Subsidy Control Bill (Eighth sitting)

Bill Esterson Excerpts

Thursday 4th November 2021 Public Bill Committees

[Kirsty Blackman]

I am baffled by this Government amendment. It seems to be directly opposite to what the Opposition moved. The Opposition were concerned that one of the principles was mentioned in the post-award referrals clause, but the others were not. With amendment 5, the Minister concedes that one of the principles should not be mentioned and is therefore asking for it to be taken out of clause 62 but not of the post-award referrals clause. To clause 60, he argued, I think, that it was okay to include one of the principles, but not the others. I am confused about why he made one argument at one point in the debate but is now arguing the opposite—for the removal of one of those principles.

[Bill Esterson (Sefton Central) (Lab)]

It is good to see you back in the Chair, Mr Sharma. The hon. Member for Aberdeen North makes a good point, which we reiterate, about amendment 5, which we will come to because of its relation to our amendments to clause 64.

[Paul Scully]

On the point made by the hon. Member for Aberdeen North, in the previous sitting we talked about UK competition and investment. It simply emphasises the point about UK competition and investment. It does not have any significant effect, because it is already captured in the guiding principles. We want to make sure that there is absolute clarity for businesses and public authorities with clause 62.

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[The Lord Commissioner of Her Majesty’s Treasury (Michael Tomlinson)]

Very good.

[Bill Esterson]

I say to the hon. Member who spoke from a sedentary position that it was not very good. As we have said throughout the—

[Michael Tomlinson]

For Mid Dorset and North Poole.

[Bill Esterson]

I think he is trying to intervene. I would not take an intervention from him anyway, because he does not wear a mask.

I rise to reiterate our concern about the lack of transparency throughout the Bill and how subsidies cannot be called in when they are under schemes. That is a continuous thread. The real concern is that potential abuses can be missed as a result of that approach. The clause exempts subsidies under schemes from a review, from post-award referrals and from voluntary referrals. We agree that schemes provide a quicker and easier route to provide subsidies, but that should not mean that subsidies awarded under those schemes should escape due scrutiny. If there is not a problem with a subsidy, there is nothing to be concerned about, but if there is a problem with a subsidy awarded under a scheme, there needs to be a mechanism, and I hope the Minister will explain what that mechanism will be, because I do not think we have heard during our deliberations about the scrutiny of potential problems with subsidies awarded under schemes.

There is the potential for a back door of free, unscrutinised public cash being opened up. We have seen problems throughout the pandemic where scrutiny was removed. I will not go over them in too much detail. We have heard about them already, such as the Health Secretary’s pub landlord, advisers to the Board of Trade, and the problems of Randox and the now former right hon. Member for North Shropshire (Mr Paterson)—I understand, hot off the press, that he has resigned. Some £3.5 billion-worth of covid-19 contracts were awarded to firms with links to the Conservative party, according to Government procurement data. That is an example of why we need adequate scrutiny.

[The Chair]

Order. That is not within scope.

[Bill Esterson]

It is an example of why scrutiny is required in this legislation.

[The Chair]

I am advised that that is not in the scope of this stand part debate.

[Bill Esterson]

There is a monumental lack of scrutiny in the clause that should not be allowed to continue, so we will oppose it.

[Kirsty Blackman]

I have a few questions. Are there any circumstances in which a subsidy given under a subsidy scheme could be considered of interest or of particular interest where the scheme itself is not considered of interest or particular interest? If that is the case, is it possible to ensure that a subsidy scheme in which any of the potential subsidies are considered as possibly of interest or particular interest is subject to the mandatory or voluntary referral, rather than the subsidies given under those schemes not being subject to any referral, despite the fact that some of them might tick the boxes and some will not? Does the Minister see what I mean?

I understand that the question is complicated but, specifically, I am concerned about the lack of ability to refer individual subsidies. Only subsidy schemes may be referred to the mandatory or voluntary referral process; the subsidies made under those schemes may not be referred. However, if we had a scheme that seems to tick all the normal boxes to make it acceptable as a subsidy scheme—it is given under clause 10 and all makes sense—but one of the subsidies given under that scheme is something that is of interest or particular interest, will the Minister confirm that that scheme will therefore be subject to mandatory referral, even if only one of the subsidies given under the scheme is of interest or particular interest?

Even from reading clause 10, I am not sure quite how tight “subsidy scheme” is drawn. Subsidy schemes—given the schemes we have seen in relation to covid, for example—can be incredibly wide and apply to a significant number of industries, whereas the Secretary of State might have made it clear that any subsidies given under agriculture, for example, are considered as particular interest. A scheme could apply to everything in a certain area—widely drawn—but might not be challengeable in its own right.

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[Paul Scully]

If a scheme can contain a subsidy of interest or particular interest, that scheme becomes a scheme of interest or particular interest, depending on the circumstances. That is therefore very much the case.

In answer to some of the points made by the hon. Member for Sefton Central on hiding subsidies and distorted payments, we have the basic level of how to treat public money—the statutory obligations on those public authorities that we discussed earlier—but the schemes themselves do not provide a back door for potentially multiple subsidies; public authorities have to consider the principles of the scheme, in the same way as they would for individual subsidies. They must not make a scheme if they judge that any subsidy within that scheme conflicts with any of the principles.

The decision to make the scheme has exactly the same risk-based scrutiny of the potential challenges as the decision to award a subsidy—especially those schemes of particular interest, which are called in by the Secretary of State and must be referred to the subsidy advice unit.

[Bill Esterson]

I want to tease out some information from the Minister. He used the phrase “risk-based scrutiny”, but I get no sense of what, if there is abuse of a scheme, the mechanism is to ensure that the subsidies within the schemes are not applied in a distorted way or in a way that misuses public money. That is the bit that I do not get.

