Paying Polluters: UN Report

Debate between Lord Callanan and Lord Purvis of Tweed

Monday 22nd April 2024 Lords Chamber

[Lord Callanan (Con)]

All such agreements are different. Many rely on international arbitration panels that are appointed by the complainant company and the defendant company with an independent chairman. We are very careful in how we regulate these matters and which clauses we agree to. As I said earlier, we will work with other countries to look at their particular disputes as well.

[Lord Purvis of Tweed (LD)]

Is the Minister aware that one of the concerns around ISDS is that it is a secret process, as opposed to a multilateral judicial process that is more transparent? Given the fact that ISDS can be used against small emerging economies and deliberately facilitated by legal funds based in the UK, what discussions have the Government had with our legal community to ensure that ISDS is not just about protecting UK interests and that the legal community in the UK is not using it strategically against emerging economies that do not have the capacity and secret processes to defend themselves?

[Lord Callanan (Con)]

As I said, ISDS clauses work both ways. They also seek to protect the interests of UK companies investing in other overseas economies. Any state that wishes to regulate against the interest has to prove that it is being transparent and fair, not discriminating against foreign investors, et cetera. All these criteria are used to make judgments about whether cases will proceed.

Climate Change: Aims for COP 28

Debate between Lord Callanan and Lord Purvis of Tweed

Tuesday 28th November 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Lord never disappoints in terms of his advocacy for more taxes on—well, everyone, effectively. He might want to talk to his own Front Bench about some of these policies. The UK is very proud of our record on decarbonisation and we are very proud of our record on helping the poorest communities. We have committed £11.6 billion of expenditure on international climate finance by 2025-26, including £3 billion to protect, restore and sustainably manage nature, and tripling the UK fund for adaptation to £1.5 billion by 2025—so we can be proud of our record.

[Lord Purvis of Tweed (LD)]

With regard to adaptation, nature and resilience, the Minister outlined the overall level of commitment, but in the latest rounds of ODA allocation this has been cut by £24 million for the most vulnerable countries around the world. This is a reduction of 49% to developing nations. Does the Minister agree that COP gives a superb opportunity for any UK representatives to give a statement that those cuts will be restored for the most vulnerable nations on earth?

[Lord Callanan (Con)]

Well, I just said in my previous answer that we have not reduced our commitment to international climate finance and all the various areas that it covers. The Prime Minister and senior Ministers are attending COP 28 and the noble Lord might want to watch for any announcements that are made at that point.

Green Investment

Debate between Lord Callanan and Lord Purvis of Tweed

Tuesday 7th March 2023 Lords Chamber

[Lord Callanan (Con)]

The noble Baroness is dogged in her support for onshore wind and makes an important point. She will know that it is now eligible for CfDs and we are looking at how we can ensure more onshore wind investment with the support of local communities.

[Lord Purvis of Tweed (LD)]

My Lords, given the Minister’s positive reply to his noble friend Lord Hannan, do the Government retain an open mind with regard to Tata, or other organisations not based in the UK, seeking up to half a trillion pounds of taxpayers’ subsidy money?

[Lord Callanan (Con)]

The noble Lord would not expect me to comment on detailed negotiations with particular companies. We have long had a policy of open and free trade, but we have some relatively limited and targeted investments, including in the automotive sector, which have proved very successful. We are not going to follow the lead of the US and close our borders to foreign competition.

Newport Wafer Fab

Debate between Lord Callanan and Lord Purvis of Tweed

Tuesday 22nd November 2022 Lords Chamber

[Lord Callanan (Con)]

My noble friend is right that the Act came into operation in January. There were some retrospective elements in that. A trigger event occurred and therefore the Secretary of State could exercise his power. When future trigger events occur, we will look at every transaction based on national security implications, as is required under the Act.

[Lord Purvis of Tweed (LD)]

My Lords, the final order stated that the security risk was the reintroduction of semiconductor production at that site. Now that have a £39 billion trade deficit with China, what are the Government’s assessments of the key sectors of the UK economy which are vulnerable to Chinese technology on the same basis as this final order?

[Lord Callanan (Con)]

As was printed in it, the final order was based on the technology and know-how that could result from a potential reintroduction of compound semiconductor activities at the Newport site. The noble Lord has read the final order. As I said in a previous answer, this has no implication for any other policies. Every one of these transactions is looked at on national security grounds in the context of the legislation that was passed giving quasi-judicial power to the Secretary of State. It has no implication for any other sectors of the economy. Every transaction is looked at on an individual basis.

TRIPS Agreement: Vaccines

Debate between Lord Callanan and Lord Purvis of Tweed

Monday 11th July 2022 Lords Chamber

[Lord Callanan (Con)]

My Lords, I think the noble Lord is wrong: the problem is not with vaccine production, as there is now an excess number of vaccines being produced; the problem is with the healthcare systems of individual countries that are unable to store, distribute and inject those vaccines, which is why we are working with developing countries to help them with that. We know that this is the case because of the problems we had rolling out the vaccine in this country, which of course has a very advanced healthcare system. I repeat the point: the problem is not with vaccine production, as there are already excess vaccines being produced; the problem is with the healthcare systems in those countries which enable them to be distributed and put into peoples’ arms.

[Lord Purvis of Tweed (LD)]

So why was it that the Government cut by nearly 60% their support for countries to have the health systems to distribute the vaccines when they became available? Why was it that when countries needed the vaccines, at the early stage of this, the Government vehemently opposed this move at the WTO? Returning to the question of the noble Baroness, Lady Sugg, can the Minister be very clear as to whether vaccine support is within or over and above the 0.5% cap? In March, in relation to a donation to Bangladesh, the Government said:

“The cost of this donation has been funded through UK Overseas Development Assistance and will come over and above the ODA spending target of 0.5% of GNI if needed.”


That is not what the Minister just told the House, so which is it?

[Lord Callanan (Con)]

The position is as I repeated to my noble friend Lady Sugg: all vaccine dose donations will be reported as overseas development assistance and be included within the 0.5%. I think the noble Lord is being very unfair about the UK’s support. We are in fact a leader of international support in response to the pandemic; we have spent more than £2.1 billion since 2020 to address its impacts and that includes up to £829 million to support the global development, manufacture and delivery of vaccines, treatments and tests in lower-income countries.

Horizon Europe

Debate between Lord Callanan and Lord Purvis of Tweed

Thursday 7th July 2022 Lords Chamber

[Lord Callanan (Con)]

The Minister the noble Lord refers to, one of my ex-colleagues, was doing an excellent job in putting together precisely the programme that the noble Lord asks for. We remain hopeful that the EU will change its position, live up to its obligations and agree to co-operate in science. That is the best way forward for both parties. If it does not, we have allocated £6.8 billion over the spending review period to put in place an alternative programme.

[Lord Purvis of Tweed (LD)]

My Lords,

“chaos in No10, breakdown of Cabinet collective responsibility and collapse of public confidence in government represents a constitutional crisis. It is also now seriously undermining our authority in key negotiations on the world stage at a time of urgent international crises”

and “destroying our credibility”. Every single word of that was from the ex-Minister George Freeman this morning. How on earth can we secure a good deal for our nation abroad when at home the Conservative Party is inflicting, in his words, “a constitutional crisis” on us?

[Lord Callanan (Con)]

It is clearly a difficult political time at the moment but I have great faith in the institutions of this country. I am sure we will get through it and continue the excellent work that this Government have been doing on all those matters.

Newport Wafer Fab

Debate between Lord Callanan and Lord Purvis of Tweed

Thursday 7th April 2022 Lords Chamber

[Lord Callanan (Con)]

What would happen in Australia is a matter for the Australian Government. Tony Abbott is a member of the Board of Trade, and of course we value his insight and opinions, but this is a quasi-judicial decision that will be taken in the interests of the United Kingdom by the Business Secretary.

