Minister for Europe sets out UK approach to EU reform

David Lidington spoke in Berlin about the UK's priorities for EU reform.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon David Lidington MP

Mr Lidington spoke at an event organised by European Movement Germany. He said:

I am delighted to be here to talk about EU reform. Today is my 9th or 10th visit to Germany in my four years as a Minister.

When I first came here as a schoolboy Berlin was a city divided.

Half the city was living in democracy and prosperity, sustained by the military and allies in Europe and across the Atlantic; the other half was suffering under a regime which denied its citizens liberty and the ability to work towards a better future.

Berlin shared its fate with much of Central and Eastern Europe.

I remember the barbed wire, no-man’s land, minefields – and the wall itself, which represented both the physical and the symbolic division of Europe between freedom and tyranny

None of us who was alive at that time can forget the excitement of the Wall coming down, and the domino effect that followed as the nations of Central and Eastern Europe took back their freedom.

Chancellor Merkel spoke very movingly about that period when she addressed the two Houses of Parliament in London last February.

She said then that for her it was a sign that change for the better was possible.

And we in Britain agree.

That is why we have worked closely with Germany and other EU partners to deliver reforms – and why working together, we have already achieved some important progress:

  • A landmark agreement on the European Union’s budget that reflected the discipline that we are all having to show domestically;

  • An historic deal to reform the Common Fisheries Policy, ending the wasteful practice of discards and pushing fisheries management to a more regional and local level;

  • Agreement on a single European Patent after 23 years of EU negotiation – including courts in Munich and London;

  • And together we have championed free trade deals with South Korea, Singapore, Canada, Japan and of course the US and pushed the European Commission to take the issue of better regulation seriously and begun to see action.

But despite this close cooperation, I still sometimes feel that our approach to the European Union is not 100% understood in Germany, and I regard it as part of my challenge as Europe Minister to improve that understanding.

So, my friends, I would like today to tackle head-on some of the misconceptions about the UK’s approach to the European Union and our approach to European reform – in particular:

  • The idea that the UK has no positive agenda for Europe;

  • The nonsense that the UK somehow does not respect European democracy;

  • And, finally, the suggestion that it is the UK that is somehow changing the rules and moving herself away from the rest.

So first, it has often been claimed that the UK has no positive agenda for Europe. The argument goes that what we are seeking is negative or anti-European.

I want to say with clarity and conviction that this simply isn’t true.

Let me start with the role that we play in promoting our shared values internationally.

  • On Ukraine, where we have seen in recent months a concerted and deliberate challenge by Russia to European values, the UK has been active in shaping a concerted EU approach to the crisis, working with partners to ensure a resolute response and most recently advocating an EU CSDP Mission to support Ukrainian Security Sector Reform.

  • On Iran, the UK has worked hand in glove with the High Representative, with France and with Germany - to work towards a robust solution to the challenge of Iran’s nuclear programme.

  • On Kosovo and Serbia, again we have worked closely with the High Representative and External Action Service to encourage the parties to work with one another – and towards closer relationships with the EU.

And we have worked closely with Germany and others to expand the borders of the EU to spread democracy, human rights and the rule of law in those parts of our continent where those values were crushed for most of the Twentieth Century.

If we look at the need for European competitiveness– something the DIHK has been consistently urging, again the UK has an active and positive agenda.

And it is one which is sorely needed not just in my country but collectively.

Over the last six years, the European economy has stalled. In the same period, India’s economy has grown by more than a third. China’s by nearly 70 per cent.

Over the next 15 years Europe’s share of global output is forecast to halve.

That has very significant implications for European citizens and for our way of life.

As Chancellor Merkel has more than once pointed out, Europe accounts for just over 7 per cent of the world’s population, 25 per cent of its economy, and 50 per cent of global social welfare spending.

The raw truth is that unless the EU raises its game, the next generation will not be able to afford the same services and standard of living as we have. This could lead to profound social and political challenge as well.

And this is why the UK advocates, with partners like Germany, an ambitious trade agenda beyond our borders.

We must ensure that we are embracing all of the opportunities that international trade can offer our citizens, including securing a Transatlantic Trade & Investment Partnership with the US.

Indeed, the European Commission estimates that completing the trade deals currently on the table could create 2.2 million jobs and add 2.2%, or €275 billion, to the European Union’s GDP.

That is why the UK advocates building a true internal energy market to lower prices for business and consumers, to improve security of supply and to help to decarbonise the energy system so that we meet our climate change goals.

