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Michael Connarty: Should not the removal of undistorted competition be welcomed, when we know that it is combined with the victory on the services directive, which has protected fundamental services such as the health and other social services in this and other countries? It is about competition, but with a realistic assessment of the needs of countries to have fundamental social services.

Sir Stuart Bell: I am grateful to my hon. Friend. Competition is in the interests of the consumer, the producer and the wider European Union of some 570 million citizens. There are benefits, as my hon. Friend the Member for Llanelli (Nia Griffith) mentioned earlier, from one end of the Union to the other. My hon. Friend the Member for Linlithgow and East Falkirk (Mr. Connarty) also anticipated my comments on financial services.

One would imagine that the Conservative party, which believes in free trade, believes in the extension of the financial services directive. One would think that Conservatives welcome the fact that the City of London, the greatest financial city in the world, will be able to march into Paris, Frankfurt, Milan and extend the wonderful financial services of our country. Yet the hon. Member for Castle Point (Bob Spink), who is no longer in his place, and Conservative Members more widely look on the financial services directive as though it were some element of protectionism. They do not want qualified majority voting on financial services because they believe that if we have it, we will lose again. In fact, that is contrary to what the Conservative party believes in—or should believe in. That takes us back to the point made by my hon. Friend the Member for Newcastle upon Tyne, North (Mr. Henderson), who wondered what the present Conservative party was all
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about. Does it ever look itself in the mirror or think about what it is saying about business men, industry and the City of London? That is a conundrum that no Labour Member is able to fathom.

I will take note of your counsel, Mr. Deputy Speaker, because I know that other Members want to speak. The internal market and the Lisbon agenda are not perfect. The hon. Member for Runnymede and Weybridge was absolutely right to say that it has taken us 50 years to get where we are; the internal market is not complete and it needs structural reform. We need more competition and more flexibility, leading to better jobs. We need less protection, more growth and employment, improved productivity and enhanced competitiveness, which are all linked to social provision. Economists and the hon. Member for Runnymede and Weybridge might lament the slow pace of implementation of the Lisbon agenda, but they should take into account the fact that net profits of the Union’s top 300 quoted companies rose 56 per cent. between 2000 and 2004. The return on equity, furthermore, was 14.8 per cent.

The truth about this European Union of ours and the Lisbon agenda is contrary to what the Conservatives suggest. We, as Great Britain and the United Kingdom, are here within the Union to give leadership. We need to send out the message from this House of Commons that the single market and the Lisbon agenda will give us a strong economy, leading to prosperity—a prosperity that also enables social provision.

The Union’s economic strength is the single market. As member states’ activities converge, enacting their own structural reforms, so the well-being of EU citizens will be advanced, strengthening the concept of interdependence and assuring the future of all our generations to come. That is the message—the positive message of the Lisbon agenda and the positive message of our Government—that this House should send out. That is how we will lead the debate through the amending treaty and back into the councils of Europe.

3.59 pm

Adam Price (Carmarthen, East and Dinefwr) (PC): It is useful to remind ourselves of why we are discussing a European treaty plain and simple, and not a treaty on the European constitution. The reason is that the people of France and the Netherlands said no. One of the main things that they said no to was a vision of Europe in which public services were privatised and the social gains of the past 50 years were sacrificed in order to secure the economic gains from the single market, which we have heard so much about in this debate.

That is not the realm of a Eurosceptic fantasist. After all, the Secretary of State said that removing barriers to competition was the fundamental task of the European Union. As for the Commission, it began with the network industries—the utilities in energy and telecommunications—but it has already moved on. Only last week, the third postal services directive was agreed, which will almost certainly mean the end of a publicly owned postal service in small European states such as Luxembourg, and could spell the end of the Post Office in this country.


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In the neo-liberal newspeak of the European Commission, privatisation is known as liberalisation, which sounds much more benevolent, and public services—far too value-laden a term—are known as services of general economic interest. I do not think that many people would rush to the barricades to defend SGEIs, as the technocrats call them. People did take to the streets, however, against the Commission’s directive on opening public services to competition—the controversial Bolkestein directive—which was part of the reason why the constitution was sunk.

In some ways, the treaty represents progress. There is recognition of public opposition to the further extension of the single market into the public realm. For the first time in the history of the EU, a specific protocol is devoted to services of general interest. My core contention, however—and here I very much agree with the contribution of the right hon. Member for Holborn and St. Pancras (Frank Dobson)—is that the treaty’s provisions are, unfortunately, insufficient to provide us with the necessary legal safeguards against further incursions by the Commission and extension of the single market model into the realm of publicly run, managed and financed services.

