Select Committee on European Scrutiny Minutes of Evidence

Examination of Witnesses (Questions 20-39)



  20. So with a greater emphasis laid on it at the European level, that might have a positive influence on the UK so we can catch up in that regard perhaps?
  (Peter Hain) We have implemented a whole series of directives in this area, most recently on inflation and consultation last year, but we have to constantly balance progress there with the need for creating a flexible economy capable of coping with the competitive pressures which are changing more often than year by year in some respects. If we do not do that, if we create a rigid model, then we will not succeed. I think there are some lessons which others in Europe are drawing from our own success, though I would not want to be too immodest about it. We still, as I indicated earlier, have a lot to learn from our European partners. For all the criticism, for example, of Germany being a failing economy, Britain I do not think, not even under this Labour Government, could have borne the burden of re-unification, so there are lessons to be learnt but I think we have a pretty good record to take forward.

Mr Cash

  21. I must say I am very interested in what you are saying; I always am.
  (Peter Hain) I find what you are saying very interesting as well.

  22. That is very kind of you. It is a mutual admiration society, even though we come from different angles. On this business of co-ordinating sound economic policies and your references to the other countries, and one perhaps has to look at France and, as you mentioned, Germany, surely you see a connection between the apparent success of the UK economic policy over the last number of years and the fact we are in fact not constrained to the same extent as other countries which are in the euro-zone by policies which have tended to slow their economic growth. One part of that is over-regulation, another part is the social agenda which is bound in by treaty changes which effectively, one would say though I would not agree with, simply cannot be changed. Do you not agree that the apparent success of the British economy over the last decade since we came out of the Exchange Rate Mechanism, for example, is associated with our having a degree of control over our economic decision-making processes? By being locked in, if I may dare suggest to you, to far too great an extent, in other words going for co-ordination as we read in the questions which are being put rather than co-operation, what is actually happening is that slowly Britain is losing its advantage, and really what we need to do is ensure that we do not get locked into further regressive, less enterprising, less competitive policies. By continuing to follow the process that other countries are pursuing, they themselves are getting into deep trouble, which is actually leading, regrettably, to the rather dark forces of extreme right wing policy-making or attempts to build on the fact there is high unemployment, there are stresses, which are being created by pursuing these extremely unenterprising policies?
  (Peter Hain) I do not think we should be too complacent about the British record. We have a good record over the last five years but in France, for example, their growth and economic record over recent years has been pretty comparable to Britain's. The European average is dragged down mainly by the legacy of East Germany, and, yes, we do very well against the European average. But if you disentangle some of the Member States from the average, against other countries (and I give France as an example and there will be others) we are not that far ahead, we have a lot of catching up to do, not least the legacy left by the Government which you supported last time. We are catching up. I would make this point, co-ordinating and co-operating over economic policy is a voluntary matter not a treaty competence in that sense.

  23. The Maastricht criteria are a requirement on this Government, irrespective of whether we are in monetary union or not.
  (Peter Hain) I do not know if we want to spend too much time travelling down this road, though I am happy to do so.


  24. Don't be tempted, Minister!
  (Peter Hain) The point is this, I think we should just take a deep breath occasionally, if I may say so, Bill, on these sorts of questions and just look at the facts rather than the dogma. The constraints being followed by the euro-zone countries are the sort of constraints which, as the Chancellor announced in his Budget speech last week, the British economy is meeting. So we have not done too badly meeting the Maastricht criteria, have we?

