I call the Minister to make an opening statement. I remind the Committee that interventions are not allowed during the statement.
The Minister for Small Business, Industry and Enterprise (Anna Soubry)
Thank you, Ms Vaz; it is a pleasure to serve with you in the Chair.
I am pleased to have the opportunity to discuss the European communication “Better regulation for better results”. My right hon. Friend the Minister for Europe and I will be happy to answer any questions the Committee may have about the better regulation agenda in the EU. As the Committee will be aware, the Government have introduced ambitious measures to minimise unnecessary red tape at national level, but action is also needed at EU level to limit the burdens on our businesses that stem from EU legislation, which the OECD has estimated to be about 50%.
Since taking office in 2014, the Juncker Commission has made welcome progress on better regulation, and the Government have lobbied consistently in Brussels to keep better regulation at the top of the Commission’s agenda. For example, the number of new initiatives proposed in the Commission’s 2015 and 2016 work programmes was 80% lower than the average in the previous five years, and more laws have been laid down for repeal in the past two years than during the whole of the previous Commission. In the “Better regulation for better results” communication, which was published in May last year, the Commission set out what more it plans to do. The communication addresses long-standing UK priorities and the Prime Minister welcomed it as a significant step in the right direction.
The communication has three main themes: transparency, tools for policy makers and reviewing the stock of legislation. Specifically, the Commission announces longer consultation periods on legislative proposals and greater independence for its regulatory scrutiny board. The board examines the quality of impact assessments and its favourable opinion is needed before the Commission may adopt a proposal. The Commission also renews its commitment to applying a small and medium-sized enterprise test in respect of new legislation, systematically considering lighter regimes for SMEs and exemptions for micro-enterprises wherever possible. That is one area in which I particularly welcome action that will reduce burdens: SMEs are the backbone of all our economies and the Commission estimates that they create 85% of new jobs in Europe. Finally, the communication describes how the Commission’s regulatory fitness, or REFIT, programme to evaluate existing EU legislation will become more targeted, quantitative and inclusive.
We welcome those better regulation reforms, which demonstrate the Commission’s positive attitude and intention to make rapid advances. The communication is evidence that our efforts to embed the EU’s focus on competitiveness, jobs and growth are bearing fruit. We continue to work with like-minded member states to achieve further progress on EU better regulation from all three EU institutions. That is genuinely a shared responsibility for minimising the burden of EU legislation.
The interinstitutional agreement—IIA—governs working practices between the Council, the European Parliament and the Commission, and it is one of the key institutional priorities of the Juncker Commission. It replaces the IIA on better law making, dating from 2003, and focuses on improving the operation of the legislative process in the EU. A draft text was published in May last year and tripartite discussions concluded in December, culminating in a political agreement at the General Affairs Council. A formal vote in the Council of Ministers is expected at the General Affairs Council next week.
The Government’s negotiating mandate adopted a two-pronged strategy for meeting ambitions for the IIA: to maintain interinstitutional balance at least where it was set by the Lisbon treaty and the previous IIA and to prevent encroachment on the Council’s powers and prerogatives; and to pursue a broad better regulation agenda, including through proposals for measures on better regulation and better impact assessment processes. The Government were also clear that where proposals on better regulation could not be achieved through the IIA negotiations, the door was to be left open to pursue them through other means.
The Government’s better regulation objectives were a priority during negotiations and they have been successfully achieved in a number of key areas, which is a real boost for small businesses, which are the motor of our economy. First, the Commission makes a firm commitment that impact assessments will include
“potential short and long-term costs”,
the impact on the competitiveness of a proposal, and subsidiarity and proportionality tests. It makes a specific commitment that its impact assessments will, in future, have
“particular regard for Small and Medium Enterprises”
through “think small first” principles. Secondly, the European Parliament and the Council confirmed that they will carry out impact assessments in relation to their substantial amendments to the Commission’s proposal, which is something that the United Kingdom has consistently called for.
Thirdly, and most important, the Commission commits for the first time to assessing the feasibility of establishing an EU burden reduction target—a significant achievement that was added to the text of the proposal as a result of the UK’s lobbying. However, we want to go further. As set out by the Prime Minister, the Government made better regulation one of the elements of our reform agenda ahead of the referendum, and as the Committee will know, the President of the European Council has proposed measures to address the agenda. That is a significant result for British businesses. We are pleased with the way in which the IIA preserves the level of interinstitutional balance, which was another of the Government’s key objectives during the negotiations. The IIA text reflects the UK’s call for a more systematic and timely consultation of co-legislators in agreeing the Commission’s annual work programme. It now provides clear provisions to hold the Commission to account to deliver its annual work programmes in line with the promised improvements to the process.
During negotiations, we explored the option of addressing the role of national Parliaments in EU decision making through the IIA. The IIA text acknowledges the need for national Parliaments to be able to exercise fully their prerogatives under the treaties, and commits the EU institutions in their legislative work to be fully compliant with subsidiarity and proportionality principles. However, the Commission and a clear majority of member states felt that that was a matter for debate between the Commission and national Parliaments directly, rather than as part of IIA negotiations. As a result, strengthening the role of national Parliaments remains a key element of the UK’s renegotiation agenda. We are seeking a new arrangement whereby groups of national Parliaments acting together can stop unwanted legislative proposals.
I hope my introduction assures members of the Committee that the Government have secured ambitious outcomes across a number of aspects of the legislative process in the EU. Crucially, the agreement strengthens the better regulation provisions in several key areas of UK interest. Hon. Members will have seen the letter from the Prime Minister to President Tusk, so they will know that better regulation is very much at the heart of our EU reform agenda. Huge progress has been made across the whole EU; awareness is growing that we must regulate less and ensure that existing regulation is doing the job it is meant to do, rather than holding back small and medium-sized businesses across the whole EU. We are leading the charge. I thank the European Scrutiny Committee for calling for this debate.