Subsidy Control Bill (Fourth sitting)

Kirsty Blackman Excerpts

Thursday 28th October 2021 Public Bill Committees

[Seema Malhotra]

I am pleased to be able to move amendment 9 on behalf of myself and my hon. Friend the Member for Sefton Central. We have proposed the amendment because we recognise that the streamlined subsidy schemes play a significant role in this legislation. Clause 10 defines subsidy schemes and streamlined subsidy schemes: unlike subsidy schemes, streamlined subsidy schemes can be made only by a Minister of the Crown, but they do create a route for certain subsidies to be passed more easily and quickly, and on occasion have the potential to effectively contribute to key policy objectives and targets, which is their purpose.

The question is why the Government have allowed only the Secretary of State to create streamlined schemes. In our view, the restriction not only limits the potential of the Bill, but undermines the important role of the devolved Administrations. Those Administrations are more likely than the Secretary of State to understand what subsidies and schemes may be most beneficial for their respective nations or areas, and by preventing them from being able to create streamlined schemes, the Government are potentially hampering the effectiveness of subsidies in Scotland, Wales and Northern Ireland. As Daniel Greenberg explained in our evidence session on Tuesday,

“throughout the Bill, you see ‘Secretary of State, Secretary of State, Secretary of State’—all powers of HMG—and you think, “Hold on, the devolved institutions are also public authorities. They appear in the list of public authorities in clause 6, so why is it that they do not also share Secretary of State powers?”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 61, Q80.]

While Labour understand that power over UK subsidies should ultimately reside in Westminster, preventing the devolved Administrations from creating streamlined schemes undermines their important role in our democratic structure, as well as the responsibilities that they have in their respective nations. It should also be noted that any proposals for streamlined schemes must be laid before Parliament, as set out in subsection (5). Any streamlined subsidy schemes created by the devolved Administrations could be subject to ample parliamentary scrutiny. Labour is therefore seeking to amend the clause to allow Welsh Ministers, Scottish Ministers and Northern Ireland Departments to create streamlined subsidies. We believe that the amendment would help increase the effectiveness of subsidies across the UK while respecting the role of the devolved Administrations. We also support the SNP’s amendment, which I think would have a very similar effect.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to take part in the Committee’s proceedings with you in the Chair, Ms Nokes. I want to say a couple of things. I agree with almost everything that the hon. Member for Feltham and Heston said, apart from the idea that the Secretary of State should have powers over what happens in Scotland, because obviously I believe that Scotland should be independent—but that is probably an argument for another day.

The powers of the Scottish Parliament were voted for democratically in a referendum that showed the Scottish people’s will that a Scottish Parliament should be created. Those powers have been discussed on many occasions, including in subsequent Scotland Acts. The powers of the Scottish Parliament, having been agreed democratically, are part of our democracy, whereas the powers that Westminster has do not seem to have ever been discussed or voted on democratically.

As regards what the Opposition spokesperson said about upholding the democratic nature of the United Kingdom and the democratic powers of the Scottish Parliament, the Welsh Parliament and the Northern Ireland Assembly, I think it is really important that the ability to make streamlined subsidy schemes be included. If the Government are going to talk about levelling up, which I am sure they will—they generally do on such matters—they should consider that those devolved bodies, which are elected to represent those areas, have a huge amount of knowledge and are much closer to the places they represent. They should be able to make streamlined subsidy schemes too, because I believe, as many people do, that they would make them better than Westminster is likely to.

[Robin Millar (Aberconwy) (Con)]

It is a pleasure to serve with you in the Chair, Ms Nokes. It is important to recognise what the constitution of the UK says, and that is very clearly that powers and competences are reserved to the United Kingdom Government. We do not have a system of equivalence; there is no equivalence between a devolved Government and the UK Government, because sovereignty rests here. I know that equivalence features in some of the contributions we are hearing, but there is no place for it in our constitution. The devolved powers and competences are very clearly defined, which is absolutely correct. The suggestion that the Secretary of State’s powers should be replicated elsewhere does not fit with our proper constitutional model.

In response to the comment from the hon. Member for Aberdeen North about powers being discussed and voted on, we do of course discuss and vote on powers in the UK Government every time there is a general election, and frequently through sittings like this too, so I am happy that there is extensive consideration of them.

