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10.37 am
Lord Mitchell: My Lords, I, too, thank the noble Lord, Lord Freeman, for bringing this report to our attention. As always, he has chaired the committee with tremendous clarity and has brought us an outstanding report. I also thank the staff, who have done such a magnificent job.
With regard to the title, The Single Market: Wallflower or Dancing Partner?, I have to say that, whatever attributes I may have as a human being, dancing is not one of them; in the ballroom, I am afraid I am on the side of the wallflower.
My noble friend Lord Haskel made various points about the European Union, and there is something else that we must celebrate today. I heard on the radio that as of this morning the gross national product of the European Union has exceeded that of the United States. That may be due to the fact that the dollar has been plummeting and the euro has been going up but, looking back over 60 years since World War II, it would be as well for us all to reflect on what an amazing achievement it has been to get to that point.
What I have to say concerns one area which always interests me—that is, mobile phones and roaming charges. I was brought up with a jolt some time ago when, having sold my company, the first thing that I had to do was get a mobile phone because previously it had been paid for by the company. I never thought about the bill as someone else had always paid it. I paid the normal tariff on my phone and, after the first month of using it when I had been travelling, I had an
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In March 2007, Sub-Committee B published a superb report entitled Mobile Phone Charges in the EU: Curbing the Excesses. It mentioned the size of roaming charges in the EU being €5.4 billion, which by any measure for the network operators was a nice little earner. No wonder they fought so hard to ensure that nothing was done to curb that success. However, Europe had a phenomenal result, which I am sure was helped by what we were doing and in the summer of 2006 mobile phone roaming charges were reduced by at least 70 per cent. I could not help but laugh as when that happened the mobile phone operators told everyone on their phones how wonderful they were that they were reducing the price, concealing the fact that they had done it through gritted teeth. That is marketing for you. Commissioner Viviane Reding has done a phenomenal job. She is to be lauded for what she has done. She pushed very hard and it was a great victory.
The main point of my speech does not concern voice usage on mobile phones, as I believe that battle has been won and in Europe voice usage is probably saturated. Most people have a mobile phone and there is not much more market in which to sell mobile phones. Also, people will not use mobile phones more for voice because they use them as they use them. The big growth area at which all the operators are looking is data. First, SMS texting came to the mobile phone operators like manna from heaven. They did not know it was going to occur; they did not know there was a market; and suddenly that market is huge. One only has to look at children standing at a bus stop, or wherever, to see that they are all texting each other all day long. It has become an amazing method of social communication. As much as some of us may detest it, as a parent there is nothing better than that welcome bleep-bleep to tell you that your child has got home or is safe. It is amazingly reassuring.
Commissioner Reding addressed a conference in Barcelona on 11 February this year and talked about data costs and how they need to be reduced. She drew attention to the fact that data costs, even for texting, are 20 times more outside the home country than within it. That is quite amazing. The real growth is not just in texts but in downloading of data, to which I shall turn a minute. She said that national regulators are unable to address those issues unilaterally. Noble Lords may not know but the cost of downloading a megabyte of data is €7. On my computer I can download a megabyte of data in two seconds. Were that on a mobile phone, that would cost €7 and mobile phone connections through 3G will go at similar speeds. That is an example of highway robbery and a total rip-off by the operators.
I want to talk about what data are. I am the proud possessor of a device called an iPhone, produced by Apple. It happens to be a phone but it is an awful lot more. It has e-mail, internet browser, share prices, YouTube, maps, on which you can find your location,
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I am trying to convey to your Lordships that the growth in the future will be in data, and data are totally and completely unrestricted and not subjected to the rules that were agreed in 2006. We are delighted that the Minister bangs the drum for European business and may he continue to do so for a long time. I would like to feel that that same drum is also being beaten for the benefits of the European consumer, because the European consumer in the data area deserves a fair deal.
10.44 am
Lord Borrie: My Lords, I am conscious that I am the first speaker in this debate who has not been a member of Sub-Committee B and that I should congratulate the chairman and the members on their hard work. A great deal of effort has gone into this report. I am delighted to support the view expressed by my noble friend Lord Haskel that the elimination of trade barriers between member states has probably been the most widely praised and successful objective of the European Union, as it was of the EEC before it. It has been like a golden thread running through the five decades since the Treaty of Rome. As this report from the Select Committee shows—I am repeating what the noble Lord, Lord Freeman, said—the whole thing received a significant boost from the relaunch of the single market and the Single European Act 1986. I very much agree with the dancing partner analogy part of the subtitle. It is a very significant dancing partner with whom we wish to have further involvement over a very long period.
It has always been clear that ending tariffs and quotas would never be enough to create a common market. All sorts of measures would be necessary, including—dare I say?—against the anti-regulatory bans across the way. There has to be regulation for common standards of consumer protection, the health and safety of workers and so on, without which enterprises in countries with lower standards would clearly have an unfair competitive advantage over the others. As someone who has previously been involved with competition authorities, I would say, in a somewhat biased way no doubt, that the competition authorities of the European Union—I mean the Commission in Brussels and the Court in Luxembourg—have played a major part in combating various restrictions on competition, whether they arise from state aids or price fixing and other cartels, but they can so readily distort free movement of goods and services, with which the single market is concerned.
