Report set to fuel single-market row

A CRUCIAL test of how the EC puts into practice its new policy of subsidiarity is due today when the European Commission presents a controversial new report on the policing of the single market.

The single market which, from next year, provides for free movement inside the Community of goods, people, capital and services, presents Europe with a dilemma. Far from being part of the new Europe laid down in the Maastricht treaty, it was agreed by EC states in 1986. But some degree of central policing is necessary to make the single market work fairly, and to prevent countries from protecting their own industries. As a result, the single market is likely to continue to be the source of rows over the division of powers between 'Brussels' and national capitals.

Douglas Hurd, the Foreign Secretary, underlined the sensitivity of the issue last night when talking to the European Parliament about the Birmingham summit. 'The answer to the question of how competence should be pursued (in the new Europe) could be summed up in one word,' he said: 'Modestly. Modestly . . . That is the new element in the thinking of the Community. We have to make sure that the Community acts where it is proper and necessary to do so.'

The report, due to be published this morning by the European Commission, is the work of a high-level advisory group chaired by Peter Sutherland, the Commission's former competition commissioner. The remit given to the group was to identify what the Community needs to do to make sure firms in the EC can compete in the single market without excessive intervention from Brussels.

The Sutherland report is expected to list more than 30 proposals to make businesses more confident that they will be free to sell all over the EC. It also sets out plans for a transparent complaints procedure to overcome obstacles.

Mr Sutherland and his colleagues are believed to have made an unexpectedly radical recommendation. The report is understood to say that the Community should actually issue more central regulations, in which Brussels lays down in detail rules that are directly applicable in every EC country. Furthermore, it is thought to recommend a potentially explosive review of past legislation.

The proposal is likely to satisfy businesses, who have to find out in each country the detail of how general rules have been put into practice.

The report may also cast some doubt on the Commission's official policy on the principle of subsidiarity, published yesterday. In a paper prepared for the Birmingham summit but delayed after objections from Sir Leon Brittan that it might embarrass the British Government, the Commission lays down three principles to govern future EC action:

The power of the Community's member states should be the rule, and the Commission's powers the exception.

The Maastricht treaty clause that attempts to define the subsidiarity principle should be seen as dealing with how powers are exercised, not who has them.

The Community should act only when there is a demonstrable need.