Select Committee on European Union Twentieth Report


4. The strategy described in the Social Policy Agenda is far removed from that envisaged in 1957, when the Treaty of Rome established the European Economic Community. While the Treaty contained a Title on "Social Policy", it was more a statement of political intent than a commitment to specific Community action or legislation. Article 117, now Article 136 of the Treaty establishing the European Community ("TEC"), stated that the "Member States agree upon the need to promote improved working conditions and an improved standard of living for workers, so as to make possible their harmonisation while the improvement is being maintained". The Article then suggests that this improvement would result "not only from the functioning of the common market, which will favour the harmonisation of social systems, but also from the procedures provided for in this Treaty and from the approximation of provisions laid down by law". The emphasis, then, was very much on the operation of the Common Market, and the assumption was that an improvement in the standard of living for all would follow from economic prosperity. Specific legislation on social matters was largely left to Member States, although Article 118 (now 137) required the Commission to promote "close co-operation between Member States in the social field". Co-operation was specifically envisaged in such matters as employment, labour law and working conditions, vocational training, social security, prevention of occupational accidents and diseases, occupational hygiene and the right of association. An important exception to the general rule of co-operation was Article 119 (now 141) on equal pay for men and women, which imposed an obligation on each Member State to "ensure and … maintain the application of the principle that men and women should receive equal pay for equal work".

5. From 1957 until the early 1970s Community action was largely limited to areas of social policy with a direct bearing on the Common Market—for example, measures on the free movement of migrant workers. However, by 1973, when the United Kingdom, Denmark and Ireland joined, the Community had committed itself to a more active social policy. The evidence received in the course of the present inquiry shows that the reasons for this development are still matters of historical controversy. It is clear that France had a long-standing concern over the possibility of "social dumping"—companies moving to areas with less stringent regulation, which may have been intensified by the prospect of enlargement. It is also possible, as one witness to this inquiry suggested, that the unrest of the late 1960s encouraged political leaders to attempt to show that the Community was committed to high standards of social protection, as well as to the interests of business. Whatever the reasons, shortly before the accession of the United Kingdom, Denmark and Ireland the existing Member States pledged themselves to "vigorous action in the social sphere", describing it as "just as important as achieving Economic and Monetary Union" [3]. This was followed by the first Social Action Programme, adopted in 1974[4].

6. The activity of the 1970s was not sustained in the 1980s, partly because the Member States could not agree on the proper limits of Community involvement in social policy. This was compounded by the requirement that proposals for action should be agreed unanimously by the Council. However, the Single European Act of 1986 introduced two new clauses into the Treaty, Article 118a and 118b (now 137 and 139, as amended). The first of these empowered the Council, acting by qualified majority and in co-operation with the European Parliament, to adopt minimum requirements for the health and safety of workers. The second placed a duty on the Commission to "develop the dialogue between management and labour at European level which could … lead to relations based on agreement". The first of these provisions seems again to have been inspired by the fear of "social dumping" in the context of the implementation of the internal market. The accession of Greece, Spain and Portugal also created greater inequality between Member States, and increased the pressure for an active "social dimension" to Community activity.

7. The Single European Act only partially realised the Community's social dimension; however, all the Member States apart from the United Kingdom signed in 1989 a "Community Social Charter". This was based on the Council of Europe's Social Charter and ILO conventions, laying down a range of "fundamental social rights" of workers. Though not legally binding, the Charter inspired an Action Programme[5] containing 47 proposals for binding and non-binding initiatives, covering a very wide range of issues—for example employment and remuneration, social protection, information and consultation, equal treatment, and a wide range of proposals on health and safety. Although progress in agreeing these proposals was slow a number were adopted, including the Directive on Working Time[6]. The United Kingdom brought proceedings against the Council in the European Court of Justice ("ECJ"), alleging that Article 118a TEC, on health and safety, did not provide a sufficient legal base[7] for the Directive, but the Court found against the UK, arguing that Article 118a should not be interpreted restrictively.

