EU: Reform

Lord Davies of Stamford Excerpts

Thursday 9th January 2014 Lords Chamber

[Lord Davies of Stamford (Lab)]

My Lords, I thank the noble Lord, Lord Dykes, and I am sure that the whole House is grateful to him for giving us the opportunity this afternoon to debate this important matter.

There has been a striking change, at least in the tactics and rhetoric of the Government on this issue over the past year or so; that is of course very welcome. I am sure that noble friends of mine will accuse me of being very naive if I place too much reliance on this, but I speak this afternoon on the basis that that change is genuine, that the Government are acting in good faith and to encourage them along that path. It is not impossible that there is a large element of genuineness about the government rethink. A year or two ago, the Government were adopting an extremely confrontational stance towards our partners in the European Union, vociferously demanding all sorts of concessions, exemptions, derogations and repatriations, and occasionally laying on some histrionics, such as walk-outs and so forth, in order to appease pressure from the Cashites in the Tory party and UKIP. It was a deplorable spectacle.

I have heard the noble Baroness, Lady Warsi, say on several occasions that the Government now take the line that they are committed to our membership of the European Union and simply want to be a member of a reformed European Union in the future. Of course, I welcome that very significant change. The change may be a genuine one for two very good reasons. One is that the Government—and the world—have clearly seen that the tactics they were adopting previously were pretty counterproductive and unintelligent, and they have drawn the sensible conclusion from that. The second thing is that they were forced to look into the abyss: into what would actually happen if we left the European Union. I know that they have had some very frank advice on that—franker in private than in public, of course—from bodies such as the CBI, the Corporation of the City of London, the Engineering Employers Federation, and from a number of Japanese and American multinationals and others as well. Therefore they have had to confront the alternative, which has been a salutary process.

In that spirit, therefore, I will not attack the Government this afternoon but will try to be helpful and suggest ways in which we can make a success of those discussions. We on this side of the House, and I think the whole country, want to see reform in a positive sense. Any human institution can always be improved and reformed, and the more important that institution, the more important it is that it is improved and reformed by each generation. Therefore we should be committed to that process in principle. I will suggest one or two bases on which the Government might decide what are the sensible initiatives to take and what the less productive course to take might be in the months and years ahead, as discussions continue with our partners.

The first thing I urge on the Government is always to focus on the substance, not on the symbolism. Always go for the content, not the colour of the wrapping on the package. We should have absolutely no more farces such as those we had with the Justice and Home Affairs opt-out, where the Government opted out of a whole series of measures and then wanted to opt right back into them, because on the substance they were very necessary and in the national interest. That was a deplorable and ludicrous exercise, and it was quite obvious that the Government were pirouetting around in order to appease their own extremists and to head off pressure from UKIP. That was not a very edifying episode at all. I hope that the Government will learn the right lessons from that in future and that they will always focus on the reality and the substance, and be pragmatic.

Being pragmatic, my second point is that it would be sensible to take up issues where we have a particular credibility and, obviously, where our national interest is directly engaged. The obvious selection is the single market. We have a natural credibility on the single market as after all, we took the decisive initiatives to push it through in the 1992 programme and so forth, which we should not allow our partners to forget. We have not completed the single market—there is some important work to be done. I hope that as a result of this discussion on the reform of the EU we will be able to make some concrete progress there.

One thing that cries out to be resolved is the services issue—we must have a proper services directive. Of course, we have a services directive, but we all know that that is inadequate. It was much better than what we had before and was a considerable achievement in itself, and we all know that you can only move human institutions along at a certain pace. However, now is the time to try to achieve a real services directive so that we have a single market in services that is comparable to the one that we have had successfully for a long time in goods.

Last time round we found that the French and the Germans were the greatest obstacle to that, but it is possible that the Germans will now be less opposed. That is partially because their economy is doing so well and unemployment is falling in Germany, so they are less frightened perhaps by the prospect of Polish plumbers coming across the frontier to work in Berlin—that was one of the many issues that arose last time—and also because the Germans have got into the habit of lecturing everybody else about deregulation, so they may be more open to deregulatory arguments themselves. Therefore I put it to the Government that a good proposal would be to invest a certain amount of capital in services and to develop, I hope, a certain amount of momentum for that.

