The truth about EU regulation

An argument I’ve always taken on with eurosceptics is the effects on business of EU regulation. Open Europe took umbrage at an article I wrote in the Yorkshire Post a few weeks ago, which questioned their wild assertions that EU regulation was out of control and crushing British business, in particular their claim that EU regulations will cost the UK £356 billion by 2018, the equivalent of £14,300 per household.

However, new analysis by the British Chambers of Commerce (BCC) indicates that EU regulation actually accounts for a tiny proportion of regulatory costs on business (0.1% in 2007-8). Indeed, according to the BCC, who should know a thing or two about how regulation affects businesses, the net cost to business of EU regulation was only £1.9bn, i.e. about £31 per person.

The BCC research also indicates that the ‘better regulation’ drive by both the European Commission and Government have, although derided by the Tories, had an effect. Having analysed 246 impact assessments on regulation affecting business in 2007-8, the BCC research states that the Government managed to cut more than £1bn in administrative costs on business.

Even hese figures, of course, don’t factor in the massive benefits to business and consumers of the European single market, estimated by the European Commission to be as much as 2% of national GDP.

The point is that, to misquote Stephen Fry’s General Melchett in TV’s BlackAdder, regulation isn’t a dirty word. Firstly, having one single set of common rules, instead of 27 different sets of national regulation, can actually cut red tape for business. Moreover, a sizeable proportion of EU regulation on matters ranging from water quality to vehicle licensing would exist at national level if the EU did not exist. The other point is that some regulation saves lives (such as banning the use of asbestos in buildings) or, in the case of the Temporary Agency Workers Directive, provides extra rights and social protection for workers,

As legislators, we don’t always get it right, and there are many ways in which the European Parliament, Government and our national parliament could improve the scrutiny and development of European law – from the initial Commission proposal to the final legislation. But research by such an authoritative business voice as the BCC (which, incidentally, also shows that EU regulation accounts for about 20% of regulation on British business, a far cry from David Cameron’s comment that “almost half of all regulations imposed on our businesses come from Brussels”) should certainly knock eurosceptic scare stories on the head.

Nonetheless, it would great to think that, faced with the evidence, the Tories, Open Europe, and Taxpayers’ Alliance will now admit that they were talking nonsense. Forgive me if I don’t hold my breath, though.

Debate on Britain and the euro gathers momentum

It is encouraging to see that the debate on whether Britain should join the euro is gathering pace. E4U launched this book with contributions from Will Hutton, former member of the Monetary Policy Committee, Willem Buiter, and BP Chairman Peter Sutherland and website last week. Let’s hope it continues to gather momentum on this important issue.

Weaker pound can help Yorkshire & Humber’s economy

The soaring value of the euro (and corresponding drop in the exchange rate of the pound) has been given extensive coverage in the media but it is not entirely bad news.

Because the EU budget is calculated in euros it means that the value in pounds of the EU regional funding we receive has suddenly risen dramatically. In 2009, Britain is set to receive around €3 billion in structural funds, worth approximately £2.2 billion this time last year. With the pound having lost around 25% against the euro since then, the amount, at the present exchange rate, would be around £2.85 billion - an extra windfall of over £600 million.

Yorkshire & Humber receives a significant amount of this, and should consequently be a beneficiary of this extra European money. What is imperative now, is that the government, our region’s development agency (Yorkshire Forward) and businesses make sure they make the most of this windfall by spending it on job-creating investments, training programmes and regeneration projects.

Another benefit in the rise of the euro is that its higher value means that there is a corresponding increase in the purchasing power of our main export market. This increases export opportunities for local firms to the eurozone. Again, Yorkshire & Humber is particularly well placed to take advantage of this, with the Humber ports our export highway to the continent.

A successful summit

After frantic negotiations, the European Council summit has ended with success on a number of fronts, with agreement on how to tackle both long and short-term political problems.

The summit ended with agreements that will enable the EU to meet its previously agreed targets (to cut carbon emissions by 20%, to increase use of renewable energy by 20%, and also achieve a cut of 20% in energy use by 2020 as compared with 1990 levels).

Given the strident opposition from several eastern European countries and Italian Prime Minister Silvio Berlusconi, it is an impressive feat that a deal was reached. Indeed, John Kerry as US representative at the UN climate conference in Poznan, has already described the deal as "an enormous act of leadership". The package also enables the EU to revive its pledge to cut emissions by 30% provided the UN climate change conference in Copenhagen next year agrees to a new deal as well.

The other pressing problem facing the summit was how to tackle the financial crisis and economic downturn. Despite the apparent spat between our Government and the Germans on how best to respond, EU leaders have announced a €200 billion stimulus package - the equivalent of roughly 1.5% of total gross domestic product in the EU. Although the precise details of the package will be ironed out over the next few days, they will include a combination of tax cuts,extra financial support for small businesses and an acceleration of public spending projects. Although individual Member States will be able to opt-out of specific measures with which they disagree, it is good news that, rather than leave all countries to 'go it alone' and so increasing economic turmoil, EU countries have come together to seek a co-ordinated response.

The discussion of how to salvage the Lisbon Treaty was, to most, the least important item on the agenda at this week's European summit - no one would argue that the EU's institutional framework is more important than the future of the planet and mitigating the effects of the economic downturn. But the deal struck maintains the package of institutional reforms that will allow the EU to be better able to deal with these long-term political problems. As I reported yesterday, the Irish government can claim a notable diplomatic victory and the 27 governments can show that the issues raised in the no campaign have been listened to and responded to.

