Economic Crime and Corporate Transparency Bill

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Committee stage
Tuesday 18th April 2023 Grand Committee

[Lord Agnew of Oulton (Con)]

My Lords, I just want to come in on the point made by the noble Lord, Lord Vaux, on micro-accounts. It was actually 11,000 companies that were registered to this poor man’s residential address in Wales. It all relates to a new loophole, which has been discovered by foreign traders selling on the internet. Up until Brexit, they were essentially avoiding VAT because there was no real mechanism for HMRC to recover it all around the world but, when we left the European Union, we brought in our own regulations. There is a loophole that if, as in this case, you are a Chinese trader and you register a company in the UK, you do not have to pay VAT through the platform on which you are selling the goods.

HRMC is completely floored by this. In its letter to Meg Hillier, it said simply that it had not recognised any fraud so far. Let us get real. Part of the problem is that it is not getting the data. If it could scrape all the data off those 11,000 company accounts, it would very quickly see the pattern.

[Lord Fox (LD)]

There appears to be a chorus of agreement, so I will not add terribly to its length. This is just to thank the noble Lord, Lord Leigh, from whose knowledge of this area we benefit. We should be in a position to listen.

We had a meeting with officials yesterday, and my read-out is that the reason for the government resistance to the previous versions of these amendments referred to by the noble Lord, Lord Leigh, was, in a sense, practical. The accounts are signed off by the board and auditors, and something needs to be done thereafter to tag them. The departmental team seemed worried that something might go wrong in that tagging process, so we should not go down this route.

Having prepared more than 20 company accounts—I concede that they were largely for large businesses—this always happens. The board signs off a set of accounts and then prepares to communicate it in a number of different media. The accounts are put in an annual report, a Stock Exchange announcement system and a website. In each case, there is a process to make sure that the read-across is performed correctly. I suggest that the practical constraint that somebody might do something wrong does not outweigh the benefit of mandating this tagging process across the board.

I agree with the noble Lord, Lord Leigh, and others that micro-companies should still be included in this process.

[Lord Ponsonby of Shulbrede (Lab)]

My Lords, I think the consensus continues. I thank the noble Lord, Lord Leigh, for introducing this group. As he said, this set of amendments really repeats those spoken to earlier, but in this case concerns micro-entities. He made the points about either accidentally or deliberately tagging wrongly, and that not seeming a substantial argument against increasing its use. As the noble Lord, Lord Fox, said, companies are well used to producing and presenting accounts in different media and ensuring that they are presented consistently across them. This tool should extend their use.

I also agree with the noble Lord, Lord Leigh, and others that the Clause 54 stand part debate in the name of the noble Lord, Lord Sarfraz, is not appropriate for the Bill. As others have said, micro-companies are not actually that small. Some numbers have been presented, but the figure I have is that 1.3 million micro-entity accounts were filed in 2019-20, the largest proportion of accounts filed with Companies House. The figures I have are of a turnover of less than £632,000 on a balance sheet of £316,000 with 10 or fewer employees. Over the years, I have been involved in a number of businesses of that sort of size, but they can and do sometimes grow into much larger businesses. There needs to be consistent tracking of these companies to see where they have come from and make predictions about where they might go, so I agree with the point on that made by the noble Lord, Lord Leigh.

Other noble Lords agreed with this point, so I hope that the Minister will resist the argument that Clause 54 should not stand part, if the noble Lord, Lord Sarfraz, chooses to speak to it, and is sympathetic to the amendments from the noble Lord, Lord Leigh.

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[Lord Leigh of Hurley (Con)]

My Lords, I will not join the complete love-in but I will focus on the amendment tabled by the noble Lord, Lord Cromwell, in particular on his provision that covers the point about SIC codes and the requirement that those are accurate. I will echo and perhaps take further his remarks about the problems that exist with SIC codes.

I appreciate that it would not be in the Minister’s remit to answer on this during our debate, but perhaps he might take time to write to us afterwards to comment on SIC codes. As he knows, they came into operation in 1948, when there was a very different business environment. They have been refreshed since then but the last refresh was in 2007 and a huge amount has happened since then. The Ron Kalifa report commented that about 50% of fintech companies do not have an appropriate SIC code. Many companies fall into a number of SIC codes, but a company can choose only four. In fact, out of the 5.3 million companies at Companies House, 3.9 million have chosen only one code, which says to me that they are just not taking it seriously.

Companies are not taking it seriously because they do not see SIC codes as particularly relevant or helpful to them. They often just repeat the previous year’s one, or indeed the one of incorporation, which an accountant may have chosen almost at random. As a result, many companies are choosing the SIC codes starting with “Other”, such as 82990 for other business services. In some areas, one-third of companies are going just for “Other”.

