Subsidy Control Bill

Baroness Sheehan Excerpts

Committee stage
Monday 31st January 2022 Grand Committee

[Baroness Sheehan (LD)]

My Lords, I will speak to Amendment 4 in the name of the noble Lord, Lord McNicol of West Kilbride, and I thank the noble Baroness, Lady Blake of Leeds, for her comprehensive introduction. I shall add just a couple of points. I particularly enjoyed the contribution of the noble Lord, Lord Ravensdale, in his introduction to his amendment, and that of the noble and learned Lord, Lord Thomas. They illustrate clearly why the Bill is lacking in detail and clarity, and why Amendment 4, to which I put my name, is totally necessary.

The letter from the Minister last week gave us some hope that, even six months on from when the Bill started its parliamentary progress in the other place, we would have greater clarity and detail on what is meant by the terms used in the Bill—to go back to basics. However, other than broad sums of money around which a subsidy, a subsidy of interest or a subsidy of particular interest may be defined, we have very little—apart from a promise of more detail to come. Even the sums attached to those definitions are liable to change, we are told, so we really are none the wiser.

The referral criteria for the subsidy advice unit—the SAU—relating to a subsidy of interest or a subsidy of particular interest tell us very little. In any case, we are told that the SAU’s report will be non-binding on public authorities, regardless of whether the referral is voluntary or mandatory. This leaves public authorities with very little guidance, and a next-step referral to the CAT is really more draconian than it need be had they been given sufficient criteria before making their applications.

The draft statutory instrument, which the Government published last week, was supposed to shed light on their thinking. It is helpful in some respects but we all know how a statutory instrument can be structured. It leaves too much to the imagination; there are too many gaps which will be filled later. Instead of clarifying what we already have, in fact it introduces a new term of a “sensitive sector”, which we are told will be defined later by an SI. I would be grateful if the Minister could shed some light on that today.

I found the statements on the streamlined routes very helpful. They seem to provide some clue as to the sort of framework that might be applied but, yet again, there are too many gaps. Too much is left to be filled in in the future, when those details are required in the present. As the noble Baroness, Lady Blake, said, the Government want us to take much on trust but trust in the Government is in very short supply at the moment. Those streamlined routes for clean heat and for research, development and innovation are helpful. It seems that some of the fundamentals of those illustrations can be put into the Bill. At least, it would be useful to know the timeframe within which we can expect to see further illustrations. It would be really useful to see a streamlined route, for example—the Minister is coughing; I hope he is okay—for fulfilling their policy of better energy efficiency in the domestic sector.

I agree with the noble Lord, Lord McNicol of West Kilbride, that a clear subsidy strategy needs to be laid out within the Bill, setting out how the Government expect subsidies to be used to provide a wider industrial strategy and progress towards the 2050 net-zero target. Importantly, it would also outline how the new subsidy control schemes work alongside other initiatives, including the shared prosperity fund and the levelling-up fund, details of which would be appreciated sooner rather than later.

The abolition of the industrial strategy last year and the disbanding of the Industrial Strategy Council was, according to the BEIS Commons Committee, a retrograde step. I therefore hope that the Government will give serious consideration to Amendment 4 and the other amendments in this group, and recognise the merits of having greater clarity in the Bill, given the boost it will give business to have long-term consistency and clarity.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I support these amendments, which are very welcome because they make up for what the Bill lacks. It is a very technocratic Bill, with lots of rules and principles, but it completely misses the opportunity to develop a grand strategy for what we want subsidies to achieve. The economic power of government finance is obviously huge; it can sway the economy for good or bad. Simply constraining subsidy-making powers, rather than planning what we want to achieve for those subsidies, indicates a huge lack of ambition on the part of the Government.

Part of that reflects an insurmountable tension within this Government, from those who are so free-marketing that they verge on being anarcho-capitalists to those who want to use the power of state finance as a way of sucking in voters and making a political legacy for themselves. Both those groups miss the point: that the Government should lead the economy into the future that we want to see and live in—one that would be comfortable for the majority of people. We need strategies for how we are going to deal with achieving net-zero carbon emissions and eliminate poverty. That would be a fantastic thing to want to achieve but, somehow, this Government actually increase poverty. Of course, this is not just about wealth; it is also about well-being. The Bill could be a chance to achieve all those things. However, the Government have to get back to the job they should be doing, which is improving the well-being of the population.

Before I sit down, I want to mention the noble and learned Lord, Lord Thomas of Cwmgiedd. He stood and spoke for five minutes without notes, apart from two scribbled sentences on a scrap of paper that I do not think he even looked at. We should all speak without notes. I am one of the biggest culprits; I cannot.

