Newport Wafer Fab

Lord Purvis of Tweed Excerpts

Tuesday 22nd November 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend is right that the Act came into operation in January. There were some retrospective elements in that. A trigger event occurred and therefore the Secretary of State could exercise his power. When future trigger events occur, we will look at every transaction based on national security implications, as is required under the Act.

[Lord Purvis of Tweed (LD)]

My Lords, the final order stated that the security risk was the reintroduction of semiconductor production at that site. Now that have a £39 billion trade deficit with China, what are the Government’s assessments of the key sectors of the UK economy which are vulnerable to Chinese technology on the same basis as this final order?

[Lord Callanan (Con)]

As was printed in it, the final order was based on the technology and know-how that could result from a potential reintroduction of compound semiconductor activities at the Newport site. The noble Lord has read the final order. As I said in a previous answer, this has no implication for any other policies. Every one of these transactions is looked at on national security grounds in the context of the legislation that was passed giving quasi-judicial power to the Secretary of State. It has no implication for any other sectors of the economy. Every transaction is looked at on an individual basis.

TRIPS Agreement: Vaccines

Lord Purvis of Tweed Excerpts

Monday 11th July 2022 Lords Chamber

[Lord Callanan (Con)]

My Lords, I think the noble Lord is wrong: the problem is not with vaccine production, as there is now an excess number of vaccines being produced; the problem is with the healthcare systems of individual countries that are unable to store, distribute and inject those vaccines, which is why we are working with developing countries to help them with that. We know that this is the case because of the problems we had rolling out the vaccine in this country, which of course has a very advanced healthcare system. I repeat the point: the problem is not with vaccine production, as there are already excess vaccines being produced; the problem is with the healthcare systems in those countries which enable them to be distributed and put into peoples’ arms.

[Lord Purvis of Tweed (LD)]

So why was it that the Government cut by nearly 60% their support for countries to have the health systems to distribute the vaccines when they became available? Why was it that when countries needed the vaccines, at the early stage of this, the Government vehemently opposed this move at the WTO? Returning to the question of the noble Baroness, Lady Sugg, can the Minister be very clear as to whether vaccine support is within or over and above the 0.5% cap? In March, in relation to a donation to Bangladesh, the Government said:

“The cost of this donation has been funded through UK Overseas Development Assistance and will come over and above the ODA spending target of 0.5% of GNI if needed.”


That is not what the Minister just told the House, so which is it?

[Lord Callanan (Con)]

The position is as I repeated to my noble friend Lady Sugg: all vaccine dose donations will be reported as overseas development assistance and be included within the 0.5%. I think the noble Lord is being very unfair about the UK’s support. We are in fact a leader of international support in response to the pandemic; we have spent more than £2.1 billion since 2020 to address its impacts and that includes up to £829 million to support the global development, manufacture and delivery of vaccines, treatments and tests in lower-income countries.

Horizon Europe

Lord Purvis of Tweed Excerpts

Thursday 7th July 2022 Lords Chamber

[Lord Callanan (Con)]

The Minister the noble Lord refers to, one of my ex-colleagues, was doing an excellent job in putting together precisely the programme that the noble Lord asks for. We remain hopeful that the EU will change its position, live up to its obligations and agree to co-operate in science. That is the best way forward for both parties. If it does not, we have allocated £6.8 billion over the spending review period to put in place an alternative programme.

[Lord Purvis of Tweed (LD)]

My Lords,

“chaos in No10, breakdown of Cabinet collective responsibility and collapse of public confidence in government represents a constitutional crisis. It is also now seriously undermining our authority in key negotiations on the world stage at a time of urgent international crises”

and “destroying our credibility”. Every single word of that was from the ex-Minister George Freeman this morning. How on earth can we secure a good deal for our nation abroad when at home the Conservative Party is inflicting, in his words, “a constitutional crisis” on us?

[Lord Callanan (Con)]

It is clearly a difficult political time at the moment but I have great faith in the institutions of this country. I am sure we will get through it and continue the excellent work that this Government have been doing on all those matters.

India: Cereals Export Ban

Lord Purvis of Tweed Excerpts

Thursday 19th May 2022 Lords Chamber

[Lord Grimstone of Boscobel (Con)]

My Lords, we are indeed working with our G7 partners to bolster the global market and to secure the export of wheat and other grains from Ukraine through grain corridors. I am proud that over 50 WTO members have now supported us in committing to keeping food markets open, predictable and transparent.

[Lord Purvis of Tweed (LD)]

As we debated last night, the consequences of the war in Ukraine and the decisions of the Indian Government are felt not only here at home but in the lowest-income countries in the world. This is why the World Bank, the IMF and the World Food Programme, together, have put forward an overall package of support. The World Bank element of that is the International Development Association, from which, in February, unique among all donor countries, the UK cut its support by £1.5 billion—an astonishing 54% reduction. In the situation the world is now facing, why on earth did the Government do this?

Newport Wafer Fab

Lord Purvis of Tweed Excerpts

Thursday 7th April 2022 Lords Chamber

[Lord Callanan (Con)]

What would happen in Australia is a matter for the Australian Government. Tony Abbott is a member of the Board of Trade, and of course we value his insight and opinions, but this is a quasi-judicial decision that will be taken in the interests of the United Kingdom by the Business Secretary.

[Lord Purvis of Tweed (LD)]

The Minister will know that trade with China over the last few years has doubled, but that doubling has occurred because we now import £40 billion more than we export. This trade deficit is the biggest in this country’s history—with any country. We are now dependent in many sectors on imports from China, while at the same time, imports and exports with our closest trading partners have declined dramatically. Why does the Minister think that is the case?

[Lord Callanan (Con)]

I suspect there are a number of different reasons for that, particularly the importation of consumer goods. Globalisation and imports from China of consumer goods, consumables, et cetera, are a good thing in terms of global trade, but we have to be wary of dealing with companies from the People’s Republic of China. When it comes to matters of national security, we are incredibly vigilant. The NSI Act gave us new powers in this area, and we will not hesitate to act on anything that threatens the UK’s national security.

Subsidy Control Bill

Lord Purvis of Tweed Excerpts

Lords Hansard - Part 2 & Report stage
Tuesday 22nd March 2022 Lords Chamber

[Lord Wigley (PC)]

My Lords, I am delighted to have added my name to Amendments 6 and 64 in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd. I did not add my name to the other amendment in this group because I did not have time to study its implications, but I am grateful to him for having put these amendments forward and to the noble and learned Lord, Lord Hope, for his comments.

I am a little worried because these are described as very modest amendments. Are they too modest for me to urge on the Government? No, they are not. The Government, who have been forthcoming on some amendments tonight, should be sending a message to Cardiff and Edinburgh, and to Belfast—to the extent that there is a Government there—that there are acceptable mechanisms for dealing with any disputes. As the noble and learned Lord, Lord Hope, said, there is every argument for having a framework that is acceptable to Westminster and the devolved Administrations so they can at least respect the mechanism and when problems arise they can turn to it. I hope that the Government will be forthcoming on this tonight, and perhaps they will be. If they cannot accept these amendments, there may be other forms of words whereby this can be achieved.

This issue has arisen in so many pieces of legislation over the past two or three years where the relationship between devolved Governments and Westminster is concerned that a framework that is acceptable to both sides need to be established—all four sides, in fact. I hope that doing so will ensure that problems can be resolved before they have been created and that there is a transparent mechanism for everyone to do so, and for that reason I support these amendments.

[Lord Purvis of Tweed (LD)]

I shall make a few remarks with regard to Amendments 6 and 64 in particular. The noble and learned Lord, Lord Thomas, is modest. He did not need to take us through the hoops of Amendment 58. His argument that the Government should be thinking again on this approach was very powerful. As the noble Lord, Lord Wigley, said, this is now the third Bill, I think, which will become an Act, where the devolved Parliaments have withdrawn consent at the outset and there have been rather tortuous discussions during the passage of the Bill to try to receive consent. Those Parliaments, properly constituted under our constitutional arrangements, feel that the Government are deliberately encroaching on their territory.

We debated this at length in Committee and I do not need to rehearse any of the arguments, but, as the noble and learned Lord, Lord Hope of Craighead, said, the Government seem to be open, when it suits them, to moving the dial towards consultation before further regulations are made. I think the noble and learned Lord was referring to Part 3 of the economic crime Act. In Section 14, the Government indicated that if there were going to be further provisions, the Secretary of State must consult the devolved Administrations on them. In this Bill, the Government have been reluctant to take a similar position of forcing Secretaries of State to consult where there are implications on devolved legislative areas.

In Committee, the Minister fell back repeatedly on saying that this Act is a reserved issue. That has been disputed by some, but even if we take it as read, the implication is that some of the schemes will impinge on devolved legislative competence. Therefore, the amendments in this group are very well made. Amendment 6, which has been supported by my noble friend Lady Randerson, regards offering some form of equivalence. While the Secretary of State indicates that this is a fully reserved issue, when there are schemes that are applicable to England only, there is no equivalent power for Wales, Scotland and Northern Ireland. That is what this amendment is seeking to correct.

I call this devolution equivalence. We are not disputing reserved or devolved competences; we are simply saying that when there are schemes that will be put forward for one nation under the legislative framework for that nation—England—there should be legislative equivalence for schemes operating within other nations. The noble and learned Lord, Lord Thomas, might say that that is modest; I say that it is reasonable. Surely one fundamental principle of our system of devolution could be that when it comes to the implementation of legislation, the reasonable test should apply.

With regard to Amendment 64, as I said, the Government seemed to move in the economic crime Act, but they seem very reluctant in this Bill. I simply do not know why, because both are comparable. Both indicate that there are reserved functions but devolved competences. Ultimately, if the Government believe, as the Minister will make the case, that this Bill will bring about great benefits, there should be equivalence between those authorities to utilise those benefits. Therefore, I hope the Government will consider these modest and reasonable amendments today and, if not, bring back at Third Reading some indications of moving.

[Baroness Blake of Leeds (Lab)]

We are very grateful to the noble and learned Lord, Lord Thomas, for tabling these amendments relating to the various devolution matters we have had outlined. We have been pleased to engage with the noble and learned Lord between Committee and Report and are glad that he and his supporters have facilitated this debate. The Minister knows we have several concerns around this Bill and its impact on devolution. The arguments have been rehearsed consistently throughout the Bill, and it is regrettable that the Government have not moved on a single one of the devolved Administrations’ requests.

We hope the Minister can clarify the situation around streamlined subsidy schemes. It has been asserted on a number of occasions that, while the Bill does not expressly permit this, devolved Ministers will be able to propose such schemes. Amendment 6 seems a very sensible proposition. If a devolved Minister makes a reasonable request of the UK Government, the Government should facilitate the creation of the relevant streamlined scheme. The simplest solution here is for the Government to accept the amendment, but, failing that, we hope the Minister can offer a very clear answer as to whether the UK Government will respond positively to sensible requests from the devolved authorities.

Amendment 64 is an interesting attempt at reformulating several Labour amendments tabled in Committee. We continue to believe that there should be a formal attempt to gain the consent of the devolved Administrations before exercising certain delegated powers or publishing guidance. Subsidy control may technically be a reserved matter, but, as we have said on numerous occasions, it directly impacts on several areas of devolved competence, not least regional development. When the economic crime Act was fast-tracked through this House, the Government worked hard to accommodate requests from colleagues from the devolved Administrations. We had hoped that would mark a new dawn for the Conservative Party’s approach to the Sewel convention, but this does not appear to be the case.

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[Lord Callanan (Con)]

They could choose not to use the scheme if they wished, but it would be a UK-wide scheme. They would be consulted on the development and involved in the expert groups that put them together.

I will move on to Amendment 58, also tabled by the noble and learned Lord, Lord Thomas. This amendment sets out a new route for subsidies given in devolved primary legislation to be considered by the courts, by allowing the relevant law officer to refer the question of whether a Bill is compatible with the principles in Chapter 1 of Part 2 to the Supreme Court. It also removes the requirement for the promoter of the legislation to consider the subsidy control principles and other requirements, and the ability of the courts to consider whether the provisions of Parts 1 and 2 of Chapter 2 have been properly applied, thereby removing the ability of an interested party to challenge the subsidy in the general courts on that basis.

I am of course very grateful for the interest taken by the noble and learned Lord in this clause and for his engagement on it with me and my officials. I believe that both he and I share an objective to ensure that these provisions reflect our constitutional and legal institutions, as well as our obligations under international law. Schedule 3, as it stands in the Bill, accomplishes those objectives.

It is important that the subsidy control requirements apply to subsidies in devolved primary legislation, and that these subsidies are not immune from challenge by interested parties. This is both for consistency with other subsidies and to ensure compliance with our international obligations, particularly under the trade and co-operation agreement with the EU. However, it is also important that the unique constitutional status of the devolved legislatures is respected. That is why we have tailored the provisions in Schedule 3 specifically, and there is no mandatory referral to the subsidy advice unit for these subsidies.

I must therefore reject the amendment tabled by the noble and learned Lord for two reasons. First, it would not meet our international obligations under the TCA, which requires us to make available a route to challenge in a court or tribunal for interested parties, on grounds of compliance with the substantive subsidy control requirements. This amendment would, effectively, remove that route.

In response to the noble and learned Lord, Lord Hope, on the intention of paragraphs 6 and 7, it is those interested parties that may challenge, for example, another public authority or another business, as long as they meet the test set out in Clause 70. The promoter would normally be the government Minister, or the person making an amendment to the Bill, and this is defined in paragraph 2 of Schedule 3.

The second problem with the amendment is that it would have the effect of asking the Supreme Court to consider questions of fact. It is my understanding that the High Court or Court of Session is the appropriate forum to consider these questions in the first instance, followed by the relevant appeals court, and, as relevant, the Supreme Court as the ultimate arbiter for questions of law. Creating a route for the law officers to refer a question to the Supreme Court implies that any challenge to a subsidy in devolved primary legislation would be a constitutional question, as it is comparable to the route for referring devolution issues under the devolution settlements. While the Bill affects the exercise of responsibilities of all public authorities in the UK, I do not consider that this is a constitutional question.

[Lord Purvis of Tweed (LD)]

I have a point of clarification, because this aspect draws two areas together. Given that agriculture and fisheries are part of this legislation, and because agriculture and fisheries are unquestionably devolved competences, there will be subsidy schemes—let us say for Scotland, an agriculture or fisheries subsidies scheme. The Minister has indicated that there can be a UK-wide streamlined scheme which will cover agriculture and fisheries, so for the first time in the devolution period, there would theoretically be two parallel support schemes for agriculture and fisheries. But there is no capacity for the devolved Administration to challenge the UK-wide scheme, because the Government are indicating that this is a reserved area, even though support for agriculture and fisheries is fully devolved. Furthermore, there is not even a direct route to ask the Supreme Court to consider the competences on the division of this. How does the Minister see the benefit of two parallel schemes: one streamlined and unchallengeable, and another a devolved one on agriculture and fisheries?

