Speaking following discussions at the Justice and Home Affairs Council, the Home Secretary said:
“We must clamp down on free movement abuse, which takes its toll on our public services and local communities. The UK ensured this issue was high on today’s agenda, and I am grateful to our EU partners for their increased support following our constructive discussion.
“Ministers have today acknowledged that free movement abuse is a problem for a number of Member States and we have secured a commitment to find EU-wide solutions to this problem.
“Stopping the abuse of free movement will help us to maintain an immigration system that works in the UK’s national interest. But this is not a problem for the UK alone. That is why we are continuing to develop a consistent and collaborative approach across the EU.”
The Rt Hon William Hague MP
Secretary of State for Foreign and Commonwealth Affairs
Speech at Schloβ Neuhardenburg
Friday 31 May 2013
Britain and Germany: Partners in Reform
Ladies and Gentlemen, I’m delighted to be here at the 63rd Königswinter Conference.
I want to talk this afternoon about reform: why we need it, and what Germany and Britain can do to build a more competitive, flexible, democratically accountable European Union.
This is a fitting venue. As you know, this palace was a reward from a grateful King Friedrich Wilhelm III of Prussia for the great reforming achievements of Karl August Fürst von Hardenberg, his Chancellor of State, including the abolition of various restrictions on trade and anti-competitive practices.
As a member of the Hanoverian civil service and then the Prussian government, I am sure Hardenberg would welcome this conference, and the close cooperation between Britain and Germany.
The growing bilateral relationship
Thinking back my visit to Berlin in October, I am struck by how much our relationship has grown even since then – a tribute, in part, to those here today.
It is a relationship where we learn from each other:
Iain Duncan Smith, our Secretary of State for Work and Pensions, was in Berlin earlier this month to understand how Germany has managed to drive unemployment down to a post-reunification low of 5.5 per cent, even as the Eurozone remains in recession.
Lord Green, our Minister for Trade & Investment, has been here this week, following a fact-finding mission at the end of last year looking at Germany’s export success.
We are in turn sharing our experience. Next week a team from the Cabinet Office will visit Berlin to explain how we have been building better understanding of public psychology into the policymaking process.
Working together in the EU
In the EU too, our partnership has gone from strength to strength:
On the EU budget, where Chancellor Merkel and Prime Minister Cameron argued that it was simply not right that the EU should spend more when national governments across Europe were cutting back. Working with other partners, we secured the first ever cut in the EU’s multiannual budget. As well as being good for our taxpayers it was good for the EU to show that the same budgetary rigour applied to European spending as to national spending.
On the first stage of Banking Union, a Single Supervisory Mechanism, where we reached a deal that respects the rights of those both inside and outside the Eurozone, and safeguards the Single Market, the bedrock of the European Union.
And on better regulation, where the Chancellor and the Prime Minister have secured a commitment to cut unnecessary regulation so that business can flourish – particularly small and medium-sized enterprises and the German Mittelstand.
We are also working very closely together to promote free trade, which I shall return to later.
In each of these cases, we have shown people in Britain, Germany and across Europe that we can make progress in reforming the EU.
But the scale of the challenges facing Europe is serious. Let me touch on three: First, how we make our way in an ever more competitive global economy. Second, how we address the EU’s lack of democratic accountability. And third, how we ensure that the EU develops the flexibility to respect the diversity of its Member States.
Competitiveness and the Global Race
In the last five years, as the European economy has flat-lined, the Chinese economy has grown by an average of 9.3 percent per year, the Indian economy by an average of 6.6 percent. By 2030, some forecasts suggest that Europe’s share of nominal global GDP could halve, as the world’s emerging economies continue to surge forward.
Part of the problem we have faced here in Europe is of course the Eurozone crisis. But if we’re honest, Europe’s economic difficulties run deeper than that. The crisis has simply brought forward the debate on some of the underlying structural problems that have been brewing for decades.
As an historian here in the heart of Prussia I must mention Bismarck. When he introduced the world’s first old age pension in 1889 for workers who reached 70, the average life expectancy was somewhere between 40 and 45. Now the average European lives to about 80.
The numbers are not sustainable. As Chancellor Merkel has pointed out, Europe accounts for just over 7 per cent of the world’s population, 25 per cent of its economy, and an incredible 50 per cent of global welfare spending.Germany has led the way in getting to grips with these challenges through a series of painful but impressive labour market reforms and through fiscal consolidation.
Others have also shown what can be done. In Lithuania the Government reduced public sector wages by more than 17 per cent from 2008 to 2010. Ireland’s Government and the trade unions came to an historic agreement to cut 28,000 public servants between 2008 and 2012. In Portugal, the public sector pay bill was reduced by almost 23% between 2010 and 2012.
In Britain, our Government has reduced the deficit by a third over three years. The private sector has created one and a quarter million jobs. Employment is around record levels, exceeding the pre-crisis peak even though we have reduced the public sector headcount by more than six hundred thousand. We are rebalancing the economy towards high end manufacturing and exports.
Getting our finances and social models into shape is not, however, sufficient. We must also create the right regulatory environment for economic growth.
World-class German and British manufacturers are already capitalising on the opportunities that emerging markets present. We export BMWs made in Bavaria (one in four of which has an engine made in Britain) and advanced aircraft components engineered in Bristol and Bremen. But we also need to look at what comes next: the opportunities in exporting our knowledge industries and professional services.
The size of the global middle class is projected to increase by three billion by 2030. As prosperity levels increase, we want these new global consumers not only to drive an Audi and to fly in an Airbus, but to work in spaces designed by British and German architects, to negotiate international business through our law firms, and to finance those deals through London and Frankfurt.
This is one of the reasons why we are worried about the proposed Financial Transactions Tax. And why we are uncomfortable with the proposed cap on bankers’ bonuses. Not because we don’t agree that the global financial industry needs better regulation: it does, and this British Government is proud to be putting in place some of the most exacting reforms of all, following the Vickers Report. But that regulation needs to help us compete in the global race, not set our feet in concrete.
Financial and professional services account for 4.4 per cent of German GDP. The sector provides nearly 2.2 million jobs in Germany and 2.1 million in the UK. Across Europe, financial and related professional services accounts for nearly 11.5 million jobs. The global market is expanding rapidly. It is ours for the taking. But if we strangle ourselves with regulation that drives away business, you can be sure that Singapore, Dubai and New York will be ready to take advantage of our folly.
Financial services underpin the rest of our economies. If we impose excessive requirements on financial institutions, we throttle businesses’ access to lending. If we tax transactions, we make it more expensive for firms to hedge against risks, as great companies like Bayer and Siemens need to do every day. We end up holding back enterprise in general: not just banking but everything that we make, build or sell.
And if, on top of that, wrong-headed regulations mean that bankers or pension fund managers are simply paid larger salaries rather than bonuses that actually reflect their performance, we are simply re-creating the sort of perverse incentives that we set out to eliminate.
Lack of democratic legitimacy
The second major challenge is how we build the democratic legitimacy of the European Union.
Let me say a word about Britain.
I think the British people agree that we need effective institutions to uphold the Single Market, so that firms across Europe can compete on a level playing field.
They want to see that market deepened, so that European firms can sell to 500 million consumers, and so that those consumers can in turn benefit from greater choice.
They appreciate the role the EU is playing in helping bring stability and prosperity to the Western Balkans and our neighbourhood – areas where the UK and Germany have worked together closely. Having just come from Croatia, which we are about to welcome into the EU and Serbia, which may soon start accession negotiations, I have just seen some of that progress at first hand.
I think the British people also want the EU to be a multiplier of our collective influence and values in the world, so that we can forge trade agreements that open new markets, tackle global poverty, or ensure the Iranian regime experiences real consequences for nuclear proliferation.
But they do not understand why Brussels has to interfere in how long junior doctors can work. Or why someone from another Member State should be able to continue to claim benefits in the UK even after they have moved back to their own country. I think we are all relieved that the European Commission is not going to ban Europeans from using olive oil jugs at restaurant tables. But it is extraordinary that such a decision should be within the EU’s power in the first place.
Too often, the British people feel that Europe is something that happens to them, not something they have enough of a say over. That the EU is happy speaking but does not seem interested in listening. That the EU is sometimes part of the problem, not the solution.
This is not just a British issue.
The latest Pew Research from earlier this month is a warning: a sharp fall in support for the EU across the continent. Eight points lower in Germany, at 60 percent. Two points lower in Britain, at 43 percent. 19 points lower in France, at 41 percent.
The fall is even starker for young people, traditionally more enthusiastic about the EU than their parents and grandparents.
Trust in the institutions is at an all time low. The EU is facing a crisis of legitimacy.
I do not believe that we are going to solve this through more powers for the European Parliament, or attempts to build a European demos that are bound to fail.
Turnout has fallen to record lows in successive European elections across the Union, although every major Treaty Change in the past thirty years has seen the European Parliament’s powers being increased.
The European Parliament plays an important role in holding European institutions to account. It can play a very positive role, as it has along with Commissioner Damanaki in the current reforms to the Common Fisheries Policy. But if the European Parliament were the answer to the question of democratic legitimacy we wouldn’t still be asking it.
I think instead that the solution lies in promoting the role of national institutions in European decision-making – because ultimately it is national governments and national parliaments that are accountable to our electorates. They are the democratic levers voters know how to pull. I want to offer some thoughts on how we might do that in a moment.