Mr Connarty

  25. Looking at the statement under section 32 of the Presidency Conclusions from Barcelona, it says, "Early retirement incentives for individuals and the introduction of early retirement schemes by companies should be reduced. Efforts should be stepped up to increase opportunities for older workers to remain in the labour market . . . ", which is all very well, but it goes on later to say, "A progressive increase of about 5 years in the effective average age at which people stop working in the European Union should be sought by 2010". That is only eight years away, to increase the working life of the population by five years. First, I have to say that the argument for this seems very thin. There are going to be progress reports but I am not sure the logic has been explained to the working population of the UK or anywhere else in Europe as to why they should work five years longer before retiring. How realistic is that recommendation? You might say a word about why they want to do it. Is it just to save paying out state pensions?
  (Peter Hain) I do not think it is that, though pensions is a whole other issue and there are difficulties across Europe. I think it is an issue which has been widely discussed here in Britain, including under our Government, that a lot of skilled people leave the labour market earlier than perhaps they should, and they should be given the right to stay on, not as it were dragooned into staying on but given the right to stay on and contribute their skills to the economy and the prosperity that that generates both for them and for the rest of us. There is an additional problem that we have a whole trend of ageing populations across Europe, leading to labour shortages. I am sure we could all think of friends and friends of friends who leave the labour market when they are well able to, and indeed want to, contribute but because the retirement age is too low are not able to do so. I can think of people who leave the Civil Service whose expertise is greatly missed when they reach 60, for instance, though we are talking about the private sector in the main here.

  26. How does the UK compare with the rest of Europe on this matter? What specific action do you think the Government should be taking to comply with this Directive?
  (Peter Hain) Again, this is not a matter for me, it is a matter for other Government colleagues. To be perfectly frank, I do not have a table in front of me giving me an exact comparison. I do not know whether Kim, my colleague, does, but I am happy to write to the Committee about that if that would be help with your deliberations.

  27. It does seem to me we are a long way from the aspiration to the reality, and I am not sure that people understand why we want to do it or what the effect will be on them and how the Government intends to bring it about. So I think it is important that the Government does develop its policy. Can I move on to energy, which you are keen to talk about and I am keen to ask about. The reality of the so-called energy liberalisation is that a French company supplies electricity to No 10 Downing Street because the French energy company bought London Electricity—
  (Peter Hain) And these lights, I suspect.

  28. I assume so. The problem is that there is no access to French domestic energy markets for people outside France. This is quite deliberate, they clearly ring-fenced their big players to build up their muscle before the liberalisation took place. Since it appears the French may well have decided well before Barcelona to agree to open up commercial and industrial energy markets, would it be correct to conclude that on this issue they did not make any significant concessions?
  (Peter Hain) No. I think a major advance was made in Barcelona. We secured, as you say, that all non-household customers would be free to choose their supplier by 2004, which means over 60 per cent of the European Union energy market is on track to be liberalised. We have never got that before. It was an important achievement. Equally important was that the decision will be taken by qualified majority voting before spring next year to open up the remainder of these markets. I stress qualified majority voting even though it will cause Bill Cash's hackles to rise because France will not be able to veto it, and it is important we establish full reciprocity. As you say, British companies, Centrica, TXU and others have not been able to get into the French market or the German market, whereas EDF, the French publicly-controlled energy company, is able to buy up pretty well whoever it likes here in Britain. This lack of reciprocity has not been acceptable, so we have achieved that break through. On household markets that will come a little later down the road, but there has been a big advance there too. It is on its way. We have never achieved that before. Can I just say why it is important? Sometimes people do not follow, in the sort of "anorak" nature of the technicalities, that gas prices in Britain are 36 per cent lower than in France and 43 per cent lower than in Germany. So we are talking about not just big opportunities for British companies but big opportunities for European industrial and domestic consumers to get cheaper gas prices and therefore make Europe more competitive, which is what this agenda is all about.

  29. There is another lobby, of course, which argues that low energy prices are causing problems with the environment, that we do not price energy high enough in this country compared with Denmark, which has a different view of whether energy should be used in the way we use it. So we have a different lobby saying that we should be using less energy but it is too cheap. But that is not where I wanted to take you, Minister. We can discuss that on a personal basis later.
  (Peter Hain) I was Energy Minister, so you can take me down that road if you want to.

  30. Yes, it is often good to look over old files and see all the things you believed in then.
  (Peter Hain) Uncomfortable sometimes.

