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European Council (Vienna)
3.30 pm
The Prime Minister (Mr. Tony Blair): With permission, Madam Speaker, I will make a statement about the meeting of the European Council on 11 and12 December which I attended in Vienna along with my right hon. Friends the Foreign Secretary and the Chancellor of the Exchequer and the Minister of State, Foreign and Commonwealth Office, my right hon. Friend the Member for Gateshead, East and Washington, West (Ms Quin). The Council conclusions have been placed in the Library.
The Council concentrated on employment and economic issues, Agenda 2000, enlargement, the future development of Europe and a number of foreign policy questions.
At Vienna--the last Council before the introduction of the euro by 11 member states--we confirmed and strengthened the strategy on economic reform and employment agreed at Amsterdam and Luxembourg last year and reinforced at Cardiff earlier this year. Macro-economic stability provides the essential basis for long-term growth. Supply-side reform must go hand in hand with that.
Member states have now submitted national progress reports on the reform of product and capital markets. Those will be subject to rigorous peer review in the first part of next year.
There will be a parallel review of national employment action plans, the first set of which were submitted during the UK presidency. At Vienna, we agreed revised employment guidelines on which next year's national action plans will be based. The new guidelines fully reflect British priorities. They place particular emphasis on tackling long-term unemployment; promoting equal opportunities; making a reality of lifelong learning; exploiting fully the potential of the service sector; creating the right climate for entrepreneurship; and reviewing tax and benefit systems to provide incentives for the unemployed to take up work or training. They promote social inclusion and examine regulations to ensure that they reduce barriers to employment. That work will be carried forward under the German presidency to produce an employment pact within the framework of a wider process aimed at employment, growth, stability and economic reform.
Jobs remain Europe's top priority. The strategy developed over the last 18 months is beginning to bear fruit, with more than 1 million new jobs created in the EU in the past year, including more than 250,000 in the UK, and the overall rate of EU unemployment falling below 10 per cent. for the first time since 1992. However, member states need to step up their efforts to implement real reforms in their labour markets, learning from one another. It was noteworthy that at Vienna representatives of small business people were included for the first time in the dialogue between Heads of Government, employers and unions.
Also in the economic field, we agreed new measures to complete the internal market, not least in financial services; to improve innovation; to increase the availability of risk capital; and to strengthen investment in infrastructure. We agreed on the gravity of the challenge posed by the millennium bug and the particular need to protect national and international infrastructure.
We also discussed the desirability of better economic policy co-ordination. A small part of that discussion concerned tax policy. The Council agreed that co-operation in that area is not aimed at achieving uniform tax rates or preventing fair tax competition; rather its aim is to reduce harmful distortions in the single market, prevent excessive losses of tax revenue and encourage employment-friendly tax structures. Work will continue on long-standing proposals on energy taxation and on taxation of savings, with a view to reaching agreement by next December. The UK Government will ensure that British interests--including those of the City of London--are fully protected and promoted in those discussions.
On a separate tax matter, I and others called for a review of the 1991 decision to end duty-free sales in Europe from next year, not least since the proposed successor arrangements risked ridicule. The Council asked the Commission and Finance Ministers to examine by next March possible means of addressing the problem, including a limited extension of the transition arrangements. Unanimity is required to secure such a change, but a door that seemed firmly closed is now at least half open.
The Council endorsed the Finance Ministers' report on external representation of the euro area. The UK's essential interests are protected--our membership of the G7 and other international forums will continue as before. We also confirmed an agenda for reform of the international monetary and financial system very much in line with the ideas for which my right hon Friend the Chancellor and I have been arguing: more transparency in international and national financial markets, better co-operation between the International Monetary Fund and other actors, and strengthened prudential and regulatory standards.
Much of the discussion in Vienna was about Agenda 2000. This is a wide-ranging and important negotiation embracing the reform of the common agricultural policy to help the consumer, to create a more efficient and competitive agriculture sector and to reduce the burden to the taxpayer; and reforms to the structural and cohesion funds to ensure that they are fair and affordable, including after enlargement. On future financing, the UK is among a large group of member states arguing for stabilisation of expenditure at current levels by 2006. Vienna confirmed the political objective of reaching overall agreement at a special meeting of the European Council on 24 and 25 March.
As for the British budget rebate, I repeat what I said in Vienna. The rebate is still fully justified and will remain. Even with it, the UK is the fifth largest net contributor in per capita terms, while we are ninth or 10th in terms of gross national product. We still pay far more than countries such as France, for example, with the equivalent population and slightly higher national income.
On enlargement, the European Council welcomed the fact that the first practical results have been reached in negotiations with Cyprus, Hungary, Poland, Estonia, the Czech Republic and Slovenia. It also welcomed progress made by Romania, Slovakia, Latvia, Lithuania and Bulgaria. It welcomed the reactivation of Malta's application, and recognised the importance of implementing the European Union's strategy to prepare Turkey for membership. Work in all these areas will intensify next year.
During the UK presidency, my right hon Friend the Deputy Prime Minister led work in the European Union on integrating environmental policy into other community policies. The Austrian presidency carried forward this work in transport, energy and agriculture. At Vienna, we agreed that it should be developed further into the spheres of international development, the internal market and industry.
At Cardiff, I launched a debate on the future development of the European Union which was carried forward at the informal summit in Portschach in October. We agreed in Vienna further steps to make a reality of subsidiarity and improve the effectiveness of EU institutions. We will issue a millennium declaration setting out the Union's priorities for the period ahead at the end of next year, to coincide with a new Commission taking office.
At Portschach, I urged the strengthening of the EU's foreign policy, not least by backing it with a credible capability for military action in regional crises where the US or NATO as a whole does not wish to be engaged. The joint declaration agreed with the French at St. Malo on 4 December gave us a sound basis on which to build this initiative. It was widely welcomed by partners at Vienna. We agreed that work should be taken forward under the German presidency. There is, of course, no question of undermining NATO in any way. Strengthening European defence capability will, I believe, strengthen NATO.
On current foreign policy issues, we underlined the urgency of bringing the parties in Kosovo to a political agreement and the importance of the European Union continuing its political and economic support for the middle east peace process. We repeated our readiness to help Russia overcome its present severe difficulties, and agreed that Russia should be the subject of one of the first common foreign and security policy common strategies when the Amsterdam treaty enters into force.
The Vienna Council also made useful progress on the economic and employment points, and above all laid a solid foundation for the difficult Agenda 2000 negotiations in the next three months. Britain's interests were safeguarded and promoted without difficulty. We defended our positions in a constructive way, just as others defended theirs.
In the days before Vienna, we issued joint statements with Spain on structural reform, with Sweden on social policy, with France on defence and with Germany on tax. All of those were welcomed in the discussion and reflected in the conclusions. At Vienna itself, we helped shape the debate on economic and employment issues, on Agenda 2000, on enlargement and on other issues, in sensible directions fully consistent with our own national interests.
This Government, I believe, have transformed Britain's relations with the rest of the European Union since they took office. It is in the fundamental interests of this country that we remain fully engaged in the debate on the development of the European Union. On the Government Benches, we have the confidence in our arguments, and in our ability to build support for them, to believe that we can win the debates in Europe in favour of economic reform and an open and decentralised Europe.
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