11 Single Market Act
| (32132)
13977/10
COM(10) 608
| Commission Communication: Towards a Single Market Act for a highly competitive social market economy — 50 proposals for improving our work, business and exchanges with one another
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| Legal base | —
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| Document originated | 27 October 2010
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| Deposited in Parliament | 4 November 2010
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 18 November 2010
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| Previous Committee Report | None, but see footnotes
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| To be discussed in Council | 10 December 2010
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
11.1 According to the Commission, the Internal Market —
with its freedom of movement for persons, goods, services and
capital, complemented by economic integration, the creation of
a single currency, and the development of the cohesion policy
— has been one of the main driving forces behind growth
in Europe, and has also helped to enhance its international competitiveness,
and to enable the EU to deal with the financial and economic crisis.
However, it notes that, since the creation of the single market,
globalisation has increased the pace of change and opened the
way for new competitors: and it suggests that this has created
two new challenges — the need to develop skills in high
value added sectors, and to help companies, particularly small
and medium-sized enterprises (SMEs), to seize the opportunities
in these new areas of growth.
11.2 The Commission recalls that, following a request
from President Barroso, a former Commissioner (Mario Monti) has
produced a report on the re-launch of the single market, which
suggests that a "deep and efficient" single market is
a key factor in determining the EU's overall macroeconomic performance,
and proposes a strategy to safeguard it from economic nationalism,
extend it into new areas essential for growth, and build an adequate
degree of consensus around it. The Commission sees this as being
achieved by the adoption of a Single Market Act — which
is not a legislative measure, but a policy manifesto — and
which it regards as an essential element of various flagship initiatives
comprising the EU 2020 Strategy, particularly the digital agenda
for Europe,[51] Innovation
Union,[52] and the proposed
Integrated Industrial Policy[53]
for a globalisation era.
The current document
11.3 The Commission says that the aim of this Communication
is to stimulate public discussion on what a Single Market Act
might involve, and it considers this under three main headings:
- achieving strong, sustainable
and equitable growth for business;
- putting Europeans at the heart of the single
market;
- dialogue, partnership and evaluation to achieve
good governance.
STRONG SUSTAINABLE AND EQUITABLE GROWTH FOR BUSINESS
11.4 The Commission says that the single market is
a key factor in the competitiveness of the 20 million businesses
in the EU, adding that, since SMEs offer the highest potential,
they should receive special attention, as well as targeted measures
which reflect their concerns. It notes that, even though the aim
of the single market is to remove barriers to free movement, businesses
often see fragmentation as a problem, with the variety of different
national regulations placing an additional burden on them. It
therefore highlights the need to identify where a lack of coordination
and harmonisation are hampering the operation of the single market,
to pursue an industrial policy which enables Europe to maintain
its competitive position on world markets, and to ensure that
the financial system works to the benefit of the real economy
and encourages sustainable economic growth. However, it notes
that the modernisation envisaged in the 2020 Strategy will entail
substantial investment, and that, in the context of a global market,
Europe is the right level to take action. It then goes on to identify
a number of areas where that aim should be pursued.
Promoting and protecting creativity
11.5 The Commission stresses the importance of the
single market being as conducive as possible to innovation and
creativity, and in particular the need for businesses to be protected
against counterfeiting and piracy. It suggests that the continuing
fragmentation of the patent system is a problem, especially for
SMEs, and that protection is unnecessarily complex and costly,
with a lack of uniformity generating high costs, and the divergent
rulings in different Member States creating a lack of legal certainty.
It therefore believes that the introduction of an EU patent and
unified patent litigation system is essential. The Commission
also comments on the absence of a European framework for the efficient
management of copyright, which it maintains is complicating the
process of making knowledge available on line. It therefore points
to the need to create a single European digital market, which
makes material available whilst protecting right-holders, thereby
extending to online services the freedoms enjoyed by physical
goods. The Commission also draws attention to the costs of counterfeiting
and piracy to the European economy, but notes that a substantial
minority believe it is justifiable to purchase counterfeit products,
and that the situation has been exacerbated by a lack of sufficiently
strong and coordinated enforcement policies for intellectual property
rights.