[Lord Callanan (Con)]

I understand the point that the noble Lord is making, but the idea that the UK Government are going to want to set up a streamlined scheme covering agriculture and fisheries in Scotland, in parallel to an existing subsidy scheme that the Scottish Government are already pursuing, is extremely unlikely. A streamlined route can indeed be challenged in the Competition Appeal Tribunal, and we would not introduce such a scheme without consulting closely with the devolved Administrations in the first place. I understand the constitutional question that the noble Lord is positing, but I think this is very unlikely. As the noble Lord well knows, all existing schemes are automatically out of scope of this Bill anyway, so the existing subsidy regimes that the Scottish and Welsh Governments have can continue as they are.

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[Lord Purvis of Tweed (LD)]

I do not think I said that there would be a streamlined scheme from the UK that would be uniquely for Scotland. I indicated that there would be a UK-wide streamlined scheme that would be for agriculture and fisheries within Scotland. As the Minister said, it would apply in England and in Northern Ireland as well. However, there would be, for the first time since devolution, two parallel subsidy schemes operating. While the Government can indicate that there would be consultation, there is no mechanism in this Bill for that dispute to be resolved, because the Secretary of State retains the decision-making power. That is why the support for these two schemes running in parallel is not equitable.

[Lord Callanan (Con)]

There is a difference in principle here. Subsidy control is a reserved matter. Under the memorandum of understanding, we have said that we will set up a mechanism that the Scottish Government can use to challenge schemes. Of course, any streamlined scheme would be approved by this Parliament anyway. In any practical political environment, there is no way that the UK Government will want to set up a parallel scheme to subsidise agriculture and fisheries, which are devolved competences, when the Scottish Government already have similar schemes in the same area.

As I have said, the devolved Administrations will of course continue, as they have always done, to make subsidies and subsidy schemes using the resources that they have. It is important to note that this Bill does not provide any resources for any schemes, and the court would need to look at the facts of the case on legality grounds in the light of the requirements of Schedule 3 to the Bill. This is, in my view, comparable to other circumstances in which devolved primary legislation is reviewed on legality grounds, such as the Human Rights Act or the United Kingdom Internal Market Act. Importantly, and in contrast to the review of the Competition Appeal Tribunal for other subsidies, the court could not consider common-law public law grounds alongside the requirements of the subsidy control grounds.

For all the reasons I have set out, I hope that the noble and Lord will not press his amendments.

Trade with the European Union

Lord Purvis of Tweed Excerpts

Monday 21st March 2022 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, the Government have vaunted freeports as one of the benefits of the new EU-UK trading relationship. The owners of P&O, who sacked 800 workers in one go, Emirati-based DP World, has been given the operation of Solent and Thames gateway freeports. The Prime Minister said that we were in a transition. Does the Minister agree that it is regrettable that it is towards an awful, potentially illegal, and unacceptable face of capitalism?

[Lord Grimstone of Boscobel (Con)]

My Lords, perhaps it goes without saying that we are deeply concerned about the news from P&O Ferries. Ministers are speaking to the company to try to understand the impact on workers and passengers, and to do all we can to ameliorate it. Speaking personally, having formerly been a chairman of some of Britain’s largest companies, I would never have behaved in the way that P&O has.

Subsidy Control Bill

Lord Purvis of Tweed Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I trust that it will be acceptable to your Lordships for me to pick up exactly where we were cut off in our prime on Monday, which noble Lords will be gratified to know was where I began speaking to Amendments 55A, 57A, 57B, 60A and 61.

Collectively, these amendments would allow the call-in powers currently provided to the Secretary of State to be exercised by the subsidy advice unit as well. Amendment 61 would create a new concept of a post-award investigation, which would be an extensive review by the SAU of the public authority’s decision-making process before giving a subsidy or making a scheme. I recognise the concerns of noble Lords that this system perhaps gives too great a responsibility to the Secretary of State. However, as I set out in response to the preceding group of amendments on Monday, it is appropriate that the Secretary of State is responsible for making these judgments in the interests of the entirety of the United Kingdom. In that function, they are answerable to this Parliament and to the interests of every citizen in the UK, and ultimately, as I keep stressing, for ensuring that the UK is compliant with its international commitments.

However, I would submit that there is a fundamental difference between a power to be exercised by the Secretary of State as a safety net, and a power to be exercised by a body such as the Competition and Markets Authority. There is very little possibility for the latter to exercise discretion and act only in situations that otherwise come to its attention. To carry out the functions envisaged by these amendments, the SAU would therefore have to scale up considerably. It would need a full market monitoring function to remain apprised of any potential new subsidies, including a public-facing arm to gather information and complaints, and it would need to develop clear criteria and decision-making processes for using these call-in powers.

Of course, ministerial decision-making must also be even-handed and evidence-based, but Ministers can and should have more discretion to make case-by- case judgments and will naturally be more aware of forthcoming distortive subsidies and where our international obligations are more likely to be impacted. The amendments tabled would require a very significant shift in the role of the SAU and would move it far closer to being a regulator of subsidies, which, to address the point made by the noble Lord, Lord McNicol, is not the Government’s intention, for the reasons that I have set out. This would of course create costs to the taxpayer, both in setting up this expanded subsidy advice unit and in the legal uncertainty and delays for legitimate subsidies that are placed under review or investigation.

I would also like to address the specific point that a government Minister will be unlikely to call in a subsidy that the Government themselves are giving. As I said in the previous sitting, Ministers will remain open-minded to referring a UK government subsidy to the SAU where it would be beneficial to have additional scrutiny of their own assessment. As with the regulations for automatic mandatory referral, there is no exemption for government subsidies. It is important to recognise that the SAU referral is a mechanism for scrutiny, transparency and advice which will support but not directly form part of the enforcement process, so there is no concern that the Government will be launching a legal challenge against themselves.

In summary, creating a function for the SAU to refer subsidies to itself or to initiate investigations would fundamentally change its role from one of oversight and monitoring to regulation and enforcement—a change which would be welcomed by the noble Lord, Lord Fox, but not by the Government, noble Lords will be shocked to know. I therefore hope that the noble Lord will withdraw the amendment.

[Lord Purvis of Tweed (LD)]

Before the Minister sits down, I have a question, which may pertain to debates on later groups of amendments. Do the Government consider a subsidy scheme to be a regulatory provision within the terms of the internal market Act?

[Lord Callanan (Con)]

The internal market Act is of course a separate piece of legislation from the Subsidy Control Bill. I will pass on the noble Lord’s question, think about it and respond later or in writing.

[Lord Purvis of Tweed (LD)]

I thank the Minister. I ask because my understanding is that a regulatory provision can be a subsidy; it has nothing to do with there being two separate pieces of legislation. As the Minister knows, the internal market Act takes into account any regulatory provision that will have an impact on the operation of the internal market. As the Minister has previously said, subsidy schemes will be considered as part of the operation of the internal market. So, if such a scheme is a regulatory provision under the terms of the internal market Act, any national authority would be empowered under that Act to ask the CMA for its view on whether that provision will distort the internal market. Is my understanding of that correct?

[Lord Callanan (Con)]

No, my understanding, on advice, is that it does not form a provision under the internal market Act.

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In addition to all of this, the CMA is already undertaking a range of activities in order to prepare for its new statutory functions, and these will gather further pace as the Bill progresses. This work will include the development of SAU guidance, engagement with public authorities, and the development of an online portal to streamline the referral of subsidies to the SAU by public authorities. I hope that noble Lords have to some extent been reassured on these matters, and I humbly request that Amendment 64 be withdrawn.

[Lord Purvis of Tweed (LD)]

Before the Minister concludes, I listened carefully to her comprehensive reply, for which I thank her. I think I heard her mention an additional 50 posts. The impact assessment indicated an assumed additional headcount of 19. What happened between when the impact assessment was put together and the current commitment was made? Presumably, there is an understanding that the role is much greater than when the impact assessment was put together.

Secondly, given that agriculture and fisheries will be involved, can the Minister assure us that those with a specific understanding of the geographical, agricultural and fisheries market—as opposed to the other sectors, which previously the CMA did not have—have been part of the recruitment process? At the moment there is no indication that they have.

[Baroness Bloomfield of Hinton Waldrist (Con)]

On the noble Lord’s first point, it has been a year since the Bill was introduced and therefore things have moved on since the impact assessment was done. On his second point, we are looking for a broad range of expertise that will enable the CMA and the SAU to fulfil their functions.

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Moved by

[Lord Purvis of Tweed]

66: After Clause 69, insert the following new Clause—
“Prohibition of references to the Office for Internal Market
(1) The United Kingdom Internal Market Act 2020 is amended as follows.(2) In section 32 (Office for the Internal Market panel and task groups) after subsection (1) insert—“(1A) The CMA may not make a reference of a subsidy or subsidy scheme under the Subsidy Control Act 2022 to an Office for the Internal Market task group.””Member’s explanatory statement
This amendment seeks to probe the interaction between this bill and the United Kingdom Internal Market Act 2020.

[Lord Purvis of Tweed (LD)]

My Lords, in moving Amendment 66 I shall speak also to Amendments 72 and 78. In so doing, I thank the Minister for his earlier reply to the brief exchange on the interaction of this Bill with the internal market Act. I wish to probe some of that a little further.

Before I do, I wish to comment, as my noble friend Lord German did, on the letter that I gratefully received from the Minister, which corrected the previous omission of not answering the question in an earlier letter. Of course, one oversight is perfectly acceptable, but the fact that, as the Minister said, the Government are unable to give per capita expenditure on the successor to the structural funds is curious. The Government were very capable of giving per capita expenditure in the spending review period for Scotland on 27 October in their press release, and on 15 December in their press release, but they seem singularly incapable of doing so when it comes to the successor to the structural funds. How are the Government able, on the one hand, to give per capita expenditure from the spending review as a whole, but not when it comes to the structural fund’s component of that? If they are unable to do that on the structural fund’s component, clearly, they are incapable of extrapolating the overall per capita expenditure. There is something rather fishy about that—fisheries, of course, is now part of this Bill—and we will be pursuing that pun further, for the benefit of the noble Lord.

The serious point is that the Government are not honouring their manifesto commitment. They are not matching EU funds and are trying to hide behind this risible “we will rise to” element of the spending review. As my noble friend said, I look forward to getting the per capita, like-for-like figures for Wales, England, Scotland and Northern Ireland. Until we get them, we will not be satisfied.

On Amendment 66, as was said earlier, the subsidies and schemes are able to be used under the principles of Schedule 1. Principle A allows a subsidy to be used for

“an equity rationale (such as social difficulties or distributional concerns).”

That is wider than simply identified market failure. Principle F goes on further in that

“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition”.


So they can impact on competition, but they should minimise that. As the Minister well remembers, the United Kingdom Internal Market Act reformed or amended the Scotland Act, the Government of Wales Act and that relating to Northern Ireland to define what distortive or harmful subsidies are, so their definition is already in statute. For example, under Sections 52 and 53 of the internal market Act,

“A subsidy is ‘distortive or harmful’ if it distorts competition between, or otherwise causes harm or injury to, persons supplying goods or services in the course of a business, whether or not those persons are established in the United Kingdom.”


The devolved Administrations have no wiggle room when it comes to their statutory obligations under the internal market Act, as regards distorting competition. The wiggle room comes in under the subsidy element to minimise competition. I want to probe which legislation they must follow when setting subsidy schemes—what will be the subsidy control Act or the internal market Act. The definitions are very clear.

The noble Lord, Lord Lamont, and others asked about the distortive elements. They are defined under the internal market Act. These are not somehow separate processes, because that Act defines what subsidies are. The second element is that Part 4 of Schedule 3 to the internal market Act excludes types of regulatory provisions. The Minister was categorical in saying that no subsidy scheme, regulation, statutory or regulatory provision that establishes a scheme under the Bill would be considered under the internal market Act, but subsidy schemes are not excluded by Part 4 of Schedule 3, which lists the exclusions to the regulatory provisions. The legislation is perfectly clear about what is covered within the internal market Act and defines this in Section 30(8). There is no difference between subsidies or anything else. A regulatory provision

“means a provision … contained in legislation, or … not of a legislative character but made under, and given effect by, legislation.”

There is broad scope as far as that is concerned. It would be helpful to have a much clearer understanding of why the Government believe that a subsidy scheme is not a regulatory provision, statutory or otherwise.

Indeed, the Act goes further with regard to what is considered non-discrimination and what would be directly or indirectly discriminating for goods or services. The Minister knows that we debated this thoroughly on the internal market Act, which says that a statutory provision for goods

“is within the scope of … non-discrimination … if it relates to any … of the following … the circumstances or manner in which goods are sold (such as where, when, by whom, to whom, or the price or other terms on which they may be sold)”.

As we know and have discussed on previous groups, subsidies can have a relationship with the price of goods and services, and that is permitted under the subsidy Bill but absolutely prohibited under the internal market Act.

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However, we do not expect that the OIM will routinely look into matters related to subsidy control. The OIM has broad discretion to review matters that it considers relevant to assessing or promoting the effective operation of the UK internal market under Section 33 of the UKIM Act. However, any analysis by the OIM would differ from that undertaken by the SAU in that it would focus on impacts such as intra-UK trade, rather than evaluating a public authority’s assessment against the principles and requirements set out in the Subsidy Control Bill.

[Lord Purvis of Tweed (LD)]

I have been following the Minister’s line of argument, but I do not think that it comes to the same conclusion. Under UKIM, a provision that is a subsidy scheme is not permitted under the non-discrimination principle, taking into account

“the circumstances or manner in which the goods are sold … by whom, to whom, or the price or other terms on which they may be sold”.

It is prohibited under the market access principles on non-discrimination. The Minister is saying that it is permitted under this Bill, because a measure would absolutely affect the price of the goods under the principles in the schedule. I am just wondering why a subsidy is not considered as a provision under the internal market Act, because they are prohibited under the non-discrimination principles.

[Lord Callanan (Con)]

The United Kingdom Internal Market Act applies only to certain regulatory provisions, and a subsidy scheme would not meet the necessary conditions required. This is a complicated legal area, and I suspect that the best way in which to advise the noble Lord would be for me to write to him with appropriate details.

[Lord Purvis of Tweed (LD)]

With respect, we are in Committee on a Bill and we are making law, and simply to say that this is a complex legal area is not correct. We are making law—and it is not convincing to say that these schemes would not be under the Act when there is nothing under the Act that says that they are not. You cannot just assert when we are making law, because we also want to make sure that these provisions are protected from challenge. As to anybody who thinks that this is not going to be open to challenge, because it provides assistance for the certain price of certain goods in one area, it will be challenged under the internal market Act, because it is discriminatory. Unless there is clear legislative protection that this is excluded from these measures, I am afraid that it comes back to the fact that this area is absolutely ripe for legal confusion.

