Thank you very much, Prime Minister. I’m delighted to be here in Riga and delighted to have had these meetings with you this morning. I’m also pleased that we’re having this, the third meeting of the Northern Futures Forum. I do think that the United Kingdom and the Nordic and Baltic countries - we have common interests, we have common agendas. We also face many of the same challenges, and I think these sorts of fora where we come up with fresh, new ideas for how we meet these challenges is an excellent setting.
But I’m particularly delighted to be the first British Prime Minister to make a bilateral visit to Latvia. I’m very proud of the part that my country has played in backing and always supporting Latvian independence and I think we can deepen the relations that we have. We’ve had good discussions on the economic challenges that we both face, how we can work together to make the European Union more competitive, more flexible, more accountable to its citizens, and on foreign affairs we’ve had a good discussion on Afghanistan, where we’re both working to ensure the security of that country, but also the security of our own countries too.
On the economy, we’ve both talked about how we are competing in a global race, how we need to tackle deficits, how we need to rebalance our economies. I’m very impressed with what Prime Minister Dombrovskis has achieved here in Latvia with one of the fastest growth rates in the European Union and with an excellent record on reducing deficit and debt. We’ve talked about how we can boost trade between our two countries; UK exports to Latvia grew almost 40% in 2011, inward investment from Latvia into the UK was up by a third. But there’s still more that we can do and we have discussed that, including the potential for British engineering companies to play a part in the €3.5 billion Rail Baltica project.
On Europe, we’ve agreed that we should work together to push a reform agenda in the EU to help drive economic growth. That means cutting red tape, it means completing the single market especially in digital and in services, and we’ll be discussing that at our summit later. And we want to secure an ambitious free trade agenda linking Europe to the fastest growing economies in the world and also pushing the EU-US trade agreement, which could be a massive stimulus to the world economy. We also discussed the EU budget deal and agreed the importance of our members of the European Parliament backing the historic deal that we made this month.
It’s been a very useful meeting. We’re two likeminded countries. We face many of the same challenges and we’re absolutely agreed on so many of the steps that are needed for successful economic growth that is pro-jobs, pro-enterprise. Something that is good for Latvia, good for the United Kingdom. So thank you again for the very warm welcome you have given to me and my team.
Good morning, Prime Ministers. Mr Cameron, a little while ago you made a very loud statement that there are a lot of problems in European Union and that there even might be a referendum whether to stay in the Union or not, whereas Latvia is planning to even tighten our bonds with European Union by possibly joining the eurozone next year. So doesn’t that mean that we still have different vision of the future of Europe and, in that context, what exact project or cooperation do you see between our countries? Thank you.
I think there’s bilateral cooperation on trade and investment, but there’s also cooperation within the European Union. And of course Latvia is making the decision to join the single currency. That is your decision as a sovereign country, a decision that you’re fully entitled to make. Britain will not be joining the euro, but the whole point of my speech about the European Union - and I think this is an approach that Prime Minister Dombrovskis would share - is that we shouldn’t be asking every European country to do exactly the same thing in exactly the same way at exactly the same time if we want to have a successful, open, flexible Europe that can appeal to new members to join it.
I think it’s particularly important we make sure the EU remains flexible, and Britain is at the heart of the single market. It was a project that we very much drove, and we think it’s the most successful part of the European Union today. So we’re at the heart of the single market but we’re not a member of the Schengen Agreement - we maintain our own borders - and we’re not a member of the eurozone - we maintain our own currency and our own independent economic policy. But I think it’s right that countries within the European Union can make these choices, and I think that a union that has flexibility is actually more likely to be successful and strong than one that insists on a ‘one size fits all’ process. I think we had good discussions about this this morning.
Prime Minister, are you disappointed in the decision taken at Brussels to cut bankers’ bonuses? Do you think it could damage the City of London, and does it stiffen your resolve to claw back powers from the EU?
Can I also ask: Latvia has corporation and capital gains tax of 15% and a flat tax on income of 25%; if you were running a Conservative government, would the UK’s tax regime look more like Latvia’s?
On the negotiations in Brussels on bank regulation, let me make a couple of points clear. First of all, Britain wants to have effective bank regulation. One of the failures under the last government was the failure of having effective bank regulation. We will look carefully at the outcome of the negotiations last night. I think there are a couple of important points to bear in mind. First of all, we are absolutely clear that we must be able to implement the Vickers plan in the UK, which in some ways is tougher than regulations that are being put in place in other European countries. We want to have this proper ring-fence between retail banks and investment banks, and the rules must allow that to happen. I think that is very important.
The second thing is that in the UK - and not every other European country has this - we have major international banks that are based in the UK, but have branches and activities all over the world. We need to make sure that regulation put in place in Brussels is flexible enough to allow those banks to continue competing and succeeding, while being located in the UK. So, we’ll look carefully at what the outcome of the negotiations was before working out the approach we’ll take at Ecofin next week.
As for the very attractive sounding Latvian tax system, obviously there are advantages if you are able to redesign your tax system when you achieve your independence and start, as it were, not from scratch, but start with a wholly new approach. But the idea of flatter and simpler tax rates and tax systems has its attractions. We have been able to do that in some cases in the UK. For instance, our corporation tax rate is heading down towards 21%, and there was a report by KPMG just this week saying that, in the course of just three years, the UK has gone from having one of the least competitive corporate tax systems to having one of the most competitive corporate tax systems. So, we have made good progress on that front.