Need for flexibilit
This idea of the right balance between national and European decision-making, and respect for the concepts of proportionality and subsidiarity, brings me to my third key challenge. How can we build a European Union that acknowledges and respects the diversity of its Member States? One that recognises that our national approaches to and ambitions for the European Union may sometimes differ?
And here I am not necessarily talking about the traditional approach – an opt-out here, an opt-in there – but perhaps something more fundamental.
The idea that, as the Eurozone develops the institutions required to solve its problems, it may have to move towards a level of integration greater than some members of the EU would ever feel comfortable with.
That, at the same time, some Member States may want to move towards enhanced cooperation, as we have done with the Unified Patent Court, or some want to do with the Financial Transactions Tax.
But that ultimately the EU remains an inclusive club based on the four freedoms and the Single Market – something that is in the interest of all its members, in and out of the Eurozone.
These are relatively new concepts. We do not yet have the answers. But we need to start asking the right questions, as partners in a shared endeavour.
Britain in Europe
I know that our friends in Germany and across the Continent follow closely the vigorous debate on Europe that we have in Britain. They could perhaps at times be forgiven for asking themselves about our commitment to making European Union work.
But the Prime Minister couldn’t have been clearer in his speech in January.
He said that Britain’s national interest is best served in a flexible, adaptable and open European Union.
That such a European Union is best with Britain in it.
And that he will campaign for such an arrangement with all his heart and soul.
So now we want to get on with the business of delivering that reformed EU.
And here, Britain and Germany must lead the way.
I understand that in bringing stability to the Eurozone, Germany faces political challenges that are both very tough and of enormous long-term importance. The choices you make over the next few years are every bit as fundamental as those we need to face.
My conviction is that the challenges we have recognised – competitiveness, democratic accountability, flexibility – are just as important to the European project as finding the right model for Eurozone economic governance. These are not competing agendas, but complementary – as I think we have both come to understand better over the last year.
A shared reform agenda
Let me set out four areas on which I think we might focus together:
First, deepening the Single Market so that we’re making the most of the growth opportunities in digital, energy and services.
Development of a digital single market by 2020 could result in a four percent increase in EU GDP. With the European e-commerce market forecast to double in size to 625 billion euros by the end of 2016, we need to start by strengthening cross-border e-commerce.
On energy, we need to go further in increasing competition across the single market, liberalising gas and electricity markets, developing new low carbon energy sources and supply corridors, and strengthening interconnections between countries to enable EU-wide trade in clean, low carbon electricity. Cheaper energy would boost British and German companies alike.
On services we need to start by ensuring that the Services Directive is fully implemented across all EU Member States. The European Commission estimated last year that just ensuring that all Member States improved their implementation to at least the current average level would add 0.4% to EU GDP. Full implementation of the Services Directive could add 2.6% to EU GDP
Second, making regulation work for business, not hold it back.
Here we are asking businesses what proposals they want to see from the Commission for reducing the regulatory burden – where SMEs need to be exempted, where rules need to be simplified, and where regulations need to be withdrawn altogether. We look forward to identifying common priorities with Germany and other partners.
Third, building new trade relationships.
Concluding all on-going and potential free trade agreements could boost EU GDP by two percent. Germany and Britain have worked hard over the last year to put the Transatlantic Trade and Investment Partnership at the top of the agenda. It could be worth 119 billion euros a year to the European Union and 95 billion euros to the United States. But perhaps more importantly, with a combined population of almost half of global GDP and nearly a third of global trade flows, Europe and the United States will be able to shape international trading standards for decades to come.
This is why it is important that we grasp the opportunity to launch ambitious negotiations next month, in time for President Obama’s visit to Northern Ireland for the G8 Summit. And why we should not limit the potential of those negotiations by excluding certain sectors from the start. On audio-visual, for example, we should have the confidence to recognise the opportunity that the American market offers us, worth 400 billion euros and growing at five per cent per year.
And fourth, starting to make the EU more democratically responsive
I do not want to go into great detail at this stage, not least because David Lidington, our Minister for Europe, set out some ideas in his speech at the Europaforum in Berlin earlier this month. But my strong sense is that we need to recognise that most people across Europe look to their own national institutions. We need to rediscover the role of national governments and national parliaments. Because, as Chancellor Merkel pointed out recently, Europe’s value is not measured by the growth of the acquis communautaire.
One area in which we have seen important progress is the Common Fisheries Policy. We are in the process of agreeing that groups of member states, not the Commission, should manage their coastal waters – because decentralisation makes sense. That would be a fine achievement but it has been long in coming because, although the EU is very good at centralisation, unlike the German or British systems, it lacks mechanisms to decentralise — to push powers down as well as up. We badly need such mechanisms. Indeed, I do not think the EU will be democratically sustainable without them.
In Britain, we are looking at the balance of competences between the EU and the national level. We want this work to contribute to an informed and serious debate in the UK. We also hope it will be of interest to our European partners, as similar discussions take place in other member states.
At the same time, we should do more to help our parliaments exercise their right to work together to raise a yellow card to object to legislation where action should be taken at a national rather than a European level, in line with the principle of subsidiarity. We should explore whether the yellow card provision could be strengthened or extended to give our parliaments the right to ask the Commission to start again where legislation is too intrusive, and fails the proportionality test. And we should think about going further still and consider a red card to give national parliaments the right to block legislation that need not be agreed at the European level.
Finding the right balance between integration in Europe for those who need it, and flexibility where it is best for our economies and our democracies, is the great challenge of German and British diplomacy over the next few years. Taking our voters with us, at the same time as we modernise our economies and states, is the great challenge for German and British politicians.
The more closely we work together, the more successful we will be in building a European Union fit for the 21st Century, and one which can truly earn the support and trust of people across our Continent and beyond.
22 May 2013
Delegations will find attached the conclusions of the European Council (22 May 2013).
Conclusions – 22 May 2013
EUCO 75/13 1
In the current economic context we must mobilise all our policies in support of competitiveness,
jobs and growth.
The supply of affordable and sustainable energy to our economies is crucial in that respect. This is why the European Council agreed today on a series of guidelines in four fields which together should allow the EU to foster its competitiveness and respond to the challenge of high prices and cost: urgent completion of a fully functioning and interconnected internal energy market, facilitation of the required investment in energy, diversification of Europe’s supplies and enhanced
Tax fraud and tax evasion limit countries’ capacity to raise revenue and carry out their economic policies. In times of tight budgetary constraints, combating tax fraud and tax evasion is more than an issue of tax fairness - it becomes essential for the political and social acceptability of fiscal consolidation.
The European Council agreed to accelerate work in the fight against tax fraud, tax
evasion and aggressive tax planning. In particular, work will be taken forward as a matter of priority on promoting and broadening the scope of the automatic exchange of information at all levels.
1. The EU’s energy policy must ensure security of supply for households and companies at affordable and competitive prices and costs, in a safe and sustainable manner. This is particularly important for Europe’s competitiveness in the light of increasing energy demand from major economies and high energy prices and costs.
While the guidelines set by the European Council in February 2011 remain valid and must continue to be implemented, further work is required as set out below.
2. Reaffirming the objectives of completing the internal energy market by 2014 and
developing interconnections so as to put an end to any isolation of Member States from European gas and electricity networks by 2015, the European Council called for particular priority to be given to: Conclusions – 22 May 2013 EUCO 75/13 2
a) the effective and consistent implementation of the third “energy package”, as well as speeding up the adoption and implementation of remaining network codes. Member States which have not yet completed transposition are invited to do so as a matter ofurgency;
(b) the implementation of all other related legislation, such as the Directive on the
promotion of renewable energies and the Regulation on security of gas supply;
(c) more determined action on the demand side as well as the development of related
technologies, including the drawing up of national plans for the swift deployment of
smart grids and smart meters in line with existing legislation;
(d) stepping up the role and rights of consumers, including as regards change of suppliers,
improved management of energy use and own energy generation; in this respect, the
European Council underlines the importance of protecting vulnerable consumers;
(e) the Commission providing guidance on capacity mechanisms and on addressing
unplanned power flows.
3. The Commission intends to report on progress on implementation of the internal energy market early in 2014. Member States will regularly exchange information on major national energy decisions which have a possible impact on other Member States, while fully respecting national choices of energy mix. Conclusions – 22 May 2013
EUCO 75/13 3
4. Significant investments in new and intelligent energy infrastructure are needed to secure the uninterrupted supply of energy at affordable prices. Such investments are vital for jobs and sustainable growth and will help enhance competitiveness. Their financing should primarily come from the market. This makes it all the more important to have a well-functioning carbon market and a predictable climate and energy policy framework post-2020 which is conducive to mobilising private capital and to bringing down costs for energy investment. The European
Council welcomes the Commission’s Green Paper on a 2030 framework for climate and energy policies and will return to this issue in March 2014, after the Commission comes forward with more concrete proposals, to discuss policy options in that regard, bearing in mind the objectives set for the COP 21 in 2015.
