The House of Commons decided, yesterday, pursuant to Article 6 of Protocol (No 2) on the Application of the Principles of Subsidiarity and Proportionality, to send a Reasoned Opinion to the Presidents of the European Institutions stating that the draft Decision on establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work does not comply with the principle of subsidiarity, for the reasons set out in the annex to Chapter One of the Forty-ninth Report of the European Scrutiny Committee During the debate Bill Cash made the following interventions:

The Parliamentary Under-Secretary of State for Business, Innovation and Skills (Jenny Willott): I beg to move,

That this House considers that the draft Decision on establishing a European Platform to enhance cooperation in the prevention and deterrence of undeclared work (European Union Document No. 9008/14 and Addenda 1 and 2) does not comply with the principle of subsidiarity for the reasons set out in the annex to Chapter One of the Forty-ninth Report of the European Scrutiny Committee (HC 83-xliv); and, in accordance with Article 6 of Protocol (No. 2) annexed to the EU Treaties on the application of the principles of subsidiarity and proportionality, instructs the Clerk of the House to forward this reasoned opinion to the Presidents of the European Institutions.

This debate will give the House a welcome opportunity to discuss the proposed platform on undeclared work, and to decide whether to send a reasoned opinion to the European Commission. The Commission proposal seeks to establish an EU-level platform on undeclared work. Undeclared work is defined by the Commission as paid activities that are lawful but are not declared to public authorities. This matter is high on the European Commission’s agenda, against a backdrop of efforts to improve job creation, job quality and fiscal consolidation.

The proposal highlights a number of concerns, based on a perception of high levels of undeclared work in the EU, including tax evasion, mis-declaration of hours worked and benefit fraud. The Commission is proposing a platform, whose members will be drawn from member states’ nominated enforcement bodies, to try to improve co-operation, share best practices and identify common principles for inspections. I should of course stress that addressing undeclared work is a priority for the Government. We have taken action at national level to detect and deter fraud through inspection, as well as to encourage good practice by providing guidance for employers.

The debate has been called because the European Scrutiny Committee requested an opportunity to discuss its concerns about whether the proposal respects the principle of subsidiarity. There are also very short time scales and deadlines to which the European Commission is seeking to secure agreement on a position; hence the debate taking place tonight.

Let me first turn to the issue of subsidiarity. The concerns that I set out in the explanatory memorandum—the Committee shares those concerns—were based on the initial draft of the proposal, which sought to mandate member states to participate both in the platform and in any enforcement activities arising from the platform’s recommendations. Like the Committee, we remain to be persuaded that the Commission has demonstrated a need to mandate member states to take part in the platform or that EU-level intervention action will add value.

However, it emerged in negotiations late last week that although member states’ participation in the high-level platform would be mandatory, participation in any cross-border operational activities recommended by the platform would be voluntary. The Council’s legal service has indicated that that is the case, and we have asked it to clarify its official position. Therefore, the principal concern about subsidiarity that we identified in the explanatory memorandum—based on an earlier text—drops away. We could decide, issue by issue, whether the UK should participate in further activity, and we would of course seek the Committee’s views on such matters. However, we have not yet had advice from the Council’s legal service in writing, and the proposals are still being negotiated, so they may change. I therefore understand that the Committee will want to decide for itself whether the proposal respects the principle of subsidiarity.

Our concerns about the detail of the proposal have been shared by other member states and, together, we have secured some changes. The changes, alongside the fact that the activities identified will not be mandatory, mean that the majority of member states will support the proposal. Therefore, the original subsidiarity risk that we identified does not still stand. Moreover, we should be involved in discussions about activities in relation to which we could be asked to take action, even if we probably do not want so to act. Negotiations are ongoing and the European Parliament is yet to begin its consideration of the proposals, so we will be continuing to work throughout the negotiations to ensure that our concerns about subsidiarity are addressed in the final text.

Let me now turn to justice and home affairs. Since publishing the explanatory memorandum, our ongoing analysis has identified that the proposal may include elements relating to justice and home affairs, thus invoking the UK’s JHA opt-in. That is because the proposals suggest, for example, that enforcement bodies such as the police will collaborate in cross-border activity. No decision has yet been made on whether or not to opt in to the proposal. Once a decision has been made, we will write to the European Scrutiny Committee. Having said that, as it is not mandatory to participate in any activities that result from the discussions, no significant burden would be placed on the UK by opting in.

