EC Internal Market

HL Deb 10 October 1986 vol 480 cc474-516

11.21 a.m.

Lord Seebohm

rose to call attention to the completion of the internal market and to move that this House takes note of the reports from the European Communities Committee on indirect taxation, foodstuffs, meat products, consumer protection policy, recognition of higher education diplomas, and simple pressure vessels (11 th, 13th, 14th, 15th, 22nd and 23rd Reports, Session 1985–86).

The noble Lord said: My Lords, the Motion before the House today sounds a bit of a rigmarole, so perhaps I had better start by explaining why we have so many reports before us. It was in March 1985 that the European Council requested the Commission, to draw up a detailed programme with a specific timetable for action to achieve a single large market by 1992". In June 1985—which was quick for the Commission—the Commission published a White Paper to the European Council entitled Completing the Internal Market. All the reports included in the Motion today have a close connection with the realisation of this objective. The Committee therefore believe that it would be sensible to debate them together, rather than hold six separate debates on the different reports.

A fundamental aim of the EC has always been to complete the internal market, which was defined by the Council in December 1985 as an area without frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the Treaty of Rome. Annexed to the White Paper is the specific timetable which lists over 300 instruments which must be adopted by 1992 if the target is to be achieved.

The Commission has issued a first report on the progress made in the first nine months; that is, from June 1985 to May 1986. This is the first of the annual progress reports that it intends to issue. In December 1985, the heads of states and governments at their meeting in Luxembourg repeated their endorsement of the White Paper, but also agreed on the extension of majority voting on issues concerning the internal market. This will not only speed up the decision-making of the Council of Ministers, but overcome some of the obstacles that I shall mention later. It was also agreed that a rolling programme should be adopted to be agreed by the sitting parliamentary presidency and the two following presidencies. The three presidencies concerned at that meeting were Luxembourg, the Netherlands and the United Kingdom. These three agreed a programme which envisaged the adoption of 100 of the measures during 1986.

While it would be unreasonable to expect dramatic progress in the early stages, it is undeniable that the programme has fallen behind schedule, and the Commission's report states that an immediate and major effort is needed to regain lost ground. To date, 27 of the White Paper's proposals have been adopted, which is a long way short of the 61 proposals that it was hoped would be passed by the end of 1985. The biggest delays have been, not surprisingly, in the agricultural sector, which I have no doubt will be dealt with by a subsequent speaker. In the future, the report urges the Council to improve its procedure following ratification of the Single Act and to move purposefully to more majority voting, and that greater priority should be given to those measures which form part of the programme vital to the Community's future for completing the internal market.

It is one group of these measures in Part 3 of the White Paper that I shall now discuss, which is vital to the creation of the internal market and the removal of frontier barriers. I refer to the question of harmonising or approximating indirect taxation, which is principally VAT and Excise duties. This is dealt with in the 11th Report of this Session published on 5th April.

We all know what VAT is, but its application varies widely throughout the Community. Standard rates vary from 12 per cent. in Luxembourg and Spain to 23 per cent. in Ireland, but nearly all have a wide variation in rates above and below the mean. For instance, France has a low rate of 5.5 per cent. on some goods and services and a top rate of 33⅓ per cent. Italy has a variation from 2 per cent. at the bottom of the scale to no less than 38 per cent. at the top end. These variations show the enormous task that lies ahead if sufficient harmonisation is to be achieved.

In fact, the attempt at complete harmonisation has been dropped and approximation with a possible 5 per cent. differential is considered adequate for most commodities if extensive fraud is to be avoided. A certain amount of fraud has always existed and a certain degree must be considered acceptable. At present, the differing rates of VAT are the main causes of delay and confusion at frontier posts. These delays are estimated to put 5 per cent. on to the cost of goods traded across frontiers.

The problem of Excise duties is even worse. Wine, for instance, is zero-rated in Italy, Greece and Germany, but is taxed at 93p per litre bottle in the United Kingdom and considerably more in Ireland. Very little progress in harmonisation has yet been made. So far as alcoholic drinks are concerned, none of the Commission's draft directives has yet been approved. In the late 1970s, the Commission initiated legal proceedings against five member states under Article 95 of the Treaty of Rome which prohibits, internal taxation of such a nature as to afford indirect protection". It was successful in all five cases and caused the United Kingdom to lower the tax levied on wine in relation to that on beer. Some progress has been made with regard to cigarettes, but very little else, and progress seems to have become bogged down.

The Committee received evidence from 26 individuals and institutions and was fortunate in having the noble Lord, Lord Cockfield, himself, Commissioner for the Internal Market, giving oral evidence in person. He pointed out the advantageous position of the United States with its population of 225 million, all with a common language, common laws, common currency, complete mobility of persons and services working in a single market; and also Japan with its population of 115 million enjoying similar advantages.

The potential of the Community with a population of 350 million must be enormous if the internal market could be completed. The noble Lord, Lord Cockfield, put the costs of maintaining frontiers at roughly equivalent to 4 per cent. of the total value of intra-Community trade or about £7 billion. HM Customs and Excise reckon that one-seventh of those costs must fall on the United Kingdom. On the other hand, estimates from other sources vary greatly and the Tobacco Advisory Council and the Calpurnia Club, an international grouping from the alcohol industry, say that for their industries the costs of frontier formalities are very small.

Most witnesses agreed that the moral and psychological effect of the removal of these barriers would be very great indeed. Witnesses also spoke in favour of many other forms of frontier simplification, such as direct payment by credit cards, more flexible deferred payment, encouragement of inland clearance, and the postponed accounting system, already operating in some countries and abandoned by the United Kingdom only recently. Perhaps I should explain that the postponed accounting system means that importers simply leave their VAT registration number and the sum involved at the port and go straight on, including their payment in their normal VAT return which can be anything between one and two months later. In point of fact this gave the importers considerable advantage over the internal manufacturer and was abandoned by the Government in November 1984 because it gave them a £1.2 billion once-and-for-all advantage in their tax take.

Various ideas for a clearing house system for VAT were put to the Committee but there was no general agreement on whether this would result in much saving or would work without a complicated computerised network which does not exist at the moment.

The general conclusion was that approximation of rates was the only realistic solution, although one witness thught it would be possible to open frontiers without approximating the rates and, as it were, let it rip! The noble Lord, Lord Cockfield said: If you abolish the physical frontiers altogether and do not approximate the rates, my own guess is that it would take ten days or a fortnight before the forces of the market compelled you to approximate them, that the degree of cross border shopping would be such and the degree of the diversion of trade so great that the Member States would themselves be compelled to take action".

The Committee wholeheartedly endorses the commitments of the European Council to complete the internal market and welcomes the Commission's White Paper. Nevertheless, it believes that measures which fall short of total abolition of frontiers, such as the postponed accounting system for VAT and other more modest measures, are of considerable value. The Committee believes that approximation of indirect taxes is a valuable end in itself in the interests of fair competition. It believes that an approximation range of 5 per cent. as suggested by the Commission may be unnecessarily narrow for VAT in many cases and too broad for excise duties. It recognises that approximation will diminish the fiscal sovereignty of member states, but this has already been surrendered under the Treaty of Rome.

In the case of the United Kingdom the effects of approximation would be overall less serious than for other member states. Some would undoubtedly lose revenue and might need special compensating arrangements. The Committee believes that the Commission's proposals in the area of indirect taxation will be resisted at every stage by member states concerned for their fiscal sovereignty, their taxation policies, their tax revenue and the undeniable difficulty of finding solutions to the many problems explored by this report. The Committee considers therefore that member states, acting through the Council, will require the highest political resolution and skill if national interests and administrative caution are to be overcome and a complete internal market is ever to be achieved.

I believe that noble Lords will have to make up their minds about three essential questions. First, do your Lordships agree that the completion of the internal market is necessary if Europe is to compete successfully with the United States of America and Japan? The Select Committee says, yes. It is also necessary to refer to the people who actually create wealth in this country, the commercial and industrial interests. I refer to the CBI Report on this matter which says: The CBI supports the Single European Act because it will promote the completion of the internal market which is essential if European companies are to compete on an equal footing with their American and Japanese counterparts … The move is important to smaller firms as well as to the industrial giants. Access to a market of Continental proportions will greatly enhance the viability of many small and medium-sized businesses, especially as many of them lack the resources to deal with different regulations in each member state. The proposed changes are necessary to realise the Community's original objectives".

Secondly, do your Lordships agree that frontier barriers must be removed in order that there should be the free movement of people, services, goods and capital in accordance with the Treaty of Rome? The Select Committee says, yes.

Thirdly, do your Lordships agree that the surrender of an element of fiscal sovereignty in connection with indirect taxation is acceptable in order to achieve the objective of completing the internal market? The Select Committee says, yes.

11.34 a.m.

Baroness Serota

My Lords, in introducing this debate the noble Lord, Lord Seebohm, has drawn the attention of the House to the longstanding aim of the EC, endorsed by the heads of state and government of Fontainbleau in June 1984, to make a reality of "a Europe without frontiers"; and with his usual clarity and competence he has explained some of the fiscal problems involved in completing the internal market by 1992, in accordance with the White Paper of the noble Lord, Lord Cockfield.

The Select Committee's reports on consumer protection policy and the recognition of higher education diplomas deal with two important aspects of this process which will have a direct bearing on the daily lives of the people of Europe. It is clearly not possible in a debate of this kind for me to describe both reports in detail and at length, but I should like to take this opportunity to outline briefly their main recommendations, in the knowledge that other members of the Committee will be speaking today in greater detail about particular aspects of the two inquiries; and their speeches will draw both on the reports and on their special knowledge and experience of the issues involved.

The consumer protection inquiry took as its starting point a Commission document entitled A New Impetus for Consumer Protection Policy. This was issued in August 1985 to mark 10 years of Community consumer policy. At about the same time the Commission produced a draft resolution on consumer education in schools. This had been anticipated in the "new impetus" document and forms an essential part of the Commission's thinking on consumer policy. These two documents were published at about the same time as the White Paper of the noble Lord, Lord Cockfield, but separate from it. They are the subject of our report to the House today on consumer protection policy.

The Select Committee's report is, I believe, the first time that any one outside the Commission in Brussels has taken a long and hard look at European consumer policy as a whole. In that sense the report is unique. How then does it fit in with the debate on the internal market? In the opinion of the Committee the internal market cannot be a success unless there are sound modern safety standards for consumer goods. Completing the internal market should not mean the free circulation of unsafe goods. The Committee believes that the aims of consumer safety and of free circulation of goods and services throughout the market can be reconciled by imposing on manufacturers a general duty to produce and trade safely in the EC, and that the Commission should then bring forward a draft directive to provide for such a duty. I hope that Her Majesty's Government will support such a draft directive of this kind and that the Minister who is to reply at the end of the debate will be able to announce their support.

The Committee also found that there are good reasons for a consumer policy at EC level as well as at national level; that progress has been slow—some consumer protection measures have been on the agenda for almost 10 years; that the Commission has been somewhat eccentric in its choice of priorities for consumer protection measures; and that the welcome and visible progress of the past 18 months is due to a much greater political commitment in the Council of Ministers which has started to hold regular meetings of European consumer affairs Ministers. Can the Minister tell the House when he comes to reply whether the Government support the idea of such regular meetings of consumer affairs Ministers, and whether there are any plans to hold such meetings in future, in addition to the one already arranged for 29th October?