5. As regards action taken to facilitate investments, priority will be given to:
(a) the swift implementation of the TEN-E Regulation and the adoption this autumn of the list of projects of common interest with a view to supporting efforts across the EU to achieve effective interconnection between Member States and more determined action to meet the target of achieving interconnection of at least 10% of installed electricity production capacity;
(b) the adoption of the Directive on the deployment of alternative fuels infrastructure;
(c) the revision by the Commission of state aid rules to allow for targeted interventions to facilitate energy and environmental investment, ensuring a level playing-field and respecting the integrity of the single market;
phasing out environmentally or economically harmful subsidies, including for fossil fuels;
(d) the presentation by the Commission of guidance on efficient and cost-effective support schemes for renewable energies and on ensuring adequate generation capacity;
(e) national and EU measures, such as the structural funds, project bonds and enhanced EIB support, to boost the financing of energy and resource efficiency, energy infrastructure and renewables and promote the development of Europe’s technological and industrial
(f) continued efforts on energy R&D, technology and the exploitation of synergies with ICT, through better coordination between the EU, Member States and industry and drawing up of a R&D strategy in energy matters to achieve genuine added value at European level.
6. It remains crucial to further intensify the diversification of Europe’s energy supply and develop indigenous energy resources to ensure security of supply, reduce the EU’s external energy dependency and stimulate economic growth. To that end:
(a) the deployment of renewable energy sources will continue, while ensuring their costeffectiveness, further market integration and grid stability and building on the
experience in some Member States which have heavily invested in renewable energy
(b) the Commission intends to assess a more systematic recourse to on-shore and off-shore indigenous sources of energy with a view to their safe, sustainable and cost-effective exploitation while respecting Member States’ choices of energy mix;
(c) given the increasing interlinking of internal and external energy markets, Member Stateswill enhance their cooperation in support of the external dimension of EU energy policy; before the end of 2013, the Council will follow up on its conclusions of November 2011 and review developments regarding EU external energy policy,
including the need to ensure a level playing-field vis-à-vis third country energy
producers as well as nuclear safety in the EU neighbourhood following up on the
European Council conclusions of June 2012.
7. Energy efficiency measures can make a significant contribution to reversing current trends in energy prices and costs. The implementation of the Directives on energy efficiency and on energy performance of buildings is of crucial importance. The Commission will review the Directives on eco-design and energy labelling before the end of 2014, in line with technological developments. Energy efficiency measures and programmes should be promoted at all levels.
8. The impact of high energy prices and costs must be addressed, bearing in mind the primary role of a well-functioning and effective market and of tariffs in financing investment. The European Council calls for work to be taken forward on the following aspects:
a) innovative financing methods, including for energy efficiency, more systematic supply diversification and improved liquidity in the internal energy market also have a particular role to play when addressing energy costs;
b) the issue of the contractual linkage of gas and oil prices needs to be looked at in this context;
c) the Commission intends to present an analysis of the composition and drivers of energy prices and costs in Member States before the end of 2013, with a particular focus on the impact on households, SMEs and energy intensive industries, and looking more widely at the EU’s competitiveness vis-à-vis its global economic counterparts. These issues will be addressed in the context of the discussion scheduled for the February 2014 European Council on industrial competitiveness and policy.
9. The Council will report back on progress on the implementation of the guidelines agreed today by the end of the year.
10. It is important to take effective steps to fight tax evasion and tax fraud, particularly in the
current context of fiscal consolidation, in order to protect revenues and ensure public
confidence in the fairness and effectiveness of tax systems. Increased efforts are required in this field, combining measures at the national, European and global levels, in full respect of Member States’ competences and of the Treaties. Recalling the conclusions adopted by the Council on 14 May 2013, the European Council calls for rapid progress on the following issues:
(a) priority will be given to efforts to extend the automatic exchange of information at the EU and global levels. At the level of the EU, the Commission intends to propose
amendments to the Directive on administrative cooperation in June in order for the
automatic exchange of information to cover a full range of income. At the international level, building on ongoing work in the EU and on the momentum recently created by the initiative taken by a group of Member States, the EU will play a key role in promoting the automatic exchange of information as the new international standard, taking account of existing EU arrangements. The European Council welcomes ongoing efforts made in the G8, G20 and OECD to develop a global standard;
(b) further to the agreement reached on 14 May 2013 on the mandate to improve the EU’s agreements with Switzerland, Liechtenstein, Monaco, Andorra and San Marino,
negotiations will begin as soon as possible to ensure that these countries continue to
apply measures equivalent to those in the EU. In the light of this and noting the consensus on the scope of the revised Directive on the taxation of savings income, the European Council called for its adoption before the end of the year;
(c) Member States will also give priority to the concrete follow-up to the Action Plan on strengthening the fight against tax fraud and tax evasion;
(d) in order to counter VAT fraud, the European Council expects the Council to adopt the Directives on the quick reaction mechanism and on the reverse charge mechanism by the end of June 2013 at the latest;
(e) work will be carried forward as regards the Commission’s recommendations on
aggressive tax planning and profit shifting. The Commission intends to present a
proposal before the end of the year for the revision of the “parent/subsidiary” Directive, and is reviewing the anti-abuse provisions in relevant EU legislation. The European Council looks forward to the OECD’s forthcoming report on base erosion and profit shifting;
(f) it is important to continue work within the EU on the elimination of harmful tax
measures. To that end, work should be carried out on the strengthening of the Code of
Conduct on business taxation on the basis of its existing mandate;
(g) efforts taken against base erosion, profit shifting, lack of transparency and harmful tax measures also need to be pursued globally, with third countries and within relevant international fora, such as the OECD, so as to ensure a level-playing field, on the basis of coordinated EU positions. In particular, further work is necessary to ensure that third countries, including developing countries, meet appropriate standards of good governance in tax matters;
(h) there is a need to deal with tax evasion and fraud and to fight money laundering, within the internal market and vis-à-vis non-cooperative third countries and jurisdictions, in a comprehensive manner. In both cases the identification of beneficial ownership, including as regards companies, trusts and foundations, is essential. The revision of the third anti-money laundering Directive should be adopted by the end of the year;
(i) the proposal amending the Directives on disclosure of non-financial and diversity
information by large companies and groups will be examined notably with a view to
ensuring country-by-country reporting by large companies and groups;
(j) efforts are required to respond to the challenges of taxation in the digital economy,
taking full account of ongoing work in the OECD. The Commission intends to assess
these issues further, in advance of the October 2013 European Council discussion on the digital agenda.
11. The Council will report back on progress on all these issues by December 2013.
COUNCIL OF THE EUROPEAN UNION - Brussels, 13 May 2013
CO EUR-PREP 18
General Secretariat of the Council
Permanent Representatives Committee / Council
European Council (22 May 2013)
- Draft conclusions
In accordance with Article 2(3)(a) of the Council’s Rules of Procedure, delegations will find attached the draft conclusions prepared by the President of the European Council, in close cooperation with the member of the European Council representing the Member State holding the six-monthly Presidency of the Council and with the President of the Commission.
Against the backdrop of high pressure on Europe’s competitiveness and increasing energy demand from major economies, the EU’s energy policy must ensure the uninterrupted supply of households and companies at affordable and competitive prices. While the orientations set by the European Council in February 2011 remain valid and must continue to be implemented, further work is required as set out below.
Good progress has been made towards meeting the objectives of completing the internal energy market by 2014 and developing interconnections so as to put an end to the isolation of certain Member States from European gas and electricity networks by 2015. Particular priority will be given to:
the effective and consistent implementation of the third “energy package”, as well as speeding up the adoption and implementation of remaining network codes. Member States which have not yet completed transposition will do so as a matter of urgency;
the implementation of all other related legislation, such as the Directive on the promotion of renewable energies and the Regulation on security of gas supply;
more determined action on the demand side as well as the development of related technologies, including the elaboration of national plans for the swift deployment of smart grids and smart meters in line with existing legislation;
stepping up the role and rights of consumers, including as regards change of suppliers, improved management of energy use and own energy generation; measures should be taken at the appropriate level to help cover the basic energy needs of vulnerable consumers without jeopardising the functioning of the internal energy market.
The Commission intends to report on the state of implementation of the internal energy market early in 2014. Member States will regularly exchange information on major national energy decisions which have a possible impact on other Member States, while fully respecting national choices of energy mix.
Significant investments in new and intelligent energy infrastructure are needed to secure the uninterrupted supply of energy at affordable prices. Such investments are vital for jobs and growth and will help enhance competitiveness. Their financing should largely come from the market, which makes it all the more important to have a predictable climate and energy policy framework post-2020, conducive to mobilising private capital and to bringing down costs for energy investment. The European Council welcomes the Commission’s Green Paper on a 2030 framework for climate and energy policies and notes its intention to come forward with such a framework in due time, after which the Council will revert to this issue.
As regards action taken to facilitate investments, priority will be given to:
the swift implementation of the TEN-energy Regulation and the adoption this autumn of the list of projects of common interest;
the adoption by the end of the current legislature of the Directive on the deployment of alternative fuels infrastructure;
the revision by the Commission of state aid rules to allow for targeted interventions to facilitate energy and environmental investment, ensuring a level-playing field and respecting the integrity of the single market;
the presentation by the Commission of guidelines on efficient and cost-effective support schemes for renewable energies and on ensuring adequate generation capacity;
EU and national measures to boost the financing of the economy, including as regards innovative instruments and possibilities for enhanced support by the EIB, in particular for energy efficiency and resource efficiency (on the agenda of the June 2013 European Council);
continued efforts in energy R&D, technology and exploitation of synergies with ICT, which calls for better coordination of EU, Member States and industry.
