The Stoiber report: a milestone in the fight against EU red tape?

Edmund Stoiber presents his report

Today saw the publication of the final report of the "High Level Group on Administrative Burdens", i.e. an EU taskforce charged with cutting red tape and easing its impact on businesses. The group - chaired by former CSU leader and state Premier of Bavaria, Edmund Stoiber, was put together back in 2007, so its final report has been a long time coming.

As we have been going on about the costs of EU regulation long before it became fashionable - compiling the first ever overall cost figure for EU regulation based on UK government impact assessments in 2009 - this has been a report we have been eagerly anticipating.

The report contains a number of recommendations, some at the EU level and some at the national level. The key EU level recommendations include:

• Adopting a new EU Action programme and strengthening existing EU programmes for reducing overall regulatory costs such as REFIT, as well as setting a net target for reducing regulatory costs and publishing annual statements of the total net cost or benefit of new legislative proposals,
• Setting a net target for reducing EU regulatory costs,
• Introducing a system of offsetting new burdens on businesses stemming from EU legislation by removing existing burdens from elsewhere in the acquis,
• Rigorously applying the “Think Small First” principle and competitiveness test to all proposals, with SMEs and micro-businesses be exempted from EU obligations as far as possible,
• Developing a common EU methodology to measure regulatory costs and benefits and making the evaluation of all EU legislation compulsory on the basis of this in order to measure actual outcomes against original objectives before any proposals for revision or new legislation are made,
• Declaring a political commitment to focus only on those interventions which are indispensable at the EU level and which add the greatest value compared with national or regional action,
• Empowering an independent body to scrutinise the Commission´s impact assessments before the legislative proposal is adopted by the Commission and to assess the evidence base and costs and benefits supporting legislative amendments by the European Parliament and Council before the legislation is adopted.

The report estimates that were all these to be adopted, businesses in the EU could save up to €41bn per year on top of proposals already adopted by the Commission and European Parliament with an "annual reduction potential" of €33.4bn.

Overall, the recommendations are very welcome and reflect many of the proposals that we have been championing for some time - for example, we first proposed an independent impact assessment board with "real teeth" back in 2009. The report also overlaps with David Cameron's business taskforce report published last year, albeit the Stoiber report does not explicitly call for the adoption of a 'one in, one out' principle when it comes to new regulation. Also, the report does not address big questions like the extent to which the EU should be involved in social and employment policy and the impact of the European Court of Justice in increasing the costs of EU regulation via the back-door as has happened most notably in the case of the Working Time Directive (which the report does not mention). 

Nonetheless the report - together with the nomination of Frans Timmermans as Commissioner for better regulation in a generally reform-orientated Commission - is indicative of a cultural shift within the Commission away from regulation as a process in of itself towards securing concrete outcomes and addressing business concerns. It is certainly, among other things, a nod to concerns raised around the EU and the UK in particular about the EU's tendency to over-regulate and impose excessive costs on businesses and consumers. 

In fact yesterday's Guardian reported that Stoiber explicitly referenced the need to keep the UK on board, and in presenting the report he argued - as passionately as it is possible to when discussing EU regulation - in favour of an EU that is less obtrusive, heavy-handed and opaque. He also admitted that in the past, many politicians and EU officials had seen any EU-level regulation - regardless of its desirability or suitability - as a means to advance the 'EU cause', but that such thinking was now history (although we would say it hasn't completely gone away).  

Overall, it is clear there is a real opportunity to create a more enterprise and business-friendly single market. However, as ever with EU reform the challenge for the new Commission and for national governments will be to translate the rhetoric into concrete action. The fact that the Commission President Barroso has seemingly rejected one of the proposals already - for an independent impact assessment board is concerning.

.@BarrosoEU doesn't support idea of independent body to control impact assessments. "Commission is sufficiently independent & strong."
— Jarno Hartikainen (@JarnoHa) October 14, 2014

This suggests the Commission is nervous about independent scrutiny of its cost estimates for new EU regulation. An independent IA board would be better at catching out harmful proposals - such as the infamous olive oil jug ban - and delivering more measured verdicts on politically contentious issies such as the proposed FTT, where major problems with the Commission’s proposal emerged after it had been tabled and undergone an internal impact assessment. The Commission's resistance suggests that despite much progress, there is still some way to go.

