Members present:

Mr Jimmy Hood, in the Chair
Mr William Cash
Mr Michael Connarty
Jim Dobbin
Miss Anne McIntosh
Angus Robertson
Mr Anthony Steen
Mr Bill Tynan


RT HON PETER HAIN, a Member of the House, Minister of State for Europe and MR KIM DARROCH, Director, European Union, Foreign and Commonwealth Office, examined.


  1. Minister, welcome again to the European Scrutiny Committee. I wonder if I could kick off. What are the Government's priorities for reform of the Council? Are you in favour of the responsibilities of the General Affairs Council being split into two separate councils? If you are, do you envisage one of these councils being responsible for defence as well as foreign affairs?
  2. (Peter Hain) Thank you, Chairman. I see Council reform as absolutely central to the future reform of the European Union. The Prime Minister has made this our priority in terms of redesigning the institutional political architecture of Europe, which we are going to do in part at the Seville Council in June but in a longer time frame during the discussions for the Future of Europe Convention where I sit as the Government representative. Essentially, and I will come directly to your question about the General Affairs Council, we want to see the Council playing a much more politically-strategic role, giving the leadership which Europe needs, which it is not doing at the moment - and this has been widely acknowledged, including by the high representative, Javier Solana, who produced a paper for the Barcelona Council and in a joint letter which our Prime Minister and Chancellor Schröder wrote. We want to see the European Council itself, the heads of government, giving decisive strategic leadership, not getting bogged down in some of the detailed issues that they have done, and as part of this, looking at a reformed presidency system, so that we do not have the instability and discontinuity inherent in the six-monthly rotation. As far as the General Affairs Council is concerned, we support the idea of a reorganisation of the GAC which, and I have sat on it myself, is a rather uncomfortable mix between a foreign ministers council and a council which is attempting to manage the general affairs of the European Union. So we favour the separation of the GAC into a genuinely foreign ministers council on the one hand, given the way Europe is now much more prominently engaged in foreign policy issues than ever before, and on the other a body which could be called a general affairs council still, I would imagine, which would prepare for European Council meetings, take many of the detailed decisions which are now dumped on the agenda of the European Council, and therefore allow the European Council itself to focus on the really big issues and provide the political leadership necessary for driving Europe forward. In respect of defence, there is already a decision, as you will be aware, Chairman, that defence ministers can meet in the GAC defence formation, which is a different issue from this particular matter. I would just make one other point, I would not rule out there being a separate defence ministers council of ministers formation in any reorganisation of the Council, and I would be happy to go into that area if you wish to press me on it, since with European Security and Defence Policy now pushing forward there may well be a case for a separate council of ministers formation specifically to consider defence matters.

  3. You mentioned there possibly reforming the presidency, have you any firm views on how you would reform the presidency?
  4. (Peter Hain) We start from the principle that, first of all, the presidency of the European Council should really be driving the political agenda of Europe in a way it is not at the moment, so what we would like to see is the European Council electing its president for a longer time frame than six months. It might be as long as five years to coincide with the full length of the Commission, but that is a matter for discussion and I would be interested in the Committee's views on that. Then a reduced number of council minister formations underneath, from the present number to perhaps ten or 12. Then different countries on a rotating basis allocated taking the chairs of perhaps one or two at a time for a longer period than six months, enabling the president of the council, a sort of team presidency approach, and enabling also countries to have more of a stake in the presidency system than, with an enlarged European Union of 25, you would have under the six-monthly rotation system, when you come round once every 121/2 years or eight times a century. So the idea is to get a team presidency which has more continuity, more strategic direction and more political clout, frankly. As against that, there is an attachment by a number of countries, especially the newer ones - and of course we have the prospect of ten new countries coming in by early 2004 with the decisions due at the Copenhagen Council in the middle of December - to their place in the sun, they like the idea of having a stake at the top table of Europe. Well, they will get a stake more regularly than if the six-monthly system continued. We suggested the idea of a host country where the six-monthly rotation would remain so that perhaps the informal council for heads of government, and maybe one or two other council of minister formations, could meet in the host country but there would not be the presidency, the presidency might be organised according to the description which I gave you earlier. That would then give each country and their people a stake, it would mean in the case of the newer countries Europe would come to Slovenia or Latvia or Malta or wherever it might be, which I think helps binds the institutions closer to the people of those countries, and of course we would be in the queue as well as would every other Member State.

