Economic and social affairs

The origins of the EU lie in economic co-operation, and much of its work remains focused on the evolution of a true single market which can create effective competitiveness and financial prosperity for member states.

Energy liberalisation: Ministers reached unanimous agreement in November 2002 on the full market opening of all EU gas and electricity markets by 1 July 2007. This means better market access for British companies, strengthened EU competition, and more choice and lower prices for consumers – industrial and domestic alike.

Modernisation of the EU’s competition rules: Through simplifying the procedures involved. This agreement brings about a real level playing field for businesses in industrial co-operation across the EU.

Single European Sky: Heralding a new era for European air users. Agreement here means big reductions in airport delays and therefore big benefits for all – the industry, businesses, consumers, even the environment.

Financial services market: Real progress on key financial services has been made. These will help to reduce the cost of capital to business and speed up the creation of a single market for financial services to increase consumer choice.

'Time to Move Up A Gear' The European Commission's 2006 Annual Progress Report on Growth and Jobs

EU budget

The EU budget is worth about €123bn (£84bn) a year.

Almost half of the budget is spent on the Common Agricultural Policy. Most of the rest of the budget is spent as Structural and Cohesion Funds, which are designed to reduce disparities in prosperity across the Union.

The remaining funds are spent in areas such as the EU’s large development budget (the EU is the world’s biggest aid donor), maintaining the internal market, and administering the Union.

The EU's budget is set each year through an agreement between Member States and the European Parliament. In December 2005, EU Member States agreed a budget for the 2007-2013 Financial Perspective. The budget agreed is worth €862bn over the seven years, or 1.045% of the EU’s Gross National Income (GNI).

In 2005 the UK agreed to increase its contribution to the EU budget for 2007-13 to ensure we paid our fair share towards the costs of EU enlargement, in return for all the benefits it will bring to the UK in terms of a larger single market and a more stable and prosperous neighbourhood. It was agreed that the maximum cost to the UK of this measure over 2007-2013 would be €10.5bn, or £7bn. The UK rebate remains and is likely to be larger in 2007-2013 than in the previous financial period.

In 2005, the UK's net contribution to the EU was £3.6bn - about £60 a head.

Economic and monetary union

The determining factor underpinning any UK decision on membership of the single currency is the national economic interest and whether the economic case for joining is clear and unambiguous. The Chancellor announced in the 2005 Budget that 'In this Budget the Treasury does not propose to initiate a further Euro assessment'.

For further general information, including details of the Government's policy and on the euro and business, visit HM Treasury's euro website.

The free movement of goods, persons, services and capital is a fundamental principle of the European Union. These four freedoms form the basis of the single market.

The UK Government believes that the single European market benefits the economy of each member state, and that the removal of trade barriers leads to a reduction in business costs as well as increasing competition and stimulating efficiency, benefiting consumers and encouraging the creation of jobs and wealth.

The single market is good for growth and jobs. EU GDP in 2002 was 1.8 per cent higher (£110 billion) than it would have been without the Single Market, equivalent to a benefit of £20bn for the UK economy (this figure comes from an economic study of the effect of the single market).

The single market is the world’s largest international free trade area. This has meant that there is a wider market for UK goods - with EU enlargement, UK business has access to over 490 million customers and in 2003, British companies exported approx £105bn worth of goods to the EU15. Since 1990, UK exports to the 10 new member states have grown more than twice as fast as those to the rest of the world and imports three times as fast.

The single market has also reduced fiscal barriers and, although tax is primarily a national issue, the European Union does have limited and specific competence in this area. For example, the Community has competence in indirect tax such as VAT as this is required to make the single market work. However, Article 93 of the treaty also states that proposals on taxation must be agreed unanimously. The UK therefore has a veto on indirect taxation.

For general information on the work of the European Commission on taxation and customs union policies, see the Commission's Taxation and Customs Union website.

The better regulation agenda is key to making Europe more competitive and more relevant to its citizens.

It is not about de-regulation: EU regulation can benefit UK business and consumers. Rather, it is about examining where the EU can add value and ensuring it does not inhibit enterprise or damage competitiveness.

Good EU legislation has demolished barriers across Europe and raised social and environmental standards, but bad legislation – unnecessary or over-burdensome rules – stifles European business and undermines the Union’s reputation among our citizens. Improving the quality of legislation is key to creating an effective and relevant European Union.

For example, higher environmental standards have helped deliver cleaner air (eg since 1990, sulphur dioxide emissions have fallen by 75 per cent) and cleaner water (water pollution fell by 65 per cent in the 5 years to 2001).

But we need to tackle the legislation that drives down competitiveness, penalises business and enterprise and distances Europe from people’s real concerns.

See the Department for Business, Innovation and Skills' Better Regulation website for details of how the UK is meeting the challenge of regulatory reform both domestically and in Europe.

In 2000, European leaders set ambitious employment targets that Europe needed to meet if we were to create a more a prosperous and socially cohesive Europe. The focus now is on measures aimed at increasing participation in the labour market and ensuring sustainable social protection systems.

In the UK, the Department for Business, Innovation and Skills (BIS), the Department for Work and Pensions (DWP), HM Treasury (HMT) and the Department for Innovation, Universities and Skills (DIUS) are responsible for the various aspects of European Union social, employment and education policy.

Further information on free movement within the single market:

• Families - visiting or living abroad
• Pensions - visiting or living abroad
• Social security agreements with other countries

Regional support

The Structural and Cohesion Funds act in support of one of the aims of the European Union – to strengthen economic and social cohesion.

The funds account for around a third of the EU budget.

There are two main strands to the EU’s so-called 'Structural Operations'.

• The Structural Funds are focused on regional development throughout the EU and account for over 90 per cent of the total monies spent.
• The Cohesion Fund supports environmental and transport infrastructure projects in Member States with a per capita GDP below 90 per cent of the EU average. Ireland, Spain, Greece and Portugal receive such funding.
  

The Department for Business, Innovation and Skills is responsible for the UK-level negotiations with the EU institutions on future Structural Funds spending. Delivery of the funds in England is through the Department for Communities and Local Government (CLG).

Enlargement

Enlargement is the process through which new member states join the EU. The project started in 1957 with six member states. Since then it has enlarged six times to the current 27 member states. Further enlargement is the best way to ensure stability and prosperity in neighbouring countries and beyond.

The prospect of EU membership has been and remains a powerful incentive to change. It has fostered the fundamental political and economic transformation we have seen in the countries of Central and Eastern Europe that joined in 2004 and 2007, and it is exerting the same powerful influence on Turkey, Croatia and the other countries of the Western Balkans.

As the good progress Croatia is making in its EU accession negotiations demonstrates, for the Western Balkans enlargement is our best chance to secure peace and prosperity, moving on from the conflicts of the 1990s. The pace of progress through the Stabilisation and Association Process – the first step towards eventual accession – is dependent on meeting rigorous conditions.  But with help from the EU, as well as bilateral assistance from the UK, the countries in the process are tackling a range of political and economic issues to bring them up to European standards.

In bridging the gap between Europe and Asia there is no more pivotal country than Turkey. It presents opportunities to secure energy corridors and increase trade links with what will be one of the world’s top ten economies. Turkish membership will also give the lie to the argument that democratic values are incompatible with a Muslim majority.