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House of Lords
Friday, 14 March 2008.
The House met at ten o'clock: the LORD SPEAKER on the Woolsack.
Prayers—Read by the Lord Bishop of Rochester.
EU: Single Market (EUC Report)
Lord Freeman rose to move, That this House takes note of the report of the European Union Committee on The Single Market: Wallflower or Dancing Partner?—Inquiry into the European Commission’s Review of the Single Market. (5th Report, HL Paper 36).
The noble Lord said: My Lords, the European Commission began its review of the single market in May 2006 and the Commission reported in November last year. Sub-Committee B of the European Union Select Committee began its work at the beginning of last year and we took evidence throughout 2007. We reported to this House on 8 February. I am particularly pleased that the Government were able to respond very quickly by 4 March, and I thank the Department for Business, Enterprise and Regulatory Reform and Her Majesty’s Treasury for their speedy review, report and response.
A word about our subtitle—we wished to ask ourselves: is the single market now an ignored, irrelevant side aspect of the European Union or very much capable of a useful and active contribution to European economic growth? I shall explain our conclusions in my contribution to the debate. I thank the Select Committee under the chairmanship of the noble Lord, Lord Grenfell, for wise counsel and support and for agreeing to the translation of the main part of the report into French and German for the benefit of MEPs, Ministers and the staff of the European Commission. This was despite some confusion among some of our European, particularly our French, colleagues—because one translation of our subtitle ended up as Small Plants in a Music Hall. I think they believed that this was a rather typical and mysterious example of a British sense of humour. But, seriously, the principle of translation of Select Committee reports of this House into foreign languages is important. I am grateful to the Select Committee and the noble Lord, Lord Grenfell, for their support in this matter, and I hope that that principle will be continued.
I thank three successive Clerks to the sub-committee, Duncan Sagar, Judith Brooke and James Whittle. We are well served in this House by the very high standard of our parliamentary Clerks who work very long hours and whose English—indeed, grammar—is far superior to that of the members of the committees they serve. I thank also our special advisers, Dean Cook, Mark Griffiths and Dr Ian Walden. They fitted long hours into their busy professional jobs for modest reimbursement.
The initial development of the Common Market, now the single market, was in large part due to the vision of Margaret Thatcher—now the noble Baroness,
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“The Government agrees that the Single Market is and continues to be of great benefit to consumers, businesses and citizens of the European Union. It has been an outstanding driver for growth and jobs, increasing EU GDP by 1.8%”—
The committee agrees with the judgment of Her Majesty’s Government, and indeed the European Commission, that the single market has so far been a great success, but there is a great danger of that success faltering. The past benefits of the single market are not fully realised by the electorate, and one cannot detect a really enthusiastic vision for the further development of the single market by member states, the Commission or Parliament. We need to re-enthuse the population of the European Union about the prospects of the single market delivering even better results.
The spring European Council is meeting this morning in Brussels on the second day of its two-day summit. I hope that the Prime Minister will take a lead in calling for the following measures, which the committee reported. First, we should call a halt to more regulation from Brussels unless it is absolutely necessary. There is broad agreement on both sides of the House on that point. Secondly, there should be an emphasis on proper implementation and enforcement of existing regulations. In the European acquis we have a great welter of regulations and directives, some of which have not been properly implemented and enforced in member states. Thirdly, the Commission should provide more advice and help to new members of the European Union in ensuring that the acquis is translated into their own domestic legislation. Fourthly, I do not think that there is any support for the appointment of any more European-wide regulators in Brussels. National regulation is the key—it is much more flexible—and I think that perhaps better co-ordination is required between nations. We do not want any further pan-European initiatives. Fifthly—I believe that the Prime Minister is particularly keen on this—there should be better help and assistance to small and medium-sized enterprises in exploiting the benefits of the single market. One can understand why very small firms do not necessarily think of trading in the European Union because of the complexities, difficulties and diseconomies of scale, but more should be done.
