Select Committee on European Union Minutes of Evidence

Examination of Witness (Questions 224-239)




  224. Good afternoon. First of all, on behalf of the Committee, may I thank you for coming this afternoon. We were sad to hear that your colleague had been taken ill this morning and hope that you will convey to her our best wishes for a very speedy recovery.
  (Mr Zourek) I certainly shall.

  225. We are all very grateful that you have spared the time to come. We have read the evidence submitted by your colleagues and thank you for that also. I think it actually came over your name. We have an enormous range of questions for you and important evidence to take later on, so we go straight into matters, if we may? I usually ask whether you want to make an opening statement, but I suspect that would take us away from the questions. At the end, if we have not covered anything, I will give you the opportunity to add.

  A. May I just say that if I am not able to give you answers immediately on some figures or other factual matters, I apologise and ask that you accept a note afterwards?

  Chairman: That would be fine; that would be perfectly acceptable.

Lord Fearn

  226. Could you explain how EU policy for entrepreneurship is complementary to Member States' national policies?

  A. I will try to do that by saying that our concept of enterprise policy is one where we try to integrate enterprise concerns in our own activities, not only in those of our Directorate-General, but also when designing legislation in general. So the department which is in charge of energy or accounting rules or any other piece of community legislation also takes into account the problems and requirements of businesses so that they can manage and so the rules and regulations are designed, if possible, to promote innovation and entrepreneurship. This is the one overall thing we try to do. To complement Member States' enterprise policy we usually try to concentrate on comparing Member States' activities in areas where we have seen big differences in the policies of different Member States, where we see that there is need for some activities and where learning from others could be an advantage. We focus on rather narrow questions. To give you one example, how best to organise the transfer of a business from one generation to another. You should not forget that about one third of all enterprises will change ownership within approximately ten years, so there is a considerable turnover. Annually this has an impact on about 2.4 million employees, so this is something which is also important from the point of view of the labour market. We look into areas where we see that there is perhaps a deficiency in one Member State or another, or neglect of certain policies, we try to convene experts and stakeholders in this area and to produce evidence of what is done in Member States and see what practices are employed elsewhere so Member States can then improve their own performance, if possible. The complementarity is to add value from the European perspective. It is not in competition, because most of these areas are purely in the competence of Member States and we have no intention of invading these areas. What we are trying to do is to offer an opportunity for Member States to learn from each other.

  227. You mentioned co-ordination. Do you think the EU and national policies are sufficiently well co-ordinated?

  A. I would say yes, going from Member States into Community activities. All Community actions which are designed and executed are done so under the direct supervision of Member States. At different levels we have management committees, policy advisory committees, committee which take decisions on budgetary allocations and invitations to tender or design of programmes, where Member States have their say in the way the Community exercises or applies its own rules and how we manage the programmes which have been designed. There is some sort of co-ordination amongst Member States via this open method of co-ordination, where they learn from each other, but this is something which is strictly voluntary and sometimes Member States grasp the opportunity to do something, sometimes they do not. The co-ordination is mostly from Member States towards Community activities and not the other way round.

  228. Can you think of any examples of lack of co-ordination which we should avoid in the future?

  A. Sometimes it is perhaps the timing which is unfortunate when we learn of Member States' activities in a certain field too late and it would perhaps have had a bigger impact if common action had been taken, common in the sense of joining forces, not interfering in the design of a Member State's activity but supporting these activities with a common campaign or awareness raising activities at the Community level. This could perhaps have had a greater impact. In some areas, where Member States have been active because of one particular event which caused them to become active in certain areas, in particular in some areas such as environment, when an urgent need appeared, they tried to establish something to support business to cope with this. It would perhaps have been even more efficient, if one had waited to co-ordinate this a little more. In the past some of these immediate actions have been taken where perhaps some better co-ordination would have been beneficial.

  229. So mainly environment.

  A. I must admit that I cannot really give you an informed response to this because we do not evaluate whether there is a lack of co-ordination in general. We look at the lack of co-ordination on a particular issue. When we see an important issue at stake and we see that there is a lack of co-ordination on the part of Member States, then we become active, but, as far as I know, we do not really have a comprehensive overview of everything that is going on that would merit better co-ordination. I do not think I can really respond to this question in the affirmative, that there is nothing else, or nothing in particular. This was just an area of which I was aware.


  230. Is there not a slight contradiction there? Are Member States not pursuing policies to help SMEs and others grow and develop, partly or largely for competitive advantage purposes? Member States are not going to slow down and co-ordinate nicely what they do with every other Member State. That would be the pace of the slowest, would it not? I am not entirely sure what you are suggesting Member States should do. If Member States want to promote policies to help SMEs, help them develop and grow in a particular area, energy for example, surely that is to the competitive advantage of countries which want to get up and go? Why should they tell everybody else what they are going to do and not do it until they have told everybody? You would not do that in business. Do you see the problem?

