Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Committee stage
Monday 31st January 2022 Grand Committee

[Lord Wigley (PC)]

My Lords, I had not intended to intervene in this debate, and I am going to do so not from a particularly Welsh angle but from a general one. I identify with Amendment 6 and the comments of the noble and learned Lord, Lord Thomas of Cwmgiedd, with regard to the practicality of any Act like this being interpreted by the courts. We are going to create a monster if we are not careful, and it may well fall down because of its own inertia.

Three areas of experience spring to mind for me in addressing this question. The first is the old—am I allowed to say it?—Chinese saying that if you give a man or woman a fish then you feed them for a day, but if you teach them to fish then you feed them for a lifetime. Therefore, any long-term economic strategy must be geared towards enabling that to fulfil itself, so that we are not just providing subsidies for the day but providing a basis on which to build.

The second experience that comes to mind is writing an economic plan back in 1970 with the late, great Phil Williams, whom some colleagues here will remember from the National Assembly. We did an analysis to find winners in terms of industry and in terms of geographic location. Most of them worked out. In fact, they were fairly common-sense things—electronics, chemistry and so on—and I suspect that they would have fulfilled themselves had there been no grant mechanism, because they were doing what there was a momentum towards.

My third and final point concerns our experience in Wales with regard to European funding; I have no doubt that similar experience will have been obtained in Cornwall, South Yorkshire, Merseyside, parts of Scotland and wherever such funding was available. The funding went not just to narrow projects but to areas of investment with a long-term payback, such as work, even blue-sky projects, in our universities. These would not create immediate jobs but provided a basis on which industry and commerce, and those who were going to invest in them, could look to the future. The scheme of grants that was available then through the European Union was very broad; we should not ignore that dimension. We need mechanisms that enable that to happen. If we can get this right, it could be very valuable. It may well be that this Bill has that potential in it, but there is a lot that needs to be clarified at the moment. Some of these amendments may help tease that out.

[Lord Bruce of Bennachie (LD)]

My Lords, I wish to intervene briefly because this has been a really interesting debate. The intervention by the noble Lord, Lord Lamont, seemed to ask legitimate questions about whether the intention of the Government’s strategy relates to levelling up or regional development.

In the 1970s, I was involved with the economic development strategy. I remember the map that the noble Lord, Lord Lamont, talked about. It was about unemployment and travel to work but it did not always take account of things such as depopulation. There are certain communities where, if there is no work, people go and look for it, but the communities are then told, “You don’t have high unemployment, so you’re not entitled to any support”. Yet those people can be encouraged to stay there, or alternatives can be brought in.

Secondly, it seems to me that this should have some relationship to the economic realities of the region. We have seen situations in which ideas have effectively been dumped into a region, with massive incentives from government, but simply did not survive. These were big projects that became white elephants and embarrassments. On the other hand, supporting local and growing businesses has proved very effective. It is exactly the kind of thing that local councils and local organisations are better at, because they have that degree of knowledge in a way that central government often does not and they are kind of organic.

I remember, in the 1970s and 1980s, the Highlands and Islands Development Board, which was set up in the 1960s. It described itself as an investment bank with a social conscience. At the time, the Scottish Affairs Select Committee was holding an inquiry that Conservative MPs had asked for, originally with a view to discrediting the board. I must say, they rather changed their view at the end of the evidence. The chairman was asked, “How many of the projects that you have supported failed, and what was the average rate of return on the investment you made?” We got an answer to those. When asked, “How did those compare with the private sector?”, the answer was, “Almost exactly the same.” The question then was, “So why do we need the Highlands and Islands Development Board?”, to which the answer was, “All these projects were turned down by the private sector in the first place but succeeded.”

We have been through a period of highland depopulation, and it is beginning to happen again. In my part of the north-east of Scotland, we lost our development assistance, perfectly understandably, on the arrival of the oil and gas industry. Now that it is leaving, we may well need to support not the fossil fuel industry but new industries, perhaps related to energy, or some of the traditional industries that add value to the food production of the area and that sort of thing.

I suggest that we are entitled to ask the Government for some kind of explanation of strategy as to how this is going to work, whether there should be a map and what kind of sectors can be expected or allowed to be encouraged. At the very least, the objective over 10 years would be to reduce the inequalities between the high-growth, high-population areas and the low-population areas to the benefit of both. I accept the point that stealing from one to give to the other is not the answer, but it is sometimes quite difficult to know what the balance is within that. The questions being asked are legitimate and justified; the Government should give us some idea of what the answers might be.

Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Committee stage
Wednesday 2nd February 2022 Grand Committee

[Lord German (LD)]

My Lords, I appear to have come into this argument about consistency between the noble Lord behind me and my noble friend Lord Purvis. It strikes me that, if this Government are intent on getting a coherent policy, they must have one fitting with the other.

My noble friend just talked about the figure of £780 per head. I will not argue in greater detail what I said during a previous day of debate in Committee, but I also want, in answer to a Written Question and Oral Questions, a statement from this Government that Wales will receive, pound for pound, what it received from the European fund. My target is £780. If the Minister could indicate in his reply whether the Government are still intent on reaching that target—and if so, when —that would be helpful.

It seems to me that consistency is also about the way in which the subsidy regime might work. How subsidies have been applied in the past is important. I quote by way of example the case of both sides of the Severn Bridge. One is in Wales, the other is in England. A major UK company relocated from the Welsh side to England. Having reflected on it, the Welsh Government spent a considerable amount of money preparing the site which the company had vacated and turning it into something that became a possible, and certainly large-scale, logistic hub into which a major British company relocated, again moving from one side of the Severn Bridge to the other. That was allowed, because basically what we were seeing was economic development potential and the available subsidy regime being used to the full.