11.6 The Commission says that it will:
- adopt the existing proposals
for the EU patent, its languages and unified patent litigation
system;
- propose a framework Directive on the management
of copyright and a Directive on orphan works;
- set up an action plan against counterfeiting
and piracy, including both legislative and non-legislative actions.
New approaches to sustainable development
11.7 The Commission says that international demand
for solutions to major challenges, such as climate, energy security,
and demographic changes are creating significant growth opportunities
for European businesses, and that the Single Market Act should
enable those opportunities to be grasped, notably by creating
a more efficient standards system, a more consistent approach
to energy taxation, and the continued development of single markets
for services, defence and environmental products. It suggests
that these measures could be implemented as part of the proposed
flagship initiative on industrial policy, by further use of the
Services Directive and development of the distribution services
sector, and by full exploitation of the digital market.
11.8 The Commission also notes the crucial role which
a single, interconnected and efficient European transport system
would play; the need for the European framework for the taxation
of energy products and electricity to enable Member States to
make optimum use of taxation as means of achieving more efficient
energy use and equal treatment for consumers; the extent to which
the divergent national rules on business services, particularly
as regards unfair practices, can hinder the operation of the retail
market; and the extent to which it would be possible to stimulate
the development of energy efficiency markets in the EU.
11.9 The Commission says that it will:
- develop the single market in
services on the basis of the mutual evaluation process set out
in the Services Directive;
- develop electronic commerce, by proposing a Communication
on the operation of electronic commerce and guidelines for Member
States;
- propose a legislative reform of the European
standardisation framework;
- adopt a White Paper on transport policy;
- revise the Energy Tax Directive to better reflect
the EU's climate and energy objectives;
- establish a High Level Group on services to businesses;
- examine the feasibility of an ecological footprint
of products;
- draw up an energy efficiency plan complementing
existing policies in all sectors where energy is consumed.
Small and medium-sized enterprises
11.10 The Commission observes the importance of SMEs
as a source of innovation and jobs, and the need for the single
market to favour their creation and development, particularly
as regards access to finance. It adds that poor access to capital
is one of the main problems preventing their expansion, with equity
capital often being concentrated in very large stocks to the detriment
of smaller firms; that there is a need to bring the Small Business
Act[54] into line with
the Europe 2020 Strategy; and that current rules on accounting
create an unnecessary administrative burden. It says that it will:
- adopt an action plan for improving
SME access to capital markets;
- assess the Small Business Act and link it with
the Europe 2020 strategy;
- review the accounting Directives to simplify
financial reporting obligations and to reduce administrative burden.
Funding innovation and long-term investment
11.11 The Commission says that access to funding
is essential for innovation and sustainable growth, and that it
ought to be possible to mobilise private savings — if necessary
in cooperation with public investments — towards the investment
in infrastructure which is central to the success of the Europe
2020 Strategy. It adds that financial markets play a key role,
and that the regulatory environment should not hamper long-term
investment. It believes that implementation of its Communication[55]
on Regulating Financial Services for Sustainable Growth should
strengthen these markets, but that new ways are needed to develop
alternative forms of corporate governance and innovative incentives
for certain types of investment.
11.12 It suggests that one way of mobilising the
necessary private investment would be to make use of the EU budget,
in partnership with the banking and private sectors, for example
through "project bonds", which would be issued by the
private sector, with the EU budget being used to improve their
rating in order to attract funding through the European Investment
Bank (EIB), other financial institutions and private investors.
It also says that conditions need to be created for a more active
mobilisation of private savings in support of SMEs and the development
of European infrastructure, and that it will explore how far the
reform of corporate governance can contribute to this: it highlights
the need for a regulatory environment to attract venture capital,
and for the coordination of rules to avoid the risk of double-taxation;
the important role played by public procurement in generating
growth and innovation, and the need for an open and competitive
pan-European procurement market; the benefits of improving competitive
conditions for the award of services concessions and reducing
legal uncertainties; and the role of public-private partnerships
in mobilising investment in sectors such as energy, waste management
and transport infrastructure.
11.13 The Commission says that it will:
- consider the creation of project
bonds to finance European projects;
- encourage private investment towards achieving
the objectives of the Europe 2020 strategy, ensuring unhindered
cross-border investments by venture capital funds and eliminating
tax treatments that disadvantage cross-border activities;
- develop legislative proposals to simplify and
update European public procurement legislation; and
- adopt a legislative initiative on services concessions.
