Subsidy Control Bill

Baroness Bloomfield of Hinton Waldrist Excerpts

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

Moved by

[Baroness Bloomfield of Hinton Waldrist]

7: Clause 10, page 6, line 36, at end insert—
“(6A) If, within the 40-day period, either House of Parliament resolves not to approve the scheme, or the scheme as modified, then, with effect from the end of the day on which the resolution is passed, the scheme, or the scheme as modified, is to be treated as not having been made.(6B) Nothing in subsection (6A)—(a) affects any subsidies given under the scheme before the end of the day on which the resolution is passed, or(b) prevents a further scheme being laid before Parliament.(6C) In this section, “the 40-day period” means—(a) if the scheme is laid before both Houses of Parliament on the same day, the period of 40 days beginning with that day, or(b) if the scheme is laid before the Houses of Parliament on different days, the period of 40 days beginning with the later of those days. (6D) In calculating the 40-day period, no account is to be taken of any period during which Parliament is dissolved or prorogued or during which both Houses of Parliament are adjourned for more than 4 days.”Member’s explanatory statement
This amendment provides that the making of streamlined subsidy schemes is subject to the negative resolution procedure and provides for the legal consequences if such schemes are not approved.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, the amendments in the name of my noble friend address the findings of the 17th report of this Session by the Delegated Powers and Regulatory Reform Committee. The report’s recommendations on the powers that the Bill delegates to Ministers have been endorsed with vigour by your Lordships’ House. This is a clear indicator of the high regard in which the DPRRC’s expertise is held, and I am sure that that will continue under the chairmanship of my noble friend Lord McLoughlin, to whom my noble friend wrote last week to set out how the Government were addressing the committee’s concerns with regard to the Bill.

As various noble Lords have noted throughout the passage of the Bill, the DPRRC’s report took issue with some of the ways in which it delegated specific powers to Ministers. I trust it will be reassuring to noble Lords that the amendments I shall now speak to respond to those concerns.

First, Amendment 7 amends Clause 10. Clause 10 provides, among other things, that Ministers may make streamlined subsidy schemes to facilitate the granting of subsidies in accordance with the subsidy control requirements. Streamlined subsidy schemes would be laid before both Houses of Parliament after they are made or amended. The DPRRC report recommended that the power to make streamlined subsidy schemes should be exercised by regulations, and that the negative procedure would be appropriate.

I am pleased to say that Amendment 7 does, I believe, meet the spirit of the committee’s proposal. The amendment provides for every new or modified streamlined subsidy scheme to be subject to the negative resolution procedure, meaning that either House of Parliament may resolve not to approve the scheme within 40 days of it being laid. I remain of the view that the nature of these schemes means that the power to make them should not be exercised by regulations. Specifically, they are designed to be easily comprehensible and used by smaller public authorities and include numerous economic criteria that would not be easily expressed in the form of regulations.

I turn to Amendments 10 to 13 to Clause 16, which concerns short-term export credit insurance as provided by UK Export Finance. The committee’s report recommended that the power to amend the list of marketable risk countries, which is included in Clause 16, should be exercised by regulations subject to a parliamentary procedure, instead of by ministerial direction. I trust the House will be reassured to hear that the Government fully accept the recommendation of the report and these amendments achieve this effect.

Amendments 15 to 17 relate to Clauses 25 to 27, which provide for definitions of “deposit taker”, “insurance company” and “insurer” respectively. The clauses include a power for the Treasury to change the definitions in these clauses via regulations. The committee took the view that the Government have not identified with sufficient precision the circumstances in which these powers would be necessary, and consequently recommended that the powers given to the Treasury to amend these definitions be removed from the Bill. The Government accept this recommendation of the DPRRC’s report. Amendments 15 to 17 will remove from the Bill these powers to make regulations in Clauses 25 to 27.

