Examination of Witnesses (Questions 25-39)
Mr Jim Murphy MP and Mr Ananda Guha
25 MARCH 2008
Q25 Chairman:Thank you, Minister, for taking
the time to be with us; we much appreciate it. As you know, we
are on the record and we are being televised and you will get
a transcript in the usual manner shortly after the meeting. Would
you like to make an opening statement?
Mr Murphy: Good afternoon; I am delighted to be with
you again!
Q26 Chairman: Thank you very much; that
is succinct and welcome! Following the European Council of 13-14
March, which is the purpose of this conversation with you, Minister,
and the statement that was made subsequent to it, could we begin
on the Lisbon Strategy and could I begin by asking you whether
there is something behind the words "a renewed focus on competition
policy in the EU single market"? Did the Council identify
some specific problems here or was this just giving it a bit of
a push?
Mr Murphy: It is largely giving it a push on
the basis that there is a danger, I suspect, in some quarters
of European politics to say that competition, undistorted markets,
better regulation is something that had its origins in the UK
and other governments' initiatives, and Hampton Court and everything
else, and it is certainly something that has been carried by the
Commission I think pretty energetically and quite effectively
in recent times. But it is about ensuring that that momentum is
not lost. So there is continued action on cartels and on anti-competition
measures; that is really the gist of it. It is not about announcing
a whole new raft of initiatives that will come with revisiting
the Lisbon Strategy more generally on jobs and growth; but in
the current context it is about maintaining the momentum, the
energy and the political will.
Q27 Chairman: Thank you very much. There
was no indication from the French, for example, that they had
any problem with a renewed focus on competition policy?
Mr Murphy: No, certainly not that I am aware
of. This is one of the issues that of course focused the minds
of Members of the House of Commons during the passage of the EU
(Amendment) Bill, which I know your Lordships will have the delight
of considering over the next few months as well. It is about the
nature of competition policy in the hierarchy of EU law, with
the French appearing to have, in some people's minds, achieved
a demotion of the importance of competition policy in terms of
being taken from the body of the text of the Treaty and placed
in a protocol of the Treaty. But the fact is that that has no
change in substance at all in respect of competition policy because,
as your Lordships are aware, the protocols have the full weight
of the EU law when it comes to Treaties, and that undistorted
competition is still within the protocol of the Treaty. So, no,
your Lordships, there has not been a change in the legal position
of competition as a consequence of that.
Q28 Chairman: Let us come on to the National
Reform Programmes and ours in particular. Maybe you could tell
us a little bit about where we stand with our own specific policy
response to the Integrated Guidelines, etcetera, etcetera; what
is going on?
Mr Murphy: There have been some criticisms.
I think it is both fair and right to say that there have been
some criticisms of this process more generally about the programmes
that Member State governments have published that have either
not been detailed enough to question and challenge, or have not
been ambitious enough to be able to track the detail of delivery.
So the programmes that are going to be published, I think you
will see a shift in some of the focus so that there is more information,
so that there can be external, multilateral challenge by other
Member States and the Commission. In terms of the UK, there was
not any specific criticism of the UK's process for last year,
so the intention will be to simply take that template from last
year and repeat it this year with a real focus on the work, in
particular arising out of Lord Sandy Leitch's work on skills.
That is the area where there is an expectation that the UK goes
further over the next year.
Q29 Lord Kerr of Kinlochard: This Committee
last year was puzzled that the Government did not pick up the
call for all Member States to designate specific Lisbon ministers
charged with monitoring national plans. Is the government still
clear that the recommendation is one that we do not need to act
on, as most other countries seem to have done?
Mr Murphy: There is a sense that in the UK Government—and
I think this argument and response is pretty well rehearsed to
your Lordships, and it is important to get this right—that
this is a shared ownership for the Lisbon Agenda and it is about
driving that process. There is now, I would argue, a much more
effective way of across Government working on EU matters in recent
months. That is not an implicit criticism of anyone else who has
sat in this chair previously; it is just an acknowledgement that
the challenge is a wee bit different. The energy of the French
Presidency, the end of the rotating Presidency, the appointment
of the very senior and some of them new jobs I think does require
a much more focused and energetic across—Government EU strategy—the
budget review and all these big issues. So I think rather than
an individual minister living in a Lisbon Strategy silo it is
a genuine attempt to have a substantial number of ministers across
Government sharing the ownership. Clearly within some departments
there is a natural fit as to who leads but in terms of delivery
across Government we think that is the proper way of doing it.
