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Speech
by George Osbourne MP It is a great pleasure to be with you at the Centre for European Reform today at the launch of your Lisbon scorecard. I congratulate you on maintaining your vigilance. It is right that we continue to hold the EU's leaders to the commitments that they made almost seven years ago. Let us remind ourselves of Lisbon's bold objective: that we make Europe the most competitive economy in the world by 2010. The scorecard shines a light up to Europe's progress - and the progress has been poor. Every year, your scorecard has returned a "C" rating, except for 2003, when you gave it a C+. This year, you have given it a "C" as well. I think you are being generous. For instead of Europe fulfilling the promise of Lisbon and becoming more competitive, we have become less competitive. Of course, it is true that over the last year, we have seen a return to growth, especially in Germany. But the broader trend is clear. A decade ago, the four largest EU countries accounted for a quarter of the world's trade, while Asia's share of world trade was less than a sixth. This year, Asia will overtake us. As recently as 2003, the eurozone's economy was 13% bigger than China's in terms of purchasing power. Now it is 16% smaller. It's not just the arrival of big developing economies that pose a competitive challenge. Relative to the United States, Europe has lost ground too. Over the last decade, productivity grew 26% in the US, compared to just 14 per cent in the eurozone. According to the Commission itself, Europe's share of global GDP is set to halve over the next forty years. America's is set to increase. Why have we not achieved the goals set out in the Lisbon Agenda? I believe the answer is this: The European Union has not understood that it needs a complete change of direction. It hasn't understood that today the primary challenge we face is an economic one not a political one. For my generation the question for Europe today is not how to unite but how to compete - not only within Europe, but with the rest of the world. With close to 20 million people unemployed, millions more economically inactive, our competitiveness falling and economic power shifting east - Europe has to wake up and realise: it's the economy stupid. And it needs to work out how to use the political institutions of the EU to help. That requires a 180 degrees change in thinking. For throughout its life, the EU has done the reverse: it has used economic means for political ends. The original Coal and Steel Community brought together French, German and Italian industry to achieve the political goal of preventing future war in western Europe. That goal culminated in the creation of the euro: an explicitly political project. In my lifetime the use of transfer funds from Western Europe to Eastern Europe, and the equalization of the deutschemark, were economic tools used politically to unite the continent and to achieve the political unification of Germany. That goal culminated
in the accession of the former communist states of central and eastern Europe
in May 2004 and at the beginning of this year But the constitutional referendums held in 2005 showed us people of Europe - if not its politicians - understand that the project of political unification has run its course. It amazes me when some European politicians try to claim that the people of France and the Netherlands didn't know what they were voting for - or more to the point, voting against - in those referendums. Of course, most French and Dutch people did not vote "no" on the minutiae of whether the voting rules in the Council of Ministers should be changed, or whether the EU should have a foreign minister. They voted no to ever closer union, because they felt that the European Union had no answers to the questions they face. How do you compete for work against people who are paid one tenth what you are? What do you do when you find the skills you've had all your life are no longer needed? The fears about immigration from Turkey or Eastern Europe, and the loss of manufacturing to Asia, are not imaginary fears if you're working in a French car plant or serving in a Dutch restaurant or, indeed, if you are employed in a Midlands metal shop or a London hotel. Politicians should not pander to those fears or ignore them. They should address them. That was what the programme of economic reform set out at Lisbon was supposed to be all about. But nothing happened. Since Lisbon, the European Union has devoted all its political energies to the constitution - a document that offered nothing but ever more remote government to the peoples of Europe. I find it extraordinary that even now, after the referendums and the defeats, the lesson has not been learnt - and there are attempts to revive that constitution. When are Europe's leaders going to start listening to what the people are telling them? The Conservative Party is listening. We will oppose those attempts to revive the constitution. If the constitution resurfaces - and it increasingly looks like it will - we will demand and expect a referendum here in the UK - just as we did so successfully back in 2004. But we also recognise that it is not enough to oppose - we have to offer a positive alternative: another direction for the European Union to take. We should be pushing for further EU enlargement. I know you share my support for further expansion. As your Director, Charles Grant, has powerfully argued, there is a danger of letting eastern expansion stall. We must continue to offer hope to peoples from Belarus to the Balkans whose goal is EU membership. We should explicitly and forcefully make the case for Turkish membership. Next week in Brussels, David Cameron and the Czech Prime Minister will be launching the new agenda of the Movement for European Reform. The Movement will make the case - not just in the UK, but across the continent - for a flexible, outward looking, competitive Europe. The Movement will campaign for a Europe that reflects people's priorities. Its agenda will focus on poverty, competitiveness, and climate change. And that agenda will be promoted by a new Parliamentary grouping after 2009. That case should have been made by the current British Government. But the European policy pursued by Tony Blair, Gordon Brown and a clutch of Foreign Secretaries has failed. Ten years ago they said that they would put us "at the heart of Europe". Ten years