The Committee divided: - Ayes: 7 / Noes: 9 - Question accordingly negatived.
Kirsty Blackman (Aberdeen North) (SNP)
It is nice to be here again, Mr Sharma. Thank you for chairing the Committee.
This is an important part of the Bill. It is vital that the database is as full as possible and that people can find the information that they need. The points that were made in the evidence sessions about searching through the database were also incredibly important. There need to be search terms that people can use so that they can look through the database to find the information that they need. The regime will work only if people can find subsidies that are relevant. Improvements to the search function need to be among the other improvements.
I got the Library to put together some figures. As of 26 October, there were 501 subsidies on the database, but 245 of them—nearly half—did not have an amount specified. I know that this is a precursor system and it is not yet fit, but that shows how important it is that we have a framework and the details in place so that public authorities know what information they need to provide and that anyone wanting to challenge the information is able to find that information on the site. So 245 entries did not specify an amount, but about £1.6 billion is currently registered on the database. In addition, 138 entries did not specify where they are from—whether that is England, Scotland, Wales or Northern Ireland—but given the way challenges are likely to work, and given principle F in schedule 1 about competition within the United Kingdom, it is incredibly important that the entries make it clear where they are from and where the subsidy has been given. The principles include a requirement that a subsidy does not affect competition between the regions. It is therefore important that that is one of the criteria that the Secretary of State specifies.
The links on the database are an absolute nightmare. If we go to any of the subsidies, it says, “Click here for more information”. Some of the links take us just to gov.uk, but other links take us to a local authority landing page. That is not right. It does not give us the details of the scheme. It would be more helpful if people were required to upload the details on to the website for the database rather than having the freedom to upload the details on to their own website. They could put them on their website and then take them down the next day. Even if there were a checking process when the information first went up, they could immediately remove it. Having the backroom systems in place so that there is enough space and server capacity on the website to store all the information would be incredibly helpful and probably provide better transparency.
I just want to pull out a couple of further things from the statistics that the Library provided. Of the subsidies recorded on the database that specify the region they are from, 30% are from England. I refuse to believe that only 30% of the subsidies that have been given in the UK since the system was started were in England. Some 21% were from Scotland, and I also refuse to believe that 21% of the subsidies that were given in the UK were given in Scotland. That just cannot be possible.
I completely agree with the amendments that have been proposed. I am not looking to argue with the Minister about the requirements set out and the strength of the database; I am just looking to ensure that the guidance that authorities have to abide by is very strong. I would rather there be too much information on the website than not enough to enable people to mount their challenges. We will come to this later, but there will be very little time for people to make a challenge. They should therefore not have to spend quite a while rummaging around trying to find the details that would enable them to make an informed challenge. I would be keen to hear the Minister make it clear that he intends a significant amount of information that is as accessible as possible to be on the website. People should be able to search the website and, if possible, a system should be in place to ensure that authorities that do not upload full information face a slap on the wrist. They should face some sort of sanction or negative consequence for failing to do their duty.
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)
It is a pleasure to serve under your chairmanship, Mr Sharma.
Clause 32 sets out the obligation for the Secretary of State to provide a database for subsidies and subsidy schemes, so that public authorities can adhere to the transparency requirements set out in the Bill, including those in clause 33. We have discussed the operational subsidy database. That was put in place to ensure the UK would be able to meet its international subsidy reporting obligations from 1 January 2021. It will continue to be adapted over the coming months to ensure it is fit for purpose for the future subsidy control regime.
The Government are committed to digital best practice in the monitoring and development of this database and all the databases that we oversee. The database uses the service standard specified by the Government Digital Service. The contract we have with our supplier is flexible—both to implement this Bill and to ensure that we can make improvements as we monitor and evaluate how it is being used.
Seema Malhotra
Will the Minister clarify his comments on digital standards? There are two key issues here. One is the content and the functional design of the database. The other is the technical design and the ease of use of its search facilities and so on. Will he comment on the quality of what can be searched for and on the duty to include accurate information on the database? Will he say a little more about how he sees them being delivered?
Paul Scully
: I will try in my remarks to develop some of the issues with public authorities and their statutory duties.
We have made minor improvements since the database came online in March and we will make changes in the coming months. We will reflect on what has been said in the Committee and throughout the Bill’s passage and by stakeholders and public authorities.
Amendment 39, tabled by the hon. Member for Feltham and Heston, and amendment 34, tabled by the hon. Member for Aberdeen North, focus on ensuring the accuracy of the information that is available on the database.
