(a); (b); and (c); cleared from scrutiny; further information requested; drawn to the attention of the Business, Energy & Industrial Strategy and the Work & Pensions Committees
(a) Commission Communication: Establishing a European Pillar of Social Rights; (b) Proposal for an Interinstitutional Proclamation on the European Pillar of Social Rights; (c) Reflection Paper on the social dimension of Europe
Business, Energy and Industrial Strategy
(a) (38691), 8637/17 + ADDs 1–3, COM(17) 250; (b) (38693), 8693/17, COM(17) 251; (c) (38695), 8717/17 + ADDs 1–2, COM(17) 206
24.1On 26 April 2017, the European Commission published a proposal for a “European Pillar of Social Rights”. It is effectively a draft declaration of twenty principles and rights to underpin national labour markets and social welfare systems in the EU, in particular the Eurozone. The legal form of the Pillar is an “inter-institutional proclamation”, which will need to be agreed between the Member States in the Council, the European Parliament and the Commission.
24.2The practical purpose of the Pillar is twofold: to summarise the social and employment rights already contained in EU law, and to complement them with additional principles and targets that take into account new economic and social realities (such as developments in the labour market). As a result, the principles included in the draft Pillar are wide-ranging, and touch on policy areas as divergent as equal pay and housing. The Commission submitted the draft proclamation to the other two institutions for their consideration, alongside an explanatory Communication and a “reflection paper” on the long-term options for the EU’s social policy dimension (see “Background” for more information).
24.3The Minister for Small Business (Margot James) submitted an Explanatory Memorandum on the Pillar of Social Rights package on 6 July 2017. With respect to the policy implications of the Pillar, she notes only that “this initiative is aimed at the Eurozone”, and that it was “not yet possible to provide a view on policy implications, as there are no legislative proposals. We will carefully examine any further proposals as they emerge”. The Minister’s Memorandum does not make any assessment of the options put forward by the Commission in its reflection paper as, in the context of Brexit, “the paper is intended for the EU27”.
24.4In October 2017, EU Employment Ministers unanimously approved the text of the Pillar with minor amendments, which had already been informally agreed with the European Parliament. Although the Minister requested a scrutiny waiver in advance of the October Council meeting, the Committee was unable to consider this request in time. By letter of 30 October, the Minister informs us that the Government had overridden scrutiny given that the Pillar “does not entail an extension of the EU’s powers” or create any “new directly enforceable rights or new legal obligations”. The Pillar was the subject of a formal signing ceremony on 17 November in Sweden it was formally ‘proclaimed’ by the EU institutions at a summit in Sweden on 17 November.
24.5The Pillar of Social Rights is a policy initiative of major significance. It is likely to set the EU’s social policy agenda for years to come. We agree with the Minister that the Pillar does not in itself have any legal effect: its eventual adoption by the EU institutions could, at most, constitute an invitation to the Commission to propose new legislation where it is both legally and politically appropriate to do so. As noted by the Employment Council, any European Commission legislative proposal based on the principles elaborated by the Pillar should have due regard for the principles of subsidiarity and conferral of competence. Although the Pillar is “primarily conceived” for the Eurozone, it is unclear whether the scope of any legislative proposals that flow from it would always be geographically restricted to the single currency area.
24.6We have taken note of the Commission’s 2018 Work Programme, which shows that proposals on a European Labour Authority, access to social protection for “gig economy” workers, a European Social Security Number and a revision of the Written Statement Directive are currently under preparation for submission to the Council and the European Parliament next year.
24.7These, and any other, legislative initiatives the Commission undertakes on the basis of the Pillar, are unlikely to take effect prior to the end of the two-year negotiating period for the UK’s withdrawal from the EU under Article 50 TEU. However, because of the Government’s lack of clarity about its vision for the post-Brexit economic relationship with the EU, we are not yet in a position to apply light-touch scrutiny to EU social and employment initiatives currently under consideration on the basis that the UK is leaving the EU.
