Subsidy Control Bill (Seventh sitting)

Kirsty Blackman Excerpts

Thursday 4th November 2021 Public Bill Committees

[The Chair]

Before we start, may I remind hon. Members about social distancing and mask wearing where appropriate, please? We will now continue line-by-line consideration of the Bill. The selection list for today’s sitting is available in the Committee Room and shows how the selected amendments have been grouped together for debate. Amendments grouped together are generally on the same or a similar issue.

Clause 52

Mandatory referral to CMA

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 28, in clause 52, page 28, line 10, at end insert—

“(c) where the granting authority for a subsidy scheme is the Government department responsible for the operation of the subsidy control regime, or

(d) where the granting authority for a subsidy is the Government department responsible for the operation of the subsidy control regime and the subsidy value is over £2 million.”

This amendment makes provision for situations for mandatory referrals in cases where the department responsible for the operation of the subsidy control regime is a granter of subsidies or subsidy schemes.

Thank you for chairing the Committee today, Chair; we very much appreciate it. I am pleased that the hon. Member for Mid Dorset and North Poole is delighted to see me here. He made very clear this morning that he was worried that the debate might be truncated without my presence. I am here to oblige by standing up and making my first speech of the day.

The amendment is about mandatory referrals to the Competition and Markets Authority. Clause 52 specifically focuses on those mandatory referrals and the criteria under which a subsidy would mandatorily be referred and therefore given an additional level of scrutiny. The mandatory referral considerations in subsection (1) of the clause say that a public authority must request a report from the CMA if it is giving a subsidy or a subsidy scheme “of particular interest” or if it is

“directed to do so by the Secretary of State”.

It goes on to say in subsection (3) that the Secretary of State may

“specify further information that must be included in a request”,

and

“make provision as to the form of a request.”

That is all well and good, but it seems to me that every single criterion for mandatory referral to the CMA relies on the decisions being made by the Secretary of State. The Secretary of State will decide what is a subsidy or subsidy scheme of particular interest and what class it falls into. That is a decision that will be made, but those details are not in the Bill.

If a subsidy is only mandatorily referred if it is of particular interest, which is defined by the Secretary of State, or if the Secretary of State chooses to refer it, there is a gap in terms of a conflict of interest, where the subsidy may be given by the Secretary of State’s Department and, given the limited criteria we have for interested parties, for example, which have not yet been expanded on—we will discuss them later on in the Bill—it would make sense for large grants made by the Secretary of State’s Department to mandatorily be referred to the CMA for a report. That would not cause a huge amount of additional work for the CMA, but it will provide an additional check and balance to the system. We do not want the Government marking their own homework on that; we would rather there was an additional level of scrutiny here.

Amendment 28 says that

“where the granting authority for a subsidy scheme is the Government department responsible for the operation of the subsidy control regime, or”—

that should be “and”, not “or”—

“where the granting authority for a subsidy is the Government department responsible for the operation of the subsidy control regime and the subsidy value is over £2 million.”

Once again, I do not feel I am being unreasonable. I am not asking for a mandatory referral every time. Sorry—I just reread the amendment, and it is right, it should be “or”. It is about a subsidy scheme that is made by the Secretary of State’s Department, so scrutinising all the subsidy schemes made by the Secretary of State’s Department, or the scrutiny of an individual subsidy where that is more than £2 million. I apologise to the Clerks for doubting them; this is how I intended the amendment to be.

This is not an unreasonable ask, but it is an extra check and balance, ensuring that the Government are appropriately scrutinised and that there is a look at all those subsidies. It is just an additional look; it will not delay the granting of the subsidy or mean that it will take longer. The subsidy will still be able to be granted fairly quickly and subsidy schemes will be able to be set up fairly quickly. However, it means that the CMA will look at those with an inherent conflict of interest because the Secretary of State’s Department is granting or setting up the subsidy scheme.

Later in the clause is a provision for the Secretary of State to make changes by regulations, but that specifically relates to the form of the request and the further information that may be included in the request. It does not relate to further criteria as to which public authorities must request a report from the CMA. If there were such a provision, I would push for the Secretary of State to make regulations and ensure that the criteria were widened. As that has not been included in the clause, I feel that I have to move the amendment.

If the Minister could give me some level of comfort, that would be very helpful. I think that that check and balance needs to be there to get rid of the inherent conflict of interest.

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

It is a pleasure to serve under your chairship, Ms Nokes. I thank the hon. Member for Aberdeen North for her remarks. She raises a number of important and pertinent issues around scrutiny, in particular about subsidies introduced by the Secretary of State.

The clause deals with the mandatory pre-award referrals to the CMA. It outlines that:

“A public authority must request a report from the CMA…before giving a subsidy, or making a subsidy scheme, of particular interest, or…where directed to do so by the Secretary of State”.

We have highlighted our concerns about the definitions of subsidies “of particular interest”. It is a glaring gap in our debates on the detail of the legislation. We think that the definition should be included in primary legislation, and I hope the Minister has listened to our concerns. I am sure that the issue will come back at future stages and, at the very least, our expectation will be that the definition is published very soon after the Bill receives Royal Assent. Things that we could be dealing with now should not end up delaying the ability to make decisions and implement the regime.

Although we are concerned about the definition, we support the overall importance of the measures outlined in the clause and the function of mandatory referral to the CMA, in the interests of checking compliance with the principles, bringing assurance on value for money and confirming that there will be no distortion or harm to the economy.

On amendment 28, the hon. Member for Aberdeen North makes an important continuing reference to the Government marking their own homework. Although we recognise the intention and some of the arguments behind the amendment, we do not think that producing a report on a subsidy every time one is given by the Department for Business, Energy and Industrial Strategy—as a sort of blunt tool—would necessarily be the most effective use of the CMA’s time.

Rather, we have argued very strongly for all subsidies, regardless of whether they are below a particular amount or given to a certain recipient, to be posted on the database to ensure sufficient transparency. We will also seek to ensure that there are greater rights on call-in powers or that the CMA can investigate itself, if it deems that there a reason to do so. We think that any assurances, which are, in part, the intention behind the amendment, could be better delivered through the Bill in other ways. On that basis, we will abstain on amendment 28. We support clause 52 standing part of the Bill.

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

As always, it is a pleasure to serve under your chairmanship, Ms Nokes. Before I begin, I would like to make a general point about today’s debate and address a question raised during our discussions on Tuesday. Throughout the discussion of clauses in part 4 of the Bill, Members will hear me refer to the subsidy advice unit, which will be a new sub unit of the Competition and Markets Authority established by this Bill. Technically speaking, the provisions in part 4 confer various responsibilities on the CMA, and it is for the CMA to decide which of its responsibilities it will delegate to the SAU. The mechanics of that process will be discussed later when the Committee considers clause 67. While the decision on how to organise its work rests with the CMA, in practice it is likely that most if not all of the responsibilities under part 4 will be delegated to the SAU. Therefore, for consistency and ease, I will be referring to the SAU throughout these debates.

Clause 52 sets out that two categories of subsidy and scheme will be subject to referral to the CMA. The first is subsidies and schemes of particular interest, which we discussed in the context of clause 11 on Thursday 28 October, and the second is the subsidies and schemes that are referred by the Secretary of State under the provisions that we will shortly discuss under clause 55. Amendment 28, as we have heard, would add to that list of subsidies subject to mandatory referrals, requiring the Department responsible for the subsidy control regime to refer individual subsidies above £2 million and all subsidy schemes to the SAU. In practice, the BESI, my Department, is the Department with responsibility for subsidy control. I can reassure hon. Members that BEIS takes its subsidy control commitments very seriously. BEIS subsidies, like those of all other public authorities in the UK, will be subject to the “subsidies of particular interest” regime. There is no special treatment in this regime for my Department: indeed, BEIS can already ask advice of the CMA where necessary, using the powers in the Enterprise Act 2002.

The Bill establishes the two categories that we have talked about: subsidies and subsidy schemes of interest, which can be voluntarily referred to the SAU, and subsidies and schemes of particular interest, which must be referred to the SAU. The Government will set out in regulations definitions for both of those categories, and those regulations will be subject to the affirmative procedure, so there will be opportunity for parliamentary scrutiny of them. Those definitions will capture subsidies that are more likely to give rise to trade disputes, as well as subsidies that are more likely to distort UK competition and investment. BEIS subsidies and subsidy schemes will be subject to the same requirements and procedures as all other subsidies. I assure hon. Members that my Department really will not get any special treatment on this issue.

However, routinely requiring BEIS to be referred to the SAU when it offers subsidies and subsidy schemes would be a disproportionate approach to managing the risk of those highly distortive subsidies. It is important for the SAU to focus its attention and casework on genuinely distortive subsidies, not to focus unduly on subsidies and schemes made by BEIS in particular. The Government fully agree that subsidies and schemes of particular interest merit a proportionately higher level of scrutiny than other less distortive subsidies and subsidy schemes, but those subsidies are, in principle, better captured through a robust and well-evidenced set of thresholds and criteria. Those criteria will be set out in regulations defining the subsidies and schemes of particular interest, rather than placing a discrete requirement on a single public authority on the face of the Bill.

[Kirsty Blackman]

Specifically regarding the process, and what might happen in terms of subsidies of interest and subsidies of particular interest, does the Minister agree that this is going to be a movable feast? The regulations will be subject to the affirmative procedure, but things may change, and therefore there will need to be a change to the interests and particular interests. I am just asking the Minister to give me comfort that if the Government agree there is a particular issue with something, and it needs to be added to the group of “interest” or of “particular interest”, it will be added.

[Paul Scully]

Yes, I can give the hon. Lady that assurance. Those schemes will be set out rigidly and subject to the affirmative procedure, so we can have parliamentary scrutiny, but none the less—as she rightly says—we need to retain flexibility, which is exactly why those definitions are in regulations in the first place, rather than on the face of the Bill. Of course, we look to provide as much parliamentary scrutiny of those regulations as possible. I ask the hon. Lady to withdraw her amendment.

[Kirsty Blackman]

I will not press this amendment to a vote at this stage, but I might bring it back at a later stage. 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 requires that public authorities refer certain subsidies and subsidy schemes to the subsidy advice unit before they are given or made. Two types of subsidies or schemes must be referred: those defined as being of particular interest in clause 11 and those that are called in by the Secretary of State under clause 55.

[Seema Malhotra]

We support clause 52. I am not concerned about the detail of the clause, but how it will be effective as part of the regime. This comes back to why the rules around what can be referred under the definition of a subsidy of particular interest and who has what call-in powers will be a fundamental question to come back to. It would be a shame to have a good clause and not use it to best effect to support the best outcomes of the regime.

[Kirsty Blackman]

I agree with the hon. Lady. My concern, which I mentioned briefly when talking about the amendment, is that subsection (1) is not flexible enough. It mentions particular interests and

“where directed to do so by the Secretary of State”,

but I would prefer to see an additional category that says, “other reasons”, with regulation to follow if that is what the Minister suggests. There are probably more reasons why things could be referred mandatorily to the CMA without having to go through the affirmative process of changing the particular interest subsidy section in clause 11. There could have been a little more flexibility in that clause, and it would be useful if the Minister agreed to think about that.

[Paul Scully]

I am always happy to think about flexibility.

Question put and agreed to.

Clause 52 accordingly ordered to stand part of the Bill.

Clause 53

CMA reporting period for mandatory referral

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

--- Later in debate ---

[Kirsty Blackman]

I have spent years looking at education reports and care inspectorate reports. There are criteria for giving marks and a particular language is used—something is good, poor or dreadful. Is the Minister expecting that “serious deficiencies” will be used by the CMA in the report? Will it say, “We consider there to be serious deficiencies”, which the Secretary of State would consider to be a red flag, resulting in the potential extension of the cooling-off period? Does the Minister think the CMA will do that explicitly, or will the Secretary of State have to read between the lines and try to work out how bad things are? We do not know how the reports will be structured, so it would be helpful if the Minister could make clear whether the Secretary of State is going to understand the meaning of the reports and whether the SAU would seek an extension to the cooling-off period because it believed there were serious deficiencies.

[Paul Scully]

There is not going to be a rating, because the SAU is not a regulator or enforcer, but it is responsible for making sure that the situation is made as clear as possible so that people, not least the Secretary of State, can understand it. That is why we have left this matter to the CMA—its staff are experts and have great experience of doing exactly that.

--- Later in debate ---

[Paul Scully]

One of the problems is that, if we define it in the way I think the hon. Lady is after, we then lose some of the flexibility. I was just about to say that the exact situation will vary on a case-by-case basis. A serious deficiency could arise, for example, if the subsidy advice unit identified that the proposed subsidy or scheme might have significant negative effects on UK competition and investment but the public authority had not considered any of the options for mitigating those effects. Another example might be if the SAU identified significant technical flaws in or omissions from the public authority’s assessments of compliance with the requirements of chapters 1 and 2 of part 2, such as the analysis of how the subsidy incentivised a change in the beneficiary’s behaviour or the impact on international trade.

[Kirsty Blackman]

Does the Minister agree that it is likely that the SAU will have internal working definitions of what is “acceptable” or “deficient”, and that it is likely to say that to the Secretary of State in giving its recommendations and possibly asking for any extensions?

[Paul Scully]

Absolutely—that is exactly what I was going to come on to. The hon. Lady has obviously seen the next paragraph I was going to read. The Secretary of State would not be taking that view on his own. It would not be an arbitrary judgment; it would be acting on the basis of a published report by the SAU, which is obviously independent.

As the hon. Member for Feltham and Heston said on Second Reading and has reiterated this week,

“the new system will work only if it provides transparency, oversight and scrutiny”.—[Official Report, 22 September 2021; Vol. 701, c. 341.]

This amendment only serves to undermine those aims slightly—unintentionally, I am sure—by limiting the circumstances in which the Secretary of State can act to extend the cooling-off period and ensure that a public authority has more time to consider the SAU’s comments. I therefore request that she withdraw her amendment.

--- Later in debate ---

[Kirsty Blackman]

I stand as a proud representative of the nation of Scotland to make a brief speech on amendment 52. The powers that are suggested under clause 55 are limited powers. They are not unlimited powers to call in anything on a whim of the Secretary of State or of anybody else. They can only be called in in relation to subsidies or subsidy schemes of interest, or subsidies or subsidy schemes in which the Secretary of State considers there is a failure to comply with chapters 1 and 2 of part 2, or there is a risk of negative effects on competition or investment within the United Kingdom.

The amendment proposed by the Opposition does not affect that. It would still apply only in the case that the devolved Administrations wanted to call in something that was a scheme of particular interest, or something that the Secretary of State had presumably already called in that was against chapters 1 and 2 of part 2 or where the Secretary of State agreed there were negative effects on competition or investment within the United Kingdom. Those are not, as the Government members of the Committee have suggested, unlimited powers parallel to those of the Secretary of State; they are limited powers. The only time the power would be exercisable is if the schemes were of interest—rather than of particular interest, because they are mandatorily referred—and the three devolved Administrations would be able to call those schemes in. It would be a limited power that would only apply for schemes of interest. I absolutely support the amendment—it makes sense—and we would obviously like it to go further. We have a devolution settlement and this is a proportionate amendment that makes sense in the context.

[Paul Scully]

Under the powers in the Bill as drafted, when the Secretary of State decides to exercise the call-in power, that direction has to be published. In addition, the SAU has to provide annual reports on its caseload, including any subsidies and schemes that were called in by the Secretary of State. That transparency will help ensure that the powers are used appropriately and that Parliament has oversight of how and when the powers are being used. Amendment 52 would allow those referrals to the SAU under the terms of clause 55 to be made by devolved Administrations, whereas the Bill provides the power for the sole use of the Secretary of State.

In the majority of cases, the most potentially harmful subsidies will be those that meet the criteria for subsidies of particular interest, which will be set out in regulations, but it is inevitable that there will be some subsidies or schemes that fall outside those boundaries. They will still benefit from the additional scrutiny offered by the SAU.

The call-in power provides a mechanism to catch potentially highly distorted subsidies that may not be caught within the “subsidies of particular interest” definition. It will also provide a safety net where there is a risk of failure to comply with the subsidy control requirements or there is a risk of negative effects of competition and investment within the UK. This is a reserved power and as such the Secretary of State’s responsibilities and interests in making referrals are UK wide. As a member of the UK Government, they are responsible for subsidies granted in all parts of the UK being compliant with our international obligations.

--- Later in debate ---

[Kirsty Blackman]

I have two questions. I would have expected that “particular interest” would cover anything that does not meet chapters 1 and 2 of part 2 anyway, so it would be nice if the Minister could clarify that point. Secondly, if any of the devolved Administrations request a meeting with the Secretary of State because they are concerned and want the Secretary of State to call something in, would the Secretary of State grant that meeting?

[Paul Scully]

On meetings, I am not the Secretary of State, but effectively, yes—we want to engage with the devolved Administrations. We do that on a regular basis, and have done in the formulation of this Bill, as we have discussed many times, and we will continue to do so as we go through guidance and the working of the Bill.

In the event that one or more of the devolved Administrations has serious concerns about a subsidy given or a scheme made, of course they can request that the Secretary of State use that call-in power. The Secretary of State would carefully consider any request from their counterparts in the devolved Administrations, just as they would on any other policy matter. As I say, we have met the devolved Administrations a number of times since July 2020 on the formulation of this Bill. We continue to meet and engage with them regularly, and listen to their views as the Bill progresses through Parliament, and we will do so in the lead up to implementation. I request that the hon. Member for Sefton Central withdraws the amendment.

[Kirsty Blackman]

My other question was about the definition of “particular interest”, or “interest”. Subsidies of particular interest will be mandatorily referred, as we have already agreed, but subsides that risk to fail to comply with the requirements of chapter 1 and 2 of part 2 could be referred by the Secretary of State. It would concern me if compliance was not part of schemes of particular interest, or schemes of interest. I understand that some schemes of particular interest would be defined on the basis of the sector they are in and the specific details of the subsidy, but I would expect that lack of compliance with the rules would cause a scheme to be of particular interest anyway. I hope the Minister understands what I am trying to get at here. If a subsidy does not comply with the subsidy control principles, surely it is either not a subsidy—it is not allowed—or it is a scheme of particular interest that would need to be looked at mandatorily, or perhaps optionally, by the CMA.

[Paul Scully]

I think I get the general gist of where the hon. Lady is going with that point. That is why, rather than trying to define them as not complying, we are trying to define them specifically at the outset, hence the regulations that we will be putting forward, but there is plenty of opportunity to have that discussion.

--- Later in debate ---

[Paul Scully]

Clause 55 gives the Secretary of State the ability to direct a public authority to request a report from the subsidy advice unit on a proposed subsidy or subsidy scheme. That may be made in relation to a subsidy of interest or any other subsidy or scheme that the Secretary of State considers to be at risk of failing to comply with the subsidy control requirements or of negatively impacting competition or investment in the UK. It is not intended to be used routinely, but it is a necessary safeguard. It is there to ensure that an additional layer of scrutiny can be applied to subsidies that might risk creating market distortions but would otherwise not be subject to mandatory referral to the SAU.

[Kirsty Blackman]

I was going to ask a question about this clause, and the Minister has managed to make me even more confused. Subsection (1) states:

“A public authority may request a report from the CMA before giving a subsidy, or making a subsidy scheme, of interest.”

It does not state that, additionally, any other subsidy may be referred to the CMA under a voluntary referral. It might elsewhere in the legislation, but it does not at this point.

My concern was that it relates only to subsidies “of interest”—subsidies of particular interest are covered by mandatory referral, and that is fine—but for subsidies that fall outside the category of interest, perhaps because interest is narrowly drawn by the regulations when interest is set, there seems to be no way for those public authorities to refer them voluntarily to the CMA, as the legislation is drafted. It would be good if they could.

Let us say that “particular interests” and “interests” are defined by the Government, that goes through the affirmative procedure, we have a discussion, and the definitions are agreed. Accidentally, however, something is left out of the category of interest—because we do not think of everything—and a local or public authority discovers the anomaly and thinks to itself, “Do you know what, I should refer this to the CMA voluntarily, because I think it probably should be included in the schemes of interest, but in the way that the legislation is written, it does not fall under that”, so it tries to make a voluntary referral. It cannot, however, because it may make a voluntary referral only in the case of something that is of interest.

There is a bit of a gap. Authorities should be able to make that voluntary referral, whether it is a scheme of interest or not. There is a concern. As to what the Minister said, absolutely, if the Secretary of State has a concern additional to the interest section, that would be fair enough and make a difference, or if the authority itself decides that it should be referred to the CMA. I do not think that that will be a huge amount of extra work. Authorities will not refer themselves to the CMA for fun; they will do so when they feel that there is a reasonable chance that what they are considering doing is contentious.

I will not vote against the clause, because voluntary referrals are a good thing, but I do not think that it goes as far as the Minister suggested it goes—unless I have missed something.

[Bill Esterson]

I was not entirely clear which clause the hon. Member for Aberdeen North was speaking to. We are still on clause 55 stand part—but it was a very good speech on the next clause, so we now know what she will say.

We expressed our concerns in the debate on our amendment. I hope that the Minister will reflect on those concerns and consider whether greater strength is needed in this clause and, similarly, I suspect, in clause 56—when we get to that debate.

--- Later in debate ---

[Kirsty Blackman]

It is no wonder that I was confused by what the Minister said. He was speaking to clause 55 and I was looking at clause 56. Apologies.

[Paul Scully]

We will hear the hon. Lady’s comments again.

Question put and agreed to.

Clause 55 accordingly ordered to stand part of the Bill.

Clause 56

Voluntary referral to CMA

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

[Paul Scully]

The clause—wait for it—allows public authorities voluntarily to refer certain subsidies or subsidy schemes to the subsidy advice unit before they are given or made. Those are known as subsidies or schemes of interest, and the criteria will be set in secondary legislation, as set out in clause 11.

To make that voluntary referral, the public authority has to provide certain information about the subsidy or the scheme that will be referred, including an assessment by the public authority of whether its proposed subsidy or scheme would meet the principles, the prohibitions and the other requirements set out in chapters 1 and 2 of part 2 of the Bill.

