Electric Cars: Export to EU
Lord Johnson of Lainston Excerpts(2 years, 11 months 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.
Lord Woodley (Lab)
My Lords, I declare an interest as a former member of the Government’s Automotive Council UK, looking at investment in this important industry of ours. The Americans have set aside £102 billion to encourage inward investment in new technologies, including electrification of the whole of their car and automotive industry. There is no doubt, looking at what we are putting aside here, that we are barely in the game. There is £850 million set aside to entice and encourage people here, which sounds a lot of money, but it is not, compared to what other people are doing. Jaguar Land Rover has asked the Government for half a billion pounds for a mega battery factory in Somerset, as opposed to Spain. It is crucial for the long-term interest of our industry that we do not let this investment disappear from our shores, otherwise, my dear friends, there will be no industry in this country in 10 years’ time.
Lord Johnson of Lainston (Con)
I greatly thank the noble Lord for his intervention and for the important promotion of this industry. I say to anyone who is thinking of locating their business in Spain that Ferrovial announced yesterday that it is leaving Spain because it is one of the least hospitable environments in Europe to do business, whereas we know that Britain remains the top destination for doing business in Europe and the second most important destination for foreign direct investment in the world. It is important to remember and celebrate that last year we raised more money for technology and start-ups, which is precisely what we are talking about with the battery and EV industry, than France and Germany combined, more than China, and more than India. It is a testament to this Government’s efforts to ensure that we have the subsidies and support, including government support, to enable our citizenry—some of the best educated in the world—to take advantage of this. I take the point made by the noble Lord very seriously. We are doing a huge amount: the facts bear it out, the money is coming here and so is the industry.
Lord Hannay of Chiswick (CB)
My Lords, would the Minister perhaps be so kind as to answer the question that the noble Lord, Lord Fox, asked about the use of the machinery of the trade and co-operation agreement to take up with the European Union any difficulties that might arise through a change in circumstances described, because it is really important? With the presumably better climate that now exists for our dealings with the European Union, surely this is the time to raise the matter in the appropriate top-level committee of the TCA.
Lord Johnson of Lainston (Con)
We work with all our partners to ensure that trade with the European Union is as seamless and friction-free as possible, and I know that we all congratulate the Prime Minister on the resolution of the situation in Northern Ireland. I believe personally and passionately from my conversations over the last few days alone—including at a breakfast I attended with the Spanish Business Council—that this will allow a substantial number of the market access barriers, the other areas of friction, to be removed. This was demonstrated when we saw the reintroduction of discussions on the Horizon programme almost immediately following the announcement of the Windsor Framework, so I am very confident that a practical solution can be reached, but these are short-term measures. The reality is that we need to build our own capacity in this country, invest in it and support it, and that is exactly what we are doing.
Lord Swire (Con)
My Lords, is not the truth of the matter that unless we rapidly increase the back-up with electric vehicle charging in this country, there will be no electric cars going to the EU, or anywhere else for that matter, from this country? What confidence can my noble friend give to those who are considering switching to electric vehicles or already have them, because the infrastructure is lagging behind the demand, and if the Government seek to achieve their targets, they need to invest more within this country?
Lord Johnson of Lainston (Con)
My noble friend is clearly hoping to upgrade his car from his 23 year-old Range Rover. We are very aware of the need, as we are as individuals in this House, to ensure that the infrastructure is there. It takes time, it is very costly, there has been government investment, but he is absolutely right that further focus is required, and I am very happy to write to him on the specifics, because it is important that everything fits together.
Lord Bassam of Brighton (Lab)
My Lords, it is all well and good the Minister telling us all this, but a new report from the Energy & Climate Intelligence Unit warns that UK motorists could miss out on £9 billion-worth of savings on electric vehicles due to the shrunken second-hand car market, which could be as many as 2.1 million vehicles smaller by 2033, if the Government continue to fail to boost EV take-up. This will be bad for drivers, bad for the country and bad for the environment, with low-income drivers forced to continue running petrol cars. What positive steps will the Government now take to buck this trend and ensure a viable second-hand car market for EV vehicles?
Lord Johnson of Lainston (Con)
It strikes me that, if you want to have a second-hand car market in EVs in this country, you need to build more new EVs in the first place. That is why we are investing heavily in making sure both that we have the facilities and capacity to procure critical minerals to enable us to make batteries, which are the core component in such cars, and that we have the partners in this country to develop the battery technology. We are not simply looking at manufacturing; we are also investing heavily in the R&D around battery design. Our real strength and core defence against the future are our brains. The investment that we have made in concepts, such as our investment of more than £500 million in the Faraday Institution in Coventry, is a good representation of the work that we are trying to do. This does not happen overnight. It is truly a national endeavour. I hope that the noble Lord is reassured that the Government’s focus is on this incredibly important and topical subject.
Baroness Randerson (LD)
My Lords, there was news this week that the failed Britishvolt company has been bought by a newly established company based abroad and that the site will not be used as intended to create a much-needed gigafactory to supply manufacturers of electric vehicles. Can the Minister clarify how the new plans fit into the Government’s priorities for the industry? What funding has already been given to this project? Are there plans to give it any further funding?
Lord Johnson of Lainston (Con)
This is an ongoing commercial issue so it would not be appropriate for me to comment on some of the specific points that the noble Baroness makes. However, we did support Britishvolt originally—I am happy to write to her with the specific numbers—as we have supported all battery endeavours in this country. It is the right thing to do. These are new technologies and companies. They are being created by entrepreneurs taking significant risk; we should celebrate that. It is not a straight line, however. We must be prepared for disruption in this market; there will be volatility. The important thing is that the Government stand behind this industry. We want a car industry in this country that builds high-quality electric vehicles with batteries made here, to sell to the rest of the world and take advantage of our post-Brexit vision for Britain.
Subsidy Control (Information-Gathering Powers) (Modification) Regulations 2022
Lord Johnson of Lainston Excerpts(2 years, 11 months ago)
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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.
Baroness Randerson (LD)
I thank the Minister for his response and thank all noble Lords who have taken part in this short debate. In particular, I thank the noble Lord, Lord Dodds. With the many months that have passed without the Northern Ireland Assembly, we here speak only too infrequently of Northern Ireland in terms of devolution. It is important that we very much keep the situation at the front of our minds, because it is very complex.
I remind the Minister that I was in the Wales Office for three years and that I have spoken here on Northern Ireland as well. I know that consultations and relationships with the devolved Administrations need time, hard work, patience and respect, and I am pleased that he repeated the importance of respect. However, I also know that it helps to have a formal structure for consultation; that makes certain that corners are not cut. The error in the Explanatory Memorandum exemplifies that this is the sort of situation which would not have occurred if there had been proper consultation on the long-term implications, as there should be on this. The important thing here is not whether the SAU is advisory but the fact that the process overall, including the role of the Secretary of State, includes penalties for non-compliance for information gathering. When a penalty is involved, there are bound to be concerns about a lack of consultation. If this had been properly flagged up during the passage of the Bill, there would almost certainly be far weaker grounds for objection by the devolved Administrations. In effect, this is an SI to amend primary legislation, which is why they are concerned.
I repeat the meaning of the final words of my opening speech: how can a system established to cater for local needs seek to do so by centralising decision-making and ruling out consultation? If it is going to be sensitive to local needs, it should increase consultation. I will look very closely at the Minister’s detailed response, for which I thank him. I do not intend to push this to a vote, but I think it will be of interest to the devolved Administrations and to noble Lords across this House who are interested in devolution. I beg leave to withdraw my Motion.