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The noble Lord, Lord Freeman, also referred to the Lisbon treaty and SMEs, and drew our attention to its difference from the now redundant constitutional treaty. But, in publishing the report yesterday on the Lisbon treaty and an impact assessment, the European Union Select Committee said that it would be concerned if any symbolic downgrading were translated into efforts to depart from the principles of free competition that have formed the cornerstone of the internal market. However, Article 51 of the TEU gives equal weight to the treaty articles and protocols, which I think the noble Lord, Lord Freeman, was worried about, and will remain the same as Articles 101 and 103 of the TFEU. Therefore, the change does not appear to be significant. I know that we must still look at it and be alert to any deviation, but undistorted competition must be the chime to which that we adhere in development of the market.

Like my noble friend Lord Borrie, one of my bibles over the years in trying to understand the single market has been the Commission’s “Scoreboard”. I, too, have been looking at the most recent edition which came out in December 2007. Some noble Lords will recall Mario Monti and other colleagues beginning this process, which from time to time looks at how effectively transposition and infringements are going in the single market.

I congratulate my noble friend Lord Jones of Birmingham on his recent trip to the United States—“Go west, young man”; he did. He told them all about undistorted competition, which I was very pleased to hear about. A good point has arisen, which I am sure that my noble friend will have noted. Figure 1 in the most recent bulletin demonstrates that in terms of transposition of directives of the single market, in 1997 we were 6.3 per cent and now we are down to 1.2 per cent. So we are becoming more and more effective at transposing the directives. But there also has to be concern about the quality of transposition and we need to have an eagle eye open to make sure that that happens successfully. I might add that the United Kingdom is down to 1 per cent in terms of transposition, but 14 countries are better at transposing than we are. So we still need to redouble our efforts. The noble Lord, Lord Borrie, has already mentioned the five states which lag behind; namely, the Czech Republic, Portugal, Poland, Greece, and, surprisingly, Luxembourg. There is also the issue of old directives which are yet to be transposed. In Figure 10, 30 are shown for the United Kingdom, which need to be transposed by 10 May 2008.

I would also ask my noble friend Lord Jones to look at the infringements. It is very interesting that the United Kingdom still is above average for the 49 infringement proceedings. We stand at 63, so we need to do more. It is interesting that, when one looks at the figures, the highest numbers of infringements take place in environmental, taxation and Customs, and energy and transport legislation. They are all crucial areas of concern to make the single market successful.

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In conclusion, this ought to be a major task of the Government’s and it should be a major task of this revising House in what we perform, especially through the European Union Select Committee and its wonderful sub-committees such as Sub-Committee B. We too should be fanatical and should be devotees of the single market. I believe that the payback is that our citizens, our businesses and our consumers will realise that Europe has something to offer and will no longer be shrinking violets in this wider single market.

11.16 am

Lord Dykes: My Lords, it is always a great pleasure to follow the noble Lord, Lord Harrison, particularly with his magisterial common sense on what he said today about the single market. Having been in previous times a very active MEP, the noble Lord is a very good example of a Member of the House of Lords who becomes more active as he gets older. He is a very active Peer indeed and gives us a lot of common sense on European matters, not just the single market. I agree very much with what he said.

I also echo the thanks of others to the noble Lord, Lord Freeman, the chairman of our committee. If I embarrass him by saying this, I apologise in advance. I had thought that I might do just a glancing reference and leave it at that, as we often do—being polite and then passing on. But I shall say just slightly more than that because we on this committee are very fortunate—I hope that the noble Lord, Lord Freeman, is not annoyed at my saying this—in having the noble Lord as chairman. Unlike some chairmen of some committees, as we all know—no names, no pack drill—the noble Lord, Lord Freeman, motors the discussion along, so it is always a pleasure to attend. Everyone has a chance to speak and is involved, but we know that the meeting will be brisk and efficient. If the noble Lord, Lord Freeman, is still a member of several company boards, they are fortunate to have him. I am not sure of the details, although I know of Thales. In fact, they are lucky—so much so that I am reminded of an accident some years ago at a famous circus in the Midlands when the human cannonball was injured, fortunately not very badly. The ringmaster wrung his hands with some grief and anxiety, and said, “It would take us years to find another man of the same calibre”.

