Subsidy Control Bill

Baroness Sheehan Excerpts

Committee stage
Wednesday 2nd February 2022 Grand Committee

Amendment 68 would allow decisions to be made on individual subsidies under a scheme subject to an appeal to the Competition Appeal Tribunal. It cannot be right that individual subsidies can effectively be hidden from scrutiny, thus requiring entire schemes to be challenged on the basis of concerns on one or two individual subsidies given within them. We will come on to discuss transparency matters shortly, but I hope the Minister can help move this debate forward a bit. Again, we are focusing in on the issue of transparency and trying to shine a light on decision-making and the financial contributions and support that would be given. With that, I beg to move Amendment 21.

[Baroness Sheehan (LD)]

My Lords, I added my name to Amendment 24. I also support Amendment 21, which is closely related, and Amendment 68, which has real implications in addressing limits on enforcement for subsidies that may have been misdirected. I thank the noble Lord, Lord McNicol of West Kilbride, for tabling these amendments and for his very able introduction of them.

To my mind, Amendments 21 and 24 have been tabled to try to establish why the Government wish to disapply the subsidy control principles and the energy and environment principles from a subsidy merely because it has been given under a subsidy scheme. According to the excellent Library briefing on the Bill, the Government have said that a subsidy scheme is a means for public authorities to award a number of subsidies to enterprises on a discretionary basis, as opposed to awarding subsidies on a case-by-case basis to individual enterprises. To use the Minister’s words, the Government want to try to create a “minimally burdensome” scheme. It would make it quicker and easier for subsidies to be given if this were to be the case.

As drafted, the Bill says that subsidy schemes must be made by a public authority only if the subsidies provided for by the scheme will be consistent with the subsidy control principles laid out in Schedule 1—I hope noble Lords are still with me; I think it will make sense in Hansard—or, where relevant, the energy and environment principles laid out in Schedule 2. That is all well and good. A subsidy made under a subsidy scheme must comply with the principles laid out in Schedules 1 and 2, so you would think it would be open to review on that basis and enforceable as such. But you would be wrong, because Clause 12(2) states that

“‘subsidy’ does not include a subsidy given under a subsidy scheme.”

Why? It does not make any sense. Hence Amendment 21 is needed to take out this nonsense, so that the subsidy control principles can apply to all subsidies.

Similarly, Amendment 24 would remove Clause 13(2) so that the energy and environment principles can also apply to all subsidies. Given that there is a threshold for transparency and accountability of about £500,000 for subsidies given under a subsidy scheme, that will very quickly add up to millions of pounds, for which, as the Bill is currently drafted, there will be no scrutiny. That would not serve businesses or the Government.

Amendment 68 is necessary because Clause 70(2) says that the CAT cannot be asked to review a subsidy decision if the subsidy was given under a subsidy scheme; only the subsidy scheme itself can be reviewed. That makes a nonsense of the enforcement regime because no route will then exist to review whether a subsidy complies with the subsidy scheme. To the question of when a subsidy is not a subsidy, the answer is when it is given under a subsidy scheme. Surely the Minister can see the absurdity of such a position. Every subsidy must be available for review if necessary. That is why these amendments are necessary. I thank the noble Lord, Lord McNicol of West Kilbride, for tabling them.

[Lord Fox (LD)]

My Lords, it is with great pleasure that I follow my noble friend Lady Sheehan and the noble Lord, Lord McNicol, in support of these amendments. Subsidy schemes seem to be designed as monoliths with no granularity at all. Why is that one of the central theses of this Bill? What possible advantage do the Government seek to gain, other than the ability to hide what money is going to whom? To those of us on this side of the Committee, that appears to be what is going on.

Amendment 21 would ensure that subsidy schemes cannot be used to hide subsidies that would, if they were stand-alone subsidies, be reported, as my noble friend set out. It is clear to all three of us that there is huge scope for significant and expensive subsidies to be hidden in these schemes. That seems to be the only reason why this is in the Bill. I am sure that the Minister will want to explain the reasons, because that must be the response to these amendments. I am sure that we will all be happy to throw our hands up if we are wrong and there is a hugely important reason why this is needed for the operation of the subsidies.

Amendment 24, co-signed by my noble friend, would require individual subsidies given under the subsidy scheme to be judged against the energy and environment principles. Once again, we are back to Monday evening, when my noble friend Lord Purvis posed a question regarding principle G in Schedule 1. The noble Lord, Lord Callanan, got to answer it; I suppose that this time it is the turn of the noble Baroness, Lady Bloomfield. During that debate, the Minister seemed to make it clear that sustainability considerations are indeed implicit in every aspect of the Bill. He suggested that, by implication, there must be some benefit for these things to be legal, but there is no explicit reference to that. I apologise if I am putting words in his mouth because principle G says the opposite. Therefore, rather than repeat what I have said, I have invented another one of my little examples, for which I apologise in advance.

Let us say that I have won a subsidy to expand my pottery business. As part of the submission, I cite increased employment and increased local sourcing of services as the beneficial effects that investment in my pottery business would bring. Nothing in the schedule or the rest of the Bill says that I have to benefit the environment by using less energy. If I am successful, I employ 30% more people and use 30% more local services, therefore achieving the scheme’s objectives, while also using 30% more energy to fire my products. That would appear to be how the Bill will work. Therefore, we need Amendment 24 to include consideration of the environmental impact that that subsidy would bring. It is very simple.

Amendment 68 would allow individual subsidies given under a subsidy scheme to be reviewed. Once again, it is cracking open the monolith and being able to look at the granularity within a scheme. Again, it follows my initial points: we need to be able to see inside these schemes for transparency to be available.

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On Amendment 68, as I have just set out—

[Baroness Sheehan (LD)]

On Amendment 21 to Clause 12, if that amendment was agreed to and the line

“In subsection (1) ‘subsidy’ does not include a subsidy given under a subsidy scheme”


was taken out, it would have no impact on a public authority’s ability to continue to allow subsidies under the subsidy scheme. It would not slow the process up.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I take the noble Baroness’s point on that. I would like to discuss it with the team when I have had a chance to look into it more thoroughly.

As I have just set out, under the terms of Clause 70, an interested party may not submit an application for the Competition Appeal Tribunal to review a decision to give an individual subsidy under a scheme. This is to ensure that scrutiny and challenge occur at the scheme level. The noble Lord’s amendment would enable applications for review to be made to the Competition Appeal Tribunal for individual subsidies granted under a subsidy scheme without the requirement for the broader subsidy scheme also to be reviewed.

--- Later in debate ---

[Lord McNicol of West Kilbride (Lab)]

On that point, how would another business or organisation know the subsidy existed if it was part of the scheme?

[Baroness Sheehan (LD)]

May I intervene too, on the same point? If a business does know about a subsidy and thinks it is unfair, it cannot go to the public authority and ask for a review. The bar is so high that the review can only be at the level of the scheme—which the business had nothing to do with designing. The public authority would have to do it. The business has no comeback.

[Baroness Bloomfield of Hinton Waldrist (Con)]

Every grant made over £500,000 will be visible. Noble Lords may be arguing that that bar is too high, but maybe we will come to that at a later stage.