Select Committee on European Union Minutes of Evidence

Supplementary memorandum by Felicity Ussher on How can Europe Build a Socially-inclusive Information Economy?

  At the Lisbon summit in March 2000, EU leaders signed up to an ambitious set of proposals to make Europe's economy more dynamic by embracing liberalisation of markets, promoting entrepreneurship and exploiting new developments in information and communication technologies. Europe now recognises that its future prosperity will depend on its ability to compete in the new knowledge economy, where a variety of information and services are bought and sold online.

  A successful knowledge economy will also need to be a socially inclusive one. The EU is beginning to acknowledge the value of the internet as a tool for generating higher employment and better quality of life. This is a welcome shift in thinking: until now the EU debate has focused on issues such as copyright and electronic commerce regulations, thus viewing the potential benefits of the internet in purely commercial terms. Now for the first time, the unemployed have been identified as internet stakeholders just as much as businesses and consumers. But Lisbon did not go far enough.

  The summit remained bound to the notion that internet access for all is what it takes to achieve social inclusion online. This, sadly, is not the case. A socially-inclusive knowledge economy requires a complete set of IT skills, the ability to use at least one form of electronic currency, free software tools and universal access to public services on the internet. These are the core elements of electronic participation.

  Reaching these goals will be more difficult than fulfiling Lisbon's immediate target of cheap, fast Web access for all—a target which the market is, in any case, already beginning to meet. The needs of Europe's poorest citizens for bank accounts and credit resources are scarcely recognised by governments or commercial suppliers, which tend to focus on the more lucrative areas of business-to-business trading, high-income consumers and the exploitation of third-generation mobile phone services.

  The aim of this pamphlet is to identify new forms of social discrimination that may be created in the internet economy. What can the European Union do to ensure that the internet offers equal opportunities to all consumers, employees and citizens? How can governments, EU institutions and the private sector work together to provide those people—who otherwide may be left behind by the market—with basic skills and resources?

  A CER study should address the following:

Where are we now?

  In the months leading up to Lisbon, the EC finalised directives on copyright and electronic commerce to help protect the privacy and intellectual property of consumers and businesses. Pledges were made not to impose new taxes, although methods of applying VAT to online sales are under consideration. The Lisbon summit expanded this agenda to include the voluntary sector, and set up targets for using IT to increase employment across all sectors of society. Access to the Web and IT training were identified as the key ways of achieving this. But were politicians just paying lip service to the potential of the Web to achieve social inclusion? If they believe there really is a link between the two, how do they plan to strengthen it?

Regulatory and political concerns

  A policy of ensuring Web access for all demonstrates the dangers of slow-moving EU bureaucracy, because the market is now offering subsidised—and in some cases, free—internet services of its own accord. It is likely that full e-participation, as defined above, will always go against the grain of market trends because it requires investment into high-risk, low-value customers. So how should the public sector intervene?

Significance of new technology

  Users of mobile phones and digital television are more socially diverse than users of PCs, and the emerging third generation of phones from Scandinavia promises broader and cheaper access to the internet. This new form of Web access looks set to penetrate lower-income sectors increasingly. Likewise, the arrival of broadband data transmissions heralds faster access and the potential for a wider range of services. These factors point towards a market solution for Web access for all. But what services will be offered across these new platforms? Will they be of use to low-income as well as high-income consumers? What content deals are being set up? How will Europe's wireless innovations boost its competitiveness against the US?

New forms of discrimination

  Online opportunities for employment and cheap goods are emerging before everyone has access to the Web. How much price discrepancy is acceptable between online and off-line payment of services such as utilities and banking? Electronic currency is the key to online participation. Do VISA and Mastercard have too much market power, given that they prohibit people with poor credit ratings from making online purchases? Should they face stronger regulation, given that they now have near-exclusive control over a new retail medium? Can emerging online models of risk transfer, such as the Equifax e-commerce scheme, be adopted off-line by European authorities? What is the feasibility of non-credit-based card payment systems, such as the Belgium-based Proton scheme?

A familiar tool-kit?

  The internet could be a useful tool in tackling social exclusion. But for it to have a real impact, governments cannot rely on IT policy alone. It will require a joined-up approach from various government departments and Commission services. The EU should address some issues—like universal access to e-currency—through legislation. But over-regulation could stifle growth, or it could prove to be irrelevant if services move off-shore. In most areas, the EU should therefore use "softer" methods to persuade the member-states to adopt best practise: bench-marking, time-specific targets and peer review, with the most innovative schemes championed by the Commission. But in this fast-moving world of the internet, should the EU intervene more directly in certain areas? For example, how can it use more of its resources to improve the skills of Europe's unemployed and socially excluded? Should the EU fund basic free software tools training, here is free software and e-currency for all, who else would do it?

Public services

  Each week brings new models for online pricing and there is no guarantee that information which is freely available today—such as newspaper headlines—will be free in a few years time. Even public sector broadcasters like the BBC are currently considering whether to apply a licence fee to their Web sites. Must we accept that information and services may not always be free online? Or should the EU ensure that there will always be basic educational content freely available? This initiative would help implement Lisbon's recognition that the Internet is an opportunity to raise Europe's basic level of skills and literacy. Should such issues fall under the remit of competition authorities? How might the emerging models of online trading change the nature of competition policy?

Employment conditions

  Even with universal access and full e-participation, can everyone gain directly from the internet economy? This is the broadest issue of all for the EU to consider. There is an increasing polarisation between dynamic, highly-educated individuals who are starting potentially-lucrative internet companies, and low-skilled workers who are forced by technology to boost their efficiency for little reward. Gordon Brown's recent UK budget favoured entrepreneurs by offering tax-free share schemes. He is doing this in the interests of UK plc. But are governments neglecting the needs of low-skilled employees? Should they provide tax incentives for companies to employ people over the internet to help resolve skills shortages and regional imbalances?

Felicity Ussher

15 May 2000

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