Single Market Act II

The Committee consisted of the following Members:

Chair: Mr Peter Bone 

Coffey, Dr Thérèse (Suffolk Coastal) (Con) 

Elliott, Julie (Sunderland Central) (Lab) 

Ellis, Michael (Northampton North) (Con) 

Harris, Rebecca (Castle Point) (Con) 

Heaton-Harris, Chris (Daventry) (Con) 

Lancaster, Mark (Lord Commissioner of Her Majesty's Treasury)  

Mactaggart, Fiona (Slough) (Lab) 

Norman, Jesse (Hereford and South Herefordshire) (Con) 

Ruane, Chris (Vale of Clwyd) (Lab) 

Simpson, David (Upper Bann) (DUP) 

Swinson, Jo (Parliamentary Under-Secretary of State for Business, Innovation and Skills)  

Vaz, Valerie (Walsall South) (Lab) 

Wright, Mr Iain (Hartlepool) (Lab) 

Alison Groves, John-Paul Flaherty, Committee Clerks

† attended the Committee

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European Committee A 

Wednesday 5 December 2012  

Mr Peter Bone in the Chair] 

Single Market Act II

8.55 am 

The Chair:  Does the member of the European Scrutiny Committee wish to make a brief explanatory statement about the decision to refer the relevant documents to this Committee? 

Chris Heaton-Harris (Daventry) (Con):  Nothing would give me greater pleasure than giving a brief explanatory statement this morning, Mr Bone, other than serving under your chairmanship for the first time. 

I will briefly describe the background to document 14536/12 and explain why the European Scrutiny Committee recommended today’s debate. The European Commission says there is clear evidence that the single market has created growth and offered new opportunities for European citizens. It also suggests that there is a continuous need for development, to respond to new social, technological and demographic challenges, and to take into account the pressure on natural resources and from climate change, and more recently the economic and financial crises. The Commission also sees the single market as key to achieving the EU’s long-term aim of a highly competitive social market economy. 

The original Single Market Act set out 12 key action areas and 50 complementary actions. However, as only one of those areas has been agreed so far, the Commission says that further progress is needed urgently. It has therefore produced this document—Single Market Act II —with a second set of priority actions. These are divided into four main chapters: developing fully integrated networks; fostering mobility across borders; supporting the digital economy; and strengthening social entrepreneurship, cohesion and consumer confidence; and each contains more specific proposals. In general, the Government welcomed the communication, although they have expressed reservations on a number of the detailed proposals in areas such as taxation, insolvency rules, unfair trading practices and action regarding the banking sector. 

When the European Scrutiny Committee considered the document on 31 October, it took the view that the EU is at a pivotal point between the original Single Market Act and its successor, which makes this a convenient moment to take stock of progress so far and to consider the general direction in which the single market is heading. It therefore recommended that the document should be debated by this Committee. 

The Chair:  I call the Minister to make an opening statement. 

8.57 am 

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jo Swinson):  It is indeed a great pleasure to serve under your chairmanship, Mr Bone. I am sure you will keep us all in order today. 

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It is great to follow the hon. Member for Daventry, who rightly outlined why this is an important moment for the European single market, which this Government support and previous Governments have supported for the benefits it brings to the UK economy. It is right that we scrutinise progress so far. As he said, the Single Market Act I has not yet been fully implemented, but its proposals are at various stages of progress. The Single Market Act II has a range of proposals, many of which are at a very early stage and have not been fleshed out with detail, but we can debate them today. 

This year marks 20 years since the creation of the single market, so it is a good time to reflect on what has been achieved. We can reflect on whether 8.55 in the morning is as convenient a time for Opposition Members, but I am glad to see that the hon. Member for Hartlepool is no longer alone on the Opposition Benches. The Opposition Whip’s timing is fantastic, no doubt assisted by the excellent service in the Tea Room. 

In 1992, the political landscape was very different. The European Community comprised only 12 nations with 345 million people and 12 million companies. It now comprises 27 nations, which will increase next year to 28, with 500 million people and 21 million companies. We joined the single market because it was in our national interest to do so, and that remains the case today. It is in our national interest at macro-economic level: trade with EU member states more than trebled and now stands at £234 billion a year; roughly 3.5 million UK jobs, or around 11% of the work force, depend on trade with the EU; and last year, 40,000 jobs were created or safeguarded by investment from Europe. Business has benefited, because the single market has reduced trade tariffs, saving more than £900 million a year for the UK car industry alone—that industry has been one of the great UK success stories in recent months. Consumers have also benefited: to give just one example, thanks to the single market, passengers were given refunds after 100,000 flights were cancelled because of the Icelandic volcano, which I am sure we all recall. 

It is of course right that the single market needs to evolve to meet the challenges of the 21st century. Evidence suggests that the single market is operating at 45% below capacity and that removing obstacles to trade could result in an increase of 7% in income per capita in the UK. More can be done to help small and medium-sized enterprises to exploit the single market fully. On e-commerce, for example, which is particularly topical at this time of year, as many people flock to the internet to buy their Christmas gifts— 

Mr Iain Wright (Hartlepool) (Lab):  From Amazon. 

Jo Swinson:  Not necessarily from Amazon. Some might be, but others are buying from independent retailers. However, 40% of EU consumers buy goods online, so that market is clearly growing, but only 10% buy goods cross-border, so there are clear difficulties or barriers, whether perceived or actual. If we can remove them, there will be benefits for UK business in particular, because of advantages such as English often being a second language for people in other EU countries. UK companies will thus have a particular competitive advantage if we can improve cross-border e-commerce. The rules governing trade in services also need to be fully

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implemented, with some member states still having disproportionate and discriminatory laws. 