The key problem with the protocol is that it does not define the distinction between services of non-economic general interest and services of general economic interest. I will not detain the House on that matter, but that is part of the problem leading to legal uncertainty. What is the legal position of public services as a result of the treaty?

All the evidence is that the Commission takes an expansive line on the definition of the role of competition policy with regard to public services. Only last month, J├Ârgen Holmquist, the Commission’s director general for the internal market and services, said at a conference that in his view, everything apart from the police, the justice system and social security could be marketised. He saw many advantages in promoting that through the Commission’s policies.

As the right hon. Member for Holborn and St. Pancras said, the best example is the Kyprianou directive on health care, which sought to introduce a form of health tourism. Superficially, it might seem to the hon. Member for Twickenham (Dr. Cable) and the right hon. Member for Suffolk, Coastal (Mr. Gummer) that that has some advantages for individuals in the short term. But we should think of the disadvantages. How can one plan a publicly run, publicly owned health system, and manage resources and work force requirements, if the level of operations that will need to be financed—and the financial cost incurred by poorer countries’ health systems in making reimbursement for operations in higher-cost countries—is unclear?

The Commission has dropped the Kyprianou directive, which was supposed to be published on 19 December. The speculation in the European Parliament is that the Commission wanted to avoid the publication of a controversial directive while member states were ratifying the treaty. This is what one socialist MEP—who led the opposition to the Bolkestein directive—had to say about the Commission:

That view has been echoed by the president of the Party of European Socialists, of which the Labour party is a member. The directive has been pulled by the Commission. It may be published after ratification, or even after the European parliamentary elections in 2009, because the Commission is worried about the public reaction.

That worry about the extension of the single market model is not confined to health care. It is happening in other areas as well. In July 2005, the Commission wrote to the Dutch Government informing them—a directly elected Government—that their system of social housing was not compatible with the single market, in order to compel housing associations to sell their empty properties. As a result, the highly successful Dutch housing association model, which mixes social housing with private rented accommodation, is unlikely to survive. Now the European Property Federation has complained to the Commission about municipal housing in Sweden, and it is only a matter of time before the same complaints are made here.

As it stands, the treaty does not provide sufficient legal certainty about the special position of public services. Given past experience, it can therefore be expected that the Commission and the Court will continue to interpret the treaty in a manner that is slanted towards the opening up of more and more public services to competition.

Michael Connarty: The hon. Gentleman is making a strong case, but he ignores the detail of the protocol. Article 1 clearly states that

will be organised

That, combined with the victory won on the services directive in the Parliament since the constitution—thanks to the work of Arlene McCarthy, a Labour MEP—has changed the environment in which the provision will be interpreted. Surely the hon. Gentleman should give credit where it is due, and recognise the progress that has been made.

Adam Price: I said that some progress had been made, in the addition of the protocol as a result of political pressure—not least from the Dutch Government—following the Altmark decision in the European Court of Justice, which gave rise to the Commission’s letter. Nevertheless, the Party of European Socialists group in the European Parliament is very worried about the draft Kyprianou directive.

The central point that I am making, which has been made by public services trade unions and other stakeholders, is that we have no legal certainty because there is no definition in the protocol. Unfortunately, when there has been tension between the rights of subsidiarity and the Commission’s right to remove what it sees as impediments to the four freedoms and to free competition, free competition has always won. That has always been the default position of the Commission and the Court.

We need certainty. The Commission and the Court should not be allowed to override the health, education
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and housing policies of directly elected Governments, whether they are member states’ Governments, devolved Administrations or local authorities. This is a constitutional issue, which is why we cannot support the Government’s motion, and why we uphold the right of the people of this country to a referendum on the treaty.

Mr. Deputy Speaker: I call Mr. Gauke.

Mr. David Gauke (South-West Hertfordshire) (Con) rose—

Harry Cohen (Leyton and Wanstead) (Lab): On a point of order, Mr. Deputy Speaker. This is a very short debate, lasting only three hours, and already the Front Benchers have taken up nearly one and a half hours of it. A three-hour debate on amendments to the European Union (Amendment) Bill will follow, and Front Benchers will have opportunities to speak on those. In those circumstances, I ask whether the debate can continue without the Front-Bench spokesmen. If a procedure can be invoked for that purpose, I should like to move the appropriate motion. Is there such a procedure?