Amendment 39 would require public authorities to ensure that their database entries are accurate and complete. Amendment 34 would create a new obligation on the Secretary of State to subject the database to routine audit to ensure that entries on the database were accurate and complete. Although I agree wholeheartedly that it is important that the information on the database is correct and complete, the amendments are unnecessary for several reasons.
First, the obligations on public authorities set out in clause 33 are clear. If an authority uploaded data that was inaccurate or incomplete, its statutory obligations simply would not have been discharged properly. Amendment 39 is therefore superfluous.
The incentives faced by public authorities also mean that there is no need for amendment 34. If the public authority does not properly fulfil its obligation to upload the required information, the clock for the end of the limitation period does not start, so the subsidy or scheme could be challenged indefinitely. This gives public authorities an in-built incentive to ensure that the information that they upload is timely, complete and accurate.
Kirsty Blackman
Who decides whether the information is complete and that the clock has started, or does that happen only in the event of a challenge? How does somebody who is challenging know that, even though they are outside a month, it does not matter because the clock has not started?
Paul Scully
Effectively, it is for the challenge. It is a loose framework. It is not like the state aid regime, where permission has to be sought and waited for before going ahead with a subsidy. It looks back at the subsidies and schemes that have been made. I shall return to the database and the issues raised about its integrity and accuracy, which I hope will illustrate some of the points.
Seema Malhotra
The Minister has stated, in effect, that public authorities that do not protect information might not be in line with their statutory responsibilities. I am not clear where, in the Bill as drafted, there is a requirement on public authorities to ensure that all entries that they place on the database are accurate and complete. It is fine to say that a public authority must ensure that an entry that it makes must be maintained on the subsidy database for six years, beginning on the date the entry is made, but where is the requirement for the information to be accurate and complete?
Paul Scully
It is as with every statutory duty placed on a public authority. The Bill contains a statutory obligation on public authorities to upload subsidies on the transparency database—in most cases, within six months. With any breach of statutory duty—whether it is on the face of the Bill or otherwise—a public authority can be challenged in judicial review in the courts. That is why I say that the amendment is superfluous: the net effect is exactly the same.
Members referred to the Teesside scheme. The reason the database was not live on 1 April 2020 was that that was the date when the scheme was set up rather than when the subsidy was paid. Subsidies that are not part of the scheme are dealt with differently.
Seema Malhotra
I am finding the logic of what the Minister is proposing quite difficult to follow. With the requirement for completeness and accuracy, we could prevent a lot of wasted time and money, possibly on the part of public authorities or enterprises that may consider a challenge on the basis that information was incomplete, where a public authority may decide not to put information on the database completely. It is important, given the functions in the Bill and the powers to be exercised, that we have as accurate and complete information as possible. There is no point in saying that judicial review or a pre-action protocol may be used later to correct information that was not provided earlier. That strikes me as building huge inefficiency into a system that could be more efficient and more accurate and could better achieve the Government’s intended outcomes. The Minister has not answered where the duty is on a public authority to ensure that its entries are accurate and complete. It is not here in writing.
I want to clarify a point that the Minister made about the Tees Valley Capital Grant Scheme. The scheme might have started on a particular date, but if the date listed on the database is eight months prior to the database existing, that is not accurate. It can be listed, but it should also be possible to say when a scheme might have started. There are different parts to the information, so ensuring its accuracy is important. Other parts of the Bill hinge on the date when something is listed, so that cannot be inaccurate—it would have a knock-on effect on the actions that can be taken and the powers that people have.
Paul Scully
The scheme that we are referring to was created under the state aid rules—under an entirely different regime when we were still a member of the framework. It is additional information rather than subsidy control—specifically, UK subsidy control. Payments are still being awarded, despite the fact that it was an EU state aid scheme in the first place.
On the public authority duty, we are looking at similar aims. I used the word “superfluous” because public authorities clearly have a statutory duty and a requirement to carry out statutory duties. If we put something on the face of the Bill, the net result will be the same. How do you challenge someone who does not want to adhere to their statutory duties? You judicially review them.
That is why the Bill does not provide for any sanction for the failure to upload a subsidy. There is a strong incentive to do so, because the sooner the subsidy scheme or stand-alone subsidy is uploaded, the sooner the limitation period for digital review under the cap will expire. The Bill sets out the statutory obligation on public authorities to upload subsidies on to the transparency database, in most cases within six months.
Any breach of a public authority’s statutory duty can be challenged by judicial review, which is why the amendments are, although worthy in their aims, superfluous to the requirements of the Bill. I therefore ask that amendment 34 be withdrawn.
