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East coast rail franchise to be brought back under public control – Politics live

Rolling coverage of the day’s political developments as they happen, including Theresa May and Jeremy Corbyn at PMQs

In the House of Lords peers are now debating the third reading of the EU withdrawal bill.

Unlike in the House of Commons, peers vote on amendments to the bill at third reading. There are various amendments tabled for debate today (see here – pdf) but the main one is one that has been tabled by Lord Krebs, a crossbencher, with Labour and Lib Dem support. It says the government must set up a body to maintain EU standards of environmental protection. The government is expected to lose when it gets put to a vote.

A cross party amendment, tabled by crossbencher Lord Krebs and with formal support from myself, Conservative Lord Deben and LibDem Baroness Bakewell, seeks to set out the environmental principles that should underpin UK law post-Brexit.

It should not be necessary. Last November, Mr Gove acknowledged the need to set out such principles and the remit for the statutory body which would hold public bodies to account. Then, late last week, we had first sight of a much delayed consultation document addressing these issues. Meanwhile, rumours abound that Gove has lost a battle with Cabinet colleagues on the proposed powers of the watchdog. It certainly seems that way.

During his Commons statement Chris Grayling, the transport secretary, and a leading figure in the Vote Leave campaign, repeatedly said that Labour would not be able to implement its plans to nationalise the railways under EU rules. After one Labour MP challenged him to renationalise the rail network, he replied:

What they [Labour] are proposing is illegal under European law.

The EU has a policy that prevents a national railway monopoly, but this is to make sure a pan-European freight network thrives, which is something Labour supporters would probably back. Most European countries have a nationalised railway system.

French president Emmanuel Macron recently nationalised a shipyardjointly owned with an Italian rival to prevent the domestic firm losing control. He was able to press ahead with his protectionist measure under Maastricht and Lisbon Treaty rules that leave room for policy objectives for which state aid can be considered compatible.

As a cursory glance at state-owned railways all over Europe will confirm, ownership is not a problem. Most European countries have state-owned railways. The UK is the exception, not the rule. It is true that EU law requires that infrastructure (rails, stations, etc.) be separate from the train services using them, but both can be publicly-owned or controlled, as they are in many EU countries. Railway companies from other EU countries, such as those operating services between Ireland and Northern Ireland or to and from the continent through the Channel Tunnel, are also entitled to offer services within the UK if they meet certain conditions. There is no reason why the UK could not bring private rail companies back into public ownership as their franchises expire.

Well substantiated mythbuster: EU rules do not stand in the way of public ownership of enterprises, nor do they hamper provision of public services. https://t.co/xwfmYSsvv3

Public service contracts for public passenger transport services by rail should be awarded on the basis of a competitive tendering procedure, except for those cases set out in this Regulation.

The UK’s island geography does make the merits of cross-border passenger rail services far less obvious than they can be on the continent. Nonetheless, the EU’s fourth rail package requires companies to competitively tender for rail passenger services everywhere in the EU, including in the UK. However, this does not prevent a bidder from being state owned. There are likely to be substantial economies of scale and scope which mean that a nationalised company would usually have a bidding advantage. In addition, the state can set quality, social and labour standards that state owned companies may in practice be better able to meet. Competitive tendering began in German passenger rail in 1996, twenty years earlier than required by the EU rules, but Deutsche Bahn, the state owned rail operator, still has over 75% market share (and its main competitors are regional operators owned by local German government). There is also nothing to stop a British government from nationalising any company winning a bid if it turned out not to be the already state owned company.

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.

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