United Kingdom Internal Market Bill

Lord Thomas of Cwmgiedd Excerpts

Report stage & Report: 3rd sitting (Hansard) & Report: 3rd sitting (Hansard): House of Lords
Wednesday 25th November 2020 Lords Chamber

Moved by

[Lord Thomas of Cwmgiedd]

64: Clause 42, leave out Clause 42
Member’s explanatory statement
This amendment is intended to remove the provision for a Minister of the Crown to provide financial assistance for economic development etc. anywhere in the United Kingdom.

[Lord Thomas of Cwmgiedd (CB) [V]]

My Lords, I rise to move this amendment to remove Clause 42 of the Bill. This amendment and Amendment 69, to which we shall come later and which stands in my name, deals with two clauses that are in some ways closely related. This clause authorises the UK Government to spend funds on the huge area of government expenditure—indeed, almost any aspect of government expenditure. Clause 44 deals with the quite separate question of state aid, and it is very important to keep them distinct. I make it clear in moving this amendment that I intend to press this to a Division.

First, I shall say a little bit about the clause. What is it for? The Conservative manifesto spoke of a shared prosperity fund which was intended to be a successor to the European Union regional structural funds. I looked on it as something that would strengthen the union by sharing the prosperity of our four nations. However, because it wore the word “shared”, it carried with it the connotation that the Governments of the four parts of the United Kingdom would share in the way in which it was distributed in accordance with the constitutional arrangements in place.

That such a fund would be greatly welcomed does not need to be stated. There are parts of the UK—and being here in Wales it is evident—that are far poorer than other parts of the United Kingdom, and investment is needed. Of course, we need to look carefully and in a structured way at how they are to be dealt with. I think we have—and I shall come to this later—some guidance published this afternoon in the Red Book, at box 3.1 on page 37. It is convenient for me to deal with that when I come to deal with the role of the devolved Governments.

There is one thing I ought to say—and I hate that this is something that will not come to pass. In Committee, the noble Baroness, Lady Bennett of Manor Castle, drew our attention to another term. She pointed out that in the European Union there were rules about funds allocated for the remediation of poverty and for equalling people up which had been made available to parts of the United Kingdom, including Wales. She pointed out that there would be detailed rules, and that Europe operated detailed rules. However, this shared prosperity fund still has no detailed rules, despite what is said in box 3.1, to which I have referred. She pointed out that the Americans have a term, pork barrelling, for this kind of fund. I would like to continue to call it a shared prosperity fund, because I believe in the union and in sharing the way our country is governed, and I hope that we will never have this aspect of American politics brought into our way of doing things but, plainly, there are dangers along those lines.

This clause is best analysed by asking eight questions. The first is why it is included in the Bill? As it stands, it is wholly separate from the other provisions we have been debating, which are to do with the internal market. The Bill is not concerned with the allocation of government powers to spend money between the devolved Governments and the Government of the United Kingdom with England. Secondly, what is its aim? I have addressed that: as was stated in the Government’s manifesto and now in box 3.1, it is intended to level up the divisions of society within the union and to help.

One immediately has to ask why this clause is needed. The Government have done city deals and have provided money, perfectly property, under our existing constitutional arrangements. Why do they need this power? If they were to provide the funds through the existing constitutional arrangements, this power would not be needed. The devolved Governments of Scotland, Wales and Northern Ireland would be involved and the spending programmes would go along the way they have always gone along, this fund being an additional fund provided from moneys no longer remitted to the European Union. Indeed, if it were to follow the lines of the city deals or its predecessors in the European Union, the Government would negotiate the other Governments, in the case of the devolved nations, or, in the case of England, the various regions and cities, what they felt the money should be spent on, consider it and make a decision. That is all perfectly feasible. So, yes, it is a very good idea to have a shared prosperity fund, and it needs no legislation.

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[Baroness Penn (Con)]

The Government are seeking the power under this Bill to spend across the whole of the United Kingdom in the areas set out in the Bill. The operation of the £220 million announced at the spending review will start from the next financial year and the full shared prosperity fund will begin the year after. More detail on how that will operate will be set out in due course.

[Lord Thomas of Cwmgiedd (CB) [V]]

I thank all noble Lords who have spoken in this interesting debate. I apologise to the noble Baroness, Lady Noakes, for referring to the document published today as the Red Book instead of its true colour which, as one sees on the screen, is blue. I was misled by the heading Google has for it, which is the Red Book.

However, Google had another use because it took up a point made by the noble Lord, Lord Naseby, and alerted me to the fact that the great and late Senator McCain had a member of staff who would go through Bills before Congress and find where there were pork-barrel provisions. He was known as the ferret, so ferrets do have great uses in politics.

