35 The Lisbon Strategy and competitiveness
| (a)
(26146)
—
—
(b)
(26161)
14509/04
SEC(04)1397
| Report from the High Level Group chaired by Wim Kok: Facing the challenge — The Lisbon strategy for growth and employment
Commission staff working document — European Competitiveness Report 2004
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| Legal base | — |
| Document originated | (b) 8 November 2004
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| Deposited in Parliament | (a) 24 November 2004
(b) 29 November 2004
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| Department | (a) HM Treasury
(b) Trade and Industry
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| Basis of consideration | (a) EM of 9 December 2004
(b) EM of 13 December 2004
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| Previous Committee Report | (a) None; but see (25302) 5615/04: HC 42-xii (2003-04), para 23 (10 March 2004)
(b) None; but see (25137) 15217/03: HC 42-xii (2003-04), para 16 (10 March 2004)
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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, but relevant to any debate on the mid-term review of the Lisbon Strategy
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Background
35.1 The Lisbon Strategy (also referred to as the Lisbon Agenda)
is an over-arching policy adopted at the European Council in March
2000 in Lisbon. Heads of Government established a target for the
Union "to become the most competitive and dynamic knowledge-based
economy in the world, capable of sustainable economic growth with
more and better jobs and greater social cohesion" by 2010.
They determined that this target needed "an overall strategy
aimed at:
- preparing the transition to a knowledge-based economy and
society by better policies for the information society and R&D,
as well as by stepping up the process of structural reform for
competitiveness and innovation and by completing the internal
market;
- modernising the European social model, investing
in people and combating social exclusion; and
- sustaining the healthy economic outlook and favourable
growth prospects by applying an appropriate macro-economic policy
mix."
At the Göteborg European Council of June 2001
an environmental dimension was added to the Lisbon Strategy by
establishing a strategy for sustainable development.
35.2 As the Commission has said, "the Lisbon
Strategy touches on almost all of the EU's economic, social and
environmental activities". Thus matters as diverse as the
Financial Services Action Plan (aimed at improving the internal
market for these services and their competitiveness in the wider
market), the Trans-European Networks (improving infrastructure),
the European Research Area and the Research and Development Framework
(knowledge-based economy) and National Action Plans (social protection
and inclusion) are designed to meet Lisbon Strategy objectives.
And the Lisbon Strategy is prayed in aid of less obvious matters
such as a European space policy. Finally the Broad Economic Policy
Guidelines (together with the Employment Guidelines and the Growth
and Stability Pact) are intended to be supportive of the Lisbon
Strategy.
35.3 The Commission is preparing a mid-term review
of the Lisbon Strategy for the Spring European Council in March
2005.
The documents
35.4 The European Council of March 2004 asked the
Commission to establish a high-level group chaired by Mr Wim Kok,
former Prime Minister of the Netherlands, to undertake an independent
review as a contribution to the mid-term review of the Lisbon
Strategy. The mandate was to identify measures for a consistent
plan for European economies to achieve the Lisbon objectives and
targets.
35.5 Document (a) is the high-level group's report
of its review, commonly known as the Kok Report. This report:
- examines the continuing need
for the Lisbon Strategy, the challenges it faces and the obstacles
to implementing it;
- highlights the need for urgent action to implement
further structural reforms;
- calls for prioritisation of objectives and a
renewed focus on the goals of growth and employment;
- identifies five priority areas for action: creating
a knowledge society, completing the internal market, improving
the business climate, reforming labour markets, and enhancing
environmental sustainability; and
- calls for further steps to improve national incentives
for reform: improved accountability through benchmarking and ranking
of Member States' performance, commitment by Member States to
the delivery of reforms by preparing National Action Programmes,
improved communication to citizens on the benefits of reform and
the costs of inaction, and reform of the Union budget to reflect
Lisbon priorities.
