Oral Answers to Questions

John Penrose Excerpts

Tuesday 29th November 2022 Commons Chamber

[George Freeman]

Unlike the Scottish nationalists, we are committed to the private-public partnership that drives investment in our nuclear industry, and Sizewell C is a major commitment. The Government are proud to be partnering with industry, and it is a shame that the Scottish nationalists are not similarly partnering with industry for the benefit of Scots voters and bill payers.

[John Penrose (Weston-super-Mare) (Con)]

13. If he will publish a White Paper on the long-term structure of the UK energy sector after the energy price guarantee ends.

[The Minister for Climate (Graham Stuart)]

The Government have announced changes to the energy price guarantee from April 2023, as well as additional support for pensioners and those on benefits. The Government will work with consumer groups and industry to consider the best approach to consumer protection from April 2024 as part of wider retail market reforms.

[John Penrose]

Does the Minister agree that while subsidies are necessary short-term sticking plasters, investors will not commit the multi-billion pound investments that the energy sector needs to upgrade and modernise energy storage, generation and transmission unless the long-term rules are clear? Will he therefore update the Energy Bill to lay out a sustainable long-term future with investable deadlines and milestones to transition from today’s highly distorted, politicised and bureaucratic sector to a cheaper, simpler, better-value industry with much lower political and regulatory risks?

[Graham Stuart]

I am proud that this Government have led the way, with contracts for difference driving renewables such as offshore wind by driving down costs. I am also delighted that we have the legislative vehicle to deliver the necessary changes, and the Energy Security Bill will be taken forward in this Parliament to transform our energy industry by turbocharging carbon capture, utilisation and storage and our hydrogen industries in pioneering projects from the Humber to the Mersey, and beyond. The Bill will encourage competition in the energy sector, creating opportunity, prosperity and security with clean jobs, new skills and, as my hon. Friend rightly highlights, cheaper bills.

Britain’s Industrial Future

John Penrose Excerpts

Tuesday 15th November 2022 Commons Chamber

[Bill Esterson]

The hon. Lady should perhaps take more care about how the Chinese are threatening to pull the plug on steel production in her constituency right now.

[John Penrose (Weston-super-Mare) (Con)]

The shadow Minister mentioned green steel. Do the Labour party’s plans include anything to do with a carbon border adjustment mechanism, which would, not just for steel, but all heavy energy using industries, level the playing field between British energy users, particularly manufacturing industries, and their cheaper competitors elsewhere in the world, who have cheaper energy costs? Is that part of the Labour party’s plans?

[Bill Esterson]

Perhaps the hon. Gentleman should be asking the Minister that question rather than me. [Interruption.] He has told me he is going to ask the Minister in a minute, and I look forward to the answer. Our view is that we have to respond to the fact that the EU is already doing this and we are clearly going to have to take action to safeguard the steel industry in this country. So I would be very interested in what the Minister says and whether it is consistent with what I have said.

--- Later in debate ---

[George Freeman]

I would point out that last week, Green Lithium announced the UK’s first large-scale merchant lithium refinery and the first such refinery in Europe, to be built in Teesport, supported by the automotive transformation fund.

[John Penrose]

I want to ask the Minister the same question that I asked the hon. Member for Sefton Central (Bill Esterson) about a potential solution to the problems of high electricity costs faced by energy-intensive industries such as steel, which we have been hearing about from Opposition Members. Would a carbon border adjustment mechanism, which the Government have already consulted on and committed to in principle, help to level the playing field between British energy costs and those abroad, therefore making British heavy industry—particularly energy-intensive industries—far more competitive on the international stage?

[George Freeman]

My hon. Friend, as ever, makes a very interesting policy observation; as Minister for science, I will not accept it at the Dispatch Box, but I will raise it with the Ministers for industry and for energy.

Energy Prices Bill

John Penrose Excerpts

2nd reading
Monday 17th October 2022 Commons Chamber

[John Penrose (Weston-super-Mare) (Con)]

I have yet to hear a question to which, in the view of the hon. Member for Kilmarnock and Loudoun (Alan Brown), the answer is not more independence for Scotland.

I rise partly to support this very necessary—albeit nose-bleedingly expensive—measure, which is essential to making sure that people can afford to heat their home over the next few months. However, while I support the fundamental underlying principle and the humanity behind it, I must register some grave disquiet in relation to the hon. Gentleman’s point about Henry VIII powers in the Bill.

The concern is not just mine but from many in the industry. Nor is it just about the constitutional point, although that matters; the Secretary of State needs no lessons from anybody here on concerns about Henry VIII powers. Broadly speaking, clauses 13, 21 and 22 will give him the power to intervene and reach in, past Ofgem, with pretty much anything he likes and for pretty much as long as he likes, provided that he can persuade himself or a few other people that the emergency is continuing.

That means two things. First, it means that nobody will be willing to invest in our energy industry if there is a continuing risk that the rules of the game are likely to be changed and the goalposts of the industry moved on a political whim. Secondly, I struggle to think of a measure that will be welcomed more by socialists on the Opposition Benches. It will give them carte blanche, without having to do anything in Parliament, to renationalise anything they like in any future Parliament, unless we trim these powers substantially and impose a significant sunset clause on them. At the moment, we have a programme that is supposed to last for six months and then be subject to a Treasury-led review, but these powers carry on well beyond that. That seems too broad, unconstitutional and a danger to investment in the industry. I urge my right hon. Friend to think carefully and urgently to trim that feature of the Bill.

Finally, the one area in which there is no sunset clause —in which we are actually removing a sunset clause that already exists—is the energy price cap. It will no longer be subject to the sunset clause to which Parliament agreed when it was originally created. That means that legislation that has dramatically and demonstrably failed to do what it was originally supposed to, which was to kill off the loyalty penalty, will carry on like the undead. It will never die, yet it is the one thing that absolutely should. I hope that my right hon. Friend will think again about those important issues.

Energy Security Strategy

John Penrose Excerpts

Tuesday 5th July 2022 Westminster Hall

[Mick Whitley]

I thank the hon. Lady for that point. The Minister will point towards the considerable up-front costs of tidal power as a barrier to progress, but such a view ignores the fact that all renewable technologies are expensive in their infancy, as well as the fact that some of these installations could have lifespans of more than a century.

[John Penrose (Weston-super-Mare) (Con)]

The hon. Gentleman is to be congratulated on getting this debate organised. My constituency of Weston-super-Mare fronts on to the Bristol channel, which is the largest source of potential tidal power. He is right, of course, about the up-front costs being significant and the lifetime costs being lower. However, even factoring that in, the total lifetime levelised costs of tidal power are, from all the figures I have seen, dramatically higher than anything else out there. Has the hon. Gentleman seen figures that I have not?

--- Later in debate ---

[John Penrose (Weston-super-Mare) (Con)]

Thank you, Mr Davies. I congratulate the hon. Member for Birkenhead (Mick Whitley) on bringing this debate before us today.

I support a great deal of what is in the energy security strategy. The measures to diversify our electricity supply are welcome, necessary and absolutely essential, particularly with what is going on in Ukraine and internationally, as we have already heard from numerous contributions. There is a great deal to applaud and support in the document. However, the problem is that, while most of the measures are good, necessary and welcome, they are very long term. We cannot build a nuclear power station or even an offshore wind farm terribly quickly. Most of them are several years away at a minimum, and some of them a great deal longer than that.

Of course, the energy crisis is now—today. All of us have people in our constituencies who are struggling with their bills, which are bad already and will be even worse this autumn because, as we have already heard, of the expected rise in the energy price cap. There will be another swingeing increase and people will find that what is difficult today will be impossible by then. I urge the Minister to consider some short-term measures in parallel with the Bill, to ensure that we do not forget the pain. We need measures to deal with some of that pain as fast as we decently and respectably can.

We have already heard from pretty much everybody who has spoken so far about the importance of insulation, so I will not belabour that point, other than to say that it is right and we need to do more about it. We can do something about it and the effect will be instant for householders. There is a problem with supply and getting enough skilled people to install the rotten stuff, but if we can get that solved—we should start now—it is the sort of thing that will happen much faster than the time it takes to build an offshore wind farm. We should have begun already.

Equally, the energy security strategy has a gaping hole when it comes to the review of electricity market arrangements, or REMA. Onward has today published a good report on what needs to be in that review. In summary, everybody has been saying for several years that the cost of renewables is falling. In fact, the cost of offshore wind is a fraction of what everyone expected it to be today, which is excellent news. The problem is that none of that is showing up in our energy bills because our energy market, particularly our electricity market, is a slave to the international price of gas. That is what it tracks and that is what dictates the bills that we all get. We need to reform that market and allow those lower renewable costs to feed through to customers. The money is there. It does not require windfall taxes or Governments to intervene through the benefits system or council tax rebates. The money is there if we can just get the flipping stuff to feed through a different market mechanism—an open market mechanism—and land in the bills on people’s doorsteps

A lot of renewable energy sources—offshore wind farms, for example—have been built under contracts for difference, which the Minister and his predecessors have been very good about. A lot of those contracts for difference are now massively in the money. In other words, they are a great deal cheaper in relation to the power they produce than the charge that we are all getting on our bills. We could take the green energy levies, which are already on our bills and which add to them, and say, “Those could be negative—they could be discounts.” Everybody could receive a rebate on their bills if we let the negative price differential between the contracts for difference, which have been signed up to, and the real price today feed through to our energy bills. That is just one example of the kind of change we could make. It could happen fast and it would prove to people that green levies do not always have to be expensive. In fact, they could be beneficial and create great retail buy-in to the notion of green power.