Seema Malhotra
I have listened to the Minister. Our difficulty is that the amendments seem to be fundamental to the integrity of the whole regime.
The Minister alluded to obligations on local authorities. I cannot see any in writing. I shall not press amendment 39, as I would like further to explore whether there are, by proxy, obligations on which we can look to draw. If not, I would like to bring this back at a later stage.
The requirement for a routine audit to verify the accuracy and completeness—a duty of the Secretary of State under clause 32—is fundamental. That gap is not filled elsewhere and we should like to press the issue today.
Question put, That the amendment be made:
Paul Scully
The clause requires the provision of the subsidy database to ensure that the subsidy control regime is transparent and facilitates compliance with our international commitments. It must be available to the public free of charge. Public authorities will be able to upload certain subsidies to the database to meet their obligations under clause 33. The Secretary of State is clearly responsible for providing the subsidy database, and if appropriate the Secretary of State may direct the Competition and Markets Authority to carry out this function on his or her behalf.
I should clarify that the five-year reporting cycle that we discussed earlier was chosen to correspond roughly with a standard parliamentary term and, for consistency, with the monitoring reports of other bodies, such as the Office for the Internal Market. There might be circumstances when reporting within a shorter time period is desirable, such as in the early stages of the new regime, enabling the Secretary of State to assess how well it is bedding in.
The database is a key part of the new subsidy control regime, enabling the public and interested parties to see which subsidies have been awarded and to whom.
Seema Malhotra
I thank the Minister for his remarks. I have made a number of comments on clause 32. He will appreciate why we feel that there are areas to address, but fundamentally we think that the clause is important.
The principle of the database being accessible to the public free of charge is important, but I reiterate the points made by the hon. Member for Aberdeen North about searchability. Useability is an additional consideration alongside accessibility, and it should be referred to in further regulations or guidance.
I understand that when the Secretary of State directs the CMA to perform duties on his or her behalf, the powers go to the CMA as a whole. It might be assumed, however, that the subsidy advice unit in the CMA will take on those duties, so will the Minister clarify whether he expects that to be done by the unit or another team in the CMA?
Paul Scully
I thank the hon. Lady. We agree on useability. We will look at making the changes to the database, not least because of the Committee’s reflections and those in further parliamentary stages, but also because of the real-time conversations with people using the database—not only people putting data on, but people wanting to read it.
The subsidy advice unit in the CMA will be responsible for the use of the database and delegation. Expertise may be brought in, but it will be for the subsidy advice unit to work on the database on behalf of the Secretary of State.
Question put and agreed to.
Clause 32 accordingly ordered to stand part of the Bill.
Clause 33
Duty to include information in the subsidy database
Kirsty Blackman
I will speak to not only amendment 35, but amendments 32 and 33. I want to address the logic behind the amendments. It is impossible to overstate the importance of the transparency database. It is the key place—the only place—where organisations and local authorities will be able to find information about the subsidies being granted. I imagine that a lot of organisations will be poring over the information on a fairly regular basis to work out whether the subsidies made meet the principles put forward by the Government. It is absolutely, desperately important that we get this right, and I am keen for us to do that from the beginning as far as possible, rather than having to make changes to the legislation afterwards.
I am concerned by what the Minister said earlier about the timing of pre-action information requests; it feels to me that organisations will just make those requests all over the place, no matter when the subsidy was actually registered. If there is no requirement to have full information on the subsidy database and there is no sanction for public authorities that do not do that, people may as well try their hand with the pre-action information request. This encourages the action process to happen, rather than providing people with the information in the first place so that they know that they do not need to make the request.
The logic behind amendment 32 is that subsidy schemes should be easier to implement than subsidies. It should be easier for public authorities to give them out: presumably, the schemes will have been agreed. They will be set up in a certain way, so the process of giving awards under them should be easier—that is literally the point of having subsidy schemes.
I turn to the logic of changing the figure from £500,000 to £100,000 and keeping a floor. If something under £100,000 has been approved as part of a scheme, it is probably going to be not that bad—it will probably be fine. But £500,000 is far too high, which is why we suggest £100,000. As was said in the evidence sessions, the figures are arbitrary—the figures are always arbitrary no matter which one is chosen. However, that was the logic behind having a differential system in place between subsidy schemes and subsidies on the subsidy database.
I like Labour’s amendment 35 and get where they are coming from, but I am more comfortable than them with the more streamlined process of the subsidy scheme.