[Lord Purvis of Tweed (LD)]

The Minister will know that trade with China over the last few years has doubled, but that doubling has occurred because we now import £40 billion more than we export. This trade deficit is the biggest in this country’s history—with any country. We are now dependent in many sectors on imports from China, while at the same time, imports and exports with our closest trading partners have declined dramatically. Why does the Minister think that is the case?

[Lord Callanan (Con)]

I suspect there are a number of different reasons for that, particularly the importation of consumer goods. Globalisation and imports from China of consumer goods, consumables, et cetera, are a good thing in terms of global trade, but we have to be wary of dealing with companies from the People’s Republic of China. When it comes to matters of national security, we are incredibly vigilant. The NSI Act gave us new powers in this area, and we will not hesitate to act on anything that threatens the UK’s national security.

Subsidy Control Bill

Debate between Lord Callanan and Lord Purvis of Tweed

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

[Lord Callanan (Con)]

They could choose not to use the scheme if they wished, but it would be a UK-wide scheme. They would be consulted on the development and involved in the expert groups that put them together.

I will move on to Amendment 58, also tabled by the noble and learned Lord, Lord Thomas. This amendment sets out a new route for subsidies given in devolved primary legislation to be considered by the courts, by allowing the relevant law officer to refer the question of whether a Bill is compatible with the principles in Chapter 1 of Part 2 to the Supreme Court. It also removes the requirement for the promoter of the legislation to consider the subsidy control principles and other requirements, and the ability of the courts to consider whether the provisions of Parts 1 and 2 of Chapter 2 have been properly applied, thereby removing the ability of an interested party to challenge the subsidy in the general courts on that basis.

I am of course very grateful for the interest taken by the noble and learned Lord in this clause and for his engagement on it with me and my officials. I believe that both he and I share an objective to ensure that these provisions reflect our constitutional and legal institutions, as well as our obligations under international law. Schedule 3, as it stands in the Bill, accomplishes those objectives.

It is important that the subsidy control requirements apply to subsidies in devolved primary legislation, and that these subsidies are not immune from challenge by interested parties. This is both for consistency with other subsidies and to ensure compliance with our international obligations, particularly under the trade and co-operation agreement with the EU. However, it is also important that the unique constitutional status of the devolved legislatures is respected. That is why we have tailored the provisions in Schedule 3 specifically, and there is no mandatory referral to the subsidy advice unit for these subsidies.

I must therefore reject the amendment tabled by the noble and learned Lord for two reasons. First, it would not meet our international obligations under the TCA, which requires us to make available a route to challenge in a court or tribunal for interested parties, on grounds of compliance with the substantive subsidy control requirements. This amendment would, effectively, remove that route.

In response to the noble and learned Lord, Lord Hope, on the intention of paragraphs 6 and 7, it is those interested parties that may challenge, for example, another public authority or another business, as long as they meet the test set out in Clause 70. The promoter would normally be the government Minister, or the person making an amendment to the Bill, and this is defined in paragraph 2 of Schedule 3.

The second problem with the amendment is that it would have the effect of asking the Supreme Court to consider questions of fact. It is my understanding that the High Court or Court of Session is the appropriate forum to consider these questions in the first instance, followed by the relevant appeals court, and, as relevant, the Supreme Court as the ultimate arbiter for questions of law. Creating a route for the law officers to refer a question to the Supreme Court implies that any challenge to a subsidy in devolved primary legislation would be a constitutional question, as it is comparable to the route for referring devolution issues under the devolution settlements. While the Bill affects the exercise of responsibilities of all public authorities in the UK, I do not consider that this is a constitutional question.

[Lord Purvis of Tweed (LD)]

I have a point of clarification, because this aspect draws two areas together. Given that agriculture and fisheries are part of this legislation, and because agriculture and fisheries are unquestionably devolved competences, there will be subsidy schemes—let us say for Scotland, an agriculture or fisheries subsidies scheme. The Minister has indicated that there can be a UK-wide streamlined scheme which will cover agriculture and fisheries, so for the first time in the devolution period, there would theoretically be two parallel support schemes for agriculture and fisheries. But there is no capacity for the devolved Administration to challenge the UK-wide scheme, because the Government are indicating that this is a reserved area, even though support for agriculture and fisheries is fully devolved. Furthermore, there is not even a direct route to ask the Supreme Court to consider the competences on the division of this. How does the Minister see the benefit of two parallel schemes: one streamlined and unchallengeable, and another a devolved one on agriculture and fisheries?

[Lord Callanan (Con)]

I understand the point that the noble Lord is making, but the idea that the UK Government are going to want to set up a streamlined scheme covering agriculture and fisheries in Scotland, in parallel to an existing subsidy scheme that the Scottish Government are already pursuing, is extremely unlikely. A streamlined route can indeed be challenged in the Competition Appeal Tribunal, and we would not introduce such a scheme without consulting closely with the devolved Administrations in the first place. I understand the constitutional question that the noble Lord is positing, but I think this is very unlikely. As the noble Lord well knows, all existing schemes are automatically out of scope of this Bill anyway, so the existing subsidy regimes that the Scottish and Welsh Governments have can continue as they are.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

I do not think I said that there would be a streamlined scheme from the UK that would be uniquely for Scotland. I indicated that there would be a UK-wide streamlined scheme that would be for agriculture and fisheries within Scotland. As the Minister said, it would apply in England and in Northern Ireland as well. However, there would be, for the first time since devolution, two parallel subsidy schemes operating. While the Government can indicate that there would be consultation, there is no mechanism in this Bill for that dispute to be resolved, because the Secretary of State retains the decision-making power. That is why the support for these two schemes running in parallel is not equitable.

[Lord Callanan (Con)]

There is a difference in principle here. Subsidy control is a reserved matter. Under the memorandum of understanding, we have said that we will set up a mechanism that the Scottish Government can use to challenge schemes. Of course, any streamlined scheme would be approved by this Parliament anyway. In any practical political environment, there is no way that the UK Government will want to set up a parallel scheme to subsidise agriculture and fisheries, which are devolved competences, when the Scottish Government already have similar schemes in the same area.

As I have said, the devolved Administrations will of course continue, as they have always done, to make subsidies and subsidy schemes using the resources that they have. It is important to note that this Bill does not provide any resources for any schemes, and the court would need to look at the facts of the case on legality grounds in the light of the requirements of Schedule 3 to the Bill. This is, in my view, comparable to other circumstances in which devolved primary legislation is reviewed on legality grounds, such as the Human Rights Act or the United Kingdom Internal Market Act. Importantly, and in contrast to the review of the Competition Appeal Tribunal for other subsidies, the court could not consider common-law public law grounds alongside the requirements of the subsidy control grounds.

For all the reasons I have set out, I hope that the noble and Lord will not press his amendments.

Subsidy Control Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage
Wednesday 9th February 2022 Grand Committee

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I trust that it will be acceptable to your Lordships for me to pick up exactly where we were cut off in our prime on Monday, which noble Lords will be gratified to know was where I began speaking to Amendments 55A, 57A, 57B, 60A and 61.

Collectively, these amendments would allow the call-in powers currently provided to the Secretary of State to be exercised by the subsidy advice unit as well. Amendment 61 would create a new concept of a post-award investigation, which would be an extensive review by the SAU of the public authority’s decision-making process before giving a subsidy or making a scheme. I recognise the concerns of noble Lords that this system perhaps gives too great a responsibility to the Secretary of State. However, as I set out in response to the preceding group of amendments on Monday, it is appropriate that the Secretary of State is responsible for making these judgments in the interests of the entirety of the United Kingdom. In that function, they are answerable to this Parliament and to the interests of every citizen in the UK, and ultimately, as I keep stressing, for ensuring that the UK is compliant with its international commitments.

