Select Committee on European Union Twentieth Report


56. The Social Policy Agenda is not a final statement of EU social policy. It is a consultation document, having in itself no legal force. It describes a range of possibilities for Community action, but it is hard to predict which of these the Community will focus on, and what precise form any action will take. In its present form it is all things to all people.

57. Many different events and influences have shaped the Agenda. Most obviously, it is a product of and contribution to the strategy agreed at the Lisbon Special European Council in March—to make the EU "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". The Prime Minister hailed the Lisbon summit as a "sea-change", signalling the EU's commitment to liberalisation and deregulation and bringing a new emphasis on competition, innovation and enterprise rather than on old-fashioned intervention. The Leader of the House told the Committee that this Lisbon strategy was "integral to the Social Policy Agenda". We welcome her interpretation, and look to the Government to argue the case for it forcefully within the Council. The Community has a well-established role in social policy, which the United Kingdom, since the Treaty of Amsterdam, has endorsed. It is essential that this policy should be a help rather than a hindrance to prosperity.

58. However, there are also other influences on the Agenda, and other interpretations of its significance. EU social policy has a complicated history, and some elements of this history—for example the role of the social partners in negotiating EU-level agreements, or Community legislation on health and safety—do not sit entirely comfortably with the UK's interpretation of the Agenda. The "European Social Model" has been associated with high levels of social protection and regulation, while the UK appears to straddle the gap between the European and United States models—relatively unregulated, with high levels of employment, but also with high levels of deprivation, including many in low-paid jobs. But even within Europe there are marked differences in levels of poverty, of social spending, and indeed of economic performance. At present the Netherlands has a high rate of productivity and growth and very low unemployment, combined with generous social provisions. Its performance differs markedly from that of some of the major economies, including Germany and France. It is doubtful, in short, whether a single "European social model" exists.

59. The Lisbon summit called for the "modernisation" of the European Social Model. In contrast, the French Presidency called in July for its reinforcement, while the European Parliament, in its Resolution of 25 October, has also called on the Commission to take various steps to "reinforce the new social agenda". These steps would include legislation on new forms of employment, a strengthened Community strategy on health and safety, guarantees for the right to strike, the application of minimum rules for information and consultation of workers, and so on. Mme Quintin, of the Commission, tried to square the circle, arguing that European social values needed to be maintained and strengthened, "but to be maintained and strengthened they needed to be modernised". It may be that the Commission has prepared the only kind of Agenda on which consensus, and further progress, are possible—one from which all Member States and other interested parties will be able to take comfort. However, the tensions underlying this consensus, and underlying the Agenda, are evident.

60. The Committee fully endorses the "social dimension" to Community action. The creation of the single market must be balanced by measures protecting citizens against potentially damaging social consequences. For example, in our Report EU proposals to combat discrimination we welcomed Community action to protect citizens against discrimination in employment on a wide range of grounds; we argued that this action would facilitate free movement and so "enhance the success of the single market". There is, however, always a risk that social regulation may impose unnecessary burdens on business, discouraging enterprise and slowing economic growth. National governments constantly appraise these risks, looking at social policy in the round. At present Community regulation on social issues is relatively limited in scope. Any Community-level decision to expand such regulation must be subjected to the same detailed scrutiny as comparable decisions at national level.

61. The Agenda is based on what the Commission describes as the "triangularism" of economic, employment and social policy. Policies in the three areas should be linked: economic performance should be measured not just in terms of growth but in terms of the impact on employment and on the standard of living for all. Equally, the Commission argues that social policy should not be considered as an end in itself, but as a "productive factor". For example, welfare schemes should facilitate the return to work of the unemployed, giving them new skills, while strong policies to combat discrimination will help members of disadvantaged groups to participate fully in economic life. The Committee agrees that economic, employment and social policies should be mutually supportive and consistent. In particular, social policies can have clear economic benefits. However, it should not be assumed that all social policy is necessarily beneficial to the economy, nor that economic factors should in all circumstances motivate decisions on social policy. There are forms of social protection on which there is universal agreement—Mr Lilley cited the example of those disabled people who are unable to participate fully in the market place—but where there will not necessarily be readily quantifiable economic benefits. Equally important is the work of non-governmental organisations, which in many cases rely on targeted government funding. Given the Community's commitment to combating social exclusion, the Committee particularly regrets the lack of Community-level funding for disability-specific NGOs. There are also other forms of social intervention, for example some health and safety regulations, which will inevitably place burdens on business and so hinder economic growth, but which may still be necessary. In such cases governments have to balance a range of factors and priorities. The Community too should not lose sight of these complexities.