[Lord Callanan (Con)]

The reason why I made that point clear to the noble Lord—and I understand the point that he is making—is to explain to him the legal advice that I have received from the lawyers responsible for this Bill. Clearly, the noble Lord has a different interpretation, but I have set it out in great detail, and the advice that I have received is that UKIM applies only to certain regulatory provision and a subsidy control scheme would not meet those necessary conditions. Clearly, there are differing views, and there are lots of esteemed lawyers in this room; that is the advice that I have received, and I am happy to go away and speak to the lawyers to get the noble Lord more detailed advice, but I can go no further than to give him the advice that we have received on these provisions.

I turn to Amendment 72. I stress to noble Lords, particularly to address the concerns of the noble Lord, Lord Wigley, that the CMA was chosen as the home of the subsidy advice unit precisely because of both the former’s experience protecting UK competition and its credibility with domestic and international stakeholders. The CMA is independent in its function and will carry out its duties as such, with equal regard and even-handedness towards all four Governments of the United Kingdom. Earlier, my noble friend Lady Bloomfield went into more detail on the different territorial offices of the CMA that already exist and on the way it carries out its functions across all the parts of our nation.

While a similarly drafted clause is included in Section 31(4) of the UKIM Act, I question how appropriate it would be to replicate that provision here. The provision in Section 31(4) reflects the unique relationship between the UK Government and the devolved Governments in ensuring the proper functioning of the internal market and their responsibilities for delivering regulatory provisions for each part of the United Kingdom.

However, a great number of public authorities will be responsible for designing subsidies and schemes that are consistent with the subsidy control principles. Of course, the devolved Administrations have an important constitutional status and a unique role in working with the UK Government on ongoing policy development for subsidy control. But subsidy control is a reserved policy and is not an ongoing legislative architecture for co-ordination between the four parts of the UK. I appreciate the devolved Administrations do not agree with that fact, but it was legislated for under the UKIM Act. I therefore request that the noble Lord withdraws his amendment.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister for his reply, but I am also grateful to my noble friend Lord Fox, the noble Lord, Lord Wigley, and the noble Baroness, Lady Blake, for their contributions on this. I am quite happy that we have explored this further. The Minister took the point—I do not think this is legal pedantry—that when it comes to the reality of when subsidies start to be issued, for those seeking to challenge or those aggrieved, this must be watertight. Therefore, I am grateful to the Minister for offering further discussions on this. I understand that his office has been in touch in seeking to organise a meeting, and I am grateful for that. He fully knows now that he will need to be prepared and bring his lawyer along to that meeting to assuage some of the concerns.

I am not entirely convinced that the requirement to act even-handedly goes, because there will be more bodies to act even-handedly towards. I do not think acting even-handedly is a zero-sum thing, given that an even-handed nature is in the internal market Act but not in how it operates as a whole, because that Act and the subsidy control regime are both reserved issues. It jars that, when it comes to the CMA carrying out its functions, it has to act even-handedly in considering the operation of the internal market, but that requirement is absent when it is considering the distortion of competition.

In the meantime, and in looking forward to the meeting with the Minister to reflect on this further, I beg leave to withdraw Amendment 66.

Amendment 66 withdrawn.

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[Lord Callanan (Con)]

My Lords, before I speak to the detail of these amendments, this is perhaps a good opportunity to update the Committee on our progress in seeking legislative consent for the Bill, as we promised in our first Committee session on 31 January.

These amendments, and a number of others we have debated, touch on the UK-wide and devolved aspects of the Bill. As we have discussed on numerous occasions, subsidy control is reserved, but there are clauses in the Bill that alter the executive competence of the devolved Administrations. From the very beginning, the UK Government, at both ministerial and official level, have worked closely and extensively with the devolved Administrations in designing the new subsidy control regime. We have worked to secure their support for LCMs for the Bill. I pay tribute to my officials and those in the devolved Administrations for their ongoing efforts in this space.

Our strong preference remains to secure legislative consent, and we will keep all avenues open to achieve this and to remedy the significant concerns of the devolved Administrations. Of course, we also want to ensure the operability of the new regime. Negotiations are still in progress, but I assure noble Lords that I will keep the House updated at the earliest opportunity, without prejudicing the content of those negotiations. I also assure the Committee that, should any amendments be necessary to reflect the outcome of those negotiations, we will table them as soon as possible prior to Report to enable your Lordships’ House to consider and scrutinise them with sufficient time.

[Lord Purvis of Tweed (LD)]

I am grateful for that “no progress” update from the Minister. With regard to the current situation in Northern Ireland, including the suspension of the Assembly and the resignation of the FM/DFM, can the Minister state whether any of this legislation will be implemented in Northern Ireland during this suspension?

[Lord Callanan (Con)]

The legislation is UK-wide so it will apply in Northern Ireland but, clearly, the absence of the Assembly will make it extremely challenging to get the Executive’s consent. However, we certainly will continue to engage with officials.

I want to give some context on all the engagement we have done. Since July 2020, BEIS Ministers and officials have had 75 meetings in total with their counterparts in the devolved Administrations. These are not just talking shops, as has been implied, but sessions of meaningful engagement. For example, our engagement has included sharing draft objectives and building-blocks for the new subsidy control regime; sharing both the Government’s consultation and the consultation response ahead of publication; and sharing our illustrative guidance and regulations in advance of publication, as well as continued engagement as this Bill passes through Parliament. This engagement will need to continue as the regime is implemented. In fact, at this very moment, officials are working with their counterparts on a memorandum of understanding that formally sets out a mutually agreed process for engagement on the crucial next phase of policy development and implementation.

Moving back to the detail of the amendments before us, I will start with Amendment 69. Again, I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, for moving the amendment, which is supported by a number of noble Lords. It would give the devolved Administrations the ability to challenge any subsidy in the Competition Appeal Tribunal, whether their interests have been affected or not. As was confirmed at the Dispatch Box in the other place, the devolved Administrations—or, indeed, any other public authority —will generally be able to apply to the CAT to review a subsidy decision where the interests of people in the areas in which they exercise their responsibilities may be affected by that subsidy. This would be a good opportunity to correct what I said on Monday: this is not exactly the same position as the Secretary of State.

The fact that the devolved Administrations are not named in this clause is by no means intended to exclude them or any other party whose interests may genuinely be affected by the granting of a subsidy. Clearly there will be limits, and the interests of the devolved Administration or local authority in a particular subsidy cannot be totally tenuous. However, the broad definition in the Bill gives the CAT maximum discretion so that, whatever the facts of the case might be, it can deem the right people as interested parties.

The reason why the Secretary of State has universal standing to challenge a subsidy, in contrast to the devolved Administrations and local authorities, is that he or she—whoever occupies that office—is responsible for the overall operation of the subsidy control regime and, as I keep saying, for the UK’s compliance with our international agreements in this reserved policy area. Neither of those reasons apply to the devolved Administrations or local authorities. It is wrong to suggest, as some noble Lords have suggested previously, that simply because the devolved Administrations exist, the Secretary of State’s horizons and duty of care are limited only to England.

It is also worth mentioning that the Government expect that the Secretary of State would use this ability only in exceptional circumstances where, in his or her view, a subsidy threatens the whole integrity of the subsidy control framework or our compliance with international agreements. It would be inappropriate to legislate that the devolved Administrations are an interested party in all cases, implying that the Secretary of State does not carry out his or her role as the responsible Minister for the subsidy control regime for everyone in all parts of the United Kingdom.

I turn now to Amendment 79, tabled by the noble Lords, Lord German and Lord Wigley. I am glad that the noble Lords referred to the recommendations of the Review of Intergovernmental Relations through the amendment. The UK Government take these co-operation mechanisms with the devolved Administrations, as set out under this review, very seriously, and we are always open to ways of strengthening these relationships. We are open to using the intergovernmental relations structures to resolve any disputes, in accordance with the IGR principles. That said, this amendment would in effect bypass a number of earlier stages in the dispute resolution process, which has already been agreed between the UK Government and all devolved Administrations. Escalation to the Council is the last resort. As I mentioned on Monday, we are also working closely with the DAs to establish a formal process for raising case-specific concerns with the department once the regime is up and running.

Let me also stress that there is no need to incorporate this provision into the Bill for disputes to be able to come under the IGR structures. Moreover, I do not anticipate that there will be any great need to refer matters of interpretation to those structures. It is important to bear in mind that there is of course a distinction between case-specific dispute, which is a matter of legality, and a public authority’s compliance with its legal obligations, for which the proper place to resolve such disputes is ultimately the CAT and a dispute or discussion between Governments on their roles and responsibilities.

There is little scope for that type of confusion over the roles and responsibilities of the UK Government on one hand and the devolved Administrations on the other in this regime. The Secretary of State for Business has responsibility for the overall operation of the regime and the UK’s compliance with its international agreements. The UK Government may also create streamlined routes to encourage subsidies that further their strategic priorities. In all other respects, UK government departments and the Secretary of State himself are in the same position as the devolved Administrations. They are public authorities within the scope of the Bill. UK government departments are treated in exactly the same way as any other public authority. All public authorities are similarly subject to the Bill and empowered by it.

As I said earlier, my officials continue to have a regular set of meetings with their DA counterparts on all subsidy control matters; these will continue, along with regular ministerial engagement. Where there is a need for dispute resolution, that dispute will come into the ambit of the agreed intergovernmental relations process.

I recognise the strength of feeling in relation to Amendment 69 in the name of the noble and learned, Lord Thomas, but I simply do not agree that either that amendment or the other would be a necessary or useful addition to the Bill. Therefore, with respect, I urge the noble and learned Lord to withdraw his amendment.

--- Later in debate ---

Finally, I come to the fascinating Amendment 80 from the noble Lord, Lord Berkeley. I thank him for tabling it because it opened a new area of discussion that I had not really considered before. I understand that the noble Lord intends it also to be a probing amendment; I will treat it as such. Clause 85 establishes that the Bill applies in full to the Crown. As part of this customary provision, the Crown does not include Her Majesty in her private capacity, Her Majesty in right of the Duchy of Lancaster or the Duke of Cornwall. The noble Lord, Lord Berkeley—I know that, as he said, he has a long-standing interest in the affairs of the Duchy of Cornwall—explained that the amendment has been designed to probe the application of the Bill to the Duchy of Cornwall. I can confirm to him that the Duchy of Cornwall is a possession of the Duke that provides personal revenue. The Duke of Cornwall is not a public authority unless he is exercising functions of a public nature.

[Lord Purvis of Tweed (LD)]

Such as opening something?

[Lord Callanan (Con)]

It’s interesting stuff, this. I suspect that the noble Lord, Lord Berkeley, is not going to get an invitation to an investiture.

Anyway, the ownership of the Duchy of Cornwall is a private matter. Where the Duchy operates on a commercial basis, depending on the specific facts at hand, it may meet the definition of an enterprise in Clause 7; lawyers have had fun drafting this. None the less, and importantly, the Duke’s relationship with the Duchy as its owner is not the exercise of functions of a public nature. It therefore falls outside the scope of the Bill.

To close, I hope that, with the explanations I have been able to provide, noble Lords will feel able not to move their amendments and to accept my Amendments 73 and 76. As we have now reached the end of the final grouping of amendments, marking the end of Committee, I express my sincere thanks to all noble Lords who have taken an interest for their thoughtful, insightful and probing discussions on this important Bill. Lastly, I thank the team of officials who have supported us in so doing. I can give an assurance that my department and I will of course reflect closely on all the points made by noble Lords, and I look forward to further engagement in advance of Report.

Subsidy Control Bill

Lord Purvis of Tweed Excerpts

Committee stage
Monday 7th February 2022 Grand Committee

[Lord Fox (LD)]

My Lords, I was not intending to speak to this set of amendments until I received the Minister’s letter—this time before the Committee started rather than during it, which is a great step forward. Unfortunately, the letter creates a problem for me because what I understand from the debate seems not to be represented in this letter, so perhaps the Minister can explain.

On the issue of subsidy schemes, the letter states:

“As my noble friend Baroness Bloomfield stated during the Committee session, all schemes must be uploaded to the transparency database”—


and I understand that to be true, so the scheme will go up on the database. The letter continues:

“This database will be freely accessible and is a key part of the new subsidy control regime, enabling the public and any interested parties to see which subsidies have been awarded, and to whom.”

But my understanding is that people will be able to see only those subsidies that exceed the limit, whereas the implication of the letter is that all subsidies will be accessible to everyone freely via the database. I would like the Minister to acknowledge that that is not the case, whether they are within a scheme or stand-alone, and this letter is therefore incorrect.

[Lord Purvis of Tweed (LD)]

My Lords, further to that point, I wish to ask a couple of questions. First, on a factual issue—I have been struggling to find this—what has the typical award been for relatively small schemes that will operate under the Bill? I am familiar with schemes in my former constituency, either under LEADER+ or a number of other schemes, where there was not a single award over £500,000 but there was transparency as to who received it, because that is basically along the principles on which local authorities operate. So my question, really, is: what piece of legislation will trump the duty that the noble Baroness, Lady Blake, referred to? If a local authority has a duty to publish, then ordinarily if it receives a grant through, for example, the levelling-up fund—on which the Minister wrote to me; I thank him for his letter and look forward to the answer to the question on a separate occasion, as I have replied to his office to highlight an omission from it—what will be the primary duty on the local authority as far as making that information public is concerned? Will it be under the duty on the local authority to publish subsidies greater than £500,000, or, if it is defined as a subsidy scheme, will it not be under such a duty?

However, my specific question is: how will this Bill interact with the Freedom of Information Act? The only way that any enterprise or anybody would be able to find out what the award is if it is under £500,000 would be to submit a freedom of information request. I have not seen anything in this legislation which excludes elements of the Freedom of Information Act, and I therefore assume that all elements of the Freedom of Information Act will apply. If that is the case, it is rather pointless having a £500,000 limit for publication if you can get all this information by issuing an FoI request. If the Minister’s response is, as I expect, that the whole thrust is to have less burden on our public bodies for the administration of this scheme, I wonder which is less burdensome: simply publishing what is already used under the e-claims scheme—I understand that most applicants under these schemes will be through the e-claims schemes, and therefore it is a press of a button to publish the information for an award—or responding to an FoI request. If I were a member of a public body, I know which one would be far less burdensome for me. I wonder whether the Minister agrees.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I am grateful to the noble Lord, Lord McNicol, for his amendment, which was moved so ably by the noble Baroness, Lady Blake. I am delighted that the noble Lord, Lord Fox, received my letter before the Committee this time. I will have to learn the lesson that it prompts more questions from him during the debate. It is obviously better if the noble Lord receives the letter after the debate has taken place—I am joking, of course. We always endeavour to get him the information he has looked for as early as possible.

