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.

--- Later in debate ---

[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.