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EU: Single Market (EUC Report)

Volume 699: debated on Friday 14 March 2008

rose to move, That this House takes note of the report of the European Union Committee on The Single Market: Wallflower or Dancing Partner?—Inquiry into the European Commission’s Review of the Single Market. (5th Report, HL Paper 36).

The noble Lord said: My Lords, the European Commission began its review of the single market in May 2006 and the Commission reported in November last year. Sub-Committee B of the European Union Select Committee began its work at the beginning of last year and we took evidence throughout 2007. We reported to this House on 8 February. I am particularly pleased that the Government were able to respond very quickly by 4 March, and I thank the Department for Business, Enterprise and Regulatory Reform and Her Majesty’s Treasury for their speedy review, report and response.

A word about our subtitle—we wished to ask ourselves: is the single market now an ignored, irrelevant side aspect of the European Union or very much capable of a useful and active contribution to European economic growth? I shall explain our conclusions in my contribution to the debate. I thank the Select Committee under the chairmanship of the noble Lord, Lord Grenfell, for wise counsel and support and for agreeing to the translation of the main part of the report into French and German for the benefit of MEPs, Ministers and the staff of the European Commission. This was despite some confusion among some of our European, particularly our French, colleagues—because one translation of our subtitle ended up as Small Plants in a Music Hall. I think they believed that this was a rather typical and mysterious example of a British sense of humour. But, seriously, the principle of translation of Select Committee reports of this House into foreign languages is important. I am grateful to the Select Committee and the noble Lord, Lord Grenfell, for their support in this matter, and I hope that that principle will be continued.

I thank three successive Clerks to the sub-committee, Duncan Sagar, Judith Brooke and James Whittle. We are well served in this House by the very high standard of our parliamentary Clerks who work very long hours and whose English—indeed, grammar—is far superior to that of the members of the committees they serve. I thank also our special advisers, Dean Cook, Mark Griffiths and Dr Ian Walden. They fitted long hours into their busy professional jobs for modest reimbursement.

The initial development of the Common Market, now the single market, was in large part due to the vision of Margaret Thatcher—now the noble Baroness, Lady Thatcher—as Prime Minister. It became a legal reality with the Rome treaty and the Single European Act 1986. I am sure that your Lordships will wish the noble Baroness good health and a speedy recovery to her place on the Benches on this side of the House. The single market is the free movement of goods, services, people and capital; and it has been a great success. I wish briefly to quote from Her Majesty's Government’s response to paragraph 149 of our Select Committee report. They state:

“The Government agrees that the Single Market is and continues to be of great benefit to consumers, businesses and citizens of the European Union. It has been an outstanding driver for growth and jobs, increasing EU GDP by 1.8%”—

per annum—

“and creating 2.75 million new jobs”.

The committee agrees with the judgment of Her Majesty’s Government, and indeed the European Commission, that the single market has so far been a great success, but there is a great danger of that success faltering. The past benefits of the single market are not fully realised by the electorate, and one cannot detect a really enthusiastic vision for the further development of the single market by member states, the Commission or Parliament. We need to re-enthuse the population of the European Union about the prospects of the single market delivering even better results.

The spring European Council is meeting this morning in Brussels on the second day of its two-day summit. I hope that the Prime Minister will take a lead in calling for the following measures, which the committee reported. First, we should call a halt to more regulation from Brussels unless it is absolutely necessary. There is broad agreement on both sides of the House on that point. Secondly, there should be an emphasis on proper implementation and enforcement of existing regulations. In the European acquis we have a great welter of regulations and directives, some of which have not been properly implemented and enforced in member states. Thirdly, the Commission should provide more advice and help to new members of the European Union in ensuring that the acquis is translated into their own domestic legislation. Fourthly, I do not think that there is any support for the appointment of any more European-wide regulators in Brussels. National regulation is the key—it is much more flexible—and I think that perhaps better co-ordination is required between nations. We do not want any further pan-European initiatives. Fifthly—I believe that the Prime Minister is particularly keen on this—there should be better help and assistance to small and medium-sized enterprises in exploiting the benefits of the single market. One can understand why very small firms do not necessarily think of trading in the European Union because of the complexities, difficulties and diseconomies of scale, but more should be done.

Our committee believes that the single market of the future should be based on a much more liberalised European economy with free and undistorted competition and hence a more flexible and dynamic European economy with less bureaucracy. For the first time in my political life I judge that in your Lordships’ House and the other place, and now in Brussels, there is an acceptance of the need to build for the future on a more liberalised, flexible and competitive European economy. Her Majesty’s Government have responded very quickly. They have welcomed the committee’s report. I pay particular tribute to Commissioner McCreevy for his dynamic leadership of his portfolio and directorate. Our committee’s report marches very closely with his thoughts and views. I pay tribute to the internal market committee of the European Parliament, with which our committee has worked very closely.

I now turn to the specific recommendations in our report. First, on energy, there is undoubtedly a battle going on in the summit in Brussels today over the view, led in part by the United Kingdom but also strongly supported by the commissioners, that we want an ownership “unbundled” system for our energy market for the future, whereby the generation of electricity and gas is separated from its transmission and sale. That model has worked extremely well in the United Kingdom, subject to ongoing and proper regulation resisted by a number of states. I hope that the commissioners and the Council will have the courage of their convictions and press ahead with wholesale reform of the energy market.

Secondly, on financial services, we have had a welter of regulation at wholesale level. We now need reform at the retail level, so that customers of financial services institutions in this country can conduct their transactions much more freely across country boundaries. Further work needs to be done on that. Thirdly, on telecoms, we do not believe that there should be a European Union-wide regulator. Our regulator does an outstanding job and other national regulators should be encouraged to police their own systems. We believe that what is called the spectrum in telecommunications should be operated and exploited by the public sector and not be subject to regulation and control by Brussels.

Fourthly, there is the topical subject of renewable energy. The Commission’s target, which I suspect will be adopted shortly by member states, is that by 2020, 20 per cent of our energy generation should come from renewable sources. The target for Britain is only 15 per cent, and at present we are on 2 or 3 per cent, so we have a mountain to climb. Some of your Lordships may have heard the report on the “Today” programme this morning from Cambridge Econometrics that it would be a major challenge for us to get even to 5 per cent by 2020. Therefore, the internal market has a crucial role. We need to lift regulations and encourage the European-wide trading of quotas in renewable energy targets.

Sixthly, on small businesses, the competition council on 25 February gave support to the notion of a new small business Act. The details need to be flushed out by the Commission, but at its heart it will provide small businesses with exemptions from certain regulations. What has been done in Brussels with an organisation called SOLVIT, which provides information to small businesses trying to trade across national barriers, has been a success. The next step is not just information but advice, on which the British Government have been outstanding.

In conclusion, the EU Select Committee—the main committee—published yesterday the impact assessment of the Lisbon treaty for the United Kingdom. It is a full document that is designed to inform your Lordships when we come to debate the treaty. I draw your Lordships’ attention to the fact that the Lisbon treaty will have very little impact on the workings of the internal market other than the extension of qualified majority voting. There is a significant change in the Lisbon treaty from the old draft constitutional treaty. It is the absence in the main part of the treaty of the term “free and undistorted competition” as being a target, an aspiration and a principle of the operation of the internal market. We are all disappointed about its relegation to a protocol. We have been assured by the lawyers that it makes no difference at all, except the jury is out. We shall have to wait to see the judicial interpretation of the placement of that aspiration in the protocol. A liberalised, competitive and lightly regulated single market is the best way to serve citizens of Europe. I commend the report to the House. I beg to move.

Moved, That this House takes note of the report of the European Union Committee on The Single Market: Wallflower or Dancing Partner?—Inquiry into the European Commission’s Review of the Single Market. (5th Report, HL Paper 36).—(Lord Freeman.)

My Lords, it has been a privilege to serve on EU Sub-Committee B for the past three years. I thank my colleagues for their companionship, our chairmen for their leadership, our Clerks for their diligence and our special advisers for their support. We have conducted many inquiries, but I have little hesitation in saying that this is probably the most important. It is important because it is an inquiry not into any particular sector of the single market but into the Commission’s review of the whole single market itself.