[Paul Scully]

The scheme itself will be challengeable.

Question put, That the clause stand part of the Bill.

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[The Chair]

I call Seema Malhotra to move amendment 59

[Bill Esterson]

rose—

[The Chair]

Apologies. I call Bill Esterson.

[Bill Esterson]

I beg to move amendment 59, in clause 64, page 36, line 11, leave out paragraphs (a) and (b).

This amendment removes the exemptions in relation to the CMA’s referrals and functions, for streamlined subsidy schemes and minimal financial assistance.

We are all having fun changing our minds this afternoon—well, maybe the Government are not changing theirs too much. We have tabled amendments 59 and 60, and the combined effect of those amendments would be to remove

“the exemptions in relation to the CMA’s referrals and functions, for streamlined subsidy schemes and minimal financial assistance.”

We understand that it may well be appropriate to exempt certain subsidies from review. During a natural disaster or a national or global economic emergency, it makes sense that subsidies designed to alleviate those emergencies should be exempt from the regulations. The same goes for a national security emergency; matters related to Bank of England monetary policy; legacy and withdrawal agreement subsidies; tax measures; special public economic interest assistance; and large cross- border or international co-operation projects. However, Government amendment 5 acknowledges that it would not be appropriate for subsidies in relation to nuclear energy to be exempt from due scrutiny, so this is about being consistent. That goes to the point that the hon. Member for Aberdeen North has made a number of times today alone, about whether subsidies awarded in unexceptional circumstances—namely, streamlined subsidy schemes and minimal financial assistance—should be free from appropriate transparency and scrutiny. We are being consistent by continuing that point.

During the debate on clause 63 stand part, I did not get an answer to my question about why the Minister believes that those subsidy schemes should be exempt from regulations. I go back to what Professor Rickard told us in Committee:

“The benefits of transparency, and more of it, outweigh the costs…I would encourage Members to think carefully about the ways in which we could further increase the transparency to ensure that the UK was a world leader in transparency in subsidies and so as to help to provide consistency and certainty for business and accountability to taxpayers.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 19, Q22.]

The Minister—and, from memory, the Secretary of State on Second Reading—talked about this domestic subsidy scheme being an opportunity to demonstrate a new way of operating a state aid regime, having left the EU system behind us. Indeed, some of the questions that hon. Members asked during the evidence session were of a similar nature: they were about what we could learn and what we could do in order to have the best possible system and lead the world. That is what the spirit of this amendment is about: improving transparency to deliver the best quality of regime possible. As Thomas Pope said when summed up his evidence:

“My view is that there is a benefit to more transparency.”—[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 20, Q24.]

We have made the point multiple times about the importance of transparency in public expenditure and what a good thing it is, because without it, there is a danger of public finances being spent recklessly without consideration of value for money. Our amendments would ensure that when a subsidy is awarded in unexceptional circumstances, there is adequate transparency. Again, I have to ask the Minister why he is so resistant to increased transparency in this part of the Bill.

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[Kirsty Blackman]

I have a quick question for the Minister, which he does not have to answer now. I would appreciate it if he could consider when a streamlined subsidy scheme is being published and set before Parliament. He has made it clear that a number of people will be consulted and that it will be drawn up in parallel with thinking from experts and potential recipients of the subsidy scheme. That is fine, but when we are assessing those streamlined subsidy schemes, it would be helpful for Parliament to have that information, and particularly to have a view from the SAU, or from the CMA more generally, about the streamlined subsidy scheme. Even if the SAU just says, “We think this looks good,” that is at least more information for Parliament. It would give me more comfort to know that the scheme fulfils the principles, or at least that the SAU thinks the scheme fulfils the principles as they are laid out. Therefore, it would be much more reasonable for clause 64(1)(a) to be included if we were given that level of comfort.

[Bill Esterson]

Again, we just are not getting from the Minister certainty about the creation of the regime, and this is a common problem all the way through. We are waiting and it is uncertain exactly how this will operate, which makes it very difficult for us to judge whether what we will end up with will provide a degree of scrutiny and transparency in the use of public funds. That applies both to streamlined subsidy schemes and to minimal financial assistance. Although I think the Minister is right about the broad point that smaller payments are unlikely to have the potential to distort in economic terms, they can still be misused. As part of the regime, we are still missing an adequate way to scrutinise, and the hon. Member for Aberdeen North gave some good pointers on how that might be addressed. For those reasons, we will push the amendment to a vote.

Question put, That the amendment be made.

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[Paul Scully]

Clause 64 provides for a limited number of exemptions from some or all of the provisions on the referral of subsidies and schemes to the subsidy advice unit. Subsections (1) and (2) exempt from the provisions of chapter 1 of part 4 various subsidies or schemes where either the subsidy control principles, prohibitions and conditions do not apply or it would otherwise be inappropriate for the provisions on referrals to apply. Subsection (3) confers a reserve power on the Secretary of State to exempt subsidies or schemes from the mandatory referral requirements where there are urgent and certain exceptional circumstances that mean that it is in the public interest that the scheme or subsidy can be given without the delay that would result from a referral. The power does not exempt the subsidy or scheme from the subsidy control requirements under part 2 of the Bill. It will still be necessary for the public authority to comply with the duty to apply the principles and other requirements.

[Bill Esterson]

We have debated the amendment and the need for the change to this clause. We have tested the will of the Committee already and will not oppose clause stand part.

Question put and agreed to.

Clause 64, as amended, accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned. —(Michael Tomlinson.)