2 Broad guidelines for economic policies
| Committee's assessment
| Politically important |
| Committee's decision | Not cleared from scrutiny; recommended for debate in European Committee B
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| Document details | Draft Council Recommendation on broad guidelines for economic policies of Member States and the EU
|
| Legal base | Article 121(2) TFEU; —; QMV
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| Department
Document numbers
| HM Treasury
(36712), 6813/15 + ADD 1, COM(15) 99
|
Summary and Committee's conclusions
2.1 EU "integrated guidelines", for economic and employment
policies, underpin the Europe 2020 Strategy and are relevant to
the annual European Semester. The Commission has proposed four
broad guidelines for economic policies, as part of new "integrated
guidelines", for consideration by the June European Council.
2.2 The Government tells us that it is broadly supportive
of the Commission's proposed text, but is critical of some of
the detail, concerning third country labour migration and taxation.
2.3 The broad guidelines for economic policies
are important in the context of both the Europe 2020 Strategy
and the European Semester. So we recommend that this document
be debated in European Committee B and we urge the Government
to ensure that the debate takes place before the June European
Council.
2.4 We suggest that in the debate Members will
want to examine particularly the texts concerning labour migration
and taxation.
Full details of
the documents: Draft Council Recommendation
on broad guidelines for the economic policies of the Member States
and the Union: (36712), 6813/15 + ADD 1, COM(15) 99.
Background
2.5 In 2005 EU "integrated guidelines",
for economic and employment policies, were introduced. The Lisbon
Treaty contains the present legal base for integrated guidelines
— Article 121 TFEU for broad economic policy guidelines
and Article 148 TFEU for employment policy guidelines. The latter
article provides that the employment guidelines must be consistent
with the economic guidelines. The guidelines are to be taken into
account by Member States in preparing and annually updating their
National Reform Programmes.
2.6 In March 2010 the European Council endorsed a
"Europe 2020 Strategy" for the coming decade, to follow
on from the Lisbon Strategy. The strategy was to continue with
integrated guidelines and the associated reporting and monitoring
process. It set out the challenges facing the EU over the coming
decade and the need for "a strategy to turn the EU into a
smart, sustainable and inclusive economy delivering high levels
of employment, productivity and social cohesion" and proposed:
· policy
priorities that focused on smart, sustainable and inclusive growth;
· seven
flagship initiatives to deliver on those policy priorities;
· mobilising
EU instruments and policies such as the single market to pursue
the strategy's objectives; and
· a governance
structure that included five headline targets that the EU should
aim to achieve by 2020.
2.7 Alongside the Europe 2020 Strategy has been the
Growth and Stability Pact. The Pact, adopted in 1997, emphasised
the obligation of Member States to avoid excessive government
deficits, defined as the ratio of a planned or actual deficit
to gross domestic product (GDP) at market prices in excess of
a "reference value" of 3%. Each year the ECOFIN Council
issues an Opinion on the updated stability or convergence programme
of each Member State. The economic content of the programmes is
assessed with reference to the Commission's current economic forecasts.
2.8 In endorsing the Europe 2020 Strategy the European
Council said that "The timing of the reporting and assessment
of the National Reform Programmes and Stability and Convergence
Programmes should be better aligned, in order to enhance the overall
consistency of policy advice to Member States". In June,
September and October 2010 the European Council considered and
endorsed measures to increase coordination of EU economic governance,
including strengthening the Stability and Growth Pact and a "European
Semester" which would tie together annual consideration of
National Reform Programmes and Stability and Convergence Programmes.
2.9 More generally the European Semester is an EU-level
framework for coordinating and assessing Member States' structural
reforms and fiscal/budgetary policy and for monitoring and addressing
macroeconomic imbalances. The European Semester cycle begins with
an Annual Growth Survey by the Commission, followed by a series
of overarching and country specific documents from the Commission
and culminating in examination of the overall and country-specific
situations by the European Council.
The document
2.10 The previous Council Recommendation on broad
economic policy guidelines was adopted in July 2010 and it was
indicated that they would remain stable until 2014. The Commission
now proposes these new guidelines to underpin the Europe 2020
Strategy.
2.11 The draft Recommendation itself is largely a
preamble with seven recitals and the draft guidelines are annexed
to the draft Recommendation.