Creating a business-friendly legal and fiscal
environment
11.14 The Commission says that, in order for businesses
to benefit from the single market, measures are needed to reduce
the administrative burden; that taxation issues are also crucial;
and that the defence and security sectors can trigger growth throughout
the economy. In particular, it notes the existence of 27 highly
disparate national corporate tax systems, which impede cross-border
activities and create significant market distortions and compliance
costs, and the consequent need for a common consolidated corporate
tax base; the disproportionate burden which the VAT system, with
its complex system of rates, exemptions and derogations, places
on businesses, and the need therefore to create a more robust
and efficient system; the costs for those involved in cross-border
activities arising from the absence of a network of national company
registers; and the importance of businesses being able to interact
electronically.
11.15 It says that it will:
- improve the coordination of
national tax policies, notably by proposing a Directive introducing
a common consolidated corporate tax base;
- publish a new VAT strategy;
- propose legislation to introduce the linking
of company registers; and
- propose a Decision to ensure mutual recognition
of e-identification and e-authentication and revising the Directive
on electronic signatures.
Being competitive in global markets
11.16 The Commission notes the part which the single
market has played in enabling European businesses to take advantage
of the open and integrated nature of world trade, and the consequent
importance of ensuring that the EU's internal and external policies
are coherent and complementary. It adds that, despite Europe's
success so far in exporting its goods and services and attracting
foreign direct investment, it needs to defend its interests, and
that free trade agreements and trading partnerships must be based
on mutual rights and obligations. It says that it will therefore
defend European interests and combat unfair trading practices.
11.17 The Commission suggests that greater convergence
of international rules will benefit the EU, and that it is important
to ensure its businesses have access to external markets, and
in particular public procurement, on fair terms: at the same time,
it also comments that the single market must remain attractive
to potential candidates for accession, and to neighbouring countries.
It notes the importance of the G20 process in bringing about both
bilateral and multilateral regulatory cooperation, where it says
that the EU will take a leading role in furthering financial reform
and the wider adoption of international standards: and it also
highlights the need to extend the current regulatory dialogues
with a number of strategic partners, in areas such as the protection
of intellectual property rights, to address protectionist trends,
and to achieve greater symmetry between the openness of the EU
procurement market and those of its trading partners.
11.18 It says that it will:
- further develop regulatory
cooperation with the EU's main trading partners; and
- propose a legislative proposal to enhance the
EU's capacity to ensure improved symmetry in access to global
public procurement markets
PUTTING EUROPEANS AT THE HEART OF THE SINGLE MARKET
11.19 The Commission stresses the need to put people
at the heart of the single market, and says that, whilst respecting
areas which are the responsibility of Member States, there are
many ways in which the human dimension of the social market economy
can help to build confidence within a large internal market. It
also points out that there are a number of legal instruments which
expressly allow the European institutions to incorporate social
measures into economic and financial areas, including the Charter
of Fundamental Rights and Article 9 of the Lisbon Treaty: and
it notes that the non-economic rights of citizens are dealt with
in the EU Citizenship Report 2010: Dismantling the obstacles
to EU citizens rights.[56]
Improving public services and key infrastructure
11.20 Whilst the Commission recognises that market
forces ensure the widest possible choice of goods and services,
it believes that the EU's social cohesion is a primary concern,
which is not adequately addressed by these alone, and that there
is a need to recognise the value of services of general economic
interest organised by public authorities in a way which meets
users' needs. It says that this is why the EU has pursued the
progressive liberalisation of the large network industries, backed
up by strict public service obligations, and it adds that a number
of such services fall within the scope of EU law, and that the
EU and its Member States need a regulatory framework which will
allow the public services both to perform their tasks and to develop
new services, with particular emphasis placed on the developments
of infrastructures enabling high-speed internet access after 2013.