    Angus Robertson

  5. Minister, welcome to the Committee. There is a debate in our smaller, medium-sized neighbouring countries on this issue about how often small and medium-sized countries would chair such revolving responsibilities in the Council of Ministers. Is the UK Government position that you believe all countries in the European Union have an equality of status and all countries should have equal chairmanship rights?
  6. (Peter Hain) Yes, that is our position. We do not distinguish in respect of rights to chair Council of Ministers meetings or indeed in terms of the team presidency approach which I suggested. If we went for the model I suggest and, say, you had around five countries in a team presidency underneath the elected president of the Council, then smaller countries would be as entitled to assume the position chairing council of ministers meetings and therefore being in the team presidency as would larger countries. Indeed I think it is really important with nine smaller countries coming in, Poland being the large one, if the enlargement negotiations remain on track and they all qualify, their rights are respected.

    Mr Cash

  7. You have given us a very candid and broad brush illustration of the direction which the Government clearly wants to take European integration, five-year presidencies as a possibility but you seem to suggest it might be a good idea, and of course the whole question of defence and foreign policy and, as you said, the development of that in the context of the CFSP. In the context of the decision making process, what is the driving force for the increased integration in these areas? Why is it thought to be a good idea and whose policies would ultimately decide the outcome? Which policies would be adopted in terms, for example, of the majority vote which presumably would accompany the development of these integrationist policies?
  8. (Peter Hain) Chairman, I was described as candid by my friend, Bill, and I hope I am always candid with the Committee, and I hope the Committee values that. What is important is the model first of all that we have in mind for the future development of Europe, and our model as a government is our vision of a Europe of independent nation states rather than some kind of federal superstate.

  9. But subject to majority voting?
  10. (Peter Hain) Subject to majority voting is widely at the moment conceded by all governments in the great majority of cases following the Single Market Act ---

  11. That is quite different. The single market is different from European governance.
  12. (Peter Hain) Well, the single market matters as part of the governance of Europe and indeed a very, very important part of what the European Union is all about. There are a number of red lines on qualified majority voting - foreign policy for example, defence policy in the sense of committing our soldiers to war. I do not think a British Government, or for that matter any other European Government, would take a decision to volunteer its men and conceivably women to fight or assume a defensive role, in the Balkans or wherever it might be, on the basis of Community decision making. Foreign policy, defence policy, treaty changes, taxation, social security, borders, these are matters of vital national interest where I think we should not proceed by qualified majority voting. But, as I think I explained to the Committee last time, if you look at the anti-terrorist measures which have been adopted since 11 September, a number of third pillar items on justice and home affairs have been moved into Community competence and can proceed with qualified majority voting because it is in our interests to do that, to stop asylum shopping, to stop the situation where people can come in across the borders, as they do, and camp out on the other side of the Channel Tunnel at Sangatte. As I explained to the Committee last time, that is an example where there would be a British self-interest in getting exactly the same procedures, exactly the same systems, exactly the same regulations, right across Europe so people could not asylum-shop to end up in Britain, if that is where they wanted to go. If I just conclude, it is an important point, you are implying integrationism is some sort of pejorative term. We are not interested in integrationism for its own sake. There are people in Europe who are but we are not. I think we are now flowing with the great tide of opinion in Europe which is against the idea of a federal superstate, wants the nation state to be the foundation and building block of Europe. I think the force is with us, if I may put it that way, and talking to representatives in the European Convention chaired by Giscard d'Estaing, it is very apparent that is the majority view.


  13. Minister, I was intrigued by an earlier comment on your views of the reform of the presidency. I am tempted to prolong our discussions on that ----
  14. (Peter Hain) I would be happy to.