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[Baroness Jones of Moulsecoomb (GP)]

I am going to ask the Minister four questions. I would like an answer today. If I do not get the answers today, I would like a meeting with him to explain why it is incredibly important that he listens first-hand. One issue I have is that the Government keep bringing us these thin Bills that ought to include things such as the ecological crisis—climate change—but do not. We as an opposition end up tabling all these amendments and then the Government complain because we are taking too long to debate the Bill. My first question is: please will the Government start putting these issues into Bills so that we do not have to keep making the same arguments about the ecological emergency? Why is that not in the Bill?

The subsidy principle should ensure that all our environmental and climate targets are met. Ecologically damaging, polluting industries should be weaned off public money completely and, ultimately, binned. My Amendment 8 would ensure that subsidies contribute towards limiting global temperature rises to 1.5 degrees centigrade of warming. That is what scientists say we must achieve, so our laws should reflect that reality. I hope that the Minister will not insult our intelligence by telling us that the Government are on track to do that; they most definitely are not. I can list an awful lot of legislation that has been passed that is damaging our chances of getting to that lower level of global warming.

My Amendment 33 would prohibit subsidies for fossil fuels and extend the definition of fossil fuel subsidies to include any government policy that makes fossil fuels cheaper than their true cost. This is really important, because fossil fuel subsidies are not just about giving money or tax breaks but include favourable regulatory systems, exemptions from environmental laws and so on. It is essential that we capture all those factors in the calculation of a subsidy.

My second question is a very particular point, and perhaps cannot be answered today. It is about community energy schemes. They are quite important in a lot of local communities. Please can the Minister tell us something about them, perhaps at a later date? I might have to bring back another amendment.

Finally, I am opposing the Question that Clause 51 stand part of the Bill. Nuclear energy is an energy scheme or an environmental scheme. I need an explanation —this is my third question—why nuclear energy is expressly excluded from the energy and environmental principles in the Bill. This seems to allow for favourable subsidy arrangements to be given to the nuclear industry against renewable and zero-carbon energy sources, which will clearly distort the market in favour of nuclear. If nuclear can compete with renewables, let it do so and scrap this exemption. If it cannot compete with renewables in a fair fight, why pursue nuclear at all? This is a probing amendment at the moment, but I will probably bring it back on Report and push a vote on it, because I am so incensed that there is not a fair fight between nuclear, which is potentially extremely polluting, and renewables. My fourth question is: will the Minister meet me so that I can explain all these issues clearly and with much more energy to him?

[Baroness Sheehan (LD)]

It is always a pleasure to follow the noble Baroness, Lady Jones of Moulsecoomb —we are often on the same page. I shall speak to Amendments 9, 10, 12 and 29 in the name of the noble Baroness, Lady Boycott, who is unfortunately unable to be with us this afternoon. I am grateful to the noble Lord, Lord Whitty, who also, sadly, cannot be here this afternoon, for adding his name to the amendments, along with my own. The main purpose of these amendments is twofold. First, they would embed consideration of climate and environmental targets in the Bill, to ensure that they are factored into the decision-making of public authorities when designing and deciding to award subsidies. Secondly, they would ensure that subsidies align with, or at least are not contrary to, our net-zero and environmental targets.

COP president Alok Sharma in a recent speech said that

“inaction or delayed action on climate will create immense risks and costs.”

He went on to highlight the economic opportunities for businesses of acting now and stated that

“my absolute focus for the UK Presidency year is delivery.”

The Government’s own Net Zero Strategy states:

“Our goal is to go even further to embed net zero across government activity. This will mean that government takes net zero into account when taking decisions.”


It further calls for

“a whole system approach to tackling climate change”,

which includes:

“Embedding net zero in a wider range of decision-making levers.”


I have purposely used the Government’s own words.

The fact is that if we do not ensure that alignment with our climate and environmental goals is embedded into new policy frameworks, such as our new subsidy control regime, we risk missing a key opportunity for delivering climate action. Delivery will not happen effectively and quickly unless both net-zero and nature considerations—because nature is inextricably linked to the climate crisis—are consistently woven into the fabric of all that Governments do at every tier of decision-making; not just centrally but devolved Administrations and regional and local government. The Government said in their response to the consultation on the Bill that

“public authorities will be able to take subsidy decisions that facilitate strategic interventions to support the UK’s economic recovery and deliver government priorities such as levelling up and achieving net zero.”

I welcome the Government’s recognition that subsidies can be a valuable way of supporting the achievement of the UK’s net-zero targets. However, there is nothing in the Bill to ensure that subsidies are directed towards interventions that can help to achieve our net-zero and environmental goals or, even worse, to avoid a situation in which subsidies that are contrary to or do not align with these goals could be introduced. Unfortunately, not all public authorities are as focused on delivering net zero as others—the Cumbrian coal mine comes to mind. Without this strategic direction, opportunities could easily be missed. I hope the Minister will agree that we need to include our net-zero and environmental goals within the Schedule 1 principles as laid out in Amendments 9 and 10 from the noble Baroness, Lady Boycott, which would guide decision-making on subsidies.