On the point about streamlining, it is important to understand some of the limitations, which are themselves discussed within the devolved Administrations, in particular on the number of elected members. For example, there is currently a discussion within the Welsh Senedd about increasing the number of its Members, and one of the reasons is to improve its ability to scrutinise itself. For all those reasons, I hope that I have made a helpful contribution to the discussion.

[Kirsty Blackman]

Is the hon. Member’s concern about streamlined subsidy schemes that he does not believe the Welsh Senedd has enough Members to agree to such schemes?

[Robin Millar]

No, I was observing that there is a discussion taking place within the Senedd about the number of Members, and one of the arguments for increasing that number is about improved scrutiny, because having more Members would allow for greater and more effective scrutiny of internal operation, and therefore any decision made, whether on a streamlined subsidy scheme, funding, grants or whatever, would benefit from that extra scrutiny.

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[Paul Scully]

The streamlined subsidy schemes will be worked up as we come up to the commencement of the Bill, so I will not set out a list of streamlined moots as yet, but they are there for something that is common and not necessarily devolved in particular areas that needs to be rolled out at speed with minimum interruption to the public authorities. The obvious example––it is not necessarily a streamlined moot––in recent years is the grant scheme that we have had in covid, which came under a lot of pressure from having to ask for exemptions within the European Union to get the framework available there, which meant that we could not roll it out to the extent that we wanted to, as quickly as we wanted to.

[Kirsty Blackman]

Does the Minister think it possible that some of the streamlined subsidy schemes that will be made are likely to encroach on devolved areas, even though they are being made for the whole UK? If so, does he believe that when a streamlined subsidy scheme is laid before Parliament it should talk about the consultation that has been held with the devolved Administrations responsible and explain why, if they disagree with the scheme, the Government are going ahead anyway?

[Paul Scully]

Rather than a streamlined scheme encroaching on the devolution settlement, it is important to stress that any public authority in the UK will be free under the Bill to create a subsidy scheme for its own purposes. Schemes have many of the same attributes that streamlined subsidy schemes have in that only the scheme, and not the individual subsidies awarded under it, needs to be assessed under those principles. Schemes offer a similar administratively light touch means of awarding many subsidies that are also open to any and all public authorities, including the devolved Administrations. What we are saying is that the streamlined subsidies are best used when they are available across the UK but schemes are available to the devolved Administrations, to the public authorities and indeed to the UK Government to award. They are more bespoke and tailored. Because of that, I ask the hon. Lady to withdraw the amendment.

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[Seema Malhotra]

I am not sure I fully agree with that. Surely it would mean that it was incompatible with the principles in schedule 1. I think that the principles would preclude that. I come back to the point that at the moment we have an asymmetry of power. I cannot, in the circumstances of streamlined subsidy schemes as they are currently defined, see why that should not be a power that is there for the devolved Administrations. It is important to go further with the amendment, and I would like to put it to a vote.

[Kirsty Blackman]

Just to come back on what the hon. Member for Thirsk and Malton said, business rates are already devolved in Scotland. We already have a more generous system of allowances. People at the lower end of income, pay or value of properties pay less than they would in England anyway. So we already have that in place. It does not have to come in as part of a subsidy scheme or streamlined subsidy scheme, as far as I am aware.

The hon. Member for Feltham and Heston is correct. The Minister seems to be saying that the schemes will apply across the UK, but nothing in the Bill says that this will apply across the UK for any of the streamlined subsidy schemes that come through. The Government could create a streamlined subsidy scheme that applied only in Blackpool, for example. The fact that it is a streamlined subsidy scheme does not mean that it has to apply across the UK.

I did not get a straight answer from the Minister about devolved competencies. Is it intended that the UK Government will make streamlined subsidy schemes that trespass on areas of devolved competency and apply those across the UK? If that is the case, I am even more concerned about this than I already was. If they are going to do that only in reserved areas, that makes sense, but given the Government’s tendency to reduce the power of the Scottish Parliament and the other devolved Administrations, I am not sure that I have a huge amount of trust in the fact that the streamlined subsidy schemes will not trespass on the devolved areas.