Secondly, on energy, I am never quite sure whether I agree with the noble Lord, Lord Howell, or not, because he says one thing at one moment, and something that sounds slightly contradictory in the next sentence. However I agree with some of what he said about energy policy. Energy policy is an area where we need to complete the single market—there is no question about that at all. We do not have a single market in the retail sector in energy, and that, after 20 years of the single market, is quite disgraceful. We should do something about that. We have had partially state-owned monopolies in France—they are not entirely nationalised, of course—and “monopolies” is the word. In the terms of the domestic market, they are holding up progress on this, very much to the detriment of the interests of French consumers, as much as anyone else. We should deal with that, and now is the time to do it. I think that we would have a lot of support in taking up that issue.

My third piece of advice to the Government is the kind of advice that I would give to anyone who felt that they wanted to slightly change their image in a particular context—that is, to surprise people positively, and come up with something that results in the continentals saying, “Good Lord, the British really have changed”, which would establish a certain credibility for what we say about being pragmatic. If we are genuinely pragmatic and open-minded and believe in European reform, clearly there will be cases when the competences of the Union should be extended to resolve a particular problem, because that is the right way in which to do it. There may be other cases, of course, which I would recognise, whereby under the subsidiarity rule it would make pragmatic sense to repatriate certain functions.

[Lord Vinson (Con)]

What powers have ever been repatriated under the subsidiarity rules?

[Lord Davies of Stamford]

I have yet to be convinced, to be honest, that any powers need to be repatriated—and I have looked at the suggestions that have been made on fish and overseas aid, and so forth. It has always seemed to me that there was a very good argument for not repatriating; in fact, in many cases, we might want to go further into integration. But we can have that discussion another time. I am certainly open-minded and could be persuaded that there are situations in which we should repatriate powers, and I hope that the Government and the noble Lord are open-minded and could be persuaded that there are cases when, in fact, the European Union is in the best position in the interests of all its members to have the necessary jurisdiction to resolve the problem.

One area where that is certainly true is with banking union. I have heard no good reason at all why we should not be members of the banking union, and it is extremely dangerous that we are not. We think that we are being very clever in negotiating the double lock, but that works only if there are four member states remaining outside the banking union. If you look at the matter purely objectively, you can see that there is every interest in our being a part of it, and it is extremely dangerous to fragment a supervisory regime or bank resolution regime. It is not something that can possibly be in the country’s interest.

Since time is short, I shall make a final suggestion, which is one that I made before to the noble Lord, Lord Newby. The Government—and I congratulate them on this—have come round to the arguments of many of us over quite a long time that we need to do something about the scandal of payday loans and loan sharks. I see that the Minister is nodding to me, and I understand that the Government have instructed the FCA to come up with an interest rate or cost limit on those payday loans. I congratulate them on doing that. When that has been done in the United States and individual states of the Union—and the Minister will be familiar with this argument, because those opposed to it have always come up with it—it has always been ineffective, because lenders have come in from other states. This is an obvious area in which, if we are to have effective regulation, we need to have it on an EU-wide basis. I put it to the Minister a few weeks ago that it would be worth taking the matter up with Brussels to see if the Commission might be minded to produce a regulation or directive, and whether our partners would agree that this would be a sensible move to take. Now that I have put the issue in public to both the Treasury and the Foreign Office, I would be grateful to the Minister when she responds to this debate, or subsequently in writing, leaving a copy in the Library of the House, if she would let me know whether my arguments have been considered and what the Government’s conclusions are.

[Lord Kakkar (CB)]

My Lords, I join in thanking the noble Lord, Lord Dykes, for having secured this important debate, and, in so doing, declare my own interests as professor of surgery at University College London and a member of the General Medical Council.

The area of health and delivery of healthcare was not an area originally anticipated as having any competence at European Union level, specifically in the treaties. The delivery of healthcare and the allocation of healthcare resources along with the development of health policy were described as an area in which member states and national governments maintained absolute competence. The Department of Health balance of competence review, necessitated by the fact that, inadvertently, much European legislation and many directives have impacted on the delivery of healthcare, determined broadly that, in those areas where European regulation and directives have impacted on the delivery, it was positive. However, it identified a number of important areas where there were unintended detrimental consequences resulting from European regulation.

