Brexit: Competition and State Aid (EUC Report)
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The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)
My Lords, I thank the noble Lord, Lord Stevenson of Balmacara. I will not say what my pay grade is in terms of what I can and cannot comment on in my response to this debate.
Like other noble Lords, I thank the noble Lord, Lord Whitty, for producing this report. I echo the words of his noble friend Lady Donaghy when she referred to him as a master of the universe for achieving a degree of consensus on his committee, particularly between herself and my noble friend Lady Noakes. I do not think that that is necessarily a difficult matter. More generally, I thank all those members of the committee who have spoken in this debate for their work. I also thank the other three speakers—my noble friend Lord Inglewood, the noble Viscount, Lord Chandos, and the noble Lord, Lord Hunt—who added their wisdom to this useful debate.
The noble Lord, Lord Hunt, reminded the House that in one of his former guises he was the director of the Met Office. I visited him once and I have the photographs to prove it. However, that was 23 or 24 years ago. We were both somewhat younger then and I do not know what colour my hair was in those days—I think probably darker than it is now.
As I have said, I thank the committee for producing this report. I thank the noble Lord, Lord Stevenson, for reminding the House that on this occasion the Government responded to it in a timely manner. I hope that has been useful to the debate. I am also grateful to the House authorities for ensuring that the debate took place at a convenient time.
This brings me on to the comments made by my noble friend Lady Noakes. She asked about the future role of the EU Committee and its various sub-committees. I obviously cannot comment on that matter—that is certainly, as the noble Lord, Lord Stevenson, would put it, beyond my pay grade. But I noted what the noble Lord, Lord Lea of Crondall, who is not in his place, said about that matter in his intervention. It is for the House authorities to take those comments on board. However, from a purely personal point of view I hope that we will continue to receive valuable reports such as this one because they provide a useful basis not only for debate but for the Government to set out their position; on this occasion it is their position on competition and state aid.
We take competition seriously. As all noble Lords would agree, competition encourages enterprise and efficiency and it benefits the consumer, who we must always keep at the forefront of our consideration, by lowering prices and increasing choice. Moreover, it improves international trade. It is a key mechanism for raising productivity and growth and for delivering an economy that works for everyone, which is a core aim of our industrial strategy that we set out late last year and are busy implementing at the moment. I think that we can also all agree that the United Kingdom has led the way globally in the field of competition law and enforcement, and that we have one of the strongest competition regimes in the world. Our law is transparent and its enforcement is based on economic reasoning which is carried out by the Competition and Markets Authority, an independent and specialist body that is recognised internationally.
I want to say a little about the authority later in response to some of the comments about governance made particularly by my noble friend Lady Noakes and the noble Lord, Lord Aberdare, because it is an important issue. We estimate that last year the CMA delivered in direct financial benefits some £18.60 to consumers for every £1 it spent, and I shall say a little more about the enhanced resources available to it.
I shall start with our EU exit and competition. We are committed to preserving the strengths of our competition regime during our exit negotiations with the EU and thereafter. Beyond the changes that are necessary to ensure that the regime is fully operational as soon as we have left the EU, we do not plan to make any fundamental changes. My right honourable friend the Prime Minister has set out our clear objectives for the exit negotiations with the EU. I shall make a point that has been made repeatedly at the Dispatch Box by others: the negotiations are ongoing and noble Lords will not expect me to be in a position to comment on them in detail. The aim is to restore our control over UK law, ending the jurisdiction of the ECJ, ensuring a smooth and orderly exit from the EU, preserving free trade with European markets without being a member of the single market and striking new trade agreements with other countries. We will continue to work closely with the CMA and sector regulators to meet those objectives while also preserving the strengths of our competition regime.
On competition law and state aid, perhaps I may make it absolutely clear again to the noble Lords, Lord Whitty, Lord German and Lord Wigley, and all other speakers who have mentioned this, that we will continue to be engaged with the devolved Administrations on these issues. Obviously it is not for me to speak for the devolved Administrations—the noble Lord, Lord Wigley, smiles, but he would not expect me to do so—but on the government side we can make it quite clear that we have already been having what can be described as meaningful discussions with the devolved Administrations. We have found significant common ground. For example, all the devolved Administrations believe that a UK-wide common framework is necessary, and we will continue to develop that regime. We will continue to engage with the devolved Administrations; for those who mentioned local authorities, that will be true for mayoral authorities and others as well. Dare I say it, the noble Lord, Lord Wigley, was being unfair when he said that there was a glaring failure to engage. I want to repeat that we are engaged and will continue to engage. I hope that we can make progress on that remit. The question of whether we go down the route of a joint ministerial committee—as the noble Lord, Lord German, suggested—and whether that is an appropriate mechanism should be dealt with in those discussions as a matter for future work.
We are also attentive to the views of business groups, legal professionals and academics. I think it was the noble Lord, Lord Whitty, who put in a plea for his and my learned friends; he was right to do so and we acknowledge their expertise. We are grateful to legal professionals and academics, including those who gave evidence as part of this inquiry. We plan to carry out further engagement in the future as we develop the legislation necessary to implement our departure from the EU.