The reason this is important is that a whole lot of government decisions are made on understanding what businesses do and how many are in a particular sector. During Covid, it was apparent from the events industry that large numbers of events companies had not properly registered their business within the SIC codes, so the Government were not able to assess the needs of those companies. Likewise, for searches helping businesses to market to other businesses, unless they know what those other businesses, particularly conglomerates, undertake it is difficult for such businesses to make progress.

Private enterprise has come up with its own version of SIC codes: rating agencies and others, such as The Data City, have created their own codes that they apply to businesses. I very much hope that this might be an area of focus in the near future, so that we can enhance the existing SIC codes and give effect to the amendment tabled the noble Lord, Lord Cromwell. Then we can see what businesses actually do here in the UK.

[Lord Fox (LD)]

My Lords, speaking to the Minister before the Committee commenced, I predicted that this group would be crucial, certainly to what we will be discussing in today’s set of amendments. Your Lordships have demonstrated that through the detail and the concern expressed on identity verification and more general issues. I am sure the Minister will have picked up that right across the Room, this is not a political issue. It is a practical issue about how this Bill, when it becomes an Act, will work—or, indeed, whether it will.

It is worth emphasising that authorised corporate service providers can and do provide legitimate services for businesses. We know that and that they are important. However, research by very many civil society organisations, not least Transparency International, has shown that in many cases those providers are at the spearhead of the abuse that happens in our society and have been the key enabler of the money laundering that we have seen across this country. They have built shell organisations of thousands of companies to be able to do that process, which is why, taken separately and together, these amendments all have something which I hope the Minister will be able to take away and discuss with your Lordships, with his colleagues and with the team. We have had some excellent speeches here.

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[Lord Johnson of Lainston (Con)]

I am grateful to my noble friend for raising this point, and I hope I have not overpromised. Personally, I am very keen to make sure that every part of the Bill is discussed and I am very happy to ensure that the comments we have raised in this debate today are passed on to the right office, which in this case is the Office for National Statistics, which falls under the Treasury rather than the Department for Business and Trade. I am sure it will welcome involving itself in this discussion.

I would like to make a correction: the consultation on the money laundering oversight regime will begin in the summer, not conclude in the summer. I apologise for that.

[Lord Fox (LD)]

I do not want the Minister to leave this process with the concept that we are entirely satisfied with his answer on the regulation of ACSPs because of the multiplicity of those regulators and, frankly, the variability of those regulators, never mind the absence of any structure or template, which the amendment proposed by the noble Lord, Lord Agnew, suggests. I hope the Minister can continue to keep that in his list of things to think about at the end of this session.

[Lord Johnson of Lainston (Con)]

I am grateful to the noble Lord for that comment.

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[Lord Vaux of Harrowden (CB)]

In our debate on the previous group, I asked the Minister what regulation the Government were intending on ID verification. The Bill allows the Secretary of State to create regulations on what the ID verification process will be. The Minister did not answer that question then, so this seems like a convenient moment for him to do so.

[Lord Fox (LD)]

The noble Lord just said exactly what I was going to say. If it is not this, what is the process to identify people and what documentation is required? It will be interesting to hear the Minister’s response to the challenge from the noble Lord, Lord Ponsonby: if it is good enough for voters in local elections, why is it not good enough for multi-million-pound companies?

[Lord Faulks (Non-Afl)]

I support this amendment. There is a slight irony because the Labour Party is against the provision on which it relies to support this amendment. That cheap debating point notwithstanding, this amendment seems quite useful and I cannot see an obvious reason why we should not have it.

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[Lord Johnson of Lainston (Con)]

I appreciate my noble friend’s intervention. It is probably a good thing that we will be cheaper than the EU when it comes to registering a company; we could call it a Brexit dividend. Without being facetious, this is about giving the Government flexibility to ensure that they charge the right amount. I have no personal view on whether it should be £75, £100 or £125; we can have this debate all evening, and I have great sympathy with it. The point is that I do not believe that anyone in this Committee is suggesting a significant change in the volume of cost for either establishing a business or registering it, so it is absolutely right that we should consult widely and make sure both that the right amount is charged and that we have the flexibility to change it one way or the other, if appropriate.

