Leaving the EU: State Aid, Public Ownership and Workers’ Rights — [Mr Philip Hollobone in the Chair]

Part of the debate – in Westminster Hall at 2:30 pm on 11th December 2018.

Alert me about debates like this

Photo of Laura Smith Laura Smith Shadow Minister (Cabinet Office) 2:30 pm, 11th December 2018

I agree with the points that my hon. Friend makes, and I share his concerns.

Economic democracy can empower groups and individuals who are otherwise excluded. Involving workers, the public and other stakeholders in economic decision making has both societal and economic benefits. Democratic participation can also enhance the effectiveness of publicly owned enterprises by tapping into grassroots forms of knowledge and the direct experience of employees and users of public goods and services. Democracy, if we are to view it as a vital part of popular sovereignty, must extend far beyond the ability to elect Governments every now and then. The active exercise of individual worker and community member ownership rights is a prerequisite of genuine democracy.

If those campaigning to leave the EU were at all serious about taking back control for the British people, they will recognise the role that democratic public ownership can play in tomorrow’s economy. It can be used to mobilise our economy in pursuit of other policy objectives. For example, democratic public ownership of our energy system could allow us to put tackling climate change at the heart of our energy system in a radical way, while protecting the industry’s workers throughout any energy transition. It is popular: opinion poll after opinion poll demonstrates that the public are crying out for more public ownership, even given the option of “whatever works”.

EU law specifically allows for the public ownership of a service provider, yet the treaty that contains that provision also sets out an economic policy based on an open market economy, with free competition and the liberalisation of services given special status. Some commentators have suggested that remaining subject to EU law will make the reversal of market liberalisation highly problematic for a UK Government who wished to do that.

To take the postal service as an example, the third postal services directive, adopted in 2008, established a clear floor for the postal market, ensuring that collection and delivery take place at least five days a week. At the same time, it has promoted competitiveness for its own sake, which has driven down standards and posed a threat. It fails to see the market as a natural monopoly, and insists that it must remain fully liberalised, restricting the UK Government’s ability to eliminate the market to sustain the publicly owned provider.

Although public ownership of the carrier is not prohibited, it is difficult to see how a UK Government who remain subject to EU law could create a public monopoly with workers and service users at its heart, and with the necessary cross-subsidisation to allow such services to thrive. As far as I am concerned, a true level playing field would establish regulations to ensure that private sector carriers could not undercut prices, and would include a re-establishment of collective bargaining, which I will mention later.

There are similar challenges in the energy sector. The European Court of Justice’s Essent ruling found that the Dutch ban on private ownership of shares in the energy sector amounted to a breach of free movement of capital. The experience in Germany shows that it is possible to create publicly owned energy companies to rival private energy suppliers, but only within the parameters of EU competition law. The recent fourth railway package poses similar challenges in the rail sector.

I briefly draw hon. Members’ attention to a recent dispute at Royal Bolton Hospital. In Alemo-Herron, the ECJ ruled that private employers that take on the provision of public services cannot be required to pay transferred staff the pay rises that they would have had if they had remained in the employment of the public sector. By prioritising the rights of private companies to business freedom over the rights of workers who find themselves in that situation, EU law creates a financial incentive to privatise our public services.

On state aid and public procurement, I recognise that the UK has not made full use of the flexibilities on offer to it as a member state. As with all other aspects of the debate, I do not blame the European Union for the pursuit of neo-liberal policies by successive UK Governments. This Government have certainly not needed any encouragement in that respect. I also accept that there will always have to be some rules to facilitate fair trade, but the EU state aid rules are far more stringent than those in the WTO subsidies regime.

Earlier this year, I called on the Government to provide funding to cover the cost of pay owed to care workers who were found to have been paid less than the minimum wage. The failure to do so risked bankrupting care providers and putting many vulnerable people at risk. The Government, however, had to discuss the issue with the European Commission because of concerns that state aid rules would prevent them from taking such action. I am not sure whether those discussions reached a conclusion before the Court of Appeal’s July ruling.

In addition to restricting the UK Government’s ability to react to certain economic events that threaten our industries, those state aid rules can restrict our ability to intervene proactively to support individual industries or domestic supply chains as part of a comprehensive industrial strategy.