EU closing in on vital climate change package

This week's plenary session in Brussels was dominated by the climate change and energy package. The negotiations between Parliament, Council and Commission to agree a deal at first reading in Strasbourg in two weeks time have been proceeding well. There is still some way to go, however, and it is vital that all sides make the last effort to reach an agreement.

To be acceptable to Parliament the package of measures must be sufficiently vigorous for us to achieve the agreed EU targets of a 20% reduction in CO2 emissions and a 20%increase in renewables by the year 2020 - but also to enable us to go further and raise this up to 30% in the event of an international agreement. I am also pleased that there seems to be agreement that the biofuels target should be subject to strict sustainability criteria, ensuring that biofuels would not have a detrimental impact on food prices.

The debate also displayed some of the worst aspects of the European Tory delegation. Roger Helmer ignored the hard science of man-made climate change caused by our high carbon emissions, claiming that "the threat is not posed by global warming, but by policy responses which would "have a devastating economic effect". Such arguments are not only scientifically bone-headed but also economically suspect. The sad irony is that the reaction to Tories like Helmer on climate change is similar to their proposed response to the current financial crisis: do nothing. But doing nothing on climate change now could, as with failing to stimulate our economy, cause widespread human suffering and serious economic decline further down the line. In taking action now, we can not only negate these potential costs but also, as exists already in some parts of the world and several European countries, develop 'green' jobs and a 'green' economy.

Some like Helmer and UKIP describe the climate change package as being extreme. If so, then I am an extremist - but let us be clear: moderation in the face of a threat to the very future of this planet would be no virtue and vigorous action no vice.

Dan Hannan on Iceland

Sadly the financial crisis continues to hit Iceland hard as it battles to keep its head above the water, seeing its currency collapse and desperately seeking foreign loans, while West Ham's owner Bjorgofur Gudmundsson is, according to the Daily Telegraph, facing the collapse of his Samson Holdings company, having already lost £230million.

Meanwhile, several prominent Icelanders, including possibly Iceland's most famous national, Bjork, has called for the country to join the safe haven of the EU and the euro, the idea of which will appall Tory MEP Dan Hannan.

A long time fan of Iceland, Hannan spent his stag night there so he could enjoy himself outside the EU (though obviously not outside most EU regulations, which Iceland follows as a member of the EEA, though with no say in shaping them).

And well done to the Fabian's Next Left blog which has dug up an astonishing article Hannan wrote for the Spectator in 2004.

In it he writes: "Being outside the EU, Iceland has been able to cut taxes and regulation, and to open up its economy. For 70 years the Althing has been dominated by the splendidly named Independence party, which has pursued the kind of Thatcherite agenda that is off limits to EU members...

"They understand that there is a connection between living in an independent state and living independently from the state. They have no more desire to submit to international than to national regulation. That attitude has made them the happiest, freest and wealthiest people on earth. Long may they remain so."

Quite spectacularly wide of the mark!

Brown gets Europe pulling together

Few people would begrudge Gordon Brown a peak at the world’s newspaper headlines after Le Monde hailed him a “European superhero” and the Washington Post declared him the saviour of the world financial system.

By boldly rescuing threatened banks by part-nationalising them, providing guarantees for inter-bank lending and injecting extra liquidity, Gordon produced a plan that was rapidly followed by the eurozone countries (whose meeting he was invited to, despite not yet being a member), and then by others around the world.

This has at least stemmed the current tsunami of financial sector troubles, but it is the combined action with other EU governments which promises to produce a long-term plan which can avert a reoccurence of the reckless gambling that left so many banks on the brink of collapse.

In today’s press conference with Jose Manuel Barroso, ahead of the EU summit, Gordon made clear that coordination and cooperation among EU governments and regulators is now imperitive. An early warning system and better regulation of transnational banks and companies are also set to be introduced. (It is also reassuring to see Barroso confirm that despite the current economic climate EU countries would maintain their ambitious plans to combat climate change by reducing carbon emissions.)

Of course there is much still to do, with the rise in unemployment a warning there are still difficult times ahead but, thanks in no small part to Gordon Brown, there is at least now a concerted effort to get EU governments pulling in the same direction.

More on the current financial crisis

Further to my comments yesterday, there is another European dimension to the financial crisis.

Imagine that, instead of the euro, we still had the peseta, the lira, the Irish punt, French francs, etc. It is highly likely that they would have responded differently on exchange markets, and some might have been subject to speculative attack. Currency market turmoil would have added to the instability, aggravating the crisis. Instead, the bulk of Europe's common market was able to rely on a stable and strong currency to help weather the storm.

This point was made in connection with other crises too, by Stewart Fleming the former bureau chief at the Financial Times in the European Voice last week.

He wrote:

"So far, in the face of the worst global financial crisis since the 1930s, the euro is once again proving its worth as a bulwark of stability. In 1997 and 1998, during the Asian and Russian debt crises, in the run-up to the launch of the euro, the single currency helped to insulate 'old' Europe from global contagion. When the bursting of the dot-com bubble triggered a transatlantic slowdown in 2001-02, the single currency again helped the eurozone ride out the worst of the storm. Now, in the wake of the US' subprime crisis, the eurozone is (once again) coping with the turbulence far better that would have been the case if the nation states of the eurozone had still been clinging to their national currencies, which is testimony to the extraordinary credibility that the single currency and its guardians in Frankfurt have amassed."

