Corbyn reignites Labour debate over EU rules on state aid and socialist manifesto

Jeremy Corbyn Black and White

Jeremy Corbyn reignited a decades-old debate inside the Labour party this week when he claimed a socialist manifesto might be blocked by the European Union’s rules on state aid if the UK tried to stay in the single market.

Since his election as leader, Corbyn has been reluctant to discuss the reasons for his euroscepticism, preferring instead to focus on sovereignty, and the need to accept the democratic will of the British people expressed in the 2016 referendum.

But in a break with this recent reticence, Corbyn told the Andrew Marr Show the single market “has within it restrictions in state aid and state spending. That has pressures on it through the European Union to privatise rail for example and other services.”

Asked to cite specific examples, he said “there are issues of state aid rules which are endlessly disputed”.

His analysis has immediately been attacked by remain MPs such as Chuka Umunna who say he is peddling “absurd myths” about EU opposition to state aid, a view shared by many Labour MEPs.

Anand Menon, professor of European politics at King’s College London, said the argument that EU state aid rules would constrain Labour’s manifesto pledges on nationalisation is “nonsense”.

“We are dealing with a union that includes the French and the Germans and they wouldn’t tolerate that level of economic interference in their economic model,” said Menon.

Yet the claim that the EU is a capitalist workers’ club and a neo-liberal straitjacket has a long lineage within the Labour party and trade union movement, dating back to Tony Benn and Michael Foot.

The contemporary Bennite Brexiters include some – but by no means all – allies of Corbyn in the shadow cabinet, a small group of older leftwing MPs, as well as a few unions, mainly outside the Labour party, such as the RMT and Fire Brigades Union.

Some groups, such as the Communist party of Great Britain, also hold this view. During the election campaign, the Communist party general secretary Robert Griffiths hailed Corbyn’s declarations that “Britain can be better off after Brexit” and “Labour will build a better Brexit”.

The view is also set out in LabourFutures, most frequently by Danny Nicol, professor of public law at the University of Westminster. “In Article 106, the EU prohibits public monopolies exercising exclusive rights where this violates EU competition rules,” claimed Nicol.

The most recent British controversy about state aid concerned the threatened Redcar steelworks where the pro-European business minister Anna Soubry said “overly strict EU state-aid rules” meant the UK could not apply for help.

Redcar campaigners insisted this view was incorrect, since the Italian and French states subsidised their steel industries, and such help is allowed so long as the cash is given for a specific reason, rather than a general subsidy,

Two lawyers expert in EU state aid law, Andy Tarrant and Andrea Biondi, say they have tested 26 economic proposals in the 2017 manifesto to see if they fall foul of any EU law. They conclude most do not even potentially fall within the scope of the state aid rules.

They believe there are only two measures which would even have to be notified: the state investment bank/regional bank proposition and the state funded regional energy suppliers. It is likely that both could be structured to be cleared.

They point out that the UK would have to triple the amount it spends on state aid to match the proportion of GDP which Germany spends on aid. Equally there are over 800 companies with state ownership in the EU.

The European commission says it has never had a policy on privatisation – a stance that dates back to the founding text six European leaders signed during the cold war.

Nevertheless, the EU does have an agenda on the economy. “There is something structurally capitalist about the EU, because one of the drivers that has pushed the [European] court forward in its jurisprudence has been market making,” Prof Menon said, but and pointed out the EU’s pro-competition stance is often aimed at protecting consumers.

In a twist lost on no-one in Brussels, the EU’s pro-liberalisation stance reflects the influence of British prime ministers from Margaret Thatcher to Tony Blair. Conservative and Labour ministers set the agenda on opening energy, telecoms, railways and postal services to the chill winds of competition. In France and Belgium, in contrast, state-controlled companies still run the railways and deliver the mail. Labour ministers fought hard to keep Britain’s opt-out from the EU’s working time directive, an exemption secured by John Major.

Nonetheless, while Brussels says it has no policy on privatisation, it is pushing policies that open the door to private providers. From 2023, all contracts to run rail services should be open to tender by public and private operators. However, in true EU style, there are exceptions, when authorities can prove the line is not “fit for competition”.

Lord John Monks, the veteran trade union leader, said: “There are no strict rules binding Corbyn, but there is a philosophy [in Brussels] that nationalisation is a bad thing. That said, we never noticed anyone being stopped from doing anything.” He pointed to a German scheme to protect jobs during the financial crisis and France, “which has done what it’s always done”.

In 2003, the French government saved engineering company Alstom from bankruptcy in 2003, although the plans had to be re-written to satisfy Brussels. The EU also allowed bank bailouts during the financial crisis, although a 2017 bailout of two Italian banks was widely criticised as abandoning EU rules intended to safeguard taxpayers’ cash.

Powered by Guardian.co.ukThis article was written by Jennifer Rankin and Patrick Wintour, for theguardian.com on Friday 29th September 2017 07.00 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010