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The Parliamentary Under-Secretary of State for Transport (Mike Penning)
It is a pleasure to be here, Mrs Brooke. I should like to get some facts on the record, not only for my hon. Friend the Member for Romsey and Southampton North (Caroline Nokes), but to give the Government’s side.
Like my hon. Friend, I am keen on competition, because I am a free marketeer as well. I am also keen, as a Minister, to consider in detail a request made by anybody anywhere in the United Kingdom. That is not what happened in 2008. The right hon. Member for South Shields (David Miliband) knows full well that when a request was submitted in 2008, it was dismissed quickly. I have not seen any legal advice instructing the Government that it would be illegal for them to look at the matter. Certainly, my legal advice, when Liverpool city council said that it would like to start turnaround, was not that I could not look at that. As a free marketeer, the Minister for the whole United Kingdom, and a Tory MP, here I am defending Liverpool. That is an interesting anomaly. Lord Heseltine would be proud of me.
It is clear that we were open and transparent all the way through; I will come back to how we achieved that. I met the operators of Southampton port—and Members from across the House—on more than one occasion to explain things exactly. In a democratic society that believes in a free market, any request should be looked at fairly by a Minister of the Crown. I looked at the request made by Liverpool city council, and I asked my officials what the procedures would be, what powers I had, and what powers were not in my hands. It was obvious that I had the power to look at the request, so we consulted widely, and got submissions from all parts of the House and across the country on what should happen. The key thing that I got back from the submissions was the point about fairness; that needs to be in whatever we do.
I looked at what I could do about the two separate payments made to Liverpool when it got the grants. First, I asked whether I or anyone in the UK had the power to ask for the regional development grant to be repaid. The answer was no; it is a Commission issue, for the Commission alone to deal with.
Mike Penning
I will continue for the moment, because I am conscious of the time, and I want to cover many of the points made. If I have time at the end, I shall come back to my hon. Friend.
The issue is being looked at by the Commission, and it is for it to decide. What was in my power was the ability look at whether Liverpool had to pay back the full UK part of the grant, whether there was any depreciation because of the length of time, and whether interest would be added. My Department made an evaluation, and Liverpool asked to pay £5.3 million as a lump sum, which I rejected. The assumptions of my officials were that the amount should be about £8 million —we ended up with a figure of £8.8 million. To ensure that I was seen to be impartial, I asked for some independent advice on how much money should be repaid. My hon. Friend the Member for Romsey and Southampton North came up with the right amount, which was £8.8 million, or £12.6 million if phased. That is almost identical to the figures that the modelling came up with, after consideration of how other repayments were made.
I made that decision, and put it to Liverpool that it would have to pay those moneys back. As yet, Liverpool has not indicated how it will pay that—in stages, or in one lump sum. The assumption—that is all it is—is that it will be a one-stage payment. As yet, Liverpool has not indicated to the Department for Communities and Local Government how it will pay the money, or when it intends to do so. My officials have been in touch with DCLG officials, who have been in touch with the city council to push it on the need for a decision.
It is absolutely the case that state aid has not been cleared yet, but I do not have any power to stop Liverpool while we wait for the Commission to act. The key to the situation is that my officials and I as the Minister, independently and with no vested interests, have looked at what can be done. I believe that competition is good, and that competition around the country will drive up the excellent cruise market. I was at the European Cruise Council conference in Brussels only last week, and even after the terrible Costa Concordia disaster, the market has picked itself up and is moving forward again.
Mike Penning
If the right hon. Gentleman could bear with me, I will give way in a moment.
Looking at the situation from my point of view, have we been open and completely honest about what we did and the process? I believe we have. Is Liverpool doing what I asked it to do? No, because it has not paid the money back and we do not yet have state aid clearance. Do I have the power to stop Liverpool? The answer is no. Would I really want to? If the European Commission declares the payment to be incorrectly done state aid—my legal advice is that it is not—Liverpool would have to pay the moneys back. Liverpool, however, has indicated that it will pay the money back. The words of the then leader of Liverpool city council, now the mayor, were, in effect: “We will pay back what you ask us to pay back.”