  31. In your letter you say that agreement was reached that a decision would be taken on the issue of full liberalisation of energy markets before spring 2003. Clearly, apart from the French, the Germans have concerns in this area because they seem to have a different approach. They are again seeking to build up the muscle of their Government interests in different markets as they did with Deutsche Post, as you know, so that when liberalisation comes they are much better at succeeding in the market. How confident are you that when that vote comes, you are going to get full liberalisation, because there does seem to be an ability on the part of some governments in Europe to stall? I think at the moment France is 65-68 per cent liberalised but it is quite clearly protecting a large slice of its market, and there are indigenous political reasons why they fight so hard. How confident are you that we will get full liberalisation agreed, not necessarily getting it in 2003 but agreeing it in 2003, and what timescale do you see for its implementation?
  (Peter Hain) I am very confident, because Germany supported the Barcelona outcome. If it came to an actual vote in 2003 on household energy liberalisation, it would be 14:1, if France camps on the position it has traditionally done. But it has already moved significantly. I think that once the current electoral cycle is out of the way, there will be more movement. It is in French consumers' interests that this should take place as much as it is in British companies' interests and in the interests of the whole of Europe to get much more competitive energy markets. If I may add one other point to your question, I think the way you deal with energy costs is not by artificially raising them but by developing forms of environmentally-friendly energy, increasing insulation and so on, which discourages wasteful energy use.

  32. I am sure that is the case. Can I move on to the debate about eEurope and ICT. Interestingly, I read the latest pamphlet from the Institute of Economic Affairs which argued that the ICT boom in the US actually gave it a five points advantage in terms of productivity per man hour worked in the US and they appear to be pulling ahead of us again, whereas we had been doing better against the US benchmarking in terms of productivity. One of the things we did have as an advantage was that since 1997, not just in the public sector but in the private sector, we seem to have put a larger element of training into every employee's skill base. We had therefore advanced quite a lot in productivity, but we were not catching up with the US at all in terms of use of ICT. I followed the Lisbon process on that field very closely. We have a report coming later today on that specific area. To what extent should the Government take action at the EU level on promoting access to the internet, because it does seem to be very uneven, rather than leaving it to markets to develop according to popular demand, and to self-regulation to police the industry? For example, I note that Germany has 2 million people using broadband and the UK has only 250,000. We tend to spend our time urging the private market to do it when in fact other countries do it centrally. There is some question of how much money Germany invested as a government in getting that result and how much they left it to the private market. It seems that the European model is based upon letting the private market do it, whereas if any country really wants to fight its corner and strengthen its hand with liberalisation it needs to have an investment plan. The EU does not seem to have an investment plan, it has an aspiration and a target and hopes the market will deliver. How much do you think the Government should take action at EU level to push internet use and try and balance out this advantage which the US clearly has had over us in the last few years?
  (Peter Hain) I acknowledge your interest and expertise in this matter and it is really important that that is the case, because I was one of those back in the early 1980s who thought that when Kenneth Baker wired Britain, or tried to somewhat disastrously, he should have gone for broadband then, which would have put us in pole position. At any rate, that did not happen. Europe does not have a bad record, there are more Europeans connected to the internet than there are Americans, but we have to catch up, you are absolutely right, and that is why the Lisbon Agenda and the current EU strategy was intended and is intended to deliver Europe as a higher quality information society, the best in the world. What we want to see is a follow-up strategy from Barcelona focused on agreeing a new broadband technology strategy. I think other Member States are agreed on this. In terms of our own specific targets that is probably a question that should be addressed to colleagues in Government. We did agree to deliver broadband technology across the European Union by 2005 and that, as you know, means Internet access at ten times the present speed. We agreed to boost our commitment to research and development towards a target of three per cent of GDP which is a significant increase by 2010. These moves will encourage us to get to where you want to get to, an objective which I share and which we should be pursuing right across Europe, including in Britain, with great urgency.