The Secretary of State is also given the power to make new regulations specifying the form in which that information must be provided to the SAU, as well as any additional information that must be provided beyond that which is already set out in the clause. That will enable the content and the form of the request to be adapted based on operational experience of whether the SAU is getting the information it needs to report back effectively.

Openness, transparency and a risk-based approach to scrutiny will ensure confidence in the new UK subsidy control regime. The voluntary referral process provides an additional avenue of scrutiny for public authorities seeking to grant some of the more potentially distortive subsidies and schemes. To answer the question from the hon. Member for Aberdeen North, who may want to ask it again, the process gets the balance right by ensuring a flexible system with enough information for the public authorities to get it right in the first place. A lot of that will be done through guidance, and the SAU is there to be helpful and give advice; it is not an enforcer or a regulator.

[Kirsty Blackman]

Let me just imagine that I made an excellent speech.

The concerns that I raised a few moments ago still stand. I think there should be more flexibility in the first part so that it is made clear to public authorities that they can refer something should it not fall under the specific definition of “schemes of interest”. I would appreciate it if the Minister considered tabling an amendment to that effect. I do not feel that that would make additional work.

I genuinely feel that public authorities would use that flexibility only in circumstances where they feel that “schemes of interest” has been defined too narrowly to cover the scheme that they would like to refer to the CMA. That flexibility would not be overused; nobody would be daft enough to overuse it. There seems to be no ability for public authorities to refer anything unless it is classed as a scheme of interest or particular interest, or is something deemed by the Secretary of State to meet various criteria. I would appreciate it if the Minister looked at that.

[Seema Malhotra]

The clause does indeed allow public authorities to

“request a report from the CMA before giving a subsidy, or making a subsidy scheme, of interest.”

We have had some interesting and helpful discussion so far, but our main concern remains the lack of clear definitions in the legislation, particularly the definition of “interest”. Such clarity would provide some necessary assurance to public authorities, the CMA and subsidy recipients about how the regime will work in practice.

We could have pre-empted this issue and had clearer definitions to ensure that more was done upstream by public authorities, meaning fewer referrals. More referrals will create more burden on the subsidy advice unit. Referrals will be made for good reason, however, so we absolutely need the provision. It is likely that there will be greater demand for referrals in the earlier stages of the regime’s implementation, but as people become familiar with the process and judgments become clearer, and the CMA gets some case studies to use, the system will improve.

It is important that there is clarity from Government. We may come back to some of this, but the referring public authority will also need clarity on what it will and will not get back. Guidance on that would be extremely helpful to make the legislation work effectively.

--- Later in debate ---

[Bill Esterson]

Thank you, Ms Nokes. On that basis, it will probably not be wise to take the interventions. I am using these things as an example of the ruling party’s attempts to remove independence. The CMA is also supposed to be independent. We have seen a desire to break the rules and then just remake the rules in the main Commons Chamber, and I fear that now we may be seeing something similar—we need to ensure that we do not see something similar—when it comes to the independence of the CMA in its role with regard to the subsidy control regime.

Without amendment, the clause will allow the Government to rewrite the contents of an independent report if there is any warning that it will say something that they do not like. That is not how independence works, and it is not good government. Our amendments would remove the power for the Secretary of State to do that. It would remove the power to edit reports published by the CMA, and it would ensure that the independence of the CMA stays as it is.

[Kirsty Blackman]

I have just a brief question. This clause lays out things that reports following mandatory or voluntary referrals “must” include and some things that the reports “may” include. Can the Minister confirm that the reports may also include things not mentioned here and that the additional things that would be included would be at the discretion of the CMA? If it can include only the musts and the mays in the clause, it will not be able to include anything else that the CMA considers would be relevant in the report. Given that the Minister has stressed the independence and expertise of the CMA, it would be sensible to confirm that it can include matters that it feels are relevant, whether or not they are explicitly mentioned in the Bill.

[Paul Scully]

The CMA is independent and will use its expertise. I think that we have crossed wires here, because actually the clause allows the Secretary of State to talk about the content of the report but not to textually amend an independent report. That is not what we are talking about here, which is what is within scope of the report—to ensure that it can actually do it. This is to be able to give additional transparency and scrutiny in the regime itself. The clause allows him to make provision about the content and form of the report, but, as I said, not to change the text of an independent report.

Any changes to the content of the report must be made by the affirmative procedure. That is core to the subsidy control regime, because if the Government believe that the process needs to be refined, it is only right to have parliamentary scrutiny of it. By contrast, any specification as to the form of the report would be a technical regulation, for which the negative procedure is appropriate. Amendments 53 and 54 remove that possibility, except by future primary legislation.

As I say, removing the mechanism for amending or enhancing the baseline for SAU reporting that is set out in clause 59 would unnecessarily tie the hands of the SAU and future Governments seeking to improve the referral process based on the experience and expertise that is gathered over time through the functioning of the new regime. As set out in clause 67, the power to change the content of the report may be exercised only for a period of one year following the publication of SAU’s first report under clause 65.

As I have set out, however, changing the form of the report is a technical matter, so it is appropriate for the regulations to be subject to the negative procedure. I therefore request that the hon. Member for Sefton Central withdraws the amendments.

[Bill Esterson]

Clause 59(4)(a) uses the phrase

“amend subsection (1), (2) or (3) to make provision about the content of the CMA’s report”.

The Minister used the terms “text” and “content” interchangeably, which highlights our concern. Using secondary legislation, the Secretary of State is able to give himself the power to amend CMA reports. That is the problem—that is what overturns the power.

[Kirsty Blackman]

The Minister did not answer my question about additional information that the CMA may include in a report that is outwith the scope of the Bill. It does not fall under part 2; it falls under something else that the CMA thinks is relevant and should be in the report. Does the hon. Gentleman agree?

[Bill Esterson]

The Minister did not answer the hon. Lady’s question, so maybe he can do that after I finish my summing up, which will not take much longer.

We will push the amendment to a vote, because the Minister did not address our concerns about removing the independence of the CMA.

Question put, That the amendment be made.

Subsidy Control Bill (Fifth sitting)

Kirsty Blackman Excerpts

Tuesday 2nd November 2021 Public Bill Committees

[Seema Malhotra]

It is a pleasure to serve under your chairship, Mr Sharma, and to debate amendments 34 and 39.

The clause provides that the

“the Secretary of State must make arrangements for the provision of a database of subsidies and subsidy schemes for the purposes”

of transparency as required by the trade and co-operation agreement—the TCA. The database must be accessible to the public free of charge, and public authorities who are obliged to upload details of subsidies or schemes should be enabled to do so. The Secretary of State may direct the Competition and Markets Authority to take on responsibilities for maintaining the database in the future.

Clause 32 mandates the Secretary of State to arrange for the database to be set up, and we support the creation of the database. We recognise that it is vital for there to be transparency over subsidies in the new regime. However, we are again concerned that key details are missing from the Bill. In order for it to function effectively, the legislation should require public authorities to make sure that their entries on to the database are accurate and complete. This is particularly important given that interested parties will use information on the database to assess whether subsidies meet the subsidy control principles and, if not, whether they should be challenged before the Competition Appeal Tribunal. Surprisingly, the Bill does not contain any obligations on local authorities or public authorities to make accurate and complete declarations. I hope the Minister will agree that that is a gap in the legislation and is one that we need to see addressed.

To resolve the problem, Labour has proposed amendment 39, which would establish an explicit duty on public authorities to ensure that their entries on the database are accurate and complete. That is the least we should expect, but I am afraid that the evidence suggests that not all entries entered even over the past 11 months have been accurate or complete. In many cases, they have not been either.

Secondly, the Bill does not place the database under any order or control mechanism. Whose responsibility is it to verify that the information on the database is accurate and complete? Again, given that the information entered on the database is crucial for effective transparency of the regime, does the Minister not agree that this is a significant gap? If the database does not have any regular audit function and if inaccurate or incomplete information entered on to it is not checked, this poor information may lead to misguided legal challenges or, indeed, to harmful subsidies failing to be addressed. The other consequence is that it reduces overall confidence in the database and the information in it. Over time, that would undermine the regime.

In the evidence given on Tuesday 26 October, Alexander Rose of DWF said that since 11 pm on 31 December 2020 only 501 subsidies had been entered on the database. He highlighted that

“of those 501, some 257 are recorded as having a zero or nil value. —[Official Report, Subsidy Control Bill Public Bill Committee, 26 October 2021; c. 52, Q73.]

He gave some frankly shocking examples of schemes that had not been accurately reported. He also questioned the database’s completeness and said that there was no way that only 501 subsidies had been awarded since the entries began.

The Minister may also remember the example of the Tees Valley Capital Grant Scheme. It was listed as having been posted on the website on 1 April 2020, but the website did not even exist on 1 April 2020. Given how vital subsidy entries will be to ensuring that subsidies meet the principles, it is clear that such complacency cannot be allowed to govern the new database under this regime. We need to get it right from the start. Expectations therefore need to be clear and they need to be defined in law. Let us remind ourselves that this is public money. Faith in the system requires good-quality information that is accurately reported, and we need to ensure that there will be a value for money check on the subsidies being proposed.

As the current database is clearly not working for those purposes, it is vital to address that point. Part of this may be about the design of the website for data entry itself, but the expectations of Parliament need to be clear on public authorities. It should be understood that there will then be real consequences if the database contains inaccurate information. We cannot control that if it is deliberate, but we need to put the safeguards in place so that the subsidies are used as intended.

Amendment 34 would ensure that the database was subject to routine auditing. We are open to discussions with the Government and stakeholders on which body is best placed to conduct such an audit. However, we believe that ultimately the responsibility lies with the Secretary of State to ensure that the database contains accurate information and is fit for purpose. I hope that the Government recognise the importance of both amendments in ensuring that the new regime is effective and transparent.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is nice to be here again, Mr Sharma. Thank you for chairing the Committee.

This is an important part of the Bill. It is vital that the database is as full as possible and that people can find the information that they need. The points that were made in the evidence sessions about searching through the database were also incredibly important. There need to be search terms that people can use so that they can look through the database to find the information that they need. The regime will work only if people can find subsidies that are relevant. Improvements to the search function need to be among the other improvements.

I got the Library to put together some figures. As of 26 October, there were 501 subsidies on the database, but 245 of them—nearly half—did not have an amount specified. I know that this is a precursor system and it is not yet fit, but that shows how important it is that we have a framework and the details in place so that public authorities know what information they need to provide and that anyone wanting to challenge the information is able to find that information on the site. So 245 entries did not specify an amount, but about £1.6 billion is currently registered on the database. In addition, 138 entries did not specify where they are from—whether that is England, Scotland, Wales or Northern Ireland—but given the way challenges are likely to work, and given principle F in schedule 1 about competition within the United Kingdom, it is incredibly important that the entries make it clear where they are from and where the subsidy has been given. The principles include a requirement that a subsidy does not affect competition between the regions. It is therefore important that that is one of the criteria that the Secretary of State specifies.

The links on the database are an absolute nightmare. If we go to any of the subsidies, it says, “Click here for more information”. Some of the links take us just to gov.uk, but other links take us to a local authority landing page. That is not right. It does not give us the details of the scheme. It would be more helpful if people were required to upload the details on to the website for the database rather than having the freedom to upload the details on to their own website. They could put them on their website and then take them down the next day. Even if there were a checking process when the information first went up, they could immediately remove it. Having the backroom systems in place so that there is enough space and server capacity on the website to store all the information would be incredibly helpful and probably provide better transparency.

I just want to pull out a couple of further things from the statistics that the Library provided. Of the subsidies recorded on the database that specify the region they are from, 30% are from England. I refuse to believe that only 30% of the subsidies that have been given in the UK since the system was started were in England. Some 21% were from Scotland, and I also refuse to believe that 21% of the subsidies that were given in the UK were given in Scotland. That just cannot be possible.

I completely agree with the amendments that have been proposed. I am not looking to argue with the Minister about the requirements set out and the strength of the database; I am just looking to ensure that the guidance that authorities have to abide by is very strong. I would rather there be too much information on the website than not enough to enable people to mount their challenges. We will come to this later, but there will be very little time for people to make a challenge. They should therefore not have to spend quite a while rummaging around trying to find the details that would enable them to make an informed challenge. I would be keen to hear the Minister make it clear that he intends a significant amount of information that is as accessible as possible to be on the website. People should be able to search the website and, if possible, a system should be in place to ensure that authorities that do not upload full information face a slap on the wrist. They should face some sort of sanction or negative consequence for failing to do their duty.

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

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

Clause 32 sets out the obligation for the Secretary of State to provide a database for subsidies and subsidy schemes, so that public authorities can adhere to the transparency requirements set out in the Bill, including those in clause 33. We have discussed the operational subsidy database. That was put in place to ensure the UK would be able to meet its international subsidy reporting obligations from 1 January 2021. It will continue to be adapted over the coming months to ensure it is fit for purpose for the future subsidy control regime. 

The Government are committed to digital best practice in the monitoring and development of this database and all the databases that we oversee. The database uses the service standard specified by the Government Digital Service. The contract we have with our supplier is flexible—both to implement this Bill and to ensure that we can make improvements as we monitor and evaluate how it is being used.

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[Kirsty Blackman]

Who decides whether the information is complete and that the clock has started, or does that happen only in the event of a challenge? How does somebody who is challenging know that, even though they are outside a month, it does not matter because the clock has not started?

[Paul Scully]

Effectively, it is for the challenge. It is a loose framework. It is not like the state aid regime, where permission has to be sought and waited for before going ahead with a subsidy. It looks back at the subsidies and schemes that have been made. I shall return to the database and the issues raised about its integrity and accuracy, which I hope will illustrate some of the points.

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[Seema Malhotra]

The clause details the specific obligations of a public authority in uploading subsidies and subsidy schemes on to the subsidy database, as it stands in the Bill. It is right that a public authority must ensure that an entry is made in respect of any subsidy scheme unless any agreed relevant exemption applies. The clause also states that a subsidy or scheme must be uploaded within six months of the confirmation of the decision to grant or make a subsidy or scheme, except for tax measures which must be uploaded within one year. Subsection (2) exempts a subsidy from the requirement to be uploaded when the individual award is less than £500,000.

As I said on Second Reading, Labour welcomes the subsidy regime, which will enable subsidies to be granted more speedily while requiring stronger checks to be in place. The Bill presents us with an opportunity to create a more responsive subsidy regime but, as we move away from the EU system of pre-notification, it is vital to ensure that the new regime, which grants subsidies first and then allows them to be challenged after, has appropriate mechanisms for oversight and transparency.

Clause 33, which outlines the obligations that public authorities have in respect of the subsidy database, demonstrates how the Bill seems to fail to provide the checks that we need for subsidies under the new regime. As the Bill stands, subsidies made under a scheme that are worth less than £500,000 do not have to be entered on to the database. I would like to understand the Minister’s justification for that and how the figure of £500,000 was decided on. Amendment 35 would leave out subsection (2) so that there is a requirement to be transparent.

The provision in the Bill is staggering. The sum of £500,000 is significant and could be given multiple times under a scheme without that being transparent. How are we then able to challenge what is being done and, as an interested party, make the possible case against? Does the Minister not agree with Professor Rickard, who said in our evidence sitting last week:

“Through transparency, we can get better compliance and better value for money”?––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 23, Q25.]

I am sure the Minister will agree that we always want to see value for money and that we can help to ensure that the subsidies that are being granted meet the goals that we are setting out to achieve.

I am sure the Minister will also agree that subsidies worth £500,000 or less can have a significant effect on the market. They can distort competition. As such, public authorities should be obliged to enter them on to the database to ensure that their aims and the subsidies can be fairly scrutinised. That is why Labour is proposing amendment 35, which would stipulate that all subsidies should be entered on to the database. We have not suggested setting a minimum threshold for publication; there are proposals on that from the hon. Member for Aberdeen North.

In the system of appeal rather than pre-notification, comprehensive transparency is vital. With the right system, entering subsidies on to the database need not be cumbersome or complicated for public authorities. It can be a straightforward task that is well worth completing for the transparency it provides in the context of every subsidy. We can search the database for the amounts that we might want to scrutinise, but every subsidy should be on the database. That is our starting point.

Amendment 35 would mandate that subsidies given under a scheme are individually also quoted under the scheme’s entry. There will be an amount associated with that subsidy under the scheme; there is no reason why that amount should not be able to be entered and should not be required to be entered.

The amendment would ensure full transparency of all subsidies under the regime and that interested parties had the relevant information needed to scrutinise any subsidy, whether given alone or under a scheme.

[Kirsty Blackman]

I will speak to not only amendment 35, but amendments 32 and 33. I want to address the logic behind the amendments. It is impossible to overstate the importance of the transparency database. It is the key place—the only place—where organisations and local authorities will be able to find information about the subsidies being granted. I imagine that a lot of organisations will be poring over the information on a fairly regular basis to work out whether the subsidies made meet the principles put forward by the Government. It is absolutely, desperately important that we get this right, and I am keen for us to do that from the beginning as far as possible, rather than having to make changes to the legislation afterwards.

I am concerned by what the Minister said earlier about the timing of pre-action information requests; it feels to me that organisations will just make those requests all over the place, no matter when the subsidy was actually registered. If there is no requirement to have full information on the subsidy database and there is no sanction for public authorities that do not do that, people may as well try their hand with the pre-action information request. This encourages the action process to happen, rather than providing people with the information in the first place so that they know that they do not need to make the request.

The logic behind amendment 32 is that subsidy schemes should be easier to implement than subsidies. It should be easier for public authorities to give them out: presumably, the schemes will have been agreed. They will be set up in a certain way, so the process of giving awards under them should be easier—that is literally the point of having subsidy schemes.

I turn to the logic of changing the figure from £500,000 to £100,000 and keeping a floor. If something under £100,000 has been approved as part of a scheme, it is probably going to be not that bad—it will probably be fine. But £500,000 is far too high, which is why we suggest £100,000. As was said in the evidence sessions, the figures are arbitrary—the figures are always arbitrary no matter which one is chosen. However, that was the logic behind having a differential system in place between subsidy schemes and subsidies on the subsidy database.

I like Labour’s amendment 35 and get where they are coming from, but I am more comfortable than them with the more streamlined process of the subsidy scheme.

I move on to our amendment 33, on minimal financial assistance. It would actually amend a future clause—clause 36 —but it makes sense to debate it at this point, as it is specifically on the amount that needs to be provided on the database. My suggestion is that all subsidies not made under a scheme should be part of the database. I am not suggesting that they should have to meet the other minimal financial assistance requirements, but I am suggesting that—this was pretty clear from our evidence sessions on Tuesday—all the subsidies not made under schemes should be registered on that database. They would not necessarily have to jump through the other hoops, but all the public authorities that we are dealing with will have done a huge amount of due diligence before giving a subsidy of any sort. They will have the information and it would not cost them much in the way of time to ensure that it is uploaded. That would increase drastically the amount of transparency and our oversight. As drafted, we will not know whether the system is working, because we will not have access to transparency data on any subsidies under £315,000 or any made in a scheme under £500,000. That is not good enough.

A new system is being set up and the Government have been clear that it is a free-market and permissive system, but neither I nor anyone else will know whether it works if we are not able to see the data and whether public authorities are making far fewer—or far more—subsidies than expected under the scheme. We will be unable to assess the adequacy of the system unless the Minister is willing to make changes to the thresholds for schemes and for general subsidies. Once again, I am not suggesting that we put other duties in place for minimal financial assistance or a requirement that other hoops have to be jumped through; I am suggesting that details are uploaded to the database so that we may scrutinise the data.

[Paul Scully]

There has been a great deal of interest in the thresholds at which the transparency obligations apply, so I will explain some of the detail and logic of those thresholds. Transparency is an important part of the subsidy control regime and key to the enforcement provisions.

As we have heard, interested parties must be able to see subsidies in order to determine whether they may be affected and whether they wish to challenge the subsidy award or subsidy scheme. Any challenge will be made in the Competition Appeal Tribunal through that judicial review. The database is a vital tool in that. To serve its purpose, the aim of the database should always be to enable interested parties to see the subsidies that they may wish to challenge. It is not designed to be a general database of public authority spending; other tools are already available elsewhere for greater financial transparency in that regard and are not limited to subsidies. The transparency requirements in the Bill have therefore been designed to focus solely on those subsidies and schemes that can be challenged on subsidy control grounds.

The Bill provides for various reasons why a subsidy or scheme cannot be challenged on subsidy control grounds, such as a subsidy award given under a published scheme not being able to be judicially reviewed in the CAT on subsidy control grounds. That is because the scheme itself is assessed against the subsidy control principles and is challengeable, rather than the award under the scheme. Another example is minimal financial assistance subsidies, which are considered too small to cause undue distortions. They therefore do not have to adhere to the subsidy control principles and other requirements. Those subsidies do not need to be on the subsidy control database.

The transparency of subsidy awards has costs as well as benefits. Providing the data would create an administrative burden for public authorities, including small local authorities, in addition to the imposed costs for those using the database if excessive, irrelevant or potentially poor-quality data is provided that interested parties have to sift through. Another thing about the impact on public authorities is the cumulative impact. We find that transparency requirements in general tend to fall on a small number of people in local authorities and other public bodies. That is why there is a relatively high bar or threshold—because of that cumulative burden on a few people in local authorities.

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[Paul Scully]

I shall come back to that, if I may. Let me deal first with consultation.

The Government’s proposed approach to transparency was set out in the consultation on subsidy control, including the proposal to exempt minimal financial assistance and subsidies given under schemes of less than £500,000. We asked whether respondents agreed with the proposed rules on transparency, and 81% agreed. We also asked specifically whether respondents agreed that minimal financial assistance subsidies should be exempt from transparency requirements, and 65% agreed that they should be exempt. Respondents pointed to the administrative burden as a reason for not lowering the thresholds. It is clear, therefore, that the approach taken in the Bill reflects the views of those who responded to the consultation.

There is no theoretical limit to the number of subsidies of any value that may be given under the specific scheme. None the less, it will be the scheme itself that will have to be applied under the principles of the subsidy control framework.

Amendment 32 would require all subsidy awards, given under published schemes, of £100,000 or more to be uploaded to the database, lowering the threshold from £500,000. Amendment 35 would remove this threshold altogether so that a subsidy of £1 given under a scheme would need to be uploaded on to the database.