A number of questions were asked about our priorities, both after we leave the EU and on competition. First, I should set out—as I think everyone will agree—that it is important to establish clarity on arrangements with the EU on the important separation issues, such as who has jurisdiction over live cases and new cases relating to pre-exit conduct. That will be crucial to delivering certainty and stability for businesses, enforcement authorities and consumers.
Secondly, it is important to ensure that the CMA has access to the financial resources and people it needs to take on the additional case load that we expect once we leave the EU. The CMA was recently allocated an extra £23.6 million to make essential preparations for its expanded role following the UK’s exit from the European Union. That money is not purely for the exiting work, as implied by the noble Lord, Lord German, but for the extra role that we are asking the CMA to take on in relation to state aid. We are confident in the CMA’s readiness to meet the demands and exploit the opportunities that will arise from our exit. We are confident that it has sufficient resources. We announced that money in the spring Budget and, as part of the Autumn Budget, the CMA was given an extra £2.8 million—as announced in the industrial strategy—to increase its enforcement activity. That will further enhance its impact on increasing competition in markets and cracking down on businesses that breach competition law.
Thirdly, the Government are keen to ensure that the CMA and its EU partners can continue to work closely together to avoid outcomes that may harm consumers. To do so, we aim to negotiate a strong, ambitious future co-operation agreement with the European Commission on competition matters. I assure the noble Lord, Lord Whitty, that we hope that it will continue with its strong record of co-operation with the national competition authorities through the European competition network. Obviously, our future relationship with that network will depend on exit negotiations with the EU.
Perhaps I may touch briefly on some of the points raised by the noble Baroness, Lady Donaghy, about the competition review, what form it will take and whether we would listen to the views of stakeholders. As I am sure the noble Baroness remembers, it is a statutory review required by the Enterprise and Regulatory Reform Act 2013 and it will lead to a report to Parliament. The noble Baroness asked when the consumer Green Paper would be published. I can assure her that it has already been published: it was on 11 April, so it is waiting for the noble Baroness to read and it will take account of a wide range of stakeholder reviews.
I acknowledge the committee’s request for further clarity on state aid. The regulation of state aid is an important pillar of competitive markets, but there is currently no domestic equivalent to the EU regime, unlike for competition. The committee will therefore have to accept my apologies that the Government were unable to clarify their position before the time of the government response to the committee’s report. Since my honourable friend Margot James gave evidence before the committee, which I think was late last year, the Government have developed their policy further on how state aid will be managed after we leave the EU. I want to take the opportunity to provide as much certainty as possible on this point, as requested by the noble Lord, Lord German, and others.
For the duration of the implementation period after we leave the EU, the UK will continue to apply the EU state aid rules, and the European Commission will be responsible, as now, for approving and monitoring aid. This will give businesses and public authorities that grant state aid certainty and continuity immediately following our exit from the EU. Longer-term decisions on the UK state aid regime are subject to further discussion with the EU as part of our negotiations on our future economic partnership, so I shall not comment on that.
It is right that a responsible Government work for all scenarios. This is without prejudice to future negotiations. The Government’s view is that the UK should be prepared to establish a full, UK-wide subsidy control framework at the point at which this is required. In line with this objective, the EU state aid rules will be transposed under the withdrawal Bill, as is the case for EU rules more broadly under the Bill. The transposition of the existing rules will apply to all sectors, including agriculture, fisheries and transport, and will replicate any existing exemptions from state aid rules.
To ensure the regime is operable, the Government have concluded that, at the point at which an independent UK state aid authority is required, the CMA would be best placed to take on this role. That reflects its experience and understanding of markets as the UK’s competition regulator, the independence of its decision-making from government and its excellent international reputation.
The EU has indicated the importance of state aid in its negotiating guidelines. We know that it is an area in which it would like to find common ground. As my right honourable friend said in her Mansion House speech:
“If we want good access to each other’s markets, it has to be on fair terms”.
Competition and state aid are areas in which we may accept binding commitments to remain in step with the EU.
My noble friend Lady Noakes raised a number of points about the CMA’s independence and about the appointment process in relation to the new activities that the CMA is taking on. One of the reasons that we selected it for this job was because of the very independence that it already has, as it is independent of the Government in its decision-making. My noble friend also raised a good point about appointments. The Government are considering those matters, specifically in relation to that new state aid function. I stress, however, that the strategic note to the CMA that my noble friend commented on is not binding but just sets out our priorities.
My noble friend Lord Wei said that he was looking for a new body. I think the CMA is a relatively new body as it is. We are asking it to take on new roles and I think that, from my noble friend’s point of view, it might be better to let it bed down in what it is doing, and doing very effectively, and leave such other matters as considering its future for another day. I believe I have touched upon the resources available to the CMA and that it is generally agreed that it has sufficient funds to do the job. We hope that, in taking on its new job, it will be able to continue to achieve what it has.
On the question of state aid, as I did on competition, I stress that we will continue our negotiations with the devolved Administrations to make sure that the new framework with the CMA works for the whole of the UK. We are committed, as always, to securing the best outcomes for businesses and consumers from EU exit.
We are grateful to the noble Lord, Lord Whitty, and his committee for its report, which has helped test the rigour of our thinking, dare I say, and identified areas for further consideration. If there are other points that I have not addressed in detail, I will, as always, write to noble Lords. I am grateful to the noble Lord—I hope his throat is up to it when he comes to respond—for bringing this to the House and allowing the Government to respond to it.