Angus Robertson

  33. Minister, you said earlier on that education is an area where there is policy co-ordination and an area where there has been a push for more co-ordination has been on language teaching and the agreement was reached that language teaching should start earlier. I am a bit intrigued how that stands in contrast to the Government's Green Paper which has called for an end to compulsory language teaching in England beyond 14. Scotland is no better than that, the level of foreign language learning is going through the floor. Is it not kind of ironic that we are shifting the balance to learning languages earlier, which seems to me to be very positive, but we seem to be ending it earlier?
  (Peter Hain) If I am allowed to speak for the Secretary of State for Education, and I will choose my words carefully in doing that, I think that is a misrepresentation of what the policy is. If you look at the language learning pamphlet which was published at the same time as the Green Paper, 14-19 Extending Opportunities, Raising Standards, which is a consultative document and the consultation ends at the end of May, it basically was wrestling with the problem of trying to teach languages to disgruntled 14 year olds as compared with shifting, as I understand it, interest in language and catching the enthusiasm of the younger school pupils so that primary school foreign language training and development would be given a much greater priority, thereby helping to catch school pupils at a much earlier age when they pick up languages enormously easily and take them through into secondary school. I think that is the strategy but I agree with you that our foreign languages standards in Britain are dreadful. Just because English is becoming the language of Europe, as it is, and the language of the world, but certainly the language of Europe with the candidate countries all speaking English, that should not absolve us from our own responsibilities to take modern foreign languages forward, which I think the Government strategy is doing. I noticed this of the Candidates in the European Convention, they do not speak other languages, they do not speak French, for example, as much as English, so I think the English are coming in that sense across Europe.

  34. Do you not think for that reason that it might be an idea to have a look at what is happening in Ireland, an English speaking country where their foreign language teaching has gone through the roof in the last five years? We do not seem to have managed that this side of the Irish Sea.
  (Peter Hain) That is why the Government's Green Paper has been brought out, because we are seized of this problem. The truth is that although we have a tendency to become lazy because English has become the language of IT and the language of modern international business, it is increasingly spoken across the world, the fact is more foreign language expertise would give our own businesses a much greater head start in winning contracts across Europe, for instance, and our own citizens much better opportunities.

Miss McIntosh

  35. I perhaps ought to declare an interest as I received a residential scholarship, a British Council Scholarship, to study at the university in Denmark. I see that in the Presidency Conclusions, and I am sure this will please my colleague, Mr Cash, that the Council wishes to continue to promote European dimensions of education, improve people's basic skills and also enhance Internet twinning with a partner school elsewhere in Europe. I can see there is some merit in that and I personally do find it quite difficult moving back from Brussels to the UK to find that without subscribing to a rather expensive satellite service you cannot get, for example, French, Danish, Belgian television. I take the point entirely that if we have a skilled workforce in languages it enables our businesses to compete much better but there is an awful lot culturally that you can learn through television. We seem to be the only country that has a mono-lingual television service. Is there any way in which the Government could see fit through its broadband strategy, perhaps by bringing forward the analogue switch-off, to enable us to have access to foreign language television?
  (Peter Hain) I must say I am very taken with the point that you make and very interested in the policy implications and I will ensure that it is drawn to the attention of the Secretary of State, the relevant Secretaries of State, together with the relevant text of the transcript of this Committee. I think you are right. Forty million Britons will visit the rest of Europe this year on business or cultural or tourist trips and, even if you take account of multiple trips, around half the population is going to go to Western Europe and a language expertise facility would be a great advantage.