I move on to our amendment 33, on minimal financial assistance. It would actually amend a future clause—clause 36 —but it makes sense to debate it at this point, as it is specifically on the amount that needs to be provided on the database. My suggestion is that all subsidies not made under a scheme should be part of the database. I am not suggesting that they should have to meet the other minimal financial assistance requirements, but I am suggesting that—this was pretty clear from our evidence sessions on Tuesday—all the subsidies not made under schemes should be registered on that database. They would not necessarily have to jump through the other hoops, but all the public authorities that we are dealing with will have done a huge amount of due diligence before giving a subsidy of any sort. They will have the information and it would not cost them much in the way of time to ensure that it is uploaded. That would increase drastically the amount of transparency and our oversight. As drafted, we will not know whether the system is working, because we will not have access to transparency data on any subsidies under £315,000 or any made in a scheme under £500,000. That is not good enough.
A new system is being set up and the Government have been clear that it is a free-market and permissive system, but neither I nor anyone else will know whether it works if we are not able to see the data and whether public authorities are making far fewer—or far more—subsidies than expected under the scheme. We will be unable to assess the adequacy of the system unless the Minister is willing to make changes to the thresholds for schemes and for general subsidies. Once again, I am not suggesting that we put other duties in place for minimal financial assistance or a requirement that other hoops have to be jumped through; I am suggesting that details are uploaded to the database so that we may scrutinise the data.
Paul Scully
There has been a great deal of interest in the thresholds at which the transparency obligations apply, so I will explain some of the detail and logic of those thresholds. Transparency is an important part of the subsidy control regime and key to the enforcement provisions.
As we have heard, interested parties must be able to see subsidies in order to determine whether they may be affected and whether they wish to challenge the subsidy award or subsidy scheme. Any challenge will be made in the Competition Appeal Tribunal through that judicial review. The database is a vital tool in that. To serve its purpose, the aim of the database should always be to enable interested parties to see the subsidies that they may wish to challenge. It is not designed to be a general database of public authority spending; other tools are already available elsewhere for greater financial transparency in that regard and are not limited to subsidies. The transparency requirements in the Bill have therefore been designed to focus solely on those subsidies and schemes that can be challenged on subsidy control grounds.
The Bill provides for various reasons why a subsidy or scheme cannot be challenged on subsidy control grounds, such as a subsidy award given under a published scheme not being able to be judicially reviewed in the CAT on subsidy control grounds. That is because the scheme itself is assessed against the subsidy control principles and is challengeable, rather than the award under the scheme. Another example is minimal financial assistance subsidies, which are considered too small to cause undue distortions. They therefore do not have to adhere to the subsidy control principles and other requirements. Those subsidies do not need to be on the subsidy control database.
The transparency of subsidy awards has costs as well as benefits. Providing the data would create an administrative burden for public authorities, including small local authorities, in addition to the imposed costs for those using the database if excessive, irrelevant or potentially poor-quality data is provided that interested parties have to sift through. Another thing about the impact on public authorities is the cumulative impact. We find that transparency requirements in general tend to fall on a small number of people in local authorities and other public bodies. That is why there is a relatively high bar or threshold—because of that cumulative burden on a few people in local authorities.
Stephen Kinnock (Aberavon) (Lab)
Does the Minister not agree that, with public trust in politics and Government at an all-time low, the more transparency that we can have in the system, the better it will be to build trust in the new subsidy control regime? Does he not recognise the serious risk of cronyism and that sunlight is the best disinfectant? Therefore, let us have the maximum transparency, and let us drop this clause from the Bill, as requested by my hon. Friend the Member for Feltham and Heston in her amendment.
Paul Scully
I do believe in transparency, that sunlight is the best disinfectant, and in the importance of this database being as accessible as possible. As I will come on to say, the starting point of many of the thresholds and the amounts that we have been adhering to for many years lie in EU state aid rules. They also reflect the consultation responses that we have received from all parties, which I will come back to. We need to ensure that the benefits of any approach to our database and transparency outweigh the costs, and I believe that the Bill strikes the right balance.
Seema Malhotra
Could the Minister define what he means by the costs of information on the database? Surely, if all the information is available to a public authority that has gone through the process of making a decision about an award, uploading entries and so on should not be an onerous process. What does he see as the cost?
Paul Scully
As I say, it is the cumulative costs that, in many ways, were the starting point. As a matter of principle, we should not seek to add duplicative red tape for public authorities—particularly local authorities and other small authorities—without good cause. I will expand on that as I continue.
Seema Malhotra
Perhaps this is an opportunity for the Minister to design a database and an extremely straightforward way of entering information. It does not seem to me that this should be onerous at all. Of course we agree that we should not add red tape, but in the interests of the integrity of the system, of public money and of preventing cronyism and people getting around controls, surely this ought to be part of a public authority’s obligation to the public. Perhaps the Minister could come back on those specific points.