24.8The Government’s own factsheet about Brexit and workers’ rights fails to make clear whether the UK may have to implement future changes to EU employment legislation as part of our obligations under a new free trade agreement. The other Member States have already said that a new free trade agreement would have to “ensure a level playing field, notably in terms of (…) social, environmental and regulatory measures and practices”.
24.9Moreover, the Government is now explicitly seeking an interim arrangement between formal withdrawal from the EU and the entry into force of a new UK-EU trade agreement. Its aim would be to prevent the immediate disruption of trade flows when the UK ceases to be a Member State, with “access to one another’s markets (…) on current terms” under the “the existing structure of EU rules and regulations.” We note in this respect that the EU-27 have only explicitly identified one option for such an arrangement: for the UK to stay in the Single Market for a limited time period after Brexit, during which it would continue to be bound by the EU acquis—including the field of social and employment policy—without formal political representation within the EU institutions. This would also necessitate the implementation of new EU laws which enter into force during the transitional period, rather than only those (as targeted by the Repeal Bill) which are effective at the moment of Brexit.
24.10Therefore, with the information available to us at present, we cannot rule out the possibility that future changes to EU legislation—including legislative proposals that may flow from the Pillar of Social Rights—will need to be implemented by the UK post-Brexit, at least for a limited period. We therefore consider it vital for the Government to participate in the discussions about the content of the Pillar, and the reflections on the future of social Europe. Both documents may yet have a significant impact in the UK. As a result, we believe it was premature for the Minister to dismiss the Commission’s reflection paper as being of interest to the other Member States only.
24.11To aid the scrutiny process we ask the Minister to clarify, as a matter of urgency, the Government’s proposals for the new economic relationship with the EU post-Brexit, as well as the proposed scope and duration of the interim arrangement (in particular in relation to effective continued membership of the Single Market). This should make clear whether the UK could, post-Brexit, be under a legal obligation to continue implementing EU employment and social legislation as it develops.
24.12We now clear the draft Pillar of Social Rights from scrutiny, given its non-binding nature. We consider that the Government’s override of scrutiny in supporting the Pillar at the Council meeting on 23 October was acceptable in view of the Minister’s request for a scrutiny clearance, which we were, regrettably, unable to consider in time. We are also content to clear the accompanying Commission Communication and the reflection paper on “Social Europe” from scrutiny, although we are likely to return to it in the context of any specific proposals reflecting the scenarios put forward by the Commission.
24.13In the meantime, we draw this Report to the attention of the Work and Pensions and the Business, Energy and Industrial Strategy Committees.
(a) Commission Communication: Establishing a European Pillar of Social Rights: (38691), + ADDs 1–3, COM(17) 250; (b) Proposal for an Interinstitutional Proclamation on the European Pillar of Social Rights: (38693), , COM(17) 251; (c) Reflection Paper on the social dimension of Europe: (38695), + ADDs 1–2, COM(17) 206.
24.14The EU has competence to take action in the field of social and employment policy by virtue of Article 153 of the Treaty on the Functioning of the European Union (TFEU), which allows it to “support and complement” the Member States in a number of fields, including working conditions, occupational health and equal treatment at work.
24.15In 2015, European Commission President Jean-Claude Juncker announced that the Commission was using this competence to prepare a flagship social policy initiative called the “European Pillar of Social Rights”, which was intended to “complement what we have already jointly achieved when it comes to the protection of workers in the EU”. At the time, he did not elaborate on the scope or legal nature of the Pillar.
24.16On 8 March 2016, the European Commission published a consultation paper on the Pillar. The Commission clarified that its purpose would be to establish “principles and commitments” related to social conditions in EU countries, and especially in the Eurozone. Setting out such principles at EU-level would offer a “way to assess and, in future, approximate for the better the performance of national employment and social policies” of EU Member States.
