Government: Convergence Programme

Baroness O'Cathain Excerpts

Thursday 12th May 2011 Lords Chamber

[Baroness O'Cathain]

My Lords, I thank my noble friend for moving this Motion, for his contribution to the EU Select Committee scrutiny of the Europe 2020 strategy, and for giving the committee evidence on the production of the UK national reform programme. Following that session, one of our recommendations was that the NRP should be debated in the House at the same time as the UK convergence programme, and I am delighted that this has happened today. I am even more delighted that my noble friend has just told us that he would hope to be able to do this again on future occasions.

The chairman of the EU Select Committee, the noble Lord, Lord Roper, would normally move this Motion, but as the Sub-Committee on the Internal Market, Energy and Transport, which I chair, has taken the lead in scrutinising the EU’s Europe 2020 strategy, of which the national reform programme forms a part, it was considered more appropriate that I should be in the hot seat. That is no problem and I am delighted to take part. I am also very glad that three other members of the sub-committee have decided to take part in this debate, and I thank them for doing so, as I do for all the hard work they put into our meetings and witness sessions. Several other members of the committee would have participated in the debate if they had not had previous commitments which were impossible to change at short notice.

Europe 2020 is the successor to the Lisbon agenda, which in 2000 was launched with enthusiasm, but unfortunately did not match expectations. The objective had been to make the EU,

“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”.

But at least one of the problems was that the Lisbon agenda lacked any credible means of enforcement. It had great aspirations but no oomph. One of these days there might be an “emperor’s clothes” moment which could, if we are lucky, result in fewer aspirational mirages and more results-oriented policy. It is not just the EU that is guilty of this, but also many governments, economists and policy wonks throughout the world of business and politics.

In drawing up Europe 2020, the member states and EU institutions have developed a more robust system of engagement, which, if it is given a chance and if it works, will enable close monitoring of the progress of each member state towards the five headline targets of Europe 2020. The five targets are: a 75 per cent employment rate for those aged between 20 and 64; 3 per cent of GDP to be spent on research and development; reduce greenhouse gas emissions by 20 per cent, increase the share of renewable energy to 20 per cent and increase energy efficiency by 20 per cent—all compared with the 1990 levels—which, as I remind myself, is 20/20/20 by 2020. Unfortunately, some of this has already slipped, so it is not as neat a description as I thought. The fourth target relates to education: less than 10 per cent of the population aged 18 to 24 should have left school early, and at least 40 per cent of the 30 to 34 year-olds should have completed tertiary education. The final target of the five is the reduction by 25 per cent of the number of Europeans living below the poverty line. Yes, it is aspirational, but there is at least some guide to where we should be focusing our policies and effort.

The cycle of economic development aimed at meeting the five targets has been arranged into a system or programme, as we have already heard, known as the European semester. The objective is to synchronise the economic planning cycles for convergence towards the eurozone entry criteria and growth—hence today’s debate looking at both the convergence programme and the national reform programme. The semester commences each year with the production of the EU’s annual growth survey, which analyses progress over the five targets and assesses the macroeconomic and fiscal context. This is followed by the setting of priority actions for member states in respect of achieving the targets. The next step in the process involves discussions in ECOFIN and at the spring European Council.

Progress on the seven flagship initiatives of Europe 2020 is also considered. Noble Lords must realise that the five targets I have already spoken about are not the flagship initiatives for 2020. The seven flagship initiatives are clearly and simply laid out on page 5 of the Select Committee’s fifth report of the 2010-11 Session, entitled “The EU Strategy for Economic Growth and the UK National Reform Programme”. I commend it to Members of the House, who should read and digest the initiatives.

At the end of the process, the European Council provides policy guidelines to the member states. I have tried to be as clear as I can in describing the process. It is a sensible, comprehensive exercise, which should highlight clear actions that we hope will result in economic growth—the ultimate aim of the whole exercise. The penultimate block in the edifice is the embodiment of member states’ specific actions in each state’s national reform programme, submitted in April at the same time as the convergence programme. The deadline for the convergence programme has been put back to facilitate this dovetailing. Finally, the European Commission analyses the national reform programme issues and country-specific recommendations in June before the whole process starts again the next January.

I apologise for this rather lengthy and cumbersome explanation of the process. I felt it was necessary to detail it so that the background to the committee’s report is understood. I know that many know all of this but we have many new Peers. It is also incumbent on all of us to understand better what goes on in the EU. After all, we contribute a lot for the privilege of being a member.

The report that we are taking note of today deals largely with the procedure for parliamentary engagement in the production of the national reform programme. It also takes the opportunity to discuss the process in more general terms and to make suggestions concerning consultation. In November we suggested to the Minister that local authorities, business organisations, trade unions and NGOs might also be consulted. I would be most interested to hear from him whether the suggestions have fallen on stony ground or will blossom and bear fruit. Was this suggestion followed through in the production of the final national reform programme?

In those same discussions, we raised the monitoring and accountability of the European semester process. It would be useful to know how national Governments are to be held to account for performance against their programmes and by whom. In the case of the UK, we have chosen to publish indicators in each relevant area against which progress can be tracked, with performance published each year in the national reform programme. The UK has not published targets in every area as other member states have done, just in every relevant area.

My noble friend the Minister agreed with us in November that there was a role for independent analysis along the lines of the Lisbon scorecard produced by the Centre for European Reform. Has any progress been made on this?

My noble friend was very cautious on the question of policy warnings, suggesting that they should be used very infrequently. He felt that enforcement should largely be as a result of peer pressure and peer review through the process of publishing national performance reviews which would be incorporated in discussions on the annual growth survey and at ECOFIN. The committee, however, felt that the discussion in ECOFIN might be circumscribed.

Since then, ECOFIN has had its first chance to discuss the plans of member states. I ask my noble friend whether the discussion was particularly robust, as, since then, we have had the bailouts for Ireland and for Portugal, and Greece seems to be in trouble again. In view of these subsequent events, does the Minister remain convinced that policy warnings should be used “very infrequently”?

Other issues have been raised, both in the European Union Select Committee and in our Sub-Committee on the Internal Market, Energy and Transport, including the role to be played by the private sector in achieving the targets, whether the targets are ambitious enough and the extent to which the final reform programmes published by member states build on drafts. I am sure that my colleagues in the sub-committee will wish to deal with these issues in more detail, but I thank the Minister for his opening comments.