[Paul Scully]

The streamlined schemes are not effectively the most commonly used ones. They are few and far between. The schemes will be far more tailored. They do very similar things and provide similar freedoms in terms of ease of access. A scheme, whether streamlined or not, needs to be assessed against the principles. Every streamlined subsidy scheme will be laid in Parliament after it is made. Any streamlined subsidy scheme that is amended will be laid in Parliament. That will ensure transparency for those schemes. We will publish a number of schemes and lay them before Parliament before the regime is commenced. Public authorities will therefore have sufficient time to understand the parameters of streamlined subsidy schemes before the subsidy control regime commences.

Question put, That the amendment be made.

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Finally, the Government may need to lay additional regulations under clause 11 at some point in the future. For example, the global economic conditions may change, meaning that we need to amend the definitions. The amendment could prevent the Government from laying essential regulations after the period of three months following Royal Assent. The hon. Lady asked why the subsidies of interest criteria are not in the Bill. We want to ensure that we have the flexibility to develop them in a changing world, so they do sit better within regulations. I therefore ask her to withdraw the amendment.

[Kirsty Blackman]

To flip that on its head, if the Minister expects and hopes that the regime will be implemented in autumn 2022, will he confirm that he also expects and hopes that the regulations under this clause will be made in advance of the summer recess in 2022 to allow authorities the time to look at them properly and digest them in advance of the scheme coming in?

[Paul Scully]

Clearly, we want to make sure that the regulations go through due parliamentary process and that colleagues have plenty of time to see them, discuss them and scrutinise them. That is absolutely appropriate. We also want to give businesses time to see what is on the horizon, and to give public authorities—those awarding authorities—time to adjust to the new framework.

[Seema Malhotra]

I beg to move amendment 12, in clause 11, page 7, line 8, at end insert—

“(4) Before making regulations under this section, the Secretary of State must seek the consent of the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland.

(5) If consent to the making of the regulations is not given by any of those authorities within the period of one month beginning with the day on which it is sought from that authority, the Secretary of State may make the regulations without that consent.

(6) If regulations are made in reliance on subsection (5), the Secretary of State must make a statement to the House of Commons explaining why the Secretary of State decided to make the regulations without the consent of the authority or authorities concerned.”

This amendment would require the Secretary of State to seek the consent of the Devolved Administrations before making regulations under this section. Where such consent is not given within one month, the Secretary of State may make the regulations without that consent, but must make a statement to the House of Commons explaining their decision.

It is my pleasure to speak to this amendment. It would require the Secretary of State to seek the consent of the devolved Administrations before making regulations under the clause. As the Minister just mentioned, the Government may wish to bring forward further regulations to make changes under clause 11. We propose that if such consent is not given within one month, the Secretary of State may make the regulations without that consent, in line with other principles here and in the United Kingdom Internal Market Act 2020, but must make a statement to the House of Commons explaining that decision.

As I have outlined, we are very concerned that there needs to be a fair and equitable four-nations solution in how this legislation is developed and implemented. That will be an important part of its success and the confidence that people have in it over time. As I have said, the devolved Administrations have an important role to play in the implementation of subsidies, and they should play their part in defining and setting the significant terms in the legislation.

If the Secretary of State is unable to gain the devolved Administrations’ consent—I hope that it will be forthcoming on the basis of there being constructive dialogue between the nations, and those mechanisms being set up in good faith—it is important that that has the scrutiny of the House of Commons, and that the Secretary of State makes a statement to the House explaining what the issues were and why agreement was not reached.

As I have said, the regulations will have an important effect on the subsidy regime. It is bad enough that they are not included in primary legislation, but it is important that dialogue happens to ensure that the best regulations are made under this clause. I hope that the Minister will agree that the definitions need to be set in partnership and in discussion with the devolved Administrations, and that it would be a sign of confidence in the regime to seek that consent.

[Kirsty Blackman]

I have a couple of points on this amendment, and I want to give it my wholehearted backing. I agree that the devolved Administrations should be consulted on these regulations. I would probably go further and have them not proceed if the devolved Administrations did not agree, but we are where we are.

I am a serving member of the Procedure Committee, and we have discussed this at huge length recently in our report and our look at how the territorial constitution works, and how the devolved Administrations relate. One thing that is brought up regularly is that if the UK Government proceed with something in the absence of legislative consent, there is no clear mechanism for the UK Government to explain to Parliament why the process has happened in advance of legislative consent. For me, it seems like the very least that the UK Government should do if something proceeds without consent.