24.17The previous European Scrutiny Committee considered the consultation paper on the Pillar of Social Rights on three occasions in 2016 and early 2017. It was unable to come to any firm conclusions about its likely impact due to the lack of detail then available from the European Commission. However, the Committee speculated about the potential legal nature of the Pillar, as well its implications for the UK in the context of its withdrawal from the EU.
24.18In its response to the Commission’s consultation, the Government states that it “welcomed the intent” of the Pillar, but took the position that non-Eurozone states “should be able to choose whether to opt-in after careful consideration of the final proposals”. The UK also expressed preference for a non-legislative approach, whereby the Pillar would set an overarching framework but maintaining “flexibility for reforms to be driven by each Member State”.
24.19On 26 April 2017, the Commission published its proposal for a Pillar of Social Rights. It is effectively a draft declaration of twenty principles and rights which, the Commission argues, should underpin national labour markets and social welfare systems. The legal form of the Pillar is an “inter-institutional proclamation”, which will need to be agreed between the Council, the European Parliament and the Commission. The Commission has submitted the draft Pillar to the other two institutions for their consideration, alongside a “reflection paper” to stimulate discussion on the long-term options for the EU’s social policy dimension (see paragraphs 0.28 to 0.30 below).
24.20The Commission describes the overall aim of the Pillar as follows:
“To serve as a guide towards efficient employment and social outcomes when responding to current and future challenges which are directly aimed at fulfilling people’s essential needs, and ensuring better enactment and implementation of social rights.”
24.21The practical purpose of the Pillar is twofold: to bring together a summary of social and employment rights already contained in EU law in one place, and to complement them with new principles and targets that take into account new economic and social realities (such as demographic changes and developments in the labour market). As a result, the principles included in the draft proclamation are wide-ranging, and include policy areas where the EU has a long history of activity—for example gender equality and equal pay—and areas that fall clearly within the exclusive competence of the Member States, such as minimum income and housing.
24.22The Commission Communication accompanying the proposal states that the Pillar is “primarily conceived for the euro area but open to all EU Member States”. What this will mean in practice is not clear from the draft text of the Pillar, which sets out general high-level principles and targets without specific reference to the single currency or the countries that use it. The content of the Pillar of Social Rights is not yet fixed, as both the Parliament and Council may insist on changes to the text of the joint proclamation before they agree to sign it. The Employment and Social Affairs Committee of the European Parliament has not yet established a timetable for its consideration of the proposal, meaning that it is not possible to judge at this stage whether the Parliament will seek to make changes to the text of the Pillar.
24.23When the Pillar is formally established, the Commission says it will mobilise “all the various instruments available” to the EU under the Treaties to ensure its principles are respected and its targets are met. This will include proposals to update and complement the existing body of EU social legislation; the issuance of guidance documents; and targeted financial support from the EU budget for employment and social programmes.
24.24With respect to further proposals for EU social legislation, the Commission refers firstly to the proposal for a Directive on parental and carers’ leave, which was published in parallel to the Pillar of Social Rights. We consider that proposal separately elsewhere in this Report. Secondly, the Commission has launched an initial consultation of the social partners on possible future EU Directives on workers’ rights in the “gig economy” and the provision of information to workers about their employment rights. It also explains that further legislative proposals “will follow in the future” as part of the Commission’s annual Work Programmes.
24.25The Minister for Small Business (Margot James) submitted an Explanatory Memorandum on the Pillar of Social Rights package on 6 July 2017. With respect to the policy implications of the Pillar, she notes only that “this initiative is aimed at the Eurozone”, and that it was “not yet possible to provide a view on policy implications, as there are no legislative proposals. We will carefully examine any further proposals as they emerge”.
