Examination of Witnesses (Questions 11
MONDAY 10 DECEMBER 2007
Professor Michael Waterson
Good afternoon. May I welcome Professor Michael Waterson; thank
you very much indeed for coming to help us in our inquiry into
the impact of the EU Reform Treaty in relation to Services of
General Interest. I know that you would like to make a brief observation
to begin with.
Professor Waterson: I should admit to a certain
amount of trepidation in this topic. Obviously I am an economist
not a lawyer, and to me at least the Treaty looks to be quite
a difficult document to follow and the way it is set out I find
it quite tricky to work around. I am pleased to see that you are
seeing a lawyer later on today so hopefully he will be able to
help you where I cannot. I have had some discussion with a colleague
of mine, Professor John McEldowney, about aspects of the Treaty
and he shares my view that it is quite difficult to understand.
In looking at the possible questions that were sent to me I felt
that the very general ones I am not particularly competent to
judge but the later ones I felt more able to make some comments
on. I am very willing to help you in your process and I am just
apologising in advance if I am not able to help you a great deal
with some of the things.
Chairman: We will see how we get on.
Any help that you can provide will be welcome because I think
we find the new Treaty in relation to the workings of the Internal
Market and its impact somewhat difficult to understand. I am going
to ask Lord Walpole to start the questioning.
Q12 Lord Walpole:
This is a general question which you do not want to answer, I
suspect, and that is: Does the Reform Treaty and its Protocol
strike a clear balance between European involvement and Member
State competency on the issue of Services of General Interest?
Professor Waterson: I guess implicitly I would
say that my answer has to be that no; it is not straightforward
because at least to me it does not seem to be clear. Both are
mentioned in ways which do not completely disentangle the respective
competencies. To the extent that I am able to answer I would say
that it is unclear, there are rather unclear boundaries.
Could I follow that question by asking, with all this ambiguity
and lack of clarity, what do you think the impact is likely to
be in terms of how states provide or ensure there is provision
on Services of Economic and also non-Economic Interest? What are
the practical consequences?
Professor Waterson: First of all I should say
with Services of non-Economic General Interest I think the position
is quite clear and that is that that is left up to the individual
states. It where we come to Services of General Economic Interest
that matters become more complex. I suppose this is because different
nations have different views about the way of life that they pursue.
Some nations within the Community take the view that particular
services should be provided through a market mechanism, others
would be rather antipathetic to that. I would imagine that there
is some compromise here. There is, as I understand it, an opportunity
to define particular Services of General Economic Interest as
being within the competence of the European Union as a whole,
but I suspect it will take some time for that to come about.
Could you give us some examples that you think are blindingly
obvious of Services of Economic Interest?
Professor Waterson: I would say, for example,
that provision of electricity and gas would be examples of Services
of General Economic Interest where manyperhaps allcountries
would view that as being provided essentially through a market
mechanism, controlled in some way by the state rather than being
provided by the state itself.
Professor Waterson: Quite possibly, yes, although
that may be an example where different states would have different
views and where it might take some time for a general view to
come about. I suspect that postal services will move towards a
Q16 Lord Whitty:
That does leave an awful lot of ambiguity really between what
constitutes Services of General Interest and the value between
economic and non-economic and it effectively leaves it to the
Member States to sort out. You could say that this is a commendable
piece of subsidiarity applying but, on the other hand, is it not
going to lead to differential activity within each Member State
and therefore what is supposed to be a unifying push towards the
Single Market being differentially applied. If a Member State
decides on one significant sector as being within the definition
and another one was out, then the degree to which, for example,
market liberalisation is being pursued with pressure from the
European Union authorities will differ from state to state because
of the state's own interpretation. This seems to me a recipe for
confusion rather than a recipe for clarification of what the Single
Market means. Governments who are responsible for these individual
services or the framework nationally which surrounds them will
want to know whether there is a view as to whether that should
be classified within a view from Brussels, whether than can be
classified in one box or the other. At the moment we can be vague,
but will it not be pretty rapid before we are going to have to
make some more definite definitions?
Professor Waterson: Yes, I think so. As I understand
it, the Union, can, through the qualified majority voting system,
determine that particular services definitely are of general economic
interest, so I think it will be natural for that to happen. I
think inevitably it is ambiguous at the moment.
Q17 Lord Whitty:
The example the Chairman gave of the postal services really are
regarded differently in different Member States. Are you saying
that that process could resolve that one way or the other?
Professor Waterson: Yes, I think it could do.
Given that it is a qualified majority then I think it could do,
Q18 Lord Whitty:
In many of the areas the state provides some of the services and
the definition does not actually differentiate in terms of ownership,
but if we are to move into the box where the normal competitive
rules should apply then clearly a state enterprise moving into
that or a partially liberalised sector could lead to different
outcomes in different economies. There are different patterns
here and it is not entirely clear whether everything stems from
the definition or whether, once you have the definition, then
you can still have a thousand flowers blooming.
Professor Waterson: I think it is interesting
here, as a comment on what you have just said, that the word "provide"
is used in Protocol 9: "national, regional and local authorities
in providing, commissioning and organising Services of General
Interest". I am not clear what the word "provide"
means compared with the word "commissioning". "Provide"
implies to me that the public authority does more than just commission
but actually, as you say, produces the service itself. Then that
seems to me to conflict with Protocol 6 on the Internal Market
and competition of ensuring that competition is not distorted.
If the state is providing the service then how is it ensuring
that competition is not distorted between it as a provider and
someone else? It then depends which of those views prevails; is
it Protocol 6 or Protocol 9 which prevails? I do not see any problem
about the elements of commissioning and organising services because
that is just arranging the way that the market mechanism operates;
it is this use of the word "providing" which seems to
me potentially to conflict with Protocol 6.
Q19 Lord Whitty:
If you take postal services in the UK you could argue that that
is largely provided by a state organisation although there are
elements of competition at the edges and government policies to
push it further. Nevertheless, that is clearly a provider role
at the moment and in most states is nearly a hundred per cent
provider role. If you take water however, is that a commissioning
Professor Waterson: Yes, I would say so.