It remains crucial to further intensify the diversification of Europe’s energy supply and develop indigenous energy resources. To that end:
the deployment of renewable energy sources will continue, while ensuring their cost-effectiveness and integration in the internal energy market;
the Commission intends to assess a more systematic recourse to indigenous sources of energy with a view to their safe and sustainable exploitation;
given the increasing interlinking of internal and external energy markets, Member States will enhance their cooperation in support of the external dimension of EU energy policy; the Council will follow up on its conclusions of November 2011 and review developments regarding EU external energy policy before the end of 2013.
The impact of high energy prices and costs must be addressed, bearing in mind the primary role of the market and tariffs in financing investment. The European Council calls for work to be taken forward on the following aspects:
energy efficiency measures can contribute in an important manner to reversing current trends in energy prices and costs. The implementation of Directives on energy efficiency and on energy performance of buildings is of crucial importance. The Commission will review the Directives on eco-design and energy labelling before end 2014 in line with technological developments;
innovative modalities of financing, a more systematic use of supply diversification and improved liquidity in the internal energy market also have a particular role to play when addressing energy costs;
the issue of the contractual linkage of gas and oil prices also needs to be looked at in this context;
the Commission intends to present before the end of 2013 an analysis of the composition and drivers of energy prices and costs in Member States, with a particular focus on the impact on households and energy intensive industries, and more widely as regards the EU’s competitiveness vis-à-vis global economic counterparts. These issues will be addressed in the context of the discussion scheduled for the February 2014 European Council on industrial competitiveness and policy.
The Council will report back on progress on the implementation of the orientations agreed today by the end of the year.
It is important to take effective steps to fight tax evasion and tax fraud and tackle aggressive tax planning, particularly in the current context of fiscal consolidation, in order to protect revenues and ensure the confidence of citizens in the fairness and effectiveness of tax systems. Increased efforts are required in this field, combining measures at the national, European and global levels, in full respect of Member States’ competences. The European Council calls for rapid progress on the following issues:
Member States will give priority to the concrete follow up to the Action Plan on strengthening the fight against tax fraud and tax evasion;
[p.m. taxation of savings interests: Directive on taxation of savings and negotiating mandates to improve agreements with neighbouring countries, in light of ECOFIN outcome;]
work will be accelerated to extend the automatic exchange of information at the level of the EU to cover the full range of income. To that end, the Commission intends to propose amendments to the Directive on administrative cooperation during the summer;
at the international level, building on the EU’s experience and on the momentum recently brought by the initiative of five Member States, the EU will seek to take a leading role in the automatic exchange of information as the new international standard, taking account of existing EU arrangements. The EU will develop to that end strong coordinated positions in the context of the G8, the G20 and the OECD;
the Council will adopt by July 2013 at the latest the pending measures to counter VAT fraud, i.e. the Quick Reaction Mechanism and the Directive on reverse charge;
work will be carried forward as regards aggressive tax planning and profit shifting, in line with the Commission’s recommendations on these issues. The Commission intends to present before the end of the year a proposal for the revision of the “parent/subsidiary” Directive and is reviewing the anti-abuse provisions in relevant EU legislation;
it is important to continue work within the EU on the elimination of harmful tax measures. To that end a reflection should be carried out on how to strengthen the Code of Conduct on business taxation;
efforts taken against aggressive tax planning, profit shifting, lack of transparency and harmful tax measures also need to be pursued globally, with third countries and within relevant international fora, such as the OECD, on the basis of strong common EU positions. In particular, further work is necessary to ensure that third countries meet appropriate standards of good governance in tax measures;
there is a need to deal with tax evasion and fraud and fight money laundering, within the internal market and vis-à-vis non-cooperative jurisdictions, in a comprehensive manner. In both cases the identification of beneficial ownership is important. The revision of the third directive on anti-money laundering should be adopted by the end of the year;
efforts are required to respond to the challenges of taxation in the digital economy, taking full account of ongoing work in the OECD. The Commission intends to further assess these issues, including possible measures to avoid erosion of taxable profits, in advance of the October 2013 European Council discussion on the digital agenda;
the Council will report back on progress on all these issues by December 2013. __________
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British-American Business Council
16 May 2013
(Check against delivery)
Ladies and Gentlemen
It’s an honour for me to join you this evening. The British-American Business Council is an important fixture in this country and in the United States – promoting an open trading environment with our respective governments. As you’ll know, the US and the UK are each other’s largest foreign investors – with that investment supporting over a million jobs in each country. Here in the Midlands, where the US is similarly the number one foreign direct investor, the local BABC chapter plays a major role in the regional economy.
I’m also delighted to share this platform with Ralph [Speth], who – with backing from the Tata Group – has turned around the fortunes of Jaguar Land Rover. JLR has created around 9,000 jobs in the UK over the past two years, and is continuing to invest in our auto sector – including its new engine plant in the West Midlands, which the Coalition has supported with a Grant for Business Investment. On a personal note, I value Ralf’s contribution as a member of the Automotive Council, which enables a healthy dialogue between the sector and my department, and has set the benchmark for collaboration between industry and government. This approach is responsible, in part, for international vehicle manufacturers committing £6 billion to projects in the UK over the last two years. That includes investment from US car makers like Ford and GM, and I’ve gained a lot from visits to the USA, when I was able to highlight the strengths of the UK research base and flexible workforce.
EU-US free trade agreement
You won’t be surprised to hear that I fully endorse what Ralph has just said about the significance of a EU-US free trade agreement. This FTA would be the biggest bilateral agreement in the world. The EU and US account for almost half of world GDP and one third of global trade flows. Every day, around €2 billion worth of goods and services are traded bilaterally. So this is a once-in-a-generation opportunity that we should move quickly on while the politics on both sides of the Atlantic are favourable. The Prime Minister’s visit to discuss this issue with President Obama underlines the importance our government attaches to it. Eliminating low tariffs alone could add billions to both our economies. A bolder agreement that addresses non-tariff barriers – including regulations, standards and intellectual property practices – would achieve even more. There are some formidable problems – overcoming vested interests in agriculture, national sensitivities around audio-visual products, growing EU worries about American energy cost competitiveness – but they are surmountable.
The UK, of course, was instrumental in getting the Transatlantic Trade and Investment Partnership off the ground. Now, during the UK’s G8 Presidency, we will be making the strongest possible case for trade liberalisation, and we look forward to launching the FTA negotiations soon. Our aim is to agree the EU mandate in time for the G8 Summit in Northern Ireland, with a view to actual negotiations beginning in early summer.
These efforts, I believe, need to be considered in two contexts. The first is the failure, so far, of multilateral trade talks. A global multilateral agreement involving the big emerging markets is a first, best solution. But we should not let the best be the envy of the good. With Doha stalled, we need the EU and US to show leadership and prove their commitment to open markets. A successful conclusion, in which we agree on common standards and rules fit for the 21st century – particularly in new and emerging technologies – would be a yardstick for others to follow. I’m particularly keen to make it easier for smaller firms to export – who lack the resources of the multinationals to work around regulatory barriers.
The second context, however, is a more domestic affair. A few weeks ago, we saw UKIP make gains in the council elections. We are talking about 7.5 per cent of the electorate who were expressing dissatisfaction on a variety of issues. But, nonetheless, this vote has been interpreted as an opportunity to revisit the issue of UK membership of the EU. In many ways, this protest vote echoes other outbursts around Europe in the past few years. After a big crisis especially, history tells us that there will often be a populist response – a politics of identity in which emotions are easily excited. Outsiders, foreigners or minorities become scapegoats for a country’s problems and it is possible to make big inroads by offering seductively easy solutions.
Last week, Nigel Lawson became the most prominent figure in UK to recommend exiting the EU – and he since has been joined by other Tory “big beasts” from the past – Lord Lamont and Michael Portillo, and also Labour’s Denis Healey. The band-wagon has now picked up several of my coalition colleagues. But let me deal with the Lawson article. He cited an intolerable regulatory and fiscal burden and attacks on the City, as well as the claim that the EU diverting us from greater prizes in Asia. But the main underlying issue was his belief that the Eurozone had set Europe inexorably on the road to political union, which the UK could not and would not join.
The case for the European Union
Now, Lord Lawson is an influential political figure who deserves to be treated with respect. He has been right on some big issues like bank reform, though perversely contrarian on the science of climate change. In 1975, he voted in favour of the common market. His article in the Times was carefully argued – which makes it all the more necessary to scrutinise his argument and the evidence he put forward.
What we must avoid is a silly, emotional argument built around stereotypes. As it happens, I understand Lord Lawson lives in France most of the time and is very happy there, while I am a so-called pro-European who speaks no European languages competently and much prefers Britain, even with our climate. Let us stick to the facts and be as objective as we can about the costs and benefits of continued membership of the EU and, within it, the Single Market.
There are valid arguments on both sides. Membership has led to a high degree of interdependence, such that around three million workers have jobs linked to trade with the EU, some of which would be at risk from withdrawal, depending on the alternative arrangements. Indeed, since 1993 – the year when Maastricht took effect – there has been just one year in 20 when employment in the UK has fallen: 2009, the peak of the global financial crisis. Compare that to the two decades before 1993, when there were at least eight years in which UK employment fell.
The single market has boosted EU GDP by about 2 per cent. Against that, there are regulatory costs – from standardisation and from EU social and environmental policies – some of which we could otherwise avoid. There is also the net budget contribution of £8 billion after rebate, half of one per cent of GDP. Academics and other experts have tried to show that Britain is a net beneficiary or a net loser, reflecting their own partiality. Over the next few years, much ink will be spilt trying to prove that the balance is red or black.