However, I would submit that there is a fundamental difference between a power to be exercised by the Secretary of State as a safety net, and a power to be exercised by a body such as the Competition and Markets Authority. There is very little possibility for the latter to exercise discretion and act only in situations that otherwise come to its attention. To carry out the functions envisaged by these amendments, the SAU would therefore have to scale up considerably. It would need a full market monitoring function to remain apprised of any potential new subsidies, including a public-facing arm to gather information and complaints, and it would need to develop clear criteria and decision-making processes for using these call-in powers.

Of course, ministerial decision-making must also be even-handed and evidence-based, but Ministers can and should have more discretion to make case-by- case judgments and will naturally be more aware of forthcoming distortive subsidies and where our international obligations are more likely to be impacted. The amendments tabled would require a very significant shift in the role of the SAU and would move it far closer to being a regulator of subsidies, which, to address the point made by the noble Lord, Lord McNicol, is not the Government’s intention, for the reasons that I have set out. This would of course create costs to the taxpayer, both in setting up this expanded subsidy advice unit and in the legal uncertainty and delays for legitimate subsidies that are placed under review or investigation.

I would also like to address the specific point that a government Minister will be unlikely to call in a subsidy that the Government themselves are giving. As I said in the previous sitting, Ministers will remain open-minded to referring a UK government subsidy to the SAU where it would be beneficial to have additional scrutiny of their own assessment. As with the regulations for automatic mandatory referral, there is no exemption for government subsidies. It is important to recognise that the SAU referral is a mechanism for scrutiny, transparency and advice which will support but not directly form part of the enforcement process, so there is no concern that the Government will be launching a legal challenge against themselves.

In summary, creating a function for the SAU to refer subsidies to itself or to initiate investigations would fundamentally change its role from one of oversight and monitoring to regulation and enforcement—a change which would be welcomed by the noble Lord, Lord Fox, but not by the Government, noble Lords will be shocked to know. I therefore hope that the noble Lord will withdraw the amendment.

[Lord Purvis of Tweed (LD)]

Before the Minister sits down, I have a question, which may pertain to debates on later groups of amendments. Do the Government consider a subsidy scheme to be a regulatory provision within the terms of the internal market Act?

[Lord Callanan (Con)]

The internal market Act is of course a separate piece of legislation from the Subsidy Control Bill. I will pass on the noble Lord’s question, think about it and respond later or in writing.

[Lord Purvis of Tweed (LD)]

I thank the Minister. I ask because my understanding is that a regulatory provision can be a subsidy; it has nothing to do with there being two separate pieces of legislation. As the Minister knows, the internal market Act takes into account any regulatory provision that will have an impact on the operation of the internal market. As the Minister has previously said, subsidy schemes will be considered as part of the operation of the internal market. So, if such a scheme is a regulatory provision under the terms of the internal market Act, any national authority would be empowered under that Act to ask the CMA for its view on whether that provision will distort the internal market. Is my understanding of that correct?

[Lord Callanan (Con)]

No, my understanding, on advice, is that it does not form a provision under the internal market Act.

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[Lord Purvis of Tweed (LD)]

I have been following the Minister’s line of argument, but I do not think that it comes to the same conclusion. Under UKIM, a provision that is a subsidy scheme is not permitted under the non-discrimination principle, taking into account

“the circumstances or manner in which the goods are sold … by whom, to whom, or the price or other terms on which they may be sold”.

It is prohibited under the market access principles on non-discrimination. The Minister is saying that it is permitted under this Bill, because a measure would absolutely affect the price of the goods under the principles in the schedule. I am just wondering why a subsidy is not considered as a provision under the internal market Act, because they are prohibited under the non-discrimination principles.

[Lord Callanan (Con)]

The United Kingdom Internal Market Act applies only to certain regulatory provisions, and a subsidy scheme would not meet the necessary conditions required. This is a complicated legal area, and I suspect that the best way in which to advise the noble Lord would be for me to write to him with appropriate details.

[Lord Purvis of Tweed (LD)]

With respect, we are in Committee on a Bill and we are making law, and simply to say that this is a complex legal area is not correct. We are making law—and it is not convincing to say that these schemes would not be under the Act when there is nothing under the Act that says that they are not. You cannot just assert when we are making law, because we also want to make sure that these provisions are protected from challenge. As to anybody who thinks that this is not going to be open to challenge, because it provides assistance for the certain price of certain goods in one area, it will be challenged under the internal market Act, because it is discriminatory. Unless there is clear legislative protection that this is excluded from these measures, I am afraid that it comes back to the fact that this area is absolutely ripe for legal confusion.

[Lord Callanan (Con)]

The reason why I made that point clear to the noble Lord—and I understand the point that he is making—is to explain to him the legal advice that I have received from the lawyers responsible for this Bill. Clearly, the noble Lord has a different interpretation, but I have set it out in great detail, and the advice that I have received is that UKIM applies only to certain regulatory provision and a subsidy control scheme would not meet those necessary conditions. Clearly, there are differing views, and there are lots of esteemed lawyers in this room; that is the advice that I have received, and I am happy to go away and speak to the lawyers to get the noble Lord more detailed advice, but I can go no further than to give him the advice that we have received on these provisions.

I turn to Amendment 72. I stress to noble Lords, particularly to address the concerns of the noble Lord, Lord Wigley, that the CMA was chosen as the home of the subsidy advice unit precisely because of both the former’s experience protecting UK competition and its credibility with domestic and international stakeholders. The CMA is independent in its function and will carry out its duties as such, with equal regard and even-handedness towards all four Governments of the United Kingdom. Earlier, my noble friend Lady Bloomfield went into more detail on the different territorial offices of the CMA that already exist and on the way it carries out its functions across all the parts of our nation.

While a similarly drafted clause is included in Section 31(4) of the UKIM Act, I question how appropriate it would be to replicate that provision here. The provision in Section 31(4) reflects the unique relationship between the UK Government and the devolved Governments in ensuring the proper functioning of the internal market and their responsibilities for delivering regulatory provisions for each part of the United Kingdom.

However, a great number of public authorities will be responsible for designing subsidies and schemes that are consistent with the subsidy control principles. Of course, the devolved Administrations have an important constitutional status and a unique role in working with the UK Government on ongoing policy development for subsidy control. But subsidy control is a reserved policy and is not an ongoing legislative architecture for co-ordination between the four parts of the UK. I appreciate the devolved Administrations do not agree with that fact, but it was legislated for under the UKIM Act. I therefore request that the noble Lord withdraws his amendment.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister for his reply, but I am also grateful to my noble friend Lord Fox, the noble Lord, Lord Wigley, and the noble Baroness, Lady Blake, for their contributions on this. I am quite happy that we have explored this further. The Minister took the point—I do not think this is legal pedantry—that when it comes to the reality of when subsidies start to be issued, for those seeking to challenge or those aggrieved, this must be watertight. Therefore, I am grateful to the Minister for offering further discussions on this. I understand that his office has been in touch in seeking to organise a meeting, and I am grateful for that. He fully knows now that he will need to be prepared and bring his lawyer along to that meeting to assuage some of the concerns.

I am not entirely convinced that the requirement to act even-handedly goes, because there will be more bodies to act even-handedly towards. I do not think acting even-handedly is a zero-sum thing, given that an even-handed nature is in the internal market Act but not in how it operates as a whole, because that Act and the subsidy control regime are both reserved issues. It jars that, when it comes to the CMA carrying out its functions, it has to act even-handedly in considering the operation of the internal market, but that requirement is absent when it is considering the distortion of competition.

In the meantime, and in looking forward to the meeting with the Minister to reflect on this further, I beg leave to withdraw Amendment 66.

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[Lord Callanan (Con)]

My Lords, before I speak to the detail of these amendments, this is perhaps a good opportunity to update the Committee on our progress in seeking legislative consent for the Bill, as we promised in our first Committee session on 31 January.

