Wednesday 28 February 2001
[Sir David Madel in the Chair]
Informing and Consulting Employees
The Minister for Competitiveness (Mr. Alan Johnson): First, I will bring the Committee up to date on the consideration of the proposed directive in Brussels. The draft directive was first proposed by the Commission in November 1998, and my Department submitted an explanatory memorandum on it in January 1999, but it was not discussed substantively in the Council until the beginning of the French presidency in July 2000. Following a brief discussion at the Employment and Social Policy Council on 17 October, the presidency produced a revised version of the Commission's proposal. I submitted an explanatory memorandum on that text on 21 November.
The Commission accepted the presidency text as a basis for further work, but reserved its position on the deletion of the sanctions provision in article 7.3. At the Employment and Social Policy Council on 28 November, the presidency attempted to secure a qualified majority in support of the proposal, but could not. The text has undergone minor revision since then, but is essentially the same as that which formed the subject of the explanatory memorandum of 21 November.
The European Council at Nice concluded that the Council should continue its examination of the draft directive. The Swedish presidency has said that it intends to work on the dossier with a view to reaching a political agreement on it, but no substantive progress was made at the working group meeting in January. The directive is not on the agenda of the Employment and Social Policy Council meeting of 6 March. The presidency has indicated that it will pursue the matter at the Councils in May or June.
I will give a brief overview of the directive's content. As currently drafted, it aims to establish a general framework of minimum requirements for employees' rights to information and consultation in undertakings within the European Community. An undertaking is a private or public undertaking that carries out an economic activity, whether or not it operates for gain. The directive applies to undertakings with 50 or more employees, but member states may choose to apply it to establishments with 20 or more employees. An establishment is a subdivision of an undertaking.
The directive requires the employer to inform and consult employees' representatives on the range of matters laid down in paragraph 1 of article 3. Paragraphs 3a and 3b of article 3 set out the modalities of that process.
Article 4 provides for member states to allow management and labour to define freely, through negotiated agreement, the practical arrangements for informing and consulting employees. Such agreements may contain provisions different from those laid down in article 3, but must respect the principles of article 1.
Article 5 provides that information may be withheld by the management in certain circumstances, or may be disclosed on the condition that the employees' representatives hold it in confidence.
Article 8 states that the directive does not prejudice the European works councils directive, but that it is applicable to the information and consultation procedures set out in the directives on collective redundancies and transfers of undertakings.
The Scrutiny Committee report raised various questions, which I will be pleased to answer. I will first provide some details on the Government's position.
The Government believe that it is desirable to inform and consult employees. It produces a better informed, better motivated and more adaptable workforce, which can increase company competitiveness. However, the Government are not convinced that a constructive dialogue between management and employees is best achieved through statutory requirements and the sanctions and penalties that would flow from a directive. We want a dialogue based on trust and partnership, not legal obligations.
The European Union could pursue policies designed to foster partnership. Article 137, the treaty base for the draft directive, provides that the Council may adopt measures that will encourage co-operation between member states through initiatives to improve knowledge and develop exchanges of information, and through best practices. That would be in keeping with the process agreed at Lisbon, and the partnership approach that we have been developing in the UK. It would contribute to the goal agreed at Lisbon: to make the EU the most dynamic and competitive knowledge-based economy in the world.
The Government are not persuaded that further regulation on the issue at the EU level is necessary. The EU has already adopted the European works council directive. In that case, there was a good argument for Community level action because the aim was to bring about information and consultation on a transnational basis. For the same reason, we have recently accepted the directive on the European company, which contains provision for employee involvement.
However, the proposed directive has no transnational elements. It would achieve nothing that could not be done by member states acting alone. The absence of a directive does not conflict with the requirements of the treaty and does not otherwise significantly damage member states' interests. The existing systems in member states for informing employees do not conflict with the treaty's requirement. Action at Community level would not bring clear benefits compared with action by member states. Those are the guidelines for assessing whether a proposed action conforms to the principle of subsidiarity. They are contained in the protocol on the application of the principles of subsidiarity and proportionality, which was incorporated in the treaty of Amsterdam. That protocol is intended to supplement article 5 of the treaty establishing the European Community, which provides that the Community shall act in accordance with the principle of subsidiarity.