As we say in our report, the single market is often referred to as one of the greatest achievements of the European Union. To many, the European Union is the single market. I was pleased that we undertook this inquiry, because supporters, such as me, of the European Union were becoming concerned that progress towards completing the single market and the free movement of goods, capital, people and services was losing momentum. Others who may be a little less enthusiastic than I am about the European Union have interpreted this slowing down as a sign of decline. Had they been with me on my recent visit to the United States, even they would have been impressed with the high esteem that the EU enjoys there. In the course of several informal engagements, I was told how the European dream is replacing the American dream. People are queuing up to join. I was told how they admired the politics of consensus between the member states. I was also told that Europe—the EU—is the world’s largest public aid donor and how it more cleverly uses aid packages instead of sanctions. There is no sign of decline there, and I was not looking for compliments.

Quite rightly, Mr Barroso and our Government continually warn that failure to take steps towards completing the single market provides room for protectionism to creep in. They are right, so we should never lose the opportunity to point out that the greatest champions for open and liberal markets in the single market are the UK Government and the European Commission. This is why the Commission is determined to act over the slow-down in the development of the single market. Our work, as the noble Lord, Lord Freeman, explained, was to examine its proposals.

It soon became obvious that what was lacking was not legislation or more rules but implementation. The rules to complete the single market are all in place. It is their implementation which is needed to encourage cross-border activity by businesses large and small—this to give all EU citizens the economic benefits of the single market. As the noble Lord, Lord Freeman, explained, we rejected more centralised bureaucracy. Instead, we recommended practical instruments, such as: assistance in the transposition of EU laws and their enforcement; better information about what the rules really are; quicker and easier problem-solving by means of SOLVIT and other schemes; better regulation by raising standards in poorly regulated member states; enforcement to liberalise markets; and perhaps even enlargement to shake up some of the older member states. The final report of the Commission last November shares many of these proposals, and so does the Government’s response to our inquiry. I, too, add my thanks to those of the noble Lord, Lord Freeman, to the Government for their quick response.

We looked at three specific sectors—energy, telecoms and financial services—to see how this would work. The key to liberalising the energy market is of course unbundling; since our report was written, the Commission has struck a deal with E.ON, the large German electricity and gas group—a deal that should pave the way to the far-reaching liberalisation of Europe’s energy market and is just the kind of imaginative use of instruments that we call for in our report. In telecoms, separation is the key. No European-wide regulator is needed; better national regulation is what we recommend. In financial services, we were concerned about a competitive market for the individual citizen. We should perhaps have been a little bit more concerned about tax and credit. I understand that nine member states are now discussing a pilot project to run a voluntary common consolidated tax base—again, the kind of co-operative instrument that should improve cross-border trade.

During our inquiry, we paid attention to the progress of the services directive, particularly, as the noble Lord, Lord Freeman, told us, in its effect on SMEs. We felt that this was important because the Federation of Small Businesses told us that nearly 80 per cent of its members are in the services sector, but only 2 per cent engage in cross-border business. This probably applies to the rest of Europe. On several occasions, the committee has emphasised the importance of the services sector to British business. We were unhappy about the watering down of the original country of origin principle, but nevertheless concluded that the final services directive in December 2006 should be strongly supported.

In its paper, the Commission also emphasised the importance of engaging SMEs in the single market. As most SMEs are in the services sector, it must follow that the successful implementation of the services directive must play an important part in completing the single market. In their response, the Government say that they support moves,

“to make it easier for SMEs to operate in the single market”.

Central to this is the obligation for each member state to set up a website where businesses, particularly SMEs, would be able to learn of the requirements needed to provide a temporary service in other member states. The website should also enable them to complete any formalities. Without this facility, any awareness-raising of the business opportunities available to our service companies in other member states will be pointless. Easy access to this information is essential, and so is its quality. I therefore hope that the committee will keep an eye not only on what DBERR is doing in this regard, but most importantly on what other member states are doing to set up this facility for use by British service companies.

In our report, we recommended that citizens be more fully persuaded of the benefits of the single market. The Government think so too, and so does the Commission. Its paper strongly emphasises that the main beneficiary for completing the single market should be the consumer. I agree. The consumer needs to be convinced of the economic benefits gained through more competition and higher standards, and they should have the right to make their voice heard. However, my impression while we conducted the inquiry was that, although the single market is incomplete, the consumer already takes it for granted. In their eyes, additional economic benefits will be marginal.

My impression, which seems to be confirmed by surveys carried out by the Commission, is that what the European citizen now values most about the single market are the freedoms—the freedom to move around, to work, to study, to travel, to live, to get married and to set up home without any barriers or formalities anywhere in the Union. Many are taking advantage of this. These social benefits as much as the economic benefits will win the hearts and minds of European citizens and persuade them of the benefits of the single market. I hope that the Government and your Lordships’ committee will remember this, because this may turn out to be the most important point to come out of our inquiry.

My Lords, I speak as a new member of the committee who was not present when any of the evidence was taken. When I arrived, the final draft of the report was more or less complete, and I have read it only since then.

As I understand it, a free market depends on all the participants sticking by the rules, whatever they are. State aid has been strictly controlled and is normally disallowed, but just as important is the question of compliance and enforcement. I see that one of the committee’s conclusions at paragraphs 154 and 155 is that enforcement is fundamental to the activities of the Commission, and that applies over a very wide range of activities—from fishing nets to the safety of electrical appliances.

Because it is where my area of expertise lies, I want to refer to transport and the standards of compliance that are observed there. In the railway and airline industries, those standards are strictly maintained on grounds of safety and many other related reasons. However, I am concerned about two issues of compliance, and I gave the Minister prior notice of the fact that I would raise them.

First, I want to talk about the devastating effect on the local bus industry of the agreement entered into on regulations concerning drivers’ hours. I suggest to the Minister that this was forced on us not by the European Union but, to some extent, by the incompetence of the people whom we sent to negotiate on our behalf and who did not understand the implications for the local bus industry. These things are difficult to negotiate but it is possible to take advice from those who are intimately involved. I suggest to the Minister that, whenever we make regulations which affect small sections of industry, advice should be taken by government negotiators to ensure that our real interests are maintained. I simply draw to his attention that the Finnish Government—a very small participant—were able to secure a derogation from these regulations but we were unable to do so, although we are affected to a far greater extent.

The second issue that I want to raise concerns the standards observed in the road haulage industry. A number of questions have been asked by my noble friend Lord Roberts of Llandudno about the appalling situation in north Wales, where hundreds of lorries are taken off the road because their drivers grossly exceed their hours—I am talking not about a few minutes but about several hours. The lorries are in a poor mechanical condition and, as a consequence, they are killing people. They are also overloaded.

The police stop those drivers in very large numbers but they have no power to do anything unless someone gets killed or something of that sort. However, the lorries just go on their way. Of course, a report is made to the home country but that is not very effective if there is no enforcement there. This applies in places as diverse as the Republic of Ireland, Greece, Bulgaria and all sorts of other countries. I know that the Government are talking about introducing some sort of on-the-spot fines but we have yet to see them.

My other point is that these lorries have free access to our roads. Again, the Government have not moved to bring in a system of lorry taxation that would at least make owners of vehicles which are registered other than in the UK pay a fair price to use our roads. That is distorting competition. The noble Lord, Lord Berkeley, will confirm that aluminium ingots from Anglesey to Austria, which have been transported by rail for a long period, have now been transferred to road using an eastern European haulier. I am not saying that that haulier does not observe the rules but in general they are not observed. In consequence, we have more road congestion, probably more accidents and gross overloading, and nothing is done about it. I say to the Minister that he has responsibilities to ensure that our side of the bargain is enforced.

The other area that I want to talk about is the independence of economic regulators. This is also touched on in the report at paragraph 157 in particular and also in paragraph 159. We have been in discussion on the Regulatory Enforcement and Sanctions Bill and have learnt that concessions are being made to secure that economic regulators—I am talking about them and not bodies such as the Environment Agency—are free from interference by national Governments.

I want to bring to the Minister’s attention that, in my view, the Channel Tunnel Rail Link (Supplementary Provisions) Bill—I am sorry about the long title—invades the independence of the regulator and, to that extent, is objectionable. It is even objectionable to the extent that when I talked this week to a concern which is considering bidding to buy these assets that are being sold by the Government—that is, the Channel Tunnel Rail Link and Eurostar—and asked them bluntly, “Would you rather that the Government had a hand in regulation or that the regulation was made independently of government by the Office of Rail Regulation?”, they said that the latter would strongly influence their decision and the price that they would pay. That is because government are transient and capricious and the regulator is rather the reverse.