These amendments, and a number of others we have debated, touch on the UK-wide and devolved aspects of the Bill. As we have discussed on numerous occasions, subsidy control is reserved, but there are clauses in the Bill that alter the executive competence of the devolved Administrations. From the very beginning, the UK Government, at both ministerial and official level, have worked closely and extensively with the devolved Administrations in designing the new subsidy control regime. We have worked to secure their support for LCMs for the Bill. I pay tribute to my officials and those in the devolved Administrations for their ongoing efforts in this space.

Our strong preference remains to secure legislative consent, and we will keep all avenues open to achieve this and to remedy the significant concerns of the devolved Administrations. Of course, we also want to ensure the operability of the new regime. Negotiations are still in progress, but I assure noble Lords that I will keep the House updated at the earliest opportunity, without prejudicing the content of those negotiations. I also assure the Committee that, should any amendments be necessary to reflect the outcome of those negotiations, we will table them as soon as possible prior to Report to enable your Lordships’ House to consider and scrutinise them with sufficient time.

[Lord Purvis of Tweed (LD)]

I am grateful for that “no progress” update from the Minister. With regard to the current situation in Northern Ireland, including the suspension of the Assembly and the resignation of the FM/DFM, can the Minister state whether any of this legislation will be implemented in Northern Ireland during this suspension?

[Lord Callanan (Con)]

The legislation is UK-wide so it will apply in Northern Ireland but, clearly, the absence of the Assembly will make it extremely challenging to get the Executive’s consent. However, we certainly will continue to engage with officials.

I want to give some context on all the engagement we have done. Since July 2020, BEIS Ministers and officials have had 75 meetings in total with their counterparts in the devolved Administrations. These are not just talking shops, as has been implied, but sessions of meaningful engagement. For example, our engagement has included sharing draft objectives and building-blocks for the new subsidy control regime; sharing both the Government’s consultation and the consultation response ahead of publication; and sharing our illustrative guidance and regulations in advance of publication, as well as continued engagement as this Bill passes through Parliament. This engagement will need to continue as the regime is implemented. In fact, at this very moment, officials are working with their counterparts on a memorandum of understanding that formally sets out a mutually agreed process for engagement on the crucial next phase of policy development and implementation.

Moving back to the detail of the amendments before us, I will start with Amendment 69. Again, I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, for moving the amendment, which is supported by a number of noble Lords. It would give the devolved Administrations the ability to challenge any subsidy in the Competition Appeal Tribunal, whether their interests have been affected or not. As was confirmed at the Dispatch Box in the other place, the devolved Administrations—or, indeed, any other public authority —will generally be able to apply to the CAT to review a subsidy decision where the interests of people in the areas in which they exercise their responsibilities may be affected by that subsidy. This would be a good opportunity to correct what I said on Monday: this is not exactly the same position as the Secretary of State.

The fact that the devolved Administrations are not named in this clause is by no means intended to exclude them or any other party whose interests may genuinely be affected by the granting of a subsidy. Clearly there will be limits, and the interests of the devolved Administration or local authority in a particular subsidy cannot be totally tenuous. However, the broad definition in the Bill gives the CAT maximum discretion so that, whatever the facts of the case might be, it can deem the right people as interested parties.

The reason why the Secretary of State has universal standing to challenge a subsidy, in contrast to the devolved Administrations and local authorities, is that he or she—whoever occupies that office—is responsible for the overall operation of the subsidy control regime and, as I keep saying, for the UK’s compliance with our international agreements in this reserved policy area. Neither of those reasons apply to the devolved Administrations or local authorities. It is wrong to suggest, as some noble Lords have suggested previously, that simply because the devolved Administrations exist, the Secretary of State’s horizons and duty of care are limited only to England.

It is also worth mentioning that the Government expect that the Secretary of State would use this ability only in exceptional circumstances where, in his or her view, a subsidy threatens the whole integrity of the subsidy control framework or our compliance with international agreements. It would be inappropriate to legislate that the devolved Administrations are an interested party in all cases, implying that the Secretary of State does not carry out his or her role as the responsible Minister for the subsidy control regime for everyone in all parts of the United Kingdom.

I turn now to Amendment 79, tabled by the noble Lords, Lord German and Lord Wigley. I am glad that the noble Lords referred to the recommendations of the Review of Intergovernmental Relations through the amendment. The UK Government take these co-operation mechanisms with the devolved Administrations, as set out under this review, very seriously, and we are always open to ways of strengthening these relationships. We are open to using the intergovernmental relations structures to resolve any disputes, in accordance with the IGR principles. That said, this amendment would in effect bypass a number of earlier stages in the dispute resolution process, which has already been agreed between the UK Government and all devolved Administrations. Escalation to the Council is the last resort. As I mentioned on Monday, we are also working closely with the DAs to establish a formal process for raising case-specific concerns with the department once the regime is up and running.

Let me also stress that there is no need to incorporate this provision into the Bill for disputes to be able to come under the IGR structures. Moreover, I do not anticipate that there will be any great need to refer matters of interpretation to those structures. It is important to bear in mind that there is of course a distinction between case-specific dispute, which is a matter of legality, and a public authority’s compliance with its legal obligations, for which the proper place to resolve such disputes is ultimately the CAT and a dispute or discussion between Governments on their roles and responsibilities.

There is little scope for that type of confusion over the roles and responsibilities of the UK Government on one hand and the devolved Administrations on the other in this regime. The Secretary of State for Business has responsibility for the overall operation of the regime and the UK’s compliance with its international agreements. The UK Government may also create streamlined routes to encourage subsidies that further their strategic priorities. In all other respects, UK government departments and the Secretary of State himself are in the same position as the devolved Administrations. They are public authorities within the scope of the Bill. UK government departments are treated in exactly the same way as any other public authority. All public authorities are similarly subject to the Bill and empowered by it.

As I said earlier, my officials continue to have a regular set of meetings with their DA counterparts on all subsidy control matters; these will continue, along with regular ministerial engagement. Where there is a need for dispute resolution, that dispute will come into the ambit of the agreed intergovernmental relations process.

I recognise the strength of feeling in relation to Amendment 69 in the name of the noble and learned, Lord Thomas, but I simply do not agree that either that amendment or the other would be a necessary or useful addition to the Bill. Therefore, with respect, I urge the noble and learned Lord to withdraw his amendment.

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[Lord Purvis of Tweed (LD)]

Such as opening something?

[Lord Callanan (Con)]

It’s interesting stuff, this. I suspect that the noble Lord, Lord Berkeley, is not going to get an invitation to an investiture.

Anyway, the ownership of the Duchy of Cornwall is a private matter. Where the Duchy operates on a commercial basis, depending on the specific facts at hand, it may meet the definition of an enterprise in Clause 7; lawyers have had fun drafting this. None the less, and importantly, the Duke’s relationship with the Duchy as its owner is not the exercise of functions of a public nature. It therefore falls outside the scope of the Bill.

To close, I hope that, with the explanations I have been able to provide, noble Lords will feel able not to move their amendments and to accept my Amendments 73 and 76. As we have now reached the end of the final grouping of amendments, marking the end of Committee, I express my sincere thanks to all noble Lords who have taken an interest for their thoughtful, insightful and probing discussions on this important Bill. Lastly, I thank the team of officials who have supported us in so doing. I can give an assurance that my department and I will of course reflect closely on all the points made by noble Lords, and I look forward to further engagement in advance of Report.

Subsidy Control Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage
Monday 7th February 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, further to that point, I wish to ask a couple of questions. First, on a factual issue—I have been struggling to find this—what has the typical award been for relatively small schemes that will operate under the Bill? I am familiar with schemes in my former constituency, either under LEADER+ or a number of other schemes, where there was not a single award over £500,000 but there was transparency as to who received it, because that is basically along the principles on which local authorities operate. So my question, really, is: what piece of legislation will trump the duty that the noble Baroness, Lady Blake, referred to? If a local authority has a duty to publish, then ordinarily if it receives a grant through, for example, the levelling-up fund—on which the Minister wrote to me; I thank him for his letter and look forward to the answer to the question on a separate occasion, as I have replied to his office to highlight an omission from it—what will be the primary duty on the local authority as far as making that information public is concerned? Will it be under the duty on the local authority to publish subsidies greater than £500,000, or, if it is defined as a subsidy scheme, will it not be under such a duty?