The UK has always been a champion of the single market, under previous Governments and the current one. We support EU institutions to improve that single market and to make it work better. Single Market Act II, which was published in October this year, identifies some gaps and missing links. The Commission communication calls for action to develop energy and transport infrastructure throughout the EU, to support the digital economy, and to strengthen social entrepreneurship, cohesion and consumer confidence. The Government support some of the proposed actions, or the general idea behind some, but we need proper scrutiny to ensure that, in the light of the communication, there are concrete proposals that we can be confident will enhance growth. 

A fully functioning single market in energy remains a UK priority. We must improve the implementation and enforcement of the third energy package. We welcome the Commission’s assessment of progress, in particular recognising the UK’s high level of switching, which is one way of getting a better deal for consumers, but investment in energy infrastructure is key, as well as being an economic opportunity for the UK and a critical part of our economic strategy. We believe that the same principles apply throughout the rest of Europe as well. The planned energy infrastructure regulation facilitates investments needed through streamlined planning processes for cross-border projects. 

We are a strong supporter of the single European sky initiative and the associated research and development programme, which will mean that air traffic control throughout the EU is more coherent between the different nations. Clearly, there is a real advantage to EU nations co-operating fully on that. We also want to ensure that the proposals to be published in the fourth railway package are flexible enough to work within the UK railway structure and compatible with reform plans. We welcome action to support EU-wide broadband roll-out, which is a big priority for many Members and their constituents. The connecting Europe facility can be a positive measure for broadband, but of course funding decisions need to be taken in the overall context of EU budget discipline, which is necessary in these difficult financial times. 

Some of the other proposals in Single Market Act II are less welcome. Although I am sure we all agree with the sentiment behind the proposal regarding access to a basic banking account, there is not enough evidence to justify that being an EU-level intervention. However, we look forward to seeing the details of the impact analysis of any proposals. 

We have to work together, and I hope that this Committee will work on a cross-party basis, where possible, to ensure that the single market reaches its full potential. The UK and UK businesses will benefit if we ensure that we play a leading role in the discussions and negotiations. 

The Chair:  We now have until 9.55 for questions to the Minister. I remind hon. Members that these should be brief. It is open to an hon. Member, subject to my discretion, to ask related supplementary questions. 

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Mr Wright:  It is a pleasure to serve under your chairmanship, Mr Bone. I thank the hon. Member for Daventry for his opening statement, and the Minister for setting out the Government’s response. She said that in the 20 years since the start of the single market, the world has changed. In many respects it has, but in 1992 we had a Conservative Government, we were in economic doldrums with a deep recession, and we faced public sector cuts, so in many ways the world changes and does not change. 

I have some questions, and I will try to adhere to your challenge, Mr Bone, of finishing by 9.55. 

The Chair:  I should have said that I have discretion to extend that time if Members require. 

Mr Wright:  Mr Bone, you have always been a generous man, and I may take you up on that offer. 

I have some broad questions and some specific ones on the 12 key points. As the Minister said, Single Market Act I was introduced just over 18 months ago and 11 of the 12 key points in it have not been implemented. Is Single Market Act II recognition that the first tranche has failed? We are in a curious position. Much of the communication relating to this Committee says that further progress is needed urgently, if possible by the end of the year. That is vague and aspirational and we cannot really disagree with it because there are no firm actions there. Will the Minister comment on that? 

Does the Minister believe that the 12 actions in Single Market Act II are achievable, given that half of them need to be implemented by the end of the year? Given what we have seen with Single Market Act I, I am not entirely convinced that we will get there, so I am interested in the hon. Lady’s thoughts on whether full implementation of those six recommendations is possible within the next three weeks. 

As I said, the 12 points in the communication are vague and in many ways aspirational, and we cannot disagree with them. However, key action 1 refers to opening domestic rail passenger services to operators from another member state. Will the Government accept that? Does the Minister believe that fragmentation of our current network has increased costs? In his report, Sir Roy McNulty estimates that that fragmentation results in our costs being 20% or 30% higher than those of our European counterparts. If we implement key action 1, will rail passenger costs fall, will fares be lower, and will bus services improve? 

The Chair:  Order. I am sorry to interrupt the shadow Minister. He is trying to help the Committee by asking a series of questions together, but it is more normal in these Committees for the Minister to reply to a question, and the hon. Member can then ask another. Otherwise, the Minister’s shorthand become a little difficult. 

Mr Wright:  That is helpful, Mr Bone. I thank you for your guidance. I will ask about the 12 key action points individually, and I shall be grateful if the Minister responds on key action 1. 

Jo Swinson:  Thank you for your guidance, Mr Bone. As the hon. Gentleman says, the world changes, but it does not change, and it is certainly true that he never misses an opportunity to make a political point. Nevertheless, I will endeavour to answer his questions. 

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The hon. Gentleman is right to highlight the fact that 11 of the actions in Single Market Act I have not yet been implemented. However, we expect further progress on them—it is not as if nothing has been happening. Many are at quite an advanced stage and we expect them to be agreed in the coming months. It is probably fair to say that many Members are sometimes frustrated by the amount of time that measures can take in this place, and that can be doubly so in European processes, where the wheels often turn quite slowly. Getting agreement from a large number of member states is not always straightforward, but as I said, significant progress has been made. 

The timetable for the 12 actions in Single Market Act II is clearly challenging. We are looking ahead to 2014, when we expect the next round of European elections and the current Commission coming to the end of its term. The ability to implement the actions outlined in Single Market Act II will therefore depend on the ability to get some kind of agreement in negotiations in the coming months, so that things can work through before the Commission comes to an end. The timetable is ambitious, but we should certainly be working towards it, focusing in particular on the growth measures, whose implementation is imperative not only in the UK but in other European nations. 