  15. So would I. I am sure it is something we will return to in the not too distant future. I wonder if we could stay on QMV. In his joint letter with the German Chancellor, the Prime Minister proposed that decisions under Treaty bases subject to qualified majority voting should be decided by QMV at European Councils. What is the prospect of this being included in Solana's Report proposing specific measures for adoption at Seville?
  16. (Peter Hain) This is something that we are quite keen on. If we take the example of the sites, we had at Laeken the unedifying spectacle of a squabble amongst the leaders of Europe as to which agency would be sited in their own country, and it broke down in the end for a number of reasons, including the fact Italy wanted the Food Standards Agency based in Parma because Prime Minister Berlosconi reckoned they had the best ham in the world and therefore that, ipso facto, defined where this Food Standards Agency should be. Finland took a different view. That is an example of an issue and a handling of it which did Europe no good at all, in fact it was very damaging for the image of Europe in the public's mind. It should have been handled by qualified majority voting and if it had been, without everybody holding a veto as to which particular part of the action they could claim, then we could have made sensible decisions. I guess decisions like that should be prepared for in the General Affairs Council. That is a concrete example.

  17. Will the report by the Council Secretary-General on specific measures to reform the Council be submitted to us for scrutiny before it is put to the General Affairs Council?
  18. (Peter Hain) Sir Stephen Wall, the Prime Minister's European adviser and a very distinguished Foreign Office official, has been entrusted with negotiating with the Spanish Presidency to try and get as much movement here as we can by the time of the Seville Council, and obviously we would want to report on that. There are, of course, a number of views on it and if the Committee is able to consider this matter and let me have its views before Seville, which is in the third week in June, I would happily feed that in. There are then a number of other matters requiring treaty change, such as the election of the president of the European Council for a longer term appointment, the election of chairs of the Council of Ministers for a longer term, the team presidency of the kind I have described. Those would require treaty change so could not actually be implemented until the next Intergovernmental Conference, which is scheduled for 2004, so there is a bit of time for scrutiny before then.

    Mr Cash

  19. You have just mentioned treaty change which could arise after the Convention, in the context of majority voting, et cetera, what is the Government's view about the question of changing the unanimity rule for the purposes of treaty amendment?
  20. (Peter Hain) We are against it.

    Jim Dobbin

  21. Good morning, Minister. The aim of the Lisbon Process as far as economic reform is concerned was to create a strong and dynamic Europe which was sustainable, and of course the creation of more and more jobs of better quality. Do you think that expectations were raised too far as far as jobs were concerned on that particular issue? As regards the economic reform, how much progress has been made?
  22. (Peter Hain) As you will be aware, the Lisbon economic reform agenda, which was essentially a British agenda adopted unanimously but, frankly, with varying degrees of enthusiasm in some areas, especially energy which I will return to, was absolutely crucial to making Europe more competitive. Europe is around 40 per cent less competitive in productivity terms than the USA for example, and with the competitive threat from the Far East, China in particular, Europe needs to be more competitive. That is why this ten year programme aimed at creating 20 million more jobs, to create in Europe the world's most advanced information technology society, was established. We have already created over the last few years 5 million of those jobs, although there has been an economic slow-down happening more recently. There has been progress. For instance, in telecommunications liberalisation, the price of long distance phone calls has fallen by half across the European Union over the last couple of years. So there is progress. We did make important progress on energy, on financial services, and on other matters which I am happy to go into, but it was absolutely crucial at Barcelona, after the process appeared to stall at Stockholm the year before under the Swedish Presidency, that the impetus was regained, and indeed that was the case.

