Here's the real reason we can't renationalise the railways

Jeremy Corbyn and Andy Burnham have both pledged to renationalise the railways - but we can't do that while we're in the European Union, says Kate Hoey. 

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As we approach the end of Labour’s leadership contest one of the most interesting things about the last few weeks has been the resurgence of policy ideas that many had thought Labour had confined to the rubbish bin.

Take the nationalisation of the railways. When Ed Miliband was the leader of our party, efforts to put immediate renationalisation in the manifesto were thwarted. One year on, and both Andy Burnham  and Jeremy Corbyn have promised to renationalise Britain’s railway network.  The debate has certainly shifted left, but could either Andy or Jeremy deliver on such a promise? I’m not so sure, as neither candidate have said how they would address the big obstacle that their promise faces: the European Union.

Undoubtedly EU law will be a huge obstacle to any renationalisation scheme – especially one that aims to do away with competition and markets. The EU is clear that its objective is “Opening up national freight and passenger markets to cross-border competition”. Its directives and regulations have created what can only be described as a legal quagmire.   

The main EU law in this area was the First Railway Directive (which was replaced and upgraded in 2012 with a new version). This was the original law that gave the Tories the excuse they needed to introduce their privatisation agenda in the nineties. That law enshrined 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, 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.”

The 2012 Directive has kept that principle and goes even further, and says that one of its aims is "to boost competition in railway service management". It also stipulates that: "Greater integration of the Union transport sector is an essential element of the completion of the internal market... The efficiency of the railway system should be improved, in order to integrate it into a competitive market".

In short, this means that multiple train operating companies must be allowed to use the same track competitively. In Germany it has resulted in the state-owned Deutsche Bahn facing more and more competition from other firms.

Provisions like this mean that, under Prime Minister Burnham or Prime Minister Corbyn, there would be huge legal obstacles in the way of renationalising the railways. How will any effort to block private operators be compatible with EU competition law, for example?

Some claim that “European rules do not dictate that railways must be fully privatised” – note the interesting use of the word “fully”. It’s true that UK law has gone further than the EU law currently requires, but it is also true that the EU would prevent a nationalisation agenda from going as far as many would like.

This is a problem that is only going to get worse with time. The EU is likely to pass even more laws in this area. Since 1991 the EU has introduced three railway packages, which have imposed numerous legal requirements on the member states. A fourth package is on its way – which will further open up domestic passenger services to competition. All of these laws limit a UK Government’s freedom of action and will bind the hands of a future Labour Government. 

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. The facts are simple: the EU creates real legal problems for any nationalisation agenda and will bind the hands of a future Labour Government that attempts to deliver on such a manifesto policy. Honest politics demands detail: before they can give renationalisation a green light, we need to know exactly how the candidates plan to get the EU-shaped elephant off the tracks. 

Kate Hoey is MP for Vauxhall and co- chair of Labour for Britain.