Will Hutton, writing in today's Guardian, goes further and believes that joining the euro is the only way Britain can secure the future of its banks and economy.

Europe must strengthen exisiting financial regulations

The financial sector crisis has left governments with little choice but to bail out banks, lest the entire financial system collapses, yet these same banks were embarking on high-risk strategies while paying obscene bonuses only a few months ago.

Understandably, this has given rise to calls for better regulation of financial markets. In Europe, which has an increasingly integrated financial market, there is a risk that new rafts of separate and diverging national regulations lead to fragmentation of this market, with duplication and extra bureaucracy adding to costs and instability. Reivisiting existing common rules to tighten them up where necessary would seem to be a more effective way forward than each country rushing to regulate its own patch in an uncoordinated way.

Even a seemingly welcome national measure can have harmful knock-on effects on other countries. Ireland's announcement that it would guarantee all deposits at its six banks, could lead to large commercial deposits being switched from un-guaranteed banks in other countries, especially those considered vulnerable, maybe in Halifax, Amsterdam or Paris. This would aggravate the current chaos, threaten jobs and trigger rivalries, with governments forced to out-bid each other in order to stem financial flows caused simply by different national approaches. Co-ordination is desparately needed.

A positive few days in Manchester

I have been cheered by an enjoyable few days at Labour party conference in Manchester.

Perhaps to the surprise of some, the atmosphere was upbeat and determined with little sign of the doom and gloom many people outside the party were wishing for.

It hasn't been the easiest few months for Gordon but his speech today was excellent, setting out a commanding set of policies for the future and drawing clear battle lines between what Labour has done so well and what the Conservatives would fail to do, coninciding of course with his calm handling of the world financial crisis in this past, manic week. Another of his points, importantly, was Labour's determination to continue to work closely with our neighbouring countries in the EU, something David Cameron has failed to comprehend since taking charge of the Tories.

The stark differences between Labour and the Conservatives with regards to the EU has been hammered home time and again throughout the conference. Both on the conference floor and in fringe meetings Labour MPs, ministers, MEPs and party members have been standing up and championing Europe and it's fantastic to hear!

It was also a great pleasure to see the moving tribute to my colleagues Gary Titley and Glenys Kinnock recieved following their announcement they would be stepping down at the next European elections. Both MEPs have worked tirelessly for their constituents, Gary for almost 20 years and Glenys 15, and it was touching to see Gordon and the rest of the party acknowledge their efforts so enthusiastically.

Breakfast with Junker

Luxembourg Prime Minister Jean-Claude Junker chairs the "Eurogroup" of Finance Ministers of the Eurozone countries. Breakfast with him this morning with him and others was particularly timely given yesterday's turmoil on financial markets.

When asked whether he thought yesterday's turmoil in the USA could cause similar financial sector bankruptcies in Europe, he paused, and said: "If I were to say 'Yes', you can imagine what the media would report and the effect this would have on the markets. If I were to say 'No', you can imagine what the media might say about me in a couple of weeks"

Actually, he was reasonably upbeat on the chances of avoiding a recession in the Eurozone (a "technical" recession of two consecutive quarters without growth was possible, but worse unlikely) and he drew attention to the advantage of the euro itself in such turbulent times: had there still been separate currencies buffeted in different directions,the extra instability would have added to the crisis.

Not that everything is perfect. He said that some countries are likely to overshoot the three percent guideline on government deficits, as they hadn't consolidated their public finance during the good times. (He did not mention France by name, but said he was glad to answer that question in French, as he effortlessly switched around from one language to another).

But, he said, the crisis had shown that the market was not the solution to everything. Good management and intervention by governments is patently needed too, as even the Americans are discovering. Market fundamentalists would do well to observe a period of silence. As a Prime Minister, he was pleased that his job was no longer considered to be be illegal.

Mr Junker, let us recall, is not a left-wing Socialist, but a Christian Democrat.

CBI should stand up for Europe at home and abroad

In the British debates on Europe, the CBI often keeps its head below the parapet. For example, during the debate surrounding the Lisbon Treaty, they were happy with the UK protocol relating to the Charter of Rights but refused to publicly endorse the treaty despite getting what they wanted.

But at European level, with its sister organisations from across Europe, it's less reticent. Their recent publication, "Successful companies for a successful Europe", comments that "ratification of the Lisbon Treaty is important to ensure it [the EU] remains operational".

It goes on to state that European companies, "want to convey a political vision to strengthen Europe by pursuing its integration process" adding that "Europe is the right dimension for addressing tomorrow's big challenges in trade, energy, environment or immigration, and for creating the best conditions for economic growth".

It also points out that:

*In 1957 the six founding countries of the EEC represented 15% of global GDP. Today, even with the rapid economic growth in India and China, the EU accounts for 20% of total GDP.

*The EU is the largest economic market in the world and the largest exporter.

*The EU-27 is characterised by "wealth creation created by European companies, high level social protection, political stability and strong democratic institutions".

Let's hope the CBI breaks its vow of silence on Europe by saying this more loudly at home, not just abroad.

The Telegraph published a bizarre insight into the world of Euroscepticism recently in this article by Ruth Lea.

