Subsidy Control Bill

Baroness Randerson Excerpts

Committee stage
Monday 7th February 2022 Grand Committee

Moved by

[Baroness Randerson]

52: After Clause 51, insert the following new Clause—
“Agriculture
The subsidy control requirements in Part 2 of this Act do not apply to—(a) the giving of an agricultural subsidy, or(b) the making of a subsidy scheme, so far as it relates to the giving of agricultural subsidies.”Member’s explanatory statement
This new Clause would exempt agricultural subsidies from the subsidy control requirements.

[Baroness Randerson (LD)]

My Lords, I decided to table Amendment 52 having read the detailed concerns expressed by the Welsh Government and NFU Scotland. In this Bill, the Government propose incorporating agricultural subsidies into the same scheme as subsidies for other businesses. That is not the usual approach to agricultural subsidies. The WTO and, of course, the EU have separate and distinct agricultural subsidy regulation.

My amendment does not refer to them specifically, but there are similar concerns about fisheries subsidies. I read the Minister’s comments at Second Reading with care. He said that the Government believe that having agriculture and fisheries in a single scheme

“will help to protect competition and investment.”—[Official Report, 19/1/22; col. 1748.]

However, he did not mention levels of production or the supply of food. That is an important omission because it is the reason why the WTO and the EU treat agriculture separately. Agriculture is subject to the vagaries of weather and disease and is prone to much greater market volatility than other products. If we do not manufacture our own TV sets in the UK, it does not have the fundamental significance that not growing our own wheat would have. For well over 100 years, regular supplies of domestically produced foods at reasonable prices have been regarded as fundamental to our national security. That applies even in the modern world of global markets.

At Second Reading, the Minister also said that the Government’s decision

“was supported by the majority of the respondents to the UK Government’s consultation who answered the question on agriculture and fisheries.”—[Official Report, 19/1/22; col. 1749.]

I have three things to say about that. First, the pattern of agriculture is different in one part of the UK and another. The devolved nations have a very different view on this, and that needs to be reflected.

Secondly, the Government’s response reveals a worryingly majoritarian approach. England is always the majority in any consultation of this nature by sheer weight of population size. This does not mean that it fully reflects the different requirements of the country.

Thirdly, the Government’s justification is that 81% of people who responded to the question in the consultation were in favour of one or both—agriculture or fish—being included. That is tempered by the fact that only 20% of respondents answered that question, so only 80% of 20% were in agreement. That support does not look so great now, does it?

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

I think a lot of this overlaps with the internal market Act, which we will debate at length on a later group of amendments. All I can say is that the set of principles will cover the position of the Herefordshire farmer.

[Baroness Randerson (LD)]

This has been an interesting debate. The noble Lord, Lord Wigley, will understand my point when I say that, as a former Assembly Member for Cardiff Central, I did not think I would be leading on a debate on agriculture—at one point I still had a farm in my constituency, but they built on it.

I learned a lot about agriculture as a Minister in two Governments. I learned about the concept, which comes up time and again, that farming is a way of life. It is a way of life wherever you are a farmer. I have lived in East Anglia and it even applies there where you have the grain barons, because if your farm fails, you lose your home. That is what makes things different from most other occupations. All speakers, with the exception of the Minister, have echoed my concerns.

I want to pick up a couple of points very briefly. Clause 41 refers to a specific amount of money for subsidy below which you will not have transparency. That amount of money is astronomical in relation to subsidies for farming and totally inappropriate. If those figures are used, there will be no transparency even for subsidies of the largest order for the largest farms. That cannot be right.

This is, of course, a probing amendment and I am specifically seeking information on how the special circumstances of agriculture will be dealt with. I hope the Minister will send us some very long letters to explain the situation because there are so many complexities and contradictions in the Government’s position. The EU treated subsidy as exceptional, in general, and something that must be justified, but it treated agricultural subsidy as normalised within a strict policy structure. The WTO treats agricultural subsidy as normalised, but the Government are now apparently applying the approach where subsidy is exceptional for agriculture. That is the basis of the seven principles. You cannot apply those seven principles in the same way that you do to other industries and businesses. Agriculture is not subsidised because of market failures; it is subsidised to ensure supply of a basic requirement of life at a reasonable price. The complexity of the Government’s situation is made worse because of the uncertainties already being felt within the market from the trade deals with Australia and New Zealand which provide additional hurdles.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

There are a couple of points I would like to address now, and obviously I will cover the other points in greater length in writing. Just to reassure the noble Baroness, on the minimum financial assistance in the Bill that she referred to, for most subsidies, including agriculture, it is £315,000 rather than the figures in Clause 41. If the figures are far too high for agriculture, then they will simply be exempt from the requirements and none of those concerns will apply. We are looking at whether the £315,000 is set at the right level, and we have the power to change it for specific sectors.