But the key issue is the counter factual. What does non-membership actually mean? Is there a clearly defined alternative arrangement to which the UK could move with minimal disruption or uncertainty? As Lord Lawson is honest enough to concede, there are “transitional” costs of leaving the EU and the unquantifiable effect on business confidence – already fragile – of removing the current certainty. Posing the question of alternatives is a crucial step, as we are discovering, in the parallel debate on Scottish independence – with secessionists variously arguing for a new Scottish currency or for accepting the disciplines of the Bank of England in a sterling area. In a similar way, there are very different alternatives to UK membership of the EU: let us call them Min and Max.
Min involves a Norwegian type of arrangement: remaining within the Single Market. This retains the benefits of the Single Market but also the budgetary cost of the continued contribution and the costs of regulations over which the UK would no longer even have a vote. It is difficult to see why such a half-way house would commend itself to opponents of EU membership since it retains most of the costs; nor is there any reason to assume that a divorce settlement would be as generous as it was for Norway. The news this week of the Commission’s unannounced inspections into the oil sector, including at Statoil premises in Oslo, demonstrates vividly that a Norway-type arrangement does not move you beyond the reach of EU law.
In practice, we are talking about Max: moving the UK to a position comparable to Canada or the USA, vis à vis the EU today (or, closer to home, to that of Turkey or the Ukraine – though Turkey is inside the EU customs union for goods, and Ukraine has negotiated an FTA with the EU, though it’s not yet in force. Switzerland also has some sectoral FTAs. Lord Lawson is clear enough that this is what he envisages – others have been less clear – and is willing to face the costs of getting there. Let us be clear what they are.
Unless we could quickly negotiate a generous free trade agreement with the EU, UK firms would face tariff and non-tariff barriers – including the likes of JLR. Indeed, our car manufacturers save hundreds of millions of pounds by not having to pay the common external tariff to export to the EU. European regulation, despite its flaws, makes it possible for car manufacturers in the UK to export across the EU without incurring additional approval costs. The same goes for more than 90,000 small UK businesses – those with fewer than 50 staff – who trade with the EU. For them in particular, operating from outside the Single Market – without the benefit of common regulations applying to all Europeans – would prove extremely tricky.
But that is only the beginning of it. Many inward investors, in both manufacturing and services, have invested in the UK because they see us as a business-friendly location and a gateway to the EU: the largest single market in the world, bigger than the US and Russia combined. We could reasonably expect an exodus of the non-EU firms headquartered in this country, precisely because they regard the UK as the gateway to Europe. The UK currently hosts more non-EU firms than Germany, France, Switzerland and the Netherlands combined, and remains the favourite destination for firms looking to establish a European HQ. And these companies in Japan, China, the USA and elsewhere whom we are currently trying to attract to the UK will, quite reasonably, think again if they believe we are planning to leave the EU.
The counter argument is that none of this will matter much – after a painful transition involving lots of problems – if, somehow, we can tap into growth elsewhere. The Eurosceptics really do need a reality check. What do they think is happening now? Exports from the UK are growing rapidly to countries like Russia, China and Brazil – not in any way inhibited by membership of the EU. And we often lag well behind Germany and even France and Italy, where exporters never saw emerging markets and the EU as alternatives.
For all the dynamism of economies in Asia, Latin America and elsewhere, let’s not lose sight of the fact that the EU is not just the largest single market in the world by a long way. It is the UK’s most important trading partner – almost half of our exports are destined for the EU, and seven of the UK’s top ten trading partners are member states. One in 10 UK jobs depend on trade with the EU.
By contrast, China accounts for 2.5 per cent of our exports, India and Russia both under 2 per cent, and Brazil under 1 per cent. The Government is rightly – and after years of neglect by our predecessors – helping business to tap the clear growth opportunities in these markets – but the EU could remain our most important market for another couple of decades. And despite the fact that the Eurozone is passing through severe economic problems – as are we after our own financial crisis – there are many growth opportunities and opportunities for further markets opening- through a digital single market, say, or a single market for energy.
And it is the EU which is leading negotiations to open up trade with Canada, India, Japan, Singapore, the ASEAN and Mercosur countries – and now, of course, the USA. That’s on top of the recent free trade agreement between the EU and South Korea, estimated to be worth up to £500million annually to the UK economy. It is far from obvious that the UK could, on its own, command the same attention or sense of priority from these countries in negotiating trade agreements.
Critics, including Lord Lawson, are also being rather melodramatic when they talk of a bureaucratic “monstrosity” imposing regulatory costs that are uniquely severe on the UK. Although it would be difficult to credit it from the rhetoric , much of this monstrous regulation is designed to open up the Single Market and its Four Freedoms through harmonised standards or mutual recognition: free trade in goods and services, and freedom of capital and labour movements. Ironically, much of the popular antipathy to the EU derives from these freedoms (especially movement of workers), but those opposing membership of the EU must vehemently claim to be dedicated to these same four freedoms. Moreover, being a part of the EU has not prevented us from having one of the most deregulated labour markets in the world, one that has generated over a million private sector jobs in the last two years. Where regulation has been genuinely excessive and problematic, as with the Working Time Directive, opt outs have been negotiated and are being successfully defended.
A great proportion of the regulation that business regularly complains about is of a local variety: the hoops that business must jump through created by our immigration controls, the planning system, our complex tax regime or health and safety – very few of which are determined by Europe. Even where the EU bears responsibility, it is fanciful to think that the alternative to EU rules would be no rules. Much of the so-called “red tape” is generated by the need of business for regulatory certainty. An “independent” UK would also generate measures for consumer, environmental and social protection.
In particular, he despairs of the regulatory stranglehold which Brussels is threatening to impose on UK banking and the financial services sector. I share many of his views on banking, notably his concern that our banks have become too large and concentrated for the good of the economy. We are now following his advice in separating, through an electrified fence, retail and investment banking operations. It is hardly surprising that the EU is also trying to tighten bank regulation after the harm caused by the banking crisis. Some of the proposed regulation is, however, overly prescriptive and excessive, especially in relation to sectors of financial services which did not precipitate the financial crisis. But let us not exaggerate. Until recently, the UK was able to shape the EU’s Markets in Financial Instruments Directive to its advantage.
And I doubt very much that our ability to relieve these burdens would be improved if we suddenly flounced out of the EU. As I’ve stressed, London is seen by global investors and firms from outside the EU as a prime entry point to the EU’s single market in financial services, thanks to the system of common regulation and the UK’s competitiveness in this industry. There are thousands of foreign-owned financial companies in the City, including several hundred from the US. Many of then would question the value of a UK location were it to cut itself adrift. But we should not allow, in any event, the interest of Canary Wharf to trump those of Birmingham, and the rest of British industry.
No serious friend of British business would be advocating the break-up of Britain’s relations with the EU. We can’t have hearts ruling heads. Today, as part of the Balance of Competences Review, I have launched calls for evidence on trade and investment, research and development, and on the free movement of goods – so we have some objective analysis of what EU membership means for the UK.
Of course there needs to be reform in the EU. Our relationship will certainly evolve as the Eurozone consolidates – necessitating, in due course, a referendum on any substantial change in constitutional arrangements. In the meantime, there is much work to be done in completing the Single Market and advancing trade liberalisation globally and, bilaterally, with the USA. The Liberal Democrat manifesto in 2010 promised we would put Britain at the heart of Europe in pursuit of national opportunity, security and prosperity – and we will continue to push for this in Government. It is simply self-indulgent and reckless for parties or individuals to risk so much in order to address one concern raised in a council election by just seven per cent of the electorate.
When historians come to analyse and to write the story of Britain’s troubled and turbulent relationship with the other countries of Europe since the end of the Second World War- and they are already beginning to do so, distinguished amongst them the speaker to the first session of this seminar, Stephen Wall – they may not find it too difficult to trace the course of events, the increasing availability of archives should ensure that, but they may well be rather baffled to explain why things happened as they did. Why did Britain, the only country in Western Europe to emerge politically, if not economically, unscathed from the two great European civil wars with global dimensions, simply surrender, almost by default, the role it could have had in defining the shape and content of the new Europe which was rising from the ashes, and that despite the urging of its closest ally, the United States of America? Why too did the domestic differences over Europe hang like a ball and chain round the ankle of every British Prime Minister, once the decision was taken to join the European Community, preventing every one of them in different ways from playing the leading part that they wished to play, as one of them put it “at the heart of Europe”? Perhaps one of the first people to write about these matters, Michael Charlton, who was able to interview and to record the views of those who took the crucial decisions in the 1950’s, got it right when he entitled his book “The Price of Victory
Before looking at the narrative of these events, it might be worthwhile to consider two threads that run through the story from its outset to the present day. The first of these is the belief that the UK and the British are somehow quite different from heir continental partners, not in fact Europeans at all, that we belong to what General de Gaulle called “le grand large”. This myth, and it really is an unhistorical myth, is what led Hugh Gaitskell – a highly intelligent and well-educated man (he was educated at the same school as I was, Winchester) – to say that joining the European Communities would be to reject a thousand years of history. I call it a myth because geographically, ethnically, linguistically and culturally there is not a scintilla of doubt that we are as European as all the other Europeans around us. Moreover the whole course of our modern history has demonstrated that we are inextricably linked, like it or not, to the course of events on the other side of the Channel. It may have protected us from invasion, but it did not save us from spending massive amounts of blood and treasure in European wars from at least the sixteenth century onwards; and it means that we still have an essential stake in the peace and prosperity of the whole European continent, ourselves included. Nor is it historically correct to suggest that our world-wide interests set us apart from the other Europeans; they too had their period of colonial expansionism. To the people we colonised and dominated in earlier times we are all just a lot of Europeans. But, even if the idea of British exceptionalism is largely mythical, it is nevertheless a powerful myth and it exercises considerable influence to this day.