The amendments, taken together, seek to introduce a common threshold for transparency for subsides that are not challengeable on subsidy control grounds because they are not subject to the main requirements in the Bill. They include subsidies given under schemes, minimal financial assistance and subsidies for services of public economic interest.

I say at the start that I am well aware of the debates that occurred in the other place on this important issue, which were alluded to by a number of speakers, and I recognise the strength of feeling behind the calls for greater transparency. I am sure noble Lords are aware that my colleague Minister Paul Scully committed the Government to review the evidence collected as part of the consultation alongside that provided by witnesses to the Committee about the transparency provisions. Officials continue to review the available evidence base and I commit to updating the noble Lord, Lord Fox, and all other Members of the Committee before Report about where we have got to in that review, and I will update Members on the cost impact of the different options as soon as possible.

Transparency of subsidy awards is an important part of this control regime and is a key tool to support the enforcement provisions. It is essential that interested parties are able to see subsidies to determine whether they may be affected and whether they wish to challenge the subsidy award or subsidy scheme to which the noble Lord, Lord Purvis, referred. Of course, the database is a vital tool in providing this transparency. The aim of the database should always be to enable interested parties to see those subsidies that they may wish to challenge. However, it has not been, and should not be, designed to be a general database of public authority spending. Other tools for general public authority financial transparency exist elsewhere, and I think the noble Lord, Lord Purvis, would accept that uploading additional data represents a cost to public authorities, and of course that is ultimately borne by taxpayers.

It is important that the database requirements find the right balance to ensure that appropriate, accurate and timely information is available to the public on the database about subsidies that they may wish to challenge. To respond directly to the concerns of the noble Lord, Lord Fox, I am happy to clarify and confirm that the subsidies on the database are primarily those that are subject to challenge under this regime. I apologise if there was any ambiguity in my letter.

I turn to the amendments put forward by the noble Lord, Lord McNicol—

--- Later in debate ---

[Lord Callanan (Con)]

That returns to the point that I made earlier. The commitment given by Minister Scully in the other place is that we will review the costs; I committed to return to the Committee with the relevant cost provisions, which I will do before Report.

Amendment 38 would remove, for the purposes of transparency, the distinction between a subsidy awarded under a scheme and a stand-alone subsidy. The amendment seeks to have one, uniform threshold for all subsidies. Taken together with Amendment 39, this new uniform threshold would be just £500.

Subsidies given under a published scheme are currently required to be uploaded to the database if they are more than £500,000. This threshold is set at that level because the database will already include information about the scheme under which these subsidies are given. In our view, this information will be sufficient for others to understand whether their interests will be affected by any subsidy given under that scheme and whether they should therefore seek to challenge the scheme.

The Bill provides for various reasons why a subsidy or scheme cannot be challenged on subsidy control grounds. For example, a subsidy award given under a published scheme cannot be judicially reviewed in the Competition Appeal Tribunal on subsidy control grounds. This is because it is the scheme that is assessed against the principles and is challengeable, rather than the individual award made under that scheme. As such, this Bill does not provide for the possibility to challenge subsidies given under schemes in the Competition Appeal Tribunal. The scheme itself should be challenged, not the individual awards.

Additional information about small subsidies would therefore have very limited value for those concerned about potentially distortive subsidies and would detract from the core purposes of the database. These requirements would lead to additional red tape for public authorities—well beyond the requirements they had to fulfil under the EU state aid regime—and in a great many cases, as I said earlier, the information would simply duplicate what those authorities already publish in appropriate formats elsewhere.

[Lord Purvis of Tweed (LD)]

I have been reviewing the code on the publications from local government; local authorities must publish on a quarterly basis any expenditure that exceeds £500, including grant payments, grants, grant-in-aid and credit notes over £500. Public bodies will publish this quarterly already, unless this Bill means they are excluded from doing so if the payment is through a subsidy scheme. If this completely takes away the duty to publish that the public body already has, it makes no sense whatever. I do not understand where the additional burden comes in, given that the local authority publication code is already there for quarterly publication.

[Lord Callanan (Con)]

Nothing in this Bill affects the existing duties of local authorities and others to publish any financial information that they already do. This Bill concerns the information that needs to be published on the subsidy database. The same point applies to the earlier question from the noble Lord, Lord Purvis, about freedom of information. I hesitate, given the trouble I got into last time, to return to the FoI principles, but nothing in this Bill affects the original FoI legislation or the principles contained in it.

I turn to Amendment 47, which seeks to introduce a transparency threshold of £500, above which subsidies granted as minimal financial assistance would need to be uploaded to the database. As noble Lords will be aware, the MFA exemption allows public authorities to award low-value subsidies of up to £315,000 per recipient over three years, with no requirement to consider the subsidy control principles or other requirements, and no need to upload on to the subsidy control database. I think that clarifies what the noble Lord, Lord McNicol, asked about—what I said earlier on this was probably incorrect, so my apologies for that. The Government have taken this approach to ensure that public authorities can deliver smaller subsidies quickly and easily without undue administrative burden, since they are very unlikely to have any appreciable distortive effects.

This amendment, by seeking to require the addition of low-cost subsidies to the subsidy control database, would certainly introduce an additional burden for public authorities. Introducing a low-value transparency threshold for such low-value subsidies would require additional staff time and costs as the volume of entries would be expected to increase significantly—for what gain, bearing in mind that these subsidies are those that, by their very nature, are unlikely to have any appreciable distortive effects?

On this basis, I do not believe that the amendment would introduce the appropriate balance between sufficient transparency to allow for meaningful scrutiny and an efficient allocation of resource to identify those subsidies that are most likely to harm our economy, either locally or nationally.

Turning to Amendments 48 and 49, as we have discussed before, the Committee will be aware that services of public economic interest—SPEI—are vital services that, without public subsidy, would not be supplied in the appropriate way by the market or, in some cases, would not be supplied at all. This clause exempts certain SPEI subsidies from the transparency requirement in Clause 33 to upload the subsidy on to the database. There are two categories of exemption: first, for subsidies of less than £14.5 million; and, secondly, subsidies for one of the activities listed in subsection (1)(b). In response to the question posed by the noble Baroness, Lady Blake, the reason for the difference is that, in our view, subsidies in the second group are even less likely to distort competition.

These amendments would mean that all SPEI subsidies of £500 or more would need to be uploaded on to the database. I submit that this would represent a significant burden on public authorities, yet it is generally agreed in the Committee, I think, that these subsidies, granted for public services, are unlikely to be unduly distortive.

The same arguments put forward for not setting a transparency threshold of £500 for MFA apply equally here, in that doing so would not represent a balanced or proportionate outcome for our domestic regime. Although noble Lords are right to challenge the Government on the issue of transparency, I would like to set out why reducing the exemption from transparency requirements for SPEI subsidies to £500 would not result in a stronger regime.

First, by its nature, granting subsidies for public services is unlikely to be unduly distortive. This is because the very reason they are needed is that other providers are unable or unwilling to provide the necessary service at a reasonable cost. This goes back to the example we discussed last time, when the noble Baroness, Lady Blake, referred to bus services in rural areas: granting a public subsidy there is unlikely to be distortive because the reason why the public authorities have to provide that service is because nobody else in the market does so. The lower risk of distortion therefore justifies a higher transparency threshold.

Secondly, Clause 29 sets out that the award of a SPEI subsidy must be given in a transparent manner, which means that the subsidy must be being given through a written contract or other written legally enforceable arrangement. As the noble Lord, Lord Purvis, noted, public authorities normally publish these contracts, and it is good practice to do so.

Thirdly, a public authority providing SPEI subsidies must be satisfied that the subsidies are limited to what is strictly necessary in providing that service, with regard to costs and reasonable profit, and must keep that under review. This means that the SPEI enterprise should not gain an unfair advantage over other enterprises; consequently, again, there is unlikely to be undue distortion to competition.

The Government do not share the view that requiring public authorities to upload SPEI subsidies with a value as low as £500 would contribute to a more robust regime. SPEI subsidies are, and will continue to be, subject to appropriate safeguards where public authorities actively ensure that this is the case so that contracts deliver value for money for the citizens in that particular area.

Although I understand the objectives of the noble Lord, for the reasons I have set out, I cannot accept this amendment. I hope, therefore, that he will feel able to withdraw it.

--- Later in debate ---

[Lord Callanan (Con)]

I thank the noble Lord, Lord McNicol, and my noble friend Lord Lamont for these amendments, which seek to reduce the time available to public authorities to upload their subsidies to the database. I note the comments made by the noble Lord, Lord McNicol, on the limitation period, which I look forward to discussing in our next Committee session.

As is the case with the thresholds on transparency, our objective here in setting the upload deadlines has been guided by the fine balance between minimising bureaucratic burdens while ensuring that accurate information is available promptly for interested parties to enable them to consider whether to launch a challenge. We agree that subsidies should be available to be seen on the database as soon as is practical. However, there are good reasons why public authorities require longer than the one and three months put forward in these amendments.

First, let me note that public authorities have an incentive to upload subsidies as quickly as possible. The sooner a subsidy is uploaded to the database, the sooner the clock for the limitation period starts to run, and therefore the sooner the public authority and the beneficiary will gain certainty that the subsidy will not be challenged. Public authorities also have a strong incentive to upload subsidies accurately first time round to avoid the possibility of having to amend entries later on.

Upload deadlines as short as one and three months may result in more public authorities needing to amend their entries at a later date. Although this is of course possible on the database, it creates an unnecessary burden for those authorities. This means that the initial period where the subsidy has been uploaded is more likely to contain inaccuracies, which will not help an interested party to know whether they wish to challenge. Surely we agree that, although we all want prompt uploads to the database, upload speed should not come at the expense of accuracy.

[Lord Purvis of Tweed (LD)]

Can the Minister confirm that, as we discussed in the debate on the previous group, if this scheme is run by a local authority in England, its duty to publish in three months still stands under the code? If so, this will have to be published within three months anyway, but that is just in a local authority area, not on the national database. So there is this rather ridiculous period of between three months and six months in which it would be uploaded on to the subsidy database. If the Minister’s argument is that doing this in three months will mean having a lot of mistakes in it, he needs to go back to the local authority code, not make assertions here in Committee.

[Lord Callanan (Con)]

As I said, none of the provisions in this Bill change any of the requirements on local authorities, but the transparency requirements are different in each case depending on what the award is and whether it is under a scheme. Sometimes, if it is a generally approved scheme, there are literally thousands of small grants, for instance. Sometimes the recipients are not identified under local authority transparency but may need to be identified under a particular scheme, depending on the size of the award. The noble Lord is correct that none of the requirements in the Bill change the requirements on local authorities; we are talking about different information for different purposes.

I understand the point made by noble Lords that, in most cases, one month should be sufficient to avoid excessive mistakes that could cause confusion for interested parties. None the less, I note that public authorities face a great many administrative obligations. Therefore, there would be an increased risk of error, or an increased cost in avoiding error, resulting from a deadline of one month—particularly for authorities that give a large number of subsidies in possibly quite complex formats.

Furthermore, the inaccuracies may not result from avoidable human error. To take another example, many subsidy schemes, particularly but not only those in the form of tax measures, are created with estimates for the value of the budget or the individual awards, but the final amounts may vary from that estimate. Sometimes the subsidy award is variable—it could be a performance-related grant—and if the beneficiary exceeds its estimates for the subsidy objective, it may be entitled to a proportionately larger subsidy. In other cases, such as subsidies in the form of tax measures, which I am sure my noble friend would never have been responsible for when he was Chancellor, the variation may be a result of higher or lower than expected expenditure—for example, on research and development—which will in turn affect how much tax subsidy that beneficiary would be entitled to.

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[Lord Callanan (Con)]

I understand the point that my noble friend is making. As I mentioned in my reply to the noble Lord, Lord McNicol, the limitation period is the subject of separate amendments, so we will have a further opportunity to discuss that in the next Committee session. Again, it is a balance between wanting to provide certainty so that the schemes can proceed and the beneficiary can proceed with some certainty, but I understand the point that my noble friend makes. The whole regime is designed to be as flexible as possible, and probably more permissive in many respects than the EU state aid regime. As I say, we will have a longer period to discuss the limitation period and the challenge on a future occasion.

[Lord Purvis of Tweed (LD)]

With regard to companies or interested parties, Clause 76 allows an interested party to make a request to a public authority for information about a subsidy or a subsidy scheme that the authority has given or made, and there has to be a response within 28 days. Presumably, that covers all the subsidies that are then issued under that subsidy scheme by the public authority, in advance of them being uploaded on to the database. Is that correct?

[Lord Callanan (Con)]

If the information is available, perhaps in other formats, my understanding is that they can start the challenge immediately, but the formal period for challenge starts after the subsidy is uploaded to the database.

[Lord Purvis of Tweed (LD)]

I am grateful, but that was not my question. Regardless of the period of challenge after the subsidy has been updated on the database, Clause 76 allows an interested party to make a request to a public authority for any information about a subsidy or a subsidy scheme that the authority has given or made. That does not state that it is uploaded on the database. It would basically require the interested party to make a request of the public authority for any subsidy issued under that scheme by that public body at any stage. They would have to do it blind, because it would not be on the database, but if they believe that there is a subsidy scheme that they have an interest in, within that certain local market, and they ask for information about that subsidy, that information would have to be provided by the public authority before it has been uploaded to the database. Any greater efficiency or lack of bureaucracy has completely gone if they are able to do that under Clause 76 anyway.

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I see where the Command Paper is trying to come from, but let us look briefly at this. I hear people say, “Get rid of the protocol”; they said it in the House earlier when we discussed the Private Notice Question. The Government are not even trying to do that. I have here a letter from the Minister; it is about two weeks old. I also have an answer from the noble Lord, Lord Frost, to a Parliamentary Question about Article 16. This is to safeguard it, not get rid of it. They are looking to make it more worker-friendly, but they are not even trying to get rid of it. People need a sense of reality. I hope that, when he replies, the Minister will be able to give us chapter and verse to clear up all the ambiguities—and away we go.

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow the noble Lord. I was thinking that it is not usual for us to have difficulty hearing what the noble Lord, Lord Dodds, says: it was down to technology and I am glad it got sorted. I welcome his amendment because it is another opportunity for the Minister to address these serious points. As the noble Lord indicated previously in Committee, on my Amendment 53, we have tried, as the noble Lord, Lord Empey, asked us to do, where there are difficult areas, to navigate a way forward. Because he is absolutely right: before his resignation, the noble Lord, Lord Frost, said in the Chamber—I think it was in reply to the noble Lord, Lord Hannan—that the Government’s intention was not to replace the protocol but to improve it.

