Written Statement of 13 June 2003

DEPUTY PRIME MINISTER

  Fire Dispute
  The Deputy Prime Minister (Mr. John Prescott)
  The Fire Brigades Union Executive Council recommended an offer from the fire service's national employers to its recall conference on 12 June. The conference voted to accept the offer, and a final agreement has been signed by employers and the union. The Government welcome this agreement which brings an end to the dispute.

  In the light of this agreement those armed forces personnel deployed on firefighting duties have been stood down permanently.

  The modernisation of the fire service remains a key Government priority. This agreement will enable all parties to work together to build a better fire service that saves more lives.

TREASURY

  Economic Reform in Europe
  The Chancellor of the Exchequer (Mr. Gordon Brown)
  This week, in my statement on UK membership of the single currency, I committed to publishing proposals for economic reform in Europe. I am reporting to the House of Commons on the areas where the Government will be developing proposals to feed in to the wider debate in Europe on economic reform.

  This is a critical time for European economic reform. Unemployment is once again rising across the European Union and employment participation rates remain low in comparison with Europe's major international competitors. The first steps towards the dynamic and socially inclusive EU envisaged at Lisbon, have already been made—the joint declaration from EU Finance Ministers to the European Council at Thessaloniki placed labour market flexibility and structural economic reform at the heart of the European economic policy agenda, but further action is needed.

  The appointment of an Employment Taskforce, to identify necessary labour market reforms, could not be more timely. We need to increase the pace of change of labour market reform and make a concentrated effort to implement effectively the changes which Member States (and European Councils) have agreed are priorities.

  The new global economy

  In the new, more competitive, global economy, it is clear that Europe needs to devise modern ways of achieving our traditional economic objective: high and stable levels of growth and employment. Policy decisions for Europe must now be made in the context
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  of an ever more open and extensive globalisation in which the countries that will do best are the countries that are flexible, open and outward looking.

  Full employment and social cohesion

  In March 2000, in Lisbon, Europe's leaders committed themselves to a ten-year strategy to reform Europe's labour, capital and product markets. This is an ambitious programme driven by the vision of a European single market that can become the most competitive in the world, and a reformed social model that combines full employment with social inclusion. This reform process is based on a shared understanding that a job is, for any adult (and, indirectly, for any dependent children), the first rung on the ladder of opportunity out of poverty and social exclusion. That is why the EU set itself challenging targets for employment for 2010. Europe must do far more if we are to reach these targets.

  Underlying issues—structural barriers; demography; inactivity

  There are three underlying but vitally important considerations. The first is the need for radical reform of our labour markets, their institutions and practices.

  The second consideration is the demographic challenge of the dramatic changes now taking place in the balance between the working age and dependent populations across the European Union. For example, in 2000 in the EU, the population of 65 year olds as a proportion of those of working age (age 15–64) was just under 25 per cent; by 2050 it will have more than doubled, to nearly 55 per cent.1

  The third consideration is that Europe can only achieve the Lisbon targets by taking active steps to get as many as possible of Europe's 13 million unemployed into work but also by reconnecting the further 77 million people of working age who are inactive for other reasons with the labour market.

  Challenges for full employment in the EU Labour market regulation

  The United Kingdom believes that minimum standards in the workplace, which are sensitive to business conditions, are essential to a modern labour market. Given the acquis that now exists at both national and EU level, any new proposals for legislation need to be rigorously assessed. Member States need to ensure that their employment legislation is not endangering the achievement of the Lisbon and Stockholm employment rate targets. Legislation that was developed during periods of sustained low unemployment may no longer be appropriate in conditions of persistently high unemployment, where the overriding need is for job creation.

  Moving people from welfare into work, and making work pay

  Europe has successfully made use of active labour market policies to help unemployed people get back to work, but it has not given enough attention to ensuring that benefit systems and active labour market policies (through public employment services) work together to

  1 World Population Ageing 1950–2050; United Nations, 2001.
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  reduce unemployment. More attention needs to be given to the incentives, for those unemployed and inactive people who can, return to work. Member States need to make greater use of a wider range of active intervention measures now available and to take steps to make work pay by careful attention to replacement ratios, tax credits etc. There should be no option simply to decide to live on benefit when help to find work is available. And, they need to ensure that disability benefits and pension systems do not pull people out of the labour force when both they and the economy as a whole would benefit from their continued participation.

  In pursuit of full employment, governments must also ensure that they address regional disparities and inflexibilities that may create disincentives to take jobs. In the UK, professionals in the south-east have often benefited from London weighting and other arrangements, where many lower paid workers have missed out. Starting this year, the UK Government plan to publish data on regional prices and inflation; remits for pay review bodies and for the public sector including the civil service will, within their nationally determined
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  frameworks, include a stronger local and regional dimension; and the reform of housing benefit will remove disincentives to work or to move.

  Skills and lifelong learning

  A skilled and adaptable workforce with opportunities for all to learn new skills and update existing skills throughout their careers is fundamental to the Lisbon objective of creating the most competitive, dynamic and socially inclusive economy in the world. There are a wide variety of approaches to vocational education and training across the EU, many of which have been very successful in training new, young entrants to the labour market. But it is fair to say that no one member state has got the approach completely right—too much training for adults, for example, is insufficiently focused on the needs of business now and in the future. Member states need to focus their training and lifelong learning strategies so that they can contribute directly to the Lisbon employment targets.

  A key challenge for member states is therefore promoting the concept of a learning society in which everyone expects, and has the opportunities, to learn and upgrade their skills throughout life. It is only by addressing all three of these issues that real progress can be made.