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European Standing Committee C Debates

E-Europe 2005 Action Plan

European Standing Committee C

Thursday 13 January 2005

[Mr. David Chidgey in the Chair]

E-Europe 2005 Action Plan

2 pm

The Minister for Energy and E-Commerce (Mr. Mike O'Brien): I welcome this opportunity to debate the Commission's communication—an update on the e-Europe 2005 action plan. Information and communications technology plays an important role in business and society at large, both in the UK and in Europe. Clear productivity gains, economic growth and better quality of life can be achieved through its exploitation.

The document we are considering updates to the end of this year the e-Europe action plan. This is a key part of the programme for structural economic reform launched at the Lisbon Council in 2000. The aim is to make Europe the most competitive and dynamic knowledge-based economy in the world by 2010. This year, the Luxembourg and UK presidencies will be working with the Commission and member states to develop a successor covering 2006–10. However, that is not the subject of our debate today.

Our main objectives are that the new action plan should, in due course, be robust enough to take account of the rapid changes that have taken place in the market and also be outward looking, taking account of the experience outside Europe and learning the lessons of the last five years. What are those lessons? First, Lisbon was clearly right to give a pre-eminent position to the importance of ICT. There is now substantial research evidence that about half the average labour productivity growth between 1995 and 2000 in the United States of America, in Europe as a whole and in the UK was due to investment in ICT. While in Europe as a whole the figure was about 43 per cent.—the UK did somewhat better at about 50 per cent.—more than half the difference between the US and European average growth rates has been attributed to the greater US investment in ICT, especially in earlier years.

While the UK is leading Europe in this area, the US is still investing much more heavily in ICT than Europe as a whole. We have to watch with care how the US uses ICT to develop its economy. That evidence is backed up by work on the UK economy showing that the single most important driver of growth in recent years has been investment in ICT.

Successive Organisation for Economic Co-operation and Development reports show a positive correlation between investment in ICT and productivity. Studies of companies in manufacturing and in services have also shown the importance of ICT to price competitiveness and efficiency. Recent work on data up to 2002 shows, after corrections in respect of other factors, the pervasive impact of high and low use of ICT and the high return that can be achieved
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from ICT investment where other elements—coupled, importantly, with increased skills—are also present.

These studies also show that the key is no longer just access to ICT, but the extent to which ICT is used by companies to improve their entire business process. That is supported by the independent benchmarking studies commissioned annually by the Department of Trade and Industry for eight years, which compare ICT usage in the UK with that in other major economies and show us to be among the leaders. There is no room for complacency on that; we must keep working at it and ensure that we stay in that leading position.

The crucial question that has been posed is whether such gains could naturally take place without help from either the UK Government or the EU. The answer is not straightforward. While only business itself can adopt the technologies and skills necessary, in many cases it is Governments who provide the environment—good or bad—and conditions in which such adoption takes place.

The Government are an important customer for ICT in relation to e-government and an important agent in addressing the market failures that prevent, delay or restrict positive progress from being made. In the UK, the Government have had a direct result in e-development of authentication technologies and encryption systems through their procurement for departmental programmes.

An example of a potential market failure is broadband. Given the success that occurred in 2002, people sometimes forget that all the signs were that by this year 10 to 15 per cent. of the UK would not be able to access broadband. That would have severely limited the usefulness of the internet to business and citizens alike, because 10 to 15 per cent. of the potential market would not have been able to access those using broadband for business purposes.

That predicted failure prompted the creation in 2003 of the joint Department of Trade and Industry and Department for Environment, Food and Rural Affairs rural broadband unit, the remit of which was to harmonise central and regional policy action. Partly as a result of its activity, including aggregating the demand for broadband by public utilities, especially in rural areas, availability across the UK is forecast to stand at 99 per cent. by the summer. That remarkable success shows that the Government, when acting with the private sector, can significantly intervene and beneficially affect how markets develop.