She wondered "who will raise the alarm" about Brussels "being out to clobber the City". Perhaps the reason no-one has, is that there is nothing to be alarmed about.

"Brussels", after all, is simply where we meet our fellow members of the EU to negotiate on common rules for our common market. The idea that the rest of them are out to get us is uttertly ridiculous, especially as they all benefit from a well-performing City!

By all means, work hard to get the details of the Financial Services Action Plan right. If we do, the City will reap substantial benefits. But to brand the whole idea as a "Brussels" plot on the basis of figures from "Open Europe" - an anti-EU campaign group - and to dismiss the constructive approach of the government as biased is standing the world on its head!

Last month the European Parliament approved the applications of Malta and Cyprus to join the euro. The steadily growing number of countries adopting the single currency makes Britain’s position outside the euro look increasingly conspicuous.

A series of multinationals, including Ford, Toyota, Honda and Unilever have all expressed concern about the effect of Britain's non-entry on their ability to invest and maintain their manufacturing bases in Britain. Indeed, a month ago the chief executive of Honda, Takeo Fukai, told the Financial Times that for Honda, Britain's apparent reluctance to join the euro meant that the company had "no plans to expand". However, in the same breath he added that "we may change our minds if Britain were to join". Meanwhile, Honda's rival Nissan has often said that Britain staying out of the euro threatens jobs at its Sunderland plant.

Companies with UK bases that sell good to the EU have to bear hedging and conversion costs of currency that our German, French, Dutch, Irish etc. competitors don't, leaving the latter with a clear advantage.

Moreover, the euro is rapidly establishing itself as the world’s strongest currency and has now displaced the US dollar as the main denomination for world trade, accounting for 45% of the global market compared to 37% for the dollar. Indeed, it is likely that world commodity prices will soon be denominated in euros rather than dollars. It is becoming increasingly clear that for the UK, staying out of the euro means being economically hamstrung.

Reading through the briefing by the Eurosceptic think-tank Open Europe on the proposals for a new treaty, I was struck by several glaring omissions.

It makes predictions on what is likely to be in the treaty, mentioning the replacement of the six month rotating presidency, merging the two EU spokesmen on foreign affairs, voting weights in the Council of Ministers and the proposal to reduce the number of Commissioners.

However, despite seeing fit to claim that a revised treaty will not increase democratic accountability and will give the EU more powers, both of which are palpably incorrect, it fails to mention one of the proposals that will form the core of any revised treaty - namely, making all European legislation subject to the double approval of national governments and the directly elected European Parliament. Indeed, a revised treaty would also give national parliaments far more influence over their ministers and enhance their ability to scrutinise legislative proposals from the Commission. Both of these measures would greatly enhance parliamentary scrutiny of European legislation, something which I am sure even the most rabid Eurosceptic would accept is a good thing, and it is most surprising that a supposedly reputable think-tank would see fit to completely ignore it.

Moreover, Open Europe claims that 54% of UK Chief Executives think that the benefits of the common market are outweighed by the cost of regulation. Yet this apparent dissatisfaction doesn't square with the stance of Business for New Europe, an independent group of business leaders, which cites a poll showing that 52% of business leaders support a new treaty, with just 31% opposed. In the words of Sir Philip Hampton, Chairman of Sainsbury's, "The key aim for business is the development of an effective single market. The main provisions of the amending treaty should help achieve that."

By the way, any sufferes from insomnia who want to see the issue of the new treaty debated by myself, Tory europhobe MEP Dan Hannan, Robert Evans and Telegraph correspondent, Bruno Waterfield should click here http://www.maramoja.tv/index2.html

Following on from this month’s earlier decision by the European Commission to take legal action against Apple’s iTunes brand for their discriminatory practices against British consumers, the EU has again this week demonstrated its relevance for consumer protection.

Last week, the EU released figures showing a large increase in the number of dangerous goods withdrawn from sale across Europe. Children’s toys now form the biggest category of banned products, the vast majority of which were made in China. Products banned thanks to ‘Rapex’, the EU’s new rapid alert system, include a Superman figure that contained poisonous high-lead paint, a teddy bear which a child could take apart and choke on the parts and a skin cream that contained a fungus which presents a serious bacteriological risk.

Elsewhere, the EU handed out fines to three brewers for breaking competition laws. Heineken and Grolsch, two brands popular in the UK, along with Bavaria were fined by the European Commission for stifling competition by colluding to fix prices. Competition Commissioner Neelie Kroes said the brewers had “carved up” the market between them, adding that such behaviour was “unacceptable.” Heineken has been fined €219m, Grolsch €31.7m and Bavaria €22.9m.

The European Commission is preparing to start legal action against computer giant Apple and major record companies over the way they are discriminating against British consumers.

The Commission says that the way music is sold via iTunes violates consumer freedom as customers cannot buy music from countries other than the one they are residing in. Currently, customers living in the Euro-zone are charged €0.99, customers living in the UK are charged €1.17 and customers living in Denmark (which uses the Kroner) are charged €1.07.

The Commission has notified Apple and its music partners of its concerns and the firms have two months in which to respond. They can also request a face-to-face hearing before the Commission to present their case. The ultimate sanction available to the Commission is to fine guilty firms 10% of their annual global turnover. However, this is only likely to happen in the most extreme cases. Apple recorded sales of more than $19bn last year.