62. Community action is severely constrained by the lack of specific competence in many areas of social policy. This can be traced back to the origins of the Community—the signatories to the Treaty of Rome in 1957 were primarily interested in economic co-operation, and saw improvement in social conditions growing out of economic success. The Treaties have evolved and grown greatly since then, but without being fundamentally rethought. A consequence is that the new competences given to the Community to address social policy have tended to grow out of the more traditional concern with economics and employment. Thus the Community has competence to enact legislation on issues such as working conditions, health and safety at work, or the integration of persons excluded from the labour market. However, issues such as housing, pensions and social security (other than for migrant workers) remain outside specific Community competence. It is not surprising therefore that the Social Policy Agenda focuses on social policy as a "productive factor".

63. In focusing on "productive" social action, the Community should not forget that in some cases inaction may make the greater contribution to economic growth and job creation. The Social Policy Agenda echoes the Lisbon conclusions in setting the goal of making the EU the world's most "competitive and dynamic knowledge-based economy". However, if one assumes, with the Prime Minister, that achieving this goal will necessitate moving "away from heavy-handed intervention and regulation", it is unclear what contribution the Social Policy Agenda will make. Baroness Jay pointed the Committee to section of the Agenda, which refers to "promoting entrepreneurship and job creation … pursuing economic reform of product services and capital markets" and so on. But while these are listed as "objectives", the specific "actions" proposed cast little light on how they will be achieved. They will, presumably, figure more prominently in the Employment Strategy. In contrast, the Committee was warned by Mr Lilley of the inevitable "ratchet effect upwards" once one started to "harmonise" social expenditure. We believe that a European Social Policy Agenda can contribute to the deregulatory and liberalising Lisbon strategy. However, it is vital that the means to achieve this goal should be made more explicit.

64. The Agenda also explores some areas beyond strict Community competence. In such areas Member States are encouraged to exchange best practice, but there is no basis for strong Community action. There is however a possibility that this informal exploration could lead to "competence creep"—a gradual extension of Community involvement in areas hitherto the preserve of Member States. The path might lead from "soft law" to "hard law"—from communications to action programmes and non-binding Council recommendations, and finally to directives or other forms of binding legislation. This could be accelerated if the Court of Justice were to interpret specific Community competences generously, possibly in the light of less formal but well-established Community actions or objectives. In 1996 the Court found against the UK's claim that Treaty provisions on health and safety at work did not provide a legal base for the Working Time Directive. Furthermore, "soft law" itself is not without legal effect. Ms Barnard highlighted the Grimaldi case, where the Court decided that Community "soft law"—in this case a Recommendation—should be used by national courts to construe national laws wherever it was "capable of casting light on the interpretation of other provisions of national or Community law". We note that the Government has already challenged the Community's competence to undertake several of the actions described in the proposed strategy on gender equality—one of the key components of the Social Policy Agenda. There is a danger that similar problems will arise in translating the other broad objectives of the Agenda into action. The Agenda states that it aims not to "harmonise social policies" but to "increase co-ordination of social policies". While there is a valid distinction to be drawn between "harmonisation" and "co-ordination" it may be difficult to sustain in practice. The Government must continue to make every effort to ensure that the limits of Community competence are respected.

65. It appears that the objectives of the Social Policy Agenda will be realised largely through intergovernmental arrangements. There will be annual meetings of the European Council to review economic, employment and social policy, while Member States will be encouraged to agree common targets, compare best practice, benchmark, and so on. There is relatively little scope for legislative intervention. In short, the approach is one of "soft" rather than "hard" law. This approach is consistent with that adopted in the employment field—the "Luxembourg process". The Committee welcomes it, and in particular welcomes the exchange of best practice—all governments can learn from each other. We particularly welcome the fact that the Social Policy Agenda explicitly compares the European economy with that of the United States of America. Europe has much to learn from America's economic success. However, we also recognise that such exchange of best practice has always occurred between governments. It is not completely clear what added benefit will be supplied by the formalisation of this practice at Community level.

66. The principle of subsidiarity is enshrined in Article 5 of the EC Treaty. Where areas do not fall within its "exclusive competence" the Community should act only if and insofar as the objectives of a proposed action "cannot be sufficiently achieved by the Member States". Any extension of Community involvement in social policy must be fully consistent with the principle of subsidiarity. We do not believe that this point has yet been adequately addressed. Comparison with the United States shows that even within a full federal state a range of responsibilities for social provision may be devolved to the various levels of local government. It is not yet clear what benefits would be achieved by centralising such responsibilities, which in the long term might have major budgetary implications, at the EU level.

