For a prime minister who insists that Britain has nothing to fear from a new EU treaty that greatly extends lawmaking by a qualified majority of Union member states, the latest EU assault on Britain's labour market is a severe embarrassment. Adding no doubt to Gordon Brown's irritation, this battle should never have had to be fought.

The EU directive on temporary workers' rights is not new. It is shopworn goods, stuffed in a filing cabinet three years ago by José Manuel Barroso, the head of the European Commission, along with other social and employment legislation that he rightly judged to run counter to the competitiveness requirements of the EU's much discussed but little advanced Lisbon agenda. In the name of “social Europe”, the Portuguese rotating presidency has brought it back from the dead — and, against vehement UK objections, succeeded yesterday in linking its fate to that of another British bane, the Working Time Directive, thus piling on pressure to compromise. There will not now be a vote until after the EU treaty signing ceremony next week. But that is small comfort to Britain's anxious employers.

This directive is a malign consequence of a fundamental misconception that has long governed EU legislation on working conditions, the idea that protecting workers and protecting jobs are one and the same. This is economic nonsense; decent employment conditions are in everyone's interest, but the evidence is that excessive protection for those in work depresses growth rates and inhibits job creation.

In overregulated countries such as Italy, Belgium and France, the near-impossibility of shedding workers inhibits employers from taking on extra people, artificially constricts the job market and confronts millions with a choice between no work at all, and undeclared jobs in the “black” economy where there is no security whatever. In any EU “social justice agenda” worthy of that name, the focus of concern would not be discrimination between “insiders” on companies' regular payrolls, and “outsiders” called in to fill temporary manpower needs, but between those in work and the real outsiders, those with no jobs and scant chance of finding them. The jobs-for-life culture of traditional trade unionism is not just outdated and unrealistic; it exacerbates the problems of social exclusion.

Labour market flexibility is the key to individual opportunity, as well as being a critical factor in equipping Europeans to compete successfully in the global marketplace. Every week, recruitment agencies in Britain place 1.3 million people in temporary jobs and Ireland makes a similarly high use of agency workers. In both countries, the result has been enviably high rates of economic participation. These are real jobs. They help families to strike the work-life balance that suits them and students to get on the jobs ladder, while enabling employers to respond flexibly to shifting economic circumstances. An estimated 250,000 of these jobs would be lost in Britain if EU law forced employers to treat temps the same as permanent staff after only six weeks in a workplace.

A common law on temporary contracts is not needed to secure adequate worker protection. Its only relevance to the functioning of the single European market is that it would accelerate outsourcing to other countries. It would disproportionately damage the British economy. If Britain cannot win this battle, and the odds do not look good, there can be no case for British assent to a treaty that makes more such defeats a certainty.