Cut state aid, free the market: that's Labour

A free-market drive to promote enterprise, increase labour mobility, and reduce state aid will loom large in the agenda for Britain's European Union presidency, to be unveiled today by Gordon Brown. The Treasury's Jobs Action Plan includes confirmation that the national minimum wage might be set lower for young people.

The Chancellor will, in Luxembourg today, let his counterparts around Europe know what Britain thinks about crucial policies affecting the move towards a single European currency. He will argue that action to promote employment is essential both for the single market and for a successful and sustainable euro for those who decide to join.

The Treasury sees the Jobs Action Plan plan as helping to promote employment growth in the EU, which it sees as an essential precondition for eventual British entry into a single currency.

Mr Brown's speech coincides with the distribution to today's meeting of the finance ministers of a European Council document encouraging the Chancellor to stick to his tough budgetary policies as a means of bringing Britain's deficit within the criteria required by the Maastricht Treaty. In stressing the importance "of maintaining a rigorous control of public expenditure" the document acknowledges that such controls have "featured in budget commitments in recent years".

But the Chancellor's fellow finance ministers will also be interested in what his paper reveals about how Tony Blair and he intend to use Britain's presidency, beginning in January, to overcome resistance to completion of the single market and promotion of small- and medium-sized business throughout the community. Identifying the focus of the conference, the paper says "the UK recognises that the development of a culture in which enterprise can flourish and is rewarded is a crucial issue not just for itself but for Europe as a whole".

The plan seeks to explain New Labour's "third way" between wholesale labour market deregulation and the traditional European "social model" of elaborate employee protection. The paper speaks of the need to strike "the right balance" between "economic efficiency and social inclusion".

The paper strongly emphasises the importance of the Government's welfare to work programme, of extending employment opportunities to those excluded from the labour market, and the desirability of its planned national minimum wage. It says that a minimum wage is "right in principle" though it says it will not be set by "rigid formula". It confirms that the Government will consider lower minimum rates for younger workers.

The paper also says that British unemployment will not be reduced "overnight" and adds: "We will need to judge the success of our policies in 5-10 years, taking account of the effect of the business cycle."

But it also adopts, in a section entitled "Making Markets Work Better" a markedly free enterprise tone in describing some of its priorities for the EU. These also include:

l A drive on competitiveness, including enforcement of the single market: This will include an effort to lower state aid by member countries which it says "distort competition and investment decisions" and so "actually reduce levels of output and destroy jobs."

l Improvements in the EU's regulatory regime: The paper discloses that the Government is also planning a presidency conference on "Better government: a more effective regulation" intended to bring together "EU and international best regulatory practice."

l Labour mobility: The paper lays heavy emphasis on the role of of increasing jobs and employability - allowing workers to find jobs away from their own home districts. The paper says that, recognising that fearing of losing low rent council homes plays a big part in discouraging mobility and the government is therefore promoting a healthy private rented sector including grants to facilitate people moving from low cost cost housing in one area to another. The paper pointedly says that "promoting labour market mobility will be especially important in the context of the creation of a single currency".

The paper is largely a description of what the UK is doing to promote jobs and labour flexibility and makes it clear that the means of job creation will differ in each country. But it will leave Mr Brown's colleagues in no doubt that he and Mr Blair are determined to use the Presidency to improve competitiveness - for example with the US and the Far East - and lubricate the EU labour market.