8. The next stage was reached at the Maastricht Treaty, approved by the Heads of Government in December 1991. A new general statement of purpose was included in Article 2 TEC, which set out the Community's task to achieve a "high level of employment and of social protection" as well as "economic and social cohesion and solidarity among Member States". Article 3 also included among the Community's activities "a policy in the social sphere". Furthermore, eleven of the Member States (all except the United Kingdom) wished to strengthen the Community's specific competence in the social field. The UK's resistance meant that these new powers had to be included in a new fourteenth protocol, the "Social Policy Protocol". The protocol noted that the eleven Member States wished "to continue along the path laid down in the 1989 Social Charter", and that they had reached an agreement to proceed without the UK. The agreement, or "Social Chapter", was annexed to the Protocol. Article 2(1) empowered the Council to adopt by qualified majority voting[8] Directives on health and safety, working conditions, information and consultation of workers, sex equality in employment, and the integration of persons excluded from the labour market. Other areas required unanimity, including social security and social protection of workers (Article 2(3)). Two Directives were subsequently adopted under this section of the Social Chapter—on the Burden of Proof in cases of discrimination based on sex and on the introduction of European works councils[9].

9. A further development in the Social Chapter was the role given to the "social partners"—management and labour. Article 3 stated that "before submitting proposals in the social policy field" the Commission should "consult management and labour on the possible direction of Community action". The Commission was also obliged to consult the social partners on the content of any proposal envisaged, and on the occasion of such consultation the social partners could inform the Commission that they wished themselves to reach agreement at Community level. Such agreements could be implemented either "in accordance with the procedures and practices specific to management and labour and the Member States", or, in those matters covered by Article 2, by means of a Council decision—normally a Directive. Three Directives have been adopted under this procedure, on parental leave, part-time workers and fixed-term work[10]. This procedure, whereby the responsibility for drafting legislation is taken away from elected governments and granted instead to representatives of management and labour[11], has not been without controversy. UEAPME, a body representing small and medium sized enterprises, brought a case before the Court of First Instance challenging the representativity of the "social partners", and thus their right to introduce the Directive on parental leave[12]. The Court ruled that the Social Partners were in this case indeed representative. However, the Court emphasised that this finding was "without prejudice … in the case of any other agreement which the Council may be requested to implement on the basis of [Article 139(2) TEC], to the question as to whether those representing management and labour who are signatories thereto are sufficiently representative". The Court also affirmed that "the Commission and the Council are under a duty to verify that the signatories to [any] agreement are truly representative". If representativity is lacking, the Commission and Council "must refuse to implement the agreement".

10. Following the change of government in May 1997 the United Kingdom decided to opt into the Social Chapter. The Amsterdam Treaty therefore incorporated it into the EC Treaty as part of Title XI on social policy, education, vocational training and youth. The UK also at the same time accepted all the legislative measures adopted under the Social Chapter.

11. The Amsterdam Treaty also introduced a new Employment Title (Title VIII) into the EC Treaty. This reflected the commitment in Article 2 TEC to "a high level of employment and of social protection". A framework was established for Member States and the Community to develop "a coordinated strategy for employment and particularly for promoting a skilled, trained and adaptable workforce and labour markets responsive to economic change" (Article 125 TEC). The introduction of the new Title reflected in part widespread concern about the high levels of unemployment within the EU during the 1990s. It was recognised that promoting employment was "a matter of common concern", but the emphasis was on co-operation between Member States rather than on European legislation. The Community was required to "contribute to a high level of employment by encouraging co-operation between Member States and by supporting and, if necessary, complementing their action". However, it was stated explicitly that "national practices" and "the competences of the Member States shall be respected" (Articles 126-7).

12. The Member States agreed at Amsterdam to make certain provisions immediately effective without waiting for the Amsterdam Treaty itself to enter into force. They announced a special meeting of the European Council, the Luxembourg "jobs summit" of November 1997, at which they mapped out Community action in the field of employment. In accordance with Article 128 the Commission was instructed to prepare Community-wide guidelines for employment policy, based on four pillars: entrepreneurship, employability, adaptability and equal opportunities. These guidelines were then translated into national policy by means of National Action Plans, prepared by the Member States and submitted to the Commission and Council for examination. Comparative analysis of these Action Plans has resulted in Joint Employment Reports in 1998, 1999 and 2000[13], identifying priority fields of action and making recommendations for national employment policies.