The Government did, in fact, consider including a specific net-zero principle but decided against this, which is a real shame because including consideration of net zero would not have precluded the achievement of wider policy objectives. It simply provides that when granting any subsidies, not just those related to energy and environment, public authorities must consider whether they align with our net-zero and environmental goals. This would not compromise the Government’s flexible, proportionate approach to the new regime.

It is important that the broader principles in Schedule 1, which apply to all subsidies, provide clear direction to the hundreds of public bodies that will use these rules and embed the consideration of net-zero and environmental goals. This would show strategic direction and leadership from the Government, and support the COP president’s aims for a clear focus on delivery. With the urgency of the challenge ahead of us—to take action to reduce emissions and restore our depleted nature—we cannot afford to miss opportunities such as this to help to deliver it. I hope that the Minister will consider embedding consideration of climate and environmental goals in the Bill and look sympathetically at Amendments 9 and 10.

Amendments 12 and 29 would provide simple clarifications aimed at ensuring that the law stated that the grant of subsidies did not release a beneficiary from its other legal duties in relation to environmental protection. Amendment 12 would clarify, within the principles, that all subsidies should be subject to that prohibition, while Amendment 29 would provide for a stand-alone clause within the general prohibitions with the same effect. We are saying that, without the amendments, there may be perverse incentives and the “polluter pays” principle could well be lost. I look forward to a response from the Minister on those amendments.

I support the amendments in this group in the name of the noble Lord, Lord McNicol of West Kilbride, and the noble Baroness, Lady Jones of Moulsecoomb, which are very much in the same vein as those of the noble Baroness, Lady Boycott.

I want to mention Amendment 33 in the name of the noble Baroness, Lady Jones, about subsidies for fossil fuels. The Minister and I have frequent disagreements on what defines a subsidy, so I am pleased that this amendment has been tabled. I support it because I hope it will give the Minister an opportunity to clarify, first, whether taxpayers’ money should be used to support exploration for new oil and gas fields, and secondly—there are many subsidies but I will restrict myself to two questions—whether the Government should in fairness continue to allow the decommissioning costs of fossil fuels in the North Sea to be met by the UK taxpayer. Oil companies at the moment are pocketing vast sums of pure profit—eye-watering and fairly obscene profits—and we are giving them money on top of that. The Minister will have his opportunity to answer that—I hope he will.

I also welcome the Motion by the noble Baroness, Lady Jones, that Clause 51 not stand part of the Bill, which is a probing amendment. I, too, want to know why nuclear energy is excluded from the energy and environment principles in the Bill; there seems to be little rationale for doing so.

[Baroness Hayman (CB)]

My Lords, I declare my interests as set out in the register, particularly as co-chair of Peers for the Planet. I am grateful for the opportunity to speak to this suite of amendments dealing with climate change and environmental issues. I particularly support Amendments 9, 10, 12 and 29, which have just been so ably introduced by the noble Baroness, Lady Sheehan, and are in the name of my noble friend Lady Boycott, who I know is deeply disappointed not to be able to be here. I did not manage to get my name on the amendments but I am here, so perhaps I can say a few words about the general tenor of this group.

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[Lord Callanan (Con)]

I think we discussed this earlier. I am really not sure of the point the noble Lord is trying to make.

Amendments 12 and 29, tabled by the noble Baronesses, Lady Boycott and Lady Sheehan, and the noble Lord, Lord Whitty, would prevent subsidies that would relieve their beneficiaries from their liabilities as a polluter. Provision already exists in the Bill to protect the “polluter pays” principle for any subsidy in relation to energy and environment. Principle B in Schedule 2 sets this out explicitly:

“Subsidies in relation to energy and environment shall not relieve the beneficiary from liabilities arising from its responsibilities as a polluter under the law of England and Wales, Scotland or Northern Ireland.”


Clause 13(3)(b) ensures that a public authority

“must not make the scheme unless it is of the view that the subsidies provided for by the scheme will be consistent with those principles.”

As I have previously set out, it is right that the provisions in the “polluter pays” principle apply only where they are relevant. That principle has long-standing foundations in UK law—including, most recently, in the provisions of the Environment Act 2021, which I also covered earlier.

Amendment 33 would prohibit subsidies for fossil fuels, including those subsidies that fall within the definition used by the IMF for fossil fuel subsidies. This would include subsidies for fossil fuel development and for the construction of new unmitigated fossil fuel-powered electricity generation, either in the UK or abroad. The principles in Schedule 2 to the Bill will help ensure that energy and environment subsidies contribute to optimal outcomes for UK citizens, recognising the importance of a secure, affordable and sustainable energy system and increasing levels of environmental protection.

