look on it as a surprisingly sober choice by the man who is said to sip cognac for breakfast.

There are those who believe that where Britain engages, it generally gets its way in Europe. That’s hard to swallow for anyone who has been shopping for a super-suction vacuum cleaner recently. But in financial services, supporters point to our influence over the Market Abuse Directive. In truth, the report card is mixed. Britain hasn’t done so well in attempts to overhaul a short-selling ban or block a financial transactions tax, which will be debated once again by finance ministers this weekend in Milan.

Hill, the low-profile former lobbyist and leader of House of Lords, will be kept busy. He inherits a number of initiatives from Michel Barnier, who was painted as the scourge of the City when he took on the internal markets brief in 2009. Certainly Nicolas Sarkozy, the then French president, said the appointment of his former Cabinet minister would herald a new era where “French ideas triumphed on regulation”.

One of those ideas was the cap which limits bankers’ bonuses to one times salary, or two times with shareholder approval. Banks such as Lloyds and Barclays have tried to compensate for lower bonuses by paying higher salaries and discretionary “allowances” and the Treasury challenged the cap in the European Court of Justice this week. Barnier’s last act has been to try to get the European Banking Authority to crack down on allowances, even though the Bank of England has waved them through. Of course, Hill cannot simply reject something that has been enshrined in law. In fact, he must contend with moves in the European Parliament to cap total compensation, not just bonuses, as the feeling goes on that Anglo-Saxon capitalism should be reined in further.

Also waiting in his in-tray is a report from Bank of Finland governor Erkki Liikanen that recommends yet another industry restructuring, this time to carve up the largest banks in Europe so that investment and retail banking activities are properly separated.

A more positive challenge comes from the creation of a “capital markets union” designed to improve access to finance for companies across the 28-nation trading bloc, and not just bank finance. Done properly, and London, already the home to Europe’s deepest capital pools, could benefit. So too could economic growth in the region, which has been anaemic. Despite some Mediterranean countries escaping recession, the wheels are falling off in France and Germany is suffering from a dip in foreign trade.