However, my specific question is: how will this Bill interact with the Freedom of Information Act? The only way that any enterprise or anybody would be able to find out what the award is if it is under £500,000 would be to submit a freedom of information request. I have not seen anything in this legislation which excludes elements of the Freedom of Information Act, and I therefore assume that all elements of the Freedom of Information Act will apply. If that is the case, it is rather pointless having a £500,000 limit for publication if you can get all this information by issuing an FoI request. If the Minister’s response is, as I expect, that the whole thrust is to have less burden on our public bodies for the administration of this scheme, I wonder which is less burdensome: simply publishing what is already used under the e-claims scheme—I understand that most applicants under these schemes will be through the e-claims schemes, and therefore it is a press of a button to publish the information for an award—or responding to an FoI request. If I were a member of a public body, I know which one would be far less burdensome for me. I wonder whether the Minister agrees.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

I am grateful to the noble Lord, Lord McNicol, for his amendment, which was moved so ably by the noble Baroness, Lady Blake. I am delighted that the noble Lord, Lord Fox, received my letter before the Committee this time. I will have to learn the lesson that it prompts more questions from him during the debate. It is obviously better if the noble Lord receives the letter after the debate has taken place—I am joking, of course. We always endeavour to get him the information he has looked for as early as possible.

The amendments, taken together, seek to introduce a common threshold for transparency for subsides that are not challengeable on subsidy control grounds because they are not subject to the main requirements in the Bill. They include subsidies given under schemes, minimal financial assistance and subsidies for services of public economic interest.

I say at the start that I am well aware of the debates that occurred in the other place on this important issue, which were alluded to by a number of speakers, and I recognise the strength of feeling behind the calls for greater transparency. I am sure noble Lords are aware that my colleague Minister Paul Scully committed the Government to review the evidence collected as part of the consultation alongside that provided by witnesses to the Committee about the transparency provisions. Officials continue to review the available evidence base and I commit to updating the noble Lord, Lord Fox, and all other Members of the Committee before Report about where we have got to in that review, and I will update Members on the cost impact of the different options as soon as possible.

Transparency of subsidy awards is an important part of this control regime and is a key tool to support the enforcement provisions. It is essential that interested parties are able to see subsidies to determine whether they may be affected and whether they wish to challenge the subsidy award or subsidy scheme to which the noble Lord, Lord Purvis, referred. Of course, the database is a vital tool in providing this transparency. The aim of the database should always be to enable interested parties to see those subsidies that they may wish to challenge. However, it has not been, and should not be, designed to be a general database of public authority spending. Other tools for general public authority financial transparency exist elsewhere, and I think the noble Lord, Lord Purvis, would accept that uploading additional data represents a cost to public authorities, and of course that is ultimately borne by taxpayers.

It is important that the database requirements find the right balance to ensure that appropriate, accurate and timely information is available to the public on the database about subsidies that they may wish to challenge. To respond directly to the concerns of the noble Lord, Lord Fox, I am happy to clarify and confirm that the subsidies on the database are primarily those that are subject to challenge under this regime. I apologise if there was any ambiguity in my letter.

I turn to the amendments put forward by the noble Lord, Lord McNicol—

--- Later in debate ---

[Lord Callanan (Con)]

That returns to the point that I made earlier. The commitment given by Minister Scully in the other place is that we will review the costs; I committed to return to the Committee with the relevant cost provisions, which I will do before Report.

Amendment 38 would remove, for the purposes of transparency, the distinction between a subsidy awarded under a scheme and a stand-alone subsidy. The amendment seeks to have one, uniform threshold for all subsidies. Taken together with Amendment 39, this new uniform threshold would be just £500.

Subsidies given under a published scheme are currently required to be uploaded to the database if they are more than £500,000. This threshold is set at that level because the database will already include information about the scheme under which these subsidies are given. In our view, 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 therefore seek to challenge the scheme.

The Bill provides for various reasons why a subsidy or scheme cannot be challenged on subsidy control grounds. For example, a subsidy award given under a published scheme cannot be judicially reviewed in the Competition Appeal Tribunal on subsidy control grounds. This is because it is the scheme that is assessed against the principles and is challengeable, rather than the individual award made under that scheme. As such, this Bill does not provide for the possibility to challenge subsidies given under schemes in the Competition Appeal Tribunal. The scheme itself should be challenged, not the individual awards.

Additional information about small subsidies would therefore have very limited value for those concerned about potentially distortive subsidies and would detract from the core purposes of the database. These requirements would lead to additional red tape for public authorities—well beyond the requirements they had to fulfil under the EU state aid regime—and in a great many cases, as I said earlier, the information would simply duplicate what those authorities already publish in appropriate formats elsewhere.

[Lord Purvis of Tweed (LD)]

I have been reviewing the code on the publications from local government; local authorities must publish on a quarterly basis any expenditure that exceeds £500, including grant payments, grants, grant-in-aid and credit notes over £500. Public bodies will publish this quarterly already, unless this Bill means they are excluded from doing so if the payment is through a subsidy scheme. If this completely takes away the duty to publish that the public body already has, it makes no sense whatever. I do not understand where the additional burden comes in, given that the local authority publication code is already there for quarterly publication.

[Lord Callanan (Con)]

Nothing in this Bill affects the existing duties of local authorities and others to publish any financial information that they already do. This Bill concerns the information that needs to be published on the subsidy database. The same point applies to the earlier question from the noble Lord, Lord Purvis, about freedom of information. I hesitate, given the trouble I got into last time, to return to the FoI principles, but nothing in this Bill affects the original FoI legislation or the principles contained in it.

I turn to Amendment 47, which seeks to introduce a transparency threshold of £500, above which subsidies granted as minimal financial assistance would need to be uploaded to the database. As noble Lords will be aware, the MFA exemption allows public authorities to award low-value subsidies of up to £315,000 per recipient over three years, with no requirement to consider the subsidy control principles or other requirements, and no need to upload on to the subsidy control database. I think that clarifies what the noble Lord, Lord McNicol, asked about—what I said earlier on this was probably incorrect, so my apologies for that. The Government have taken this approach to ensure that public authorities can deliver smaller subsidies quickly and easily without undue administrative burden, since they are very unlikely to have any appreciable distortive effects.

This amendment, by seeking to require the addition of low-cost subsidies to the subsidy control database, would certainly introduce an additional burden for public authorities. Introducing a low-value transparency threshold for such low-value subsidies would require additional staff time and costs as the volume of entries would be expected to increase significantly—for what gain, bearing in mind that these subsidies are those that, by their very nature, are unlikely to have any appreciable distortive effects?

On this basis, I do not believe that the amendment would introduce the appropriate balance between sufficient transparency to allow for meaningful scrutiny and an efficient allocation of resource to identify those subsidies that are most likely to harm our economy, either locally or nationally.

Turning to Amendments 48 and 49, as we have discussed before, the Committee will be aware that services of public economic interest—SPEI—are vital services that, without public subsidy, would not be supplied in the appropriate way by the market or, in some cases, would not be supplied at all. This clause exempts certain SPEI subsidies from the transparency requirement in Clause 33 to upload the subsidy on to the database. There are two categories of exemption: first, for subsidies of less than £14.5 million; and, secondly, subsidies for one of the activities listed in subsection (1)(b). In response to the question posed by the noble Baroness, Lady Blake, the reason for the difference is that, in our view, subsidies in the second group are even less likely to distort competition.