I am fully in agreement with the noble Baroness, Lady Sheehan, that inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change. However, I cannot accept this amendment because unabated gas-fired generation currently plays a critical role in keeping Great Britain’s electricity system secure and stable. New-build gas generation capacity will continue to be needed to ensure security of supply until clean alternatives are deployable at scale.

[Baroness Sheehan (LD)]

I have a question for the Minister. We have a real problem with fuel poverty and the energy cost of living—indeed, the cost of living everywhere. Energy costs are so high, and they are going to get even higher come April. Does it not worry the Minister—and, through him, the Government —that Shell paid $1.8 billion in tax to Norway in 2020 but, over the same period, it received $99.1 million from our Government in the UK? In that year, the UK was the only country where Shell operates in which it did not pay tax, according to the company’s own annual report on payments to Governments. There is something very wrong here.

[Lord Callanan (Con)]

That is not a subject for today’s debate. I have no idea whether the figures produced by the noble Baroness are accurate, but we have had this debate many times. We are phasing out fossil fuel-required generation. We have one of the fastest deployable rates of renewables in the world. We have the largest offshore wind capacity in the world. I appreciate that the noble Baroness wants to go even faster but, unless she is standing here saying that we should turn the lights out tomorrow, even the Climate Change Committee accepts that we will need gas-fired generation in the years to come. This is a transition, not a revolution, so we will scale down our use of fossil fuels gradually but, in the short term, we will continue to need them.

[Baroness Sheehan (LD)]

I really must challenge the Minister on this. He knows that this is not a question of switching off the lights overnight. The Climate Change Committee has a well-worked-out plan for scaling down our use of fossil fuels. In that plan, we start to reduce our reliance on oil and gas to a point where the only oil and gas we have is mitigated by some form of abatement, in whatever form that may take, by 2050. The plan is not that we continue to use gas unabated until 2050—that just is not the case. It is very misleading to say that.

[Lord Callanan (Con)]

Indeed—[Interruption.] I will let the noble Baroness, Lady Jones, come in as well.

Subsidy Control Bill

Baroness Sheehan Excerpts

Committee stage
Wednesday 2nd February 2022 Grand Committee

Amendment 68 would allow decisions to be made on individual subsidies under a scheme subject to an appeal to the Competition Appeal Tribunal. It cannot be right that individual subsidies can effectively be hidden from scrutiny, thus requiring entire schemes to be challenged on the basis of concerns on one or two individual subsidies given within them. We will come on to discuss transparency matters shortly, but I hope the Minister can help move this debate forward a bit. Again, we are focusing in on the issue of transparency and trying to shine a light on decision-making and the financial contributions and support that would be given. With that, I beg to move Amendment 21.

[Baroness Sheehan (LD)]

My Lords, I added my name to Amendment 24. I also support Amendment 21, which is closely related, and Amendment 68, which has real implications in addressing limits on enforcement for subsidies that may have been misdirected. I thank the noble Lord, Lord McNicol of West Kilbride, for tabling these amendments and for his very able introduction of them.

To my mind, Amendments 21 and 24 have been tabled to try to establish why the Government wish to disapply the subsidy control principles and the energy and environment principles from a subsidy merely because it has been given under a subsidy scheme. According to the excellent Library briefing on the Bill, the Government have said that a subsidy scheme is a means for public authorities to award a number of subsidies to enterprises on a discretionary basis, as opposed to awarding subsidies on a case-by-case basis to individual enterprises. To use the Minister’s words, the Government want to try to create a “minimally burdensome” scheme. It would make it quicker and easier for subsidies to be given if this were to be the case.

As drafted, the Bill says that subsidy schemes must be made by a public authority only if the subsidies provided for by the scheme will be consistent with the subsidy control principles laid out in Schedule 1—I hope noble Lords are still with me; I think it will make sense in Hansard—or, where relevant, the energy and environment principles laid out in Schedule 2. That is all well and good. A subsidy made under a subsidy scheme must comply with the principles laid out in Schedules 1 and 2, so you would think it would be open to review on that basis and enforceable as such. But you would be wrong, because Clause 12(2) states that

“‘subsidy’ does not include a subsidy given under a subsidy scheme.”

Why? It does not make any sense. Hence Amendment 21 is needed to take out this nonsense, so that the subsidy control principles can apply to all subsidies.

Similarly, Amendment 24 would remove Clause 13(2) so that the energy and environment principles can also apply to all subsidies. Given that there is a threshold for transparency and accountability of about £500,000 for subsidies given under a subsidy scheme, that will very quickly add up to millions of pounds, for which, as the Bill is currently drafted, there will be no scrutiny. That would not serve businesses or the Government.