To read more click here.

The news that the euro has displaced the US dollar as the world's principle currency accounting for 45% of the global market compared with 37% for the dollar, offers yet another illustration of the potential economic gains of British membership of the single currency.

As Europe's share of world trade is greater than that of the US, it was always likely that the euro would replace the dollar as the main denomination for world trade. Nonetheless, when you consider that, as recently as 2002, the euro represented 27% of the global financial pie, compared with 51% for the dollar, it is clear that, after some initial teething problems, the euro is rapidly establishing itself as the world's strongest currency. Certainly, it conclusively rubbishes the notion put about by eurosceptics in the UK that the euro was a 'toilet currency'.

The creation of the single currency in 1999 has enabled the development of a deeper and more liquid financial market, consolidated by a strong, growing eurozone. As Rene Karsenti, President of the Internal Capital Market Association, puts it: "it is the stable interest rates in Europe that have helped and the fact that the euro has strengthened and shown resilience".

From the perspective of the UK, this news again demonstrates why, in the UK's case, staying out means missing out. Firstly, UK companies within the EU have to bear hedging and conversion costs of currency that our German, French, Dutch, Irish etc. competitors don't, leaving the latter with a clear advantage.

The next step for the single currency will be for world commodity prices to be fixed in euros rather than dollars. At present, many of our production costs rise and fall with the value of the dollar. Because of this, British manufacturers are hostages to fluctuations in the American economy that have nothing to do with our suppliers nor our own economy. This advantage that the Americans currently enjoy, of having world commodity prices fixed in their own currency, will be transferred to Europe. It would be nice if the UK were able to take advantage of this.

I thought the Treasury was going to get its comeuppance in a spectacular way with the European Court of Justice ruling this week on where tax should be paid (the country of the seller or the country of the buyer) for internet orders, notably alcohol and tobacco, across national borders in the European Union.

For years, the Treasury has argued the merits of "tax competition" between countries, and has opposed any suggestion of harmonising tax rates within the single European market. Well, they would have had tax competition in spades had the Court of Justice ruling gone the other way, as much of the media had anticipated. As it is, there will still be opportunities for people to purchase goods in countries with lower rates of taxation whenever they travel, although they will not be able to do it from their arm chair over a computer.

But let us be clear. These different rates of indirect tax within a single market do mean that British tax rates on, say, alcohol and tobacco can be undercut by our neighbouring countries. This means that millions of pounds and thousands of British jobs have been lost by the white van run to Calais, stocking up on cigarettes and alcohol to bring back to Britain for personal consumption (legal) and sale (illegal). It also means that the Treasury has lost billions of pounds in revenue, in turn meaning either a cut in services or a rise in the rate of other taxes.

"Tax competition" between countries inevitably means a race to the bottom in terms of what tax rate you set. This may have superficial attractions in some quarters, but in reality undermines the ability of governments to find a suitable balance between different forms of taxation and undermines their ability to use tax as a disincentive for smoking and excessive drinking.

Surely it is not totally unreasonable to suggest that, in a single market, a single rate (or at least a minimum rate) of excise duty and VAT is sensible? No one is suggesting common rates of direct taxation (income tax) - only of indirect taxes where variable rates can create market distortions.

This view is gaining ground in Britain. The British Retail Consortium has called for excise duty rates to be harmonised across the EU to create "a level playing field". The Chartered Institute of Taxation has referred to "the long-term unsustainablity of significantly different excise duty rates is self-evident in a union which allows free movement of goods and people". The Association of Licensed Multiple Retailers says problems "arise because of duty differentials across Europe. All sides need to work towards greater parity". (all quoted in YP 24 Nov)

Indeed, the EU treaty provides for harmonisation of indirect taxation (though not direct taxation), but by unanimous agreement among the member states. In other words, there is no question of any tax rate being set that does not meet with the approval of the British government. In those circumstances it would seem sensible to agree to discuss this matter with other countries to see if there is any possibility of agreeing on harmonised rates, or a higher minimum rate, precisely to
avoid major domestic policies being undermined.

The Court judgement has made this problem less acute than would have spectacularly been the case had it gone the other way. Nonetheless, the problem has not disappeared altogether. We should have the courage to address it.

I was delighted to see Ed Balls's initiative today on EU financial management. The Economic Secretary to the Treasury has taken up the European Parliament's suggestion that each Member State government take full auditing responsibility for its own EU budget spending (80% of EU spending is carried out by national governments).

He has announced that the UK will do this. It will in future provide a written statement on how EU funds have been spent in Britain. This statement will have to be cleared by the National Audit Office.

In doing so, Britain will lead by example. Other EU governments will find it difficult to resist pressure to do likewise. Indeed, Ed said he would urge all other member states to follow suit when he meets fellow finance ministers in Brussels on Tuesday.

He also warmley welcomed the House of Lords Report which I mentioned in my blog last Tuesday (14 November). This, he said, "serves to dispel some popular myths about fraud and corruption in the EU", which the Lords indeed said was minimal.

But financial management systems can be improved, especially at Member State level where most of the problems of not fully complying with procedures has occured. As Ed Balls said: "While we have been making some progress, it's not fast enough."

Well done, Ed!

An article in the European Voice by Hans Martens (subscription required), chief executive of the European Policy Centre, recently caught my eye by strongly arguing that EU economies are in a good shape.