  A. Yes, but my comment would be that I have rarely met programmes which have been designed to promote one's own competitive advantage and to disregard what other Community Members do. If there is an attempt to increase the competitive advantage, it is over our main competitors outside the Union, it is vis-a"-vis the United States or Asia. It is less between Member States. Secondly, all Member States have now committed themselves to promote sustainable development and it is more from the sustainability point of view that we also try to have a more harmonious approach in the support mechanisms and it is less about competing one Member State against another; it is rather how to put small- and medium-sized enterprises (SMEs) into a position where they can take advantage of the internal market. Usually it is easier for bigger enterprises to grasp the advantage of the internal market than for a small- and medium-sized enterprise. Mostly, what I see is that Member States are interested in making the advantages of the internal market accessible for themselves. They are also extremely aware of the fact that our economy is integrated very much more and that there is no real point. Either these are businesses or crafts which are not competing across borders, so the competitive advantage vis-a-vis somebody else is not really of concern, or you cannot do it independently of others. To give you one recent example, biotechnology. There is now a determined effort by all Member States to follow a common action plan or way ahead on biotechnology because doing it individually and independently of each other did not produce the expected result and they learned the lesson that it is better to join forces and do it jointly. The majority of programmes I am aware of are not competing with or disregarding others, they do not have a beggar-thy-neighbour attitude.

Lord Shutt of Greetland

  231. What is the current cost of EU entrepreneurship support policies and roughly what increase would be incurred in the light of the proposals in the EU Green Paper?

  A. I could provide a written note on the budget but to give you a rough description of what we do, the actual budget that we spend is about

450 million for the period 2001-05 for something which we call the multi annual programme for entrepreneurship. This is the overall envelope for this programme from 2001 to 2005. This consists mainly of financial instruments which are administered by the European Investment Fund (EIF) and which are, for instance, support for start-ups, a guarantee facility, venture capital promotion and this type of activity. It is not direct action by the Commission. We are not supporting individual SMEs: we support either national venture capital funds or other support institutions via the European Investment Fund which then render support to small- and medium-sized enterprises. The main part of the

450 million is designed for these financial instruments.

  232. May I just stop you there? Is that

450 million a year or

450 million in the period 2001 to 2005?

  A. For the whole period. Then we do have a network there to give immediate access to information for small- and medium-sized enterprises which is called the Euro Info Centre. We have some 300 of them in Europe which are mostly supported by business organisations like chambers of commerce and other business organisations, on which we spend some

75 million. The smaller part, roughly some

60 million, is devoted to these activities which I described as policy development, organising studies to compare performance in Member States, to commission a study to look into the legislation in Member States or how long it takes to set up an enterprise and create this type of evidence. So that is the extent of the multi annual programme, which is administered mostly by D-G Enterprise. We do have other budgets allocated to small- and medium-sized enterprises and to enterprise policy. I should like to mention the framework programmes for research and development; the fifth and the sixth. These are always five-year framework programmes which amount to approximately

3.6 billion. The fifth framework programme, which comes to an end this year was about

1.5 billion; the sixth framework programme which starts this year is about

2.2 billion.


  233. Over how many years is that?

  A. For five years each. It is always a five-year period. Out of this overall envelope of roughly

1.5 billion and

2.2 billion, we have some

544 million in the fifth framework programme and some

400 million in the sixth framework programme earmarked particularly for SME programmes. Of course much of the structural fund spending is also to the benefit of enterprises, particularly small- and medium-sized enterprises, and this is in the order of magnitude of

16 billion for the period 2000 to 2006. Because we consider education and training are important, we also have some programmes for cross-border support for training. There is a programme called Leonardo da Vinci which for the period 2000 to 2002 had a budget of some

25 million.

Lord Shutt of Greetland

  234. A paper would be helpful. The numbers are climbing.

  A. I could send you a table, if you so wish.

  235. I asked the question on EU entrepreneurship support as though that were a package and labelled as such. There could be other activities of the EU which anybody on the outside might think sounded like entrepreneurship support but they were not labelled that way by you. Will your paper cover that?

  A. I hope so. I could also provide you with something else which is a report we have published on our activities to help small- and medium-sized enterprises, not just the figures but details of the activities. To give you one example, which has nothing to do with entrepreneurship policy, expenditure on environmental protection, and this is why it came to the structural funds, is not only what D-G Environment is spending on individual or particular programmes, it is a much larger amount of money spent via the agricultural policy. This is also environmental protection but it is labelled common agricultural policy. We tried to produce figures which you could count as support for enterprises.