The noble Lord, Lord Freeman, will be delighted to know that I am ending my comments about him now, but we thank him as well for being in charge of this report. His business background helped us all to get more insight into our discussions with the evidence givers and our examination of officials and so on in Brussels and London, and from our meetings and discussions with Ministers who also were very keen to emphasise the official government support for the single market. That has been a leitmotiv of British government policy since the mid-1980s when it began and has been one of the hallmarks of leading British policy on European matters. From that point of view it is very positive.

I am an all-round European enthusiast, although I do not go around saying that everything in the EU is wonderful. There is massive room for criticism about a number of aspects. None the less, I am very

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enthusiastic about the generality of our EU membership, so I do not say that the single market is the only thing that matters and that we can just have a bit of trade and mercantilism here and there, and economic activity, but no integration of any kind. I do not think that that is to the taste of the public in any way at all. They want more as they perceive themselves to be Europeans as well as patriotic citizens of this country.

This report also showed a success in deciding quite wisely to concentrate just on a number of key areas. If we had sought to examine every aspect, sector and sub-sector of the single market, it would have been very difficult for us. How wise we were to follow up the then inquiry referred to by the noble Lord, Lord Mitchell, on mobile phones from the spring of last year with further examination of those matters in this report.

Incidentally, I wanted to ask the noble Lord, Lord Mitchell, who is an expert as a result of the traumas he has suffered as the client of a mobile phone company, whether he has had the experience of cancelling a mobile phone contract. It takes just a few hours to set up a contract. You walk into shop and bingo, you have the contract and the charges start. But has the noble Lord ever tried to cancel such a contract? That is where restrictive practices can be seen. It is similar to the position with credit card companies and to a lesser extent bank cards. When you call to cancel the contract, it can take months. That is particularly true of mobile phone contracts.

We can be very pompous here and say, “Wicked countries in the EU have lots of restrictive practices, but we don’t have any”. Even some members of the CBI used to say that. I am sure that there are some restrictive practices everywhere, and I am sure that the Minister is an expert on the issue and tries to get rid of them. However, tremendous disutilities can arise in the area of contracts.

Another example of something that can become a significant national restrictive practice is in the area of implementation of the directives that come from the creation of the single market. There is a long list of them, and by and large they are very successful. However, once again the disutilities become evident. As we know, there are two kinds of implementation: one is the implementation that is brought about through the legislative process whereby governments and parliaments enact directives, and the other is the real implementation that comes from regulators and all those concerned with oversight and monitoring in departments such as DBERR in this country and similar ones in other member states. This implementation reflects what is happening on the ground, and that is a much harder thing to achieve. Nowadays, by the way, we have fewer directives and they are couched in broader terms as framework documents. They are much more rational instruments of Community legislation than was the case with the somewhat tedious documentation of earlier days.

It takes a long time for a real single market to be created because it is a hugely complex thing. Lest again we feel pompous and superior to our foreign colleagues in these matters, such as thinking that the Germans have guilds, apprenticeships and strong

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trade unions, which is sinful, let us consider the market from the point of view of the other member states. They say that Britain has the biggest restrictive practice of all, and here of course I mention the euro. My partner Sarah says that sometimes I talk about the euro too frequently at dinner parties, so to be reasonable I say that I will raise the subject on only one out of every three occasions. The UK not joining the single currency is regarded by other member states as a gigantic and foolish restrictive practice. The Minister cannot say that when he comes to reply, so I give him dispensation not necessarily even to refer to it. But let me just say that you cannot have a real single market without a single currency. The adverse factors that arise from the huge expense of changing from sterling to the euro and vice versa are enormous. The costs are huge and the pound is propped up with twice the level of interest rates as those for the euro. Indeed, the euro faces a dilemma because the European Central Bank has been so successful in its German-style monetary restraint policy that if it were to lower interest rates the euro will rise in value—more expansion would lead eventually to more inflation—whereas if it were to raise interest rates because of inflation fears, the euro still goes up because it becomes a better earner. In the mean time, the euro has become the most successful currency in the world, and ill-advised as they were, the British Government missed the opportunity to join it from 1997 onwards. It now gets harder and harder for Britain to join the euro because presumably we would want to see a devaluation with our trade figures. While Britain is an important trading partner, would the other member states be able to accept that?

We need to be sensible about what we and the other member states can contribute. All have pluses and minuses. Germany, with its large manufacturing sector and trade surplus, actually supports the entire European Union. In effect it is the main trade surplus element. Our trade deficit is embarrassing, but fortunately we are good on invisibles, which gives us a lead in financial services. It works all ways.

