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Undeclared Work (Reasoned Opinion)

Volume 582: debated on Monday 9 June 2014

[Relevant document: Forty-ninth Report from the European Scrutiny Committee, Session 2013-14, on Undeclared Work: Reasoned Opinion, HC 83-xliv.]

I beg to move,

That this House considers that the draft Decision on establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work (European Union Document No. 9008/14 and Addenda 1 and 2) does not comply with the principle of subsidiarity for the reasons set out in the annex to Chapter One of the Forty-ninth Report of the European Scrutiny Committee (HC 83-xliv); and, in accordance with Article 6 of Protocol (No. 2) annexed to the EU Treaties on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

This debate will give the House a welcome opportunity to discuss the proposed platform on undeclared work, and to decide whether to send a reasoned opinion to the European Commission. The Commission proposal seeks to establish an EU-level platform on undeclared work. Undeclared work is defined by the Commission as paid activities that are lawful but are not declared to public authorities. This matter is high on the European Commission’s agenda, against a backdrop of efforts to improve job creation, job quality and fiscal consolidation.

The proposal highlights a number of concerns, based on a perception of high levels of undeclared work in the EU, including tax evasion, mis-declaration of hours worked and benefit fraud. The Commission is proposing a platform, whose members will be drawn from member states’ nominated enforcement bodies, to try to improve co-operation, share best practices and identify common principles for inspections. I should of course stress that addressing undeclared work is a priority for the Government. We have taken action at national level to detect and deter fraud through inspection, as well as to encourage good practice by providing guidance for employers.

The debate has been called because the European Scrutiny Committee requested an opportunity to discuss its concerns about whether the proposal respects the principle of subsidiarity. There are also very short time scales and deadlines to which the European Commission is seeking to secure agreement on a position; hence the debate taking place tonight.

Let me first turn to the issue of subsidiarity. The concerns that I set out in the explanatory memorandum—the Committee shares those concerns—were based on the initial draft of the proposal, which sought to mandate member states to participate both in the platform and in any enforcement activities arising from the platform’s recommendations. Like the Committee, we remain to be persuaded that the Commission has demonstrated a need to mandate member states to take part in the platform or that EU-level intervention action will add value.

However, it emerged in negotiations late last week that although member states’ participation in the high-level platform would be mandatory, participation in any cross-border operational activities recommended by the platform would be voluntary. The Council’s legal service has indicated that that is the case, and we have asked it to clarify its official position. Therefore, the principal concern about subsidiarity that we identified in the explanatory memorandum—based on an earlier text—drops away. We could decide, issue by issue, whether the UK should participate in further activity, and we would of course seek the Committee’s views on such matters. However, we have not yet had advice from the Council’s legal service in writing, and the proposals are still being negotiated, so they may change. I therefore understand that the Committee will want to decide for itself whether the proposal respects the principle of subsidiarity.

Our concerns about the detail of the proposal have been shared by other member states and, together, we have secured some changes. The changes, alongside the fact that the activities identified will not be mandatory, mean that the majority of member states will support the proposal. Therefore, the original subsidiarity risk that we identified does not still stand. Moreover, we should be involved in discussions about activities in relation to which we could be asked to take action, even if we probably do not want so to act. Negotiations are ongoing and the European Parliament is yet to begin its consideration of the proposals, so we will be continuing to work throughout the negotiations to ensure that our concerns about subsidiarity are addressed in the final text.

Let me now turn to justice and home affairs. Since publishing the explanatory memorandum, our ongoing analysis has identified that the proposal may include elements relating to justice and home affairs, thus invoking the UK’s JHA opt-in. That is because the proposals suggest, for example, that enforcement bodies such as the police will collaborate in cross-border activity. No decision has yet been made on whether or not to opt in to the proposal. Once a decision has been made, we will write to the European Scrutiny Committee. Having said that, as it is not mandatory to participate in any activities that result from the discussions, no significant burden would be placed on the UK by opting in.

The Commission and presidency are pushing hard on the proposal, and we were informed on Friday that they hope to reach a general approach on 11 June, which is very soon. The deadline for sending the reasoned opinion to the Commission is 11 pm tonight. With the timing of the recess and the Queen’s Speech, this evening was the earliest opportunity to facilitate a discussion in time to meet the deadline, although I appreciate that the timing is not ideal for such an important discussion. If we run out of time tonight, I will be happy to follow up any questions in writing, although given the numbers present, that seems somewhat unlikely—[Interruption.] The shadow Minister may want to raise lots of questions.

Oh, I am looking at the wrong side of the House. I hope that we will have time for a reasonable discussion and come to a decision on issuing a reasoned opinion tonight.

I thank the European Scrutiny Committee for its consideration of this issue and the Minister for her comments. Given the time scale involved and the number who would like to speak, we should try to meet the European Commission’s 11 o’clock deadline, although I doubt that I share the Minister’s enthusiasm or optimism that we will do that, given the Members who wish to speak. Nevertheless, as the Minister said, we have the first opportunity for the House to start banging on about Europe again so soon in the new Session.

