Magazine article Public Finance

Light at the End of the EU Tunnel

Magazine article Public Finance

Light at the End of the EU Tunnel

Article excerpt

Much has been written about the big questions concerning whether we should leave or remain in the EU, including sovereignty, the alternatives to the existing customs-union membership of the single market and how leaving the EU would affect the UK's place in the world.

It is easy to overlook the sheer extent to which EU membership affects public policy across the board in the UK. If Whitehall is freed of these constraints, it will enjoy a revolution in new policy and creativity in government at all levels.

As justice secretary Michael Gove has said: "Every single day, every single minister is told: 'Yes minister, I understand, but I'm afraid that's against EU rules.' I know it. My colleagues in government know it. And the British people ought to know it too: your government is not, ultimately, in control in hundreds of areas that matter."

You may remember, for example, Tony Blair as prime minister insisting that foreign criminals should be deported "automatically". It never happened. More recently, Gove said that the home secretary pleads with him not to empty our prisons of foreign EU nationals because, as soon as an individual is deported, even if they are a convicted criminal, they can come straight back to the UK because of the laws of freedom of movement (from which we have no opt-out).

During the 2010 parliament, once it was clear that there might be a referendum on the EU, the public administration select committee (as the committee I chair was then called) considered how we should produce a report assessing the impact of EU membership on government policy. We failed. The EU has permeated public policy to such an extent - in every department of state, in the devolved legislatures and in local government - that we found the task too daunting.

The House of Commons library estimates that some 60% of UK law now emanates from the EU. The increased impact of the EU was most striking for ministers who had served in the previous Conservative government. The new treaties that followed Maastricht (Nice, Amsterdam and then Lisbon) along with the Human Rights Act, have had a cumulative effect. They are paralysing initiative, creativity and accountability in Whitehall.

Take the so-called 'tampon tax', about which there was a major row in parliament last year. MPs from all parties got behind the campaign to get rid of VAT on sanitary products, which amounts to a tax on being female, but the UK has lived for years in the bizarre situation where the European Commission has deemed these items to be `luxury goods' on which EU states are required to charge VAT of at least 5%. Despite a cross-party outcry, UK ministers cannot propose to change this.

For the same reason, parliament is not allowed to remove VAT on home insulation or solar panels, even though the government is spending billions on subsidising people to help achieve a low carbon economy. (At the same time, the EU also applies punitive tariffs on Chinese imports of solar panels to protect the German solar panel industry.) Everyone agrees we need to tackle fuel poverty - the last Labour government wanted to abolish VAT on domestic fuel. However, it is not permitted for the UK to lower VAT below the 'reduced rate' of 5%.

From fisheries and farming to financial regulation in the City, the all-enveloping nature of the ever-growing body of EU directives, regulations and court rulings quietly presses down on almost every walk of life. …

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