The Committee was greatly concerned about consumer safety. I know that the noble Lord, Lord Allen of Abbeydale, who has always been concerned with that matter, will be speaking further on it later in the debate today. We heard evidence from a number of sources that procedures for harmonising European safety standards are far from satisfactory and do not guarantee a strong consumer input into the writing of European safety standards. Moreover, the basic safety levels which would be laid down under a general directive to manufacture safe goods might not be high enough for certain goods and services. So specially agreed European standards will be needed for particular products. The Committee believes that, given the Commission's small and somewhat meagrely resourced consumer protection service, the Commission should concentrate far more on consumer health and safety.

We unanimously agreed that priority should be given to the regulation of toys and children's equipment. I hope that the Minister will be able to tell us whether the Government expect to reach agreement on the toy safety directive when the Council of Ministers meets on 29th October, and, more generally, whether the Government will press the Commission to provide more adequate resources for consumer protection so that the directorate in Brussels responsible for consumer affairs (DGXI) can protect consumer interests across a wider range of EC policies.

Both consumer and business organisations, in giving evidence to the committee, emphasised the importance of taking consumer interests into account across the whole range of EC policies. The committee suggests in its report that a more consumer-oriented common agricultural policy or greater competition, for example, to reduce air fares in Europe will bring consumers far more benefits than the sort of detailed and relatively minor protection measures with which the Commission has so far concerned itself.

I am afraid the report is severely critical of the present arrangements for consumer consultation in the European Community. The officially recognised body—the Consumers' Consultative Committee—was described to us as "something of a disaster". The committee recommends that it should be reformed and strengthened. We also recommend that the Commission should introduce into draft legislation consumer impact audits similar to those that have been introduced in relation to the environment which would set out for consumers the implications of any proposed legislation. These are relatively simple and, I believe, inexpensive reforms and the whole Committee hopes that they will be supported by Her Majesty's Government.

The report also deals, as I said at the outset, with consumer education. We reject the idea that consumer education should be a separate curriculum subject and would prefer to see a multi-disciplinary approach across the broad spectrum of the curriculum. Some witnesses said in evidence to us that they detected an anti-business bias in the teaching of consumer education in schools. We state firmly in the report that teaching materials for consumer education must be truthful, balanced and fair and that consumer education must not be a vehicle for political propaganda. The classroom should not become a battleground for conflicting political ideologies. I am sure that all members of your Lordships' House will agree with that recommendation. At present, most consumer teaching materials are supplied by organisations who have a vested interest. We therefore recommend that the Director General of Fair Trading in the United Kingdom, who is impartial, should be empowered to contribute to the supply of consumer education materials.

I now turn briefly to the report dealing with the draft directive on the mutual recognition of higher education diplomas. I must first apologise to the House for its size and for its weight. We decided to print most of the written evidence received from some 150 bodies as well as the oral evidence, as the full report is, to our knowledge, the only comprehensive survey of the British professional scene in the 1980s and the evidence is therefore well worth preserving as a reference source for the light that it throws on the state of the professions today. Also, of course, the bulk of the evidence and the great variety of views contained in it are a vivid indication of how long it would take to deal individually with all the professions which need to be harmonised if a true common market in professional services is to be achieved.

The report accepts the importance for the Community and for the United Kingdom of completing the internal market in professional services. Up to now, this has depended on a long-drawn-out process of negotiating directives dealing with the professions one by one. The Commission now proposes a horizontal approach which would require member states to recognise qualifications granted by other member states.

The committee quickly concluded that a true internal market in professional services could not be achieved by 1992 on the basis of the existing sectoral directive approach; that is, on the basis of separate directives applying to individual professions. So while we accepted that the underlying aim of the draft directive that to proceed on a horizontal basis across the board is sound, we rejected the way in which the Commission's proposal is formulated. The Commission's proposal is limited to qualifications which need at least three years' study, and the only people who can take advantage of the proposal, and therefore of the common market in professional services, are those who have earned their qualifications in this way. But in the view of the Committee that method would exclude many people, particularly in the UK, who have earned qualifications through membership of chartered bodies or gained professional qualifications through part-time study or distance learning.

Such ways to earn qualifications are important, especially for people who have not had an early opportunity of higher education if they are to be able to acquire qualifications later on in life and thus overcome the problems of employment. Therefore, in the committee's opinion it is essential to ensure that the benefit of any directive in this field applies also to those whose qualifications have been conferred by one of the chartered or similar professional bodies in the UK.

In suggesting an alternative approach to that of the Commisssion in its draft directive, the committee recommended that the Commission should concentrate on what people do and whether they are qualified to do it, rather on how they got their qualifications or how the professions are organised. We say that such an approach, based on distinguishing between activities and professions, should be complemented by a Community-wide system of mutual accreditation of professional qualifications. We then set out in detail in the report how this all might be achieved, but I will not take up the time of the House to go into the details now as they can be studied in the report.

The committee's report on the recognition of diplomas was completed in a very short space of time. The reason for this is that the committee understood, when it began the inquiry, that action at Council level on the draft directive might be expected during this year. Can the Minister tell us, when he comes to reply, what stage negotiations on the directive have now reached and when the Council is likely to adopt the draft directive in either its present or amended form? Can the Minister also tell the House whether the Government accept the directive as it stands or whether they endorse the Committee's proposed alternative solution? We took pains to put forward a constructive alternative solution to that of the Commission but one that is based firmly on accepting the principle of a common market in professional services, and one based also on the need to reach speedy agreement.

Before concluding, I must take this opportunity to thank all the members of Sub-Committee C for the continuous encouragement and support given to me during these two difficult inquiries and, indeed, throughout the past two years during which I have been chairman of the sub-committee. The burden of the work has been heavy, particularly for the second inquiry when we had to meet weekly, and sometimes for the whole day, in order to meet the timetable. I know that the members would also wish me to thank our two excellent specialist advisers—Mr. Maurice Healy of the National Consumer Council, who helped on the consumer protection policy report, and Professor David Edward of the University of Edinburgh, who played such a key part in our deliberations on the complex and difficult matters involved in the inquiry into the recognition of higher education diplomas. His expertise and knowledge of the issues was absolutely invaluable. I know that they would also wish me to express our warmest thanks to our clerk, Mr. Keith, who worked so tirelessly throughout both inquiries and whose constant help and support was greatly appreciated by us all.

Finally, I commend both reports to the House in the hope that they will assist in the consideration of the issues involved in the completion of the internal market.

11.50 a.m.

Viscount Rochdale

My Lords, I should like to start by adding my thanks to the noble Lord, Lord Seebohm, for introducing this very important debate on the completion of the internal market. Perhaps I may then go on to make a personal apology to your Lordships. Several months ago, long before we decided to have this debate, I committed myself to speak this evening at a meeting in the North of England on Industrial Year. I came to the conclusion that I could not possibly go back on that commitment, but nor did I wish to forgo addressing your Lordships on the particular report produced by Sub-Committee B of which I was chairman. After taking advice I decided that I ought to try to carry out both commitments.

I should like to make one point on this subject, with which I think my noble friend who will reply for the Government will agree; namely, that unless we in the United Kingdom make a success of our Industrial Year, we shall be ill able to take advantage of the completed internal market in 1992 when we hope that it will be in existence. I make my apologies to your Lordships and hope that I shall not be accused of discourtesy.

As the House has already been told, in today's Motion as set out on the Order Paper there are six reports to be discussed. All of them are important but they represent only a very small proportion of the great issues that have to be resolved if we are to arrive at a completion of the internal market, and especially if we are to reach it by 1992.

Turning to the Commission's White Paper, Part II of that paper refers to the harmonisation of technical standards throughout the Community. It is that topic which I particularly want to talk about because it relates to the report on simple pressure vessels, to which I shall come in a moment. The importance of harmonising technical standards lies in the fact that goods produced in one member state in accordance with its own approved legal standards can then freely pass into and be sold in any other member state without, as often happens at present, having to undergo repeated further inspection, further tests and further certification in order to comply with other national requirements. All that causes considerable delay in the production and sale of goods and adds considerably to the costs. It is a real deterrent to trade within the Community and sometimes to trade externally with the outside world. Witnesses who gave evidence to the sub-committee told us that in some cases these delays could increase the cost of the vessels that I intend to talk about by as much as 50 per cent. We refer to this in some detail in the report in paragraphs 26 and 27, for those who are interested.

In attempting to establish harmonised technical standards the Commission all too often seems to have encountered considerable pressure from other member states to include in the relevant directives that were in preparation far too much detail, so that arguments took place about what should or should not be added. When the draft directive came before the council and came up against the unanimity arrangements, the delays were often impossibly long and the result was that on this directive, which was introduced as long ago as 1978 (that is, eight years ago), there was stalemate and the directive had to be withdrawn and the process started all over again. That is referred to in paragraph 40.

In order to overcome the insistence of member states that the Commission should include all the detail that the individual state thought it wanted, the White Paper proposes (on page 19) what is known as the "new approach" to dealing with technical standards and their harmonisation. Briefly, this provides that in any directive dealing with the harmonisation of technical standards only essential safety requirements should be included and no more. Detailed Community technical standards would be prepared by expert standard organisations, such as, in this country, the British Standards Institution. Of course those Community standards would take time to prepare. They would constitute important guides but what is even more important they would not be mandatory.

The Commission then went on to consider what should be done in the meantime because, as I mentioned a moment ago, the Community standards will take time to produce. As an interim or transitional arrangement and to avoid further frustration, there should be mutual acceptance now of the present position; namely, of different member states' existing standards or practices. This general procedure should not only make an important contribution towards speeding up the completion of the internal market, but in my view, and I think in the view of all the members of my sub-committee—and perhaps this is equally important in this age of rapidly changing technology—it should provide the flexibility to make innovation in design and performance much easier.

Turning to the work of Sub-Committee B, of which I had the honour to be chairman, the committee was confronted by a draft directive with the rather forbidding title of "Harmonisation of the Laws of Member States relating to Simple Pressure Vessels". In that field the Commission was attempting to achieve harmonised technical specifications. When it first saw this draft directive, the sub-committee did not take very kindly to the idea at all. It was conscious of the fact that its previous inquiries had been on some major issues, such as merchant shipping policy, airline policy and such great issues. When members of the committee came to think about simple pressure vessels, I must say frankly that they were not enthusiastic about the title, but when it was recognised that this was to be the very first directive for which the "new approach" was to be tried—in other words, that this directive was in effect the guinea-pig for the new approach—the sub-committee realised that it constituted a very much bigger issue altogether and so set about its work enthusiastically.

Since this directive was produced others have been prepared and are in the pipeline. One was referred to in The Times yesterday. It concerned technical standards for toys and teddybears, and was the first directive on goods for consumer use as opposed to the pressure vessels which are for industrial use.

Perhaps I may now define what is meant by "simple pressure vessels". I shall try to do my best to avoid all technical details. A good deal of technical detail is included in the report of the sub-committee and I shall try to avoid that. In the directive there are three categories. The first category includes compressed air metal reservoir cylinders of varying sizes, some small and some large, made mostly of aluminium or steel. They are to be found in a very great number of different uses where there are compressed air installations, whether in industry, in the home or on the roads, with the noisy earsplitting drills that we all know so well and which have a great many uses. That part of the directive constitutes far and away the largest trade. I shall refer to it again as the commercial vessels sector.

The second category, a substantially smaller trade, relates to compressed air cylinders used in the braking mechanism of heavy road vehicles. They are automotive vessels.

In the report we give some comparative figures of the difference in size of those two trades—commercial and automotive—in paragraphs 21 and 34. They are enormous. The size of the commercial category is of the order of £12.5 million, but it affects trade in which those vessels could be incorporated of about £250 million, whereas the automotive trade is much smaller and is only of about £2.5 million to £6 million.