11.21 More specifically, the Commission says that
it will take the initiative in providing public authorities with
a "tool-kit", enabling them to offer high-quality local
services, and that it will continue to provide answers to practical
questions raised about the application of EU law in areas such
as state aids and public procurement, implement measures to evaluate
and compare at European level the quality of services of general
interest, and examine the case for extending universal service
obligations into new areas. It also highlights the need for an
interconnected cross-border infrastructure network, which is at
present hindered by a lack of coordination between Member States
and the absence of a suitable funding framework at European level,
as well as better interconnected energy networks, which address
missing links and ensure that energy is used and transported more
efficiently: and it notes the need for Europe's radio spectrum
to be used efficiently and in a coordinated way to ensure that
enough is available to meet the needs of citizens and business.
11.22 The Commission says that it will:
- adopt a Communication and other
measures on services of general interest;
- revise the Community guidelines for the development
of the trans-European transport network;
- adopt a Communication on energy infrastructure
priorities and propose a new European instrument for energy security
and infrastructure; and
- adopt the proposed Decision establishing a European
Radio Spectrum Action Programme.
Increasing single market solidarity
11.23 The Commission notes Mr Monti's view that a
sense of disillusionment towards the internal market may arise
from the perception that successive liberalisations have been
at the cost of social rights, and it says that a more all-embracing
view needs to be taken, whereby economic freedoms and freedoms
of collective action are reconciled, and everyone has the opportunity
to benefit from the single market. It suggests that exercising
the freedom to provide services involves being able to send staff
to another Member State, and that implementation of the Posting
of Workers Directive should be improved; it notes that a recent
Green Paper[57] launched
a debate on the challenges which must be met in order to ensure
that workers receive adequate pensions; and that there is scope
for a European framework for restructuring exercises which would
enable businesses to deal with industrial disputes. It says that
it will:
- ensure that the rights guaranteed
in the Charter of Fundamental Rights and social impacts are taken
into account during the development of new single market legislation;
- adopt a legislative proposal to improve the implementation
of the Posting of Workers Directive;
- re-examine the Directive on the activities and
surveillance of pension funds;
- create a European framework for the advance planning
of industrial restructuring.
Access to employment and lifelong learning
11.24 The Commission suggests that the single market
provides a tremendous opportunity to make better use of training
and qualifications and to respond to job offers in other Member
States, and it highlights the attraction of being able to train
in another country, suggesting that a period abroad should become
a standard part of the training of all young Europeans. The Commission
also identifies the right to pursue a profession in another Member
State as one of the freedoms guaranteed by the Treaty, and the
need to remove restrictions on the recognition of qualifications
obtained elsewhere, in order to meet the growing need for a qualified
workforce; and it also wants to promote the academic recognition
of diplomas and periods of training in another Member State. It
says that it will:
- propose a legislative initiative
to reform the systems for the recognition of professional qualifications;
- develop a 'Youth on the Move card' and expand
the corresponding internet site; and
- implement the European qualification framework.
New resources for the social market economy
11.25 The Commission says that the Social Business
Initiative must enable the talent and financial resources available
in Member States to be tapped by bringing together within the
single market those involved with socially innovative projects
which stimulate growth; that improvements could be made in the
legal environment within which some market economy activities
are organised; and that an initiative on corporate governance
is needed to redefine the role of businesses in today's economy.
It says that it will:
- propose a Social Business Initiative;
- propose measures enabling the legal structures
of foundations, cooperatives, mutual associations to be improved;
and
- launch public consultations on corporate governance
and on improving the transparency of information provided by businesses
on social and environmental matters and respect for human rights.
A single market serving consumers
11.26 The Commission says that the single market
must add value for consumers, offering a wide variety of high-quality
goods and services, coupled with a high level of protection against
risks arising from product quality. However, it notes that the
information needed to make an informed choice is often lacking,
particularly where cross-border transactions are involved, and
it says that it will evaluate existing practices where price comparison
websites are involved. It also proposes to step up market surveillance
for product safety, improving coordination among national authorities;
to address the difficulty which many, including students, face
in opening bank accounts, and the lack of transparency surrounding
bank charges; to enable consumers to derive full benefit from
the retail financial services market, by making it easier to change
service provider, particularly across national borders; and to
look further at the taxation problems which make it more difficult
for people to move, set up home and acquire goods and services
freely throughout the EU.
