A Trade Union Reform Agenda for Europe

Introduction: the European Union We Want

The story of the UKs involvementin the European Union is one of success, whether it be in terms of greaterinternational stability, increased trade and investment, or better rights forworking people

There have been setbacks. The UK began the 1990s by joining theEuropean exchange rate mechanism. Wedid so at a disastrously high exchange rate and paid the price in lostjobs. The British economy dropped deepinto recession, a recession that only ended on Devaluation Day in September1992. Small wonder therefore that theBritish people have been cautious ever since about giving up the pound or thatthe single European currency now dominates Britains European debate, leavingother issues in the shade.

Yet the British people haveshown no inclination to leave the European Union. For all except a small minority that question was settled onceand for all in 1975. Most Britishpeople want the European Union to succeed and they want the British Governmentto play a leading part in promoting that success. Because they understand that we can achieve more for our peopleby working together with our EU partners than we could ever do by operating inisolation.

Our trade links alone with ourEuropean Union partners are stronger now than they have ever been:

Nearly 60% of UK foreign trade is now with the EU.

We export more to Germany than to the USA, more toSweden than to Australia and New Zealand put together, and twice as much toBelgium as to Japan.

Over 3 million British jobs depend directly on UKmembership of the European Union.

The days when Britain thoughtit could go it alone in the world are long gone. We live now in an increasingly interdependent world.

One in which international trade, overseasinvestment, global communication, world-wide travel, transferred technology andcross border crime are commonplace.

One in which we all need partners abroad to help usboost business, create jobs, promote trade, protect the environment, tackleterrorism, preserve peace and defend our interests.

Gordon Brown rightly remindedthe May 1999 TUC conference Unions and the Euro of the shared needs, mutualinterests and linked destinies that unite working people. Our EU partners are more than just ournearest neighbours. They also share ourfundamental values. We have to workwith our EU partners. Tony Blair madeclear at Ghent in February 2000 that this means abandoning the ambivalentattitude and hesitant approach to Europe that Britain has often displayed inthe past, and instead cooperating with our colleagues in reforming todaysEuropean Union.

The key question is: what kindof European Union do we want? Thisdocument presents the nucleus of an answer not a detailed blueprint, but aEuropean Union reform agenda from a trade union perspective.

One which urges the British Government to showleadership on the single currency and argue the case for UK entry in an earlyreferendum. To do otherwise risks forfeitingpopular support and sacrificing British influence in Brussels, putting morethan just jobs in jeopardy.

One which accepts that the single currency cannotsucceed unless it is accompanied by a broad package of EU reforms aimed atencouraging a competitive economy and a stable society. A package that helps business and employeesalike to cope with the stresses and strains that change inevitably brings. Reforms that show the relevance of the EU toworking people and their families and communities in the opening decades of the21^st century.

One which seeks to overcome the democratic deficitthat disfigures the way so many EU decisions are made and to pull back the veilof secrecy behind which the Brussels bureaucracy works.

One which recognises the importance of the Europeansocial dimension to working people across the European Union, especiallyworkers in the UK where employment protection laws are among the weakest in theEU. Without a strong framework ofemployment and social rights the EU will fail to gain the support of itscitizens.

Sounding An Uncertain Trumpet

It is essential that the UKGovernment backs its pro-Europe rhetoric with strong action. The time is right for the Government to leadthe fightback against the vocal but misguided individuals who want us to leavethe European Union. Going it alone is ahigh risk strategy in a global economy which can soar one year and sour thenext.

We live in an uncertain worldin which even audited accounts are now in doubt. An unstable world in which share values are currently sinking, pensionschemes are under pressure and retirement rights are under review. An insecure world of terrorist threats and tensionsin the Atlantic alliance. Turning ourback on our EU partners is no way to safeguard the concerns that we and they havein common.

Reluctance and Resistance

The EU social dimension iscrucial in persuading working people that Europe is in their bestinterests. In the dark days ofConservative government it was the EU which gave British workers new rights andset out a clear social agenda.

It was new EU laws that obliged the Britishgovernment to introduce a health and safety six pack of measures makingworkplaces safer.

It was the European Court of Justice that compelledthe British government to abide by the EU Working Time Directive setting limitson working hours.