The third category of the directive concerns containers for certain gases. We found that there had been no discussion on that in Brussels that we could see. We therefore had little discussion on it ourselves.

The witnesses' views that we received are given in the report. We discuss witnesses' views under two headings. We discuss them under the technical heading and under the procedural or new approach heading. We give our conclusions.

Lest there be any misunderstanding, we generally welcome the whole concept of the new approach. It would be fair to say, however, that we recognise that its application would often have to be tailored to suit the different trades to which it applies. In the case of simple pressure vessels, we do not entirely endorse the proposals set out in the draft directive.

We heard surprise from witnesses that cylinders for the automotive brake systems should have been included in the directive at all. There are already other existing directives in this field. We came to the conclusion that the Commission should withdraw that part of the directive altogether and put it forward in an entirely separate and simpler directive.

I must say a few words about commercial vessels. This is an important trade, as I have already said, not just in the vessels themselves but in the number and variety of installations in which they form an essential part. Where trade is completed, installations can be interfered with through uncertainty and delays as to the design and fitting of the vessels in them, which other member states are prepared to accept. That point of view was put to us strongly by the firm of Compair Broomwade, which is the biggest in that industry. Its evidence will be found in full in the report.

Witnesses also made the point to us that the proposed target date for implementing this draft directive which was June 1988, and is in Article 19 of the directive, was impractical. The question that arose then was how much time could be saved. That was very much in our minds.

The next point that was strongly in our minds was that of safety. That was important to us. We were greatly impressed by the safety record of those vessels over the years wherever they had been made within the Community. That influenced our conclusions. Obviously, the safety record must be maintained, but it led us to the view that existing national standards and practices, having proved to be generally safe and, apart from the delays to which I have already referred, satisfactory, could, with goodwill on all sides, be mutually accepted by member states and the trade barriers which exist could be lifted immediately. That could speed up things.

We then went further and looked to the longer term. We felt that the outcome of the experience gained was that the need and incentive to develop harmonised standards in this field, with its possible damaging inflexibility and effect on innovation, would be found no longer to exist; in other words, the mutual acceptance of existing standards, provided safety records were maintained, was all that was necessary.

That led us to our main recommendations. We see that a much simpler directive is needed. I would again emphasise that we could not have come to that conclusion without the industry's safety record, which we applauded and which was obvious.

I commend the report to your Lordships. I hope that your Lordships will agree with it. This is only a short report, but we had to complete it at fairly high speed so that it could be finished before your Lordships rose for the Summer Recess. It meant a great deal of hard, extra work. I know that all the Members of the subcommittee would wish me to express our thanks to the Clerk and the specialist advisers and their staffs for the hard and determined work that they put in.

12.7 p.m.

Lord Gallacher

My Lords, perhaps I, too, may thank the noble Lord, Lord Seebohm, for the manner in which he introduced his report and spoke about the other reports which are to follow the one on taxation. I have to deal with the internal market for foodstuffs and some proposals regarding the internal market for meat.

The purpose of the internal market for foodstuffs is to facilitate intra-Community trade. For the United Kingdom that is one of the most delicate areas of the proposals put forward by the noble Lord, Lord Cockfield.

Food is a matter on which all member states have their own laws and customs. Moreover, despite the major increase in the United Kingdom's degree of self-sufficiency in certain primary agricultural products over the past 15 years, we are still a net food importing country. Imports of food, beverages and tobacco have a greater negative effect on our balance of payments than imports of motorcars.

Your Lordships' committee felt that the completion of the internal market in that area could be a double-edged sword. If the United Kingdom is successful in further increasing its food exports, that will have a positive effect on the balance of payments. On the other hand, if food imports are increased, our adverse trade balance will deteriorate. The strength of food retailing in Britain, for example, now lies in our "own brands". That has been a good development for the consumer. The difficulty is that own brands are almost entirely sold in "own" shops. So far, British retailers, in so far as they have been expansion-minded at all, have tended to look westwards rather than to Europe, as a consequence of which a useful opportunity for penetrating the Community market is not available to us.

Contrast that, my Lords, with the way in which Continental brewers have quickly captured the British market for lager in collaboration of course with British brewers in the process, doing no good at all to the United Kingdom hop-growing industry.

It was with those considerations in mind that the Select Committee undertook its wide-ranging inquiry into food, drawing attention to some of the possible pitfalls in the White Paper of the noble Lord, Lord Cockfield, while welcoming its overall approach to harmonisation in this area. The Commission's scheme falls into two parts, drawing a clear dividing line between matters that still require Community legislative action and those which do not require further legislation, and making a new distinction between subjects that require Council legislative powers and those which can be delegated to the Commission.

The Commission considers that since the treaty provisions, as interpreted by the European Court, require foodstuffs lawfully marketed in a member state to be sold in all others, subject only to exceptions where essential public interests need to be protected, no further compositional rules for individual foodstuffs are necessary. Future Community legislation will therefore be restricted to regulating the exemptions, especially the protection of public health, the provision of adequate information for consumers, the safeguarding of fair trading and the operation of necessary public controls.

The Community's decision-taking process is at present too slow. It took the Community 10 years to agree the mineral waters directive, 14 years in the case of the jams directive and 12 years in the case of the food labelling directive. Nothing could be slower than it is at the moment. The Select Committee feels, however, that the Commission may be over-optimistic in its timetable to complete the internal market for foodstuffs by 1992. It takes at least three years, for example, to test for the safety of one food additive. The committee therefore recommends that the remit, structure and resources of the Scientific Committee on Food should be changed.

The Commission is proposing a voluntary Community approach to nutrition labelling. The United Kingdom has a particular interest in this field as it is regrettably a world leader in the number of its inhabitants who die from cardiovascular disease. The Government have accepted the COMA report, which recommended mandatory fat labelling of foods, having also accepted the evidence for some link between saturated fat levels and cardiovascular disease.

We deliberated extensively on this subject partly because it was the first opportunity for a House of Lords Select Committee to consider the important COMA report. We decided to welcome the Government's recommendation for voluntary nutrition labelling to supplement the COMA recommendations for mandatory fat labelling. Mandatory nutrition labelling may in due course be found necessary and the Select Committee recommends that Her Majesty's Government should discuss the possibility of full nutritional labelling on a mandatory basis. We do not consider that the United Kingdom should wait for an agreed Community system of nutrition labelling but should pursue its intention of introducing its own plans as soon as possible. These are already well advanced.

The Commission has announced its intention of introducing legislative proposals permitting the process of food irradiation in the Community. The irradiation process can be used to preserve or maintain the quality of foods but is currently illegal in the United Kingdom other than for patients needing sterile diets as part of their treatment. During the course of the inquiry a Government sponsored report was published which concluded that controlled food irradiation would be acceptable on public health grounds. The Select Committee felt that before this process was legalised in the United Kingdom consumers should be helped to understand the basic principle. Food which has been irradiated is not changed in appearance. We recommend therefore that in order to allow consumers the freedom to choose whether to buy irradiated food, wherever practicable each irradiated food item should be positively labelled. We also recommend that the United Kingdom should wait for the Community to agree a common approach before permitting the irradiation process and that the process must be carefully controlled and monitored.

Food additives are a major area of barriers to trade and much evidence expressed concern about this subject. The Select Committee recommends that the Commission should immediately set in hand research to establish the need for additives. We also recommend that the Commission should expand the Scientific Committee on Food or consider setting up a new committee of independent experts.

Our report makes a number of other recommendations on important subjects—on metrication, where we recommend that the Government should start a review now in order not to hinder the completion of the internal market for foodstuffs by 1992, and on food inspection where we recommend in-factory inspection and the establishment of a small Community food inspectorate appointed by and reporting to the Commission. In this connection experience gained in running a Community system of inspection under the common fisheries policy is worthy of study.

Turning to the related subject of intra-Community trade in meat products, our report welcomes the Commission's proposals on the grounds that public health should be protected and that, wherever possible, barriers to trade should be removed. The report supports the principal aims of the revised draft on meat products; namely, the introduction of new procedures for inspecting, approving and withdrawing approval from establishments, a new procedure to be followed in the event of disputes between member states, new rules on health checks, the taking into account of the requirements of the internal market, the introduction of health rules for certain meat products not covered by the existing directive and the provision of new requirements for the packaging, health marking and storage of certain products.

The ideas behind the Commission's thinking are sound. But the Select Committee felt that the draft directive had been drafted without adequate consultation with interested parties. For example, the Commission proposes the issue of a health certificate intended to guarantee that meat products comply with the directive so as to minimise the need for physical checks. But the example included in Annex B to the draft directive allows the consignor to make so many deletions that the certificate would be valid but virtually devoid of meaning.

Another difficulty is the requirement to separate production activities in different rooms. Manufacturers of meat products would be required to have up to 18 separate rooms for different purposes. We are concerned at the cost and practicality of this proposal and believe that the requirements for separate rooms should be relaxed wherever this is possible without jeopardising health standards. As in the report on the internal market for food, the Select Committee considers inspection to be a matter of great importance. The United Kingdom and Ireland, for geographical reasons, are in vulnerable positions, as all imported meat and meat products enter by an airport or a sea port, which gives rise to the possibility of interference, substitution or fraud. If inspection only took place inland, the animal health risk would increase. We recommend therefore that Ireland and the United Kingdom should maintain the right to carry out inspections of consignments at the frontier when a health risk is suspected. I have deliberately given only the gist of both reports. We did not set out to produce conclusions that would please those who gave evidence to us. It is no less gratifying when your Lordships' Select Committee's views on a subject as important as the internal market for foodstuffs appear acceptable to British manufacturers, retailers and consumers. They do not support every opinion reached but, in general, they are supportive, as recent comments show. Equally, all three groups are concerned lest speeding up decision-taking results in less consultation or even risk-taking in an area as fundamental as food processing, distribution and consumption. There is a challenge here for the Community. If unanimity is to be achieved in the 12 member states about every detail concerning a whole range of different foodstuffs before trade in such commodities can proceed freely throughout the Community, we shall all need to live to a ripe old age if we are to see a real common market.

A major advantage of the EC, as the noble Lord, Lord Seebohm, pointed out, is the size of its internal market. Proposals to achieve a free internal market by 1992 are thus not merely ambitious but, if accomplished, will give a much needed boost to the concept of a European community as such. It is in that spirit that we received and examined these proposals. We now commend them to your Lordships' House.

12.20 p.m.

Lord Allen of Abbeydale

My Lords, the noble Lord, Lord Seebohm, to whom we are greatly indebted for initiating this important debate, has very clearly explained the background. I propose to plunge straight in with my brief remarks about the two topics in which I had some involvement: consumer protection and the recognition of higher education diplomas.

I should like to begin by paying a warm tribute to the noble Baroness, Lady Serota, for the skill with which she guided us in our deliberations in these far from simple subjects. Consumer protection is not a topic where there is any great wealth of specific provision in the Treaty of Rome. But it would hardly be thinkable to talk about completing the internal market unless goods made in one member state can move freely and go on sale anywhere in the Community. Equally clear, this must carry with it the right of Community citizens to count on those goods being safe. This is the main point I wanted to make on our report. Although the noble Baroness, Lady Serota, foreshadowed that I would be dealing with this point in greater detail, she has, as one would expect, already outlined perfectly clearly the essential points in this context.

I certainly go along with the conclusion in the committee's report that there is a powerful case for a Community directive, legally enforceable, which would impose a duty on manufacturers to produce and trade safely, and, notwithstanding the difficulties of enforcement, I should like to see as part of this obligation a requirement to provide clear and intelligible instructions to the consumer. The National Consumer Council has reminded us that each year within the Community there are about 46,000 deaths and 40 million injuries involving consumer products. From personal experience I think that a modest contribution to those injuries is made by the obscurity of some of the accompanying instructions.

