Opinion of the Committee of the Regions on 'The role of local and regional authorities in public service` (97/C 116/07)

THE COMMITTEE OF THE REGIONS,

having regard to the decision of the Committee of the Regions of 15 November 1995, according to Article 198C, paragraph 4, to refer the preparation of this opinion to Subcommission 1;

having regard to the opinion of Subcommission 1, adopted on 11 December 1996, the rapporteur of which is Mr Ken Bodfish (CdR 148/96 rev. 3);

having regard to the Commission Communication 'Services of General Interest in Europe` (COM(96) 443 final);

considering the Treaty establishing the European Community, and, in particular, Article 94 thereof,

considering the report from the European Centre of Enterprises with Public Participation (CEEP) entitled 'Europe, Competition and Public Service`,

unanimously adopted the following opinion at its 16th plenary session on 15 and 16 January 1997 (meeting of 16 January).

1. General observations

1.1. The Committee of the Regions (COR) welcomes the opportunity to consider the issues raised by the CEEP document relating to the question of the proper balance between the operation of the market and the role of the public sector in the Union. The document provides a useful oversight of the development of the European Community from a basic customs union to the present complex organization with extensive competencies in the regulation of public utilities, some of which have been traditionally provided by the public sector. It also traces the increasing move towards the promotion of competition in the provision of public services across Europe, together with the rise of the concept of the separation of the regulation of these 'services in the general economic interest` from their provision and the protection of consumers' rights through a system of charters.

1.2. In commenting on the CEEP document, Subcommission 1 in its Opinion, takes the opportunity to state its views on the role of local and regional authorities in the provision of public services; the increased importance of citizens' rights and consumer protection and the role of local and regional authorities in the regulation of public services.

1.3. The Opinion raises certain concerns about the CEEP proposals, which are to some extent addressed in the Commission's Communication on 'Services of General Interest in Europe`. Consequently, the Opinion comments both on the CEEP proposals and the Communication.

2. The role of local and regional authorities in service provision

2.1. The CEEP report is a valuable contribution to the current debate on how to reconcile the liberalisation effects of the Union's competition policies with the preservation of general economic interest requirements traditionally associated with the provision of public services. At the heart of this debate is the issue of the rights of the people of the Member States, both as citizens and consumers, to be able to receive quality service, whether the provider is a public or a private body. The interaction of competition, the provision of public services and the consumer interest is central to the debate, as is recognised by the Commission's Communication.

2.2. The Committee of the Regions is firmly of the view that local and regional authorities and their elected members have a central and crucial role to play in this area. This role has two essential components: their responsibility for the provision of public services and, in their role as democratically elected bodies, their concern to protect the rights of their citizens.

2.3. Firstly, local and regional authorities throughout the Member States have the responsibility for providing a wide range of services to the public, such as education and cultural services, housing, transport, social support and medical services. The particular mix of services for which local and regional authorities are responsible varies considerably from country to country but, taken together, they have a significant impact upon the quality of life of the citizens of the Union.

2.4. The responsibility for the provision of the service by the local or regional authority does not imply that the service has to be provided directly by the authority. Often it is provided by a private supplier working under contract from the responsible authority. In either case, however, the responsibility for the services remains with the authority and, as such, the issue of the quality of the service provided to their citizens is directly a matter of central concern for the authority. In such instances, the authority will have a crucial role in specifying the services to be provided on its behalf and in ensuring effective delivery.

2.5. The second component of the role of local and regional authorities in this debate is in their capacity as democratically elected bodies. As such, they are naturally concerned with protecting the rights of their citizens. Where public services are provided by other bodies, whether Government agencies or private companies, local and regional authorities can undertake the role of 'champion` of the citizen. This role could be a formal one with the authority acting as the statutory regulator of the services to be provided to its citizens. In this role, the authority would be responsible for ensuring that the service provider is kept to the service obligations envisaged for the proposed European charter - continuity of service, equality of access, quality and efficiency and agreed standards of performance.

2.6. More typically, however, a local or regional authority may not have a statutory regulatory role. Nevertheless, the authority may see it as an extension of its democratic role to act as the 'voice` of its citizens in monitoring the performance of other service providers in its locality. Even without a formal role in regulating the service, authorities could still seek to ensure that the service provider is aware of its obligations: represent the views of citizens in discussions on service standards and take up complaints on behalf of individual citizens. The role of 'citizens champion` is increasingly seen as an important part of the democratic role of local and regional authorities. The COR sees this role as contributing to the accountability of those bodies providing public services to the citizen.