I shall concentrate on two areas that were highlighted in that competence review and in the third report of Session 2013-14 of the Science and Technology Committee of the other place. The first is the question of the European working time directive, which has been debated extensively in your Lordships’ House. I return to that because the directive continues to have a very important impact on the way that we are able to organise and deliver healthcare in our country and because the unintended consequences of its impact have been substantial.

The working time regulations have affected the quality of care. Although initially it was anticipated that restricting working time to 48 hours per week for trainees would promote patient safety and improve quality, regrettably that has not been the case in this country. Indeed, where the question of the duration of working hours for junior doctors has been studied carefully, particularly in the United States, it is clear from prospective evaluations that have been undertaken over a period of time that such a restricted period of working each week has a detrimental impact on patient safety.

There has clearly also been a detrimental impact on our ability to train junior doctors.

[Lord Davies of Stamford]

I am most grateful to the noble Lord for giving way. I greatly recognise and admire his expertise and experience in this area, but can he perhaps tell the House why our continental partners, in France and Germany and so on, do not seem to have had the same problem with the delivery of healthcare that he suggests we have had as a result of the directive?

[Lord Kakkar]

I thank the noble Lord for his intervention. That is because the application of the working time directive in those countries has been different from our rather fastidious application of the directive here in the United Kingdom. It is also due to the fact that the organisational structure for the delivery of healthcare is very different in France and Germany from the way that we deliver healthcare in our country.

Particularly in the craft specialties, such as my own specialty of surgery, trainees have found it increasingly difficult, within the restriction of 48 hours and the restricted period of time now available for specialist training, to develop the skills necessary to deliver independent consulting practice, which is very much a feature of the delivery of healthcare in our NHS but is rather different from countries such as France and Germany, where they tend to have larger departments with a much more hierarchical structure.

There has also been a substantial cost impact from the adoption of the working time regulations. In the first full year after their application across the National Health Service, an extra £200 million was spent on the provision of locums to fill rotas necessary to cover the provision of out-of-hours care within the NHS. Indeed, just for surgical specialties, the Royal College of Surgeons has assessed that an additional £60 million was spent to provide locums to cover surgical rotas. The Royal College of Surgeons estimates that, because of the application of the working time regulations, some 40,000 surgical hours are lost per month. Again, that has had a detrimental impact on ensuring that access to services can be adequately delivered to meet workload demands. Most worrying is the fact that, on a number of occasions, coroners have included in their narrative verdicts reference to the working time regulations as having had a detrimental impact on the care of individual patients.

Her Majesty’s Government recognise that this is an important challenge. Indeed, in 2010, the then Health Secretary and the Business Secretary announced that they were to initiate negotiations with our European partners not on withdrawing from the working time directive as it applies to healthcare but on ensuring greater flexibility, which would allow us to develop training schemes to meet the specific needs of the NHS in England in the training of our trainees. That resulted in the process being pursued through the mechanism of the social partners, but regrettably that negotiation has failed and the question has now been returned to the European Commission.

Clearly, this is an important area where action is required. As I have said, we need not to withdraw from the working time directive but to allow the necessary flexibility to allow working hours to increase from the current level of 48 hours to 56 or 65 hours, depending on what point trainees are at in their training and on what specialty or discipline they are training in. Can the Minister confirm that this might be a priority area in any further negotiations with our European partners?

The second area is the question of clinical research. Our country has a very distinguished heritage in terms of its contribution to biomedical research globally. The citations for research undertaken in our country are substantial. Some 12% of global citations for biomedical research are derived from research conducted in our country, a substantially greater proportion than in any other country in the world. Much of this is based on our distinguished history in delivering important clinical research. In 2001 6% of all patients entering clinical trials in the world came from the United Kingdom. By 2006, after application of the clinical trials directive, that had fallen to 1.4% and in the period 2007-11 there was a further 22% decline in the number of patients entered into clinical trials from our country.

The clinical trials directive has not only impacted on clinical research in our own country, it has affected all other European member states in terms of their competitiveness globally to deliver clinical research. The Medicines and Healthcare Products Regulatory Agency, which registers new clinical trials, identified in 2007 some 1,207 new trials registered. By 2011 it was down to 943. Clearly, the clinical trials directive is having a detrimental impact. It has, indeed, been renegotiated and a clinical trials regulation was agreed in 2012 by the European Parliament, due for application in 2016. The third report of the Science and Technology Committee of the other place identified ongoing concerns even about the newly drafted clinical trials regulation, concerns that were raised in evidence the committee received from the Academy of Medical Sciences and from the Wellcome Trust, a major funder of clinical research in our country.