For certain products with very special risks such a general directive would not be enough and would have to be supplemented, as we suggest, by specific European standards, starting, one would hope, with children's toys. There is no question but that there are still too many dangerous products around, and any progress in this area has so far been frustratingly ineffective.

This raises quite an important question of priorities. I should like to draw attention to what we say in paragraph 32 of our report when we state: Given the Commission's small consumer protection department it might be wiser for it to plan initially for a consistent and coherent rather than a comprehensive safety policy". We take the point that information will be becoming available in due course from the surveillance team which has been mounted to find out more about home accidents within the Community. This question of priorities is very important over the whole of this area. It is all very well to press for a new impetus, but the Commission's own list of candidates for possible legislation is not nearly discriminating and selective enough. They seem to have put together all the issues where they think there might be some consumer interest, including some very old friends such as consumer credit. That has been knocking around for longer than one would care to think. Even if the present resources of the Commission could be increased—and there is clearly quite a strong case for that—it would still be essential to arrange the future programme in some order of precedence, and the machinery of consultation over drawing up that list stands in need of considerable improvement.

However, I should like to emphasise that whatever is decided about priorities, consumer safety ought to come at the top. In the end progress will depend on the degree of political will. One has only to think of the years spent on a product liability convention until at last Ministers suddenly decided to take this issue seriously. Then quite quickly they produced a conclusion which, although not free from flaws—which I expect we may be discussing in some detail in the forthcoming Session—nevertheless was a major step forward. I trust that today, echoing what the noble Baroness, Lady Serota, said, as a preliminary to the forthcoming meeting of the Consumer Affairs Council we may get some indication of the extent of Ministerial commitment in this context.

I should like to spend a few minutes on the report about the recognition of higher education diplomas. I confess that I found it to be an unexpectedly fascinating topic. Here again the main issues have been very clearly explained by the noble Baroness, Lady Serota, but the subject matter is I think to many of us so novel but at the same time so important that I may perhaps be forgiven for treading gently over some of the same ground again. The report is concerned with legal restrictions in any of the member states which make it impossible for persons from other member states to provide professional services there and which are therefore a further serious obstacle to completing the internal market. It is an area where we have a considerable interest not only as an importer but also as an exporter. Over the years directives have been negotiated for professions which can be pretty clearly defined—sectoral directives, in the jargon. There are not very many of them, but, as I have implied, to complete them has been a pretty lengthy process. For architects, for example, it took 17 years. There are many other professions—nobody knows how many—which quite plainly could not be covered by sectoral directives for many years to come, if ever. It is therefore not surprising that the Commission, as part of the task of completing the internal market, should have made this attempt to draft a general provision which would sweep up all professional activities where there is some legal restriction in any member state which prevents a member of a particular profession from elsewhere pursuing his professional activities there.

I confess that my first reaction was that it was impossible. I reflected that in Great Britain, to go no further, we have never managed to remove the barriers between the English and the Scottish legal professions. However, having waded through the evidence—and, as has been pointed out, it is pretty voluminous—I am not so sure. But I am bound to comment that a good deal of the evidence seems to have been prepared on some misapprehension of what the draft directive would achieve—a fact which I do not find altogether surprising.

However, if the difficulties are not insuperable, they are indeed formidable. An initial problem is that those who have prepared the draft have assumed that entry to all the professions likely to be covered by the directive is limited to those obtaining higher education diplomas after completing a vocational course of at least three years. The draft would not cover those who qualify for a professional standing in this country without having gone through some higher education course first, even if, as may be, the professional training through which they have gone is much longer than three years.

There is a gap here which I do not think is acceptable. It could mean that people whose profession in other countries requires a three-year higher education diploma could come and practise here, whereas access there by some of our professionals could be barred. As has been pointed out, one of the problems is that apart from Ireland, we are apparently unique in leaving to the chartered bodies the regulation of entry to a number of professions. Another major problem is that although the directive is said to cover activities rather than named professions, unfortunately the draft forgets that this is the intention and continues to refer to professions. It really assumes an equivalent of professions throughout the Community. Alas, this is an assumption which is not warranted.

Although it is true that this approach has worked reasonably well for the sectoral directives, even here there are problems. For example, the surveyors are finding that the architects' directive prevents them from carrying out certain of their normal activities in some of the other countries. These problems are bound to get very much worse under a general directive covering professions which are not nearly so clear-cut as those covered by the sectoral directives. These considerations, and others, lead to the conclusion that the draft in its present form is not acceptable. However, we cannot just close our eyes and hope that the problem will go away.

We found general agreement that the obstacles to freedom of movement for professionals cannot be comprehensively removed without a general directive of some kind. I think there can be no doubt that it could be advantageous to us, as well as to the rest of the Community, for there to be an open market in professional services. Without it, the internal market would certainly not be complete.

So, as my noble friend Lady Scrota has explained, we tried our hand at a solution, which was a little complicated and is set out in some detail in our report. We were not starry-eyed about the prospects of persuading all the other member states that some such approach was to be preferred to the present draft, but we thought it a fair assumption that we should not be entirely alone in stumbling across pretty grave difficulties in the present draft. The evidence we had from United Kingdom officials did not give us all that much of a clue as to the way the Government's mind is working. I have no idea whether our arguments are likely to commend themselves to Her Majesty's Government, never mind the potentates at Brussels. I hope we shall soon find out.

12.33 p.m.

Lord Sainsbury

My Lords, all the reports which we are considering today deal with the internal market, but I should like to confine my remarks to the fifteenth report on consumer protection policy. As has been said already, the Treaty of Rome does not specifically provide for consumer protection although there are passing references to consumer interests in the agricultural policy. Nevertheless, we must not lose sight of the fact that an essential objective of the Community is the constant improvement of living and working conditions. That there is still much to do in the specific matter of consumer protection must not allow us to overlook what has been achieved.

As the committee report states, the Commission recognised that consumer interests needed to be taken more into account in Community policy-making as early as 1961. It is unfortunate that in spite of the adoption of the first and second consumer programmes, progress on specific measures has taken so long. Draft directives have been in the pipeline for 10 years or more—a truly elephantine period of gestation. Progress has improved with the recent adoption of five directives on product liability, doorstep selling, price indication, consumer credit and misleading advertising. I understand that these are being progressively implemented in the United Kingdom.

There is widespread support for the objectives behind the Commission's proposals for a new impetus on consumer protection policy. But the success of the new impetus will largely depend on learning the lessons from the slow progress of the past. In the first place, there must be full and early consultation with all interested parties. The consumer interests rightly seek a greater involvement. However, the promotion of consumer interests is not the sole prerogative of consumer organisations. If for no better reason than their own self-interest, retailers are dedicated promoters of the consumer interest. In striving to meet, indeed anticipate, the demands of their customers for goods they wish to buy, at prices they are prepared to pay, retailers have played a formidable role in the development of the internal market. Retail organisations are also anxious to be consulted fully in the early stages of draft directives. I believe that they have a wealth of practical guidance to offer.

British retailers support the three general principles embodied in the new impetus. They agree that the adoption of general objectives on safety and health standards are important elements in developing free and open competition within the Community. However, there are difficulties in translating the concept of consumer protection into specific workable proposals that can be easily understood and implemented. I believe that there needs to he a more careful regard for what it is reasonable and practical to regulate at Community level; what should be included in a draft directive; what detail should be left to the national legislation. This is especially important where the proposals themselves do not concern trade between member states.

I also believe that greater realism should be shown in the choice of proposed directives. For example, we already now have one dealing with misleading advertising. At one stage there was a proposal for a second directive on advertising dealing with unfair advertising. What fun the legal experts would have in defining what was unfair.

Finally, I should like to touch on the question of consumer education. The development of consumer education within schools would be a positive step and retail organisations can help. However, it is important that necessary information should be available, particularly for buyers of consumer durables, so that they can make the right choice to suit their needs.

Retailers will, I am sure, continue to play their part as they have done in the past. I should also like to recognise the valuable contributions of consumer organisations, especially the Consumers' Association with their Which? publications and the Citizens' Advice Bureaux.

Perhaps I may conclude by congratulating all the distinguished members of the sub-committee on a most valuable and thorough report.

12.42 p.m.

Baroness Carnegy of Lour

My Lords, the noble Baroness, Lady Serota, has already spoken in general about the report on consumer protection and other noble Lords have commented in more detail on it. I was a Member of the Committee which produced that report, and I too should like to pay tribute to the noble Baroness for the splendid way in which she chairs that Committee and the clarity with which she leads us.

I want to highlight the particular part of the report which the noble Lord, Lord Sainsbury, has just mentioned—the part which deals with consumer education. I pick this out for special attention because, in the context of this debate, it seems to me to be of outstanding importance. After all, what hope is there for the most carefully thought-out and constructed internal market if the ordinary man or woman in Europe does not see how to take advantage of that market for himself or herself or is confused by the changes that it brings?

In the modern market economy consumer education has to be about just that. If your Lordships have been able to glance at the evidence in our report you will have seen that a number of witnesses made the point made by the noble Baroness, Lady Serota, that nowadays there is no place for consumer education used as a tool to convey an anti-employer/anti-industry bias, or for that matter to convey any other partisan bias. Indeed it is no longer enough to regard consumer education simply as an optional extra. Consumer education is now increasingly accepted as an essential element in the education of every citizen of every modern state, and in its evidence to the Committee the CBI was among the most enthusiastic advocates of this fact.

An element of consumer education has to be included to help people to be good, discriminating, alert and aware shoppers, alert and aware housekeepers and alert and aware users of services. It has to help people not to be easily pressured into buying what they do not want. It has to help people to identify quality, safety and value for money in goods and services which are on offer.

It is also accepted that community education—and this is very important—must help people to understand something of how the modern economy operates, and how its operation depends on the critical awareness of shoppers and users of services, and also on the competent response of the sellers of goods and the providers of services, whether those sellers and providers are shop assistants on the floor, salesmen, planners, or clerical workers, whether they are designers and manufacturers or company directors, and whether they are employees, self-employed or employers.

It is because of the importance of consumer education in this wider sense that in 1985 the Commission published the draft resolution on this subject, a resolution calling on member states to back up the development of the internal market by bringing about the gradual systematic introduction of consumer education throughout the period of compulsory education in their countries. At the same time the Commission expressed the view as the noble Baroness, Lady Serota, has said, that consumer education should not be treated as a separate subject in schools but as a dimension of many subjects right across the existing curriculum, and that this should be achieved by each member state in the way best suited to its particular education system.

As your Lordships know, like consumer protection, education is not covered by the Treaty of Rome. The Community cannot legislate for itself on education. Discussion of education matters takes place within an education committee which sits alongside rather than within the Community's structures, and influence is exerted and mutual help made possible through the small-scale promulgation of pilot scheme, seminars, conferences and the like rather than through big Community-wide initiatives. The Commission is proceeding in that way on consumer education. In collaboration with member states, it has funded a network of small projects within schools, and the Committee heard what a success those projects were. In the United Kingdom pilot projects took place in London, Manchester and Alloa in Scotland. The Commission has committed itself to funding some teacher training projects in different countries and to translating and adapting teacher training material for exchange between member states. The Select Committee endorses the need for the Commission's initiatives in schools and these back-up projects so that member states can learn from one another's experiences.