On rail services, it is worth saying that we have not yet seen the Commission’s full proposals and we will need to study the details. In general, we support further harmonisation, but we need to see whether what is proposed can be justified. There have also been some discussions with the Scottish Government; they are concerned that much of the rail network in Scotland is on rural routes, and want to ensure that anything agreed does not negatively impact on Scotland. Obviously, we will work closely with them and, as necessary, the other devolved Administrations to ensure that we address their concerns in the discussions within Europe. 

Mr Wright:  May I move on to key action 2, which is to establish a true single market for maritime transport? That objective seems to be laudable and would improve the competitiveness of the European Union. I agree with that approach and with the Government’s view, as set out by Lord Green, the Minister for Trade and Investment, who stated that the Government support key action 2 

“to remove duplication in administrative and customs processes, whilst ensuring that any proposal does not compromise the integrity of national borders and customs controls, impose additional costs on UK businesses, or result in an increase in the EU budget.” 

That seems to be a sensible approach, but is that ambition achievable? We in the UK have system of privately owned ports, while in many respects our European counterparts’ are part of the national Government, so there is more scope on the continent for greater integration. Does the Minister think that that ambition can be achieved, and if so, how? Given that the details we have are somewhat vague, is it feasible that we would have the organisation of access to ports in an integrated manner? 

Jo Swinson:  The hon. Gentleman is absolutely right to mention the difference between the UK ports market and that of many of our European counterparts. We have

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in the main privately owned ports, which is not common in many other member states. The proposals under key action 2, in the blue belt package, do not prevent member states from subsidising their ports, so it is understandable that UK businesses have concerns. As he is well aware, this is an issue in his constituency and the general region. 

Is it be feasible? It may well be feasible. We will be working and negotiating for a good deal on the action, but we will not agree to legislation that puts additional burdens on industry and would not make our ports more competitive. That will be the acid test for the Government. Equally, we have a lot to offer the EU: we can share our experience in the UK that the market approach to the provision of ports can work well. Obviously, we will have to see how the negotiations progress, so I will not promise that that will definitely happen. 

Mr Wright:  It is fair to say that the Minister could not really say any more, so allow me to move on to key action 3, which is to accelerate the implementation of the single European sky. 

I am interested in the relationship between European aviation policy and UK aviation policy. Key action 3 essentially says that we need single integrated European airspace management. How does that fit in with UK aviation policy and airport capacity? Do the Government intend that Heathrow, or perhaps another airport in the UK, will be the major European hub so that someone flying to the States or the far east would come to the UK? Would European policy enable that to happen? Will the Minister explain how aviation policy links in with key action 3? 

The communication also refers to direct routing, and rightly says that it will have benefits for aviation safety, reduce transport costs for citizens and businesses, and lower greenhouse gas emissions. How will direct routing work, and will the Minister give practical illustrations of how that will happen? 

Jo Swinson:  The hon. Gentleman asks me to describe the practical details of air traffic control, so I apologise in advance if I do not manage to get the details entirely right. I am not familiar with the exact way in which it works. It is an area in which we have a wonderful acronym, which is not always the case in the EU, where we sometimes have confusing acronyms. In the single European sky, however, we have functional airspace blocks—FABs—which bring states together to try to improve interoperability of technology and consistency in regulation. That is a good model to take forward. 

The UK is in a FAB with Ireland, and in advance of anything happening, the UK and Irish FAB has already started working with the Danish and Swedish FAB to see how we can improve things such as technology, interoperability and service. The hon. Gentleman rightly says that there are benefits—for example, direct routing will help with climate change. Those of us who represent areas outside the south-east will see the significant benefits not just in terms of reducing greenhouse gas emissions, but in local economic development. 

Clearly, air traffic control technology moves on apace. We must ensure that it improves, so that instead of 27 systems, we have systems that work better together.

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That is a sensible approach. If the hon. Gentleman wants more technical information that is beyond my current state of engineering knowledge, I will be happy to write to him, but I hope that I have given him some reassurance. 

Mr Wright:  Let me press the Minister on direct routing. According to the communication, it is estimated that the fragmentary European airspace system costs around €5 billion a year. That is a big competitive disadvantage to the European Union. Direct routing would help our competitiveness. In the Minister’s example, if she were flying from Glasgow to, say, the United States, how would direct routing work? I return to the question whether, as part of wider European policy, she would fly to Heathrow or to another UK hub airport. How will that work, and how will it improve the continent’s competitiveness with other regional economic blocs? 

Jo Swinson:  I shall endeavour to answer. If the hon. Gentleman imagines a map of Europe, obviously there are land boundaries, and airspace has similar boundaries. At the moment, because of the different systems operating, it often makes more sense for aircraft not to take the most direct route, but to remain in their virtual piece of airspace, and that may mean that routes are much longer. On average, aircraft fly 42 km further than is strictly necessary as a result of that fragmentation. If we can make the different bits of the air traffic control jigsaw fit better together so that a circuitous route is not necessary, that will help to reduce flight times, flight distances and the amount of fuel used. 

The Government are doing a range of other things to make sure that there are economic benefits for regional airports such as, for example, enabling my constituents, if they were flying to the United States, to do so from Glasgow airport instead of having to take a flight to Heathrow and then out again. In terms of aviation policy, that is a bit wider than the single European sky, but the benefits of air traffic control measures are that flying across different countries’ airspace will become simpler and the detours we see now will not be necessary. 

The Chair:  Order. Before we move on, it might be helpful to hon. Members if I say that, because of the way the debate is developing and the sensible order in which the shadow Minister is dealing with things, if Members want to come in on the particular point, they should catch my eye and we will take questions from them and go back to the shadow Minister afterwards. 

Fiona Mactaggart (Slough) (Lab):  Mr Bone, that is exactly what I was about to do. Thank you. 