I turn to the committee’s recommendations on the much-debated Clause 47. Noble Lords will be pleased to hear that Amendments 45 and 46 respond to these concerns. The DPRRC raised several concerns on the drafting of Clause 47, in particular subsection (7). I will restate briefly the Government’s position on the necessity of this clause.

The flexibility to delay publication of a financial stability direction is important where that publication would prematurely disclose the existence of a subsidy. Immediately disclosing certain subsidies could potentially cause further damage to confidence in the recipient enterprise, cause a run on that recipient, and damage wider market confidence. While it may be possible to interpret Clause 47(6) as allowing for a delay in publication, that is not the intended purpose of the subsection, which is intended to provide for a duty of publication. The Government’s view is that it is much more appropriate to provide for an explicit process for delay in publication, with a limited and specific condition for such a delay. This is what the Government have done in subsection (7).

The absence of a parliamentary procedure is not to prevent non-approval of the direction by Parliament, but rather to ensure that the effectiveness of any intervention is not impaired by fear among stakeholders that support could be withdrawn. If there is concern that support could be withdrawn, there is a material risk that a recipient enterprise will reject the support offered or that the market will not be reassured by such support. That is why similar powers to act without parliamentary approval are provided for in the special resolution regime, reflecting the importance of legal certainty for the success of emergency interventions.

As the DPRRC report on this provision made clear, legal certainty was one of several factors considered in relation to a parliamentary procedure for this measure and was not the sole deciding factor for choosing the process in Clause 47. Other factors included protecting information flows and necessary secrecy in certain circumstances, and the speed of deployment.

Amendment 46 makes provision for a delay in publication of a financial stability direction in the event that the Treasury considers that doing so would undermine the purpose of issuing the direction. The amendment makes explicit the need to publish a direction and lay it before Parliament when doing so would no longer undermine the reason it was given. It constitutes a temporary delay in publication, not permanent secrecy, as was perceived by the committee, but which I assure noble Lords was never the Government’s intention. This amendment makes that explicit.

Clause 47(6) requires the Treasury to publish a direction in whatever manner the Treasury sees appropriate. In direct response to concerns regarding parliamentary accountability, Amendment 45 adds to this subsection the requirement for the Treasury to lay a direction in Parliament when publishing a direction. This ensures a direct route for parliamentary visibility of a direction in addition to the requirement in Clause 47(6) to publish a direction to the public. The Government fully agree with the committee: parliamentary scrutiny is vital to our democracy and this Government will not try to avoid it.

To further assuage the concerns of the House, I am happy to announce that my honourable friend in the other place, the Economic Secretary to the Treasury, has written to the Public Accounts Committee and the Treasury Committee; these letters commit to confidentially notify the chairs of the use of a financial stability direction to disapply requirements of the Bill where the publication of a direction is delayed.

Before I conclude with this suite of amendments, I must inform the House that there is one area where the Government have not amended the Bill in line with the committee’s recommendations. The committee stated in its report that it considers the powers in Clause 11 to be inappropriate, recommending instead that key terms relating to the definition of “subsidies and schemes of interest” and “subsidies and schemes of particular interest” are placed on the face of the Bill.

The Government do not agree that these definitions should be added to the Bill. It is important that the Government fully engage with external stakeholders as well as Parliament to ensure that this important element of the new regime is fit for purpose. The Government have already published, in January, a set of illustrative regulations, setting out a suggested approach for defining “subsidies and schemes of interest” and “subsidies and schemes of particular interest”.

In that vein, we can commit that the Government will undertake a public consultation before making the first set of regulations under Clause 11 that establish definitions for “subsidies and schemes of interest” and “subsidies and schemes of particular interest”. This consultation is expected to launch very shortly.

I trust that this demonstrates the willingness of the Government to design this important part of the subsidy control regime in an open and collaborative way, and in a manner that uses the expertise of the devolved Administrations and of legal and subsidy control practitioners at all levels of government within the UK. Following the consultation, the final regulations will be laid before Parliament for approval under the affirmative procedure before the regime comes into force.