Our committee believes that the single market of the future should be based on a much more liberalised European economy with free and undistorted competition and hence a more flexible and dynamic European economy with less bureaucracy. For the first time in my political life I judge that in your Lordships’ House and the other place, and now in Brussels, there is an
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I now turn to the specific recommendations in our report. First, on energy, there is undoubtedly a battle going on in the summit in Brussels today over the view, led in part by the United Kingdom but also strongly supported by the commissioners, that we want an ownership “unbundled” system for our energy market for the future, whereby the generation of electricity and gas is separated from its transmission and sale. That model has worked extremely well in the United Kingdom, subject to ongoing and proper regulation resisted by a number of states. I hope that the commissioners and the Council will have the courage of their convictions and press ahead with wholesale reform of the energy market.
Secondly, on financial services, we have had a welter of regulation at wholesale level. We now need reform at the retail level, so that customers of financial services institutions in this country can conduct their transactions much more freely across country boundaries. Further work needs to be done on that. Thirdly, on telecoms, we do not believe that there should be a European Union-wide regulator. Our regulator does an outstanding job and other national regulators should be encouraged to police their own systems. We believe that what is called the spectrum in telecommunications should be operated and exploited by the public sector and not be subject to regulation and control by Brussels.
Fourthly, there is the topical subject of renewable energy. The Commission’s target, which I suspect will be adopted shortly by member states, is that by 2020, 20 per cent of our energy generation should come from renewable sources. The target for Britain is only 15 per cent, and at present we are on 2 or 3 per cent, so we have a mountain to climb. Some of your Lordships may have heard the report on the “Today” programme this morning from Cambridge Econometrics that it would be a major challenge for us to get even to 5 per cent by 2020. Therefore, the internal market has a crucial role. We need to lift regulations and encourage the European-wide trading of quotas in renewable energy targets.
Sixthly, on small businesses, the competition council on 25 February gave support to the notion of a new small business Act. The details need to be flushed out by the Commission, but at its heart it will provide small businesses with exemptions from certain regulations. What has been done in Brussels with an organisation called SOLVIT, which provides information to small businesses trying to trade across national barriers, has been a success. The next step is not just information but advice, on which the British Government have been outstanding.
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In conclusion, the EU Select Committee—the main committee—published yesterday the impact assessment of the Lisbon treaty for the United Kingdom. It is a full document that is designed to inform your Lordships when we come to debate the treaty. I draw your Lordships’ attention to the fact that the Lisbon treaty will have very little impact on the workings of the internal market other than the extension of qualified majority voting. There is a significant change in the Lisbon treaty from the old draft constitutional treaty. It is the absence in the main part of the treaty of the term “free and undistorted competition” as being a target, an aspiration and a principle of the operation of the internal market. We are all disappointed about its relegation to a protocol. We have been assured by the lawyers that it makes no difference at all, except the jury is out. We shall have to wait to see the judicial interpretation of the placement of that aspiration in the protocol. A liberalised, competitive and lightly regulated single market is the best way to serve citizens of Europe. I commend the report to the House. I beg to move.
Moved, That this House takes note of the report of the European Union Committee on The Single Market: Wallflower or Dancing Partner?—Inquiry into the European Commission’s Review of the Single Market. (5th Report, HL Paper 36).—(Lord Freeman.)
10.20 am
Lord Haskel: My Lords, it has been a privilege to serve on EU Sub-Committee B for the past three years. I thank my colleagues for their companionship, our chairmen for their leadership, our Clerks for their diligence and our special advisers for their support. We have conducted many inquiries, but I have little hesitation in saying that this is probably the most important. It is important because it is an inquiry not into any particular sector of the single market but into the Commission’s review of the whole single market itself.
As we say in our report, the single market is often referred to as one of the greatest achievements of the European Union. To many, the European Union is the single market. I was pleased that we undertook this inquiry, because supporters, such as me, of the European Union were becoming concerned that progress towards completing the single market and the free movement of goods, capital, people and services was losing momentum. Others who may be a little less enthusiastic than I am about the European Union have interpreted this slowing down as a sign of decline. Had they been with me on my recent visit to the United States, even they would have been impressed with the high esteem that the EU enjoys there. In the course of several informal engagements, I was told how the European dream is replacing the American dream. People are queuing up to join. I was told how they admired the politics of consensus between the member states. I was also told that Europe—the EU—is the world’s largest public aid donor and how it more cleverly uses aid packages instead of sanctions. There is no sign of decline there, and I was not looking for compliments.
