Labour would be unable to nationalise the railways under new EU rules

Labour would be unable to nationalise the railways under new EU rules

A Labour government would be unable to nationalise the railways due to new EU competition rules.

Despite Brexit, the EU’s Market Pillar Directive is being implementing by the British Government and requires “competitive tendering of public service contracts”.

According to the EU, the legislation would “reduce the large number of remaining national rules” in rail transport which can discriminate against new operators.

Last week Jeremy Corbyn committed Labour to staying in a customs union with the EU, a policy which would require UK compliance with a large part of the EU single market.

But Labour’s new Brexit position and the Market Pillar Directive could invalidate one of Labour’s key aims: nationalisation. The Opposition has announced its intention, if elected, to remove rail, water, energy and the Royal Mail from private ownership.

Under the new rules, it will be technically possible to have a state monopoly on rail, if rail franchises are subject to competition and state-controlled bodies manage to win every contract.

But under this system, the government could comply with the new legislation but be caught out by EU state aid rules, which happened to the French government when it tried to maintain a state monopoly on rail.

In order to comply with the 4th Railway Package the French split up their state-owned railway SNCF into separate entities, SNCF Mobilités (operations and trains) and SNCF Réseau (infrastructure manager), both of which were wholly owned by the state railway SNCF (EPIC).

But the plan failed to comply with EU rules on state aid and a recent ECJ judgement found similar structures in France were not compliant.

Subsequently, a review commissioned by the French government recommended that both companies (Mobilités and Réseau) should be privatised.

The EU directive, part of the 4th Railway Package, aims to complete the single market in rail services. – It can be viewed online here.

Shadow Transport Secretary, Andy Macdonald, did not respond to our repeated requests for a comment.