Subsidy Control Bill

Debate between Lord Fox and Lord Lamont of Lerwick

Committee stage
Wednesday 9th February 2022 Grand Committee

[Lord Lamont of Lerwick (Con)]

My Lords, I have added my name to this amendment, which was so powerfully and eloquently moved. Its purpose is to give the CMA standing to exercise enforcement powers through the CAT.

To some extent, this amendment overlaps with the amendment I moved earlier. I strongly agree with what was said about the limitations of relying on people who are affected by subsidy decisions to challenge them within the tight time limits that we have debated. I have already said, probably at too great length, that there needs to be much more independent enforcement.

I do not want to go over all the points I made earlier but, just in case some of the Committee thought I was overegging or inventing it, I want to refer to what the Financial Times said about this Bill. It carried an article on 2 July headed:

“The UK carves a risky new path on state aid.”


It went on to acknowledge what the Government have claimed as the great advantage of the new system—that it is speedier and more flexible—but commented:

“On the altar of speed, it”—


the Government—

“has sacrificed scrutiny. This is worrying from a government that has shied away from accountability and spent lavishly on contracts.”

It went on:

“The government envisages public bodies largely having a free hand in deciding whether subsidies comply with broad principles.”


I mentioned this point earlier: really, the regime seemed to amount to allowing public authorities to do whatever they wanted, and the assumption was that public authorities knew the law and would therefore observe it.

Finally, the FT said:

“The combination of a light-touch system and an interventionist government willing to spend lavishly on special projects creates dangers of a distortive spending spree—and of ministers becoming vulnerable to lobbying by vested interests.”


That is one of the problems. I am not in any way questioning the integrity or motives of the Government, but it is so easy for vested interests to have an undue influence on these decisions and it is a slippery road down to the politicisation of subsidies. I very much think that we need to move one way or another, whether it is by the route that the noble and learned Lord, Lord Thomas, so eloquently laid down or the one that I referred to earlier. We need to move to more arm’s-length, independent and effective enforcement.

When he spoke in reply to my earlier amendment, the Minister said the Government will not refer themselves to the CMA, as though that were perfectly obvious. It may be perfectly obvious that no one would do that, but in a sense they ought to. There ought to be a mechanism by which a Government are referred to the CMA.

When I first got into the House of Commons, I used to come and listen to debates here. People always gave Latin tags. I am sure that if Lord Boyd-Carpenter or Derek Walker-Smith, Lord Broxbourne, were examining this Bill today, their Latin tag would be “Quis custodiet ipsos custodes?”—who will guard the guards? I am sure everybody knew that already. That is the principle. Who is going to contain and limit the Government?

[Lord Fox (LD)]

My Lords, I rise to speak to Amendment 71 in my name. I thank the noble Lord, Lord Lamont, and the noble and learned Lord, Lord Thomas of Cwmgiedd, for their support. I acknowledge that anything I say is unlikely to carry the weight of those two authoritative Peers, so your Lordships will be pleased to hear that I will be brief.

The noble and learned Lord, Lord Thomas, raised the issue of private enforcement. It is intriguing to me that the Government should choose private enforcement to police something as important as a subsidy regime. They do not use private enforcement to police their income tax regime or all manner of important economic activity, yet they have chosen this route. They have explicitly decided to eliminate the devolved authorities, councils and LEPs from the process of enforcement and have added a 28-day deadline to that private enforcement process, which makes it almost impossible for private individuals to enforce in a timely manner. One would think that enforcement was perhaps not at the forefront of the Government’s objectives when looking at the Bill, and nothing so far has convinced me that the Government are interested in enforcing.

At Second Reading, the noble Lord, Lord Lamont, let out the cri de cœur: who will enforce the Bill? The answer is clear: no one. There is an informal system of bringing to book that will ensure that very little enforcement goes on. Yet if we look somewhere else in the CMA, the Digital Markets Unit is pre-emptively calling the big techs in and dealing with issues under its orbit. It is not that the CMA cannot do it; it is that the Government have decided not to let it do it.

Both these amendments—the one in my name and the other—seek to give a role for the Competition Appeal Tribunal to pre-emptively deal with transgressions. What are the Government frightened of in this? I do not think that the Minister has so far articulated a valid reason as to what is wrong with enforcing the Bill. If the Government think it is important to have the Bill, why not enforce it?

I used one example: the CMA’s own digital markets unit. It is clear that regulators all over are acting pre-emptively. Look at the Pensions Regulator. It can proactively go in and do things, so it is not as if we do not do it in this country. Generally, the regulator can act pre-emptively, except in this case. It is not clear to me what is behind the Government’s decision to do that. My key objective for Amendment 71 is for the Minister to very clearly articulate to the Committee why this subsidy regime should not be policed.

Subsidy Control Bill

Debate between Lord Fox and Lord Lamont of Lerwick

Committee stage
Monday 7th February 2022 Grand Committee

[Lord Lamont of Lerwick (Con)]

My Lords, I added my name to these amendments in the name of the noble Lord, Lord McNicol. I shall not weary the Committee by repeating the points that he made, but I strongly agree with him. I added my name just because I was puzzled and regard as unfair the imbalance between the time given to public authorities to list subsidies and the very short timetable for people to object to them. I do not see why it should take six months to make public what has been done, while one month seems an extraordinarily short time for somebody to challenge it. As may have been said when I was unfortunately out of the room trying to get on PeerHub, one could easily imagine circumstances where perhaps the website was not working very well, and a few days were missed. “It never happens,” the Minister says. Well, we shall see. That would be a first in public sector computers.