24.26The Minister wrote to us on 20 July 2017 to outline the outcome of the discussion by EU Employment Ministers on the Pillar at their meeting on 15 June. The Member States expressed general support for the objectives and principles of social rights within the Pillar, which they considered to be “sui generis”, but had at that time not yet agreed on the final text of the inter-institutional proclamation. The Council subsequently endorsed the text of the Pillar unanimously at their meeting on 23 October, paving the way for its formal promulgation by the EU institutions at a summit in Gothenburg, Sweden, on 17 November. Although the Minister asked for scrutiny clearance of the Pillar prior to this meeting, the Committee was regrettably unable to consider it in time. By letter of 30 October, the Minister informed us that the Government had overridden scrutiny given that the Pillar “does not entail an extension of the EU’s powers” or create any “new directly enforceable rights or new legal obligations”. The Pillar was formally ‘proclaimed’ by the EU institutions in Sweden on 17 November.
24.27In parallel to its proposal for a Pillar of Social Rights, the Commission also published a “reflection paper on the social dimension of Europe”, effectively a discussion paper on the high-level options for development of the EU’s social policy from now until 2025. The Commission used a very broad definition of “social”, including not only policy relating to working and living conditions, but also consumer rights, health, environmental protection, state aid and taxation.
24.28In the paper, the Commission has sketched out three possible directions of travel for EU social policy:
24.29The Minister’s Memorandum does not make an assessment of the options put forward by the Commission saying that, in the context of Brexit, “the paper is intended for the EU-27”.
24.30The Pillar of Social Rights is a policy initiative of major significance. It is likely to set the EU’s social policy agenda for years to come. We agree with the Minister that the Pillar does not in itself have any legal effect: its adoption by the Parliament and the Council can, at most, constitute an invitation to the Commission to propose new legislation where it is both legally and politically appropriate to do so.
24.31While we note the Commission’s emphasis on the fact that the Pillar is “primarily conceived for the euro area”, we cannot gauge the practical effect of that statement until it puts forward concrete policy initiatives. The most obvious route for application of new EU legislation to a sub-set of Member States only would be the enhanced cooperation (EH) procedure. This is one of the options put forward in the reflection paper on Europe’s social dimension, as a way of allowing the Eurozone to deepen their integration independently of the other Member States.
24.32However, there is no mechanism to force individual Eurozone countries to agree to the enhanced cooperation procedure in any given case of new social or employment legislation. As such, the only way for the Commission to ensure that proposals based on the objectives of the Pillar apply to the entire single currency area would be for them to be adopted using qualified majority voting (QMV) under the ordinary legislative procedure, which would mean it would apply to all Member States.
24.33Finally, we wish to place the eventual Pillar of Social Rights—and any concrete initiatives that may flow from it—in the context of Brexit. We are not yet in a position to forego scrutiny of EU social and employment policy initiatives on the basis that the UK is leaving the EU. Although the Government made its formal notification of the UK’s withdrawal under Article 50 TEU on 29 March 2017 which means that the Treaties will cease to apply to the UK after a two-year period, it has provided no details about the institutional or legal aspects of the post-Brexit economic relationship with the EU.
24.34We have taken note of the Government’s European Union (Withdrawal) Bill and the accompanying factsheet on workers’ rights, which provides further detail on the Prime Minister’s pledge to “protect and enhance” EU-derived employment legislation. The Withdrawal Bill, in its current form, would only “preserve” EU law contained in Directives insofar as it has been transposed domestically on “exit day”, which is expected to be 29 March 2019. It is unlikely that any new legislation the Commission may propose as a result of the Pillar would be adopted by March 2019, let alone have entered into force.
24.35The factsheet on workers’ rights contains a question on whether the Government commits to staying in line with changes to EU employment legislation post-Brexit. The document goes on to avoid directly answering this question, stating instead:
“We do not need to be part of the EU, nor bound by EU legislation, to have strong protections for workers. According to statistics on health and safety at work, the UK is one of the safest places to work in the EU. The UK already goes beyond EU minimum standards in a number of areas, such as entitlement to annual leave and provisions for shared parental leave and flexible working.”
