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Social Policy (Europe)

Volume 282: debated on Wednesday 24 July 1996

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12.30 pm

I welcome my right hon. Friend the Member for Richmond and Barnes (Mr. Hanley) to the Front Bench today. This is the first time he will have had the pleasure of engaging in debate with me, so my welcome for him is even greater than it might have been for any other Minister who might have attempted to yawn his way through the debate. I am sure that my right hon. Friend will not do that.

I make no apology for raising this subject again, the fifth time I have done so in the House since 1992. I promise my right hon. Friend that, if he accepts all my recommendations, I will never speak on this subject again. I suspect that that is a promise neither of us will be able to keep.

Our greatest problem in relation to European social policy has been our failure fully to understand how the treaty of Rome and its amendments work and have worked, and how the institutions of Europe have implemented the treaties. I refer to the Commission, the court and the Council of Ministers.

We have endlessly been told not to worry too much about the wording of the treaties; that they are vague, that they can be interpreted as we like, and that, after all, it is the nation states that will drive forward implementation of the treaties, so all will be well. In short, we are told that the vagueness of the wording will constitute our defence. I, on the other hand, have endlessly repeated that the language of the treaties, beginning with the preambles—even though they are officially ultra vires—is very important, because it allows the court to understand the precise direction in which the treaties lead.

Comments made by Advocates General and justices of the European Court have shown time and again how they see the vague treaty obligations being implemented. The problem of the 48-hour working week is a clear practical example of what I mean.

I should like to start by reading out some of these preambles. In wonderfully general language, one of them states:
'The Community shall have as its task… a high level of employment and of social protection, the raising of the standard of living and quality of life, and economic and social cohesion and solidarity among Member States."
Article 3 further states that
"a policy in the social sphere comprising a European Social Fund"
shall be pursued, and that
"the strengthening of economic and social cohesion"
shall be the guiding principle.

It is important to understand that the justices believe that such language gives them a sense of Europe's direction, which is eventually to act as one on such matters.

Too often, I believe, my right hon. and hon. Friends fail to understand the language in which these documents are couched. Articles 117 to 122 all concern social policy and are written in wonderfully general language. For instance, article 117 says:
"Such a development will ensue not only from the functioning of the common market, which will favour the harmonisation of social systems, but also from the procedures provided for in this Treaty and from the approximation of provisions laid down by law, regulation or administrative action".
Article 118 states:
"the Commission shall have the task of promoting close co-operation between Member States in the social field, particularly in matters relating to: employment; labour law and working conditions; basic and advanced vocational training; social security; prevention of occupational accidents and diseases; occupational hygiene; the right of association and collective bargaining between employers and workers".
Article 118a, which comes under qualified majority voting, is relevant, because, in the titanium dioxide case, the court has decided that such matters will be decided not by unanimity among the member states but by QMV. That is of course relevant to the 48-hour working week. It reads:
"Member States shall pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers, and shall set as their objective the harmonisation of conditions in this area".
I do not intend to read out all the articles, but I do suggest that my hon. Friends read, re-read and re-re-read them.

Especially I would ask my hon. Friends to read article 5, which stipulates that member states
"shall abstain from any measure which could jeopardise the attainment of the objectives of this Treaty."
That is critical, because our social chapter opt-out is in Europe's sights.

The Minister's predecessor, my right hon. Friend the Member for Watford (Mr. Garel-Jones), assured me at the time of Maastricht that the court would not be a problem: that it was in the business of decentralising, and would rule in favour of nation states. Since then, there have been judgments against us on the transfer of undertakings and on fishing. Most recently, the Advocate General made his remarks about the 48-hour working week.

I was told after a previous speech that I was attacking the court. That is not my intention. It is only carrying out what it has always done—it sees itself as the architect of political union, just as it always has since 1954. Indeed, Judge David Edward told a Committee of the House exactly that. It is therefore quite wrong to think that I am attacking the court. What I am attacking is our failure to understand what we have signed up to. While we are contemplating the implementation of the social policy opt-out, Europe is already planning how the social chapter will work.

Back in 1960, Advocate General Roemer said:
"The European treaties are nothing but a partial implementation of a grand general programme, dominated by the idea of a complete integration of the European States".
Lasok and Bridge, authors of one of the premier reference works on the subject, have this to say:
"references to the spirit or the aims of the Treaties enable the Court to fill in the gaps in the system and so to 'update' the text. In doing so the Court has consciously acted not only as the Constitutional Court of the Community but also as an architect of European integration".

