Trade Bill

Lord Fox Excerpts

Committee: 2nd sitting (Hansard): House of Lords
Wednesday 23rd January 2019 Lords Chamber

[Viscount Trenchard (Con)]

My Lords, this amendment is rather strange in the context of this Bill. It seems intended to restrict the Government’s ability to make changes to the state aid rules unless they have consulted a long list of bodies—and even the public. But as the noble Lord, Lord Stevenson, said, the Government do not intend to use this Bill to provide themselves with a device for making such changes. One of the benefits of Brexit is that we will be able to apply our own state aid rules, either based on an equitable free trade area with the EU or consistent with WTO principles. The present EU rules need to be much improved and made proportionate; on occasion, they discriminate against British business and have a negative effect on the economy and jobs.

The UK is, quite properly, a very restrained user of state aid compared with our continental neighbours, spending approximately €90 per capita against a range of €170 to €240 per capita in Germany, France and Belgium. The point is that in cases such as that of Sheffield Forgemasters, the UK Government should be free, with the agreement of another place and your Lordships’ House, to grant state aid under what will rightly be very narrow criteria. Another case in point might be the Horizon Nuclear Power plant, which has been suspended by Hitachi because of a failure to agree the financing structure. Does the Minister agree that Her Majesty’s Government should look again at the extent to which they might commit public funds to ensure the successful completion of a hugely important contributor to our future energy mix—especially against a background where the only other major new nuclear power station, Hinkley Point, is to be financed by the French state and the Chinese state? Does the Minister agree also that this amendment is in any event completely unnecessary, because the Government have no need or intention to implement state aid commitments in rolling over existing free trade agreements?

[Lord Fox (LD)]

My Lords, had we debated this amendment during the last session, the night before last, we would not have had the benefit of yesterday’s report from the IPPR think tank on the subject of state aid. It reinforces the point made by the noble Viscount, Lord Trenchard, that the United Kingdom is a restrained user of state aid when compared to other countries in the European Union. That gives the lie to some of those who believed that the European Union was restricting the UK Government’s decision on the scale of state aid in this country—and that message might be conveyed to some members of other parties in the other place who are alleged to believe that the European Union would continue to restrict industrial support activities.

I was surprised to hear the huge shopping list that the noble Viscount, Lord Trenchard, presented for further state aid—his is not a voice that I had imagined would be making that point. That highlights the need for a state aid strategy. If we have an industrial strategy—which we do, whether some Members opposite like it or not—the purpose of state aid is to find strategic ways of delivering it in the best possible way for the best possible good of this country and its trading environment with the rest of the world.

Whether we trade as an EU nation, through FTAs or, as some people dream of, on WTO terms—which would be a nightmare for the rest of the world—there will still, sensibly, be restrictions and rules affecting what aid we can give and what restraints we have to apply. In spirit, therefore, I support the amendment, and I am interested to hear the Minister’s response.

I have a query that will probably reveal my ignorance of the process of legislation. Paragraph 4(1) of Schedule 2 contains a more general injunction around statutory instruments and consultation. I wonder whether that part of the Bill may pick up, to a large extent, what the noble Lord, Lord Stevenson, seeks to achieve. I would be happy to be wrong about that, but it would be helpful if the Minister, either now or later, would fill us in on that.

[Lord Lansley (Con)]

My Lords, I understand the point the noble Lord is making and exploring on this issue, and when we explore that point, it is worth saying that much depends on our future relationship with the European Union, and how we incorporate state aid into that. If we were in the European Economic Area, we would apply EU state aid rules; that is what EEA members now do. If we were in a free trade agreement with the European Union—as Canada and South Korea, for example, are—we would do something different. State aid provisions are built into those agreements, but they are based not on EU state aid rules but on the WTO Agreement on Subsidies and Countervailing Measures. That will all entirely depend on what the future relationship looks like.

The point has correctly been made that we use state aid proportionately less—about half as much, as a proportion of GDP, as the French do, and a quarter as much as the Germans. So state aid rules themselves have not necessarily restrained us from doing things. The noble Lord will be aware of the report on competition and state aids by the committee of which I have the privilege to be a member—the Internal Market Sub-Committee of the European Union Committee. The Government’s approach is, essentially, that we will replicate EU state aid rules in UK law, but we will, of course, be repatriating them so that they are exercised by our authorities rather than by the European Commission. In that context, it will be the Competition and Markets Authority, rather than any other body, which does that in this country—and it will do so independently.

