From trains to energy, Labour can deliver nationalisation within the single market

3rd July, 2017 12:30 pm

One of the central arguments made by “Lexiters” – people who make an alternative, left-wing argument for leaving the EU – was that EU competition law prevents governments from nationalising industries such as rail and energy.

However, across the continent in countries such as France and Germany, the state owns rails and energy producers. The argument does not hold together. We can leave the EU and stay in the single market. Labour can stay in the single market and deliver on their policies of nationalisation. The way to ensure that we have the prosperity to maintain railways and energy network is by putting jobs first and staying in the single market.

There is a huge difference between what European laws state and how they are implemented by sovereign nations. Article 101 and 102 of the Treaty on the Functioning of the European Union are the key passages when it comes to EU competition law. In the first of the two it states that activities which “restrict” or “distort” competition are prohibited. This is then given teeth in article 102 which assert that companies taking a “dominant position” would be “incompatible with the internal market”. This “abuse” could be by “directly or indirectly imposing unfair purchase” or “selling prices” or by “limiting production”.

Though the European Commission may have tried to push for the breaking up of state cartels, they have stayed in place. Just look at France’s national energy company, Électricité de France (EDF). From 1947 to 1999 the state owned all of the company. In 1999 it was forced by a European directive to open its firm to competitors. In 2004 it became a limited-liability company, floating 20 per cent of the company on the stock exchange. In 2008 the French state still owned 85 per cent of the company, meaning the French state still owns the company and controls its direction.

For Lexiters the railways are a key case study to why the EU prevents nationalisation of the railways. The 1991 railways directive and the fourth railway package, which would seek to create a pan-European rail service, are highlighted as seeking to break up European rail operators and pushing rail providers towards privatisation. But as an article by the TSSA points out it was John Major’s government, not the European Union, that led to the privatisation of the railways in the mid-1990s.

EU law means that all industries must be open to competition but that doesn’t mean that the state cannot own these industries. All of the mechanics of railways companies, such as assets, budgets and accounts, must be kept separate from the state. The provider of the rail infrastructure must have clearly separate accounts from those in the passenger service.

But this has been no impediment to the state’s ownership of rail passenger and infrastructure services across Europe. All these countries do is establish holding companies for which they provide the funding. In France the train operator SNCF and the providers of the rail infrastructure, the RFF, are state owned. The same stands for the Italy, where the state owns FS, which holds both infrastructure manager RFI and passenger train operating company Trentialia.

At the heart of  the Labour manifesto was the aim to go back to our pre-Thatcherite settlement for the utilities industry and bring “private rail companies into public ownership” like in France and creating a publicly owned and decentralised energy system like Germany.

If anything, European frameworks offer the opportunity to put a break on excessive corporate monopolisation. Further to this, the European public procurement regulations are about preventing companies being sold off to the lowest bidder. Europe provides the framework and the sovereign state has to enforce it. That’s why a social democratic leadership of the European Union is so integral to its future and creation of a truly progressive Europe.

It is to Europe that the Labour Party should look for the future of decentralised models of nationalisation. Germany, with its state funded regional banks, offer a model as to how Labour can create a new industrial settlement for the 21st century. Far from preventing nationalisation, state-owned rail and energy companies have maintained their presence on the continent when ours were being privatised. Labour can deliver their programme of nationalisation within the single market. The uncertainty of being outside it is what puts their manifesto of hope in peril.

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