67. We also remain uncertain how "targets" or "objectives" set by the Commission will be enforced, or indeed whether their enforcement would not be an unacceptable restriction of national autonomy. As Ms Barnard told us, the targets may hold out a carrot, but there appears to be no stick. We have heard no convincing explanation of how targets will be enforced, other than by moral arm-twisting. The process depends on the good will of Member States, and there is clearly a danger that if the present political consensus among national governments breaks down, the Social Policy Agenda may collapse.

68. This point gains force in the context of enlargement. The applicant states have radically different traditions and practices. The "European Social Model", if indeed any single model may be identified, has no place in their recent history. For example, the role of the "social partners" is profoundly affected by the legacy of Communism. The EU must therefore be sensitive in asking applicant states to move towards the current western European consensus on social policy—it must not attempt to impose a single rigid model. In particular, the Member States must take such factors into account when deciding where legislation (which will form part of the acquis communautaire) is appropriate, and where consensus not only among Member States, but among applicant states, is feasible.

69. A further risk is that the intergovernmental nature of Community social policy will add to the "democratic deficit". While national governments are of course democratically elected, the decisions they take within the Council are not always subject to democratic scrutiny either by the European Parliament or by national parliaments. The proceedings and negotiations of the Council are by and large conducted in private, and it is difficult for interested parties or for individual citizens to make their views heard. There is a danger that the Social Policy Agenda will effectively bypass the European Parliament, the only European body with a clear democratic mandate. The role of national parliaments will apparently be even more exiguous—we note with concern that national parliaments are not included among the "actors" who will participate in developing the agenda. We are not convinced by the argument that "national parliaments" can be equated with "national governments"—particularly as national governments have so prominent a role within the Council, whereas parliaments have none. In contrast, European legislation is in most cases adopted by means of co-decision, so that the European Parliament (though not national parliaments) is enabled to conduct detailed public scrutiny. This is not to say that the legislative route should in all cases be the preferred one. Nevertheless, we urge the Government to make every effort to ensure that consultation concerning EU social policy is as wide as possible, and that democratic scrutiny and accountability are preserved.

70. The intergovernmental approach may also limit the enforceability of social rights. If the Social Policy Agenda is to achieve its objective of ensuring "the development and respect of fundamental social rights", then not only will these rights have to be agreed and defined, but mechanisms enabling citizens to enforce them will have to be found. This may involve legislation—otherwise, it is hard to see how Community level "fundamental rights" will be enforced through the Community courts.

71. Finally, we are concerned about the role of the social partners in Community social policy. The structured dialogue of management and labour was clearly relevant in the 1950s. The Coal and Steel Community, precursor of the European Economic Community, was based on a few major industries—a small number of large employers, and heavily unionised workforces. The relevance of this dialogue today, with a far greater preponderance of small and medium sized enterprises, and far lower rates of Trade Union membership, is more questionable. Despite this, Article 139 TEC enshrines a procedure whereby the social partners, following a consultation by the Commission, may reach Community-level agreements. These will in turn be implemented by a Council decision, usually a Directive. Although the Commission must initiate a consultation, it has no control over its outcome. Neither the Council nor the European Parliament has any opportunity to amend the agreement of the social partners. This procedure is little known in the United Kingdom, and indeed it runs counter to the UK's tradition of parliamentary sovereignty. It is, however, far more familiar in some other Member States. We regard the proposal in the Social Policy Agenda to initiate such consultations in a range of areas with concern. We do not believe that the European level social partners, as presently constituted, are representative of all European employers and workers, still less of the population as a whole. There is, for instance, no representation of consumers, nor indeed of governments, who as employers would have a major interest in any measures adopted. While the Court of First Instance ruled in UEAPME v Council that the social partners were sufficiently representative to introduce the Parental Leave Directive, it emphasised that this judgment would not prejudice future claims of the same sort. We view with particular concern the proposal to launch a consultation with the social partners on data protection within the employment relationship. This proposal comes under the heading "Reinforcing fundamental rights and combating discrimination". We do not believe that social partner agreements are an appropriate means to protect fundamental rights. More broadly, we hope that the Government will urge the Council to look again at the role of the social partners, including the issue of representativity. We particularly draw the Government's attention to the constructive suggestions made to this Committee by the Employers' Forum on Statute and Practice.

72. The Social Policy Agenda is part of a continuing process. We expect the Stockholm European Council on 23-24 March 2001, and annual summits thereafter, to move the process forward. We welcome this effort to bring together the different but related areas of Community policy and to enhance co-operation between Member States. Nevertheless, we repeat that there must be a dialogue—the process must be seen to be open and accountable. Moreover, the Community must continue to respect national differences if this dialogue is to flourish—it must not be allowed to harden into a major extension of Community control over social and welfare policies.


73. The Committee believes that the Social Policy Agenda raises important questions of policy and principle to which the attention of the House should be drawn, and we make this Report for debate.

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