The database will already include information about the scheme under which these subsidies are given. This information will be sufficient for others to understand whether their interests will be affected by any subsidy given under that scheme and whether they should seek to challenge the scheme itself.  As such, and as I have said, the Bill does not provide for the possibility to challenge subsidies given under schemes. 

Further, the Bill provides for an exemption from the transparency requirements for small subsidies given as minimal financial assistance, which is found in clause 36. Amendment 33 would remove this exemption. It would require information about all subsidies of any size to be uploaded to the database, except for those given under a scheme or subject to another exemption. 

I believe that the costs entailed in all three amendments clearly outweigh the benefits.

[Kirsty Blackman]

Does the Minister feel that his rejection of amendment 33 renders the cumulative provisions of clause 36 unworkable? How will anyone know that somebody has received cumulative subsidies if there is no requirement for those subsidies to be registered anywhere? What is the point of those provisions if we are not going to be able to police them?

[Paul Scully]

The challenge will be to the scheme itself, not to the subsidies within it.

[Kirsty Blackman]

I was talking specifically about minimal financial assistance and the cumulative impact. An organisation cannot have more than £315,000 over a three-year period before it has to be registered, but if there is no requirement to register the 20 subsidies received —or 200,000—how is anyone ever going to know?

[Paul Scully]

A public authority awarding something that it believes will be a subsidy below that will have to publish a letter demonstrating that it is adhering to minimal financial assistance. That is therefore for businesses or the recipients of the subsidy to double-check. Although it is the public authorities that will be awarding the subsidies and they will be analysed by people checking the database, if I ran a business that was reliant on a subsidy, I would, to be frank, make sure of it. I would not want to leave it to the awarding authority to do all the paperwork. I would want to make sure that my business interests were looked after. So there is that risk of task duplication.

[Kirsty Blackman]

One more point: the duty is on the public authority to ensure that it is complying with the regime. It is the public authority’s duty to do that. The Minister made it clear earlier that the public authority has a statutory duty. However, the public authority is then having to rely on that organisation telling them that it has had a subsidy. The public authority will know that that will push the organisation over the £315,000, that it will not be eligible for minimal financial assistance and that it will have to be registered on the scheme. A duty has been placed on the public authority for something over which it has no control and because the Government refuse to put that on the subsidy database it will not be able to find out whether the law is being broken.

[Paul Scully]

All I will say is that if the public authority is issuing something that it believes to be a subsidy, albeit under MFA, it will publish a letter to explain to the recipient why that MFA exemption appears.

[Kirsty Blackman]

Who is going to get the letter? Just the business? Where does it say in the Bill that the public authority has to publish a letter when providing a subsidy? Let us say Aberdeen City Council gives a subsidy to somebody and Aberdeenshire Council gives a subsidy to that same business. How are they going to know that the other authority has done it when the only paper trail is a letter that Aberdeen City Council has given to the business?

[Paul Scully]

It is not published as such, but is sent to the recipient. That is in clause 37. I hope hon. Members agree that we have taken a proportionate, sensible and balanced approach here, first, to make sure that we can exempt small subsidies from the requirement to apply the principles of subsidy control, and secondly, to enable public authorities to assess the subsidy schemes against their principles, rather than duplicating the analysis for every individual subsidy awarded within those schemes. Publishing additional information about small subsidies would have limited value for those concerned about potentially distortive subsidies and would detract from the core purpose of the database. The requirements would lead to additional red tape for public authorities, well beyond the requirements they had to fulfil under the EU state aid regime. In a great many cases, the information would simply duplicate what those authorities already publish in appropriate formats elsewhere.

I do not doubt that, overall, both local and national Government need to make databases interoperable so they can talk to each other, data can be scraped from them and they can be read more easily alongside each other. However, I do not believe that that is for the Bill to address. The exemption from minimal financial assistance subsidies and the £500,000 threshold for subsidies given under schemes finds the right balance between the administrative burden of uploading subsidies and the transparency that the regime needs.

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[Seema Malhotra]

I thank the hon. Gentleman for his comment. If he thinks that there should be such a requirement or that that should be in the guidance, perhaps he might raise it with his own Front Bench. It is important to have some of those checks in place. However, where fraud might be taking place, or there is an impact of—perhaps genuine—cumulative subsidies, whose responsibility is it? If an enterprise has been in receipt of multiple subsidies and does not declare them, where are they declared? If feedback to the local authority or the public authority is incomplete, how do we find out, unless subsidies are on the database and it is then much easier to search and identify them?

There is a lot more to be taken away from this discussion in terms of inefficiency and higher risk of fraud—or, if not fraud, perhaps some forms of maladministration or error. A transparent and full database would reduce the risk of many of those issues arising, and would then reduce the cost of seeking pre-action information or judicial review. Why must we clog up our tribunals with matters that could have been avoided had we had better control systems in the first place? A transparent and full database would ensure the value for money not just of the subsidy but of what the system demands and who pays for checks and balances later in the process.

The complexity of some of those issues requires us to think them through in more detail. I will not be pushing amendment 35 today, but we certainly plan to return to it in later stages of the Bill.

[Kirsty Blackman]

On a point of order, Mr Sharma, if I wanted to push amendment 33 to a Division, would it happen now or during the debate on clause 36?

[The Chair]

Later.

[Kirsty Blackman]

I would like not to move amendment 32 and to push amendment 33 to a Division.

[The Chair]

Ms Malhotra, would you like to withdraw amendment 35 or to press it to a Division?

[Seema Malhotra]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Kirsty Blackman]

I beg to move amendment 26, in clause 33, page 17, line 24, leave out “one year” and insert “three months”.

This amendment would reduce the length of time public authorities have to enter a subsidy in the database from one year to three months, with respect only to tax measure subsidies.

[The Chair]

With this it will be convenient to discuss the following:

Amendment 37, in clause 33, page 17, line 24, leave out from “measure,” to “or” in line 25 and insert

“as soon as practicable, or within one month, beginning with the date of the tax declaration, whichever is sooner”.

This amendment would require the public authority to make an entry into the subsidy database in respect of a subsidy or scheme given in the form of a tax measure as soon as practicable and at the latest within one month.

Amendment 18, in clause 33, page 17, line 26, leave out “six months” and insert “one month”.

This amendment would reduce the length of time public authorities have to enter a subsidy in the database from six months to one month.

Amendment 38, in clause 33, page 17, line 26, leave out from “form,” to “scheme.” and insert

“as soon as practicable, or within one month, whichever is sooner.”

This amendment would require the public authority to make an entry into the subsidy database in respect of a subsidy or scheme in any other form as soon as practicable and at the latest within one month.

Amendment 27, in clause 33, page 17, line 27, at end insert—

“(3A) Before this section comes into force, the Secretary of State must make regulations defining the term “tax declaration” in subsection (3)(b).”

This amendment requires that Government to define the term “tax declaration” before this section comes into force.

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[Kirsty Blackman]

This is one of the most important parts of the Bill that the Government have got wrong, and I am massively concerned. A number of witnesses raised concerns about the length of time. Some of those time lengths might have come from the trade and co-operation agreement, but my understanding is that those are minimum thresholds. It is entirely proper for us to put in stricter thresholds, should we desire to do so. It is important that those times be changed, for the sake of transparency and to protect organisations that might be harmed by subsidies being given to somebody else.

Amendment 26 would

“leave out ‘one year’ and insert ‘three months’”.

That is specifically about tax measures. The logic behind having a three-month period, rather than the one-month period I have suggested for normal measures, is that tax measures may be more complex, and it may take authorities longer to make that registration on the database. That should give them enough slack to be able to put that information on the database.

My big concern about tax subsidies is followed up in amendment 27 on the meaning of “tax declaration”. That meaning is not clear to me and, when I asked a tax professional, they did not know what “tax declaration” means in this case. It is important that the Government make clear what that means because, if “tax declaration” is the tax return, that return is made after the financial year in which that happens. It could possibly take up to two years for a requirement for that to be registered on the database. By that time, a competing organisation might have gone under. It was made clear to us in the evidence sessions that six months was a fairly long time; nearly two years is a very long time. It is completely unacceptable for the Government to choose to do that.

If the Minister says that “tax declaration” means the tax return, that would be helpful in making clear the meaning of “tax declaration”. My understanding, from the evidence given by Daniel Greenberg, is that that would be enough for everybody to understand the implementation of the legislation. The length of time is a massive concern for me. That is why I am proposing on tax measures that the length of time be changed from one year to three months, which is reasonable.

Where measures do not relate to tax, I am proposing that six months be changed to one month. That is again to protect businesses where the subsidy has distorted competition to the extent that they are in serious difficulties. I understand what the Minister said about time being paused if a subsidy has not been uploaded properly on the database, or if a pre-action request is made, but my concern is that people will make pre-action requests left, right and centre, no matter the date put in. It is also far too long a period of time.

The public authority that is granting money to an organisation has to go through a number of hoops in order to do so. It is completely reasonable to ask it to upload that as close to that point in time as possible, rather than let it potter about for six months, because it is already doing lots of paperwork. It is already jumping through hoops in relation to that subsidy, so it makes sense for us to reduce the time. It builds much more protection into the system, which is important. Surely that is the point of having a system. If we did not have international agreements and did not have to have any system in place, it would be different, but we do have to have a system. Therefore, the system that we have should make sense and should work.

I will just speak briefly about the Opposition amendments that have been put forward. They are along a similar line and try to do very similar things. Should the Opposition decide to push the amendments to a vote, I would be quite happy to back them, because it is really important to get this right.

[Seema Malhotra]

It is a pleasure to speak to our amendments 37 and 38, and to the other amendments in this group. I thank the hon. Member for Aberdeen North for the persuasive arguments that she has outlined. She has mentioned that our amendments are on similar lines. Ours perhaps go slightly further, and I will lay out our arguments as to why we have tabled the amendments in this way.

Amendments 37 and 38 would change the period that public authorities have to enter their subsidies on the database to one month, including for subsidies given in the form of a tax measure. Schedule 1 highlights the intention for subsidies to be proportionate, fair and targeted. However, the extensive time period described in clause 33 allows public authorities to have six months to publish on the database, or one year if the subsidy is given in the form of a tax measure. That is notwithstanding the important comment made by the hon. Member for Aberdeen North, which I think also came up in some of the evidence sessions, about what is intended by “tax declaration” within the context of the Bill and what time could elapse between the equivalent of the subsidy being made and that being public. An understanding of that would be very helpful for the purposes of scrutinising that aspect of the Bill and whether there needs to be a change.

Having one year to enter tax measures into the database means that subsidies that do not meet the regulations can still be granted and be spent over that significant amount of time. As subsidy details are not entered into the database, interested parties do not have the necessary information to scrutinise or challenge the subsidies. That means there could be a six-month period in which a highly damaging subsidy can be granted without any challenge. Does the Minister recognise the damage that extensive publication periods could have on the fairness and transparency of the regime, and the extra cost to the public purse of ceasing to recoup some of the subsidies that may be subject to a successful challenge but may already be spent by then? What are the Government’s reasons for making the publication period so long? In last Tuesday’s evidence session, Jonathan Branton, partner at DWF Group, said:

“I have yet to hear a really persuasive case for why you need that long to publish the fact that you have made a award. Why do you need six months to get yourself together to publish that something has been done?”––[Official Report, Subsidy Public Bill Committee, 26 October 2021; c. 58, Q79.]

That was a powerful point. Can the Minister enlighten us? We in Parliament have a responsibility to the public to try to ensure value for money and transparency in public expenditure. That question is at the heart of how we ensure that the proposed regime commands the confidence, credibility and trust of all four nations of the UK and our constituents.

--- Later in debate ---

[Paul Scully]

Let me start by explaining the intention behind the process of uploading the subsidies to the database. As with other aspects of the transparency requirement, we have sought to balance the objectives of minimising unnecessary bureaucratic requirements on public authorities while ensuring transparency for those interested in subsidy awards, and most importantly for those that may be subject to challenge under the Bill’s provisions. As such, we have set the deadline for uploading subsidies on to the database at six months—the deadline for most subsidies—which is the time limit that existed under the EU’s state aid system.

Special provision is made for tax subsidies, as calculating their exact value is more complex and cannot be done until tax declarations have been received and finalised. I will come back to the time limit and the definition of tax declarations.

We expect public authorities to upload subsidies promptly because they have a strong incentive to do so. Generally, the date of uploading a subsidy on the database will determine the end of the limitation period to challenge it. The sooner a subsidy is uploaded to the database, the sooner the clock for the limitation period will start running, and therefore the sooner the public authority will gain certainty that the subsidy will not be subject to a challenge. Public authorities will therefore seek to upload subsidies as soon as possible.

Amendments 18 and 38 would shorten the upload deadline for subsidy awards and subsidy schemes not given in the form of tax measures. Amendment 18 would shorten the deadline to one month and amendment 38 would oblige public authorities to upload the subsidy award or scheme as soon as possible, and within one month at the latest.

As I said, we expect public authorities to upload as soon as the relevant data are available, and to use the whole period of six months only if there is good reason. An upload deadline as short as one month would likely result in more public authorities needing to amend their entries at a later date. Although they can do so as a permitted notification within the meaning of clause 81, that creates an unnecessary administrative burden for those authorities. It also means that the information on the database is more likely to contain minor inaccuracies.

I am sure that hon. Members will agree, as their earlier amendments suggested, that accuracy is really important, so a longer deadline for uploading is not only justified but sensible. I again emphasise that the approach taken in the Bill reflects the views of those who responded to the public consultation on the approach to subsidy control earlier in the year. The consultation set out the details of the proposed approach that we are now discussing, including the six-month deadline for uploading general subsidies. Of those who responded to the question, 74% agreed with the Government’s proposed approach.

Amendments 26 and 37 seek to shorten the deadline for uploading subsidies in tax measures on to the database. Subsidies in the form of tax measures can be an effective tool for achieving policy objectives, but they are generally a more complex way of giving subsidies. They are more likely to have performance-related conditions, which means that it can take longer to determine the exact amount of the subsidy. Of course, a public authority will have an estimated value for the subsidy when it is granted for the purpose of assessing compliance with the principles, as well as for costing the measure for the purpose of managing public money. However, a final amount may not be known until the tax declaration has been completed. Even once that declaration has been submitted, further discussion between the beneficiaries of the subsidy and the public authority might be necessary, to confirm that the calculations in the tax declaration are correct.

[Kirsty Blackman]

Points were made earlier on the specific length of time. Why is the final amount required to be on there at the beginning, because they could presumably just put in how much they expect it to be? That would be much better for those organisations that may be looking to challenge it.

[Paul Scully]

They will clearly have that estimated calculation, but the database will function most effectively if the public authority uploads a subsidy when it can be confident of its accurate value. That will enable an interested party to determine whether to challenge the subsidy through a judicial review. It is important that public authorities are not then coming back and correcting those figures. It is a balance between ensuring that we get the entries in a timely fashion and in an accurate fashion. That is admittedly a difficult balance to strike, but the majority of people in the consultation agreed with our approach, which is set similarly to the EU state aid scheme.

The result of what we have set out is that a public authority will require sufficient time between the date of the tax declaration and the obligation to upload that subsidy to the database. We have determined that 12 months from the date of the tax declaration is sufficient time for public authorities and beneficiaries to calculate the exact subsidy amount. Amendment 26 would reduce that period from 12 months to just three months, and amendment 37 would reduce it to one month. That would mean a significant reduction in the time available for a public authority to make those final calculations and upload the subsidy.

As with non-tax subsidies, an upload deadline of one or three months will increase the likelihood of error. Again, I am sure that is something we want to avoid. We expect public authorities to upload subsidies in the form of tax measures as soon as they can and, as I mentioned, they will have a strong incentive to do so. That is why 12 months is an appropriate deadline to reduce the risk of inaccurate information being uploaded. Shortening the deadline would not improve subsidy transparency in our view, nor help interested persons who may wish to challenge a subsidy in the form of a tax measure.

[Kirsty Blackman]

If I had an enterprise that was being harmed by either a tax subsidy or any other kind of subsidy, I would rather know that the subsidy had been given and not know the exact amount than have no information at all until my business had gone under.

[Paul Scully]

I come back to our earlier discussions about the onus that is put on public authorities, and the impact that it will have on them, not only to put the amount on the various databases but possibly to go back and correct them. I appreciate that it is a difficult balance to strike, but none the less the balance is based on the EU state aid rules. It has gone through the public consultation and the majority agreed with it.

Amendment 27 would add a requirement to define a tax declaration in regulations before the subsidy control regime came into force. I can reassure hon. Members that, in the vast majority of cases, I would expect that the relevant tax declaration would indeed be a tax return. There are other examples: duty and certain other types of taxation treatment. That is why it is called a tax declaration rather than a tax return. But most of the time it would indeed be a tax return. The precise details would vary, depending on the specific tax and the mechanics of the measure in question.

As I have said, the Government will provide thorough guidance—I come back to the guidance that we have spoken about on a number of occasions—to ensure that public authorities are aware of their subsidy control obligations, including how to report subsidies in the form of tax measures. If it would be helpful to public authorities, subsidy beneficiaries and interested parties, that guidance will provide further explanation as to what should be considered a tax declaration. As that does not affect the substance of the law, I do not think it would be appropriate for secondary legislation. I therefore request that hon. Members withdraw or not press these amendments.

[Seema Malhotra]

I thank the Minister for his comments. There has been quite an important discussion and debate today. I want to highlight why this matter is complex and why more is needed on it. The Government quote from their consultation response, but on the specific point about the public authorities consultation question—should it be within six months?—I think it was actually quite a loaded question: “Do you agree that the obligation should be to upload information within six months of the commitment to award a subsidy?” That is hard to disagree with, even if people think that it should be one month or less. As with many of the questions, we had 15% of respondents answering this, and a majority did agree with the proposal. I do not think people would necessarily disagree with it. But even those who then did think a bit further and disagreed commented that six months was too generous and could be shorter, and apparently suggested a range of alternatives.

What is important is to get this right. The Minister made a couple of points in relation to where there may be some information that is not fully available—I do not know what specifically that would be—that would result in edits to correct some information, which could be after a month or two. I would like the Committee to have an opportunity to reflect on that and perhaps to talk to local government and other public authorities about what difficulties they might perceive if the period was to be greater than one month, or whether they did think that one month could be workable in the context of an easy-to-enter database. I think that, rather than pushing this matter to a vote today, we should see some further work done on these issues, in order to have confidence about the deadline, and come back to this on Report, with some of that information and further research being clear.

[Kirsty Blackman]

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

[Seema Malhotra]

I beg to move amendment 36, in clause 33, page 18, line 7, leave out “negative” and insert “affirmative”.

This amendment makes the regulations set out in Clause 33(8) subject to the affirmative procedure.

This amendment would ensure that any future changes made to the minimum threshold for publication were decided through the affirmative rather than the negative procedure. We have said throughout the passage of the Bill that too many aspects of it are set to be decided at a later date by the Secretary of State. Decisions that could and will have a significant impact on the new subsidy regime, such as those that would change authorities’ database obligations, should be afforded appropriate parliamentary scrutiny. The decision to change the minimum threshold for publication on the database is one example that would alter the transparency and clarity of the new regime. It is not right for it to be nodded through Parliament or go under the radar. It should be given parliamentary scrutiny and the vote that it demands.

[Kirsty Blackman]

I have a wee comment to make on this. The Government increasing the minimum threshold required on the subsidy database is a very contentious issue that we have discussed at length, including with witnesses. A significant number of respondents to the consultation answered on the basis of the numbers put before them. It is important enough that lots of people responded to the consultation. It is important enough that we have had a length of time debating the numbers. The negative procedure does not make sense, given the Bill’s possible impact. Unless the Bill is amended, the Government could, at a stroke, change the threshold to £2 million under the negative procedure. In terms of transparency, accountability and ensuring that this makes sense and works for everybody, it would be sensible for the amendment to be accepted.

[Paul Scully]

Clause 33 sets out that the Secretary of State may change the threshold above which subsidies given under schemes are required to be uploaded to the transparency database. Amendment 36 seeks to change the procedure for these regulations from negative to affirmative. 

The regulations can be used to change the thresholds for all subsidies given under schemes, or for those matching a specific description, such as those given to a specific sector. The regulations cannot be used to make changes beyond this—for example, to change the requirement to upload all subsidy schemes to the database—and nor do they change the substantive subsidy control requirements, which are assessed at scheme level, rather than for each individual subsidy given under a scheme. As such, these regulations should be considered technical.

The Bill proposes the right parliamentary procedure for different types of secondary legislation. For example, the powers to amend the exemption thresholds in clause 42(1) are subject to the affirmative procedure because they affect the substantive subsidy control requirements rather than simply the threshold for uploading information to the database.

[Kirsty Blackman]

Does the Minister agree that if the Government were to change the threshold from £500,000 to £20 million, that would require some scrutiny?

[Paul Scully]

As I have set out, the figure of £500,000 strikes the right balance between transparency and minimising undue and unnecessary administrative requirements. We currently have no intention of changing the overall threshold. The Secretary of State has power to change the threshold if necessary—for example, because of changing market conditions or international obligations.

Subsidy Control Bill (Sixth sitting)

Kirsty Blackman Excerpts

Tuesday 2nd November 2021 Public Bill Committees

[The Chair]

I remind the Committee that with this we are discussing the following:

Amendment 19, in clause 34, page 18, line 12, leave out “may, in particular,” and insert “must”.

This amendment seeks to ensure the Secretary of State will include all these measures in the regulations.

Amendment 41, in clause 34, page 18, line 12, leave out from “The” to “particular,” and insert “Regulations made under subsection (1) must”.

This amendment makes it a requirement for subsidies entered into the database to include the information set out in paragraphs (a) to (i) of subsection (2).

Amendment 20, in clause 34, page 18, line 27, at end insert—

“(j) any other matter which the Secretary of State deems necessary”.

This amendment is linked to amendment 19.

Amendment 21, in clause 34, page 18, line 27, at end insert—

“(j) the purpose of the subsidy”.

This amendment would allow the Secretary of State to include a requirement in regulations that a public authority’s entry in the database details the purpose of the subsidy.

Amendment 43, in clause 34, page 18, line 27, at end insert—

“(j) the date the subsidy or scheme was entered onto the database.”