I am not an expert on this matter, but what the Minister has described sounds to me like a recipe for Schiphol, which has already overtaken Heathrow as an international hub airport, to continue to prosper extremely at the expense of airports such as Heathrow. The Government’s policy in relation to Heathrow is already forcing us further down the international competitiveness scale, so why should we feel enthusiastic about this policy, which will mean that Schiphol, which is bigger than the country it is in, thrives and Heathrow continues to decline? 

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Jo Swinson:  The hon. Lady will know that there is a review of airport capacity in the south-east, which the Government commissioned. We will be interested in the results of that. Clearly, Heathrow’s importance as a business hub is key to our economy, and we do need to be aware of the competition in other countries, such as Schiphol, with the facilities that it can provide and the routes that it can offer. However, it would be strange if the hon. Lady was suggesting, as some kind of protectionist policy for Heathrow, that it did not make sense to go ahead and explore how air traffic control could work better across country borders. It is obviously better and, not least, probably safer if we get the technology working more closely between different countries, with greater interoperability. There are other benefits as well, such as fuel savings and shorter routes because aircraft are not flying around to avoid certain pieces of the airspace jigsaw. Clearly, the Government need to be looking at the competitiveness of Heathrow and what we can do to support that in our wider aviation policy, but I do not agree or accept that we should try not to go ahead with the single European sky on that basis. 

Chris Heaton-Harris:  First, let me say how impressed I am by the Minister’s knowledge of the individual subjects, because they are very complicated and involve a lot of historical knowledge. Will she say a few words about military airspace, because that is one of the big issues that hits the single European sky and puts blocks in the way of our FABs, as I think they are called? 

Jo Swinson:  The hon. Gentleman is perhaps reaching the limits of my expertise on air traffic control, but I can understand the likely interrelation between military airspace and civil aviation airspace. Clearly, joined-up working is needed to ensure that military aircraft do not end up—to put it bluntly—colliding with civil aviation aircraft. I can understand the security implications of a more integrated system, but I am sure that there are solutions so that we get the benefits of the single European sky without having to compromise security. The hon. Gentleman is right to raise the issue. I will be happy to write to him and other members of the Committee with any other details that are not currently in the recesses of my greater-than-it-was knowledge of air traffic control. 

Mr Wright:  I echo the hon. Member for Daventry in saying that this is a wide-ranging document, incorporating rail policy, air traffic control management and broadband infrastructure. I therefore pay tribute to the Minister for having been briefed substantially on the document during the past few months. 

Key action 4 is about improving the implementation and enforcement of the third energy package and making cross-border markets that benefit consumers a reality. In the present cold spell, that is obviously welcome. I hope that the Minister does not believe that this comment is partisan, but her Government’s energy policy is a right mess, and it needs to be sorted out for the benefit of our competitiveness as a nation and for the benefit of consumers so that they can gain from lower prices. The communication estimates that consumers throughout the EU would save up to €13 billion every year if they

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all switched to the cheapest electricity tariff available. Does the Minister think that the actions set out in the communication will help? 

Will the proposals improve competition in the energy market? I am thinking particularly about the domination of the big energy companies, which have 98% of the domestic market and so are able to hold consumers to ransom in many respects. When wholesale prices go up, energy bills for consumers go up, but when wholesale prices come down, the bills do not seem to come down as quickly as they should. What will the measure do to improve effective competition in the wholesale energy market? Does the Minister think that the Energy Bill complements the communication? How will it help? The communication refers to 

“the agreed objective of a completed internal energy market by 2014”, 

which is not far away. Is the Minister confident that that will be achieved? 

The communication also makes reference to 

“the transition towards low-carbon energy systems at the lowest possible cost.” 

Will the hon. Lady say a little about decarbonisation targets going beyond 2020, to 2025 or even 2030? As the Minister with responsibility for business, she will know that firms need certainty in order to plan for the long term and invest on the scale that is required. At the moment, the Government’s energy policy does not provide certainty, which means that potential jobs and investment in our offshore wind industry are being lost, going overseas and being undermined. Will she say a little about that? 

Jo Swinson:  As the hon. Gentleman says, energy is topical at the moment, what with the weather having turned rather chilly. The third energy package is not yet implemented in the UK—there are some challenges and difficulties—but across the EU, we are not alone in that. Indeed, the point of the fourth package is to try to address some of the difficulties in Single Market Act II. 

The hon. Gentleman asked whether we will get a fully integrated energy market before 2014. Clearly, that remains the ambition, but even the full implementation of the third package would not entirely get us there, so we will keep working towards that. 

The hon. Gentleman asked about competition and whether the measure would be good for consumers. The draft regulation removes planning barriers to make it easier for companies to work on a cross-boundary basis, which ought to be good for consumers because it improves competitiveness, but he is right to say that there is a challenge in getting the best deal for consumers. As the Minister with responsibility for consumer affairs, I am aware of that. Switching is part of the solution and, indeed, the UK Government are leading within the EU on energy switching. We can share some of our experience with other countries, although I do not think we should be complacent about the position we have reached in the UK market. 

The hon. Gentleman talks about the dominance of the big six energy companies, which have 98% of the market. It is important to point out the other 2%, and I happen to be in that 2%: for a long time I have purchased

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my energy from Good Energy, which buys renewable energy and is a lovely, fantastic company, and I get my gas from a not-for-profit provider called Ebico. When constituents come to talk to me about their concerns and frustration with the energy markets, I find that many of them are unaware of some of the options outside the big six, because those companies have such big advertising budgets and are household names. More can be done to improve consumer information about the options out there. For example, the many people who are concerned about what they perceive to be the excessive profits of the big six could buy their energy from a company or a social enterprise that is not making profits, 

Mr Wright:  The Minister makes an important point. She mentions improved competition and other suppliers, including Good Energy. I met Good Energy and other providers last week. She rightly identifies that consumers are baffled by the range of tariffs and do not have the information they require. The communication is about improving competition and benefits for consumers in the European market; as Minister with responsibility for consumer affairs, can she tell me what provisions it contains to ensure that consumers have the information they need to switch and be confident that they are choosing the cheapest deal? 

