Expressing implacable opposition to the harmonisation of European welfare standards, Mr Lilley said he wanted to see more cooperation against social security fraud and in reducing costs of benefits.
He used an international conference at the University of York, marking the 50th anniversary of the Beveridge report which formed the basis of social security legislation, to warn against a blanket approach to welfare provision and European interference in the British system.
'We are living in a fool's paradise if we think that we can or should ratchet up our schemes to match the most advantageous available in any member state . . . (That would be) simply a road to bankruptcy,' Mr Lilley said. Restraint was not compatible with the levelling up of provisions.
Some people advocated harmonising social security provisions to avoid so-called 'social dumping', but that was a thinly veiled appeal for protection, Mr Lilley said. 'Since we must be able to compete with non-European products, we must be able to compete with each other. The total costs of employment include pay and social charges. There is no point in making social charges uniform and leaving pay adjustable.' He dismissed as 'nonsense' those who advocated harmonisation because of the alleged need for a social Europe to offset the impact of increased competition in the single market: 'It is up to each country to tailor such help to its own needs.'
He said Britain was most at risk from interference over judgments by the European Court of Justice on its welfare system. He said the Barber judgment on pension rights for women had caused 'major problems with the timetable for introducing equal treatment of men and women in occupational pension schemes, possibly pushing many major pension schemes into massive deficit'. The court ruled that women should be able to retire at the same age as men, instead of at 60 and 65 respectively.
It was essential, he said, for EC member states to co-operate 'so that we are all fully aware of the implications for each others' countries of changes to Community law'.
Mr Lilley, who is reviewing entitlement to benefits in the search for public expenditure cuts, said measures were being taken across Europe to curb welfare spending in the face of the increasing numbers of elderly and jobless people and single-parent families.
'Uprating of benefits has become less generous in some countries, contribution conditions are being tightened and employer-employee contributions being increased. Here is another area where we can exchange views and learn from each other, indeed, where there is a positive advantage in having different systems,' he said. But governments needed to co-operate in the flow of information across borders to help eliminate fraud.
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