later Charles Clarke summed it up when he said that Britain is "now more remote from the centre of European power than ever… with the Chancellor bearing as much responsibility as the Prime Minister - indeed, in some areas more." Scarcely a month has gone by of those ten years when we haven't read in some newspaper or another that the Chancellor of the Exchequer lectured other European Finance Ministers about the need for reform. Yet what has he to show for it? Under the new financial perspective the share of the EU's budget taken by the CAP is set to increase. Thanks to the abandonment of the rebate, Britain's contributions to the EU Budget are set to rise every year. The Services Directive which would complete the single market and help our service economy has been watered down beyond recognition. Textile tariffs have been imposed damaging British retailers and consumers. And as the WTO has pointed out in its latest trade policy review, the EU's agricultural tariffs have gone up, not down, since their last review in 2004. We know the Chancellor's delivered the sermons about reform. Where is the evidence that anyone in Europe has taken the slightest bit of notice. Foreign policy is about results. Gordon Brown has achieved none. We need a new approach at ECOFIN. An approach that is less hectoring, and more practical. An approach focused on achieving clearly defined goals. And those goals share a common thread: they are essentially economic in nature. So let me spell out briefly what our positive agenda for Europe would achieve, with five specific, positive goals. First, we must drive for free trade within the EU: we should complete the single market in services. Since services account for more than four fifths of our economy, and more than a third of our exports, services are a vital interest of the UK. The focus of Britain's efforts in Brussels should be on reviving the moribund services directive. We should be as energetic in overcoming French opposition to liberalisation as the French are in blocking British efforts to reform the CAP. Prising open the continent's financial services markets was a key element of the Lisbon Agenda. It is exactly what we want the EU to achieve. But many of the directives which have followed have ended up not opening markets but threatening them. For example, the Markets in Financial Instruments Directive was intended to create a level playing field in financial services, by creating a common set of rules across the EU, and a common regulatory regime. That's a good idea in theory - but the Directive in practice threatens to place significant burdens on all financial firms. I welcome Commissioner McCreevy's recognition of this problem. In London last week he said that there "is a real risk that the dream of a single new rulebook replacing 27 existing rulebooks could be turned into a real practical nightmare." In his words, we should "not hesitate to propose to modify or even repeal measures that are not delivering the intended benefits." I agree. But how have we come to this position? Second, we should be insisting that the EU's central external objective is break the Doha deadlock. As the second biggest market in the world, the EU has the weight to drive forward trade negotiations. So let us drive free trade. We cannot shut out the future. We must stand up for the European consumer against the vested interested of a few noisy producers. That means standing up for free trade. In this task we should be well placed, as the trade Commissioner is our very own Peter Mandelson. It would help, however, if we had a Chancellor who was on speaking terms with him. I welcome talk of an EU-US free trade area. But we can aim higher. By building a coalition for free trade within the EU, to champion consumers and the interests of the many, we can - and we must - be the spark that restarts global trade talks. That brings me on to the third positive goal. For we cannot open free trade to the agricultural markets of the developing world without CAP reform. Yet in 2003 Britain, for all the rhetoric about being at the heart of Europe, was excluded from the Franco-German deal on the CAP. Our response two years later was to throw away the rebate, our biggest bargaining chip for future reform. We should start preparing the ground now for the next mid-term review in 2008 - and identify now the opportunities for maximum leverage. Where is the evidence that the Government has even started to do that? Fourth, we should reclaim control over issues of social legislation. We have pledged to restore our opt-out from the European Social Chapter, but let me be clear why I think this is important. We support the minimum wage, maternity rights and other important employment protections. But we believe these decisions should be decided by national governments. Centrally imposed regulations take no account of differences in working arrangements across countries. For example, here in Britain the working time directive has had a catastrophic effect on parts of our National Health Service. Social legislation is best dealt with at a domestic level. Finally, we must do more to ensure the EU succeeds in areas where we should be working together - like the environment. I applaud the leadership of the EU in establishing the emission trading system. It has the potential to be the prototype of the global system that is the only long term solution to climate change. But it is marred by horse-trading, and over-allocation has left the price of carbon in free-fall. So far, against a Kyoto goal of reducing carbon emissions by 8%, the EU has managed just 1%. So we must insist on tighter phase two allocations that challenge EU firms to reduce their emissions. Only then will the trading system provide the incentives for the long-term investment in green technology that we need. Getting the environmental policies right is part of a new agenda in Europe. As Europe's leaders approach the European Council in Germany, many feel that the political project has lost its way; that it is heading up the wrong path. They are right and the reason is this: They are pursuing the wrong political project. I say let us focus Europe on the challenges of my generation. Let us address the fears of Europeans who feel left behind by globalisation. Let us work together on new battles like climate change. Let us promote a positive future for Europe that is relevant to the age in which we live. Let's start talking to my generation. |