And it was the European Court which insisted that theequal pay laws applied to part-time workers in the UK.

More recently it has been frameworkagreements negotiated between the European TUC and European employerorganisations under the 1991 Social Protocol and transposed into EU Directives thathave led to new UK rules on parental leave, part-time work and fixed termcontracts. Sadly, the only reason thatthe British Government is currently consulting on how to bring UK informationand consultation rights at work into line with those already enjoyed elsewherein the EU is because of an EU Directive that the UK tried to suppress but ultimatelyproved powerless to resist.

The Trade Union Constituency

A referendum on the singlecurrency, whenever it comes, is going to be won or lost in the workplaces aswell as the homes of Britain. Europessocial dimension will be a key point in positive campaigning on the Euro.

A recent MORI poll showed thattrade union members are narrowly in favour of the UK joining the euro. Few union members either love or loathe theeuro but plenty remain open to persuasion either way, making them a keyconstituency in any referendum campaign.They want to know what kind of Europe Britain will be helping to build:

One ruled by bankers businessmen and bureaucratsbothered only about the single currency and the single market?

Or a Peoples Europe intent on closing the currentgap between EU economic and social integration, so that retraining and rightsat work count as much as restructuring and redundancies everywhere in the EU? A Peoples Europe which removes thedemocratic deficit that scars the EUs present methods of making decisions.

Persistent Ambiguity

Britains trade unionswelcomed the Labour Governments action in signing up to the EU social protocolimmediately on taking office in 1997.The Tory opt-out had denied British workers a voice in Europesdecisionmaking process on social matters.The Labour Government restored that voice.

However, it remains far fromclear what kind of European Union the British Government wants to build.

In the autumn of 1998 Tony Blair published a pamphletoutlining an agenda for European Union reform.It envisaged a single European market strengthened by a successfulsingle currency and supported by social cohesion among Europes citizens. However, it sidestepped the issue of when orwhether Britain should join that currency and said nothing specific aboutEuropean social policy.

In December 2000 at the EU summit in Nice the UKgovernment ensured that the EU Charterof Fundamental Rights was limited to a political declaration lacking legalstatus, denying EU citizens fundamental trade union rights like freedom ofassociation and rights to collective bargaining and action.

Until it lost its blocking minority in June 2001 the UKgovernment resisted the EU Directive on information and consultation rights atwork and argued for delayed implementation dates. It has been repeating these tactics with the EU proposals fortemporary agency workers rights at the beginning of 2003.

In February 2002 Tony Blair entered into anastonishing and shameful alliance with right wing Italian Prime MinisterBerlusconi, with joint papers promoting deregulated labour markets and an endto EU competence in social and employment law.

When Europe delivers newrights for workers it is imperative that the British Government ensures thatthe benefits are felt in full. Rightsagreed in Europe must not be watered down in the UK.

Whilst the British Governmentstays semi-detached from the UK debate on the single currency, and ambiguous inits attitude to European social measures, the British people will lackleadership. There will be no prospectof developing in Britain the new consensus for change and reform that is neededuntil the Government gives a strong lead on the key European questions.

A European Reform Agenda

There are a number of considerationsand priorities that the EU should pursue in each of the three main policyareas.

1. The SingleEuropean Market

The Tony Blair GerhardSchroeder Declaration Europe: The Third Way / Die Neue Mitte of 1999 wasstrong on the call for flexible competitive markets in Europe, soft on theEuropean social agenda and silent on the single currency. It was right to insist that the EU needs tobecome better at responding to economic and industrial change if it is to matchcompetition from the American and Asian economies. Creating a single European market by dismantling artificialbarriers to trade can strengthen European business by exposing nationalmonopolies to competition and encouraging Europes firms to specialise in whatthey are best at.

The EU 1992 single marketprogramme swept away several barriers to trade among member states.

It cut out many of the petty customs procedures andfrontier formalities which wasted valuable time.

It removed many of the different technical rules andregulations that fragmented European markets and put European businesses at acompetitive disadvantage against their rivals from the USA and Japan.

It encouraged moves towards standardisedspecifications, leading firms to begin to base their business strategy on theidea of an integrated Europe-wide market.