Q30 Lord Kerr of Kinlochard: You are not
bidding for the job, Minister?
Mr Murphy: If you had asked me that about six
weeks ago the answer would have been yes as we were in the middle
of the Lisbon Treaty process, but now I am comfortable with it!
Q31 Lord Blackwell: To follow up on this
National Reform Programme, the Conclusions are peppered with exhortations
for the UK Government to do various things—to implement
the agreement on common principles on flexicurity, to substantially
reduce the number of young people who cannot read properly, to
encourage universities to develop partnerships with the business
community, etcetera, etcetera. Will any of this change anything
that the UK Government does or are they all directed at other
Members?
Mr Murphy: This approach is directed at all
Members, of course, but with each Member State having to adopt
its specific set of policy objectives over the following years
when, as your Lordships are aware, in different European capitals
the nature of this conversation is significantly different both
in content and tone. But in terms of the UK the Conclusions in
the statement that has just been read I think encapsulate what
the Government is trying to do and trying to do in respect of
the Welfare Reform Act, in terms of over two and a half million
people on incapacity benefit, with this year seeing the end of
that benefit and a much greater focus on skills, particularly
amongst those with mental health difficulties. I think 40 per
cent of people coming on to incapacity benefit at the moment have
a mental health illness. There is a substantial number of younger
workers or former workers on incapacity benefit, women in particular—40
per cent of those coming on to incapacity benefit are women and
again that is a dramatic change in just one generation. Of course,
we used to think of incapacity benefit in terms of the public
conversation as a benefit for people who were basically decommissioned
out of the former heavy industries—made redundant but also
decommissioned in terms of career, unfortunately. But the way
in which that benefit is now being phased and the employment support
is being introduced is an important component of what we are signing
up to here. There are the other aspects of the Leitch Review of
Skills and there are the budget measures, so all of these are
a specific policy prognosis for the particular problem that we
have in the UK, which is, I would argue, generational unemployment,
where two or perhaps indeed three generations of one family have
not known anyone in work, and where it became the norm within
a family structure—and in fact on occasion with a whole
family tree—that certainly far too often very few people
had a career, let alone a job. That is really what is captured
by the Conclusions.
Q32 Lord Blackwell: I am trying to understand
what value the National Reform Programme adds because presumably
those are things that you would want to tackle anyway?
Mr Murphy: Those are the things that as a progressive
Government we should be tackling, but I suggest that if we were
not doing these things this National Reform Programme would be
more of a challenge. If we had gone back to the bad old days of
incapacity benefit being an alternative—and I do not want
to make a wildly political observation here, but if we went back
to the days where incapacity benefit was seen by many as an alternative
to unemployment benefit, including by many from Job Centre Plus
workers, whereby here is a benefit that you can receive at a higher
rate with no conditionality for a three-year period with only
a medical once every three years, if we were stuck in that mindset
still this would be—and this is a frank observation—a
much more substantial challenge because we would not have a strong
and contrary argument. But this remains a challenge because other
Member States are able to either bilaterally or multilaterally
challenge the progress that we are making, in the same way that
we are able to challenge the progress that they are making on
their specific programmes.
Chairman: Thank you very much. Still on the Lisbon
Agenda, let us move on to the question of investing in knowledge
and innovation. Lord Wade.
Q33 Lord Wade of Chorlton: You will be aware
that the Council's Conclusions create this fifth freedom—the
free movement of knowledge. I would be most grateful if you could
tell us how you think this is going to impact and what the impact
of that decision is going to be, particularly in the UK? I am
particularly interested in how it might affect innovation and
enterprise?
Mr Murphy: I know that this fifth freedom conversation
has evolved relatively recently, as your Lordships will be aware,
and certainly in the short to medium-term at least this so-called
fifth freedom would not have the same status in the EU prioritisation
as the existing four well-established Treaty-enabled freedoms.
Notwithstanding that, the way I would describe it would be that
this fifth freedom encapsulates the work that is already going
on. I think it is an effective way to describe the existing work
that is happening across the EU at the moment on innovation, on
intellectual property, on education and training. But at the moment
that is the status of it. It is a way of describing existing work;
it is not an attempt to place in European statute a separate and
additional freedom that European citizens currently already enjoy.