Therefore, I ask the Government to pay attention to both the detail and the effect that their decisions have on people’s ability to function properly in the open market, which we all want to see.

My Lords, I, too, thank the noble Lord, Lord Freeman, for bringing this report to our attention. As always, he has chaired the committee with tremendous clarity and has brought us an outstanding report. I also thank the staff, who have done such a magnificent job.

With regard to the title, The Single Market: Wallflower or Dancing Partner?, I have to say that, whatever attributes I may have as a human being, dancing is not one of them; in the ballroom, I am afraid I am on the side of the wallflower.

My noble friend Lord Haskel made various points about the European Union, and there is something else that we must celebrate today. I heard on the radio that as of this morning the gross national product of the European Union has exceeded that of the United States. That may be due to the fact that the dollar has been plummeting and the euro has been going up but, looking back over 60 years since World War II, it would be as well for us all to reflect on what an amazing achievement it has been to get to that point.

What I have to say concerns one area which always interests me—that is, mobile phones and roaming charges. I was brought up with a jolt some time ago when, having sold my company, the first thing that I had to do was get a mobile phone because previously it had been paid for by the company. I never thought about the bill as someone else had always paid it. I paid the normal tariff on my phone and, after the first month of using it when I had been travelling, I had an enormous bill, most of which related to calls that I had made on the Continent. I am normally good at judging what prices will be but that bill made me speechless. Therefore, I have a vested interest in this report.

In March 2007, Sub-Committee B published a superb report entitled Mobile Phone Charges in the EU: Curbing the Excesses. It mentioned the size of roaming charges in the EU being €5.4 billion, which by any measure for the network operators was a nice little earner. No wonder they fought so hard to ensure that nothing was done to curb that success. However, Europe had a phenomenal result, which I am sure was helped by what we were doing and in the summer of 2006 mobile phone roaming charges were reduced by at least 70 per cent. I could not help but laugh as when that happened the mobile phone operators told everyone on their phones how wonderful they were that they were reducing the price, concealing the fact that they had done it through gritted teeth. That is marketing for you. Commissioner Viviane Reding has done a phenomenal job. She is to be lauded for what she has done. She pushed very hard and it was a great victory.

The main point of my speech does not concern voice usage on mobile phones, as I believe that battle has been won and in Europe voice usage is probably saturated. Most people have a mobile phone and there is not much more market in which to sell mobile phones. Also, people will not use mobile phones more for voice because they use them as they use them. The big growth area at which all the operators are looking is data. First, SMS texting came to the mobile phone operators like manna from heaven. They did not know it was going to occur; they did not know there was a market; and suddenly that market is huge. One only has to look at children standing at a bus stop, or wherever, to see that they are all texting each other all day long. It has become an amazing method of social communication. As much as some of us may detest it, as a parent there is nothing better than that welcome bleep-bleep to tell you that your child has got home or is safe. It is amazingly reassuring.

Commissioner Reding addressed a conference in Barcelona on 11 February this year and talked about data costs and how they need to be reduced. She drew attention to the fact that data costs, even for texting, are 20 times more outside the home country than within it. That is quite amazing. The real growth is not just in texts but in downloading of data, to which I shall turn a minute. She said that national regulators are unable to address those issues unilaterally. Noble Lords may not know but the cost of downloading a megabyte of data is €7. On my computer I can download a megabyte of data in two seconds. Were that on a mobile phone, that would cost €7 and mobile phone connections through 3G will go at similar speeds. That is an example of highway robbery and a total rip-off by the operators.

I want to talk about what data are. I am the proud possessor of a device called an iPhone, produced by Apple. It happens to be a phone but it is an awful lot more. It has e-mail, internet browser, share prices, YouTube, maps, on which you can find your location, and now movie downloads and music downloads. Noble Lords will know that for young people today social online networking is a key aspect of their lives. They do it all the time and the phone is a key area for that. Those same people use their phones on holiday in Europe, and I am sure that they use them with gay abandon until they come home and look at their bills. The roaming charges are key, and where Apple have gone Nokia and BlackBerry will follow, as will all phone manufacturers.

I am trying to convey to your Lordships that the growth in the future will be in data, and data are totally and completely unrestricted and not subjected to the rules that were agreed in 2006. We are delighted that the Minister bangs the drum for European business and may he continue to do so for a long time. I would like to feel that that same drum is also being beaten for the benefits of the European consumer, because the European consumer in the data area deserves a fair deal.

My Lords, I am conscious that I am the first speaker in this debate who has not been a member of Sub-Committee B and that I should congratulate the chairman and the members on their hard work. A great deal of effort has gone into this report. I am delighted to support the view expressed by my noble friend Lord Haskel that the elimination of trade barriers between member states has probably been the most widely praised and successful objective of the European Union, as it was of the EEC before it. It has been like a golden thread running through the five decades since the Treaty of Rome. As this report from the Select Committee shows—I am repeating what the noble Lord, Lord Freeman, said—the whole thing received a significant boost from the relaunch of the single market and the Single European Act 1986. I very much agree with the dancing partner analogy part of the subtitle. It is a very significant dancing partner with whom we wish to have further involvement over a very long period.

It has always been clear that ending tariffs and quotas would never be enough to create a common market. All sorts of measures would be necessary, including—dare I say?—against the anti-regulatory bans across the way. There has to be regulation for common standards of consumer protection, the health and safety of workers and so on, without which enterprises in countries with lower standards would clearly have an unfair competitive advantage over the others. As someone who has previously been involved with competition authorities, I would say, in a somewhat biased way no doubt, that the competition authorities of the European Union—I mean the Commission in Brussels and the Court in Luxembourg—have played a major part in combating various restrictions on competition, whether they arise from state aids or price fixing and other cartels, but they can so readily distort free movement of goods and services, with which the single market is concerned.

National competition authorities have also played their part. I am glad that it was this Labour Government, from 1997 onwards, who put through the Competition Act 1998 and the Enterprise Act 2002, which were designed not only to strengthen national competition laws, but also to align them with the competition laws in Articles 81 and 82 of the treaty.

The noble Lord, Lord Freeman, also mentioned co-ordination as important, between the different countries, as distinct from imposing a super regulator for the EU as a whole. Co-ordination between the EU Commission and the national competition authorities has existed now successfully for some years through what is called the European Competition Network. There has been, as the Select Committee recognises, a growing trend towards economic protectionism in a number of member states and evidence of support for so-called national champions in several member states, which is always a risk of any attempt to create an internal market. That is a worry. It was also referred to my noble friend Lord Haskel.

The committee is too discreet, if I may say so as the first non-member of the committee to speak in the debate, to name and to shame those member states that are either bad or in some cases hopeless at implementing the various requirements of the internal market. However, it records the concern of a number of witnesses that national regulatory authorities in certain member states, particularly the accession states, are not sufficiently resourced or independent of their Government to carry out their regulatory functions satisfactorily. Evidence from the EU Commission was that increased divergence among the 27 member states constitutes a “challenge”—it puts it in a modest way—to the proper functioning of the single market, particularly because agreement on legislation, its transposition into national law and, above all, enforcement have become more difficult.

The EU Commission’s internal market scoreboard does name names, which I cannot help but refer to because it makes an outstanding point. It specifically mentions the Czech Republic’s performance as “very worrying”, as its deficit is about three times the EU average. I will not repeat the other specific points made.

I hope that I have sufficiently indicated that I am supportive of the internal market and glad that it has been largely successful despite some of the important deficiencies. However, it is easy to exaggerate the importance to UK trade of the EU internal market; in a debate like this, there is an inevitable risk that we do just that. However, the internal market is, and will remain, significant, if only because our proximity to the continent means that trade in goods is facilitated by low transport costs. Often, however, transport costs are less important in trade than used to be the case. They are largely irrelevant where the trade is not so much in physical export or import of the goods, but in design, intellectual property and other intangibles. Trade in services, to which several speakers have already referred and in which the United Kingdom excels, is hardly dependent on geographical propinquity of the trading nations concerned at all.

It is in the UK’s interest to have open trading relations with the rest of the world as well as the EU, and I want to put the debate in that context, to take advantage of all the possibilities: traditional ties with the Commonwealth and the growing prosperity of India, China and other countries well beyond the boundaries of the EU; let us not forget trade with them. Of course, I realise that it is not practical to build a co-ordinated system of competition policy, effective employment and consumer standards into free trade across the world, to create a single internal market as we are trying to do in the EU. However, it is in the UK’s interests to do what we can through the World Trade Organisation, the Doha round and so on, and to combat the protectionist tendencies within the UK which sometimes come from leading countries such as France.

