Select Committee on European Scrutiny Third Report


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

Legal base
Document originated(b) 8 November 2004
Deposited in Parliament(a) 24 November 2004

(b) 29 November 2004

Department(a) HM Treasury

(b) Trade and Industry

Basis of consideration(a) EM of 9 December 2004

(b) EM of 13 December 2004

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)

To be discussed in CouncilNot known
Committee's assessmentPolitically important
Committee's decisionCleared, but relevant to any debate on the mid-term review of the Lisbon Strategy

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


 
previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2005
Prepared 27 January 2005