So, we are in a situation where the noble Lord and I come, perhaps, from a different starting point but reach the same conclusion: we find ourselves in an undesirable situation but it is one of the Government’s making, and if there are ways to ameliorate the position, the Government have to come up with the solutions, because what is not really in question, as the noble Lord, Lord Empey, said, is that the Government are not looking to replace the protocol. We are, then, tasked with trying to remove one of the barriers that the Department for the Economy in Northern Ireland has indicated, which is that uncertainty is itself a barrier, and that has to be recognised. That uncertainty is ongoing, which is already one of the damaging impacts, as the noble Lord, Lord Dodds, indicated.

We are, I think, in month four now of a three-week process that Boris Johnson promised to Jeffrey Donaldson of a short, sharp negotiation on the protocol. Four months in, it might just be that Boris Johnson is not so reliable in the commitments he gives—it is a suspicion of mine, but it may well be the case. Nevertheless, as the Minister, the noble Baroness, Lady Bloomfield, indicated to me last week in Grand Committee, when I asked if it was the case that, if the Government secured everything they asked for in the negotiations, then EU state aid rules will continue to apply:

“To respond to the concern of the noble Lord, Lord Purvis, that state aid rules would continue to apply even if the UK’s negotiating position were accepted, these are specific and limited circumstances. I trust that this will allay the Committee’s concerns on this important issue.”—[Official Report, 2/2/22; col. GC 244.]


It really comes down to “specific and limited”. “Specific and limited” will mean that there is the ability for reach-back. It will mean that, for parent companies, the guidance will stand that they will now have to start to run two sets of accounts. It will mean that there will be dual reporting, depending on whether it is state aid or subsidy control. It will mean that there will potentially be dual challenge mechanisms. It will mean that the CJEU will still define the state aid component elements of it. Whether or not there are streamlines, whether or not it is more efficient, whether it is less bureaucratic, as the Government’s Command Paper said, or whether it is “specific” or “limited”, it still means that it is different; it still means that it is not the UK approach. That, I think, is symbolic, but it is also important in content.

I will not use any of the language of “territorial nature” et cetera; that is not for me to say. I will close with one element, though. In the 100-page document The Benefits of Brexit, there is not a single independent reference to Northern Ireland at all. That was published on the day that the Northern Ireland First Minister resigned. We are in difficulty, Minister, and I think that taking what has been offered by some as a way of making the situation better is something the Government should consider very carefully indeed.

[Lord McNicol of West Kilbride (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Purvis, and his detailed analysis, especially picking up and bringing back some of the issues from last week. With his contribution and the others, I will be short. I am grateful to the noble Lord, Lord Dodds, for tabling this probing amendment and facilitating discussion on this hugely important topic. I will focus my short remarks on the bigger picture rather than the specific details, which I think have been covered well enough.

Regardless of where people stand on the Northern Ireland protocol and the Government’s negotiations to reform it, it is a part of international law, as we have heard. This legislation therefore needs to be consistent with it. There are different legal opinions on the matter and, while some are favourable to Her Majesty’s Government’s approach, others suggest that decisions relating to Northern Ireland will at best be complex but at worst be subject to challenge or litigation. Neither of these outcomes would be good for firms, businesses or the authorities operating in Northern Ireland.

When this Bill was in the Commons, the Government were asked if they would pause to allow room for negotiations to continue. The answer was no. Despite the passage of those months, we appear to be no closer.

With that, I will leave my comments and look forward to the Minister’s response.

--- Later in debate ---

[Lord Callanan (Con)]

I understand the point the noble Lord is making but, to return to the words I used, there must be a genuine, direct link to Northern Ireland—it cannot be hypothetical or presumed. We have issued detailed guidance on the subject, but we accept that the current situation is not good enough, which is why we are attempting to renegotiate the terms of the protocol, particularly Article 10.

[Lord Purvis of Tweed (LD)]

I have the text of the Command Paper in front of me. I heard the Minister say that the Government are negotiating for a single scheme to apply for all businesses across the UK. That is not what the Command Paper argues for in paragraphs 63 to 65. I have raised this before in the Chamber and in Committee. The Government are asking for a dual system, where there will be

“enhanced referral powers or consultation procedures for subsidies within scope, to enable EU concerns to be properly and swiftly addressed.”

The Government are not seeking a single system; they are seeking two systems with a streamlined approach for applicants to go to the EU system. Can the Minister clarify that?

[Lord Callanan (Con)]

We are seeking to have a single regime—the regime we are discussing now—that applies across the whole of the United Kingdom. As I said, this is the subject of negotiation. Intense discussions are going on. I and other Ministers will update the House as soon as we conclude those agreements.

--- Later in debate ---

[Lord Fox (LD)]

My father spent half his working life milking other people’s cows and the other half milking cows in a small, tenanted farm. Farming is a way of life across the United Kingdom. You must be committed to it to make it work, so people are anxious when they see this subsidy scheme in such turmoil.

At Second Reading, the Minister said that including agricultural subsidies in the subsidy control regime would

“help to protect competition and investment”—[Official Report, 19/1/21; col. 1749.]

in agriculture and fisheries. First, will the Minister acknowledge that the agricultural subsidy scheme has much wider objectives than simply competition and investment? There is a range of social and other economic benefits that the schemes are supposed to be designed to protect. Secondly, how does including agricultural and fisheries subsidies in the subsidy control regime protect competition and investment better than leaving them where they are: outside the scheme?

[Lord Purvis of Tweed (LD)]

My Lords, I wish to ask the specific question of how, if this Bill includes all agricultural support without the delineated areas we have discussed previously in Committee—such as for upland farmers and areas with less favoured status—it will interact with the internal market Act.

My noble friend Lady Randerson specifically referenced hill farmers. I represented many hill farmers; I will debate with my noble friend separately the merits of Welsh lamb as opposed to Scottish Borders lamb, but it is fairly obvious which is the superior product. The point is that specific subsidy support for the type of production rather than the end product is allowed under the subsidy scheme because upland farms have less favoured area status. It was delineated.

However, the Government proposed under the internal market legislation that no discrimination would be allowed on any of the end product—the lamb. We allowed that discrimination because of the less favoured area status for hill farming. I question whether, if all this is now wrapped into the subsidy Bill, this is open to challenge in terms of competition and non-discrimination, as specific support for the production of one product—lamb—will be provided to certain farmers in certain areas but will not be available to others who do not have less favoured area status.

This Bill removes all those delineated areas. Presumably, all that is now within scope of the internal market Act. That means, I think, that none of this area of support can have the assured status that it did beforehand. I strongly support my noble friend’s efforts to get clarity on this.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I thank the noble Baroness, Lady Randerson, and the noble Lord, Lord Bruce of Bennachie, for tabling this amendment and for their concern for the agricultural sector. This amendment seeks to exempt agricultural subsidies and schemes from the requirements of the new domestic regime. I appreciate that the devolved Administrations are particularly concerned about the inclusion of agriculture in the new domestic regime. This issue has come up during our regular engagement, both at ministerial and official level. We have worked hard to understand concerns here, particularly in relation to existing schemes and how they might be considered under the new regime, as well as in relation to the development of guidance on the principles. We have sought to reassure that existing schemes and subsidies will be able to continue indefinitely.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

I register those concerns. Consultation with the devolved Administrations continues, but I repeat that the subsidy schemes of each devolved Administration can be devised in the context of the particular differentiation between each separate authority.

[Lord Purvis of Tweed (LD)]

I do not think the Minister addressed the point regarding the interaction with the UK internal market Act, which has also given rise to some concerns. She said that the Bill would be able to focus on agriculture-specific market failures. As my noble friend indicated, it is not market failure as such; it is the circumstances in which the industry operates. Is the Minister saying that, for all these schemes, the CMA will be the unique body that now determines the viability of all the geographical areas? The CMA is the body that has the authority under this Bill to consider whether the schemes are operating according to the principles. Defining what market failure would be within agriculture, on the different types of land, will now ultimately be for the CMA, which is a ridiculous situation to be in.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I reassure the noble Lord that the CMA has an advisory function; the tribunal will be the body that decides. The subsidies will be devised by the local authority, or the devolved Administration, so that they can use the CMA for advice.

To go back to the earlier point, the Bill will allow the Scottish Government to provide subsidies to less favoured areas should they so wish.

To reiterate, the CMA has only an advisory function. It is the responsibility of the public authority to decide.

[Lord Purvis of Tweed (LD)]

We have to read this debate in the context of the previous debates. As the Minister has previously said, the Government want to move away from delineating support for geographical areas, so it is utterly pointless to say that a scheme for less favoured area status could be devised, because the flexibility from this Bill means that Glasgow could provide any agricultural subsidy to any farm anywhere, which is frankly ridiculous.

If it is not the CMA’s responsibility under this Bill, it is the competition tribunal’s. How on earth will the competition tribunal have the capacity to judge all the areas for geographical support, for agricultural support and for industry support? It seems a bit of a nonsense.

[Baroness Bloomfield of Hinton Waldrist (Con)]

The public authorities can devise their own schemes according to their own policy priorities, as long as they comply with the principles of the Bill.

--- Later in debate ---

[Lord Callanan (Con)]

The noble Baroness is approaching this issue in completely the wrong way. First, this is a UK-wide regime, so the Secretary of State is acting in his capacity as UK-wide Minister responsible for it. We have said that we will take it extremely seriously if a devolved Administration request a referral to the subsidy advice unit. We are currently in discussions with the devolved Administrations on how such a system could be codified. However, the key point is that this is just a referral to the subsidy advice unit. It is not rendering a subsidy illegal; it is not challenging it.

Directly relating to the point made earlier by the noble Lord, Lord Bruce, a devolved Administration have exactly the same rights as the Secretary of State or a local authority or anybody else to challenge the decision. The right for the Secretary of State to call in a proposal is just to refer it for advice from the subsidy advice unit; it is not to challenge the decision. The challenging of a decision takes place in the Competition Appeal Tribunal.

[Lord Purvis of Tweed (LD)]

The case that the Minister makes is a case against what he took through in the internal market Act. Under that Act, the Secretary of State is responsible for the economic impact on the whole of the United Kingdom, but a national authority can refer a regulation made by the Secretary of State to the CMA—in fact, one or more of them can refer. Why can they do that in the internal market Act but not in this Bill?

[Lord Callanan (Con)]

The internal market Act, which we debated at great length, reserved the application of a subsidy control regime to the UK Government. This is now the subsidy control regime that the United Kingdom Internal Market Act set up.

[Lord Purvis of Tweed (LD)]

I do not think that is relevant, because no one had any doubt about the fact that the internal market is a reserved power. They are both reserved powers; in the internal market Act, the Secretary of State acts on a reserved basis for the whole of the internal market, but it allows a national authority to refer a decision of the Secretary of State to the CMA if it has doubts about that measure. Subsidy control is a reserved matter—there is no doubt about that—but the subsidy Bill prevents a national authority referring a decision by the Secretary of State to the CMA. Why?

[Lord Callanan (Con)]

I think the noble Lord is getting confused between the subsidy advice unit and the Competition Appeal Tribunal. Exactly the same right exists for devolved Administrations, the Secretary of State or a local authority to challenge a decision in the Competition Appeal Tribunal. This call-in power is related strictly to the ability to request an opinion from the subsidy advice unit. That is where I think the noble Lord’s confusion comes in. The same right exists for authorities to challenge a subsidy, but there is an overall policing function which belongs to the UK Government to look after the international obligations of the UK under agreements such as the TCA.

[Lord Purvis of Tweed (LD)]

I am talking about a call-in that is exactly the same as in Section 36 of the internal market Act. I am not talking about tribunals; I am not talking about it being adjudicated. I am not confused; I am talking about referrals. The internal market Act allows referrals from a national authority; this Bill does not. All I am asking is why there is a difference between the two.

[Lord Callanan (Con)]

It is because the responsibilities are different. They might all rest within different parts of the CMA, but the responsibilities under the internal market Act are different to those under the Subsidy Control Bill that we are debating today. The policing of the Act is of course the responsibility of the UK Government; it is a reserved responsibility, but the same right to challenge a decision exists for the Secretary of State as it does for the devolved Administrations. Using the ability to refer a decision to the subsidy advice unit, we are saying that we will take a request from a public authority or devolved Administration very seriously under the Secretary of State’s call-in powers, but, in addition to that, we are currently in discussions with the devolved Administrations to see whether it is possible to reach an agreement on some sort of codifying mechanism to refer decisions to the subsidy advice unit.

We hope that no UK government subsidies would require referral, but I can tell the Committee that Ministers will be open-minded to calling in a UK government subsidy for SAU scrutiny where that is requested by another public authority or considered desirable for other reasons.

To respond to the concerns of the noble Baroness, Lady Blake, the Secretary of State would always take into account any urgent circumstances, whether in considering the use of the call-in powers or in the exemption from mandatory referral for subsidies of particular interest set out in Clause 64.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

My Lords, it is always a genuine pleasure to follow the noble and learned Lord in his analysis of these issues. I support the noble Lord, Lord Lamont, in seeking a degree of clarification on why the Government are reluctant for the CMA to have a more proactive role in offering advice.

The Government made the decision to bring forward what is in effect a framework Bill—as the noble Lord, Lord Lamont, highlighted, we have had a number of such Bills—and have said that a lot of it will be fleshed out in either regulation or guidance. The consistency of the application of that guidance is the critical aspect of this, however. We have seen the cost: it is potentially hundreds of millions, if not billions, of pounds, if we are to believe the noble Lord, Lord Agnew. He said that, with the flexibility that comes with not having specific rules, we see what can happen with the lack of consistency—and that was a Minister doing a 10-minute interview with an individual company and then making a decision at the end of it, as he said. He was a Minister who absolutely had decision-making power.

To link that with the previous issue, if the Secretary of State is also a Minister for England and, in addition, the area concerned is agriculture, but the Minister with responsibility will be the BEIS Minister, that highlights some of the areas of concern that there could be. Therefore, the ability of an independent body such as the CMA to have the power to call in and build up a caseload of how it is itself judging the principles and application of those principles will be very important. In the absence of that caseload being built up, we will continue to have a situation where each public body will itself define how it interprets the principles.

The Minister may argue that that is a good thing, but that may not necessarily be so. If you have a wealthy public body that defines market failure differently from a less wealthy public body, ultimately it will only have to go to challenge. Trying to avoid that situation is the intent behind these amendments. I looked at the Treasury’s Green Book, which the Minister referred to. It is the defining body. It has four example of what market failure might be, in addition to what is in principle A within the Bill. There is no existing CMA set of defined markets or set of reports considering how the seven principles will operate; this is a brand-new territory, and it may be a number of years before we come to this situation. Some of the witnesses who gave evidence to the Commons processes said that there will be a major chill effect because of that uncertainty.

