Documents considered by the Committee on 27 October 2010 - European Scrutiny Committee Contents

3 Europe 2020 Strategy: integrated guidelines




SEC(10) 488




COM(10) 193

Draft Council Recommendation on broad guidelines for the economic policies of the Member States and of the Union: Part I of the Europe 2020 integrated guidelines

Draft Council Decision on guidelines for the employment policies of the Member States: Part II of the Europe 2020 integrated guidelines

Legal base(a) Article 121 TFEU; —; QMV

(b) Article 148(2) TFEU; consultation; QMV

Department(a) HM Treasury

(b) Work and Pensions

Basis of considerationMinister's letter of 11 October 2010
Previous Committee ReportHC 428-i (2010-11), chapter 9 (8 September 2010)
Discussion in Council(a) ECOFIN 8 June 2010, European Council 17-18 June 2010, ECOFIN 13 July 2010

(b) Employment, Social Policy, Health and Consumer Affairs Council 7 June 2010, European Council 17-18 June 2010, further consideration by Employment, Social Policy, Health and Consumer Affairs Council on 21 October 2010

Committee's assessmentLegally and politically important
Committee's decisionFor debate in European Committee B


3.1 In 2000 an action plan, known as the Lisbon Agenda or Lisbon Strategy, was launched to "make Europe, by 2010, the most competitive and the most dynamic knowledge-based economy in the world". In 2005 the action plan was relaunched for the remainder of the decade as the Lisbon Strategy for Jobs and Growth. As part of the relaunch two-part "integrated guidelines" were agreed. They contained broad guidelines for the economic policies of the Member States and the then Community and guidelines for the employment policies of the Member States. The guidelines were to be taken into account by Member States in preparing and annually updating their National Reform Programmes. Each Member State reported annually on its reform programme and received non-binding recommendations, proposed by the Commission and endorsed by the Council, for future policies.

3.2 In March 2010 the Commission proposed a "Europe 2020 Strategy" for the coming decade, to follow on from the Lisbon Strategy. It set out the challenges facing the EU over the coming decade and the need for "a strategy to turn the EU into a smart, sustainable and inclusive economy delivering high levels of employment, productivity and social cohesion" and proposed:

  • policy priorities that focused on smart, sustainable and inclusive growth;
  • seven flagship initiatives to deliver on those policy priorities;
  • mobilising EU instruments and policies such as the single market to pursue the strategy's objectives; and
  • a governance structure that included five headline targets that the EU should aim to achieve by 2020.

The strategy was to continue with integrated guidelines and the associated reporting and monitoring process.[25] The plan for a strategy was endorsed by the European Council in March 2010.[26] The Lisbon Treaty contains the legal base for the integrated guidelines — Article 121 TFEU for broad economic policy guidelines and Article 148 TFEU for employment policy guidelines. The latter article provides that the employment guidelines must be consistent with the economic guidelines.

3.3 Alongside the Lisbon Strategy has been the Growth and Stability Pact. The Pact, adopted in 1997, emphasised the obligation of Member States to avoid excessive government deficits, defined as the ratio of a planned or actual deficit to gross domestic product (GDP) at market prices in excess of a "reference value" of 3%. Each year the Economic and Financial Affairs Council (ECOFIN) issues an Opinion on the updated stability or convergence programme of each Member State. These Opinions, which are not binding on Member States, are based on a recommendation from the Commission. The economic content of the programmes is assessed with reference to the Commission's current economic forecasts. If a Member State's programme is found wanting, it may be invited by ECOFIN, in a Recommendation, to make adjustments to its economic policies, though such Recommendations are likewise not binding on Member States. This whole procedure is essentially the Pact's preventative arm. On the other hand, the Pact also endorsed a dissuasive or corrective arm involving action in cases of an excessive government deficit — the excessive deficit procedure provided for in Article 126 TFEU (formerly Article 104 EC) and the relevant Protocol. The March 2010 European Council, in endorsing the Europe 2020 Strategy said that "The timing of the reporting and assessment of the National Reform Programmes and Stability and Convergence Programmes should be better aligned, in order to enhance the overall consistency of policy advice to Member States".[27]

3.4 These two documents presented, in April 2010 the Commission's proposals for the integrated guidelines for the Europe 2020 Strategy. It suggested the guidelines should remain largely stable until 2014 to ensure a focus on implementation. The Commission proposed ten guidelines:

  • Guideline 1: Ensuring the quality and the sustainability of public finances;
  • Guideline 2: Addressing macroeconomic imbalances;
  • Guideline 3: Reducing imbalances in the euro area;
  • Guideline 4: Optimising support for research and development and for innovation, strengthening the knowledge triangle and unleashing the potential of the digital economy;
  • Guideline 5: Improving resource efficiency and reducing greenhouse gases emissions;
  • Guideline 6: Improving the business and consumer environment and modernising the industrial base;
  • Guideline 7: Increasing labour market participation and reducing structural unemployment;
  • Guideline 8: Developing a skilled workforce responding to labour market needs, promoting job quality and lifelong learning;
  • Guideline 9: Improving the performance of education and training systems at all levels and increasing participation in tertiary education; and
  • Guideline 10: Promoting social inclusion and combating poverty.

Guidelines 1-6 are the proposed broad economic policy guidelines, which come within the remit of the Economic and Finance Affairs Council (ECOFIN), and Guidelines 7-10 the employment policy guidelines, which come within the remit of the Employment and Social Policy Council.

3.5 The details of the first six proposed guidelines were set out in document (a), which presented a draft Recommendation to Member States for adoption by the Council. The details of the four proposed employment guidelines were set out in document (b), which presented a draft Decision for adoption, after consultation with the European Parliament, by the Council. The Decision would require Member States to take account of the guidelines in their employment policies.

3.6 When we considered these documents, in September 2010, we said that the potential impact of the integrated guidelines for the Europe 2020 Strategy and for EU commentary on Government policies was important, that we thought the Government should be examined about that potential in a debate in European Committee and that, therefore, we recommended such a debate on the two documents.

3.7 However, we also said that before that debate took place we wanted to hear from the Government on two points, related to the employment guidelines, document (b). We noted that these guidelines, which Member States "shall take into account in their employment policies" under Article 148(2) TFEU, were being adopted on the basis of a legally binding Council Decision, whereas the economic guidelines were adopted on the basis of a non-legally binding Council Recommendation. We asked the Minister to explain to us the thinking behind why the employment guidelines were to be adopted by a Decision and not a Recommendation, and whether this affected their legal status in the Member States. On this note we saw that, under guideline 8, Member States were told that "quality initial education and attractive vocational training must be complemented with effective incentives for lifelong learning, second-chance opportunities, ensuring every adult the chance to move one step up in their qualification and by targeted migration and integration policies". If these were indeed guidelines, we thought this recommendation should have been expressed in terms of "should" rather than "must".

3.8 Secondly, we asked the Minister whether, in his view, the Decision adopting the employment guidelines fell within the definition of a "legislative act" under the TFEU. If it did the subsidiarity early warning mechanism in Protocol 2 would apply, meaning that the House could submit a "reasoned opinion" to the Commission if it thought that the proposal did not comply with the principle of subsidiarity. We continued that:

  • as the excerpt from the guidelines above showed, this was a policy field in which the Commission was making detailed recommendations;
  • but it was also one where competence was shared with the Member States — so the principle of subsidiarity was particularly important;
  • we thought that the draft Decision was a legislative act because the Council was to adopt the Decision after the "participation" — in this case consultation — with the European Parliament: so the procedure came within the generic definition of a "special legislative procedure" in Article 289(2) TFEU;
  • however, doubt arose because the legal base did not state in terms that it was a special legislative procedure;
  • in correspondence with us, the previous Government took the view that, where a legal base in the TFEU did not state that it was an ordinary or special legislative procedure, the act adopted was always non-legislative rather than legislative, irrespective of the participation of the European Parliament; and
  • were that interpretation to be right, the House could not have invoked the subsidiarity early warning mechanism on this proposal.

The Minister's letter

3.9 The Minister of State for Employment, Department for Work and Pensions (Chris Grayling) says in response to our first point that:

  • in contrast to Article 121 TFEU, the legal base for the Council Recommendation, Article 148 TFEU, the legal base for the Council Decision, does not specify the form of the act that must be used to adopt the guidelines;
  • it is therefore in theory an open choice but the Government would argue that adopting the guidelines by Decision has no policy implication;
  • the Decision is only for adopting guidelines which the Council is required to do but those guidelines are clearly non-binding under the terms of the Treaty, which the Decision text replicates;
  • this is an oddity, and the Government does not have access to any argument or explanation deployed in advance of the Amsterdam Treaty in 1997, when the employment title first appeared;
  • the Government is very clear, however, that the guidelines, nor the Europe 2020 process based on them, cannot be used to commit the UK to any policy action;
  • it is clear from Article 148(2) TFEU that the guidelines are not intended to be legally binding;
  • Member States are required to produce annual reports and Article 148(3) TFEU is clear that these are on implementation of national employment policy;
  • any recommendations to Member States, therefore, should have the same focus and be on the basis of 148(4) TFEU only;
  • Article 148 TFEU does not provide for any action against a Member State that did not comply with the obligation (in the Treaty, repeated in the Decision) to take account of the guidelines;
  • in the Government's view the purpose of the guidelines is to provide a framework for what Member States should coordinate on — the aim is not to drive national policy but to increase collectively the EU level of employment;
  • the process gives the Government scope to report on what it thinks is most relevant and useful for the exchange of good practice; and
  • it will, moreover, have a role in agreeing to the text of the Joint Employment Report and it is that which may cover implementation of the guidelines which the Government's believes amounts to setting the European Council's priorities for the year ahead.

3.10 Finally, in response to our first point, the Minister says that, in relation to our suggestion that in Guideline 8 the word 'should' would be better employed than 'must', the Government tried to get this amended but without success. He continues that, whilst the Government agrees that the use of an imperative does appear to be in conflict with the role of the guidelines, the word has no legal force and any interpretation of it to that effect would be overridden by the overall non-binding status provided for by the Treaty, particularly in Guideline 8 where it relates to an area that is wholly national competence.

3.11 In response to our question about whether the adoption of the guidelines could be interpreted as a legislative act, the Minister says that:

  • the Government's view is that an act is non-legislative unless the legal base specifies that it is adopted under the ordinary legislative procedure or the special legislative procedure;
  • therefore, the subsidiarity protocol does not apply, although the Government is clear that the guidelines and action based upon them must respect national competence, as Article 147 TFEU specifies; and
  • the involvement of the European Parliament under Article 148(2) TFEU is purely consultative and not legislative.


3.12 We are grateful to the Minister for his responses. We note the firmness of his language in saying that the guidelines for the employment policies of Member States are not binding on the Member States, and that this is clear from Article 148(2) of the Treaty on the Functioning of the European Union (TFEU), the legal base. But the wording of that Article does not, in our opinion, bear this out: it talks of an obligation rather than a discretion: "guidelines which the Member States shall take into account in their employment policies", rather than "may". We also note that Article 2(3) TFEU says that "Member States shall coordinate their economic and employment policies within arrangements as determined by this Treaty, which the Union will have competence to provide". And in relation to the actual content of the current guidelines, we note the UK was unsuccessful in negotiating the replacement of "must" with "should" in Guideline 8. So we conclude that the extent to which these guidelines bind the UK is more ambiguous than the Minister's account would suggest.

3.13 The consequence of the distinction the Minister, and seemingly the Treaty, draws between legislative and non-legislative acts is that national parliaments are stopped from formally raising subsidiarity concerns through the early warning mechanism in the Subsidiarity Protocol on all non-legislative acts. This strikes us as perverse in a field such as employment policy where the impact of EU policies on the individual citizen can be considerable and where there is, consequently, particular sensitivity about safeguarding national sovereignty.

3.14 These are both points which, in addition to the impact of the integrated guidelines for the Europe 2020 Strategy and for EU commentary on Government policies, Members could explore in the debate in European Committee, which we recommend should now take place. In relation to the employment guidelines the Minister might usefully be asked to explain:

—  the negotiating history and implications of Articles 2(3) and 5 TFEU, which give the EU competence to "ensure coordination of the employment policies of the Member States", and in what respects this "coordinating" competence, introduced by the Lisbon Treaty, is distinct from shared competence and the doctrine of pre-emption;

—  what, if any, are the policy grounds (above and beyond the Treaty definition of "draft legislative act") for stopping Parliament from formally raising subsidiarity concerns through the early warning mechanism on EU employment guidelines which Member States must take into account in their employment policies;

—  or, in the likely absence of policy grounds, whether the inappplicability of the subsidiarity early warning mechanism is simply an example of the law of unintended consequences at work; and

—  how he thinks the distinction the TFEU makes between legislative and non-legislative acts might affect the development and application of the principle of subsidiarity. For example, given that the Subsidiarity Protocol does not apply to non-legislative acts, should subsidiarity only be a relevant consideration in assessing EU legislation rather than guidelines such as these.

25   See (31373) 7110/10: HC 5-xiv (2009-10), chapter 1 (17 March 2010) and Gen Co Debs, European Committee B, 22 March 2010, cols. 3-28. Back

26   See  Back

27   IbidBack

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