THURSDAY 13 DECEMBER 2007

Mr Charlie McCreevy

  Q470  Chairman: Thank you very much indeed for giving us some time. Perhaps I should give you some background. As Sub-Committee B, which we represent, we have been working for almost a year on our report, which we hope to publish in February, on the Commission's Review of the Internal Market. We came in July and spoke to a number of Commissioners and we want to publish in February, before the Spring Council. I have to say I think we are largely in agreement with the Commission in terms of aspirations. We had a session this morning where we found ourselves in agreement on a whole number of issues. If I may kick off, my question is about the "vision" thing, about trying to convince customers, citizens, employees, that the common market, the internal market, the single market, however one refers to it, has made great progress. There is a lot more to do and it really has made a difference to you, the citizen, but at the moment we feel that, for jolly good reasons, it is a bit remote as a concept, it is a bit stale, it is a bit economic, it is a bit financial, it is a bit business-like. How can we, for good and solid reasons, convince our electorates that there has been real success and the European Union, the Commission, the Council and the Parliament, are determined to improve it even further?

  Mr McCreevy: Speaking to an audience of UK people, I live in the nearest adjoining country to you and I am sure we share a lot of commonalities. Trying to convince the UK electorate about the benefits of Europe is something, I am afraid, that the Single Market Review document will not be able to do, no matter how well it is produced, so I think a lot of it is fairly historical, et cetera. You are more conversant with those reasons than even I would be. However, I have always believed that if ordinary folk can see benefits in their way of life or in their pockets, call it what you will, they are more inclined to be more generous to the party or agency or union or federation that they see has brought that about, and consequently that is how politicians try to get elected. The same applies in Europe. If you see and can directly relate that something came as a result of something coming from Europe or some moves made here, I think people would be more inclined to think positively about it. On the other hand, if you are thinking that a lot of things being done coming from a Brussels law basis has led to your being worse off or discommoded or upset, you are definitely going to think negatively about it. I am not, as those who have followed my political career would know, what would be termed a Europhile. I would classify myself as having a healthy, pragmatic approach to all things coming from Brussels. When I was nominated for this particular job after being a Government minister for a long number of years, those people in Ireland who were very much Europhiliac would have said, "You are sending a fellow out who has maybe mixed views on all things European". Having said that, in the Single Market Review what we try to aim at is consumers and small businesses in order to show that we can really change things. We propose things like what you can do with simple things, like being able to switch bank accounts, et cetera, rather than all the great big stuff and everybody will get a benefit from it. That is what we are intending to do over the next years, and frankly we do not intend to have much more legislation. Definitely I do not; I cannot speak for whoever comes after me, but according to the policy document, the Single Market Review, this is what we are going to concentrate on—effective actions rather than long, deliberative, legislative actions, changing things very slowly, and ending up with a mismatch. The new approach is to let people become more involved and hopefully over a period of time more benefits will flow from this machine here in Brussels, and in the United Kingdom, where the people have a more negative opinion of Europe than probably anywhere else, I think this will improve things there. On the other hand, it is only fair to say that across many of the Member States in Europe, even the ones that have been in it for 50 years, over the years there has been a kind of growing weariness or wariness (or both) of things like that as well. We hope the Single Market Review will show real benefits and allow people to be better off. We would like to point out that having the single market in 1992 through Lord Cockfield, who was here long before me, brought about a change, but then again, as in politics, people take things for granted from the free movement of goods across Europe to low cost aviation. I am hoping the Single Market Review will improve things somewhat.

  Chairman: That is extremely helpful and we are fully sympathetic to that.

  Q471  Lord Walpole: You did say you did not want any more legislation, which I must say we probably all agree with, but what I want to ask you about is whether we will get better quality legislation by ratification, by simplification, by having as little as possible with good impact assessment and cost benefit analysis, uniform across all countries and with everything being implemented by all countries willingly. I am after something simpler than what has come out in the past.