Avoiding that aspect, the desirability of an independent body such as the CMA having responsibility under this Bill for putting flesh on the bones of the principles and the definition of market failure is important. We will not be able simply to rely on the guidance from the Government, especially because we know that it might change very quickly. We are already on our second, if not third, set of guidance with regard to the subsidy control principles in Northern Ireland, and the Minister alluded to the fact that we may be on another set before this legislation comes into force. We cannot simply rely on guidance; therefore, there is real merit in these amendments. I am supportive of the noble Lord bringing them forward.

Subsidy Control Bill

Lord Purvis of Tweed Excerpts

Committee stage
Wednesday 2nd February 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow the noble Lord to pick up, and indeed support, many of the points he made about geographical inequality, and to tease out a bit further from our debate on the first day of Committee the Government’s refusal to link any form of geographical basis to the proposal on deprivation, as with others.

As the noble Baroness, Lady Blake, indicated, we are now going through parts of the White Paper on levelling up, and I am sure that the struggling communities across many parts of England will be relieved to hear that they are going to get more politicians. It brought back some memories. When I was a youngster, there was the proposal for more politicians in the north-east of England but with no extra money—a proposal for what we might call a north-east assembly. There was a very outspoken MEP in that region at the time—one M Callanan, I think he was called. I remember reading him in the Chronicle and seeing him on Tyne Tees telly. He said—I paraphrase—that with more politicians without any budget, the Government were desperately seeking to shore up their flagging regional devolution campaign. How times have changed.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

For that campaign, we used a large inflatable white elephant.

[Lord Purvis of Tweed (LD)]

That is what I remember seeing on Tyne Tees telly.

[Lord Callanan (Con)]

It was the cheapest campaign I have ever been on.

[Lord Purvis of Tweed (LD)]

Well, I think the proposals for the White Paper are cheaper, because there is no money attached to them at all.

The Government’s position is that, to maintain the level of EU structural support, £1.5 billion a year must be distributed. I will not quibble about some of the details, but let us take it as read that £1.5 billion a year must be distributed. The Government promised that there would be no shortfall. There were two references in the manifesto that stated so:

“a UK Shared Prosperity Fund to ensure that the people of the UK do not lose out from the withdrawal of EU funding”.

The Minister stated so when he led on the repeal of the structural fund SI, and he stated so again on Monday in Committee.

We, national devolved Governments and local authorities thought that this was a straightforward commitment to replace the previous funds without there being a loss of funds, but no. On page 74 of the spending review, the weasel words “rise to” were inserted. The Government stated that, to ensure that the people of the UK did not lose out from the withdrawal of EU funding, the investment would need to be £4.5 billion in this spending review period, but, as they stated on page 74 of the spending review, it is £2.6 billion over the next three years—a cut of £1.9 billion, cutting support in areas most in need. The cuts in the coming years are a staggering £1.1 billion.

As the noble Lord, Lord Wigley, said, nor has there been any commitment to replicating per-person investment support. Under the previous schemes, investment was £130 per person in England, £180 per person in Scotland, £280 per person in Northern Ireland and £780 per person in Wales, reflecting the areas identified for particular need. I would like the Minister to write to me about what the proposed per-person investment will be for 2022. That is when we will know whether indeed we are losing out from the withdrawal of EU funding.

I was genuinely interested in what the Minister said on Monday about the geographical delineations referenced in Amendment 14 with regard to areas of need. He said, and he was specific in his language, that there was a differing approach from that used by the levelling-up fund. I then looked at the levelling-up fund methodology, which states that the methodology used is

“to develop an index of priority places for the Levelling Up Fund.”

Furthermore,

“any comparison of need between places in different nations should be made using a consistent set of GB-wide metrics only.”

The levelling-up fund is using an index of priority places based on need. To be consistent, that is GB-wide, and all authorities, when they are putting forward their bids for the levelling-up fund, will be clear as to what status they are in with regard to the index of priority.

So far, that is clear. However, the Government have said that there is no link between the two. The conclusion might be that this Bill is not linked with the levelling-up approach, but that is not what the Minister said at Second Reading. He said:

“Under this regime, public authorities at all levels of government will be empowered to give subsidies to help address regional disadvantages, supporting our levelling-up aims.”—[Official Report, 19/1/22; col. 1712.]


So the aims are the same, but if there is no methodology to support a scheme’s aims of addressing regional disadvantage under this Bill—in other words, inequalities —how will levelling up actually be achieved? The CMA will only have the ability to review a scheme’s legality under this Bill; it will have no scope to help to address and support our levelling-up aims. Who will do that? Which body will consider whether this Bill is “supporting our levelling-up aims”, as the Minister said at Second Reading?

The Minister might say that they are completely distinct and that the fund will operate completely distinctly from the subsidy regime. I looked at the levelling up-fund prospectus, which states categorically at paragraph 6.9 that all applicants to the levelling-up fund

“must also consider how they will deliver in line with subsidy control (or State Aid in Northern Ireland) as per Government guidance … This will be tested as part of the appraisal process and monitored thereafter.”

How, and by whom? If every application to the levelling-up fund is to be considered in the context of this Bill, they are linked. If the Government are making the case for having a regional index for that fund, for which all applications have to satisfy this Bill, but this Bill says that there will be no index or any regional aspect, how on earth will this be monitored with regard to meeting the levelling-up aims?

My final point refers to further amendments to Clause 18 on markets. The Minister has been at pains to say that there will be no definition of “local market”. I question how all the Government’s different considerations will be satisfied if there is to be a review of the impact on local markets without there being an index such as the levelling-up fund. I simply do not know why the Government have made the clear distinction between this Bill and the levelling-up approach, which they say has to be consistent with the Bill. I hope the Minister will be able to clarify those points.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I sat here on Monday on the first day of Committee and I wondered how much of the replying Minister’s speech was written already—that is, Ministers were not responding to any of the good sense or good words that they heard from this side of the Room. It struck me that that should be seen as a little more important than it was on Monday.

This is an important group, because it is asking what we want to use the subsidies for, rather than just saying, “How do we want to control subsidies?” Supporting areas of deprivation has to be a core principle in our subsidy schemes and everything the Government do. We are very lucky now; we have a department for levelling up and we have a White Paper. Apparently, the White Paper points out how unequal the UK is. If you measure it on any economic or social metric, it is incredibly unequal. We have to ask: what have the Government been doing for the past 12 years? Of course, they are a Conservative Government, so clearly the levelling-up agenda is to mop up all the damage they have done in the past 12 years. Tackling deprivation and inequality will take a lot more than fine words, and streamlining subsidy schemes that are tailored to overcoming deprivation would be a good start.

Similarly, we should be making it easy for public authorities to support cultural and environmental objectives. I support noble Lords who have spoken so far, and I will be interested to hear the Minister’s response to Amendment 23, tabled by the noble Lord, Lord Wigley, on this point, because it would be a great shame if the Bill were to interfere with achieving cultural and environmental objectives. We should concentrate on calculating social value as articulated in Amendment 36, tabled by the noble Lord, Lord McNicol of West Kilbride, as this is still a fledgling area of procurement practice and was one of the features of David Cameron’s early years as Prime Minister when he was still trying to do some good. The Government seem to have stalled on social value since then. If we can improve the methodology for calculating social value and properly embed it in procurement and subsidy schemes, every pound spent by the public sector will have a much greater benefit for our communities. It will help to tackle deprivation, benefit the environment and create flourishing local authorities. I hope the Minister can explain what the Government are doing to advance the social value agenda.

--- Later in debate ---

Going back to the question from the noble Lord, Lord Ravensdale, about whether Clause 18 should stand part of the Bill and picking up on the contribution of the noble and learned Lord, Lord Thomas, I hope these clarifications have shown the utility of this prohibition.

[Lord Purvis of Tweed (LD)]

If a public authority—let us say the Scottish Government—had a scheme and defined for the purposes of that scheme the entirety of Scotland, therefore allowing relocation anywhere within Scotland, is the Minister satisfied that this would come under the Bill?

[Lord Callanan (Con)]

If it was in compliance with the other principles in the regime, of course it would be in compliance. It would be for the Scottish Government to determine what they would consider—

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

If the Secretary of State decided that the geography was the whole of the United Kingdom, would that be acceptable under the Bill, too?

[Lord Callanan (Con)]

The noble Lord is dragging me into hypotheticals, but obviously the purpose of the Bill applies to the whole of the United Kingdom, so the principles would apply across the whole country, yes.

--- Later in debate ---

In respect to the comments of the noble Lord, Lord Bruce of Bennachie, it is important to restate that this prohibition is not intended to capture subsidies that may substantially improve the attractiveness of investment in a specific area, as I have just explained, which would have the indirect effect of recipients relocating. The approach strikes the right balance: the clause will prohibit some of the most potentially harmful subsidies, without preventing what all would agree are levelling-up subsidies that attract investment to disadvantaged parts of our nation.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister; he is being very generous. This is just to confirm this point: if a public body is able to self-define an area under this clause, there would be nothing to prevent the Scottish Government from defining the area as Scotland. They could therefore offer relocation subsidies to businesses in England to relocate to Scotland, and vice versa; there would be nothing to stop the Secretary of State from defining the area as England, which would be more worrying, and therefore having subsidies that are specifically for those relocating from, say, Wales.

[Lord Callanan (Con)]

I think the noble Lord is confusing two different areas. There is the area that would define a particular scheme and the direct subsidies that we are talking about. Yes, clearly there would be a prohibition on the Scottish Government directly financing the relocation of a company from England to Scotland, or vice versa.

[Lord Purvis of Tweed (LD)]

No, that is because the area is Scotland.

[Lord Callanan (Con)]

It does not matter, because anywhere within the United Kingdom is the area covered by this Bill.

[Lord Purvis of Tweed (LD)]

Minister, Clause 18 could say the United Kingdom, but it does not. It says “area”. As the Minister has said on a number of occasions today, the public authority defines the area.

[Lord Callanan (Con)]

It would be the area of the particular authority that is offering the subsidy. Earlier, I offered a more precise definition of what the area would be, whether it is the Scottish Government for Scotland or the council area that the noble Lord, Lord Bruce, referred to in north-east Scotland. They would be the areas of the authority combined. If the Scottish Government, for instance, wanted to offer a direct subsidy for a company to move, or the British Government offered a subsidy for a company to relocate, even within their own area, it would not be permitted.

As I said, indirect attractiveness in enhancing training provisions, for example, would be permitted. This is to prohibit a particular small class of actions. The example that we used was in the United States. We have all seen examples of companies moving from one state to another. They literally close down one operation and move to another because of the enormous subsidies offered. That is what we want to prohibit. We certainly do not want to prohibit areas—indeed, it would be contrary to our policy aims—from making themselves more attractive by offering indirect subsidies, as this would help the levelling-up agenda. I hope I have clarified that.

Amendment 34 was tabled by the noble Lord, Lord McNicol. First, I will say a few words about the purpose and effect of Clause 29, which this amendment seeks to change. The clause sets out the specific provisions for giving subsidies for services of public economic interest, which are services provided to carry out particular tasks in the public interest. These are services where, without a public subsidy, a vital public service would not be supplied in an appropriate way by the market—or, in some cases, would not be supplied at all. These could include, for example, ferry links between Scottish islands—no doubt the noble Lord, Lord Berkeley, would want to quote the example of the Scilly Isles—and a rural bus service.

The provisions in Clause 29 facilitate the subsidies being given while ensuring that this is done transparently, that they are reviewed regularly by the public authority, and that they avoid overcompensating the beneficiary. The Government’s aim in drafting Clause 29 was to provide a simple yet effective framework within which public authorities could confidently provide SPEI subsidies that would allow the continued provision of important services and, in doing so, ensure that the subsidy is limited to what is necessary to deliver that service.

In response to the question from the noble Lord, Lord German, about whether a leisure centre would be considered an SPEI, I do not want to comment on that specific scenario. There is no reason in principle why it should not be, but the Bill would absolutely allow a subsidy to a leisure centre, whether it is an SPEI or not—we could probably have lots of debates about the degree to which leisure centres are SPEIs—if the public authority was assured that there was a market failure or equity rationale and the other relevant requirements were met. I will purposefully not comment on his proposition that the residents of London should not benefit from public leisure centres. I am sure that is not what he was trying to imply.

The amendment tabled by the noble Lord, Lord McNicol, seeks to add a further requirement on public authorities when considering the cost of delivering the SPEI. They would need to consider the social and economic welfare of users of the service and of those engaged in its delivery. These will be important factors for many, if not all, SPEIs, and I expect that public authorities would regularly take account of these considerations when reviewing these types of services on a case-by-case basis. For example, service providers of rural transport services may be required, by the terms of their contract, to consult service users through annual customer surveys or regular engagement with local stakeholders to show that the service in fact meets local needs.

However, the inclusion of this amendment in the Bill would introduce additional complication and a degree of uncertainty for public authorities in how they undertake this assessment. The defining factor for SPEIs must be the type of service that is provided and the fact that it would not be adequately provided by the market. The provisions in Clause 29 are designed to ensure that those services are designed appropriately and with minimal market distortion. As important as the social and economic welfare of service users and providers is, I do not believe it is at the core of this assessment and of the subsidy control provisions.

More broadly, it is important to emphasise that the subsidy control regime does not sit in isolation, nor should it determine every element of spending decisions taken by public authorities in the UK. They must continue to take into account spending rules and to ensure value for taxpayers’ money. They must also make evidence-based, democratically accountable policy decisions about how and where to intervene, in a way that takes into account the specific characteristics and needs of the geographical area and the subject matter for which they are responsible. It may therefore be appropriate for public authorities to include reference to the social and economic welfare of service users and providers in their own guidance on specific SPEIs.

With respect to the social and economic welfare of those engaged in delivering the services, I remind the noble Lord that the UK has one of the best employment rights records in the world. We continue to build on this record, ensuring that our workers have access to the rights and protections they deserve. I therefore do not believe that it is desirable for the subsidy control regime that we are debating to prescribe how public authorities must account for the social and economic welfare of service users and those engaged in delivering the service.

Finally, I will comment on Amendment 36. I am also grateful to the noble Lord, Lord McNicol, for tabling this especially thought-provoking amendment. I understand that the noble Lord intends it to be a probing amendment and I will treat it as such. It raises some interesting questions about subsidies and the nature of the relationship they create between a public authority and a subsidy beneficiary.

The social value Act, from which I assume his amendment takes its inspiration, requires a public authority that is procuring the provision of services, goods or works to give weight to social value factors in what would otherwise have to be a strict value-for-money calculation. Authorities within the scope of that Act should consider whether it applies where a subsidised contract is awarded. In contrast, and perhaps paradoxically, the giving of public money in the form of a subsidy is not primarily a market-based or economic calculation. Of course there are economic duties, within this regime and in public spending controls, to ensure that a subsidy is efficient and effective.