The second thread is more deeply hidden and less part of the daily political discourse but partly because it is not a myth, it is, I believe, more significant. For most European countries, and that goes for the countries of Central and Eastern Europe every bit as much as for those of the West, the first half of the twentieth century was a catastrophic period during which their political institutions foundered in totalitarian dictatorships or in foreign occupation. This has made them more naturally sympathetic to turning towards collective European responses to the challenges of achieving peace and prosperity and has also meant that they are far from convinced that, when the waves mount around them, national solutions will be the best answer. In our case, and that of a few others, that same period saw our political institutions survive the greatest tests they had ever faced, which means that we do not have that same built-in sympathy for collective European solutions to our problems nor that mistrust of purely national responses. That fault line has run through the history of Britain in the European Union and it cannot simply be wished away. It means that we will always be a bit more sceptical, in the non-pejorative sense of that word, about further moves towards a closer union. But it does not in my view invalidate the case for a Britain at the heart of a Europe whose motto, if the ill-fated Constitutional Treaty had seen the light of day, was to be “Unity in diversity”.
The two early, but fateful, decisions which successive British governments took, first not to join the Coal and Steel Community and then not to join the European Economic Community from the outset, passed off without any serious differences between or within the two main parties who shared the honours, if that is the right word, for those two pretty disastrous strategic errors. A few, courageous voices were raised by individual politicians, usually those with direct experience of the Second World War and thus aware of the political significance of what was under way. But they were brushed aside. Nor did the civil service contain many who questioned the conventional wisdom of the day. It was a failure for which virtually the whole British political class was responsible. When one looks at the reasons given for those two acts of denial – the supposed reactions of the Durham miners to the Coal and Steel Treaty, the unlikelihood of the Rome Treaty to get anywhere or lead to any important consequences for Britain - one can only wonder at their triviality and at their inaccuracy. Later, when the error of those two decisions were recognised and Britain was attempting to negotiate its way in, to be met by two Gallic vetoes which certainly did nothing for the morale and for the public support of that recognition, the disruptive capacity of European issues as a feature of the domestic political debate both between and within the two main parties became more apparent. There was Gaitskell’s reaction to the original application, which I have already mentioned, and there was Labour’s rejection of the accession terms which the Heath government had negotiated. Both decisions split the Labour party, while Conservative differences were still at that stage pretty marginal. It is hard to recall without irony that the Conservative party in that period was proud to call itself “the party of Europe”.
The next phase, the renegotiation of the terms of accession and the 1975 referendum, was entirely driven and dominated by British domestic politics. In negotiating terms the results were meagre, obtained once the Wilson/Callaghan government had made clear that it was not proposing changes either to the founding treaties or to the treaty of accession. But, as Stephen Wall has made clear in his recent, magisterial volume of the official history, the whole operation was a brilliant tactical success for Harold Wilson. What the referendum, which was most certainly seen by all concerned at the time as an in/out test of public opinion, did not do was to settle the matter of Britain’s membership once and for all. Within months internal hostilities within the Labour party had resumed and by the time of the 1983 election the party was campaigning for withdrawal. There are plenty of lessons to be drawn from the experience of 1974/5 by the present generation of politicians but I am not sure that most of them are even aware of them.
As the 1980’s passed so did Labour’s anti-European fever, with a little, gentle help from Jacques Delors. But it proved to be contagious and before long the temperature in the Conservative party was mounting. The departure from office of Margaret Thatcher in 1990 was at least in part due to that; and the Major government with its tiny, and dwindling, majority after the 1992 election became a hostage to what was now, somewhat speciously, called euro scepticism. The Conservative Party has remained in thrall to these divisive demons ever since. And, while the Labour Party is relatively free of Euroscepticism, the internal divisions between Prime Minister Tony Blair and Chancellor of the Exchequer Gordon Brown over the decision on whether or not Britain should join the euro demonstrated that it remains far from immune from the disruption which European issues have habitually sown in British politics.
Now, with the Prime Minister’s failed attempt to block the Fiscal Union Treaty in December 2011 and with his Bloomberg speech in January of this year we are once again headed into stormy waters and a period when the domestic implications of Britain in Europe and what actually goes on in Brussels are inextricably but often confusingly linked. The Cameron timetable for an in-out referendum may be clear but the conditions for its fulfilment are obscured by uncertainty over the outcome of the 2015 general election and by an almost total absence of specificity as to what the British government’s agenda in Brussels is going to be and as to what might be negotiable with the other member states. Moreover there is now a wild card on the table, UKIP, all set to do pretty well at the 2014 election for the European Parliament, when the combination of low turn-out and the attraction of a protest vote without immediate consequence, will play in its favour. The effect of the UKIP threat, which so far has had more impact on Conservative party opinion and election prospects than it has had on those of the other two main parties, is all too likely to ramp up the disruptive influence of domestic politics on what the British government of the day sets out to do in Brussels.
What conclusions can one reasonably draw then from this often sorry saga of the impact of EU membership on the UK’s politics and vice-versa and from the disconnect between the pursuit of Britain’s interests as a full and engaged member of the European Union and the necessary support for those policies by the electorate?
The first conclusion I would draw is that we (what can loosely be called the British political class – and in that category I would include not just politicians and officials, but also the media and academe) have not made a very good job of presenting and explaining to the general public the workings of the Brussels institutions, the often complex and far from straightforward choices that have to be made in European negotiations and fundamental nature of the strategic choice that Britain made when it decided to join the European Communities. Taking advantage of the fact that Europe has never been, and still is not, that high on the list of the electorate’s preoccupations, and always aware of the decision in their own ranks, the politicians have for the large part, with some honourable exceptions, chosen to ignore or to obfuscate, to avoid anything like a serious debate about European issues, preferring to score Brussels meetings as if they were just another Premier League encounter. And the press has swung from the almost unquestioning support of the 1970’s to the almost blanket derision and misrepresentation of today. As to analysis and research – and here I realise I am treading on delicate ground with the present audience – this has yet to get across to the average politician, let alone to the average voter. A situation in which the present Prime Minister appears to believe that Britain joined the European Communities for the Single Market, which in fact did not exist until nearly twenty years after it joined, is a sobering reminder of that. Is it too late now to remedy that situation? I do not believe so. Already in the last few months, as it began to dawn on many observers that Britain really might be drifting – or as one party leader put it, sleepwalking – towards the exit, there seems, to me at least, to have been some improvement in the public debate. There remains a long way to go if any eventual referendum vote is not to result in withdrawal and in Britain’s subsequent marginalisation in world affairs and in the political management of the region in which it will still be situated and on which it will still crucially depend.
The second conclusion I would draw is that no progress will be made in persuading the British people of the good sense of being a full participant in European policy-making if we do not fashion a broad, positive European agenda which the leadership of all three main parties can support. An agenda simply composed of vetoes and red lines and no-go areas will not achieve that; nor will one that seeks to repatriate for Britain alone substantial parts of existing European policy making, some of them quite evidently linked to the Single Market. Variable geometry is alive and well and living in Brussels – look at the euro, look at Schengen, look at the opt-out and opt-in provisions in Justice and Home Affairs. It should be possible, with goodwill, to fashion further elements of that approach in the context of an emerging banking union – if, that is, one stays at the table to do so. That is not repatriation or renegotiation, it is just pragmatic politics. Such a positive agenda will need to reach out well beyond the UK’s normal comfort zone of completion of the Single Market, with more progress on services and the digital economy, of further enlargement, of freer world trade; it will have to be built up in the interests of all member states, not just to accommodate the particularities of one of them. As the economics of austerity bite deep into the defence budgets of all member states, is it not high time for Britain and France, the key players in any European Common Security and Defence Policy, to contemplate further cooperation at the European level, encouraged to do so, as they are being, by a transatlantic ally which no longer fears a weakening of NATO and which actually wants Europe to do more collectively in this field?
And then, thirdly and finally – and here I will step firmly onto the political terrain which you invited me to do – I would suggest that a lot of scepticism is in order over the basic case for an in/out referendum, in 2017 or at any other date. That case is being made most vociferously, if not exclusively, by those who want Britain to pull out. It is suggested that we have never had an in/out choice. That is nonsense; the 1975 referendum was precisely that. It is suggested that the European Community of 1975, which we voted by 2:1 to remain in, is not the European Union of today; indeed so, but nor is NATO today the NATO we joined in the 1940’s, nor is the UN today the UN we joined in 1945, and no one is suggesting we should have an in/out referendum on membership of those organisations. It is suggested that the choice we were offered when we originally joined was misrepresented as being simply to join a Common Market; anyone who seriously believes that should go back and read the parliamentary debates or the editorials of the time or perhaps glance at George Brown’s 1967 White Paper which said that “the economic balance is a fine one” and then went on to set out the case for our second application in largely political terms. If they want a voice from the other side of the political spectrum, they could do no better than turn to a young Margaret Thatcher who told an American audience in 1966:
“The Common Market is political as well as economic…if we went in for political reasons – the concept of a united Europe or a prolonged peace – as I believe we should”. Most improbably of all it is asserted that an in/out referendum would settle the matter once and for all; well, just look at what happened after 1975 and see whether your confidence in that is not a little bit shaken. The commitment to hold a referendum on any significant further transfer of powers to Brussels is there, embedded in the 2011 legislation, and no one that I know of is suggesting repealing that. So why not rest on that, and get on with pushing a positive agenda broadly within the framework of the existing allocation of powers?