Amendment 68 is necessary because Clause 70(2) says that the CAT cannot be asked to review a subsidy decision if the subsidy was given under a subsidy scheme; only the subsidy scheme itself can be reviewed. That makes a nonsense of the enforcement regime because no route will then exist to review whether a subsidy complies with the subsidy scheme. To the question of when a subsidy is not a subsidy, the answer is when it is given under a subsidy scheme. Surely the Minister can see the absurdity of such a position. Every subsidy must be available for review if necessary. That is why these amendments are necessary. I thank the noble Lord, Lord McNicol of West Kilbride, for tabling them.

[Lord Fox (LD)]

My Lords, it is with great pleasure that I follow my noble friend Lady Sheehan and the noble Lord, Lord McNicol, in support of these amendments. Subsidy schemes seem to be designed as monoliths with no granularity at all. Why is that one of the central theses of this Bill? What possible advantage do the Government seek to gain, other than the ability to hide what money is going to whom? To those of us on this side of the Committee, that appears to be what is going on.

Amendment 21 would ensure that subsidy schemes cannot be used to hide subsidies that would, if they were stand-alone subsidies, be reported, as my noble friend set out. It is clear to all three of us that there is huge scope for significant and expensive subsidies to be hidden in these schemes. That seems to be the only reason why this is in the Bill. I am sure that the Minister will want to explain the reasons, because that must be the response to these amendments. I am sure that we will all be happy to throw our hands up if we are wrong and there is a hugely important reason why this is needed for the operation of the subsidies.

Amendment 24, co-signed by my noble friend, would require individual subsidies given under the subsidy scheme to be judged against the energy and environment principles. Once again, we are back to Monday evening, when my noble friend Lord Purvis posed a question regarding principle G in Schedule 1. The noble Lord, Lord Callanan, got to answer it; I suppose that this time it is the turn of the noble Baroness, Lady Bloomfield. During that debate, the Minister seemed to make it clear that sustainability considerations are indeed implicit in every aspect of the Bill. He suggested that, by implication, there must be some benefit for these things to be legal, but there is no explicit reference to that. I apologise if I am putting words in his mouth because principle G says the opposite. Therefore, rather than repeat what I have said, I have invented another one of my little examples, for which I apologise in advance.

Let us say that I have won a subsidy to expand my pottery business. As part of the submission, I cite increased employment and increased local sourcing of services as the beneficial effects that investment in my pottery business would bring. Nothing in the schedule or the rest of the Bill says that I have to benefit the environment by using less energy. If I am successful, I employ 30% more people and use 30% more local services, therefore achieving the scheme’s objectives, while also using 30% more energy to fire my products. That would appear to be how the Bill will work. Therefore, we need Amendment 24 to include consideration of the environmental impact that that subsidy would bring. It is very simple.

Amendment 68 would allow individual subsidies given under a subsidy scheme to be reviewed. Once again, it is cracking open the monolith and being able to look at the granularity within a scheme. Again, it follows my initial points: we need to be able to see inside these schemes for transparency to be available.

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On Amendment 68, as I have just set out—

[Baroness Sheehan (LD)]

On Amendment 21 to Clause 12, if that amendment was agreed to and the line

“In subsection (1) ‘subsidy’ does not include a subsidy given under a subsidy scheme”


was taken out, it would have no impact on a public authority’s ability to continue to allow subsidies under the subsidy scheme. It would not slow the process up.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I take the noble Baroness’s point on that. I would like to discuss it with the team when I have had a chance to look into it more thoroughly.

As I have just set out, under the terms of Clause 70, an interested party may not submit an application for the Competition Appeal Tribunal to review a decision to give an individual subsidy under a scheme. This is to ensure that scrutiny and challenge occur at the scheme level. The noble Lord’s amendment would enable applications for review to be made to the Competition Appeal Tribunal for individual subsidies granted under a subsidy scheme without the requirement for the broader subsidy scheme also to be reviewed.

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[Lord McNicol of West Kilbride (Lab)]

On that point, how would another business or organisation know the subsidy existed if it was part of the scheme?

[Baroness Sheehan (LD)]

May I intervene too, on the same point? If a business does know about a subsidy and thinks it is unfair, it cannot go to the public authority and ask for a review. The bar is so high that the review can only be at the level of the scheme—which the business had nothing to do with designing. The public authority would have to do it. The business has no comeback.

[Baroness Bloomfield of Hinton Waldrist (Con)]

Every grant made over £500,000 will be visible. Noble Lords may be arguing that that bar is too high, but maybe we will come to that at a later stage.