  36. Minister, what specific steps would the Government like the European Union to take now in respect of the Middle East?
  (Peter Hain) I have just returned from Valencia where we had an important meeting with the Euro-Med countries at a Euro-Med Conference and we play a very active role as the European Union with our High Representative, Javier Solana, being a very respected interlocutor, in seeking to promote negotiations between both the Palestinians and the Israelis, I cannot claim with much more success than anybody else has had. We need only look at the visit paid recently by Secretary of State Colin Powell from the USA. It is a constant source of discussion at the European Union level and high level missions are constantly engaging with the Israelis and the Palestinians. Europe, of course, provides virtually all of the Palestinian Authority's development assistance—these have been very largely destroyed by the Israeli defence forces—to enable them to develop an infrastructure in Palestine. Europe has actually got a proud record on that but not a successful one in terms of promoting negotiations, which are the only way forward.

Angus Robertson

  37. Do you not agree with these three out of the four largest political groups in the European Parliament, including the European Socialists, the Liberals and the Greens, that the time has come to actually step up the pressure on the Israeli Government vis a vis their military incursion into Palestinian areas and seek the suspension of the association agreement that was not backed by the UK Government at the last Council of Ministers' meeting? Is that something that you might want to think about supporting now?
  (Peter Hain) It was not backed, you are quite right, nor was it backed by a majority of other Member States at that meeting. Until we have achieved a situation where suicide bombings end and Jenin-type incursions by the Israeli Defence Force end as well, we are not going to get circumstances in which we can promote the negotiations which in the end will be the only guarantee for Israel's security on the one hand and Palestinian rights and justice for Palestinians on the other.


  38. Minister, it does seem that unfortunately we do not have any influence on suicide bombers but we should have some considerable influence on the Israeli Government and we do not seem to be using that influence other than seeking agreements that we know will have to come anyway but which no side is wanting to seek to achieve. They have just cocked a snook at the European Union, they have now cocked a snook at the UN and some of us see no end to it. We see the British Government and the American Government making excuses for them and it just goes on and on and on. We do not see any solution to it at all and it is getting rather depressing what is happening in the diplomatic field from our point of view.
  (Peter Hain) It is enormously depressing but I do not think it is fair to say that we are making excuses for it. For example, the Foreign Secretary was one of the first to call for an inquiry into what happened at Jenin and those awful events. That has been secured, although it has now run into some difficulties. We have been trying, not with fantastic success, in fact with very little success, but none of these have been successful, this is the bleak reality, we have been trying to do everything that we can to create circumstances in which negotiations can take place of the kind that I have described. But it has not been an heroic story and it has not been a successful story. But I do not think gestures, including ending the association agreement or imposing sanctions, as others have asked for, at this stage would achieve anything with the Israeli Government on the one hand in its present cast of mind, and on the other with suicide bombings happening. It is not easy to know what to do and there is no point in me pretending otherwise. But I agree with you that it is desperately, desperately depressing as somebody who has supported the rights of the Palestinians over many decades.

Mr Tynan

  39. I think everyone shares the frustration that you feel as well as ourselves. I understand the Palestine infrastructure, which was created by the use of UN aid, has been totally destroyed. My concern is that it has been said that aid will not go into Palestine until there is a peace settlement. What is the situation as regards helping build the infrastructure in Palestine? Do we have to wait until there is a cease-fire or are they actively engaged in trying to create that situation at the present time?
  (Peter Hain) We are trying to do this and it has been part of our consistent policy, Britain's and the European Union's, to demand that Israel withdraws from the Occupied Territories but also to insist that the Palestinian Authority does all that it can, and it has not been doing all that it can although its capacity to do so has been virtually destroyed, to stop the suicide bombings. Notwithstanding the horror that I share about the events in Jenin, I do think that suicide bombings create a siege atmosphere in any community which means that you get the kind of over-reaction that you have got. That is not to justify it in any way at all, it is simply to describe reality. The Palestinians are gaining nothing by suicide bombings except greater destruction and greater horror for their own people. Israel is not achieving its objective of security for its own state and its own people by its policies. These policies are all failing. American policy has failed, European policy has failed, Israeli Government policy has failed, the policy of the Arab States has failed, the policy of the Palestinian leadership has failed. This is an abject and depressing saga of failure on all sides. We have got to get through it.

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