  23. The Commission is in the process of presenting proposals to reinforce economic policy co-ordination in 2003, how do you think co-ordinating economic policy can be reinforced further without national economic sovereignty being undermined?
  24. (Peter Hain) First of all, taxation, for example, is a matter of national economic policy, and as far as we are concerned it will remain that way. That is not exactly a unanimous view across Europe but it is certainly a big majority view. On economic policy co-ordination, it is important for example we pursue the Lisbon Agenda, and we made progress on this at Barcelona, following many of the policies we have adopted in the last five years as a Labour Government, investing more in skills, up-grading our educational base and so on. So there is co-ordination of policy to that extent, though there is no Community competence in educational skills so it is a matter of co-ordination of policy. Of course, the countries in the euro-zone effectively do co-ordinate their policy because they have a common interest rate, and the decisions on that level obviously affect wider macro-economic policy. So in terms of modernising the infrastructure, whether in financial services, whether in research and development, whether in reducing the burden of regulation on small businesses, whether in labour market reform, all these areas are areas where we can co-ordinate economic policy, some of them at micro-level rather than necessarily at macro-level. I would like to see the commitment to full employment which we have made our standard under this Government in Britain being adopted right across Europe as well.

    Mr Connarty

  25. Welcome, Peter, to the Committee. One of the concerns that I have and a number of people have is that the agreements which have been advanced across Europe are in some areas seriously disadvantaging the United Kingdom. One example is in financial services. I have certainly been reading material from the financial services industry which is concerned that the way we implement the regulations - I think somebody called it "goldplating" - actually causes great disadvantages to the financial services industry in both London and Edinburgh. So the question is, what safeguards do we have? Similarly, there is the present state of chaos in the air traffic control industry and open skies, for example, which proposes a three-year licensing period when we have in fact struck a deal based on 30-year licensing for what I think is a botched-up method of part-privatisation of air traffic control, that will in fact disadvantage the industry in the UK. I am going to come back later with a specific question on other examples. It is basically what seems to be the way they are implemented. Other governments protect their big players and we do not. What safeguards can we have that this Barcelona Agreement will be rolled out on an equal basis across Europe without once again the UK ending up disadvantaged in some key areas?
  26. (Peter Hain) For example, through energy liberalisation, where we got ----

  27. I am going to come back to energy liberalisation.
  28. (Peter Hain) In that case I will hold my fire until that point. I think you have made a very fair point about goldplating. We have an honourable tradition in British Governments of implementing things as the text says we should do, and that is not always done elsewhere, to be frank. But looking at things in the round, bearing that in mind and I have been very open in my answer to you about it, Britain has not done too badly, in fact we have done rather well since we have been in Europe, and we have done rather well, especially if I may say so, in the last five years, whatever hindrances that problem might have produced. If you look at the opportunities, for example, for the financial services industry, where Barcelona saw an important step towards the completion of the single market by 2005, that will give our savers better returns and our businesses access to cheaper capital and an ability for Britain's financial institutions, which are pre-eminent in the world, to find extra business and make extra returns right across the European single market. The seven key directives which were agreed will be adopted by the end of the year and it is estimated that completing the single market in financial services will boost European GDP by 0.5 per cent, including in Britain. So that is a concrete example of how we actually gain out of it. The energy decision was another one. On the single skies initiative, a quarter of European flights were delayed by 15 minutes or more in 2000, and even a 25 per cent reduction in these delays would save the air transport industry and the public 1.5 billion a year. So these measures are all to our advantage and that is why we agree them.

    Mr Tynan

  29. It would appear there is an opportunity for some kind of consistency between the objectives on the Social Agenda and Employment Agenda as regards the European Union. You have made the point as regards full employment, there was in the Conclusions a re-emphasis on full employment as an essential goal of economic and social policies. Did the Council in your view strike a satisfactory balance between its concern to raise the employment rate and that of preserving social protection?
  30. (Peter Hain) I think so. I know there was a lot of debate around Barcelona, to which you may be referring, saying that a neo-liberal agenda had been adopted and we had become as a government a party to that. I think that is wrong and is far too simplistic. The most important right in this area is the right to work, and the whole cornerstone of the labour market reform agenda adopted in Barcelona and the economic programme in which it was situated, is to create full employment, as we have pretty well moved towards achieving here in Britain, to make it easier to get work, to create greater job flexibility but at the same time to underpin that with vital labour market social standards, provided by the Social Chapter, provided under a number of EU Directives and indeed our own legislation. So I think the balance is about right. We are not adopting an American hire-and-fire neo-liberal economic policy, and certainly not labour market policy, but we are wanting to make it easier for people to get work and easier for companies to gain the greatest productivity from their staff underpinned by high social standards.