3. Citizen's Rights and Consumer Protection

3.1. It is clear that the rights of citizens as consumers of public services are becoming increasingly important in the Member States. The CEEP document, in proposing a European Charter for Public Service, sets out fundamental principles of public service - accessibility, universality, equality, continuity, quality, transparency and participation by the consumer. These principles are fully endorsed in COM (96) 443 final.

3.2. The principles are appropriate in relation to public services whoever is the provider. They are significant for local and regional authorities in their role as providers of services. It has to be admitted that public bodies, in their provision of services, have not always in the past adhered to those principles. The reasons for this are complex, but the result has often been monopolistic practices, with poor service, inflexibility and no redress for complaints.

3.3. The principles can provide a valuable guide for local and regional authorities in their role both as service providers and as citizen's champions. They are valid whatever the service provided or whoever the provider, but must be capable of taking account of the wide variety of arrangements for service delivery, traditional practices and economic circumstances.

4. The CEEP Proposals

4.1. The significant role of local and regional authorities in the provision of public services forms the background to the consideration by the Committee of the Regions of the CEEP report and, in particular, the conclusion of the report that the present legal framework of the EU does not provide sufficient recognition of the role of the public sector. The Opinion provides the views of the COR on the three specific proposals contained in the report:

- an amendment to the Treaty, in the form of a new Article 94A;

- the adoption of a European Charter for the public sector, laying down principles applicable both by the Community in the exercise of its competence and by Member States in the context of subsidiarity; and

- the introduction of an assessment body which, in collaboration with all the partners involved, will ensure the follow-up of national and community policies.

4.2. The CEEP report clearly illustrates the widely differing traditions in the provision of such services in Member States with contrasts between the free-market approach and the state-interventionist approach in various states, often with roots in the 19th Century. The report also emphasizes the wide differences in the constitutional and legal position of the public sector in Member States. These widely differing approaches lie at the heart of some of the concerns which the COR has relating to the practicality of the CEEP proposals.

4.3. Whilst the report does provide a useful background to this diversity of approach, there is some concern that it still does not comprehensively portray the variety of approaches as it does not appear to have adequately taken account of the arrangements which have evolved in some of the Member States in Scandinavia.

4.4. The report also appears to build its conclusion, which potentially would have wide-ranging consequences for public services, on a relatively narrow range of services, such as transportation and telecommunications, which tend to reflect the areas of responsibility of the active members of CEEP, and in particular the background of the working group which produced the document.

4.5. There is concern that the report does not appear to have taken into account the great diversity of services to the public which are typically provided by local and regional authorities in the Member States as referred to earlier. This rather narrow focus has meant that there has been no real consideration given to the implications of the introduction of the CEEP proposals to those services to the public provided by local and regional authorities.

5. The Commission's Communication on 'Services of General Interest in Europe`

5.1. The Communication is a valuable contribution to the debate on the role of services of general interest in the Union; their provision and the relationship with the competition requirements of the Single Market.

5.2. The Communication is particularly important in the context of this Opinion, because it recognizes:

- the role of general interest services as a 'social cement`, reflecting a sense of community;

- the variety of different ways of organising general interest services;

- the variety of service providers (public, private or partnerships);

- the role of local and regional authorities in regulation;

- the economic importance of these services, which requires the need to face 'the challenge of change`; and

- the role of consumers.

5.3. The Communication emphasizes that general interest services must serve society as a whole and 'implies certain basic operating principles: continuity, equal access, universality and openness`. There is recognition of the need to strike a balance between the duty to provide general interest services and the promotion of market efficiency, accepting that there are limits to market mechanism in this area.

5.4. The Communication specifies two basic principles governing the Commission's approach to public services:

- neutrality in relation to the status of the service provider; and

- freedom of the Member State to define what are general interest services.

5.5. Equally important, given the concerns raised by the subcommission, is the statement that 'the conditions of Article 90 do not apply to non-economic activities`. These are areas which are often the responsibility of local and regional authorities. Indeed, the services which are referred to in detail relate primarily to transnational services - telecommunications, postal services, transport, electricity and broadcasting.

5.6. The Communication proposes that an amendment be made to Article 3 of the Treaty by adding a new paragraph (u) as follows:

'(u) a contribution to the promotion of services of general interest`.

5.7. The aim of this addition would confirm the Commission's view that general interest services already fall within the Community remit, enabling the Community to take such services into account when drawing up policies. This proposal is accompanied by a statement that such services are 'primarily an area for action by the Member State`. The Commission does not intend to amend Article 90 of the Treaty.

6. CEEP proposal to amend Article 94 of the Treaty

6.1. The CEEP report proposes a re-definition of the role of the public sector in the market economy of the European Union and proposes amendments which would enable the Union to draw up 'an overall conception of the principles of the organization and working rules for services in the general economic interest` and 'the regulation of the operation of such services`.

