Undeclared Work (Reasoned Opinion)

Ian Murray Excerpts

Monday 9th June 2014 Commons Chamber

[The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott)]

I beg to move,

That this House considers that the draft Decision on establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work (European Union Document No. 9008/14 and Addenda 1 and 2) does not comply with the principle of subsidiarity for the reasons set out in the annex to Chapter One of the Forty-ninth Report of the European Scrutiny Committee (HC 83-xliv); and, in accordance with Article 6 of Protocol (No. 2) annexed to the EU Treaties on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

This debate will give the House a welcome opportunity to discuss the proposed platform on undeclared work, and to decide whether to send a reasoned opinion to the European Commission. The Commission proposal seeks to establish an EU-level platform on undeclared work. Undeclared work is defined by the Commission as paid activities that are lawful but are not declared to public authorities. This matter is high on the European Commission’s agenda, against a backdrop of efforts to improve job creation, job quality and fiscal consolidation.

The proposal highlights a number of concerns, based on a perception of high levels of undeclared work in the EU, including tax evasion, mis-declaration of hours worked and benefit fraud. The Commission is proposing a platform, whose members will be drawn from member states’ nominated enforcement bodies, to try to improve co-operation, share best practices and identify common principles for inspections. I should of course stress that addressing undeclared work is a priority for the Government. We have taken action at national level to detect and deter fraud through inspection, as well as to encourage good practice by providing guidance for employers.

The debate has been called because the European Scrutiny Committee requested an opportunity to discuss its concerns about whether the proposal respects the principle of subsidiarity. There are also very short time scales and deadlines to which the European Commission is seeking to secure agreement on a position; hence the debate taking place tonight.

Let me first turn to the issue of subsidiarity. The concerns that I set out in the explanatory memorandum—the Committee shares those concerns—were based on the initial draft of the proposal, which sought to mandate member states to participate both in the platform and in any enforcement activities arising from the platform’s recommendations. Like the Committee, we remain to be persuaded that the Commission has demonstrated a need to mandate member states to take part in the platform or that EU-level intervention action will add value.

However, it emerged in negotiations late last week that although member states’ participation in the high-level platform would be mandatory, participation in any cross-border operational activities recommended by the platform would be voluntary. The Council’s legal service has indicated that that is the case, and we have asked it to clarify its official position. Therefore, the principal concern about subsidiarity that we identified in the explanatory memorandum—based on an earlier text—drops away. We could decide, issue by issue, whether the UK should participate in further activity, and we would of course seek the Committee’s views on such matters. However, we have not yet had advice from the Council’s legal service in writing, and the proposals are still being negotiated, so they may change. I therefore understand that the Committee will want to decide for itself whether the proposal respects the principle of subsidiarity.

Our concerns about the detail of the proposal have been shared by other member states and, together, we have secured some changes. The changes, alongside the fact that the activities identified will not be mandatory, mean that the majority of member states will support the proposal. Therefore, the original subsidiarity risk that we identified does not still stand. Moreover, we should be involved in discussions about activities in relation to which we could be asked to take action, even if we probably do not want so to act. Negotiations are ongoing and the European Parliament is yet to begin its consideration of the proposals, so we will be continuing to work throughout the negotiations to ensure that our concerns about subsidiarity are addressed in the final text.

Let me now turn to justice and home affairs. Since publishing the explanatory memorandum, our ongoing analysis has identified that the proposal may include elements relating to justice and home affairs, thus invoking the UK’s JHA opt-in. That is because the proposals suggest, for example, that enforcement bodies such as the police will collaborate in cross-border activity. No decision has yet been made on whether or not to opt in to the proposal. Once a decision has been made, we will write to the European Scrutiny Committee. Having said that, as it is not mandatory to participate in any activities that result from the discussions, no significant burden would be placed on the UK by opting in.

The Commission and presidency are pushing hard on the proposal, and we were informed on Friday that they hope to reach a general approach on 11 June, which is very soon. The deadline for sending the reasoned opinion to the Commission is 11 pm tonight. With the timing of the recess and the Queen’s Speech, this evening was the earliest opportunity to facilitate a discussion in time to meet the deadline, although I appreciate that the timing is not ideal for such an important discussion. If we run out of time tonight, I will be happy to follow up any questions in writing, although given the numbers present, that seems somewhat unlikely—[Interruption.] The shadow Minister may want to raise lots of questions.

[Ian Murray (Edinburgh South) (Lab)]

indicated dissent.

[Jenny Willott]

Oh, I am looking at the wrong side of the House. I hope that we will have time for a reasonable discussion and come to a decision on issuing a reasoned opinion tonight.

[Ian Murray (Edinburgh South) (Lab)]

I thank the European Scrutiny Committee for its consideration of this issue and the Minister for her comments. Given the time scale involved and the number who would like to speak, we should try to meet the European Commission’s 11 o’clock deadline, although I doubt that I share the Minister’s enthusiasm or optimism that we will do that, given the Members who wish to speak. Nevertheless, as the Minister said, we have the first opportunity for the House to start banging on about Europe again so soon in the new Session.

It is worth reflecting on what is in the document, because undeclared work is an important issue. We should reflect on how harmful it can be to our economy and to the people who participate in it, and particularly on bogus self-employment in the construction sector. I was going to talk a little about that, but, given the time scale, I would like simply to agree with the Minister on the issues around subsidiarity and what the proposal is trying to achieve.

We have no problem whatever with trying to improve co-operation between member states’ enforcement authorities in order to prevent and detect undeclared work, including bogus self-employment. We should all share that aim, and it is welcome for all member states to work together on that. We should also be improving member states’ enforcement authorities by giving them the technical capacity to tackle cross-border undeclared work. We are very good at that in this country and should be sharing our best practice, as well as getting best practice from other member states on other mechanisms for doing that.

The third aim of the document is to increase public awareness of the urgency of action and to encourage member states to step up their efforts to deal with undeclared work across the European Union. I could spend a few minutes bashing the Lib Dem Minister and ask her what she is doing to persuade the Commission to look seriously at subsidiarity, because if they were to remove the mandatory element of the proposal, everyone would welcome taking it forward on a non-compulsory basis and be able to help other member states to go forward with the rest of the proposal.

The reality on the ground is that people are often looking desperately for work and will sign any contract placed in front of them in order to secure employment. With the freedom of movement across the EU, it is right that member states work with one another to tackle rogue employers who perpetrate undeclared work and attempt to hide behind other member states’ borders—they hide behind undeclared work in order not to pay their fair share of taxation and to undermine workers’ rights. It is that sort of limited and practical proposal that shows how the European collaboration project could work and add value to member states.

I do not know whether the Minister will get an opportunity to respond to the debate, or whether she will have time to do so, but I would like to pose a number of questions; if she does not get an opportunity to respond, perhaps she could write to me to give me some comfort.

What assessment has the Minister’s Department made of the scale of undeclared work across the EU, and in particular the UK? What investigation has she made into the cross-border problems of undeclared work? That information may be incredibly helpful in indicating the problem we are dealing with and what the benefits of such an EU-wide platform would be. What recent discussions have current enforcement agencies such as the Gangmasters Licensing Authority, the Employment Agency Standards inspectorate, and Her Majesty’s Revenue and Customs had with the Government and the European Commission on undeclared work and the usefulness of the proposal? Finally, I do not think the Minister mentioned this, but does she agree with the proposals in principle? The Opposition agree with the Government’s position, and hope we can get it to the European Commission as soon as possible.