Who should finance a loss-making industry?

Two MEPs discuss public transport.

Dirk Sterckx

If handled well, public transport alleviates our mobility bottlenecks and it plays a vital role in our fight against climate change. In order to reach these goals, public transport policy should adapt to our contemporary society. But in most European countries public transport carries a huge historical burden; unjustified monopolies are protected by national or local authorities which often have vested interests in the monopolistic operators. The lack of competition kills all incentives to innovate and does not encourage better services.

Regulated competition would be a better solution. The government should award the exploitation of public transport networks or sub-networks to the operator who is able to deliver his services with the best conditions. Efficiency, optimal and customer-oriented services should be the leading standards in this procedure. But tendering does not preclude an active role for the government. On the contrary, the government has a key role to make public transport a success story.

Government, whether national, regional or local, has to decide what kind of public transport it needs, how much it wants to invest and what the priorities are. Once it has established this regulatory framework, an operator should in general be chosen by a tendering procedure. At the same time, the operator must be obliged to comply with the regulatory framework. An independent supervisory body should be the judge whenever disputes arise. As such, no contracting party could ever be an involved party and judge at the same time. This principle is a crucial element in the liberalisation process.

For example, the liberalisation of the railways in the UK initially failed because the government had made the unforgivable mistake of completely removing government intervention. After this mistake had been corrected, the situation completely changed. Investments are going up and the number of passengers is on the rise. The Swiss railways should be taken as a model. The Swiss railway company, a liberalised company, is one of the most safe and cost-effective railway companies in the world. All of this is due to the input and control from federal and local authorities.

In May 2007, seven years after the initial European Commission proposal on public transport, the European Parliament had at last an opportunity to express its opinion in second reading. The Commission had the intention to introduce regulated competition between operators. Unfortunately, the majority in the Parliament has chosen a stand-still; the current state of affairs in public transport could very easily be maintained. The member states have won their battle.

The initial goal was to make tendering the rule, apart from some justified exceptions. The way things stand now, the exceptions could easily become the rule. For example, member states keep the possibility to make direct awards on railway contracts. No justification has to be given. The same is true for low value contracts and for contracts awarded to small- and medium-sized enterprises (SMEs). Although I do agree with the reasoning behind this exception, the thresholds to be classified as a low-value contract or SME are set too high. This significantly enlarges the possibility to award contracts directly. Another justified exception to the obligation to tender is the direct award to an internal operator. But again, the definition of internal operator creates a loophole. An internal operator is supposed to be under the complete control of the competent authority. The current definition denies this principle; a public-private partnership remains possible. Even subcontracting is not excluded. As such, private companies benefit from the internal operator status without being obliged to participate in a tendering procedure.

To conclude, the compromise voted in the Parliament is a bad one. The extremely long transition periods make the situation only worse. With the support of the Christian Democrats and the left wing in the Parliament, the Council of Ministers is the big winner in this dossier. National interests have been given the upper hand. Customers are left in the cold.

• Belgian Liberal (ALDE) MEP Dirk Sterckx was rapporteur for the Parliament’s transport and tourism committee on international rail passengers’ rights and obligations.

Erik Meijer

Public transport, which started in the 19th century as a provision for the rich happy few, was once profitable for private companies. Today the private car dominates. Public transport cannot make real profits again, but we cannot live without it. It is a necessity for urban planning in densely populated areas, for the protection of the environment against private cars and for masses of people who find their jobs at a long distance from their homes. Many public transport companies could only survive by selling themselves to towns and regions, or by supporting remaining private companies with taxpayers’ money. As a typical neo-liberal reform in June 2000 the European Commission tried to force towns and regions to open all their public transport contracts to public tender. One of the arguments was the rise of international companies, which offer to take over this task if they receive compensation from the competent local authorities. The conse-quence would be that ‘in-house production’ by an internal operator, owned by a town or region, would no longer be permitted.

In the period from summer 2000- November 2001, I worked on my report for European Parliament’s first reading. Consulting big towns, consumer organisations, trade unions, national unions of local administrations and environmental movements strongly confirmed my already existing objections to this proposal. As a result, I proposed a different solution. Local authorities should have the freedom to tender to a market-oriented organisation or to provide public transport themselves on a non-commercial basis. In that case it is probable that rural areas and communities where the political right dominates will choose mainly the first possibility, and urban areas and communities dominated by the left will choose mainly the second possibility. I accepted that where an authority opts for public tendering it has to meet EU standards, as a consequence of being a part of the common market. But in the non-commercial alternative the EU has no role to play. Finally, the EC proposals were blocked in the first reading of my report on 14 November 2001, with 317 votes against 224. My alternative got not only the support of the three left-wing groups in the Parliament, but also of UK Conservatives and Liberals, and some other forces of the right who preferred a freedom of choice without too much EU influence.

During the next five years the Council of Transport Ministers tried to discuss their common position for the second reading by the Parliament, but they did not manage to do so earlier than December 2006. In the main, they followed my proposals. Internal operators, whether controlled by town, agglomeration authority or region, are allowed to continue their services and small private operators can get a contract without complicated tendering. From that moment, parts of the common position were resisted by a majority of the liberals and a minority of the EPP-ED, who tried to limit the possibilities for in-house production and ‘direct award’ to exceptional cases. In the Parliament’s transport committee 42 amendments were accepted, including a few which can be suspected of disturbing the proposed system. Informal negotiations with the current German presidency of the EU resulted in a compromise on a range of amendments. The problematic texts were not included. Six of the eight political groups - the exceptions were ALDE and the ITS - signed 17 new amendments on the basis of this compromise. On 10 May the plenary accepted those amendments as well as a restriction on subcontracting by internal operators.

The choice of 2001 has been confirmed. Local and regional authorities which maintain a transport company under their control have no obligation to offer their public service to interested outsiders. If a private operator is contracted, companies under a limit of 23 buses get a favourable position in comparison with big international companies. Local authorities again have freedom of choice, within the rules of an EU framework. Member states have again the freedom to change national laws which had anticipated the expected EU obligation to tender.

• Dutch European United Left-Nordic Green Left MEP Erik Meijer was rapporteur on the proposed regulation for public service obligations in passenger transport.

Two MEPs discuss public transport.