If I remember rightly from the evidence that we received—I stand to be corrected if not—the Government’s intention is for this to be done by the CMA on a UK-wide basis, and not to be disaggregated to individual nations or regions. Clearly, the state aid rules themselves may have geographical parameters, as ERDF and other EU funding has done in the past, but that is a different matter. The rules on the application of state aid would be applied in this country. So we will have something considerably beyond the WTO requirements. For example—this is probably the best example and the most important for businesses—EU state aid rules would require us to have processes of notification and prior approval whereas, where WTO rules are concerned, if the Government engage in subsidy then they do so at the risk of post-hoc challenge and complaint. That is quite a different structure.

I say all that simply because, while this is an interesting issue, I am not sure whether the amendment does the job. However, I put it to the noble Lord that he might suggest that if future trade agreements of this kind, which are generally with third-party countries, were to apply state aid rules in a UK and third-party country agreement which differentiated from the WTO subsidies and countervailing measures provisions, that should be the subject of consultation and approval in this House. I cannot see why we would want to approve an arrangement for a WTO agreement on subsidies, which would simply be applied in the normal course of events. I hope that those few remarks are helpful.

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[Baroness Jones of Moulsecoomb]

My Lords, when I first came to your Lordships’ House just over five years ago, I found some of the procedures absolutely incomprehensible. It has taken me a little time to find my feet. Quite honestly, a lot of those procedures lack common sense.

I do not understand why it was ever necessary to draft Amendment 19, let alone for it to be moved. It is common sense: of course we need this sort of information. It is asking for such basic information which, in any sensible universe, would be published as a matter of course. This is transparency which helps all of our businesses and our economy. We are now only weeks away from Brexit day, and we are still completely in the dark about all these things. There are many supply chains which depend on this sort of information. They depend on our existing trade arrangements. Businesses do not have the slightest clue whether they will be able to continue on existing terms in just two months’ time.

I would have thought that, if the Government had everything lined up ready to roll over these trade deals—which I very much doubt—then Ministers would be telling us about it and about what a great job they have done. The Minister would do a great service to the Committee, and to the country, by giving us a full account of where the Government are in these negotiations. It should not have to be an amendment to the Bill—it is so basic—but if the Government will not tell us then we have to compel them.

[Lord Fox]

My Lords, the irony of this is that, if the EU was pursuing this activity, it would have to make all this information available and disclose it to the European Parliament. We are being put at a disadvantage in the process of what is called taking back control.

--- Later in debate ---

[Baroness Fairhead]

I thank the noble Baroness, Lady Kramer, for the further question, and will try to reassure her. The Government have been engaging actively with those third parties on that approach since it was outlined as part of the implementation period arrangements at the European Council of March 2018. But we must consider that a decision for those third parties, those countries themselves. Any action or internal measure taken is for them to consider based on their own domestic legislation and practice. Indeed—this is a critical point—some internal measures, given their very nature, may not even be public knowledge. For this reason, let me assure the noble Baroness that we agree it is right that we engage actively both with third parties and with multilateral organisations and encourage them to consider the steps needed for their own domestic legislation. This enables the continuity that, as the noble Lord, Lord Price, said, in principle they all fundamentally agree with, because it is in their mutual interest.

Moving into the future and the next 10 weeks, if we go to a new deal, this will have to be even more revved up, because we are hoping and planning for an implementation period. But as the noble Baroness will be aware, that would require an agreement, and therefore we must also have plans in place for no deal. We do not think it appropriate for the UK Government to essentially monitor a list of the actions over sovereign countries and hold them accountable. It would also be practically challenging for the reasons I have set out.

[Lord Fox]

I do not think anyone on these Benches has said that the UK Government should be holding the other Governments to account for these actions. We are asking whether you understand what the necessary actions are. Are you tracking them? Do we really know the critical path each agreement has to take in order to reach the golden point of Dr Fox’s magic moment when they all become reality? I think you are saying that you do not know what the path is, that you are not mapping that critical path and that therefore you cannot say how long it is going to take because you just do not know.

[Baroness Fairhead]

I say to the noble Lord that we are actively working and engaging with them. It is for them to decide. They have discussed with us what they currently believe. Some they are actively working through, some the third countries and bodies do not choose to make public—to us or anyone else. That is what I am trying to explain. I do not want this House to be in any doubt or to give the sense that we were just asking them and walking away. We are actively engaging with all the parties I referred to.

I now turn to Amendments 19 and 97. I will take those together, as they both—