However, the EU still has someway to go to complete the construction of the single European market. Three remaining requirements stand out.

a.Definitions of Public Spending and Borrowing: Consistent EU ruleson what counts as public spending and borrowing could put UK local authoritiesand bodies like the Post Office onto the same footing as their counterpartselsewhere in the EU, freeing them to borrow and invest in modernisation. The UKs definition of what counts asgovernment borrowing, the Public Sector Net Cash Requirement (PSNCR), is rigidand restrictive. Adopting the moretypical EU model of the General Government Financial Deficit (GGFD) wouldremove artificial limits on investment by British local authorities and publicbodies. The 2002 EU Lisbon summit called on Europes governments to benchmarkbest practice and learn from each other.This is one way to do so.

b.Taxation Rules: Better taxarrangements between EU member states could help to create the level playingfield that firms need to be competitive.This is one lesson from the duty free debacle. The demonstrations by UK road haulage drivers about relativerates of tax in the UK and elsewhere in the EU provided a noisy echo.

c.Competition Rules:European businesses are vulnerable to competition from, and takeover by,their stronger foreign rivals. Forinstance, the policy whereby each member state favours national champions hasleft Europes defence industries struggling to stand up to Americancompetition. Lack of Europeanintegration has meant that much European defence spending has gone towaste. Closer co-operation is needed. In many other sectors there has also been anotable flow of foreign capital buying up UK companies. This has been particularly visible in thegraphical, paper and packaging sectors where there has been a series of largetakeovers by North American companies.

2. The SingleEuropean Currency

Joining the single Europeancurrency offers us many advantages.Easier trade and travel and the jobs that they bring, plus greaterprotection against speculation in foreign exchange markets of the kind which weexperienced so severely in September 1992.Hundreds of millions of European citizens already use the eurosuccessfully on a daily basis. The eurois here to stay.

Convergence and the Five Tests

The Governments five economictests, allowing the UK to join the euro only after an assessment that thebenefits are clear and unambiguous, are formidable[1]. Many economists doubt whether such hard andfast conclusions can ever be reached about phenomena that are surrounded byuncertainty. However, an OECD studyconcluded in 2000 that the UK already came closer to meeting the Maastrichtconvergence criteria for economic and monetary union than many existing membersof the eurozone. The NationalInstitute of Economic & Social Research published in April 2002 a studywhich concluded that the Chancellors five tests had already been passed.

Understandable concern arisesover the stability and growth pact, the EUs common rules for governmentborrowing. Instead of following the UKexample by adopting rules to eliminate the structural deficit in the publicfinances and to balance government spending and borrowing over the economiccycle, our EU partners have stuck to an outdated deflationary formula andobliged the European Commission to try to enforce it. EU member states should reform the pact toconcentrate on what really counts: government borrowing adjusted to takeaccount of the state of the economic cycle. In or out of the eurozone it need pose no particular threat to UKpublic spending plans.

By giving a firm commitmentthat the integrity of its public spending plans will remain uncompromised whenthe UK joins the euro the British government could squash the scaremongeringabout public spending cuts. Only twoother EU states, Ireland and Spain, devote a smaller share of national wealththan the UK to spending on public services.While the UK devotes 41% of output to general government expenditure theEU-15 average is over 47% with France on almost 54% and Germany nearly 49%. Coming into line with common practiceelsewhere in the EU would tend to mean stronger public services in the UK, notweaker ones.

Confidence in joining the eurowould be encouraged by reform of the European Central Bank. In particular it should be made clearer thatthe Bank has a responsibility to support growth, investment and employment andnot only stability. The ECB shouldpublish the minutes of its Governing Council meetings to enhance transparencyand promote accountability, and establish an advisory committee composed of allthe relevant actors including the European social partners.

The Exchange Rate

More immediate concern arisesover the exchange rate at which the pound should be linked to the Euro whenBritain joins the single currency. Manymanufacturing firms have felt at a critical disadvantage due to the strength ofsterling for years. Independentestimates reckon that the pound must fall by up to 20% for painless entry,roughly the extent by which the pound was overvalued when Britain joined theEuropean exchange rate mechanism in 1990.Most economists would judge it risky for the UK to join the euro at anexchange rate close to recent levels.But such levels are unlikely to last once the financial markets learnthat the British government is recommending joining the euro in a referendum.