However, I do not understand how this subsidy Bill will mean that companies can relocate or move, except by indices that, we are told, are now not consistent with the subsidy regime. It is therefore difficult for a member of the public or a public body trying to think how they will sort out their subsidy regimes from now on to make certain decisions about the future. Perhaps the Minister can provide us with some certainty on what relocation means, because without a map, a plan or boundaries, where does it stop? Where does it start? Does it mean that both sides of the Severn Bridge are in the same government economic plan and can be at both ends at the same time?

I want to say a few words about the SPEI schemes and ask the Minister some questions about them. In principle, such schemes are helpful and permissive because they follow on from the EU’s SGEI scheme, but there are two differences between the European scheme and the scheme proposed in this Bill. The first is that the SPEI must reflect the principles in Schedule 1, of which principle F is a new one. This amplifies the question I asked just now about whether, without access to a methodology for location, it will be possible to determine the issues raised by principle F. The second difference concerns the need for public interest objectives to be placed as an obligation for the companies concerned—that is, the companies that provided the delivery of goods and services or actually delivered them—in future.

To understand that need, how are we to measure what public good or public service obligation is? That is not yet reflected in the content of the Bill, and I wonder whether the Government will make it clearer, especially as we are probably not talking about the exempt ones but of that lower limit up to £700,000 and then further to £14.5 million. These are important features of any economic development plan for any area. The schemes currently captured by the SPEI rules include housing, rural transport services and some aspects of health. My question to the Minister is: how much broader could SPEI schemes go? The public good could span a wide regime of operations. In the light of two examples, I will ask the Minister how a scheme could be tested and whether he could treat these examples as a means of achieving an understanding of the intention behind this proposal in the Bill.

The amendments in the name of the noble Lord, Lord McNicol, are trying to establish a level of detail that we do not yet have. It is essential to have that detail, either in the Bill or in further explanation from the Government, of what schemes could be involved and use these services. Those services could be provided under current expenditure or from capital expenditure for projects that are needed.

I want to work on leisure centres, and arts centres or concert halls. Leisure centres used to be very much a local authority activity, but they are critical to providing a social good in ensuring the good health of communities. Therefore, many local authorities have now turned to the private sector to build, and sometimes to run, these centres. Would an SPEI scheme be available for that sort of operation?

It is similar for arts centres, which are frequently multipurpose halls now. As well as concert halls, they are perhaps homes for orchestras and community centres. Not only concerts but a whole lot of activities occur in them. Having a regime that provides a subsidy means that ticket charging can be affordable across the community. In places such as London, it is possible not to have a subsidy, because the audience will clearly pay far more for their tickets than they would in other parts of the country.

Given the disparities in the regions and nations of our United Kingdom, it is important to understand how these things will work in practice. A number of these multipurpose halls may well have a resident artist, an orchestra, a teaching capability or an education facility. In fact, it would be easy to demonstrate a public good, but they will need support or a subsidy. Will an SPEI scheme apply equally to them, provided that the public good stands up? It could be said that the availability of affordable tickets for the general population is important, no matter where it comes from.

In conclusion, this section of the Bill needs further explanation, simply because it could be used to great effect by local authorities and the devolved Administrations. Unfortunately, it does not mean that they will have a subsidy to offer, certainly not in Wales, unless the Government can match the £780 a head that we had until last year.

[Lord Bruce of Bennachie (LD)]

My Lords, the Government are anxious to reduce regional inequality and to promote greater equality, but it is difficult to understand how that it is going to happen without the economy seeing some relocation. The Government’s plans today involve taking money away from the home counties and transferring it to the north of England. That puts them in a political quandary, because if they do not deliver material results in the red wall seats and they have also alienated their blue wall seats, they may find themselves losing on both fronts. That is a problem for them, but from the country’s point of view we want to see those inequalities being reduced. My question to the Government is how they think this can be achieved if any suggestion of relocation is prevented.

Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Committee stage
Monday 7th February 2022 Grand Committee

I recall somewhere along the line reading that the Government would outline further information specifically on agricultural principles. I look forward to the Minister’s explanation, as well as an explanation of how all this will fit within WTO rules.

[Lord Bruce of Bennachie (LD)]

My Lords, I am very happy to support my noble friend on this amendment, to which I have added my name. She has explained quite accurately and in detail why we believe this is necessary.

My first point is about the consultation, which is slightly disturbing. The Minister, the noble Lord, Lord Callanan, wrote to me after Second Reading having said in response to my intervention that 81% of consultees had supported the inclusion of agriculture. My noble friend had pointed out that that was 81% of a much smaller percentage, but more fundamentally, the Minister failed to acknowledge two things. First, if 100% of consultees from Wales or Scotland were against—I am not saying it was quite that close—to suggest that 81% were in favour, which just about represents the imbalance of population between England and the rest of the United Kingdom, is exactly the wrong approach to devolution. Devolution has to recognise that if the devolved Administrations are sufficiently different from the rest of the UK, there has to be some real effort to accommodate that difference. Citing UK statistics is the wrong way to do it.

The other issue is much more fundamental. There was quite a bit of debate within the Conservative Party a few years back about whether subsidising agriculture was justified at all—whether free market economics should be let rip—but, as my noble friend has said, food production is a little bit more important than that. Food security has always been recognised by successive Governments as relevant.

