Memorandum by Confederation of British
1. The Confederation of British Industry
(CBI) is the national body which represents the views of the business
community to government in the UK and Europe. It is an independent,
non-party political organisation funded by its members in industry
and commerce. The CBI represents companies from every sector of
the UK business, including:
more than 250,000 public and private
companies, over 90 per cent of them small firms with fewer than
200 employees; and
more than 200 trade associations,
employer organisations and commercial associations.
2. The CBI is widely recognised as Britain's
business voice and is well placed to make representations on behalf
of employers to the House of Lords European Union Committee, Sub-Committee
F (Social Affairs, Education and Home Affairs).
3. This paper presents UK business views
on the issue of social policy in the European Union (EU). Social
policy among Member States varies widely as it is determined by
a nation's specific culture and history. For example, co-determination
is a central part of the German system of industrial relations
but has no place in Scandinavian or British systems. This presents
Member States with very different challenges in their labour marketswhich
they must be allowed to tackle with tailored solutions. Once minimum
standards have been introduced, the value of the EU lies in exchanging
experiences and identifying commonaltiesnot in imposing
a standard and ill-fitting social model from above.
4. Making reference to the discussions of
Working Group XI on Social Europe this paper suggests that:
the Working Group correctly identified
that there was no case for extending EU competences;
but care must be taken this
is not accomplished through the back door by incorporation of
the EU Charter of Fundamental Rights;
members of the group worked hard
to ensure no recommendation was made to extend QMV and this must
alternatives to legislation are valuable
but should not be used indiscriminately; and
the Social Dialogue process needs
The CBI believes that progress towards a strong
and competitive EU can only be established through real consensus
building between member states.
5. The CBI is committed to a strong, effective
and competitive EU. Our members have experienced directly the
benefits of the Single Marketfor businesses and for consumersand
supported progress towards its completion. Members also recognise
that the EU is more than just a single marketand that it
has a role to play in creating high growth and prosperity. However,
the Commission has acknowledged that progress towards the Lisbon
goalof making the EU "the most competitive knowledge-based
economy in the world by 2010"has not been entirely
encouraging. If this goal is ever to become a realityand
the benefits it offers to EU citizens and business to be realisedthen
the EU must ensure that inappropriate social legislation is not
6. The reason EU social legislation is often
inappropriate is that it fails to recognise the diversity of national
systems. Overarching EU solutionswhile essential in creating
the Single Marketare often inappropriate in the area of
employment. "One-size-fits-all" impositions for social
policy prevent Member States from being able to respond to their
particular labour market issues. EU action can restrict them from
introducing the most appropriate policiesfor example, to
deal with unemployment amongst particular groups. This not only
damages EU competitiveness but risks one of the key benefits that
citizens have identifieda high level of employment. The
role of the EU is not to impose uniform structures, but to add
value through bringing together the diversities of Member States'
7. The core principles of subsidiarity and
proportionality should ensure that social measures are only taken
forward at an EU level where it can add real value. Subsidiarity
is designed to ensure that local, tailored solutions, which are
often more effective, are not superseded by less effective EU
solutions. This would often be the case with social policy where
the variety of national social policies and their specificity
to the local labour market, often means that national and regional
or sectoral solutions are the most effective level to take action.
However, it often appears to be the case that mere lip service
is paid to the principle of subsidiarity with regard to EU legislative
proposals. Proportionality determines that the tool used should
fit the objective required. The national context of labour market
issues and requirements for flexibility mean that EU level legislative
action is rarely an effective or sensible tool to address EU policy
issues. These two principles of subsidiarity and proportionality
should guide EU thought on social policy. This would determine
that it would be inappropriate to extend EU competences or the
use of QMV on current competences, but that progress could be
made through alternatives to legislation, for example considered
use of the open-method of co-ordination, and through reforming
the social dialogue process.
8. The CBI therefore recommends that the
proposals from the Working Group on Subsidiaritywhich are
a helpful stepshould be fully heeded. It is important that
the subsidiarity protocol of the Amsterdam Treaty is given operational
formperhaps through a clearly defined Charter of Competences,
which determines what the EU should and should not do. UK business
also advocates a firm commitment from the Commission to proportionalityto
using the lightest possible toolswhich should be accompanied
by the creation of a independent body to undertake regulatory
impact assessments for proposals.
The Working Group correctly identified that there
was no case for extending EU competences . . .
9. The CBI welcomed Working Group XI's decision
that the social policy competences of the EU should not be extended.
The CBI was also pleased to note that, despite this issue having
been given a high profile, the vast majority of group members,
as stated in their written contributions, saw absolutely no case
10. The CBI believes there is no justification
for EU competences in the field of social policy to be extended.
Current exclusionssuch as wage policy, freedom of association
and the right to strikeare those where it is imperative
that Member States have the freedom to determine individual, tailored
policies relevant to their industrial relations models. EU-wide
policies prevent national or even local solutions being developed
and therefore do not only not add value but can prevent a country
responding appropriately to, for example, its particular circumstances
of unemployment. The CBI does not therefore see any benefit or
necessity for extending EU competences in the field of social
policy. We would however be interested in following up the Minister
for Wales Peter Hain's suggestion that consideration be given
to returning some areas of shared competence to the Member States,
eg collective representation.