Subsidy Control Bill

Baroness Sheehan Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

[Baroness Boycott (CB)]

My Lords, I declare my interests as set out in the register and apologise for being unable to attend day one in Committee. I am very grateful to the noble Baroness, Lady Sheehan, for introducing my amendments on that day, and to the noble Lord, Lord Whitty, and the noble Baroness, Lady Hayman, for their support.

Today I am introducing Amendment 63, again with the welcome support of the noble Baroness, Lady Sheehan, and the noble Lord, Lord Whitty. Some of the reasons for this amendment have just been set out. It is linked to my earlier amendments in that it is aimed at ensuring that progress towards achieving our net-zero and environmental goals is reported on and monitored after decisions on subsidies have been made.

Amendment 63 provides that a review of the impact of the subsidy control regime on progress towards achieving net zero and our environmental goals should be included in the annual report prepared by the CMA, as has just been mentioned. The Government have said that the new subsidy regime aims to enable public authorities to deliver

“strategic interventions to support the UK’s economic recovery and deliver government priorities such as … net zero.”

As debated on day one, the framework permits subsidies that support our net-zero goals, but there is very little in the Bill that actually enables subsidies that support or encourage consideration of net-zero and environmental goals in their design and the way they are awarded.

Ultimately, if we do not do this, the Government will not know whether the subsidy regime is delivering on its net-zero and environmental priorities. Tracking underlying progress is absolutely crucial to identifying whether their aims are being met and to understanding what progress or changes we need to further make.

On day one, the Minister said that:

“Net-zero and climate change considerations are not inherent to all subsidies”,


and that placing a principle that considers our climate change and environmental commitments in the Schedule 1 principles

“could lead to public authorities having to do bespoke, possibly onerous, assessments for every single subsidy awarded or subsidy scheme made”.—[Official Report, 31/1/22; col. GC 158.]

The delivery of net zero is one of the key strategic priorities of this Government, but if there is to be no specific principle ensuring that public authorities properly factor this into their decisions, it seems even more important that we put clear monitoring and reporting of these issues in the Bill.

The Bill sets out an overarching monitoring and reporting process, predominantly led by the subsidy advice unit within the CMA, which includes determining

“whether any changes should be made to the regime as a whole or certain aspects of the regime.”

However, absolutely nothing explicitly suggests that this monitoring and reporting process will encompass the impact of the new subsidy regime on achieving the strategic net-zero priority.

With nothing in the Bill that embeds this consideration, it is really difficult, if not impossible, to understand how the Government intend to monitor whether their strategic objectives are being met, or indeed possibly being undermined. The Government have declared a climate emergency, so it seems quite astonishing that we are prepared to put public money towards efforts that could undermine that goal. Indeed, all public money should be put towards anything that makes this goal more available and possible for us all.

[Baroness Sheehan (LD)]

My Lords, I rise to speak to Amendment 63 in the name of the noble Baroness, Lady Boycott, to which I and the noble Lord, Lord Whitty, have added our names.

Before doing so, I want quickly to speak about Amendment 62, which I support. I recognise the less than complete nature of the assessment it advocates, namely the

“assessment by the CMA, on the basis of the reports it has prepared”.

However, those reports are limited to the voluntary or mandatory referrals referred to in paragraphs (a), (b) and (c). I also have some reservations about the reference to the legislation meeting its stated objectives; that is living in hope that a stated objective might actually appear in the Bill at some point.

I thank the noble Baroness, Lady Boycott, for her comprehensive introduction to Amendment 63; it leaves me with little to say. These subsidies will be used by hundreds of public authorities. According to figures I have seen, some 550 public authorities will be able to give out subsidies under this regime. Can the Minister confirm that figure? It is important that many of them fully grasp the importance of their decisions. The Government have said that meeting the net-zero target and levelling up will be policy objectives, but words are not enough. We need to be able to demonstrate that that is the case. This amendment would ensure that it is the case with respect to the net-zero target and other environmental targets. The amendment will be especially necessary if the Government resist that tabled by the noble Baroness, Lady Boycott, which would include a new principle to consider net-zero goals.

Clear and detailed monitoring and reporting of climate change risks and opportunities has been successfully implemented in other parts of our economic system—for example, by the FCA and the PRA through amendments to last year’s Financial Services Act, and by the Pensions Regulator through the pensions Act, also of last year. For the first time, the Pensions Regulator has published guidance on governance and the reporting of climate-related risks and opportunities. Such inclusions in those Acts really help to drive climate alignment across these sectors.

This Bill is an opportunity to do the same in relation to our subsidy control regime. Amendment 63 would allow the Government to continue to claim that they are a global leader on climate change.