  236. In terms of where we are now and the proposals in the Green Paper, what is the lift which is suggested there?

  A. We do not suggest a marked increase in the amount of money to be spent. We found that the financial instruments were taken up very well and they seem to be very helpful. We try to continue that but we have no intention of asking for an incredible amount of money, because we have learned our lesson, that protection from the Commission is not at all appropriate in this area. These are Member States' activities. What we should like to do is go for savings by reducing the complexity in the support networks: the Euro Info Centres, the business information centres which deal mostly with regional development, the information relay centres. We create a common framework for them or a back office so that they can communicate more easily, so that there is a one-stop-shop for enterprises whatever their concern might be and they do not have to learn which service is in charge of what part of the policy.

  237. In terms of the enlargement of the European Community then, is the per capita spend in this area going to be lessened?

  A. The applicant countries are already part of this. They are already now entitled to do so. What we want is to have a follow-up activity of what is now called PHARE which is designed for candidate countries so that we can take this amount which is spent under this heading and bring it there, but this would not be a net increase, it would just be that Member States are treated like Member States and not like other countries any longer. It is no longer a pre-enlargement or a foreign policy instrument, it becomes part of the internal policy. We have no intention of creating particular envelopes within the Community. We mostly try to be helpful and take into account the needs of candidate countries via the structural funds. We consider the regional funds to be the most appropriate to use for this purpose. There is no need for a further instrument.


  238. You said earlier on that one of the reasons that the Commission gets involved in these areas is where there are big differences in Member States, for example. You also said another reason is where there are gaps in some Member States where performance could be improved. The third reason you gave was where exemplars could be used. Bearing in mind those different attributes, what is your view about the performance of the UK in those regards? Do you see any areas of big differences in the way things are done in this country in support of enterprise and entrepreneurship compared with elsewhere?

  A. I am afraid I am not really in a position to give marks to Member States for their performance. I think that in quite a few areas we see UK activities at the forefront of European performance and where others could learn. There are others where we could see that the United Kingdom might have some room for improvement. To give you one example of what I have in mind, how much time does it take and how much money does it cost to set up a company? There are differences from 12 days to 180 days within the Community and from free of charge to

700. This makes a difference. We tried to present evidence and to make Member States reflect on this. We also see some areas like how to integrate immigrants and female entrepreneurs into the entrepreneurship field. I can say that we draw quite a number of important lessons from the UK in the area of integrating immigrant entrepreneurs into the fabric of enterprises. I cannot give you a kind of overall picture and say the UK is outperforming all the rest or not. There are areas where the UK has a great advantage. What I would surmise is that the public awareness of entrepreneurship is rather high in the United Kingdom. The reason for publishing this Green Paper on entrepreneurship was based on two questions. One is: how come the public has more or less the same appreciation or image of entrepreneurs in the United States as in Europe but still we have a quite considerably smaller number of people who become entrepreneurs? What is the difference between Europe and our competitors? By the way, there is an enormous difference within Europe between the north and the south of Europe in the activities of entrepreneurs. The second question is: when we do have enterprises, why are they less interested in the growth of the enterprise than our competitors in other areas of the world? The questions we address in this Green Paper and in this policy in front of us are: how do we stimulate activities to create entrepreneurs and once they have become one, how can we support enterprises so they are interested in growth? The focus of all the projects we run is directed towards these two considerations: to have more entrepreneurs and to have enterprises growing. This is the main thinking. It is not a philosophy or a comprehensive approach as such, it is trying to promote or support these policies.

  239. You very neatly led me on to another question. You said that one of the reasons was the American/European comparison and that you are concerned to establish new businesses but also to promote growth of the old ones. In this inquiry we are principally concerned with the latter: growth of the old. Could you just pick out one scheme, one action of best practice in Member States that helped support growth and development of businesses which have got going and really grown and developed? Best practice in terms of enhancing the human capital side of entrepreneurship. There are four different aspects: best practice in terms of enhancing human capital; enhancing access to risk capital; enhancing the commercialisation of science and technology; promoting intrapreneurship. All the time concerned with growth rather than new. Could you just give an example for each of those areas of good practice, best practice in Europe? One of your objectives in the Commission is to promote best practice, so I assume you must.

  A. For the purpose of saving time, may I make reference to our report on the charter. There is a charter for small businesses which devotes itself to how to support growth and development of small- and medium-sized enterprises. We are reporting on this. Member States have signed up to promote this and have agreed to follow a certain line of activities. We report what Member States have done in a given year, what the programmes are and we also give a kind of evaluation of them and, when interviewing Member States, we ask the business community. So it is not an evaluation which is done either by self-appreciation by the government or the Commission giving marks, it is rather reporting that we have meetings with the business communities of these countries who tell us how they felt this activity was helping or not helping their concerns and this is a report which is available and I would ask you to look at these practices. There is a list of actions following this kind of logic which are considered to be best practices. If you permit, I would refer you to this report on the charter which we have published recently.

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