[Lord Fox (LD)]

This has turned into something of a Dutch auction. We have lost sight of the purpose of this group of amendments, which is to look through the telescope from the other end. This is about enforcement: how much money will be needed by the enforcement authorities to enforce the Act? Does the Minister agree that the current level of enforcement with the current legislation is inadequate? If so, what will change to fund the organisations to create adequate enforcement? If it will not happen through the measures being discussed in this group of amendments, how will it? That point was made by various noble Lords in the Committee. It is the nub of the answer that we are seeking from the Minister.

[Lord Johnson of Lainston (Con)]

I am grateful for the noble Lord’s intervention. If I may, I will come to my conclusion before answering those important points. The Government need to continue setting fees via regulations. I would personally be very reluctant to try to set any minimum floor. The assumption will be that the right amount of fees will be set and they will be higher than currently charged. Estimates from Companies House suggest around £50. We are happy to have discussions about that as we go forward but I ask the noble Lord to withdraw his amendment.

Carer’s Leave Bill

Lord Fox Excerpts

Friday 3rd March 2023 Lords Chamber

Moved by

[Lord Fox]

That the Bill be now read a second time.

[Lord Fox (LD)]

My Lords, the Long Title of the Bill is:

“A Bill to make provision about unpaid leave for employees with caring responsibilities”,


and that is what it will do. The Bill will give new rights to at least 2 million employees who have unpaid caring responsibilities, supporting them to remain in work and improving their health and well-being. It will also support employers’ retention and recruitment and increase their productivity. I must confess to a level of trepidation in making this speech which I did not expect to have. I spend most of my waking hours looking at legislation for what will not work and thinking of ways to explain to Ministers why things should not happen. It is a very unusual position I find myself in to be promoting the benefits and importance of a piece of legislation, so I beg your Lordships’ indulgence as I make this attempt.

I speak as the party’s business department lead, and I must confess to feeling something of a carpetbagger in supporting the Bill. The real credit for getting to this point lies on other shoulders, and it is on those shoulders that I now clamber. In particular, I commend the noble Baroness, Lady Pitkeathley, and my noble friend Lady Tyler. I look forward to hearing from them later, as I do from all other noble Lords who will speak. The role of the noble Baroness, Lady Pitkeathley, in bringing the issues facing carers to the fore has been exceptional and extends back decades—I did ask her, and I established that “decades” is the right word. Her counsel on the Bill has been invaluable, as has the counsel of my noble friend Lady Tyler. I am sure she will mention her Private Member’s Bill, which presages this one. The other shoulders on which I clamber belong to my honourable friend in the other place Wendy Chamberlain MP, who is standing at the Bar. It was thanks to Wendy that the Bill successfully passed all stages in the House of Commons on 3 February this year with no amendments, receiving support from the Government and MPs across the House. I am looking forward with anticipation to hearing the Minister—the noble Lord, Lord Johnson—and anticipate his support. I thank his department for its help in preparing for this debate.

As I have said, the Bill has received strong support from all quarters: 85 MPs have explicitly stated public support for it and it has been endorsed by over 140 organisations, including small and large employers, trade unions, employer representative groups, local and national carer organisations and the APPG on Carers. Indeed, I was very pleased to meet a number of exemplar employers, both large and small, earlier this week to hear about their experiences of already providing carer’s leave and the positive impact that it is having on both their workforce and their business. They explained and brought home in human terms, and indeed business terms, how this leave is beneficial.

I also heard from two carers, both of whom are here with us today, who told me how invaluable it was to be able to take carer’s leave to better juggle work and care. I thank them for taking some time off and coming to your Lordships’ House. Again, they reinforced the human side of what we are discussing today. It really does matter—and it matters to an awful lot of people. Carers UK, which helped to facilitate many of these meetings, has been leading on this issue for years. The noble Baroness, Lady Pitkeathley, has been very much a part of that. Its research has uncovered that at least 2 million people—probably millions more—in paid employment are unpaid carers, so this is a significant issue.

The stresses and strains of having to juggle paid employment with unpaid care has led to hundreds of thousands of carers leaving the labour market or reducing their hours in work. This is at a time when recruitment into all forms of business is almost at a crisis level. More than 500,000 people—half a million—left the workforce between 2018 and 2020 because of the lack of support, 600 people per day on average. The acute shortage of social care support is also placing additional unsustainable pressure on carers and making it harder for them to manage both work and care. Caring has intensified too, with the proportion of unpaid carers providing significant care—over 20 hours per week—increasing by 42% since 2020, so they are having to do more caring, often as a result of less other care being available to their families. Many carers now report—it is no wonder—that they are exhausted and burned out, especially those who find the process of juggling so difficult. The Bill will help to meet some of that huge caring challenge. Again, it does not pretend to sweep all the issues away, but it is an important step.