That is important in relation to legislative consent motions for primary legislation where something trips over into devolved competencies, as we have seen a number of times in recent years. When it comes to these regulations, I think it is really important that the devolved Administrations are in agreement with what happens, because, in the main, they will be guaranteed authorities implementing subsidy schemes in the devolved areas. The Scottish Parliament has authority over the local authorities in Scotland so it will oversee some of their work, particularly when it comes to directing them how to best improve their local areas. If the UK Government are to proceed without the consent of the devolved Administrations, they must come and explain to us why.

I note that the UK Government and Scottish Government, as well as the other Administrations, have regular conversations about how things could go forward, but I feel there is a significant amount of disagreement at the moment in many areas. It would be very good if we could all come to an agreement about what “particular interest” means. If we cannot, I believe that this House should know why the UK Government think that agreement has not been reached, and why they intend to proceed anyway.

[Paul Scully]

Obviously, the Government welcome the devolved Administrations’ ongoing interest in the Bill, and we continue to engage with them on a regular basis. In coming up with this framework, I think we have had at least 34 official-to-official engagements and 10 or so ministerial-to-ministerial engagements with the devolved Administrations. It is important that we continue that spirit of discussion, because we have to set the right definitions for the subsidies of schemes of interest or particular interest.

Having those appropriate definitions is really important to ensure that the subsidy advice unit is focused on the subsidies and schemes that are most likely significantly to distort competition and investment in the UK, or that may do the same to our trade with other countries. It also means, as we have heard, that regulations made under clause 11 may need to be amended quickly in the event that economic conditions change rapidly, for example. A requirement to seek the consent of the devolved Administrations each time the power is used risks introducing significant delays into the process.

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[Seema Malhotra]

I thank the Minister for his comments. I also thank other hon. Members who have contributed, particularly the hon. Member for Aberdeen North, who brought her expertise and experience from the Procedure Committee to the discussion. That was quite helpful as it highlighted a wider issue about better defining how the House can more effectively support the goals of our devolved Administrations and of Westminster in a more coherent way.

This quite measured amendment would

“require the Secretary of State to seek the consent of the devolved Administrations before making regulations under the clause. Where such consent is not given within one month, the Secretary of State”

can go ahead. The amendment deals with making regulations under the clause, and would ensure that the process was working properly.

[Kirsty Blackman]

Does the shadow Minister agree that because the clause deals specifically with schemes of interest and of particular interest, it is pretty unlikely that a situation will arise whereby an economic failure needs to be addressed in the space of a month, but cannot be addressed because the Government cannot change the definition of “interest” or “particular interest”?

[Seema Malhotra]

I think the hon. Member is right on this—the definitions would not necessarily change in those circumstances, and some of that is more about the speed of being able to grant a subsidy—but I am not sure I followed the logic of the intervention, although I appreciate that there is a concern there and it is important that we iron out those scenarios. However, I am not sure the intervention is pertinent to the issue being debated now.

I will press the amendment to a vote.

Question put, That the amendment be made.

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[Paul Scully]

Absolutely. I was going to say that the interested party can, obviously, make a challenge—commence a judicial review of the decision. The duty to consider and act consistently with the principles does leave room for legitimate judgment by public authorities.

On the question of what standard will be applied when looking at that, should it be judicially reviewed, the Competition Appeal Tribunal will apply the judicial review standard when hearing challenges. None the less, the guidance that is going to be published will provide advice on the practical application of provisions, including the duty to consider and act consistently with the subsidy control principles. That guidance will be published in good time for public authorities and other stakeholders to understand the key requirements of the new regime before it commences.

Question put and agreed to.

Clause 12 accordingly ordered to stand part of the Bill.

Clause 13

Application of the energy and environment principles

[Kirsty Blackman]

I beg to move amendment 17, in clause 13, page 7, line 30, leave out

“in relation to energy and environment”.

This amendment would require public authorities to consider energy and environment principles when giving any subsidies, not just those related to energy and environment.