Labour Members—[HON. MEMBERS: "Where are they?"] None of them is here, and nor are the Liberals. Still, both parties make great play of the fact that, if they ever came to government, jointly or on their own, they would increase expenditure on a new range of social benefits. As I understand my hon. Friend's argument, however, what they say does not matter at all. This whole policy area has been taken over by Europe, which will decide how much we spend on it. So what the Labour and Liberal parties think is wholly irrelevant.

My hon. Friend makes a powerful point. I am told that, if Labour gains power—God help us if it does—it will think the unthinkable, but I urge him not to think the unthinkable—that Labour will get into power. The resistance that the Government have put up has slowed the process, although it will not stop it. Labour will simply help to accelerate the process by acquiescing to everything laid down by Europe.

The latest and most important example of the process in action is the working time directive, of which my right hon. Friend the Minister will be only too well aware. Although limitations were set in the Council on the way the directive works, it will cost in practice up to £2 billion to implement, with a further £1 billion needed in the following two years.

The costs to industry will be severe and will be borne across the economy in lost employment, as the flexibility to employ under the previous conditions changes. The directive also breaks the historical way in which successive British Governments—ironically, even socialist Governments—have accepted the more laissez-faire and relaxed view on the way in which employers and employees negotiate contracts in this country.

May I congratulate my hon. Friend on securing this debate? If I may say so, he is an entirely worthy successor to his honourable predecessor, the noble Lord Tebbit. I wish to give an example of the effect that the social chapter and the 48-hour week will have in my constituency.

Cleveland Potash—based near Whitby in the northern end of my constituency—is by far the biggest employer in the area. I was told last week that, if the 48-hour week is imposed, the company will have to lay men off. It is the only potash mine in this country, and competes, with mines in South America. The fact is that one works when the work is there, not when the Commission says so.

I totally agree with my hon. Friend, who has practical experience in these matters—something that too few hon. Members have. He has run a business, employed people, and, no doubt, laid people off at times.

If the working time directive is so successful, Spain—which has implemented all the measures—should be rocketing away in trade, and should have no unemployment. Everything in Spain should work according to what Labour believes and the proposal allows. Instead, Spain has more than 23 per cent. unemployment, more than 30 per cent. youth unemployment and a stagnating economy.

The idea that this country would put up with those problems and not have constant turmoil on the streets is unbelievable. This country, which has implemented none of the measures, has the lowest, and still declining, level of unemployment in Europe, and an enterprise economy on which we pride ourselves.

The interesting thing about Spain is that it gets £8 million a day from the EU, but, in spite of all that public subsidy, it does not succeed.

My hon. Friend makes yet another powerful point. The same applies to Germany, which has rising unemployment, and France. Having taken hard decisions—from changing the nature of pension rights to deregulating and making the work force more flexible—the Government are seeing those successes bear fruit. It would be a tragedy if we allowed that to change by implementing the directive.

Although there are practical reasons why implementation would be a disaster, there is also a principle involved. If we allow this matter to go through, and if we do not make it clear to the Commission and to our colleagues in Europe that we will not accept it and that we are prepared to do almost anything to stop it, a flood of further regulation will follow the directive. That regulation would restrict the flexibility of the British work force, and would bring it into line with the sclerotic and declining state of employment in Europe. That is why, for once, the principle is critical. Even though it is said that the situation is not as bad as some make out, the principle makes it devastating.

My right hon. Friend the Minister must demonstrate that he will resist implementation at all costs, because behind it lie increased holiday rights for fathers, increased regulations on employers on sex discrimination, more stifling controls on part-time workers, workers' privacy regulations, and restrictions on an employer's ability to dismiss employees. It goes on—the catalogue is endless.

Another matter of social policy which may even affect the would-be move to a single currency is the issue of pensions. We have made our pensions provision flexible by putting it out into the private sector. Funds have been provided, and people now have security for the future in a way that they never did before. In Europe, none of that is happening. I understand that an estimated £10 trillion-worth of liability exists across Europe, and that would be imported to this country were we to go down the road of a single currency. The process of social policy is about moving us to the lowest common denominator that exists across Europe.

We must make it clear that there is no point in putting a line in the sand and having an opt-out, if we accept that that opt-out can be bypassed by treaty obligations. We must make it clear that we will not only resist implementation but will absolutely refuse to allow it to happen. We must also seek a different relationship with Europe.

It is inconceivable that a Conservative Government could allow social provisions as contained in the articles of the treaty to dictate to us on the flexibility of our work force, which has better employment provisions than elsewhere. Now is the time for us to debate a different relationship, which would allow Britain to be the enterprise centre of Europe and the flexible trading partner with the rest of the world that we have always prided ourselves on being.