However, the first requirement of this regime—the first condition that a public authority must satisfy before giving a subsidy—is, in essence, one of social value: what is the equity rationale? Is there a market failure and what is the benefit to wider society in providing this subsidy? I hope this answers the question of the noble Baroness, Lady Jones, on the same subject. Moreover, public authorities must conclude their assessment against the principles with the balancing test in principle G: that the beneficial effects of the subsidy should outweigh any negative effects. Of course, these duties fall on the public authority and not the beneficiary directly but, in considering the first and last principles, the public authority must consider the effect of the subsidy in the round.

If it were reasonably foreseeable that, in the actual purchasing of a good or service funded by subsidy, the beneficiary would be undermining the equity rationale for giving the subsidy or that it would somehow worsen another equity objective, then it is hard to see that the subsidy could satisfy either principle A or G. None of this is to say that a public authority cannot impose secondary requirements on a beneficiary, where the size and nature of a subsidy might lead it to do so. Many public authorities award subsidies through a written contractual arrangement that sets out the terms and conditions under which the financial assistance is given, and this would be the way to impose such conditions. But it would be disproportionate to require public authorities to impose social value conditions in all cases, particularly as the questions of equity are already built into the fabric of the regime.

As an aside, the noble Lord has also proposed that public authorities should be able to impose penalties if the use of the subsidy does not deliver the chosen social value purposes. As I have explained, it is not proportionate to require public authorities to impose these secondary requirements. However, let me reassure him that Clause 77 provides that if a subsidy is not used for its intended purpose, it can of course be recovered.

I am grateful to all noble Lords for putting forward their amendments and for the long subsequent discussion that has taken place, but I hope I have set out the reasons why I am unable to accept these amendments on behalf of the Government. In the light of the fulsome explanations I have provided, I hope that noble Lords will feel able to withdraw or not press their amendments.

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[Lord Hope of Craighead (CB)]

My Lords, when the Minister comes to reply, would he explain the purpose of Clause 47(6), which requires that the direction must be published? We need to understand the purpose of that subsection before we look at Clause 47(7) which is the subject of this discussion. As I understand it, it is there in the interests of transparency and clarity. If that is the purpose, it is even more surprising that there is a power to disapply.

After all, the purpose of the direction is to inform somebody. Who is it who is to be informed? It is not subject to parliamentary procedure, but it is there for a purpose. We need to know from the Minister expressly what that purpose is, so that we understand the significance of Clause 47(7).

[Lord Purvis of Tweed (LD)]

My Lords, I support my noble friend Lord Fox and will add a couple of points. First, on the streamlined schemes, there is the potential for them to be very major and, in effect, a policy driver in themselves. But if they are laid and are not in an order, which we would have the ability to scrutinise, they will not necessarily come with an equalities or impact assessment. It will be a fundamental weakness if they are simply laid. It goes against the grain of what we have been trying to argue, which is for good-quality proposals that come with equalities assessments. It will bypass that and that is a retrograde step.

On the ability to amend without there also being scrutiny, I point out, having checked on legislation.gov.uk, that there are 15 references to deposit-takers in other legislation and 34 references to insurers. What the Government propose is simply to amend primary legislation and a suite of other measures. The area of confusion for me is that there is also legislation that relates to Scottish insurance, which could be changed by a Secretary of State without there being proper scrutiny of that either.

My final point relates to the element of secrecy in Clause 47(7). The Government seem to be proposing that we go back to a situation of hue and cry, in which measures by the Treasury that could be supporting individual businesses will never be reported. We will know only if there are whistleblowers, if people are raising concerns and they have that knowledge. We saw to our cost with the Libor-fixing situation what can happen when there is a lack of transparency and reporting. It is simply not good enough. When I was a member of the Finance Committee of the Scottish Parliament, we had mechanisms for our committee to meet in private when Finance Ministers were able to say, either on the grounds of national security or during the economic crash, that there were reasons why information would not be made public at that point. We were briefed and there would, subsequently, be a report that Parliament could have. There are other mechanisms for secrecy than this approach.

Finally, I have been a Member of two Parliaments for 18 years now. I never thought I would read a parliamentary committee highlighting this statement:

“In other words, because the Government might be defeated if the direction could be voted upon, there should be no parliamentary procedure and no vote.”


This provision should not progress. It is as simple as that.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I am grateful to the noble Lord, Lord Fox, for tabling these amendments. As we have heard, they reflect the bulk of the DPRRC’s recommendations. I also thank the noble and learned Lords, Lord Judge and Lord Thomas of Cwmgiedd, and the noble Lord, Lord Fox, for signing Amendment 50, even if it was not to support me but the recommendations of the DPRRC.

The DPRRC took the unusual step of voicing its concerns for Clause 47(7) at first, rather than working through the Bill and its clauses in turn. That goes to highlight even further its real concerns, specifically around issues of transparency and secrecy. We will come on to further amendments on transparency and try to open this up because, as we have heard, when you shine a light on the decisions being made, they are put under scrutiny. Issues and concerns can be brought to the fore so that we do not, as the noble Lord, Lord Purvis, said, end up relying on whistleblowers.

Taking the point made by the noble Lord, Lord Purvis, it may be that the immediate release of certain directions and information could have undesirable consequences in terms of market behaviour, but there must be other ways of taking it forward. The noble Lord has touched on one of them at the Scottish Parliament, where meetings were in private but the information was subsequently released.

At Second Reading, the Minister said:

“However, we will of course take into account the findings from the Delegated Powers and Regulatory Reform Committee’s report and we will review accordingly.”—[Official Report, 19/1/22; col. 1712.]


I know we are all sitting here waiting to see if any of those will be enacted, and I very much look forward to the Minister’s response. The words of the DPRRC have been quoted but it is worth putting on the record points 13 and 14 in its 17th report, which say that:

“We do not recall any other occasion where the Government have argued that one reason why Parliament should not be able to scrutinise delegated legislation is because the Government might be defeated on it … Neither have the Government cited any precedent where the ability to disapply a legislative provision (here, the Bill’s subsidy control requirements) can be achieved by a direction that can be kept secret from Parliament.”


With that, I look forward to the Minister’s response.

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There are circumstances where it would clearly be necessary to delay the publication of a financial stability direction. Publishing a direction effectively discloses that financial assistance has been given and therefore undermines the ability to grant assistance on a covert basis. For example, the ability to delay disclosure is critical in instances where the Bank of England provides liquidity support to stabilise a failing firm. In situations such as this, disclosure of the direction could further damage confidence in a firm, exacerbate a liquidity stress, or give rise to financial and market-wide instability—including further firm failures—unrelated to broader market fundamentals.

[Lord Purvis of Tweed (LD)]

Is it the view of the Minister that the powers under subsection (6) allow for delayed disclosure?

[Lord Callanan (Con)]

Yes, that is the subsection which provides the ability to publicise that fact—it is in subsection (6).

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[Lord Purvis of Tweed (LD)]

So the point the Minister is making, which is to have the legal ability to delay disclosure, is afforded under subsection (6). The deletion of subsection (7) then does not affect that power. It would mean only the removal of the ability for there to be no disclosure at all, because the power to delay disclosure would be under Clause 47(6). Is that correct?

[Lord Callanan (Con)]

We think that subsection (7) is important for financial stability and legal certainty but, as I have said on the other amendments in this group, I am happy to take this away and look at the matter further.

This is the very effect that assistance, and the direction that facilitates that assistance, would be deployed to avoid. Northern Rock serves as a clear example, where the revelation that the firm was in receipt of emergency liquidity assistance led to a run on the bank. That exacerbated its problems and, in the end, hastened its failure. Consequently, if disclosure of financial stability directions cannot be deferred, it would effectively render them unusable in situations where it is necessary to provide lending on a covert basis. Making a direction unusable in this way would be especially problematic if the success of the financial assistance was dependent on the use of a financial stability direction to disapply any of the requirements.

In relation to the specific statement being referenced in paragraph 16 of the report, as mentioned by the noble Lords, Lord Purvis and Lord Fox, that statement makes it clear that the concern is not about the risk of parliamentary defeat. The concern surfaced in the statement is the perception of stakeholders of a risk that non-approval could result in the rejection or undermining of the proposed subsidy. In that circumstance, the primary concern would not be in relation to a defeat in Parliament but that, as a result of that risk perception among stakeholders, the subsidy would be ineffective in the short term or even rejected by the proposed recipient. This would mean that the use of the power would not even get to the point of a vote.

The current drafting of Clause 47(7) provides a clear mechanism in law for delaying publication and a basis on which the Treasury can make the decision that the publication would undermine the purposes for which the direction was given. When the Treasury considers that publication would no longer undermine the purpose of the direction, it would at that time—this comes to the point made by the noble and learned Lord, Lord Hope—be required to publish that direction in accordance with the duty in Clause 47(6). Therefore, subsection (7) simply makes explicit the ability to delay publication where that publication would undermine the purpose for which the direction was given. It does not provide a means for the Government to avoid scrutiny indefinitely.

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Moved by

[Lord Purvis of Tweed]

22: Clause 12, page 7, line 25, at end insert—
“(c) must not make the scheme without a statement that the scheme will operate, either in full or in part, under this Act or EU regulations.”Member’s explanatory statement
This amendment would require a public authority to make a statement that the scheme will operate, either in full or in part, under this Act or EU regulations before it can be made.

[Lord Purvis of Tweed (LD)]

My Lords, I shall speak also to Amendment 53 in this small group, which relates to the interaction between this legislation and EU legislation that will continue to apply to Northern Ireland. I do so in the context of the news today that the Agriculture Minister in Northern Ireland has unilaterally ended the checks on the Irish Sea border at midnight tonight. That will inevitably raise more tension in a situation where we would have hoped that, as a result of the Foreign Secretary’s talks with the vice-chair of the Commission, there would be de-escalation of tensions. However, it seems that that the context has changed dramatically.

The Northern Ireland consideration of the Bill is still live. The Government have already taken an approach on the levelling-up agenda that is different from that in Northern Ireland. I am confused about why Northern Ireland was given a distinct status within the levelling-up fund. However, the key element is this legislation. Amendments 22 and 53 are probing amendments and are designed to be constructive because, regardless of any outcome of the negotiations between the Foreign Secretary and Vice-President Šefčovič, EU law will continue to apply in certain areas in Northern Ireland, even if they are limited. There has been a debate about how limited that might be, but in certain areas it may be fairly substantial. Even if the Commission accepts everything in the Government’s Command Paper on renegotiating or resetting the Northern Ireland/Ireland protocol and the Government get everything they want—that is a large if and has probably become much larger after the news today—EU law will still operate and Northern Ireland will still operate under two legal systems for certain areas of subsidy control. These were raised at Second Reading, so I do not need to go into detail on what they are.

The Foreign Secretary said that the UK should never have to notify another power—that is the European Commission—on any decision about setting tax. That will still be the case because part of this provision is on revenue and taxation. The guidance published under Section 48 of the United Kingdom Internal Market Act, which was designed to clarify the situation, did not clarify it in many areas. I read it thoroughly. Separate guidance was published on 24 June last year. It included an annexe, Public Authorities’ Assessment of How Individual Subsidies Comply with UK-EU Trade and Cooperation Agreement Principles. It had a checkpoint system. There are 18 questions that anybody providing a subsidy in Northern Ireland or GB will have to satisfy in order for them to have a greater understanding of whether EU law applies. Some of those questions are almost impossible to answer, but nevertheless there is a process that must be gone through. The Northern Ireland Department for the Economy states that 14 ongoing subsidy schemes are covered within the GBER and are likely to be in the European Union’s purview. My reading of this legislation is that, in any new scheme put forward by the European Union, Northern Ireland public authorities will be able to choose to operate under a new European Union scheme. That would be under state aid and the purview of the CJEU so, regardless of any negotiation, we are going to be operating under separate and distinct reporting schemes.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

It might indeed be an initial response, because the noble Lord has the advantage of me: I was not aware of the announcement made this afternoon by Northern Ireland’s Agriculture Minister, while we have been in Committee. However, I thank the noble Lords, Lord Purvis of Tweed and Lord Fox, for tabling these amendments. I appreciate that they are intended to be helpful and generate some discussion about these issues, which I suspect will be ongoing.

I begin with Amendment 22, which would require public authorities to make an explicit statement as to whether a subsidy scheme falls under the new domestic regime or EU state aid rules before it is made. Clause 48 already makes it clear that the subsidy control requirements do not apply to a subsidy given, or a subsidy scheme made, in accordance with Article 10 of the Northern Ireland protocol, nor do the requirements apply to a subsidy or subsidy scheme to which Article 138 of the EU withdrawal agreement applies.

It follows that, in the very limited number of cases where public authorities determine that schemes are operating under EU state aid law, the required information will be uploaded to the relevant EU databases on the Commission’s website. All other schemes, which represent the vast majority, will fall under the new domestic regime and be uploaded to the UK transparency database. As such, we do not consider it necessary to include a requirement on public authorities to make a statement as to whether a scheme operates under the Bill or EU state aid rules.

I thank my noble friend Lord Lamont for his comments. I understand his concerns about the interaction between the state aid regime and the subsidy control regime. I assure him that the EU state aid rules under the Northern Ireland protocol currently apply only in certain circumstances to aid that affects trade in goods and electricity between Northern Ireland and the EU. Such subsidies are within the scope of the protocol only where there is a genuine and direct link to Northern Ireland and a real, foreseeable impact on trade between Northern Ireland and the EU. The Commission’s unilateral declaration of December 2020 made it clear that Article 10 could affect a subsidy in GB only if there was a genuine and direct link in Northern Ireland. This would be the case if, for example, the beneficiary had a subsidiary in Northern Ireland.

EU state aid rules also apply under Article 138 of the withdrawal agreement in relation to aid for EU programmes and activities within the multiannual financial framework as a transitional provision. To respond to the concern of the noble Lord, Lord Purvis, that state aid rules would continue to apply even if the UK’s negotiating position were accepted, these are specific and limited circumstances. I trust that this will allay the Committee’s concerns on this important issue.

Amendment 53 from the noble Lords, Lord Purvis of Tweed and Lord Fox, would require a mandatory referral to the CMA’s subsidy advice unit, or SAU, for any subsidy which the public authority believes has a connection to economic activity in Northern Ireland, but where that authority has decided that the proposed subsidy is not within the scope of Article 10 of the Northern Ireland protocol. The SAU would then, as part of its report, determine whether EU rules would apply.

I am afraid that I must reject this amendment as we believe that it is unnecessary. The Government have already provided guidance for public authorities to determine in advance whether the subsidy they are planning to give will be in scope of the Northern Ireland protocol. A requirement for the subsidy advice unit to make a report in advance would needlessly delay the deployment of a large number of subsidies that are clearly not in scope of the Northern Ireland protocol. It would also significantly increase the workload of the SAU and the cost to taxpayers.

The Government have published guidance for public authorities on the Northern Ireland protocol, making it clear where it does or does not apply. This guidance was last updated in June 2021, and we will continue to update it as needed. This guidance supports public authorities to make an informed decision on whether their proposed subsidy is in scope of the Northern Ireland protocol, and there exists in the department an advisory team that any public authority can contact for additional support. We need not bring delay into the system unnecessarily.