11.27 The Commission says that it will:
- draw up an action plan for
the development of European market surveillance, drawing up guidelines
for customs controls in the area of product safety and revising
the general product safety Directive;
- adopt a legislative initiative on the access
to certain basic banking services and calling for self-regulatory
initiatives of the banking sector to improve transparency;
- propose a Directive on a single integrated mortgage
market;
- adopt a Communication aimed at identifying and
eliminating tax obstacles faced by citizens; and
- propose an amendment of the Regulation on the
rights of air passengers and possibly a Communication on the rights
of passengers using all means of transportation.
Good governance of the single market
11.28 The Commission says that, if the Single Market
Act is to fully achieve its objectives, the European institutions
must enter into dialogue, establish partnerships with stakeholders,
and evaluate objectively the results obtained; and it says that
it intends to engage fully in any debate, urging its partners
to enter into discussion on the various initiatives proposed in
this Communication. In the meantime, the Commission says that
it will continue its evaluation work, including the organisation
of single market forums; consider ways of developing the full
potential of the Internal Market Information system; look at ways
of improving the ability of consumers to obtain redress in the
event of a problem; strengthen its partnership with the Member
States in the management and implementation of the single market;
widen the range of stakeholders consulted on the policies proposed
and their implementation; improve the awareness of consumer rights;
and strengthen informal problem-solving tools, such as SOLVIT.
It says that it will:
- improve the procedure for evaluating
the aquis, in particular by using the 'mutual evaluation'
process set out in the Services Directive and applying it to other
single market legislation;
- extend the Internal Market Information System
(IMI) to other legislative areas;
- submit initiatives on the use of alternative
dispute resolutions in the EU, supplemented by recommendations
in the area of financial services, digital transactions and collective
redress;
- develop a more resolute policy to enforce the
rules of the single market;
- increase consultation and dialogue with civil
society in the preparation and implementation of texts;
- promote a one-stop shop to provide citizens and
businesses with information and support; and
- strengthen informal problem-solving tools.
11.29 The Commission concludes by saying that it
intends that the Single Market Act should be discussed throughout
Europe over the coming months, with its Action Plan being circulated
widely to national and regional parliaments, to economic and social
players, and others in civil society. In particular, it has asked
for comments by the end of February 2011, and, in the light of
these, it will invite the other institutions to agree a definitive
version of the Plan for 2011-12, which it says will serve to commemorate
the 20th anniversary of the single market at the end
of 2012.
The Government's view
11.30 In his Explanatory Memorandum of 18 November
2010, the Minister for Employment Relations, Consumer and Postal
Affairs at the Department for Business, Innovation and Skills
(Mr Edward Davey) says that the Government strongly supports the
idea of strengthening the single market, pointing out that, given
its economic importance for both businesses and consumers, it
can provide the framework conditions needed for the EU's economy
to thrive. The Government therefore considers that a coherent
approach tackling existing bottlenecks and shortcomings of the
single market is a necessary element of the growth agenda. It
also considers that the policy proposals within a Single Market
Act should be coordinated with the Commission's Europe 2020 strategy
and its initiatives to avoid unnecessary duplication and inconsistent
policy decisions. The Government also strongly supports the external
dimension of the single market, in particular, the need to ensure
that the Europe's market remains open to the world, and that other
markets are open to its trade and investment.
11.31 The Minister says that the Government will
submit a full response to the Commission's consultation on the
Single Market Act, and will continue to consider the proposals
in this Communication over the coming months. However, based on
this general assessment, it has the following views.
11.32 On the proposals on strong, sustainable
and equitable growth for business, it supports:
- measures to build on the mutual
evaluation exercise and develop the single market in services,
believing that more could be done to liberalise business-to-business
services and that an explicit commitment to resist protectionist
and discriminatory policies in the area of financial services
is essential, as is facilitating the establishment by retailers
of premises in other member states and removing the barriers to
cross-border retail services;
- proposals to reform the standardisation framework
in 2011 to make procedures for setting standards more effective,
efficient and inclusive, and to extend their scope from goods
to services;
- current proposals for an EU Patent, and the proposal
to improve the governance of copyright at the European level and
to take action against counterfeiting and piracy;
- measures which reduce costs and barriers for
SMEs, for example by improving their access to capital markets
and simplifying financial reporting obligations, and it welcomes
the Commission's commitment to ensure that the "Think Small
First" principle is implemented in both policy and the legislative
procedure, and to review the 2008 Small Business Act;
- the consultation on corporate governance, observing
that the best solutions are owned and driven by market participants,
investors and companies.