Finally on these short-term measures, later this year the existing energy price cap legislation will come up for either roll-over or renewal. I want to make an urgent and earnest plea to the Minister: rather than just rolling the thing over, we should instead reform it dramatically, because it was originally introduced to do something entirely different from what it has been doing. It was introduced originally to try to get rid of the loyalty penalty, which penalises people who do not switch. People were being ripped off left, right and centre if they did not switch, and that added cost to the market overall, which is mainly focused on people who are loyal, but it was spread across the entire market and ultimately raised overall prices.

The cap is hideously expensive to administer and imposes enormous complexity and hedging costs on energy market firms, many of which have gone bust because they did not get their hedging right. If we can simplify that cap, change it dramatically and change how it works, we can strip out all that cost. If we strip out all that cost, that rebate, discount or reduction in costs can be fed through to the customer. Again, that could result in a lower overall cost to our hard-pressed constituents, all of whom are struggling now and all of whom will be struggling even more.

There is a lot to admire, to applaud and to support in the energy strategy, but an awful lot is missing. We need to address that quickly and urgently, and it needs to happen now in order to make a difference to all our hard-pressed constituents as soon as possible.

Energy Security Strategy

John Penrose Excerpts

Tuesday 19th April 2022 Commons Chamber

[Kwasi Kwarteng]

I know that Bristol has a strong tradition of green, carbon-reducing policies. I should be happy to visit the city and see the great work that is being done there. It is a part of the world that I know well from Airbus and other great industrial concerns.

[John Penrose (Weston-super-Mare) (Con)]

I congratulate the Secretary of State on this excellent document. May I press him on the review of energy market arrangements and the long-term fundamental reform of the underlying market? Will he reassure me, and others on this side of the House—at the very least—that that will be done in a spirit that will maximise competition and consumer choice to ensure that we make the customer the king and the queen, and that it will include price cap reform?

[Kwasi Kwarteng]

All these issues are being looked at. The six-month periods for the price cap are being reviewed, and, as I have said, financial resilience for new entrants will be considered. A subject that has not been mentioned so far is the future system operator and the electricity system operator. That is a remarkable innovation, and I am proud that it is included in the document. I should be happy to talk to my hon. Friend about these matters.

Penrose Review: UK Competition and Consumer Policy

John Penrose Excerpts

Tuesday 8th March 2022 Westminster Hall

[John Penrose (Weston-super-Mare) (Con)]

I beg to move,

That this House has considered UK competition and consumer policy in response to the Penrose review.

It is good to have you looking after us, Mr Efford, to ensure that we do not misbehave during the course of the debate. It is good to see you in the Chair.

Just over a year ago, I was commissioned to write a report by the Treasury and the Department for Business, Energy and Industrial Strategy. It came out almost exactly a year ago and it is called, “Power To The People”. It is about competition policy and was produced at the request of the Government. A year after publication, I thought it was reasonably sensible to think that we might want to have a look at what has happened as a result of my recommendations—which ones have happened and which ones have not—hoping perhaps to goad, tease or otherwise persuade my hon. Friend the Minister to be as indiscreet as he possibly can be about what might happen in future, to fill in any gaps, and discuss the recommendations that have not yet taken place.

I will summarise briefly progress on implementing some of the recommendations in the report in the intervening year and I will focus fairly straightforwardly on the things that have not happened yet, so that the Minister has a text from which to work—if I may put it that way—and on the gaps that remain. To be fair, although I do not want to overclaim on this, it is true to say that there has been a reasonable amount of progress across Government on some of the recommendations in my report.

For example, there have been a series of consultations and commitments from the Competition and Markets Authority about the kind of changes that it wants to make to its internal processes and the way it works. One of the central recommendations in the report is that the CMA needs stronger consumer powers—upgraded to match its anti-trust competition powers—and a whole series of other things necessary for it to move faster to judgments in individual cases much more quickly. Ideally, in most cases—the easier cases—that should be within days or months, rather than in the current parlance, when things can easily run into years; we need faster and more certain decisions.

The CMA is supposed to upgrade its capability to become what I termed the “micro-economic sibling” to the Bank of England’s macroeconomic work. In other words, every time the Bank of England talks about the macro economy, the CMA should have a public role in putting forward our progress in creating supply-side reforms to improve competition in individual markets and in individual parts of the country. As we all know, our country has a real problem with declining levels of productivity and of competitiveness the further away from the M25 one travels.

The report therefore makes a series of recommendations, some prompting a series of consultations on internal reforms to the CMA, which are very welcome. There are things like the

“micro-economic sibling for the Bank of England”,

which I have just mentioned, which has been declared and is due to be set up. There have also been declarations that the CMA’s consumer powers will be upgraded in due course. We will need primary legislation for that, but there has been extensive consultation on it. There will also be things such as stronger penalties for companies that do not comply with data requests and so forth, seeking to slow down the progress of any competition cases. So, all—or mostly—good news in that area at least.

The CMA has also established something called the digital markets unit, the DMU, which will be absolutely essential to future operations in ensuring that we can deal with consumer detriment created by digital network monopolies—the big FANGs of Facebook, Amazon, Netflix and Google. The DMU is now in operation, but in shadow form, because it does not have any of the necessary legislated powers that it requires. It has at least started. There has also been an increase in the CMA’s resources post Brexit because, as we left the UK, we had to have a stronger domestic pro-competition set of institutions, otherwise all the things that had been happening in Brussels, in the EU’s competition world, would not have been coped with, so they were repatriated.

Equally, the ideas in the chapter on economic regulators are about trying to reduce the overall role of such regulators over time. We should be trying to normalise as much of the markets that they run as possible. There is no intrinsic reason why, for example, energy, telecommunications or others cannot be mostly normal and as usual, as run of the mill as buying a loaf of bread or a pint of milk. We do not need an economic regulator to protect us when we do that. There are large chunks of these markets where we could be just as protected by normal consumer protection laws, and would not need an economic regulator, except for the bits of those markets that are fundamentally based around network monopolies.

Every single one of the economically regulated sectors in our economy—telecoms, energy, water or any of the others—all have network monopolies at their core, whether it is electricity distribution, the national grid, local electricity distribution grids, gas pipes, water pipes or whatever it might be. There is a network monopoly at the core, and those are inherently less competitive. We cannot get them to work in the normal way, and there has to be a residual level of economic regulation on those networks. Perhaps there are some deeply embedded and hard-to-solve consumer detriments in finance, too. Other than that, we could and should seek to erode the role of the economic regulators over time, normalising their markets as far as we can, as this report recommends. It is not a quick process; it will take time, but it can and should be done, outside the areas I have just described.

How are we doing? In some respects, quite well. There is something called the “Economic Regulation Policy Paper”, which I am sure everybody here has been keeping next to their bed for bedtime reading. That came out of the Department for Business, Energy and Industrial Strategy a couple of weeks ago, and is intended to address the statutory duties of the economic regulators, and increase the level of competition they are involved with. It makes all the right noises and speaks all the right warm words about doing that. I will come back to that in a minute, because one of its problems is that, in modernising the statutory duties, to enable the process I have laid out, it is going to

“launch a review of utilities regulators’ statutory duties in 2022.”

It does not say when that is going to be launched, when it will be finished or what it will do about it when it is done. Everybody here will be familiar with the term “long grass”. I hope the Minister will be able to reassure us that this is not long grass, that it will happen in a timely way, and that he is out with his lawnmower trimming the sward to ensure that it will happen, rather than get parked somewhere and gently forgotten.

There is also good news on public procurement, which has been brought into sharp focus during the pandemic. We absolutely need to have a faster, better and more transparent public procurement process. We inherited this process from the EU as the OJEU—Official Journal of the European Union—rules. They do a lot of good things, but incredibly slowly and in bureaucratic fashion. As a result, we end up with processes that are clunky. When we have a national or international emergency, such as the pandemic, they are cruelly exposed as not working well enough.

I am pleased to say that there was when I published this, and there remains, a continuing commitment to launching a new public procurement Bill. That is due, probably not in this Session, but I hope in the next. It has been heavily trailed, and I hope and expect that it will take what we have and make it much more nimble, digital and open to small firms being able to compete with long-standing large incumbents, such as Carillion. It will not only be pro-competitive but will involve a great deal of better value for money for taxpayers. It will mean that we are less likely to have, for example, a scramble for personal protective equipment, if we have another national emergency such as the pandemic in future.

Finally, on the positive side of the ledger, there has been some progress on the ideas I talked about for trying to improve competition outside the south-east, and to improve retail opportunities for people who need redress, if they have been done wrong and their consumer rights have been breached. There has been a little progress on trying to make small claims courts and ombudsmen work better, more digitally and faster, while continuing to be cheap, so that there is ready justice, if necessary, for somebody who has not got what they paid for under consumer rights. That is all good, but we have a great deal further to travel.