I have tried your patience long enough. If I leave one thought with you it is that the real debate over Britain’s role and place in Europe is just beginning, not that it is nearly over.
Lord Hannay of Chiswick
The European Union: Our Shared Future
The Rt Hon David Lidington MP, Institute of International and European Affairs, Dublin, 9 May 2013
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1. Your Excellencies, Distinguished Guests, Ladies and Gentlemen.
2. I am very honoured to have been invited to speak on Europe Day, in a year when Ireland is holding the Presidency of the European Union for the seventh time.
3. I am also delighted to be back in Dublin. The Institute of International and European Affairs enjoys an international reputation for thought leadership and research, and I hope to draw on that great breadth of knowledge in our conversations later today.
4. It is a source of great pleasure that UK-Irish relations are in such an excellent state. In today’s challenging and fast-changing international context, solid friendships based on mutual understanding like ours are so valuable, yet all too rare.
5. Across the board, there is a great range of increased co-operation underway.
6. …We are working towards a joint visa arrangement for the Common Travel Area;
7. …We are working jointly to promote tourism to these islands.
8. …We have an ambitious plan to improve our trade with third countries through joint engagement.
9. …And we are working together on a new initiative to harness the potential of our renewable wind resources, and reduce our reliance on fossil fuels.
10. While the relationship between our nations is forward-looking, it is also important to remember the past. In March this year, our Prime Minister and the Taoiseach committed both governments to commemorating our shared past.
11. The decade between 2012 and 2022 has and will witness many important anniversaries, particularly the centenaries of the Ulster Covenant, the Battle of the Somme, the Easter Rising and the Government of Ireland Act.
12. As we move forward, we will work to remember these events in a way that encourages mutual understanding and respect.
Shared future in Europe
13. Ladies and Gentlemen, I am here today to talk about our shared future in Europe.
14. 2013 marks the 40th anniversary of Ireland joining the European Community in 1973, alongside Britain and Denmark, bringing to nine the number of member states.
15. A football match was played at Wembley stadium that year which pitted representatives of The Three newcomers against The Six existing members, and I’m pleased to report that the newcomers won 2-0.
16. Taoiseach Enda Kenny looked back on Ireland’s EU experience when he addressed the European Parliament in January this year. The Irish people had made a good decision to join, he said, and had traveled far and well.
17. In the UK, we too need to understand better what EU membership actually means for us. Hence last summer the UK Government launched the Balance of Competences Review to give us an informed, evidence-based analysis of the impact of EU membership on the UK.
18. Officials will produce 32 reports over the next two years looking at everything the EU does and how it affects the UK from the environment to education to EU enlargement. To do this as thoroughly as possible, we are seeking evidence from the widest possible range of experts and interest groups in the UK and beyond.
19. To tackle a common misconception head on, the Review is not designed as a prelude to the repatriation of powers.
20. In fact, the Review will not be making specific policy recommendations. Instead, it will provide a wealth of evidence and objective analysis to inform a constructive and serious debate in the UK.
21. We also hope the review will provide an additional contribution to the broader European conversation about the future of Europe and so we are keen to hear from others across Europe on these issues.
22. Addressing the challenges Europe faces in the 21st century and coming up with solutions that work for all will call for the sharpest analysis we can muster.
23. The Taoiseach has said that it is in Ireland’s strategic national interest for the UK to be at the heart of Europe.
24. I agree. And when the British Prime Minister gave his own speech on Europe one week after the Taoiseach, there were some who assumed they already knew what it was going to say.
25. Yet those who studied the speech saw that the Prime Minister was not making a pitch to leave, or disengage from, the European Union. Far from it. And I can’t stress that point enough. The Prime Minister has been clear that Britain’s strategic national interest is to be part of the EU, shaping the policies of the EU.
26. But he also said that the EU is losing public support, and not just in the UK. We all need to face up to this fact.
27. The Eurobarometer survey published in 2012 showed that only 27% of Britons felt very or fairly attached to the EU. The figure is higher in Ireland, at 44%, and the EU average is higher still – at 46%. However, none of these statistics are encouraging.
28. Recent elections across Europe have shown an increase in support for movements which challenge the authority of the status quo. We have seen this in election results from Italy to Finland; from France to Greece.
29. Economically, the EU is seen as currently delivering lower living standards, frozen incomes, and few jobs for young people.
30. And politically the EU is increasingly perceived as inflexible and undemocratic.
31. The Prime Minister set out an alternative vision of a reformed Europe that is more competitive, more open, more flexible and more democratically accountable … A Europe that delivers not just for the UK but for the rest of Europe too… and a Europe that he would campaign heart and soul to stay within.
32. This speech has sparked a genuine debate across Europe. Not everyone agrees with our point of view – nor do we expect them to - but there is agreement on the need to pose these questions, and a growing sense of urgency about the need to find the answers.
Competitive and open
33. Both the Taoiseach and our Prime Minister have noted how Europe has been transformed in the last 40 years.
34. In the UK, the 1970s were an era where we had:
35. … an astonishing 12.9 million work-days a year lost to strikes and a three-day working week.
36. …inflation that peaked at 25%.
37. …And we had to go to the International Monetary Fund for a bailout that was then the biggest it had ever given.
38. Now we live in a digital age, with industries that couldn’t have been conceived of forty years ago – the internet, smart phones, the low carbon economy, computer graphics, online retailing, and much more.
39. The single market has broken down borders, unlocked opportunities, and helped to bring prosperity to both our countries. Ironically, it took the economic crisis to make people on both sides of the Irish Sea fully wake up to how important our two economies are to each other.
40. Ireland’s four and a half million consumers constitute the fifth largest export market for British goods. And forecaster, Oxford Economics, suggests that Ireland will overtake France as the UK’s third largest export market for goods and services by 2030.
41. In return, the UK remains Ireland’s largest export destination. 16% of Irish industrial exports go to the UK, a position which has not changed since the introduction of the Euro. We estimate that some 50 billion Euros of goods and services flow across the Irish Sea each year.
42. Meanwhile, investment from the UK into Ireland since 2003 has totalled £10.5 billion, creating 55,000 jobs. The Irish Development Agency lists the UK as the third largest source of new investment in Ireland in 2011.
43. And in 2010, net FDI by Ireland into the UK was £1.3 billion.
44. Despite all of this, the single market has struggled to keep up with the pace of change.
45. And over the years, great snares of regulation have built up, making it harder for businesses to hire people, to take on new work and to grow.
46. Economically, we face huge challenges. We must manage the consequences of a decade of irresponsible borrowing and lending by governments and financial institutions alike. At the same time, we have to deal with a historic shift of global power to the emerging economies of Asia and Latin America.
47. In Ireland and the UK we both know that there are no easy, pain free answers. The EU needs to become more competitive in order to maintain the standard of living which Europeans currently enjoy. We need to keep up in the global race in which we compete against countries like Indonesia, Malaysia and India.
48. So how can we hope to achieve a more competitive and open EU?
49. Well, first of all, there is huge potential for reform of the Single Market and the wider European economy.
50. Significant non-tariff trade barriers remain in the Single Market. Recent analysis suggests that current trade between the UK and other EU member states could be as much as 45% below potential – equating to untapped export potential of around £80 billion.
51. Development of the Digital Single Market by 2020 could result in a 4% increase in GDP in the EU. At present, Hungarian Dr Who fans can’t watch the show on the BBC iPlayer because it is available in less than half of the EU member states.
52. And we’ve waited years for a pan-European iTunes that could help bring British or Irish music to an even wider audience.
53. We want a deeper market in services. Services make up about 70% of EU GDP but only 24% of intra-EU trade. Effective implementation of the Services Directive across the EU could add d £30 billion per year to the EU economy, or 2.6% of GDP.
54. Competitiveness also means keeping taxes on employment and enterprise low, a point that both the UK and Ireland understand.
55. We welcome the ambition of the European Council to make solid progress on scrapping regulations for small and medium-sized businesses over the summer.
56. There are some that argue that the only way to restore growth and competitiveness is to leave the EU. That is not the view of the British Government.
57. Yes, it is true that our fastest growing export and investment markets are going to be in emerging economies.
58. But it is still the case that Europe is the destination for about half of our exports, and it is forecast to remain our number one market for the next 10 to 15 years at least.
59. We export more to North Rhine Westphalia than to the whole of India. We also gain a bigger share of foreign and direct investment into the EU than any other EU Member State. Partly this will be due to the attractiveness of the UK on our own, but this also flows directly as a result of our membership of the single market.
60. It is also clear that our best chance of securing ambitious free trade deals with the US and major emerging economies is through using Europe’s collective leverage.