11.33 The Government is, however, concerned that
some of the proposals would limit Member States' flexibility to
find solutions suitable for their specific needs, and it will
be particularly mindful of the need for the principle of subsidiarity
to be respected in areas which are fundamental to national sovereignty,
such as taxation, where it would oppose any increase in EU competence.[58]
Likewise, it says that a common consolidated corporate tax base
would have to ensure that the UK's tax sovereignty and ability
to maintain an internationally competitive tax system are not
undermined.
11.34 The Government says that, whilst some of the
proposals on putting Europeans at the heart of the single market
merit further consideration, it is concerned that others are
not focussed sufficiently on ensuring the single market's role
in removing barriers to free movement and delivering growth. In
particular, whilst it agrees that the single market should deliver
benefits for citizens as well as businesses, it believes that
the best way to do this is to bring about the conditions within
which businesses can thrive and create sustainable jobs for the
future. It says that it will look closely at those proposals in
the Single Market Act which touch on the social and employment
dimension, some of which raise difficult policy and legal questions,
in order to ensure that any future proposals for EU action do
not undermine UK competence, are consistent with the principles
of subsidiarity and proportionality, and do not result in the
imposition of new costs on Member States or businesses.
11.35 The Government says that many of the proposals
on good governance are in the right direction, and it agrees
with the Commission that paying more attention to how existing
single market legislation is enforced should be a central component
of efforts to make the current framework operate effectively.
It believes that established mechanisms like the mutual evaluation
process developed under the Services Directive, the Internal Market
Information system and SOLVIT should be strengthened so as to
ensure that businesses and citizens can exercise their Single
Market rights, adding that evidence gathered through these networks
should feed back into the EU policy-making process and strengthen
future single market legislation.
11.36 The Government concludes by saying that, whilst
it intends to submit a response to the Commission, it will not
conduct a formal consultation on the Communication as this would
duplicate the Commission's own consultation exercise, but that
it will be raising the Communication with a number of stakeholders,
and will take into account evidence gathered in its consultation
on corporate governance launched in October 2010. It does, however,
stress the need for the Commission to abide by the principles
of smart regulation, present proper analysis and evidence to justify
its proposals, and to consider alternatives to regulation before
committing to legislative solutions.
Conclusion
11.37 As we have noted, the Commission regards
this document as an essential element of various flagship initiatives
comprising the EU 2020 Strategy, including an Integrated Industrial
Policy on which we have recently reported, and, like
that document, it is ambitious and wide-ranging in seeking to
identify ways in which the single market can be developed to increase
the competitiveness of EU industry and hence economic growth,
whilst preserving the human dimension of the social market economy.
To that extent, it is clearly an important document, which we
are therefore drawing to the attention of the House.
11.38 Having said that, the very breadth of the
document means that it lacks a certain degree of focus, and its
underlying general objective is difficult to dispute. Moreover,
whether — and to what extent — the detailed measures
recommended are justified seems to us best considered by the House
as and when each of them is put forward, rather than on an across-the-board
basis. For that reason, we are clearing the document.
51 (31368) 9981/10: see HC 428-i (2010-11), chapter
28 (8 September 2010). Back
52
(32042) 14035/10: see HC 428-viii (2010-11), chapter 8 (17 November
2010). Back
53
(32138) 15483/10: see HC 428-ix (2010-11), chapter 14 (24 November
2010). Back
54
(29791) 11262/08: see HC 16-xxix (2007-08), chapter 8 (10 September
2008). Back
55
(31694) 10822/10: see HC 428-i (2010-11), chapter 71 (8 September
2010). Back
56
COM(10) 603. Back
57
(31793) 12102/10: see chapter 15 of this Report. Back
58
For example, a proposal to amend EU energy tax legislation should
not cut across the right of Member States to decide on the measures
that will best help them meet their greenhouse gas emission targets. Back
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