The common agricultural policy aimed for self-sufficiency across the European Union. Its climatic variation meant that that was in a much higher proportion of food consumed than would be the case with the United Kingdom, but that makes us even more vulnerable once we withdraw. What percentage of our food should be produced from our own capacity at home surely has to be an article of serious discussion. Now that we have left the European Union and the Government are actively negotiating trade agreements around the world, some people seem to argue that all that matters is that the food should be cheap—not that it should be secure; it should just be cheap. The consequence is that we have concluded agreements with New Zealand and Australia which many farmers and food producers, particularly in Scotland and Wales, feel have substantially disadvantaged them in terms of what their farming methods are about.

When we move to the next phase, if farming and agricultural support are devolved, presumably they are devolved to allow divergence—because divergence exists. Grandfathering is all very well but it does not look forward far enough, to where land use could change quite radically. On this occasion, I note that the Green representatives are not here; I think they might have something to say.

At Second Reading, I mentioned that the issue of rewilding is beginning to create some degree of tension. Yes, there is a lot of excitement about the idea of trying to return things to nature, and that it might be helpful in terms of climate change, but what will its social impact be? What will its impact on employment be? What will it do to communities? Will it reduce access? Will it reduce the employment opportunities that farming currently provides? Those are real questions. Wales and Scotland—and Northern Ireland, for that matter—want to pursue a policy that determines, for their benefit, what the right balance is.

I have no particular animus for or against Ed Sheeran, but he claims that he wants to spend £200 million of his fortune rewilding as much of the UK as possible. I want to know how much sensitivity he has. What is fine in Suffolk might be a bit different in Inverness-shire or Montgomery or wherever. It is important that he understands that the land use regime in Wales and Scotland is a matter for the people there, not a pop singer in Suffolk. He can do it as long as it fits with that policy.

I say this to the Minister: it is not clear what five, 10 or 15-year idea the UK Government have. Grandfathering existing regimes does not allow for divergence later as we change our use. Basically, it is not consistent for the Government to argue that they support devolved agricultural policy but wish to take control of the subsidy regime that is essential to the delivery of that policy.

It is also not good enough to say that subsidy control is a reserved matter. Of course it is—I acknowledge that—just as the internal market is, but if the conclusion of that is UK Ministers, who are also English Ministers, saying, “What we really mean is that we will do as we please and the devolved Administrations will just have to lump it”, that is no way to secure the future of the United Kingdom. It is also no way to ensure that the devolution settlement can continue to work when it is under so much pressure. The Government need to understand that there is real concern that including agriculture in this Bill has implications that are bad for not just agriculture but the United Kingdom.

[Lord Wigley (PC)]

My Lords, I am grateful to the noble Baroness, Lady Randerson, for moving this amendment. I am delighted to follow the noble Lord, Lord Bruce; I agree with his comments. At this point, I should declare my registered interest as a member of the Farmers’ Union of Wales. I am one of the last great landowners of Wales, with six acres of land, so I have a direct interest in the outcome of these debates.

There are at least two dimensions to this issue. The first is whether this sort of legislation is appropriate for application to agriculture in general. Over my lifetime, the question of subsidy in agricultural terms has been related to the security of the supply of food and the price of food. Those are somewhat different considerations to those that may be apposite if we were considering subsidy for the steel industry or other industries. We need a system that is fine-tuned to the agricultural reality, which is different in terms of not only the nature of the product but the scale of the operation; that is particularly true in Wales—and in Scotland as well, I suspect—where there are many small farmers. They are small farmers in terms of their turnover and investment compared with the massive investment one might have in the manufacturing industry.

In Wales, farming is more than just a livelihood, it is a way of life—and a way of life that sustains the community. Therefore, consideration of the impact of subsidy, the relevance of subsidy and when it should and should not be available has many more dimensions to be taken on board than if it were a straight manufacturing subsidy question. My background was in the manufacturing industries, as I have explained before, but I am acutely conscious of the difference that exists between agriculture and the manufacturing industries

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

While I absolutely accept that the agriculture industry is completely different from others that will be covered by the Bill for many of the cultural reasons that have been brought up by others, I do not have the information that the noble Lord requests, but we will write, because we undoubtedly have it back in the department.

[Lord Bruce of Bennachie (LD)]

Less favoured area status was mentioned by my noble friend. In Scotland, 86% of the land has less favoured area status. If we have gained, as we have over many years, a reputation for prime Scotch beef, for example, it has been done by an integration of finishing farmers and suckler cow premiums on the hills. The Minister said that that could be a legacy scheme, but we are doing trade deals with New Zealand and Australia, which may want to challenge that. I think that people want reassurances that such schemes, legacy or adapted in future, will not fall foul of the implications of the Bill. That is the sort of concern that our farmers are facing at the moment.

[Baroness Bloomfield of Hinton Waldrist (Con)]

I register those concerns. Consultation with the devolved Administrations continues, but I repeat that the subsidy schemes of each devolved Administration can be devised in the context of the particular differentiation between each separate authority.

--- Later in debate ---

[Baroness Blake of Leeds (Lab)]

My Lords, in moving the amendment in the name of my noble friend Lord McNicol, I am grateful to the noble and learned Lord, Lord Hope of Craighead, and the noble Lords, Lord Bruce and Lord Wigley, for signing some, and in some cases all, of the amendments in this group. The amendments would extend the call-in power afforded to the Secretary of State to the devolved Administrations in Wales, Scotland and Northern Ireland—I can see a theme developing in these amendments. I know from experience that consultation is a tough thing to do properly. We are seeing repeatedly a lack of appropriate and meaningful consultation and that really needs to be addressed, along with the sense of a lack of respect in dealing with other areas and other bodies that need to be included so that a fair and level playing field can be established.

