Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

We appreciate that the CMA will be undertaking preparatory work as we speak, and this amendment is not meant as a criticism, but during the passage of other Bills it is perfectly normal for us to probe whether a chosen regulator—because it will not be an enforcement agency—is the correct one. It very much picks up on my noble friend Lord Whitty’s remarks in the previous debate about the role of the CMA and how ready it and the SAU are. Do they have the resources and the expertise? Amendment 64 aims to make sure that the SAU has four-nation representation on it. With that, I beg to move Amendment 64.

[Lord Bruce of Bennachie (LD)]

My Lords, I speak in support of Amendment 64, to which I have added my name. I also support Amendment 65, which my noble friend Lord German will address in more detail. Overall, and as has been said, this Bill has worrying implications for the devolution settlements. Just as the United Kingdom Internal Market Act may be used to impact the devolved Administrations unfairly—certainly, that is their concern—reserving the subsidy regime to the UK Parliament and the powers that have been given to the Secretary of State are causing alarm across the devolved Administrations.

The Government like to claim, and the Minister has made this point a few times, that leaving the EU gives the devolved Administrations more power and flexibility. Under the EU, they were constrained by the state aid rules that no longer apply. Now, they can pursue their own. That would be true if the UK Government were not introducing legislation that allows them to override the devolved Administrations, without even a requirement for consultation and with no reciprocal rights to challenge UK Ministers’ decisions as regards not only the UK but England.

Oversight of these two pieces of post-Brexit reserve-power legislation, which I would argue are draconian, has been allocated to the Competition and Markets Authority, which has been asked to acquire skills and experience that it does not yet have. It is important for us to recognise that this is new territory for the CMA.

Thomas Pope of the Institute for Government says that this Bill

“does not yet guarantee a Brexit success story. Gaps in the legislation could deny Parliament”—

I would argue are denying Parliament—

“a proper chance to scrutinise how the new system will work—and point to future rows between the UK government and the devolved administrations.”

He further points out that the regulations have no input from the devolved Administrations. The Minister keeps saying that he is consulting, but the devolved Administrations say it is not consultation at all. Pope argues that

“a successful system needs buy-in from all parts of the UK.”

That is absolutely the case. He went on to say that the Institute for Government’s report

“recommended that any regulations should be made in consultation with the devolved administrations”—

I emphasise the following—

“with the process preferably led by experts in the CMA. The government’s approach risks future clashes”.

These arguments have been further developed by George Peretz QC, who points out, as previous debates in this Committee have highlighted, that granting authorities need to test their subsidies against the effects on competition and investment, without reference to the wider issues—in other words, social and environmental implications, and the other issues we are discussing. It is a very narrow definition, which could lead to broader subsidy intentions being overridden. It is true that the TCA refers to the socioeconomic situation of the disadvantaged area concerned. How could the EU not agree to that, given the CAP and its own state aid rules? But there is no definition of what constitutes a disadvantaged area or what disadvantage is. We have discussed the lack of any area map in previous Committee debates.

Mr Peretz goes on to say that

“nothing in the Bill provides for the devolved governments to have any say in the appointment of CMA panel members who will, as part of the Subsidy Advice Unit, exercise the CMA’s powers under the Bill”,

such as they are, and

“there is no equivalent to the provisions of Schedule 3 to IMA20 that require the Secretary of State to seek the consent of the devolved governments before making appointments to the Office for the Internal Market”.

Why is that the case for the internal market Act but not the Subsidy Control Bill? Surely, consistency, at least, requires that. This amendment seeks to remedy this and, I suggest, for very good reason. As I said, the CMA is moving into new and unfamiliar territory. It is surely essential that it understands the needs of the devolved areas and can balance them across the UK.

The powers that the Secretary of State has, which are not reciprocated for the devolved Administrations, put the CMA in a potentially invidious position. If the Secretary of State seeks to challenge, for example, the livestock support regime of any of the devolved Administrations, he or she can do so—on so far unstated but potentially restricting grounds. If a Minister introduces a subsidy, let us say, for London which the devolved Administrations feel disadvantages them, they have no corresponding right to challenge. I would anticipate the argument of grandfathering current regimes and repeat what I said in the debate on agriculture earlier in the week: that, over time, the regimes may change as circumstances change and, at that point, they will not be grandfathered and may be subject to challenge. That is important to note.

As George Peretz points out, the result looks distinctly unbalanced. For example, if the Welsh Government decide to grant a subsidy to which the Secretary of State objects, perhaps on the basis of its impact on England, the Secretary of State may be able to refer it to the CMA and will have standing to challenge it before the CAT. The Secretary of State may also be able to issue guidance that recommends against types of subsidy that the Welsh Government might have in mind, guidance to which the CMA and the Welsh Government have to have regard. On the other hand, if the Secretary of State grants subsidies to businesses in England or, using his or her powers under Section 50 of the internal market Act, to businesses in Wales to which the Welsh Government have objections, none of those possibilities are open to the Welsh Government. I rest that case, because it is crucial.

The Minister may argue that, as with the Monetary Policy Committee of the Bank of England, members are appointed to the CMA for their expertise rather than their geographical base, but he is ignoring that no such expertise yet exists for the new regime. It is surely imperative that, from the outset, the CMA is fully conversant with the needs of the devolved Administrations and that administering the regime evolves in a way which is sensitive to them. The Minister knows my opposition to separatism and nationalism, but I am a passionate home ruler and believe that the devolution settlements should be upheld and not eroded.

The Minister will assert that these are reserved powers—he has done it several times already during this Committee—and are based on the sovereignty of Westminster and not on a federal system which we do not have, or even a devolved consensus. To disregard the devolved Administrations, regardless of where the legal and constitutional power lies, is reckless. The Government are putting the union at risk in the way they are proceeding with this Bill by using reserved powers and failing to recognise the sensitivities. To say to the devolved Administrations, “You have more freedom than you had under the EU, but we’re having reserved powers that will qualify, test or challenge that freedom” is a two-edged sword that does not stack up. Right now, the mood in the devolved Administrations is that they do not trust the Government’s intentions, not yet knowing what they are.

[Lord Wigley (PC)]

My Lords, I am delighted to follow the noble Lord and agree with almost all the comments that he made—not entirely, but almost. In particular, I am glad to support Amendments 64 and 65, proposed earlier by the noble Lord, Lord McNicol, and have added my name to both of them.

My feeling—and this is really what the noble Lord was speaking about a moment ago—is that we are building a grit creation machine here. We are creating the grit that will cause difficulties as the wheels of this operation move forward. I do not think that is what the Government really want to do.

I well remember being on a committee chaired by the noble Lord sitting next to me a couple of years ago, when we were questioning the CMA’s role in these matters. We found that the CMA, quite legitimately, had very little experience of dealing with devolved dimensions. This was not a criticism of it; that was not its role. It still does not. We should therefore ensure that we build the necessary talent and experience into the relevant units or committees of the CMA that can at least advise on these matters, but it seems that we want to tie the hands of the CMA. It does not have that background; it has no obligation to work in close proximity to the devolved regimes under the Bill. It should certainly find a way of doing that if it wants the operation to go smoothly, otherwise problems will arise.