In our report we also take a look at where we are in schools at the present time, particularly in the United Kingdom. Evidence suggests that, though there is some very good consumer education going on in some schools, it is extremely patchy. In some primary schools it is a dimension of much that is done, and the flexibility of primary education does not make that too difficult to achieve. However, in many primary schools it seems that there is as yet no conscious effort to achieve what is required.

In secondary schools at present consumer education takes place mainly within limited subject areas—notably, as one would expect, home economics, and a little in business studies, economics and modern studies. The evidence suggests that what is done consists more of facts to be assimilated than the developing of the very important attitudes and skills which young people need for the future.

Overall, the evidence indicates a lack of awareness among teachers of the possibilities of adding this extra dimension across the curriculum, and a lack of resource material with which to work, and it seems that this situation is not confined to the United Kingdom. To improve matters calls for a concerted national effort, and an effort on a number of fronts. In countries where decision-making on the curriculum is more centralised, as it is, for example, in France or in Scotland, this can to an extent be facilitated from the centre. The committee was, I think, particularly interested in the evidence from the Scottish Consumer Council which has been involved with the Scottish Central Committee on the Curriculum and has produced curriculum guidelines for use in schools. They are published and are now going out to schools all over Scotland.

In less centralised systems like those in England and Wales greater awareness has to be raised among, for example, directors of education, councillors and individual head teachers. The committee took the view that there needed to be a bit more awareness in the Department of Education and Science itself, because we were interested to find that although we had three of the Commission's pilot projects in this country it seemed to know very little about them. Everywhere it is clear that help needs to be given through teacher training, initial training and in-service courses. I add my own view that there needs to be a wider dissemination of this thinking among youth and community workers, perhaps in Open University courses and other adult education programmes.

Teachers in schools need to know of the large quantity of material available through the National Consumer Council and its related bodies in Scotland, Wales and Northern Ireland. A bibliography was published by the National Consumer Council in 1984 of material that can be used and there was a pack prepared in 1985 by the Department of Trade and Industry for schools, named the Fair Deals Pack. The council has also carried out a review of the kind of business-sponsored material mentioned by the noble Lord, Lord Sainsbury. Teachers need to be aware of the National Consumer Council's own unit and its planned regional resource centres. They need to know of the new range of materials produced by Manchester University, assisted by the National Consumer Council. Indeed they need to enlist the help of local industry in producing local materials which young people will find of particular interest.

There is much to be done. Fortunately we do not need some new, great subject in the schools. There will not be a huge demand on teachers' time or on financial resources. But this is a most helpful development of the general trend, which teachers all over Europe are wanting to pursue, of making education closer to the needs of the lives of the young people whom they teach.

I hope that my noble friend on the Front Bench will take note of what is being said in this debate about the importance of consumer education, and will convey to his right honourable friend the fact that his Department of Trade and Industry and the Department of Education and Science need to do everything they can to encourage industry, the local authorities, head teachers and teaching staff themselves to press on with all speed on this most important enterprise.

12.55 p.m.

Baroness Robson of Kiddington

My Lords, I should like to join other noble Lords in thanking the noble Lord, Lord Seebohm, for his introduction of this mass of reports from your Lordships' Select Committee. I should also like to join the noble Baroness, Lady Carnegy, in thanking our chairman, the noble Baroness, Lady Serota, for the wonderful way in which she chaired both the subjects that have been the subject of Sub-Committee C.

I want to concentrate on the report, Recognition of Higher Education Diplomas. Among all the reports that we are considering today, there is something special about it. If we could achieve recognition for it, that would undoubtedly have a personal impact on individuals which would enable them to realise that a Europe without frontiers is worth achieving. It is different in that sense from the other reports we have been discussing.

At the Milan summit in June 1985, which has already been mentioned, the European Council took note of the Commission's White Paper and approved its approach in principle. The draft directive is therefore of great importance, as it attempts to implement decisions taken at the highest level. In undertaking the inquiry into the Commision's draft directive the committee was fully aware of the problems involved in finding an acceptable solution. Despite the shortage of time we were able to spend on this, and the sometimes excessively long hours of our committee sittings, it has nevertheless probably been one of the most important projects we have undertaken and also the most difficult.

The Commision is aware of the large numbers of professions likely to be involved. It seems to us that it was treating the directive in many ways as a basis for consultation. That is why, as the noble Baroness, Lady Serota, said, the committee decided to consider alternative solutions which could be recommended and which might have a better chance of being accepted.

The first problem the committee had to deal with was trying to determine the number and scope of professions which might be affected by the draft directive. Mr. Petite, of Lord Cockfield's Cabinet, admitted in evidence to the committee that the Commission had only an approximate idea of the number of professions concerned and that they might vary from country to country. The Department of Trade and Industry in its evidence to the committee told us that it had sent out a questionnaire to 125 professions. The noble Baroness, Lady Serota, has already pointed out that there are 150 different pieces of evidence included in the report.

Another problem arises when trying to establish which statutory body in each country is responsible for conferring the right to practise a certain profession. It can be either a university or a higher education establishment, a government agency, or, as in many cases in this country, a chartered or similar professional body.

Lastly, a problem arises when trying to compare the scope of the work undertaken by different professions in different countries. An outstanding example mentioned in our report is the problem of, for example, the right and duty of environmental health officers to inspect abattoirs. That is their duty in this country, but in many countries including France this service can only be undertaken by a fully qualified veterinarian. As has already been mentioned, the problem of the quantity surveying profession is equally great in some other countries such as Greece where only an architect is entitled to undertake this duty. It therefore became increasingly clear that because the term "profession" means different things in different countries, the draft directive should address itself to "activities" rather than to "professions". This was clearly stated by the noble Baroness, Lady Serota.

In the light of all these problems, the committee was faced with three alternatives: we could reject the directive; we could accept it with minor amendments; or we could offer alternative solutions. Option 1 of outright rejection, in your committee's view and I believe in the view of every Member of this House, would be inconceivable because of the undoubted advantages to the whole Community of an open market and because without it the term "a Europe without frontiers" would be only empty words.

Option 2 of accepting with minor amendments also appeared impossible to the committee. The number of problems raised in evidence in only one member state has amply illustrated the difficulties involved. Multiply these 11 times and you realise the impossibility of the task. Amendments suggested by the United Kingdom would not necessarily be accepted in other member states, or vice versa. I believe it was while listening to the evidence given by Mr. Porter, secretary of the Royal College of Veterinary Surgeons, that in my view the first possible solution seemed to be appearing. His contention was that the professions should be given a time limit of two years to sort out their own sectoral directives, but if they failed to do so the general directive would apply. This would take care of some of the professions, such as the physiotherapists who are well on the way to getting their own sectoral directive.

At first sight, this seemed a very attractive proposition. However, on closer examination, more and more problems were thrown up. Remembering that it took 16 years to achieve the pharmacists' directive and 17 years for the architects to agree on their directive, the timescale seemed impossible. Added to that, some of the professions have not even begun to establish who their relevant counterparts are in the different countries, so that the hope of achieving anything in a two-year period and then, without any other solutions or amendments, lumping all the other professions into a general directive at the end of two years did not seem to your committee to be possible.

The other problem with a two-year moratorium is that most professions, when interviewed by the committee or when reading their evidence, considered themselves to be a special case. It does not take much imagination to realise that the Commission could not possibly hope to deal with the increased workload that the suggestion of a two-year moratorium would entail and the hope of achieving the desired result by 1992 would fade.

It was at this point that the committee realised that we must concentrate on activities instead of professions. It is much more important in the context of a Europe without frontiers to have the right to earn your living by exercising your particular skill anywhere in the Community than to have the right to use a particular professional title or to belong to a professional body. Additionally, such an approach would prevent the limitation of the directive to activities for which higher education diplomas are required and would be of general application and take in the specialist training that many professional people have in this country. It would not be easy to achieve. It would necessitate the listing of all those activities which are restricted in member states. An individual from any country would then be able to submit his qualifications for an objective assessment.

One very important proviso has to be added to that right; in other words, the right of a country or a professional organisation to tell an applicant that his qualifications are not up to their standards. In order to be able to introduce a system of that kind it is desperately important that the individual applying should have the right of recourse to law in the national courts of the member states who are refusing the right to practise.

We go on in the report to give our opinion about the steps that will be necessary to achieve this desired end. I shall not go into them in greater detail as they are all set down under "Opinion of the Committee". I should like to commend the report to your Lordships' House. I hope that its conclusions will be acceptable not only to the Community but above all to Her Majesty's Government and that through it we can achieve a Europe without frontiers.

1.12 p.m.

Lord Graham of Edmonton

My Lords, as a non-member of any of the committees whose reports we are discussing this morning, perhaps I may say what a pleasure and a privilege it is both to have had the reports drawn to my attention and to have listened to the excellent introductions that we have heard this morning.

I want to pay particular attention to the report on consumer protection policy. For many of us, it is the story of the EC and the Common Market when we see on page 10, under the major sub-heading of Part 3, "Why expectations have been unfulfilled". To provide myself with a text, I should like to read from paragraph 16: the Commission has been much less successful in taking consumers' interests into account across the range of EEC policies. It is here that progress looks meagre compared with the problems to be tackled. The benefits of a directive on doorstep selling or on correspondence courses are trivial compared with the benefits to consumers which would flow from reforming the Common Agricultural Policy or applying the competition rules to air fares".

The first point I want to touch on is the question of applying competition rules to air fares. I know that it is in accord with the philosophy of this Government to liberalise and to deregulate as much of those matters as are the concern of and under the purview of the Government.

I am certainly not knocking the Government. I feel fairly certain that this Government will have been doing all that is possible actually to bring about some change in the structure of air fares in Europe. But what I want to do today is to give the Minister a gentle kick, and say to him that this is an area in which I believe the air travelling consumer public will benefit very greatly from some action. When I study the matter, it is quite clear there is much evidence of many cosy arrangements that are to the benefit of a great number of people and organisations but which, in my view, are detrimental to the interests of the consumer.

What do we find? Scheduled airline services are subject to commercial agreements between airlines and to bilateral agreements between governments. In my view, in far too many cases these arrangements amount to little more than a series of mini-cartels. Let me give the House just two illustrations of how in practice these cosy arrangements work to the detriment of the travelling public. Within France, from Nancy to Nice the cost is 413 dollars; yet from Paris to New York the cost is 270 dollars. Taking mileage as a comparison, from London to Paris the cost is 184 per cent. higher than from London to Athens.

In my view, there is a great danger that this co-operation and collaboration between airlines and between governments breed inertia, higher prices and diminished efficiency. What we have to do is to tackle this as energetically as any other detriment to any other major interest within the European Community. No doubt the Minister will tell me that the matter is not static: consideration is taking place and transport ministers do meet.

What we are looking for is not necessarily a deregulation of the air fare structure on the American style, but certainly we want to look forward to a liberalisation and to see how it can be managed quickly and sensibly. We have to do something about it, and the airlines and the European Community have got to do something about it, because only on 30th April this year we had the ruling from the European Court of Justice. On that day it decided unequivocally that the airline industry is subject to the competition rules of the Treaty of Rome. And what does Article 85 of the Treaty of Rome tell us? It states: The following shall be prohibited as incompatible with the common market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the common market".

A better description of the present system of airline organisation it would be difficult to find. I am delighted to see the Minister in his place, with his ministerial colleague, because earlier this year his ministerial colleague, the noble Lord, Lord Beaverbrook, in answer to a question from me confirmed that following investigations by the Monopolies Commission and consideration by the Government and by the noble Lord's colleague in another place, action is being taken which is within the remit of the Government in order to force large bodies better to consider the view of the consumer. That was in respect of the package holiday trade.

