It used to be said that the two things you could never escape were death and taxes.To these we can now add a third item: regulation.

Regulation once had a good name: everyone knew that it was necessary, for example, to maintain safety standards and protect consumers. When done sensibly, as it was in the 1980s, it could also provide another service – the revolutionary market liberalisation in the UK’s gas, electricity and telecommunications markets would not have been possible without the sure steer from the regulatory bodies established by Conservative governments to reassure consumers and to ensure competition and standards of service.

But more recently, regulation has become a tarnished word, associated with unnecessary burdens on honest and diligent businesses which erode profitability, waste time and sap the morale of staff. So regulation may sometimes be necessary in protecting employees, investors and consumers, but we should be sure that the benefits are real ones which outweigh the costs of implementation.

The European Union’s financial services action plan (FSAP) was introduced in 1999, and it was at first welcomed by the City and by those who believed that it was time to liberalise Europe’s financial markets. After all, the creation of the single market in goods has been one of the EU’s greatest successes, and it is only natural that the creation of an open market in financial services should follow.

If we are to judge just by the amount of activity the FSAP has been a success, with action taken in 39 important areas such as insider dealing and prospectuses. It was helpful that that the former internal market commissioner, Frits Bolkestein, was a champion of liberalisation, but his efforts were often thwarted by a Commission whose head, Romano Prodi, failed to step in when nationalist protectionists interfered. This happened notably when German MEPs blocked the EU’s plans on cross-border takeovers and when Italy manoeuvred to prevent the trading of equities other than through stock markets.

Nevertheless, a lot has been done, and Bolkestein considers the FSAP as his greatest success. But fatigue and some indigestion has set in. The City used to be a textbook example of self-regulation, but since the election of the Labour government in 1997 it has been subjected to two major regulatory movements. The creation of the Financial Services Authority and the imposition of a mountain of European regulation have led many in the City and elsewhere to ask for a breathing space. Their one-time enthusiasm for the FSAP seems a distant memory, and was based on a desire for meaningful liberalisation, not excessive regulation.

The good news is that not only do we have a new commissioner, Ireland’s Charlie McCreevy, who is committed to deregulation, but we also have in Joao Manuel Durao Barroso a president of the Commission who is determined, above all other aims, to turn around Europe’s declining competitiveness.

There are inherent problems in regulation of the financial markets. It is hard to think of any industry as competitive and as innovative as the modern financial services industry. It is also hard to think of any business that is quite so complex.

Inevitably, there will be many cases where regulation will be out of date by the time it is implemented. For example, at a recent meeting of the European parliament’s economic and monetary affairs, we were discussing the EU’s plans for clearing and settlement at a time when the London Stock Exchange is subject to two takeover bids that, if implemented, will blow the Commission’s plans off course or possibly even out of the water.

So it is a relief that McCreevy’s priority is to analyse the impact of current EU legislation before proposing anything new, and that he plans to withdraw such regulations that appear not to be working. He already has much on his plate, what with the Basel II capital adequacy requirements and the new accountancy standards to implement.

The Conservatives in Westminster and Brussels will be considering the next phase with keen interest. We will continue to champion the liberalisation that we know is in Europe’s interest, but we will also take heed of the City’s judgement that at this time a period of consolidation and review is what we all need.