To be clear, in the Bill at the moment the Secretary of State has the power to direct a public authority and request a report from the CMA in relation to a proposed subsidy or scheme. As currently drafted, that does not extend to the devolved authorities; they do not have the equivalent powers to call in or challenge subsidies. The question for all of us is why that should be the case. It is yet another example of the significant disparity of power under the proposed subsidy regime, even though the devolved authorities clearly have an interest in the application of the regime in their respective nations.

The Government may not feel it is appropriate to give devolved authorities exactly the same power as the Secretary of State—for example, it may make sense to constrain their powers to decisions taken within their jurisdictions—but surely those authorities need some ability to refer matters to the CMA. Another aspect of this measure is that the Secretary of State can issue a call-in direction that requires granting authorities to respond outside of England in relation to subsidies within the CMA. Why does that not happen the other way round?

As we know, we have had a number of debates on devolved matters, but we remain to be convinced that Her Majesty’s Government are moving in the right direction when it comes to matters of devolution. These amendments are an opportunity for the Minister to prove us wrong and illustrate that there has been some movement as a result of the very many representations in this area.

There is also the vexed area whereby a call-in by the Secretary of State could significantly slow down progress in granting financial support for inward investment. This could result in that investment being lost. There are also very sensitive cross-border issues, as we have discussed, which present further challenge and could result in a perceived conflict of interest where they are not appropriately addressed.

I leave it to the noble Lord, Lord Fox, to introduce his amendments, which seek to further extend these provisions. We will, as always, listen to the Minister’s response with great interest. We must get away from the very real sense that Whitehall, unfortunately, is determined to hang on to power rather than really move forward on devolution, to which I believe this subsidy Bill could give great store. I beg to move.

[Lord Bruce of Bennachie (LD)]

My Lords, I am very pleased to have added my name to this group of important amendments. We are pressing a real depth of concern about the UK Government’s attitude to the devolution settlement altogether. With this Bill and the internal market Act, the Government are using the case for reserved powers to appear to be testing the devolution settlement, not quite to destruction, but to considerable tension.

These amendments ask why it is right that the Secretary of State has the right to instruct a public authority to seek a report from the CMA but the same Secretary of State—who is also the Secretary of State for England—is not susceptible to being challenged over any subsidy scheme that he or she has devised that may be perceived by any or all of the devolved Administrations as contrary to their interests or concerns. As the noble Baroness has said, it may not be the case that there should be absolute equality—we do not have a federal system yet—but we need recognition that it is simply not good enough that the Secretary of State can ignore, cast aside and overrule the devolved Administrations without them having any comparable right to challenge the English regime, never mind the UK regime. It is important that Ministers show some sensitivity and understanding on that.

This Committee does not need me to tell it that I have no sympathy with the SNP case for breaking up the United Kingdom or for independence. My view is that the SNP is a monumentally incompetent, obsessive political party that has no capacity to lead Scotland anywhere useful. However, the fact remains that it is in a mood to try to use every opportunity to stir up discontent and break the UK apart. The Government should not be helping it. They should be looking at how they can show, clearly, openly and honestly, that they are trying to set up a system based on mutual respect and understanding.

Even though the powers are reserved and the Secretary of State, in his capacity as Secretary of State for the United Kingdom, may be the decider of last resort, it should be as a last resort. Until you get to that position, it is important that the devolved Administrations have balanced and comparable powers. My simple question is this: why is it right that the Secretary of State can challenge Scotland, Wales and Northern Ireland on a scheme, but they have no right to challenge him or her on a scheme applied within England, which is what the Bill says?

[Lord Fox (LD)]

My Lords, just as the noble Baroness, Lady Blake, suggested, I shall speak to Amendments 55, 57 and 59 in my name. We are back trying to break up the monolith again. In the Bill, the Government seek to centralise the power in the Secretary of State in Westminster and, as my noble friend Lord Bruce set out, that person is Secretary of State for both England and the United Kingdom.

--- Later in debate ---

A further reason for reserving the call-in power to the Secretary of State is to ensure that the subsidy advice unit is neither overstretched nor enlarged beyond the appropriate level for its role in this regime.

[Lord Bruce of Bennachie (LD)]

I am glad that those conversations are taking place, but is not the danger that if the devolved Administrations do not have the opportunity to get that advice, they might as well move to a direct challenge? It makes the friction more extreme rather than less. I accept the point the Minister is making about not wanting lots of frivolous requests, but if the right to request at all is denied, the danger is that there will be more contentious challenges.

[Lord Callanan (Con)]

We are not denying the right to request, which is why we are currently in discussions with the devolved Administrations to try to codify the system, but we have to accept the reality that they have a fundamental objection to subsidy control being reserved to the UK Government. They do not believe that it should be a UK-wide function. While we can agree and discuss many of the details, it is a black or white situation whether it is reserved to the UK Government. We feel it should be. That was Parliament’s decision in the United Kingdom Internal Market Act. The devolved Administrations do not agree with that, but it is a fact, so while it is possible to agree with them on many of the details, and we have engaged extensively at ministerial and official levels, we cannot resolve the fundamental difference of opinion on the overall principle.

There is a risk that this amendment would overburden the subsidy advice unit with numerous and unnecessary directions for referrals. The noble Lord, Lord Bruce, talked about the ability of the current Scottish Administration to put friction in the relationship and to seek to cause division where there is perhaps no division at the moment, and that would require substantial and unpredictable additional resources. In contrast, given my department’s responsibility for and its relationship with the Competition and Markets Authority, the Secretary of State will be able to take referral decisions that factor in the overall workload and capacity of the subsidy advice unit and will work with others in government to ensure the unit is appropriately resourced to deliver its functions over the medium and long term.