These amendments would mean that all SPEI subsidies of £500 or more would need to be uploaded on to the database. I submit that this would represent a significant burden on public authorities, yet it is generally agreed in the Committee, I think, that these subsidies, granted for public services, are unlikely to be unduly distortive.

The same arguments put forward for not setting a transparency threshold of £500 for MFA apply equally here, in that doing so would not represent a balanced or proportionate outcome for our domestic regime. Although noble Lords are right to challenge the Government on the issue of transparency, I would like to set out why reducing the exemption from transparency requirements for SPEI subsidies to £500 would not result in a stronger regime.

First, by its nature, granting subsidies for public services is unlikely to be unduly distortive. This is because the very reason they are needed is that other providers are unable or unwilling to provide the necessary service at a reasonable cost. This goes back to the example we discussed last time, when the noble Baroness, Lady Blake, referred to bus services in rural areas: granting a public subsidy there is unlikely to be distortive because the reason why the public authorities have to provide that service is because nobody else in the market does so. The lower risk of distortion therefore justifies a higher transparency threshold.

Secondly, Clause 29 sets out that the award of a SPEI subsidy must be given in a transparent manner, which means that the subsidy must be being given through a written contract or other written legally enforceable arrangement. As the noble Lord, Lord Purvis, noted, public authorities normally publish these contracts, and it is good practice to do so.

Thirdly, a public authority providing SPEI subsidies must be satisfied that the subsidies are limited to what is strictly necessary in providing that service, with regard to costs and reasonable profit, and must keep that under review. This means that the SPEI enterprise should not gain an unfair advantage over other enterprises; consequently, again, there is unlikely to be undue distortion to competition.

The Government do not share the view that requiring public authorities to upload SPEI subsidies with a value as low as £500 would contribute to a more robust regime. SPEI subsidies are, and will continue to be, subject to appropriate safeguards where public authorities actively ensure that this is the case so that contracts deliver value for money for the citizens in that particular area.

Although I understand the objectives of the noble Lord, for the reasons I have set out, I cannot accept this amendment. I hope, therefore, that he will feel able to withdraw it.

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[Lord Callanan (Con)]

I thank the noble Lord, Lord McNicol, and my noble friend Lord Lamont for these amendments, which seek to reduce the time available to public authorities to upload their subsidies to the database. I note the comments made by the noble Lord, Lord McNicol, on the limitation period, which I look forward to discussing in our next Committee session.

As is the case with the thresholds on transparency, our objective here in setting the upload deadlines has been guided by the fine balance between minimising bureaucratic burdens while ensuring that accurate information is available promptly for interested parties to enable them to consider whether to launch a challenge. We agree that subsidies should be available to be seen on the database as soon as is practical. However, there are good reasons why public authorities require longer than the one and three months put forward in these amendments.

First, let me note that public authorities have an incentive to upload subsidies as quickly as possible. The sooner a subsidy is uploaded to the database, the sooner the clock for the limitation period starts to run, and therefore the sooner the public authority and the beneficiary will gain certainty that the subsidy will not be challenged. Public authorities also have a strong incentive to upload subsidies accurately first time round to avoid the possibility of having to amend entries later on.

Upload deadlines as short as one and three months may result in more public authorities needing to amend their entries at a later date. Although this is of course possible on the database, it creates an unnecessary burden for those authorities. This means that the initial period where the subsidy has been uploaded is more likely to contain inaccuracies, which will not help an interested party to know whether they wish to challenge. Surely we agree that, although we all want prompt uploads to the database, upload speed should not come at the expense of accuracy.

[Lord Purvis of Tweed (LD)]

Can the Minister confirm that, as we discussed in the debate on the previous group, if this scheme is run by a local authority in England, its duty to publish in three months still stands under the code? If so, this will have to be published within three months anyway, but that is just in a local authority area, not on the national database. So there is this rather ridiculous period of between three months and six months in which it would be uploaded on to the subsidy database. If the Minister’s argument is that doing this in three months will mean having a lot of mistakes in it, he needs to go back to the local authority code, not make assertions here in Committee.

[Lord Callanan (Con)]

As I said, none of the provisions in this Bill change any of the requirements on local authorities, but the transparency requirements are different in each case depending on what the award is and whether it is under a scheme. Sometimes, if it is a generally approved scheme, there are literally thousands of small grants, for instance. Sometimes the recipients are not identified under local authority transparency but may need to be identified under a particular scheme, depending on the size of the award. The noble Lord is correct that none of the requirements in the Bill change the requirements on local authorities; we are talking about different information for different purposes.

I understand the point made by noble Lords that, in most cases, one month should be sufficient to avoid excessive mistakes that could cause confusion for interested parties. None the less, I note that public authorities face a great many administrative obligations. Therefore, there would be an increased risk of error, or an increased cost in avoiding error, resulting from a deadline of one month—particularly for authorities that give a large number of subsidies in possibly quite complex formats.

Furthermore, the inaccuracies may not result from avoidable human error. To take another example, many subsidy schemes, particularly but not only those in the form of tax measures, are created with estimates for the value of the budget or the individual awards, but the final amounts may vary from that estimate. Sometimes the subsidy award is variable—it could be a performance-related grant—and if the beneficiary exceeds its estimates for the subsidy objective, it may be entitled to a proportionately larger subsidy. In other cases, such as subsidies in the form of tax measures, which I am sure my noble friend would never have been responsible for when he was Chancellor, the variation may be a result of higher or lower than expected expenditure—for example, on research and development—which will in turn affect how much tax subsidy that beneficiary would be entitled to.

--- Later in debate ---

[Lord Callanan (Con)]

I understand the point that my noble friend is making. As I mentioned in my reply to the noble Lord, Lord McNicol, the limitation period is the subject of separate amendments, so we will have a further opportunity to discuss that in the next Committee session. Again, it is a balance between wanting to provide certainty so that the schemes can proceed and the beneficiary can proceed with some certainty, but I understand the point that my noble friend makes. The whole regime is designed to be as flexible as possible, and probably more permissive in many respects than the EU state aid regime. As I say, we will have a longer period to discuss the limitation period and the challenge on a future occasion.

[Lord Purvis of Tweed (LD)]

With regard to companies or interested parties, Clause 76 allows an interested party to make a request to a public authority for information about a subsidy or a subsidy scheme that the authority has given or made, and there has to be a response within 28 days. Presumably, that covers all the subsidies that are then issued under that subsidy scheme by the public authority, in advance of them being uploaded on to the database. Is that correct?

[Lord Callanan (Con)]

If the information is available, perhaps in other formats, my understanding is that they can start the challenge immediately, but the formal period for challenge starts after the subsidy is uploaded to the database.

[Lord Purvis of Tweed (LD)]

I am grateful, but that was not my question. Regardless of the period of challenge after the subsidy has been updated on the database, Clause 76 allows an interested party to make a request to a public authority for any information about a subsidy or a subsidy scheme that the authority has given or made. That does not state that it is uploaded on the database. It would basically require the interested party to make a request of the public authority for any subsidy issued under that scheme by that public body at any stage. They would have to do it blind, because it would not be on the database, but if they believe that there is a subsidy scheme that they have an interest in, within that certain local market, and they ask for information about that subsidy, that information would have to be provided by the public authority before it has been uploaded to the database. Any greater efficiency or lack of bureaucracy has completely gone if they are able to do that under Clause 76 anyway.

--- Later in debate ---

[Lord Callanan (Con)]

I understand the point the noble Lord is making but, to return to the words I used, there must be a genuine, direct link to Northern Ireland—it cannot be hypothetical or presumed. We have issued detailed guidance on the subject, but we accept that the current situation is not good enough, which is why we are attempting to renegotiate the terms of the protocol, particularly Article 10.

