Relaunching the Single Market: EUC Report

Baroness Wilcox Excerpts

Tuesday 13th September 2011 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Innovation and Skills (Baroness Wilcox)]

My Lords, this topic is of great importance to both the United Kingdom and the European Union in addressing the current economic situation. First, I commend the EU sub-committee under the chairmanship of my noble friend Lady O’Cathain for producing such an excellent report.

I shall start by responding quickly to a question from the noble Lord, Lord Liddle, who is quite frightening in his rise to glory through this House. He gave evidence as soon as he took his place here; he was then invited on to the Select Committee; and he is now standing opposite me speaking for Her Majesty’s Opposition. I worry about where he will be going next. However, I shall do my best. He asked whether the Government agree with the recommendations of the Mario Monti report. The answer is that we agree with many of Mr Monti’s points but, if the noble Lord does not mind, I shall write to him, with a copy to the chairman of the committee, with more detail on our thoughts about the individual recommendations, as we do not agree with them all.

The Government see the single market as one of the fundamental cornerstones in the drive for growth, as outlined by the Prime Minister in the pamphlet Let’s Choose Growth. In its report the committee raised a number of points that I should like to comment on further.

The Government agree that the social dimension of the single market should not be seen as a trade-off against market liberalisation. By removing barriers to trade, the single market opens new markets for businesses, provides consumers with greater choice, encourages innovation and, ultimately, creates jobs. It is the main driver of growth and prosperity across Europe and plays a key role in maintaining the European Union’s global competitiveness. Pressing for a deeper, more competitive and more effective single market is a key commitment of the UK Government’s Trade and Investment for Growth White Paper, which was published in February 2011.

Additionally, all EU proposals should be accompanied by impact assessments that analyse associated costs and benefits. We are working towards this aim with the Commission and other like-minded member states.

In response to the question of the noble Lord, Lord Bradshaw, infraction proceedings should proceed at a faster pace. We absolutely agree with him that infractions are too slow. Infraction proceedings under the services directive have only just started against Austria. The EU pilot cases are designed to speed up this process. I agree with him that fairness and enforcement are the watchwords here, and I thank him for that.

The services directive is central to the completion of the single market. Many providers in the UK look to Europe as a market for their services but they face restrictive regulatory practices in order to provide their services across borders. These barriers hinder service sector growth and job creation, and their proportionality needs to be rigorously assessed. Companies and individuals currently bear unnecessary costs, and consumers get less choice and lower-quality services at inflated prices. Further simplification of the administrative environment, ensuring transparent, proportionate regimes, is a crucial part of successful implementation and is vital to facilitate the growth of SMEs.

It is important where member states are shown to be lacking that any deficiency is addressed immediately by the member state or, ultimately, through the infraction process by the Commission. Ineffective implementation, transposition and enforcement will lead to potential gains not being realised.

The Government feel that the mutual evaluation process used at EU level for the first time was a valuable exercise and that member states, together with the European Commission, created a good evidence base for further improvements. The Commission and other member states feel the same way and the process will be used as an evaluation tool in other fora.

The noble Lord, Lord Hannay, asked about reopening the services directive. The United Kingdom would be open to a new services directive but there is unlikely to be sufficient support in other member states or from the Commission. We are keen to introduce a proportionality test into the current directive against which any barriers should be measured. We are also keen that the Commission should use these enforcement powers where there is blatant protectionism.

The mutual recognition of professional qualifications directive covers professionals who need to register with a regulatory body in order to practise or hold a title. The European Commission is currently reviewing this directive, with a view to proposing legislation by the end of the year. The main proposal is a professional card that can be presented to regulators. We are concerned that this could add an additional layer of bureaucracy and have asked the Commission to think through the proposal in more detail before taking action. We need to reduce regulated professions in areas where they are causing barriers. Consequently, we are pushing for member states to review their regulated professions and remove regulations that are unnecessary or disproportionate. Where necessary regulations remain, we would like more cross-EU collaboration to allow applications for recognition to be processed more smoothly.

We must also recognise the vital role that flexible labour markets play in a vibrant economy. It is important that we do not impose further EU labour regulations that undermine domestic regulatory systems and have a negative impact on labour market flexibility. The Government have taken note of the Commission’s proposals on the Single Market Act regarding the posting of workers directive. While we are happy to look at proposals to better implement the directive’s provisions, it is crucial that these proposals do not impose unreasonable burdens on business or the Exchequer.

The Government agree with the authors on the significance of a fully functioning digital single market. However, we come to a slightly different approach on assessing the recent policies of the European Commission.