The SNP embraces EU reform - but is it trying to have it both ways on treaty change?

Ahead of next month's crucial Scottish independence referendum, the Scottish government has put out its own paper on EU reform, designed to position the SNP on the pro-reform as opposed to the status quo side of the debate. The report has generated very little coverage (our daily press summary being the exception). It's a mixed bag but contains some worthy ideas - we look at the key points below:

Reconnecting European citizens with the EU

The paper notes that "it is important that the EU institutions and the Member States recognise and respond to the challenges to the EU’s wider legitimacy". Its suggestions include:

"the Scottish Government considers that greater observance of the principle of subsidiarity, is one of the key means of maintaining the democratic legitimacy of the EU… it is essential that the procedure for monitoring subsidiarity by national parliaments is extended further to give an enhanced role for both sub-national and local parliaments."

Cutting red tape and EU "competence creep"

The paper notes that warns that “much more remains to be done” to alleviate concerns about EU “competence creep” and excessive “red tape”, and to “restore a balance between the burden of EU legislation and the benefits expected to derive from its implementation.” It adds that:

"the volume and complexity of the EU regulation affecting businesses in Scotland can pose a significant administrative and financial burden on them (particularly SMEs) and is threatening their ability to recover from the economic and financial crisis."

Its recommendations include:

• Consistent regulation - greater adherence to the framework set by the EU Treaties with less ‘competence creep’ without formal amendment of the Treaties,
• Increased flexibility to the member States when incorporating EU law into domestic legal systems and greater use of exemption schemes, in particular for SMEs,
• Further developing the impact assessment tool and applying it at each stage of the EU legislative process where prospective legislation is subject to significant amendment by the Council and/or European Parliament,
• Focusing on overall principles rather than detailed prescriptive measures,
• An increased review of legislation which is no longer appropriate for today’s climate.

The above are good suggestions - indeed ones which Open Europe has been advocating for a while now (see our 2011 report on European localism and our 2010 report on EU over-regulation for example) but as always, the question is how to translate this into practice. 

Still, the report has some pretty big gaps - for example, it barely mentions the EU budget despite this being in radical need of reform (for example, contrary to common perceptions, Scotland would benefit from devolving regional subsidies back to the national level). Likewise beyond some general praise for EU free movement, the report does not discuss whether changes are needed to rules around EU migrants' access to benefits. In some places, the report calls for more protectionist measures at the EU level, such as amending procurement laws to ensure that contractors to pay the living as opposed to the minimum wage. 

The SNP is also keen to distance itself from David Cameron's EU policies and says that changing the EU Treaties is "neither necessary nor desirable". The party claims that its reforms can be accommodated within the existing Treaties. Whatever the rights and wrongs, this is slightly ironic given that Scotland's potential accession to the EU as an independent country rests squarely on the EU Treaties being opened and changed: not only the accession itself (to which all other member states would have to agree) but also to get the opt-outs from the euro and Schengen that the SNP says it wants.

It's also ironic since if SNP has its way, it could deliver the kind of opening of the Treaties that the Tories are hoping for. 

Is Juncker saddling up to take on the EU's red tape dragon?

In an interview with Bild am Sonntag, European Commission President-designate Jean-Claude Juncker argued that:

“It is right that there are concerns [among EU citizens] that the EU is interfering in things that are not its concern… for this reason, I’ll create a European Commissioner for cutting bureaucracy.”

This is a welcome suggestion - we floated a similar idea back in our "EU localism" report back in 2011, and the Dutch subsidiarity review also recommended a 'subsidiarity commissioner'. Of course Juncker is not be the first person to say they wish to EU cut red tape and he will most likely not be the last. However, this is an encouraging sign, and suggests that he is not totally deaf to the concerns of business and citizens.

To make the idea more than symbolic, Juncker will need to do more than create a new post. The new Commissioner will need to be able to reach across the EU Commission's many departments and force other Commissioners to move forward with scrapping redundant laws. Specific tools could include the imposition of sunset clauses into new legislation and the right to demand updated impact assessments for existing regulations (UK government impact assessments often projected benefits which failed to materialise). For all this to take place, there will need to be a cultural shift in the Commission.