There seems to be an imbalance here. What is sauce for the goose ought to be sauce for the gander—or is it the other way round? Six months is certainly far too long and one month is far too short. I agree with everything that the noble Lord, Lord McNicol, said.

[Lord Fox (LD)]

My Lords, during the debate on the previous group, the noble Baroness, Lady Altmann, asked, “How will they know?” This amendment seeks the answer to the question: how will they know in time? As the noble Lord, Lord McNicol, said, because of the limits of reporting, we are talking about very sizeable subsidies that could exist with a competitor company for up to a year before a person is able to find out what their company is competing against. I am sure that the Minister would understand that that is not a fair situation, and it is within the gift of the Government to make it fairer.

Both noble Lords spoke about the imbalance; that is, a long time to report it and a short time to appeal it. One would almost think that the Government were seeking to discourage the process of challenging subsidies. I am sure that that is not the Minister’s aim and therefore the best way of expressing that aim is to redress that balance.

Reflecting on the last debate and this one, I think that we are in a bit of a mess around reporting—or, indeed, we are not but the Government are. On the one hand, we have the database with the six-month time limit and a very high ceiling; on the other hand, we have local authority websites with a three-month time statute and a much lower ceiling, and potentially we have FoIs—although the problem is that you need to know something exists before you can FoI it. The Government have therefore knowingly or unknowingly set up a multiple market for information.

If I am a business and I need to know what is happening in my sector, the Minister will say that this information is freely available. It is freely available on a pull basis. I shall have to employ someone to go out there regularly to check whether the information exists, where it is and what is happening in my sector. If I am a small business in a market where the receipt of subsidy could affect my business, I shall have to employ an extra person or part of an extra person to do that. This does not seem a sensible way of dealing with the issue. A central database with a shorter time span and a lower value ceiling would be the best way to help businesses thrive.

Subsidy Control Bill

Debate between Lord Fox and Lord Lamont of Lerwick

Committee stage
Monday 31st January 2022 Grand Committee

[Lord Lamont of Lerwick (Con)]

My Lords, I will speak even more briefly than did the noble Viscount, Lord Chandos, in expressing a modicum of support for him. It is up to the Minister to explain why equity is not included rather than for the noble Viscount to prove the case for including equity; it seems a bit of an omission. We read today about the failure of the British Business Bank to do well on some of its investments. We have also had the publicity about the Covid loans that have not been recovered. Why do I mention the British Business Bank? Because we have seen a whole series of equity injections by this Government that have not always had an overall rationale.

The noble Viscount, Lord Chandos, referred to the spread of returns from equity investment and how different investors would take a different view of the future, but the reason often advanced by government for direct investment is what is termed “market failure”, and I see that the phrase “market failure” is referred to in the Bill. Unfortunately, market failure is a convenient get-out for Governments wishing to subsidise a particular entity. The very fact that Governments provide direct investment, which I know the noble Viscount favours in a way that I would not, often disguises the fact that there is a subsidy. They say that it is because of market failure and they want it to be on market terms, but, too often, it turns out just to be an implicit subsidy. I agree with the noble Viscount that equity, particularly from a public sector grant-making organisation, can often conceal a degree of subsidy. I hope that careful consideration will be given to the point that he has rightly raised.

[Lord Fox (LD)]

My Lords, I shall speak to Amendments 2 and 3 and then Amendment 2A, as they seem to associate with each other.

In the speeches of the noble Lord, Lord Wigley, and my noble friend Lord German, the nub of the question is: what is a subsidy and what is it not? I see Amendment 2 from the noble Lord, Lord Wigley, as trying to unearth that definition. Later, we will discuss Clause 11, which allows certain definitions to be defined by affirmative regulation rather than appearing in the Bill. These definitions are:

“subsidy, or subsidy scheme, of interest”,

and

“subsidy, or subsidy scheme, of particular interest”.

This is the Subsidy Control Bill and it would be enormously helpful if the Government would put in the Bill what they seek to control because, at this stage, they have not revealed their hand. In this amendment, the noble Lord, Lord Wigley, seeks to delineate where a subsidy starts and finishes: the territory, as he puts it. This is a moot point and a key issue that we will talk about later. The noble Lord, Lord Lamont, talked about market failure. We need to understand what the Government understand as “the market” in the first place to delineate where a failure may or may not have occurred. Hereby lies the issue.

In a letter to my noble friend Lord Purvis, the Minister sought to help and, perhaps, to clarify. He replied:

“The geographic scope of a market depends on the goods, services and activity in question—which means geographic scope can vary.”


I think that that flies in the face of some of the words that we heard just now from the noble Lord, Lord Wigley. The letter continues:

“A key factor is the distance over which these goods or services can be supplied”—


the sandwiches of the noble Lord, Lord Wigley, perhaps—or

“the preference of customers”.

I understand the issue about distance—I can get that—but to include the preference of customers is potentially specious.

To take an international example rather than a Welsh one—although, of course, Welsh is international, if I am speaking from England—there was no market for Spanish-grown strawberries until such time as Spanish-grown strawberries were imported to this country. Then there was a market, because customers showed a market preference. So at the outset of a subsidy there may be no customer preference because there is no product for the customers to prefer. Some time after the six months have expired and the subsidy is open to challenge, the product appears on the market. How is customer preference to be applied retrospectively to subsidies as the market goes forward? I do not think that the issue of customer preference is easy to define, understand or control. If the Minister stands by the words in the letter to my noble friend, we need a much clearer understanding of how that customer preference role will play out. Not only do we need to understand geography, but we need to understand the customers.