In the area of clinical research, I suggest not that we withdraw from the clinical trials directive or the future clinical trials regulation, because there are important benefits to having a certain standard across the European Union, but that we should be able to ensure that flexibility provides for the specific environment in which we undertake and deliver clinical research in our country, with the strong national clinical governance mechanisms that we have in place, rather than find that the directive and the future regulation have had a detrimental impact on our ability to remain competitive in the life sciences area. The life sciences are an important feature of national activity, both in terms of ensuring excellence in our health service and in terms of the economic impact that life science industries have for our country.

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[The Senior Minister of State, Department for Communities and Local Government & Foreign and Commonwealth Office (Baroness Warsi) (Con)]

My Lords, I thank and congratulate my noble friend Lord Dykes on securing this debate on an issue of such significance to the United Kingdom. It has been a great starter for the main meal of a debate which I sincerely look forward to tomorrow. I am sure that many of the issues that have been raised today will be raised again tomorrow.

This Government are clear that membership of the EU is in the UK’s interest. We are also clear that the EU urgently needs to reform. As the Prime Minister and Deputy Prime Minister set out in speeches last year, the EU needs to become more competitive, more flexible and more democratically accountable, with powers flowing both ways and fairness between eurozone and non-eurozone members. I am delighted to hear the noble Lord, Lord Liddle, say that he agrees with almost 80% of the Prime Minister’s speech from last January. He also agrees with the need for reform, and it would be interesting to hear specifically the areas that he does not agree with. I certainly look forward to hearing from the Benches opposite in relation to how they feel the British people could also have their say in relation to these matters.

It is the Government’s priority to engage with all member states and the European Union institutions to make these reforms, which we feel are essential, a reality. Some have suggested that the UK is seeking special treatment in Europe. I want to be very clear on this. The reforms that we seek are for the benefit of all member states, and we are working with them to achieve this. My noble friend Lord Howell of Guildford said exactly that.

It is not as the noble Lord, Lord Giddens, described. I am pleased to say that we are already making significant progress, and I do not accept what my noble friend Lord Dykes said in his analysis. Let me give him a few examples of what I think our approach is already doing in terms of making a difference. We worked closely with countries such as Sweden to achieve a double majority voting rule, which provides a safeguard for non-eurozone members in banking union decisions and makes sure that our voice is heard.

We worked with other member states, including Denmark, Germany, Sweden and the Netherlands, to abolish the policy of—

[Lord Davies of Stamford]

Will the noble Baroness tell the House the reasons which make it not in the national interest to be part of the banking union?

[Baroness Warsi]

To be part of the banking union we would have to be part of the euro, and I am certainly not going to spend this debate debating the benefits of membership of the euro.

[Lord Davies of Stamford]

The noble Baroness is, with respect, wrong about that. A number of countries are joining the banking union who are not members of the euro, though they may join the euro of course. The banking union involves a common supervisory, common bank resolution and a common retail deposit insurance system which can be applied to countries which are not currently in the euro.

[Baroness Warsi]

I will look into this matter again. My understanding was that the banking union flows from the single currency and not from the single market, and therefore I will look at this question again and write to the noble Lord once I have considered it.

I was talking about work that we had done with the Danes, the Germans, the Swedes and the Dutch to abolish the policy of “discarding” caught fish as part of a wholesale reform of the common fisheries policy. We have secured the first ever exemption of micro-businesses from new EU proposals from 1 January of last year. We have worked with a coalition of countries to secure the first ever cut to the EU’s budget. We could have done none of this alone. Our engagement with other member states has been, and will continue to be, key. We will continue to work closely with our partners to further the good work on international trade agreements and cutting red tape to make Europe more competitive. We will work with others to ensure that the rights of eurozone-“outs” are protected as the eurozone puts in place the necessary governance arrangements to secure its long-term stability and safeguard the position of the single market.