We welcome that the Commission is not planning a full revision of the e-commerce directive because we are sceptical that reopening the directive would be productive. A preferred option would be to build on the fundamentals of the directive through advice and the promotion of best practice, using the existing directive to deliver more successful cross-border transactions.

My noble friend Lady O’Cathain referred to the new consumer rights directive and my background knowledge of it. Political agreement of the consumer rights directive has now been reached and the Council will formally adopt it very soon. We have supported the aims of this directive throughout because greater harmonisation of consumer rules across the European Union, particularly on distance selling, will improve the functioning of the single market. The directive also applies to digital content and will, among other things, require additional pre-contractual information such as system compatibility requirements and any technical protection mechanisms to be provided to consumers.

On intellectual property, both the European Commission and the Government have recently released strategies for future intellectual property policy. The Government’s was published in response to the Hargreaves review of intellectual property and growth. Both agree that a modern, integrated European intellectual property regime will make a major contribution to growth, job creation and economic competitiveness. Many of Hargreaves’s recommendations and European Commission proposals fall on common ground. Additionally, the Government agree with the Commission regarding other digital initiatives. These include policies that enhance the competitive deployment of high-speed broadband and the introduction of an alternative dispute resolution for online trading, which will help to overcome consumers’ difficulties in obtaining redress from businesses in other countries.

The Government believe that a common consolidated corporate tax base is unnecessary for the single market to function effectively. We will not agree to any proposals that would jeopardise the UK’s ability to shape its own tax policy or prevent the UK creating the most competitive corporate tax regime in the G20.

The noble Lords, Lord Liddle and Lord Hannay, spoke of the euro-plus pact. The noble Lord, Lord Hannay, mourned the fact that we did not join it, as did the noble Lord, Lord Liddle. It is true that we did not join the pact. However, we welcome the euro area’s determination to push forward structural reforms, which are very important for the future strength and stability of the single currency, which is firmly in the UK’s own economic interests. As we know, almost half of our exports go to the eurozone countries. The United Kingdom has its own special relationship with the European Union and the euro. We have a formal treaty opt-out from membership of the single currency. That is why we have decided not to participate formally in this pact.

The noble Lord, Lord Hannay, then referred to energy markets. My Secretary of State, Vince Cable, shares the noble Lord’s concerns regarding our energy markets. On the point that was made about competition policy, he is very interested in competition enforcers looking into the market via a market study. This is one of the enforcers’ competing priorities. They will have to make a decision on this shortly.

Looking forward, since the House of Lords inquiry took place, the agenda has not been static. On the digital single market, the Government initiated and hosted a meeting with 13 other like-minded member states in July. At that meeting, we agreed to put collective pressure on the European Commission, with clear targets and deliverables for how the Commission plans to implement the digital single market. A joint letter from the like-minded group to different EU commissioners will be sent out shortly. The next meeting of the group is scheduled for November. Following the Government’s response to the Hargreaves review we will, within the next few months, consult on the detail of how it will proceed, and will set out plans in a White Paper in spring 2012. Much of this will have consequences for the digital single market and wider European intellectual property.

We have also been working with the Polish and Danish Governments—the current and upcoming presidencies—to ensure that the single market and growth remain a priority. There are still a number of key issues to be resolved before we achieve full implementation of the services directive, but we remain optimistic that we will be able to achieve progress on this, on reducing burdens to business and on ensuring as far as possible the free movement of labour, goods, services and capital. These are the aims of the single market and are of great importance for both the United Kingdom and the growth agenda generally.

I have just realised that I have missed two questions. I think I have time in which to answer them; this will save you having to wait to receive a letter from me. One is from the noble Lord, Lord Hannay, and one is from the noble Lord, Lord Liddle. I apologise for having done that.

The noble Lord, Lord Hannay, asked a question on strong competition policy and rolling back state aid. The state aid regime is the cornerstone of the single market; it helps to ensure effective competition. The Commission rules create a level playing field for UK companies, while at the same time enabling member states to make targeted interventions aimed at correcting market failures. Whether you agree or not, that is the answer I give you today.

With regard to the query of the noble Lord, Lord Liddle, about how the United Kingdom should work with Europe, I agree with the noble Lord that the United Kingdom needs to work more collaboratively with our European partners and should take absolutely no joy from the eurozone’s current situation, given that the European Union is, as I have said before, the UK’s main trading partner. I once again thank the noble Baroness, Lady O’Cathain, for a most excellent report.