6.2. The COR fully understands the concern in some quarters at the inter-relationship between the Union's competition policy and the provision of public services. It is understood that the CEEP proposals are initiated partially to ensure that the operation of the Union's competition policy does not undermine the provision of universally available public services to citizens of a Member State. Indeed, the COR is in general support of the issues which need to be addressed in the provision of services of general economic interest and which are included in the outline for a charter. In particular, the fundamental principles of public service referred to earlier are supported.

6.3. However, there remains much uncertainty as to the scope of the present powers of competition in relation to the whole range of public services provided in Member States. The contribution of Commission officials to the discussions of Subcommission 1 suggested that existing powers under Article 90(2) permit some measure of exemptions for services of general economic interest and provide certain constraints on competition - for example, to ensure the provision of a universal service. More importantly for local and regional authorities, however, was the Commission's view that, in relation to services provided by such authorities, the competition Articles of the Treaty have relatively limited impact, except in those areas where services are actually or potentially of a transnational nature: for example, transportation; telecommunications; postal services and energy. These are the areas upon which the CEEP report appears to concentrate and upon which it has based its proposals for an amendment to the Treaty.

6.4. But as stated earlier, the great majority of public service provision by local and regional authorities is not transnational in character and the COR would maintain that they do not fall within the scope of the Union's competition policy although the responsibility of local and regional authorities to recognize their obligations under existing competition legislation is well understood.

6.5. In view of these concerns, the COR welcomes the statement in the Communication that the Commission does not intend to amend Article 90.

7. Charter for Services in the General Economic Interest

7.1. The CEEP report proposes a European Charter which would set out the services of general economic interest which might be subject to the Charter; obligations for operators of such services; principles for the organization and management of the services; and a role for the Community both in harmonizing such services introduced by Member States and, in certain circumstances, introducing services of general economic interest on a Community-wide basis.

7.2. The COR supports, in a general sense, the principle that where public services are provided to citizens, there can be a benefit in setting out explicit standards of service which citizens can come to expect. For that reason, the COR would support the issues listed as obligations for operators of services set out under Chapter III of the proposed Charter, including continuity of the service; equality of access; adaptability; quality and efficiency, including consultation with citizens and adequate complaints' procedures. The COR sees these obligations or principles as a valuable guide for all service providers - including local and regional authorities.

7.3. However, such practical experience as exists of the operation of Charters as a means of maintaining and improving the quality of public services, would suggest that they are most effective when the provisions of the Charter are reached after a consideration of the appropriate balance between the ability of the service provider to achieve particular targets and the legitimate expectations of the citizens receiving the service. This is a delicate balance and one best arrived at by the organizations closest to the provision of the service and the representatives of the citizens' concerns. In the COR's view, should the matter of compatibility between the Treaty's competition provisions and citizens' general access to services be discussed at the IGC, care must be taken to ensure that the determination of criteria for public service is a national, regional and local responsibility, which should take precedence over the Treaty's concern with competition.

7.4. In the local and regional government context, the range of services provided to the public is essentially best negotiated in terms of standards within the Member State by the organizations statutorily responsible for the provision of the services and their citizens.

7.5. As emphasized earlier, a Charter may be useful as a guide, or framework of reference for use by service providers and consumers in addressing the provision of services. But given the great variety in historical, constitutional and legal backgrounds, the range of services provided, the relative economic strengths of Member States and present variety of expectations amongst consumers, the Charter should not be seen as a rigid standard - a supportive instrument, but not a strait-jacket.

7.6. The CEEP proposal envisages that each Member State should decide which services should be subject to the Charter. This will, of itself, produce an extremely varied approach, given the wide variety of arrangements for the provision of services in Member States. When taken with the variety of standards for particular services both between and even within Member States, a huge range of standards will result. This is, of itself, not objectionable. The principle of subsidiarity will encourage diversity of approach. Yet it is then envisaged, under Chapter I, that the Community should attempt to harmonize these services. The COR has the strongest doubts whether it is appropriate for the Commission to attempt to extend its competence to the harmonization of the range of public services presently provided by local and regional authorities, or practicable to do so.

7.7. The COR notes that the Communication, whilst referring to 'basic operating principles` makes no reference to the production of a Charter. Indeed, the Communication emphasizes the subsidiary principle in its approach to general interest services.

7.8. Whilst strongly supporting the value of explicit standards of service, the COR remains unconvinced as to the value of a European Charter, except possibly in relation to the small number of transnational services to which the Communication draws attention.