National competition authorities have also played their part. I am glad that it was this Labour Government,
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The noble Lord, Lord Freeman, also mentioned co-ordination as important, between the different countries, as distinct from imposing a super regulator for the EU as a whole. Co-ordination between the EU Commission and the national competition authorities has existed now successfully for some years through what is called the European Competition Network. There has been, as the Select Committee recognises, a growing trend towards economic protectionism in a number of member states and evidence of support for so-called national champions in several member states, which is always a risk of any attempt to create an internal market. That is a worry. It was also referred to my noble friend Lord Haskel.
The committee is too discreet, if I may say so as the first non-member of the committee to speak in the debate, to name and to shame those member states that are either bad or in some cases hopeless at implementing the various requirements of the internal market. However, it records the concern of a number of witnesses that national regulatory authorities in certain member states, particularly the accession states, are not sufficiently resourced or independent of their Government to carry out their regulatory functions satisfactorily. Evidence from the EU Commission was that increased divergence among the 27 member states constitutes a “challenge”—it puts it in a modest way—to the proper functioning of the single market, particularly because agreement on legislation, its transposition into national law and, above all, enforcement have become more difficult.
The EU Commission’s internal market scoreboard does name names, which I cannot help but refer to because it makes an outstanding point. It specifically mentions the Czech Republic’s performance as “very worrying”, as its deficit is about three times the EU average. I will not repeat the other specific points made.
I hope that I have sufficiently indicated that I am supportive of the internal market and glad that it has been largely successful despite some of the important deficiencies. However, it is easy to exaggerate the importance to UK trade of the EU internal market; in a debate like this, there is an inevitable risk that we do just that. However, the internal market is, and will remain, significant, if only because our proximity to the continent means that trade in goods is facilitated by low transport costs. Often, however, transport costs are less important in trade than used to be the case. They are largely irrelevant where the trade is not so much in physical export or import of the goods, but in design, intellectual property and other intangibles. Trade in services, to which several speakers have already referred and in which the United Kingdom excels, is hardly dependent on geographical propinquity of the trading nations concerned at all.
It is in the UK’s interest to have open trading relations with the rest of the world as well as the EU,
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We must promote the further development of the EU single market, but not as if the EU were our only trading partner. We should be outward facing to the world as a whole, encourage the EU to do likewise and, to paraphrase Commissioner Peter Mandelson, we need open European markets and open global markets.
10.54 am
Lord Berkeley: My Lords, I follow my noble friend Lord Borrie in not being a member of the committee, but I have read the report with great interest. I congratulate the chairman, the noble Lord, Lord Freeman, and the committee on one of its best reports.
I do not quite see the same enthusiasm in the Commission on the railway, which is what I shall concentrate on. I wondered whether the reference to a wallflower was to the Commission’s transport department, but I shall come to that. The foreword of the report summarises everything very well. It talks about competition and the benefits to consumers and relates the failure of member states to implement legislation—as other noble Lords have commented—and the maintenance of barriers. It worries about economic protection and talks about regulatory authorities being independent, which I will come back to. As my noble friend Lord Borrie said, it talks about the problem of national champions and unbundling.
Although the report is largely about the energy, telecoms and financial services sectors, most of the comments, problems and successes also apply to the railway sector, which suffers from many of these things. I fear that the Commission is doing less to resolve them than some noble Lords have suggested may be the case in these other sectors. For example, as regards paragraph 81 on “Restrictions to Effective Competition”, the liberalisation of the railways sector started in 1991, which I suppose is only 17 years ago, and was designed to stimulate competition, as for energy.
We still have vertical integration on the railways. There are two different models. One is a holding company with lots of subsidiaries, which are, of course, independent until they choose not to be. I am going to name and shame them, because it is about time they were: Germany and Italy. There is another version, which France has, with totally separate infrastructure and operations, but there is a requirement for the infrastructure manager to use the operations company
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I congratulate my noble friend on what the Government are achieving on energy in the Commission, but it must be done on the railways as well. There is a lack of transparency. If an independent train operator wants to ask for a path between A and B in Germany—as happened a couple of years ago—and applies to the infrastructure manager, the infrastructure manager’s operating arm phones the customer within 24 hours, saying “We could do it for you cheaper”. That is not how the single market is supposed to work. There is a lack of investment and capacity. There is collusion between incumbents, who are very good at making rules and standards designed to keep out the competition. The railways are wonderful at rules. Of course, there is unfair state aid. I could go on at length, but I am not going to.
I welcome that the report rightly states that competition brings efficiencies, lower prices, better quality and growth. That applies to rail freight as well. I declare an interest as chairman of the Rail Freight Group and a board member of the European Rail Freight Association, which is pressing the Commission hard on all these issues. We are urging the Commission to come forward with legislation to sort out the failure of the previous legislation alongside enforcement, neither of which they are doing very well.
