42 Restructuring and employment
| (26474)
7771/05
COM(05) 120
| Commission Communication: Restructuring and Employment — anticipating and accompanying restructuring in order to develop employment: the role of the European Union
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| Legal base | — |
| Document originated | 31 March 2005
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| Deposited in Parliament | 7 April 2005
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| Department | Trade and Industry
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| Basis of consideration | EM of 17 May 2005
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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"Restructuring"
Section 1.272 42.1 The Communication does not define "restructuring".
However, it appears that the Commission uses "restructuring"
as shorthand for the response of industry to technological development
and innovation and the opening-up of competition. So, for example,
restructuring occurs when:
· an
innovation in information technology reduces the number of employees
one company needs or creates jobs, requiring new skills, in another
company; or
· in
response to the removal of obstacles to international trade, a
company moves all or some of its activities to another part of
the world or diversifies into work in which it has a competitive
advantage; or
· because
of a further move towards the completion of the EU's internal
market, a company relocates its operations to another Member State.
The document
Section 1.273 42.2 The Communication:
· explains
what the Commission sees as the EU's role in responding to restructuring;
· provides
an over-view of existing EU policies and instruments to help manage
restructuring;
· outlines
proposals for further action; and
· launches
consultations with the "social partners" (that is, organisations
which represent employers and employees) on two matters —
restructuring and promoting best practice in the way European
works councils operate;
Section 1.274 42.3 The Commission notes that
restructuring is often essential to the survival and development
of businesses. Restructuring also has a part to play in the achievement
of the Lisbon Strategy's objectives for growth and more and better
jobs. But, in addition to the benefits it can bring, restructuring
can impose heavy costs on, for example, the individuals who lose
their jobs and need to retrain and move to another area to seek
work; it can also impose substantial costs on the local communities
in which restructuring occurs. The Communication notes that most
of the response to the challenges presented by restructuring occurs
at the national, regional or local level. But the Commission believes
that the EU has an important part to play in helping to create
the conditions for economic and technological development, in
building the capacity to identify changes and in facilitating
adaptation to restructuring. Moreover, action by the EU is necessary
to fulfil the Community's commitment to social cohesion.
Section 1.275 42.4 The Communication discusses
existing EU policies, and proposals which the Commission has already
made, that are relevant to restructuring. They include:
· the
existing competition policy and the rules which support it;
· the
current Structural Funds and the proposals for changing their
focus and substantially increasing their budgets between 2007-13;[161]
· the
current and proposed framework proposals for research and development;[162]
· the
current and proposed programmes for education and training;[163]
· the
proposal for the inclusion in the Financial Perspective for 2007-13
of a new Growth Adjustment Fund, with an annual budget of €1
billion, to provide financial support for, among other things,
unforeseen events arising from restructuring;[164]
· parts
of the Commission's proposals for the Social Policy Agenda for
2005-10;[165]
· the
new Merger Regulation;[166]
and
· the
Commission's Communication of April 2004 on industrial policy
for an enlarged Europe.[167]
Section 1.276 42.5 The Annex to the Communication
summarises the measures the Commission proposes as part of the
EU's response to restructuring. They are:
· "Review
of the European Employment Strategy, focussing on three priorities:
boosting the employment rate, increasing the adaptability of workers
and companies, investing more in human capital.
· "Reform
of the financial instruments, more particularly to strengthen
the contribution of the cohesion policy, the ESF [European Social
Fund] and the European education and lifelong learning programmes
to the Lisbon strategy.
· "Creation
of a growth adjustment fund … and of contingency reserves
as part of cohesion policy … to deal with unforeseen events.
· "Promotion
of fundamental social standards, decent working conditions and
the social dialogue in external policies.
· "Closer
monitoring of restructuring by the European Monitoring Centre
on Change.
· "Enhanced
sectoral and regional monitoring of sectors liable to undergo
significant changes in their short-term competitive situation.
· "Greater
involvement of sectoral social dialogue committees on restructuring
issues.
· "Creation
of an internal Commission task force on restructuring.
· "Creation
of a 'Restructuring' Forum.[168]
· "A
Green Paper on the development of labour law [to be published
in 2006].