24.36This statement is highly ambiguous, and we cannot reasonably conclude from it that the Government has ruled out implementing future changes to EU employment legislation. There are indications that the UK could continue to be under a legal obligation to implement future changes to EU employment legislation as part of the post-Brexit framework for UK-EU relations, at least during a transitional period.
24.37We note in this respect that the Prime Minister has now explicitly called for a two-year “implementation period” during which UK-EU “access to one another’s markets should continue on current terms” at the end of the Article 50 period. The framework for this period would be “the existing structure of EU rules and regulations”. We can only conclude that this would, in effect, be a temporary extension of UK membership of the Single Market, which the Government had already hinted at in its proposals on customs matters and financial services.
24.38The European Council has already ruled out any partial Single Market membership for the UK as a non-EU country, and we would therefore expect the EU to insist on a transitional deal which requires the UK to adhere to the entire Single Market acquis (which would include EU employment and social legislation).
24.39As the other Member States would not want to be at a competitive disadvantage to the UK while it was still effectively in the Single Market, we can only conclude that such an arrangement would also require the Government to continue implementing new EU law which enters into force during the transitional period. If not, it is difficult to see how the aim of creating a level regulatory playing field throughout the Single Market could be attained. However, this is not the situation envisaged by the European Union (Withdrawal) Bill, which would effectively take a “snap shot” of EU law at midnight on 29 March 2019, without taking account of EU legislation not in force at that time. The Government has not provided any detail about its proposed terms for the transitional mechanism, or how it intends to address this issue should it arise.
24.40Looking further ahead, the EU is also expected to argue for long-term regulatory convergence as part of any post-Brexit free trade agreement with the UK in return for preferential access to the Single Market. The European Council guidelines state that “any free trade agreement [with the UK] (…) must ensure a level playing field, notably in terms of (…) social, environmental and regulatory measures and practices”. While this may not go so far as requiring compliance with EU law, it is clear from the Union’s current agreements with third countries that the most comprehensive level of access to the Single Market (such as that enjoyed by Norway or Ukraine) entails continued adherence to EU employment law.
24.41It is now crucial for Government to urgently clarify its holistic vision for the future relationship with the EU, and what—if any—continued legal obligations there might be for the UK to maintain a level of convergence with EU legislation post-Brexit, in the fields of employment and social policy. The Committee will assess in due course the importance of the various social and employment proposals contained in the Commission Work Programme for 2018, and what their implications could be in the context of the UK’s withdrawal from the EU.
For the ESC’s consideration of the 2016 Commission Communication outlining its initial thoughts on the Pillar of Social Rights, please see: Twenty-ninth Report HC 342–xxviii (2015–16), (13 July 2016); and Thirty-first Report HC 71–xxix (2016–17), (8 February 2017).(20 April 2016); Eighth Report HC 71–vi (2016–17),
316 See .
317 In anticipation of the final declaration by all three institutions jointly, the Commission has also adopted a with the same text as its proposal. This is meant to serve as a “reference” until the final text of the Pillar is agreed ().
318 submitted by the Department for Business, Energy & Industrial Strategy (6 July 2017).
319 Council of the EU, ““ (23 October 2017).
320 Letter from Margot Parker to the Chair of the European Scrutiny Committee (5 October 2017).
321 Letter from Margot Parker to the Chair of the European Scrutiny Committee (30 October 2017).
322 DExEU, ““ (June 2017).
323 In response to the question, “Will you commit to staying in line with EU legislation in this area, even after withdrawal, to ensure that UK workers will not be getting a raw deal compared to their counterparts in EU member states?”, the factsheet avoids a direct “yes” or “no”, and instead says: “We do not need to be part of the EU, nor bound by EU legislation, to have strong protections for workers. (…) The government has shown its commitment to extending workers’ rights when this is the right choice for the UK, and will continue to do so as we leave the EU”.
