Fresh Start, or Dead End, on Europe?

TUC analysis of Fresh Start Project

'Manifesto for Change'

February 2013

In January, ahead of the Prime Minister's speech on Brussels, the Tory-led Fresh Start Project (FSP) issued a 'Manifesto for Change' setting out a reformist eurosceptic approach to repatriating powers from the EU to the UK. This TUC briefing analyses the proposals made and sets out the TUC's views.

Introduction

The main claim of the manifesto is that the Government should seek to re-negotiate the settlement with the EU to include in particular:

• An emergency brake for any Member State in financial services.
• Repatriation to Member States of the competence in social and employment law. Failing that a UK opt-out and emergency brake.
• A UK opt-out from policing and criminal justice measures not already covered by block opt-out.
• A new legal safeguard for the Single Market.
• The abolition of the Strasbourg seat of the European Parliament, the Economic and Social Committee, and the Committee of the Regions.

At the outset it should be said that most possibilities cited are at best impractical, and at worse illegal under current rules. In some cases, the claims are even contradictory and it would be impossible for the UK to be outside the EU but at the same time continue to enjoy certain aspects deriving from membership.

An emergency brake for financial services and a new legal safeguard for the Single Market

The EU single market means an area without frontiers or tariff barriers where goods, services, capital and people can circulate freely. FSP claim that the single market is not integrated enough as far as services are concerned and advocate for genuine liberalisation in this field, though FSP do not specify exactly what services they would like to see opened up to the European market. This is particularly worrying given the type of privatisation that the UK has already enforced domestically in a number of sectors with dubious results for the taxpayer, e.g. in transport. Similarly, in health care, government proposals to open up the NHS to private service providers have encountered public opposition and it would be highly detrimental to other countries if the UK were to push for similar liberalisation of other countries' health services just so that British private healthcare providers could benefit from new markets into which to export their services.

However, there is a sector in particular which the FSP makes no mystery about, claiming that the financial sector is critical to the UK economy and it deserves a special status, above other industries, and a special safeguard. In particular FSP take issue at the raft of EU regulations of financial markets tabled since 2008 - completely ignoring the reason for their introduction: an economic crisis of epic proportions, which originated among other things from the under-regulation of a sector responsible for putting on the market toxic financial products and for which taxpayers are having to foot the bill to this day and for many years to come. This also contradicts the (albeit hypocritical) Government line that it was the last Labour Government's deregulation of financial services that played a major part in the crisis.

The idea of an emergency brake against EU financial regulations derives from other parts of the Treaty not relating to the internal market. To balance the extension of qualified majority voting to a greater number of areas of EU competence (where countries can no longer exercise their veto), the Lisbon Treaty introduced a procedure to protect the interests of member states. It allows them to block the adoption of a legislative proposal and to send it to the European Council -heads of state and government - if they feel that the proposal has an impact on fundamental aspects of their social security (article 48) or criminal law system (article 82.3). In such cases, the normal procedure is suspended. After discussion, and if there is a consensus, the European Council sends back the proposal to whichever Council of Ministers that was dealing with the original proposal, where the normal legislative procedure resumes. If there is no consensus, a minimum of 9 Member States can proceed with enhanced cooperation on the basis of the original proposal (a process called 'enhanced cooperation', currently being used to implement a financial transaction tax which encountered UK opposition).

There are reasons why such an emergency brake clause is not available to all the areas touched by EU law and most importantly is not foreseen in the internal market chapter: it is precisely to avoid the fragmentation and the putting up of protectionist barriers that the UK fears so much. So it is interesting that here it is the UK that would be advocating 'protection' of its financial services sector against EU regulations that are meant to enforce the standards that might have helped to prevent the financial gambling that got us in the mess in the first place.

That the government is called upon to pick the financial sector as a champion is also ironic for a party that has so far refused to do the same for manufacturing and in the wider context of industrial policy. It is also contradictory to earlier calls of 'rebalancing' the British economy away form dependence on financial services as main creator of wealth, and towards new and greener industries amongst other.

Repatriation to Member States of the competence in social and employment law. Failing that, a UK opt-out and emergency brake

FSP seek to restore the situation as it was prior to 1997 when the Blair government reversed the British opt-out from the social chapter of the Maastricht Treaty (1992) and fully signed up to implement all social and employment legislation deriving from articles 19 and 145-161. These articles underpin the coordination of employment and social policies and in particular the adoption of minimum standards at EU level that aim to improve living and working conditions; protect workers' health and safety; eliminate all forms of discrimination and implement the principle of equal pay; protect dismissed workers; and workers' rights to be informed and consulted. These articles have also allowed the adoption of measures to regulate forms of atypical work (such as part time, fixed term contracts and agency work), some of which were generated on the back of social partners' agreements.

What the FSP want to roll back all of these advances to retain a highly flexible labour market and have it regulated exclusively at national level. In particular FSP wants to

• repeal the working time directive;
• review the application of the temporary agency workers directive and remove any so-called gold plating; and
• review any other social and employment law before applying new EU regulation in this area.

FSP call for these laws to be 'repatriated' to the UK.

If FSP have their way, British workers would lose their right to:

• four weeks paid holidays,
• 11 consecutive hours of daily rest (and 35 consecutive hours of weekly rest) to be taken immediately (especially important for those working on shifts or on a 6 days working week), and
• the protections around night work, which should not exceed 8 hours in any 24 hours period, and entitlements to regular free health assessments,

all of which exist despite the existing individual opt out form the weekly limit of 48 working hours.

