By Craig Rimmer
The last week was all about doing business in Europe for me. I was at a Brussels Business Association dinner on the Tuesday and the American Chamber of Commerce on Thursday, and the starting gambit in the debate on both occasions was that labour costs in Belgium are too high.
Belgians on average pay the highest income tax of any developed country according to the OECD and according to the American Chamber of Commerce (quoting Institut Economique Molinari, July 2013), for every €100 of purchasing power in an employee’s pocket, an employer needs to pay €252 compared to €157 in the UK and €145 in Ireland.
Belgium taxes highly and has high labour costs but traditionally has made up for this through research and development and high productivity. Despite the obvious disadvantages between labour costs in Belgium and the rest of the EU, it was the disparity with the rest of the world that concerned business leaders most because as much as Belgium has lost ground against its partners, the EU has lost more ground against the world.
The truth is we can’t compete with the developing world on labour costs but we can make sure we are not stacking up hurdles that make doing business in the EU even harder. David Cameron, set out in the Sunday Telegraph seven key targets for negotiation to change the UK’s relationship with the EU and I applaud his bold vision.
There is clearly finer detail that will be hammered out during the process of negotiation with our EU partners but it is my sincere hope that we are able to bring about change that is not just beneficial for the UK but also for the whole of the EU.
The EU needs more labour flexibility and to strip out the current social democratic bias that pervades treaties and directives. Put simply, the Social Chapter of the Maastricht Treaty must go. It is not enough to secure an opt-out again because Labour will just opt back in again as a quick-fire way of securing their policy agenda. We would all benefit if this area of policy making is ceded back to the national parliaments and social democracy has to be voted in rather than moved forward through directives from the Commission.
The EU needs a strong Britain battling for businesses and enterprise. Britain leads by example, in terms of the wealth generated by our entrepreneurs and the flexibility of our labour force. We now need to lead Europe through the renegotiation process, to secure a great deal for Britain and Europe.
Negotiation should also be about give and take. We are not really interested in giving up our rebate. So what could we concede ground on? Perhaps, it is time for the UK to consider joining the Schengen Area, so travelling between countries does not require a passport and allowing for more labour flexibility across Europe.
Businesses would be able to apply for Schengen Area visas for their UK based workers. Tourists could apply for just the one visa and plan to visit London, Paris and Rome, rather than potentially skipping out the UK altogether.