Subsidy Control Bill

Deidre Brock Excerpts

2nd reading
Wednesday 22nd September 2021 Commons Chamber

[Seema Malhotra]

I thank the Secretary of State. Indeed, I did hear those comments in his opening remarks. I was seeking to clarify the issue because I do not think it is clear across the House, and it is important that it is tested and made clear in the course of the passage of the Bill.

Crucially, what is the Government’s intention if the Bill does not receive legislative consent from Scotland, Wales and Northern Ireland, as has been requested?

[Deidre Brock (Edinburgh North and Leith) (SNP)]

Is the hon. Lady suggesting a four-nation approach whereby any one of the nations has a veto over decisions taken by those four nations that they feel are not in their interest?

[Seema Malhotra]

I am not clear why the hon. Lady refers to a veto. I think we are talking about the symmetry of powers in terms of being able to bring forward a challenge. I hope that makes the point clear.

[Deidre Brock]

rose—

[Seema Malhotra]

If it is okay, I want to move on because I am conscious of time, but the hon. Lady may want to make her point in her own remarks.

Finally, on the issues of oversight and enforcement, while well-designed subsidies can support Government objectives and foster growth and opportunity, there are risks too. Subsidies can distort markets, undermine competition and unfairly discriminate between businesses. Effective oversight and enforcement are critical to the success of our subsidy control regime, yet they are lacking in certain areas of the new regime. The Bill does not provide enough certainty as to the definition of “interested parties” that are able to challenge a subsidy. Does that definition extend to local authorities and devolved Administrations?

There are also concerns about the limited powers of the CMA’s new subsidy advice unit under the Bill. We are pleased that a trusted independent regulator is being given key responsibilities. However, as the Bill stands, the CMA lacks any power to instigate an investigation on its own initiative or to take enforcement action. This requires careful consideration, particularly when transparency issues around the Bill are taken into account.

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[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

It is a pleasure to respond to the hon. Member for Feltham and Heston (Seema Malhotra) and to follow the hon. Member for Newcastle upon Tyne Central (Chi Onwurah). I thank all hon. Members who have spoken in this important debate. I aim to respond to as many of their points as possible in the time available—I know that we have further business—but I would like to begin by quickly reminding the House of what the Bill signifies and what it will achieve.

The Bill is the very first subsidy control framework designed by the UK for the UK. It will be flexible and agile, allowing all public authorities to design subsidies that deliver strong benefits across the whole UK. For the first time, in all instances, public authorities will decide whether to grant a subsidy. The Bill will provide certainty and confidence to businesses investing in the UK. It will enable public authorities to deliver strategic interventions that will support our economic recovery and deliver on the priorities of the British people, such as levelling up.

We have talked a little about scrutiny; the hon. Member for Newcastle upon Tyne Central spoke about scrutiny of secondary legislation and guidance. I am glad that my hon. Friend the Member for Clwyd South (Simon Baynes) raised the issue of the lack of scrutiny in this debate. It is nice that the Opposition have found a couple of Back Benchers to come and join the debate, but it is outrageous that we have had so little input from Opposition Members.

This Bill will strengthen our Union by protecting our internal market through a single coherent framework that fully complies with our international obligations. On that note, I thank the hon. Members for Feltham and Heston, for Aberdeen South (Stephen Flynn) and for Aberdeen North (Kirsty Blackman) for their points. To ensure that the new regime works for all parts of the UK, we look forward to continuing to work closely with the devolved Administrations, as we have throughout its development, as the Bill passes through Parliament. We hope that the devolved Administrations can understand and support the approach that we have taken, and will give their legislative consent. I can say to the SNP Members who spoke earlier that to date we have had 30 meetings with the devolved Administrations on an official-to-official basis to discuss the Bill, and 10 at ministerial level.