I think it is right too that in an European Union of 28 Member States each countryis able to deliver these objectives in ways that work for them. For example, as Germany seeks to deliver a sustainable and predominantly renewable national energy supply through the Energiewende, the UK is pursuing a competition-driven low-carbon market through a wide-ranging set of electricity market reforms.

And that challenge of competitiveness is also why we have a positive agenda too for ensuring a free market within Europe’s borders.

The single market is one of the European Union’s proudest achievements. Since Margaret Thatcher, Helmut Kohl and their counterparts signed the Single European Act back in 1986, we have created a genuine marketplace across borders.

Easyjet, for example, have said that their airline, now employing more than 8,000 staff across Europe, would not have come into being without the single aviation market within the EU.

But this project is unfinished. While the EU is the world’s largest economy, it needs to be its most competitive economy too if we are to retain that leading position.

And the single market in services lags far behind the single market in goods even though in pretty much every EU country that future growth, and growth in jobs, is going to come from the services sector. And Europe’s underperforming services sector is one of the main causes of our productivity gap with the US.

This is where I take up the challenge laid down earlier to say where we thought the EU should be ‘bigger on the big things’ – well this is one of them.

We must build momentum behind services, not trying to tackle every sector at once, but focussing on specific sectors – like professional business services – where manufacturers who use these services and service providers alike will benefit and see mutual advantage of the digital economy.

The digital economy is also a driver of growth. But while the internet has no borders, our digital start-ups have to contend with 28 different sets of regulation. Barely one fifth of the EU’s online retailers sell across borders. That has to change if we are going to compete globally, to get youngsters back into jobs and to maintain our standard of living.

The need for competitiveness is why the UK advocates freeing businesses to innovate rather than piling on more regulation.

And I know that this is one the themes that runs through the DIHK report on our tables today.

Unnecessary rules have a price. They mean additional costs for businesses – and therefore consumers - and they divert investment and jobs elsewhere.

A survey of European businesses in March, carried out by the Confederation of British Industry, found that, while almost a quarter planned to repatriate their foreign operations to Europe over the next three years, three times as many would be doing so if the EU simplified its regulations.

At a time like this, with millions of young people unemployed, can Europe really afford to be turning business and jobs away?

I am encouraged by the progress we have already made, working together.

The Barroso Commission has launched ambitious deals with the US, Japan and countries across South East Asia.

We have reached political agreement on deals with Canada and Singapore. And concluded an agreement with South Korea.

At the same time, the REFIT programme has made some welcome progress in scrapping unnecessary legislation.

And I applaud these developments.

But we’ve got to be honest about the scale of the challenges we face.

And that means that the next Commission will need to be both more ambitious and at the same time more disciplined.

Ambitious in securing international trade deals, completing the single market, and improving the business environment.

And disciplined in intervening or proposing new legislation only where that is strictly necessary - and leaving decisions to the national level whenever possible.

Ensuring that the EU is, as Commission President Barroso, like David McAllister, put it: “big on the big things, and small on the small ones”. That is one of the ways that Europe will start to answer the challenge that so many citizens in so many different countries posed in last month’s European Parliament elections.

The second misconception that I would like to address is that the UK doesn’t respect European democracy.

Actually – the UK cares about the state of democracy at the EU level very deeply.

Stable democracies rely on citizens accepting the rules as effective and legitimate, and feeling like they have a stake in how decisions are made.

People need to know that their voice counts in the organisations whose decisions have such an impact upon their lives.

And at the moment in Europe that simply isn’t the case.

Last month’s elections to the European Parliament sent a clear message to anyone who was willing to hear it.

Across Europe, voter turnout stagnated. It actually fell – again – in the majority – 17 out of 28 – of countries. In Poland to 23%. In the Czech Republic to 18%. In Slovakia to just 13%. These are countries that joined the EU only 10 years ago.

Now, I realise that things may feel different here in Germany. Here, partly owing to the coincidence with local elections, turnout rose to 48% and I sincerely welcome that.

But across our continent, voters chose to stay at home, to vote in record numbers for populist, anti-EU parties of both right and left. And the truth is, this shouldn’t be a surprise, when survey after survey has shown that trust in the EU institutions is at historic lows.

Now before the European Parliament elections, some people argued that people across Europe just needed to be better engaged in the process; and that you could increase engagement by asserting that the political group whose parties won the most seats should choose the Commission president.