My contention is that in a digital world, we should be able to have the same kind of 24/7 service that we expect when logging on to do our grocery shopping at 3 am— I do not do that, but some people do. That is something that, increasingly, we expect to be able to do. If we can shop 24/7, we should be able to seek redress 24/7 when that is needed, but there is a noticeable gap there.

Although that gap is starting to close, and there have been reforms of the small claims court for example, there has been no reform in other areas that need it, such as in the creation of county competition courts. Such reform is necessary to create opportunity for small, local companies that are being ganged up on by larger local incumbents and prevented from prosecuting their competition rights, because taking someone to the Competition Appeal Tribunal in London for a breach of competition law is never going to be affordable.

Even under the current fast-track approval process, redress is still out of reach for most small regional firms. A restaurant in Bristol, an estate agent in Hull or an hotelier in Liverpool will not be able to afford to do anything if they are being ganged up on by a local competitor until we get what I am calling “county competition courts”. I am afraid that there has been little progress towards that at the moment. Nor has there been progress towards a generalised update and improvement of local trading standards teams. That is needed in many parts of the country to ensure that there are proper defenders of consumer rights.

I do not want to cavil too much, because there is a decent list of progress. It would be churlish to say that nothing has happened in the last year, because it really has. I commend the Government and my hon. Friend the Minister on that progress, but I am afraid that there is a slightly longer list—it is certainly a serious list—of things that have not yet happened on the other side of the ledger. I will run through them quickly, then leave it for others to pick up on any particular points.

First, one of the report’s central points is about speeding up how fast people can get justice through the CMA if they need it. As I mentioned at the start of my speech, we have to ensure that all but the most complicated, hideously difficult and groundbreaking cases can be decided by the CMA. Most cases ought to take weeks or months rather than years. At the moment, there is no overall core process redesign within the CMA or the Competition Appeal Tribunal, which is effectively the appeals court for lots of CMA cases. Such a redesign—if I can call it that—will be necessary to make dramatic improvements in the availability and certainty of justice.

That matters because at the moment, it is all too easy for large, well-lawyered incumbents to walk backwards, slowly, in the face of a challenge from a small, plucky entrepreneurial, insurgent firm that is trying to transform and disrupt a particular market. If they can strew legal obstacles in the challenger’s path, they can basically make it much harder for Britain’s economy to be nimble.

[Cherilyn Mackrory (Truro and Falmouth) (Con)]

I appreciate what my hon. Friend says about competition. Does that apply to local authorities, which tend just to employ one arm’s length contractor when plenty of local people could bid for jobs such as road building and maintenance, for example?

[John Penrose]

That is a particularly good example of the kind of problem that I was referring to when I mentioned public procurement reforms. I think we should be all extremely interested in what they show. When those reforms come, they should mean that local government, as well as national Government and many arm’s length bodies—from the NHS to English Heritage, and everyone else in between—should be able to make much faster decisions in a way that is more accessible to small firms that are not equipped to wade through pages and pages of tender documents, some of which require a PhD and actually have little to do with whether a product or service is better than the big incumbent’s. That will be an essential change.

Speeding up the CMA is absolutely essential. One of the most glaring and—I am afraid to say—saddest omissions from the recommendations is on better regulation. There is a difference between deregulation and better regulation. I am sure that you are thoroughly familiar with it, Mr Efford, but for the record and for everybody else, deregulation is where standards are got rid of and there is a sort of race to the bottom—that is not what I am recommending in this report at all—whereas better regulation says, “How do we deliver the same standards in environmental quality, food standards, workers’ rights and all the other things that we regard as essential in our modern society, in a way that is cheaper, quicker, simpler, or more digital or more modern? How can we do that in a way that costs the providers of those things less?” If it costs the providers less, that means they can do it at lower cost, which means that consumers can get the same product or service at a lower price in the first place. It is up to everybody and it will be for all our benefit if we can do that.

However, getting rid of red tape and regulation is one of the hardest things to achieve in Westminster and Whitehall, because everybody here knows that the culture of this place is framed in terms of making new rules. That is how civil servants or—dare I say it?—one or two MPs make their career; it is by inventing new rules and not by getting rid of old ones. That is the culture of this place.

Better regulation is an extremely easy thing to say and an extremely difficult thing to do, although there have been examples—rare ones—in the past where we have succeeded. There was a brief flowering of success between 2010 and 2015, under David Cameron when he was Prime Minister, whereby the pro-regulatory ratchet got reversed and for a couple of years we were genuinely making progress, and in fact local firms and small firms and their organisations, particularly the Federation of Small Businesses and similar bodies, noticed it and said, “This is working”.

Unfortunately, when David Cameron left office, the blob pounced; I do not know whether a blob can pounce, but perhaps it enveloped the new regime. When David Cameron left office, the blob looked at what worked—basically, it was having a gateway condition saying, “If you are the Minister for paper clips, you can’t have new rules about paper clips until you have found two old ones to get rid of”; that was the thing that had been making things work until then—and said, “That’s a terribly old-fashioned way of doing it. We’ve got a much better way of doing it. Why don’t we have a big target and we’ll hit the target and that will be good?”

However, because the blob had got rid of all the rigour and all the mechanisms for getting rid of the red tape, what happened instead was that there was a huge target, which was completely missed. In two years, we went backwards, by £8 billion-worth of extra costs, when we had expected to remove £9 billion-worth of extra costs. Instead of removing £9 billion-worth of extra costs, we added £8 billion-worth, which was a £17 billion miss in two years.

That was absolutely disastrous compared with what we had been doing for the previous five years, and the thing that worries me is that it is being recommended that we go back to something rather similar. I do not care whether it is one in, one out or one in, two out, but it is essential that we have that gateway condition, because if we do not have it we will carry on going backwards.

I am afraid, and very sorry to report, that the benefits of Brexit report—another piece of bedtime reading, Mr Efford, which I am sure you have gone through in detail—says on page 27 that we will not reintroduce the old system at all but will stick with the one that has just failed, and we will carry on repeating the same mistake that we made before. I really hope that my hon. Friend the Minister will be able to tell me that that has now changed around, but I fear that he will be unable to. If we do not change around, then we will fail again, and—let us be very clear about it—that is what we are currently heading towards.

I have final thoughts on the economic regulators, Mr Efford; I am nearly there. As I say, we have had some progress here, because, as I mentioned, the Government have said that they are consulting on trying to improve the statutory duties of economic regulators to add extra competition, which should lead to shrinking the regulators over time.

However, as I also mentioned, we do not have a date for when the report on the economic regulators is due, so we do not know if anything will ever be done about them; I hope that my hon. Friend the Minister will be able to say that the Government will do something about them. Without a date and without a firm commitment in principle that the report will genuinely try to normalise as much of the market as it can, outside the network of monopolies that I was talking about, the suspicion has to be that we are not trying to normalise these markets and that what will happen—unacknowledged, but none the less firmly—is that there will be no appetite for normalising as much of these markets as we can, and that instead the preferred destination is perpetual heavy regulation. I really hope that my hon. Friend the Minister can reassure me that that is not the de facto intention behind what we are currently doing.

My final point is about the final chapter in the report, which is on subsidy control. Subsidies are a very heady political drug, if we are not really careful. No matter the political party we belong to, it is always tempting when lobbyists come knocking. It does not matter whether a Member is in opposition or in government, nor whether it is local government or national or sub-national Government. When lobbyists come knocking, they say how terrible it is that this big, important local employer has been left behind—it did not invest in whatever it was it was doing and is now 20 years out of date, so it has been overtaken by plucky entrepreneurial upstarts from other parts of the country or, indeed, from other countries—and they say, “Isn’t it terrible that these jobs are now at risk? What we need is a just a temporary wafer-thin subsidy to tide us over for a couple of years while we fix things.” Of course, they do not fix things and then, a couple of years later, they come back and ask for more.

That is expensive for taxpayers and it reduces both the productivity of industry and the long-term security and sustainability of British jobs, which become progressively more and more vulnerable to international competition. Ultimately, it is the thing that did for us in the 1960s and 1970s, and which we had enormous pain trying to fix in the 1980s and 1990s. Subsidy control is vital. It is one of those rules that has just come back, post Brexit, from being run by Brussels. We have a Subsidy Control Bill before Parliament at the moment—it is in the Lords. It will do all sorts of really good things to speed up our subsidy control process; it is much more nimble and light-touch. If authorities are compliant with six or seven different principles—

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

Seven.

[John Penrose]

I thank the Minister for that information. If they comply with seven different principles of good subsidy, as opposed to bad subsidy, they can just get on with it—whether that is a local council or a national Government Minister, or anybody in between.

That is fine, except that we are keeping them a secret. We are not telling anybody what the subsidies are that we are dishing out. The EU system, which is what we are trying to replace, says that it is necessary to disclose any subsidies above half a million euros, which is quite a high level, actually. It means that a lot of subsidies are never disclosed at all, particularly if they are dished out by local councils. We are saying that it is not necessary to declare any subsidies under half a million pounds. The last time I looked at the euro-pound exchange rate, that is a higher level of disclosure than the old EU system. There are some other levels that are a bit lower for other bits and pieces, about which I am sure the Minister will remind us.