  31. Do you believe there is a trade-off between moving towards a more competitive and dynamic economy on the one hand and greater social cohesion on the other?
  32. (Peter Hain) I think the two go hand in hand. I do not accept that you have to dump social standards and employee rights and standards in the quest for greater economic efficiency. I think you have to reduce rigidities and inflexibilities in the system because it enables businesses to do better and the economy to do better and, as we have seen in the last five years, more than a million more jobs have been created in Britain as we have followed this agenda, but there are more trade unionists in Britain than there were in 1997. What strikes me, comparing our record across Europe, is that we have things to learn in respect of investment, we are still lagging on investment, in productivity terms we are still behind Germany and France, in our skills base and in our research and development levels. However, in terms of employability and employment compare us with France, for instance, which is very much in the news this week, French unemployment is 9 per cent where ours is 5 per cent, although France's rate has been coming down. So it is possible, and indeed that is our objective as a Labour Government, to have high social standards and a foundation of minimum employment standards with the right to work being paramount and people being given the opportunity to work.

  33. You say in your letter on the Synthesis Report that the summit set the framework for the 2002 mid-term reviews of the Employment Strategy. What exactly did you mean by that?
  34. (Peter Hain) Simply that we would want to keep under review Europe's ability to reach a target of full employment at a time when unemployment across Europe and outside Europe has been rising. It is not a universal picture in every country and the problems in East Germany have weighed very heavily on this picture, but it is the case that the world slow-down since 11 September has meant that Europe has been going through a difficult time in employment terms and therefore we wanted to keep under review the extent to which we were achieving the full employment objective and whether the policies necessary to secure that were being implemented.

  35. Do you think the Council reinforced the Employment Strategy? How do you think they improved the EU's chances of meeting its goal of full employment by 2010?
  36. (Peter Hain) By adopting this range of measures from energy liberalisation to cut energy costs, although I do not want to dwell on that too much, to financial services liberalisation, labour market reform, all of these matters, underpinned by sound macro-economic policies, I think that will position Europe much better for the future.

    Angus Robertson

  37. Can I move on to the role of the social partners. In a previous life, when I lived on the Continent, I was a member of a Works Council for a number of years and active in social partnership in Austria, which has a very developed social partner model. Part of the recent discussions have been for reinforcement of social cohesion through social partnership. My observation is that the UK is light years behind the social partnership model in Germany, Austria and other countries, and I would be interested in your thoughts about how the social partnership model might be enhanced in the UK.
  38. (Peter Hain) This is something which is continuously being addressed by colleagues in Government, especially by the Secretary of State for Trade & Industry and the Minister of State responsible. It is something that I personally am very strongly in favour of. I think you get a more productive, healthier economy especially in a modern context where skills, employee commitment and high levels of education and participation in business are so crucial to their success. The old caricature of, as it were, authoritarian management on the one hand and a remote workforce which does what it is told on the other, cannot work in the modern world, and therefore the principle of social partnership is very important.

  39. 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?
  40. (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

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

  43. 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?
  44. (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.

  45. The Maastricht criteria are a requirement on this Government, irrespective of whether we are in monetary union or not.
  46. (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.


  47. Don't be tempted, Minister!
  48. (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

  49. 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?
  50. (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.

  51. 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?
  52. (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.

  53. 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 ---
  54. (Peter Hain) And these lights, I suspect.

  55. I assume so. The problem is that there is no access in reality 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?
  56. (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, Centric, 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.

  57. There is another lobby, of course, which argues that low energy prices is 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.
  58. (Peter Hain) I was Energy Minister, so you can take me down that road if you want to.

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

  61. 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, and 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?
  62. (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.

  63. 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 begun to pull ahead of us again, whereas we had been doing better against the US in benchmarking terms of productivity. One of the things we did have as an advantage was that we seem quite clearly since 1997, not just in the public sector but in the private sector, to have put a larger element of training into every employee's skill base, and therefore had 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 in fact 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 got 2 million people using broadband and the UK has only got 250,000. We tend to spend our time urging the private market to do it when in fact other countries do it centrally, and there is this 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, and 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?
  64. (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

  65. 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?
  66. (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 students 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 very rapidly 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.

