Renationalising the railways

This week in the New Statesman, former Labour Minister Kate Hoey has published an article headlined “Here’s the real reason we can’t renationalise the railways” (http://www.newstatesman.com/politics/2015/08/renationalise-railways-what-no-one-will-tell-you-we-cant-while-were-eu), though in fairness in the article itself she only seems to go as far as to pose the question “could either Andy or Jeremy deliver on such a promise?”, which they have both made. She answers her own question with, “I’m not so sure”, because “neither candidate have said how they would address the big obstacle that their promise faces: the European Union.”

The root of the problem, according to Ms Hoey, is the EU’s aim of “Opening up national freight and passenger markets to cross-border competition“, operationalised by the First Railway Directive (most recent version in 2012) which enshrines the role of the private sector “by making it a legal requirement for independent companies to be able to apply for non-discriminatory track access on a member state’s track” and in the more recent 2012 version stating the aim of “boost[ing] competition in railway service management“.

The Directive is also “calling for: “separating [of] the management of railway operation and infrastructure from the provision of railway transport services, separation of accounts being compulsory and organizational or institutional separation being optional” and it is here the wheels really start to come off Ms Hoey’s train.

First of all, the Directive does not even require track ownership and train services to be in separate ownership – in terms of EU law there is no need for Network Rail – it could quite easily be a subsidiary of the service-provision business, though they would need to be organizationally distinct and publish their own accounts.

Secondly, Ms Hoey seems unable to appreciate the irony involved in her own argument, when she subsequently goes on to refer to Deutsche Bahn which, while nominally a private company has only one shareholder – the Federal Government of Germany. In other words, renationalising Britain’s railways could be achieved on the German model without, presumably, offending EU law.

So what is it that is going on in EU law? One of the fundamental aims of the European Commission has been to create markets which are genuinely European. For instance freedom of movement has as one of its aims to create a European Labour Market. In the same way, the Directive that Hoey refers to aims to create a European market in rail services. For instance, that when goods are being sent from, say, Germany to Spain by rail, they will have to pass through France. The aim of the Directive is that the exporter from Germany can select their own provider and will have no hindrance in using the railtrack in Germany, or France or Spain. Certainly its aim is to prevent the situation where, for instance, the train is stopped at the border with France to be hitched to an engine provided by French railways. This is hardly the same thing as wholesale privatisation, which has landed the UK with the idiotic situation where rail services in Scotland are provided by Abellio, a subsidiary of the Dutch national railways Nederlndse Spoorwegen.

An important part of the EU requirements quoted by Hoey is this that it is “a legal requirement for independent companies to be able to apply for non-discriminatory track access on a member state’s track”. But this is the case for the UK just now, so it should, in EU terms, be permissible for another rail company to apply to offer services in competition with those provided by, for instance, ScotRail. But no one does, or ever has. What has happened is that the UK rail system has been divided up into franchises/ regions, and fixed term contracts have been allocated – competitively as long as the public sector doesn’t get carried away with itself and apply – to private sector companies, who receive increasing amounts of public subsidy for the privilege of providing our rail services (and not always well). This, it should be clear, goes way beyond the requirement of allowing non-discriminatory access. It would be perfectly possible for the old BR to continue to exist and operate, just as long as other providers were given access as well. Current practice suggests that this is much more likely for freight services, whether between countries or different parts of the UK, than it is for passenger provision.

Essentially, Hoey is over using some EU regulations to argue that nationalisation of Britain’s railways is not possible, when the fact is that we could follow the German or the Dutch model of railways, still effectively in public ownership.

She concludes her article by arguing that “It would be hyperbole to say that all efforts to renationalise the railways would be blocked by the EU, but it would be equally naïve to dismiss the problem“. It would indeed be naïve – certainly remiss – to imagine that the EU does not create issues, but as the German and Dutch models show these issues can be managed, and managed effectively, to the extent that the Dutch national rail company can come over to the UK and manage our services at a profit to themselves which, no doubt is recycled back into the Dutch national rail system.

Hoey goes on to argue in her conclusion that “Honest politics demands detail“, and an honest politics on this matter would be to recognise that while the EU might create constraints, it is possible – as the Dutch and the Germans have shown – to live well and prosper within those constraints. These constraints must be recognised and need to be managed, but they are no argument to sustain the view that British railways cannot, or should not, be renationalised.

But that omits the final question I want to address, which is “why Kate Hoey” who is after all a Labour MP, and while Labour have given up on “secur[ing] for the workers by hand or by brain the full fruits of their industry and the most equitable distribution thereof that may be possible upon the basis of the common ownership of the means of production, distribution and exchange, and the best obtainable system of popular administration and control of each industry or service“, we might ask why a current Labour MP should actually argue against it. Perhaps the truth of this is contained in the following quote from a then member of the Conservative Shadow Cabinet (2008), that “Although Kate would sit very comfortably on the Conservative benches, in a way she’s far more useful to us haranguing the Government as a Labour MP,” (http://blogs.telegraph.co.uk/news/jonathanisaby/3668691/With_foes_like_Kate_Hoey/) Either we have to express astonishment that a Labour MP can misuse EU regulation to argue against nationalisation of a public utility, or we have to ask why this person remains a member of the Labour Party at all? Perhaps we should ask both questions?

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