We must promote the further development of the EU single market, but not as if the EU were our only trading partner. We should be outward facing to the world as a whole, encourage the EU to do likewise and, to paraphrase Commissioner Peter Mandelson, we need open European markets and open global markets.

My Lords, I follow my noble friend Lord Borrie in not being a member of the committee, but I have read the report with great interest. I congratulate the chairman, the noble Lord, Lord Freeman, and the committee on one of its best reports.

I do not quite see the same enthusiasm in the Commission on the railway, which is what I shall concentrate on. I wondered whether the reference to a wallflower was to the Commission’s transport department, but I shall come to that. The foreword of the report summarises everything very well. It talks about competition and the benefits to consumers and relates the failure of member states to implement legislation—as other noble Lords have commented—and the maintenance of barriers. It worries about economic protection and talks about regulatory authorities being independent, which I will come back to. As my noble friend Lord Borrie said, it talks about the problem of national champions and unbundling.

Although the report is largely about the energy, telecoms and financial services sectors, most of the comments, problems and successes also apply to the railway sector, which suffers from many of these things. I fear that the Commission is doing less to resolve them than some noble Lords have suggested may be the case in these other sectors. For example, as regards paragraph 81 on “Restrictions to Effective Competition”, the liberalisation of the railways sector started in 1991, which I suppose is only 17 years ago, and was designed to stimulate competition, as for energy.

We still have vertical integration on the railways. There are two different models. One is a holding company with lots of subsidiaries, which are, of course, independent until they choose not to be. I am going to name and shame them, because it is about time they were: Germany and Italy. There is another version, which France has, with totally separate infrastructure and operations, but there is a requirement for the infrastructure manager to use the operations company SNCF as a subcontractor for all its activities. They achieve the same objective of the national champion. There are major problems with access to rail infrastructure, just as there are on energy.

I congratulate my noble friend on what the Government are achieving on energy in the Commission, but it must be done on the railways as well. There is a lack of transparency. If an independent train operator wants to ask for a path between A and B in Germany—as happened a couple of years ago—and applies to the infrastructure manager, the infrastructure manager’s operating arm phones the customer within 24 hours, saying, “We could do it for you cheaper”. That is not how the single market is supposed to work. There is a lack of investment and capacity. There is collusion between incumbents, who are very good at making rules and standards designed to keep out the competition. The railways are wonderful at rules. Of course, there is unfair state aid. I could go on at length, but I am not going to.

I welcome the fact that the report rightly states that competition brings efficiencies, lower prices, better quality and growth. That applies to rail freight as well. I declare an interest as chairman of the Rail Freight Group and a board member of the European Rail Freight Association, which is pressing the Commission hard on all these issues. We are urging the Commission to come forward with legislation to sort out the failure of the previous legislation alongside enforcement, neither of which it is doing very well.

In this instance, I hope that the noble Lord, Lord Freeman, and his committee will consider having a look at the railways from the same point of view that they have done in this report. We must press for unbundling, as for energy. It is desperately important. Total separation, as the committee recommends in paragraph 87, is the only model that will work. Independent system operation does not work; there is always collusion, as I have said. It needs comprehensive regulation, which also does not exist. I can see why the member states prefer to have the ISO model as there is less legislation and they can avoid enforcement and regulation. What are they going to do about that? It is very important that our Government press other member states to get in line.

I shall now turn to regulation which, like other noble Lords, I see as the key to the success of the single market in all these industries. Regulations must, along with Governments, ensure fair, transparent, competitive environments for growth. The rail regulator here does a good job; in particular, the cost of and process for appeals are about as cost-effective as one can get in this country. Germany also has a very good rail regulator. Unfortunately to appeal one has to go through several levels of courts. One can see how the incumbent hates what the regulator is doing by the strong, public battles that they sometimes have, but at least Germany has a regulator. In France, the regulator consists of one person who has an advisory role only. Given all the other things we have talked about in member states, there is no consistent regulatory policy across the European Union. I understand why this report, the Commission and the department do not want to see a European regulator. That is probably right, but consistency has somehow to be imposed on all the other regulators so that they all do the same things in the same way. On the railways, the regulators meet regularly and swap advice, so I am pleased that the Government are supporting the agency for the co-operation of energy regulators, and I hope there will be something similar for railways soon.

For me, the key thing is that national regulatory authorities need to be independent of Governments—as the noble Lord, Lord Bradshaw, said—especially when financial interests are at stake. That is set out in paragraph 157. I welcome the Government’s restatement of that policy, but I hope that my noble friend can ensure that it is consistently applied across other parts of the Government. On the Channel Tunnel Rail Link issue, it is wrong that the regulator is also the Government, who have a financial interest in selling the part of the industry that they are about to regulate. It has been said that it is in our interests to regulate the industry to get as high a price as possible. That is contrary to my noble friend’s policy in BERR, and I hope that that can be applied, even at this late stage, to the Department for Transport and the CTRL.

I look forward to the response from my noble friend. I urge the Government to continue to intensify their help to the Commission by citing best practice and working as hard as they can to make sure that other member states understand what we have achieved, without being arrogant—I know that we are not arrogant. As the noble Lord, Lord Borrie, said, it has been very difficult in the new accession countries, but it is still possible to get consistency. I hope that in a year when a large amount of railway legalisation and enforcement will be coming out of the Commission the noble Lord, Lord Freeman, and his committee will think it is a good opportunity to have a look at the railway sector across Europe.

My Lords, it is entirely appropriate that a Freeman should introduce the debate on the four freedoms of the single market. I congratulate the noble Lord, Lord Freeman, and his colleagues on doing so and on producing this report from Sub-Committee B. I have always been a fan—a fanatic—of the single market. The reason I am a fanatic is that I believe that the central message when explaining Europe to our friends and colleagues and the electorate is to say that the benefits of the single market are considerable. That is why we should apply ourselves in the rigorous way we often do to making sure that that single market comes to fruition. Of course, we will never complete the single market because it is the nature of markets continually to change. That is why we need to be athletic and able to move from time to time to introduce and be aware of that to open those markets up, some of which are threatening to close.

We would have got over a lot of our troubles in recent years about the divide on Europe if we had explained that, as the report states, the market brings enormous opportunities for consumers and citizens—who in the end are our goal—and for businesspeople. At the moment, businesspeople fear that they are obstructed. I sometimes think their obstruction is less real than imagined or is encouraged by the Eurosceptics who so often tell people that Europe is a place of danger and a pitfall of one description or another. I then ask myself why any British business should penetrate it and get stuck into it. There ought to be a political consensus on us all being devotees of the single market. I note today that the Back-Bench speakers—and I too am an intruder on Sub-Committee B—have all been from this side of the House, other than the noble Lord, Lord Bradshaw. The best thing the noble Baroness, Lady Thatcher, ever did was to sign the Single European Act in 1986. I believe she knows that. We should try to devise that political consensus which takes us forward on the benefits that will come from that, which will be enormous for everyone. For instance, we should explain the single currency—which is dealt with in a strange way—by saying that every good market has a single currency attached to it. We should explain that we have a single market in the United Kingdom, which is why we have a single currency called the pound in the four nations of the United Kingdom. The theory can be the practice for all purposes for businesses in Europe and for British businesses.

I congratulate the noble Lord, Lord Freeman, and his colleagues on identifying three areas—energy, telecommunications and financial services. We must ask ourselves whether they are the areas, industries and businesses where British business is pre-eminent, so it will always be to our advantage to clear the bracken that interferes with the single market to help British businesses succeed. The report recommends the unbundling of full ownership in the energy sector. Like the noble Lord, Lord Berkeley, I have some reservations about that. While there may not be a European-wide regulator, there has to be some mechanism in all these instances where the national regulators, who are best placed to understand the situation, can be encouraged to have common standards. It is, after all, a single market, so common standards have to apply throughout.

I listened to what my noble friend Lord Borrie so wisely said. There are other markets outside the single market, which is the biggest market in the world. I have always taken the view that the single market is a forcing house for business and industry within the United Kingdom and Europe that makes us fitter and faster to operate in the wider markets elsewhere.

I also believe that there are real opportunities worldwide to begin to say that the four freedoms we support within the single market will be beneficial not just within the European Union but worldwide too. We can be evangelistic about those four freedoms. I am also happy that noble Lords have talked about telecommunications and financial services.