8. The Role of Regulators

8.1. Chapter IV of the Charter seeks to bring the support of the Union behind the separation of regulators and operators. The COR welcomes the recognition of the role of regulation in the Communication. This model has attracted considerable interest in recent years, and has increasingly been adopted in certain Member States, particularly in relation to the regulation of monopoly public utilities. In the context of local democracy, a role of regulator could be envisaged for local and regional authorities. Such a role could be particularly relevant in relation to services which are the responsibility of the authority to provide, but which have been contracted to a private supplier. In these instances, authorities could - and often do - set out the specifications for the service to be provided and ensure its effective delivery. Similar arrangements could be envisaged where the responsibility for the provision of the service lies with another public body or private company, but where the service concerned is of particular significance to the local population - for example, water provision or transport systems. Here, the local or regional authority could be specified as the regulator for that service, acting on behalf of its citizens as consumers. The COR is pleased that COM(96) 443 recognizes that local and regional authorities are able to act as regulators.

8.2. The crucial element is accountability. The regulator must be responsible in a clear way to the citizens for whom the services are provided. This link may vary according to the service, but accountability to a democratic body is essential. Experience of this model is still relatively limited, but some criticisms have been made where the regulator's accountability is uncertain or blurred. The COR would not wish to see the Commission adopt a prescriptive approach to regulation which, in many circumstances, ought better to be agreed at Member State level.

9. CEEP proposal for an observation post for services of general economic interest

9.1. Our concern at the principal proposals contained in the CEEP report are based on the perception that they have been put forward without giving adequate attention to the range of services provided by local and regional authorities. The COR urges further examination of the proposal to establish an observation post for services of general economic interest. Referring to, among other things, the principle of subsidiarity we do not consider that the EU should regulate how providers of public services should organize their activities particularly those services provided by local and regional authorities. The European Commission already possesses the responsibility for the general surveillance of the legal aspects at a European level, a role recognised by the Commission. This role could, however, be strengthened through the participation of local and regional authorities. The surveillance should be supported by committees and/or reference groups in which representatives from both national and local level are represented when questions of public service are concerned.

10. Conclusion

10.1. CEEP proposal to amend the Treaty

10.1.1. The COR supports the statement in the Communication that no amendment is necessary to Article 90.

10.2. CEEP proposal for a European Charter

10.2.1. The COR has observed that the European Council has provisionally concluded that the IGC should look at the matter of compatibility between the Treaty's competition provisions and the principles of general access to public services in the citizen's interests. Further, the COR has noted that the principle of maintaining and improving public services through Charters specifying rights and obligations between service providers and citizens has been discussed in this connection. The COR supports the principle that the existence of local Charters specifying rights and obligations between service providers and citizens can, in many circumstances, contribute to the maintenance and improvement of public services. However, they are of the view that such Charters are best negotiated at the level closest to the citizens, particularly in those cases where the service concerned has no transnational impact and will need to be fully compatible with the constitutional and statutory provisions of the Member State concerned. Whilst the provision of a European Charter could in principle be a valuable support and encouragement to the development of quality public services, as a framework for reference, rather than an instrument for harmonisation, the COR remains unconvinced of its practicality, particularly in the light of the emphasis in the Communication on the limited nature of harmonisation envisaged and on the primary role of the Member State in this area. In the view of the COR, local and regional authorities have a significant role to play as providers of services, and this role could be expanded to include the monitoring and regulation of services provided by other public bodies or the private sector.

10.3. The Commission's Communication

10.3.1. The COR welcomes the Communication as a valuable contribution to the debate on the provision of public services of general interest.

10.3.2. The COR supports the view that such services are significant both to the economic and social health of the Community.

10.3.3. The COR welcomes:

- the recognition of the diverse nature of provision and regulation;

- the recognition of the role of local and regional authorities in regulation;

- the statement that Community policy is not concerned with the status of the body providing the service; and

- the confirmation that the definition of such services is primarily a matter for Member States.

10.3.4. The COR supports:

- the proposal to develop the concept of universal service or public service obligations, particularly in terms of the quality of service and users' rights; and

- the statement that the provision of general interest services, such as health, welfare, education, water and housing is a matter of national or regional responsibility (although capable of Community support).

10.3.5. In relation to the proposal to amend Article 3 of the Treaty, the COR

- recognizes the emphasis placed throughout the Communication on the subsidiarity principle in relation to services most often provided by local and regional authorities,

- welcomes the confirmation that general interest services continue to be primarily an area of action by the Member State; and

- on the basis that the amendment would serve only to confirm that such services already fall within the Community remit, would not oppose such an amendment.

Brussels, 16 January 1997.

The Chairman of the Committee of the Regions

Pasqual MARAGALL i MIRA