This amendment requires the date on which the subsidy or scheme was entered onto the database, to be included in entries on the database.

Amendment 42, in clause 34, page 18, line 34, at end insert—

“(3A) The Secretary of State may by regulations make provision about further information that must be included in a public authority’s entry in the subsidy database in relation to a subsidy or subsidy scheme.”

This amendment allows the Secretary of State to make regulations setting out further information required to be published on the subsidy database.

Amendment 44, in clause 34, page 18, line 34, at end insert—

“(d) the date the public authority confirms the decision to give each subsidy under the scheme;

(e) the duration of each subsidy under the scheme;

(f) any time limits or other conditions attached to the use of each subsidy under the scheme;

(g) the amount of each subsidy or the amount budgeted for each subsidy under the scheme;

(h) the date each subsidy under the scheme was published.”

This amendment requires that the information required to be entered into the subsidy database for subsidy schemes includes much of the same information required for subsidies.

[Kirsty Blackman]

Thank you for chairing the Committee, Ms Nokes. I came back thinking that I had notes, but I have just written two sentences on a bit of paper. Hopefully I will not ramble too much. I want to speak to amendment 19 and amendment 20, which is linked to amendment 19, and amendment 21. I think that is all, but I will speak to other amendments as we come to them.

The logic behind amendment 19 is, unsurprisingly, to try to give us a bit more certainty about what the Secretary of State will require to be included in the subsidy database. It changes “may, in particular” to “must” in subsection (2), to give us certainty that those things will definitely be included. That strengthens the clause and makes it clearer. Amendments 20 and 21 allow the Secretary of State to include anything else that they think is necessary, because if “may” is strengthened to “must”, we need to allow the Secretary of State to have a bit more flexibility to include anything else not listed.

Amendment 21 is about the purpose of the subsidy. We are concerned, having looked at the entry requirements for local authorities—sorry, I mean public authorities; I spent far too many years as a local authority councillor. This amendment has been included because I am not convinced that paragraph (b) on the policy objective of the subsidy scheme adequately covers what we would like to have in that database. People who put things in the subsidy control database need to say why they are giving the subsidy to the organisation. That is important not just for setting the policy objective, particularly in subsidy schemes, but for knowing the point of that individual subsidy—why it is given to that organisation. It will be very helpful if the Minister outlines whether he thinks additional things may be added to this list by the Secretary of State. I hope he can be clear with the Committee that this is not necessarily a prescriptive list and the Secretary of State may include other things in it. I am assuming that is why the language was chosen at the beginning of subsection (2), but if the Minister could state that, it would be helpful for us to understand.

We have discussed at some length the importance of the subsidy control database, and the fact that it is the only way enterprises or public authorities will be able to find out about subsidies that have been made that may distort competition. I agree with the shadow Minister, the hon. Member for Feltham and Heston, that it is very important that we get this right, and that we have as much information as possible, so that people can make pre-action requests and challenge a subsidy.

The subsidy control database is not a tick-box exercise, and I hope that subsidy control is not a tick-box exercise; subsidy control is necessary, and not just so that we can meet our international obligations. Presumably, the Government think that it is a good thing. It is good that we have regulations around subsidies; that is very important. If subsidy control is not to be a tick-box exercise enabling us to meet our obligations, and if we are not saying, “We’re just going to do the bare minimum,” it is key that the Government give some thought to the amendments tabled by Labour and the SNP, and consider whether it is important to strengthen the data on the subsidy control database, as well as the ability to search it and timelines, which we have talked about.

Amendment 21 would require the purpose of the subsidy to be put on the database. That is missing from the list in clause 34. It would be useful for organisations and public authorities to have information on why the subsidy was given. If the Minister believes that

“the policy objective of the subsidy or scheme”

adequately covers the purpose of the subsidy, it would be helpful if he could state that, and say that the Government will request authorities to include the purpose of the subsidy. That would give us comfort about the information that will be on the subsidy control website.

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

It is, as ever, a pleasure to serve under your chairmanship, Ms Nokes. I thank hon. Members for their interest in clause 34 and the amendments to it. As we have heard, the clause concerns the technicalities of how we will require public authorities to upload details of subsidies to the database, and allows the Secretary of State to make regulations setting up the information requirements of the database. The regulations will be technical in nature, and Parliament will have the opportunity to review them through the negative procedure.

We have thought really carefully about this, and I would like briefly to take the Committee through our rationale for taking the power. The definitions, rules and processes at the core of the proposed new regime are set out in the Bill. Further technical detail and specificity will be needed on the exact transparency requirements. Our new regime needs to be responsive to market and technological changes and to reflect future trade deals and international obligations. It is also important that it can respond to unforeseen events and developments. We need to be able to act quickly, when necessary, to events such as financial crises, covid-19, and changes in world markets and the global capacity for the production of particular materials.

The list of information that must be uploaded on the database relates to the technical, administrative reporting requirements placed on public authorities, rather than the substantive subsidy control requirements that determine which subsidies are given. For these reasons—the need to change at pace, and the fact that these are simply reporting requirements, not rules about when subsidies can be given—we have provided for the Secretary of State to have the power to make these requirements by regulation, rather than putting them in the Bill.

We share the desire to be as transparent as possible. This is a crucial part of the regime, not a tick-box exercise; I assure the hon. Member for Aberdeen North that we take it very seriously. In order to give Parliament further information about what kind of information may be provided, subsections (2) and (3) provide illustrative lists.

Amendments 19, 20, 41 and 42 concern similar matters, so I will address them together. As I have said, the Government’s intention in providing the list of requirements in subsections (2) and (3) is to illustrate the kind of information requirements that may be included in the regulations. Those regulations are not yet prepared. More work is required to gather evidence and scope out the most appropriate way of setting out the database upload requirements in legislation. These requirements need to be clear and operationally viable, and must ensure appropriate transparency and value for those interested in subsidy award data.

Our intention is to make the regulations as straightforward and concise as possible and to avoid duplication. The amendments would mean that the Secretary of State must include in the regulations all the fields listed in clause 34(2).

Amendment 41 also covers the list in subsection (3)—the lists would no longer be illustrative but would be a minimum that could be added to. The regulations would be required to include information that, on the basis of the information gathered before drafting the regulations, might be surplus to requirements. We want to ensure that the exhaustive work is done beforehand, because we have tried to avoid creating additional, unnecessary reporting requirements for public authorities in the UK’s new subsidy control regime while still being as transparent as possible. Before setting out the requirements, the Government will carry out full analysis to ensure that data fields are useful and appropriate.

[Kirsty Blackman]

Can the Minister give me some comfort that public authorities updating the database and those searching the database will be involved in the consultation, and that the majority of the decisions taken by the Government are likely to be led by consultation responses, rather than if the consultation comes back and states, “We absolutely want paragraph (f); that absolutely has to be there” the Government would be unlikely to decide not to have paragraph (f)?

[Paul Scully]

We will engage with all those bodies—with the public authorities that will have to do the reporting; with the recipients of subsidies; and with people interested in subsidy data and transparency. We have already started that engagement, and it will continue because it is important that the database is as useful as possible and is balanced by a proportionate approach so that we do not duplicate effort. None the less, these will all be taken into account as we gather the evidence.

The data required for the database needs to be available to public authorities without creating large administrative burdens, either on those authorities or on subsidy recipients. It needs to be data that is relevant to all subsidies and schemes, or to be clear in which circumstances it is required, and where it is not. It needs to be presented so that those viewing it can easily access the data available and seek out the information they need. 

In addition to getting this right for commencement of the new regime, it is important to remember, as I mentioned earlier, that the requirements may need to change over time. For these reasons, I believe it is right that the lists in subsections (2) and (3) remain illustrative—that is to say, the regulations should not be required to include all types of information listed. The ability to tailor the regulations in future is essential for ensuring that the database does what it needs to do and can allow for different requirements for different types of subsidy. 

Amendments 21, 43 and 44 seek to add further categories of information to the illustrative lists. As I have already set out, these lists should be considered illustrative of the technical requirements that the Government expect to bring forward in secondary legislation. As such, any additions are unnecessary.  

The illustrative list provided clearly demonstrates that the regulations are intended to cover the information for interested parties to understand the key facts about a subsidy or subsidy scheme, and whether it is likely to harm their interests.

Amendment 40, which stands in the name of the hon. Member for Feltham and Heston, would make it compulsory for the Secretary of State to make regulations under this power. I assure members of the Committee that the Government intend to bring forward these regulations before the commencement of the subsidy control regime. However, I do not believe it is appropriate to consider these regulations essential to the operation of the new subsidy control regime as set out in the Bill, because the regulations are essentially technical.

[Kirsty Blackman]

The Minister says that the Government intend to bring forward the regulations before the subsidy regime starts. Can he give us an assurance that it will be not a few days before but long enough for public authorities to understand their obligations and include the correct data?

[Paul Scully]

I can reassure the hon. Lady on two things. First, we want to ensure that we develop this with public authorities—that we engage with them so that they are part of the process. They will be reporting, so we want them to understand what they have to do.

Secondly, as I said in answer to the hon. Lady during a previous sitting, we want to do this in good time and ensure that public authorities, beneficiaries and everyone involved have time to digest it. That is very much the aim ahead of commencement.

The regulations are essentially technical in character and do not fundamentally change the substantive subsidy control requirements. The current practice clearly demonstrates that there is no need to have such specific requirements in force for the database to be operational as it is already up and running, although we can and will improve it.

I therefore request that the amendment be withdrawn.

--- Later in debate ---

Division 9

Ayes: 5

---

Labour: 4
Scottish National Party: 1

Noes: 9

---

Conservative: 9

[Kirsty Blackman]

I beg to move amendment 22, in clause 34, page 18, line 35, leave out subsection (4) and insert—

“(4) Regulations to be made under this section for the first time are subject to the affirmative procedure. (5) Any subsequent regulations made under this section are subject to the negative procedure.”

This amendment would have the regulations be considered under the affirmative procedure, in the first instance, and the negative procedure for any future tweaks.

I like to think I am not an unreasonable person. We have debated at some length what needs to be on the subsidy control database, and it was also discussed during our evidence sessions. It is fundamental to the operation of the scheme that the subsidy control database is fit for purpose and that the information that is available on it is agreed in consultation with the public authorities and the enterprises that it will affect. That relates both to what goes on to the database and to the ability to challenge anything that is happening.

When the regulations are first made, there is likely to be some disagreement. We have had plenty of disagreement already about whether a provision should say “may” or “must” and members of the Committee have brought up good points that Ministers may not have heard before. The Minister’s characterisation of some of the consultation responses has been slightly challenged by the shadow Minister on the ground that some of those responses were not as clear as the Minister suggested. For that reason, when we consider for the first time the information to be included on the subsidy control database, it is important that we do so by the affirmative procedure. Any subsequent changes can be done by the negative procedure.

As the Minister has said, this is a framework Bill, but we have not seen this part of the framework. If the scheme is to work, we need to see what it will involve. The Minister said that this section was specifically about what was included on the database and not about the regulation of subsidy because there are rules on whether or not they are awarded. He is right about that, but we will not be able to understand whether subsidies are being given unless they are on the database. We simply will not know whether they exist. The only burden on public authorities is to provide a letter to the business; it does not involve any level of check or anything that enables us to scrutinise what has happened. The affirmative procedure, in the first instance, would be the best way forward, with the negative procedure for future iterations—tweaks to ensure it is operating correctly.

[Paul Scully]

Amendment 22 concerns the procedure by which the Secretary of State can make regulations to set out the information that public authorities must upload to the transparency database.  

As we have discussed in the context of other amendments, these regulations are highly technical. They do not change the substantive subsidy control requirements or the basis on which subsidies can be given. They are also not necessary for the database to function—as demonstrated by the fact that it is already operational. 

The negative procedure is most appropriate for a technical issue such as this.  As I mentioned this morning, the Bill proposes the right parliamentary procedure for different types of secondary legislation. I mentioned the powers to amend the exemption thresholds in clause 42(1) being subject to the affirmative procedure because they affect the substantive subsidy control requirements rather than the thresholds or entries on the database that we are discussing.

The regulations will be drafted and published in good time to ensure that public authorities understand what the regulations will require of them.  I therefore request that the amendment be withdrawn.

[Kirsty Blackman]

I thank the Minister for his statement. It will be interesting to see whether the regulations come forward in the negative or the affirmative.

I do not intend to press the amendment to a vote. I say simply that, although the website is operational, it is not very functional. The Minister has admitted that it has shortcomings, a number of which would have been sorted if the intention of the regulations had been made clearer in the Bill or if they would be discussed under the affirmative procedure.

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 gives the Secretary of State the power to make regulations that stipulate what information must be provided by a public authority with respect to a subsidy scheme or subsidy award when it is recorded on the subsidy database.

The regulations will be subject to the negative procedure.

[Kirsty Blackman]

Subsection 2(g) of the clause mentions

“the amount of the subsidy or scheme or the amount budgeted for the subsidy or scheme.”

That directly contradicts what the Minister said in relation to tax measures. He said that tax measures could not be put on to the database in advance of knowing exactly how much the tax measures would be. I suggested that it would be possible to include the budgeted amount on the website. The Minister said that would not be possible—it would be important to have the final amount. This specifically states that in regulations the Government might ask for the budgeted amount—particularly for tax measures, where there is such a long time before a public authority has to upload the information, during which a business might, because of the distortive effects of the subsidy, be in serious financial difficulties and go under. It is bizarre that the argument that the Minister made is directly contradicted by subsection 2(g). It would be helpful to know why the provision is in the Bill if the Government would not even consider using it—which is what he suggested earlier.

--- Later in debate ---

[Paul Scully]

To answer the question from the hon. Member for Feltham and Heston, the criteria used to determine how the figures are arrived at are part of the purpose of the subsidy, which is why that information is in the Bill, but guidance will also be provided, as will regulations on gross cash equivalents.

On the point made by the hon. Member for Aberdeen North, that, effectively, is why this is an illustrative list. Budgeted amounts can vary significantly from the final subsidy, so it might not be appropriate for them to be used in all cases, including for tax. None the less, we want to work out these issues on an evidence-led basis, having engaged with the public authorities to see how the database will work in practice. It is important we work with the public authorities to come up with the guidance and final regulations in plenty of time before commencement.

[Kirsty Blackman]

It would be very helpful if when the consultation is carried out the Government were to ask enterprises whether they would prefer to see the data earlier, or the final figure. I think the Government have got it wrong on this one.

[Paul Scully]

As I said, we will engage with enterprises and public authorities, as well as academic and legal experts, to make sure we get the balance right. We think we have a balanced and proportionate response, but that will be developed in plenty of time before commencement.

Question put and agreed to.

Clause 34 accordingly ordered to stand part of the Bill.

Clause 35

Introductory

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

--- Later in debate ---

[Paul Scully]

The exemption allows public authorities to award low-value subsidies of up to £315,000 over three years with maximum flexibility and minimal administrative burden. Subsidies given through the minimal financial assistance exemption are very unlikely to have any appreciable distortive impact on international trade and investment, or UK competition and investment, so it is appropriate to exempt them from the substantive requirements of the regime, subject to the value threshold set out in the clause and the relevant procedural requirements set out in clause 37.

[Kirsty Blackman]

I continue to believe that subsection (2) of the clause is meaningless and unpoliceable because of the way that the subsidy control database is being put together. I would very much like it if the Minister would, either now or at some future point, in writing preferably, let us know how the Government intend to ensure that public authorities are able to find out whether an organisation has had a subsidy before, what its value was, and whether the subsidy that it will potentially award to that organisation will push it over the £315,000 limit.

There is no point in the clause if there is no way in which it can work because of the Government’s decisions on how the database is run. I am very pleased that a public authority will have to write a letter to an organisation to say, “We’re giving you a subsidy under the minimal financial assistance scheme,” but that does not go far enough. It may be helpful if it had to write a letter to all granting authorities, because then they would all be aware of the subsidy that had been given, and they could take decisions. This is an unfair and not sensible burden to put on granting authorities, because there is no way that they can ensure that they are abiding by the law, or get the transparency data to prove that they have done so.

[Seema Malhotra]

We will not support clause stand part. My contribution will build on the arguments made by the hon. Member for Aberdeen North. We debated amendment 33, which I think went part way to covering some of our concerns, but our concerns are broader, in questioning the exemptions from some of the control requirements.

The clause outlines subsidies that are exempt from the subsidy control principles, stating that the principles do not apply to subsidies worth less than £315,000 to one enterprise over three years. We believe that subsidy control principles exist for a reason; we are having these debates and setting up this regime for a reason. Subsidies should help to pursue a specific policy objective. They should be proportionate. They should encourage certain behaviours. They should not fund unnecessary costs. They should not be distortive or cause overwhelmingly negative effects. They should not affect competition and investment within the UK. Those principles should stand regardless of the size of the subsidy.

A subsidy being smaller does not mean that it cannot be disproportionate or bring about negative effects. All subsidies have the power potentially to harm the economy. They should be transparent and subject to scrutiny and the potential for challenge, and therefore all should be required to be in line with the subsidy control principles. I have not heard anything from the Minister, although he may yet persuade me otherwise, about why the clause is needed and why the Bill cannot require all subsidies to be transparent and in line with the subsidy control principles—it is the Subsidy Control Bill.

[Paul Scully]

Clause 37, as we will discuss in a second, states that the public authority has to confirm with the enterprise that the subsidy is still below the threshold. That is the right balance for a proper process to confirm that the threshold is respected without applying disproportionate burdens of oversight for small subsidies that are unlikely to be distortive in any way. Although the regime is light touch, it still imposes some obligations, and it is not proportionate to impose them on very small subsidies that are unlikely to have an impact on trade and competition. For that reason, we feel that the balance is right between the transparency required to make sure that the subsidies are made and reported, and that we can understand the effect and distortion they may have, and the administrative burden that will be put on public authorities and those smaller businesses.

[Kirsty Blackman]

I appreciate the case that the shadow Minister made. I am not entirely convinced at this point; I need to think about it a bit more. I will therefore abstain if clause stand part is pushed to a vote, but I reserve the right to change my mind on Report.

[Seema Malhotra]

We wish to push clause stand part to a vote.

--- Later in debate ---

[Paul Scully]

It works both ways. If I were an enterprise receiving a subsidy, such as minimum financial assistance, I would want to make sure that I was doing my own due diligence, and public authorities do. Any businessman would know that there are legal implications and legal requirements of running a business. It should be the case that it works both ways.

There are interlocking elements within the framework that ensure that both public authorities and enterprises are doing their own due diligence. The procedural requirements will make sure that enterprises receive subsidies only through the MFA exemption when they are genuinely entitled to do so, while still minimising the administrative burden associated with awarding a subsidy. I commend the clause to the Committee.

[Kirsty Blackman]

I have a few questions about the clause. It would be helpful if the Minister could lay out what he expects the timeline to be for these requirements. The minimal financial assistance notification has to be given in advance of the subsidy being awarded. It is an intention letter that says the body intends to give the subsidy. Presumably that has to happen at any point in advance of the actual cash changing hands or the tax measure taking place.

My second question is about the minimal financial assistance confirmation, which is the written statement confirming that the subsidy has been given, the date it has been given and the gross value of the assistance. The Minister made clear earlier in the debate that it could be up to a year, or even longer, before an enterprise actually knows what the gross value of that assistance is if it is a tax measure. Are the bodies expected to give the confirmation as soon as they give the subsidy, or are they expected to give the confirmation as soon as they know the exact amount, particularly for tax measures? The provision does not seem to add up with the details we were given on the subsidy control database.

The other questions I have are about what “written” means. If a public authority emails these details to an organisation, does that count as written? Clause 37 says that

“the enterprise must keep a written record”.

Does it have to keep these details on a piece of paper in a filing cabinet, or can it be kept in an electronic form? What if the enterprise does not have much in the way of offices? What if it operates largely online? We have seen many enterprises move towards online working. Is an electronic version acceptable? Would the enterprise be fulfilling its duties by keeping an electronic record, or do we need that bit of paper, hanging about somewhere in someone’s house or office or wherever?

If the Minister cannot give exact answers to my specific questions, it would be handy if he could supply the answers at a later date—

[Paul Scully]

In writing?

[Kirsty Blackman]

In writing would be absolutely fine—if that is by email, I am happy to receive it electronically. It would be helpful if the Minister could write to us to confirm what “written” means. For people to be able to meet their obligations, he will probably have to make some sort of statement about what the Government intend, either today or at a later stage.

[Seema Malhotra]

It is a pleasure to speak to clause stand part. The Minister could have saved himself a whole debate had he supported our arguments on clause 36, because this clause sets out the procedural requirements attached to subsidies given under the clause 36 exemption.

The clause outlines how public authorities must provide the intended recipient with a notification, stating that they cannot award a subsidy until they have received confirmation from the intended recipient in a number of areas, including that the relevant threshold will not be breached. There are a whole set of debates to be had about what is considered a subsidy and what is not—we have had that on other aspects of the Bill—and about the lack of full clarity on the interface with the freeports policy or on taxation and subsidies. Clear guidance will be needed for interpretation by the enterprise of what it needs to consider when answering the question under subsection (2)(c). I hope that the Minister will set out in his remarks how he intends that to happen, to give surety to the enterprise and to the public authority.

As I said, Labour does not support clause 36. In my view, we have not heard a convincing case for such exemptions, which seem to be beyond what is needed. Our starting principle must be and must remain transparency. Confidence in this regime is all about transparency, to ensure that there is no cronyism or potential fraud. Once we have set up an agile, simple and robust system, which it is surely not beyond our wit to do, it should be straightforward to provide that information.

The Minister said earlier that the MFA notification would not need to be published. Will he clarify whether that is still the intention if an MFA notification goes to an enterprise? Local authorities and public authorities can simply publish on their websites, for example, when they have given some form of notification. That is a common thing to do, and publishing on a website what has been given to an enterprise does not in my view involve any issue of commercial confidentiality or of not being in the public interest; it would simply be transparent.

If we do not win the argument about changing the detail of the regime, there might be a middle way: at least the notifications ought to be published. Will the Minister tell us whether that has been given consideration and, if so, what the conclusion was and why? If it has not been given consideration, perhaps he will take it away and we can look at it as part of ongoing discussions with local authorities and other public authorities on other areas in the Bill, particularly clauses 32, 33 and 34.