That simply did not work.

Even in Germany where the Spitzenkandidaten process received more attention than elsewhere in the EU, the polling that I have seen suggests that only 7% of voters knew who the EPP’s lead candidate was. In other countries that percentage was closer to zero – and in the UK not one of the main parties supported the Spitzenkandidaten.

Moreover, the so-called Spitzenkandidaten process has no clear basis in EU law, was never discussed and agreed by our leaders and flies in the face of the consensual way – the European way that we have always taken these decisions.

In fact, the Treaties are clear that it is the accountable, elected heads of government in the European Council who propose who runs the European Commission, taking into account the European Parliament elections, and that MEPs in the Parliament then vote on the nomination.

And so to argue that the process automatically determines whom the European Council will nominate is just plain wrong.

  • On no ballot paper in European Parliament elections did any of the Spitzenkandidaten appear as candidates for Commission President.

  • As I’ve said, the overwhelming majority of the electorate Europe-wide had no idea that a link was being claimed between their vote for an MEP and the Commission President.

  • And actually, if we want to delve into the detail, the EPP which claimed the right to nominate actually lost seats, received a minority of votes, and in numerical terms more people actually voted for the opposition S & D than for EPP parties. That’s not to diminish what individual parties achieved – including our sister party, the CDU, here in Germany. But to present this as somehow a Europe wide election and democratic validation of the Spitzenkandidaten process is wishful thinking.

In the UK, we are deeply concerned that one of the founding principles set out in the Treaties and underpinning the EU’s institutional architecture – that the European Commission is independent and devoted to upholding the general EU interest, a reputation critically important if rulings on state aids and competition are to be respected– is being undermined.

The Commission President must be able to build consensus across all 28 Member States and all political divides.

Under the Spitzenkandidaten process, we run the very real risk that, almost by accident, the once independent Commission becomes a creature of the European Parliament, working in the interests of a single political grouping.

So let us be clear: a decision by the European Council to nominate a candidate based on this process will have lasting consequences.

If we do not see Spitzenkandidaten as the answer, and if – as history reveals – giving the European Parliament a greater and greater role in the EU’s functioning – something that has happened in every treaty change in the last 20 years and beyond – has not in practice reduced the EU’s democratic deficit, nor made citizens more in touch with Europe, what then should we do? Well, we must recognise that it is national systems which enjoy greatest legitimacy with voters.

Half as many people again voted in their most recent national elections than in elections to the European Parliament. In the UK the ratio is more like 2:1.

We need to work within the grain of what people understand.

And that is why we agree with those who are calling for a greater role for national governments in the Council and for national parliaments in the EU’s functioning.

It was the Dutch parliament which originally put forward the idea of a “green card” – and we support this idea to give parliaments a constructive role in encouraging the Commission to bring forward legislation in a particular area, or to repeal or revise existing measures.

National parliaments have significant expertise to bring to the legislative process, ensuring outcomes that are more relevant to communities by involving those who know them best – their representatives.

And the Danish parliament, amongst others, has called for the incoming Commission President to firmly declare that he or she will always respect the so-called “yellow cards” by which a group of Parliaments can object to a proposal on grounds of subsidiarity. We agree with this, and we agree too with those who argue that the yellow card needs to be made more attainable.

And we agreed also with the Netherlands Foreign Minister Timmermans when he called last autumn for a “red card”: by which national parliaments working together could block Commission proposals outright.

I would like to take a moment to address three of the most common questions I’ve heard raised on national parliaments.

First, there are those who argue that national parliaments’ role is first and foremost to scrutinise governments.

Well, I agree that this is a fundamental role for national parliaments to play – and there are different ways of organising this in line with the diverse domestic constitutional set-ups in different European democracies.

But it isn’t a zero sum game. Surely we don’t imagine that because national parliaments are working with governments on EU matters they cannot also be working with their parliamentary counterparts in other Member States?

Second, there are those who worry that a greater role for national parliaments will somehow impair the EU’s legislative effectiveness, or “gum up the machine”.

Well, I strongly disagree with this. National parliaments have a positive role to play, both sharing their expertise with EU institutions and helping citizens to feel connected with the EU.

And if national parliaments are so concerned that a legislative proposal fails to meet the subsidiarity test, or that its provisions are inherently disproportionate to meet the objectives of the Treaties, that a large number of them get together to issue reasoned opinions, then they are surely only helping the EU to avoid the kind of unnecessary legislation which attracts so much negative feeling. They are giving expression to the principles of subsidiarity and proportionality that should run like a golden thread through everything the EU institutions do.