However, broadly speaking, we are going to declare less in future: we will be less transparent than we were in the past. That leaves the door open to cronyism—to local authorities or national Governments dishing out money to their mates, secure in the knowledge that nobody will know because we will not be able to see. It also leaves the door open to higher levels of subsidisation, potentially of less competitive firms, and therefore to wasting taxpayers’ money in future. Given what is happening to the cost of living at the moment, none of us wants to waste a single penny of hard-won taxpayers’ money, particularly when we have to take it as taxes in the first place.

It is a curate’s egg. It is sort of two cheers, rather than three, for what has been done so far. After a year, there has been genuine progress, and I am delighted to celebrate the points on the positive side of the ledger that I started off with. However, there is quite a lot—marginally more—on the negative side of the ledger; those things have not yet happened, but they could. The advantage is that most of the reforms that I have gone through—which have not yet happened, but which could—will not cost the Treasury a bean. They will not cost the taxpayer a bean. They will mean that British jobs and companies will become more competitive, more sustainable and safer in the long term, because, ultimately, the only thing that protects us against international competition is the fact that we are better than the international firms we compete against. It is a cheap route to economic success.

I am hoping, therefore, that it is a bit of a no-brainer. It is one of those things about which we say, “Why wouldn’t you do all of this stuff? Why on earth would you not?” The only reason, I am sure, is that there are genuinely significant vested interests behind some of these things that make them difficult to shift. However, we have a doughty warrior in the shape of the Government Minister responding to this debate. I am therefore looking forward to hearing how quickly he will be able to fight and smite the various different vested interests that would otherwise slow us down.

--- Later in debate ---

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Mr Efford. I thank the hon. Member for Weston-super-Mare (John Penrose) for initiating this debate, and for his work on this issue. His very important “Power to the People” report was published around a year ago. In his opening remarks, he clearly laid out the sentiments and recommendations of the report, as well as, importantly, the context of declining competitiveness, the productivity challenge we face and the importance of making sure that we can act against the non-compliance of companies that do not play their part, so that we can ensure a fair regime for all businesses and for consumers. He rightly raised points about the vested interests that distort our markets.

Competition law seeks to curb practices that undermine or restrict competition to the detriment of consumers. Those practices can include a firm’s abuse of its dominant market position, anti-competitive practices, and mergers or takeovers that, if allowed, would result in a substantial lessening of competition. There has been a rapid increase in takeovers and mergers, particularly during the pandemic lockdowns, so that is an area that needs further work. I will come back to that.

Labour welcomed the Penrose report, and also highlighted where it needed to go further. UK markets are becoming more concentrated, and that hits consumers and workers, and stops small businesses in their tracks and prevents them from progressing. are stopping small businesses in their tracks. We want a re-evaluation of the role of the Competition and Markets Authority to ensure that it has the tools to tackle the growing concentration of market power.

We may disagree on rolling back economic regulation, but the issue is not necessarily the principle; it is more about asking whether we have the regulations we need for effective regulation of markets for consumers. That may not be about quantity; I think it is about quality. That is where the debate needs to start. I am not interested in regulation for regulation’s sake. For me, regulation is about purpose; it is about making sure that it will be effective and deliver the outcomes that we believe are necessary. We need more robust competition policy; we need to crack down on tax avoidance, and challenge mergers and acquisitions that mean taking on unsustainable debt, or that are not in Britain’s long-term strategic interests.

I thank all hon. Members who have contributed; they have made important and distinct contributions highlighted different areas of the subject. We in this House have long known about the work that my hon. Friend the Member for Makerfield (Yvonne Fovargue) does on consumer protection. She raised important issues around fake reviews—reviews are part of how consumers are informed—and around how action can be taken when consumers are misinformed. She also raised the important point that consumers and businesses have a common interest in making sure that markets work effectively and fairly. She highlighted the importance of ensuring that reform is based on how consumers behave today, how the market works and how consumers receive their goods and services. Many of those issues are interconnected. She rightly alluded to the important work of Which? in this area, and I thank it for its contribution.

The hon. Member for Truro and Falmouth (Cherilyn Mackrory) shared a rich picture of her constituency, the opportunities and sectoral issues in her local economy and the challenges in taking forward some of those opportunities. The hon. Member for Folkestone and Hythe (Damian Collins) highlighted clearly the dominance of power of the social media companies, which is an important backdrop to the digital markets reform that we have discussed. The hon. Member for North Ayrshire and Arran (Patricia Gibson) talked about the importance of value for money and consumer protection. Some of the issues that she raised, like those raised by my hon. Friend the Member for Makerfield, were very powerful.

Focusing on consumer interest has never been more important given the cost of living crisis that consumers face. Inflation is out of control, with energy, food and petrol prices rocketing. It is not just about global factors; we know that poor Government economic management has left us uniquely exposed. We have a buy now, pay later loan scheme for energy bills, rather than dealing with the problems in our energy market. We are very worried about raising taxes on working people and businesses at the worst possible time. In parallel to our debate, an Opposition day debate is taking place to call on the Government, again, to stop the national insurance rise in April.

There has been a long journey of reform. Hon. Members will be aware than when Labour was in power, we argued strongly that UK regulation of anti-competitive practices was weak. That led to one of our first pieces of legislation, the Competition Act 1998. That recent journey is worth noting, because, as my hon. Friend the Member for Makerfield said, it has been four years since the Secretary of State for Business, Energy and Industrial Strategy asked the CMA for proposals to better protect consumers in the digital economy and improve public trust in markets.

The then CMA chairman, Lord Tyrie, outlined his proposals to the Secretary of State in a letter in 2019. The Penrose review followed in February 2021. Last summer, the Government published two consultation documents—the first on reforming competition and consumer policy and the second on a pro-competition regime for digital markets. Both sets of proposals would require legislation to take forward some of the challenges raised, but the Government have yet to publish their response to either of those consultations.

I recognise that both the Penrose review and the Government’s consultation represent some progress in addressing the rules governing the UK’s companies and markets, not least as they recognise that reform is necessary. They are also vehicles for reforming the UK anti-trust regime post covid and post Brexit. The Penrose review is very important in that respect. The existing system, however, is no longer serving consumers appropriately, and is not fit for purpose in a digital age. It could lead to new monopolies created at any time in new markets.

[John Penrose]

It sounds as though the hon. Lady is joining other Members in saying that we need a new competition and consumer Act to fix some of those things. Could she confirm that that is the Labour party’s position? I think that is what she is saying, but I do not want to put words in her mouth.

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

It is a pleasure to serve under your chairmanship, Mr Efford.

I congratulate my hon. Friend the Member for Weston-super-Mare (John Penrose) on securing the debate and on his report. Wolfie Smith will be turning in his Afghan coat when he sees that “Power to the People” has become the mantra for fixing broken markets to encourage good competition and free markets, but the report is an interesting read. That reference got tumbleweed from some of the younger Members, but I hope that my hon. Friend remembers Wolfie Smith.

My hon. Friend’s report is an important contribution to the debate on reforming the UK’s competition policy. It has had a significant role in shaping the Government’s thinking on the priorities for reform, and I reiterate my thanks to him for his work and for his continuing engagement with and advocacy for reform.

In the report, my hon. Friend argues that the UK’s competition and consumer regime should be one of the best in the world and the Government are absolutely four-square behind that objective. Now that the UK has left the EU, we must build on this country’s innovative foundations to create a robust and agile economy that works for everyone and that is fit for future generations.

Competition and consumer policy has a central role in creating a thriving free market economy that encourages innovation, enterprise, growth and productivity. Competition policy is crucial in creating the right conditions for healthy competition between traders in markets to win over consumers by offering the best deals and innovation. Consumer policy is vital in underpinning consumer confidence. It empowers consumers to engage in markets in an assured manner, knowing that they have a strong set of legal rights that will be respected and enforced.

That is why we committed in our manifesto to give the CMA enhanced powers to tackle consumer rip-offs and bad business practices. It is also why the Government committed in our plan for growth to the UK’s having a best in class competition regime that will raise innovation and investment across the economy.

An effective competition and consumer policy will help us to build back a better and fairer economy, giving businesses confidence that they are competing on fair terms and giving the public confidence that they are getting a good deal. The UK’s competition regime is already well regarded internationally, so we are starting from a strong foundation. However, we should always strive to be better and to go further.

Markets and the way that consumers and businesses engage with each other have changed dramatically since the current legislation was enacted. That change is particularly stark in the digital economy. The tech revolution has brought huge benefits. Recent research has shown that about 15% of all businesses have adopted at least one artificial intelligence technology. In recent years, we have also seen that some digital markets have certain characteristics that make them more prone to weak competition.

Despite the actions that the UK has taken to promote competition, there is evidence from the CMA that competition may have weakened over the last 20 years. In 2020, the Government commissioned the CMA to produce an expert state of competition assessment to improve our collective understanding of the level and nature of competition across the UK economy. In its first “State of UK Competition” report, the CMA found that mark-ups, the ratio of prices to costs, had increased by 7% from 2000 to 2018. It found that in 2018 the average combined market share of the 10 largest firms in an industry was 3% higher than in 1998. It is essential that the competition regime does more to encourage and maintain competitive markets.