  Mr McCreevy: Fortunately or unfortunately, due to the very complex decision-making process that we have here in Europe, it takes a long time to bring into effect. It was difficult enough with six, nine, 15. Now it is doubly difficult with 27. It is not an exponential graph. It has not got that much more difficult with 27 than it was, say, with 15, but consequently we have adopted what we have termed the better regulation agenda, which means that we do consult widely. Some of the time, I have to say, it is the usual suspects that cut up, but the bodies are well clued in. Some bodies are better clued in in some Member States than others but we do consult widely and, I have to say, a little bit to my surprise since I came here, views are strongly taken into account from representative organisations. I would say as a minister for a long time there is always a danger that you become a kind of captive of the people that you are consulting and the problem has always been that with a decision like that you have to make decisions to please. That is a McCreevy view but we do consult widely. It is now part of the process that everything has to go through rigorous impact assessment. Having said that, I think it has improved over the three years we have been here. Four years ago there was not any such thing here. Now there is. We have tried to streamline it somewhat so that it is fairly independent because at the moment the perception is that the same people who prepare the impact analysis impose it. We will probably improve that in time to come without creating another monster. That is the last thing we need out here, another bureaucratic kind of machine for that to happen. We have adopted a programme of simplification under the better regulation agenda and Mr Verheugen, the Vice President, is the person in charge and we all must submit proposals. We have submitted a couple of hundred on cost benefit analysis and impact analysis as well. Impact analysis is wider than just cost benefit analysis. The bigger question is about uniformity and that is one of the reasons why I am a bit negative always about directives. Directives are an overarching type of a framework. They allow Member States a fair degree of flexibility. Most Member States add on rather than subtract and most Member States gold-plate rather than take away, including particularly the United Kingdom in the financial services area, maybe for good policy reasons, like it or not, and then it is not difficult for some Member States to be able to see where that directive has been transposed into national law, say, in country C because it might be part of a great bill about something else and then the Member State in question might add things (for very good reasons) and then it is a bit hard to identify and inevitably it is gold-plated. The only way to go against gold-plating is to have regulations coming from here. A regulation has the exact same effect in 27 Member States but that is one of the reasons why it is so hard getting a regulation nowadays because Member States are very reluctant to sign up to that type of regulation. Also, may I say that in the negotiation process that we have to go through now most things we do nowadays are in joint decision-making with the European Parliament and the Council of Ministers. The Commission produces; they decide. To get agreement in the Council of Ministers you have to make all types of compromises usually, yet for an agreement in the European Parliament you have to make wider compromises and then there is some time negotiating between the whole lot of us, then we finally get to the end of the process and maybe sometimes it is difficult to recognise the end product from the product that we started out with, and that is after a number of years. Then we usually give at least two years for our Member States to transpose it into national laws and sometimes longer, and then Member States add on to it, so we then end up with a bit of a mish-mash. That is why one of my reasons for being very reluctant to go down the legislative route is that I cannot guarantee what we are getting at the end, but I believe you have to deal with the hand of cards that you are given. That is the process, that is what we have to go through, hoping that the better regulation theme song is taken up, which it is with most Member States. The UK has got a better regulation agency. I read earlier this week where a report came out saying that since the start the Financial Times said that they could not identify that as something it had, but all the same I think that each Member State now has that in place. We have set a programme in line and the Commission together with the Member States will lower the administrative burden by 25%, and we must judge things on that basis. So hopefully if every Member State keeps it at the top of their agenda when they are thinking about bringing in new laws—they think of simplification, they think of better regulation—they might be reluctant from the start to bring in laws that impose a greater burden on businesses and other people.

  Q472  Lord Walpole: Thank you. I think we are probably impressed by that, as long as it is quality and simplification.

  Mr McCreevy: In my early days here I was in Paris and of course I ended that by becoming Commissioner in November 2004, and I used the phrase in a speech "less is more" and that became quality rather than quantity. I will tell you a funny story. I was in the Irish Parliament for 27½ years, I was in the government for a long time, and at the end of the session we used to say, "Here is a list of bills to go through. What have we done?", and then the following year we would say the same. We did 52 bits of legislation, which is the best record ever, ten times better than the opposition did in the next ten years. The more you could produce the better off you would be and I used to rail against that when I was Minister for Finance and I do not think they do it any more now, that the more pieces of regulation the better off they were. I think quality should become the byword rather than quantity.

  Q473  Baroness Eccles of Moulton: Mr McCreevy, you have been very reassuring about how there should not be a lot more legislation. The single market has got as far as it has, as we sit here today, and we all know that there are some quite substantial problems still around in order to get it as far as we would like it to be. Would you identify for us what you see as the biggest problems that need to be resolved and maybe even the odd solution?

  Mr McCreevy: In the area of goods, due to the programme initiated by Lord Cockfield, I think we can say that it is largely complete. You do not have queues at borders with trucks passing up and down. Something like 60,000 different pieces of paper were done away with in that period. I think we have achieved a fair lot there. In the area of goods there are still some problems to do with standardisation, et cetera, but we have made substantial progress there. In the area of services we have not. Services include everything from banking services, financial services to—I could say hairdressing but I do not anticipate that people want to do services for hairdressing in Bratislava and come back every day. That is why we tried the Services Directive. If you were dropped out of the sky from Mars on the planet earth in Europe you would wonder why we had had all the hullabaloo about the Services Directive. Can I just say to you that I thought that Europe was about one of the founding tenets—the free movement of goods, people and services. What are you going on about having a big directive about? The reality was and is that there is not really a totally free movement of goods and services. We have broken it up into two parts. From 1999 there was the services action plan, which had 42 separate initiatives, and many of you will have heard about it, coming from the City of London. But the purpose of it all is to create a truly integrated financial market, which in the wholesale area we have largely done, not so much in the retail financial services area, but we are trying to do something now in our paper on mortgage credit, which we will produce next week, and other things as well. In other areas we are hoping the Services Directive that we got through the Parliament this time last year is going to do something. The one thing with the Services Directive is this. Member States have until December 2009 to go through every piece of legislation, local and regional and national, to see where they would be conflicting with the Services Directive and the rigour of having to do that analysis will probably show up in Member States. If they do it adequately, anomalies and problems that they should not have and bureaucratic points and so on that cause difficulties, and we would end up with a situation that we should in a few years' time be able to have a pretty reasonable free flow of services in the internal market, not as foreseen with Lord Cockfield's goods in the single market, but you should see a big change. Anything would be an improvement because services now make up nearly 70% of the EU's GDP. It is the reverse of what it was 50 or 60 years ago, so that is where we must gain our grip because Europe is not the cheap place that it was any more to use goods and services. Some are very successful in these markets so we have to go for better things in the area of services.