If this is a genuine attempt to de-regulate, Juncker will be able to count on support from UK, Scandinavian, Central and Eastern and Dutch governments. However, Juncker himself has also talked up the need for the EU to be more involved in social policy so it remains to be seen how strong his commitment to de-regulation will actually be.

So this is a welcome idea but one that needs full support and back-up across the EU in order to fly.

The closest Cameron has got to setting out an EU "shopping list" yet few have noticed

What do David Cameron's seven EU 
reform commitments mean?

Writing in the Sunday Telegraph, David Cameron set out seven objectives - or eight if you read between the lines - for a Conservative EU reform agenda ahead of that potential 2017 EU referendum. Surprisingly, despite this being the most explicit that David Cameron has been in setting out a 'shopping list' (an unfortunate term), it has generated surprisingly little attention, in the UK and abroad.

To be fair, none of these objectives are completely new, one is not strictly to do with the EU, while in the case of some of the others it would be rather difficult to define success. Interestingly only the point about removing the commitment to “ever closer union” would definitely require treaty change.

In large parts, these are broad principles rather than specific policies - which is wholly appropriate given that it would be silly to set out a set of clear polices so far in advance (though some of these could easily get under way now). Here are the seven:

Commitment	What does it involve?	Treaty Change?
“Powers flowing away from Brussels, not always to it”	This is an overarching principle which would take a number of forms, including repatriating entire areas of EU powers, such as regional policy, to repealing specific regulations, to structural changes in the EU (incl. possible Treaty changes) that makes it easier to roll back the acquis such as a "green card" for national parliaments.	Depends. Reforms to regional policy and repealing individual rules, such as the Working Time Directive, would not require treaty change. Removing entire EU powers or structural changes might.
“National parliaments able to work together to block unwanted European legislation.”	At present a third or more of national parliaments can require the European Commission to reconsider proposals (a yellow card) - but it has only been used twice. There are various proposed ways of strengthening this mechanism to allow national parliaments collectively the power to strike down EU laws. This could give them a legal veto – the ‘red card’ or simply strengthen the existing mechanism.	If placed into EU law it would require treaty change. However, the Dutch Foreign Minister has suggested this could also be done through a "political agreement" between the Member States requiring the Commission to treat the yellow card as a de facto veto.
“Businesses liberated from red tape and benefiting from the strength of the EU’s own market – the biggest and wealthiest on the planet – to open up greater free trade with North America and Asia.”	De-regulation is very difficult to quantify. It could involve proposals to exempt small business from EU regulations. It could also involve imposing a repeal mechanism (a green card operated by national parliaments), sunset clauses, for EU laws as well as reviewing old EU regulations. This agenda also suggests further services liberalisation and the completion of the Trans-Atlantic Trade and Investment Partnership (TTIP) and further free trade agreements.	None of the "competitiveness agenda" requires Treaty Change. However, it is far from certain that TTIP will be agreed and then ratified while cutting EU red tape is always a challenge in the face of interest groups and the European Parliament - but far from impossible in the face of political will.
“Our police forces and justice systems able to protect British citizens, unencumbered by unnecessary interference from the European institutions, including the ECHR.”	This could involve withdrawal from the ECHR, successful reform of the ECHR or a UK Bill of Rights limiting its impact in the UK. The reference to “European Institutions” could imply removing the European Court of Justice’s (ECJ) jurisdiction over EU crime and policing law.	Withdrawing from the ECHR would not require EU treaty change as it's not to do with the EU. Removing ECJ jurisdiction over EU crime and policing laws would.
“Free movement to take up work, not free benefits.”	This could involve a number of changes to EU rules around free movement including strengthening the link between economic contribution of EU migrants and access to benefits and ending "exportability" of child benefits.	Reforming the Free Movement Directive and the Social Security Regulation could be done without treaty change. Putting an outright cap on EU migration - which Cameron has NOT suggested - would require Treaty change.
"Support for the continued enlargement of the EU to new members but with new mechanisms in place to prevent vast migrations across the Continent.”	This would involve imposing tougher transitional controls on all future EU accessions, for example by extending the existing 7 year maximum transitional period or linking the right to free movement to population size and/or relative wealth levels.	EU enlargement requires a new Treaty with the accession state(s) over which all existing EU members would have a veto, so London could push this demand as the price for its agreement. However, enlargement does not alter the underlying EU Treaties themselves.
Dealing properly with the concept of “ever closer union”.	The EU treaties currently include a commitment to “ever closer union”. Removing these words would be largely symbolic but could have some political, and possible indirect judicial, impact.	Yes, given that the concept is itself enshrined in the treaty.