The reason I tabled the amendment is something that we covered earlier today in relation particularly to net zero and thinking about the obligations that we all have to ensure the protection of the environment. I think it is really important, as the Minister agreed earlier today, that in every policy decision that is being made by every authority, whether it is granting a subsidy or doing anything else, those authorities are considering the environmental principles of that decision.

This proposal would ensure that consideration was given to the energy and environment principles in schedule 2 in relation to every subsidy that was given. That is not too much for us to ask of granting authorities. They are giving subsidies, and we have to remember that the subsidies they are giving represent significant amounts of money. We are talking about hundreds of thousands of pounds; we are not talking about when a local authority gives a grant of 100 quid to a small community council to put up Christmas lights. As we are talking about big sums of money, it is totally reasonable that we expect these public authorities—which do anyway a huge amount of audit, and a huge amount of sense checking of any spend that they do and consideration of any spend that they do— to think about all that spend. They should do so not just in relation to subsidies, but in relation to the energy and environment principles.

I probably would have written schedule 2 slightly differently. I maybe would have had slightly different energy and environment principles, including the Opposition’s suggestions around net zero, but given that those are in the Bill and that schedule 2 is in the Bill, it is totally reasonable for us to say that those authorities should consider the energy and environment in everything they do. That is not explicit or even implicit in schedule 1, in terms of the concerns that authorities have to look at with regard to the principles there. This is hugely important.

[Andrew Bowie]

Given that we did not accept the hon. Lady’s earlier amendment, does she not worry that this new proposal might weaken the Bill further with regard to what she is talking about—environmental protections?

[Kirsty Blackman]

I think that, actually, schedule 2 does provide some environmental protections; I am quite comfortable in saying that. It does not do everything I would have wanted it to do. It does not create a requirement to meet the carbon commitments and move towards net zero in the consideration of the principles. However, increasing the level of environmental protection is in there, and it is important that all authorities are thinking about increasing the level of environmental protection in whatever they are doing. Now is the time for the UK Government to make that explicit in relation to everything that everybody is doing, whether it is subsidies or something else. That is why the amendment has been tabled.

[Seema Malhotra]

I thank the hon. Lady for her explanation of the amendment. We certainly recognise the intention behind it, which was something we looked at and gave thought to. We share the view that climate and environmental considerations should be taken into account in assessing all subsidies, and ensuring that all subsidies are assessed in the context of the UK’s net zero commitments is important. That is a real gap in the Bill—for example, transport subsidies might sit outside the scope of schedule 2, and therefore a public authority might not be required to consider the environmental questions and impact relating to those.

Labour believes that hardwiring the net zero considerations into all subsidy decisions would be better achieved by amending schedule 1, as our amendment would have done. I hope that as we proceed with our debates in the House and the period of COP26, which is just ahead of us, we can return to how we embed that principle in the legislation. These are principles of general relevance, so that is where we see a general requirement to consider net zero sitting a little more comfortably. That is why, while we support the intention behind the amendment, we would prefer to reconsider how we look at embedding the general principle of net zero more widely in the legislation.

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[Kirsty Blackman]

I thank the Minister, the Opposition and the hon. Member for Thirsk and Malton for their comments. I agree that this amendment is not the best possible way of achieving our aim, and that other amendments moved this morning—particularly the amendment to schedule 1—would be a better way to go about embedding net zero in our commitments. Unfortunately, the will of the Committee was tested this morning, and schedule 1 went unamended. Hopefully it will be amended on Report, or the Government may choose to change it to include net zero commitments in the principles, but this is where we are in the absence of them doing so.

If we are talking about subsidies to get young people into employment, every local authority, or whoever is granting the subsidy, should ensure that they do so in a way that does not take us away from our net zero targets. That should be part of the decision-making process for every decision we make, whether it is about training young people or building an offshore wind farm. My concern, which was raised by the Opposition this morning, is that that is not embedded in everything the UK Government are doing, and it should be. I tabled this amendment because net zero should run through everything that everybody does, but I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Paul Scully]

The clause establishes that public authorities granting energy and environment subsidies, or establishing schemes to award such subsidies, must assess them against the additional principles in schedule 2.