Q34 Lord Wade of Chorlton: My reaction to
that is what does it really mean then? What is the purpose of
it? If it is not going to make information more freely available
then what is the purpose of it?
Mr Murphy: I think what it usefully does is
give those of us who have a genuine ambition in this field for
better coordination of research development, for more effective
work on patenting, on issues such as freedom of intellectual property
rights, on climate change technologies and all of those big issues,
a single patenting process across the EU that really gives a degree
of political commitment to make progress on things that we would
wish to do in any case. I think that is the important part behind
this. As I say to your Lordships it is not in the short or medium-term
an attempt to enshrine an additional freedom with the same weight
or significance as the existing four freedoms.
Q35 Lord Wade of Chorlton: You do not expect
anything to change?
Mr Murphy: What will change is that the work
currently taking place should become more effective as a consequence,
but I do not expect—nor would it be inviting or welcome—a
raft of centrally imposed bureaucratic solutions on new EU legislation
in this field. But it really does give us an opportunity for those
Member States who see this as an area where the EU has not been
as active as it should be to maximise the political will that
has been created by the description of it as a fifth freedom.
Q36 Baroness Symons of Vernham Dean: I am
a bit confused about this, Minister. If we are going to be sharing
more in terms of research and technologies and intellectual property
what does that do for the competitive edge that some industries
have within their own countries? Whilst cooperating in a lot of
ways we all actually are competitors as well as cooperators. How
does that work?
Mr Murphy: I know at one level we have the confidence
and innovation of our great universities that in a truly competitive
European environment we would be able to succeed. That is one
response to it. So that is the intra-European market on technology
and innovation. There is also the external challenge that we face.
The EU is an economic community and your Lordships may either
have personal experience or have other experiences of trying to
patent an innovation across the EU, and despite the progress that
is being made currently the fact that you have to go through the
different processes, the different translations—I think
printed in up to 23 different official languages—all of
those sorts of things, the time that it takes to bring a product,
an innovation to attracting capital, to break through the bureaucracy
and bring to market across the EU is far too long. I do not have
the precise details with me today but it takes significantly longer
than it should do if we had the political will to resolve it,
and certainly it is a time constraint and timeline that our competitors
in the US, Japan and increasingly China are not tied in by. So
that type of competition within the EU and externally is important.
Chairman: Thank you. I am letting Lord Jopling slip
in a question which is not actually on the Council agenda.
Q37 Lord Jopling: I think it is relevant,
my Lord Chairman. I wonder if you could tell us how the creation
of this fifth freedom for free movement of knowledge sits alongside
the movements towards the data protection regime, and in particular
how might the fifth freedom affect the aim and scope of the EU/US
high level contact group on data protection, which was very prominent
in the discussions of the Justice and Home Affairs Council on
28 February last?
Mr Murphy: The UK is supportive of this dialogue
between the EU and the US in terms of data protection, and the
work is still being carried out on the details of underlaying
the principles. Your Lordships may find it helpful if I were to
share with the Committee some of the thinking as to what these
principles would be. They are being discussed and need to be finalised
but it is around the purpose limitations of the data protection
proposals, proportionality, information security, oversight, access,
transparency and notice and also redress. I think the background
to this is that of course with an exchange of information between
the US and an EU Member State there has to be a recognition by
the EU Member State about the adequacy of protection—I think
that is the phrase that is used—and if the EU Member State
has declared the protections and principles of adequate quality,
then the information exchange and data protection exchange can
take place. I think the difficulty—and I am not a spokesman
for the US government, far from it—the US had was differing
definitions of adequacy and the barrier being set at different
levels in terms of EU Member States' definition of adequacy, which
has led to confusion, difficulty and particularly when there are
two EU Member States involved in a tripartite way with the US.
I think that is one of the major drivers of this initiative. The
impact on competitiveness in a Single Market and the issues we
have been discussing is largely about the movement of information
regarding individuals—it does not affect it in respect of
national security. I cannot see that it can hinder the competitive
environment, the competitive completion of the single market that
we have been talking about. I think it is an important improvement
if we get it right, but we are still working on the details.
Chairman: I think we must make progress but thank
you very much Lord Jopling and the Minister. We are still on the
Lisbon Agenda and let us come to the Regulatory Environment, Lord
Blackwell.