In our view, the directive does not conform to the requirements of article 5. The Government are not persuaded of the need for a directive that is difficult to reconcile with subsidiarity and that would cut across existing practices in member states for no benefit. I will be pleased to respond to the Committee's questions.
The Chairman: We now have until 11.30 am for questions to the Minister. I remind the Committee that questions must be asked one at a time; there should be ample opportunity for all hon. Members to ask several questions. Attlee-type brevity will be appreciated.
Mr. Nick Gibb (Bognor Regis and Littlehampton): I was delighted to hear the Minister's statement. The Opposition fully agree with the Government's approach. What must now be under scrutiny is how successful the Government will be at establishing British interests in the EU. How successful has he been so far, and how confident is he of being so in future, in securing a blocking minority against the directive? What is the latest news on German and Danish support for the Government's position?
Mr. Johnson: At the Council meeting on 28 November, there was no qualified majority. Only one substantive discussion has taken place sincethe working group meeting in January. The position of the countries that the hon. Gentleman mentioned was stated clearly at that meeting and has not changed. There was no qualified majority in November or January and we expect there to be none in the future.
Dr. Stephen Ladyman (South Thanet): The Opposition may be satisfied with the Government's position, but I am not sure that Labour Members will be. The Minister says that information is best provided through a partnership built on trust. However, if no one sets down in statute the minimum requirements for information to be given to employees, what are the chances of building partnerships in companies where employers have little respect for their employees?
Mr. Johnson: I would turn that question around. Part of our argument is that the directive breaches subsidiarity. There is a case for us to examine our domestic legislation. On 18 January, my right hon. Friend the Secretary of State announced that we would look at the collective redundancies agreement. We were pleased to sign up to the European works councils agreement to which most of the recent high-profile cases should have been subject.
The Government's view, and my strongly held personal viewI have had some experience of such issuesis that genuine partnership and co-operation cannot be engendered through a mechanistic, legal directive route. In fact, that approach would directly militate against creating the climate that we want to establish. There is some history of that, for example Whitleyism, the Bullock report and the industrial democracy experiment that was conducted as recently as the late 1970s.
As there would be legal provisions to be decided by the European Court of Justice, it is possible that the very companies mentioned by my hon. Friend would be asking, ``What is the minimum that we can get away with to comply with whatever directive?'' rather than, ``How do we change the culture of our organisation from confrontation to genuine partnership?'' The issue should be addressed in our domestic legislation. I have strong views on it, as do the Government.
More importantly, the directive does not in any way enhance the domestic situation; in many countries it cuts across it, with no benefit in terms of employee relations, which is why we are not alone in objecting to the proposal.
Mr. Keith Darvill (Upminster): How far do other member states share the UK's conviction that the proposal breaches the principle of subsidiary?
Mr. Johnson: Each of the other member states, without exception, wants to preserve its own system of employment relations. The debate occurs in member states that have different systems, such as a voluntary approach. There is not the same degree of controversy in member states where the proposals coincide with what is already in force. In some member states the social partners make decisions on all such issues without any recourse to legislation.
The question of subsidiarity arises insofar as every country is determined to preserve its own arrangements. We recognise that there must be a degree of flexibility with regard to subsidiarity; the protocol that supplements article 6 of the treaty contains guidelines, rather than firm rules. If this is not a case for subsidiarity, what is? There are several measures to which it is said that subsidiarity would not apply because it is flexible. All directives are flexible. On the basis of those arguments, it is difficult to see where subsidiarity would apply.
Other member states are determined to protect their systems; our position is built around subsidiarity. I cannot argue for the other member states. However, as there is not a qualified majority for this, I assume that the other countries that are part of what the hon. Member for Bognor Regis and Littlehampton (Mr. Gibb) described as a blocking minority feel the same way to varying degreeswhether they are considering subsidiarity or the extent to which the directive cuts across local arrangements, which is effectively the same argument.