We also heard a bit about the devolved Administrations’ input into guidance. Obviously an agreed framework is needed before there is something to give guidance for, and we have made that clear in discussions with our devolved Administration colleagues. We will continue to work with them as we work through that guidance.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

The Minister will have noted the concern of the Welsh Government about the fact that the agriculture and fisheries subsidies will be within the scope of the UK subsidy regime as a result of the Bill. We have already heard today a member of the Minister’s party express concern about his local farmers being undercut by devolved Governments’ support for their farmers. Can the Minister assure us that this Bill and the United Kingdom Internal Market Act 2020 will not be used to interfere with decisions by the devolved Governments on devolved matters such as agriculture?

[Paul Scully]

We have consulted on agriculture, fisheries, and sanitary and phytosanitary measures. There was no particular agreement among the devolved Administrations, but some people raised those issues.

The Bill introduces a permissive framework. It is totally different from the EU state aid regime, which is the only regime of its kind in the world. No other country, no other trading bloc, has such a restrictive regime, whereby authorities must ask permission and then wait for months to receive it. The Bill flips that on its head. A public authority can give support where it feels the need for it, and only the most distortive levels of support will then be challenged and go through the courts.

Let me turn to some of the issues raised by the hon. Members for Feltham and Heston and for Aberdeen North, and by the right hon. Member for East Antrim (Sammy Wilson) in relation to how this interacts with the Northern Ireland protocol. I reiterate that the UK will continue to be a responsible trade partner that respects our international obligations. However, as the Secretary of State for Business, Energy and Industrial Strategy said in his opening speech, the robust subsidy regime that the Government propose makes it clear that there is no need for EU state aid rules to continue to apply in Northern Ireland, and that all subsidies will be within the scope of the domestic regime. This framework has to work with whatever is involved in our international obligations. However, as the right hon. Member for East Antrim will know, the Command Paper gives the details of that, and I should love nothing more than to hear of rejoicing in his constituency.

Subsidy Control Bill

Deidre Brock Excerpts

3rd reading
Monday 13th December 2021 Commons Chamber

[John Penrose]

That is absolutely right. It is not just about whether a particular subsidy breaches those principles, but as the hon. Member rightly points out, it is also a question of whether we can then spot that a pattern of cronyism is emerging. If a particular local council was giving out grants to its mates, we could see that much faster. That may not be breaching the subsidy control principle, but you can bet your bottom dollar that people would want to know about that and that the most almighty stink would be created.

That brings me on to the final group of my three groups of amendments, which is about the ability to challenge and check individual items or individual examples of a subsidy within a broader subsidy scheme. At the moment, if someone registers a subsidy scheme under the terms of the Bill, dishes out subsidies under that subsidy scheme and then basically ignores the terms of the subsidy scheme or misapplies them in some terrible way—because of cronyism, because they are just doing a bad job, or even fraudulently—nobody, under the terms of the Bill, can challenge the individual decisions being made. That cannot be right, and it seems daft. All I am saying is that we need to be able to challenge individual examples within a broader scheme, otherwise this transparency mechanism or challenge mechanism will be fundamentally flawed.

That is the modest proposal. So far, I have not heard a single argument that unpicks the logic of that. As far as I can see, there are three Departments of Government with a dog in this fight. There is Lord Frost, who is in charge of the Brexit dividend, and he ought to be thoroughly in favour of this because of the opportunity it offers. There is the Secretary of State for Business, Energy and Industrial Strategy—he was here briefly just now, and I hope he will be back later—who is of course a good free marketeer and is thoroughly committed to improving productivity, so he should be in favour of this, too. Finally, there is the Chancellor of the Exchequer, who is the guardian of taxpayers’ money. As I have said, we should be taking pride in the fact that we are one of the least heavily subsidising economies in the developed world, and we certainly were when we were part of the EU, so I cannot see that he is going to be objecting to it either.

As I sit down, I therefore just ask the Minister to please explain the logic behind opposing any of the arguments that not just I but others have been advancing. Will please explain who on earth thinks this is a bad idea, because I cannot find them or see them and I do not think anybody knows who they are?

[Deidre Brock (Edinburgh North and Leith) (SNP)]

I rise to speak in support of all the amendments and new clauses in the names of my hon. and right hon. Friends and myself, but specifically new clause 1. I am aware that the Cabinet Secretary for Rural Affairs and Islands has already written to the Secretary of State for Environment, Food and Rural Affairs specifically on this matter.