In addition, though he has not said so specifically, apart from a passing reference to need to achieve a union for both eurozone and non-eurozone countries, another priority for David Cameron will most definitely be to secure safeguards against eurozone caucasing.

A number of questions still remain of course, including the various reform ideas not touched on this article, including the EU budget, employment law or dealing with the ECJ (though they all could fit under the general principles he has laid out).

Lastly, David Cameron has said he will pursue this reform agenda followed by a referendum “if he is Prime Minister”. This is important as he appears to be setting down a red-line in any future negotiations with the Liberal Democrats to continue the Coalition.

The big question is if these reforms were to fail, would he campaign to leave or stay in regardless?

Open Europe Chairman Lord Leach: The single market must be the EU's primary mission

Open Europe Chairman Lord Leach of Fairford writes in the Sunday Times: 

In the 1990s, the process of eliminating trade barriers between Europe’s member states was hijacked by an ideologically driven elite bent on nation-building; on giving flesh to the postwar dream of ending conflict by abolishing Europe’s patchwork quilt of selfish national states.

In constructing this project, the ends always justified the means, even if this meant ignoring the electorate. Those in this country who opposed the UK joining what was to be the crowning glory of European integration, the single currency, were vilified as Little Englanders.

Now the game is up. Elected parliaments have become the sole accepted seal of legitimacy. A new generation is saying that the EU is in desperate need of both democratic and economic reform. The Dutch government has called time on “ever closer union”, the German chancellor Angela Merkel says we should “consider whether we can give something back” to member states, and the Italian prime minister Enrico Letta talks of treaty changes in the “very near future”.

The latest sign of the changing times is an unprecedented joint call from German, Swedish and UK business leaders — from the head of the world’s largest bank down to the Mittelstand, between them guiding companies employing about 1m people — in favour of sweeping change. Germany’s leading business magazine, Wirtschaftswoche, wrote: “Now business leaders have spoken up — some of them for the first time. This is not only good, but it is long overdue.”

Britain needs to be attuned to the changing mood. Its current shouting match between polarised camps doesn’t help. I have lost count of the number of times I’ve been asked by the BBC to take part in or stage a debate between “europhile” and “eurosceptic” business leaders. Spurious facts and figures are thrown around — “3m jobs will be lost if we leave the EU” or, “if we withdrew, the UK would instantly be freed from all EU regulatory costs”.

The reality is that business tends to be neither die-hard europhiles nor convinced “outers” — with exceptions, most are in between. Business values access to European markets but doesn’t see why it has to come with a political union. On balance, business still likes the EU’s combined weight in trade talks but worries about protectionist tendencies and the dampening effect of Brussels regulation on firms competing in global markets. As the economic climate hardens, more business people on the Continent make the same analysis, concluding that we have to lay grand ideological projects to rest and focus on where the EU can add value.

The objective is therefore simple. The EU’s defining purpose must be the single market — it doesn’t have to be the only thing the EU does, but it is the primary mission. The task at hand is equally simple: maximise trade — including in the hugely underdeveloped EU services market — and minimise non-trade costs. Once we have tested the limits of reform, we can see if it still makes sense to remain an EU member.

So it’s time for business to make its voice heard. It won’t be easy to achieve the reforms we need if we are to reverse Europe’s economic decline and win back the support of our electorates. If Europe’s wealth and job creators throw their weight behind this agenda, not even the most detached politician or eurocrat will be able to resist.

France must take inspiration from David Cameron on Europe

This is the argument made in a very interesting op-ed penned by French MEP (and former Justice Minister) Rachida Dati, of the centre-right UMP party, for today's Le Figaro. We reported on the article in today's press summary, but we thought it was worth translating it (almost) in its entirety.