We will continue to seek greater democratic accountability within the EU, particularly through strengthening the role of national Parliaments, and ensuring that the principles of subsidiarity and proportionality are respected. We will continue to position ourselves at the heart of the debate on the interests that matter most to the United Kingdom.

I think that the reading of the Government’s position on the part of the noble Lord, Lord Davies of Stamford, is simply wrong. We have been clear that membership of the EU is in the UK’s interest. On many occasions, the noble Lord has heard me detail at this Dispatch Box what I feel those interests are.

My noble friend Lord Howell also spoke about the respect for more subsidiarity and national Parliaments needing a red card. I fully agree with that. The Foreign Secretary has, indeed, called for a red card for national Parliaments, and others, such as the Dutch Foreign Minister, have made it clear that they, too, agree. We support the principle set out by the Dutch—namely:

“Europe where necessary, national where possible”.

My noble friend Lord Howell is absolutely right to say that follow-up is now needed. The noble Lord, Lord Davies, also said that we should focus on substance, not rhetoric. I wholeheartedly agree with that. Progress is being made. For example, the Prime Minister worked with Germany, the Netherlands, Sweden and Denmark to secure the cut in the EU budget. The PM and Commission President Barroso co-chaired the meeting of leaders from Germany, Italy, the Netherlands and others in the Business Taskforce, which presented a report on cutting red tape. These are but a few examples.

The noble Lord, Lord Kakkar, has raised the working time directive before. This Government are committed to limit the application of the working time directive in the United Kingdom. The noble Lord made some incredibly important points in relation to specific professions where this has had a disproportionate impact. The evidence suggests that a one-size-fits-all approach in the working time directive limits the time available for training and reduces operational flexibility in relation to particular professions and, of course, in relation to medicine and surgery. The Government will continue to prioritise this important issue which came up in the first set of balance of competences review reports. I do not have details of the clinical trials directive in my brief but I will certainly write to the noble Lord.

My noble friend Lord Dykes asked why the European Union Act 2011 excludes enlargement treaties from the referendum lock. The referendum condition is focused on treaties that expand EU competences or change the voting rules. Extending the geographical scope of the EU does not currently fall within the relevant section because it does not curtail the competence of existing member states such as the United Kingdom.

The noble Lord, Lord Giddens, asked me four questions. I will try to answer some of them. He spoke about the first set of reports from the balance of competences review. I dealt with some of this in an Oral Question earlier today. Although the first set of those reports mainly concern non-contentious areas, even where they lay out the benefits of EU membership they go on to say that further improvements could be made. Therefore, there is a real need for reform outlined in those reports. The noble Lord asked about the restrictions on EU migrants. I do not think I could put it better than my noble friend Lord Howell who commented on that point. I wholeheartedly endorse his comments. The noble Lord has asked me before about the PM campaigning for an exit. I can tell him that my right honourable friend the Prime Minister is campaigning for a referendum. We need to get back behind the idea of giving people the right to decide. We can then campaign in whatever camp we want to as to what we feel the outcome of that referendum should be, but we should at least give people the choice.

The noble Lord, Lord Liddle, suggested that treaty change would not happen or that there would not be the possibility of treaty change. A number of ideas have been considered in European capitals and in Brussels that we feel would require treaty change. Europe is changing because of the eurozone crisis, among other reasons, and we expect that process to include treaty change.

I conclude by thanking the noble Lord, Lord Dykes, again for giving us the opportunity to examine this interesting issue. We have covered some ground and I am sure we will cover more ground tomorrow. The noble Lord, Lord Dykes, in setting out the debate, asked specifically about the vision for reform. I will simply repeat what I said at the beginning about a Europe that is more competitive, more flexible and takes account of the diversity of its different EU member states and the differences between those which belong to the single currency and those which do not; a Europe that is more democratically accountable, so that the connection between citizens and the EU can be strengthened; a Europe where powers flow both ways; and a Europe that ensures fairness between those that are in the eurozone and those that are not.

Many European leaders welcomed the Prime Minister’s January speech and the debate that it has provoked. Many voices across Europe—in the Netherlands, Germany, Sweden, Italy, Austria, the Czech Republic and elsewhere—have spoken out in support of European reform. The Government will continue to prioritise this issue, working closely with our partners across Europe to deliver a Europe that works for all its member states and that works better.