Mr. Deputy Speaker: All that the hon. Gentleman is seeking to do is take up even more time. I think that we should proceed in the normal way.

4.9 pm

Mr. David Gauke (South-West Hertfordshire) (Con): I thank the hon. Member for Leyton and Wanstead (Harry Cohen) for highlighting how extraordinary it is that we have so little time to debate this Bill in the required detail.

I thought there might just possibly be some degree of consensus in the debate on the single market. There is a specific question within the governing party as to whether the Government support the directive on cross-border health care—a point raised by the right hon. Member for Holborn and St. Pancras (Frank Dobson)—and we look forward to hearing their views on that, but on the general issue of the single market, consensus could be found if we were to look for it, although after a slightly snippy contribution from the Secretary of State I am not sure that we found it this afternoon.

Those of us who are somewhat sceptical about some aspects of the European Union welcome the idea of trade; we want to bring down barriers and we are against protectionism. That point of view has been there from the very beginning when the UK joined the Common Market, as my hon. Friend the Member for Hertsmere (Mr. Clappison) pointed out. There is also a recognition by those on the Government Benches and others who tend to be more sympathetic to the European Union that not everything is going quite as well as it might be in this regard. The Government’s own assessment of the single market, published a year or so ago, said that

There is a recognition on all sides that too much regulation is coming from the EU and that that is damaging the competitiveness of Europe as a whole and the single market, and in particular that it is causing difficulties with job creation. The Minister for Europe made a point last night about there being 92 million economically inactive citizens of the EU;
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moreover, EU growth is slower than that of the US and our unemployment is higher. As the Prime Minister said when he was Chancellor,

Judy Mallaber: If the hon. Gentleman’s party were to seek to renegotiate the treaty, given the importance of preventing unfair competition through the exploitation of workers, would it feel that any provisions should be introduced on a Europe-wide basis to allow free competition and ensure that there was not unfair competition because of exploitation?

Mr. Gauke: The point I am making is that the current balance is not quite right and that regulation is too heavy-handed. Ministers share that point of view, although I am unsure whether the hon. Lady does. Given the consensus we have on wishing to bring down trade barriers and on the regulatory burdens in the EU being too high, we must examine how the treaty performs in addressing those problems—and it clearly fails.

The heart of the matter is the issue that my hon. Friend the Member for Runnymede and Weybridge (Mr. Hammond) and other Members have raised: the dropping of the objective of free and undistorted competition from the objectives of the EU. That is important. That was a concession made by Tony Blair to the French President, shortly before President Sarkozy became the leading supporter of Mr. Blair’s campaign to become president of Europe, but the Government argue that it does not really matter, as it is all in a protocol. What that point of view fails to appreciate is that European Court of Justice interpretations of the provisions of treaties tend to place greater weight on the preamble and the early articles. Evidence to support that comes from Professor Alan Riley of the City university in London, who wrote for the Centre of Policy Studies:

and he supports that assertion with a long list of examples from case law.

Antonio Bavasso, visiting professor of competition law at University college London and a partner with Allen and Overy, said the following about the changes as a consequence of this deal:

Both those independent experts make the argument that the change will weaken what we see as our objective—free and undistorted competition. I know that many Labour Members do not support that view.

Rob Marris rose—

Mr. Gauke: I do not have much time, but I shall briefly give way to the hon. Gentleman. Does he support free and undistorted competition?

Rob Marris: I have said that I want free and open competition, but I do not like the word “distorted”. Were not the Maastricht treaty’s provisions on monetary
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union and the UK opt-out contained in a protocol, which has protected us all these years?

Mr. Gauke: The difficulty that Labour Members have when they make that argument is that the European Court of Justice will sometimes have to balance two conflicting objectives. If an objective is in the early articles to the treaty or in its preamble, that gives it greater weight than if it were in a protocol. This situation is completely different from the one in respect of monetary union.

Professor Alan Riley makes three important points about the consequence of the downgrading of competition. This is not just a nebulous concept, because he gives three examples. He says that this change will make it easier to expand the scope for lawful state aid and to permit merger clearance on broader industrial policy grounds, and that it will weaken pressure for market liberalisation. That is, of course, the Sarkozy agenda.

When President Sarkozy secured the downgrading of competition, he said:

That is the key point. He continued:


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