Relaunching the Single Market: EUC Report

Lord Hannay of Chiswick Excerpts

Tuesday 13th September 2011 Grand Committee

[Lord Hannay of Chiswick]

My Lords, it is all too easy, in this period of turbulence for the eurozone, to take one’s eye off the salience of the single market for the future prosperity and economic stability of all 27 members of the European Union. It is all too easy, too, to think that the single market was part of yesterday’s narrative, not today’s and tomorrow’s—all too easy but all too wrong, for two broad reasons.

The first reason is positive. A lot remains to be done before we have a true single market—a genuinely level playing field for our businesses, both manufacturers and services. Achieving that is not some academic or bureaucratic fancy. If noble Lords want an example, they should just look at the prescriptions that are being given to the weaker members of the eurozone—Greece, Portugal, Spain and Italy—by the IMF, the Commission and the European Central Bank. All involve programmes for getting rid of national barriers to investment and employment and removing national protections for vested interests; that is, for achieving a less imperfect single market. Moving the single market forward is therefore an integral part of making the EU capable of competing with the great emerging economies of China, India, Brazil and others.

The second reason that I suggest is the one put eloquently last week in a lecture at the London School of Economics by the president of the European Council, Herman Van Rompuy, when he said that it was the single market that had stood and continues to stand as the principal barrier against the follies of protectionism that so exacerbated the effects of the previous great economic and financial crisis in the 1930s.

This debate could not be more timely, as is the excellent report of the sub-committee, chaired by the noble Baroness, Lady O’Cathain, on which I congratulate both her and it. If the noble Baroness will forgive me one side remark, the only thing that I would suggest is never to refer to “old Spanish practices” in Brussels. I once went to a Bilderberg conference at which an Under-Secretary-General of the United Nations referred to “old Spanish practices” in front of Javier Solana, and the meeting had to be suspended for quite a long time.

What should the priorities be for the future development of the single market? Many of them are set out in the report that we are debating. First, I suggest that we need to recognise—this is the point that the noble Baroness, Lady O’Cathain, mentioned that I would get around to—that the services directive that was adopted a few years ago is a singularly imperfect and incomplete basis for a single market in what is now the largest part of all our economies. I argue that we need to go back to the drawing board as soon as this is politically feasible and start work on a second services directive to remedy at least some of, if not all, the deficiencies of the first. I hope that the Minister will give us some idea of the Government’s thinking on this point.

Secondly, I suggest that we also need to keep up the pressure for the liberalisation of energy supplies and markets, on which some progress has been made in recent years but where much remains to be done. Over the medium to long term, energy markets are tightening up and prices are set to rise as the global competition for resources increases. Europe surely needs to be making the most efficient use of those resources and to be working together collectively to maximise access to and diversification of supply, and I welcome the decision, which I believe was taken yesterday in Brussels, to give the European Union a remit to work on the diversification of supply.

Thirdly, we need a strong competition policy to underpin the single market and to roll back the increases in state aid that have been an inevitable but, in the long term, undesirable feature of the response to the current global economic and financial crisis.

If those are the priorities, we are certainly going to need allies in order to pursue them successfully—allies who go well beyond the enlistment of the majority of other member states, which is of course what you need if you are to get any piece of legislation through. We will need a strong Commission—and that was referred to by both previous speakers—ready to bring forward new liberalising proposals and ready to take a tough line on competition issues. We will need a Court of Justice whose rulings bring pressure to bear on laggard member states to implement properly the agreements reached in the Council—a point made by the noble Baroness, Lady O’Cathain, regarding the services directive still not being implemented in some member states. We will need a European Parliament ready to weigh in on the side of liberalisation when it exercises its powers of co-decision, but not to throw its weight behind protectionist amendments. Those three European institutions are not perhaps the flavours of the month in debates in this Parliament—particularly at the other end of the Corridor—but we need to realise that they are essential allies in any moves towards a more complete single market, and we need to treat them as such.

Another perhaps not very welcome point that we need to grasp is that you cannot hope to have a real single market on an à la carte basis, as some seem to think you can. An à la carte approach—picking the things you like and discarding the ones you do not—will lead to 27 different orderings of priorities and no single market at all. Therefore, when the rules of public purchasing lead to a contract going to a company in another member state, we will need to learn to resist the knee-jerk protectionist reaction. We really must not delude ourselves into thinking that a campaign to repatriate powers from the European Union is compatible with the proclaimed objective of achieving a more complete single market. It is not, and it would be a pity if we had to find that out by bitter experience rather than by applying a bit of common sense at the outset.

One final point: if the single market really is the bulwark against protectionism that Van Rompuy says it is—and I totally agree that that is the case—we need to be there to protect and to promote that bulwark in every forum available. That is why it was an error for the Government to have decided not to participate in the euro-plus pact, even when 24 out of 27 member states are in fact doing so—and a fair number of them are not in the eurozone. It is rather ironical, when our Government’s economic policies are totally consistent with those being followed and indeed applauded by eurozone Governments, that we should be absenting ourselves from a forum for discussion in which issues related to the single market will inevitably arise. I hope that over time the Government will have second thoughts about that decision and will realise that the euro-plus pact has nothing whatever to do with Britain’s decision on the euro itself, which is a separate matter that we all understand is not going to happen in the near future.

I welcome the fact that in his remarks after the G7 Finance Ministers’ meeting in Marseilles last weekend the right honourable gentleman the Chancellor of the Exchequer recognised the importance of this country being a continuing champion of the single market and of a firm competition policy. I hope he will ensure that he and his colleagues are there to do that on each and every occasion that it needs to be done.