The Government published two consultations on legislative reforms in July last year, building on the work of my hon. Friend the Member for Weston-super-Mare. The consultation, “Reforming Competition and Consumer Policy”, set out a vision for the future of our competition and consumer policy. The separate consultation, “A New Pro-Competition Regime for Digital Markets”, set out a vision for a new agile and flexible regime to promote competition in digital markets, something that my hon. Friends the Members for Weston-super-Mare and for Folkestone and Hythe (Damian Collins) highlighted that we need to improve.

The package of reforms in the Government’s two consultations shares the ambitions of the report by my hon. Friend the Member for Weston-super-Mare. Those proposals seek to enhance the powers of the CMA and consumers’ rights, and ensure that those rights are robustly enforced. They will work to protect consumers and help businesses thrive. In addition to sharing those ambitions, my hon. Friend’s detailed report has had a considerable influence on where Government see opportunities for reform.

[John Penrose]

Will the Minister clarify when the Government expect to respond to the consultations he mentions? Clearly, they will inform what might or might not be in any future competition and consumer Act.

[Paul Scully]

Indeed. My hon. Friend is right to have used the near anniversary of his report as an opportunity to discuss the issue. Unfortunately, he has slightly missed the target of the consultation response, which we hope to bring forward very shortly. To answer my hon. Friend the Member for Truro and Falmouth (Cherilyn Mackrory), the Penrose report did not need Her Majesty to give a notification that it was coming forward. Unfortunately, I cannot pre-empt what Her Majesty will say in the Queen’s Speech about future legislation.

A central recommendation of the Penrose report, which my hon. Friend the Member for Weston-super-Mare has repeated today, is that the Government should take steps to ensure that the enforcement of competition and consumer law speeds up to keep pace with the modern digitising economy. We agree and propose a range of measures to make enforcement more efficient. For instance, we propose that the CMA should have stronger powers to penalise businesses that obstruct or slow down investigation. The Government have also proposed new ways for businesses and the CMA to reach agreements on the actions needed to resolve competition issues in market-wide investigations and merger reviews. Both those changes were recommended by my hon. Friend in his report.

He also recognised the need for UK competition regulators to work in partnership with regulators overseas, to help address competition and consumer issues that span borders. We agree that effective international co-operation is an important part of the UK’s competition and consumer regime. Promoting that co-operation is a key objective in our free trade agreements, and we have successfully secured text on that in the UK’s recent agreements with Australia and New Zealand. We have consulted on legislative proposals to ensure that the CMA and consumer authorities can work as effectively as possible with their international counterparts.

My hon. Friend’s report also emphasised the role of consumer protection law in empowering consumers and driving effective competition. We agree that our already strong consumer rights framework must continue to support consumers into the future, allowing them to benefit from new technology and business models and to feel empowered to make the best decisions available to them. We have consulted on measures to tackle subscription traps, where a consumer enters into a subscription for a product or service but has difficulty leaving. We have also consulted on measures to tackle fake reviews, as mentioned by the hon. Member for Makerfield (Yvonne Fovargue), which undermine competition and give unfair advantage to traders who are willing to use them.

In taking steps to strengthen the protections for consumers, the Government are aware of the need to consider any new burdens on businesses. We want to ensure that consumers get that fair deal and that businesses are not overburdened by regulatory barriers. My hon. Friend the Member for Weston-super-Mare is absolutely right to talk about better regulation, and I will speak a little more about that, if I have time.

My hon. Friend talked about how we can have better dispute resolution, because when consumers enforce their rights, poorly performing firms face more pressure, and consumers know they can trust the system to be on their side if they need it. That is what we need.

[John Penrose]

The Minister is being very generous. I just want to press him a bit on the point about better regulation. So far, he has not said that he wants to go back to one in, one out, or to one in, two out. Could he clarify what mechanism the Government have to ensure that better regulation happens, as opposed to being wished for with a target that will not be hit?

[Paul Scully]

We consulted on reforming the better regulation framework, and the Government do not think that a one in, two out rule—or whatever number out—is consistent with delivering world-class regulation to support the economy in adapting to a new wave of the technological revolution or in achieving net zero, so we want to reduce costs to business wherever we sensibly can do so and regulate only where strictly necessary. We intend to do that by looking at the merits of each case rather than using the one in, two out system, and we plan to change the better regulation system so that it will do that. However, it is very important that we get the balance right.

The Government believe that a well-functioning alternative dispute resolution system can make markets work more effectively, increase consumer confidence in spending and generate higher trader compliance with the law. It is an important avenue to redress for consumers that more easily allows for mediated settlements and is less confrontational than a court process, which is often more costly and time intensive, so we sought views on proposals to enhance the role of ADR in resolving consumer disputes.

My hon. Friend the Member for Weston-super-Mare also recommended that the CMA’s civil consumer enforcement powers should be upgraded, which would allow it to decide cases and impose fines in the same way as it does for civil enforcement of competition law. Again, we sought views on empowering the CMA to enforce consumer law directly, and we consulted on giving the CMA new powers to decide whether consumer law has been broken. Under the proposal, the CMA could directly impose directions, remedies or monetary penalties on firms that mistreat their customers without having to go through the courts, as is currently the case. That would allow the CMA to intervene earlier and to go further.

My hon. Friend the Member for Weston-super-Mare also mentioned the CAT. I have to say that although there are plenty more things that the CAT could do, changes have been brought on by covid. I visited CAT’s virtual court the other day, when it heard the case of Newcastle United’s takeover by the Saudi buyers. It had 35,000 people tuning in, which is more than all but the top nine average gates in the premier league, so a lot of Geordies and Newcastle fans elsewhere are now experts on competition law—I am not sure whether that is a good thing or a bad thing. None the less, it really shines a light—being with the transparency tsar—on the work of the CAT and the competition regime.

Clearly, there are also challenges in some markets in the digital economy, which my hon. Friend the Member for Folkestone and Hythe talked about. That is why we looked at what we can do to have a bespoke regime in the digital consultation. Frankly, government is not particularly good at keeping up with technology—I am talking about government as an overall body, rather than any particular government—so it is right that the market looks at how we can introduce conduct requirements and how we can have pro-competitive interventions by the digital market unit to keep up with an ever-changing regime. We also consulted on a merger regime, which is exactly the point that my hon. Friend the Member for Folkestone and Hythe was talking about—the so-called killer acquisitions and other stifling of innovation. I remember the days of Netscape, Mozilla Firefox and all the other browsers that were available but have now fallen by the wayside—again, tumbleweed from my hon. Friend the Member for Bolsover (Mark Fletcher), who is far younger than me.

My hon. Friend the Member for Truro and Falmouth talked about Cornwall. She did not just talk about regulation and competition regimes and legislation to promote things such as the direct sales of fish and the secondary industries around the exciting opportunities for lithium. Actually, it is about promoting enterprise and innovation. If regulation is there, that is fantastic, but it does not always need to resort back to a constructed regime if there are businesses ready to grab opportunities. That needs to be part of a suite of measures to ensure that the UK is the best place to start, grow and scale up a business. Part of that is the strategy that BEIS is coming up with, to show that we are ready to invest in—and are investing in—and support, for the long term, those kinds of technologies, which will give businesses the confidence to invest in areas such as Truro and Falmouth in order to make the most of that.

Looking at some other areas, the hon. Member for Makerfield talked about weddings. That was an interesting point about the covid pandemic, because I think that shows the difficulty of having a consumer policy. I was the Minister charged with engaging with the wedding sector, and that was a challenge. We had brides and grooms looking forward to their special day, which costs a lot of money. The whole point about the wedding sector is that it builds up anticipation and expectation. Clearly, however, venues and organisers especially had spent a lot of money and had a lot of reservations, but they have only a single day to provide their service. When they were compelled to lock down, or when demand was stifled, if they had refunded everything in one go, they would have been out of business. The balance was hugely difficult, with a lot of arguments between them and the CMA within that. I am glad that we got through that, largely, and that we were able to navigate through it by working with the CMA and the sector to make progress.

I will conclude on the report of my hon. Friend the Member for Weston-super-Mare, because I want to give him time to respond. His report represents a significant milestone in the process of reforming competition and consumer policy. I reiterate my thanks for his work. We will continue the conversation as we bring legislation to bear, as we make the changes where primary legislation is required, despite the fact that changes are already happening. He has acknowledged the direct impact of some of his proposals, on which we have consulted, so we will bring that all together. I continue to work with stakeholders—I spoke with them only last week on this very subject—and we are carefully considering the feedback. We will come back with measures in good time.

[John Penrose]

I thank all hon. Members for their contributions to the debate. One thing that has been very clear is that everyone present wants us to go further and faster. Everyone is saying, “Get on with it. Why are we not moving more quickly?” I think it is the only time in my life that I have ever been outflanked on a competition issue by the Labour Front Bencher—I am paraphrasing the hon. Member for Feltham and Heston (Seema Malhotra)—who agreed with a great deal in the report but would like to go further in a few areas. Even without that, the clear message from everyone who spoke is that we agree with most of this and we want it to happen quickly, please, and to go further. Radicalism, not incrementalism, has been the universal message.