Paul Scully
First, on cronyism, the starting point for the thresholds—as I will come to in a minute—were based on EU state aid, which we have had for the best part of 40 years.
Seema Malhotra
I am sorry to make this point again to the Minister: the EU state aid regime was based on information being available to the public. The whole system was different. There was pre-notification, so by the time a subsidy was awarded, a transparent process had taken place. The proposed regime will not do that. The shift in the system means that safeguards are needed for public money and so that any future scandal does not cause a crisis in the regime. Does not the Minister realise that shifting the regime to a different position from that in the EU will have consequences?
Paul Scully
First, moving the subsidy control scheme from pre-notification and pre-approval will mean that the subsidies can actually get to those businesses and interests at the right time, rather than when it is too late or when they would have less of an effect. The hon. Member for Aberdeen North mentioned the pre-action information requests and transparency requirements. We have based this on the consultation responses from people who will be at the cutting edge of the system, and it is also in line with other international examples. We have looked at other examples around the world, which is why I probed our witnesses on what happens in other parts of the world. We have been looking at that with this scheme.
This system, as drafted in the Bill, does strike the right balance in ensuring that people can drill down into this scheme. On the pre-action information request process, if the database is not keeping up with the ever-changing world of subsidies, businesses, environmental impact and other areas relating to subsidies, there are safeguards to ensure that it is as transparent as possible.
Let me briefly deal with some of the thresholds and give a little more information. Public authorities must upload information about all stand-alone subsidies that exceed the minimal financial assistance threshold of £315,000 cumulated over three years, unless they are subject to a specific exemption. They must also upload information about all subsidy schemes.
The Bill provides for transparency of large awards given under schemes—those over £500,000. That was worked out roughly, allowing for currency differences, according to the EU amounts. Although these large awards cannot themselves be challenged in the CAT using the subsidy control requirements, they do provide important information about how the scheme is being used by the public authority, and their size means that the benefits outweigh the costs.
Seema Malhotra
Will the Minister clarify the maximum number of subsidies of, say, £450,000 that may be given under a subsidy scheme? How would anyone know about them?
Paul Scully
I shall come back to that, if I may. Let me deal first with consultation.
The Government’s proposed approach to transparency was set out in the consultation on subsidy control, including the proposal to exempt minimal financial assistance and subsidies given under schemes of less than £500,000. We asked whether respondents agreed with the proposed rules on transparency, and 81% agreed. We also asked specifically whether respondents agreed that minimal financial assistance subsidies should be exempt from transparency requirements, and 65% agreed that they should be exempt. Respondents pointed to the administrative burden as a reason for not lowering the thresholds. It is clear, therefore, that the approach taken in the Bill reflects the views of those who responded to the consultation.
There is no theoretical limit to the number of subsidies of any value that may be given under the specific scheme. None the less, it will be the scheme itself that will have to be applied under the principles of the subsidy control framework.
Amendment 32 would require all subsidy awards, given under published schemes, of £100,000 or more to be uploaded to the database, lowering the threshold from £500,000. Amendment 35 would remove this threshold altogether so that a subsidy of £1 given under a scheme would need to be uploaded on to the database.
The database will already include information about the scheme under which these subsidies are given. This information will be sufficient for others to understand whether their interests will be affected by any subsidy given under that scheme and whether they should seek to challenge the scheme itself. As such, and as I have said, the Bill does not provide for the possibility to challenge subsidies given under schemes.
Further, the Bill provides for an exemption from the transparency requirements for small subsidies given as minimal financial assistance, which is found in clause 36. Amendment 33 would remove this exemption. It would require information about all subsidies of any size to be uploaded to the database, except for those given under a scheme or subject to another exemption.
I believe that the costs entailed in all three amendments clearly outweigh the benefits.
Kirsty Blackman
Does the Minister feel that his rejection of amendment 33 renders the cumulative provisions of clause 36 unworkable? How will anyone know that somebody has received cumulative subsidies if there is no requirement for those subsidies to be registered anywhere? What is the point of those provisions if we are not going to be able to police them?
Paul Scully
The challenge will be to the scheme itself, not to the subsidies within it.
Kirsty Blackman
I was talking specifically about minimal financial assistance and the cumulative impact. An organisation cannot have more than £315,000 over a three-year period before it has to be registered, but if there is no requirement to register the 20 subsidies received —or 200,000—how is anyone ever going to know?