I am all for airlines having their interests well looked after and also tour operators, travel agents and their trade associations; but I try humbly to say that while the consumer may not be sovereign—I do not plead that case—he is entitled to a better deal. We have the rather sad situation which is referred to in the report, and we have the evidence from the consumers in the European Community (UK) Group on pages 80 to 89. This is what our own consumer body says: Competition in the air transport sector is overdue. Progress has been slow and the Commission has not so far used the Treaty to stop anti-competitive bilateral agreements. The Council should adopt the proposals in the Commission's 2nd Memorandum on air transport policy as a first step". I would ask the Minister a direct question: what have the Government in mind to do concerning that particular point?

Then there is the very sad situation of the extent to which consumers are given support and have their views taken into account. It is quite appalling when one reads page 88 of the evidence before us: The Consumers' Consultative Committee (CCC) was set up by the Commission in 1973, to provide some balance to the more powerful lobbies. It is consulted on a wide range of proposals affecting consumers. However, the CCC is often consulted on major proposals from other Directorates-General … only after they have already been agreed within the Commission". This is the damning part of this paragraph: In recent years, at least one CCC meeting a year has been cancelled for lack of funds. CCC Working Group meetings, where detailed specialist responses are drafted, are arranged at short notice and have also been restricted through lack of funds". My Lords, is it not a disgrace and a scandal that the consumers—the ultimate payers for all the policies of the Common Market—through the mechanism that we have created in our best interests, have to suffer in that way? I believe that we need to examine that matter very, very closely.

I should now like to turn quickly to one or two of the other aspects which are before us. I am putting forward the views of consumers and, in that respect, I must draw attention to my long association with the consumer Co-operative movement. It is a voluntary body of 9 million consumers, with an over-the-counter trade of approximately £5 billion. Although we have been in the business of attempting to protect the consumer for about 140 years, of course others have equally been busy in the field. Yet, sadly, we have the situation that we have today.

I believe that the parts of the report which deal with consumer protection have been critical and realistic, but they have also put forward a policy. They certainly stress the very low profile which has been given to the consumer interest. For example, we see in the report that the CAP spends £98 on every Euro-cow and spends less than one penny on consumer interests. Is that a proper proportion of the balance of the interests inside the European Community? If, indeed, the consumer interests are to be elevated to their rightful place, I believe that there must be adequate funding. I believe that the consumer ought to have much more "bite" in these matters.

Finally, I give a very warm welcome to what the report says concerning the health and safety of consumers. There is a clear need for action and, in the absence of the noble Lord, Lord Allen of Abbeydale, I wish to commend the views of the National Consumer Council. It drew my attention to the horrific statistic that within the European Community some 46,000 deaths and 40 million injuries occur every year, involving consumer products. These are man-made and self-inflicted wounds, and we ought to be addressing ourselves seriously to ways in which we can eliminate them. The NCC urges our Government to introduce a general duty on traders to supply safe goods as soon as possible and asks for the extension of such a duty throughout the Community.

In conclusion, I certainly fully support the recommendation on page 23 which says: The Commission should bring forward a draft directive providing such a duty. That refers to a duty to impose on manufacturers a duty to produce and trade safely.

The directive should also oblige manufacturers to supply information on how to use their products safely. I believe that we are all indebted not merely to those serving on the committee but also for the continuing excellence of the reports we have had. They will long be referred to and used effectively by those, such as myself and everyone else here this morning, who want to see the interests of consumers as well as the interests of the Common Market advanced in every way.

1.23 p.m.

Lord Denning

My Lords, I should like to add my tribute to this excellent work done by the chairman and the members of the Select Committees in producing these five magnificent reports, comprehensive as they are, at a most important stage devoted to completing the internal common market. However, I should like to put that in its wider aspect in relation to the Single European Act now being discussed in your Lordships' House. These reports by the Select Committees are the one way in which this House can influence legislation in Europe.

Let me remind your Lordships of the legislative machinery in Europe. There is in Brussels the Commission composed of civil servants, sometimes called Eurocrats, who draft the legislation, make the proposals and indeed draft the directives. Those directives then become law when they receive approval by the Council of Ministers who are nominated by their countries. The real legislative and operative machinery begins with the Commission and then goes forward through various stages. Under the Single European Act, many of those decisions are now to be made by a qualified majority voting, which means that the United Kingdom has no influence upon them except through the voice and the vote of the Ministers in the Council. The important function of this debate and of these excellent reports is therefore that they are the one way in which Parliament can influence the decisions taken by the Council of Ministers at Brussels. We no longer have a veto. All we can do is tell the Ministers how we believe they should vote.

That is the background from which I will now turn to the most controversial of all the reports; namely, Recognition of Higher Education Diplomas. It is extremely important, if we can manage it, that throughout Europe professional men should be able to go from one country to another to practise their various skills without inhibition. The doctor who has qualified in this country and the doctor who has qualified in France can interchange without further qualifications or hindrance. That is desirable for all those professional activities which are to be considered. There has been great difficulty in getting it through, whether we are speaking of architects, pharmacists or whoever it may be. The aim of the new proposed directive is to move away from small individual sectors to a wide spectrum over all professions.

The Commission proposes a higher educational diploma to be made available throughout the Common Market. In order to obtain it, one must have three years of vocational training in a university or an equivalent institution. Once one has the diploma, one may practise in all the other countries of Europe in that profession. That was expressed very well by the committee in their conclusions. They said: the fundamental defect of the Draft Directive is that it does not maintain a clear distinction between activities and professions.

When one turns a bit further back, one finds that the reason for that distinction is the distinction between the French and the English languages. The report reads: It should be borne in mind that the French word profession and the equivalent word in most other European languages refers to the occupation by which a person earns his living. The overtones of the English usage of the word 'profession' are conveyed by expressions which, literally translated, mean 'liberal profession' or 'free profession'". We are getting muddled as to which activities are involved in this directive. That is a fundamental defect upon which the Select Committee have reported.

They go on to say, concerning this higher educational diploma and its requirement of three years, that it will be very difficult for many of the institutions in this country. It is all very well for those with university training, but what about the many other skilled professions? I have here a letter from the Institute of Road Traffic Engineers in which they say that they would be put in great difficulty. They are all qualified and have great experience and are often given training or examinations, but they do not have to go through a higher educational course of three years. They are well qualified without that.

This anxiety was expressed in an article in the Financial Times on 24th September: Trouble looming for U.K. professional people". This is foreseen by the directive which has been put forward by the committee to us, in which they say that they cannot object to the directive as a whole but that it should be amended. They continue: It would be possible to frame a Directive… where there is geniuine equivalence of professional qualifications". So the directive can be amended by suitable steps. That is where I come to my final observations—

Lord Lloyd of Kilgerran

My Lords, I am so sorry to interrupt the noble and learned Lord in his most interesting dissertation, but I am having some difficulty in following from where he is reading in this interesting and excellent report. If he would be so kind as to mention either the paragraph or the page from which he is reading, I should be very much obliged. I am very grateful to the noble and learned Lord for giving way.

Lord Denning

My Lords, page 39, paragraph 118, the Summary of Conclusions reads: The fundamental defect of the Draft Directive is that it does not maintain a clear distinction between activities and professions. When I spoke about the word profession, I was reading from page 16, paragraph 19. That reads: It should be borne in mind that the French word profession and the equivalent word in most other European languages refers to the occupation by which a person earns his living".

Then, when I suggested that when it is not possible to reject a directive outright it should be possible to amend it—and the Committee agreed with that—I was quoting from the conclusions on page 39, paragraph 119. That reads: On the basis of the distinction between activities and professions, it would be possible to frame a Directive which would remove obstacles to free movement where there is a genuine equivalence of professional qualifications. If I may amplify that, paragraph 98 on page 35 reads: For all these reasons, the Committee have concluded that the Draft Directive cannot be accepted as it stands. It is essential to ensure that the benefit of the Draft Directive is extended to those whose qualifications have been conferred by one of the chartered or similar professional bodies in the United Kingdom for which there seems to be no direct parallel except in Ireland. As regards chartered or similar bodies, the letter from the Institute of Road Traffic Engineers states how well qualified and experienced they are, and makes the point that they ought to be able to go over to Europe and practise there without having to produce some higher educational diploma after three years at university. Again, in the case of part-time people, if they have a qualification which has perhaps been obtained at Birkbeck they ought to be able to practise in Europe without a professional educational diploma.

There is a significant sentence in this report at the top of page 34. It reads: The Committee believe that the Commission would have taken a less sanguine view about the suitability and workability of its chosen formula if it had had before it the evidence available to the Committee. That makes me wonder what evidence the Commission takes when it frames the directives. Where does it inquire? Does it hear evidence? Goodness knows, my Lords, it is a body of civil servants! Our committee have said very rightly, "We have heard the evidence and there are pages and pages from the institutions which have put written evidence before the committee."

The committee have pointed out that they have had the evidence, and I should have thought they were in a much better position to form a judgment than that Commission sitting in Brussels. We do not know what evidence the Commission had on which it framed this directive. This directive is not in our English fashion. I am afraid that the French have had a great deal of influence. There are a whole lot of preambles. I shall not criticise it too much, but there it is. That is what we have to cope with nowadays.

I should like to stress—and this is of the first importance—that we are to have this Single European Act when those decisions at Brussels will be taken by a Council of Ministers. We can no longer say No. We can be out-voted and cannot say No any more. All we can do in this Parliament is to say to our Ministers "Stand up for England. Do not give way too easily to all these other chaps. Bring them round to our way of thinking." That is what I hope the committee of the noble Baroness, Lady Serota, and the other committees will say. The voice of England and of Parliament should be made known to the Ministers who go over to Brussels to vote on these directives. I hope that their voice, their reasoning and the influence of the reports of the committee will have great weight when they come to make their decisions.

1.37 p.m.

Lord Bruce of Donington

My Lords, from this side of the House I should like to say that I think I express the views of your Lordships in congratulating the committees, and in particular their chairmen, on these reports that have been produced today. Some of them arrived a little late. The last one arrived on 8th October. Nevertheless, they constitute a compendium of information, argument and opinion which is extremely valuable not only to Members of your Lordships' House but also to Members of another place, and indeed, within a wider context, to the councils of Europe itself.

Therefore, it is perhaps a pity that we do not devote sufficient parliamentary time to a more detailed consideration of the matters that are raised by the reports of our Select Committees on European matters. Altogether, since approximately a year ago these committees have met for some 350 hours, yet the time that your Lordships' House has been able to devote to examining the reports, to passing comment upon them and, dare I mention it, to arguing about them has only occupied some 21 hours of your Lordships' time in this House—less than the time of 24½ hours which your Lordships were kind enough to devote to a discussion of the Act on salmon. If the affairs of Europe are so important to the United Kingdom and to the United Kingdom Parliament, one would have hoped that they would have had a higher priority in business.

We are in some difficulty, because when we are discussing European matters we tend to have a split mind. May I give your Lordships an example? For about live years, from 1974 to 1979, in common with others of your Lordships from all parts of the House—there was a total of some 16 of us—I was a Member of the European Parliament and took a full part. By that I mean that I spent at least 130 full days in every year for those four years in trying to promote the interests of the European Community, keeping a very watchful eye the whole time and seeking also to represent the views, as I saw them, of the United Kingdom.

Those of us who believe in the vital importance of the European Community have a somewhat difficult choice to make. Where does one's first loyalty lie? Does it lie with the European Community? What fealty do individual Members of this House owe to the European Community? What fealty do they owe to the United Kingdom? Where the two are in conflict, as they are sometimes bound to be, because the European Community and its Commission are not the fount of universal and undisputed wisdom, and if they are wrong on occasions, where does one's duty lie? Noble Lords must put this question to themselves. I cast no reflection on any of them; nor do I desire to make even any direct imputation on any Member of your Lordships' House. But I must say, and I say it now, that I regard my first duty as being to the United Kingdom and all 42 million adult inhabitants of it, plus their children, and to this Parliament. This is my priority.