  67. 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.
  68. (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

  69. 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?
  70. (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.


  71. Minister, what specific steps would the Government like the European Union to take now in respect of the Middle East?
  72. (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

  73. 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?
  74. (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.


  75. 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.
  76. (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

  77. 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?
  78. (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.

  79. Do I take it from that that the aid that is required will not be forthcoming until there is a cease-fire, a peace settlement and suicide bombings stop?
  80. (Peter Hain) I do not think it is as clear-cut as that. No decisions have been made on rebuilding the Palestinian Authority's infrastructure, as we want to do, because it is simply not practical at the moment. Inserting development projects in the middle of war zones is not practical. We have strongly condemned, as Commissioner Patten especially has in very strong terms, the destruction or the waste of tens of millions of European funds, that is in sterling, European funds just blasted to smithereens by the conflict there.

    Mr Cash

  81. You may have heard the Today programme this morning in which there was a response to these tragic circumstances.
  82. (Peter Hain) I did.

  83. I think it was either the Israeli Ambassador or a very senior Israeli spokesman clearly indicating that they regard this as a fight for their survival and the history of this, which goes back centuries, is not a new problem. What concerns me, to come back to the question of the involvement of the European Union in this, is you said Solana was a respected person, and I am not going to argue with your description, but what I am going to say is that he was given pretty short shrift and some newspapers reported it as a humiliation. Is not the problem really that the truth is that Europe is completely split on this subject, there are splits all over the world on what position people should adopt and who they think should be supported? If I may say so you put a very balanced response just now when you pointed out about the problems of suicide bombers. Nonetheless, is not this huge problem connected, as far as Europe is concerned, with this constant ambition to be involved and to take a position as a European Union? Is that not part of the difficulty that we now face, that there are these ambitions which cannot be fulfilled because of the genuine splits for very, very profound and historic and political reasons in an historic landscape, and that all this talk of legal personality, for example, in the European Union, which I have been following very closely in my capacity, is in fact highly dangerous because if, in fact, there was a legal personality in this kind of area in the European Union it would be a total disaster and Europe would actually get an extremely bad result from interfering in these matters on that basis. Could you please comment on that issue.
  84. (Peter Hain) I will happily do so. First of all, I think from my recollection of the newspapers the words "humiliation" and others were used about Secretary of State Powell's visit, so if that was used, and I did not see those reports, about Javier Solana's visit, he was not alone, was he? If I may say so, I think in your embittered stance on Europe you should be a little more rounded about these matters. This is a desperately difficult situation. If you are saying to me that Europe should simply turn its back on the situation as the richest part of the world with strong historic ties to the region and have nothing to do with this because it would fit your agenda of saying that Europe should have nothing to do with pretty well everything, I do not think that is a responsible position to take.

  85. But that is not what I am saying and you know that.
  86. (Peter Hain) I am just responding to your question. I think Europe should continue to do all that we can. Europe is evolving, the development of Europe in global affairs is in its infancy but in my view it should increase. I think the world is evolving into a multi-polar world with America the dominant super power but China is going to be much more important later this century and Russia wants a partnership with Europe. Why does Russia want a partnership with Europe? Because Europe is seen as an increasingly important global force.

  87. Can you answer my question on legal personality. Is it the Government's intention to give credence and/or encouragement to the idea that the European Union should be given legal personality in the context of Common Foreign and Security Policy and matters of that kind?
  88. (Peter Hain) It is my view and the Government's view, happily they coincide, that Europe should have a more powerful Common Foreign and Security Policy. Yes, I think we should shoulder our burden of responsibility in areas like the Balkans for peacekeeping purposes and the trouble spots in our own backyard.