My hon. Friend the Minister can take away a reassuring message that, perhaps contrary to what he might have expected, there is cross-party agreement on more competition and more consumer rights, because from that comes a better and more trusting economy, and therefore a more productive and high-wage economy. At the start of the debate, I was not sure that I would get that, but it has been clear that that is where we are. However, we will need to push him a bit, because he did not mention a couple of things in his remarks, such as the stuff about whether we can further reform some of the economically regulated sectors, to normalise as much of them as we can to ensure that we do not need extra protections, because the existing ones will be enough. It looks as if he might not have got to a section of his speech, so it would be lovely if he commits to that when we get to the primary legislation.

The Minister was also clear that there will be primary legislation. I appreciate that he cannot give too many details in advance of the Queen’s Speech. However, it is clear that we cannot have the digital markets unit functioning effectively without primary legislation. Therefore, more progress will be needed. He was very clear about the shortcomings—as he sees them—of the one in, one out mechanism, or the one in, two out mechanism, for better regulation and about the fact that he has a mechanism, he thinks, for an alternative approach that will work, but when I asked him about how, we just got a repetition of what, rather than how, and there was no detail behind it. I am sure that he has that, and I hope that he will come around to describing it in detail in public shortly, because at the moment it is a bit of a mystery. Without it, we will have nothing that works.

That said, I again thank everyone for participating and the Minister for his comments. I think we are making progress. We have an awfully long way still to travel.

Question put and agreed to.

Resolved,

That this House has considered UK competition and consumer policy in response to the Penrose review.

Corporate Transparency and Economic Crime

John Penrose Excerpts

Monday 28th February 2022 Commons Chamber

[Kwasi Kwarteng]

I have answered this question before and I say, once again, that not everybody of Russian heritage giving money to any political party is an oligarch. I appreciate that the hon. Lady is not saying this explicitly, but the implication is that they are, and I reject the premise of the question.

[John Penrose (Weston-super-Mare) (Con)]

I warmly welcome these measures, particular the register of overseas entities. As has been widely said, some of us have been waiting for that for a very long time and it is hugely welcome, not just in here, but right the way through civil society outside this place. We cannot sanction an oligarch unless we know where he or she has stashed their money, and this register will make a big difference. May I push the Secretary of State a little further on his response to the question put by my right hon. Friend the Member for Newark (Robert Jenrick) about how long it will take once this new legislation is in place to clean up all the rubbish that is currently on the register, in order to make sure that we have something that is both clean and useful, and we do not have a case of “garbage in, garbage out.”?

[Kwasi Kwarteng]

My hon. Friend makes a very good case. There are two aspects to this. Clearly, there is the immediate signalling aspect, which will affect people’s decisions in the here and now. There is also the task of getting the register up and running, which may take a few months. I am open to working with him to make sure that we do that as quickly as possible.

Economic Crime: Planned Government Bill

John Penrose Excerpts

Wednesday 26th January 2022 Commons Chamber

[Paul Scully]

I thank the hon. Gentleman for his comments. Our appetite for tackling economic crime remains undiminished, as it does with Companies House reform, which has been well trailed and well considered. We will continue to work in this area, but I cannot pre-empt what Her Majesty will say in the Queen’s Speech.

In terms of the bounce back loans, the Economic Secretary to the Treasury, my hon. Friend the Member for Salisbury (John Glen), made it clear in the House that HMRC did not produce the figure of £4.3 billion, and the money has not been written off. The figure was an inference by journalists, who subtracted £1.5 billion—the estimate of the amount to be recovered by taxpayer protection—from the £5.8 billion that was estimated as error and fraud in 2020-21. It was publicised before Christmas. Our Department continues to work with our fraud measures with partners in Government, the British Business Bank and all the partner banks who issued this money in the first place.

[John Penrose (Weston-super-Mare) (Con)]

I appreciate that the Minister cannot be tempted to comment on what might or might not be in the Queen’s Speech, but based on what Lord Agnew said, if it were to be true, I please urge the Minister to consider that it will be about as popular as a cup of cold sick with anyone out there who is concerned about the fight against corruption or the fight for transparency. The well of excuses after three or four years of promising this piece of legislation or its related pieces has now run dry. This legislation is essential for the credibility of this country and this Government, particularly when we have a crisis in Ukraine and all sorts of Russian oligarchs waiting to move money into this country if they can, and when there are fundamental questions, as we heard in Prime Minister’s questions, about Westminster today. It is essential that we do not back away from this central piece of legislation, which is a touchstone issue for many stakeholders out there.

[Paul Scully]

I appreciate my hon. Friend’s work in tackling corruption and encouraging further transparency, which we have had several conversations about. We remain undiminished in our approach to tackling economic crime, for the reasons that he has given, and to Companies House reform, too. We will work with the Home Office and the Treasury to make sure we can get these measures in place as soon as possible.

Subsidy Control Bill

John Penrose Excerpts

3rd reading
Monday 13th December 2021 Commons Chamber

The key things that we are keen to look at are: the issue of agriculture being included; the issue of net zero not being included; the issues around transparency; and, finally, the issues around parity of esteem, particularly with interested parties. I hope that the Minister can give me some comfort from the Dispatch Box on the last of those, to make clear for anyone looking at this in the future that the devolved Administrations are counted as interested parties when it comes to indirect, as well as direct interests.

[John Penrose (Weston-super-Mare) (Con)]

I rise to speak to the amendments in my name and that of my hon. Friends. I start by saying that there is a great deal to support about this Bill, and I think I mentioned that on Second Reading. This Bill is vitally important, not just because it is required under the terms of our leaving the EU, but because it does some very important things to how the future subsidy control regime will be applied. We have already heard that the central set of principles is crucial. The notion of pre-approval and allowing things to be done at pace to create a much less bureaucratic, much more nimble, much more predictable regime is overall hugely to be welcomed. I hope everyone will be able to sign up to that.

The Bill also means that I hope we will be able to move to a principle where we have as few exemptions and exceptions to our subsidy control regime as possible. It is essential that we have a subsidy control regime that does not allow loopholes through which—I am sure the Minister would never dream of doing such a thing—some less principled future Government might try to drive any sort of measures through that might involve either cronyism or economic distortions of any kind. It is essential that there are minimal loopholes and that the Bill covers as evenly and as predictably as possible the entire economy.

It is no accident that this country has had one of the lowest levels of public subsidies granted in recent years under the guise of the EU’s regime. For the free marketeers among us and those who care about economic efficiency and productivity, that should be a source of pride, and we should not be trying to overturn or change that in future. In fact, I made that point in the Government-commissioned competition policy review that I was recently asked to do, which has a chapter specifically on subsidy control that says that less is definitely more. It is far better to do less in the area and therefore ensure more space for companies and business leaders to compete on their organisations’ abilities and the quality of their products and services rather than on whom they know in Government and, as a result, how much rent and subsidy they can wring out of their political connections. It is essential that we remember that, adhere to it and persist with it as much as we can.

That is crucial, because the Bill done right ought to be a major piece of post-Brexit dividend that we should seek to achieve as a result of leaving the EU. If we get it right, we can have a faster, more nimble and more economically rational way of dealing with subsidies. We can keep the best of the objectivity that everyone said we had under the EU but do it in a faster, more digitally enabled and generally more modern, less bureaucratic and less covered-in-red-tape fashion. Such a post-Brexit dividend is here for the taking. It is waiting for us to pick it up off the table, provided that we can do it correctly.

My concern—this is why I tabled amendments 1 to 8 —is that while the Bill does an awful lot of that right, we may be about to make one critical error. We have already heard the points about transparency made by the SNP spokeswoman, the hon. Member for Aberdeen North (Kirsty Blackman). It is all very well to pre-approve and to have a more flexible, faster and more nimble approach, but that will work only if we have an army of armchair auditors who can spot when something is going wrong and say, “Hang on a second. This is a marvellous principle, but it isn’t being adhered to in this case.” Without transparency, hon. Members, people in our constituencies and the journalists who pore over such things will not be able to do so until it is too late. In a digitising economy, speed matters, too. If it cannot be done before it is too late—or at all—companies will be driven out of business. Once all that is left is rubble, the jobs are lost and the investment is forgone, it is too late to come back two years later—or even eight months later in fast-moving sectors—and say, “We’re terribly sorry; we got this wrong.” We need to be able to move rapidly and pick up things up as soon as possible. That is why I tabled the amendments.

[Kevin Hollinrake]

My hon. Friend makes a strong point about armchair auditors in particular. As soon as the US published all loans of $150,000 under the paycheck protection program—its version of the coronavirus business interruption loan scheme—$30 billion was paid straight back to the US Treasury on the basis that companies did not want that visibility. It was not that money was taken fraudulently—perhaps it was taken inappropriately.

--- Later in debate ---

[John Penrose]

My hon. Friend makes a very good point. For those of us who worry about the scale of subsidies, who take pride in ours being a relatively low-subsidy country and economy and who want it to stay that way—we do so because we care about competitiveness and people competing only on the basis of their ability to please their customers rather than whom they know in Government—that must be the right approach. That American example of how transparency can drive down subsidy levels is a good one. Incidentally, it would be fascinating to see how that applies to countries such as Spain, which have low thresholds for declarations and therefore high levels of declarations. We can follow that carefully.