Given that clause 36 remains part of the Bill, however, we recognise that the regulations listed under clause 37 will be necessary to bring some procedure to minimal financial assistance. We will therefore not vote against clause stand part.

--- Later in debate ---

[Paul Scully]

It is something that we will continue engaging with local authorities and public authorities on. For local authorities, there are already other spending databases, so subsidies over £500 will already appear on those databases. Again, we will work through that kind of engagement as we come on to the guidance.

[Kirsty Blackman]

The Minister said that the letters are allowed to be sent by electronic means. Can I clarify that the written records kept by enterprises are also allowed to be electronic?

[Paul Scully]

I believe that is the legal definition of what “written” means and therefore how those records are kept, but if it is not, I will clarify that later.

Question put and agreed to.

Clause 37 accordingly ordered to stand part of the Bill.

Clause 38

Services of public economic interest assistance

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

--- Later in debate ---

[Paul Scully]

The devolved Administrations remain one of the key areas—perhaps the key area—where the subsidies will be given. We are not substantively changing the spending powers of the devolved Administrations, or indeed of any public authority.

[Kirsty Blackman]

The Minister specifically mentioned agricultural subsidies. Agriculture is devolved to the Scottish Parliament—it is a Scottish parliamentary competency—but he is suggesting that if Westminster intervenes in a devolved competency it is okay for it to not even run it by the Scottish Parliament in any formal way.

[Paul Scully]

We have not committed to changing the agricultural threshold. We intend to analyse carefully the full implications of lowering the threshold before making any final decision. Why would we want to do that? Because it may be desirable to effectively manage UK competition and investment as a whole. However, this was one area in which our analysis showed that there was no one single response to the consultation. I come back to the point that we will continue to engage closely with the devolved Administrations, as with all public authorities.

[Kirsty Blackman]

I disagree with the comments of the hon. Member for Aberavon. Clearly, I think that Scotland should be able to make its own decisions and have its own regime. In fact, I think it should be part of the EU and under the state aid regime, which has worked particularly well in an awful lot of areas.

I do not think that the amendment goes far enough. I am happy to support it if it is pushed to a vote, but I would have gone further in making sure that the Scottish Government, Scottish Ministers, the Welsh Senedd and Northern Irish Departments had even more of a say than that proposed by the amendment. If the amendment is pushed to a vote, I will support it on the basis of it being the minimum that I would expect, but I would prefer it to be even stronger.

[The Chair]

Perhaps we could have some clarity as to whether the amendment is to be withdrawn or pushed to a vote.

--- Later in debate ---

[Bill Esterson]

I beg to move amendment 46, in clause 43, page 25, line 16, at end insert—

“(3A) The Scottish Ministers, the Welsh Ministers, and a Northern Ireland department may request the Secretary of State to declare a natural disaster or another exceptional circumstance in Scotland, Wales, and Northern Ireland.

(3B) If the Secretary of State refuses a request made under section (3A), he must make a statement in the House of Commons outlining the reasons for his refusal.”

This amendment allows the devolved administrations to ask the Secretary of State to declare a natural disaster or exceptional circumstances, so that the exemptions listed in Clause 43(1) applying to Scotland, Wales, and Northern Ireland may apply. If the Secretary of State refuses a request for exemption, this amendment requires him to make a statement to the House of Commons.

Amendment 46 allows the devolved Administrations to ask the Secretary of State to declare a natural disaster or exceptional circumstances so that exemptions listed in clause 43(1) applying to Scotland, Wales and Northern Ireland may apply. If the Secretary of State refuses a request for exemption, the amendment requires them to make a statement to the House of Commons. To reiterate the point I made in the last debate, we are determined to ensure that the role for the devolved Administrations in the administration of their own nations is respected and considered. Of course, we agree that the subsidy regime sits with the Westminster Government, because it is a UK-wide system, but on matters as important as states of natural disaster, devolved Administrations should always be consulted.

Members will appreciate that natural disasters are not political by nature. A natural disaster does not discriminate who it targets and where it affects. By that logic, devolved Administrations, which are just as likely as anywhere else to experience natural disaster, should be granted powers to request that the Secretary of State declares a natural disaster or exceptional circumstance so that the exemptions listed in clause 43(1) may apply. We believe the amendment would respect the role of devolved Administrations in managing their response to disasters effectively, while still ensuring the Secretary of State has the final say.

[Kirsty Blackman]

The very nature of natural disasters is that they do not occur across the entirety of the UK in one go. Let us hope a natural disaster does not occur across the whole of the UK in one go! Generally, they are regionally specific; they will happen in a relatively confined geographical area. Whether it be flooding, an earthquake or something of that sort, not everywhere will be affected. Therefore, thinking about how this provision could apply, it makes a huge amount of sense for there to be an actual mechanism through which the devolved Administrations can request for the Secretary of State to declare a natural disaster. I would hope that the Secretary of State would be doing so anyway, and would recognise that a disaster in Wales—

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

Surely that is exactly the point. If a natural disaster has occurred, it is almost certain that the Secretary of State would declare a natural disaster. There is nothing that I can see preventing any devolved Administration within the United Kingdom from requesting that the Secretary of State does that in law anyway. I do not think this amendment is required at all.

[Kirsty Blackman]

The hon. Gentleman said that it is almost certain—probable, at least—that the Secretary of State would do so, but it is not certain. The amendment allows an actual mechanism for the devolved Administrations to make that request. It also makes it clear that if the Secretary of State refuses a request of this nature, they have to explain why. That is very important for transparency. This transparency issue is also important—

[Robin Millar (Aberconwy) (Con)]

What would the logic would be if the situation were reversed, so that the UK Government wished to declare a natural emergency, but the devolved Administration did not? Has the hon. Member given that any thought?

[Kirsty Blackman]

That is nothing to do with the subject of this amendment, which is specifically about the devolved Administrations being able to ask. If the Secretary of State wishes to declare a natural disaster, and Wales, Northern Ireland or Scotland does not want them to declare it, there is no mechanism for that—we do not have the powers to do that.

On the issue that was raised by the hon. Member for West Aberdeenshire and Kincardine, it is important that the devolved Administrations have this mechanism because, as has been stated earlier, trust is at an all-time low. We have been very clear that some of the relationships between the devolved Administrations and the UK Government are not in a particularly good place right now. Building this provision in means that there is an additional safeguard in place, so that those places that know their areas best and know the effect on those areas better than Westminster does, because they are closer, are able to make that request.

[Paul Scully]

Natural disasters such as floods, fires and other exceptional circumstances can arise that require subsidies to be given at pace, to compensate for the damages caused. The clause allows the Secretary of State to publish a notice to declare that exemptions from the subsidy control requirements apply in respect of a natural disaster or other exceptional occurrence. That will allow public authorities to give subsidies that compensate for the damage in a timely manner.

The hon. Member for Aberdeen North is right that not all such emergencies would apply across the whole of the United Kingdom. In many cases, the natural disaster in question would be localised to a specific place or region. Although it is the responsibility of the Secretary of State to declare that the exemption applies, subsidies using the exemption may be given by different public authorities, such as UK Government Departments, local authorities, agencies and, of course, the devolved Administrations. Public authorities are empowered to design subsidies in the most appropriate way to address the damage caused for their specific local needs. The Secretary of State does not need to approve the subsidies given under the exemption, once the natural disaster or other exceptional occurrence has been declared. The existing processes in the Bill already ensure that this type of subsidy can be given across the UK, by the devolved Administrations or other devolved authorities.

If a natural disaster or other exceptional circumstance occurred within the area of any of the devolved Administrations, it would of course be open to that Administration to request that the Secretary of State trigger the exemption, if the Secretary of State has not already done so. If the conditions for the exemption were fulfilled, the Secretary of State could then seek to publish a notice as soon as possible.

The clause is limited to very narrow circumstances to avoid creating an over-broad exemption to the domestic subsidy control regime that could damage UK competition and investment, and our ability to fulfil our international obligations. It is therefore appropriate that the Secretary of State has sole responsibility for determining when the criteria for triggering the exemption have been met. The Secretary of State must publish and lay in Parliament a notice to trigger the use of the exemption. That will ensure that the Secretary of State exercises the power in a transparent and accountable way. I request that the hon. Member for Sefton Central withdraws the amendment.

[Paul Scully]

Clause 43 enables public authorities to award subsidies to compensate for the damage caused by a specified natural disaster or other exceptional occurrence without having to apply the majority of the subsidy control requirements. The subsidies awarded under the clause would be exempt from the principles, prohibitions and requirements, but the transparency requirements would still apply. Before the exemption can be used, the Secretary of State must publish a notice declaring that a natural disaster or other exceptional occurrence has happened and that this exemption applies, and that notice must be laid in Parliament.

[Kirsty Blackman]

It would be useful to know where the notice is likely to be published. Will the Minister commit to considering whether the notice could be on the subsidy control database in some way? Perhaps on the database people could see a wee link that says, “This is where natural disasters have been declared”—hopefully it will not happen very often. If would be helpful if people could see all that information.

[Paul Scully]

Clearly, the notice has to be laid in Parliament, and I hope that I explained in my letter to the hon. Member exactly what that means. Clearly, we will also publish that on the gov.uk website and in other areas. I have forgotten the second part of her question.

[Kirsty Blackman]

It was about whether that information would be on the subsidy control database website.

--- Later in debate ---

[Kirsty Blackman]

It would be useful to know how widely national security is defined. Are we talking about subsidies specifically relating to, for example, new military equipment, or to much more tangential things, such as for an organisation that provides server capacity for one of the security services? How tangential can something be in order to be covered by the clause? If the Minister cannot answer, I would be grateful for an answer at some point, in writing or through the method of interpretive dance, if that is what he prefers, because it would be helpful for us to understand this. This is a brief clause, but I am concerned that that definition could be drawn too widely. I just do not know because I do not have enough information.

[Bill Esterson]

The clause makes it clear that subsidies given to safeguard national security are not subject to the subsidy control regime. This is an important principle that must be interpreted without prejudice in the light of our international commitments; I am sure the Minister agrees with that. We are pleased to see it in the Bill.

--- Later in debate ---

[Bill Esterson]

I beg to move amendment 47, in clause 48, page 27, line 6, at end insert—

“(2A) On the date on which the Act is passed, the Secretary of State must make a statement to the House of Commons regarding the applicability of Article 10 of the Northern Ireland Protocol to subsidies given and schemes made by public authorities in each part of the United Kingdom.”

This amendment would require the Secretary of State to make a statement to the House of Commons regarding the applicability of Article 10 of the NI Protocol on the date on which the Act is passed.

The amendment would require the Secretary of State to make a statement to the House of Commons on the applicability of article 10 of the Northern Ireland protocol on the date on which the Act is passed. Clause 48 provides that the requirements of the subsidy control regime do not apply to subsidy schemes that are subject to the Northern Ireland protocol. The Minister will suggest, I imagine, that this gives comfort to public authorities and avoids the double jeopardy of both regimes applying to a subsidy scheme—I take that from what he and the Secretary of State said on Second Reading.

If the Minister were to say that, he would be assuming that there is clarity on which subsidies and schemes are subject to the protocol. On this vital question that public authorities will need to interpret, there is no agreement between the UK Government and the European Commission. There is significant uncertainty about the extent of the reach back—that is, where EU state aid rules will continue to apply across the UK. Where a subsidy is applied in Wales, Scotland or England has consequences in Northern Ireland. George Peretz told us in last Tuesday’s evidence session,

“if I am advising a client such as a local authority or a subsidy recipient, my immediate problem is that I have to look at two sets of guidance—one issued by the European Commission and one by the Department for Business, Energy and Industrial Strategy—that in some important respects tell me very different things.”—[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 46, Q64.]

His final assessment was:

“It is all a bit of a mess.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 48, Q67.]

We should all note that the European Union published proposals to address problems with the Northern Ireland protocol a fortnight ago. That is a step in the right direction, although the proposals it put forward do not address the state aid subsidy issue. In contrast, on Second Reading on 22 September, the Secretary of State suggested

“we have proposed the change to the Northern Ireland protocol to bring all subsidies within scope of the domestic regime.”—[Official Report, 22 September 2021; Vol. 701, c. 338.]

Here we are six weeks later, and we are no clearer about the status of the negotiations with the EU. I hope the Minister will set my mind at ease and tell us what the UK proposals are to solve the problem that George Peretz set out so well in evidence last week.

Let us remind ourselves: the Government negotiated the Northern Ireland protocol and signed it, so they now have a duty to make the protocol work, just as they have a duty to make Brexit work. It is no good threatening to rip up an agreement that the Prime Minister himself signed just two years ago, and certainly not without something to put in its place. Perhaps the Minister can confirm when he last discussed these issues with his European counterparts, and the timeline on which he expects there to be clarity on article 10 of the protocol and its impact on the Bill.

The purpose of the amendment is to require the Secretary of State to provide a statement on

“the applicability of Article 10 of the Northern Ireland Protocol to subsidies given and schemes made by public authorities in each part of the United Kingdom.”

Public authorities and recipients need and deserve certainty on this issue.

[Kirsty Blackman]

The hon. Member for Sefton Central used the quote I was going to use from the Secretary of State, who was really pretty clear that the new subsidy control regime that we are discussing is the one that will apply across the United Kingdom. That was the point the Secretary of State was making—that this is the only subsidy control regime that will apply across the United Kingdom. That seems pretty factually incorrect, not least for Northern Ireland but, as the Opposition Front Bench spokesperson pointed out, for other parts of the UK where that trade will end up going to the EU.

The very least the Government could do is to ensure that a formal statement is made, because if we are relying on what Government Ministers have said in the course of either debates in the House or statements, we do not know the answer. We have been told a number of different conflicting things. I get that this is a movable feast and that there is no final decision on exactly how it will work. That is why the amendment is so reasonable. It specifically says that the applicability statement will need to be made on

“the date on which the Act is passed”.

Presumably, by the date on which the Act is passed we will have some idea of which regimes will apply in Northern Ireland. We have spoken very little about Northern Ireland specifically during the course of this Committee but, when the Minister talks about giving certainty to enterprises and public authorities, it seems to me that Northern Ireland is in a unique position where there is no certainty at all. People literally do not know which regime will apply.

It is all well and good to say, “We will consult with people and ensure that they see the guidelines in advance of having to put them in the subsidy control database,” but the fundamental issue of which regime they are complying with has not yet been answered in a way that would stand up to any kind of scrutiny. The amendment is completely reasonable and, if the Minister does not want to accept it, he should be clear with us and with the organisations concerned, particularly in Northern Ireland, about how he and the Secretary of State will explain to them which regime they will be operating under.

[Paul Scully]

As we have heard, amendment 47 to clause 48 would require the Secretary of State to

“make a statement to the House of Commons regarding the applicability of Article 10 of the Northern Ireland Protocol to subsidies given and schemes made by public authorities in each part of the United Kingdom”,

on

“the date on which the Act is passed.”

Clause 48 excludes subsidies in the scope of article 10 of the Northern Ireland protocol from the domestic subsidy control regime, which, as the hon. Member for Sefton Central says, is to avoid double regulation of subsidies. Subsidies that are subject to the protocol and comply with the EU state aid laws will be exempt from the requirements of the new domestic regime.

I should remind hon. Members that the Secretary of State is already required, as a statutory duty, to publish guidance on the practical application of article 10 of the Northern Ireland protocol under section 48 of the United Kingdom Internal Market Act 2020. BEIS published that guidance on 31 December 2020. That is intended to help public authorities reach a view on whether article 10 applies to subsidies granted in Northern Ireland and the rest of the UK, to which they must have regard.

The guidance is based on the EU Commission’s unilateral declaration of 18 December 2020, which made it clear that article 10 would apply in Great Britain if there was a genuine and direct link back to a company in Northern Ireland. That is most likely the case of a subsidised company in Great Britain with a subsidiary in Northern Ireland. The Command Paper on the Northern Ireland protocol published on 21 July 2021 set out the Government’s position that comprehensive and robust commitments are in place on subsidy control in the trade and co-operation agreement, and that those are being further strengthened through the UK’s Subsidy Control Bill, making the existing provisions in article 10 redundant in their current form.

--- Later in debate ---

[Paul Scully]

I disagree. This framework, which is a bare-bones framework, as I have said, has to work with whatever is in the Northern Ireland protocol, whatever is negotiated. That is why, for the reasons I have said, I talked about the reach-back provisions, which are never perfect. We know that the Northern Ireland protocol is not perfect, but it is a negotiated view. That is why, in those intensive discussions, we are looking at delivering significant changes and trying to improve an imperfect situation.

[Kirsty Blackman]

If an enterprise in Northern Ireland is given a subsidy, and that enterprise has competition in or trades with both Scotland and Ireland, which regime does it need to comply with if it gets that subsidy? Does it need to comply with the state aid or subsidy control regime, or both?

[Paul Scully]

It would first depend on what it trades in, and then on what its service is, because those are dealt with in different ways. It would then depend on the framework of the company and what structure it has in GB and Northern Ireland, because it must have genuine reach-back to Northern Ireland to be able to apply to that.

[Kirsty Blackman]

I appreciate the Minister being so indulgent in giving way. Are there any circumstances in which an organisation—an enterprise that is given a subsidy or a public authority giving out a subsidy—will have to comply with both the subsidy control and state aid regimes?

[Paul Scully]

The regime has been specifically worked through so that there is no double jeopardy, as the hon. Member for Sefton Central described at the beginning. They have to deal with one or the other. Clearly, as I said, the one they would deal with depends on the framework of the company, the ownership of the company, and whether it deals in electricity or services, because different rules clearly apply. None the less, as the negotiated provision is constituted, they would only have to apply to apply to one or the other. If it is state aid, they do not then need to worry about domestic subsidy control, and vice versa. The Command Paper clearly stated that we believe that we can bring it under domestic subsidy control, although that is not being negotiated yet, so that is clearly not the situation at this moment in time.

--- Later in debate ---

[Bill Esterson]

We gave the Government every opportunity with our amendment, but they chose to vote it down. They have left us with what my hon. Friend the Member for Aberavon called a dereliction of duty, which is a good way of putting it. The clause does not do justice to businesses, awarding bodies, communities or our constituents. Those are good reasons why we should vote it down.

[Kirsty Blackman]

I have not had a chance to think about exactly how not having the clause as part of the Bill would affect the Bill as a whole. I share the concerns, that there are major issues with the clause, but at this point I will abstain on any vote.

[Bill Esterson]

I understand the hon. Lady’s concerns, but there is such a big problem with what is set out, it is right for us to register our objection by voting against the clause.

--- Later in debate ---

[Paul Scully]

This clause establishes that subsidies and subsidy schemes for nuclear projects are not required to be assessed against the additional principles for energy and environmental subsidies that are set out in schedule 2.

[Kirsty Blackman]

I would just like to ask why.

[Bill Esterson]

I am interested in the answer to that question as well, given that in the last 11 years of Conservative Government we have not seen the investment in new nuclear that was needed to meet our climate obligations.

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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—

Subsidy Control Bill (Third sitting)

Kirsty Blackman Excerpts

Thursday 28th October 2021 Public Bill Committees

[Seema Malhotra]

I thank the Minister for his remarks on clause 6. We have no further issues in relation to it.

[Kirsty Blackman (Aberdeen North) (SNP)]

It is a pleasure to be part of this Committee. I wonder whether the Minister could explain a little more the logic behind the exclusions. I have read the explanatory notes, and the intention is still not entirely clear to me. I do not think that I have a problem with it—I think it makes sense— but if he could explain it a little more that would be really helpful.

[Paul Scully]

I am very happy to respond. The provisions for subsidies given by Parliament, the Scottish Parliament, the Welsh Senedd and the Northern Ireland Assembly are set out in clause 78 and schedule 3, which provide for the giving of subsidies by means of primary legislation. They are covered separately to reflect the unique legal and constitutional position of Acts of Parliament. The legislature is considered to have given a subsidy when it is given under a duty imposed by primary legislation. Those subsidies are captured by schedule 3, but if a subsidy is given under a power in primary legislation, the relevant public authority will be the Minister exercising that power.

--- Later in debate ---

[Kirsty Blackman]

Just to clarify, is the logic that the devolved Administrations and the Houses of Parliament can continue to give subsidies in primary legislation, and that is why an exclusion, or a separate provision, is in place relating to them? Is it partly to do with not being able to bind future Parliaments, or is that totally separate from what we are discussing?

[Paul Scully]

It is more to do with the fact that public authorities have been added as an extra, whereas state aid did not go down that far. The public authority definition at the beginning widens the definition of who can give subsidy control, whereas it is established that the UK Government and the devolved Administrations, including the Scottish Parliament, can continue to give as they do now.

--- Later in debate ---

[Paul Scully]

If a person is not engaged in economic activity, they will not be defined as an enterprise. Generally speaking, a charity or community group is unlikely to carry out economic activity. However, we are not explicitly excluding anyone from the definition of enterprise just because of their legal form. The hon. Lady talks about social enterprises, which are obviously different from charities, because some can be normal companies but do not make profits or have shareholders. However, that is economic activity, so those would be included within the definition.

The test looks at the activity that is proposed to be subsidised, rather than the legal form of the subsidy recipient. One organisation may be considered an enterprise in some contexts and for some activities but not others. One example might be a medical research charity that has a retail arm. Support given to the medical research activity is not a subsidy, because the research is not economic activity, even though the charity’s retail operation may be considered an enterprise.

[Kirsty Blackman]

I have a couple of questions. I am aware of social enterprises in Aberdeen that make and sell frames or make bread and run cafés and things like that. It sounds as if that would be included within the definition of economic activity, because they are selling things to the general public, even though their main purpose is to ensure that people who are disadvantaged in society are given the opportunity to get work experience and things like that. It would be helpful if the Minister could say whether he intends the clause to cover all economic activity, regardless of who is doing it, but that the subsidy relates only to the arms of those organisations that are undertaking the economic activity; and that the clause applies across the board to charitable organisations and social enterprises as well as normal businesses, so long as the thing they are doing is classed as economic activity. Have I got that right?