The Commission and presidency are pushing hard on the proposal, and we were informed on Friday that they hope to reach a general approach on 11 June, which is very soon. The deadline for sending the reasoned opinion to the Commission is 11 pm tonight. With the timing of the recess and the Queen’s Speech, this evening was the earliest opportunity to facilitate a discussion in time to meet the deadline, although I appreciate that the timing is not ideal for such an important discussion. If we run out of time tonight, I will be happy to follow up any questions in writing, although given the numbers present, that seems somewhat unlikely—[Interruption.] The shadow Minister may want to raise lots of questions.

Mr William Cash (Stone) (Con): We are extremely conscious of the timetable this evening, and the fact that the whole business must be dealt with by at least 10.45 pm. We will do our best—at least, some of us will—to ensure that we get through the business as quickly as possible, but we must also have regard to what needs to be said.

The explanatory memorandum that the Minister has just discussed states: “The Government is not yet persuaded that the proposed decision to require Member States to participate on a mandatory basis is consistent with the principle of subsidiarity and believes that participation in any platform should be on a voluntary basis.”

I know that further consideration is being given to that position, and as far as we are concerned the matter is of sufficient importance to be regarded as a breach of subsidiarity. That is our view, and the view of our legal adviser and the European Scrutiny Committee. The Minister added:

“The Government’s view is that the proposal lacks the empirical evidence base or analysis of structural failure at Member State or Union level which would support a case for intervention.”

We wish to underline the inadequacy of the Commission’s impact assessment, which acknowledges the absence of a clear “incidence chain” linking the establishment of the EU platform to a reduction in undeclared work, greater social well-being and better economic outcomes.

We also seek a clear explanation from the Government about their position on the content of the draft reasoned opinion prepared by the European Scrutiny Committee, as well as an indication of how they intend to use it in Council negotiations on the draft decision. Will member states continue to express a preference for voluntary participation in any EU platform on undeclared work? The Commission’s impact assessment indicates that most member states favour a voluntary approach.

We wish to press the Minister for a clearer indication of the scale and significance of the cross-border dimension in tackling undeclared work. In that context we bear in mind that, as she has said, there are justice and home affairs implications in respect of that and of whether there should be an opt-in.

Will the Minister confirm that the Government will oppose any attempt in the general approach proposed to interfere in internal governance structures and the co-ordination mechanisms of national enforcement authorities responsible for tackling undeclared work?

I think that that is as much as needs to be said at this stage, but I wanted to put that on the record and make a general comment about reasoned opinions. I have been sceptical about reasoned opinions and the yellow card system for a long time—in fact, from the moment they were first put forward. We know that there are thresholds, but we were extremely disturbed when, in relation to the European Public Prosecutor’s Office, the threshold was passed by all member states and—surprise, surprise—the European Commission ignored that fact. The national Parliaments, which the Commission keeps telling us are so important, took the view that there was a breach of subsidiarity. On account of that it was assumed that the Commission would withdraw the proposal, but no such thing occurred.

I say that in general as we start the new parliamentary Session, because it is no good getting these grand statements—we are getting a lot at the moment—from the likes of Mr Juncker and company about the kind of European Union they want. There are very serious questions about the drive towards political union. If they want to trample on national Parliaments, when they put forward and achieve the threshold in terms of reasoned opinions and subsidiarity, and just ignore them, then I am afraid the increase in disaffection with the European Union will grow exponentially.

Mr Cash: Is the Minister saying that she still believes that, as far as the UK Parliament is concerned, there should be a yellow card for the purpose? The question is as simple as that.

Jenny Willott: (…)The points raised by the hon. Member for Stone about the yellow card system generally are above my pay grade, but I think that his points were well made and I will make sure that they are referred back to the most appropriate Minister.
….I hope that I have tackled all the issues raised. If I have not—we can go through the Hansard—I will be more than happy to clarify anything I may have overlooked.
Question put and agreed to.