It is worth reflecting on what is in the document, because undeclared work is an important issue. We should reflect on how harmful it can be to our economy and to the people who participate in it, and particularly on bogus self-employment in the construction sector. I was going to talk a little about that, but, given the time scale, I would like simply to agree with the Minister on the issues around subsidiarity and what the proposal is trying to achieve.

We have no problem whatever with trying to improve co-operation between member states’ enforcement authorities in order to prevent and detect undeclared work, including bogus self-employment. We should all share that aim, and it is welcome for all member states to work together on that. We should also be improving member states’ enforcement authorities by giving them the technical capacity to tackle cross-border undeclared work. We are very good at that in this country and should be sharing our best practice, as well as getting best practice from other member states on other mechanisms for doing that.

The third aim of the document is to increase public awareness of the urgency of action and to encourage member states to step up their efforts to deal with undeclared work across the European Union. I could spend a few minutes bashing the Lib Dem Minister and ask her what she is doing to persuade the Commission to look seriously at subsidiarity, because if they were to remove the mandatory element of the proposal, everyone would welcome taking it forward on a non-compulsory basis and be able to help other member states to go forward with the rest of the proposal.

The reality on the ground is that people are often looking desperately for work and will sign any contract placed in front of them in order to secure employment. With the freedom of movement across the EU, it is right that member states work with one another to tackle rogue employers who perpetrate undeclared work and attempt to hide behind other member states’ borders—they hide behind undeclared work in order not to pay their fair share of taxation and to undermine workers’ rights. It is that sort of limited and practical proposal that shows how the European collaboration project could work and add value to member states.

I do not know whether the Minister will get an opportunity to respond to the debate, or whether she will have time to do so, but I would like to pose a number of questions; if she does not get an opportunity to respond, perhaps she could write to me to give me some comfort.

What assessment has the Minister’s Department made of the scale of undeclared work across the EU, and in particular the UK? What investigation has she made into the cross-border problems of undeclared work? That information may be incredibly helpful in indicating the problem we are dealing with and what the benefits of such an EU-wide platform would be. What recent discussions have current enforcement agencies such as the Gangmasters Licensing Authority, the Employment Agency Standards inspectorate, and Her Majesty’s Revenue and Customs had with the Government and the European Commission on undeclared work and the usefulness of the proposal? Finally, I do not think the Minister mentioned this, but does she agree with the proposals in principle? The Opposition agree with the Government’s position, and hope we can get it to the European Commission as soon as possible.

We are extremely conscious of the timetable this evening, and the fact that the whole business must be dealt with by at least 10.45 pm. We will do our best—at least, some of us will—to ensure that we get through the business as quickly as possible, but we must also have regard to what needs to be said.

The explanatory memorandum that the Minister has just discussed states:

“The Government is not yet persuaded that the proposed decision to require Member States to participate on a mandatory basis is consistent with the principle of subsidiarity and believes that participation in any platform should be on a voluntary basis.”

I know that further consideration is being given to that position, and as far as we are concerned the matter is of sufficient importance to be regarded as a breach of subsidiarity. That is our view, and the view of our legal adviser and the European Scrutiny Committee. The Minister added:

“The Government’s view is that the proposal lacks the empirical evidence base or analysis of structural failure at Member State or Union level which would support a case for intervention.”

We wish to underline the inadequacy of the Commission’s impact assessment, which acknowledges the absence of a clear “incidence chain” linking the establishment of the EU platform to a reduction in undeclared work, greater social well-being and better economic outcomes.

We also seek a clear explanation from the Government about their position on the content of the draft reasoned opinion prepared by the European Scrutiny Committee, as well as an indication of how they intend to use it in Council negotiations on the draft decision. Will member states continue to express a preference for voluntary participation in any EU platform on undeclared work? The Commission’s impact assessment indicates that most member states favour a voluntary approach.

We wish to press the Minister for a clearer indication of the scale and significance of the cross-border dimension in tackling undeclared work. In that context we bear in mind that, as she has said, there are justice and home affairs implications in respect of that and of whether there should be an opt-in. Will the Minister confirm that the Government will oppose any attempt in the general approach proposed to interfere in internal governance structures and the co-ordination mechanisms of national enforcement authorities responsible for tackling undeclared work?

I think that that is as much as needs to be said at this stage, but I wanted to put that on the record and make a general comment about reasoned opinions. I have been sceptical about reasoned opinions and the yellow card system for a long time—in fact, from the moment they were first put forward. We know that there are thresholds, but we were extremely disturbed when, in relation to the European Public Prosecutor’s Office, the threshold was passed by all member states and—surprise, surprise—the European Commission ignored that fact. The national Parliaments, which the Commission keeps telling us are so important, took the view that there was a breach of subsidiarity. On account of that it was assumed that the Commission would withdraw the proposal, but no such thing occurred.