Small businesses are hugely important. From time to time, there has been a fear that we create and design the single market for big business. In some ways, that is understandable because such business are the most likely to reach across the European Union and always have the loudest voice. But perhaps the noble Lord, Lord Freeman, and Sub-Committee B could look at small businesses and the way in which we can disband the idea that a single market is foreign and unhelpful, and at whether we can do more to convert those 99 per cent of enterprises, many of which would be very successful in a single market if they were given the opportunity.

The noble Lord, Lord Freeman, also referred to the Lisbon treaty and SMEs, and drew our attention to its difference from the now redundant constitutional treaty. But, in publishing the report yesterday on the Lisbon treaty and an impact assessment, the European Union Select Committee said that it would be concerned if any symbolic downgrading were translated into efforts to depart from the principles of free competition that have formed the cornerstone of the internal market. However, Article 51 of the TEU gives equal weight to the treaty articles and protocols, which I think the noble Lord, Lord Freeman, was worried about, and will remain the same as Articles 101 and 103 of the TFEU. Therefore, the change does not appear to be significant. I know that we must still look at it and be alert to any deviation, but undistorted competition must be the chime to which that we adhere in development of the market.

Like my noble friend Lord Borrie, one of my bibles over the years in trying to understand the single market has been the Commission’s “Scoreboard”. I, too, have been looking at the most recent edition which came out in December 2007. Some noble Lords will recall Mario Monti and other colleagues beginning this process, which from time to time looks at how effectively transposition and infringements are going in the single market.

I congratulate my noble friend Lord Jones of Birmingham on his recent trip to the United States—“Go west, young man”; he did. He told them all about undistorted competition, which I was very pleased to hear about. A good point has arisen, which I am sure that my noble friend will have noted. Figure 1 in the most recent bulletin demonstrates that in terms of transposition of directives of the single market, in 1997 we were 6.3 per cent and now we are down to 1.2 per cent. So we are becoming more and more effective at transposing the directives. But there also has to be concern about the quality of transposition and we need to have an eagle eye open to make sure that that happens successfully. I might add that the United Kingdom is down to 1 per cent in terms of transposition, but 14 countries are better at transposing than we are. So we still need to redouble our efforts. The noble Lord, Lord Borrie, has already mentioned the five states which lag behind; namely, the Czech Republic, Portugal, Poland, Greece, and, surprisingly, Luxembourg. There is also the issue of old directives which are yet to be transposed. In Figure 10, 30 are shown for the United Kingdom, which need to be transposed by 10 May 2008.

I would also ask my noble friend Lord Jones to look at the infringements. It is very interesting that the United Kingdom still is above average for the 49 infringement proceedings. We stand at 63, so we need to do more. It is interesting that, when one looks at the figures, the highest numbers of infringements take place in environmental, taxation and Customs, and energy and transport legislation. They are all crucial areas of concern to make the single market successful.

In conclusion, this ought to be a major task of the Government’s and it should be a major task of this revising House in what we perform, especially through the European Union Select Committee and its wonderful sub-committees such as Sub-Committee B. We too should be fanatical and should be devotees of the single market. I believe that the payback is that our citizens, our businesses and our consumers will realise that Europe has something to offer and will no longer be shrinking violets in this wider single market.

My Lords, it is always a great pleasure to follow the noble Lord, Lord Harrison, particularly with his magisterial common sense on what he said today about the single market. Having been in previous times a very active MEP, the noble Lord is a very good example of a Member of the House of Lords who becomes more active as he gets older. He is a very active Peer indeed and gives us a lot of common sense on European matters, not just the single market. I agree very much with what he said.

I also echo the thanks of others to the noble Lord, Lord Freeman, the chairman of our committee. If I embarrass him by saying this, I apologise in advance. I had thought that I might do just a glancing reference and leave it at that, as we often do—being polite and then passing on. But I shall say just slightly more than that because we on this committee are very fortunate—I hope that the noble Lord, Lord Freeman, is not annoyed at my saying this—in having the noble Lord as chairman. Unlike some chairmen of some committees, as we all know—no names, no pack drill—the noble Lord, Lord Freeman, motors the discussion along, so it is always a pleasure to attend. Everyone has a chance to speak and is involved, but we know that the meeting will be brisk and efficient. If the noble Lord, Lord Freeman, is still a member of several company boards, they are fortunate to have him. I am not sure of the details, although I know of Thales. In fact, they are lucky—so much so that I am reminded of an accident some years ago at a famous circus in the Midlands when the human cannonball was injured, fortunately not very badly. The ringmaster wrung his hands with some grief and anxiety, and said, “It would take us years to find another man of the same calibre”.

The noble Lord, Lord Freeman, will be delighted to know that I am ending my comments about him now, but we thank him as well for being in charge of this report. His business background helped us all to get more insight into our discussions with the evidence givers and our examination of officials and so on in Brussels and London, and from our meetings and discussions with Ministers who also were very keen to emphasise the official government support for the single market. That has been a leitmotiv of British government policy since the mid-1980s when it began and has been one of the hallmarks of leading British policy on European matters. From that point of view it is very positive.

I am an all-round European enthusiast, although I do not go around saying that everything in the EU is wonderful. There is massive room for criticism about a number of aspects. None the less, I am very enthusiastic about the generality of our EU membership, so I do not say that the single market is the only thing that matters and that we can just have a bit of trade and mercantilism here and there, and economic activity, but no integration of any kind. I do not think that that is to the taste of the public in any way at all. They want more as they perceive themselves to be Europeans as well as patriotic citizens of this country.

This report also showed a success in deciding quite wisely to concentrate just on a number of key areas. If we had sought to examine every aspect, sector and sub-sector of the single market, it would have been very difficult for us. How wise we were to follow up the then inquiry referred to by the noble Lord, Lord Mitchell, on mobile phones from the spring of last year with further examination of those matters in this report.

Incidentally, I wanted to ask the noble Lord, Lord Mitchell, who is an expert as a result of the traumas he has suffered as the client of a mobile phone company, whether he has had the experience of cancelling a mobile phone contract. It takes just a few hours to set up a contract. You walk into shop and bingo, you have the contract and the charges start. But has the noble Lord ever tried to cancel such a contract? That is where restrictive practices can be seen. It is similar to the position with credit card companies and to a lesser extent bank cards. When you call to cancel the contract, it can take months. That is particularly true of mobile phone contracts.

We can be very pompous here and say, “Wicked countries in the EU have lots of restrictive practices, but we don’t have any”. Even some members of the CBI used to say that. I am sure that there are some restrictive practices everywhere, and I am sure that the Minister is an expert on the issue and tries to get rid of them. However, tremendous disutilities can arise in the area of contracts.

Another example of something that can become a significant national restrictive practice is in the area of implementation of the directives that come from the creation of the single market. There is a long list of them, and by and large they are very successful. However, once again the disutilities become evident. As we know, there are two kinds of implementation: one is the implementation that is brought about through the legislative process whereby governments and parliaments enact directives, and the other is the real implementation that comes from regulators and all those concerned with oversight and monitoring in departments such as DBERR in this country and similar ones in other member states. This implementation reflects what is happening on the ground, and that is a much harder thing to achieve. Nowadays, by the way, we have fewer directives and they are couched in broader terms as framework documents. They are much more rational instruments of Community legislation than was the case with the somewhat tedious documentation of earlier days.

It takes a long time for a real single market to be created because it is a hugely complex thing. Lest again we feel pompous and superior to our foreign colleagues in these matters, such as thinking that the Germans have guilds, apprenticeships and strong trade unions, which is sinful, let us consider the market from the point of view of the other member states. They say that Britain has the biggest restrictive practice of all, and here of course I mention the euro. My partner Sarah says that sometimes I talk about the euro too frequently at dinner parties, so to be reasonable I say that I will raise the subject on only one out of every three occasions. The UK not joining the single currency is regarded by other member states as a gigantic and foolish restrictive practice. The Minister cannot say that when he comes to reply, so I give him dispensation not necessarily even to refer to it. But let me just say that you cannot have a real single market without a single currency. The adverse factors that arise from the huge expense of changing from sterling to the euro and vice versa are enormous. The costs are huge and the pound is propped up with twice the level of interest rates as those for the euro. Indeed, the euro faces a dilemma because the European Central Bank has been so successful in its German-style monetary restraint policy that if it were to lower interest rates the euro will rise in value—more expansion would lead eventually to more inflation—whereas if it were to raise interest rates because of inflation fears, the euro still goes up because it becomes a better earner. In the mean time, the euro has become the most successful currency in the world, and ill-advised as they were, the British Government missed the opportunity to join it from 1997 onwards. It now gets harder and harder for Britain to join the euro because presumably we would want to see a devaluation with our trade figures. While Britain is an important trading partner, would the other member states be able to accept that?