[Richard Fuller (North East Bedfordshire) (Con)]

My hon. Friend is making a very useful speech, and I very rarely say that in Parliament—not about him, but generally about speeches here. Does he agree that the value of his amendments is that they would increase the number of pieces of information we have, and that the Government are missing the value of predictive analytics in considering the way in which subsidies are or are not working, as that can then be applied to other areas of Government expenditure?

[John Penrose]

That is absolutely right. Transparency is of course about trying to improve the productivity of our economy and avoiding distortions of our economy, and of course it is also about trying to reduce cronyism, but my hon. Friend is right to say that there is a longer-term benefit in that we can then tell whether the subsidies we are offering are any good: are they actually having the effect we want them to have and can we learn from that? I am afraid there is a long and ignoble history—we can all see this and cite examples from Governments of all political types and stripes in history—of politicians just getting it wrong and not learning that extra data might very well achieve something. I am afraid the old phrase that politicians are terrible at picking winners but really good at picking losers applies here in spades, and data and objectivity are essential in pricking that bubble and avoiding that happening again.

The good news is that Ministers get it: Ministers are clear about the value of transparency. They have said so to me and others. In fact, the Minister said to me in a letter earlier in December:

“Transparency is fundamental not only to the future subsidy control regime but also to good governance more widely.”

That is absolutely right. So, the principle is clear: there is no disagreement in any part of the House that this is the right thing to do.

So, why are we not doing it? That has been covered partly in Committee, but it bears being repeated here strongly and forcefully. The EU regime which the Bill is supposed to supplant has a series of transparency declaration thresholds. Everything over half a million euros must be declared; there are thresholds too for cumulative grants, which we heard about in the speech of the hon. Member for Aberdeen North, although half a million euros is the basic threshold. This Bill, however, says that everything over half a million pounds has to be declared. Unless the exchange rate has gone completely doolally in the last 10 minutes, that is a much, or moderately, higher level than half a million euros, and as a result we will in the future be declaring fewer subsidies under this transparency regime than we were in the past, in spite of the fact that Ministers have rightly said transparency is absolutely essential and a core principle with which we all agree. We are not delivering on the central principle on which everybody agrees, and that is why I have tabled basically three groups of amendments. They do three things, some of which we have already heard about; the hon. Lady summarised them nicely, so I will not go through the detail again.

The first group addresses amounts and says, “Look, we shouldn’t just say we have to declare anything over half a million pounds; we should be much more transparent than that.” If we are really serious about trying to be world-class about this issue, let us knock three zeros off that number: let us go for £500 instead. What have we got to hide? What have we got to be scared of? Why do we not just put it all out there and let people see? That would be transformational, for the reasons I have just described.

[Dr Dan Poulter (Central Suffolk and North Ipswich) (Con)]

My hon. Friend is making a very good speech and making very good points. On the issue of transparency, surely it would be cheaper as well as more transparent to do exactly what he says, because when there is a digital system putting all this information together it takes more time and money and reduces the productivity of the staff involved if they have to sift through what meets a certain threshold. Why not, as my hon. Friend says, just put everything out there?

[John Penrose]

Absolutely; my hon. Friend makes an important point. Equally, the point about cost goes more broadly than that too. We heard about the cumulative threshold where, if a single company receives multiple different grant applications or subsidies that collectively go above £315,000 over three years, that is supposed to be declared—but how will it be declared? The company is supposed to keep the letters, but it does not necessarily have a duty to declare it. The different subsidy granting organisations, be they local authorities around the country or whatever, will not necessarily know to talk to each other and will not know for at least six months, or a year in some cases, whether someone else has made those grants.

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[Nigel Mills (Amber Valley) (Con)]

Does my hon. Friend agree that there is a general presumption that there should be more transparency about people receiving money effectively from the taxpayer? We could have a strange situation where if I am being paid £600 for grass cutting for my local council, the council would publish the invoice on its database, yet if I am receiving tens of thousands of pounds of taxpayers’ money, it would not be published. Surely, that cannot be the right balance.

[John Penrose]

That is absolutely right. Although I appreciate that there is a technical distinction between amounts of subsidy and amounts of general local authority spend, it is a very strong comparison. If it is worthwhile recording £500 spend on anything by a local council, why are subsidies so special and why should they be different? If anything, because of the scope for potential cronyism and other concerns, we should be tougher on subsidies than on other kinds of spending. Let us at least make the thresholds the same at £500, and then there can be no concern or worry about it.

The first collection of amendments is about the amount. The second collection of amendments, about which we have already heard a bit from the hon. Member for Aberdeen North, is about speed. As I have mentioned, in today’s digitising economy, publishing details of a subsidy potentially almost two years later, or even six months later, could be way too late. A company could have gone under if it had been faced by a successfully heavily subsidised competitor in its local area. Jobs will have been destroyed, wealth will have been destroyed, investment will have been forgone and, most importantly, the reputation of that local economy as a free, fair, sensible level-playing-field place to do business will have been damaged.

Clearly speed matters today, and it will matter more and more as our economy moves faster through digitisation. It makes no sense at all, therefore, to allow six months, and in some cases even longer, for those subsidies to be declared. When someone dishes out a subsidy, a letter has to be sent to the person receiving it, so in most cases they could put the subsidy on to the database at the same time—they could probably do it electronically if they had the right interface. I am suggesting that that could happen within a month; it could probably happen within days, but let us be generous and kind, and give people a bit of space.

I will expand on the point about tax-related subsidies. It is true, as we heard, that a tax-related subsidy can take almost two years to be recorded and to become transparently visible under the current proposals. I cannot see any reason why that should be the case, not just for tax-related subsidies but for anything else at all. In general, for most tax-related subsidies, we can do it immediately because we know the value with some certainty right up front. If I am giving someone a subsidy as a reduction on their business rates, I know how much the value of that subsidy is going to be on the day it comes out, so I can put that out on the subsidy database right there and right then. The same goes for most other kinds of tax-related subsidies, such as subsidies on VAT or whatever it may be.

Only for a very small number of tax-related subsidies would there be uncertainty for any length of time. As we have already heard, and I think this is absolutely right, it is perfectly possible to come up with a good estimate to begin with, and I do not think it works—it is not an adequate piece of logic—to turn around and say, “Well, because we don’t know precisely what this particular subsidy amount will be, we should not reveal it at all.” That is making the best the enemy of the good, and the trouble with that, and with saying that we are therefore not going to put anything out, is that we do not end up with the best or the good. We end up with something that is actually pretty dreadful, because we are keeping it secret for up to two years. How does that make sense when, as we have already heard, we can estimate it very accurately? In fact, in many cases these things are done in bands, and we can certainly say, at the very least, that it will be roughly in this or that band. Even if we get it wrong, we can still correct it later, and people know it is there, what it was and roughly how much it will have been. That will have allowed challenge, if necessary.

[Kirsty Blackman]

Specifically on the issue of uploading subsidies to databases and challenging such subsidies, the only way in which a subsidy will be overturned anyway is if the subsidy was given incorrectly—if it was against subsidy principles or was distortive in some way—so surely this has no effect on the vast majority of subsidies, except that it means they will be uploaded much more quickly. However, in the case of subsidies that are wrong, bad and going to cause problems, surely the quickest possible time is better so that we would be able to see them.

[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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[Sarah Olney (Richmond Park) (LD)]

It is a pleasure to contribute to this very thoughtful debate. I do not share the enthusiasm of the hon. Member for Weston-super-Mare (John Penrose) for Brexit as a whole; nevertheless, I support his comment that if this is to be one of the benefits of leaving the European Union, it is important that we get it right, especially since all the other benefits seem disappointingly slow to materialise.

I support many of the hon. Gentleman’s comments about transparency: it is important that the information is made available. He is right that it will improve the efficiency of subsidies if we can see who is getting them and understand where they are being applied. I valued the intervention from the hon. Member for Thirsk and Malton (Kevin Hollinrake) about what has happened in the United States, and that is an important point to consider. It is important to think about the effectiveness and efficiency of subsidies, and the use of taxpayers’ money.

This will be a new subsidy regime for the UK. The more information that is available to the widest number of people, the more we will be able to see as a country—not just the Government—what is and is not an effective subsidy. We will be able to see what has worked, what has played a role in driving investment to underdeveloped regions and what has helped to build new sectors of the economy. It is so important that that information is available. More particularly, I support the moves of the hon. Member for Weston-super-Mare to move the threshold to £500, because, where subsidies can distort markets, it will have a disproportionate impact on smaller businesses. That is why moving the threshold in the way that he proposes is so important.

[John Penrose]

May I back the hon. Lady up by saying that it is about not just smaller businesses, but local economic effects? Something that may, on a large scale, be distortive for the entire national economy may be distortive at a much smaller level for a particular city region or a particular town. I hope that she agrees with that point as well.