Economic Policy within the EU

The choice of whether or notto join the single currency could carry important implications for what we usedto think of as exclusively domestic policy but which in future will fall underthe increasing influence of our EU partners.The economic policies of all EU member states are now regarded asmatters of common concern and co-ordinated within the Council ofMinisters. The Council sets out broadguidelines for national policies and establishes surveillance systems to checkfor consistency with the guidelines.There are sanctions for failing to comply.

As time passes the guidelinesthat apply to all EU member states will be dominated more and more by theconcerns of the majority that support the single currency. Today Britain is part of a shrinking minorityof three. But the other two havestepped up their preparations to join:

Denmark is deferring its decision till after an EUintergovernmental conference in 2004.But its currency, the Danish kroner, used to shadow the Deutschmark andis already tied to the euro within tightly defined bands.

A referendum in Sweden is set for September 2003.

Soon only Britain may stay outof the single currency, isolated not only from todays 14 other EU states but probablyalso from most of our 24 partners once new entrants join the EU from 2004. Rump states that do not belong to the singlecurrency club will pack little punch.They will see EU guidelines and policies drafted with the needs of the eurozonestates placed first, and be able to win only minor modifications to theirpartners plans. Similar considerationswill slowly affect other EU policies like the rules on state aid to industry,competition policy and regional policy.

If the EUs current review of state aid to industrywere to freeze existing structures UK manufacturing could be locked into a longterm disadvantage, since Britain spends only one third the EU average on aid toindustry. Only Portugal spends less.

The very definition of what counts as a publicservice that governments are permitted to provide is already under threat fromthe General Agreement on Trade in Services (GATS).

Inward Investment

The last five decades arelittered with examples of Britain joining late in Europe. We missed the boat in 1957 when the originalCommon Market was formed, and suffered the consequences. Between 1957 and 1973, while we remainedoutside the European Economic Community, the share of inward investment thatBritain captured fell from 40% to just 15%.As soon as we joined that share increased. The creation of the single market means that the UK has gainedenormously from intra-EU investment. By1997 over 5000 continental European companies had invested in Britain and thatfigure is still rising.

John Majors futile attempt tohide behind a British veto showed how humiliating such a stance can be. He quickly had to cave in to pressure fromour EU partners. The ability of the Labour Government only to reduce VAT onfuel when it wanted completely to abolish it is one example of what the futuremay hold.

The UK is in no position tolecture our EU partners. UKproductivity and skill levels are below the EU average. British living standards lag behind those ofour main European rivals. We have morepeople living in poverty. Our publictransport systems are the ones most in a jam, and we only aim to raise ourhealth service spending to the EU average in 2006.

The continued uncertaintyabout British intentions towards the euro is causing companies to reconsiderkeeping a manufacturing base in the UK.Black & Decker have already moved from the North East of England tothe Czech Republic. Phillips arereviewing their commitment to manufacturing in the UK. Carlos Ghosn, President of Nissan, hasstated that the future of their Sunderland plant could depend on whether the UKadopts the euro, and that having their cost base in pounds and their revenuebase in euros is a consideration each time Nissan have to make an investment. The possibility of international firmspulling out of the UK can only increase if the prospect of a decision onBritish entry to the eurozone is postponed again.

While Britain stays out of thesingle currency our influence in EU decisionmaking will become steadily moremarginal while the EU grows relentlessly more important to jobs and livingstandards in Britain. Opting out is nota low risk policy for Britain. It is toplay a dangerous game with all our futures.Appearing to favour opting-in while declining to argue the case fordoing so does nothing to build support for the sensible choice in any eventualreferendum.

Staying out could also costBritain influence in other important fields.Washington wants to deal with a government in London that carries weightwith its EU partners in Brussels. Thisis especially true now that NATOs newest members Poland, Hungary and the CzechRepublic are about to join the European Union along with seven more newentrants. The increasing importance ofthe EU in the international trade talks that decide World Trade Organisationrules leave Britain with a lot to lose if staying out of the single currencywere to relegate us to junior partners in the EU. Eventually Warsaw would carry more weight than London.