Q38 Lord Blackwell: Minister, the European
Council Conclusions stressed the importance of the report on the
Better Regulation agenda, and in particular asked for the redoubling
of efforts on the target set last year on reducing administrative
burdens arising from EU legislation by 25 per cent by 2012. Firstly,
could you confirm my understanding that that target applies to
all EU legislation? It is under the section on SMEs (small and
medium-sized enterprises) but my understanding is that it is not
just SMEs, it is all regulation. Secondly, given that all EU legislation,
however well intentioned, tends to end up producing a burden on
business—and I am assuming, and maybe you can confirm, that
this 25 per cent means reducing from the baseline in 2007, it
is not just reducing new burdens by 25 per cent and it is an absolute
reduction—in which case, do you have any real expectation
about how it will be met and has the UK Government or could the
UK Government table its own proposals to the Council on how regulations
could be reduced by 25 per cent by 2012? Is that something you
have considered?
Mr Murphy: Your Lordship, I think it is generally
accepted across the EU that the UK is amongst the most energetic
on this agenda. I think I reflected with your Lordships before
that in a previous job but one in Government I was the Better
Regular Minister, so this is something that I am happy for us
to discuss all afternoon, if your Lordships would wish. The fact
is that not because of but perhaps even despite my intervention
the EU has made progress with an Impact Assessment Board being
set up in 2006 with the identification of these targets. I would
say first of all that there is a changing but not changed culture
in the EU on regulation, but that is an improvement in terms of
changing culture rather than changed, and there have been important
ways in which Impact Assessments have led to the withdrawals of
proposals. Where do I think the weaknesses are? If your Lordships
do not mind I will very briefly mention them to you. One is the
"something must be done"-ism. I do not know whether
this is true for your Lordships' House, but there are very few
elected politicians who say, "Elect me and I will do nothing
about it." So the "something must be done"-ism
is true in all parties in the House of Commons and it is true
in the European Parliament as well. So the "something must
be done"-ism sometimes could be, without being blasé,
that risk is part of society and we cannot have such a risk averse
society in business or elsewhere. So that is one. Secondly, we
have to ensure that where there has been progress there has been
enough progress and there are some proposals that have not escaped
the Impact Assessment process. Thirdly, and I think this would
be the biggest change, retrospective analysis of the proposed
Impact Assessment's likely outcomes. What I mean by that mouthful
is that you have brought forward this proposal, you have told
us it would cost X euros, X million or X 100 million or X thousand
euros, and three years in, five years in actually it has cost
three times that. What does that tell you about the methodology
of your Impact Assessments and the value of future projections
because of course Impact Assessments often, and indeed on most
occasions, are a projection of expected impact and I think we
need to have a greater degree of retrospective analysis of how
accurate they were? Those are relatively frank—and certainly
the first one was a personal reflection on the "something
must be done"-ism.
Q39 Lord Blackwell: Minister, if I could
just press you on this and I would not in any way want to discourage
the efforts you are making, but the points you have just made
are things that I could see might help in limiting the flood of
new legislation and new regulation against, as you have pointed
out, the tendency for increasing the activist in you to want to
do more and more things in more and measures. Every time a new
regulation is passed, every time a new law is passed it adds to
the burdens of business on the whole and, as we also know, most
of the burdens on British business now come from European legislation
rather than what you do at Westminster. So I wonder whether you
really have any expectation in reducing—not just stopping
the flow or reducing the flow—the burdens on business by
25 per cent unless you are able to identify some things that you
want the EU simply to stop doing?
Mr Murphy: We are confident, and as I say we
and the Dutch are amongst the most enthusiastic on this agenda.
You are right to quote the figures, the 25 per cent by 2012. It
is anticipated that this would save across the EU £100 billion,
I think it is, by 2012, and our role as the UK Government through
the Better Regulation Commission and the work that we do is to
make sure that the European Commission, the individual Commissioners,
the parliament and others are on track to achieve that, and we
see that as our function and external challenge on delivery. We
also have our own domestic delivery plan on this, which I think
exceeds the EU target on better regulation. And it is not just
of course on business, which is of crucial importance, but also
on public sector workers, on the number of times there is a repeat
request from public sector frontline workers to provide the same
information—a repeated request for that sort of information.
So there is a better regulation in the private and the public
sector. In conclusion to this answer, if we ever felt that the
momentum was ebbing then we see as our role as trying to enforce
it again.
Chairman: Thank you very much indeed. Still under
Lisbon, can we come to the Services Directive?
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