13. It might appear from what has been said above that there has been some tension between the Community's approach to employment policy and its approach to social policy. While legislative action on social policy has evolved slowly, in the face of the at times open opposition of the United Kingdom and the less open reluctance of some other Member States, the non-legislative "co-ordination" of national employment policies has emerged and grown considerably within just three years. Article 2 TEC pledges the Community to achieving "a high level of employment and of social protection", but the twin objectives have in reality been tackled very differently. The pressure of recession and mass unemployment in the 1990s diverted attention away from social regulation towards less burdensome, non-legislative policies designed to raise employment levels. The Social Policy Agenda may indicate a further change of emphasis, but it is a matter of dispute whether the new approach has succeeded in reconciling past tensions.

14. The "Luxembourg Process", which emerged from the special European Council of November 1997, has been evaluated and added to at two further European Councils. At the Cardiff summit in 1998 the Council stressed that job creation relied on sustained economic growth, and launched an initiative on structural policy in order to encourage reforms for improving competitiveness and the working of markets. The aim was to reduce the burdens on small firms and to facilitate the creation of new small businesses. Then at the Cologne summit of June 1999 a third element was added, the "Cologne process" or "European Employment Pact". The pact emphasised the need for a mix of macroeconomic policies "geared to growth and employment while maintaining price stability". Shortly before the Cologne summit the idea for a Special European Council on employment, to be held during the Portuguese Presidency, was first raised at a meeting between the British Prime Minister and his Spanish counterpart, Mr Aznar. The Cologne Presidency Conclusions took up this idea, inviting the Portuguese to convene in the spring of 2000 a Special European Council on employment, economic reform and social cohesion, "to review the progress made after the Cologne, Cardiff and Luxembourg processes".

15. The Special European Council met in Lisbon on 23-24 March 2000[14]. As noted above (paragraph 1), it set the Union's new strategic goal for the coming decade: "to become the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion". To achieve this goal will require "no new process"—instead the European Council will take on "a pre-eminent guiding and co-ordinating role" in drawing together the existing Broad Economic Policy Guidelines, the Luxembourg, Cardiff and Cologne processes[15]. The European Council will monitor the coherence and synergy of the existing processes at meetings to be held annually in spring.

16. One of the key elements of the Lisbon strategy was the recognition that social policy would have to adapt to the changes in the world economy. A section of the Presidency Conclusions was devoted to "Modernising the European social model by investing in people and building an active welfare state":

    People are Europe's main asset and should be the focal point of the Union's policies. Investing in people and developing an active and dynamic welfare state will be crucial both to Europe's place in the knowledge economy and for ensuring that the emergence of this new economy does not compound the existing social problems of unemployment, social exclusion and poverty (paragraph 24).

In this broadly-defined area of social policy a number of priorities are identified—developing education for the "knowledge society"; an "active employment policy", designed to get people into work; the modernisation of social protection; and the promotion of social inclusion. However, the description of these last two priorities is particularly short on detail. For example, the Lisbon Conclusions state that the "European social model, with its developed systems of social protection, must underpin the transformation to the knowledge economy". At the same time these systems must be "adapted as part of an active welfare state". The Council is invited to strengthen co-operation and the exchange of best practice in this area, as well as looking at the future evolution of social policy in the long term, but no clear objectives are set down as to the direction of this "evolution". The Social Policy Agenda is designed to fill this gap, providing the basis for the Council's further reflection.

17. The emphasis throughout the Lisbon Conclusions is on flexibility, dynamism and modernisation. The Luxembourg and Cardiff processes have already introduced the Union to the "open method of policy co-ordination" in the employment field. Instead of heavy regulation they have relied chiefly on "soft law"—broad policy guidelines, benchmarking, peer review and so on. The Lisbon summit proposed to extend such methods to social policy, promoting understanding of social exclusion through "continued dialogue and exchanges of information and best practice", encouraging the "mainstreaming" of social inclusion in Member States' policies on employment, education and training, health and housing policies. The prospect of direct Community intervention in these areas is downplayed, and instead the approach is described as "fully decentralised … in line with the principle of subsidiarity". It appears that intergovernmental discussion, within the Council, will largely replace the more familiar Community legislative processes. This prospect was welcomed enthusiastically by the United Kingdom Government. Reporting on the outcomes of the summit, the Prime Minister told the House of Commons that

    The Council marks a sea change in European economic thinking. It points Europe in a new direction—away from heavy-handed intervention and regulation, towards a new approach based on enterprise, innovation and competition.[16]

On social policy, the Prime Minister was equally confident that the traditional British approach of liberalisation had prevailed:

    We have made clear that the central European economic issue … is reform: how we modernise the European social model and how Europe embraces the enterprise agenda and seeks to match the dynamism of the United States, while preserving our commitment to social justice.

