11 Broad Economic Policy Guidelines
| (26337)
5864/05
+ ADDs 1 & 2
COM(05) 8
| Commission Communication: Second report on implementation of the 2003-2005 broad economic policy guidelines
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| Legal base | — |
| Document originated | 27 January 2005
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| Deposited in Parliament | 7 February 2005
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| Department | HM Treasury |
| Basis of consideration | EM of 15 February 2005
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| Previous Committee Report | None; but see (25306) 5651/04 + ADD 1: HC 42-xi (2003-04), para 21 (25 February 2004)
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| Discussed in Council | 17 February 2005
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 The Broad Economic Policy Guidelines (BEPGs) are at the centre
of the economic policy co-ordination process in the EU. BEPGs
cover a wide range of policy areas, including public finance and
labour and product markets. BEPGs provide the reference text for
the Commission and Council to monitor economic developments within
the EU and Member States. While the BEPGs are central to the EU's
economic policy co-ordination process, they have no binding force.
Until 2003 BEPGs were set annually, but there is now a multi-annual
set of guidelines for the years 2003-2005. Last year the Commission
produced a preliminary report on implementation of these multi-annual
BEPGs.[24]
The document
11.2 This Communication is the Commission's second report on implementation
of the BEPGs for the years 2003-2005. It is one of the background
documents the Commission will draw on in preparing its 2005 Spring
Report on the economy and the mid-term review of the Lisbon Strategy,
both for the European Council. It assesses progress, or lack of
it, in implementing the BEPGs in 2004 and its focus has shifted
from policy intentions, as in the previous report, to policy measures.
11.3 The report summarises this assessment on the
basis of detailed analysis in a two-part annex: the first being
a general commentary and overall assessments of each Member State
and the second containing more detailed sections on each Member
State. The main issues highlighted in the summary include economic
recovery in 2004, the role of macro-economic policies, budget
deficits and sustainability of public finances, labour market
reform, productivity, work incentives, integration of the internal
market (including liberalisation of network industries, such as
the e-communications and energy sectors), integration of financial
markets and competition policy, a knowledge-based economy and
research and development, social cohesion and environmental sustainability.
11.4 The Commission concludes its summary with the
comment, "Overall, progress in implementing the 2003-2005
BEPGs leaves much to be desired" and says:
"Summing up, the overall conclusion from this
second Implementation Report on the 2003-2005 BEPGs is that progress
continues to be mixed. Some Member States are making better progress
than others. For instance, a relatively good follow-up of the
country-specific recommendations has been given by Belgium, Denmark,
Ireland, the Netherlands, Finland and the United Kingdom, while
progress can be considered limited in several Member States. Concerning
the recommendations to the new Member States, addressed just half
a year ago, the assessment of their implementation indicates that,
albeit with different speeds, it goes in the right direction,
notably in Cyprus and Slovakia. Alternatively, when focusing on
the development by sector, relatively good progress has been made
in making the overall business environment more favourable, in
enhancing the effectiveness of competition policies and in improving
environmental sustainability. The pace of labour market reforms,
which was stepped up somewhat in 2003, appears to have been maintained.
Progress, however, has been limited as regards the ongoing transition
to a knowledge-based economy where a substantial gap remains between
the EU and the US. The pace of Internal Market integration also
appears to have slowed down with limited progress noted on the
transposition of Internal Market directives and a continued high
level of infringement cases. Furthermore, the limited progress
in several Member States to reach a sound budgetary position and/or
correct an excessive deficit continues to be a source of concern.
Although some progress was made in improving fiscal sustainability
with inter alia pension reforms in some Member States,
debt ratios remain high and long-term sustainability is not yet
secured in 14 of the Member States in 2004. Taken together, the
overall pace of reform remains unchanged in 2004. It is clear
that with the current reform pace, full implementation of the
2003-2005 BEPGs will not be secured, making it difficult to fulfil
the Lisbon ambitions."
11.5 In looking at individual Member States the Commission's
annex highlights what it sees as four key challenges facing the
UK:
- improving the relatively low
level of productivity;
- addressing the high numbers of working-age people
claiming sickness and disability benefits and sustaining labour
supply in the longer term;
- improving the quality and efficiency of public
services; and
- strengthening the budgetary position so as to
avoid emerging budgetary imbalances.
11.6 The Commission says of the UK:
"After one and a half years of implementation,
the United Kingdom has made good progress in addressing the four
policy challenges that were identified in the country specific
part of the BEPGs. Some progress has been made in addressing the
challenge to improve the relatively low level of productivity.
While competition in specific sectors such as professional bodies
has improved, less progress has been made in the deregulation
of pharmacies and the liberalisation of postal services. Official
evaluation of efforts to boost both public and private R&D
and innovation has been limited. Work is ongoing to improve basic
workforce skills, with initiatives to strengthen apprenticeships
and facilitate adult learning.
"Good progress has been made in addressing the
challenge of reducing the high numbers claiming sickness and disability
benefits and sustaining longer-term labour supply. The government
has recently announced a major extension of existing pilot projects
to support the return to work of benefits claimants.
"Good progress has been made in addressing the
challenge to improve the quality and efficiency of public services.
Reforms are being been made to ensure that increased public spending
is used efficiently and cost-effectively, building on the existing
output-focused role of public service agreements.
"Finally limited progress has also been made
in addressing the challenge added in 2004 on strengthening the
budgetary position so as to avoid emerging budgetary imbalances.
Notwithstanding some signs of budgetary improvement relative to
the deficit of 3.4 per cent of GDP in 2003, substantial uncertainties
exist and it remains too early to conclude that imbalances are
being avoided."
The Government's view
11.7 The Financial Secretary to the Treasury (Mr
Stephen Timms) says, in words identical to those used by his predecessor
in relation to the Commission's previous report:[25]
"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 the need to speed up the pace of structural reforms
on labour, product and capital markets, given the clear risk that
the current pace of reforms will not meet the 2010 Lisbon targets.
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 As we found with the previous Commission
assessment, this document is useful in analysing the economic
policies of Member States in relation to the Broad Economic Policy
Guidelines for 2003-2005. It throws light also on aspects of progress
on the Lisbon Strategy and the internal market. We have no questions
in relation to it and are content to clear it.
24 See headnote. Back
25
Ibid. Back
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