To begin with, I will tell a little story to illustrate that the apprehensions around this issue were long-standing, even before the United Kingdom Internal Market Act 2020 passed into being, and now appear to be fully justified, especially when we take into consideration the principles of mutual recognition and non-discrimination contained in that Act. In late November 2020—on St Andrew’s Day, rather ironically—in the debate on the statement on the agricultural transition plan, I asked the Secretary of State for Environment, Food and Rural Affairs for assurances that the Bill, as it was then, would have absolutely no impact on Scotland’s ability to set support in Scotland independent of the system chosen for England. He responded that Scotland and the other devolved authorities

“will have more freedom than ever before to design a policy that they judge to be right for them. We will set up a joint group across the UK to do market surveillance, to ensure that there is not disturbance to the internal market”.—[Official Report, 30 November 2020; Vol. 685, c. 42.]

The House will note that there was no answer to my question in that reply. However, shortly afterwards the Secretary of State reassured a fellow Conservative MP who had expressed fears on behalf of farmers in his English constituency that food production might not be supported under the new English scheme and that his farmers could

“be undercut by farmers, including in the devolved nations, who are subsidised for food production or by area, not just for stewardship”.—[Official Report, 30 November 2020; Vol. 685, c. 50.]

I wondered how he could give any such assurance if he intended keeping the UK Government’s nose out of our agricultural support choices, but I ken noo.

As my hon. Friend the Member for Aberdeen North (Kirsty Blackman) has mentioned, at the heart of the problem is the broad recognition that agricultural subsidies do not fit neatly into standard subsidy control regimes. That is why agriculture has its own separate subsidy control arrangements in the EU through the common agricultural policy, and in the World Trade Organisation through the agreement on agriculture. Equally, while the trade and co-operation agreement has provided interim rules on subsidy control in the UK since Brexit, it does not apply to subsidies subject to the provisions of part 4 or annex 2 of the WTO agreement on agriculture, which relate to most agricultural subsidies.

The Scottish Government have asked the UK Government repeatedly why agriculture is included in this new regime when it is not included in most standard subsidy control regimes, but I understand that to date no satisfactory reason has been given. The Minister has responded that a majority of respondents to the Department for Business, Energy and Industrial Strategy consultation thought it should be included, which seems jolly fair-minded of the Minister, we might think. On the other hand, the UK Government have so far chosen to ignore the serious concerns raised by the Scottish and Welsh Governments. The UK Government have refused to share the consultation responses with our Government, even the anonymised ones, which makes it even more difficult for Ministers and civil servants to understand the reasoning behind this decision or at least to assess whether the responses were weighted and, if so, how. The only reply that I have seen from the Government’s response to the consultation is that this hitherto accepted exemption has been removed in order to maintain a “consistent approach” and a broad sectoral scope. So it is some sort of tidying-up exercise, apparently.

Taken all together, this ratchets up what were considerable levels of concern to—I think it is fair to say—alarm not just in the Scottish and Welsh Governments and other devolved Administrations but in organisations such as the National Farmers Union of Scotland. There is less concern from the National Farmers Union of England. I wonder why that might be. It is worth reminding ourselves that the high percentage of less favoured areas in Scotland’s agricultural land—some 86%—is almost directly reversed in England, where it is only 12%. We have unique agricultural conditions and practices, so the need for a support system that recognises and understands that and takes it fully into account is vital.

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[Jim Shannon]

I very much sympathise and agree with the argument the hon. Lady is putting forward. In Northern Ireland we have the highest quality products, we have an export market that we want to retain, and we want to retain food security as well. She referred to the National Farmers Union of Scotland; the Ulster Farmers Union is also committed to retaining that. Does she agree that the Minister should consider this very seriously, with that in mind?

[Deidre Brock]

Yes, very much so. I agree with the hon. Gentleman because the excellent food produced in Scotland is also to be taken into account. I hope the Minister is listening carefully to what I am saying and will take it into account when he speaks. I would be interested to hear his point of view.