We need to be sensible about what we and the other member states can contribute. All have pluses and minuses. Germany, with its large manufacturing sector and trade surplus, actually supports the entire European Union. In effect it is the main trade surplus element. Our trade deficit is embarrassing, but fortunately we are good on invisibles, which gives us a lead in financial services. It works all ways.

I agree strongly with the suggestions made by my noble friend Lord Bradshaw and the noble Lord, Lord Berkeley, whose detailed comments, for which I am grateful, outlined the idea of a single market in trains, developing both passenger and freight railways as quickly as possible. Again, it is very complicated and the old historical realities of each member state mean that walls of resistance are set up against any kind of co-ordination and integration. However, it is beginning to happen with the far-sighted decision of other member states to form a high-speed network all over Europe for passenger trains and increasing co-operation on freight. A recent example of that is the new freight train service being launched between Luxembourg and Perpignan to carry juggernaut lorries on flatbed wagons instead of them having to use the motorways. That is a major contribution to helping to avoid further excessive congestion, particularly for this country given its small size. The single market in railways will take a long time to develop, but these are the practical things that the public in all the member states want.

I commend too the Britain for a new Europe pamphlet on the extraordinary degree of economic and financial integration already being achieved in the single market. The public have reacted to it and want to be consumers on a European scale, even if they are still at the margins geographically. On that, a lot of co-ordination for geographical reasons is developing between Kent and the Nord-Pas de Calais. There are many examples of French companies operating in Kent and British people running small businesses in the Nord-Pas de Calais. It may have been a struggle, but they are beginning to be successful. This kind of thing is what consumers and customers will want in the future, so we have to make sure that the expenses of such ventures are minimised; that is for Government action.

I conclude by referring to the single European payments area for banks and bank customers. This is still a highly unsatisfactory situation and needs to be looked into. Charges are still excessive partly as a result of the different currency used in this country and because the banks are still pursuing their latent restrictive practices by keeping these charges as high as possible. The Commission is doing its best, but it is a slow process. It is now legally supposed to be a single area, but the disutility remains massive. I hope that the Minister will at least refer to this issue, even if he does not refer to the euro.

My Lords, I join other noble Lords in thanking the European Union Sub-Committee on the Internal Market and its chairman, my noble friend Lord Freeman, for preparing the report and introducing this important debate. It is particularly apt that we should take note of the report in a debate now because it provides us with a chance to reassess the principles that motivate our engagement with Europe and explore what must be done to ensure that these principles continue to drive decision-making.

The single market did not come about overnight. It has its roots in the creation of the European Economic Community and shares—or it could be argued is the realisation of—many of its philosophical aims, primarily market liberalisation. In January 1993, the single market came into force and, as my noble friend Lord Freeman said, marked a concerted attempt to remove barriers to the free movement of goods, services, people and capital. How far has this been realised? The European Commission launched its review of the single market in May 2006, and in doing so freely admitted that the barriers indeed have not yet been fully removed. What motivated this tide of economic liberalisation was the desire to reinvigorate the European project. In the words of the then Commissioner, Lord Cockfield, the idea was to create opportunities for growth, job creation, improved productivity and profitability, healthier competition, professional and business mobility, stable process and consumer choice. These are laudable aims. To an extent they have been realised.

The impact of the single market has been by and large positive. It facilitated the creation of a home market of 500 million consumers, making the EU the world’s largest trading bloc. Between 1992 and 2006, the estimated gains in terms of economic growth amounted to 2.2 per cent, and in terms of employment gains 1.4 per cent. For the United Kingdom that means that it is worth £20 billion a year. The real risk is that this progress gets mired in the troubles of economic nationalism and the patchy application of overinvasive regulation. I join the call of my noble friend Lord Freeman for a halt to new regulation and for greater attention to proper and uniform enforcement across Europe of existing regulation. I should say to the noble Lord, Lord Borrie, that we on these Benches of course acknowledge that regulation has an important role, but it must be reasonable and consistently applied.

So, like my noble friend, I welcome the benefits that have come from the single market and hope that they will continue. But we must also ensure that we continue to capitalise on the possible advantages. For example, there have been many benefits to multinational companies, but the positive impacts on small and medium enterprises are not as easy to see. Indeed, much more needs to be done so that they can take advantage of the opportunities that might exist.

Too often, however, any attempt at stimulating this kind of growth comes in the form of more legislation. I was pleased to read in the report of the committee’s keen understanding of the principle, as explained by my noble friend Lord Freeman today, that more regulation often means more barriers. I was further pleased by the committee’s strong support for the Commission’s commitment to keeping legislation simple and, generally, to resistance to EU super-regulators.

Very few SMEs are engaged in cross-border activity, partly because of the regulatory barriers and the lack of information to assist businesses, a point to which several noble Lords have referred today. I would be grateful to hear from the Minister what the Government can and will do to help small and medium-sized enterprises to participate fully in the single market.

But it is not only small businesses that fail to reap the full benefit of the single market: consumers are also at risk of losing out and need to be better informed as to the range of benefits, social as well as economic. The noble Lord, Lord Haskel, in particular, emphasised the potential benefits to people of the single market.

The failure of cross-border purchasing and of key markets has affected the continuation of genuinely free and undistorted competition, a point to which the noble Lord, Lord Harrison, referred. Again, I would be interested to hear from the Minister how the Government propose to tackle these issues.

I turn now to the specific economic areas that the report addresses, with the hope that the attention paid to the energy, telecommunications and financial services sectors might also shed some light on what can be accomplished more broadly. There is a real risk that the advantages of the single market, in these sectors in particular, might be undermined by nationalist economic policy and regulation. It is not enough for some countries merely to pay lip service to European commitments and then erect barriers to free trade by promoting the champions of their national industries. Competition suffers and prices cease to be fair. There are well documented examples of gas flows between member states temporarily not moving in the direction which would have been expected given the relative market prices. It is essential to have a level playing field and I welcome the committee’s emphasis upon competition, the need for unbundling ownership and the need to complete the single market for the benefit of consumers and businesses alike. What steps does the Minister intend to take with his European colleagues to ensure that this problem is resolved?

With the threat of global warming and the immense speed with which the energy markets will have to adapt in the near future, a level playing field is absolutely vital. Success in reducing carbon emissions depends to a large degree on the robustness of the European carbon markets and the ability to have a stable price for carbon. A stable regulatory scheme in which all member states play their role in ensuring that price drivers act uniformly is essential for the European Emissions Trading Scheme to operate. Indeed, it is imperative if we are to combat climate change.

The single market has effects much wider than preserving free trade for business and, although that is still crucial, the wider context allows us to understand how important it is that the Government do all they can to ensure an equitable commitment to free trade in Europe.

Ensuring competitive practice is not the only requirement to promote the success of the single market. The telecommunications sector is a good example of where, in the first instance, there was a successful opening up of national markets to competition. But as the pace of liberalisation has differed between countries as well as between the markets within the sector, harmony is needed. Measures are required to address competition issues across the EU. There are still a number of barriers to achieving a true market for telecommunications in Europe. For a start, the consumer markets are essentially national. This means that there are incumbent providers heavily entrenched in these markets. The noble Lord, Lord Mitchell, referred to roaming charges, data and the need to achieve a fairer market across Europe. Will the Minister explain what the Government can and will do to remove these barriers?

As we have been observing since the onset of the sub-prime debt crisis, it is essential that the financial markets and services are stable and robust in their own right. Increased competition and stability are the goals of a single market in financial services. It also has a tremendous effect on the goal of creating more jobs in Europe. Will the Minister assure the House that completing a single market in the financial industry will be made a priority by the Government?

The noble Lords, Lord Bradshaw and Lord Berkeley, reminded us that in addition to SMEs, energy, telecoms and financial services there are other industries—notably transport—where a single market is some way from being realised. The noble Lord, Lord Bradshaw, regretted the fact that the United Kingdom’s corner did not seem to be fought adequately in the context of ensuring fair and uniform enforcement of regulation. The noble Lord, Lord Berkeley, asked for a close look, in particular, at the railways industry.