To return to the points made, it is clear from the debate that we all share a number of objectives: first, to have a more prosperous United Kingdom; secondly, to spend the money wisely; and thirdly, to spend it in a way that is effective and goes to those areas that need it. We all believe that such spending and levelling up will benefit the union. However, there is profound disagreement as to the way in which this should work with our devolution settlement. It seems to me from the response given to my noble friend Lord Purvis of Tweed and from the Minister’s speech that only one conclusion can be drawn from what the Minister is saying and that these powers are needed not to spend the money outside the areas of devolved competence but to spend it in the areas of devolved competence. That is the aspect that fundamentally divides us and is fundamentally wrong about this clause. It seems to me that, given the Minister’s position and the clarity that comes through her statements, this is a direct attack on devolution under the guise of some other words. Therefore, I seek to press to a Division the amendment that I tabled to remove this clause, which is so destructive of our union.

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Moved by

[Lord Thomas of Cwmgiedd]

69: Clause 44, leave out Clause 44
Member’s explanatory statement
This amendment is intended to remove provisions changing the legislative competence of the devolved legislatures to prevent devolved Acts making provision about the regulation of the provision of certain subsidies by public authorities.

[Lord Thomas of Cwmgiedd (CB) [V]]

My Lords, in a way this issue is much simpler because Clause 44 has been put in with one purpose only: to alter the devolution scheme. I intend to move that it be removed from the Bill and, if necessary, I will press this to a Division.

I ought to say from the outset that the regime of state aid is plainly necessary, and it is necessary to have one for the whole of the UK, as I will explain in a moment. It is necessary first to say a little about the background. Until relatively recently, the British Government’s stated position had been to retain the EU regime and put in place an independent body, such as the CMA, that would police it. Whether it was like the Commission or whether it was advisory was something to be worked out. Obviously, that would not have required any change to the devolution scheme because we would have been proceeding as we had during our membership of the EU.

However, the present Government decided to change that, and they intend to use Henry VIII powers to do so by statutory instrument. That instrument has been drafted and is no doubt to be debated soon. It has been considered by the Secondary Legislation Scrutiny Committee, which has concluded, and I think it important that noble Lords hear its conclusion:

“The House will be aware of the Committee’s concern, raised on several previous occasions, that secondary legislation is being used to introduce policy changes about important issues which should more properly be the subject of primary legislation, thus affording a higher degree of parliamentary scrutiny. This is another such occasion and one on a subject that appears central to the UK’s negotiation position with the EU. We take the view that it is neither a welcome nor indeed acceptable use of secondary legislation”.


That is a clear intimation that we should look at this in a proper debate on state aid.

Obviously, that is for another occasion, but if that instrument is passed and the EU regime is revoked, the Government’s position is very simple, and we will live under this regime for the next several months—that is, the World Trade Organization rules will apply. We, as the United Kingdom, are bound by them as a matter of treaty obligations and the devolved Governments are bound to follow World Trade Organization rules in relation to subsidies. Of course, it will be without any direct policing authority, but that is the course that has been decided on, so there is no urgency about this issue and I will return to that in a moment. Of course, the position could change.

I very much hope that there will be a deal with the EU, and no doubt there is a prospect that a deal may deal with the subsidy regime, but at the moment we have to proceed on the assumption that, first, the current regime will be withdrawn, and that we will move to the WTO regime. That is the background.

Secondly, I emphasise again that this is not an amendment suggesting that the UK does not needed a regime. It is perfectly obvious that any internal market has to have a state aid regime, just as world trade has to have a set of state aid rules, weak though the WTO rules are on this issue. One cannot see a stronger argument for a properly thought through regime of state aid than in the recently published paper of the Institute for Government Beyond State Aid. It explains why it is necessary, how it should be done, what should be done before it is established and that it should be widely consulted on. Of course, there has been a lot of time to do this, but nothing has been done.

I think it must be accepted that the Government desire to proceed. Why they want to do so now is unclear, but they believe that they have hit a snag, which is the fact that for the time of our membership of the European Union we lived with the devolved Governments dealing with all these issues and, as I outlined in the previous debate, this competence is not reserved. Therefore, unashamedly, the Government want to use this legislation to alter the devolution settlements. Whereas in other parts of the Bill I have been critical of the fact that the Government are trying to do something by stealth, here what they are trying to do is much clearer. What they are trying to do is, if I may say so, not open dealing or being straightforward. They are trying to make state aid a reserved matter by the device of expanding or extending the competition policy reservation. If they wanted to do this properly, one would have expected it to be dealt with in a much more straightforward manner.

The real issue is how should we now proceed, and there are three alternatives. The first, obviously, is to leave this clause in the Bill. I will come back to that in a moment. The second is to work out a policy and enact it by primary legislation. The third is to use the common frameworks. I shall deal with the second of those suggestions first.

If there is to be a state aid policy, it cannot be denied that it would need widespread consultation. If we were to go down this route, the Government would need to carefully craft legislation and bring it before Parliament. If, in such legislation, there is a need to change the devolution settlements, that can be in the Bill so that we know what is required and how it can be dealt with. That is one solution. There is absolutely no reason why we cannot do that, because we will be living under a World Trade Organization regime in the interim and the devolved Governments will be bound by that.