I say that in general as we start the new parliamentary Session, because it is no good getting these grand statements—we are getting a lot at the moment—from the likes of Mr Juncker and company about the kind of European Union they want. There are very serious questions about the drive towards political union. If they want to trample on national Parliaments, when they put forward and achieve the threshold in terms of reasoned opinions and subsidiarity, and just ignore them, then I am afraid the increase in disaffection with the European Union will grow exponentially.

I shall be very brief, because I, too, know the time limits. I prepared a great oration to last for 90 minutes, because I know the Minister loves it so much. Really, I have just two questions: first on the detail of the Government’s position and secondly on the legal base.

The first question is a fairly easy one. The Government were uncomfortable with the legal base put forward by the Commission in article 153(2)(a). I am not sure what the Government’s current position is and I would very much like to hear what the Minister has to say.

Equally, I was not quite sure from what the Minister said whether the Government’s position on subsidiarity was shifting following the clarification at Council working group level that, while participation in the proposed EU platform will be mandatory for all member states, participation in the activities of the platform will be voluntary. I am not sure that that will be the case, because in the proposed text issued by the Commission it does not appear that the national authorities’ participation in the activities of the platform could, or would, be voluntary. Article 5(1) requires that

“Each Member State shall appoint one single point of contact as a member of the Platform.”

Article 5(4) provides that

“Single points of contact shall liaise with all enforcement authorities which are involved in the prevention and/or deterrence of undeclared work regarding the activities of the Platform and guarantee their participation at the meetings and/or contribution to the activities of the Platform or its working groups if issues discussed involve their field of competence.”

It strikes me that there is a bit of an issue here, which is one of the very good reasons why we should issue a reasoned opinion. I would like the Minister’s clarification on that.

Finally, there is quite a budget attached to this platform. Europe is very good at spending money on doing these things. Personally, I do not see the value in half of this stuff, but I would very much appreciate it if the Minister clarified those two points.

A number of the points that have been raised by hon. Members are very similar. First, it is important to put on the record that undeclared work is an extremely important issue across Europe. It is on a larger scale in some countries than others. The hon. Member for Edinburgh South (Ian Murray) asked what research had been undertaken on the levels of undeclared work in the UK. The most recent estimate for the UK was, I think, 1.7%—extremely low. In other member states the figure is significantly higher, so it is clearly a bigger issue in other states.

Cross-border working was mentioned by the hon. Member for Stone (Mr Cash) and the hon. Member for Edinburgh South. One of our concerns is that very little evidence has been put forward on the implications and requirement to take action on cross-border work. On the assessment of the numbers and the amount of detriment that can be attributed to them, we are not convinced that the data are particularly accurate. We have asked the European Commission to identify, in a much better way, the scale of the problem. The UK, alongside other member states, does a lot of work internationally across borders, in a completely voluntary way, to try to tackle these issues. A huge amount of work is done because, as responsible Governments across different countries, we all think it is really important to tackle this issue. We do not feel that the Commission has provided evidence that what is being done at the moment is not a good enough approach and we have not seen evidence to suggest that the problem is significantly larger. That is one of the main reasons why we feel that the Commission has not made the case for why this needs to be done at EU level, rather than at member state level.

The hon. Member for Stone asked about participation and about our position on the subsidiarity principle, given that we are saying that the position has changed. We still have concerns that the mandatory nature of the platform is a breach of the subsidiarity principle. However, as regards the operation, given that the only mandatory element is attendance at the platform, we now believe that the concerns we raised in explanatory memorandums about the requirements for member states to take action when it is for them to decide—it has been agreed in the negotiations that it should not be mandatory—are not such a problem for the UK. Yet we feel it is really important that any activity should remain voluntary rather than mandatory.

Is the Minister saying that she still believes that, as far as the UK Parliament is concerned, there should be a yellow card for the purpose? The question is as simple as that.

We certainly support today’s motion, and we think that we should be sending a reasoned opinion. Our concerns are, however, less, now that the rest of it appears to be voluntary. We still feel strongly about the mandation, which is why we are working with other member states on the negotiation to ensure that the activity that follows from the platform should be voluntary. That is why we have asked for written confirmation from the Council legal services. We tried to get it for this evening’s debate so that we could be clear on the position. It is still a moveable feast and we are still in negotiations, but we hope to reach that position. A number of other member states have similar concerns about the mandatory element and we are not the only member state working to try to ensure that the rest remains voluntary.

The hon. Member for Edinburgh South referred to the issue of bogus self-employment in the construction sector. We hope that the work of the platform will include looking at such issues and analysing them. We will press for a full analysis of areas that we think it would be useful for the platform to consider.

The points raised by the hon. Member for Stone about the yellow card system generally are above my pay grade, but I think that his points were well made and I will make sure that they are referred back to the most appropriate Minister.

I hope that I have tackled all the issues raised. If I have not—we can go through the Hansard—I will be more than happy to clarify anything I may have overlooked.

Question put and agreed to.