We appreciate that the new regime represents a significant shift from the requirements of the previous EU state aid regime and that public authorities will need to familiarise themselves with the new requirements and processes. Public authorities will already be used to the interim arrangements under our international obligations, including in the trade and co-operation agreement, which require an assessment of a prospective subsidy or scheme against six principles. As always, my department stands ready to support further through guidance and advice to help to ensure that public authorities in all parts of the United Kingdom are prepared and feel comfortable making their own assessments and giving out subsidies, hopefully without the need to seek advice from the subsidy advice unit. Therefore, for the reasons I have stated, I am unable to accept the amendment and hope that, given the explanations I have provided, the noble Baroness will feel able to withdraw the amendment.

Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

We appreciate that the CMA will be undertaking preparatory work as we speak, and this amendment is not meant as a criticism, but during the passage of other Bills it is perfectly normal for us to probe whether a chosen regulator—because it will not be an enforcement agency—is the correct one. It very much picks up on my noble friend Lord Whitty’s remarks in the previous debate about the role of the CMA and how ready it and the SAU are. Do they have the resources and the expertise? Amendment 64 aims to make sure that the SAU has four-nation representation on it. With that, I beg to move Amendment 64.

[Lord Bruce of Bennachie (LD)]

My Lords, I speak in support of Amendment 64, to which I have added my name. I also support Amendment 65, which my noble friend Lord German will address in more detail. Overall, and as has been said, this Bill has worrying implications for the devolution settlements. Just as the United Kingdom Internal Market Act may be used to impact the devolved Administrations unfairly—certainly, that is their concern—reserving the subsidy regime to the UK Parliament and the powers that have been given to the Secretary of State are causing alarm across the devolved Administrations.

The Government like to claim, and the Minister has made this point a few times, that leaving the EU gives the devolved Administrations more power and flexibility. Under the EU, they were constrained by the state aid rules that no longer apply. Now, they can pursue their own. That would be true if the UK Government were not introducing legislation that allows them to override the devolved Administrations, without even a requirement for consultation and with no reciprocal rights to challenge UK Ministers’ decisions as regards not only the UK but England.

Oversight of these two pieces of post-Brexit reserve-power legislation, which I would argue are draconian, has been allocated to the Competition and Markets Authority, which has been asked to acquire skills and experience that it does not yet have. It is important for us to recognise that this is new territory for the CMA.

Thomas Pope of the Institute for Government says that this Bill

“does not yet guarantee a Brexit success story. Gaps in the legislation could deny Parliament”—

I would argue are denying Parliament—

“a proper chance to scrutinise how the new system will work—and point to future rows between the UK government and the devolved administrations.”

He further points out that the regulations have no input from the devolved Administrations. The Minister keeps saying that he is consulting, but the devolved Administrations say it is not consultation at all. Pope argues that

“a successful system needs buy-in from all parts of the UK.”

That is absolutely the case. He went on to say that the Institute for Government’s report

“recommended that any regulations should be made in consultation with the devolved administrations”—

I emphasise the following—

“with the process preferably led by experts in the CMA. The government’s approach risks future clashes”.

These arguments have been further developed by George Peretz QC, who points out, as previous debates in this Committee have highlighted, that granting authorities need to test their subsidies against the effects on competition and investment, without reference to the wider issues—in other words, social and environmental implications, and the other issues we are discussing. It is a very narrow definition, which could lead to broader subsidy intentions being overridden. It is true that the TCA refers to the socioeconomic situation of the disadvantaged area concerned. How could the EU not agree to that, given the CAP and its own state aid rules? But there is no definition of what constitutes a disadvantaged area or what disadvantage is. We have discussed the lack of any area map in previous Committee debates.

Mr Peretz goes on to say that

“nothing in the Bill provides for the devolved governments to have any say in the appointment of CMA panel members who will, as part of the Subsidy Advice Unit, exercise the CMA’s powers under the Bill”,

such as they are, and

“there is no equivalent to the provisions of Schedule 3 to IMA20 that require the Secretary of State to seek the consent of the devolved governments before making appointments to the Office for the Internal Market”.

Why is that the case for the internal market Act but not the Subsidy Control Bill? Surely, consistency, at least, requires that. This amendment seeks to remedy this and, I suggest, for very good reason. As I said, the CMA is moving into new and unfamiliar territory. It is surely essential that it understands the needs of the devolved areas and can balance them across the UK.

The powers that the Secretary of State has, which are not reciprocated for the devolved Administrations, put the CMA in a potentially invidious position. If the Secretary of State seeks to challenge, for example, the livestock support regime of any of the devolved Administrations, he or she can do so—on so far unstated but potentially restricting grounds. If a Minister introduces a subsidy, let us say, for London which the devolved Administrations feel disadvantages them, they have no corresponding right to challenge. I would anticipate the argument of grandfathering current regimes and repeat what I said in the debate on agriculture earlier in the week: that, over time, the regimes may change as circumstances change and, at that point, they will not be grandfathered and may be subject to challenge. That is important to note.

As George Peretz points out, the result looks distinctly unbalanced. For example, if the Welsh Government decide to grant a subsidy to which the Secretary of State objects, perhaps on the basis of its impact on England, the Secretary of State may be able to refer it to the CMA and will have standing to challenge it before the CAT. The Secretary of State may also be able to issue guidance that recommends against types of subsidy that the Welsh Government might have in mind, guidance to which the CMA and the Welsh Government have to have regard. On the other hand, if the Secretary of State grants subsidies to businesses in England or, using his or her powers under Section 50 of the internal market Act, to businesses in Wales to which the Welsh Government have objections, none of those possibilities are open to the Welsh Government. I rest that case, because it is crucial.