2.12 The Commission's draft preamble:
· notes
that the EU has developed policy coordination measures, combined
under the European Semester;
· says
that the financial crisis revealed weaknesses in the economy of
the EU and of the Member States;
· says
that moving the EU to a state of job creation and growth is the
key challenge faced today, and that this requires ambitious and
coordinated policy action;
· suggests
that these actions should encompass a boost to investment, a renewed
commitment to structural reform, and exercising fiscal responsibility;
· suggests
that Member States and the EU should address the social impact
of the crisis, and says Member States should make sure the benefits
of growth reach all citizens and all regions;
· suggests
that action in line with the guidelines would contribute to reaching
the goals of the Europe 2020 Strategy;
· continues
that the guidelines are addressed to the Member States and the
EU, and should be implemented in partnership with national, regional
and local authorities, parliaments, social partners and civil
society; and
· says
that the proposed guidelines are in line with the Stability and
Growth Pact and should form the basis of the European Semester's
Country-Specific Recommendations.
2.13 The Commission proposes four broad economic
policy guidelines:
· boosting
investment;
· enhancing
growth by the Member States implementation of structural reform;
· removing
key barriers to growth and jobs at the EU level; and
· improving
the sustainability and growth-friendliness of public finances.
2.14 With respect to the investment guideline, the
Commission's proposed text says:
· increasing
the level of investment is key to boosting demand, and improving
competitiveness and the growth potential in the EU;
· the
potential of EU funds to finance investment should be exploited,
and making finance reach the real economy calls for increasing
transparency and information provision; and
· macroeconomic
and financial stability, as well as regulatory predictability
and financial sector openness and transparency, are critical elements
for keeping the Union an attractive host for foreign investment.
2.15 The Commission's proposed text for the guideline
on structural reform says:
· ambitious
implementation of reform by Member States in product and labour
markets and social welfare systems is crucial to the recovery,
correcting imbalances, and unleashing the potential of EU economies;
· Member
States should coordinate reform closely;
· labour
market and social systems reforms need to be pursued closely,
and actions on legal migration should make the EU an attractive
destination for talent;
· reforming
and integrating product markets should be continued, and efforts
should continue to streamline the regulatory environment; and
· information
and communication technologies and the digital economy, and in-depth
reform to modernise research and innovation systems are emphatically
important.
2.16 On the third recommended guideline, on removing
key barriers to growth and jobs at the EU level, the importance
of further integration of the single market is highlighted, specifically
mentioning the Digital Single Market, the Capital Markets Union
and the Energy Union as areas where the EU can make a contribution.
The Commission's text also says EU legislation should focus on
those issues that are best dealt with at the EU level.
2.17 The Commission's proposed text for the guideline
on improving the sustainability and growth-friendliness of public
finances starts by saying stable finances are key for growth and
job creation. It then says that:
· Member
States should secure long term control over the deficit and debt
levels, through the EU rules based framework, and this should
be complemented by national budgetary arrangements;
· budgetary
consolidation should prioritise growth-enhancing expenditure items
and expenditure reforms should target efficiency gains;
· a common
consolidated tax base should be pursued, and taxes should be shifted
from labour to consumption, property and environmental taxes;
and
· broadening
tax bases should also be considered.
2.18 After a written procedure, the ECOFIN Council
is expected to endorse draft broad economic policy guidelines
in May. These are expected to be the base for a discussion at
June European Council. (The Commission has also proposed new employment
guidelines as the other half of new integrated guidelines, which
will also be processed for the June European Council.[1])
The Government's view
2.19 In his Explanatory Memorandum of 13 March 2015
the Financial Secretary to the Treasury (Mr David Gauke) says
that:
· the
Government welcomes the emphasis in the recommendation on structural
reform at both the Member State and EU levels, the importance
of investment, and the need for fiscal responsibility;
· it supports
the statement that EU legislation should focus on those issues
that are best dealt with at the EU level;
· while
the Government broadly supports the case for labour market reform
set out in the Annex, it believes, however, regarding the references
to legal migration, that the regulation of labour migration from
outside the EU should be a matter for Member States to determine
on the basis of national assessments of economic need;
· it also
does not support the recommendations on taxation, which the Government
believes is overly prescriptive, in particular the need to pursue
a common consolidated tax base, which contravenes the principles
of proportionality and subsidiarity; and
· the
Government believes decisions on specific matters of taxation
are best made by Member States taking into account country-specific
circumstances.
Previous Committee Reports
None.
1 (36703), 6144/15 + ADD 1, for which we are awaiting
the Government's Explanatory Memorandum. Back
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