Jo Swinson:  The ways in which we can get a better deal for consumers are not restricted to changes at EU level. They include improving the competitiveness of the market and making important decisions about energy investment and security, which is key, as I am sure the hon. Gentleman agrees. We recognise that significant investment will be required in the coming years to secure the means to meet our future energy needs and, bluntly, to make sure that when we flick the switch, the bulb lights up. 

The hon. Gentleman mentioned the need for consumer information. The Government are looking at a range of ways to enhance consumer power and simplify consumer law. He also mentioned the simplification of tariffs, which is really important, because the vast array of tariffs available can be a bit of a minefield for consumers. The Government have outlined plans to ensure that a simpler range of tariffs is offered to consumers. 

Mr Wright:  The Minister pre-empts my intervention— 

The Chair:  Order. You are not intervening but questioning, Mr Wright. 

Mr Wright:  Thank you, Mr Bone. My further question concerns what the Prime Minister said in the House a couple of months ago about ensuring by law that the cheapest energy tariff is provided to consumers. Can the Minister update the Committee on that? 

Jo Swinson:  My right hon. Friend the Secretary of State for Energy and Climate Change made a statement to the House recently, and the hon. Gentleman may well have been in the Chamber for it. That statement set out in full detail exactly what the Government are doing about tariffs and ensuring that energy companies give their consumers a better deal. 

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The hon. Gentleman also mentions decarbonisation, which is important. I appreciate that there was some disappointment about decarbonisation targets, but we have secured a big set of investments in renewable energy, which will be an important part of the UK’s energy future. As a Scottish MP, I know that we already have a huge amount of hydro, and there is massive potential for offshore wind and other renewable technologies. Thanks to the work on renewable technologies done by the Catapult centre at Strathclyde university, I am well aware not only of the advantages for energy consumers but of the economic benefits that the UK will be able to realise from becoming a leader in renewable energy. It is important that the House sends a clear message to business about the commitment of this Government and future Governments to renewable energy in the UK, so that business knows that investing in renewable energy will be a sound business decision. 

Valerie Vaz (Walsall South) (Lab):  It is a great pleasure to serve under your chairmanship, Mr Bone, especially on this issue. 

My question relates to the second part of key action 4, which is about the “mobility of citizens and businesses”. I am a member of the Health Committee, which recently published a report in which we expressed our concerns about the lack of an English language test for doctors who come to work here from Europe. We and the General Medical Council feel that there should be some sort of language test so that doctors can practise safely here, albeit in keeping with the European Union’s requirements regarding the mobility of citizens. Will the Minister undertake negotiations to ensure that we can have some sort of test that enables doctors to practise here safely? 

Jo Swinson:  The hon. Lady raises an important point. Our citizens benefit from mobility of labour across the EU, not only because they can go and work in other countries, but because the people of other countries can come and work here, and they often make an excellent contribution to our public services. Clearly, the ability to communicate in English is vital for a doctor working in the UK, and it is important that we are able to ensure that the necessary standards are in place. I am happy to bring the hon. Lady’s comments to the attention of my colleagues in the Department of Health—I am sure that they are already abreast of the issue—and to ensure that that point is reflected in our European negotiations. 

Mr Wright:  Key action 5 is titled “Develop the EURES portal into a true European job placement and recruitment tool”. Does the Minister share my concern that there is a big flaw in that, given that one of the biggest social and economic problems facing this country and the European Union is youth unemployment? It is hardly mentioned in this communication, but I think it should be. There is vague mention of assessing 

“the possibility for EURES to also cover apprenticeships and traineeships”, 

but there should have been much more emphasis on challenging youth unemployment. One in four young men in my constituency is without work. In Spain, youth unemployment rates are 40% to 50%, so this is a big issue. 

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Chris Ruane (Vale of Clwyd) (Lab):  Will my hon. Friend give way? 

The Chair:  Order. We are in the question session at the moment. If you want to ask a question afterwards, Mr Ruane, that will be fine. 

Mr Wright:  Will the Minister accept that given the merits of this communication, this big omission should be addressed? 

Will she say a little about the practicalities of how the portal will work, because, again, this involves vague and aspirational language? What help will people who are unemployed in Hartlepool or in East Dunbartonshire—or anywhere else—be able to get to access information from across the European Union to seek employment elsewhere? I should be interested to know how this will work practically. I am thinking about not only people moving from the UK to other parts of the European Union, but those going in the opposite direction. 

I have mentioned in the House a report that was published on Monday by Engineering UK saying that we have enormous potential, but that we also need to double the number of engineering recruits into the UK by 2020 to meet demand. Given that there will be unemployed engineers in places such as Germany, what assistance will be given to ensure that they will be moved into the UK, and what impact does the Minister think that that will have on unemployment figures here? I fully appreciate that there is a single market, but we have a particular concern about UK unemployment. Given the big mismatch between the huge potential in manufacturing and engineering in my area, among others, and unemployment, should there not be a more national approach on this, rather than a European approach? 

Jo Swinson:  I think we agree that this is a massive concern. It is a concern in Hartlepool and in East Dunbartonshire, and I am sure it is a concern in every constituency represented in the Committee. The EU is only one way of tackling this, so it is important that there is action at national level. Obviously the UK has a range of programmes, such as the youth contract and the Work programme, but we are not complacent because more needs to be done, particularly given the figures that the hon. Gentleman cites from his constituency. 