[Lord Whitty (Lab)]

My Lords, I have added my name to Amendment 63 but I want to say a couple of things about Amendment 62 because, as we proceed through this Committee, it is clear that there is a bit of fuzziness about what exactly the role of the CMA is. Historically, the CMA and its predecessors have reported effectively on the nature of competition across the British economy but, of course, the issue of state intervention has been left to the European level. Some of us were slightly concerned that the CMA would take over that function after Brexit; in the end, I was sort of convinced that it should, rather than creating a whole new body, but it has to do a number of different things. It has to look after our trade obligations not only to the EU but in all the other trade agreements we have reached, in which we agreed that we will not unreasonably subsidise goods that are traded so as to undercut our trading partners. So, we have a big international obligation—one that can lead to retaliation and all sorts of problems arising with the WTO and other international bodies.

We have all that, but we also have the area of subsidies in the UK. This includes the delicate relationship between the UK Government and the Secretary of State acting for England, the devolved authorities and local authorities. It is a very complex area, and all this is to be landed on a new body within the CMA: the SAU. It is not yet clear whether it will have the resources, expertise and personnel to do that. We have gone along with this, but we need to be clearer on, for example, whether it is a regulator or an overseer and reporter on the activities of the public authorities that are giving subsidies and quasi-subsidies. As we debated earlier in the Bill, this involves a range of things—for example, preferential procurement. At the end of my contribution at Second Reading, I asked the Minister whether my county would be able to give preferential treatment to a local firm because it provided local employment, or whether it had to make sure that the neighbouring county of Wiltshire was not thereby being undercut.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

I hope that that addresses the noble Lord’s concerns.

[Baroness Sheehan (LD)]

Can I ask the Minister about her remarks about the OEP’s remit? I think that she said that it would cover whether the Government are meeting their climate change requirements. However, the OEP’s remit does not cover whether the subsidy control regime is working towards our net-zero targets. What the amendments are trying to say—as we tried to include in the Financial Services Act and the pensions Act, successfully—is that a more granular approach will be needed, which has to be provided by the regulatory authorities within the sectors concerned because, otherwise, we really will not know whether each sector is working towards the net-zero targets that we are all trying to achieve in the timespan that we have.

[Baroness Bloomfield of Hinton Waldrist (Con)]

One of the noble Baroness’s concerns was that there was no overarching principle for the Government’s drive towards net zero. I think that the Environment Act provides the overarching context for whatever we are doing. As I say, the Office for Environmental Protection will also scrutinise the Government’s progress towards targets annually. I do not know what further level of granularity the noble Baroness wishes to apply.

[Baroness Bloomfield of Hinton Waldrist (Con)]

There is also the Climate Change Act, as my noble friend has just reminded me.

[Baroness Sheehan (LD)]

I shall not repeat what I have said, but I do not think that the OEP will be able to tell us whether the subsidy control regime is working in the way that subsidies are being allocated in terms of meeting our climate change requirements. There is precedent in this, as I keep saying, with the Financial Services Act and pensions Act, and the actions that the Pensions Regulator took on the back of that Act. They all speak volumes as to how important it is to have each sector being held to account. Those are the points that the noble Lord, Lord Whitty, and the noble Baroness, Lady Jones, made. Every single sector within the country needs to be shown to be pulling its weight and we need to know where we have to put in greater effort, if it is not working towards the net-zero targets.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I understand the noble Baroness’s concerns, but I am not able to go further than I have done at the Dispatch Box. On the point that the noble Lord, Lord Whitty, made about the steel industry, followed up by the noble Lord, Lord Wigley, we are directing subsidies towards greening industries like that, so we can invest in electric arc technology, and hydrogen as well. It is part of an overall drive by this Government to be consistent with the environment principles that we have laid out.

Subsidy Control Bill

Baroness Sheehan Excerpts

Lords Hansard - Part 1 & Report stage
Tuesday 22nd March 2022 Lords Chamber

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise with great pleasure to follow the noble Lord, Lord Whitty, who has powerfully and clearly introduced this group of amendments. I will offer the Green group’s support for Amendments 3, 51 and 61. Were we not in a state of continual juggling of different Bills, I am sure that we would have attached one of our names to them.

Amendment 3, on which the noble Lord indicated he is likely to test the opinion of the House, is particularly important in considering the negative effects. I am influenced in that view by a visit I made yesterday to a village called North Ferriby and a site threatened with the development of an enormous Amazon warehouse, with significant environmental effects. From those environmental effects flow effects to people’s lives and well-being. It is the absolute reverse of levelling up in that it is making people’s lives much worse. It is clear that, when talking about economic development, there is inadequate consideration of local environmental effects and the broader effects on the state of our world.

However, I rise chiefly to speak to Amendment 5 in my name. Rather than trying to stop damage, this amendment is trying to lead the Government in a positive direction, which could help them deal with some of the issues facing them today and will be tackled by the Chancellor tomorrow.

