TUC: It is government choices, not the single market, that are limiting British control over our own industries

4th August, 2017 7:00 am

Last week, France announced it would nationalise shipbuilding yards in Saint-Nazaire. The yards had been the target of a takeover bid by Italian firm Fincantieri. But the French government intervened. Nationalisation will safeguard jobs and protect France’s security interests, said President Emmanuel Macron.

This is exactly the type of decisive intervention we are often told is not allowed by the rules of the single market. And it has huge implications for what future British governments can do in the field of state aid, nationalisation and public procurement.

Firstly, members of the single market are able to decide whether most public services and social security systems are privatised or not. If a national government does choose to put services out to tender, then the rules of the single market often require that any company from within the EU can apply to run them. But the decision about whether to outsource, or to keep services in-house, is a matter for our government.

In some cases, current laws require that a service should be open to private competition. But governments have considerable scope to determine what standards should be met by providers.  The government could – like Germany, the Netherlands and France, for example – enable its own state-owned companies to run the majority of domestic passenger rail services.  But it chooses not to – even going as far as to actively prohibit state-owned companies from bidding. And this is despite allowing the Dutch government, for example, to run passenger services across Greater Anglia.

Indeed, the government has, over the past 40 years, chosen to privatise far more than most other EU governments, selling off whole chunks of British industry and public services because of an ideological preference for the private sector over public provision. But that has been a political choice, not a requirement of the single market.

Secondly, the single market does not prevent governments acting in the national interest where security is a concern, or in cases of market failure. The EU has allowed governments to support domestic steel industries in countries like Germany and Italy. And the government here could have done the same, but chose not to. Governments can also provide support through training, research funds for growing industry, and regenerating local economies.

Thirdly, national governments are allowed to use their considerable buying power to promote decent conditions and fair treatment of workers and local communities. Here again, though, the poor choices made by British governments shine through.

When the government transposed the latest EU directive into law in 2015, it watered-down rules to make contractors comply with national and international labour standards, and to take social, economic, equality and environmental criteria into consideration, rather than basing decisions solely on price. Wherever possible, the UK government opted to use guidance rather than regulation, ensuring the lightest possible interpretation of those EU rules designed to protect and enhance public services.

The EU’s rules on public procurement are rather more progressive than the practices of British governments during the past few decades. Far from EU law prohibiting it, the government could choose to require those bidding for government contracts to train people, use local labour and pay decent wages – all while remaining within EU law.

Fourthly, the EU’s rules on fair competition work both ways – protecting our industries from unfair competition. Take the steel industry, for example. The EU used its fair market measures to take action against Chinese steel dumping, despite attempts by the British government to prevent that.

The common thread is the ideological refusal of the government to intervene more decisively in industry and the economy – not the rules of the EU or the single market in preventing such action.

A future Labour government might, for example, want to support strategically important industries or specify that public money is spent only with companies that invest in training local people. Such manifesto promises can clearly be fulfilled with Britain remaining inside the single market.

Bringing the railways back into public ownership would be possible, too. New EU rules that come into effect in 2020 will oblige member states to open domestic passenger services to competitive tendering. But there is nothing to prohibit state-owned companies from bidding and winning those contracts, should the government choose to allow it. And there is an exception to allow direct awarding of contracts to state-owned companies when done on the basis of objective efficiency and performance criteria.

Leaving the single market, on the other hand, would be unlikely to increase the freedom for government to intervene – or to ‘take back control’ as some might say. In fact, it may lead to government intervention in industry and privatised services becoming harder.

If we want to make a new trade deal with the EU from outside, they will want us to sign up to the existing EU rules on state aid anyway. That’s part of the negotiating terms that the European Council has set out. And the EU may be less sympathetic to arguments about how strategic an industry is when put forward by a non-member than when a member makes that argument.

If we do free trade deals with other nations outside the EU, they too will require rules on state intervention – possibly much tougher than the single market’s rules. The US government wants much more freedom for its private health companies to run the NHS for example. Even if we just fell back on WTO rules, they also place constraints on state aid.

Remaining in the single market would not prevent a future government from intervening in the economy. Governments like France and Germany already do that. But leaving the single market could damage the economy, raising prices and cutting wages. And nobody voted for that.

Owen Tudor is the TUC’s Head of EU and International Relations

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