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[Paul Scully]

We are back to old-fashioned analogue for this part of the Bill Committee. The clause prohibits subsidies that are contingent, whether in law or in fact, on export performance. It permits two types of subsidies to be given for export credit support, including short-term export credit insurance for non-marketable risks, and an export credit, an export credit guarantee or an insurance programme as permitted by the agreement on subsidies and countervailing measures. It also defines key terms and specifies a list of marketable risk countries.

[Kirsty Blackman]

I have a quick question on subsection (7), which says that a direction given under subsections (4) or (6) must “be laid before Parliament” and

“be published in whatever manner the Secretary of State considers appropriate.”

It makes sense that it is laid before Parliament. I am not sure what that means, although I probably should. Does it mean that a written statement on the changes is laid before Parliament? Do the words

“be published in whatever manner the Secretary of State considers appropriate”

mean that it will be published for the public or for granting authorities to see? What method does the Minister think might be considered appropriate? Are we talking about putting it on gov.uk, for example, or about writing to organisations to let them know why the changes have happened?

[Paul Scully]

The clause basically allows the Secretary of State to give a direction to amend the list in order to respond to any changes in market conditions. That direction must be laid before Parliament and published.

[Kirsty Blackman]

Specifically on that point, if the Minister does not mind, does “laid before Parliament” mean a written statement or does it mean regulation? I am confused. If he does not have an answer, I would be happy to speak to him later.

[Paul Scully]

I will write to the hon. Lady.

[Kirsty Blackman]

Specifically on the words “must be published”, I would be keen to know how the Government might publish the direction. I am not asking the Minister to tie himself down, but I want clarity that it will be published in such a way that those who are affected by it are likely to see it, rather than it being hidden away somewhere in the back of gov.uk, where they would not trip across it unless by accident.

[Paul Scully]

I will clarify that, but there is no purpose in hiding it. We want to give certainty to businesses and the public authorities.

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[Seema Malhotra]

We support clause 17 standing part of the Bill.

[Kirsty Blackman]

This is one of the issues that has frustrated me most about the entire Brexit thing: a whole bunch of left-wing Brexiteers thought that these subsidies would be allowed in the event of our leaving the EU and coming out of its state aid system. They thought that we would be able to incentivise local content, and a lot of people in left-wing areas supported Brexit for that reason, but it is expressly prohibited by the WTO and the trade and co-operation agreement. I am just rising to vent my frustrations briefly; I am not going to vote against the clause.

Question put and agreed to.

Clause 17 accordingly ordered to stand part of the Bill.

Clause 18

Relocation of activities

[Seema Malhotra]

I beg to move amendment 13, in clause 18, page 10, line 13, at end insert—

“(3A) This section shall not come into force until the Secretary of State has laid before Parliament a report complying with subsection (3B).

(3B) The report must explain how the prohibition established in this section is consistent with—

(a) reducing deprivation across the United Kingdom; and

(b) the Government’s policy on the establishment of freeports in the United Kingdom”.

This amendment would mean that the prohibition in clause 18 does not come into force until the Secretary of State has laid before Parliament a report explaining how that prohibition is consistent with reducing deprivation across the UK and the Government’s freeports policy.

I am grateful for the opportunity to move this amendment, which would mean that the prohibition in clause 18 would not come into force

“until the Secretary of State has laid before Parliament a report explaining how that prohibition is consistent with reducing deprivation across the UK and the Government’s freeports policy.”

Clause 18 provides that a subsidy is prohibited if it is conditional on relocation from one part of the UK to another, and that the relocation would not occur but for the giving of the subsidy. Subsection (2) clarifies the meaning of an enterprise relocating existing activities: such a relocation occurs where the business carries on activities in one area of the UK before the subsidy is given, and it ceases to carry on those activities in that area after the subsidy has been given and instead carries them on in another area of the United Kingdom. Clause 18 is intended to protect the UK’s internal market and prevent subsidy races between parts of the UK.

The Government’s March 2021 consultation document anticipated clause 18, and suggested that measures could be introduced to prevent the uneconomic relocation of economic activity between England, Scotland, Wales and Northern Ireland. The important word there is “uneconomic”, which is notably missing from what appears to be a slightly blunter instrument in clause 18 as currently drafted. The Government’s consultation cautioned:

“Any additional measures here would need to recognise the value of subsidies which seek to address regional inequalities.”

