European Council

Part of the debate – in the House of Commons at 1:08 pm on 24th March 2005.

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Photo of Tony Blair Tony Blair Prime Minister 1:08 pm, 24th March 2005

With permission, Mr. Speaker, I shall make a statement about the European Council that took place in Brussels on 22 and 23 March. It was the fifth in a series of summits about the Lisbon agenda on economic reform in Europe.

It is the British case that economic reform is not going as far or as fast as it must. Nevertheless, over the past five years, 6 million extra jobs have been created in Europe. We have opened up the telecommunications market, and the gas and electricity markets have been liberalised, bringing new choice to consumers. Air travel has also been opened up, bringing cheaper air tickets. In the recent World Economic Forum study of international competitiveness, six EU states were among the 15 most competitive nations in the world. Britain is one of them and has risen a number of places in the last year.

Some progress has been made, but the truth is that there used to be eight EU countries in the top 15. There are still far too many unemployed people in Europe and too many businesses unable to compete as they should. That provides the EU's challenge.

The European Council rightly decided yesterday to support the Barroso Commission's emphasis on growth and jobs as the first-order priorities. There was also strong support for the Commission's proposals for improving and simplifying its approach to regulation.

However, the services directive is at the heart of this next phase of the Lisbon programme. Services account for 70 per cent. of both the UK and EU economies. The directive is intended to liberalise that market. It does this by requiring national Governments to make it easier for European service companies to establish on their territory, so regulatory regimes must be simplified and made accessible. It also facilitates temporary, cross-border trade in services.

The directive is unquestionably an ambitious measure. Authoritative studies show that it could bring at least 600,000 new jobs to Europe, and add some €37 billion to the European economy. Also, many of the accusations made about it are unfounded or overstated. It does not mean that workers from a low-cost member state can work permanently under their country of origin wages and conditions in another member state. The posted workers directive already prevents that. Neither does it mean that consumer protection and health and safety legislation will be circumvented or abandoned. Again, there are complementary measures that cover those areas.

It is true that there are some genuine concerns about the implications of the proposals—for example, for us there is their impact on the national health service—that need to be addressed in the negotiations. The directive, inevitably and rightly, will be amended as it goes through its legislative process. The Commission signalled that several weeks ago, and confirmed as much again at the European Council. However, the changes will be part of the normal legislative and negotiating process and, fortunately, the final decision will be by qualified majority voting. None of that has changed as a result of this European Council, whose conclusions were of course subject to the unanimity rule, so any member state had a veto over them.

However, to have withdrawn the directive, as some wished, would have been a grave injustice and error for Europe's economy. President Barroso is therefore absolutely right to maintain it. The Commission remains committed to the main principles of the directive, as do we and many other EU Governments, notably those from the new member states. Its adoption will be a key test of Europe's seriousness about reform.

The issue, however, that underlies the debate about the services directive is the future of the European social model. Some, notably France, believe that that model should remain in its existing form. Some, like Britain, believe firmly in Europe's social dimension but wanted it updated to take account of modern economic reality.

Fortunately, in this debate—which will dominate discussion of Europe's economic future over the coming years, just as the debate over the transatlantic alliance will dominate debate on foreign policy—we have the benefit of some empirical evidence. The UK has shown that it is possible to have flexible labour markets combined with a minimum wage, tax credits to help families into work, family-friendly policies to help the work-life balance, the new deal for the unemployed, record investment in education and skills, and a strong economy. I believe that that is the modern social model for Europe, and that it is recognised as such by many of our partners. The result has been higher growth, higher employment and lower unemployment for the UK. Those successes can be replicated across Europe, with the right policies.

It is worth adding that the UK has also benefited from its decision, unique amongst the larger member states, to open its labour markets to workers from the new member states. Far from disrupting our labour markets, they have, for the most part, made a positive contribution to the British economy. If we want Europe to compete not just with the USA but with China and India in the future, this type of open and flexible economy is precisely what we need.

I should report briefly to the House on four other issues covered during this European Council. We endorsed the deal reached in ECOFIN on reform of the stability and growth pact. That introduces a more sophisticated system for implementing the rules, taking account of issues such as the level of debt, investment, and the impact of the economic cycle, all in line with UK objectives, while maintaining financial prudence.

On climate change, we discussed a long-term strategy for the EU, including progressive targets for reducing emissions. We shall take that process forward in the context of our G8 and EU presidencies later this year.

On Africa, the European Council noted the Commission for Africa's report and agreed that we had to step up our support for that continent. There is now unanimous support inside Europe for the policies that can confront the challenge—indeed, the scandal—of thousands of African children who die needlessly every day and, where they survive, live lives of unimaginable poverty and deprivation: 2005 must be, and should be, Africa's year.

On Croatia, we discussed follow-up to the recent decision by European Foreign Ministers to postpone accession negotiations, but to start as soon as there is full co-operation by the Croatian Government with the International Criminal Tribunal for the Former Yugoslavia. The British Government, in principle, strongly support Croatian membership of the EU. The next step is likely to be EU discussions with Croatia, led by the present and future presidencies, about how to achieve full co-operation with the tribunal. I should add that we also supported democracy in Lebanon.

As was obvious from this Council, and from recent NATO-EU summits, there is a big debate going on in Europe today. It is vital to Europe's future, and to the future of Britain. In this debate, we know where we stand: in favour of the transatlantic alliance as the bedrock of our security; in favour of adapting Europe's economy to the future as the path to our prosperity. It is a debate in which we have allies. It is a debate that we can win. But to win we have to participate, fully, wholeheartedly, with self-confidence and belief; we must not marginalise Britain, reducing it to the role of spectator. The policy of this Government is clear: to be at the centre of the debate, not the margins.

I commend this statement to the House.