I am fully sensible of and indeed applaud the co-operative measures that are being put forward to enable members of various professions of various qualifications to pursue the right to practise their professions or their arts anywhere within the Community. I applaud all attempts to standardise on a basis acceptable to the highest standards that we always try to attain in the United Kingdom—the highest standards of qualification in the various professions concerned. Therefore I applaud those sections of the various reports which have been referred to by many of your Lordships this morning and this afternoon which seek to further the ability of lawyers, architects, surveyors, acccountants, doctors, dentists, engineers, chemists, photographers, bankers, actuaries, insurance brokers and so on to practise throughout the Community.

This is extremely helpful to the individuals concerned, and I warmly applaud it, but they number around 500,000 or (shall we say?) 1 million individu- als at most in the United Kingdom. I am very pleased indeed that they should be given the facility to go anywhere in the Community and that their counterparts in similar professions should have similar facilities here. However, we are talking about 1 million people at most. What about the remaining 41 million inhabitants of the United Kingdom? How will their affairs be affected by what we discuss here? How will they be affected by measures that are brought into being for the achievement of the internal market which is what the basic discussions and the reports are about today?

My only criticism of the committees in this regard is that they have taken for granted and have put themselves behind the basic assumptions that have been made by the Commission in respect of the establishment of the internal market. They have accepted that assumption uncritically. Their own words are manifestly obvious: The extension of the internal market throughout the Community". They have said it without qualification. That is their view. They fully endorse the views that have been put forward by the noble Lord, Lord Cockfield, in his report.

The fact of the matter is that the internal market has been in existence for a considerable time. A report was published in 1977 under the distinguished chairmanship of Sir Donald MacDougall, who at one time was an extremely prominent person in the CBI. Sir Donald and his colleagues endeavoured to survey the whole spectrum of European Community activities. I cannot at this stage (and will not in the interests of time) go into his conclusions, but he said in 1977: Free trade in goods and services within the Community of nine has been largely achieved although significant non-tariff barriers remain in both the industrial and in the agricultural fields So even in 1977 the great bulk of the freedom to move goods and services was already accomplished anyway.

The completion of the internal market, however desirable it may be, is marginal to what has already been done. I am bound to point out to your Lordships that, in spite of the observations about what difficulties remain in terms of getting across frontiers because of certain non-tariff obstacles—we are all familiar with the French shoving barricades across the roads to prevent stuff coming in from Spain; we are all familiar with that because the French are a law unto themselves in these matters—it apparently was not difficult for manufactured goods to flood into the United Kingdom to the extent that we are now £9 billion per annum in deficit on our trade in manufactured goods with the EC. So quite clearly if there are difficulties they certainly have not affected the net flow of goods into this country.

I do not have to emphasise the result of that. The result has been a massive increase in unemployment in the United Kingdom—and not only in the United Kingdom. I am not seeking to make a particular point because the noble Lord, Lord Young of Graffham, has periodically reminded us that it is also a European problem; and so indeed it is. Your Lordships will recall that at the meeting of the Committee for Institutional Affairs in the European Council which deliberated in Brussels from 29th to 30th March 1985, at which the British Government were represented by Mr. Malcolm Rifkind, the view expressed was: Furthermore, after 10 years of crisis, Europe, unlike Japan and the United States, has not achieved a growth rate sufficient to reduce the disturbing figure of almost 14 million unemployed". Therefore, with the progressive acceleration of the easing up of the restrictions in the internal market, so progressively has unemployment increased.

This does not mean that the removal of internal barriers is therefore wrong. What it means is quite simply this. The objective of the free movement of goods, services, capital and persons contains within itself a contradiction and the freedom of movement of capital, in particular, is not compatible with full employment in the Community. It is as simple as that.

The freedom of movement of capital in the Community, as well as in the United Kingdom, has simply meant that capital resources—it applies in Germany and it applies in the United Kingdom more particularly—which ought to have been invested in this country to help the production of goods that people need (and the needs of the people in terms of housing and everything else are clamant in the United Kingdom) have been going to the United States, Korea, Hong Kong and Taiwan. That freedom to export capital, which is enshrined and made permanent in the EC, has meant that we cannot utilise in full, or even nearly in full, the technical and human resources that are available not only on the Continent but in the United Kingdom.

Are we concerned with the establishment of the internal market as a tidy intellectual exercise, as a matter of intellectual principle or, when we have the internal market, fundamentally with people? It should be noted that the population of the United Kingdom is 42 million adults. Let us have the internal market, but the internal market gets taken out of its context. A medicine or a food is presented to us for our benefit without taking into account the side effects. The extension of the internal market, without adequate steps being taken for investment to sustain the full development of that market, brings no benefits either to the inhabitants of the United Kingdom or to the inhabitants of the EC; and that is where the Commission fails.

In following up this theory the Commission presents a partial solution. But the Commission is not equipped to do otherwise. It has no one directorate, no one commissioner who is charged with presenting the whole economic picture or the economic consensus to the Council of Ministers. It is fragmented into various directorates, of which that under the charge of the noble Lord, Lord Cockfield, is only one. There is no coherent strategy at Community level.

As the noble and learned Lord, Lord Denning, says, since the proposals for action have to come from the Commission to the Council of Ministers, if the Commission has no coherent economic strategy as a whole beyond the bland statement enshrined in Article 3 of the Treaty of Rome on the freedom of movement of goods, services, capital and persons, the situation will continue with large-scale unemployment in Europe, whatever is done with the internal market. Capital investment—the employment of resources—is in the hands of, at the most, 5 per cent. of the population of Europe and that is where the wealth is concentrated. It is upon that wealth that investment for employment depends. Nothing could be clearer than that.

The Commission itself produced two reports in which surveys were carried out. It produced the Maldague Report in 1975, which was a most coherent account of the effect of the multinational corporations in the European Community, and it also produced the MacDougal Report. The Commission prevented the discussion of these documents in the European Parliament. Time and again a general attempt was made by Members on all sides, including Conservative Members, to have these reports discussed because there is no strategy.

The reason that I put this view before your Lordships this afternoon is not—I repeat, not—to criticise the basis and the existence of the European Community; it is only to lay before you considerations which in my view members of a Select Committee ought to bear in mind when considering the restrictive remit in respect of a restrictive directive and of which Members of your Lordships' House may wish to take account.

Baroness Carnegy of Lour

My Lords, before the noble Lord sits down, will he tell us whether the views he has just expressed on the inadequacies of the possibilities of the internal market are those of the Labour Party or are they his own?

Lord Bruce of Donington

My Lords, the views that I express in so far as they have been critical of anything—and I do not see that they have been critical on party lines—are, so far as I am aware, the views that are commonly acceptable within my party, but I shall be quite willing to sustain them at any time. I am not accustomed to being dictated to by anybody and I believe the views that I have expressed are sentiments that are quite acceptable to the party to which I have the honour to belong, and ought to be acceptable to all your Lordships because they have not been couched in controversial terms.

1.58 p.m.

The Parliamentary Under-Secretary of State, Department of Trade and Industry (Lord Lucas of Chilworth)

My Lords, I welcome the opportunity this afternoon to set out the Government's position on the internal market. Perhaps by way of introduction your Lordships will permit me to make a few general comments about it and the importance which we attach to its completion.

One might ask why we believe that completion of the internal market is so important. First, we are fulfilling our obligations under the Treaty of Rome. Despite the elimination of tariff and quota restrictions between member states, the common market envisaged in the treaty has not yet been achieved. For example, the free movement of goods is impeded by technical barriers, such as differing national product standards, and the growth of a free and competitive market for services is blocked by a range of national restrictions. But it is not just a question of being, so to speak, legalistic. The second reason recognised by the founders of the European Community is that the creation of a genuine common market will bring substantial benefits to the European economy as a whole. The size of the home markets in the United States and Japan offer economies of scale which are one important element in their industrial success. Now the Community has an opportunity to emulate and surpass them. Following the accession of Spain and Portugal the Community has a potential home market of 320 million people—a market which is more than one-third as large again as the United States.

Completion of the internal market is a precondition to the creation of a British and European industrial capability sufficiently large to compete effectively on world markets and, above all, in the advanced technologies. Collaboration between European companies is a key element. But in order to create the right framework, there must be collaboration between European governments. We have embarked on two major policy initiatives with this in mind. One is to support a shift in Community research and development programmes and the other has been to endorse EUREKA, and that supports collaboration between European companies in developing products for the world market place. These initiatives complement the emphasis which we have placed upon completion of the internal market.

I should now like quite briefly to say something about the priorities. First of all there is the removal of physical barriers to trade through the simplification of frontier formalities. Then there is the need to tackle technical barriers, notably in the field of product standards. The proposed directive on simple pressure vessels, to which my noble friend Lord Rochdale referred, and the numerous measures on trade in foodstuffs, to which the noble Lord, Lord Gallacher, referred, have all been considered by the Select Committee and undoubtedly can benefit from the Community's new approach to harmonisation. Other priorities include financial services and transport, and the freedom of establishment for the professions, of which the proposed directive on recognition of higher education diplomas is a central element. We are also keen to make progress on the removal of fiscal barriers. The internal market programme of course has implications for consumer policy, and we agree that it is essential to have a consumer protection policy at Community level.

While the Community has been moving toward completion of the internal market for a number of years, I think that some doubts have been expressed as to whether we shall achieve our objectives. Some people may ask themselves—or perhaps the Government—why are we optimistic that the process can be accelerated now? I believe that one reason is the political impetus established since the Commission published its White Paper Completing the Internal Market. I pay tribute also to the noble Lord, President Lord Cockfield, for the determination that he has shown in this direction. The broad conclusions of the White Paper were endorsed by Community Heads of Government at the Milan Council in June, and successive councils at Luxembourg and the Hague have reconfirmed their comitment to completing the internal market. To carry forward and accelerate this work is one major objective of our presidency of the Community, and I assure the noble Lord, Lord Seebohm, that that is a major objective.

These are important matters. I think it is appropriate that your Lordships' House should have the opportunity to debate them and I am grateful, as others are, to the noble Lord, Lord Seebohm, for having introduced these subjects to us today. I find myself in the middle of a Friday afternoon with a somewhat daunting task of replying to five debates. I hope that your Lordships will allow me the indulgence of missing out some points and perhaps I may concentrate on those points on which great emphasis has been put or perhaps those which, in my privileged position, I can pick out for comment.

Perhaps I may start by taking up the central point of the contributions of the noble Lord, Lord Seebohm, this afternoon when he was talking about indirect taxation. The Government welcome the report as a very valuable contribution to the debate—this of course is the 11th report of the Select Committee—on how best to remove fiscal barriers to trade. In their report the Select Committee come down in favour of the Commission's proposals for approximation of indirect tax rates while recognising the many political and practical obstacles to their adoption. I believe that these problems should not be underestimated. I have to say that the Government remain to be convinced that approximation is necessarily the best or the only means of removing these barriers.

Of course, the report points out that the problems are numerous not only for the United Kingdom but for all member states, and in addition to political and fiscal policy difficulties we also foresee a number of purely practical and administrative problems with the Commissioner's proposals. In short, the Government believe that a careful assessment needs to be made of the balance between the benefits for the internal market and the problems that approximation raises before the final decisions can be taken. In that respect we welcome the Commission's undertaking to produce more detailed proposals for rate approximation and the VAT clearing house by 1st April of next year. Until we have had time to study those proposals in depth we must reserve judgment. In the meantime, though, we continue to work for the adoption of frontier facilitation measures to reduce delays and formalities.

