Subsidy Control Bill

Baroness Jones of Moulsecoomb Excerpts

Committee stage
Wednesday 2nd February 2022 Grand Committee

[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.

[Lord Berkeley (Lab)]

My Lords, I rise to move Amendment 25A in my name. I shall not speak to any other amendments, because to some extent I am here as an amateur among experts. I have one point to make, which I hope I can do quite quickly. However, I support the general trend from my noble friend’s introduction and other noble Lords who have spoken.

I was unable to speak at Second Reading, because if I had I would have missed the sleeper to Cornwall, which I have to take. I am sorry about that. Many questions that come up are about how and what can replace the different bits of the EU competition regime. I got to know it quite well and got either to like or love it but at least to deal with it. My amendment covers everything that I think are subsidies, although when one looks at the definition of subsidies in the Bill it is unclear whether it covers a one-off payment or a series of payments or even what in the transport world is called the public service obligation. Perhaps somebody will refer me to where I have got it wrong in that instance.

In all these things, there seems to be nothing in the Bill about whether any particular subsidy, whatever anybody is talking about, is value for money or whether it has gone through the government procurement rules, which, in simple terms, means that it has gone out for three quotes or something like that. There may be many instances where that is not appropriate. I worry about whether this is just giving a blank cheque to Ministers or any local authority that chooses without any of the checks and balances. It may go to the CMA in the end, but to start with it is not there. This afternoon, we have been debating the PPE issue. I am not suggesting that was about the urgency for procurement. On the other hand, the urgency has long since passed, and that leaves a nasty taste in some people’s mouths.

My other reason for raising this is that I have been involved in a levelling-up plan for a ferry to the Isles of Scilly, which some noble Lords know about. The local authority applied for £48 million from the levelling-up fund to be given to one private company without any tendering. The noble Baroness, Lady Vere, has been very helpful and has tried to put my mind at rest that government procurement rules will be looked at here. However, there are two issues. I think they apply to many procurement issues that come into the category of subsidy control.

The first is: should it be given at all, and has the amount applied for been properly calculated? Has the authority gone out for competitive tenders or can it demonstrate that it is value for money? Secondly—this is often more difficult—is there a better way of doing it? I have given the example of Scilly, where a better way would be to do it with one ferry rather than two, for half the price. That is not part of a levelling-up application. On the other hand, somebody should be looking at things like this to make sure that the Government, or the taxpayer, are getting value for money.

That could apply to many projects which noble Lords have mentioned on levelling up, including no doubt the railway projects in the regions which my noble friend talked about. It would help me to understand whether there is any check in the Bill involving value for money and going out to competitive tendering, or not, to demonstrate that that has been done before a decision is taken to go ahead.

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[The Deputy Chairman of Committees (Baroness Fookes) (Con)]

My Lords, I point out that if Amendment 15 were to be agreed, I could not call Amendments 16 or 17 by reason of pre-emption.

[Baroness Jones of Moulsecoomb (GP)]

I agree with every word that the noble Lord, Lord Fox, just said. I liked him shouting “tosh!” at the Government; that was great. That is a very gentle word for it. He also sent me into a mild panic, because I had not realised that my noble friend Lady Bennett had tabled a clause stand part debate in this group. All I can do is repeat her explanatory statement which says that this

“is intended to elicit why Bank of England monetary policy subsidies are excluded from the provisions of the Bill.”

I hope there is an answer on that in the Minister’s speech. I had thought the noble Lord, Lord Fox, was perhaps talking about my Amendment 33 which we have of course already debated. I thank him for his remarks.

On this group generally, I have argued many times about government regulation-making powers, because I am absolutely sick of the Government bringing skeleton legislation that needs little more than a parliamentary rubber stamp for them to make substantive law by future regulations. This is a power grab that most of us absolutely abhor. However, this is a unique case. I want to support these amendments for new regulation-making powers because the alternative envisaged by this Bill is that, instead of making regulations which are passed by Parliament, the Government would simply make a decree and then inform Parliament after the fact. I support the amendments.

[Lord Judge (CB)]

My Lords, I apologise that I was not able to attend Second Reading. I had other commitments in the House, so ask noble Lords to forgive me.

I put my name down in support of the noble Lord, Lord McNicol, and was delighted to do so. However, I am sure he will forgive me if I explain that I am actually not supporting him but the Delegated Powers and Regulatory Reform Committee, which is what we should be looking at. The noble Lord, Lord Fox, thought there might be some erudition, but there is no need for it; this is a perfectly simple constitutional aberration.

When the Minister comes to reply, I would like him to kindly look at paragraph 16 of the committee’s report, where there are three “extraordinary” provisions—that was the word used—which need attention. Unless he can answer in a way that convincingly refutes their effect, we might as well keep on fighting about this. As I say, it is a constitutional aberration and we should not have it. It is an amazing thing for one of our committees to say that a subsection, in this case Clause 47(7), should be removed from the Bill. We need to know why it should not.

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[Lord Callanan (Con)]

My Lords, the amendments in this group are technical amendments that would update the Bill to permit regulations made on gross cash equivalent to apply to all parts of the Bill to which they are relevant. These amendments have the same basic purpose so I will take them together.

Subsidies can come in many different forms, from cash grants to discounted contributions in kind. It is important to establish a common methodology for calculating the value of the latter kind of subsidy as this will avoid public authorities taking different, and difficult to compare, approaches to this issue. Clause 82 enables the Secretary of State to make provisions by regulations, which will be subject to the negative procedure, for how the gross cash amount and the gross cash equivalent amount are to be determined for four different clauses that are listed in the Bill. These regulations will set out a methodology for calculating the value of any subsidy or scheme for use by public authorities. This will avoid public authorities using to calculate gross cash equivalent a range of methodologies that may not be wholly or easily comparable with each other.

Clauses 10 and 11 concern the creation of subsidy schemes and streamlined subsidy schemes, and enable the Secretary of State to make regulations defining the meaning of subsidies or subsidy schemes of interest or of particular interest. The amendment to Clause 82 would ensure that regulations made under it, which make provisions about how the gross cash amount and the gross cash equivalent are to be determined, are applicable to all regulations and schemes made under the terms of the Bill.

The other amendments to Clauses 10 and 11 would enable the values of subsidies of interest or of particular interest, subsidy schemes and streamlined subsidy schemes to be defined by reference to the gross cash amount or gross cash equivalent amount of the subsidy or scheme. I hope noble Lords will agree that these are minor and technical amendments that will avoid any need for complex cross-referencing in the regulations and reduce any confusion for public authorities; I therefore ask that they be accepted. I beg to move.

[Baroness Jones of Moulsecoomb (GP)]

I would like to raise a small, technical point; I think that the Minister skimmed over it in the debate on Amendment 33 in my name, possibly because I did not explain it properly. Subsidies for fossil fuels should be calculated using the IMF definition of financial assistance for fuel consumption multiplied by the difference between existing and efficient prices. In his reply, the Minister explained that he would not want to ban subsidies for fossils fuels, but he did not say anything about the merits of the IMF definition of fossil fuel subsidies. This is an important issue because it factors in the negative impacts of environmental and social costs, which are otherwise ignored. When we look at fossil fuel subsidies holistically, we realise just how much more expensive fossil fuels are than renewables. I do not expect an answer today, but it would be good to have an answer in writing whenever possible because the Minister did not mention it.

[Lord Callanan (Con)]

That issue is not covered by these amendments, but I will come back to the noble Baroness in writing.