[Paul Scully]

The hon. Lady has got that right. Some charities have a commercial retail arm that are taxed and approached in different ways. For example, Help for Heroes has a retail arm as well as the main fundraising arm. There is clearly no intention for subsidies of cake sales or anything like that—money may be handed over, but that is fundraising—whereas retail involves the selling of things. I am not saying that that specific example will involve in any subsidy, but such an example, where a separate business is aligned to the charity, is where the enterprise comes in that covers the economic activity that we are describing.

Question put and agreed to.

Clause 7 accordingly ordered to stand part of the Bill.

Clause 8

Persons under common control

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

--- Later in debate ---

[Kirsty Blackman]

May I ask the Minister for some clarity on that? He says that he expects that more information about principle A will come out in guidance. Does he expect that that will encourage granting bodies to look at reducing inequality in some of the subsidies that they make?

[Paul Scully]

It will set that out in guidance. The hon. Member for Feltham and Heston talked about the evidence session, and Guildford got quite a bad rap, having come up a couple of times as the example. None the less, we want to ensure that we directly address issues of inequality and disparity through the levelling-up agenda. That will come out through guidance and ensure that we address exactly what the hon. Member for Aberdeen North was saying.

[Kirsty Blackman]

One more try on this. Does the Minister expect that the Government’s levelling-up agenda will be part of the direction of travel in the guidance, so that the guidance will encourage granting authorities to line up with the Government’s levelling-up agenda?

[Paul Scully]

In terms of levelling up, it has been designed to provide a bespoke and dynamic framework. It allows public authorities to deliver bespoke subsidies that are tailored to their local needs, which will indeed address the UK Government’s priorities, such as levelling up, but within their own areas. Public authorities are best placed to work out how to address the inequality and disadvantage within regions, as well as between regions, so we have developed an approach that ensures that disadvantaged areas have the maximum freedom and reassurance to receive the levelling-up subsidies and best meet the characteristics of the area.

--- Later in debate ---

[Seema Malhotra]

I thank the hon. Gentleman for his comments. My understanding is that the energy and environment principles would apply to subsidies in relation to energy and the environment. We are talking about a slightly broader principle here, which is that any subsidy granted under the regime should not have a harmful impact on achieving our net zero outcomes. That would seem to be a slightly perverse use of public money when net zero is such an explicit goal and when civil servants will need to be working towards it. Indeed, as Dr Barker outlined on Tuesday,

“the green industrial revolution that we are all seeking to work towards in order to achieve net zero is also something that will require…partnership between business and Government”,

and

“an effective subsidy system can be part of that.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 39, Q52.]

These amendments are simply saying that if we are serious about what achieving net zero will mean, we should not allow a system to be established, at the same time as COP26, that could work against that, and do so using public money.

[Kirsty Blackman]

For the avoidance of doubt, my colleague and I support amendments 7 and 8, which are both incredibly sensible. As is quite often the case in Bill Committees, I wish I had thought of them earlier and tabled them first.

I agree with the hon. Member for Feltham and Heston about COP26. This is happening now, and it is a moment that we can take advantage of to get towards net zero commitments. COP is coming up and there is a groundswell of public support for trying to make a difference. This is something on which my colleague and I also moved amendments during proceedings on the Advanced Research and Invention Agency Bill. We wanted ARIA’s No. 1 priority to be a focus on net zero. We also wanted a commitment from the Government that ARIA would itself operate on a net zero basis, because we are beyond the time for talking about this. In order to meet the UK Government and the Scottish Government’s commitments, we need to be taking action on this, rather than just talking about it.

It is all well and good to have in place the stuff that my neighbouring MP, the hon. Member for West Aberdeenshire and Kincardine, talked about for energy and environment subsidies, but we need that for all subsidies, whether they relate to energy and the environment or anything else. This should run through everything that the Government are doing. For every decision in the Budget, which is being discussed in the main Chamber, we should be asking, “How does this get us towards net zero and reducing our carbon output?”

I just do not think we are there yet. It does not feel like the Government are taking this seriously enough, and it is not just this Government. Governments around the world are not taking this seriously enough. We need to be there now and making that commitment. If the subsidy control regime is intended to work and to stand the test of time, and if we are looking towards those net zero targets, we need that to be in this Bill. At the very least, we need a strong commitment from the Minister that subsidies in relation to not just energy and the environment but other areas will be more favourably looked on, or less likely to be rejected out of hand, if they specifically work towards reaching the UK’s net zero targets, and particularly if they work towards something that is carbon negative. We are not doing enough of those things, so if more of the new policies that come through were carbon negative, it would be much easier for us to get to our net zero target. If the Minister could make some strong commitments on that, it would be hugely welcome, but I will be happy to support the amendments tabled in the name of the Opposition.

--- Later in debate ---

[Bill Esterson]

That is a good point. The hon. Gentleman is right that this does not end when we reach net zero—that is the first point. The second point is that if we need a change, we can amend the legislation later. Right now, however, this is the crucial change that the country and the world need to make. I reiterate that we as Members of the UK House of Commons—those of us here today—have an opportunity to make a statement and a commitment and to put this change on the face of the Bill.

[Kirsty Blackman]

I got so carried away with my attempts to convince the Government to get to net zero as soon as possible that I forgot to ask questions when I stood up previously. It would be useful if the Minister could clarify why there are two schedules. Why does the treatment differ between the two areas? There is a difference in the treatment of subsidies in relation to energy and the environment compared with subsidies relating to any other area, and I do not quite understand the logic of having two different things. One set of principles could have covered everything, including moving toward net zero. If the Minister will explain why there are two separate schedules and why the two areas are being treated differently, that would be incredibly helpful.

[Paul Scully]

Let me answer that point before I speak to amendment 7. The two schedules and the additional principles are there literally just to adhere to our international obligations.

Hon. Members can rest assured that our new subsidy control regime will support the UK in meeting our net zero target by 2050, first by facilitating strategic and appropriate subsidy interventions with minimal bureaucracy and delay and secondly by ensuring that energy and environment subsidies are assessed against additional principles that promote carbon neutrality and sustainability.

The hon. Member for Sefton Central said that he could not see net zero in the Budget, but the spending review backs up the net zero strategy published the week before. The Budget will fund our strategy, which will then leverage private money and create jobs and opportunities in markets that will drive towards net zero.

Turning to amendment 7 itself, it is unnecessary explicitly to require public authorities on the face of the Bill to consider the negative effects of subsidies on the UK’s net zero commitment as part of their compliance with principle G. Public authorities will clearly need to consider the effects of subsidies in the round before awarding them, but the amendment would give undue prominence to net zero considerations with respect to subsidies that may have entirely unrelated objectives, such as high street regeneration or providing training opportunities for young people.

[Kirsty Blackman]

Does the Minister agree that this is the most important thing for every single one of us? Whether people are regenerating high streets or doing anything else, they should be ensuring that they are also moving towards net zero.

[Paul Scully]

I agree that we should be doing so, but what I am saying is that we do not need to do it in a process-driven way. It should be done, in the first place, in the devising and implementation of policy. I do not want to create two separate processes, because that might lead to public authority having to make assessments for every single subsidy that is awarded or made, even when there is no meaningful impact—just look at that bureaucracy. What we need to do is ensure that we enmesh net zero thinking in our policy development at every layer of government, rather than just listening for signals. Clearly, we need to take that leadership at COP26. We realise that this is the time to lead and to act, for all international Governments.

Unfortunately, the Bill will not have completed its parliamentary process by the time everyone leaves Glasgow. None the less, we need to ensure that we set out the strong work that we are doing. We have already announced policies that involve subsidies in some sectors, such as the clean heat grant and the contracts for difference scheme, announced by the Chancellor in the March 2020 Budget, providing up-front capital grants for the installation of low-carbon heat pumps and, in limited circumstances, biomass boilers. Those schemes will help consumers to overcome the higher up-front costs of low-carbon heat and will build the supply chains for it ahead of the introduction of regulations for existing buildings off the gas grid later in the decade. Those schemes—all schemes—will have to meet the terms of the domestic principles, which should also ensure that the money is well targeted and achieves good value for the taxpayer.

We have established the green jobs taskforce, which advises on how Government, industry and the education sector can work alongside other stakeholders to realise the opportunities of a green industrial revolution, supporting green jobs and skills, and ensuring that those opportunities are open to all. The evidence collected by that taskforce and its recommendations are being considered by Government as part of the development of the ongoing net zero strategy, which was published last week. We will develop that.

Those are the clear leadership principles that we should be promoting and pushing out to international colleagues from Governments around the world, who are coming to Glasgow this week and next, ahead of COP26. However, we do not need just this one principle, understandable as it is, in the Bill. Principle G already singles out negative effects on competition or investment within the UK and on international trade and investment. That is appropriate, as such distortions go to the very heart of what the subsidy control regime is for. By definition, a subsidy must have effect on competition, investment and trade, and distortion is common to all subsidies, regardless of what they seek to achieve.

Net zero considerations, however, are not inherent to all subsidies. Some subsidies will of course help businesses to reduce their emissions, but a great number will not have any meaningful or, importantly, measurable impact on the UK’s greenhouse gas emissions.

Amendment 8 would add to schedule 2 a requirement for energy and environment subsidies and subsidy schemes to deliver, or to incentivise the beneficiary in delivering, the UK’s net zero commitments. The intended effect is that a public authority planning to grant an energy or environment subsidy or scheme would not be able to proceed unless it was satisfied that that subsidy or scheme contributed towards net zero commitments.

It may be useful to recap that energy and environment subsidies must be assessed against a number of additional principles, which are set out in schedule 2. Those common-sense principles are designed to ensure, for example, that public authorities consider the need for energy and environmental subsidies to achieve reductions in emissions or otherwise increase the environmental protection relative to the level achieved without subsidy. They also ensure compliance with the UK’s international obligations under the trade and co-operation agreement with the European Union.

We share the commitment to the net zero agenda, as I expressed. We believe that subsidies correctly designed and targeted can be a powerful means to achieve that.

[Kirsty Blackman]

The Minister is doing a good job of explaining what is intended by some of this, putting some meat on it, which is helpful. Will he explain what environmental protection means?

[Paul Scully]

There is a wide definition of environmental protection beyond net zero, as big and important as that is. The principles in schedule 2 fully support the UK’s priorities on net zero and the wider protection of the environment. The additional requirement to assess the subsidy or scheme against the net zero priorities is therefore unnecessary and may actually discourage public authorities from granting energy and environmental subsidies designed to achieve other valuable aims, such as an affordable energy system or increasing biodiversity. I humbly ask the hon. Member for Feltham and Heston to withdraw the amendment.

--- Later in debate ---

[Seema Malhotra]

I thank the Minister for his remarks. Notwithstanding the debate that we have just had and our ongoing concerns, which we want to return to later in the consideration of the Bill, we support schedule 1.

[Kirsty Blackman]

I would like to ask a few questions, particularly about principle F in schedule 1, which says:

“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”

If someone was looking to invest in the United Kingdom, create jobs, start a business or bring a specific arm of a business to a certain place, and Aberdeen were to subsidise that, which would therefore have a negative effect on Cardiff, because Cardiff was not getting the jobs and Aberdeen was, is that excluded as a result of principle F? It concerns me that pretty much every subsidy that could be given will have a potential negative effect on another part of the UK because it would be incentivising investment, or whatever, in one part of the UK.

I am concerned that principle F can be read either as not meaning anything or as something that is too restrictive for what the Government are trying to achieve with what they are doing. I am thinking about what the Government are trying to achieve because a number of Government Back Benchers stood up on Second Reading and said, “This is great, because it means we will be able to get lots more investment and put lots of subsidies into our area.” If that is the Government’s intention, which I think it probably is, I worry that the risk-averse nature of granting authorities means that they will be concerned about doing that, in case they fall foul of the principle. If the Minister gave us a bit more clarity on how the principle is intended to work, that would help granting authorities to make the right decisions in order to subsidise economic development in their areas.

[Paul Scully]

I thank the hon. Lady for that important question. The answer to her first question is no. It is more about fitting in with the levelling-up agenda, which is what hon. Members talked about on Second Reading—attracting subsidies to an area. For example, we have seen a lot of renewables investment, including offshore wind and the manufacture of equipment, in Teesside and Humber. We have seen the setting up of gigafactories in the north-east and other areas, and such inward investments provide stimulus in those areas. There are natural clusters of businesses in those areas, but it is more in this regard—the distortive effects of, say, moving companies from one area of the UK to another, and adhering to the United Kingdom Internal Market Bill, which we debated last year. It is about ensuring that that works, rather than being in some sort of race between the devolved Administrations of the nations, or between regions, to attract inward investment.

[Kirsty Blackman]

If, for example, an offshore wind farm is built off the coast of Teesside, rather than off the coast of Aberdeenshire, because of the subsidy regime that is in place, that is, by its very nature, disadvantageous to Aberdeenshire. That is what I am trying to work out here.

I think I get what the Government are intending: they are trying to stop a subsidy race. That is the intention behind the schedule, but I feel that the schedule does not achieve it. I am concerned about how the provision is worded, because any subsidy will be advantageous to one region and not to another, which is the intention behind subsidies. There could be more clarity on that principle so that it achieves what the Government want and does not preclude local authorities, or any other granting authority, from making decisions that will advantage their areas.

[Paul Scully]

Essentially, the framework and the clause minimise, but cannot eliminate, distortion. That is the purpose of the Bill.

[Paul Scully]

My hon. Friend makes a good point. The Bill weighs up the benefits versus the disadvantages, and minimises rather than eliminates distortion—we cannot eliminate distortion. We have talked about this a number of times, and we will continue to, but the upcoming guidance will start to flesh out some of the specifics, which it is probably not appropriate to get into now.

[Kirsty Blackman]

Principle G absolutely does help, but it does not fix the problem. Ensuring that the positive effects outweigh the negative effects is good and grand, but comparing a windfarm in Teesside and a windfarm in Aberdeenshire relates to balance rather than the positive effects outweighing the negative. That just encourages the same investment and the same number of jobs in one place in the United Kingdom rather than in another. That is why I am concerned that G does not exactly fix that issue.

Question put and agreed to.

Schedule 1 accordingly agreed to.

Schedule 2

The energy and environment principles

Amendment proposed: 8, in schedule 2, page 52, line 15, at end insert—

“(c) delivering the UK’s net-zero commitments.”—(Seema Malhotra.)

This amendment would ensure that subsidies related to energy and the environment incentivise the beneficiary to help deliver the UK’s net-zero targets.

Question put, That the amendment be made.

Subsidy Control Bill (Second sitting)

Kirsty Blackman Excerpts

Tuesday 26th October 2021 Public Bill Committees

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

I am happy to let Ms Blackman go first.

[Kirsty Blackman (Aberdeen North) (SNP)]

Q Thank you, Ms Nokes, and thank you, Minister. Dr Barker, you seemed to say that pretty much all of the subsidies should be declared—that there should be transparency about all subsidies. Can I check that was what you said there?

Dr Barker: That is what I said, yes.

[Kirsty Blackman]

Q Okay. Perfect. You are in the unusual position where you represent both those people who may receive subsidies and those who may challenge subsidies. Do you feel that the balance is right? Do you feel that, given how the Bill works, your members are likely to be able to challenge subsidies that they feel are disadvantaging them or their organisations?

Dr Barker: This is why I was arguing for transparency. Transparency is an important part of that. A lot will depend on how quickly and effectively the system operates and how much trust there is in the system. If you are potentially a competitor and you can see that there is a clear justification, based on widely understood principles, for a subsidy—it is something that is not being covered up and that is openly stated—and if you have trust in the decision-making process, the system is going to work well, and there is probably going to be less legal challenge from competitors. But as soon as that trust is lost—because things are taking too long, because there is a lack of transparency, because decisions are being made on a very unsafe basis, or because officials do not understand how to apply the principles—that is going to build mistrust and that will then lead to more legal challenge and more problems from the system. It is very important that all the components of the system have the right resources and the right clarity in terms of guidance, and that there is transparency.

[Paul Scully]

Q Dr Barker, you rightly mention guidance—that you want to give certainty, but not be too prescriptive. I take your point about that, and we need to make sure it works for the whole of the UK. We have a more permissive approach, with the seven principles. Assuming that we set and define subsidies that are of particular interest to your satisfaction—perhaps just the most distorting, rather than the wider definition you were worried about—will that give enough certainty to businesses and the flexibility that they need to be able to prosper in the UK without the more prescriptive system of EU state aid?

Dr Barker: Yes. For us, it is very much about finding the balance. We absolutely do not want a highly prescriptive, bureaucratic regime. We really do see the benefits to our members of nimbleness. It is finding that balance between being nimble and not too nimble, such that decisions are made that then subsequently fall through. It is finding that sweet spot that we need to search for.

--- Later in debate ---

[Bill Esterson]

Q Good afternoon, Mr Peretz. You have been giving a lot of the very detailed challenges and saying how some of the problems might come out and be addressed. Can I ask you to look at the Bill as presented and give an overview of what you think the Committee’s top priorities to address in the Bill might be?

George Peretz: We have touched on a couple of the main issues. The devolution issue that we have discussed is quite important. There is an issue with enforcement, particularly in relation to measures that are not regarded by the public authority as being subsidies, but are just a grey area—and that view could simply be wrong—and how those are dealt with. The Bill does not really address on its face how those will be dealt with. One can sort of work out how they are likely to be dealt with but it would be better if that situation was more expressly catered for and dealt with.

There is an enforcement problem in that, ultimately, unless the Secretary of State decides to refer things to the Competition and Markets Authority—of course, there will be cases where things have to go to the CMA—the mechanism does very much rely on private enforcement by, at the moment, interested parties, who are going to be commercial operators and probably not public interest ones or local authorities. You cannot always rely on commercial operators to enforce things like this. There are all sorts of reasons why they may not. Quite a lot of commercial operators are hoping for the same subsidy themselves, so they will keep quiet, or they get the same subsidy themselves and will therefore be quiet, whereas actually there is a real public interest problem.

You will get situations with quite small companies who are concerned about subsidies being given to a much bigger competitor. They will understandably be reluctant to annoy both the granting authority, probably, and the bigger competitor. There are also the inevitable costs and risks of litigation. In a new regime, those costs and risks are greater, because various points have to be sorted out and decided in the first few cases until you get some case law on it. So inevitably the risks and costs are greater. There is more chance that you will end up in the Court of Appeal on a point than there would be once the regime has bedded in.

All of those will be quite off-putting to a lot of private enforcement. Ultimately, that is the keystone on which the whole enforcement mechanism depends, because if nobody brings challenges to this, public authorities will often get away with pretty sloppy reasoning and genuflection to the principles rather than serious engagement with them. I think that is a concern.

[Kirsty Blackman]

Q I have a couple of questions. In the event that BEIS is the granting authority, the only person, realistically, who can make a referral to the CMA to look at it is the Minister, who is in charge of the granting authority. Is there an argument for other people to be added so that a conflict of interest does not arise?

George Peretz: That is absolutely a fair point. If the subsidy measure comes from central Government or even if it is BEIS that is the granter, is it realistic to expect the Secretary of State to call it in or make a post-award referral? You are obviously going to be concerned, from a Scottish perspective, with the possibility that you have a BEIS decision—there is serious concern about this in Scotland—that has an adverse effect on the Scottish economy in some way or another. That is the point I was making. It does seem to me right, as matter of principle, that in those circumstances the Scottish Ministers at least—and potentially other people—would have the right to send the matter off to the CMA to consider.

Bear in mind that the CMA report is not binding, so in a situation where the Secretary of State wanted to say, “Well, I hear what the CMA says, but I just disagree: I still think that this measure is wholly compliant with the principles and the CMA has just got it wrong in suggesting that I change it”, he can go ahead. It is then a risk of litigation—it might be better if the Scottish Ministers had a clear right to bring that litigation too, but that is the current position.

[Kirsty Blackman]

Q That is helpful. I have a couple of additional questions following on from Stephen Kinnock’s question about the Northern Ireland protocol. We have heard already that granting authorities in the UK tend to be fairly risk averse. Given their risk-averse nature, would a situation where most of the granting authorities in the UK are advised that they have to apply state aid rules as well as the Subsidy Control Bill rules make it more difficult for them to put in subsidies in the way that the Government are hoping?

George Peretz: It certainly generates work, so I look at it not entirely unfavourably, but yes, from anyone else’s perspective it is a bad thing. There is certainly an issue, and not much that the Bill can do about it. Given the way article 10 stands, the Bill does the only thing that can be done, which is simply to exclude from the Bill measures falling within the scope of article 10, but you do then have that issue.

When we were members of the EU in the old days, you would advise on something that was state aid, or was certainly likely enough to be state aid that the beneficiary—they tend to be quite cautious because they do not like to receive money that they then have to pay back—said, “We are rather concerned that it is state aid, but it does not seem to fall within the any of the block exemptions and has not been notified and cleared.” In the old days, if the grant were a from local authority, the beneficiary would go off to BEIS, which would take a look at it, and if there was a real risk that it was state aid, they would be notified. That happens now, but there is a bit of a suspicion that BEIS will take a somewhat conservative view of what article 10 covers, because that is the UK party line. That is fine, but the UK party line may not actually be right and may not be what a UK court would decide.

If you are the beneficiary of a grant from a local authority in the situations that I have described, and you are concerned that your competitor may challenge that as an article 10 measure in the UK courts, as they are entitled to do, the BEIS guidance says that it should be fine, and although the court may read that guidance, it certainly would not be bound by it. Ultimately, if a UK court is uncertain, it will refer the matter to the European Court of Justice, about which we have heard rather a lot in recent days, and it will decide, or at least decide the parameters within which that decision is to be taken. It is all a bit of a mess.

[The Chair]

I will bring the Minister in because we will have a hard stop at 3 pm.

--- Later in debate ---

[The Chair]

I will bring in Kirsty Blackman and come back to you if there is time.

[Kirsty Blackman]

Q You spoke about the generalities of where it says Secretary of State quite regularly in the Bill, Daniel. Clause 70 specifically talks about interested parties and those people who are able to call in a subsidy; it mentions the Secretary of State, but also persons

“whose interests may be affected”.

In your view, could we ensure that Scottish Ministers, Northern Irish Departments or Welsh Ministers have that ability by amending that section, by the Minister saying in Committee that that is the case, or by changing the explanatory notes? Would those all be routes that would allow those three authorities to have the ability to refer as well?