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Quite rightly, Mr Barroso and our Government continually warn that failure to take steps towards completing the single market provides room for protectionism to creep in. They are right, so we should never lose the opportunity to point out that the greatest champions for open and liberal markets in the single market are the UK Government and the European Commission. This is why the Commission is determined to act over the slow-down in the development of the single market. Our work, as the noble Lord, Lord Freeman, explained, was to examine its proposals.
It soon became obvious that what was lacking was not legislation or more rules but implementation. The rules to complete the single market are all in place. It is their implementation which is needed to encourage cross-border activity by businesses large and small—this to give all EU citizens the economic benefits of the single market. As the noble Lord, Lord Freeman, explained, we rejected more centralised bureaucracy. Instead, we recommended practical instruments, such as: assistance in the transposition of EU laws and their enforcement; better information about what the rules really are; quicker and easier problem-solving by means of SOLVIT and other schemes; better regulation by raising standards in poorly regulated member states; enforcement to liberalise markets; and perhaps even enlargement to shake up some of the older member states. The final report of the Commission last November shares many of these proposals, and so does the Government’s response to our inquiry. I, too, add my thanks to those of the noble Lord, Lord Freeman, to the Government for their quick response.
We looked at three specific sectors—energy, telecoms and financial services—to see how this would work. The key to liberalising the energy market is of course unbundling; since our report was written, the Commission has struck a deal with E.ON, the large German electricity and gas group—a deal that should pave the way to the far-reaching liberalisation of Europe’s energy market and is just the kind of imaginative use of instruments that we call for in our report. In telecoms, separation is the key. No European-wide regulator is needed; better national regulation is what we recommend. In financial services, we were concerned about a competitive market for the individual citizen. We should perhaps have been a little bit more concerned about tax and credit. I understand that nine member states are now discussing a pilot project to run a voluntary common consolidated tax base—again, the kind of co-operative instrument that should improve cross-border trade.
During our inquiry, we paid attention to the progress of the services directive, particularly, as the noble Lord, Lord Freeman, told us, in its effect on SMEs. We felt that this was important because the Federation of Small Businesses told us that nearly 80 per cent of its members are in the services sector, but only 2 per cent engage in cross-border business. This probably applies to the rest of Europe. On several occasions, the committee has emphasised the importance of the services sector to British business. We were unhappy about the watering down of the original country of origin principle, but nevertheless concluded that the final services directive in December 2006 should be strongly supported.
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In its paper, the Commission also emphasised the importance of engaging SMEs in the single market. As most SMEs are in the services sector, it must follow that the successful implementation of the services directive must play an important part in completing the single market. In their response, the Government say that they support moves,
Central to this is the obligation for each member state to set up a website where businesses, particularly SMEs, would be able to learn of the requirements needed to provide a temporary service in other member states. The website should also enable them to complete any formalities. Without this facility, any awareness-raising of the business opportunities available to our service companies in other member states will be pointless. Easy access to this information is essential, and so is its quality. I therefore hope that the committee will keep an eye not only on what DBERR is doing in this regard, but most importantly on what other member states are doing to set up this facility for use by British service companies.
In our report, we recommended that citizens be more fully persuaded of the benefits of the single market. The Government think so too, and so does the Commission. Its paper strongly emphasises that the main beneficiary for completing the single market should be the consumer. I agree. The consumer needs to be convinced of the economic benefits gained through more competition and higher standards, and they should have the right to make their voice heard. However, my impression while we conducted the inquiry was that, although the single market is incomplete, the consumer already takes it for granted. In their eyes, additional economic benefits will be marginal.
My impression, which seems to be confirmed by surveys carried out by the Commission, is that what the European citizen now values most about the single market are the freedoms—the freedom to move around, to work, to study, to travel, to live, to get married and to set up home without any barriers or formalities anywhere in the Union. Many are taking advantage of this. These social benefits as much as the economic benefits will win the hearts and minds of European citizens and persuade them of the benefits of the single market. I hope that the Government and your Lordships’ committee will remember this, because this may turn out to be the most important point to come out of our inquiry.