The Minister may argue that, as with the Monetary Policy Committee of the Bank of England, members are appointed to the CMA for their expertise rather than their geographical base, but he is ignoring that no such expertise yet exists for the new regime. It is surely imperative that, from the outset, the CMA is fully conversant with the needs of the devolved Administrations and that administering the regime evolves in a way which is sensitive to them. The Minister knows my opposition to separatism and nationalism, but I am a passionate home ruler and believe that the devolution settlements should be upheld and not eroded.

The Minister will assert that these are reserved powers—he has done it several times already during this Committee—and are based on the sovereignty of Westminster and not on a federal system which we do not have, or even a devolved consensus. To disregard the devolved Administrations, regardless of where the legal and constitutional power lies, is reckless. The Government are putting the union at risk in the way they are proceeding with this Bill by using reserved powers and failing to recognise the sensitivities. To say to the devolved Administrations, “You have more freedom than you had under the EU, but we’re having reserved powers that will qualify, test or challenge that freedom” is a two-edged sword that does not stack up. Right now, the mood in the devolved Administrations is that they do not trust the Government’s intentions, not yet knowing what they are.

[Lord Wigley (PC)]

My Lords, I am delighted to follow the noble Lord and agree with almost all the comments that he made—not entirely, but almost. In particular, I am glad to support Amendments 64 and 65, proposed earlier by the noble Lord, Lord McNicol, and have added my name to both of them.

My feeling—and this is really what the noble Lord was speaking about a moment ago—is that we are building a grit creation machine here. We are creating the grit that will cause difficulties as the wheels of this operation move forward. I do not think that is what the Government really want to do.

I well remember being on a committee chaired by the noble Lord sitting next to me a couple of years ago, when we were questioning the CMA’s role in these matters. We found that the CMA, quite legitimately, had very little experience of dealing with devolved dimensions. This was not a criticism of it; that was not its role. It still does not. We should therefore ensure that we build the necessary talent and experience into the relevant units or committees of the CMA that can at least advise on these matters, but it seems that we want to tie the hands of the CMA. It does not have that background; it has no obligation to work in close proximity to the devolved regimes under the Bill. It should certainly find a way of doing that if it wants the operation to go smoothly, otherwise problems will arise.

Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Lords Hansard - Part 1 & Report stage
Tuesday 22nd March 2022 Lords Chamber

Moved by

[Lord Bruce of Bennachie]

4: Schedule 1, page 53, line 6, at end insert—
“Agricultural subsidies
H_ Subsidies for agriculture should, in addition to being connected to the purposes under section 1 of the Agriculture Act 2020, take particular account of areas of agriculture disadvantage and levels of marginality of land.”Member’s explanatory statement
This amendment would require agriculture subsidies to take particular account of areas of agriculture disadvantage and levels of marginality of land.

[Lord Bruce of Bennachie (LD)]

My Lords, I shall speak to Amendment 4 in the name of my noble friend Lady Randerson and myself. As has already been reported, my noble friend is unfortunately self-isolating with Covid, but we are cosignatories of this amendment.

I hope to have a short but important debate about the role of agriculture in the context of this Bill. In Committee, we moved for the removal of agriculture from the Bill, and it remains our view that it is not appropriate for agriculture to feature in it. The European Union and World Trade Organization, as well as most countries and other organisations, keep agriculture as a completely separate administration, for all kinds of good reasons to do with issues such as food security and the environment. It is also important for the social and economic life of rural communities. In that context, given that the Government have made it clear that they are determined to keep agriculture in the Bill, we have tabled this amendment to try to ensure that the criteria by which agriculture is treated give some comfort—and, more than comfort, substance and reality—to how our marginal farming areas can prosper in future.

It is no secret that there is real concern among farming communities not only about the consequences of leaving the EU and its agricultural regime but about the trade agreements that the Government are signing with Australia and New Zealand, which open up our market to competitive imports—and without a subsidy regime for our marginal areas, we will simply not be able to compete. For example, 86% of the land area of Scotland is designated as less favoured; it is marginal and difficult to farm. It has mostly been dependent, therefore, on a range of different subsidy regimes, whether that is headage or area payments, market intervention or price support. All of those mechanisms have been designed to ensure that farming can be viable in those communities, and that the rural economy of those areas can be sustained.

Therefore, our amendment would put it into the Bill that particular account should be taken of areas of agricultural disadvantage and the levels of marginality of the land. I have cited the figures for Scotland; I do not have the exact figures for Wales, but it involves a significant proportion of the land area of Wales—and it is important for parts of England, such as the border country with Scotland, the Lake District, Cumbria and the ridge of the Pennines. Left to a completely open market and no subsidy support, agriculture on those hills would pretty well disappear. While it may be that the return of wilding is currently supported, it cannot maintain a viable community if there is no activity on that land that can be sustained.

In simple terms, we ask the Government to recognise that marginal land and land that is agriculturally disadvantaged should be explicitly stated as deserving of support. If the Government recognise that, they will give a degree of assurance to farmers across the areas identified, which they desperately need. It is already clear that subsidies are being reduced, and the marginality of those farms gives rise to real concern that they will not be viable in future—and the whole of our landscape will change.

This is a serious issue. It really matters to our hill farmers that they survive, and it matters to our rural culture that they survive, and this amendment would help to ensure that they do.

[Lord Wigley (PC)]

My Lords, I am delighted to support this amendment. I wish the noble Baroness, Lady Randerson well; it is a shame that she is missing this debate as her heart would very much be in it. She has quoted figures for Wales regarding the marginality of land.