There is a risk that schedule 1 will constrain Scotland’s ability to tailor future policies to the needs of Scottish agriculture. There are concerns about how the regime will work for legacy common agricultural policy schemes delivering income payments and coupled support, and doubts about whether clauses 48 and 81 will allow devolved Governments to make changes where required in order to develop and progress agricultural policies in future. Additional difficulties and potential for legal challenge are created over what could effectively be the avoidable double-banking of subsidy control schemes through the application of the new regime. The Scottish Government are also concerned about the principle that a subsidy that does not unlawfully distort international law could still be challenged, as set out in our Cabinet Secretary’s letter to the Minister,

“on the basis that it does not minimise negative effects on competition or investment in the UK which is a principle that goes beyond the minimum required under the TCA”.

Apart from those numerous concerns, the inclusion of agriculture could dramatically weaken the role of what has been the agreed common frameworks process in this area, which was put in place specifically to manage policy divergence within the UK and any impacts that that might have on the UK internal market. I have been told that no other state in the world includes agricultural payments as subsidies. While I am not entirely sure that that is the case, it is certainly highly unusual. In May, the Minister indicated to the Cabinet Secretary that he was prepared to work on bespoke solutions in the regime that would recognise the particular needs of the agricultural sector, but there has been nothing so far and, I repeat, no real explanation of how it is all supposed to actually work. Perhaps it has been filed in the “too hard” bin, along with many other devolved Administrations’ concerns, or the “can’t be bothered” bin—I am not sure.

If agriculture is left in this Bill, that could create serious problems for devolved Governments in the delivery of their own policies on food production. If the Government are serious about protecting devolution, they will abandon their plans. I urge the House to hear the concerns voiced by Scotland’s devolved Government—I am sure we are going to hear from the Welsh Government as well, and potentially from the Northern Ireland Assembly—and support the inclusion of new clause 1.

Subsidy Control Bill

Deidre Brock Excerpts

Consideration of Lords amendments
Wednesday 20th April 2022 Commons Chamber

[Paul Scully]

The hon. Gentleman makes a really good point. We tried to work with all the devolved Administrations right the way through the process from beginning to end, and we have continued conversations with each of them over this period. Clearly there are, and will be, differences in the process. This needs to work for the whole of the United Kingdom, so I am keen that we continue the dialogue, whether it is with Scotland, Wales or Northern Ireland, to ensure that we can do as much as we can to reach agreement, though clearly that will not always be possible; that is the nature of dialogue.

[Deidre Brock (Edinburgh North and Leith) (SNP)]

Is the Minister not saying that ultimately, on these devolved matters, the English Government, as represented down here in Westminster, will have a power of veto over the decisions of the Scottish, Welsh and Northern Ireland Governments?

[Paul Scully]

No. However, the UK Government have a reserved power over subsidy control, so it is the UK Government who act on that reserved power.

Finally, we have introduced an amendment specifying that the Secretary of State may provide statutory guidance to public authorities on pre-action information requests—that is, the provision of information following a request about a subsidy decision to an interested party that is considering whether to ask the Competition Appeal Tribunal to review the subsidy.

I shall now move on to two amendments related to levelling up. Lords amendment 50 makes it clear that addressing local or regional disadvantage is considered to be an equity rationale for the purpose of assessing compliance with principle A. This puts beyond any doubt that a subsidy to address local or regional disadvantage can be given, provided that the other principles and requirements of the regime are met. Lords amendment 9 exempts from the prohibition on relocation those relocation subsidies that have the effect of reducing social or economic disadvantage. The subsidy must, of course, also comply with the principles and other requirements.

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It is disappointing that agriculture continues to be included in the Bill.

[Deidre Brock]

I am extremely disappointed that the views and concerns of the Scottish and Welsh Governments and the National Farmers Union across these islands, including NFU Scotland, about agricultural subsidies being in scope have been virtually ignored by this Government. They are certainly not reflected on the face of the Bill. Does my hon. Friend share those concerns?