When addressing the questions that I and other noble Lords have raised, I hope the Minister will assure your Lordships of his commitment to liberalising markets through less legislation and simplified regulation, and that his approach to these issues will follow the committee’s recommendations. A successful Europe means a successful Britain—and a successful Europe needs a renewed commitment to the single market. We welcome the report’s recognition of this key fact.

However, as the noble Lord, Lord Borrie, rightly said, we must also look at the effects outside Europe. With the emergence of new economic powers such as India and China on the world stage, it is essential that we can compete successfully, so we need not only a single market but an open market. Indeed, the noble Lord, Lord Borrie, referred to open global markets. This must come through lighter regulation, which must, in turn, come in step with our European partners.

We think that the Minister, because of his experience and his role, has a real chance to make a difference for the United Kingdom and, indeed, for Europe. We share wholeheartedly with the Government the certainty that we are better as a dancing partner than as a wallflower, but when it comes to additional regulation considerably more coyness would be healthy.

My Lords, I am pleased to have had the chance to listen to some amazing contributions and I thank noble Lords for making them. I know that I carry everyone’s thanks to the noble Lord, Lord Freeman, for the production of this excellent report. I ask the noble Lord to pass on the Government’s thanks to every member of the committee for all their hard work. A lot of it may go unnoticed but certainly not by me. Further to the excellent remarks of the noble Lord, Lord Dykes, on the calibre of the chairman, it begs the wish that he is not fired either.

I am pleased to have the opportunity to participate in the debate. When I heard that it was to be held and the noble Lord, Lord De Mauley, mentioned that perhaps I might be in a position to push it along, I gave up what I was doing today, cancelled everything and willingly and happily came to learn from your Lordships. I hope to make a contribution.

The single market is one of the European Union’s defining achievements. My noble friend Lord Mitchell referred to the weak dollar, which probably puts the comparative wealth aspect between the European Union and America in favour of the European Union right now, but, even with a strong dollar, the strength and power of the 27 countries would be so utterly different and significant than in the past. It goes along with the other huge achievements. It was the single market, that bastion of democratic capitalism, that could provide such a welcoming home to 10—and then another two—accession states, many of which had been subjected to disgusting state communism from the Soviet Union for so long. To have been able to put that phalanx of peace into central Europe is one of the lasting achievements that the single market and the European Union could deliver.

Let us remember that there have never been 60-odd years of sustainable peace between these 27 countries, ever. One or two of them have been knocking the living daylights out of each other at some point over the past 3,000 years. Now we have this great achievement of delivering peace, on the back of which so much can be achieved. It all comes back to the single market and the reality of, now, nearly 500 million people being able to enjoy an economic relationship that grows and strengthens every day, bringing renewed hope to so many people. That market has created around 2.75 million jobs. It has increased trade by 30 per cent between each member state.

Nearly 60 per cent of the United Kingdom’s total trade is with other European Union member states. Noble Lords will recognise that I spend the greater part of my life on aeroplanes and trains, going around banging the drum for brand Britain. I remind your Lordships that we sell more to Germany than we do to India, China, Japan and Russia put together. Germany then sells a lot of it to other countries, so UK goods and services get transported around the world. But if we ignore some of our fellow member states in the trade equation we do so at our own risk. I spend quite a lot of my time in the European Union doing that same job of banging the drum and trying to knock down some of the last vestiges of protectionism in how we go about our trade.

We reckon that about 3 million British jobs are linked to the export of UK goods and, increasingly, services—happily for our economy—to the EU. People in Britain benefit from a greater choice of higher quality goods and services at lower prices because of increased competition and stronger protections to guarantee their consumer rights, which in turn deliver a better product. Every year, EU investment helps to create and protect UK jobs and generate trade.

I hope noble Lords will remember that we are a favoured location for inward investment from all over the world: second in the world to the United States and first in Europe. Just under 20 per cent of all the inward investment from the world that comes into the European Union comes to this country. One of the reasons for that is that we speak the global language—which is not American, but English. We are in the right time zone. We have that fabulous jewel in the crown, a flexible labour market. At the same time, we have restructured our economy so that we make things and provide services that the world wants to buy. There are many reasons, but one of them is that we are right inside the single market. We are precisely where so many investing yen, dollars, roubles and rupees want to be. That is a fabulous achievement for the United Kingdom, and I feel privileged to be able to champion UK trade and investment around the world.

The Government welcome the European Commission’s publication on 20 November last year of its fundamental review of the single market. I am pleased that the Commission, led by President Barroso, shares with Her Majesty’s Government the priorities of the strengthening of competitiveness of the European economy, deepening liberalisation and furthering economic reform. I assure the noble Lord, Lord De Mauley, that the Government will strain every sinew to ensure that we carry on driving that forward.

We welcome the Commission’s recognition that the single market needs to be adapted to deal with the challenges of the 21st century. I shall explain what one or two of those challenges are. The European Union does not invest enough in research and development; indeed, nor does the UK. Collectively, the EU is behind Japan and way behind the United States. However—I say this with great pride because at UKTI we can push this forward all the time as a business equation, let alone as a matter of pride in brand Britain—the UK has four universities in the top 10 in the world: Cambridge, Oxford, Imperial London and University College London. We have six in the top 25 and nine in the top 30. The top French university is number 26, its second is number 28 and it does not have another in the top 70, while the top university from anywhere else in the whole European Union is in Holland, at number 48. Ireland has one at number 53. Germany’s first university in the top 100 in the whole world is at number 60. I wish Brussels would put more energy into putting forward that equation rather than indulging in the sometimes frustrating protectionist measures that we all know so well.

Protectionism, of course, is another of the great challenges of tomorrow. I listen with increasing alarm to the fight going on for the democratic nomination in the United States; they are even thinking of tearing up NAFTA, let alone what they are going to do to the WTO. America is meant to be the home of the brave and the land of the free; it might be brave, but when it comes to trade it is not free. The European Union together, using its single market clout, must get into Geneva and then across the pond; it must drive free trade, to the benefit of Africa, Brazil, India and Asia. That is an important use of the tool of the clout of a single market at a time when the challenges of the 21st century, a century that belongs to Asia, will change for ever.

At the same time, we have to get on to the page of allowing the commodities—things that sell only on price—to move to low-cost economies. Instead of concentrating on legislation in Brussels that tries to keep the same job for the same person, we should start thinking about getting those who are out of work into work; reskilling people into tomorrow. That should be the priority and we should use the clout of the single market to provide those opportunities. If, in the 19th century, enterprise and entrepreneurship clustered around transport—rivers, ports, canals and, eventually, the railway—and in the 20th century they clustered around the OEMs, the original equipment manufacturers—they sank the pit, they built the shipyard, they built the textile mill, they built the car factory—then in the 21st century they will cluster around the development, exploitation and transfer of knowledge. It will be the only distinction, the unique selling proposition, for any entrepreneurial exercise in the developed economy. If we can do that on the back of the wealth and power that are created in a single market, a 21st century that belongs to Asia holds no fears for the European Union. If, however, we carry on looking backwards and marching valiantly towards 1970, we will have a real problem. The single market is the key to this; it can provide the critical mass of tariff-free trade that can generate the wealth and provide the hope for so many people.

I shall turn to some of the points made by noble Lords during the debate. As the noble Lord, Lord Freeman said, the Prime Minister is banging the drum today in the spring Council. The four points are important. They mean the proper implementation and enforcement of what currently exists. In some countries, compliance is a voluntary event; we all know that. That has to stop in order to win street cred for all of this among European citizens. We want better regulation, but if this is going to work we want less regulation. I assure the noble Lord, Lord De Mauley, that that fight will continue.

We need to help the new members of the European Union get on with implementing those measures which create the single market—we are in a fabulous place to do that as a nation. They way to do that is to come at it as partners, not with the arrogance of pretending to be bigger or superior. We are the one nation that, right the way through, across the parties, never wavered in getting those accession states into the European Union. They know that we never wavered in our support. That gives us a special place in their hearts that we can use to help them to build capacity and understanding to make the single market work.

My noble friends Lord Harrison and Lord Mitchell referred to the constant need to help small and medium-sized enterprises, which represent 99 per cent of the private sector of the European Union, grow, develop and create the wealth and employment which will make the difference in a knowledge-based economy. The single market has made it easier to start or buy a business. The average cost of setting up a new company in the former EU 15 has fallen from €813 in 2002 to €554 in 2007. The time needed to register a company administratively, while still frustratingly far too long, has reduced from 24 days in 2002 to 12 days today. The fight goes on. We are doing better than most, but we could carry on trying to set an example and do it better.