At the European level, similar arguments apply. There are clear advantages for business in having a dynamic and effective single market in ICT. The action plan addresses that by helping to build a common legal framework, thus increasing business and consumer confidence—for example, the e-signatures and e-commerce directives are fundamental to Europe-wide e-business. The action plan increases competition throughout the Union through, for example, the registry framework for electronic communications and helps to spread best practice on issues such as e-government, e-inclusion and information security.
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I look forward to a good debate and the Committee's endorsement of this programme.

The Chairman: We now have until 3 pm at the latest for questions to the Minister. I remind hon. Members that questions should be brief and asked one at a time. There is likely to be ample opportunity for all hon. Members to ask several questions.

Michael Fabricant (Lichfield) (Con): The Minister will note that in the report there is a plan for broadband aggregation throughout Europe. Given the Government's experiences with the Broadband National Aggregation Board, in which £571,000 of public money was invested only for it to be discontinued, does he think the European initiative will have any greater success?

Mr. O'Brien: The hon. Gentleman is seeking to undermine the remarkable success of some regional development agencies in developing the broadband strategy. It has worked well in some areas and less well in others, and we are now ceasing the central involvement that is no longer required because of how it has developed.

Europe will play an increasingly relevant role. It will not intervene in the market as such, but will act in a way that shows that the market is moving in a particular direction. It will enable various private sector organisations to see that there are ways of aggregating and taking advantage of business opportunities, which will, I hope, profit the private sector and benefit the whole community.

Richard Younger-Ross (Teignbridge) (LD): I shall refer to page 7 of the document before us. The European Scrutiny Committee referred the report to us for a number of reasons, one of which is that it asked

    ''whether the specific instruments and targets adopted for eEurope are the right ones or whether a greater impact could be achieved through a new battery of policy tools''.

It questioned whether the Commission is being robust enough in considering that and went on to criticise the Minister for not asking the right questions of the Commission. Will he outline what questions the Government have put to the Commission and why the statement made by the European Scrutiny Committee may be wrong?

Mr. O'Brien: We have been ensuring that the Commission is aware of how the market is developing in this country. We have asked the Commission to ensure that it deals with security issues and with the fact that the ICT and the broader telecoms market is changing and coming together, and to adjust its policy to take that into account. A strategy is needed in the coming decade for the private sector to be given the standardisation that it requires in telecoms and in ICT to ensure a broader, more open market across the whole of Europe.

We want the Commission not to start interfering with how our domestic open market operates, but to try to establish the standardisation required to ensure that the private sector can take most advantage of the opportunities in the other 24 EU members. Is the Commission doing all that? Those are the issues that we have placed before it.
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Mr. Michael Jack (Fylde) (Con): The extract from the 25th report of the European Scrutiny Committee on page 3 of the document states:

    ''New technological developments such as mobile communication technologies will also be taken into account.''

For example, UK mobile suppliers have launched 3G services, which have a data-transmitting capability in the context of the matters under discussion. What steps are the Government taking to encourage the competition Commissioner to ensure that the outrageous charges associated with roaming in Europe and the use of the technologies do not act as a deterrent to the wider use of e-commerce through mobile devices at a uniform price across Europe?

Mr. O'Brien: It is not only the European Commission that addresses those competition issues, although it is right that it should be involved. We are talking bilaterally to other countries that are involved in some methods of determining high-roaming charges and encouraging them to adopt a more open and free-market approach to establish competition. It is part of the process of encouraging them and showing them that a more open approach can work more effectively and successfully.

We also want to ensure that where the Commission has a role, it recognises the need to keep prices low. To some extent, it is for Ofcom, not so much the Government, to take those steps and to engage in the detail of them should they take place, although I appreciate that we are ultimately responsible, as we created Ofcom.

Ofcom has been directly involved with the Commission in encouraging the changes that are necessary in the market, and as a result some of the prices are coming down. The hon. Gentleman is right to raise the matter; it is, and will remain, important for us and for Ofcom.

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Prepared 13 January 2005