Martens’s article focused on a study by the Economist Intelligence Unit and the Columbia Program on International Investment which showed the EU attracted nearly three times more foreign direct investment (FDI) then any other economic area.

In 2006 417billion euros of FDI was put into the EU, compared with 150billion going to the US, 13,5billion to Brazil, 17.5billion to Russia, 7.96billion to India and 69.25billion to China. Better still, it is predicted that Europe will maintain this considerable level of FDI in 2010.

Martens also highlights the World Economic Forum’s competitiveness index which again shows how strongly EU economies are performing, despite the commonly held view they are struggling. The index is based on both short-term growth prospects and potential for sustainable long-term wealth creation. Nine European countries are in the top 15 with the likes of Brazil, China and India well down the list.

The doom merchants have long been predicting trouble for the EU's economy, particularly for those countries in the eurozone, but in fact Europe is attracting massive investment and is well positioned to maintain its strong position in the long-term future.

Yet more tired anti-EU nonsense is being trotted out by the Centre for Policy Studies, in the Thatcherite thinktank's latest attempt to revive the policies of the 'Iron Lady'.

The chairman of the CPS, Lord Blackwell, has opined that Europe's 'outdated protected regional economic block is in danger of locking us into the slowest growth markets' while the European social market model is 'destroying' Britain's ability to compete. Indeed, the CPS urges the Government to change our relationship with the EU into something resembling that of Switzerland

Far from being a 'protected economic block', the EU is committed to open and fair trade. Indeed, it conducts more trade with the rest of world than does the USA, Canada, Russia and Japan, including accepting, without quotas or tariffs, exports from all of the least developed countries.

Meanwhile, Britons continue to enjoy the longest period of uninterrupted economic growth in living memory whilst still benefiting from the fundamental workplace rights laid down in the European Social Chapter.

Some economic destruction!

This morning, I addressed the French equivalent of the CBI (the MEDEF) in Paris - only 85 minutes from Brussels thanks to the High Speed Train (TGV).

I enjoy telling French audiences how France is the real problem country in Europe (why would anyone think it was Britain?), not just because they rejected the Constitutional Treaty but because they have one of the poorest records of applying European law, they ignored the stablity pact on macro-economic policy, they are overly protectionist, they oblige the European Parliament to shift from Brussels to Strasbourg for four days per month, and they have been extremely reticent about accepting new countries into our Union.

This is not new: the French only approved the EEC treaty by a narrow majority, rejected the EDC treaty, and even boycotted all EU Council meetings for a while when they weren't getting their way in the 1960s. They held up British membership for ten years and blocked the start of elections to the Eurpean Parliament for twenty. I could go on...

Indeed, CIVITAS, a British think-tank, has done precisely that with a new publication called "How France Has Undermined The European Project" and its accompanying press release entitled "EU would work better without France".

Interestingly, far from being provoked, the audience seemed to largely agree with my point. France is going through a period of soul-searcing on its attitude to Europe, having to get used to the fact that it is far from playing the leading role as it once did, but unsure how to react. Above all, the French are unsure about what it is that they disliked about the Constitutional Treaty, with some having opposed it because it was too "liberal", others because it was too "social", some because it was too integrationist, but more because it was too limitative of integration ("too British"), some through opposition to other European matters such as Turkish accession or the services directive ("the context not the text") and many through simple opposition to Chirac and the government. How will France be able to identify the points it might like to address in revisiting the Constitutional Treaty? What will its future attitude to Europe be?

The issue of immigration is dominating the front pages of the papers after government statistics revealed that 447,000 EU immigrants from former eastern bloc countries have come to live and work in the UK since 2004.

For the right-leaning media this number alone is enough to spark a plethora of “we’re full up” style stories and columns ahead of the expected accession of Bulgaria and Romania in January 2007.

Yet every other single statistic released about the Workers Registration Scheme demonstrates just how successful the immigration of such a large number of fellow EU citizens has been for the UK.

One of the most interesting was on Newsnight, where it was revealed that EU immigrants from former communist countries (known as the Accession Eight or A-8) currently make the biggest net contributions to the Treasury.

Over 80 per cent of A-8 immigrants are aged between 18 and 34. They are already educated and trained at no cost to Britain and almost all are healthy and working. This means that they are paying income tax, council tax, national insurance and VAT while claiming almost no money back from the government.

Indeed, the statistics (intriguingly printed by the Sun, though not in percentages) show, that out of 447,000 immigrants just 193 people have been awarded income support (0.04%), 574 people (after working for at least a year before losing their jobs) have been accepted for Job Seeker’s Allowance (0.1%), 110 have been given council houses (0.02%) and 453 awarded homelessness assistance (0.1%).Child benefit was awarded to 27,280 claimants but even this works out at a measly 6.1 per cent.

Of equal important is the amount of money being ploughed into local economies. Wages are not only being spent on obvious things such as rent and food but they are also providing welcome boosts to local infrastructures like public amenities and public transport.

Many of those calling for limits on immigration often argue that Britain’s resources simply can’t cope with the number of immigrants arriving. It is a given that immigrants will sometimes need the NHS, and the seven per cent who have brought their children here will use our schools, but all the evidence suggests that immigration will actually help improve public services, as their contributions will be greater than their demands.

With many of the A-8 immigrants expected to return home before they retire, the tax contributions they are making now and in the future will also help pay for our pensions.

