The King’s Speech on 17 July outlined the newly elected Labour government’s plans for the United Kingdom, including 39 Bills that it intends to introduce in this parliamentary session. Among these are included ambitious plans for the re-nationalisation of passenger railway services, the establishment of a publicly owned clean power company, and special measures to force private water companies to improve services and clean up the waterways that have been subjected to environmental degradation in recent years. This post analyses the Labour government’s plans to bring public services back under public control. In doing so, it argues that the proposals provide public lawyers with the opportunity to revisit questions about the role of the state in delivering public services, including the fundamental question: what is ‘public’ about public services? 

Rail Nationalisation

The Passenger Railway Services (Public Ownership) Bill seeks to realise Labour’s manifesto commitment to bring passenger rail services under public ownership. To avoid having to pay compensation to the current private operators, the Bill will not immediately re-nationalise the rail industry. Instead, it will allow the contracts to be brought under public ownership when the current ones expire, or if private providers fail to meet their obligations. Additionally, the Railways Bill would facilitate a ‘comprehensive’ reform of the rail industry with the establishment of a new public body, Great British Railways (GBR), which will have responsibility for managing the railway network and passenger services. A new independent regulator, the Passenger Standards Authority, would be tasked with monitoring standards.

The plans state that both Bills will apply to Great Britain, but it is not clear what precisely this means for Scotland and Wales. The Welsh Government took over Transport for Wales as an ‘operator of last resort’ in 2021, and ScotRail was brought under public ownership in 2022. Passenger rail services are currently provided by an arm’s-length company owned by the Scottish Government. The policy document ‘Getting Britain Moving,’ published in April 2024, pledged to give devolved leaders in Scotland and Wales a ‘statutory role’ in the rail network, but was light on the details of how this integrated network will be managed. 
 
A Publicly Owned Power Company

The Great British Energy Bill supports Labour’s mission to make Britain a ‘clean energy superpower’ through the creation of a new, publicly owned power company. It is expected that Great British Energy will be headquartered in Scotland and will have responsibility for managing clean power projects throughout the UK, whilst working in partnership with the private sector. In other words, it does not envision a purely public clean energy industry, but rather a hybrid one led by the public sector. The underlying motivations for the new company, as suggested in the plans, are the need to reduce energy dependence on imported oil and gas, and to transition to clean energy by 2030 in an urgent effort to address climate change.

Significantly, the plans do not include re-nationalising the existing private energy companies. Despite widespread support for re-nationalisation at the 2023 Labour Party conference, and the more ambitious plans for nationalisation set out in its 2019 manifesto, the current plans reflect Keir Starmer’s previously stated commitment to a ‘pragmatic… rather than ideological’ approach to nationalisation. 

Reforming the Water Industry

The Water (Special Measures) Bill is a response to the current failures of the privatised water industry in England, including Thames Water’s financial crisis and the revelation that the water companies have been regularly discharging raw sewage into English rivers. The Bill proposes to strengthen regulation in order to improve services for customers and to address environmental challenges. Proposals include the creation of a new code of conduct for private water companies to ‘boost accountability,’ giving Ofwat additional powers to restrict bonuses for water company executives if environmental standards are not met, and new powers to impose fines. 
As with the wider energy sector, the Bill falls short of a commitment to nationalise the water industry in England (water was never privatised in Scotland or Northern Ireland, and Dŵr Cymru was brought back into public ownership in 2001). Despite the fact that the aforementioned challenges have increased public support for nationalisation, the party has previously stated that nationalisation is not on the cards, as it does not want to take on the financial risk of re-nationalising a heavily-indebted industry (Thames Water alone is £15.6bn in debt). 
In sum, Labour’s plans to ‘bring back the state’ include re-nationalising the railway industry, creating a new publicly owned power company, and introducing stronger regulation to hold private water companies to account, whilst avoiding re-nationalisation unless it is forced to step in as an operator of last resort should Thames Water go bust.

What’s Public about Public Services?
 

While the precise details of the plans and the accompanying Bills have yet to be debated, it is clear that the Labour government is laying the foundation for a renewed role of the state in delivering public services. Therefore, the proposals provide an ideal opportunity for public lawyers to reconsider the question of what constitutes a ‘public function’ and what makes public services ‘public.’ These are questions that received a great deal of attention in the wake of the widespread privatisations of the 1980s and 1990s, when it became necessary to determine the scope of judicial review, and then, latterly, the scope of the Human Rights Act 1998, the Freedom of Information Act 2000, and the Environmental Information Regulations 2004 (and their Scottish equivalents). In these contexts, inconsistent judicial interpretation of the meaning of ‘functions of a public nature’ and the resultant criticism have revealed a tension at the very heart of the public-private distinction, arising from the fact that we still do not have a clear answer to the question of what makes public services ‘public.’