I agree strongly with the suggestions made by my noble friend Lord Bradshaw and the noble Lord, Lord Berkeley, whose detailed comments, for which I am grateful, outlined the idea of a single market in trains, developing both passenger and freight railways as quickly as possible. Again, it is very complicated and the old historical realities of each member state mean that walls of resistance are set up against any kind of co-ordination and integration. However, it is beginning to happen with the far-sighted decision of other member states to form a high-speed network all over Europe for passenger trains and increasing co-operation on freight. A recent example of that is the new freight train service being launched between Luxembourg and Perpignan to carry juggernaut lorries on flatbed wagons instead of them having to use the motorways. That is a major contribution to helping to avoid further excessive congestion, particularly for this country given its small size. The single market in railways will take a long time to develop, but these are the practical things that the public in all the member states want.

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I commend too the Britain for a new Europe pamphlet on the extraordinary degree of economic and financial integration already being achieved in the single market. The public have reacted to it and want to be consumers on a European scale, even if they are still at the margins geographically. On that, a lot of co-ordination for geographical reasons is developing between Kent and the Nord-Pas de Calais. There are many examples of French companies operating in Kent and British people running small businesses in the Nord-Pas de Calais. It may have been a struggle, but they are beginning to be successful. This kind of thing is what consumers and customers will want in the future, so we have to make sure that the expenses of such ventures are minimised; that is for Government action.

I conclude by referring to the single European payments area for banks and bank customers. This is still a highly unsatisfactory situation and needs to be looked into. Charges are still excessive partly as a result of the different currency used in this country and because the banks are still pursuing their latent restrictive practices by keeping these charges as high as possible. The Commission is doing its best, but it is a slow process. It is now legally supposed to be a single area, but the disutility remains massive. I hope that the Minister will at least refer to this issue, even if he does not refer to the euro.

11.27 am

Lord De Mauley: My Lords, I join other noble Lords in thanking the European Union Sub-Committee on the Internal Market and its chairman, my noble friend Lord Freeman, for preparing the report and introducing this important debate. It is particularly apt that we should take note of the report in a debate now because it provides us with a chance to reassess the principles that motivate our engagement with Europe and explore what must be done to ensure that these principles continue to drive decision-making.

The single market did not come about overnight. It has its roots in the creation of the European Economic Community and shares—or it could be argued is the realisation of—many of its philosophical aims, primarily market liberalisation. In January 1993, the single market came into force and, as my noble friend Lord Freeman said, marked a concerted attempt to remove barriers to the free movement of goods, services, people and capital. How far has this been realised? The European Commission launched its review of the single market in May 2006, and in doing so freely admitted that the barriers indeed have not yet been fully removed. What motivated this tide of economic liberalisation was the desire to reinvigorate the European project. In the words of the then Commissioner, Lord Cockfield, the idea was to create opportunities for growth, job creation, improved productivity and profitability, healthier competition, professional and business mobility, stable process and consumer choice. These are laudable aims. To an extent they have been realised.

The impact of the single market has been by and large positive. It facilitated the creation of a home market of 500 million consumers, making the EU the world’s largest trading bloc. Between 1992 and 2006,

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the estimated gains in terms of economic growth amounted to 2.2 per cent, and in terms of employment gains 1.4 per cent. For the United Kingdom that means that it is worth £20 billion a year. The real risk is that this progress gets mired in the troubles of economic nationalism and the patchy application of overinvasive regulation. I join the call of my noble friend Lord Freeman for a halt to new regulation and for greater attention to proper and uniform enforcement across Europe of existing regulation. I should say to the noble Lord, Lord Borrie, that we on these Benches of course acknowledge that regulation has an important role, but it must be reasonable and consistently applied.

So, like my noble friend, I welcome the benefits that have come from the single market and hope that they will continue. But we must also ensure that we continue to capitalise on the possible advantages. For example, there have been many benefits to multinational companies, but the positive impacts on small and medium enterprises are not as easy to see. Indeed, much more needs to be done so that they can take advantage of the opportunities that might exist.

Too often, however, any attempt at stimulating this kind of growth comes in the form of more legislation. I was pleased to read in the report of the committee’s keen understanding of the principle, as explained by my noble friend Lord Freeman today, that more regulation often means more barriers. I was further pleased by the committee’s strong support for the Commission’s commitment to keeping legislation simple and, generally, to resistance to EU super-regulators.