· "Facilitation
of intra-Community worker mobility through proposals designed
to improve the portability of pension rights.
· "Launch
of the second phase of consultation of the social partners on
restructuring and European works councils, in particular with
a view to encouraging their adoption of best-practice guidelines
on restructuring and European works councils."[169]
Section 1.277 42.6 In the Conclusion of the Communication,
the Commission says that:
"restructuring must not be synonymous with social
decline and loss of economic substance. On the contrary, restructuring
can underpin economic and social progress — but only if
such measures are correctly anticipated, and provided firms can
manage the necessary change quickly and effectively, and provided
public action helps ensure that change is carried out in sound
conditions.
"Policies aimed at blocking change and freezing
economic structures can only defer the problem and exacerbate
the negative effects. They would tend to slow down innovation
and lead to a loss of competitiveness on the part of European
companies. Additionally, policies which would in effect make workers
less employable would have grave effects on growth potential and
social cohesion."[170]
The Government's view
Section 1.278 42.7 The Minister for Employment
Relations and Consumer Affairs at the Department of Trade and
Industry (Mr Gerry Sutcliffe) tells us that the Communication
strikes a reasonable balance between the necessity of restructuring
and the need to manage its effect on employment. He says, however,
that the details of the individual proposals outlined in the document
will need thorough examination to ensure that they are consistent
with the principle of subsidiarity and that they would add value.
Section 1.279 42.8 Commenting on the launch of
consultations with the organisations representing employers and
employees, the Minister says that guidelines on good practice,
rather than legislation, are appropriate because of the diversity
of circumstances to which companies have to adapt themselves.
He adds that, if the guidelines were to be turned into legislation,
it:
"would be likely to mean [that] employers, before
making collective redundancies, had to inform and consult employee
representatives about restructuring plans earlier, more often
and in more detail than presently required. This has the potential
to significantly delay and drive up the cost of restructuring
operations that are essential to maintaining competitiveness against
the USA and Asia and would run directly counter to the Lisbon
agenda, threatening its employment and growth targets."
Section 1.280 42.9 The Minister tells us that,
in the negotiations on the 2007-13 Financial Perspective, the
Government has opposed the Commission's proposal for the creation
of a Growth Adjustment Fund. He says that the Government:
"believes that 'unforeseen' expenditure in support
of the Lisbon agenda should be met through reprioritisation and
the existence of sufficient margins within the heading. Most other
Member States share the UK's opposition to the GAF."
Conclusion
Section 1.281 42.10 We welcome the Commission's
view that attempts to block economic change would be inappropriate
and to the detriment of employment and prosperity. We agree with
the Commission on the importance of cooperation between employers
and employees in preparing for and managing restructuring, together
with assistance from public authorities where required.
Section 1.282 42.11 As the Minister says,
the policies outlined in the Communication will need thorough
scrutiny when the Commission presents each of them in full. At
this stage, therefore, it would be premature for us to comment
on the substance of the proposals, beyond expressing our support
for the Government's view of the proposed Growth Adjustment Fund.
Accordingly, we are content to clear the document from scrutiny.
Section 1.283 42.12 We draw the Communication
to the attention of the House because of the economic and social
importance of restructuring.
161 (25423) -; see HC 42-xv (2003-04), paras 38 to
69 (24 March 2004); and (25864) 11606/04; HC 42-xxxii (2003-04),
para 10 (13 October 2004). Back
162
See para 21 of this Report. Back
163
See (25846) 11587/04: HC 42-xxxi (2003-04), para 2 (15 September
2004). Back
164
See (25847) 11607/04: HC 42-xxxiv (2003-04), para 13 (27 October
2004). Back
165
See (26381) 6370/05: HC 38-xi (2004-05), para 4 (15 March 2005). Back
166
See (24160) 5007/03: HC 63-xxxvi (2002-03), para 2 (5 November
2003). Back
167
See (25580) 8875/04: HC 42-xx (2003-04), para 2 (18 May 2004). Back
168
The Commission proposes that this Forum should ensure that all
the initiatives on restructuring fit together and that the Commission,
the Council, the European Parliament, the social partners and
outside experts should take part in the Forum. Back
169
Page 13 of the Communication. Back
170
Page 12 of the Communication. Back
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