I emphasise that this amendment is at odds with the Bill’s position that a measure that would currently fall within the scope of Article 10 of the Northern Ireland protocol should not be subject to the rules and processes contained in this Bill. That is the whole purpose of Clause 48. This means that it cannot be referred to the SAU for any reason, and the SAU will not undertake any evaluation in relation to the protocol or the EU state aid rules. It is the responsibility of central government to ensure that the UK is compliant with those rules. As such, any subsidy in scope of the mandatory referral provisions in Clause 52 is, by definition, not in scope of the Northern Ireland protocol provisions for the application of EU state aid.

The SAU has important advisory and scrutiny functions: to evaluate public authorities’ own assessments of compliance with the subsidy control requirements; and to monitor and evaluate the operation of the domestic regime as a whole. However, it is not a regulator with responsibilities for making definitive judgments, including on whether a specific subsidy is in scope of the Northern Ireland protocol.

I therefore ask the noble Lord, Lord Purvis, to withdraw his amendment and other noble Lords not to press theirs.

[Lord Purvis of Tweed (LD)]

I am grateful for the Minister’s response. As much as the Government are asserting that there will not be a challenge or confusion, it is necessary to have greater clarity for those who are putting the schemes together and those who will potentially challenge some of the recipients.

I am grateful to the noble Lord, Lord Lamont, for raising the issue of reach-back. It will remain an issue. The fact that the Government state that they will take responsibility for notifying the Commission about subsidies given does not necessarily mean that they will be free from challenge. Given the fact, from our discussions with my noble friend Lord Fox, that this is fundamentally a challenge-based system, greater clarity on this matter will be important—particularly given that there could be areas of dual approach.

We all know that Northern Ireland has a high number of intermediary businesses. These are for both businesses that have activity in Northern Ireland and GB and businesses based in Ireland or the European Union that have some form of manufacturing or processing in Northern Ireland as well as in GB. These enterprises will, by definition, operate under dual systems and potentially apply for either state aid or subsidy control operations; indeed, I would be amazed if they did not. This means, therefore, that any of those applications or schemes are potentially open to challenge.

I did not agree with the Minister when she said that increasing the role to provide that certainty will represent an increased cost to taxpayers. I have read the impact assessment. If the Government are right that this applies to limited areas, I do not think that it will be a massive burden on the 19 people in the CMA who will be operating on this anyway. The Government seem to be relying on the fact that any confusion or uncertainty can be resolved by seeking advice from BEIS or Defra and the department’s subsidy control team.

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Moved by

[Lord Purvis of Tweed]

35: After Clause 29, insert the following new Clause—
“Subsidies free from political motivation or influence
For the purposes of this Act a subsidy is only lawful if provided free from political motivation or influence.”Member’s explanatory statement
This amendment would prohibit subsidies that are not provided free from political motivation or influence.

[Lord Purvis of Tweed (LD)]

Great—we have got here. I rise to move Amendment 35.

“Billions were written off and no one seemed to care but me”


was the headline of the Times interview with the noble Lord, Lord Agnew, which made for rather depressing reading. We are regrettably in the context of an enormous amount of money that has been lost through fraud, with the bad cocktail of the allegations made by William Wragg MP of blackmail of MPs with projects in their constituencies. That chair of a Select Committee is speaking to the Metropolitan Police about allegations of blackmail. One of the reasons why this is significant for the Bill was highlighted in one of our previous discussions. The default is that information will not be put in the public campaign but will need to be challenged. That creates a poor recipe.

I was struck when I looked at the prospectus for the levelling-up fund. As we discussed before, this is a separate process, but it is linked to the levelling-up agenda. William Wragg has made allegations of blackmail and funds not being allocated to the constituencies of individual MPs. I suspect that the noble Lord, Lord Lamont, will not want to contribute to this group, but I may talk to him separately as he has great experience—I am not making any allegations, I must say. I will clarify that straight away. I have a dossier here but it is nothing to do with him.

The levelling-up fund introduced an unusual concept: Members of Parliament will back a bid under the levelling-up fund, as a priority. The number of bids received by a local authority will relate to the number of MPs in that area. As GOV.UK states:

“Accordingly, local authorities can submit one bid for every MP whose constituency lies wholly within their boundary.”


I think it is a novel experience in the UK system to ask an MP to nominate a bid for a government fund. That is why I was interested in hearing separately about the experience of the noble Lord, Lord Lamont. As the allegations from William Wragg are that there has been blackmail by government Whips, who can then use leverage through this process because this fund specifically gives MPs a role, this is a considerable concern. Rightly or wrongly, this Bill opens up even greater flexibilities for public bodies or individual elected representatives.

We know that, from the Prime Minister downwards, we should all operate under the Nolan principles of selflessness, integrity, objectivity, accountability, openness, honesty and leadership; I believe that is still the case. On integrity:

“Holders of public office must avoid placing themselves under any obligation to people or organisations that may try inappropriately to influence them in their work.”


On openness:

“Holders of public office should act and take decisions in an open and transparent manner.”


For any public body with delegated responsibilities for elected officials, who now could well be directly linked with subsidy schemes whose operations involve billions of pounds, we need a heightened level of audit and transparency so as to avoid political direction, both on individual subsidy decisions under a scheme and on the establishment of the scheme itself—as well as on the power of government Whips.

There is already considerable use of delegated powers for decision-making in local government, on planning and in other areas. Nothing in the Bill would prevent subsidy schemes being operated under local government delegated powers. That could be a positive; the Minister may argue that it would reinvigorate local government. I am not necessarily opposed to the idea, but if that is the case—I think this was the point made by the noble Lord, Lord Lamont, at Second Reading—with these greater powers, for accountability to be effective, there should be greater transparency.

On our discussion on the previous group of amendments, without that transparency and reporting, the job becomes even harder. If the job on accountability is even harder, the vulnerability in operating against the Nolan principles is heightened. The Minister, the noble Baroness, Lady Bloomfield, conceded at the Dispatch Box in Committee that there was a concern about the shield of scrutiny in this area and suggested that there would be further discussions. I wrote that down. We can check Hansard, but I did write it down, because I thought it would be useful later in Committee. The Minister should not scold herself, because that is a very welcome development.

The cure for all this will be transparency. Already we know that accounting officers operating under local government have to certify that the decisions being made in many areas have been made under fiduciary duties and are legal. That duty will, I hope, still apply to subsidy schemes. There will be other bodies—local enterprise partnerships, for example—that are not directly elected. There will also be bodies authorised under the Bill that will not operate at the traditional levels of accountability of elected bodies. There should therefore be a heightened provision for working free from political motivation or influence.

Surely we do not want to go back to the situation in which there were bridges to nowhere, and decisions were made that we only found out about through scandal. Clearly, we want to protect ourselves from blackmail, fraud and waste. The Government may wish to change some of the language in the amendment—I am open to discussing that with the Minister—but I hope that we will be able to add to some of the principles, so that any decisions involving public money will not be fraudulent or subject to political interference and those with malign intentions will not be able to hide behind the shield of secrecy.

[Baroness Blake of Leeds (Lab)]

I speak to this amendment with significant experience as a senior local councillor. Obviously, the Nolan principles applied to all of us. Recently, in public-private partnerships such as the LEPs, all members had to declare their interests. Sometimes, because of commercial sensitivity, some of the private sector partners chose to step down from the LEP. That level of transparency is now accepted practice—and quite rightly so. It is an enormous tragedy that the noble Lord, Lord Purvis, had to table such an amendment but it reflects the extraordinary times we are living in.

I have to be honest: standards in public life are being severely scrutinised now and, in many cases, found wanting. It is with huge regret that we are in a position where such a requirement has to be brought forward in this debate, but that is where we are. The noble Lord, Lord Purvis, is absolutely right to draw attention to the current state that we are in.

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[Lord Callanan (Con)]

It is very unfair of the noble Lord, Lord Fox, to suggest that I would not engage with his amendment. In this debate, I particularly enjoyed the noble Baroness, Lady Blake, using exactly the same argument that I will deploy against the amendment to argue somehow that she is in favour of it.

Anyway, let us explore the amendment as it was tabled, because I think we will all agree that it is a particularly ridiculous amendment. However, I thank the noble Lords, Lord Purvis and Lord Fox, for putting it forward. Essentially, the amendment seeks to prevent subsidies being given where there is a political motivation or influence. I will not engage with some of the broader points noble Lords made about transparency and things like that because we will come on to those points later in the debate, but I will take the amendment as it is printed. I suspect that what both noble Lords actually meant to say is that they seek to prevent improper political influence over subsidy decision-making. On that, we completely agree, of course. However, as I will argue, I do not believe that this amendment is necessary to achieve that.

First, there are already a number of safety nets in the Bill which will help to prevent improper political influence over subsidy decision-making. Any subsidy, unless exempted, must meet the subsidy control principles, including remedying an identified market failure or addressing an equity rationale. In addition, the subsidy must be limited to what is necessary to achieve it. A subsidy which had improper political influence would struggle to meet those principles.

Secondly, Clause 77 prevents the misuse of subsidies, and a public authority may recover a subsidy from the beneficiary where it has been used for a purpose other than the purpose for which it was given. Even outside the subsidy control requirements, a subsidy must meet value-for-money tests, which help to ensure that public spending is being made appropriately. For UK government spending, this is governed by the Treasury Green Book—all those in government who have to engage with the Treasury will know how rigorous it is in implementing that—and, of course, all the principles set out in Managing Public Money. They will be generally applicable to all public authorities in the UK, although the devolved Governments have their own detailed rulebooks, as is right. Finally, a subsidy granted for an improper purpose may give rise to judicial review on public law grounds.

More broadly—this comes back to the point that the noble Baroness, Lady Blake, made, even though, bizarrely, she was arguing in favour of the amendment—it is unclear how a public authority might avoid any political motivation whatever. I do not think that that would be desirable. When the noble Baroness, Lady Blake, was in a position of authority on Leeds City Council, her authority, or a devolved Government, for example, was or would have been democratically elected. I assume that when she stood for election with her party she set out her political priorities. She might have said that where a subsidy was appropriate she wanted to stand for election on that basis. It is right and proper that she should have been able to do that where the subsidy met the subsidy control principles. It would be almost impossible for any democratically elected local authority or a devolved Government to avoid any political influence. We are all politicians, some of whom were democratically elected. This applies to central and local government.

All subsidies have a degree of political motivation or influence because they are desired to achieve a public policy objective on which people stand for election and which will have been set by a public authority with democratic accountability. Let us pursue the example from the noble Baroness, Lady Blake. If she stood for election on Leeds City Council with a commitment to, for instance, provide subsidised transport in rural parts of Leeds—I think Leeds has some rural areas—it might have been appropriate to provide a subsidy to a bus operator. That commitment will have been made at a political level as the result of her manifesto in a political election. That would have been a politically motivated subsidy, but I think we would all agree that, in the circumstances, that would have been wholly appropriate and presumably useful for that particular area.

I hope that I have demonstrated that the amendment is unnecessary. The wording is clearly seriously flawed. I therefore hope the noble Lord will be able to withdraw it.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister and to my noble friend Lord Fox and the noble Baroness, Lady Blake. This very short debate has been illustrative because, some of the flippancy aside, it addressed the vulnerabilities that could arise from a lack of transparency in certain areas of subsidy schemes. There is absolutely no intention to prevent anybody standing to represent people in their area and to argue the case for their area. That is absolutely fundamental and a positive. I did it. I fought hard to keep structural funds in the south of Scotland. I will fight the fact that that money is now being taken away by the Minister’s Bill. That is something I will fight for. I will be very passionate for it, and I will hold the Conservatives to account for taking those funds away from the Scottish borders.

--- Later in debate ---

[Lord Callanan (Con)]

We are not necessarily against adding new data points, but it depends what they are. Of course, as I mentioned earlier, all subsidies will need to benefit the British public and be well delivered. But of course there is the WTO provision that we need to be careful about, particularly in the context of the TCA and the action that is being launched against us. I will not go any further into the prohibition because I see that the noble Lord is going to ask me about it.

[Lord Purvis of Tweed (LD)]

I have a separate point, on the principle of adding on the issue of local content and domestic goods. I understand and entirely agree with what the Minister said about the WTO prohibition of subsidy schemes that are prejudiced against non-domestic or non-local content. But of course the recipients, if they are manufacturers and exporters, will also have to categorise their own goods under the rules of origin, under both the TCA and the WTO, for all our FTA agreements—so that data will be there. I think that there is a great benefit to having, across key sectors where the Government want to identify whether there is market failure, the knowledge base regarding the level of domestic production. It is not a case of directing the subsidy towards it, which would contravene WTO rules; it is building up that knowledge base that will help overall industrial policy, which would be a positive—especially when it comes to regional production and manufacturing in certain areas.

Secondly, while I agree with the Minister about the discrimination, we can of course use countervailing measures, as the Minister knows—so, in relation to that knowledge base for domestic products, the WTO allows us to particularly support domestic production when it comes to countervailing measures. So, again, that would be information that the Government would find useful to have.

[Lord Callanan (Con)]

I understand the noble Lord’s point, but I go back to the fact that this prohibition exists for a good reason. I accept his point about additional data points that could be incorporated at very little cost, but of course he is picking on particularly narrow subsidies that might be given to the manufacturing industry. His points about rules of origin are for separate schemes under the TCA. I will think about his points.

But the prohibition exists for a good reason and is reflected in Clause 17. Of course, if all countries were to subsidise local content, world trade would be unduly distorted, and UK firms would suffer as a result, so that is why we as a country have signed up to these agreements at both WTO and EU TCA level. It is essential that all members of the WTO play by the same rules, which include a prohibition of local content and export subsidies. The UK does not provide, and does not intend to provide, subsidies that are prohibited by the WTO or under the TCA. I make that point clear.

I believe in the advantage of global trade—not just the WTO rulebook, but the global connections and markets that promote prosperity and growth worldwide, and specifically in the UK. Global supply chains allow British businesses to use inputs that are the best and most cost-effective in the world. Certain companies and industries may in some cases have their own targets for local content or for something similar—that is indeed what we have done under the contracts for difference schemes, but others are watching these commitments closely—or there may be a commitment to use products from the local area. However, those commitments would not be tied to the giving of a subsidy in any way, and as a result should not be included in a subsidy database entry.

I think I have dealt with most of the points raised. I had some additional points I wanted to make to back up what I have said, but my Whip tells me we are on a hard stop for a couple of minutes’ time. Are there any particular points raised in the debate that I have not dealt with? I think I have dealt with them all and explained our position—so, as we have agreed with most of his points, I hope that the noble Lord, Lord McNicol, will feel able to withdraw his amendment.