In the aftermath of the second world war, the architects of nationalisation in the UK were primarily concerned with how best to provide public services to support economic and social reconstruction. Lawyers gave little thought to what was ‘public’ about these goods and services. However, as services once provided directly by the state, such as water or social care, were privatised, it became necessary to identify the characteristics of these services that make them ‘public.’ The problem is that there is little consensus on what these are, and different criteria are used for different legal instruments. Although Lord Woolf set out a broad, factor-based approach in Donoghue v Poplar Housing & Regeneration Community Association Ltd, in coming to its decision that Poplar HARCA was a public authority within the meaning of HRA 1998 s 6(3)(b), the Court focused largely on institutional, rather than functional, characteristics. While s 6(3)(b) defines a ‘public authority’ as ‘any person certain of whose functions are functions of a public nature,’ the Court in Donoghue focused on the close relationship between the contracting authority and Poplar HARCA, rather than the nature of the functions the housing association performs. 

This narrow interpretation has influenced the reasoning in subsequent cases, leading to concern that a gap in human rights protection had arisen due to an inability to pin down the ‘public’ nature of these functions. For example, the House of Lords in YL v Birmingham City Council also placed a heavy reliance on institutional characteristics, such as the source of powers and the commercial aims of the care home in question in that case. In 2019, the reasoning in YL was followed by the Court of Session (Inner House) in Ali v Serco to conclude that private contractor Serco was not performing a function of a public nature within the meaning of HRA s 6(3)(b) in its provision of accommodation for asylum seekers. In coming to its decision, the Court reasoned that a distinction must be made between entities with public law responsibilities and those that enter into private law contracts to provide services for public bodies. In this case, the Court concluded that Serco had entered into a contract with the Home Office to provide accommodation on a private law basis. Again, this judgment demonstrates the emphasis that courts have placed on institutional, rather than functional characteristics. Notably, the Outer House had previously decided that Serco was performing a function of a public nature because it was effectively taking over the role of the state in performing a humanitarian function, i.e. the provision of housing to people made vulnerable through forced displacement. The divergent interpretations of the Outer and Inner House of the Court of Session highlight the difficulties in identifying and applying the relevant criteria to determine whether a function is indeed ‘public.’

Similar disagreements have occurred when determining which bodies should be subject to other public law instruments, including the Freedom of Information (Scotland) Act 2002 and the Environmental Information Regulations 2004. It is understandable why there is a lack of clarity over which functions are ‘public.’ As Janet McLean previously put it, ‘if prior to privatisation we could not agree about what was a public function – even when the state itself was performing the activity – how are we now to determine when a private entity is doing something public?’
The new government’s proposals shed some light on its thinking as to what makes public services ‘public.’ The two overarching justifications for rail re-nationalisation, the creation of Great British Energy, and stronger regulation of the private water companies are (1) the need to facilitate economic stability and growth and (2) the drive to increase environmental standards and meet climate targets. According to the Labour Party, achieving these policy aims will require direct involvement of the state, albeit to a different extent in different sectors. Reading between the lines, public services can thus be understood as those that serve the public interest, often in areas where the profit motive of the private sector leads to fragmentation, gaps in coverage, negative social and environmental externalities, and/or unjustifiable costs. They are not merely services that serve the public, but rather those that do so with the aim of achieving collective, social goals, such as reducing greenhouse gas emissions in line with the UK’s domestic and international obligations through improvements in public transportation. 

Nevertheless, the proposals also suggest that the extent of state involvement will be largely determined by economic factors, with re-nationalisation planned in the sectors likely to contribute to economic growth (rail) and not planned for those where the financial risks are apparently too high (water). As a political strategy, this makes sense. However, it also suggests that economic values are prioritised when determining what is in the public interest. Indeed, the framing of the public as ‘customers’ in many of the documents cited above reinforces a conceptualisation of the ‘public interest’ as an aggregation of individual consumer interests, rather than a collective interest. Therefore, if we understand public services to be those that are designed to serve the public interest, it is important to ensure that public service reforms reflect the broader description of the public interest set out in the paragraph above. 

Conclusion

Whilst the newly elected Labour government’s plans for nationalisation are arguably more conservative than those presented in its 2019 manifesto under the leadership of Jeremy Corbyn, the plans reveal an ambitious strategy to reform public services to better serve the public interest. Thirty years ago, public lawyers were preoccupied with privatisation and its impacts on public law norms and principles. The current plans to increase the involvement of the state in the vital public services of rail transportation, energy, and water provide us with the chance to revisit the public-private distinction, this time with a renewed focus on the nature of ‘public functions’ and a clearer articulation of the state’s role in performing those functions.
 
*The title is inspired by Janet McLean, ‘Public Functions Tests: Bringing Back the State?’ in David Dyzenhaus, Murray Hunt, and Grant Huscroft (eds) A Simple Common Lawyer: Essays in Honour of Michael Taggart (Hart 2009).

Dr Erin Ferguson is a Lecturer in Law at the University of Aberdeen.

(Suggested citation: E, Ferguson, ‘Bringing Back the State: Labour’s Plans for (Re)Nationalisation’, U.K. Const. L. Blog (25th July 2024) (available at https://ukconstitutionallaw.org/))