Select Committee on European Union Fortieth Report


Letter from Ivan Lewis MP, Economic Secretary, HM Treasury to the Chairman

  I would like to take this opportunity to follow up my letter to you of 19 July 2005[18] by providing an overview of progress against the Treasury's priorities during the UK's Presidency of the EU. The Paymaster General has written separately on tax and customs policy, so I will not cover those here.

  On Budgetary issues, the UK Presidency managed to reach agreement on both the 2006 annual EC Budget and the 2007-13 Financial Perspective, both of which represent a good outcome for the UK. I wrote to you recently with full details of the 2006 EC Budget deal, and separately concerning Council's agreement on the Future Financing negotiations. You are also aware of the very positive work done under the UK Presidency on the Commission's proposals for a "roadmap towards an integrated internal control framework" for the EC budget (my letter of 5 December refers), and I know that sub-committee A will be looking more closely at those issues in its forthcoming inquiry.

  On our broader Presidency priorities, you will recall that our work programme for the ECOFIN Council identified five key themes. We were able to make good progress in each of these priority areas over the course of the UK Presidency, as follows.


  At the Manchester ECOFIN Informal meeting in September, Finance Ministers and Business leaders reached consensus on the reforms needed to deliver stronger economic growth and social justice in Europe in the face of rapid global economic change. Subsequently, in October the Chancellor published his report "Global Europe: Full Employment Europe" setting out proposals for major reforms to enable Europe to grow faster and tackle unemployment, and Member States also published the first Lisbon National Reform Programmes (NRPs) as part of the re-launched Lisbon Strategy.

  In December, ECOFIN reviewed the Lisbon NRPs and concluded that implementation of national reforms is key for Europe's long-term economic success, and the Council would continue to monitor and evaluate rigorously Member States' progress on reform. In parallel, the Council also welcomed a report on globalisation and agreed, for the first time, Conclusions setting out the reforms necessary for Europe to respond successfully to the opportunities and challenges of globalisation. ECOFIN confirmed that globalisation represents opportunities for Europe provided we put in place the policies needed to realise these, and that labour market reform is key, but policies need to reflect the different social models in Member States.


  Regulatory reform was at the heart of our Presidency programme, and we made good progress on several fronts, including a. commitment to test to the competitiveness impact of all new EU regulations in impact assessments, and a commitment for administrative burdens to be measured in all EU proposals. We are working closely with our successors the Austrian and Finnish Presidencies to agree a forward work programme on better regulation, with a focus on risk-based regulation and business consultation.


  The UK Presidency set the shape of financial services policy in the European Union for the medium term, with ECOFIN endorsing the approach set out in the Commission's Green Paper on financial services policy 2005-10. My Explanatory Memorandum on the subsequent Commission White Paper (15345/05) has been recommended for debate in Standing Committee B, and I hope the Committee will agree that the approach it outlines—which includes a strong focus on implementing and enforcing existing measures, ensuring the better regulation agenda is rigorously applied and recognising the importance of European financial services remain globally competitive—is very much in line with the UK's priorities in this area and is therefore to be welcomed. The Chairs of the Lamfalussy Committees also reported to ECOFIN in October on how they plan to cooperate more effectively to reduce burdens on business.

  As highlighted in my letter of 19 July, we continued to press during the UK Presidency for the full and rapid implementation of the EU's Counter-Terrorism Action Plan. In this context finance ministers agreed to work together proactively in support of further action in Europe to freeze terrorist assets.

  We achieved a first-reading deal with the European Parliament on the Capital Requirements Directive, which introduces modern risk-based capital rules for EU banks and investment firms. We also completed work on the Third Money Laundering Directive and reached a Council common position on the Funds Transfers Regulation, both of which apply a risk-based approach to combating terrorist financing and financial crime.


  As part of our commitment to a more outward-looking Europe, Finance Ministers agreed an EU package on financing for development ahead of the UN Millennium Development Summit in September, including a doubling of annual aid from 2004 to 2010. On 9 September, with the participation of the UK, France, Italy, Spain and Sweden, we launched the pilot International Finance Facility for Immunisation, which could save 5 million children's lives by 2015.

  Finance Ministers also emphasised the need for an ambitious outcome to the present round of WTO trade talks. While it was disappointing that greater progress could not be made in Hong Kong in December the UK will continue to work for an ambitious and pro-development outcome to the Doha round in 2006.


  The UK Presidency worked to develop real engagement with Europe's international partners on a number of fronts. The inaugural EU-US economic ministerial in November agreed an action plan on all areas of transatlantic economic cooperation, including agreement to hold the first regulatory cooperation forum, and we brokered in December a joint EU-US statement agreeing future priorities for the Financial Markets Regulatory Dialogue. We are pleased that this work will now be taken forward under successive Presidencies, with "EU-US dialogue" provisionally tabled for another ECOFIN discussion under the Austrian Presidency in June.

  The Commission has also identified an EU-India financial services dialogue as a priority for 2005-10. And, the UK Presidency worked through the EU to build support for economic regeneration in the West Bank and Gaza Strip, in support of the Middle East Peace Process.

  I hope the above gives you an overview of the key achievements of what was a very successful UK Presidency. We are now working closely with the Austrians and Finns to ensure that progress on UK priorities continues into 2006, and look forward to continued engagement with your committee as we do so.

6 March 2006

18   Correspondence with Ministers, 45th Report of Session 2005-06, HL Paper 243, pp 81-82. Back

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