In this instance, I hope that the noble Lord, Lord Freeman, and his committee consider having a look at the railways from the same point of view that they have done in this report. We must press for unbundling, as for energy. It is desperately important. Total separation, as the committee recommends in paragraph 87, is the only model that will work. Independent system operation does not work; there is always collusion, as I have said. It needs comprehensive regulation, which also does not exist. I can see why the member states prefer to have the ISO model as there is less legislation and they can avoid enforcement and regulation. What are they going to do about that? It is very important that our Government press other member states to get in line.
I shall now turn to regulation which, like other noble Lords, I see as the key to the success of the single market in all these industries. Regulations must, along with Governments, ensure fair, transparent, competitive environments for growth. The rail regulator here does a good job; in particular, the cost of and process for appeals are about as cost-effective as one can get in this country. Germany also has a very good rail regulator. Unfortunately to appeal one has to go through several levels of courts. One can see how the incumbent hates what the regulator is doing by the strong, public battles that they sometimes have, but at least Germany has a regulator. In France, the regulator consists of one person who has an advisory role only. Given all the other things we have talked about in member states, there is no consistent regulatory policy across the European Union. I understand why this report, the Commission and the department do not want to see a European regulator. That is probably right, but consistency has somehow
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For me, the key thing is that national regulatory authorities need to be independent of Governments—as the noble Lord, Lord Bradshaw, said—especially when financial interests are at stake. That is set out in paragraph 157. I welcome the Government’s restatement of that policy, but I hope that my noble friend can ensure that it is consistently applied across other parts of the Government. On the Channel Tunnel Rail Link issue, it is wrong that the regulator is also the Government who have a financial interest in selling the part of the industry that they are about to regulate. It has been said that it is in our interests to regulate the industry to get as high a price as possible. That is contrary to my noble friend’s policy in BERR, and I hope that that can be applied, even at this late stage, to the Department for Transport and the CTRL.
I look forward to the response from my noble friend. I urge the Government to continue to intensify their help to the Commission by citing best practice and working as hard as they can to make sure that other member states understand what we have achieved, without being arrogant—I know that we are not arrogant. As the noble Lord, Lord Borrie, said, it has been very difficult in the new accession countries, but it is still possible to get consistency. I hope that in a year when a large amount of railway legalisation and enforcement will be coming out of the Commission the noble Lord, Lord Freeman, and his committee will think it is a good opportunity to have a look at the railway sector across Europe.
11.04 am
Lord Harrison: My Lords, it is entirely appropriate that a Freeman should introduce the debate on the four freedoms of the single market. I congratulate the noble Lord, Lord Freeman, and his colleagues on doing so and on producing this report from Sub-Committee B. I have always been a fan—a fanatic—of the single market. The reason I am a fanatic is that I believe that the central message when explaining Europe to our friends and colleagues and the electorate is to say that the benefits of the single market are considerable. That is why we should apply ourselves in the rigorous way we often do to making sure that that single market comes to fruition. Of course, we will never complete the single market because it is the nature of markets continually to change. That is why we need to be athletic and able to move from time to time to introduce and be aware of that to open those markets up, some of which are threatening to close.
We would have got over a lot of our troubles in recent years about the divide on Europe if we had explained that, as the report states, the market brings enormous opportunities for consumers and citizens—who in the end are our goal—and also for business people. At the moment, business people fear that they are obstructed. I sometimes think their obstruction is
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I congratulate the noble Lord, Lord Freeman, and his colleagues on identifying three areas—energy, telecommunications and financial services. We must ask ourselves whether they are the areas, industries and businesses where British business is pre-eminent, so it will always be to our advantage to clear the bracken that interferes with the single market to help British businesses succeed. The report recommends the unbundling of full ownership in the energy sector. Like the noble Lord, Lord Berkeley, I have some reservations about that. While there may not be a European-wide regulator, there has to be some mechanism in all these instances were the national regulators, who are best placed to understand the situation, can be encouraged to have common standards. It is, after all, a single market so common standards have to apply throughout.
I listened to what my noble friend Lord Borrie so wisely said. There are other markets outside the single market, which is the biggest market in the world. I have always taken the view that the single market is a forcing house for business and industry within the United Kingdom and Europe that makes us fitter and faster to operate in the wider markets elsewhere.
I also believe that there are real opportunities worldwide to begin to say that the four freedoms we support within the single market will be beneficial not just within the European Union but worldwide too. We can be evangelistic about those four freedoms. I am also happy that noble Lords have talked about telecommunications and financial services.
Small businesses are hugely important. From time to time, there has been a fear that we create and design the single market for big business. In some ways, that is understandable because they are the most likely to reach across the European Union and always have the loudest voice. But perhaps the noble Lord, Lord Freeman, and Sub-Committee B could look at small businesses and the way in which we can disband the idea that a single market is foreign and
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