10 November 2011

The UK government and allies should explore devolving EU social law

The UK Government with allies should look at ways to regain more control over EU social, employment and health & safety laws that are currently being decided in Brussels, but for a range of economic, political and democratic reasons are better handled locally or nationally.

Should the UK Government decide to, and succeed in, repatriating social policy, these laws – or the benefits and costs stemming from them – would not magically disappear overnight. The UK Government and Parliament would probably want to keep many of these laws in part or in full, such as anti-discrimination rules. However, the big difference would be that the regulations themselves, and the benefits and costs they generate, would be under the control of Westminster, empowering MPs and voters to change them to better reflect local circumstances, and national democratic preferences.

Cutting the cost by 50% could result in the equivalent of 140,000 jobs

Based on the Government’s own Impact Assessments, we estimate that EU social law currently costs UK business and the public sector £8.6bn a year. Social and employment law is necessary and clearly comes with benefits. Repatriating EU social law could allow the UK to seek changes and cost savings that would be very difficult to achieve if they were subject to agreement at the EU level. We consider various scenarios to illustrate what impact such changes would have on the UK economy. For example, cutting the cost of EU regulations in this area by 50% could result in the equivalent of 140,000 new jobs in Britain or 58,000 jobs in case of a 25% cut, if the entire increase in output as a result of the saving goes into employment. In reality, however, the benefits from deregulation would likely be split between employment and productivity. Under such a scenario, a 50% cut in the cost of regulation could create the equivalent of 60,000 new jobs in the UK in addition to adding £4.3bn to the country’s economic output.


A ‘double lock’ would avoid creeping EU powers

We set out a number of ways in which repatriation can be achieved. Due to the blurring of EU social policy with other areas, and the history of the EU institutions imposing social policy on the UK via the backdoor, protocols or political assurances setting out a UK carve-out from this area are unlikely to be effective on their own. Instead, we argue for a ‘double lock’ solution: First, a legally binding protocol. Second, if a dispute arises over a proposal’s potential impact on UK social policy, the British Government should have the right to refer that proposal to the European Council, where unanimity applies.

Devolving social policy must be weighed against other policy objectives

Devolving EU social policy could provide a significant economic boost and help to close the democratic deficit caused by the one-size-fits-all nature of EU regulation. Ultimately though, it is up to the UK Government and Parliament to decide when and how much political capital should be invested in repatriating EU social law and what concessions may have to be made in return.

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