Finally, Amendment 8 is a minor and technical amendment to Clause 11. It clarifies that regulations made under Clause 11 may make specific reference to the value of the subsidy or scheme or to the sector in which the recipient of the subsidy operates, as well as other appropriate criteria as necessary. I trust that this amendment makes it clear that the list in subsection (2) was always intended to be indicative as opposed to exhaustive. I beg to move.

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[Lord McNicol of West Kilbride (Lab)]

My Lords, we now come to the first mass grouping of a government concessions package. Like others, I express the thanks of these Benches to the noble Lord the Minister and the noble Baroness and the Bill team for the discussions and this good set of revisions to the Bill. There are 11 amendments in all, and as the noble Lord, Lord Fox, has said, many have been previously moved and supported by noble Lords from across the House, especially in Committee.

As we have heard, this group relates to the recommendations in the DPRRC report, which were plentiful and uncharacteristically forceful. Like everyone else, we are glad that common sense has prevailed, particularly in relation to the situation around Clause 47, whereby certain information could have been withheld from Parliament and, by extension, the public.

The concessions made by the noble Baroness in the name of the noble Lord the Minister are most welcome, but the bigger issue at play here is the frequency with which the Government have attempted to take broad powers for themselves, often without proper justification. We hope that that trend will change as we move towards a new parliamentary Session, and these concessions and these moves help to show that. Like the noble Lord, Lord Fox, we would have liked to see movement on Clause 11, on definition of schemes of interest and schemes of particular interest—but we will take these 11 amendments, with thanks.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, this has been a short but constructive debate, and I welcome noble Lords’ support for this suite of amendments.

The noble and learned Lord, Lord Hope, requested a report on the obstacles to the granting of LCMs by the devolved Governments, and I am happy to make that commitment: we will bring a report at Third Reading. We also wish to note the constructive engagement of the noble Lord, Lord Fox, who has successfully picked up the mantle on the issues highlighted in the DPRRC report. I am sure that his speech made some difference, alongside the good standing of the DPRRC and our respect for its work.

Amendment 7 agreed.

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Moved by

[Baroness Bloomfield of Hinton Waldrist]

52: Clause 65, page 37, line 17, leave out “fifth” and insert “third”
Member’s explanatory statement
This amendment changes the reporting requirement so that the CMA must prepare its first report three years after commencement instead of five years after commencement.

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Moved by

[Baroness Bloomfield of Hinton Waldrist]

59: Schedule 3, page 58, line 4, leave out “(1)(a) and (b)”
Member’s explanatory statement
This amendment is consequential on the amendment at page 46, line 39 in the Minister's name, and provides that for the purposes of paragraph 8 of Schedule 3, the Clause 33 references to subsidies and schemes are taken to refer to those provided by primary legislation.

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Moved by

[Baroness Bloomfield of Hinton Waldrist]

60: Clause 79, page 45, line 30, at end insert—
“(ea) section 76 (duty to provide pre-action information);”Member’s explanatory statement
This amendment adds the duty to provide pre-action information to the list of matters in Clause 79 on which the Secretary of State may issue guidance.

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Moved by

[Baroness Bloomfield of Hinton Waldrist]

62: Clause 81, page 46, line 39, leave out from “apply” to end of line 40 and insert “—
(a) for the purposes of section 33(1) and (3) (see instead section 33(5)), or(b) if the modification is only a permitted modification (but section 33(5) applies to a permitted modification as it applies to other modifications).”Member’s explanatory statement
This amendment removes the exemption from the duty to enter modifications in the subsidy database, in relation to permitted modifications.

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Moved by

[Baroness Bloomfield of Hinton Waldrist]

63: Clause 87, page 49, line 20, leave out “first” and insert “second”
Member’s explanatory statement
This amendment provides that the sunsetting provision for the Part 4 regulation-making powers will be triggered by the second report that the CMA makes under section 65, rather than the first report.