Electric Cars: Export to EU
Lord Fox Excerpts(3 years, 1 month ago)
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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
Lord Fox Excerpts(3 years, 1 month ago)
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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”.
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.