In the context of European funding, which this regime is now replacing, the reality in Wales was that many of the schemes to help rural areas were under European grant systems rather than under specific agricultural systems. There is a coming together of the agricultural support and the support for the rural communities in which those agricultural businesses must exist, and both must work together if they are to underpin the future of the small farms, the hill farms, in Wales. There are many uncertainties at present, as the Minister answering this debate is aware. She has met the farming unions in Wales, and she knows their worries. One way of at least giving some hope for the future is to pass an amendment along these lines; if the Government cannot accept the exact words here, they can come back at Third Reading with an amendment that ensures that there is no inhibition, no prevention, in the new system of helping those rural communities in such vital matters.

--- Later in debate ---

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, before I turn to this amendment, I want to take this opportunity to correct the record. During the fourth Committee session of the Subsidy Control Bill on 9 February, I stated that data for England from the Rural Payments Agency showed

“that 99.5% of subsidies given to the agriculture industry in the UK would not fall within the remit of the subsidy”.—[Official Report, 9/2/22; col. GC 428.]

This figure was also provided in a letter dated 8 February responding to the points raised by several noble Lords during the third Committee session on 7 February. Late last week, the data was reviewed, uncovering a calculation error. In reality, Rural Payments Agency data for England shows 96.4% and not 99.5% of farm payment recipients are paid below the level of the minimal financial assistance threshold. I wish to clearly correct that for the record today.

But my conclusion still stands. The vast majority of agricultural subsidies will indeed fall below the MFA threshold and will not be subject to the substantive subsidy control rules, including the principles. It is only the largest subsidies, many of which will be to relatively large and well-off landowners, that will need to be assessed to ensure they comply with the common sense principles in this regime.

I turn to Amendment 4, tabled by the noble Baroness, Baroness Randerson—I wish her a speedy recovery—which was so ably introduced by the noble Lord, Lord Bruce of Bennachie. It seeks to add an additional principle to Schedule 1 that would require agricultural subsidies to be connected to the purposes listed under Section 1 of the Agriculture Act 2020. It would also require subsidies for agriculture to take particular account of areas of agricultural disadvantage and levels of marginality of land.

The subsidy control principles set out in Schedule 1 to the Bill are designed to apply equally to all strands of the UK economy. Their central purpose is to help protect domestic competition and investment, as well as trade and investment between the UK and other countries, from undue distortion which can arise from the giving of subsidies. This amendment, however, would radically depart from this. It would create a new principle which is not aimed at reducing distortion to competition, investment, or trade and is of no relevance to most types of subsidies.

The noble Lord, Lord Wigley, is quite correct: I am fully aware of the concerns of the farmers’ unions—particularly those in Wales, whose representatives I have met—and indeed those of the noble Lord, Lord Whitty. I reassure both noble Lords, however, that nothing in the new system will work against the granting of subsidies because, building on what the noble Lord, Lord Wigley, said, both agricultural and non-agricultural subsidies have much in common and need to work together to support rural economies.

The Bill establishes a clear, flexible framework for granting subsidies and will not inhibit public authorities from taking into account areas of agricultural disadvantage if they wish to do so. Agriculture is of course an area of devolved policy under the devolution settlements of Scotland, Wales and Northern Ireland. Spending decisions on agriculture are for the UK Government on behalf of England, and the three devolved Administrations in the areas in which they exercise their responsibilities. It is for them alone to take these spending decisions, so long as they are compliant with their domestic and international obligations, including the subsidy control regime. I cannot accept an amendment that would have the effect of putting further constraints on how devolved authorities exercise their powers.

My noble friend the Duke of Montrose rightly mentioned that the existing agricultural schemes and subsidies will be able to continue. The Bill provides broad and flexible grandfathering provisions for legacy schemes. Subsidies and schemes in existence prior to the Subsidy Control Bill coming into force may continue indefinitely if provided for under the original terms of the scheme. The Bill does not require subsidies made under legacy schemes to carry out an assessment of compliance against the subsidy control principles.

In particular, I cannot accept a reference to the Agriculture Act in this Bill. This section of the Agriculture Act is an excellent list of legitimate reasons to give financial assistance, many examples of which will be considered subsidies under the definition in the Bill. But I do not know whether my counterparts in the Scottish and Welsh Governments and the Northern Ireland Executive would welcome the application of this largely England-only legislation to their own agricultural policy, when it was never intended to serve that purpose.

The Bill has been designed to support public authorities in giving subsidies in line with their policy goals and the specific circumstances of their areas of responsibility, and the subsidy control principles are conducive to that. Principle A, for example, sets out that subsidies or schemes must be designed to remedy a market failure or address an equity concern. A subsidy designed to address agricultural disadvantage could certainly fall under one or both of these categories, depending on the type of disadvantage meant. Indeed, the Government’s amendment to add “local or regional disadvantage”, as an example of an equity rationale, underlines that.

Marginality of land may also need to be factored into the design of the subsidy or scheme where it is relevant. The subsidy control principles require a public authority to design their subsidies and schemes to change the economic behaviour of the beneficiaries, and to limit the subsidy to what is necessary to bring about the policy objective. It may very well be relevant to take into account the marginality of land to ensure that these principles are met. Fundamentally, however, it is not for the subsidy control regime to dictate whether agricultural subsidies—whether given by Defra, the devolved Governments or another authority—should account for less favourable pastoral land. In many cases it may well be appropriate for agricultural subsidies to factor in unfavourable conditions faced by farmers. However, this is for the public authorities themselves to determine and to incorporate into the terms and conditions of their own schemes.

