11. BROAD ECONOMIC POLICY GUIDELINES
(24203)
5441/03
COM(03) 4
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Commission Communication on the implementation of the 2002 broad economic policy guidelines.
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| Legal base: | —
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| Document originated: | 14 January 2003
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| Deposited in Parliament: | 22 January 2003
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| Department: | HM Treasury
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| Basis of consideration: | EM of 29 January 2003
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| Previous Committee Report: | None
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| To be discussed in Council: | Not known
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| Committee's assessment: | Politically important
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| Committee's decision: | Cleared
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Background
11.1 Broad Economic Policy Guidelines (BEPGs) form part
of an annual process of policy formulation, implementation and
surveillance and ensure that Member States' economic policies
are consistent with the goals of the EC Treaty. BEPGs are at the
centre of the economic policy co-ordination process in the EU
and cover a wide range of policy areas, including public finance,
labour and product markets. The recommendations included in the
BEPGs are not binding on Member States.
11.2 The 2002 BEPGs, which were adopted by the Council
in June 2002, drew attention to four areas of EU policy as deserving
particular attention:
- safeguarding and further strengthening the macroeconomic framework;
- promoting more and better jobs, raising labour force participation
and addressing persistent unemployment;
- strengthening conditions for high productivity growth; and
- promoting sustainable development in the interest of current
and future generations.
11.3 The Commission's guidelines for each Member State
were divided into three parts: budgetary policy; labour markets;
and product markets, entrepreneurship and the knowledge-based
economy.
The document
11.4 The Communication reporting on implementation of
the 2002 BEPGs highlights the following messages:
- following slowdown in 2001, growth started to recover in early
2002 but did not then accelerate. Despite weak economic growth,
employment creation continued, but weakly, and the rise of the
unemployment rate was only marginal. Headline inflation was slow
to come down;
- monetary policy was kept on hold until well into the autumn,
before a further easing towards the end of the year;
- budgetary positions deteriorated in 2002. Progress towards
achieving budgetary positions of close to balance or in surplus
stalled or moved into reverse in several Member States with large
structural deficits. Despite budgetary strains, public investment
was generally maintained or slightly increased. More work is needed
in some Member States in order to secure the long-term sustainability
of public finances;
- given weak economic growth, labour markets on average performed
well. There are the first tentative signs that the labour market
reforms of recent years are beginning to pay off. But good performance
on average hides wide variation between Member States. Reform
in 2002 remained slow and Member States need to do more work;
- progress on the full implementation of the Internal Market
has been disappointing, as has progress in eliminating barriers
to trade and cross-border service activities. But good progress
was made in strengthening competition and regulatory authorities.
State aid continued to decline and liberalisation in the network
industries also continued, though competition remains insufficient;
- progress was made in integrating financial markets;
- several initiatives were taken to improve the business environment
and encourage entrepreneurship. All Member States made progress
in implementing the European Charter for Small Enterprises;
- the EU is slowly catching up with the United States in terms
of information and communications technology (ICT) usage, but
important gaps remain in business R&D and patenting; and
- several Member States introduced measures to promote environmental
protection.
11.5 In the section of the document about individual
Member States the Commission says the UK's macroeconomic performance
"has combined low inflation, sound public finances and steady
growth for a number of years. A platform of stability has been
achieved by recent policies". The Commission says it judges
the key challenges facing the UK as levels of productivity; concentration
of unemployment in certain communities; and the quality of public
transport services.
11.6 On the UK's fiscal policy the Communication notes
that the Government balance was in surplus by 0.7% of GDP in 2001
with a prediction for 2002 of 1.6% and that gross debt levels
are projected to remain under 40% of GDP. On labour market reforms
the report says the UK "surpasses all of the EU-wide Lisbon
employment targets". In discussing product markets the document
notes the UK is "open to international competition... The
economic environment is favourable to entrepreneurship with low
levels of regulation and relatively low corporate tax rates...
state aid is among the lowest in the EU and liberalisation of
the network industries is well advanced". But, although catching
up with the EU average in recent years, the UK's relatively low
level of productivity remains a problem.
The Government's view
11.7 The Financial Secretary to the Treasury (Ruth Kelly)
says:
"The Government has been keen to develop the role of the
BEPGs, in particular to make them more measurable, and to improve
their presentation, as part of the overall programme of EU multilateral
surveillance. The Government supports the production of a Commission
report assessing the implementation of the previous year's BEPGs.
"The Government shares the Commission's overall emphasis
on the need for sustainable non-inflationary growth, coupled with
comprehensive structural reforms on labour, product and capital
markets. The Government's policies for achieving these are: sound
macroeconomic policies based on well-managed public finances and
low inflation; and structural reform, including improvements in
the workings of goods and services markets, reforms to improve
the functioning of labour markets, including better job search,
improved training and better incentives to work for the low paid,
better regulation and promotion of entrepreneurship."
Conclusion
11.8 This document is useful in analysing the economic
policies of Member States in relation to the 2002 Broad Economic
Policy Guidelines. We have no questions in relation to it and
are content to clear it.
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