35.6 Document (b) is the 2004 edition of the Commission's
annual report on competitiveness in the Union. The report provides
an analytical contribution to the debate on how to attain the
Lisbon Strategy objectives. This year it examines five issues:
- productivity and the public
sector — this section is mainly a literature review of various
studies on how the size of the public sector affects public sector
performance and the overall competitiveness of the economy;
- European productivity, innovation and public
sector research and development — this section examines
the influence of public sector research and development on output
and innovation in the Union;
- performance in the Union health sector —
this section considers the impact of the health sector on the
performance of Union economies, drawing on comparisons with the
USA and noting the relatively large size of the health sector
in Member States and its potential to affect the performance of
the economy as a whole;
- the European automotive industry: competitiveness,
challenges and future strategies — this section presents
an overview of the European automotive industry and discusses
the industry's global evolution, the factors underlying its competitiveness,
and prospects; and
- the challenge to the Union of a rising Chinese
economy — this section discusses the issues facing the Union,
especially the new Member States, and examines Chinese development
and the role of industrial policy.
The Government's view
35.7 Of the Kok report the Financial Secretary to
the Treasury (Mr Stephen Timms) says:
"The Government agrees that globalisation
has intensified the competitive pressures facing Europe, making
structural reform more important than ever. It shares the view
that Member States need to act urgently to implement further reforms.
The opportunities offered by globalisation should not be missed:
through the reform of labour, product and capital markets, the
EU can capitalize on the growing interdependence of the global
economy, and stimulate growth and employment within its borders.
"The report also reflects several of
the priorities set out in the Government's submission to the High
Level Group, including: a call for greater prioritisation of the
Lisbon agenda with a renewed focus on growth and employment, a
call for strengthened Lisbon governance, a recognition of the
importance of scoreboards to rank Member State performance, and
a call for Member States to set out future commitments to reform.
"The Government agrees with the priorities
identified in the report: creating a knowledge society; completing
the internal market; improving the business climate; reforming
labour markets; and enhancing environmental sustainability.
"The report includes a proposal for
Commission analysis and suggestions for action to facilitate integration
of retail financial markets by the end of 2005. The Government
does not consider this is necessary. Many remaining barriers stem
from differences in national culture, practices and language —
these are all areas where EU legislation likely to be quite ineffective.
It would be more effective to tackle these barriers by non-legislative
means wherever possible.
"The report also calls for reform of
the EU budget to reflect Lisbon priorities, including budgetary
incentives to encourage national reform. The Government agrees
that the budget should be refocused on the Lisbon priorities —
and is arguing for this in the negotiations on the next Financial
Perspective. But it is disappointing, that the report makes no
mention of the need for substantial reform of the CAP and Structural
Funds, which account for around two thirds of Community spending.
It is unclear how incentives for reform would work in practice.
For EU level spending to be justified, it must achieve more than
spending by Member States alone. It is not clear that budgetary
rewards for good behaviour would be consistent with this principle.
"Aside from its formal recommendations,
the report also refers to corporate tax and VAT measures to cut
compliance costs for companies. The Government remains clear that
corporate tax systems remain a national preserve, and that fair
tax competition is the way forward for Europe. Tax harmonisation
would put Europe's global competitiveness at risk. As regards
the introduction of the VAT one-stop scheme, the Commission has
recently brought forward a package of proposals to introduce simplification
changes primarily for business involved in cross-border trade,
including a one-stop scheme. The proposals (EM 14248/04)[95]
support the Government objectives to reduce burdens on business."
35.8 The Minister emphasises that the report's recommendations
are not binding on Member States.
35.9 On the report on competitiveness, the Minister
of State for Trade, Investment and Foreign Affairs, Department
of Trade and Industry (Mr Douglas Alexander) merely says: "This
is a factual background document with no direct policy implications.
However, the Commission may draw upon this report, along with
other evidence, when formulating and considering policy proposals".
Conclusion
35.10 Both these documents add usefully to the
debate about the efficacy of the Lisbon Strategy. The Kok Report
poses some hard questions for policy makers and the 2004 Competitiveness
Report provides useful background information on some of the relevant
issues.
35.11 We clear both documents. But we consider
them relevant to any debate on the mid-term review of the Lisbon
Strategy.
35.12 When we considered the 2003 Competitiveness
Report in March 2004 we reported the Government's view that this
annual production is "an important factual and analytical
basis on which to benchmark progress towards the Council's year
2000 Lisbon goal". But we also reported the Government's
intention to draw to the Commission's attention our view of the
report's unwieldy nature and its own view that the report might
usefully be slimmed down.[96]
We note that this year's report is in much the same format as
previously and we urge the Government to continue to press the
Commission for a report which is more readily accessible, particularly
in relation to its key findings.
95 See HC 38-ii (2004-05), para 5 (8 December 2004). Back
96
See headnote. Back
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