I will summarise the main elements of the Bill. It will provide powers to make regulations to create an entitlement to carer’s leave. It does this by inserting new provisions into the Employment Rights Act 1996. The leave will be unpaid and will be for the purpose of caring for a dependant with a long-term care need. All employees who meet the qualifying criteria will be entitled to the leave, no matter how long they have worked for their employer. It will be available to take in blocks from as small as half a day to up to a week in total at least—depending on future legislation—over a 12-month period.

I now go to the qualifying criteria. First, the person must be providing care for, or arranging for the care of, a dependant with a long-term care need. The definition of “dependant” is broadly drawn, and we should be very pleased about that, because it will make things a lot easier to manage and administer. The Minister talked about simplicity, and the breadth of drawing creates simplicity in the delivery. The Bill states that

“a person is a dependant of an employee if they … reasonably rely on the employee to provide or arrange care”—

“reasonably rely” is an important phrase in this Bill. This is a helpful safety net and ensures that a wide range of relationships are in scope, wider than just immediate family members.

Secondly, the definition of long-term care need is similarly broad. In the Bill,

“a dependant of an employee has a ‘long-term care need’ if—

(i) they have an illness or injury (whether physical or mental) that requires, or is likely to require, care for more than three months,

(ii) they have a disability for the purposes of the Equality Act 2010, or

(iii) they require care for a reason connected with their old age.”

The Bill also requires that regulations set out the employee’s rights regarding their existing terms and conditions while on leave and have their right to return to work once they have finished their leave. The reference to terms and conditions does not, of course, include pay. As I have said, this is an unpaid leave right.

I believe it is important that the right to carer’s leave should work for both employees and employers. This is why employees will be required to give reasonable notice to take their leave, which enables employers to make necessary arrangements to manage their absence. In fact, in many cases, carers are having to use short-term sick leave or phone in sick to meet the care responsibilities they have. This is far less easy for an employer to manage than having advance knowledge that something is happening, where they can know the day and the hour, so it is actually a big advantage for employers.

The detail of notice requirements will be a matter for regulations, but the Government’s consultation response makes it clear that the notice period requirements may be similar to those for taking annual leave, which should keep the landscape simple for those requesting and responding to requests for this leave. I should remind your Lordships that there is a separate cover for emergency issues, which does not come within the Bill.

Employees have a right to carer’s leave, so it is stronger than a right to request, but the Bill acknowledges that there might be situations where it will be challenging for the employer to grant the leave requested. Therefore, an employer will be entitled to postpone the leave, but they may not deny a request. Clearly, this will be about the relationship between the employee and the employer, but the employee has a right. The aim of this approach is to ensure that employers engage with their employees so that they can agree on a suitable date. As with other employment rights, an employee will be able to make a complaint to an employment tribunal where their employer has unreasonably postponed or prevented them from taking carer’s leave.

I shall say just a few words about the general and delegated powers, because details of how the provision will work will be set out in secondary legislation. There are delegated powers in this Bill, and noble Lords, including me, have often been concerned, rightly, about the way in which delegated powers will be used. In this instance, the delegated powers will allow the Secretary of State to set out the extent of the leave entitlement and when it will be taken, and employee entitlements while on leave and on return to work. They will also allow for regulations to cover procedural requirements around notice periods and postponement, and the consequences of failing to follow requirements.

This is all wholly consistent with the approach taken to family leave rights generally. That consistency makes it clearer and easier for employees, employers and the legal community, and is a sensible and pragmatic approach. I was delighted that the DPRRC yesterday expressed no concerns with the secondary legislation in the Bill.

In conclusion, I encourage noble Lords to engage with the Bill. I think we all want it to succeed and to pass through your Lordships’ House as quickly and easily as possible. We have an opportunity here to make a real difference to the lives of those who will seek to rely on this entitlement in future, and the people for whom they care. I hope that with the support of noble Lords, we can take that opportunity and deliver legislation that can make a change for the better. I beg to move.

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[Lord Fox (LD)]

My Lords, I join the Minister in thanking noble Lords for their contributions today. When I saw the speakers’ list, I suspected that we would have a good debate, but it has exceeded those expectations. I think it has been a wonderful debate and I understand that even the Deputy Speaker refused to leave the Woolsack in order to be able to hear the end of it. I start by specifically thanking the Minister: the care and the detail with which he replied to the debate is a very good sign, and I am really delighted by that. I am afraid I will have to pull him up on one thing. He suggested that the noble Baroness, Lady Pitkeathley, might be satisfied: I can warn him, from what little I know of the noble Baroness, that she will be at his door tomorrow with the next requirement.