Paul Scully
A public authority awarding something that it believes will be a subsidy below that will have to publish a letter demonstrating that it is adhering to minimal financial assistance. That is therefore for businesses or the recipients of the subsidy to double-check. Although it is the public authorities that will be awarding the subsidies and they will be analysed by people checking the database, if I ran a business that was reliant on a subsidy, I would, to be frank, make sure of it. I would not want to leave it to the awarding authority to do all the paperwork. I would want to make sure that my business interests were looked after. So there is that risk of task duplication.
Kirsty Blackman
One more point: the duty is on the public authority to ensure that it is complying with the regime. It is the public authority’s duty to do that. The Minister made it clear earlier that the public authority has a statutory duty. However, the public authority is then having to rely on that organisation telling them that it has had a subsidy. The public authority will know that that will push the organisation over the £315,000, that it will not be eligible for minimal financial assistance and that it will have to be registered on the scheme. A duty has been placed on the public authority for something over which it has no control and because the Government refuse to put that on the subsidy database it will not be able to find out whether the law is being broken.
Paul Scully
All I will say is that if the public authority is issuing something that it believes to be a subsidy, albeit under MFA, it will publish a letter to explain to the recipient why that MFA exemption appears.
Kirsty Blackman
Who is going to get the letter? Just the business? Where does it say in the Bill that the public authority has to publish a letter when providing a subsidy? Let us say Aberdeen City Council gives a subsidy to somebody and Aberdeenshire Council gives a subsidy to that same business. How are they going to know that the other authority has done it when the only paper trail is a letter that Aberdeen City Council has given to the business?
Paul Scully
It is not published as such, but is sent to the recipient. That is in clause 37. I hope hon. Members agree that we have taken a proportionate, sensible and balanced approach here, first, to make sure that we can exempt small subsidies from the requirement to apply the principles of subsidy control, and secondly, to enable public authorities to assess the subsidy schemes against their principles, rather than duplicating the analysis for every individual subsidy awarded within those schemes. Publishing additional information about small subsidies would have limited value for those concerned about potentially distortive subsidies and would detract from the core purpose of the database. The requirements would lead to additional red tape for public authorities, well beyond the requirements they had to fulfil under the EU state aid regime. In a great many cases, the information would simply duplicate what those authorities already publish in appropriate formats elsewhere.
I do not doubt that, overall, both local and national Government need to make databases interoperable so they can talk to each other, data can be scraped from them and they can be read more easily alongside each other. However, I do not believe that that is for the Bill to address. The exemption from minimal financial assistance subsidies and the £500,000 threshold for subsidies given under schemes finds the right balance between the administrative burden of uploading subsidies and the transparency that the regime needs.
Paul Scully
Let me start by explaining the intention behind the process of uploading the subsidies to the database. As with other aspects of the transparency requirement, we have sought to balance the objectives of minimising unnecessary bureaucratic requirements on public authorities while ensuring transparency for those interested in subsidy awards, and most importantly for those that may be subject to challenge under the Bill’s provisions. As such, we have set the deadline for uploading subsidies on to the database at six months—the deadline for most subsidies—which is the time limit that existed under the EU’s state aid system.
Special provision is made for tax subsidies, as calculating their exact value is more complex and cannot be done until tax declarations have been received and finalised. I will come back to the time limit and the definition of tax declarations.
We expect public authorities to upload subsidies promptly because they have a strong incentive to do so. Generally, the date of uploading a subsidy on the database will determine the end of the limitation period to challenge it. The sooner a subsidy is uploaded to the database, the sooner the clock for the limitation period will start running, and therefore the sooner the public authority will gain certainty that the subsidy will not be subject to a challenge. Public authorities will therefore seek to upload subsidies as soon as possible.
Amendments 18 and 38 would shorten the upload deadline for subsidy awards and subsidy schemes not given in the form of tax measures. Amendment 18 would shorten the deadline to one month and amendment 38 would oblige public authorities to upload the subsidy award or scheme as soon as possible, and within one month at the latest.
As I said, we expect public authorities to upload as soon as the relevant data are available, and to use the whole period of six months only if there is good reason. An upload deadline as short as one month would likely result in more public authorities needing to amend their entries at a later date. Although they can do so as a permitted notification within the meaning of clause 81, that creates an unnecessary administrative burden for those authorities. It also means that the information on the database is more likely to contain minor inaccuracies.
I am sure that hon. Members will agree, as their earlier amendments suggested, that accuracy is really important, so a longer deadline for uploading is not only justified but sensible. I again emphasise that the approach taken in the Bill reflects the views of those who responded to the public consultation on the approach to subsidy control earlier in the year. The consultation set out the details of the proposed approach that we are now discussing, including the six-month deadline for uploading general subsidies. Of those who responded to the question, 74% agreed with the Government’s proposed approach.