Secondly, to my mind a much more attractive way forward is to use a common framework. I regret that this matter came up in Committee very late on a night when, as the Minister will remember, we were all fairly exhausted at the end of the debate on Part 5. I hope he will recall that I then suggested that maybe one way forward was a common framework.

Having the privilege of being a member of the Common Frameworks Scrutiny Committee, I raised the question of a common framework with the Counsel General for Wales, Mr Jeremy Miles, and the Cabinet Secretary for the Constitution, Europe and External Affairs in the Scottish Government, Mr Michael Russell. They expressed a view that this was a way forward. Last night the Counsel General wrote in very clear terms, and I hope that the letter has safely reached the Minister and many others. He made it clear that state aid had always featured on the list of common frameworks but there had been no progression. He continued:

“The Welsh Government has been clear that it would wish there to be a single state aid subsidy control regime for the whole of the United Kingdom, or at least for Great Britain if the Northern Irish protocol makes this impossible, provided it is co-designed by all the Governments which have to implement it. I therefore wish to make a clear and unequivocal offer on behalf of the Welsh Government. If the Government will remove Clause 44 and agree without prejudice to its legal position to participate in discussions on a legislative framework on state subsidy control, we will commit in good faith to work intensively on such a framework on a tight timetable to reach agreement within three months of the Government tabling a proposal, or in any event by 31 March next year. In the meantime, we will commit to not put forward any primary or secondary legislation to the Senedd which in any way touches on the regulation of state aid subsidies until these discussions have concluded.”


So there is a plain offer of a way forward on the table. That is the second alternative.

The third alternative is to proceed with this clause. I urge noble Lords to take the view that it would be quite wrong to do so. At this stage there is no clear knowledge of what the policy will be. It is not clear what changes, if any, need making to the devolution settlements. The appropriate time to make such a change would be with the policy properly devised and the powers that are needed.

I urge noble Lords to take the view that tackling all this now, with this proposal to change the devolution settlements without a policy by this back-door device of altering the competition reservation, is wrong. It would be better by far to work out what is needed and, if possible, to proceed by a common framework, because that will produce a legal regime with no doubt proper enforcement powers across the UK. We should not put this in at the tail end of a Bill without proper thought as to the context. There is time to do this: the WTO regime will tide matters over until a common framework is agreed or until there is legislation. I therefore move the amendment and I will be prepared to test the opinion of the House on this matter.

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[Lord Callanan (Con)]

I am not sure whether that was a question or a speech in the wrong place—but I take the noble Lord’s point. I think he is getting issues conflated. The common frameworks programme of course is a programme of work with diffuse levels of power and ultimately it is not clear where regulation lies. To resolve those matters on a cross-UK basis, there is no doubt in our mind where the proper operation of these powers is—state aid, or rather subsidy control, is a reserved matter for the UK Government. However, we have said that we want to work collaboratively. We want to work with the devolved Administrations and of course, as we have said, we will consult closely with them on any new policy that we develop and indeed on whether legislation is necessary. But, given my general support for the framework and the Government’s support for the framework programme, I do not believe that it is appropriate for this matter to be included in the framework programme.

[Lord Thomas of Cwmgiedd (CB) [V]]

I will be brief, as obviously it would be very unfair if the Welsh were totally to outnumber everyone else in the number of speeches delivered this evening. I thank all noble Lords for their contributions to an interesting, though short, debate.

First, it is very encouraging that there is complete consensus on the need for a single subsidy regime for the internal market. There is no doubt about that. Secondly, there must be a consensus that at the moment this is not something that the UK Government have power over—otherwise this clause would be unnecessary. It is not a reserved matter and therefore under the devolution schemes it is a matter for all the devolved Governments. Thirdly, it is clear that there is no uncertainty. The Government are taking us out of the EU regime, assuming the instrument is passed, and we will go into the WTO regime—so that is the regime for the foreseeable future.

The real question is: are we going to go forward by diktat from Whitehall and Westminster or are we going to go forward by consensus? An obvious way of going forward is a common framework. I regret to say that I cannot agree with the Minister that a common framework is inappropriate. It is absolutely appropriate, because it will cater for the kind of divergence that will be allowed in the subsidy regimes. This is a matter of acute importance to people such as fishermen and those involved in agriculture. We need to know what level of divergence is permissible and negotiate that.

Finally, a decision has to be made on the role of the CMA. I moved amendments earlier this week in relation to the CMA simply because I imagine it will have to be the policeman of this regime. But what is it to be? Is it to be an adviser? Is it to have a central role? Or are things to be laid out in a common framework?

I therefore say that this clause ought to be removed. Get the policy right first. Try it by common framework and let us go forward on that basis. Therefore, I want to take the opinion of the House on the appropriate means of going forward—and the appropriate means is taking this clause out of this Bill.