'Evaluating the EU’s Regulatory Burden and Its Discontents: The Labour Market, Free Movement and Social Europe'

Abstract:
Concerns about the ‘regulatory burden’ associated with the UK’s membership of the EU are not just the preserve of Eurosceptic Conservative MPs, UKIP, or others in the political class. They are shared by some influential sections of the business community worried about matters like banking and financial services regulation and environmental impact assessment laws. Another area of concern, but with a much longer provenance, is employment and social policy. This has informed successive governments’ domestic deregulation programmes as well as calls to rein in perceived EU ‘over-regulation’: the Conservatives’ ‘lifting the burden’, New Labour’s ‘flexible labour market’, and now the Coalition’s on-going Fundamental Employment Law Review and promise to tackle EU law as part of the wider ‘Red Tape Challenge’.

My paper considers this, factoring in the views of groups like the CBI, British Chambers of Commerce, Institute of Directors, and bodies like Business for New Europe. It also looks at Cut EU Red Tape, a recent report produced by a government-appointed business taskforce.

Whilst acknowledging the force in some aspects of the report’s conclusions and recommendations, much of what is proposed is contentious. It would certainly be highly problematic if implemented. The idea that the EU ‘over-regulates’ is, in any case, contested in many specific aspects. It is also evident to most reasonable observers that the UK has long enjoyed considerable leeway in its implementation of EU requirements. Furthermore, membership of the EU has not prevented us having one of the most ‘lightly regulated’ labour markets in the world - an analysis with which the OECD has readily concurred.

Despite deregulatory and neo-liberal trends across much of Europe - driven by the post-2007 crisis, deflationary pressures, and faltering growth and recovery - a degree of regulation in the workings of the labour market, free movement, and Social Europe is necessary. An obvious paradox, I suggest, is that much of the EU’s regulation is required if only to restrict excessive regulation and market distortions at the Member State level. Indeed, UK business leaders themselves recently called for this when asking the EU to fully implement the Services Directive. Plainly, without such top-down regulation across the European Economic Area, in areas like services and free movement of capital and labour, it will be difficult to establish a functioning labour market. Nor, without it, will a viable single market be possible. It is only the EU that is capable of providing the necessary trans-European legal framework.

Apart from such considerations, the UK, like the rest of Europe the UK, faces serious challenges: low productivity and growth, and continuing deflationary pressures impacting on growth, productivity, and employment conditions, as evidenced by the exponential leap in the number of workers on low pay since 2007. A minimum, floor of social protection, operating within an EU regulatory framework, is not just an essential element of ‘Social Europe’ it is an indivisible part of the wider European project.

The paper concludes with the suggestion that whilst the business community may well hope for (even expect) less unnecessary EU labour market interventions, and less ‘Social Europe’, any concerns they are likely to still have at the end of talks between the Prime Minister and other EU leaders are likely to be outweighed by a very much bigger concern - the negative outcomes that a UK exit would produce. This was a sentiment clearly expressed by the business organisations polled in last year’s CBI/YouGov poll.