Amendments 26 and 37 seek to shorten the deadline for uploading subsidies in tax measures on to the database. Subsidies in the form of tax measures can be an effective tool for achieving policy objectives, but they are generally a more complex way of giving subsidies. They are more likely to have performance-related conditions, which means that it can take longer to determine the exact amount of the subsidy. Of course, a public authority will have an estimated value for the subsidy when it is granted for the purpose of assessing compliance with the principles, as well as for costing the measure for the purpose of managing public money. However, a final amount may not be known until the tax declaration has been completed. Even once that declaration has been submitted, further discussion between the beneficiaries of the subsidy and the public authority might be necessary, to confirm that the calculations in the tax declaration are correct.
Kirsty Blackman
Points were made earlier on the specific length of time. Why is the final amount required to be on there at the beginning, because they could presumably just put in how much they expect it to be? That would be much better for those organisations that may be looking to challenge it.
Paul Scully
They will clearly have that estimated calculation, but the database will function most effectively if the public authority uploads a subsidy when it can be confident of its accurate value. That will enable an interested party to determine whether to challenge the subsidy through a judicial review. It is important that public authorities are not then coming back and correcting those figures. It is a balance between ensuring that we get the entries in a timely fashion and in an accurate fashion. That is admittedly a difficult balance to strike, but the majority of people in the consultation agreed with our approach, which is set similarly to the EU state aid scheme.
The result of what we have set out is that a public authority will require sufficient time between the date of the tax declaration and the obligation to upload that subsidy to the database. We have determined that 12 months from the date of the tax declaration is sufficient time for public authorities and beneficiaries to calculate the exact subsidy amount. Amendment 26 would reduce that period from 12 months to just three months, and amendment 37 would reduce it to one month. That would mean a significant reduction in the time available for a public authority to make those final calculations and upload the subsidy.
As with non-tax subsidies, an upload deadline of one or three months will increase the likelihood of error. Again, I am sure that is something we want to avoid. We expect public authorities to upload subsidies in the form of tax measures as soon as they can and, as I mentioned, they will have a strong incentive to do so. That is why 12 months is an appropriate deadline to reduce the risk of inaccurate information being uploaded. Shortening the deadline would not improve subsidy transparency in our view, nor help interested persons who may wish to challenge a subsidy in the form of a tax measure.
Kirsty Blackman
If I had an enterprise that was being harmed by either a tax subsidy or any other kind of subsidy, I would rather know that the subsidy had been given and not know the exact amount than have no information at all until my business had gone under.
Paul Scully
I come back to our earlier discussions about the onus that is put on public authorities, and the impact that it will have on them, not only to put the amount on the various databases but possibly to go back and correct them. I appreciate that it is a difficult balance to strike, but none the less the balance is based on the EU state aid rules. It has gone through the public consultation and the majority agreed with it.
Amendment 27 would add a requirement to define a tax declaration in regulations before the subsidy control regime came into force. I can reassure hon. Members that, in the vast majority of cases, I would expect that the relevant tax declaration would indeed be a tax return. There are other examples: duty and certain other types of taxation treatment. That is why it is called a tax declaration rather than a tax return. But most of the time it would indeed be a tax return. The precise details would vary, depending on the specific tax and the mechanics of the measure in question.
As I have said, the Government will provide thorough guidance—I come back to the guidance that we have spoken about on a number of occasions—to ensure that public authorities are aware of their subsidy control obligations, including how to report subsidies in the form of tax measures. If it would be helpful to public authorities, subsidy beneficiaries and interested parties, that guidance will provide further explanation as to what should be considered a tax declaration. As that does not affect the substance of the law, I do not think it would be appropriate for secondary legislation. I therefore request that hon. Members withdraw or not press these amendments.
Seema Malhotra
I thank the Minister for his comments. There has been quite an important discussion and debate today. I want to highlight why this matter is complex and why more is needed on it. The Government quote from their consultation response, but on the specific point about the public authorities consultation question—should it be within six months?—I think it was actually quite a loaded question: “Do you agree that the obligation should be to upload information within six months of the commitment to award a subsidy?” That is hard to disagree with, even if people think that it should be one month or less. As with many of the questions, we had 15% of respondents answering this, and a majority did agree with the proposal. I do not think people would necessarily disagree with it. But even those who then did think a bit further and disagreed commented that six months was too generous and could be shorter, and apparently suggested a range of alternatives.
