Britain likely to resist new EU rule on works councils

London Times, 5 June 1997

BRITAIN is poised to reject suggestions from Brussels that all companies with more than 50 staff should set up works councils and that those which resist should face sanctions.

Padraig Flynn, the European Social Affairs Commissioner, described the measure as a fundamental social right, but Downing Street indicated that Tony Blair had strong misgivings about the idea. The Prime Minister had not studied the proposals in detail, but his office said that they seemed unneccessary and he was likely to oppose them.

We are not in favour of new regulation in this area, a Downing Street official said. We would need to be convinced that this step is necessary, given that it seems inconsistent with subsidiarity.

And last night Lord Richard, the Leader of the Lords, told peers: We are doubtful if it makes sense to legislate on this new measure at EU level. It should be left to member states to decide and, within that, for individual employers it would clearly impose an additional cost.

Businesses should not be weighed down with unnecessary red tape. But it's equally important to empower employees so that they can realise their skills and their potentials.

The scheme is the third piece of legislation under the Social Chapter of the Maastricht treaty which Mr Blair has promised to sign. He will raise the issue at the Socialist Congress in Sweden today. Although he has called for a crusade against unemployment across Europe, Mr Blair is expected to say that to impose too much regulation on the labour market would be dangerous.

He will back the Swedish proposal that an employment chapter be included in the Maastricht treaty to help to create jobs, but he will oppose any action that would damage Europe's competitiveness.

Floating his scheme to penalise firms that failed to inform and consult their workers, Mr Flynn said that sanctions were essential to stop companies flouting existing labour rules, as the Renault company had done when it announced the closure of its Belgian car plant at Vilvoorde.

The nature of penalties had yet to be devised, but he suggested that dismissal notices would be declared null and void if an employer failed to follow rules on consultation and the negotiation of a redundancy plan with employees.

The plans were warmly welcomed by the TUC, but the CBI and the European Employers Federation have resisted tougher EU rules on works councils, fearing that they would hinder industrial restructuring and diminish European competitiveness.

John Major insisted on a British opt-out from the social chapter at Maastricht in 1991, calling it a job destroying machine. But Mr Blair has promised to sign it, although he urged colleagues at his first European summit last month to avoid new social measures that would put a burden on business.

Gordon Brown, the Chancellor, yesterday announced plans to use Britain's presidency of the EU next year to fight for more flexible labour markets, and the Government has put forward a flexible markets clause for the new employment chapter.

But the Goverment's job market ambitions are viewed with suspicion on much of the Continent and Lionel Jospin, France's new Socialist Prime Minister, regards flexibility as a code-word for harsh Anglo-Saxon practices.

Mr Flynn noted yesterday that Britain and Ireland were the only two EU states without laws requiring works councils at most levels, and he said he expected the full support of the Blair Government when the new social chapter measures reach the legislation stage.

But in an article in the Swedish newspaper, Dagens Nyheter, Mr Blair writes: The risk that the employment chapter might backfire, putting in jeopardy more jobs than it creates, is not one that I am prepared to take.