However, clause 18 does not seem to do that. There is no acknowledgement of the value of subsidies that seek to address regional inequalities. Alexander Rose of DWF Group said on Tuesday that relocations can be highly beneficial to the economy.

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[Seema Malhotra]

My hon. Friend is absolutely right to put the amendment in those terms—it seeks to bring clarity. The Minister will probably appreciate that these are complicated questions for enterprises that may be in receipt of subsidies for positive reasons that meet the objectives of the regime and public policy goals. Clarity for public authorities in granting those subsidies is also important, ensuring that they are not subject to challenge when they genuinely want to achieve positive outcomes, but would be caught under the fairly blunt definition in clause 18. I look forward to the Minister’s response.

[Kirsty Blackman]

The concerns I raised on principle F of schedule 1 are very similar to the ones being raised here. The Government have an intention here, but the clause will not achieve that intention; it is also too restrictive.

I love this amendment; it feels hugely cheeky. I know it is very serious, but I love the way it is drafted—how sad is that?—and I quite like the way both issues are put together in the same amendment. It makes sense that this measure is included alongside the amendments moved earlier by the Opposition on areas of deprivation. There is also the freeport element. The clause basically rules out freeports and the way the Government have explained they are intended to work, which is massively concerning if that is the Government’s plan.

If, for example, a Government Department was to relocate from Whitehall to Salford—I cannot think which Department might be doing that—and if there is going to be some sort of incentive for them to do that, that relocation would be prohibited. Surely that is something that the Government want; if they did not want it, they would not be doing it. They want Government Departments to be able to relocate to places outside Whitehall and to bring jobs to those areas. I am glad they are doing that, but it now would not be able to provide any subsidies for that to happen. That does not make sense.

If the Government’s stated aim and objective is to try to level up places to ensure more jobs, there is going to have to be some level of relocation. That is going to have to happen. We are going to end up in a situation where the Department for Business, Energy and Industrial Strategy does not have 400 staff here and has 400 staff in Salford instead. Surely that is a good thing, rather than a bad one. It would be helpful if the Government could clarify what is meant here.

I agree with the amendment. I agree with the report. We covered areas of deprivation this morning. The freeport thing, however, is unsolvable unless the Government provide us with more information, whether by the Minister explaining, changes being tabled for future iterations of the Bill—perhaps on Report—or the report asked for by the Opposition being provided.

[Paul Scully]

I shall cover a few of the points raised. To take the example of a local authority wanting to incentivise a business to move back to its high street or something like that, the Bill would not prevent local authorities from offering subsidies to support regeneration.

As for what constitutes an “area” in the relocation prohibition, it is not a defined term in the Bill. Public authorities will therefore have to apply common sense in their interpretation. The objective is to prevent the relocation of all, or part of, existing economic activity between different areas of the UK, but there will be circumstances in which relocation within an area may occur. For example, where a business has an existing presence in a region and moves within that region, it is unlikely to engage the prohibition. Again, that will come in guidance.

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[Paul Scully]

The regenerative example that I gave would fit, but it will be fleshed out in guidance. Let me come to freeports quickly, because that issue complies with the principles and prohibitions set out in the Bill, including in the clause.

When designating freeports, bidders are required to explain how their choice of tax site locations minimises displacement of economic activity from wider local areas, especially other economically disadvantaged areas. The focus of freeports, however, is to encourage new investment and to create new businesses and jobs, rather than harmful displacement, so tax sites will be designated only once the mitigation of displacement and other factors have been demonstrated by the successful bidder in its tax site. We are confident that the risk of harmful displacement has been minimised.

In summary, the subsidies will not be conditional on the relocation of existing economic activities.

[Kirsty Blackman]

The Minister has made a good case on subsidies for the purpose of regeneration, but that is not stated in the clause. At no point is it stated that the regenerative ideals or decisions to produce regeneration in an area trump the clause.

[Paul Scully]

I said that the clause does not prevent local authorities from offering subsidies to support regeneration. None the less, we will supply more support through guidance, because we want to give public authorities the confidence to apply subsidies in that scenario and similar ones.

The purpose of the clause overall is to prohibit wasteful subsidies that serve only to poach economic activity from one area to another. I must say, the ears of the good people of Guildford must be burning after their third mention in a couple of days—