As far as Temporary Agency Workers Directive is concerned, it is difficult to see what 'gold plating' there is to remove since even the most basic provision on equal treatment on pay in the UK only kicks inafter 12 weeks of assignment and the use of the so called 'Swedish derogation' (which allows temps who have a contract with an agency and are paid in between assignments not to receive equal treatment on pay) is spreading fast. If anything, trade unions would argue that the UK implementation fails to give the protections envisaged by the directive and could do with tightening up, especially to prevent abuse.

But ultimately, what FSP want is to negotiate a complete opt-out from the entire social chapter and the introduction of an emergency brake to guard against the adoption of future EU law in these fields. It is clear that this is an area where British workers would lose out the most if hard-fought European standards were to be cancelled, though FSP are confident that these would be replaced by domestic legislation - which experience has shown has tended to be far weaker, albeit with a few exceptions such as anti-discrimination provisions.

FSP recognise that both the complete opt-out and the emergency brake (see above) would entail treaty change but FSP fails to acknowledge that this would be extremely unlikely, given recent declarations by a number of EU member states. In fact, other countries would see no benefit in conceding to these requests: should the UK opt out of the social chapter, it would put other countries at a competitive disadvantage in that their systems would be undermined by the more flexible standards that the UK would be able to apply.

Should the UK fail to obtain the above, FSP advocate the nuclear option: an Act of Parliament whereby the UK unilaterally stops applying EU social and employment law. This would be a serious breach of international law and would amount to the UK reneging on the rule of law and on their international commitments. And it would incur EU fines. FSP dismiss the possibility on the grounds that no fine has ever been levied on the UK for not implementing EU directives (except the £398m fines for mismanagement of EU farm subsidies which were paid in 2008/9 and the £601m set aside for future payments; or the more recent ruling against the UK on clean waters for which a penalty is yet to be set.) Surely a country cannot set its foreign policy on the gamble that it may walk away scot free on past experience: what if the gamble is lost? How much would that cost the British taxpayer?

A UK opt-out from policing and criminal justice measures not already covered by block opt-out

There are substantial changes in this area which make it easier and quicker for actions to be taken at European level. The so-called 'pillar' structure disappeared with the Lisbon Treaty. This means that now, in almost all circumstances, qualified majority decision-making based on proposals from the Commission and co-decision with the European Parliament, will apply.

Special arrangements were extended for Denmark, Ireland and the United Kingdom so that these countries benefit from a block opt-out and have to opt in to individual pieces of legislation where they so choose. For instance, the UK can decide whether it wants to opt in to measures relating to passports, ID cards, permits or all other similar documents that make up migration controls. The UK has opted in to the European Arrest Warrant. However this block opt-out option is only available until May 2014, after which it will have to be renegotiated.

Certain exceptions remain, where unanimity continues to be the rule (and thus the UK can continue to exercise a veto), such as:

• family law;
• the possible creation, on the basis of Eurojust, of a public prosecutor;
• operational police cooperation; and
• administrative cooperation between Member States.

FSP complain that once the UK opts in to any of the measures, it loses democratic control over issues such as data protection and becomes subject to harmonisation of criminal law standards which affect irreversibly the common law system. At no point does the FSP mention the benefits that the UK has derived from the measures it has opted into, nor does it consider the fact that there are ways of accommodating traits of common law into the EU legal system which is already the case since the European Court of Justice bases its reasoning not only on codified law but also on legal precedent.

The abolition of the Strasbourg seat of the European Parliament, the Economic and Social Committee, and the Committee of the Regions.

FSP want to abolish the monthly carousel of the European Parliament sessions in Strasbourg. This is about the only proposal unions could possibly agree in that it would save considerable sums of money, not to mention the positive impact it would have on the environment in terms of reducing the European Parliament's carbon footprint. However, as trade unions, we should not lose sight of the fact that the economy of the city depends greatly on the European Parliament and that to limit the negative effects on employment, unions might want to propose that the European Parliament seat in Strasbourg be used for the meetings of the heads of state and government for instance, or some other activity that would positively contribute to the local economy.

The FSP also call for the abolition of the EESC - in their view dominated by unions; and the Committee of the Regions. The fact that the EESC is dominated by unions is a gross misrepresentation. It is the only body that represents business, workers and civil society organisations on an equal basis. It is a consultative body whose opinions are not binding on the European Commission, but it has often been easier to adopt progressive positions in agreement with employers within the EESC than anywhere else, e.g. on the origin of the crisis, on the need to re-regulate finance, on the need to introduce a financial transaction tax etc.

The Committee of the Regions is made up of local councillors. In an era where citizens often complain about the EU democratic deficit and member states advocate ever more 'subsidiarity' (the principle that decisions should be taken at the level closest to where the issue arises) abolishing the body that represents local communities and regions would seem counterintuitive.

More worryingly, FSP suggests the abolition of a number of EU agencies namely those devoted to human rights, workplace and employment issues and training. Interestingly the FSP does not suggest the abolition of the European Pharmaceutical Regulatory Agency which protects and promotes public and animal health and evaluates marketing licenses in medicinal products and has its seat in...London!