What is important is to get this right. The Minister made a couple of points in relation to where there may be some information that is not fully available—I do not know what specifically that would be—that would result in edits to correct some information, which could be after a month or two. I would like the Committee to have an opportunity to reflect on that and perhaps to talk to local government and other public authorities about what difficulties they might perceive if the period was to be greater than one month, or whether they did think that one month could be workable in the context of an easy-to-enter database. I think that, rather than pushing this matter to a vote today, we should see some further work done on these issues, in order to have confidence about the deadline, and come back to this on Report, with some of that information and further research being clear.
Kirsty Blackman
I have a wee comment to make on this. The Government increasing the minimum threshold required on the subsidy database is a very contentious issue that we have discussed at length, including with witnesses. A significant number of respondents to the consultation answered on the basis of the numbers put before them. It is important enough that lots of people responded to the consultation. It is important enough that we have had a length of time debating the numbers. The negative procedure does not make sense, given the Bill’s possible impact. Unless the Bill is amended, the Government could, at a stroke, change the threshold to £2 million under the negative procedure. In terms of transparency, accountability and ensuring that this makes sense and works for everybody, it would be sensible for the amendment to be accepted.
Paul Scully
Clause 33 sets out that the Secretary of State may change the threshold above which subsidies given under schemes are required to be uploaded to the transparency database. Amendment 36 seeks to change the procedure for these regulations from negative to affirmative.
The regulations can be used to change the thresholds for all subsidies given under schemes, or for those matching a specific description, such as those given to a specific sector. The regulations cannot be used to make changes beyond this—for example, to change the requirement to upload all subsidy schemes to the database—and nor do they change the substantive subsidy control requirements, which are assessed at scheme level, rather than for each individual subsidy given under a scheme. As such, these regulations should be considered technical.
The Bill proposes the right parliamentary procedure for different types of secondary legislation. For example, the powers to amend the exemption thresholds in clause 42(1) are subject to the affirmative procedure because they affect the substantive subsidy control requirements rather than simply the threshold for uploading information to the database.
Kirsty Blackman
Does the Minister agree that if the Government were to change the threshold from £500,000 to £20 million, that would require some scrutiny?
Paul Scully
As I have set out, the figure of £500,000 strikes the right balance between transparency and minimising undue and unnecessary administrative requirements. We currently have no intention of changing the overall threshold. The Secretary of State has power to change the threshold if necessary—for example, because of changing market conditions or international obligations.
Seema Malhotra
I appreciate that the Minister has stated the Government’s position on the £500,000 threshold but he has not made the case for it, neither on the operation of the regime nor on value for money or transparency. The hon. Member for Aberdeen North powerfully made the point that the Government have the power to change the £500,000 threshold under the negative procedure. Has the Minister held discussions—with the Secretary of State or others in government—about whether there should be a maximum that the Secretary of State may propose? The consequence is much less transparency over greater amounts of public funds. That surely cannot be the right direction of travel for any Government, and certainly not for a scheme that we want to stand the test of time and enjoy the confidence of the public.
Paul Scully
In this instance, we are looking at adjusting the thresholds for specific sectors, such as agriculture, that are characterised by smaller businesses where a relatively small subsidy can have a distortive effect. It might be more appropriate to have a specific threshold in the future, but the focus in the transparency measures in this Bill is on enabling interested parties to see the subsidies that they may wish to challenge. We are not setting out to provide a general database of public authority spending, but the schemes are transparent because the details of a scheme itself must be uploaded on to the database. That is where the challenges may come. Transparency is set within this framework and that is why it is appropriate to use the negative procedure. I ask the hon. Lady to withdraw the amendment.
Seema Malhotra
I thank the Minister for his comments. In the light of the complexity of many of the issues that we have debated, I will not push the amendment to a vote. However, the issue must be looked at in the round to ensure that clause 33 is as robust as it can be and will stand the test of time. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Question proposed, That the clause stand part of the Bill.
Paul Scully
The clause sets out the duty on public authorities to upload certain information on to the database about their subsidies and subsidy schemes. It provides public authorities with clear rules on whether a subsidy award should be uploaded to the database or not. It sets out the three rules for public authorities granting stand-alone subsidies and subsidy schemes.
Seema Malhotra
This is an important clause, but it requires significant improvement. We will not vote against clause stand part, but I hope that the Minister will engage positively on the issues. This is not a party political matter. It is genuinely in people’s interests to have a robust regime, and we have outlined the cornerstones of that.
Question put and agreed to.
Clause 33 accordingly ordered to stand part of the Bill.
Clause 34
Information to be included in the subsidy database