3. TheEuropean Social Agenda

Social Change in Europe and the USA

Much has been made of theability of the USA economy to create more jobs than Europe in the last decade. Much less attention has been paid to thedire social consequences of the American approach. One that leaves 40 million people without health insurance, asociety disfigured by violence and crime as the have-nots seek to steal theirpiece of the pie from those that have, an enormous prison population, and grossinequalities between the fortunate and the less favoured. Europe must do better.

But Europe faces uniqueobstacles in doing so. As in the USA asingle European market and a single European currency will encourage businessesto change their production methods and modify their product ranges to staycompetitive. Firms will be the first tofeel the strains in adjusting to changing circumstances and workplaces areliable to be hit hard. However, theimpact of economic change is rarely even.Some industries and some areas will grasp the opportunities faster thanothers. Some will be poorly placed torespond. They will suffer disproportionately.

Unfortunately the EU cannotdeal as easily as the USA with economic pressures and technologicaldevelopments that hit one state harder than others, for two reasons.

First, because labour mobility is lower in Europethan in America due to language and cultural barriers. Far fewer Europeans change jobs and movehome to another EU state than Americans who move between states of theUnion. Moving from Colorado toCalifornia is much simpler than moving from Coventry to Cologne.

Second, because public funds in Europe do not move asreadily in support of regions hit hard by economic change as they do in theUSA. The EU budget is much smaller thanthe USA federal budget and lacks the mechanisms to steer financial supportautomatically to regions in recession.Social welfare transfers to mitigate hardship are routine in theUSA. Corresponding arrangements do notexist in the European Union.

The consequence is thatworking people are more at risk in Europe than in the USA. A positive European social agenda will bevital in helping them to co-operate in adopting new products and processes, andin coping with the stresses and strains that economic and industrial changebring.

For British workers the factremains that it is generally cheaper and easier to make them redundant thantheir colleagues in other EU states. Manycompanies have seen British workers as the first option when it comes tocutting jobs. Examples of companiesmaking such redundancies in the UK include Alsthom, Bombardier, Dyson,Motarola, Procter & Gamble, Royal & Sun Alliance and Xerox.

A common European socialsafety net, to give everyone at least the same basic standards of socialprotection and rights at work, can stop structural change from turningindustrial casualties into social outcasts.It can help everyone to face up to the challenge of change at work andensure that, even in the extreme cases where modernisation means redundancies,the people affected still feel they have a stake in society.

Making EU Social Policy

The EU summit in Lisbon in2000 adopted what it calls the open method of coordination (OMC) to encouragefaster progress towards a social Europe, intending it to complement EUlegislation, European collective agreements, social dialogue and other EUsupport programmes.

Supporters of the OMC approach emphasise nationalaction by member states learning from each other in the common pursuit of bestpractice. They aim to promoteconvergence whilst respecting national diversity by relying on benchmarking,common indicators and peer group pressure rather than rules enforced by law.

Unfortunately the OMC approach can also become a sophisticatedsubstitute for effective EU action, especially for EU legislative measures, andthis is the interpretation which the British government has tended to favour,with the backing of the Confederation of British Industry.

We welcome the European socialpolicy agenda agreed at the December 2000 summit in Nice with its emphasis onmore and better jobs and on the quality of social policy. This apparently clear and welcome commitmentby EU member states makes all the more inexplicable subsequent attempts by theBritish government to undermine EU competence in the fields of social andemployment law through the Blair-Berlusconi pact. Rather than weaken the EU role there should be greater legislativepowers for the European Parliament, more qualified majority voting in theCouncil of Ministers, and a strong European Commission to carry out EUdecisions.

A positive EU social agendashould include further action, including EU legislative measures, in severalareas.

European Social Dialogue: the restructuring of European industry thatwill inevitably accompany the completion of the single market and theintroduction of the single European currency makes it more crucial than everthat the EU develops mechanisms through which both sides of industry can worktogether and with government in managing the process of change.

European social dialoguecurrently takes several forms: European works councils, cross sectoralrelations between the employers organisations UNICE and CEEP and the EuropeanTUC, and increasingly at sector level. Examplesof progress at sector level include agreements on working time among mobile staffin the civil aviation sector, subsequently transposed into an EU Directive, andon European harmonisation of the legislation governing the private securityindustry, including development of codes of conduct. However, progress has been uneven, with social dialogue runninginto difficulties in the graphics sector and many others.