In terms of the practical help that EURES can offer, this is about trying to make it easier for people in the UK who want to work in another EU country to see what vacancies there are and perhaps to apply online. There is also information available about the types of living conditions that people might face. Many might not have lived abroad or visited some of these countries, yet going there might be a sensible move for them at a particular point in their life. 

The hon. Gentleman also mentioned the challenge of the skills gaps in the UK. He cited engineering, and British business will confirm that there are not enough engineers for the opportunities that are available. He will appreciate that that problem cannot be solved overnight because it is a legacy of policies over the years. We need to make sure that British business does not lose out. If skilled engineers are needed and we do not have them in the UK, we must ensure that engineers from Germany or elsewhere in Europe, or indeed the world, can come and work here in the UK. 

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The hon. Gentleman asked about the impact on jobs in the UK. If there are businesses in the UK that can plug skills gaps, they will prosper and then create other jobs, which will help employment. I agree that many of these issues must be dealt with at a national level, but there is a role for the EU on improving cross-border flows of labour, especially for people with specific skills, and ensuring that there is better information about what opportunities are available. 

Chris Ruane:  My hon. Friend the Member for Hartlepool said that there is not enough emphasis on the long-term unemployed and, specifically, on long-term youth unemployment. I know that the Minister has an interest in well-being, as she was previously chair of the all-party group on well-being, but unfortunately she missed my Adjournment debate last night on the effect of mindfulness in reducing unemployment. 

In that debate, I cited a couple of key statistics, one of which is that there are 1 million long-term unemployed young people, and the effect of long-term unemployment on a person’s outlook, mental capacity and well-being is huge—it changes the chemistry of the brain. Furthermore, 32.3% of 16 to 25-year-olds have one or more psychiatric condition, compared with 10% of over-65s—it is the highest proportion. It is a chicken or egg question—is the unemployment a cause of that, or a consequence of that? I ask the Minister to take on board the shadow Minister’s point and re-emphasise the need for a specific reference to long-term youth unemployment. 

Jo Swinson:  I thank the hon. Gentleman for his contribution. I am sorry that I missed his debate last night, but I am glad that he secured it, because this is an issue on which he has worked for some time, along with academics in Wales who have gathered evidence and carried out analysis. It one of those issues that is not always easy to raise in a political setting, but the links with mental health difficulties are particularly important. That is a chicken and egg question because we know not only that mental health problems can make it more difficult to get a job, but that the lack of a job has an impact on mental health. That is one of the reasons why it is really important that we focus on unemployment. 

I will not say that EURES is the whole solution, but it has helped. The Committee might be interested to know that 100,000 jobseekers a year get a job or job offer through EURES, which is welcome. There are 750,000 CVs on the system at any one time, and there are 50,000 yearly placements and 3.5 million-plus visits to the portal each month. It is part of the solution but, of course, we need to do much more on this important issue through not just our EU work, but cross-departmental working in government. 

Mr Wright:  Let me press the Minister on the practicalities in two direct ways. First, if EURES is available now, what will change? Secondly, will she talk through what would happen if an unemployed person, such as a skilled subcontractor—there are many in Hartlepool—went into Hartlepool jobcentre this morning? Will he or she be offered work across the European Union? I said that I would make two points, but I shall be cheeky and add a third: what will be the costs of developing the portal to the UK national Government? 

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Jo Swinson:  The shadow Minister raises the important point that EURES exists already. This is about reforming and improving it, and it is fair to say that we should not just set something up and then assume that it is working perfectly and not look at it again. Its scope will change so that it can be targeted at schemes, which can be decided at a national level. It will also integrate private employment services into the network, when they are not already involved, and provide better guidance on its delivery across member states. This measure is about building on something that already has a degree of success and making it better. 

I do not have the answer to the hon. Gentleman’s question about costs, although I will endeavour to find out for him, but an online process is often a pretty cost-effective way of providing information and search facilities. If a small IT cost is involved in improving the system so that more job opportunities can be provided, I suspect most Members would think that was a good investment. 

Mr Wright:  My second point was about a person going into Hartlepool jobcentre and, with help, finding a range of employment possibilities across the EU on the portal. Is that possible now, and how will it be developed? I am sorry to press the Minister, but this is an important point. 

Jo Swinson:  The hon. Gentleman is right that it is an important point. The portal does exist now, and EURES jobs are available for someone going into their jobcentre in Hartlepool. Somebody who is unemployed can go into their local jobcentre, browse the vacancies and put their CV online so that employers can have a look. It is probably fair to say that more could be done to publicise that and to ensure that provision is uniform across all jobcentres, so that there is not a great service in one and a less good service in another, but that is a challenge of delivering public services more generally. However, provision is already there for the hon. Gentleman’s constituent—that is an appropriate test—and we want to make it even better. 

Mr Wright:  With your permission, Mr Bone, I will move on to key action 6. The Committee will be disappointed to hear that I am going quicken up as I go through the second half of the key actions. 

Given that we will have the autumn statement today, this really is a key action, because it is titled “Boost long-term investment in the real economy by facilitating access to long-term investment funds”. Access to finance is one of the major problems—if not the major problem—that firms tell me about when it comes to ensuring that they can grow and secure employment opportunities. Getting it right at a national level, as well as a continental level, is therefore vital. 

I have a number of specific questions. The Government’s response to the communication contains an interesting phrase. The Minister for Trade and Investment says: 

“The Government welcomes initiatives to boost the long-term investment in the real economy by facilitating access to long-term investment funds. The Government favours the establishment of a third fund regime and brand for retail long-term investment funds”. 

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What does that mean? How will it apply on the ground? This is another good example of vague aspirational language that does not say an awful lot. Everybody agrees with long-term institutional investment to help the real economy, but the details are scant. Is there any news about when the forthcoming green paper on financing long-term investment in the EU economy will be published? What will happen in the next year to ensure that such things occur? I imagine—at least I hope—that we will hear something from the Chancellor today about action at the national level to boost access to finance for small and medium-sized enterprises and other businesses, but will the Minister put a little more meat on the bones? 