In answer to the noble Baroness’s question, I am afraid that we did not ask respondents to the consultation where they were based because it is a UK-wide regime, but we will write with more detail if we have it back in the department.

Lastly, as the noble Baroness brought up the difference between the WTO and the EU regimes, I just say that the Agreement on Agriculture within the WTO and the new subsidy control regime fulfil very different purposes. The AoA is an international agreement aimed at reducing distortion of international trade in agriculture; the proposed domestic subsidy control regime facilitates compliance with our international commitments but goes beyond this by protecting UK competition and investment. The WTO provisions are no substitute for a domestic subsidy control regime. The EU is a case in point of a system that has both WTO subsidy commitments and its own internal regime, and this is the approach that we are taking for subsidies in all sectors in the UK.

I will write with any further responses that I need to make, having reviewed Hansard in the morning.

[Baroness Randerson (LD)]

I thank the Minister for that. I fear that she makes my point for me in terms of Clause 41. My argument is that there needs to be transparency on this, and the amounts of money are set so high that there will not be that transparency. If this scheme is going to work on a farm-by-farm basis, which is what it will have to do, the Government will need to set separate, different and lower figures for agriculture. The Government really need to go away and look at this again.

Please could the Government consider applying some real-life worked examples of how this would apply in different parts of the UK—even within different parts of England? They need to be worked through, and public authorities need to have further information on how this would work. I urge the Government to discuss this issue with local authorities and the devolved Governments before the walls of our systems are bulldozed through in the latter stages of the Bill. I beg leave to withdraw the amendment.

Amendment 52 withdrawn.

--- Later in debate ---

[Lord Callanan (Con)]

I was expecting more interventions before my reply—I offer my apologies.

These amendments relate to Clause 55, which provides, as has been stated, that the Secretary of State can direct a public authority to request a report from the subsidy advice unit for a proposed subsidy or subsidy scheme. This so-called call-in power will be used as a safety net where the Secretary of State considers that a subsidy or scheme is at risk of not complying with the subsidy control requirements or that it poses a risk of negative effects on competition or investment in the UK and therefore warrants further scrutiny.

In the majority of cases, the most potentially harmful subsidies will be those that meet the criteria for subsidies of particular interest. The Government’s proposal for how these criteria should be defined has been set out in illustrative regulations that have been made available to this Committee. However, it is inevitable that there will be some subsidies or schemes that fall outside those boundaries but would still benefit from the additional scrutiny offered by the SAU. The call-in power is a safety net. It provides a mechanism to catch potentially concerning subsidies that are not caught within the “subsidies of particular interest” definition and have not otherwise been voluntarily referred to the subsidy advice unit. It is expected that such subsidies will be few and will reduce further as the regime settles in.

When the Secretary of State decides to exercise this call-in power, the direction must be published. In addition, the subsidy advice unit must provide annual reports on its caseload, including any subsidies or schemes called in by the Secretary of State. These annual reports will be laid before Parliament. This transparency will help to ensure that the power is being used appropriately and that Parliament has oversight of how and when the power is being used.

Amendments 54, 56, 58 and 60 would allow the devolved Administrations to refer a subsidy or subsidy scheme to the subsidy advice unit under the terms of Clause 55. Similarly, Amendments 55, 57 and 59 would extend the power to call in subsidies for review by the subsidy advice unit to all local authorities in the United Kingdom.

The Secretary of State’s responsibilities and interests in the subsidy control regime are UK-wide. The subsidy control regime is a reserved matter. The UK Government are responsible for the compliance of the UK subsidy control regime in all parts of the United Kingdom with our international obligations, including the trade and co-operation agreement with the European Union. It is therefore right that the UK Government have responsibility for the referral mechanism that deals with any subsidies that fall outside of the established criteria for further mandatory scrutiny. It is also right that the UK Government oversee the functioning of the regime as a whole, including the caseload of the subsidy advice unit.

In response to the specific concerns raised by the noble Lords, Lord Bruce and Lord Purvis, I believe it is important that the positions of the devolved Administrations and other public authorities are taken into account in the exercise of this function. I assure noble Lords that the Secretary of State would take it extremely seriously if he received a request from another public authority to call in a particular subsidy or scheme. Of course, he would engage with the substance of that request and consider it on its merits, but I hope it goes without saying that officials and Ministers in my department would discuss the matter appropriately with the public authority that raised the concern; this would apply even if it were a subsidy given by the UK Government.

[Baroness Randerson (LD)]

If the Secretary of State has acted as Minister for England and a devolved Government want to get the Secretary of State to call something in on the grounds that they are not happy with it perhaps being uneven or giving an unfair advantage to a company operating in England, what Chinese walls—that is, what process—will the UK Government put in place to ensure that the Secretary of State, who has just made a decision on England’s behalf, will not then judge himself or herself when the issue is called into question by a devolved Government?

[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.