Mike Penning
Will the hon. Lady bear with me for a second, because two other colleagues have tried to intervene as well? I have been given only 10 minutes to sum up the debate and, with so many people present, we could have done with a little longer.
The key for me is whether the effect on other ports and other incomes around the country will be dramatic. I have seen no evidence for that yet. At the European cruise conference, I spoke to the representative of a cruise operator that does not operate here at the moment, but will put 22 cruises in next year. I asked, “Would you be doing this at any other port in the UK?” The answer was no. I had to take that at face value. Will there be such a dramatic effect? I do not honestly think so. The Government have been genuine and honest about how much pain there should be, and Liverpool city council will have to step up to that and be as honest and open with us, and with its own electorate, as we were with it on what will have to be paid back and when. Also, should it have gone ahead without state aid approval? No, it should not have done.
Dr Julian Lewis
With regard to the European money, are the Government in a position to make representations to the European Commission on the matter? If the Government think that the Commission is unlikely to ask for the money back, does that not suggest that the Commission acted in a distorting and anti-competitive way when making the money available in the first place?
Mike Penning
My hon. Friend is leading me down a path that I am probably quite happy to be led down. I understand from my legal advice that the Commission has never asked for any such funding back in other, similar cases. Looking around Europe at subsidies, the Commission would probably rather not open such a Pandora’s box.
Mr Denham
The Minister says that he has no power to act, but infraction proceedings would be taken against the British Government in the first instance, not Liverpool. Ministers have always had the ability to prevent the misuse of European regional development fund money, if they thought the misuse would leave the Government liable to action by the Commission. There must be legal powers for him to take to guard against the risk of infraction proceedings by the European Commission.
Mike Penning
The right hon. Gentleman would be absolutely right if my legal advice was that I would be in breach, but my legal advice is that I will not be. He has had far more senior positions in government than me, so he knows that Ministers look at their legal advice and sometimes ignore it and sometimes accept it. In this case, I decided to accept the legal advice, as it came from those more qualified than me.
Mrs Glindon
I thank the Minister for giving way. In 2009, the Department for Transport specifically said that the port of Tyne would be adversely affected by the lifting of the restrictive conditions, and that remains the case, because as a port, we are in direct competition with Liverpool for some of the cruise destinations. Furthermore, if the Government do not enforce a suspension injunction, they could be failing to comply with their EU treaty obligations.
Mike Penning
I thank the hon. Lady for her intervention. I have visited the great port of Tyne, and there are great plans for it. I was not a Minister in the Department for Transport in 2009, so she will have to speak to her colleagues about not paying back the subsidy. The key is that there is a formula for how much should be paid back, because there is a discount for the period of time, and interest must be added. That formula produced the figure. The issue is difficult for hon. Members, especially those who represent other ports, and I would probably feel exactly the same if I represented a port. The issue is all about fairness and what is legal.
I have sought advice. Any former Minister in this Chamber knows that we would never have said how much must be paid back without obtaining legal advice on whether it would be in breach of anything. Based on the legal advice that I have received, we are not in breach, and that is why I gave Liverpool the option of paying back the £8-plus million, or £12 million over a period. That is what Liverpool must make up its mind about. It should have paid back earlier, and it should not have gone ahead as it did.
Mike Penning
I need to come to my conclusion. It is useful that people understand that the process has been open. I have tried throughout to ensure that competition is fair. I know that some colleagues will not like the result, and that people in other ports think that there will be a huge adverse effect. As a Conservative, I passionately believe in competition, and that is what this is all about. If the legal advice is that under the formula £8.8 million should be paid back, subject to the Commission’s permission, that is only fair. If I had acted in any other way, I would have had a load of Liverpool MPs in this Chamber arguing the matter the other way around.
Instead of ignoring the situation, I looked at it carefully, and instead of dismissing it straight away, which is what happened in 2008, we considered whether we could increase capacity, create jobs and create more turnaround. That is what I hope we have done. This debate has been useful, but I do not think everyone will agree.