Jo Swinson:  The hon. Gentleman asked about the brand that could be established. The idea is that individuals—whether investors or those seeking investment—would know that venture funds with that brand attached to them complied with certain cross-EU standards. That would be a good way of ensuring there was more information out there, which can help with access to finance and reduce some of the uncertainty. 

The Commission is looking at tax issues in terms of cross-border venture capital investment. We think the taxation regime in place in the UK is what is necessary, and it is working, and we do not think that EU-level action is needed on that. The Commission is also consulting on the undertakings for collective investment in transferrable securities VI; it will look at long-term investment funds, and we will see what happens as a result of the consultation. This is one of those issues where we have an action listed, but we do not necessarily have huge amounts of detail and flesh on the bone. 

Obviously, as the hon. Gentleman pointed out, we all agree in general terms that it is good to boost long-term investment. The Chancellor will, I am sure, have things to say about that in today’s autumn statement. In terms of taking a more long-term approach to the economy generally, my right hon. Friend the Business Secretary has taken great interest in promoting long-termism in thinking and investment through Professor Kay’s review, which reported earlier this year and to which the Government have now responded. 

The hon. Gentleman rightly says that access to finance for small businesses is important. All hon. Members are aware of that, and we are looking at a range of different measures through which we can improve that access, not least the business bank, which was also announced recently. 

Mr Wright:  Key action 7 is designed to modernise EU insolvency rules. I knew that you were going to be in the Chair, Mr Bone, so when I read the first sentence describing the key action, I issued a wry smile, because while I know that you cannot possibly comment, I would love to know your feelings about it.  The sentence says: 

“Businesses operating in Europe benefit from an overall positive business environment, which the EU is further improving through its better regulation agenda.” 

I imagine that you have your personal thoughts about that, Mr Bone— 

The Chair:  Order. When I sit in this Chair, I have no views about anything. 

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Mr Wright:  You are entirely scrupulous, Mr Bone, and we all appreciate that. 

I have a broad policy-based approach to key action 7. The measure seems to be very welcome, because people need to be able to fail and then get back on their feet by setting up business perhaps much earlier than has previously been the case. For far too long, our culture in the event of business failure has been, “You try once, and then you don’t try again,” but that is not the right approach in a modern economy, in which failures can be real opportunities to learn and to adapt, so that the next time that someone who has failed in business sets up a business, they can bring their previous experiences to bear in a positive way. 

The Minister was not in her post at the time, but we discussed our culture of insolvency in Committee during consideration of the Enterprise and Regulatory Reform Bill, and I think that she has invited me to talk to her about that particular concern. How does key action 7, which appears to be very laudable, fit in with the culture of our insolvency practices, which seems to be much more risk-adverse and does not encourage entrepreneurs to get back up on their feet and succeed? 

The Chair:  Order. Before the Minister responds, let me inform the Committee that the hour allocated for questions is almost over. However, as it appears that Members still wish to ask questions, under the provisions of Standing Order No. 119(9), I am extending the time to allow the remaining questions to be asked. We shall move on to the debate after no more than half an hour. Any extra time given for questions will be deducted from the total time for debate, so we shall still finish no later than 11.25 am. 

  Jo Swinson: Thank you, Mr Bone. You are very kind to indulge the Committee by making sure that we have the maximum time available for questions. 

The shadow Minister asks how I think that key action 7 fits with the UK system of insolvency law. I think that it fits very well. He says that we need a culture in which trying and failing in business is not seen as negative, and one of the things that is often said about the American system is that someone is not seen as a successful business person until they have at least one failed business behind them. Clearly, there are big lessons that people learn through failing, and failing should not be seen as something that means someone just cannot do business. We need to get a regime that strikes a balance by ensuring that people are not disincentivised from trying again. 

Yesterday I met victims of the Farepak scandal and MPs who have been campaigning on that issue, and my ministerial casework includes a range of points raised by MPs. There are concerns about the situation when people’s businesses have become insolvent and their creditors have not been paid, so we also need to ensure that when negligence has occurred, there is a disqualification regime in place to mean that people are protected. It is important to get the balance right. 

While we always wish to improve the system and to keep it under review, the UK, by and large, gets that balance right. Indeed, we often achieve that better than some other EU member states that do not necessarily embrace the same concepts as us. If we can get the key

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action agreed, it will help the UK by helping growth in the single market, while benefiting UK businesses due to establishing concepts across the EU that are similar to those that we already have in the UK. 

Mr Wright:  I have no further questions about key actions 7 and 8, although I do not know whether any other hon. Member wishes to talk about them. 

Key action 9, which is titled “Reduce the cost and increase efficiency in the deployment of high speed communication infrastructure”, is vital to ensure that we are competitive in the modern world. When I was reading the communication, it struck me that the EU’s approach seems to be much more in keeping with that set out in the House of Lords Communications Committee’s June report, the summary of which said: 

“Government policy has become preoccupied with the delivery of certain speeds to consumers. This, in our view, has had a detrimental effect on policy making and the long-term national interest…The delivery of certain speeds should not be the guiding principle; what is important is the long-term assurance that as new internet applications emerge, everyone will be able to benefit, from inhabitants of inner cities to the remotest areas of the UK.” 

That is important because potential businesses in my patch, which is a predominantly urban constituency with outlying villages, such as Dalton Piercy and Elwick, say that they have no access. To what extent does the Minister think that key action 9 is in keeping with the Government’s emphasis on speed rather than accessibility? Will she change tack on broadband policy as a result of what the communication says? 