  Q474  Baroness Eccles of Moulton: So would you say then that on the whole the goods part of the services is pretty okay and financial wholesale services are not doing too badly?

  Mr McCreevy: Improving.

  Q475  Baroness Eccles of Moulton: Retail financial services are yet to be tackled?

  Mr McCreevy: Yes.

  Q476  Baroness Eccles of Moulton: But surely the really difficult one is the—

  Mr McCreevy: Ordinary services.

  Q477  Baroness Eccles of Moulton: Yes. I was just trying to think of how I could define them. We all know what they are—the rest of the services.

  Mr McCreevy: Yes.

  Q478  Baroness Eccles of Moulton: But surely there are some huge problems to be sorted out there, are there not? You say that they are going to have to be transposed.

  Mr McCreevy: After getting that very difficult directive through, my services produced in July a kind of a handbook which I sent to all Member States as to how all this could be done. We thought about having workshops here in Europe. My services visited Member States and the relevant people to see how they could go about this big job of work. Funnily enough, the new Member States that joined in the last two years, in order to get their laws into line with the acquis, had to do a lot of this in any event, so they should be in a better position. But the older members of the Union, such as Ireland and the UK and France and Germany, will have a fair job of work to do, and that will throw up some problems because even though we have to make concessions to get the Services Directive through, otherwise there will be no Services Directive, this work that has been done should make a big difference and you should see a proper market return over a period of time, and yes, probably a future Commission will come back to address some of the anomalies that will still be there. During the debate on the Services Directive we took health out of it, not only the people for expanding health service provision but also those against it, all sides came together and said, "That should go", and it did, but we promised there would be a separate piece of legislation to deal with mobility. That is on the part of my colleague, Mr Cipriano, and it was intended that he would produce the document next week. I do not know if that is going to be possible as we speak but it is imminent in any event, and that will be quite controversial, particularly if you are a minister, but we have these problems the whole time. Gambling was in the Services Directive and it was taken out. We decided not to have it in the Services Directive when we published, so I have about ten cases going on with Member States. Most of the complaints come from companies in the UK with which you will be very familiar. Even though these countries or other countries have big national players themselves, they do not want anyone else playing in the game, as a consequence we have to be going down the route of infringement proceedings. Gambling is never going to be agreed on—sorry; a politician should never use the word "never"—because you could never get agreement on some of these cultural differences throughout the whole of the European Union, and even within Member States it is a very vexed question. We have to pursue it in the law because the Court of Justice has defined that gambling is a service like everything else. You can if you like ban gambling in your Member State totally. That is not a problem, but you cannot discriminate between, say, a home provider and a provider from another Member State. You have the same rules, the same licensing arrangements, public good issues, et cetera. Hopefully we will make progress on some of these other services.

  Q479  Baroness Eccles of Moulton: So within the existing regulatory framework you would consider that the problems that are thrown up as the directives get absorbed into Member States' own law within the regulatory framework can be resolved?

  Mr McCreevy: Yes, and I think what gets people resolved is that people are aware of this. I publish a market scoreboard every six months which says everything about the rate of transposition of the directive into national law. People are scoring well below 1%. The UK is pretty okay in that department. Then I publish the infringement list, et cetera, and it might be an infringement of proceedings in country B, but that might be because maybe in those countries people are not so much aware of the European laws. Particularly in the areas like public procurement. I know that if even a technical mistake was made in the public procurement issue in Ireland and the UK, the offending company would be like a shot to the court in the UK or Ireland, whereas in other European countries they are not so much aware of that. Consequently, the fact that you would not have a whole big number of complaints about infringements of laws does not necessarily say that their department is working perfectly there. It is just that the knowledge is not as strong as it would be in others. Hopefully these things we have like SOLVIT centres and the fact that we are going to have a single point of contact in each Member State with the Services Directive will make people more aware. That will not convince people overnight that everything good comes from Brussels. In my view it is good to have a healthy kind of pragmatic approach to things coming from Europe because not everything in Europe is perfect. We are supposed in the EU to allow the principle of subsidiarity, what should be done locally should be done locally. The decision that should be made by your Member State should be done by the Member State rather than in Brussels, and if you can get away from having all the decisions here in Brussels we will be far better off and people will have more respect for us.