324 From the EU’s current agreements with third countries, it is clear that a higher degree of access to the Single Market (such as that enjoyed by Norway or Ukraine) entails continued adherence to EU employment law. For example, both Norway and Ukraine undertake to implement EU employment legislation as it develops under the terms of the EEA Agreement and the EU-Ukraine Association Agreement respectively.
325 Prime Minister, ““ (22 September 2017).
326 The Guidelines state: “To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship in the light of the progress made. Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms. Should a time-limited prolongation of Union acquis be considered, this would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply.” (Our emphasis).
327 Jean-Claude Juncker, ““ (9 September 2015).
328 See our predecessors’ Reports of , and .
329 According to the European Commission, the logic applying the principles and targets set out in the Pillar primarily to the Eurozone (but leaving it open to non-euro Member States to participate) was that “efficient and resilient labour markets are essential to the smooth functioning of the Economic and Monetary Union”.
330 See our predecessors’ Report of .
331 See .
332 In anticipation of the final declaration by all three institutions jointly, the Commission has also adopted a with the same text as its proposal. This is meant to serve as a “reference” until the final text of the Pillar is agreed (Commission Recommendation (EU) 2017/761 of 26 April 2017).
333 COM(17) 251, p. 4.
334 In parallel to the proposal for the Pillar, the Commission has already published new legal guidance on the implementation of the Working Time Directive. We have considered this document in a separate chapter in this Report.
335 on a “possible action addressing the challenges of access to social protection”.
336 on a “possible revision of the Written Statement Directive (Directive 91/533/EEC)”.
337 submitted by the Department for Business, Energy & Industrial Strategy (6 July 2017).
338 from Margot James to the Chair of the European Scrutiny Committee (20 July 2017).
339 Letter from Margot Parker to the Chair of the European Scrutiny Committee (30 October 2017).
340 Due to Brexit, the reflection paper already omits the UK from the variety of statistics reproduced, and even excludes the UK from the map of the Single Market.
341 Enhanced cooperation.
342 More information on the enhanced cooperation procedure is available .
343 The enhanced cooperation procedure requires that the objectives of a proposal “cannot be attained within a reasonable time by the Union as a whole”. The Commission can also only commence the procedure after it has received a request from at least nine Member States, and its normal right of initiative is therefore constrained. Whether these preconditions exist for proposals that may flow from the Pillar of Social Rights can only be judged on a case-by-case basis. To date, the enhanced cooperation procedure has never been used for employment or social policy proposals.
346 Prime Minister Theresa May, ““ (17 January 2017).
347 DExEU, ““ (15 August 2017).
348 Letter from Stephen Barclay to Lord Boswell (30 August 2017).
349 The Guidelines on Brexit adopted by the European Council in April 2017 state: “Preserving the integrity of the Single Market excludes participation based on a sector-by-sector approach. A non-member of the Union, that does not live up to the same obligations as a member, cannot have the same rights and enjoy the same benefits as a member.”
350 The European Council Guidelines on Brexit state: “To the extent necessary and legally possible, the negotiations may also seek to determine transitional arrangements which are in the interest of the Union and, as appropriate, to provide for bridges towards the foreseeable framework for the future relationship in the light of the progress made. Any such transitional arrangements must be clearly defined, limited in time, and subject to effective enforcement mechanisms. Should a time-limited prolongation of Union acquis be considered, this would require existing Union regulatory, budgetary, supervisory, judiciary and enforcement instruments and structures to apply.” (Our emphasis)
351 By way of reference, EUR-lex currently 33 pieces of EU legislation which have already been adopted but which do only become applicable during the envisaged transitional period (March 2019—March 2021). This list will undoubtedly grow in the remaining 17 months under the Article 50 process.
352 See for example of the EEA Agreement (for Norway) or Annex XL to chapter 21 of the .
1 December 2017