I would like to pick a few of the bones out of this debate, because it has brought together a wide variety of issues. I thank the noble Lord, Lord Young, for bringing up the issue of young carers and young adult carers, because I failed to bring it forward, and I am delighted that he was able to do it. He also talked about workplaces being aware of how many carers they have. My noble friend Lord Shipley pointed out that there are an awful lot of hidden carers within the workforce. Even those businesses that have very well-defined carer systems, carer passports and whatever else do not unearth all the carers they have, so there is an awful lot of work to do, both at a governmental and societal level and at a granular level in businesses, particularly in small and medium businesses where they do not have the HR processes and the systems or the people to do this work.

The noble Baroness, Lady Pitkeathley, said a lot of interesting things, but I will pick out her point about trying to remove the guilt from this process—the guilt of the employee having to go and ask, cap in hand, for time to do a very important task for the person for whom they care. By putting that into a process, we start removing that guilt. My noble friend Lord Shipley mentioned the ageing population, and this is crucial. The demographic, as it goes forward, is going to drive the need for care, year on year, to an even higher level than we see today.

I thank the right reverend Prelate the Bishop of Leicester for his contribution. He talked about valuing carers, and so many carers in the current situation do not feel valued by people around them. He talked about dignity, and I think part of what we are trying to do is create an element of dignity. The right reverend Prelate also talked about interdependence, with so many, as the noble Baroness, Lady Pitkeathley, said, feeling lonely. These are key issues. This was picked up by the noble Baroness, Lady Uddin, who talked about her own personal experience, which was quite moving, as well as the wider issue about how this is a real challenge in the harder-to-reach communities in our society, and I thank her for her delivery. My noble friend Lady Tyler talked about not having to make the choice between caring and working, not having to walk out of your work because you cannot manage the process of day-to-day life.

I am now going to do what most Ministers seem to do, which is shuffle a few pieces of paper. I thank the noble Baroness, Lady Blake, and everybody else for their support, but I did have some trepidation that one of your Lordships was going to come up, not necessarily with an excoriating review of what we had here but with a whole catalogue full of massive improvements. We all know there is more to be done, and I am sure, as I have just said, there will be lots of people wanting to suggest what that should be. But the sense I got from the Chamber is that there are not going to be lots of amendments coming forward, because the way we get this Bill through quickly, or indeed get it through at all, is without amendments—by accepting what we have and moving on. I thank the noble Baroness, Lady Blake, for her, I think, cry of: “Forwards. Let us seize the moment”. I ask your Lordships to join with us, with the Minister and me, to seize that moment, and I invite noble Lords to support a Second Reading of the Bill.

Bill read a second time and committed to a Committee of the Whole House.

Protection from Redundancy (Pregnancy and Family Leave) Bill

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2nd reading
Friday 3rd March 2023 Lords Chamber

[Lord Fox (LD)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Browne. We are in danger of basking in his enthusiasm, having had two speeches in succession.

There is only a small number of speakers in this debate, but that reflects the fact that, to use a phrase we heard when discussing the previous Bill, this seems like a slam dunk. It is a Bill that we should not be speaking against. In advance of his speech, I welcome the noble Lord, Lord Leong, to his first Front-Bench speech—the first of many, we hope. My speech will be relatively short, because the preceding speakers have covered a whole tranche of it. The noble Baroness set out a compelling case for the Bill, which I have to say, as did the noble Lord, Lord Browne, has been a long time coming.

The Bill owes its existence to 2019, when the Government announced that they would extend redundancy protections, but of course it goes back much further than that. The Queen’s Speech in 2019 contained a government commitment to introduce an employment Bill, as we have just heard, that would extend redundancy protections and prevent maternity discrimination, among other things. To date, we have not seen that employment Bill, and it was not included in the Queen’s Speech in 2021 or 2022. I ask the Minister if I am right in saying that this tranche of government-supported Private Members’ Bills, which in a sense fillet some aspects of that employment Bill, is a sign that we will not be seeing an employment Bill in this Parliament. Many of us are beginning to draw that conclusion. We would say, and I am sure other Members of your Lordships’ House would agree, that that is a tremendous shame. There is a huge amount of work that needs to be done in that employment Bill, and many people will be disappointed.

I turn to the Private Member’s Bill in hand. It is very good that the Government are choosing to support the Bill, which was led by Dan Jarvis in the Commons and so eloquently by the noble Baroness, Lady Bertin, here. It is a big step forward, and they are both to be very much credited for bringing it forward. I am delighted that it will receive government support—and of course it will receive support from these Benches.