  89. Who is going to decide on matters like the Middle East as to which position should be adopted if you have a legal personality in the European Union?
  90. (Peter Hain) It depends what you mean by a legal personality. If you are suggesting that this becomes a Community competence, that is not our policy. That should not be meant to imply, as I think you are doing and have conflated into an argument, that High Representative Solana should not be trying his best to put Europe's weight behind a solution to the Middle East peace process. I think we have a duty to do what we can and I think his role is very important. It is respected in Washington and it may not for the moment be particularly respected by the Sharon Government, but then who is, but I thought what was very important at the Sharm el-Sheikh discussions under Prime Minister Barak, the then Prime Minister of Israel, was Solana was part of those negotiations in 2000, was respected by the Israeli Government and that is the way I think Europe should be moving.


  91. I think I should say I am not in any way super critical of what is happening in the European Union because I understand how difficult it must be and I wish Javier Solana very well, and like you I hold him in high regard, but I think the point has to be made when you see him treated with such contempt as he was when he visited the region it does not fill you with any comfort at all. I think sooner or later the European Union has to play a hard ball game instead of, as it appears to be, trying to sweet talk the Israelis out of these terrible tragedies that are occurring.
  92. (Peter Hain) I would agree with you, Chairman, but I would just say one other thing. As a member of a Government that is strongly committed to an independent Palestinian state co-existing in peace and in co-operation with the State of Israel, I really do think that those Palestinians, whatever their frustrations, and goodness me they must be monumental, those Palestinian leaders who are encouraging suicide bombings are actually blocking the development of that independent state that I know you have supported, Chairman, Mike Connarty, and probably many other Members of the Committee, as I have over the years. We need a better strategy from the Israeli Government but we need a better strategy from the Palestinian leadership, however difficult it is for them, and the Arab world as well or this situation is just going to go from a nightmare into something worse, if that is possible.

    Mr Connarty

  93. To return to the declaration at the Barcelona European Council on the Middle East, it states in the fourth paragraph "As the legitimate authority, the Palestine Authority bears the full responsibility for fighting terrorism with all the legitimate means at its disposal." You did refer earlier obliquely to the fact that what authority is at its disposal is constrained when the leader of the Palestine Authority, Yasser Arafat, is basically surrounded, cut off without telephones, without food and water at times, completely unable to communicate from Ramallah to Jenin. I have been to the area a number of times and know that in terms of Israeli blockades Jenin to Ramallah is a very, very long road to get in contact with or any other part of the Occupied Territories. You are talking to a very diminished authority. I would condemn, and I am sure you would, extra judicial killings of people who are accused of collaboration or whatever. In terms of control of suicide bombing, it is quite clear that there are other forces in that area, Islamic Jihad, Hamas, Hezbullah, who want to see this fail for their own reasons, they certainly want to see the Palestinian Authority and Fatah fail for their own reasons. You are talking to one group on one side who have very little ability, it is like asking Sinn Fein to stop the Continuity IRA or the Real IRA from bombing and shooting when they have got no over control them, and on the other hand you have a state that is recognised, that is funded in particular by the US and is in a relationship with the European Union and other countries that is perpetrating acts of, some may say, state terror, some may just say acts beyond the bounds of legitimacy. In terms of who you are talking to you can actually solve the problem. It appears to me that the European Union should really be focusing on how it can influence or pressure the Israeli state to withdraw and clearly then help build up a legitimate authority of those on the Palestinian side who want to see the Islamists and the Fundamentalists being defeated as much as they want to see the establishment of a Palestinian state. If that is a correct analysis, what is our Government going to do to strengthen the hand of the European Union in pressuring or whatever they have to do to bring Israel to a more realistic position?

(Peter Hain) There is a General Affairs Council due to take place in a couple of weeks which will review policy. I do not have an easy answer to that. As a Minister it would be wrong for me to pretend otherwise. The truth is the Israeli Government is not open to influence and the actions of the suicide bombers are discouraging it from adopting a more constructive policy in its own interests. I am sorry, it sounds very weak but it is desperately difficult.

Chairman: Minister, we fully appreciate your point. I would like to thank you for your usual candour and for your contribution during this evidence session, in particular on the last point which we are all very, very concerned about. Minister, thank you very much.