Daniel Greenberg: From a purely technical perspective, I think that is on the cusp of the things that I would be comfortable encouraging you to simply put in the explanatory notes. It either is an interested party or it is not. If it is not, saying in the explanatory notes that you hope it is may not be enough to get you over the line, in contrast to the Minister helpfully saying so to the Committee.

If I may briefly speak about the difference between explanatory notes and a Pepper v. Hart statement, Chair? The official explanatory notes are a source that the courts will have regard to in determining doubts and questions about the law. A Pepper v. Hart statement is the law: it is part of the legislative intention when the Act is passed, so it is more powerful.

However, if the Act says “dog” but the Minister says to the Committee, “We meant cats as well”, that will not help. You can have all the ministerial statements you like, but if it don’t go woof, it isn’t covered. However, if you have a clear understanding that it is expected that interested parties are to include the devolved Administrations, then the Minister saying that that is the Government’s legislative intent in using that phrase gets you well over the line. Would you then need an amendment? No.

[Kirsty Blackman]

Q Another additional question on that—the other thing that has concerned me, as well as a number of the witnesses today, is the amount of stuff that is in regulation and guidance, not in primary legislation. Do you feel that the balance has shifted towards more things being done by guidance and regulation in recent years? Do you feel that there is a significant portion of the Bill that is being done by regulation and guidance, rather than through primary legislation, or even by affirmative procedure?

Daniel Greenberg: Yes, okay, there is a bit of a shift, but it has been quite slow. People have been complaining about the increase in skeleton Bills by successive Governments since I started in public service 150 years ago. So, there is an increase, but it has been gradual.

However, if I may say so, you should not be complaining about that here. My whole point is that this is inevitably a Bill about structure and shape. Those of you considering the devolved institutions and other interests want to ensure that you have the flexibility to move forward while balancing everybody’s interests. The best way to do that without having to come back to Parliament each time is to ensure you have powers with a mechanism for consultation and co-ordination. Then, you know that that process of co-ordination will have the powers necessary to give effect to it through subordinate legislation and quasi-legislation. You should not be complaining on this occasion, because the Bill needs to be skeletal in order to give the flexibility for the ongoing relationships between the different powers concerned by the substance of the Bill. Does that help?

[Kirsty Blackman]

It does, thank you.

[The Chair]

Thank you. Seema Malhotra, did you want to come back in?

--- Later in debate ---

[Seema Malhotra]

Q We had some discussion about clause 70(7)(a), and there is some point of clarification about the definition of “interested party”, which I do not think is fully clear in relation to the devolved Administrations, but either we agree on the need for the Bill to be taken forward, I hope with some significant improvements, or there is a view that that cannot be achieved. I want to come back on a couple of points that you made, Mr McKee, that I was not fully clear on. The first is on being prepared to be involved in discussions, the question being what outcomes would be achieved. Do you feel clear at the moment on what specific changes, whether in relation to call-in powers, an obligation to consult or consent, you would want to see inserted in the Bill to meet some of those concerns? It would be very helpful to understand specifically what they were. Perhaps that could be in writing afterwards.

Secondly, I was not fully clear on what your view was in relation to local authorities. It seemed that it was more for the Scottish Parliament to decide what local authorities in Scotland may or may not do, rather than local authorities across the UK being able to make subsidies if they felt that they were in line with the subsidy control principles, and beneficial for their area. I was slightly confused on what your view was about local authorities being able to make subsidy decisions in Scotland. Perhaps you could come back on both those points, and put in writing what specific changes you want to see.

Ivan McKee: On the specifics of what our asks would be, I am very happy to put that in writing. In broad terms, it centres around, as I said, the requirement to not have the Secretary of State able to operate in devolved areas, as per the devolved settlement, and for the Scottish Government and Scottish Ministers to be able to do that. For us to have equivalent powers as it refers to devolved areas would be the ask, in broad terms. I have outlined some of that verbally, but I am very happy to come back to the Committee in writing with the details on specifically what that means.

Local authorities have always been able to grant aid within the rules that exist, so effectively nothing changes there. What changes with regard to the Bill is the authority that it gives the Secretary of State that it does not give in devolved areas to Ministers in the devolved Administrations. That is our concern.

[Kirsty Blackman]

Q Nice to see you, Ivan. My question is about the priorities and the fact that we are being asked to take on trust an awful lot of the stuff that is coming forward in regulation and guidance. Given the current track record of the UK Government and their relationship with Scotland, trampling over the Scottish Parliament, do you think that it is likely that the regulations and guidance that come through will be in any way suitable or tailored to the needs of Scotland, or do you think that they are likely to be done for the benefit of the UK?

Ivan McKee: Experience has shown us over recent years that the commodity of trust is in short supply. We would be very concerned if the issues that we are talking about were not dealt with in the Bill. I think we would be in a very difficult place if we were relying on guidance that might come out later to give us the comfort that we require that this was not a challenge to the devolution settlement, and the powers of the Scottish Government and Scottish Ministers.

[Kirsty Blackman]

Q Just one more on that. Are you aware that about one 10th of the subsidies on the UK subsidies website are from Scotland? About 50 of the 500 are Scottish subsidies. Scotland, presumably, does not do 10% of the subsidies in the UK. Do you think that the UK probably needs to pull its socks up a bit there?

Ivan McKee: I would not like to comment. We do what we think is right for the people, communities, regions and businesses in Scotland. I am sure that the UK Government will do what they think is right for businesses in England.

[The Chair]

If there are no further questions, I thank you, Mr McKee, on behalf of the Committee for giving evidence to us today.

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

Subsidy Control Bill (First sitting)

Kirsty Blackman Excerpts

Tuesday 26th October 2021 Public Bill Committees

[The Chair]

Thank you. I am going to call Kirsty Blackman first, then Steve Kinnock, Kevin Hollinrake, Alexander Stafford and Mr Millar. As already indicated, and looking at the time, could we stick to brief questions and brief answers to carry on up to the allocated time?

[Kirsty Blackman (Aberdeen North) (SNP)]

Q I have two questions, but the first one is a yes/no answer. The first is: has COSLA been consulted on what the forthcoming guidance is likely to say? The second question is for both of you. Schedule 1, principle F says:

“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”

Can I ask you both if that sounds like it is meaningful, and if it is meaningful, what does it mean?

Dr Pazos-Vidal: I assume that the first question was addressed to me. We have had a number of discussions, it is true, in the preparation of the Green Paper and the consultation, and some of this work was facilitated by other organisations, such as ones you are going to speak to later today. I think when we are talking about consultation, we are talking about consultation as something that is structured, something that is predictable, something that has more accountability and something that approaches corporate action to a certain extent. That is something that in the UK is far more touch and go compared with other countries. I think this is an opportunity, on something as potentially economically and politically sensitive as this, to have a much more structured system of consultation, rather than the issue of a local approach. That sometimes works fine—no problem—and I have said to myself that perhaps we could possibly do that many times over the years. Here it is a rather serious matter that is also very political as well, and we should have a very predictable and pre-set system. I should have mentioned that there is a precedent in the UK with the Localism Act 2011. Part 2 deals with subsidies and passing down funds from the EU. At the time, we negotiated a system of proper consultation with local government, in this case from the UK Government, so perhaps that is an issue at present that we can look at in terms of implementing this Bill.

Professor Fothergill: Subsidies are something that you should only use sparingly and where they really deliver something that is beneficial. That is why we need the principles that are set out in the legislation. Indeed, it is hard to see how we can get away from those principles that are set out in the legislation, because all bar one are embodied in the trade and co-operation agreement that was signed with the EU last December. The additional point that the UK Government have added is basically to stop one area entering into a bidding game with another area within the UK, and that, in a sense, is a sensible addition. These are meaningful principles: you use subsidies sparingly, but you use them where they really can deliver something that you think is socially and economically valuable.

[Stephen Kinnock (Aberavon) (Lab)]

Q I have a question for Professor Fothergill about aid intensity. As we know, under the previous state aid regimes, there were upper limits on the percentage of state aid that could be given. There is no guidance on what the aid intensity percentages should be in this legislation. Could you briefly set out what your thoughts on that are —I would certainly assume that aid intensity should be higher than was the case previously—and why that should be?

Professor Fothergill: The detail is not there in the legislation. It is all to be determined; it will follow in the guidance, one presumes. Under the old EU rules, the aid intensity ceiling varies from scheme to scheme and from place to place, but if we were talking about regional investment aid, for example, the maximum aid you could give in the top tier of assisted area was 30% for a larger business. It actually rose to 50% for a very small business, but the problem that we had under the old EU rules was that in the lowest category of assisted area, which covered most of the assisted areas in England, the ceiling for regional investment aid was only 10%. Frankly, at 10%, that is very marginal and very unlikely to make much of a difference to business decisions. If a decision is that marginal, really, come on: is it going to tip the balance? Incidentally, the EU has recently raised that lower threshold to, I think, 15%.

--- Later in debate ---

[Seema Malhotra]

Q To clarify, that is the maximum amount.

Thomas Pope: We could make it shorter within our own legislation if we wanted to.

[Kirsty Blackman]

Q My questions focus particularly on chapter 3, which is about the subsidy database and transparency. Do you have any idea what the logic is behind the tax entries in the database? It seems to me that if something relates to a subsidy measure that is taxed, it may not need to be reported for almost two years—or even longer—because it is a year past the first declaration on the tax. Does that make sense, or would it be better to have something different?

I have two more questions. In the event of cumulative subsidies, where an organisation receives various subsidies from various organisations and it takes them over the threshold of the three-year period, who is responsible for ensuring that that is put on the subsidy database? I am not clear on that.

Lastly, EU state aid rules have a number of de minimis exemptions for agriculture and various other things. Does the fact that the Bill does not include them cause problems, or is it more of a tidying-up exercise?

Thomas Pope: On tax, again, that is a longer allowance that is in the TCA, and that is why it looks like that in the Bill. Of course, the bigger question is why it was permitted in the TCA in the first place. I think it is because tax measures tend to operate on a slightly different cycle—we have our financial years and budgets—and that is why there is a different time period, but I am not quite sure.

In terms of cumulative subsidies, I am not sure that they would end up on the database—I do not believe that is the case. In terms of monitoring that, and knowing whether subsidies have exceeded a de minimis limit, I think that is the responsibility of the recipient rather than the public body. However, I am afraid that is one where you would have to ask some lawyers.

Professor Rickard: I do not know the logic behind the 12 months, but as I said in my opening remarks, I think that is quite a long time. If a competitor is benefitting from a discriminatory tax break, then after 12 months I could be out of business. So it does seem like a very long time, and I would think about the potential benefits of shortening it.

The cumulative subsidies question is an excellent point, and it highlights the arbitrariness of having these thresholds. The monetary thresholds are potentially obscuring these cumulative subsidies, exactly as has been suggested. In my own research on procurements, not in the UK but elsewhere, I find that Governments break up their procurement contracts specifically to get them below the threshold so that they do not have to report them and they are not open to scrutiny. I am not suggesting that happens in terms of subsidies, but these cumulative subsidies could potentially take on that kind of logic where you are breaking up a subsidy or collaborating on providing subsidies below that threshold that actually end up going above the threshold.

Finally, in terms of exemptions, there are exemptions included in this Bill. Sometimes they may be legacy exemptions, but I think that the benefits of having this information surely outweigh the costs. If we understand where the subsidies are going and who is getting subsidised, we can have a better understanding of whether these subsidies are working and achieving their goals. If you are weighing up the costs and benefits, I think the benefits of having fewer exemptions would outweigh the costs.

[Kirsty Blackman]

Q To follow that up, probably with Mr Pope, it says specifically that indirect subsidies are to be included. In the event that an indirect subsidy occurs, who is responsible for ensuring that there is transparency and information about that?

Thomas Pope: That is a very good question, and one that I am afraid I do not know the answer to.

[Andrew Bowie (West Aberdeenshire and Kincardine) (Con)]

Q Thank you very much for your evidence this morning. Coming to Mr Pope first, you spoke about the domestic subsidy control regime being almost unique, and said that we were charting our own course. On balance, do you think having a subsidy control regime is a good thing?

Thomas Pope: Yes.

--- Later in debate ---

[Seema Malhotra]

Q May I ask one further follow-up question in relation to this? I am not saying that there would be, but there may be circumstances in which accurate information is not always reported. What mechanisms do you see in the Bill—or does there need to be more on this—in relation to potential audit and checking of the accuracy of the information being submitted, and who should be doing that?

Professor Rickard: I think you are right that we are not only trusting the governing authorities to mark their own exams, but trusting them to provide accurate information about what they have done. So I think there are two possibilities—this is blue-sky thinking. One, as I have suggested before, is to collate information—get the information from the granting authority, but also request information from the body or entity that has received the subsidy. And then you can confirm: do these numbers match? This happens in trade all the time: you say, “What is the export data? What is the import data? Can we match these data?” And if not, what is the problem; why do they not appear to match? One way to have a check and balance on the information that is being provided by the governing authority is to seek this kind of information from the people who received the subsidy. It could even be a condition of receiving the subsidy that you will report this information.

The second suggestion, which is one that Mr Pope offered previously, is giving the CMA a bigger role for audits, and even beyond that. I am glad to see that the CMA has been tasked with doing five-yearly reports, but I really think that there is a lot of additional room for ex post scrutiny, not only of the regime but of individual subsidies, to say, “Did this subsidy achieve this goal? Was the subsidy successful? Did it engender jobs, business and economic opportunities?” I think that is a really important role for the CMA or another entity like that, but in order to be able to do this kind of auditing, this ex post analysis, we need more information, which means we need more transparency.

Thomas Pope: I would agree with all of that. What I would say is that I think there is an incentive to get the information right, in that I think if you are found to have got it wrong, probably your 28-day time limit after you have offered accurate information does not apply. So you do want to make sure that you are providing accurate information here. But I completely agree about some role for the CMA or some other body in getting the information from recipients—it sounds like a very good idea to me—and checking that, subject to how burdensome that would be. Yes, that is a good cross-validation. I suppose the concern here would be that the CMA ends up a sinkhole of time, just looking through every single thing that goes on the database, but if you just have a flag to say, “Hold on, the information doesn’t match here,” and then the CMA looks further, they are two strategies that work together quite well, I think.

[Kirsty Blackman]

Q Professor Rickard, you mentioned the subsidy database that there is already. I have had a bit of a look at that. Do you think that it is a model for how we should take this forward, or do you think that there are significant amounts of information that we need to add to it in order that it will make sense to people? You did touch on this, but could you just expand on it?

Professor Rickard: I think it is a commendable first step. I think it is great that it is publicly available, that it is online, that it is relatively transparent. There would be some more things that I would like to see. For example, there are many cases, as you will know from looking at it, where it just says “other” or “not available”, and there are a lot of cells that have not been filled in or do not look as if they have been filled in correctly. I encourage some mechanism to ensure that you cannot just say “other” or “not available”. Sometimes the amounts are listed as zero; I am not sure I understand why that is the case. I also think best practice could be followed in terms of international comparability. For example, you could put on these codes that we use to identify the sector, like NACE codes—internationally standard codes that would identify the sector to which these subsidies are going.

The Bill is really commendable and is a great initial step, and I am glad to see it up there, but there are ways that it could be improved by providing more information, and more consistent and detailed information, and by using some of these international standard codes that exist in databases that we use—for example, for imports, employment, industries or firms.

[Seema Malhotra]

Q I am keen to get your views on the subsidy advice unit and its role, responsibilities and powers as defined in the Bill. Do you think that the unit should have some further external voices on it, whether on the board or involved in its work? It seems to have a huge amount of responsibility, but its membership can only be drawn from within the CMA, from which panels might be appointed to undertake reviews. To give confidence, a process of review will need to be robust and have knowledge of devolved competencies, regional issues and so on. Do you think the unit will be strong enough, or do you think it needs some adaptation in order to make it the most effective it needs to be?

Thomas Pope: I certainly think that the CMA and/or the subsidy advice unit should have a membership and input reflecting its four-nation role in the UK and the fact that, although subsidy control is a reserved matter, it affects devolved competence and the operation of policy in all four nations of the UK. I therefore think it is appropriate that there be better devolved representation. These statutory responsibilities go to the CMA and are then exercised by the subsidy advice unit and the Office for the Internal Market. I think it is time for a look at the CMA’s governance, although that is obviously slightly beyond the scope of the Bill.

There could certainly be ways that the subsidy advice unit could get input. A particular concern could be that, because the regional economies of the UK can look quite different, you may need a different set of local expertise when the CMA or SAU were looking into a particular subsidy in Scotland from what you would need in the north of England, which has quite a different industrial structure. There are lots of creative ways that the SAU could do that. You could have regional panels that have that expertise. I would go further and have a real look at the governance of the CMA as well, because ultimately, while it is the SAU doing the subsidy control, those are the CMA’s powers.

Professor Rickard: I was surprised to see in legislation that members of the SAU can only be employees of the CMA. There may be very good reasons for that. The key for the SAU is to ensure that it is insulated from politics and that the decisions it makes are really not only economic logic but are consistent with the principles. Of course, there is a role for politics in that—people saying, “We want to achieve these particular outcomes”—but I think you really want the SAU to be a technocratic body staffed by experts who will review a subsidy on balance, in line with the principles. With those goals in mind, there may be scope for expanded membership, or certainly at least for ensuring some sort of feed-in from experts on the particular issues, subsidies or areas that the SAU happens to be investigating.

Carbon Capture and Storage

Kirsty Blackman Excerpts

Wednesday 20th October 2021 Westminster Hall

[Kirsty Blackman (Aberdeen North) (SNP)]

Thank you very much for chairing this meeting, Mrs Miller, and huge thanks to the hon. Member for South Cambridgeshire (Anthony Browne) for securing the debate. I have to agree with my colleague, the hon. Member for Stockton North (Alex Cunningham)—the hon. Member for South Cambridgeshire made a number of excellent points. I would only disagree with one, and that is the number of jobs he said would be created as a result of carbon capture and storage. In fact, it was a drastic underestimation, given that the Scottish cluster would support an average of 15,000 jobs a year to 2050—many of which are direct jobs, with a number of indirect jobs—and that is an average. That is a significant number of jobs that would be supported by just that one project.

It was decided yesterday that the Scottish cluster will be a reserve cluster, rather than one that will be progressed in track 1. That is hugely disappointing. As the hon. Gentleman noted, successive UK Governments have previously pulled the rug out from under carbon capture and storage. What was done to us in relation to Peterhead makes this feel like another kick in the teeth, particularly when the Government have been clear that the Scottish Acorn cluster project has met all the criteria for going ahead. It is just an arbitrary decision that only two are going ahead, rather than three.

The Scottish cluster is ready to go. We can make the track 1 timetable. The Government have accepted that we meet all the criteria. I do not understand why the Government have taken this decision in the face of the Climate Change Committee’s recommendations about how much carbon capture is needed to meet our climate change obligations, or even in order to meet the Government’s own climate change obligations.

I have been working alongside Acorn and Pale Blue Dot for a significant number of years. This morning, I spoke with poor Charlie, who works at Acorn, who must be fed up of seeing my face on Zoom meetings and in person, because we have met so often over such a number of years. I have been and continue to be a champion of the Scottish cluster for many good reasons. It has the potential to capture 60% of the UK Government’s 2030 targets. It is forecast to deliver 1.3 gigawatts of low-carbon hydrogen by 2030. Under the existing memorandums of understanding, it has a diverse group of 10 CO₂ customers, which meet more than 60% of the Government’s target. It will also reliably unlock 30% of the UK’s CO₂ storage resource, which is absolutely huge.

I see absolutely no reason why the Government have chosen only two clusters. I am not criticising the fact that the Government are finally proceeding with CCS—I think that is great. However, it seems so arbitrary and deeply unfair that the Scottish one has been put in reserve, given that it is ready and given that we can progress it right now. I would love the Minister to answer why the Government have chosen to progress only two and, if they continue to progress only two and not move to three, how they will meet the storage obligations. How will they meet the carbon capture suggestions made by the Climate Change Committee, which the UK Government have said they will do? How will they meet those targets if they do not progress the Scottish cluster?

--- Later in debate ---

[Wera Hobhouse (Bath) (LD)]

It is a pleasure to serve under your chairmanship, Mrs Miller.

It is in all our interests to stop climate chaos, and we must work together globally and nationally to find and implement adequate solutions. Carbon capture, utilisation and storage—CCUS—is the new big buzzword. As global warming is caused by emissions of carbon dioxide, a logical solution is clearly to capture the damaging gas. However, not all proposals are as sustainable in the long term as they seem. The Government have a clear favourite: to capture the CO₂ that is produced by burning fossil fuels, and to store it back in the Earth’s rock. It would allow Britain to continue extracting fossil fuels, burning them and pumping the carbon dioxide back into the seabed, where it is out of sight. That would be easy and very convenient for the existing fossil fuel industry, but not so fast. At best, it would not add to the carbon dioxide in the atmosphere. The question is: why not put all the much-needed investment into renewable energy, which is really where the future lies?

[Kirsty Blackman (Aberdeen North) (SNP)]

I do not disagree that we should be investing in renewable energy, but why should we not do both?

[Wera Hobhouse]

I thank the hon. Lady for that intervention, because it is always the argument that certain things are too expensive. All sorts of renewable energy production projects, including the use of tidal energy, have been rejected because they are too expensive. There is only so much investment that the Government can make, which we understand. Why not put it into renewable energies, rather than putting it into projects that keep the fossil fuel industry going? The Government should make it clear that the aim has to be to keep fossil fuels in the ground. They should do that now and support the development of renewable alternatives of power. It cannot be business as usual for the fossil fuel industry.

However, there are more ambitious ideas that involve the capture of CO₂ that is already in the atmosphere. It would mean that we remove some of the carbon dioxide that is sitting like an invisible film around our atmosphere. The Minister will know that such technology is called direct air capture. It, too, is not very well developed yet, but it seems to be a far more future-proofed direction to go for any Government. It is the way both to reduce carbon dioxide in the atmosphere and to produce a gas that can be used to make the replacement for fossil fuels.