The Gyllenhammar report on theeconomic and social implications of industrial change made clear the need forbinding minimum standards to be met by companies undergoing restructuring. Prime amongst the reports recommendationswas the need for good social dialogue between companies and theiremployees. The Gyllenhammar groupagreed on the need to create a European framework for information andconsultation with employees. We welcomethe continuing discussions between the European social partners on this issueand hope they will encourage socially responsible restructuring.

There is now clear evidencethat workers who are well informed, properly consulted and reasonably secureoutperform those who are not.Organisations adopting such a partnership approach have proved to bemore productive, more competitive and more profitable than their moretraditional rivals. It is essentialthat the British government encourages European social dialogue. Europes trade unions are committed todeveloping a European industrial relations system as part of this process. This is being helped by closer working betweenindividual unions in different member states.

The next step should be whendecisions are made in 2004 on the recommendations of the Convention on theFuture of Europe. The Convention shouldsupport including in the new EU Constitutional Treaty recognition for thecurrent role of the social partners in Europes social and economic governance. The treaty should also consolidate theirexisting role in social policy, and ensure they are consulted on employment andtraining policy.

Transnational Trade Union Rights: By including the Charter of FundamentalRights in the new Constitutional Treaty the Convention on the Future of Europewould recognise social dialogue and the role of the social partners as afundamental pillar of the European Union.This would mean legally binding obligations on member states and the EUto respect a number of core individual and collective rights. These should include:

national and transnational trade union rights ofassociation and collective bargaining and trade union action as provided for inthe relevant International Labour Office Conventions

national and transnational rights for workers toinformation consultation and participation

prohibition of all forms of discrimination

a ban on child labour

rights to occupational health and safety protection

rights to a minimum income including socialprotection in case of unemployment

freedom of movement within the EU, including forthird country national who are legally resident in the EU.

Health and Safety: action at European level hasmade a big difference to workplace safety, and trade unions have been behindmuch of it. Since 1985 unions workingin partnership with Members of the European Parliament have won amendments tomore than 25 EU health and safety directives. The decision to ban asbestos inall member states by 2005 and agreement on action to protect against noise andvibration are only the latest in a long line of union successes. Further EU action is needed now on themanagement of occupational stress and violence to staff, and on workplace basedinitiatives aimed at preventing accidents and occupational ill-health.

Working Time: ending the long hoursculture is of special relevance to Britain because British workers work about160 hours per year longer than the European average. It was a great mistake for the British Government to seek towater down the Working Time Regulations.Sadly, the UK is still out of step with our EU partners in counting publicholidays as part of the four weeks annual leave entitlement laid down by EU law. The next priority should be to end the UKopt-out allowing individuals to work more than 48 hours per week and to ensurefull and robust application at national level of the original directive inexcluded sectors.

Parental and Maternity Leave: the EU has takensome modest steps to promote family friendly policies at work, notably with itsprovisions for unpaid parental leave.Employers require flexibility at work to meet fluctuations in customerrequirements and unions can do plenty to assist, such as in negotiatingannualised hours schemes and other new ways of working. But flexibility at work must also includetaking more account in future of employees family responsibilities andpersonal circumstances.

Regrettably the BritishGovernment sought to go even further than the Irish Government in imposing acut-off date which would exclude many thousands of existing parents from theprovisions of the Parental Leave Directive. We welcomed the TUC initiative inmounting a successful legal challenge.

Information and Consultation at National Level: the European Directivefor improving employees rights to information and consultation is aparticularly good example of how EU member states can learn from oneanother. The new law can help topromote partnership between both sides of industry provided it is enforcedrobustly. There are already cases inthe UK of unions and companies creating partnerships based on sharedinformation and strong consultation which the Government has welcomed.

It was bitterly disappointingto see a British Labour government leading opposition to the proposals for adirective on information and consultation rights at work from 1998 until itsblocking minority evaporated in 2001, and seeking to delay coverage of smallerfirms. There is an enormousgroundswell of interest among trade union members in the UK in achievinginformation and consultation rights similar to those already enjoyed by theircounterparts elsewhere in the European Union.It matters to them. Too oftenBritish workers find out about changes in their companies from the media. Involving employees more in decisions atwork is one way of managing people better and organising work more effectively.