Cable gets it 100% right on EU regulation (almost)

Vince Cable: Unimpressed by the Working Time Directive

In a nice contrast to the doom, gloom and cynicism which all too often characterise the European debate, here's some much needed can-do spirit from UK Business Secretary Vince Cable. The topic - how to cut down on EU regulation - is a favourite of ours (sad, we know). In a piece for the Telegraph, Vince described a recent meeting in Vilnius, where, apparently, 15 member states, going under the catchy name of the "Like Minded Group", agreed to work towards less cumbersome and more business friendly EU regulation.

Cable attacks the "dreadful economics" and "illiberal" nature of the Working Time Directive in particular and EU social and employment laws in general (at least by implication). But he concludes "the tide is turning":

"Beyond the Like Minded Group, Spain and Italy want the EU to focus more single-mindedly on a growth agenda, including deregulation. Last November the European Commission agreed to attack the regulatory burden with exemptions for micro businesses. And earlier this year, following sustained UK lobbying, we achieved agreement in Brussels to exempt around 1.4 million UK small businesses from burdensome EU accounting rules...I discovered in Vilnius that we are not on our own. We are part of a new progressive European majority replacing the dinosaurs of the past."

This is good stuff, and as we have argued repeatedly, exactly the type of measures that the UK Government should push for (nicely tying in with our piece, also in today's Telegraph, on how the UK should be actively courting Germany in a bid to put free trade at the heart of what the EU does).

However, Cable also rules out a scenario is which the UK "could carve out a comprehensive opt-out of all EU employment legislation", saying that "in practice it is difficult to see how Britain could on the one hand continue to enjoy the benefits of the Single Market, worth £3,500 a year per UK household, while on the other refusing to engage on difficult issues."

It's of course true that it would be politically very difficult to get a carve-out from EU employment law. It's also true that EU employment law acts as a 'subscription fee' for the UK's participation in the single market. But as we set out in our recent paper on EU employment law, where does that argument take you? Should the UK then accept other sub-optimal policies such as the CAP and CFP as that, after all, is part of the 'package deal'.

This position also assumes that EU membership for the UK (and other member states) is "Pareto optimal" i.e. there's no other possible outcome of European cooperation that makes every member state at least as well off and at least one member states strictly better off. Looking at how well Europe is working at the moment (ehum), that is clearly not the case. It's therefore right for the UK to consider the division of labour between member states and the EU in employment law - and other policy areas as well.

But in any case, it's a positive that Cable and the UK government are active in this area. Lets hope they keep up the good work...

'Can't touch this': Vince's MC Hammer moment

Business Secretary Vince Cable today announced a plan to ease the burden of regulation on small businesses in a bid to boost the economy. The plans would include a three-year break for small businesses from new regulation in addition to scrapping plans for extending parents' right to request flexible working and scrapping new rights for time off to train. The government has also vowed to review some 22,000 existing government regulations on business, with ministers forced to justify maintaining any that are challenged.

Now this is all welcome stuff, but the government has managed to completely ignore the regulation factory numero uno - that is Brussels - instead opting for a "can't touch this" approach.

When it comes to business, the EU is the main driver of regulatory cost in the UK. EU regulations do come with benefits, we don't deny that. But a lot of it is unnecessary or overly burdensome.

We can argue about the counterfactual (i.e. would the regulations have existed in the UK anyway), but what becomes clear during exercises like these is the extent to which the UK (and other member states) have lost control over their own regulatory reform agendas, as a huge number of laws are now locked in at the EU level. Changing an EU law requires re-negotiation and agreement amongst 27 different member states and the regulation-obsessed bunch that is the European Parliament.

Despite the fact that scrapping or amending unnecessary EU regulations could save the UK billions of pounds each year, and generate billions more in various dynamic effects, the Coalition has chosen to look the other way.

The problem with this approach is the familiar dilemma: you can leave EU regulation alone, but EU regulation will never leave you alone. The recent extension of the Gender Equality Directive by the ECJ to ban price differentiation between men and women should serve to illustrate this point (a ruling expected to cost the UK insurance industry an additional £1 billion).

We've been looking at the cost, proportion and impact of EU regulation in greater detail than most (see here, here, here, here, here, here for example). Just a reminder of our latest report on the topic: based on 2,300 of the Government's own regulatory impact assessments we've estimated that in 2009, 59% - or £19.3 billion - of the total cost of economic regulation (introduced since 1998) in this country stems from EU legislation. Cumulatively since 1998, EU laws account for £124 billion, or 71%, of the total cost.

And here are a few graphs showing the regulatory cost stemming from the EU to the main departments dealing with business regulation:

It's hard to better illustrate why any attempt to tackle regulation that doesn't focus on the EU level simply isn't credible. We would be lying if we said that the Coalition's refusal to engage with EU regulation doesn't frustrate us. In fact, we'll soon publish a list of EU laws that the Coalition must seek to re-negotiate. So do watch this space.

"The pill doesn’t need sweetening"

These were the words of Vince Cable today, the first minister from the new Coalition Government to speak in the European Parliament. You can read the full text of the speech here.

Vince was talking, among other things, about the Single Market, suggesting that reinvigorating it did not need a 'package deal' to ‘compensate’ people for freer trade – by for example introducing more social legislation. "The pill doesn’t need sweetening, and the sweeteners may also do serious harm," he said.

In the rest of the speech, he pleaded with the EU to revisit the Doha trade talks and urged Europe to wake up to global competition from countries like China and India.

He concluded his speech by stating the Government's position on the proposed hike to next year's EU budget. MEPs, of course, are likely to call for increases above those acceptable to most member states and certainly the cash freeze called for by the UK. Vince said:

At a time when national governments, including mine, are having to make very painful cuts in public spending, no one can understand why the European budget is not being subjected to the same discipline. There is a big backlash on the way, not only in the UK. Can I plead with you to tackle this issue sensibly? Any sense that the European Parliament and Commission are not acutely sensitive to this issue will be seriously damaging.

One has to presume that sending a Lib Dem and not a Tory minister to deliver this message to the European Parliament was not an accident on behalf of the Government. Perhaps the pill did need sweetening after all...