As we know, the Bill will enable the Secretary of State to make regulations about protection from redundancy during and after pregnancy, and for six months after returning from maternity, adoption or shared parental leave. The Bill will deliver the government commitment that was made in 2019. Sometimes it is good to recognise that Bills come in different ways; most of us work on primary legislation in an adversarial way, and it is good to see us joining across the House to welcome this.

A real driving force behind the Bill was the 2016 EHRC landmark investigation into pregnancy and maternity discrimination at work. It came up with the need to extend the period covered by existing protections against unfair selection for redundancy under Regulation 10 of the Maternity and Parental Leave etc. Regulations 1999, so as to cover both pregnancy and the six-month period after returning to work from maternity, adoption or shared parental leave.

Like the noble Baroness, I was shocked by the numbers; I had to go back and look at them. There seems to be agreement that 54,000 new mothers do not go back to their job after maternity leave. That is a huge waste of human capital, as well as undermining the family economies of some of our poorer families across the country. The noble Baroness cited 2018 data. Unison has provided me with a briefing which refers to a TUC survey in 2020 of more than 3,000 women, and the numbers are very similar: one in four women had experienced unfair treatment at work, including being singled out for redundancy and furlough—which was another version, in a sense. It is very much at the low-paid end where most of this happens. Low-paid women—those earning less than £23,000 a year—were much more likely than women with higher salaries to be victims of this sort of discrimination. Gong forward with the Bill will therefore have a discriminatory advantage both in terms of sex and the economy.

Those of us who have worked in business know that it is really important to give women who come back from maternity leave a proper opportunity to get their feet back under the table and to get back into the system. The Bill will make it impossible for unscrupulous employers to get rid of women in a way that has clearly been happening systematically across the country.

As we have heard, the Bill received support from the Government and MPs from all parties during its passage through the House of Commons. There have been voices beyond your Lordships’ House that say that it does not address all the underlying issues within the legal system. I am sure this is true, but it undeniably moves things forward, and for that reason it has our full support.

The noble Lord, Lord Browne, cited the German experience. I have quite a lot of experience of that, having worked for businesses that had a big footprint in continental Europe. I add to that the experience of Sweden, which is even further down the road of cultural change. The way that Swedish employment law operates has created a family-centric culture in that country. I do not pretend that the Bill will achieve that, but it is certainly a step in the right direction.

Electric Cars: Export to EU

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Thursday 2nd March 2023 Lords Chamber

Asked by

[Lord Fox]

To ask His Majesty’s Government how they will ensure that electric cars built in the United Kingdom after 2024 meet the country-of-origin requirements, such that they can continue to be exported to the European Union tariff-free.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

The modern rules of origin we negotiated with the EU underpin our unprecedented zero-tariff, zero-quota trade agreement. These rules were developed with industry to reflect the needs of UK electric vehicle manufacturing. We are aware of the supply chain challenges, also caused by external factors, including Russia’s war in Ukraine. This is why our officials are in constant dialogue with the sector to support it to access the maximum benefits of this agreement and other assistance.

[Lord Fox (LD)]

My Lords, I thank the Minister for his Answer. He did not say what his department is doing about the clause in the trade and co-operation agreement that kicks in at the end of this year—in 2024—where, if there is not 40% of local content in UK-manufactured electric vehicles, they will be subject to up to 22% tariffs when exporting to the EU, and that will have a knock-on effect on other free trade agreements. Will the Minister undertake specifically to go back to the European Union to look at that clause, because we will not be able to export electric vehicles from this country economically unless it is put on hold at the end of this year.

[Lord Johnson of Lainston (Con)]

I am very grateful to the noble Lord for raising this point, and I hope I answered his Question to some extent. It is very important that we invest in future vehicle manufacture in this country. In the papers I brought with me to this great House are lists of the enormous number of subsidies, grants, credits and other mechanisms of support to ensure that we can build here the electric vehicles and the batteries we need, homegrown in the United Kingdom, to ensure that we have almost 100% of content of these vehicles when we sell them—not just to the European Union but all around the world. It is important to mention the automotive transformation fund and how it has helped Stellantis and Nissan, both of which are successfully working on producing batteries following, crucially, a critical mineral supply deal with Indonesia which I personally signed one month ago. There is work to do, let us be under no illusion, but the Government are committed to it. Huge amounts of money and a great deal of resource, including the attention of His Majesty’s Government, have been committed to it.