This should lead to less and better regulation and thereby free up the Brussels machinery for the really important priorities.

Third, there are those that worry that such changes – a green card, a strengthened yellow card, a new red card - would require amending the Treaties.

And to that, my response is: sure, let’s make it concrete when the Treaties are next re-opened. But there is nothing at all stopping an incoming Commission President making a political commitment to each of these proposals right now.

These proposals, and the rest of the reform agenda outlined by David Cameron, are designed to work with the reality of the public and political debate across Europe; and to pragmatically address people’s concerns. We believe in tackling those issues head on rather than pretending that somehow they don’t exist.

This strategy is helping to convince people in the UK that reform of the EU is attainable.

Recent polls suggest that in the UK, support for staying in the EU has now overtaken support for leaving – a significant shift when compared with the period before the Prime Minister laid out his strategy.

And that’s when people are being asked to judge the EU as it is now.

When you ask a different question – when you poll whether British people would want to stay in a reformed EU - the answer is “Yes”, and by a margin of 2:1. This has been the case consistently for more than two years.

But this is not only about the UK. Our Government has been clear that we are seeking reform, both economic and political reform, of the EU for the benefit of all EU Member States…

…and so the final misconception which I would like to tackle is that it is the UK which is changing the rules and moving away from its EU partners.

The Eurozone crisis exposed the problems of trying to run a currency union without a proper fiscal, financial and political union to back it up.

And since the crisis began, the Eurozone has started to put in place the governance and structures that it has always needed: creating a Banking Union, a European Stability Mechanism to bail out Eurozone countries and a Single Resolution Mechanism to bail out Eurozone banks.

The UK has never stood in the way of this for the simple reason that we want the euro to work and we support our partners putting in place the structures that they need to make this happen, to restore stability and growth to the currency union.

At the same time, we have been equally clear that in response to this integration, non-euro members like the UK would need safeguards to protect their rights and interests and to establish the right articulation between members of the currency union and those countries outside the Eurozone.

But let’s be clear. The UK did not change the rules; it was the creation of the Eurozone that did this.

Now, I know there are some who think that protecting the integrity of the single market and the interests of Eurozone outs is a theoretical debate.

I want to disabuse you of that notion.

It is an issue fundamental to the future viability and integrity of the EU.

Let me give you just two examples today.

First, that of location policy set by the ECB.

Under this policy, which the UK is challenging in the courts, euro-denominated instruments could only be cleared by a clearing house that is physically located in a Eurozone Member State.

In practice, what that means is the creation of a fragmented, two-tier market within the EU, something that should have no place within a European single market governed by common rules applicable to all 28 Member States.

Second, there is a danger that with their in-built qualified majority from 1 November 2014, Euro members could use their collective voting weight to write the rules for the whole EU.

And that is a problem because, for example, it could leave us in a position where euro members – including ones with little or no financial services industry or interest themselves – can caucus together to impose financial services legislation on the UK – the world’s leading financial centre.

We have already seen the Eurogroup discussing EU business privately before involving other Member States, particularly in the run-up to ECOFIN meetings.

These are fundamental challenges to the principle that the EU is for all Member States and should protect their interests equally.

I ask you, how would Germany respond if your vital national interests were threatened so fundamentally?

There is some encouraging news.

In their recent joint article, German Finance Minister Wolfgang Schäuble and UK Chancellor George Osborne recognised the need to avoid this kind of discrimination between euro-ins and euro-outs.

We have shown through the ESM and the establishment of the European Banking Authority that compromises can be reached that can be seen as fair.

Working together, Germany and the UK can ensure that future EU reform provides a long-term solution to these issues, putting Eurozone integration on a sound basis, and guaranteeing fairness to Member States inside the single market but outside the single currency.

Ladies and gentlemen, let me conclude.

Like our partners across Europe, the UK Government wants the EU to work.

We want the EU to be able to fulfil its central tasks of upholding liberty, peace and democracy across our continent and of maintaining and spurring European prosperity at a time of historic challenge in the global marketplace.

We want the UK to play a leading role in this EU.

And, together with our partners, we’re not going to fight shy of the challenges to make sure that that happens and we will work to ensure reforms are in the collective interest.

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Published 26 June 2014