One of the possibilities is to combine CO₂ and carbon monoxide with green hydrogen and produce a synthetic fuel that could be used in aeroplanes. I have made that point to the aviation Minister, and I hope the Government are listening. The technology has been thought of by a number of universities, among them the University of Leeds. This synthetic fuel behaves in similar ways to traditional aircraft fuel and can even be mixed with it. It would be one solution for aviation to become net zero.

Any of these new technologies will need to overcome many hurdles and need millions in investment, but they exist and they open up the possibility of a truly circular economy that will be much more future proof. I urge the Government to look beyond short-term fixes to keep the fossil fuel industry going and to look at CCUS for negative or carbon-zero emissions as one of the great opportunities for getting to net zero.

The Government need a clear vision for the long-term future of the planet. They must be clear that fossil fuel extraction and consumption will become the past not just as late as 2050, but long before that. Carbon capture to keep the fossil fuel industry going would be the wrong decision. We need long-term, good strategic decisions from the Government.

Gas Prices and Energy Suppliers

Kirsty Blackman Excerpts

Thursday 23rd September 2021 Commons Chamber

[Kwasi Kwarteng]

My hon. Friend knows that competition is the key to this market. We had a world that was oligopolistic in this respect, but we have introduced the price cap, and there are plenty of small, nimble entrants driving innovation and a dynamic system. I am absolutely committed to a competitive market, and I am sure that after this process we will still have a vibrant and dynamic energy system.

[Kirsty Blackman (Aberdeen North) (SNP)]

Too many people nowadays have to watch every single penny, and have to worry about where all the money to pay the bills will come from. Will the Secretary of State have a look at the amount of time that it takes a supplier of last resort to provide people with an accurate forecast for their energy costs, and, if possible, try to reduce the period during which they experience that uncertainty?

[Kwasi Kwarteng]

I would be very happy look at that, as the hon. Lady suggests. I have said many times, I am in contact with Mr Brearley, the chief executive officer of Ofgem, on practically a daily basis now, and this is something that I can raise with him at our next meeting.

Subsidy Control Bill

Kirsty Blackman Excerpts

2nd reading
Wednesday 22nd September 2021 Commons Chamber

[Stephen Flynn]

I admire the hon. Member’s optimism, but I am not quite sure where he has read that, because, of course, the Bill does not have that detail. He is hoping that the Secretary of State will subsequently provide that detail, but the Bill does not make that clear.

Another extremely important point that the Bill does not make clear is in relation to relocation subsidies. Essentially, the Government are saying that they will not relocate subsidies to areas with a more significant problem. They might want to level up—to use their term—but that is not going to happen under the terms of the Bill.

[Kirsty Blackman (Aberdeen North) (SNP)]

Does my hon. Friend agree that, in fact, the Bill does the opposite of levelling up, in that it refuses to allow anything to happen in disadvantaged areas that will disadvantage rich areas? That is how the Bill is written—it is in schedule 1F.

[Stephen Flynn]

My hon. Friend could not have put it better. It is a pity that there are not more Tory Back Benchers present to hear her and understand the damage that they are going to do to their own communities.

The Bill’s key objectives also include net zero. Again, there is no detail on net zero or how the Government intend to subsidise its delivery. We are being told to just believe—to hope on a whim and a prayer—that the Government will do this, that they will deliver. Let us look at that from a Scottish perspective. Let us look at the Government’s record. As the Minister and, indeed, others in this Chamber know only too well, Scottish renewables projects, which are key and fundamental to reaching net zero, pay the highest grid charges in the entirety of Europe. In the UK—on these islands—renewables projects in the south-east of England get paid to access the national grid, whereas renewables projects in Scotland have to pay to do so.

--- Later in debate ---

[Kirsty Blackman (Aberdeen North) (SNP)]

It is great to hear the thoughtful contributions from that Tory Bench, although not from the Treasury Bench, I hasten to add. The hon. Member for Amber Valley (Nigel Mills) and I have spoken in many debates together, and I always appreciate his forensic assessments of the details in the Bills before us. I hope that he will be on the Committee, and I hope that I will be too.

First off, I want to ask a couple of questions about what the Secretary of State said, because I am immensely confused by a couple of the things that he said. First, he said that the devolved Administrations were broadly happy with the Bill. If they are broadly happy, why have the Welsh Government said that they object to five of the six parts of the Bill? One out of six does not equate to “broadly happy”. In fact, I get the impression that they really do not like it and are not happy about it.

We have not seen what the Scottish Government are saying about the legislative consent motion, but I cannot imagine that they will be terribly happy with the power grab that is occurring as a result of the Bill. So I am quite confused by what the Secretary of State said. Does he mean that the devolved Administrations are broadly happy with having a state aid regime? Does he mean that they are broadly happy with the detail of the Subsidy Control Bill? I do not know. I do not understand what he is saying, because it does not seem to be coherent with what the Welsh Government have said in public about this.

The other thing that I am really confused about is what the Secretary of State said about the EU state aid provisions no longer applying to Northern Ireland. I thought he said something about article 21 of the Northern Ireland protocol, but maybe he meant article 16. I am not sure what he meant. In terms of the planned changes to state aid application in Northern Ireland, he seemed to be saying that the new subsidy control regime would apply there and that the UK Government were seeking some sort of change to an article in order to ensure that that happened. I am not aware of any publicity around the UK Government asking the EU for a change, but if that has happened, why have we not heard about it?

Could we please have a bit more information on this? We have the trade and co-operation agreement and we have the Northern Ireland protocol, but how do the UK Government expect these measures to apply in Northern Ireland without us breaking either the agreement or the protocol? That does not make sense. If the Secretary of State was making that important an announcement, you would think he would do it in a ministerial statement rather than as an aside during the Second Reading of this Bill. I would be really keen to hear a bit more information about what this actually means.

[Seema Malhotra]

The hon. Lady is absolutely right about the confusion that has been raised. Does she agree that it is important that the Government clarify what they are suggesting has changed in relation to article 10 of the Northern Ireland protocol and whether it has been dropped on the basis of this Bill? Should they not also tell us whether their proposal has been negotiated with the EU, and what the status of those discussions and any agreement might be?

[Kirsty Blackman]

Absolutely. If we as a country can suddenly renege on our international obligations and agreements, why cannot Scotland hold an independence referendum next week? The UK has agreed to these agreements and it would be great, when the Minister speaks at the end of the debate, if he could explain exactly what is going on. This is serious enough for a Minister to be making a separate statement to the House, because it is such an important matter for the people of the UK and particularly for the people of Northern Ireland.

My hon. Friend the Member for Aberdeen South (Stephen Flynn) spoke eloquently about the levelling-up agenda, and I agree that the red wall Tories elected in the north of England should be jumping up and down about this—we are jumping up and down about it, as the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) suggested—because it explicitly excludes us from doing anything that may disadvantage any other area of the UK. In schedule 1, principle F says:

“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”

And principle G says:

“Subsidies’ beneficial effects…should outweigh any negative effects, including in particular negative effects on competition or investment within the United Kingdom; international trade or investment.”

That reference to international trade or investment confuses me.

The principles try to level the playing field across the UK, so there can be a subsidy in Manchester only if a person in the south of England would not move their company as a result.

[Sammy Wilson]

For balance, does the hon. Lady accept that principle A says:

“Subsidies should pursue a specific policy objective in order to remedy an identified market failure”?

If there is market failure and certain regions of the United Kingdom are disadvantaged because of their distance, history, lack of skills, lack of resources or whatever it happens to be, principle A allows subsidies to be used for levelling up.

[Kirsty Blackman]

Principle F rejects that, so which one has primacy? Which one is the most important? If they directly disagree with each other, is it more important that we can do what is said in principle A or is it more important that we can do what is said in principle F?

I think the subsidy regime should be used in the same way as the EU state aid regime, which focuses on regions that need additional support. Whatever this Conservative Government say—we will not believe them anyway, given the amount of lies we have been told—it is not the case that this regime assists levelling up; it does the opposite. If they want to assist levelling up, they should design a regime that ensures different areas can have different subsidy regimes that benefit their local area even though they may disadvantage other areas.

[Kevin Hollinrake]

The hon. Lady may have identified this herself already, but freeports, for example, allow businesses to relocate and benefit from different taxation regimes. Such businesses are treated more beneficially in how they operate and in their cost of operation. Does she accept that freeports do exactly what she is setting out?

[Kirsty Blackman]

Freeports are not covered by the subsidy regime we are talking about today. They are a separate thing. I can say from the Back Benches that I am not particularly keen on freeports, but the idea is that there is a wall around the port—the guidance specifically says that there has to be a physical barrier around the area—and there is a different taxation regime within that wall. I am yet to be convinced of the economic benefits that will come as a result.

We hope to have green ports in Scotland, and the failure of the UK Government to agree that we can pay the real living wage and focus on net zero within those green ports means that the freeport system, as it stands, is not nearly as advantageous as it could or should be. Even though the freeport system is set up to encourage such things, I have not seen evidence that it will actually do so, particularly given the rejection of the key principles we want to put in place.

[Angus Brendan MacNeil]

It is unclear that the UK Government have a strategy to replace the EU’s successful regional structural funding for Wales, Northern Ireland and many parts of the highlands in Scotland. Such funding and state aid go hand in hand, and they are seen as different things. Indeed, the freeports are seen as a different thing. There needs to be something else to go with this for areas of the UK that are disadvantaged by policy set in the south-east of England for the south-east of England.

[Kirsty Blackman]

Absolutely. We need to replicate the good things we had in the EU, the things that supported different areas. A system has been put in place to ensure that different parliamentary constituencies can get money from the UK Government, but it is super-interesting that the constituencies the Government have chosen to put at the top of the list are those constituencies represented by Conservative MPs, rather than the constituencies with the highest levels of deprivation. The difference is dramatic.

It is hugely concerning that, if the UK Government are left to do so much in this Bill by guidance, as set out in clause 79, we are going to have a situation where the Secretary of State will have significant control and flexibility without even having to come through door of this House. The Bill says that the Secretary of State is going to issue guidance about

“the practical application of—

(a) the subsidy control principles;

(b) the energy and environment principles;

(c) the subsidy control requirements in Chapters 2 and 3”.

I am clear that there needs to be detailed guidance, but we should be at the stage where we are scrutinising it. When we come to the evidence sessions in Committee, the people before us should be able to talk about the guidance. I get that some of the regulations are going to be made by the affirmative resolution and some by the negative resolution, but my major concern is not those that are going to be made by resolutions in this House; it is those that are going to be made by guidance.

Let us we look in detail at some of the stuff in this Bill. Schedule 2 says:

“Subsidies in relation to energy and environment shall be aimed at and incentivise the beneficiary in—

(a) delivering a secure, affordable and sustainable energy system and a well-functioning and competitive energy market, or

(b) increasing the level of environmental protection compared to the level that would be achieved in the absence of the subsidy.”

I am keen to know what “environmental protection” means. What does it mean? It is not in there. We do not know what it means because we have not seen the guidance that the Secretary of State is going to be allowed to produce on their own without running it past this House.

The same applies in respect of

“a secure, affordable and sustainable energy system and a well-functioning and competitive energy market”.

Does that mean a well-functioning and competitive energy market for those people who buy and sell energy, or for the consumer? Does it mean for the person who is being hit by those higher fuel bills or for the people trading gas on a daily basis? I do not know what it means because we do not have that information. If the Government were willing to provide us with the guidance, and we had access to it and seen it, we would be able to ask questions and comment on the specificity of the guidance. When we have experts come before the Committee, we would be able to hear their expert opinion on it, but we cannot, because we do not have the guidance. It is really unfortunate that, on Second Reading, when we are deciding whether or not the Bill should go forward, we have not got the information we need in order to do that.

I want to make a couple more points about energy. One of my colleagues mentioned the transition charges. The subsidy regime that is being set up says, “We can’t have one part of the UK advantaged over another part of it.” However, it also says, “No subsidy can negatively affect interconnectors.” So we will still have a situation where energy from the EU is allowed to come into the UK—the companies are not paying any charges for using our network—yet people who have wind farms in Scotland are paying £5.50 per unit of energy. And those in Wales are being paid £2.80 per unit of energy. That system was created when fuel was driven around in vans and had to be driven to places that then used the power. One of my colleagues said that there is an incredible level of disinterest among those on the Government Benches about dealing with transmission charges. I appreciate that some of them have considered it, but a Minister has not stood up to say, “You are right. This is a travesty and we need to fix it.” We would really like a commitment on that, particularly if this Bill is going to give protection to interconnectors but no protection to those wind farms in the north of Scotland that are being charged an absolute fortune.

I want to talk about the Labour party’s position on the Bill, as I am really disappointed that it is not willing to vote against it. It is important for it to do that. We are going to vote against it. I am on the left. I appreciate all the things that the Labour party has done in the past, but I have spent six years getting increasingly frustrated by the failure of the Labour party to oppose this Tory Government and to stand up even for the Welsh Government at this point. This is really unfortunate. I do not understand at all why the Labour party is not voting against this tonight. We are voting against it. I am not going to support this Bill, as I do not think it should get its Second Reading. I say that for reasons of the power grab, the massive inadequacies in the Bill and the fact it is going to do the opposite of levelling up—it is going to entrench the inequality we already have.

--- Later in debate ---

[Sammy Wilson (East Antrim) (DUP)]

In principle, we welcome this Bill. First, it represents an opportunity for us to introduce subsidy control regimes that are specific to the United Kingdom and are not influenced by Brussels and the wider European interest, hence sometimes actually detrimental to our own country. It is an important part of the whole Brexit process that we have this independence.

Secondly, it is important that we have a nationally controlled regime. As one who speaks from a region of the United Kingdom, of course I want an even playing field when it comes to the application of subsidies. Some regions are richer than others and will therefore have more money to be put into subsidies than others. Some areas may have more political influence. That is partly why I find some of the objections raised by Opposition Members very odd. For example, a Minister in central Government could introduce subsidies for constituencies in a way that is beneficial to the electoral interests of his own party—the governing party—and we need a control regime that enables that kind of decision to be challenged.

My only concern about the Bill—perhaps the Minister will clarify this later; it has been raised by Members already—is that the challenge function seems to be limited to either the Secretary of State or to interested persons. As far as I can see in any definitions that have been given in the Bill, interested persons would not include Ministers from any of the devolved Parliaments or Assemblies in the United Kingdom. In fact, the only such definition is in clause 8, which refers to businesses and enterprises. The Minister needs to clarify this. If he wants to argue that this is a robust control regime, then the ability to make referrals must not just rest with the Secretary of State. It must also rest with devolved Administrations, who have interests in how subsidies may be used, particularly by central Government Departments or Ministers. Others may want the challenge function so that they can make mischief. If the Minister is serious about saying that we want to have an effective UK-wide regime, it must be clear that the function is available to all interested parties across the UK.

I come specifically to the Northern Ireland issue. Of course, in Northern Ireland the control of subsidies will not be totally under the Competition and Markets Authority or the tribunals. We will operate a dual regime under the withdrawal agreement and the Northern Ireland protocol. On state aid and its controls, it is quite clear:

“The provisions of Union law listed in Annex 5”—

a whole list of EU rules is there—

“shall apply to the United Kingdom, including with regard to measures supporting the production of and trade in agricultural products…in respect of measures which affect that trade between Northern Ireland and the Union which is subject to this Protocol.”



The Secretary of State said in answer to the Opposition spokesperson and, I think, the Scottish National party representative that, as far as the Government are concerned, it is clear that Northern Ireland is covered by the Bill, but the only way in which Northern Ireland can be totally within its provisions is through the removal of article 10.

I know it is a lengthy Bill, but I have read through it and I do not find any reference to article 10 being altered, removed or changed. Perhaps the Minister can point that out to us later on. I would welcome that, by the way; in fact, I would be overjoyed, and people in Northern Ireland would be overjoyed if that is hidden somewhere in the Bill in words that I do not understand, have not spotted or whatever. If it is there, please point it out. There will be great rejoicing in Northern Ireland as a result.

[Kirsty Blackman]

Even if that were in the Bill, I am concerned that it is not in the competence of this place to change that unilaterally without having a discussion with the European Union.

[Sammy Wilson]

The hon. Member made that point, and I was not sure whether she was supportive of the withdrawal of article 10 or appalled at the prospect because the EU opposes it. The one thing I did notice, however, was that she was appalled that there should be any interference in the role of the Government in Scotland to make subsidy decisions. If that is the case, she should be equally appalled for policy makers in Northern Ireland and welcome any unilateral decision by the Government here at Westminster to give them the same freedom.

[Kirsty Blackman]

I honestly do not have a view on whether it is a good or bad thing. I am just utterly confused, because I do not think that the Government have the power to do it. I want to know what they mean so that I can work out whether I oppose it or not. I do not know what they are saying.

[Sammy Wilson]

Of course, the Government have the power to do it under article 16 where it is deemed that provisions in the withdrawal agreement are damaging economically to Northern Ireland. I cannot think of anything more damaging to Northern Ireland than a subsidy regime that applies in the rest of the United Kingdom but which can be stopped from applying in Northern Ireland.

Let me give some examples of how conflict between the dual systems could operate. One of the principles outlined in schedule 1 is that subsidies should be proportionate—there is no fixed percentage; it is simply that they be proportionate—but under the EEA-EU state aid regime, subsidies cannot be more than 50%. For example, if a subsidy is made available to a firm in Scotland that could equally be looking at Northern Ireland, Scotland would have the advantage of saying that it is so important to Scotland and fits in with its objectives that it will give it a subsidy equal to 70%—that may even be accepted under the control regime in the rest of the United Kingdom. However, Northern Ireland would be excluded from seeking to attract that firm on the basis that the EU state aid rules say it cannot go over 50%. That is one way in which the dual system is going to be a disadvantage.

Another example is that the EU refuses to allow state aid to be given where it is simply for expansion, but under the principles outlined in schedule 1, a subsidy of that nature could be given in the rest of the United Kingdom. We could find that a subsidy complies with the control regime in GB, but does not comply with EU state aid rules in Northern Ireland, so placing Northern Ireland at a disadvantage.

On the EU state rules—and the Secretary of State said it—one of the reasons for bringing forward our own control system is that it can be more flexible and quicker. In fact, I think he said that a decision could be made within 30 days, but under EU state aid rules, there has to be a standstill period that can last up to a year. The Secretary of State said that in the House today. Again, when it comes to attracting businesses by using subsidies in Northern Ireland—even if we could match the subsidy available in England, Scotland and Wales, or wherever else somebody is trying to attract the firm—the slowness of the process, imposed by the fact that we are subject not only to the control regime in the rest of the United Kingdom, but to EU state aid rules, could mean that we find that a firm simply says, “Well, we can get a decision quicker in England, Scotland or Wales, and that is where we are going”, and Northern Ireland would be disadvantaged.

That is one of the reasons why no fiddling about with regulations is going to make a difference here. If Northern Ireland still remains firmly under article 10 of the withdrawal agreement, state aid rules apply there and the dual system has to apply there, then this is not a case, as someone has said, of trying to control the subsidy race, because Northern Ireland cannot even enter the race. We will be spectators of the race, stopped from entering it by the provisions of article 10 and the requirement for Northern Ireland to remain under the state aid rules.

Lest people think that this is just an issue for Northern Ireland—they may say, “Well, tough! That was what happened with Brexit.”—let me say that this is the elephant in the room and the issue has not been addressed in this Bill. Those state aid rules apply to trade between Northern Ireland and the Union, but any subsidies to a firm that operates through Northern Ireland into the EU, even though it is based in England, Scotland or Wales—or might even trade into the EU through Northern Ireland—will also be caught up in this.

The issue of the reach of the state aid rules has not been addressed in this Bill, and it is not just an academic argument. It is not even just for subsidies that may be given to firms in England, Scotland or Wales; this can also affect the international trade deals that the Government do with the rest of the world.

For example, British Sugar has challenged the deal made by the Secretary of State that allows 250,000 tonnes of sugar cane into the United Kingdom tariff free. That has been challenged by British Sugar on the basis that it represents unfair competition in the European market. British Sugar sells on the European market. It uses sugar beet, and tariff-free sugar cane would give Tate & Lyle an advantage. That is being challenged in the courts, and article 10 has been cited. If we are to ensure that a subsidy control regime does not disadvantage one part of the United Kingdom, or catch some of the subsidies that may be made available to firms located in other parts of the United Kingdom, rather than in Northern Ireland, article 10 is all-important. It is important for the Minister to provide clarification on that.

I have spoken to officials in the Department for the Economy in Northern Ireland. They have said—it is quite clear why—that they are finding it difficult to get information about how this scheme will work. So much of the Bill depends on new regulations being made. The general headlines are there, but the regulations need to be made. For example, what is an interested party, and will the Minister regulate to widen the scope of that? What about guidance for the subsidy and the person of interest, or about subsidies of particular interest? We do not know which subsidies are likely to be of particular interest, but that will be made by regulation. The Bill is peppered throughout with indications that such things will be clarified by regulations from the Minister, and that is important when it comes to the operation of subsidy control. We are dealing with the Bill, yet we are blind to some of the issues that need to be addressed.

Another issue is the time allowed for appeal or challenge, which is 30 days. I do not want the same long drawn-out process that the EU has, but 30 days in which the subsidy is registered or placed on a database is particularly short. Why has that period been selected, especially since getting information together for such a challenge might be that much more difficult? Lastly, the tribunal has significant powers, but it is how those powers will be used that is important. When the Bill comes to Committee, it is important that many of these issues are addressed.

From a Northern Ireland perspective, I hope that the promise made from the Dispatch Box is correct. If it is, I would love to see where that is being delivered in the Bill. If not, I would say that the Bill does not deal with some of the factors that have caused the greatest distortion of trade when it comes to the application of subsidies, namely a dual regime in Northern Ireland—a regime that allows the European Court of Justice to make those decisions. The promise made by the Minister in his opening speech that the Bill represents the freedoms we have thanks to Brexit is not quite true. The Bill still leaves a significant foothold in the United Kingdom for Brussels and the European Court of Justice when making final decisions about subsidies that apply in Northern Ireland, or about subsidies that are given to firms in England, Scotland or Wales, but that may fall under the EU state aid regime because, through their trading in Northern Ireland, they impact on the European market.