18. While the Treaty of Rome envisaged improvements in social conditions resulting primarily from the success of the Common Market, and only secondarily from the approximation of the laws of Member States, the language of the Lisbon strategy attempts to establish the interdependence of economic, social and employment policies. A "competitive and dynamic knowledge-based economy" is the goal, but this is in turn defined not only as an economy capable of "sustainable … growth", but as one "with more and better jobs and greater social cohesion". There not only have to be more jobs, but "better" jobs; equally, greater social cohesion is seen as an integral part of economic success. The reference to "modernising the European social model" is qualified by the phrase "investing in people"—social protection is presented not only as an aspect of social justice but as a form of investment leading to economic growth.

19. No account of the development of EU social policy would be complete without reference to the role of the European Court of Justice. All Member States recognise fundamental social rights. The difficulty has been to distinguish between those that are "justiciable"—capable of being interpreted and applied by the courts—and those that are not. The Court of Justice has played an important role in fleshing out the rights outlined, sometimes sketchily, in the EC Treaty, and giving them a Community meaning. Thus it has ruled that the dismissal of a woman who exceeds the female retirement age (when there was a different statutory pensionable age for men and women) contravenes the Equal Treatment Directive[17]; that less favourable treatment on the grounds of pregnancy is discriminatory[18]; and that it is unlawful to dismiss a transsexual on account of a change of sex[19]. The future role of the ECJ, should EU social policy come to rely more on "soft law" of the sort described in the Lisbon conclusions, is less clear, and has been one of the issues addressed in the present inquiry.

3  At the conference of Heads of State or Government in Paris in October 1972. Back

4  See the Council Resolution of 21 January 1974 concerning a social action programme (OJ C 013, 12.02.1974, pp. 1-4). Back

5  Communication from the Commission concerning its action programme relating to the implementation of the Community Charter of basic social rights for workers (COM(89) 568), 29 November 1989. Back

6  Council Directive 93/104/EC of 23 November 1993 concerning certain aspects of the organization of working time (OJ L 307 13.12.1993 p.18). Back

7  See Case C-84/94 United Kingdom v Council of the European Union [1996] ECR I-5755. Within the Commission action programme the Directive was included in a section devoted to "improvement of living and working conditions", rather than that devoted to "health protection and safety at the workplace". Back

8  Now co-decision with the Parliament and QMV. Back

9  Council Directive 97/80/EC of 15 December 1997 on the burden of proof in cases of discrimination based on sex (OJ L 014 20.01.1998 p.6); Council Directive 94/45/EC of 22 September 1994 on the establishment of a European Works Council or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees (OJ L 254 30.09.1994 p.64). Back

10  Council Directive 96/34/EC of 3 June 1996 on the framework agreement on parental leave concluded by UNICE, CEEP and the ETUC (OJ L 145 19.06.1996 p.4); Council Directive 97/81/EC of 15 December 1997 concerning the Framework Agreement on part-time work concluded by UNICE, CEEP and the ETUC (OJ L 014 20.01.1998 p.9); Council Directive 1999/70/EC of 28 June 1999 concerning the framework agreement on fixed-term work concluded by ETUC, UNICE and CEEP (OJ L 175 10.07.1999 p.43). Back

11  UNICE (the European employers' confederation), ETUC (the European TUC) and CEEP (the European organisation for public sector employees). Back

12  Case T-135/96 UEAPME v Council of the European Union [1998] ECR II-2335. Back

13  See the draft Joint Employment Report 2000 (11190/00 COM(2000) 551 final) of 12 September. Back

14  See the Committee's Report, Prospects for the Lisbon Special European Council (Session 1999-2000, 7th Report). Back

15  Lisbon Presidency conclusions, paragraph 36. Back

16  HC Deb, 27th March, col. 21. Back

17  See Case C-152/84 Marshall v Southampton and South-West Hampshire Area Health Authority [1986] ECR 723; for the Equal Treatment Directive see Council Directive 76/207/EEC on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions (OJ L39, p. 40, 14.02.76). Back

18  Case C-177/88 Dekker v Stichting Vormungscentrum voor Jong Volwassenen [1990] ECR I-3941. Back

19  See Case C-13/94 P v S & Cornwall County Council [1996] ECR I-2143. Back

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