The focus this week has been on preparations for the European Council in Brussels today and whether there will be agreement on the need for limited treaty change to strengthen the eurozone and stabilize the volatile markets. In this blog, I want to return to one of the recurring arguments put forward by those who want the UK to leave the EU, by arguing that the EU creates high levels of regulation and tax, making it uncompetitive. They say that leaving would free Britain to concentrate on growing markets like China and India.

While many would agree that some of the older directives, such as the working time directive, should be altered or withdrawn, it is worth recalling that Member States such as Germany manage to export manufactured goods to the BRICs more effectively than we do despite being fully affected by EU regulations (see my blog of 11 November).  This is because they are better at imbedding new technologies into existing products. As the Economist said on 24 November, “In the early 1980s about 6m people [in Britain] worked in manufacturing; today the figure is barely 2.5m…Germany’s much-lauded Mittelstand companies have succeeded through foresight and by specialising in the unglamorous business of making parts for complex final products.”

This week, Eric Schmidt, Executive chairman of Google was in Brussels speaking at the first Innovation Summit. He informally reminded some MEPs of the recent McKinsey Report which showed that the digital economy creates 2.6 jobs for every job lost, and also pointing out that mobile connectivity can help stimulate growth. He said that in the coming years, the real wealth creation will come from the interaction of mobile, local and social: most successful new innovative start-ups will include these elements.

At the Innovation Summit, Mr Schmidt gave some pointers as to how Europe’s future need not be one of crisis - but one of innovation. He outlined an agenda focusing on how governments can identify “smart problems” and steer entrepreneurial energy in a productive direction through:

• Education: “We need to invest in training a new generation of smart problem-solvers, and encourage innovative methods for teaching and learning.”
• Copyright and other Internet issues: Europe should  implement a regulatory framework which fosters cloud computing and other innovations.
• Patents: Europe should avoid following the U.S. lead on patents because Europe is “still light years ahead of us!”.
• Culture of entrepreneurship: Governments should provide support and investment for world-class clusters of innovation, like the UK government’s Tech City initiative in East London.

But is anybody in the Government from the top down listening? The Government still wants to spend billions on a high speed railway which will do little to generate thousands of jobs. This week, not only has an extra £500 million been announced for building a tunnel underneath the Chilterns, but Attorney General Dominic Grieve said there was “great uncertainty as to what the future might hold” for locals near the line because suggestions that a later feeder route or “spur” could be built linking the line to Heathrow airport is likely to cause a long-term “planning blight” (see The Daily Telegraph of 5 December). A much better idea would be to invest more in digital infrastructure.

On top of this, the Government’s Autumn Statement includes provisions for urban broadband fund to create up to 10 “super-connected cities”, but does nothing for the many rural areas which are still internet “non-spots”. Hundreds of thousands   of small companies are unable to be fully competitive in an interconnected world because they simply cannot get a quality connection (see my previous blog). A constituent of mine from Milton Keynes recently emailed me to say that it takes him over 15 minutes to read 2-3 emails, and that his wife cannot connect to her university courses because their internet connection is too slow. This is simply unacceptable in the twenty-first century.

Why can’t the Government see the writing on the wall? Perhaps because it is digitally written.

HS2