The noble Lord, Lord McNicol, mentioned the common frameworks. The new domestic subsidy control arrangements and the UK common framework on agriculture are complementary. The inclusion of agriculture in the domestic subsidy regime will minimise the risk of distortions to UK competition and investment and ensure consistency across sectors. The common UK frameworks will enable policy proposals to be discussed and areas of disagreement resolved.

I hope I have managed to reassure noble Lords and, for the reasons I have set out, I ask the noble Lord, Lord Bruce of Bennachie, to withdraw the amendment on behalf of the noble Baroness.

[Lord Bruce of Bennachie (LD)]

My Lords, I thank the Minister for her response and all noble Lords who have taken part in this important and useful debate. There are just two or three things that need to be picked up. The noble Duke, the Duke of Montrose, started off with some sympathy for what we were saying but then turned against it, citing the continuation of the existing schemes. As the noble Lord, Lord Whitty, pointed out in his intervention, however, the world is changing—rapidly—and it may well be that, in the coming years, new schemes may be introduced and therefore that assurance would not have validity. Indeed, there is a general concern that marginal farms could be bought up by big institutions and squeezed out of existence.

I take the Minister’s point about the Agriculture Act, but we just wanted to make sure that we could add into the Bill the very good principles in the Act. I accept that it applies to England, but it would be very surprising if the Government of Scotland took issue with the principles in it. The point, nevertheless, is that farmers want an assurance that the support that they have had under various schemes since the Second World War is likely to continue in some form or other. There is a very real worry that that is not the direction of travel in which the Government are heading. That the matter is devolved does not preclude it also costing a significant amount of money, which previously came from the European Union’s common agricultural policy and now has to fall on the budget of the devolved Administrations.

I hope the Minister will understand, therefore, that the reason we are trying to put this in the Bill is to set out an explicit assurance that marginality will be a criterion that will be encouraged, just as a minor detail. Moreover, if that is in the Bill, it will make it more difficult for New Zealand or Australia, for example, to suggest that the subsidy is somehow incompatible with a trade agreement. Speaking with the experience of an MP for a farming constituency, I can assure the House that the suckler cow premium and the hill farmers have been the basis of building up the pre-eminence of Scotch beef and Aberdeen Angus beef. It is a system that has worked extremely well. Take the subsidies away from the hill farmers and prime Scotch beef will be much harder to deliver economically. The same applies to lamb in Wales and in Scotland. The hills of Scotland, Wales, the Borders and the Lake District without lambs and sheep would not be the attraction that they have been in the past.

I regret to say that I do not think that the Minister’s assurances go far enough, and I would like to test the opinion of the House.

Subsidy Control Bill

Lord Bruce of Bennachie Excerpts

Lords Hansard - Part 2 & Report stage
Tuesday 22nd March 2022 Lords Chamber

[Lord Bruce of Bennachie (LD)]

My Lords, I support the second part of the amendment tabled by the noble and learned Lord, Lord Thomas, on the point about equality. There is a poll out today which says that the majority of people in Scotland do not expect the union to survive for the next 10 years. I think and hope that they are wrong, but it is indicative of how serious this issue is and that it is really important that not only the law but the Government’s approach recognises the need to accommodate equality of treatment between the devolved Administrations and the UK Government. The noble and learned Lord’s amendment puts that quite clearly, and the Government should take it seriously.

[Baroness Bryan of Partick (Lab)]

My Lords, I too support Amendment 55. I travelled from Scotland this morning to support it, so I hope that despite the late hour, your Lordships will bear with me.

On the devolved Governments, this is yet another very modest amendment and provides the very minimum recognition that devolved Governments have responsibility for important areas of their economies and should have the right in relation to call-in and enforcement.

I thank the Minister for his letter of 15 March with the update on the Bill’s progress. I do not think that anyone was surprised to read that, despite what he terms the Government’s best efforts, they have not been able to secure the legislative consent Motions. However, I was very sorry to read that the Government have decided to proceed without them. The Minister wanted to emphasise the Government’s determination to continue working collaboratively and transparently with the devolved Administrations, but both the Scottish and Welsh Governments do not believe that there has been a strong attempt to work collaboratively. Instead, they feel that they have been told rather than consulted.

The explanation given in Committee by the noble Baroness, Lady Bloomfield, in her closing comments on the set of amendments dealing with devolution, made it clear that the Government believe that they have every right to override the concerns of devolved Governments on the grounds of the UK Parliament’s status as

“the supreme legislative body of the United Kingdom”,

believing that it is merely

“a reflection of constitutional reality.”

She also stated that she simply did not believe that

“it is appropriate to require the Secretary of State to seek consent even when the Secretary of State may ultimately proceed without that consent on a reserved matter.”—[Official Report, 31/1/22; cols. GC 115-117.]

This issue is at the heart of the problem that this amendment tries, in some small way, to deal with. As has been mentioned, the Secretary of State is acting for what the Minister describes as the “supreme legislative body” but at the same time is representing the interests of England.

Speakers in Committee described this as lacking justice and being unfair. The Minister did not answer on this issue in Committee, nor was it referred to in his letter. We hope that we will find out in due course whether the review of intergovernmental relations will make a real difference. While the UK Government show so little understanding of and lack of esteem for the devolved Governments, it is hard to imagine that there will be a significant change. I hope the Minister can give some reassurance that the Government will reconsider allowing the role for devolved Governments outlined in Amendment 55 as, if they do not recognise the legitimate concerns of the devolved Governments, I fear it will contribute to the break-up of Britain, as the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Bruce, warned.