. . . but care must be taken this is not accomplished
through the back door by incorporation of the EU Charter of Fundamental
11. Although the discussions of group showed
that there is neither justification nor demand to increase EU
competences in the social field, the danger remains that this
will be accomplished through incorporation of the EU Charter of
Fundamental Rights into the Treaty. Many of the issues, such as
the right to strike and unfair dismissal, specifically excluded
from EU competence due to the inappropriateness of EU action in
this area, are included in the Charter. Incorporation could result
in the EU gaining competence in these areasalthough Convention
discussions determined that this is inappropriate. If the EU was
to ever gain competence in these areas it should do so through
negotiations between democratically-elected Governmentsand
not gain them through the back door as a side effect of making
the Charter legally binding.
12. Incorporation also risks undermining
Directives that have been built on agreement between Governments
and that allow some national flexibilities in implementation.
For instance, the Charter's article on non-discrimination prohibits
all unfair treatment without the caveat, widely recognised in
EU and domestic law, that "indirect" discrimination
is sometimes justifiable on objective grounds. This could lead
to EU and domestic discrimination law being rewritten according
to the Charter rather than national and EU policy preferences.
Incorporating the Charter also has a number of other undesirable
effects, such as the possibility of legal uncertainty created
by confusion over the jurisdictions of the European Court of Justice
and the European Court of Human Rights.
13. The CBI has been investigating current
proposals to incorporate an amended Charter, containing new horizontal
articles designed to prevent the transfer of competences. At present
we are unconvinced this would be accomplished. UK business therefore
recommends that the current situation of a declaratory Charter,
which business welcomed as a way of raising the profile of Fundamental
Rights in Europe, should not be altered.
Members of the group worked hard to ensure no
recommendation was made to extend QMV and this must be upheld
14. Some Convention representatives favour
extending QMV on social policy. However, the CBI remains in strong
opposition to any such move. Of particular concern is the extension
of QMV to areas such as those covered by article 137, free movement
of workers (article 42), professional training (article 47.2)
and discrimination (article 13).
15. These cover the key areas which have
developed out of different histories and cultures. Member States
therefore have fundamental differences in approachwhich
allow them to craft effective policies for their particular traditions.
Extending QMV would mean these genuine differences, together with
the tailored and therefore most effective responses, would simply
16. While Working Group XI correctly made
no firm recommendation of extending QMV on social policy, this
was only due to the hard work of a number of members of the group.
The CBI is aware that some members of the Convention are likely
to raise the issues again. Many argue that enlargement requires
QMV to ensure Europe can function. While the CBI does recognise
concerns over the inefficiency of European institutions, UK business
does not believe the way to solve this is by overriding genuine
differences in national preferences. The CBI is particularly concerned
that, despite the lack of consensus within the group, its final
report made strong "suggestions" that QMV could be envisaged
on articles 13 and 42 and parts of 137. QMV cannot be envisaged
on these articles which must be dependent on agreement between
Alternatives to legislation are valuable but should
not be used indiscriminately
17. The CBI strongly endorses the Commission's
use of alternative methods to legislation such as "the open
method of co-ordination", co-regulation and self-regulation.
In many areas, benchmarking, exchanges of experience and peer
review are more valuable and effective tools than legislation
because they recognise that different countries face different
problems that are not susceptible to top-down solutions.
18. In particular, the CBI has seen real
added value through the flexibility of the open method of co-ordination
as this has been applied to the fields of stock options and health.
CBI members also highly value the Employment Guidelines as they
allow Members States to determine tailored solutions for important
social policy areas.
19. However, there are risks that Working
Group XI's recommendation to incorporate the open method into
the Treaty would undermine its benefits. The value of the open
method lies in its flexibility, which could be diminished if incorporation
turns it into a legal standard rather than a method. Also, it
is vital that the open-method of co-ordination is not indiscriminately
appliedthe merits of applying the open method must always
be considered on a case-by-case basis and cannot simply be applied
wholesale to new areas.
20. The open method is not the only alternative
to legislation and the Commission should seek to promote, for
example, exchanges of experience as valuable actions in their
own right and negate the common perception that these are somehow
second best or a prelude to legislation.
The Social Dialogue process needs reforming
21. The CBI believes that there is value
in social dialogue where objectives and roles are well understood.
It recognises that in some circumstances where the EU should legislate,
there is value in social partners negotiating the details, drawing
on their detailed knowledge of conditions and concerns within
actual companies and workplaces.
22. But such negotiations should follow
on from rather than pre-empt a mandate from the Council of Ministers,
and should be freely entered into.
23. The CBI also believes that there can
be a useful role for more general social dialogue discussionsfor
instance on the general principles of policies to combat unemployment,
provided that these discussions are focused on a real exchange
of views and analysis. Any agreed statements should record only
those areas where there is genuine agreement. Areas of disagreement
should be noted, but attempts to declare a non-existent consensus
devalue the whole process.
Human Resources Directorate