Subsidy Control (Information-Gathering Powers) (Modification) Regulations 2022

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Monday 20th February 2023 Lords Chamber

[Lord Dodds of Duncairn (DUP)]

My Lords, I wish briefly to raise a couple of issues. First, the report of the Secondary Legislation Scrutiny Committee refers to the responses from the Scottish and Welsh Governments. I am keen to understand what type of engagement there was with the Northern Ireland departments. We recognise, of course, that there is no Northern Ireland Executive or Assembly, but the Select Committee on the protocol, of which I am a member, has received many regulations and explanatory memorandums. This indicates that, while there is the absence of devolved government, officials are engaging on a departmental level and seeking responses and input on behalf of Northern Ireland. I would be interested to know what consultation took place with departments in Northern Ireland. If there was such consultation, what was the response?

The second issue I would like clarified is how the statutory instrument interacts with Article 10 of the Northern Ireland protocol. Article 10 puts Northern Ireland outside the UK subsidy control regime and means that we are subject to EU state aid rules. The territorial application of this instrument appears to extend to Northern Ireland. I would like clarity for those in Northern Ireland, who are always seeking to understand the interaction between our own domestic UK legislation and the laws that now govern us from the European Union. We are unique in that respect, so I would like some clarity on the interaction between this instrument and the fact that we are under EU state aid rules.

[Lord Fox (LD)]

My Lords, it is a great pleasure to follow the noble Lord, Lord Dodds, and the noble Baroness, Lady Blake, who, alongside the noble Lord, Lord Coaker, and my noble friend Lady Randerson, have the scars of the Subsidy Control Bill on our backs. We all worked on its passage, and my noble friend Lady Randerson also worked on the United Kingdom Internal Market Bill, to which she referred.

The wheels of ministerial responsibility have turned, and we have a different Minister answering some of the questions which, as my noble friend pointed out, were previously raised. I am grateful to the noble Lord, Lord Dodds, for raising Northern Ireland, because the ambiguity of the Northern Ireland regime was something we discussed many times with the Minister’s predecessor. That issue was never properly resolved from the Dispatch Box; perhaps a new Minister can provide some more clarity.

It is difficult to look at this, having been through the passage of the Subsidy Control Act, and feel that the Government were operating in good faith during that process. This is exactly what we said would happen, and it was essentially denied from the Dispatch Box, so here we are. I would dispute a little with the noble Baroness, Lady Blake: I do not think this is the thin end of the wedge. We have seen the thin end, and we are moving up the wedge as far as the Government’s attitude towards the devolved Administrations and devolved power is concerned. This is just another example, and it clearly shows that the Conservative model for taking back power is to remove power from the devolved Administrations, as well as assuming power from Brussels.

My noble friend pointed out that this comes at that difficult nexus between devolved and reserved powers. That is what the common frameworks process was established to deal with. Can the Minister tell your Lordships’ House why the common frameworks process was not considered the right way to resolve this issue, which, as my noble friend rightly said, sits on the border between devolved and reserved issues? That is exactly the reason why the common frameworks were put in place.

My noble friend illustrated the non-political system that was practised between the EU and the devolved Administrations. There were strict legalistic rules which set up how the money was distributed. But now, all the evidence suggests that His Majesty’s Government are departing from what I would call a legalistic framework and working to political grace and favour. Political allocation of subsidies is clearly what is happening. We only have to look at what has happened to date. Under the cover of bidding processes, money is being allocated where it suits this Government best for their electoral prospects. This is a big departure from the legalistic approach the European Union established. We could set that aside and say that this is clumsy, which it is. We could perhaps understand if the Government rushed into this in haste without proper consultation with the devolved Administrations. I would like to think that was true. It would be easier to illustrate that if the Minister could tell us whether the CMA requested these powers, why it requested them and when.

It is clear that this has again upset the relationship with the Welsh Government and, I am sure, with the other devolved Administrations, as we heard from the noble Lord, Lord Dodds. Why are the Government being so clumsy on this? What, in the long run, are they seeking by cutting themselves off from the information supply? The noble Baroness, Lady Blake, said that the Government are cutting themselves off from valuable information which should be available. I can only take the gloomy view of this. This instrument makes the process of what I will call “subsidy gerrymandering” easier. For that reason, we find it unacceptable.

[The Minister of State, Department for Business and Trade (Lord Johnson of Lainston) (Con)]

I thank the noble Baroness, Lady Randerson, for tabling this Motion and the noble Lords, Lord Dodds and Lord Fox, and the noble Baroness, Lady Blake, for their incredibly valuable contributions. I am also well aware of the nature of this debate and how it relates to devolution and the important sense of respect between the UK Government, the devolved Administrations and public authorities. I stress my own personal sensitivity to this matter. I note the comment of the noble Baroness, Lady Blake, about the timeliness of the responses sought by devolved Administrations; I will ensure that I relay that to my colleagues. I also want to stress the importance we place on interlocution with the Welsh Government.