Very few SMEs are engaged in cross-border activity, partly because of the regulatory barriers and the lack of information to assist businesses, a point to which several noble Lords have referred today. I would be grateful to hear from the Minister what the Government can and will do to help small and medium-sized enterprises to participate fully in the single market.

But it is not only small businesses that fail to reap the full benefit of the single market: consumers are also at risk of losing out and need to be better informed as to the range of benefits, social as well as economic. The noble Lord, Lord Haskel, in particular, emphasised the potential benefits to people of the single market.

The failure of cross-border purchasing and of key markets has affected the continuation of genuinely free and undistorted competition, a point to which the noble Lord, Lord Harrison, referred. Again, I would be interested to hear from the Minister how the Government propose to tackle these issues.

I turn now to the specific economic areas that the report addresses, with the hope that the attention paid to the energy, telecommunications and financial services sectors might also shed some light on what can be accomplished more broadly. There is a real risk that the advantages of the single market, in these sectors in particular, might be undermined by nationalist economic policy and regulation. It is not enough for some countries merely to pay lip service to European commitments and then erect barriers to free trade by promoting the champions of their national industries. Competition suffers and prices cease to be fair. There are well documented examples of gas flows between

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member states temporarily not moving in the direction which would have been expected given the relative market prices. It is essential to have a level playing field and I welcome the committee’s emphasis upon competition, the need for unbundling ownership and the need to complete the single market for the benefit of consumers and businesses alike. What steps does the Minister intend to take with his European colleagues to ensure that this problem is resolved?

With the threat of global warming and the immense speed with which the energy markets will have to adapt in the near future, a level playing field is absolutely vital. Success in reducing carbon emissions depends to a large degree on the robustness of the European carbon markets and the ability to have a stable price for carbon. A stable regulatory scheme in which all member states play their role in ensuring that price-drivers act uniformly is essential for the European Emissions Trading Scheme to operate. Indeed, it is imperative if we are to combat climate change.

The single market has effects much wider than preserving free trade for business and, although that is still crucial, the wider context allows us to understand how important it is that the Government do all they can to ensure an equitable commitment to free trade in Europe.

Ensuring competitive practice is not the only requirement to promote the success of the single market. The telecommunications sector is a good example of where, in the first instance, there was a successful opening up of national markets to competition. But as the pace of liberalisation has differed between countries as well as between the markets within the sector, harmony is needed. Measures are required to address competition issues across the EU. There are still a number of barriers to achieving a true market for telecommunications in Europe. For a start, the consumer markets are essentially national. This means that there are incumbent providers heavily entrenched in these markets. The noble Lord, Lord Mitchell, referred to roaming charges, data and the need to achieve a fairer market across Europe. Will the Minister explain what the Government can and will do to remove these barriers?

As we have been observing since the onset of the sub-prime debt crisis, it is essential that the financial markets and services are stable and robust in their own right. Increased competition and stability are the goals of a single market in financial services. It also has a tremendous effect on the goal of creating more jobs in Europe. Will the Minister assure the House that completing a single market in the financial industry will be made a priority by the Government?

The noble Lords, Lord Bradshaw and Lord Berkeley, reminded us that in addition to SMEs, energy, telecoms and financial services there are other industries—notably transport—where a single market is some way from being realised. The noble Lord, Lord Bradshaw, regretted the fact that the United Kingdom’s corner did not seem to be fought adequately in the context of ensuring fair and uniform enforcement of regulation. The noble Lord, Lord Berkeley, asked for a close look, in particular, at the railways industry.

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When addressing the questions that I and other noble Lords have raised, I hope the Minister will assure your Lordships of his commitment to liberalising markets through less legislation and simplified regulation, and that his approach to these issues will follow the committee’s recommendations. A successful Europe means a successful Britain—and a successful Europe needs a renewed commitment to the single market. We welcome the report’s recognition of this key fact.

However, as the noble Lord, Lord Borrie, rightly said, we must also look at the effects outside Europe. With the emergence of new economic powers such as India and China on the world stage, it is essential that we can compete successfully, so we need not only a single market but an open market. Indeed, the noble Lord, Lord Borrie, referred to open global markets. This must come through lighter regulation which must, in turn, come in step with our European partners.

We think that the Minister, because of his experience and his role, has a real chance to make a difference for the United Kingdom and, indeed, for Europe. We share wholeheartedly with the Government the certainty that we are better as a dancing partner than as a wallflower, but when it comes to additional regulation considerably more coyness would be healthy.

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