61. Trade with countries outside the EU is expected to provide essential jobs and growth over the coming years. The EU agreed a trade deal with Singapore in December, it started talks with Japan in the spring and we hope to conclude a deal with Canada soon.
62. But the largest prize is now within our grasp after decades of waiting and that is the Transatlantic Trade and Investment Partnership with the US.
63. Both our Governments have made this deal a priority, and we hope to make progress at the G8 leaders meeting in Northern Ireland in June which the Taoiseach is due to attend.
64. The European Commission estimates that this one deal alone would bring €545 to a family of four in Europe every year.
65. The Prime Minister also talked about the importance of flexibility in the EU, but what do we mean by this? And as importantly, what do we not mean by this? Let me start with the latter.
66. I want to be absolutely clear: the British vision for the future of the EU is not about cherry-picking, or ‘Europe a la carte’. As the Prime Minister said, we want to reform the EU for the benefit of all Member States.
67. Flexibility within the EU reflects our diversity. The breadth, depth and variety of Europe is both its charm and its great strength.
68. …As things stand now, some countries are in the Euro, others are not;
69. …Some take part in the Schengen arrangements, others – including the UK and Ireland - have retained their border controls.
70. …Twenty four countries have signed up to the EU patent.
71. And almost all Member States have their issues they regard as sensitive – whether agriculture, shipping or savings banks, where national interests have been accommodated.
72. The EU’s flexibility to deal with variety is a strength, not a weakness.
73. Our collective future is not about who’s joining in and who isn’t. It’s about embracing and mobilising the huge cultural, political and economic diversity of 27 – soon to be 28 – different countries.
74. Flexibility doesn’t mean that there are no rules. Flexibility is completely compatible with the Single Market and its rule-based structures. But that doesn’t require everything to be harmonised.
75. A more effective EU does not have to mean a bigger, more expensive or, indeed, more centralised EU. People feel that the EU is a one way process, that more and more decision-making is taken from national parliaments to the European level until everything is decided by the EU.
76. That needs to change. If we cannot show that decision-making can also flow back to national parliaments then the system will become democratically unsustainable.
77. A third and final point from the Prime Minister’s speech was the need for greater democratic accountability,
78. As the Eurobarometer figures I gave you earlier show, there is a worrying disconnection between the EU and its people.
79. And the latest opinion polls show growing levels of skepticism about Europe across the continent, notably in Spain and other countries hard hit by Europe’s crisis.
80. As the EU continues to evolve and the Eurozone integrates more closely, we must ensure that the people continue to be heard.
81. We believe national parliaments are the main source of democratic legitimacy and accountability in the EU. This is how the voices of people across the EU can be heard, and this is where their connection to the EU can be strengthened. They need to play a more active role in the functioning of the EU.
82. Now is the time to start thinking about how this could happen. We should improve the functioning of the existing yellow card mechanism by improved cooperation between national parliaments through COSAC, the Conference of Parliamentary Committees for Union Affairs of Parliaments of the European Union.
83. We could consider establishing the practice that COSAC or national parliaments can summon a European Commissioner to explain a proposal to national parliaments. And at the national level, we can look into improving our own scrutiny arrangements.
84. And when it comes to Britain, the Prime Minister has said that the Conservative Party in its manifesto will offer the British public a chance to have their own say on Europe after the next election.
85. To conclude, it is clear that the EU is vital to both our countries’ futures, and therefore we face an imperative to use the current crisis as an opportunity to reform and reshape it, and make it a body to which we will be proud to belong in the years to come.
86. Britain is playing a full part in this debate.
87. We are committed to helping to shape the future of an open, flexible and adaptable EU. We want to work with partners like Ireland to achieve a better deal for all Member States.
88. We’re not saying it will be easy, but we think that change is necessary, it is inevitable and it is achievable. Thank you.
 Source: European Policy Centre
 BBC i-Player only covers 11 European states (10 EU, plus Switzerland) (Source:EC, BBC)
 The UK has made the issue of licensing a priority and has built up alliances in support of its position (Source: BIS).
24 April 2013
I welcome your proposal to discuss tax evasion and fraud at the May European Council. As you know, the loss of tax revenue resulting from tax evasion and aggressive avoidance is staggering. In a period of fiscal consolidation where hard-working citizens and businesses are being asked to bear extra burdens, we need coordinated, truly global action to address these issues. This is why I put tax transparency at the heart of the 2013 G8 agenda when I wrote to you and other G8 colleagues at the start of this year.
I welcome the initiative of the Commission’s recent Action Plan on Tax Fraud and Tax Evasion, which sets out a range of proposals on which Europe can show leadership. As part of this, we very much support implementing existing measures, including the proposal for amending the EU Savings Tax Directive – where we appear closer than ever to reaching agreement – and proposals for reviewing the full range of tools to tackle evasion and avoidance.
However, as the Commission’s Action Plan itself recognises, tax evasion and aggressive tax avoidance are global problems that require truly global solutions. Otherwise, tax evaders will simply play the system and arbitrage between one jurisdiction to another. There is now, ahead of the G8 Summit in June, a timely opportunity for the G8 and EU to inject the political will required to raise international efforts to a new level and take radical, rather than incremental, action in four areas.
Firstly, on tackling tax evasion, the introduction of the Foreign Account Tax Compliance Act by the US could move us rapidly to a new global system of multilateral automatic exchange of information. This covers a wide variety of products and entities – and critically, includes requirements, which the UK is implementing, to ensure that we can collectively tackle tax evasion through the use of offshore trusts.
The UK has also taken other concrete steps to clamp down on tax evasion. We recently concluded automatic information exchange agreements, based on our agreement with the US, with our Crown Dependencies – the Isle of Man, Guernsey and Jersey. We are also in advanced discussions with our Overseas Territories to do the same, and continue to work closely with them and the Crown Dependencies on further concrete steps they can now take to demonstrate their steadfast political and practical commitment to tackling tax evasion.
The recent announcement by the UK with France, Germany, Italy and Spain to pilot multilateral automatic information exchange based on our agreements with the US is a significant step. I am delighted that other European countries, including Poland, have already signalled their willingness to join this initiative. And to support the development of a universal standard, the UK has also asked the OECD to report ahead of the G8 Summit on how to deliver this effectively. I hope that at our May Council we can give the strongest possible message of support from Europe for the rapid adoption of multilateral automatic information exchange as a new global standard, and encourage other jurisdictions to publicly commit to joining a multilateral system at the earliest opportunity.
Second, we must break through the walls of corporate secrecy. A lack of knowledge about who ultimately controls, owns and profits from companies leads to aggressive tax avoidance, tax evasion and money laundering, undermining tax bases and fuelling corruption across the world. Therefore, the G8 and EU must work together to ensure full transparency in beneficial ownership.
This means ensuring full and maximum implementation of the existing Financial Action Task Force standards on transparency in beneficial ownership. I hope G8 Leaders will consider publishing national Action Plans by June that set out concrete steps that their governments will take to achieve this – including, for example, by enhancing the availability of beneficial ownership information through central public company registries. Europe now has a real opportunity to be in the vanguard through the 4th EU Anti-Money Laundering Directive. But as ever, we must work with other countries and financial centres to ensure a level playing field.
Third, I have always been clear that competitive national tax systems go hand in hand with individuals and corporates paying the taxes they owe. The majority of them do so, and make a valuable contribution to society and to the funding of our public services. But some are choosing to shift their profits artificially to ultra-low tax jurisdictions, distorting competition.
Again, we need a truly global solution. As I am sure you will agree, the path to reform starts with the basic recognition that current global tax rules do not reflect the modern and globalised economy that our citizens live and trade in. The UK will, with the rest of the G8, seek to provide high-level political support to the ongoing efforts in the OECD and G20 to identify problems and gaps in these existing rules, and to work up options for reform. And I hope that the European Council can strongly support these efforts, which will reach a critical juncture this summer.
But as part of these longer-term changes, there should be room for a serious debate about what further steps can be taken to address continued attempts at aggressive tax avoidance. For example, we should consider how the steps taken by some firms to undertake country-by-country reporting on the tax paid in their countries of operation can be further encouraged on a voluntary basis. This can hugely benefit tax authorities, especially those in developing countries that have limited capacity to collate this information themselves.
The final theme of the G8 tax agenda is ensuring developing countries can collect the taxes owed to them. The UK is setting up a new unit, joint between our tax authorities and the Department for International Development, to improve the capacity of developing countries to collect tax domestically, including a fair share from multinational companies. I hope all G8 and EU countries can make a similar commitment to prioritise their development assistance in this way.
Our recent success on the EU Accounting Directive will also enable developing countries to access information about payments made to their governments in the oil, gas and mining industries, improving the use of such revenues. To set an example to other countries that are considering similar legislation, I hope you will join me in urging EU partners to commit to early implementation of the Directive. And to complement company reporting, I hope that European countries can seriously consider – as the UK is actively doing – how to implement the Extractives Industry Transparency Initiative, which enhances governments’ own reporting of their extractive tax receipts.
The UK looks forward to continuing to work with all Member States and the European Commission on this hugely important agenda and to addressing these global issues with global solutions. I am confident that the upcoming European Council and the G8 Summit will be remembered as the turning point in the battle against tax evasion and avoidance and the restoration of confidence in the fairness and effectiveness of our tax systems.
I am copying this letter to the President of the European Commission and other members of the European Council.