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Hugo Robinson: Bad for business

Hugo is a Researcher for Open Europe. In the third instalment of a series on how the EU constitution is returning by stealth, he explains how business could be affected.

Business people in the UK have fallen out of love with the EU in recent years.  It isn’t hard to see why. 

Brussels has produced a torrent of costly regulation. Of the 22,000 pieces of legislation on the EU statute book, more than 12,000 have been introduced in the ten years since 1997, compared to 10,000 during the forty years from 1957 to 1997. The EU law book now runs to a staggering 170,000 pages. 

Such huge number make the eyes glaze over.  But its worth remembering that even a single regulation can shut down an industry.  For example, last week the commission casually banned the manufacture of traditional barometers, and closed down a whole industry with the stroke of a pen.

A study by the British Chambers of Commerce, using the government’s own impact assessments, found that EU regulation has cost the UK economy £40 billion since 1998 alone. According to a recent ICM poll of 1,000 UK chief executives, 54% of businesses think that the cost of EU regulation now outweighs the benefits of the single market.

So far a lot of media attention has been focused on the issue of giving up the veto in new areas, and moving to qualified majority voting (QMV).  But even more importantly, the constitutional treaty proposes to change the way that votes are taken in the areas where majority voting does apply. That’s very significant because majority voting already applies to about half of EU legislation.

Under the proposed new system the number of member states votes needed to block a new law would be substantially increased.  Meaning that in areas where the UK is currently blocking legislation with the help of a couple of other countries, we would need to find even more allies if we wanted to carry on blocking the proposal.

Overall, academic work shows that the new voting system would reduce the UK’s power to block legislation by almost 30 percent.  This means that the EU would inevitably be producing even more regulation, with even higher costs for business.

Despite this, a recent joint paper from two pro-euro groups, “Business for New Europe” and the Centre for European Reform, attempts to make a “business case” for adopting the new version of the constitutional treaty. It makes for pretty extraordinary reading.

The paper argues that: “Under the new system, those opposing a law would find it slightly harder to block it. But that should not concern the UK or businesses, since most of the draft laws coming out of the Commission are liberalising measures.”

Ah, so no need to worry then. Business can trust the lovely European Commission to always uphold its interests - even if the UK Government is opposed to a given measure.

This is clearly a mad argument.  However, the report will be formally launched at an event next monday, entitled 'Why treaty change matters for business and for Britain'.  Intriguingly, CBI Director General Richard Lambert is among those taking to the podium.  Europhile hacks have been briefed that he will support the line taken in the paper and swing the CBI behind a campaign for the constitutional treaty (as it once campaigned for the euro). But if he does so, he risks splitting his membership. 

Former CBI Director-General Digby Jones said back in 2004 that his organisation’s key concerns on the original EU Constitution were clear: “We don’t want anything that weakens UK control of decisions on employment law, financial regulation or energy policy.'  But the new voting system would weaken the UK’s control of all of these issues and more besides.

Even just looking at the proposals that are currently in the pipeline, we can see that less power would mean trouble for UK business - never mind anything nasty that might be further down the line.

The UK and a few other liberal states are currently blocking the Temporary Agency Workers Directive, which would give the temporary workers the same rights as permanent workers. The UK has more temporary workers than any other EU country (700,000), and lots of businesses, particularly the smaller ones, rely on them. If the measure came through it would be more expensive to hire temp workers, reducing competitiveness and increasing unemployment. The BCC has warned strongly against this coming into force, saying that it will lead to reduced employment opportunities for those who need it the most.

France, Spain and others, backed by the EU Commission want to get rid of the derogation that allows the UK to opt-out of the EU’s 48 hour working week. The UK is able to block it through alliance with a few other member states. But under the revised Constitutional Treaty, the UK might need to either extend its list of allies or accept giving up its opt-out. The DTI estimates that losing this opt-out on the working time directive would cost the UK economy £9 billion a year. 

The idea that Britain should hand over its powers, safe in the belief that the Commisison has changed its spots is ludicrous.  Yes, Portuguese Commission President Jose Barroso has talked a good game, and promised a more business-friendly approach.  He has even promised to roll back EU regulation.  But what has actually happened?

The Commission promised a ‘bonfire of the diktats’, and talked about axing over 200 regulations.  But how many have gone? Just two. The Commission last month finally managed to get rid of the “knots in wood” directive from the 1960’s and the 1968 food packaging sizes regulation.  It would be fair to say that this will not transform the European economy – particularly given that the EU adopts about 1,200 pieces of new regulation a year.

There are several well intentioned free marketers in the Commission.  But they seem unable to make a difference.  Industry Commissioner Gunter Verheugen has taken the extraordinary step of going on the record to complain that powerful civil servants have tried to obstruct his deregulatory moves. He says that EU mandarins often take the view that “more regulation equals more Europe.”

Let’s look at the big picture. Given Europe’s chronic decline in international competitiveness relative to China and the US, the EU needs to be regulating less, not more. Is it really in the interest of British business to reduce the UK’s power to stem the flow of EU regulation? For the sake of UK business we need a referendum to call a halt to this, and force a fundamental shift towards a real reform agenda in Europe.

Related links: The first and second parts to this series


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