[Lord Purvis of Tweed (LD)]

I have the text of the Command Paper in front of me. I heard the Minister say that the Government are negotiating for a single scheme to apply for all businesses across the UK. That is not what the Command Paper argues for in paragraphs 63 to 65. I have raised this before in the Chamber and in Committee. The Government are asking for a dual system, where there will be

“enhanced referral powers or consultation procedures for subsidies within scope, to enable EU concerns to be properly and swiftly addressed.”

The Government are not seeking a single system; they are seeking two systems with a streamlined approach for applicants to go to the EU system. Can the Minister clarify that?

[Lord Callanan (Con)]

We are seeking to have a single regime—the regime we are discussing now—that applies across the whole of the United Kingdom. As I said, this is the subject of negotiation. Intense discussions are going on. I and other Ministers will update the House as soon as we conclude those agreements.

--- Later in debate ---

[Lord Callanan (Con)]

The noble Baroness is approaching this issue in completely the wrong way. First, this is a UK-wide regime, so the Secretary of State is acting in his capacity as UK-wide Minister responsible for it. We have said that we will take it extremely seriously if a devolved Administration request a referral to the subsidy advice unit. We are currently in discussions with the devolved Administrations on how such a system could be codified. However, the key point is that this is just a referral to the subsidy advice unit. It is not rendering a subsidy illegal; it is not challenging it.

Directly relating to the point made earlier by the noble Lord, Lord Bruce, a devolved Administration have exactly the same rights as the Secretary of State or a local authority or anybody else to challenge the decision. The right for the Secretary of State to call in a proposal is just to refer it for advice from the subsidy advice unit; it is not to challenge the decision. The challenging of a decision takes place in the Competition Appeal Tribunal.

[Lord Purvis of Tweed (LD)]

The case that the Minister makes is a case against what he took through in the internal market Act. Under that Act, the Secretary of State is responsible for the economic impact on the whole of the United Kingdom, but a national authority can refer a regulation made by the Secretary of State to the CMA—in fact, one or more of them can refer. Why can they do that in the internal market Act but not in this Bill?

[Lord Callanan (Con)]

The internal market Act, which we debated at great length, reserved the application of a subsidy control regime to the UK Government. This is now the subsidy control regime that the United Kingdom Internal Market Act set up.

[Lord Purvis of Tweed (LD)]

I do not think that is relevant, because no one had any doubt about the fact that the internal market is a reserved power. They are both reserved powers; in the internal market Act, the Secretary of State acts on a reserved basis for the whole of the internal market, but it allows a national authority to refer a decision of the Secretary of State to the CMA if it has doubts about that measure. Subsidy control is a reserved matter—there is no doubt about that—but the subsidy Bill prevents a national authority referring a decision by the Secretary of State to the CMA. Why?

[Lord Callanan (Con)]

I think the noble Lord is getting confused between the subsidy advice unit and the Competition Appeal Tribunal. Exactly the same right exists for devolved Administrations, the Secretary of State or a local authority to challenge a decision in the Competition Appeal Tribunal. This call-in power is related strictly to the ability to request an opinion from the subsidy advice unit. That is where I think the noble Lord’s confusion comes in. The same right exists for authorities to challenge a subsidy, but there is an overall policing function which belongs to the UK Government to look after the international obligations of the UK under agreements such as the TCA.

[Lord Purvis of Tweed (LD)]

I am talking about a call-in that is exactly the same as in Section 36 of the internal market Act. I am not talking about tribunals; I am not talking about it being adjudicated. I am not confused; I am talking about referrals. The internal market Act allows referrals from a national authority; this Bill does not. All I am asking is why there is a difference between the two.

[Lord Callanan (Con)]

It is because the responsibilities are different. They might all rest within different parts of the CMA, but the responsibilities under the internal market Act are different to those under the Subsidy Control Bill that we are debating today. The policing of the Act is of course the responsibility of the UK Government; it is a reserved responsibility, but the same right to challenge a decision exists for the Secretary of State as it does for the devolved Administrations. Using the ability to refer a decision to the subsidy advice unit, we are saying that we will take a request from a public authority or devolved Administration very seriously under the Secretary of State’s call-in powers, but, in addition to that, we are currently in discussions with the devolved Administrations to see whether it is possible to reach an agreement on some sort of codifying mechanism to refer decisions to the subsidy advice unit.

We hope that no UK government subsidies would require referral, but I can tell the Committee that Ministers will be open-minded to calling in a UK government subsidy for SAU scrutiny where that is requested by another public authority or considered desirable for other reasons.

To respond to the concerns of the noble Baroness, Lady Blake, the Secretary of State would always take into account any urgent circumstances, whether in considering the use of the call-in powers or in the exemption from mandatory referral for subsidies of particular interest set out in Clause 64.

Subsidy Control Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage
Wednesday 2nd February 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

My Lords, it is a pleasure to follow the noble Lord to pick up, and indeed support, many of the points he made about geographical inequality, and to tease out a bit further from our debate on the first day of Committee the Government’s refusal to link any form of geographical basis to the proposal on deprivation, as with others.

As the noble Baroness, Lady Blake, indicated, we are now going through parts of the White Paper on levelling up, and I am sure that the struggling communities across many parts of England will be relieved to hear that they are going to get more politicians. It brought back some memories. When I was a youngster, there was the proposal for more politicians in the north-east of England but with no extra money—a proposal for what we might call a north-east assembly. There was a very outspoken MEP in that region at the time—one M Callanan, I think he was called. I remember reading him in the Chronicle and seeing him on Tyne Tees telly. He said—I paraphrase—that with more politicians without any budget, the Government were desperately seeking to shore up their flagging regional devolution campaign. How times have changed.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

For that campaign, we used a large inflatable white elephant.

[Lord Purvis of Tweed (LD)]

That is what I remember seeing on Tyne Tees telly.

[Lord Callanan (Con)]

It was the cheapest campaign I have ever been on.

[Lord Purvis of Tweed (LD)]

Well, I think the proposals for the White Paper are cheaper, because there is no money attached to them at all.

The Government’s position is that, to maintain the level of EU structural support, £1.5 billion a year must be distributed. I will not quibble about some of the details, but let us take it as read that £1.5 billion a year must be distributed. The Government promised that there would be no shortfall. There were two references in the manifesto that stated so:

“a UK Shared Prosperity Fund to ensure that the people of the UK do not lose out from the withdrawal of EU funding”.

The Minister stated so when he led on the repeal of the structural fund SI, and he stated so again on Monday in Committee.

We, national devolved Governments and local authorities thought that this was a straightforward commitment to replace the previous funds without there being a loss of funds, but no. On page 74 of the spending review, the weasel words “rise to” were inserted. The Government stated that, to ensure that the people of the UK did not lose out from the withdrawal of EU funding, the investment would need to be £4.5 billion in this spending review period, but, as they stated on page 74 of the spending review, it is £2.6 billion over the next three years—a cut of £1.9 billion, cutting support in areas most in need. The cuts in the coming years are a staggering £1.1 billion.

As the noble Lord, Lord Wigley, said, nor has there been any commitment to replicating per-person investment support. Under the previous schemes, investment was £130 per person in England, £180 per person in Scotland, £280 per person in Northern Ireland and £780 per person in Wales, reflecting the areas identified for particular need. I would like the Minister to write to me about what the proposed per-person investment will be for 2022. That is when we will know whether indeed we are losing out from the withdrawal of EU funding.

I was genuinely interested in what the Minister said on Monday about the geographical delineations referenced in Amendment 14 with regard to areas of need. He said, and he was specific in his language, that there was a differing approach from that used by the levelling-up fund. I then looked at the levelling-up fund methodology, which states that the methodology used is

“to develop an index of priority places for the Levelling Up Fund.”

Furthermore,

“any comparison of need between places in different nations should be made using a consistent set of GB-wide metrics only.”

The levelling-up fund is using an index of priority places based on need. To be consistent, that is GB-wide, and all authorities, when they are putting forward their bids for the levelling-up fund, will be clear as to what status they are in with regard to the index of priority.

