Undeclared Work (Reasoned Opinion)

Jenny Willott 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.

--- Later in debate ---

[Jenny Willott]

A number of the points that have been raised by hon. Members are very similar. First, it is important to put on the record that undeclared work is an extremely important issue across Europe. It is on a larger scale in some countries than others. The hon. Member for Edinburgh South (Ian Murray) asked what research had been undertaken on the levels of undeclared work in the UK. The most recent estimate for the UK was, I think, 1.7%—extremely low. In other member states the figure is significantly higher, so it is clearly a bigger issue in other states.

Cross-border working was mentioned by the hon. Member for Stone (Mr Cash) and the hon. Member for Edinburgh South. One of our concerns is that very little evidence has been put forward on the implications and requirement to take action on cross-border work. On the assessment of the numbers and the amount of detriment that can be attributed to them, we are not convinced that the data are particularly accurate. We have asked the European Commission to identify, in a much better way, the scale of the problem. The UK, alongside other member states, does a lot of work internationally across borders, in a completely voluntary way, to try to tackle these issues. A huge amount of work is done because, as responsible Governments across different countries, we all think it is really important to tackle this issue. We do not feel that the Commission has provided evidence that what is being done at the moment is not a good enough approach and we have not seen evidence to suggest that the problem is significantly larger. That is one of the main reasons why we feel that the Commission has not made the case for why this needs to be done at EU level, rather than at member state level.

The hon. Member for Stone asked about participation and about our position on the subsidiarity principle, given that we are saying that the position has changed. We still have concerns that the mandatory nature of the platform is a breach of the subsidiarity principle. However, as regards the operation, given that the only mandatory element is attendance at the platform, we now believe that the concerns we raised in explanatory memorandums about the requirements for member states to take action when it is for them to decide—it has been agreed in the negotiations that it should not be mandatory—are not such a problem for the UK. Yet we feel it is really important that any activity should remain voluntary rather than mandatory.

[Mr Cash]

Is the Minister saying that she still believes that, as far as the UK Parliament is concerned, there should be a yellow card for the purpose? The question is as simple as that.

--- Later in debate ---

[Jenny Willott]

We certainly support today’s motion, and we think that we should be sending a reasoned opinion. Our concerns are, however, less, now that the rest of it appears to be voluntary. We still feel strongly about the mandation, which is why we are working with other member states on the negotiation to ensure that the activity that follows from the platform should be voluntary. That is why we have asked for written confirmation from the Council legal services. We tried to get it for this evening’s debate so that we could be clear on the position. It is still a moveable feast and we are still in negotiations, but we hope to reach that position. A number of other member states have similar concerns about the mandatory element and we are not the only member state working to try to ensure that the rest remains voluntary.

The hon. Member for Edinburgh South referred to the issue of bogus self-employment in the construction sector. We hope that the work of the platform will include looking at such issues and analysing them. We will press for a full analysis of areas that we think it would be useful for the platform to consider.

The points raised by the hon. Member for Stone about the yellow card system generally are above my pay grade, but I think that his points were well made and I will make sure that they are referred back to the most appropriate Minister.

I hope that I have tackled all the issues raised. If I have not—we can go through the Hansard—I will be more than happy to clarify anything I may have overlooked.

Question put and agreed to.