12.46 pm

I shall be extremely brief. I congratulate my hon. Friend the Member for Chingford (Mr. Duncan Smith) on securing the debate. Some of us have been accused over the years of heinous and dastardly crimes against our country, our Government and our party, but he is saying in substance nothing new—we expressed these opinions in this place during the debates on the Maastricht treaty.

My hon. Friend will recall that we assembled some comments taken from debates on the treaty in a pamphlet that we called "Game, Set and Match?" In a debate on 20 January 1993, he said:
"Therefore, the route that I have demonstrated leaves the door open for substantial Community interference in social policy, effectively undermining our exclusion from the social chapter."
In the same debate, I said:
"Even though we may wish to opt out of the 48-hour working week directive … it is impossible to imagine a situation in which, 11 member states having voted for a particular directive, the court will not rule against us if we continue to defy that directive."—[Official Report, 20 January 1993; Vol. 217, c. 413–22.]
It is clear that we are not saying anything new, and what we said was not startling then—everyone else in Europe was saying pretty much the same thing.

I congratulate my right hon. Friend the Minister on a tiny ray of hope in "A Partnership of Nations", the Government's White Paper on European policy, in which paragraph 20 states:
"The Government is considering ideas for limiting the scope of Community action".
That may not have been enough for my right hon. Friend the Member for Wells (Mr. Heathcoat-Amory)—who made it clear that he did not believe that our European policy is working—but that is what we must pin our hopes upon if we are to stop European social policy wrecking our economy.

12.48 pm

I am honoured to be replying to the debate that my hon. Friend the Member for Chingford (Mr. Duncan Smith) has had the good fortune to secure. I am grateful for his welcome.

The Government's position on European social policy is already well known to the House. Since the Maastricht negotiations in 1991, the UK has been in a unique position in Europe. We and our European partners have taken separate paths as far as increasing the burden on businesses of social legislation is concerned. I think my hon. Friend the Member for Chingford will agree that the path taken by the UK is the better one.

I need only cite as evidence the decisions by LG and Siemens to locate major new manufacturing facilities in the UK to demonstrate that our policy is working. We are by far the most attractive destination for overseas investment in Europe. A significant factor in those investment decisions is our social opt-out. Though we participate to the full in the single market, we have chosen not to be bound by commitments taken on by our partners under the agreement of the Fourteen on social policy.

There is some confusion about what our opt-out means. It is not correct that we are not bound by any elements of European social policy. The European Union treaty has always contained several provisions relating to social policy, such as health and safety and equal treatment: we are bound by them, and we honour them in full. In fact, the UK has a much better record than most member states on that.

However, we are not bound by any agreements concluded by the Fourteen under the Maastricht social agreement, such as the European works councils directives. Some sections of the press have trumpeted the fact that, in spite of that, some British multinational companies have decided to adopt works councils. The crucial point is that those companies had the freedom to choose, and made their decisions voluntarily. It is vital for businesses that they, not Government, make such decisions.

Another example is the directive on parental leave, to which my hon. Friend referred, which was also recently agreed by the Fourteen. British companies are, of course, free to provide generous benefits for employees after the birth of their children, but we will not force them to incur high costs, regardless of their ability to meet them, by relinquishing our social opt-out. The most likely result would be not higher social standards but higher unemployment.

The UK's flexible and deregulated labour market encourages employment and growth. We want it to continue to do so. Had the UK signed up to the social chapter, legislation on working conditions could have been imposed on us by qualified majority, whatever the views of the British Government, employers and workers. That is why the Government will not sign up to the terms of the Maastricht social chapter. We certainly could not sign up to the social chapter and then control it.

I am sorry, but I do not have long. If I have time, I will come back to my hon. Friend.

We could not pick and choose the bits of the social chapter that suit us. The moment we signed up, the scale of legislation would undoubtedly increase, and Britain would be overruled on many matters vital to our economy.

What do we believe to be the European Community's legitimate role in social policy? It is certainly not the case that we see no role for the European Community at all in employment or social matters. There is vital work that the Community can do, but its social policy and employment agenda must be founded on three important principles.

The first is competitiveness. Significant and sustainable growth is impossible in an uncompetitive economy. If Community businesses are not able to maintain and improve their competitiveness, jobs will not be created in the Community but be increasingly located outside it. Europe will not be able to compete in the global marketplace. Many provisions of the agreement of the Fourteen on social policy will lead directly to a loss of competitiveness. Many British and foreign businesses also believe that.