The noble Lord, Lord Freeman, referred also to what is key to the future for the United Kingdom in a single market: the two great sectors of energy and financial services, especially retail. With energy, we must continue the drive. I can assure noble Lords that we will drive constantly to achieve liberalisation of energy markets across the whole European Union. With financial services and especially in retail, it is high time that certain countries—let us name some names: Germany and France—get on the page of a liberalised market, not for the benefit so much of business as of the consumer, to make sure that the customer gets a better deal across the whole of Europe.

I, too, share the frustration of the noble Lord in seeing the words “free and undistorted competition” removed from the draft treaty. It is sad that, while lawyers advise us that that does not affect the end game, it is the mood music which is created, the spirit of what this is all about, that are diminished. Noble Lords have my assurance and that of Her Majesty’s Government that the fight will go on to make sure that undistorted competition and a free market continue to be the at the very top of our agenda in all that we do in Brussels.

The noble Lords, Lord Bradshaw and Lord Berkeley, made some very helpful and obviously knowledge-based remarks on transport, especially the railway system. In my time at the CBI, I visited many countries. I remember sitting in the offices of an automotive components manufacturer in Ljubljana in Slovenia. One could have eaten lunch off the floor; it was a fabulous place. It had big markets for its components—into Torino in Italy, into München for BMW, up into Paris for Renault and then into my home town of Brum for Jaguar and Land Rover. The person to whom I was speaking said that it took a truck about 48 hours to get up to Birmingham, having dropped off on the way. I said, “A truck? Why don’t you use the railway? It is environmentally sound and, I would suggest, more cost effective”. He laughed at me and said, “A railway? It gets to each of the different boundaries on the way up there. Sometimes, it all gets taken off, counted and gets put back on, and what gets put back on is less than what got taken off. Sometimes, they insist that the train is pulled through a particular country by a train that is actually made in that country. Sometimes, you get the whole train having to be run by personnel from that country, and then, of course, in other countries, freight waits and can sit in sidings for ages. I’d rather put it on a truck”. We will not achieve an effective single market, at a productivity level which can beat the Americans, who can put freight on a train in Chicago and take it off in New Orleans, or certain parts of India and Asia, or win anywhere in the European Union, if we do not have a cross-border railway system that works.

On regulation of the railway sector, I entirely agree that the focus should be on free, undistorted, liberalised and competitive markets. In the same way that the Government have influenced the energy sector with a view to opening it up, so we will continue, I assure the House, to work with the European Commission in pushing for a better regulated and more competitive railway sector. The Government would like to see greater regulatory co-operation across the European Union. The key is co-operation; the key is the independence of regulators. A flexible regulatory framework will require greater regulatory co-ordination and consistency, coupled with a robust process for reaching agreement on cross-border issues. That is the key to this; it is not individual government ownership or interference. Governance will depend on stronger and more independent national regulatory authorities. Noble Lords have this Government’s assurance that we will continue to push and press on that. I shall refer the specific transport points raised by noble Lords to the Secretary of State for Transport and I assure them that they will be taken up.

I learn more every day from my noble friend Lord Borrie about regulation. Regulators and regulation are necessary, but they can be the last refuge of a protectionist. It is important that, in our quest for good regulators, we do not allow the protectionists to win.

I am indebted to my noble friend Lord Harrison for his remarks. As he said, it is a joy always to listen to the tour d’horizon that we receive. I came back from Saudi Arabia earlier this week; I am off to Thailand next week. Every time I come back, I know that I live in a different country from that described by certain newspapers in this country. It is not just the prerogative of one newspaper or other. I just know that I live in a different country from that which many people read about every day. It is important that all people in the public realm, not just in this House, constantly try to promote brand Britain for its values, many of which are encapsulated in the essence of the single market.

My noble friend Lord Mitchell moved on to roaming. I, too, speak with a vested interest in this, as does the taxpayer, because the taxpayer pays for the mobile phone bill when I call in from all over the world on government business. The phone bill is disproportionately expensive for the calls that I make and text messages that I send from overseas because of the roaming charges. It is not right that the UK taxpayer pays more for that than when I text from Glasgow to London. The fight goes on. I sincerely hope that the changes will mean a better deal for use of what is one of the great tools of making the single market work and better realising, especially for the young, the benefits of globalisation.

I am grateful to the noble Lord, Lord Freeman—

My Lords, does the Minister judge that the passage of the Lisbon treaty, both in this Parliament and all the Parliaments of the European Union member states, will facilitate the effective development of the single European market, or does he feel that it is irrelevant to that?

Yes, my Lords, I would have said for the purposes of this debate that the Lisbon treaty is irrelevant to the continued drive for an effectively working single market. Many factors around the fringes will affect it, one of which, I suggest, if we are not careful, is the mood music. We have to make sure that people understand and enjoy the street cred that comes with a single market, and see it for the opportunity that it is, and not the threat. That understanding is more important in other countries than here; this country in its DNA gets globalisation and single markets. We like wider markets in which people get richer every day and buy our goods and services. It is not rocket science. We get it throughout the country. I cannot say the same for certain other countries. I will not name names, but I can think of one 22 miles south-east of Dover.

I want to deal with one point raised by the noble Lord, Lord De Mauley. He raised the single payments policy. That is a Treasury lead, not a UKTI lead. As the noble Lord knows, it is related to European Union monetary policy. I will refer the matter to Ministers in the Treasury and ensure that they get back to him.

In conclusion, Her Majesty’s Government believe that the Commission’s single market review, by highlighting areas in which the single market can be further improved, will give the European Union the impetus to move forward and create more jobs that are sustainable. It will centre the whole drive of enterprise and entrepreneurship around the development of knowledge to increase competitiveness and to ensure that there is a European Union single market which works for consumers and for businesses. Both aspects of democratic capitalism have to operate in a globally competitive environment, or we are history. At the same time we can use it to tackle the challenges of poverty, prejudice and ignorance that happen throughout the European Union.

The single market has created one of the great opportunities of this century. The United States is going to spend the next 20 years welcoming other powers to the top table. Its omnipotence economically is over. We will see China, India and others join it at the top table. I do not see the demise of America; I merely see a widening at the top. Whether the European Union—480 million people living in peace—wishes to join that top table, is going to be for the single market to deliver. On that basis the report from the European Union Sub-Committee B has made an important contribution to the analysis. I commend it.

My Lords, in thanking the Minister most sincerely for that very comprehensive response, I shall briefly respond to the points directed at the Select Committee. This has been a very interesting and worthwhile debate. Your Lordships on all sides have spoken with a single voice. When the Hansard report is read by those in Brussels, they will be impressed by the coherence and unanimity of our views.

The noble Lord, Lord Haskel, reminded us that it is important that we should retrace our steps in Select Committees. We will do so in looking at the implementation of the services directive. The noble Lords, Lord Dykes, Lord Bradshaw and Lord Berkeley, form a powerful lobby, arguing for an examination of where we have got to, both for road and railway transport, in the internal market. That certainly has my strong personal support. The noble Lord, Lord Mitchell, talked about text messaging. I have to say to the noble Lord—and I know he realises this—that he and other members of the committee really did have influence on Commissioner Reding. Lords reports in Brussels really do count, probably uniquely, if I might say so, among many of the other nations in the European Union. The noble Lord played his part, and we will continue to follow mobile phone charging, but text messaging in particular.

The noble Lord, Lord Borrie, reminded us of the importance of looking at intellectual property. That is unfinished business in terms of the internal market. The noble Lord, Lord Harrison, asked us to look at SMEs. We will continue to do so. I stressed the importance of that in my opening remarks.

I thank my noble friend Lord De Mauley from the Front Bench. I am sure that the committee will agree with the vast majority of the comments he made. He is one of the few Front Bench spokesmen who seems to have a new portfolio each day. He discharges them with great distinction.

I thank the noble Lord, Lord Jones, for stopping off between Saudi Arabia and Thailand and for his good humour. Certainly from these Benches, but I think I speak for all noble Lords, we congratulate the noble Lord on the diligence and excellence of his contribution and on his experience. He is certainly not a wallflower, but I think that internationally he would make a marvellous dancing partner.

On Question, Motion agreed to.