I’m sure I am not the only one who can remember doom-laden leaders from the right-wing papers claiming that immigrants from new EU countries would travel to Britain to exploit the benefits system.

And the same newspapers are now rehashing the same old stories to print similarly inflammatory articles on the imminent arrival of immigrants from Bulgaria and Romania, should their accession go ahead in 2007, and should they be granted equivalent access.

The right has long called for a serious debate on immigration and now it is here all they can do is point to one big number, whilst ignoring the startling facts that prove immigration of EU citizens to the UK has been a resounding success.

I notice that today's Financial Times reports on the European Union's work in standing up to powerful multi-national companies, having fined Microsoft some £350 million and pharmaceutical giant, Roche, a similar amount, deterring them from operating price fixing cartels.

The EU also prevented the merger between GEC and Honeywell which would have created a monopoly situation in Europe and has forced Microsoft to open some of its products to competition.

Does anyone really believe that any of our countries alone would have had the power to stand up to these big multi-nationals? By acting together in Europe we can ensure a more balanced fair market on a level playing field.

There is no question the British economy is buoyant but there is a growing fashion to suggest other member states of the EU are lagging distantly behind. But this is simply not the case.

The predicted GDP growth of each EU country is expected to be positive in 2006, with Portugal’s 0.9 being the lowest and Estonia’s the highest at 8.9, despite dropping from 9.8 in 2005. Interestingly, many of the EU’s newest member states are predicted to have the highest GDP growth for 2006. Remarkably, 18 countries inside the EU will grow faster than the UK.

Even the so called “basket case” of Germany, which has had high unemployment since reunification, has just resumed its place as the world’s largest exporter (where as Britain still has a large trade deficit).

So it seems that the Conservatives are rediscovering the value of strong European institutions now that they are confronted with national protectionism in other EU countries. The rise of "economic patriotism" in France and elsewhere, threatening to exclude British businesses that compete with their national champions, has produced a flood of Conservative MEPs calling for stronger action by the Commission to enforce European Single Market rules. Sometimes they even go further. Thus, Phillip Bushill-Matthews tabled a question at question time to the Commission last week, asking:

"Does the Commission have sufficient powers to effectively challenge countries that unilaterally choose to label certain industrial sectors as off-limits because of a declared national interest that is self-defined? Should the EU be granted any further powers in order to take control of this situation and if so what should these be and how should they be advanced?"

It's not long ago that Tory MEPs were moaning about the over powerful Commission interfering in national life. Now they are rushing to strengthen it further.

Interestingly, the same point was made recently by the Daily Telegraph’s European correspondent, David Rennie, in his recent article in The Spectator (11 March, pp20-21). He wrote that “all the current threats to the single market pose a real political dilemma for British Eurosceptics and the Conservative party – indeed for anyone who claims to support free trade and business. There is one mechanism for defending the single market, and it lies with the supranational powers of the European Commission…”

I received the following correspondence from a constituent who makes some interesting points, and as the matter is highly topical I thought I'd post it in full on here...

Hello Richard,

There’s a controversy about company mergers that seems to be getting out-of-hand. Here’s a view that might help.

According to both Marxist and Capitalist interpretations, it doesn’t matter whether businesses operating from a country are owned by local shareholders or by those who live somewhere else. From both points-of-view, the concept of ‘national champions’ and of protecting ‘national firms’ from their shareholders selling out to those from other countries, is of much less relevance than how they operate in relation to their employees, suppliers and customers.

‘National Champions’ and protection from bidders (including so-called locusts) is a right-wing idea that seeks to reinforce the control of the workers, and to preserve market hegemonies and national hierarchies. It is a paradigm opposed to the objectives of both the EU and Socialism. Such nationalism is consistent with the pronouncements of Le Pen, Nick Griffin and their well-known and hated antecedents.

Moreover, replacing national institutions with pan-European ones has helped to make our EU the most successful peace process the world has ever known.

Giving access to bigger product markets has enabled poorer and small States to catch-up with their richer neighbours, who’ve been rewarded by new and growing markets on their doorsteps. Sharing their national currencies with the big economies has enabled small countries to gain from the lower borrowing and trading costs that arise from more liquid markets. Graduated opening of service markets and eroding discrimination in culture, trade, sport, music and transport has encouraged the ever closer union of peoples and ideas, without more Euro-bureaucracy. These are wonderful achievements in a continent otherwise well known for its history of extreme prejudice and violence.

We need to enable more pan-European institutions including pan-European companies and Trades Unions. We certainly don’t need more protectionism standing in the path of greater solidarity.

Allowing company mergers across borders – and where appropriate, encouraging them - enables firms to acquire, and share with their workers, knowledge and relationships that pushes them both along steeper learning curves. So those European peoples are gaining economies of both scale and knowledge within a huge market that even giant firms cannot dominate. Our country has been a major beneficiary of inward take-overs and mergers and all States need more of the same, not less.

The way our country gains from acquisitions is that complacency and narrow vision is challenged by outside investors, and who plainly value the potential of our firms more highly. The experience is that inward investors invest in generating higher productivity and value for all of the stakeholders. I share Gordon Brown’s vision that some European countries are limiting the opportunities for Europe by espousing their right-wing approach of protectionism.