[Sarah Olney]

I absolutely do, which is why it is so important to get this level of oversight at the much smaller threshold that the hon. Gentleman is proposing. Potentially, within the gap between the £500 that he is proposing and the £500,000 that the Government are proposing, there will be a great deal of market-distorting subsidy, and it will be up to competitors who have been disadvantaged to challenge or to bring their own court cases against those subsidies. If they do not have knowledge about how they are personally being disadvantaged, what can they possibly do about it? That is why that point is so important.

My new clause 2 is about climate change. I welcome the comments made by the hon. Member for Aberdeen North (Kirsty Blackman) about the importance of this matter in her excellent opening speech. There are the seven principles against which the subsidies will be assessed, and also the nine energy and environmental principles. What I am disappointed about is that they do not add up to a broader commitment to using public money to fight climate change. I can only amplify what the hon. Lady said about it being our key public challenge at this time, covid notwithstanding.

The Liberal Democrats would have welcomed the opportunity to put the transition to net zero at the heart of the UK’s subsidy regime, and for the Government to have used every tool at their disposal to make the transition as swiftly and painlessly as possible, and we can see how public subsidies can help to achieve that.

New clause 2 provides for an annual report to Parliament detailing the climate change impacts of subsidies granted that year. This would have been an important mechanism for reviewing the extent to which subsidies are being used to stimulate or to de-risk investment in the green economy. We look to the private sector to drive much of the innovation that we need to see and to create the consumer markets for our net zero future, but the Government must do all they can to encourage the private sector to prioritise reducing emissions alongside creating economic value.

Public subsidies are an important part of the levers available, and taxpayers need to see that they are being used effectively. Let us take, for example, the nine environmental and energy principles. In the past few months, we have seen a tremendous concern about our energy sector, and it is easy to imagine a scenario where subsidies are being granted to improve energy resilience and energy supply. Such goals might make sense in the short term as they are in line with the principles, but when we are making short-term decisions about subsidy use, it is really important that we step back and look at the longer-term impact of some of those decisions. We need to take the opportunity every year to make sure that, regardless of the short-term decisions that sometimes need to be made, we are nevertheless continuing along the path towards net zero—the challenge that the Government have set for themselves. To have that separate net zero/climate change consideration of the total use of all of our subsidies would be an important check for the Government to make sure that they are progressing towards net zero in the way that they should

In short, this Bill would have been much improved by enabling greater scrutiny of the subsidies granted. I regret that the Government are not doing more to enable that.

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Labour tabled amendments 15 and 18 to ensure the Bill explicitly states that subsidies and streamlined subsidy schemes can be used for the purpose of reducing regional inequality. Under EU state aid rules, subsidies could be, and indeed were, targeted at areas of economic deprivation, significantly aiding struggling regions. Labour recognises there were some drawbacks to the EU’s assisted area map, but it did, as my hon. Friend the Member for Aberavon (Stephen Kinnock) said, direct resources to areas of most need. The Government should not waste the opportunity the Bill brings to ensure we can target areas of economic deprivation.

[John Penrose]

I am listening carefully to the hon. Lady. I am sure everybody here would agree with the principle of trying to level up, particularly in parts of the UK outside London and the south-east, but can she address the point I was making about politicians having a long and really pretty awful record in picking losers? How does she think that, under her proposal, things are going to be different this time?

[Seema Malhotra]

I do not think it is about us picking losers or winners at all. This is about us using the data, understanding where there are areas of greatest need and having that as part of a data-led levelling-up agenda. Given that the Government have created a specific Department for levelling up, Labour is surprised that that mandate is not clear and that the hon. Gentleman does not have the answers he needs to have a framework that gives confidence that we are applying resources to areas of greatest need. To be frank, the Government’s record on that is not very strong. The Bill should be explicit that supporting areas of deprivation should fall squarely within the subsidy control principles.

On improving the way the new regime will operate, there is a serious lack of transparency in the Bill on how public money is spent and how value for money can be assessed.

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

I thank hon. Members across the House for the informed debate on the Bill and will try my best to respond to their comments in the few moments that I have.

A number of amendments have been tabled on the topic of transparency, which I take really seriously. My Department is working on a programme of improvements for the subsidy database. To name just two examples, we are resolving the technical glitch that meant that subsidies were uploaded with a zero value. Additionally, we are developing an update to add the data for upload to the information published on the database. Officials will actively look at further improvements over the coming months and in advance of the new regime coming in.

The Government intend to review again the evidence collected as part of the consultation alongside that provided by witnesses to the Committee about the transparency provisions. We will reflect carefully on the points raised so far and engage further on our findings with parliamentarians in both Houses as the Bill progresses. I know the strength of feeling in the House on this matter, and we will consider carefully what further action we could take to address those concerns if they come back in the Lords.

I start with the amendments that would reduce the threshold at which subsidies are uploaded. The transparency provisions seek to minimise the administrative burdens and costs to public authorities while ensuring that information is available on subsidies that must meet the substantive subsidy control requirements. That is an important tool to aid interested parties to challenge potentially harmful subsidies. However, the amendments would create an additional administrative burden for public authorities, including small local authorities. Paradoxically, they could make it harder to identify in the database the most potentially harmful subsidies that are eligible to be challenged in the Competition Appeal Tribunal. Many small subsidies will also be publicly available via other transparency tools. Such data may not be perfectly formatted, but it does go far wider than subsidies.

In relation to services of public economic interest, there was broad support from consultation respondents for the application of different transparency measures. The contracts must meet the specific requirements set out in clause 29. That is why the database requirements are different for those subsidies.

[John Penrose]

May I just caution my hon. Friend? I think the paraphrase of his argument about the size of the subsidy database is that big databases are less transparent than small ones. That is clearly bonkers and not right, and I do not think it stands up to any scrutiny. He may be arguing that that is okay because other databases will have the information and that it can all be compared and contrasted, but that works only if the data is in a common format that allows for mutual searching, and there is no such plan for that. May I gently caution him about pushing that argument too far? I do not think it will stand much strain in the Lords.

[Paul Scully]

All I would say is that it is easy to hide something in plain sight, but the subsidy transparency database is being developed under the Cabinet Office’s standard system for all Government databases. I have talked before about interoperability, and we would expect to be able to link those databases and to scrape them in the future.

Economic Crime

John Penrose Excerpts

Thursday 2nd December 2021 Commons Chamber

[Dame Margaret Hodge]

One of the specific areas on which we make a recommendation in our motion before the House is the reform of Companies House. The situation of my hon. Friend’s constituent is just the sort of situation in which Companies House ought to be able at least to verify and possibly to pursue the wrongdoers.

Economic crime is often the facilitator of other crimes—from people trafficking to drug smuggling, and from terrorism to corruption. It does not just enable other crimes; it impacts on our national security. Dirty Russian money laundered into the UK is spreading like a spider’s web through our society. It is used to buy influence and to control our football clubs, our vital infrastructure and, more recently, our politicians and our politics. Today, we want not just to lay out the problem, but to put forward three pragmatic reforms that the Government could adopt—not tomorrow, but today. These are three oven-ready policies that together could have a significant impact in both preventing economic crime and punishing its wicked perpetrators.

We have become the destination of choice for a number of reasons. First, we have a very weak regulatory regime after decades of deregulation. Introducing reforms to our corporate liability regime would start to address the inadequacies in the regulations we have inherited. Even where we do have clear laws—this is my second point—our enforcement agencies are both inadequately resourced and risk averse in their policing of our system. Lack of money and fear of failure drive their decisions, and unlike America, we let criminals get away with it. Reform of Companies House would constitute the start of creating a tougher enforcement regime. Thirdly, we still allow a lack of transparency to flourish, giving wonderful cover to ne’er-do-wells and making it difficult to follow the money. If we cannot follow the money, dirty money triumphs.

[John Penrose (Weston-super-Mare) (Con)]

I congratulate the right hon. Lady and my hon. Friend the Member for Thirsk and Malton (Kevin Hollinrake) on arranging this very important and very timely debate. I am only sorry that I cannot stay for the whole thing because I am due to speak elsewhere.

I want to pick up on the point the right hon. Lady was just making, and ask whether she would agree that it is not enough to improve the three things she is talking about to come up to some sort of international standard. Because of the existence of the City of London—a huge economic asset in Britain’s economy—we actually have to be better than almost anybody else, given not just the benefits but the risks that that creates.

[Dame Margaret Hodge]

I completely agree with the important contribution that our anti-corruption tsar has made in the House today. I think it is a really short-term view to believe that our British economy can flourish on the back of dirty money. We will flourish if we clean up the act in the City of London and it again becomes a trusted institution.

I just wonder how many Panama papers, Paradise papers, Pandora papers, FinCEN—Financial Crimes Enforcement Network—leaks, laundromat leaks, Falciani leaks and Luxembourg leaks we need for our Government to wake up, stop mouthing warm words, which they do a lot, and start acting with tough measures to bear down on this dangerous crime and this terrible trend.

A proposal to toughen up the regulatory framework was included in the 2015 Conservative party manifesto. The party pledged—I hope I am quoting accurately—to create a criminal offence where companies

“fail to put in place measures”

to prevent economic crime. The Government launched a consultation that lasted four years, and then parked the issue in the long grass by referring it to the Law Commission. I understand that the Law Commission is about to report, but we need and want corporate liability reform, and we want it now.