Here it is:

Is a new wind blowing through Brussels? The old myth of [European] federalism may be falling...The elite cheers the self-proclaimed 'Europeans', who, to preserve their post, write pamphlets lamenting this technocratic Europe, rejected by the peoples and origin of all populist movements. Some others want to change things, acting against the tide of the 'Brussels elite'. These are the modern, the courageous, the defenders of a realist Europe. David Cameron is one of them.

When he proposes to the British people a referendum on the UK's future in the EU, he acts responsibly. To deny [a referendum] to the British people, who are asking for it, would be the best means to exacerbate the anti-European sentiment that is on the rise not only across the Channel, but everywhere in Europe. When [David Cameron] proposes repatriating certain competences from Brussels to the national level, that's what we want too!

We believe, like David Cameron, that the future of Europe depends on it. It's with this same spirit that we must move forward with useful deregulation. David Cameron has had the audacity to put this idea onto the European agenda. Even [European Commission President] Barroso, the 'pusillanimous', has been forced to launch the REFIT programme, aimed at simplifying and easing EU law.

[...]

[French President] François Hollande is right to be cautious with the British offensive, which is good in the form, but whose exact outline we don't know yet. An ultra-liberal initiative would backfire against the people we say we are listening to. It is imperative to simplify [EU regulation] to boost the competitiveness of European businesses, especially SMEs. But this simplification must not be done to the detriment of certain rights of workers or the safeguard of citizens’ private life. However, this is a debate that deserves to be opened.

Ms Dati then goes on to address a specific EU policy area:

I plead for this simplification to be applied to the domain of energy as a matter of priority...The most serious problem [with EU energy policy] is the multiplicity of contradictory environmental, energy, and climate targets. Taken individually, these targets are laudable. But the facts have proven that, combined, they could cancel each other out - not to speak of the damage done to the competitiveness of our businesses. 

This is the case with renewable energy. Due to the subsidies it benefits from, the market is distorted as its use is prioritised. By their own nature, these sources of energy are intermittent, and cannot cope with energy demand on their own...I intend to make the ambition for a European energy policy that is more flexible in its targets and, finally, consistent, one of the priorities of the UMP's campaign for [next year's] European elections.

The UMP must finally stop hesitating about its European stance. We have never been listened to so much as when we knew how to talk and listen to the [French] people, particularly the popular classes. On Europe, they are asking us for a realist revolution. Let's listen to them!   

UK government's business taskforce launches push to cut EU red tape

Today sees the release of the Business Taskforce report on cutting EU red tape in an effort to boost competitiveness. As our previous work on EU regulation suggests - the Taskforce is picking up on many of our suggestions - this is a push we are very much in favour of, particularly at a time when squeezing out every bit of economic growth possible is vital for economies across the EU.

The report proposes 30 wide ranging reforms to cut EU red tape.We're still working our way through the detailed suggestions but we've included some initial reaction below, which we'll update as we go.

• The task force backs the full implementation of the EU’s Services Directive. This could deliver up to a €230bn boost to EU GDP, according Open Europe estimates. However, we have suggested the EU should go even further and push for the introduction of the ‘country of origin principle’ which could increase further gains to closer to €300bn (2.3% of EU GDP).

• Open Europe welcomes the push to exempt small businesses from burdensome legislation, although more needs to be done to address existing issues with social and employment law.

• In a report from 2011, Open Europe estimated that EU social policy (i.e. EU social and employment legislation and EU health and safety rules) cost the UK economy £8.6 billion a year. The figure is heavily driven by a few very costly EU Directives – most importantly the Working Time Directive and the Temporary Agency Workers Directive. However, some health and safety laws stemming from the EU also represent a net cost to the UK economy. This is the case, for instance, for the Control of Vibration at Work Regulations 2005 and the Control of Noise at Work Regulations 2005.

• The task force has adopted Open Europe’s recommendation that low-risk firms be exempted from the obligation to regularly update their health and safety risk assessments.

• Looking for ways to improve EU-wide competitiveness and the European business environment, as the report recommends, rather than looking for specific UK opt-outs is likely to increase the chance of support from like-minded EU countries.