10.29 am
Lord Bradshaw: My Lords, I speak as a new member of the committee who was not present when any of the evidence was taken. When I arrived, the final draft of the report was more or less complete, and I have read it only since then.
As I understand it, a free market depends on all the participants sticking by the rules, whatever they are. State aid has been strictly controlled and is normally disallowed, but just as important is the question of compliance and enforcement. I see that one of the committee’s conclusions at paragraphs 154 and 155 is that enforcement is fundamental to the activities of
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Because it is where my area of expertise lies, I want to refer to transport and the standards of compliance that are observed there. In the railway and airline industries, those standards are strictly maintained on grounds of safety and many other related reasons. However, I am concerned about two issues of compliance, and I gave the Minister prior notice of the fact that I would raise them.
First, I want to talk about the devastating effect on the local bus industry of the agreement entered into on regulations concerning drivers’ hours. I suggest to the Minister that this was forced on us not by the European Union but, to some extent, by the incompetence of the people whom we sent to negotiate on our behalf and who did not understand the implications for the local bus industry. These things are difficult to negotiate but it is possible to take advice from those who are intimately involved. I suggest to the Minister that, whenever we make regulations which affect small sections of industry, advice should be taken by government negotiators to ensure that our real interests are maintained. I simply draw to his attention that the Finnish Government—a very small participant—were able to secure a derogation from these regulations but we were unable to do so, although we are affected to a far greater extent.
The second issue that I want to raise concerns the standards observed in the road haulage industry. A number of questions have been asked by my noble friend Lord Roberts of Llandudno about the appalling situation in north Wales, where hundreds of lorries are taken off the road because their drivers grossly exceed their hours—I am talking not about a few minutes but about several hours. The lorries are in a poor mechanical condition and, as a consequence, they are killing people. They are also overloaded.
The police stop those drivers in very large numbers but they have no power to do anything unless someone gets killed or something of that sort. However, the lorries just go on their way. Of course, a report is made to the home country but that is not very effective if there is no enforcement there. This applies in places as diverse as the Republic of Ireland, Greece, Bulgaria and all sorts of other countries. I know that the Government are talking about introducing some sort of on-the-spot fines but we have yet to see them.
My other point is that these lorries have free access to our roads. Again, the Government have not moved to bring in a system of lorry taxation that would at least make owners of vehicles which are registered other than in the UK pay a fair price to use our roads. That is distorting competition. The noble Lord, Lord Berkeley, will confirm that aluminium ingots from Anglesey to Austria, which have been transported by rail for a long period, have now been transferred to road using an eastern European haulier. I am not saying that that haulier does not observe the rules but in general they are not observed. In consequence, we have more road congestion, probably more accidents and gross overloading, and nothing is done about it.
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The other area that I want to talk about is the independence of economic regulators. This is also touched on in the report at paragraph 157 in particular and also in paragraph 159. We have been in discussion on the Regulatory Enforcement and Sanctions Bill and have learnt that concessions are being made to secure that economic regulators—I am talking about them and not bodies such as the Environment Agency—are free from interference by national Governments.
I want to bring to the Minister’s attention that, in my view, the Channel Tunnel Rail Link (Supplementary Provisions) Bill—I am sorry about the long title—invades the independence of the regulator and, to that extent, is objectionable. It is even objectionable to the extent that when I talked this week to a concern which is considering bidding to buy these assets that are being sold by the Government—that is, the Channel Tunnel Rail Link and Eurostar—and asked them bluntly, “Would you rather that the Government had a hand in regulation or that the regulation was made independently of government by the Office of Rail Regulation?”, they said that the latter would strongly influence their decision and the price that they would pay. That is because government are transient and capricious and the regulator is rather the reverse.
Therefore, I ask the Government to pay attention to both the detail and the effect that their decisions have on people’s ability to function properly in the open market, which we all want to see.
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