Subsidy Control (Information-Gathering Powers) (Modification) Regulations 2022

Baroness Blake of Leeds Excerpts

Monday 20th February 2023 Lords Chamber

[Baroness Randerson (LD)]

My Lords, I put down this regret Motion because the purpose of this SI runs directly contrary to the points of principle that we on these Benches argued for during the passage of the Subsidy Control Bill. We argued for more consultation with devolved Administrations; instead, this SI reduces it.

In explanation, this instrument removes an obligation for the CMA to consult with the devolved Administrations when preparing or revising the policy statement in relation to information-gathering powers, which are used by the Competition and Markets Authority’s Subsidy Advice Unit under the terms of the Subsidy Control Act 2022. It also removes the requirement for the Secretary of State to consult the devolved Administrations when making regulations about penalties in relation to these powers.

The Act established a new subsidy control regime to replace the EU’s well-established state aid. The Government’s aim was to enable local authorities and devolved Administrations to deliver subsidies more tailored to local needs. The CMA, via its SAU, has a monitoring role, and there are penalties for not complying with its information-gathering powers.

The Act touches on a sensitive area of overlap between reserved and devolved powers: subsidy regulation is reserved but economic development is devolved, and, clearly, subsidies are an important economic development policy tool. When the subsidy control powers operated under the EU umbrella, DAs worked to a pretty clear and non-party-political framework of rules. On paper, the Government’s aims in making the new framework more sensitive to local needs should make economic development easier for devolved Administrations and local authorities. However, these regulations undermine the whole principle of sensitivity to local needs by removing the obligation to consult.

There are additional aggravating features to this situation. First is the lack of any previous notification that this was the Government’s intention. I can find no specific announcement during the passage of the Bill that this was how the Government intended to use their power. The Welsh Government inform me that they were first informed on 21 July, when shown a draft of these regulations. At official-level meetings prior to this date, there had apparently been none of the usual courtesies of giving advance information on the Government’s direction of travel, which would have enabled Welsh Government officials to have some input into the drafting.

Secondly, there is the opaque way in which this legislation is drafted. Although these regulations flow from the Subsidy Control Act, they implement an implied amendment to the internal market Act. Noble Lords will recollect that that Act was controversial from a devolution perspective: the DAs did not grant legislative consent, and attempts were made to amend the Bill to take greater account of the economic development responsibilities of devolved Administrations. These regulations mean that the internal market Act remains drafted as is from the textual standpoint but with an implied textual amendment which will have the effect of removing the requirement to consult with devolved Administrations. It will give the Secretary of State more discretion on penalties and give the CMA more discretion on policy relating to subsidy control. The CMA Subsidy Advice Unit already has no obligation to give due regard to DA opinions, and this is another blow to the possibility of positive relationships between devolved Administrations and the UK Government. This is a pity, as I am told that relationships between the SAU and officials in devolved bodies have been very positive, so there is no good reason to change the balance of powers. As well as removing the obligation to consult, this also removes any possibility of challenge if devolved opinions are ignored. I suspect that this is the Government’s intention here: governing always seems easier if you shut yourself away and do not listen.

These regulations will bring the duties placed upon the SAU out of line with the duties placed on the CMA’s Office for the Internal Market, suggesting that a similar retrenchment of devolved powers may be likely for the latter. Do the Government have such plans?

Further aggravating features were brought to our attention by the diligent work of the Secondary Legislation Scrutiny Committee. It expressed concern that the Government’s explanation or defence of the removal of this obligation to consult is that the CMA and the Secretary of State will still have to consult the devolved Administrations if their interests are “sufficiently affected”. The SLSC stated that, in the absence of any definition of this term, it is worried about how it will be interpreted. I hope the Minister can be very explicit on how the new rules will be interpreted.

The SLSC also drew our attention to a serious error in the Explanatory Memorandum, which said that the DAs had not objected, when in fact they had done so unequivocally. The EM has now been corrected, but this is a serious error—much worse than the usual omissions. If the views of the DAs on the regulations governing consultations are misrepresented, it is hard for us to have confidence in the good faith of the consultations that flow from them.

In summary, these regulations will impact adversely on economic development opportunities in the devolved nations and hinder the ability of the DAs to shape the subsidy regime of the future. They reinforce the view that this centralising Government are determined to take every opportunity, however small, to undermine devolution. I realise that the Government want to hold all the reins of power, not least because, in this case, carefully placed subsidies are an easy way to bolster support in chosen parts of the country. The same principle underpinned the Government’s decision to centralise the shared prosperity fund and to cut the Welsh and Scottish Governments out of decision-making. The outcome of the first round of that funding makes my point for me.

I urge the Minister to think long term. Every time the Government chip away at devolution, they persuade a few more voters living in the devolved nations to give up on devolution and move to support independence. The Government should instead be bolstering good relations with the devolved Administrations, and that means respecting their powers and opinions. The Government are in danger of making enemies out of friends. The Welsh Government are not the Scottish Government; they are not predisposed to object to everything. I am sure the Minister will seek to reassure me that consultation with the devolved Administrations will in fact continue, but unfortunately the evidence is already there that it is pretty sketchy and corners are cut on existing obligations. I thank the Minister for his prior interest in my concerns on this, and I assure him that I will listen carefully to his response.

[Baroness Blake of Leeds (Lab)]

I thank the noble Baroness, Lady Randerson, for her clear and explicit exposition of the concern here. I have read the Welsh Government’s report, and significant concerns are raised in it. As we have heard, the Secondary Legislation Scrutiny Committee, which we have to take very seriously indeed, expresses concerns.

Misrepresentation has to be taken extremely seriously. My experience is of working at a regional level, having responsibility for money coming in through the form of subsidies and navigating the area of state aid. That is significant and important in building relationships and establishing trust and transparency in an area where there are competing interests. Every subsidy will be scrutinised, and there will be questions about why one area has got one as opposed to other areas.