• Creation of a digital single market could be vital, particularly from the UK perspective with over 70% of UK citizens having bought products or services online but only around 10% having done so across borders.

• Open Europe recommended adopting a ‘one in, one out’ rule for EU regulation back in 2010 and continues to support such a move as suggested by the task force’s report.

• On-going assessment of the impact of regulation is vital. For example, the benefits of many regulations are based on assumptions or forecasts and while probable or viable at the time, these do not always come to pass. EU regulations on environment and climate change are a prime example of this. With circumstances shifting it is important that regulation is flexible.

• The Taskforce also adopts out proposal that Commission proposals which don't come with a robust Impact Assessment, clearly showing the need for and benefit of the law, should be dropped. We agree that more effective use of Impact Assessments is vital and giving the EU’s so-called Impact Assessment Board (IAB) more teeth (which we has long advocated) and the power to ‘red flag’ harmful EU proposals (e.g. the ban on olive oil jugs) would be a positive start. The focus of the IAB must be to ensure high methodological standards so that approval of a regulation depends on its merits, not political motives (for example, major problems with the Commission’s proposal for a financial transaction tax emerged after it had been tabled and undergone a Commission impact assessment).

These ideas deserve the support of like-minded EU member states at a time when policymakers are desperately seeking ways to improve Europe’s growth and competitiveness. It is essential that these good ideas are followed by concrete action to reduce the existing and future burden of EU law on European and British businesses.

The war on EU red tape: Will this time be any different?

The headlines above speak for themselves. From time to time, the European Commission makes an announcement that it will make EU business rules "lighter", "simpler" or "smarter". But it deliberately stays away from the terms "deregulation" or "less regulation". They are usually a mixed bag, ranging from measures with real impact to irrelevant to even involving more regulation. To date, none of these initiatives have come anywhere close to achieving less, but better EU regulation across the board, that we and many businesses are calling for.

The European Commission has now unveiled the first results of REFIT - or its Regulatory Fitness and Performance Programme. Based on a 'screening' of the entire stock of EU legislation, the Commission has set out what it's planning to do (or not do) to make EU law lighter.

So will this time be different? Well, yet again, the proposal is a mixed bag.

The good stuff:

The Commission lists a number of proposals it has already put out, and are pending approval from member states and MEPs. Some of these would have a positive impact, including:

• Making EU public procurement rules more SMEs-friendly, mainly via the reduction of the paperwork needed to bid for contracts;
• Making it easier for professional qualifications to be recognised in different member states;
• A one-stop-shop for clinical trials.

The Commission also stresses it is already carrying out (or will do so in the near future) thorough evaluations of EU regulations in a dozen policy areas. These include:

• All EU rules on health and safety at work (no less than 23 separate Directives at the moment) - though the evaluation would only be published by the end of 2015;
• EU rules on temporary agency workers (which cost the UK economy around €2 billion a year);
• The Renewables Directive, which is dated and ridiculously micro-managing.

These rules are in desperate need of revision, so well done Commission for identifying them.

The not-so-good stuff:

Dropping proposals that are dead in the water: The Commission is offering to scrap proposals that are pending and unlikely to be adopted, which of course has no tangible impact as they haven't been adopted yet. Some of the proposals identified (e.g. a Directive simplifying VAT obligations or a Regulation on the statute of a European private company) have been pending for ages and were unlikely to ever come to pass.

Turning several rules into one rule:  The Commission also puts forth several ideas for the 'codification' and the 'consolidation' of existing legislation, meaning turning different sets of rules into one set of rules. As we pointed out in the past, if you merge ten existing directives into one, you definitely make the acquis more user-friendly, which has value in itself. However, if the substance of the rules remain, the impact on business will also remain pretty much the same, so this is of limited value on the ground.

More EU harmonisation: Somewhat cheekily, the Commission has also snuck in a proposal for more EU integration in a contentious area by presenting a Common Consolidated Corporate Tax Base as an example of simplification. Now, there may be a business-case for a CCCTB, but this also seems like back-door 'harmonisation' - which is a very different thing from 'simplification'.

In conclusion, so far there are some positive steps in here, but whether it will turn into a serious, de-regulatory exercise - with real impact on businesses - will very much depend on what comes out of the Commission's review and level of follow through.