Secondly, we insist on diversity. That is, or should be, one of the Community's greatest strengths. The diversity of our institutions, traditions and legislation is as great in employment and the labour market as in almost any other sphere, and it must be respected. No one can believe that the measures necessary to combat unemployment in Greece or Spain are the same as those required in Britain. Are the problems of regulating working practices the same in Sweden as they are in Portugal? I think not. Unnecessary harmonisation risks raising costs and damaging competitiveness.

The third essential is subsidiarity. European social policy must respect the division of legal competence between the Community and member states that is laid down in the treaties, and the principle of subsidiarity that is now enshrined in them. Much of the action required to combat unemployment must be, and often can only be, undertaken by member states themselves. The Community's role is to support and complement action by them, not to try to supplant that action altogether or to tell them what action they must take.

When the treaty on European Union was concluded, the UK succeeded in including the principle of subsidiarity in its text. In the current intergovernmental conference to consider treaty changes, the UK will make proposals to entrench subsidiarity still further.

We are also committed to doing everything in our power to convince our European partners of the dangers of creating a two-tier labour market: one tier of people with permanent jobs, well paid and with all the benefits of pension rights, holiday pay, and employment protection legislation; and a second tier either with no job, or forced into temporary contracts—or even the black economy—because employers are deterred by excessive regulation from offering permanent jobs. We are bound by a simple moral principle: it is wrong to favour those in jobs at the expense of those without them, or to concentrate on protecting the employment of the first tier while failing to increase the employability of the second.

It is clear that adding yet more employment law or social legislation will do nothing to help the people of Britain, or those of the rest of Europe.

Conservative Members fully endorse all that my right hon. Friend has said, but what will the Government do to renegotiate our obligations under the various treaties, and limit the powers of the European Court of Justice to bring in by the back door the very things to which he is rightly opposed?

If I have time, I shall come to that.

We are not going to add more employment law or social legislation, because that will not help the people of Britain or of Europe. Europe's employers are well aware of that. A large-scale survey carried out by UNICE, the Union of Industrial and Employers Confederations of Europe, last year found that employment law was the second highest cause of concern for business men. A survey last summer by the European Enterprise Centre found that two thirds of Europe's smaller companies were worried that higher social costs resulting from the Maastricht social chapter would make them less competitive.

Some member states are seeking to extend Community competence over employment at the intergovernmental conference. The UK will strongly oppose this, just as we shall oppose any suggestion that our social opt-out should be abolished. My right hon. Friend the Prime Minister has made that very clear.

The need to create more jobs and to tackle unemployment is one of the highest priorities in Europe, but it is businesses and employers who create jobs and the Governments of individual member states who create the right conditions for employment. Jobs cannot be brought into being simply by legislating for them in the treaty. The way to create new employment in Europe is to improve competitiveness and productivity.

I must mention an issue that has been the subject of much lively debate inside and outside the House. The Government are awaiting the judgment of the European Court of Justice on the UK's challenge to the working time directive. The UK believes that the directive is a piece of social legislation that has been foisted on us in the guise of a health and safety measure.

We hope that the court will confirm our interpretation of the health and safety article 118a, which would exclude its use for such measures. If the court does not endorse our view, we will ensure at the intergovernmental conference that our concerns about possible erosion of our social opt-out, and about that directive in particular, are addressed. The Government's IGC White Paper "A Partnership of Nations" expressed our determination to ensure that the health and safety article of the treaty should not be used for social policy by the back door.

Now that some Labour Members are present, I can refer to their leader. He has tried to calm the fears of British business on several occasions, because the Labour party remains committed to signing the job-destroying social chapter. In that, it is playing true to form—more regulation and higher costs for employers, which will lead inevitably to firms going bust and to higher unemployment.

The right hon. Gentleman has tried to maintain that the Labour party would sign up to proposals for social regulation only if they did not inflict economic or competitive damage on British business. That claim is disingenuous, to say the least. The right hon. Gentleman constantly refuses to accept that, if Britain gives up its social opt-out, it will sign up to a future of European labour law, with unquantifiable consequences. The social agreement between the other EU nations contains substantial sections governed by qualified majority voting, and with QMV one cannot pick and choose those bits one likes and those one does not. The right hon. Gentleman's proposition is pure doublespeak.

One reason why more social policies have not been put through the social chapter is that Britain has an opt-out, and other countries do not want to give British business a competitive advantage. Our opt-out is protecting businesses across the whole of Europe from giving away competitive advantage to the rest of the world. Labour would give all that away. Adair Turner, director general of the Confederation of British Industry, has said that the way to pick and choose is not to sign up to the social chapter at all.