By protecting so-called ‘national champions’, governments simply reinforce inefficiency and domestic exploitation. It’s no surprise that Italy and France (for example) have such low participation in paid work and have high social exclusions that spillover into angry protests and violence. British national experience is that cross-border take-overs bring dynamism, investment and access to markets that create better-paid jobs.

Intervention by EU institutions has helped in other fields. Football clubs now promote new forms of international understanding because the EU ruled that players could be transferred across boundaries without restriction. That intervention has invigorated British football, and is helping to erode national prejudices everywhere.

Does it matter if other countries pursue nationalist causes that injure their own economic health? Well, yes it does very much. Because we rely upon our neighbours’ prosperity for our trade, we need them to afford to buy from us. And, as we found in the 1930s, economic fascism is an infectious creed that tears us all down.

What the EU needs to do is encourage even more pan-European institutions and especially non-government ones such as firms. Developing trans-nationals through mergers, and allowing financial markets to become pan-European, are an essential part of bringing people together in peace and prosperity. Ownership of large companies is already more often accrued by pension funds and other forms of common ownership, than smaller ones.

I very much hope that the Socialist Group in the European Parliament will use all deliberate means to enable our ‘Economic Europe’ to triumph over ‘Economic Patriotism’.

With kind regards,

Andrew Dundas

As I've pointed out before, the debate about the type and extent of regulation we need in the EU is an important one - important enough that we should be careful to avoid scoring cheap party-political points, or over-simplifying arguments for rhetorical effect. We can get regulation right or wrong; it can be good or bad, restrictive or liberating. In an attempt to encourage some of my colleagues to recognise the positive side of regulation in our single European market, I recently put this question to the European Commission:

"What are the latest figures available to the Commission on the total economic benefits to European citizens of the existence of the European single market?"

The reply came back today:

"A comprehensive study on the total economic impact of the Internal Market was carried out in 1996 and published in 1998. It concluded that in 1994, Gross Domestic Product (GDP) was between 1.1% and 1.5% higher than it would have been if the Internal Market did not exist. For the same year, the employment gain was estimated to have accounted for over 300,000 jobs.

"Since then, there have been partial assessments. Among the latest are:

• "The Communication on the occasion of the 10th anniversary of the Internal Market included a new round of macroeconomic estimates of the impact of the 1992 programme. According to these estimates, EU GDP in 2002 was 1.8 percentage points, or €164.5 billion, higher thanks to the Internal Market. In addition, about 2.5 million jobs had been created in the EU since 1992 as a result of the opening up of frontiers between Member States;


• "A study by Commission services based on accounting data of EU firms has found evidence of a significant impact of the Internal Market programme on productivity. Efficiency, as measured by the productivity of assets, increased by approximately 25% between 1993 and 2001;


• "In the field of Public Procurement, a study for the Commission estimated the economic benefits from the application of EU Directives. Results show that the application of the transparency procedures required by the Directives could reduce prices of goods, services and works contracts by approximately 30%. The study also showed that the success rates of foreign firms operating in other Member States to win contracts are actually comparable to those of domestic firms bidding in their home countries."

The Seventh Framework Programme for Research and Technological Development is currently being considered by the institutions. Research is, of course, an area where it makes sense for all our member states to pool their resources: a common research programme on subjects of common interest is far more effective than duplicating each other 25 times over!

Part of the programme relates to medical research on public health issues. That has come under pressure from those who argue that it does not meet the priorities of economic competitiveness as defined in the Lisbon Agenda.

But this is a short-sighted view which should be refuted by ministers and MEPs who are currently deliberating on the programme’s priorities. Health research is not only worthwhile in its own right, but it is also worthwhile in terms of its economic merits.

Take, for example, respiratory health, which is currently missing from the programme. Respiratory health problems are Europe’s second biggest killer, accounting for one in four deaths. That costs our health systems EUR 102 million per year. It is also the major cause of absenteeism from work. It gets far less media coverage than cancer or cardiovascular diseases, but it ranks alongside them both in scale and in needing further research on countering the growth of lung diseases, asthma and so on. We must make sure that area of research forms part of the 7th programme.

The Adam Smith Institute is a right-leaning think-tank which describes itself as

"the UK's leading innovator of free-market policies. Named after the great Scottish economist and author of The Wealth of Nations, its guiding principles are free markets and a free society. It researches practical ways to inject choice and competition into public services, extend personal freedom, reduce taxes, prune back regulation, and cut government waste."

It's intriguing to learn, then, that in its recent paper on deregulation, written by Tim Ambler of the London Business School and regulation expert Keith Boyfield, the institute comes out strongly in support of regulation directly at EU level where this is appropriate:

"We do not need both local and Whitehall governments tackling one topic, nor Whitehall and Brussels regulating one another. The concept of Directives (Framework Laws in the new Constitution) provides some national flexibility; but since flexibility is only additive (you can do more than the minimum demanded, but not less) Directives give rise to gold-plating. This adds to the burden on business in certain Member States, and means that the precise trading rules are different in each country, adding to the information burden on business. Accordingly, the UK government should press for EU legislation to appear as Regulations only, not as Directives."

This makes sense, of course. Regulations (laws) are directly applicable, while Directives (framework laws) are transposed by national governments. Where we need common rules for a common market, it's more sensible to agree one set of rules for the whole EU than to agree basic principles and then leave it up to individual countries to implement the principles in different ways.

Eurosceptics could learn much from these free-marketeers.

Download the full report here (PDF).