The Select Committee's report mentions in particular the 14th VAT directive. The Government's position on this directive is quite clear. My right honourable friend the Chancellor of the Exchequer has given a commitment to agree to the directive if all other member states do so also. Regrettably, five member states remain firmly opposed to that directive, either on revenue or control grounds. I believe that in fact we can make progress on the frontier facilities, while we go on considering the other problems particularly associated with tax harmonisation, and I shall look forward to the report in April of the noble Lord, President Lord Cockfield, which he has promised.

Turning now to the consumer directives, I pay tribute, as others have done, to the noble Baroness, Lady Serota, and indeed of course to her colleagues for the immense amount of work they have done in an area which has always been of great interest to your Lordships.

The Government welcome that report warmly. We agree that it is essential to have a consumer protection policy at Community level and we attach great importance to securing recognition of consumers' interests in all relevant areas of Community policy. We endorse the committee's criticisms of the Commission's current arrangements and procedures for consulting consumer representatives. Improvements in consultation would help to ensure that those interests were better taken into account in all EC policies. We shall be pressing for progress in that area at the Council planned for 29th October.

The noble Baroness, the noble Lord, Lord Graham, and others talked about the need for legislation to make it an offence to market an unsafe product. The Government propose to introduce legislation on that point as soon as parliamentary time permits. We welcome, in principle, the proposal for a Community directive to that end.

The noble Baroness asked whether the Government expected to obtain agreement on a toys safety directive at the 29th October meeting. The Commission has submitted a revised proposal but only in the past few days. It is, as noble Lords will be aware, a complex subject and there are genuine differences over what the es***sential safety requirements should be. I am not therefore optimistic that an agreement is in prospect.

The noble Baroness and the noble Lord, Lord Allen of Abbeydale, asked whether the Government would legislate to empower the Director General of Fair Trading to contribute to the supply of consumer education teaching material. Information material is produced by the OFT and is widely used in schools. The Government are currently considering a number of possible ways of promoting further the development of consumer education. I should like to return to this point when I respond to my noble friend Lady Carnegy of Lour. For the Director General of Fair Trading to undertake that function would be one option but I do not believe that it is necessarily the only one that we should consider.

I recall that I have answered questions about the regular holding of consumer councils on a number of occasions from this Dispatch Box. We favour regular consumer councils and will encourage future presidencies to ensure that such councils have a fair share of the time available.

I shall deal with the directive relating to higher education diplomas, which is a subject about which the noble Lord, Lord Allen of Abbeydale, and the noble Baronesses, Lady Serota and Lady Robson of Kiddington, spoke. I accept that progress in that area is painfully slow. The Select Committee report underlines that point. The United Kingdom has therefore endorsed conclusions in successive European Councils which have invited the Commission to submit proposals to bring about the effective freedom of establishment of professions within the Community. We support the objective of the Commission's proposed general directive on acceler- ating progress on this matter. I welcome the committee's endorsement of that objective.

The noble Lord, Lord Allen, said that in that area there were formidable hurdles to be overcome. He is right. Before taking any firm decision therefore the Government believe that it is essential carefully to consult the professions in this country about the way in which the directive might affect them. Our aim has been to seek the view of all those who may be affected if the directive were to be adopted. We have so far consulted 150 professional bodies, many of which gave evidence to the Select Committee.

The complexity and importance of the directive means that one cannot look forward to its early adoption. We shall want to be clear about the feasibility of the horizontal approach as well as the overall balance of advantage. The suggestion made of drawing a clearer distinction between the professions and activities and focusing perhaps on the latter is valuable. It demands very full examination.

The noble Baroness, Lady Robson, paid us a particular service by explaining with such clarity the complexity of the problem. All of us should be grateful to her. The noble Baroness reflected upon the wide range of different activities undertaken by individual professions in each member state. The first task, as she pointed out, is to clarify which people precisely would be covered. We are working at this, but the coverage is still far from clear. That is one reason why we cannot take the final view of the detailed provisions.

The noble Baroness explained clearly how possible solutions to the problems identified in the directive may make the situation even more complex. That is why I wish to underline that while the Committee's solution of focusing on activities is valuable, we would want to test it very carefully to work out its implications.

The noble and learned Lord, Lord Denning, in a not perhaps unfamiliar speech, touched upon higher education diplomas. I reassure the noble and learned Lord that our objective is to ensure that if the directive were adopted, United Kingdom qualifications would be fully accepted by other member states and United Kingdom professionals would not have to seek additional qualifications. The noble and learned Lord will forgive me if I do not embark this afternoon upon the other points that he made. We shall return to them, as he well knows, next Friday when we shall give further consideration to the European Communities (Amendment) Bill.

My noble friend Lord Rochdale spoke on one of the smaller reports. It is quite technical. I believe that the report deserves, as, indeed, do the others, particular close study. I would, however, say this. Simple pressure vessels are products in which United Kingdom manufacturers suffer significantly from barriers when attempting to trade with other Community countries. Consequently, we are keen to see progress on this proposal. There have been difficulties in applying the new approach to harmonisation. But we are prepared for the basic safety requirement to be written in very general terms with the standards organisations—the BSI and so on—left to specify in detail how these shall be met. However, our Community partners wish to see far more detail specified. This takes time. Here again progress has been slower than had been hoped. But there is, I believe, a determination to move forward and secure early adoption.

My noble friend referred in his opening comments to Industry Year 1986. I am grateful that he should have reminded your Lordships of the importance that the Government place on Industry Year and the continuance of this effort into the future. I underline what my noble friend said. We have to continue our Industry Year initiative so that industry can be well placed to take advantage of the enlarged market when completed.

The noble Lord, Lord Gallacher, spoke about foodstuffs and meat. The Government support in general the Commission's new approach. The decision-taking process has been slow—the noble Lord spoke of a period of 12 years or so—because of the failure of member states to agree on particular food measures. We do not support the idea of handing over complete responsibility for detail to the Commission without member states having a chance to vote on the proposed measures. Food is a most sensitive issue for member states. We do not believe that they can abdicate their responsibilities to the Commission. The Government support the conclusions reached by the committee in the light of its examination of the proposal to amend Directive 77/99 on meat products. In the discussions at official level that have taken place in Brussels, I am glad to tell your Lordships that it should be possible to agree many more extensive easements than those proposed by the Commission to the structural standards that processing plants are required to meet.

The noble Lord, Lord Sainsbury, in a most interesting and, if I may be allowed to say so, characteristic overview rather than detailed approach, said that we should perhaps pay more regard to what is reasonable and practical to be included in directives. The noble Lord was, I believe, saying, "Let some of these esoteric ideas disappear and let us get down to harsh, hard practicalities". We share the noble Lord's view absolutely and entirely.

The noble Lord talked to us a little about consumer education, but I wondered whether he was talking about a buyer's education. I believe that we have a lot of agencies that look after that area. Nevertheless, it made me think very seriously about the suggestion of my noble friend Lady Carnegy of Lour that in consumer education we should think very much more widely; that we should think of this as it relates to the subjects across the whole curriculum of education. The noble Baroness drew our attention to what she sees as the superiority of the Scottish education system. I should want to read very carefully what she said about that before I make a comment in your Lordships' House this afternoon.

However, we promote consumer education generally through my department. We make funds and equipment available. I believe that in general terms the necessity is being taken on board by the teaching profession. I think that noble Lords will be very much encouraged by what my right honourable friend the Secretary of State for Education and Science had to say in Bournemouth earlier this week on the subject of curriculum and parent, governor and teacher collaboration in the education field.

I touch briefly on the point that the noble Lord, Lord Graham, made when he said he was going to chide the Government. I think the noble Lord said that he was going to give us a gentle kick. He spoke about air fares. The noble Lord knows that my honourable friend the Secretary of State for Transport is making a determined effort during the United Kingdom presidency to make substantial progress in liberalising air services. Member states have accepted a commitment to liberalisation in this area. I cannot deny that we have some way to go, but I believe—and I think the noble Lord will accept—that we are making some progress in this area. The noble Lord is well known to us all—and I am grateful for his declaration of interest—for his interest in the Co-operative Movement. The noble Lord drew attention to the low profile of the consumer in the balance of interest in the Community budget. I shall touch upon this in a moment. He referred to the £100 spent per euro-cow—

A noble Lord

It was £80.

Lord Lucas of Chilworth

He referred to the sum of £80 per euro-cow, as against the rather less than one penny spent on consumers. I was glad that he underlined that. We agree with him. We agree that the common agricultural policy does not adequately take account of the consumer. The Government have recently announced that the National Consumer Council is to undertake a full study of the impact of the common agricultural policy on consumers. I hope that that will encourage him as well as others of your Lordships' House.

I turn last to the characteristically robust speech of the noble Lord, Lord Bruce of Donington. The noble Lord took a stand on perhaps reasonably familiar lines. I was glad that he paid tribute to the committees who study and advise us on European legislation. We on this side of the House share that view. It is not for me to discuss the priorities of the business of the House. My noble friend Lord Davidson is here. He belongs to the management team and I have no doubt has taken note of the point.

The noble Lord, Lord Bruce of Donington, asked whether the loyalty lies here in the United Kingdom and to its 56 million people or with the European Community? I suggest that he seeks to divide the two interests. I believe that the two interests, the interests of the 320 million people of the total Community and the interests of the 56 million people in the United Kingdom, are compatible. I suggest that the right way to overcome the problems which the noble Lord outlined to us and which others have highlighted is to look to the common ground for the common good. I believe that that is the test of our loyalty, and if we succeed in that test, it will be for the benefit of everybody.

I should have liked to have the opportunity to debate all the various reports but that is just not possible. I shall undertake to read carefully what has been said and to respond in writing to those points which I might have missed. I believe that we have had a very informed debate. I think noble Lords have agreed that completion of the internal market is a worthwhile objective, but perhaps they are less optimistic that this process will be completed by the target date of 1992. All noble Lords can be assured that the British Government will do everything in their power to stay on course and maintain momentum. Indeed, one of the major objectives of our presidency is to make and to accelerate progress towards completion.

How do we aim to achieve this? Together with our predecessors and successors in the presidency, the Dutch and the Belgians, we have developed an action programme which lists almost 150 measures for consideration by the middle of next year. Most of these will be discussed in the Internal Market Council, the Agriculture and Transport Councils and the Economic and Financial Council. My colleagues who chair these councils have singled out the internal market measures from the normal programmes of work and have given them a particularly high profile in priority.

I conclude by saying what I truly believe and what the Government believe. The completion of the internal market will have benefits for both industrial and consumer interests in this country and in the rest of Europe. The Government are committed to making progress in this area and I repeat that we shall do everything possible to ensure that momentum is maintained.

Lord Seebohm

I think this must be the most complicated and comprehensive debate ever initiated by a Select Committee, and I am glad I do not have to make comments at this stage. We have discussed everything from higher education to dangerous teddy-bears, and I think that is enough.

I end by thanking everybody who has joined in the debate and reiterate what the noble Baroness, Lady Scrota, said at the beginning—it shows the enormous amount of good work done by the staff of the office. These six reports we have been talking about today are only half the number of reports that have been issued this year. It is a magnificient effort and they deserve a great deal of thanks from your Lordships for the very good work they have done. I beg to move.

On Question, Motion agreed to.

House adjourned at twenty-nine minutes past two o'clock.