Amendment 5 is all about helping small-scale community energy projects to make a big impact in the energy system. In Committee, the Minister suggested that community energy is not within the scope of the Bill, but I hope we might see a broader response today, and at least a positive response and acknowledgement from the Minister that this is a huge lacuna in government policy that desperately needs to be filled.

This amendment adds community energy to the list of circumstances that may be used to determine a subsidy, where the generator is a community energy project. What we see is that the rural community energy fund is soon winding down, despite its success. The Minister and I have, in another context, discussed the lack of any other community energy schemes, despite the Government’s promises to deliver them.

You might ask, “Why would subsidies be needed?” The fact is that community schemes often need early-stage seed funding to get them to the stage where they can seek investment. Without that, many communities, desperately keen to set up their own scheme, are never able to get one off the ground. What we are talking about is perhaps something like an electric car club, where a community can generate its own energy. I saw this in Stroud a few years ago: solar panels on the roof of a doctor’s surgery powered an electric car club car. This had all been supported by community investment and was run by the community, with the nature of the project being chosen by the community.

It is clear that this can unlock more than £64 million in private capital investment. It is an incredible opportunity for public money to kick-start a community-led green revolution. Importantly, thinking about the levelling-up agenda, this means that communities with money can put it into their local community and get the money circulating around that community. This is a cost-effective way of unleashing the possibility of many new green jobs.

I am not expecting the amendment to pass today, but there is a huge opportunity here. The crisis the Government are facing is clear: the cost of living crisis and concern, particularly in the context of the tragic situation in Ukraine, about energy self-sufficiency. But there is energy all around us: energy from the sun, the wind and people within communities desperate to help tackle the climate crisis and meet the needs of their own communities. Let us make sure that we have a subsidy scheme that can support all that physical and human energy and put it to good purposes to improve the lives of us all and our environment.

[Baroness Sheehan (LD)]

My Lords, I rise to speak to Amendments 3, 51 and 61, to which I have added my name. I have checked with the Public Bill Office that my name is on those amendments—it is online but it has not made it to the printed copy. I should also add that I am a director of Peers for the Planet.

The reason I have added my name to these amendments is that I feel strongly about this. I hope that the noble Lord, Lord Whitty, will be press Amendment 3 to a Division if the Minister is unable to meet us half way or come some way towards what we are looking for, which is some recognition of an alignment with our climate change and natural environment concerns.

Just last month the IPCC published its sixth report, which is full of dire warnings about the climate. Time is running out and we are fast approaching a 1.5-degree rise. The raw science tells us that we really have to act now. The concentration of carbon dioxide in the atmosphere is at an unprecedented 419 parts per million; it has never been at that level, records show, in the last 800,000 years. It is going up in a straight-line vertical trajectory at the moment, so we really need to act as quickly as we can. The NASA website shows that many other of the planet’s vital signs are moving in the wrong direction and those adverse changes are accelerating.

A Bill laying out a new subsidy regime is an important policy lever to meet our climate ambitions. However, as things stand, there is a deafening silence on climate and nature alignment in the Bill. Amendments 3, 51 and 61 seek to fill that void, not in a prescriptive manner but by allowing the Government to determine how the aims should be achieved. Notwithstanding what the Minister’s response will be to the amendments, I hope that nevertheless he will confirm from the Dispatch Box that the guidance to the Bill will specifically include how public authorities should approach climate and wider environmental considerations with respect to subsidies. The Minister said as much in his letter to my noble friend Lord Purvis but it would be good to have it reiterated on this occasion.

[Baroness Hayman (CB)]

My Lords, I support Amendments 3, 51 and 61. I declare my interests as set out in the register.

The amendments seek to ensure that considerations around net zero and the environment are embedded in the legislation at the stage of principles, at the stage of guidance and at the stage of reporting. They are very similar to amendments well discussed in Committee. I have to say that when responding to those amendments the Minister did not show even a modicum of delight; he said that we were banging on—although he did not use that term—about our favourite topics, a term he did use, and said he had a sense of déjà vu. I am afraid it is déjà vu all over again, because these issues are too important for us not to return to them.

I believe there is a disjuncture in the Government’s attitude. When responding, the Minister made absolutely clear the Government’s view that

“net zero is of critical importance.”—[Official Report, 31/1/22; col. GC 159.]

That is not something between us. He also recognised the relevance of the subsidy regime that we are discussing in achieving the Government’s aims, and pointed out that environmental and net-zero schemes had already been agreed under the interim subsidy control mechanism. So we have a situation where the Government recognise the severity of the climate crisis, the fact that economically we need to shift the economy and growth into a sustainable pattern and into areas that will be productive in terms of jobs—and, indeed, will create the sorts of jobs that support the levelling-up agenda we were just talking about, because they are the sort of infrastructure jobs that go across the country—and that we need to support jobs that will provide energy security in future.