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Chris Heaton-Harris MP: We should get rid of European financial and employment regulations that hinder job creation and economic growth

6a00d83451b31c69e2015436fee65a970cSeven Conservative MPs have teamed up with the Centre for Policy Studies and ConHome to propose ideas to turbo charge the UK economy. Yesterday, Harriett Baldwin outlined controversial reforms to welfare

Chris Heaton-Harris is the Member of Parliament for Daventry.

Just as the Coalition is taking tough action to tackle the UK’s massive deficit, Europe needs quick and drastic action to solve its debt crisis. We must spend less to reduce borrowing and pay down debt, whilst implementing policies to kick-start growth in the economy.

A growing number of politicians across the EU now realise that many of the regulations they have put in place hinder the growth they seek.

Here in the UK, the Coalition Government scrapped over £3billion of unnecessary regulation in 2011 and has imposed a moratorium on new regulations on small businesses, but there is only so much we can do domestically; as the Chancellor of the Exchequer said recently: "We need to get them (our EU partners) to stop and realise that if they carry on regulating, then they will eventually price the entire continent out of the world economy."

Solving the problem

The Lisbon Strategy was meant to deliver "the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion" by 2010. However, the British Chambers of Commerce estimated (2010 government figures) that EU-driven regulation introduced in the period 1998-2009 cost British business £60 billion.

Based on over 2,300 of the government’s own impact assessments, an Open Europe study (2010) found that regulation has cost the UK economy £176 billion since 1998, a sum roughly equivalent to the UK’s entire budget deficit. Of this amount, 71% had originated in EU legislation. In 2009, the annual cost of regulation to business and the public sector was estimated to be £32.8 billion, 59% from EU legislation.

The last Labour Government’s Better Regulation Agenda doubled the annual cost of regulation from an estimated £16.5 billion in 2005, largely due to new and costly EU regulations. If 60% to 70% of new regulation is coming from the EU, this should be the major focus of future reform.

Open Europe’s conclusion was simple and relevant: "Fewer and better regulations would give Europe a massive economic boost, at a time when it is facing high unemployment, low growth and a declining share in world trade". The European Commission has tried pursuing some worthwhile initiatives to cut regulation. However, between 2003 and 2009 the Commission only dropped four proposals following a cost-benefit analysis. In some respects the financial crisis and economic adversity have created greater political pressure for rushed regulation, threatening to roll back the positive steps the Commission has previously taken.

There are a number of areas where EU laws cause more harm than good and actually, as I detail below, there is scope to make things work better without demanding an infamous "Treaty Change" .

Employment Legislation

EU employment legislation has cost the UK economy £38.9 billion since 1998, after the Labour Government signed the Amsterdam Agreement ratifying the ‘Social Chapter’ from the Maastricht Treaty previously not applicable to the UK.

For example, the British Chambers of Commerce estimated the Working Time Directive cost businesses over £19.5 billion between 1999 and 2010. On top of that is the cost and disruption to the public sector, particularly for trainee doctors in the NHS; something we will see up close and personal in the new year when many Accident and Emergency Centres face massive staffing shortfalls.

When EU regulation adds costs to the public sector, it effectively raises our taxes and reduces the quality of our public services.

Financial Services Legislation

The City is still by far the pre-eminent financial centre in Europe, generating great wealth for our country and contributing crucial tax revenues. In the wake of the banking crisis, the EU’s extensive approach to financial services regulation has impacted Britain far more than anyone else. Three new EU financial supervisors established this year may exacerbate this problem.

It is imperative that we protect the City’s global competitive position, to keep jobs and wealth in this country. Ensuring that we have regulations that work and do not hinder UK businesses in these two areas is vital.

Three policies for growth

Impact Assessments

The European Commission currently produces estimates on how much its proposals might cost business. For new legislation negotiations at an EU level the UK Government should use its own impact assessments and refuse to negotiate proposals where the costs and benefits have not been properly quantified. Where there is a difference in assessments, the legislative proposal should be halted until agreement can be found.

Find a simple method of scrapping EU laws

The EU needs to simplify methods to suspend or remove legislation that is too expensive or is better enforced at a national level. Member States should be encouraged to bring forward ideas where legislation already passed is no longer required and perhaps a simple majority vote in the Council should be enough to remove a piece of EU legislation.

Get rid of laws that hinder job creation and economic growth

If we are going to have a multi-speed gearbox for Europe, it should have a reverse. One area where this could be applied is EU social and employment policy.

Most EU legislation in this area is based on Title X (Articles 151 – 161) of the Treaty on the Functioning of the European Union. Article 153 (Lisbon Treaty) is the foundation of many health and safety and labour laws.

We should aim to repatriate social and employment legislation, as was Conservative Party policy at the last General Election. To do this, we would need to achieve the disapplication of Articles 151 -161 TFEU to the UK and other Treaty Articles to ensure that Britain will not be bound by EU social and employment policy.

Returning these regulations to the control of Westminster would both empower MPs and, crucially, the electorate. The main objectives of this change would be to amend these laws so that they fit better within the UK’s labour market model and help build growth in the economy.

There is broad agreement throughout the political and business worlds that both the UK and the EU need new measures that will encourage sustainable growth. Hopefully the ideas above would be a great step forward in stimulating economic success both here in the UK and across the continent.


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