This is a technical debate. The specific matter of the subsidy advice unit, which I am going to cover this evening, involves a number of technical aspects. I am extremely comfortable with having further conversations with any noble Lords about any of the specifics we are discussing, as I did over the weekend with the noble Baroness, Lady Randerson.

The noble Lord, Lord Dodds, mentioned consultations relating to article 10 and the subsidy advice unit, and I am happy to provide the noble Lord with a fuller answer on that. It would not cover subsidies that would come under the EU state aid rules because clearly, the subsidy advice unit is for UK-based subsidies. There are some services it will be relevant for, which I am happy to talk about in further detail later.

I also reassure the noble Baroness and other contributors to this very important debate that in this instance there is no lack of respect. There has been no abdication by central government of responsibilities and duties to devolved nations. We are not shutting ourselves away, as may have been suggested. This is not a forerunner of a roll-back of devolution. It is not a power grab, as has been mentioned. I would not suggest that, relating to this specific issue, this is even the tip of the thinnest end of the wedge; I do not think the wedge comes into it. Hopefully, I will now explain why.

The measures contained in this and various other pieces of legislation relating to it actually give devolved nations more flexibility—as has been said by the noble Baroness—to design their subsidies so that they can rightly ensure that all such support is directed to local priorities, better serving their citizens and enabling, frankly, a far better series of targeted outcomes. This is, if noble Lords will allow me a reference, what we talk about when we use the phrase “Brexit dividend”.

--- Later in debate ---

Comments were made that the consultation process was not to the liking of some noble Lords—

[Lord Fox (LD)]

Before moving off the point, to take what the Minister has said, I still do not quite understand why, if the CMA still had to consult the devolved Administrations in the way that it would have to without this measure, how that consultation would stop it doing anything that the Minister has just described that it will be doing. In other words, what is the purpose of removing that obligation to consult?

[Lord Johnson of Lainston (Con)]

There are a number of useful procedural and technical reasons for doing that. The point is that the Subsidy Advice Unit is exactly that; it is an advisory unit which the devolved Administrations or local authorities will call in themselves in order to review whether their subsidies conform to our international agreements. There are some specific areas where these might be reviewed—I think that if it is above £5 million, that would automatically trigger some of them to review—but these are reserved powers and this relates to an advisory unit, so this is effectively tidying up the process. That allows the Secretary of State to have more control over the framework. I think we agree that setting levels of fines for non-provision of information, which is very important; it would not be helpful if devolved nations or local authorities were not providing the information we need in order to ensure that we are running an effective subsidy regime, and to ensure that each of the other devolved nations were able to view what each of the others were up to. Therefore it is absolutely right that the Secretary of State can set those rates, and it would not be appropriate for that to go to consultation, because it is a reserved matter and specifically relates back to the devolved nations. I hope I have explained myself; I am very happy to have further meetings on this at a later date. I have a few more comments to make, and then I will come to the end.

It is important to note that the Government have engaged regularly with the devolved Administrations on the design of a UK-wide subsidy control regime. Clearly, the whole point is to make this regime a positive factor of the post-Brexit vision of Britain. This is both at official and ministerial level, including through a regular policy forum. It is in all our interests to ensure that the regime works for the whole of the UK and enables the UK’s domestic markets to function properly. I note that as part of its outreach programme for public authorities, the Department for Business and Trade delivered in-person events in Belfast, Cardiff and Glasgow, and dedicated online sessions for public authorities in Wales and Northern Ireland. The series, attended by 1,500 people in total, also helped build awareness and understanding of the new regime among public authorities.

Therefore, while it is right and proper for debates in this House and for legislation to reflect important points of principle, such as the difference between reserved and devolved competencies, I hope noble Lords will be reassured that the actual delivery of specific polices, such as the administration of the UK’s subsidy control regime, is much more practical and pragmatic in nature. The Subsidy Advice Unit and Department for Business and Trade have had a productive and positive working relationship with counterparts in the devolved Administrations throughout the development of the new subsidy control regime. His Majesty’s Government are absolutely committed to maintaining that working relationship and looking for further opportunities to collaborate with devolved Administrations as we look to the future of the regime as well. We are not trying to make enemies of friends. For those reasons, I ask the noble Baroness to withdraw her Motion.