Watching the results of the European Parliamentary election, it would be all too easy to think this does not matter to us. After all, most of our laws come from Westminster don’t they?

Actually, according to many euro-sceptics as much as 80% – possibly more – of our laws emanate from Brussels. Even those politicians prepared remain within the EU admit that it must be about half. But this is something of a numbers game, because what really matters is where economic decisions are made. Admittedly, many of the regulations that affect British businesses do start with the EU, but while some are probably overkill and political madness gone mad, others may well have some relevance. For example, human rights legislation has often helped ordinary people against the government – which cannot be bad (well, not often).

Economic decisions
For most of us, it is what happens to business regulation, interest rates and tax that really matters to us and this is still managed from here, although how much longer this will be allowed to continue depends partly on ratification of the Lisbon Treaty – ostensibly about increasing transparency and democracy – and partly on us remaining outside the Eurozone.

This needs to be seen in a global context. Business regulation can probably no longer be left to individual countries, at least as far as banking is concerned. The is that with fragmented regulation, massive institutions whose turnover frequently rivals the GDP of smaller countries can simply select the country with the weakest regulation, in which to domicile.

This is called regulatory arbitrage and in a world of global finance makes fragmented regulation highly dangerous.

Setting our own interest rates is something that is more ‘smoke and mirrors’ than fact because while the Bank of England’s Monetary Policy Committee can, indeed, determine base rate, it is the banking system that determines the practically more important London Interbank Offered Rate (Libor) and its global counterparts. Libor matters to banks because, as we saw recently when wholesale capital markets dried up, the banks simply didn’t want to lend to each over, even overnight, in case the borrower ran out of money. This led to temporary collapse of financial markets, which taxpayers round the world had to rescue.

The situation in respect of setting taxes is ostensibly more within the control of individual governments. But even here, the VAT rate actually lies within parameters set in Europe. And government spending can only be paid for by taxation or borrowing. As we have seen, borrowing depends on interest rates and those countries that lose their “Triple A” credit rating end up paying more for their borrowing. So in practice governments have little option but to allow global factors to influence their total tax take. They can, of course, micro-manage how tax is raised, but that can lead to the sort of anomalies we saw in the last budget with minimal amounts being raised from those earning £150,000 a year plus, simply for party political purposes.

Who won the election?
In some respects, everyone lost. The UK government has been further weakened by being battered at the polls, but there is no chance of an election to produce a more stable administration – whether of centre-left under Gordon Brown, left under Alan Johnson or centre-right under David Cameron.

We do not need an ineffective and indecisive government; we need one that will lead from the front and help with economic recovery by encouraging entrepreneurship and good management.

When it comes to looking after our retirement planning and investments, we have to look after ourselves and there can be little doubt that vigilance and professional advice are essential. If you are wondering what to do contact Robert Bruce Associates for individual assistance.