Jo Swinson:  The hon. Gentleman rightly raises the issue of ensuring that broadband coverage is on the agenda as well as broadband speed, although that is also important. Some businesses can access broadband but find, particularly due to the nature of their business—whether they are involved in design or video, or in something else that is hungry for broadband capacity and bandwidth—that a lack of access to high-speed broadband can be as detrimental as a lack of access overall would be. Rather than making a choice of addressing one or the other, we need to ensure that progress is made on both. 

The fact that such infrastructure is listed as one of the key actions in the document shows that there is recognition in Europe that that is important. The connecting Europe facility is a welcome project. It is helpful that there has been talk of using the budget to leverage in private investment. Private investment is a key sector of the economy, and it ought to be in businesses’ interests to ensure that we get infrastructure up and running. That, in itself, is an economic opportunity. 

We now have the state aid clearance that we were looking for with regard to the UK’s broadband investment, which I know will be welcomed in constituencies up and down the country because it will ensure that access can be provided where it does not presently exist. The hon. Gentleman is right to highlight this important issue for business. 

Mr Wright:  Key action 10 is titled “Make electronic invoicing the standard invoicing mode for public procurement”. On one level, that seems laudable, but

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does the Minister think that the phrase “putting the cart before the horse” is applicable here? If e-invoicing for public procurement is going to work, would it not be best for the European Union to think about a single, workable EU-wide standard first? That is far from what we have at the moment, and the different systems and standards in place add to cost. Instead of key action 10, should not the UK Government have pushed for something like an EU-wide standard—the promotion, in the Single Market Act, of a single standard—and then for making e-invoicing the default mode? Without that, there is a risk that we will have higher costs and more red tape for SMEs, which will ultimately undermine the competitiveness of businesses in the EU. 

Jo Swinson:  The hon. Gentleman raises an important point, but I do not think that the answer is either/or. Parts of the proposal talk about fully structured invoices, which clearly can deliver a greater degree of standardisation. They also have the benefit of reducing errors and costs, as the hon. Gentleman outlined, because there will be no re-typing, transcribing or misreading of invoices. Having a more standard pro forma can certainly be helpful with e-invoicing. 

At the same time, if that standard has not yet been achieved, I would not want to say that we should not go ahead with e-invoicing at all, because it is clearly a measure through which we can reduce not only processing costs, which is welcome, but opportunities for fraud, for example. The measure can also lead to faster payments to suppliers, which is particularly helpful to businesses in these difficult times. 

Mr Wright:  Finally—[Hon. Members: “Hear, hear!”]. I have now forgotten what I was going to say, so with your permission, Mr Bone, may we go back to the beginning? 

Finally, I would like to take the fourth plank of key actions—on social entrepreneurship, cohesion and consumer confidence—together. Reading the communication, it strikes me that there are no measures in place for social entrepreneurship at all. Actually, there is nothing whatsoever about entrepreneurialism. What efforts have the Government made to ensure that social entrepreneurship is pushed? It is an important model for ensuring fair and responsible economic growth, but as far as I can see, the fourth plank of the Single Market Act II does not push it at all. 

Jo Swinson:  I hope that the hon. Gentleman does not have particular questions on what is in that particular plank. Much of it makes a lot of sense although, as I outlined earlier, we certainly have questions about some of it. He says that the communication does not go far enough on social entrepreneurship. I can only say that that is something that can be pursued at an EU level, but it is also something that national Governments have a real opportunity to promote. I mentioned earlier my personal support for social enterprise through some of my buying decisions. We want to make sure that there is a diversity of corporate governance structures, including social enterprise. There is a range of different ways in which we can promote that. For example, the Government’s response to the Nuttall review on employee ownership is a good way in which social enterprises can be supported, and that is just one of the alternative business models. I understand the hon. Gentleman’s desire to go further, but the UK Government are able to take steps on it, as well as to pursue it on an EU level. 

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Mr Wright:  Given the importance of social entrepreneurship, and of widening corporate governance and ownership models as much as possible, how does key action 11 fit in with the Government’s proposals for workers to give up some of their rights at work in exchange for shares in the business? 

Jo Swinson:  The hon. Gentleman refers to one of the specific proposals in the Growth and Infrastructure Bill, which, as he is aware, is in Committee. That is only one small part of a wide range of measures. The Government are keen to make sure that we have a flexible set of arrangements under which businesses can be set up. The proposal has been described by some organisations, such as the CBI, as “niche”, but it might be of use to some small, high-growth start-ups. The Government’s work on employee ownership, particularly with the group that has been set up—it met for the first time either last week or the week before—to drive forward the implementation of our response to the Nuttall review, will be even more significant for how we make sure we champion employee ownership and alternative business models. 

Mr Wright:  This will be my final question—or comment, rather—on behalf of the Opposition. Given that the Minister has had to deal with rail policy, air traffic control management, broadband and employee ownership, does she agree that she has handled this magnificently—[ Laughter. ] Opposition Members have admired her grasp

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of these issues, given their wide scope and the fact that some were outside her brief. We have certainly enjoyed this exchange, although perhaps other hon. Members have not. 

Jo Swinson:  That was like the end of “News at Ten” with the nice “and finally” story about fluffy pandas or whatever. I thank the hon. Gentleman for his kind comments. 

The Chair:  I thank the Leader of the House—oh, Minister, you are not the Leader of the House; you just did a very good impression of being the Leader of the House. If no more Members wish to ask questions, we will proceed to the debate on the motion. 

10.4 am 

Jo Swinson:  I beg to move, 

That the Committee takes note of European Union Document No. 14536/12, a Communication from the Commission: Single Market Act II—Together for new growth; and supports the Government’s aim of prioritising growth enhancing measures. 

We had a very good airing of the various issues during the question session, so I have nothing in particular to add. I commend the document to the Committee. 

Question put and agreed to.  

10.5 am 

Committee rose.  

Prepared 6th December 2012