Stephen Booth: We must debate the unavoidable question of the UK’s future relationship with the EU now

Stephen Booth is Research Director for Open Europe.

We are told that work has begun in Whitehall on how the UK might return powers from Brussels to Westminster, but the question is how can this be achieved and what, exactly, should the Government be looking to repatriate?

In the first of a series of reports looking at the major EU policy areas, Open Europe has this week published its first attempt to offer some answers to these increasingly important questions. ‘Repatriating EU social policy: the best choice for jobs and growth?’ (pdf) examines the nature of EU social and employment law and the costs and benefits of deciding these regulations at the EU-level.

Using Government impact assessments, we estimate that EU social law currently costs UK business and the public sector £8.6bn a year. But more importantly, cutting the cost of these regulations by 50% could result in a boost in economic output equivalent to the creation of 140,000 new jobs in Britain. Under a scenario where the benefits of deregulation would be split between higher employment and increased productivity, which is more likely, a 50% cut could generate the equivalent of 60,000 new jobs in the UK in addition to adding £4.3bn to economic output. Savings could be achieved without significantly compromising on workers’ protection: for example, by exempting low-risk working environments from aspects of health and safety legislation or overturning EU court rulings on the Working Time Directive (pdf), which have made hospital rota systems unworkable.

A serious push for EU reform would not be the distraction from the jobs and growth agenda that some have argued, but the exact opposite. Social and employment law does of course come with benefits, although they are often difficult to quantify, but it’s unclear that there is any significant practical benefit in deciding these laws at the EU level, which invariably results in an awkward one-size-fits-all solution, rather than nationally. As Nick Clegg told MEPs yesterday, “There are questions we need to ask about certain employment laws. Is it really essential or desirable for the healthy functioning of a thriving Europe to have EU legislation insisting people work a 48 hour week, regardless of whether they want – or need - to work longer? Or European laws laying down how our builders should – or should not – use their ladders?”

Should the UK Government decide to, and succeed in, repatriating EU social policy, these laws – and the costs and benefits they generate – would not disappear overnight. However, MPs in Westminster could choose to keep them or alter them to better reflect voters’ democratic choices and the needs of the UK economy.

So, given that regaining the power to regulate its own labour market could allow the UK to tailor its employment law to provide a substantial boost to jobs and growth, how can this be done practically and politically?

In the report we set out a ‘double lock’ which could serve as a model for restoring UK control over not only social policy but other EU powers. First, this would require a protocol exempting the UK from EU social law to be inserted in the EU Treaties. Second, in cases of a dispute with the EU institutions, the Government or Parliament would have the right to veto a proposal with an impact on UK social policy at the European Council, where unanimity applies. Simultaneously, the European Court of Justice would need to be stripped of its right to review the application of the opt-out, reducing the risk of EU social policy being imposed on the UK via the backdoor.

This would require an EU Treaty change and negotiation with the other 26 member states, many of which regard EU social policy as an essential accompaniment to the single market. So, there are clearly substantial political challenges.

However, the eurozone crisis, and its long-term consequences for the future makeup of the EU, means that uncomfortable questions about the UK’s future relationship with Europe are increasingly unavoidable. New voting rules, due to come into force under the Lisbon Treaty in 2014 (with a transition period until 2017), will mean that the eurozone countries will together have a permanent inbuilt majority in the EU’s key decision-making forum, the Council of Ministers, where qualified majority voting is the norm (see the graphic on p5 of our report (pdf)). With greater eurozone integration looking increasingly likely, there is a real risk that non-euro members, such as the UK, are consistently outvoted by a eurozone 'caucus’ on crucial votes regarding not only social and employment law but other issues of vital importance to the UK’s interests, such as on financial services and the wider single market.

The need has therefore never been greater for a comprehensive plan to get powers back from the EU as part of the long-term political settlement to reshape Europe in the wake of the current crisis. The Government and Parliament must now decide when and how much political capital should be invested in repatriating EU powers over areas such as social policy or financial services.