So far, that is clear. However, the Government have said that there is no link between the two. The conclusion might be that this Bill is not linked with the levelling-up approach, but that is not what the Minister said at Second Reading. He said:

“Under this regime, public authorities at all levels of government will be empowered to give subsidies to help address regional disadvantages, supporting our levelling-up aims.”—[Official Report, 19/1/22; col. 1712.]


So the aims are the same, but if there is no methodology to support a scheme’s aims of addressing regional disadvantage under this Bill—in other words, inequalities —how will levelling up actually be achieved? The CMA will only have the ability to review a scheme’s legality under this Bill; it will have no scope to help to address and support our levelling-up aims. Who will do that? Which body will consider whether this Bill is “supporting our levelling-up aims”, as the Minister said at Second Reading?

The Minister might say that they are completely distinct and that the fund will operate completely distinctly from the subsidy regime. I looked at the levelling up-fund prospectus, which states categorically at paragraph 6.9 that all applicants to the levelling-up fund

“must also consider how they will deliver in line with subsidy control (or State Aid in Northern Ireland) as per Government guidance … This will be tested as part of the appraisal process and monitored thereafter.”

How, and by whom? If every application to the levelling-up fund is to be considered in the context of this Bill, they are linked. If the Government are making the case for having a regional index for that fund, for which all applications have to satisfy this Bill, but this Bill says that there will be no index or any regional aspect, how on earth will this be monitored with regard to meeting the levelling-up aims?

My final point refers to further amendments to Clause 18 on markets. The Minister has been at pains to say that there will be no definition of “local market”. I question how all the Government’s different considerations will be satisfied if there is to be a review of the impact on local markets without there being an index such as the levelling-up fund. I simply do not know why the Government have made the clear distinction between this Bill and the levelling-up approach, which they say has to be consistent with the Bill. I hope the Minister will be able to clarify those points.

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[Lord Purvis of Tweed (LD)]

If a public authority—let us say the Scottish Government—had a scheme and defined for the purposes of that scheme the entirety of Scotland, therefore allowing relocation anywhere within Scotland, is the Minister satisfied that this would come under the Bill?

[Lord Callanan (Con)]

If it was in compliance with the other principles in the regime, of course it would be in compliance. It would be for the Scottish Government to determine what they would consider—

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

If the Secretary of State decided that the geography was the whole of the United Kingdom, would that be acceptable under the Bill, too?

[Lord Callanan (Con)]

The noble Lord is dragging me into hypotheticals, but obviously the purpose of the Bill applies to the whole of the United Kingdom, so the principles would apply across the whole country, yes.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister; he is being very generous. This is just to confirm this point: if a public body is able to self-define an area under this clause, there would be nothing to prevent the Scottish Government from defining the area as Scotland. They could therefore offer relocation subsidies to businesses in England to relocate to Scotland, and vice versa; there would be nothing to stop the Secretary of State from defining the area as England, which would be more worrying, and therefore having subsidies that are specifically for those relocating from, say, Wales.

[Lord Callanan (Con)]

I think the noble Lord is confusing two different areas. There is the area that would define a particular scheme and the direct subsidies that we are talking about. Yes, clearly there would be a prohibition on the Scottish Government directly financing the relocation of a company from England to Scotland, or vice versa.

[Lord Purvis of Tweed (LD)]

No, that is because the area is Scotland.

[Lord Callanan (Con)]

It does not matter, because anywhere within the United Kingdom is the area covered by this Bill.

[Lord Purvis of Tweed (LD)]

Minister, Clause 18 could say the United Kingdom, but it does not. It says “area”. As the Minister has said on a number of occasions today, the public authority defines the area.

[Lord Callanan (Con)]

It would be the area of the particular authority that is offering the subsidy. Earlier, I offered a more precise definition of what the area would be, whether it is the Scottish Government for Scotland or the council area that the noble Lord, Lord Bruce, referred to in north-east Scotland. They would be the areas of the authority combined. If the Scottish Government, for instance, wanted to offer a direct subsidy for a company to move, or the British Government offered a subsidy for a company to relocate, even within their own area, it would not be permitted.

As I said, indirect attractiveness in enhancing training provisions, for example, would be permitted. This is to prohibit a particular small class of actions. The example that we used was in the United States. We have all seen examples of companies moving from one state to another. They literally close down one operation and move to another because of the enormous subsidies offered. That is what we want to prohibit. We certainly do not want to prohibit areas—indeed, it would be contrary to our policy aims—from making themselves more attractive by offering indirect subsidies, as this would help the levelling-up agenda. I hope I have clarified that.

Amendment 34 was tabled by the noble Lord, Lord McNicol. First, I will say a few words about the purpose and effect of Clause 29, which this amendment seeks to change. The clause sets out the specific provisions for giving subsidies for services of public economic interest, which are services provided to carry out particular tasks in the public interest. These are services where, without a public subsidy, a vital public service would not be supplied in an appropriate way by the market—or, in some cases, would not be supplied at all. These could include, for example, ferry links between Scottish islands—no doubt the noble Lord, Lord Berkeley, would want to quote the example of the Scilly Isles—and a rural bus service.

The provisions in Clause 29 facilitate the subsidies being given while ensuring that this is done transparently, that they are reviewed regularly by the public authority, and that they avoid overcompensating the beneficiary. The Government’s aim in drafting Clause 29 was to provide a simple yet effective framework within which public authorities could confidently provide SPEI subsidies that would allow the continued provision of important services and, in doing so, ensure that the subsidy is limited to what is necessary to deliver that service.

In response to the question from the noble Lord, Lord German, about whether a leisure centre would be considered an SPEI, I do not want to comment on that specific scenario. There is no reason in principle why it should not be, but the Bill would absolutely allow a subsidy to a leisure centre, whether it is an SPEI or not—we could probably have lots of debates about the degree to which leisure centres are SPEIs—if the public authority was assured that there was a market failure or equity rationale and the other relevant requirements were met. I will purposefully not comment on his proposition that the residents of London should not benefit from public leisure centres. I am sure that is not what he was trying to imply.

The amendment tabled by the noble Lord, Lord McNicol, seeks to add a further requirement on public authorities when considering the cost of delivering the SPEI. They would need to consider the social and economic welfare of users of the service and of those engaged in its delivery. These will be important factors for many, if not all, SPEIs, and I expect that public authorities would regularly take account of these considerations when reviewing these types of services on a case-by-case basis. For example, service providers of rural transport services may be required, by the terms of their contract, to consult service users through annual customer surveys or regular engagement with local stakeholders to show that the service in fact meets local needs.

However, the inclusion of this amendment in the Bill would introduce additional complication and a degree of uncertainty for public authorities in how they undertake this assessment. The defining factor for SPEIs must be the type of service that is provided and the fact that it would not be adequately provided by the market. The provisions in Clause 29 are designed to ensure that those services are designed appropriately and with minimal market distortion. As important as the social and economic welfare of service users and providers is, I do not believe it is at the core of this assessment and of the subsidy control provisions.

More broadly, it is important to emphasise that the subsidy control regime does not sit in isolation, nor should it determine every element of spending decisions taken by public authorities in the UK. They must continue to take into account spending rules and to ensure value for taxpayers’ money. They must also make evidence-based, democratically accountable policy decisions about how and where to intervene, in a way that takes into account the specific characteristics and needs of the geographical area and the subject matter for which they are responsible. It may therefore be appropriate for public authorities to include reference to the social and economic welfare of service users and providers in their own guidance on specific SPEIs.

With respect to the social and economic welfare of those engaged in delivering the services, I remind the noble Lord that the UK has one of the best employment rights records in the world. We continue to build on this record, ensuring that our workers have access to the rights and protections they deserve. I therefore do not believe that it is desirable for the subsidy control regime that we are debating to prescribe how public authorities must account for the social and economic welfare of service users and those engaged in delivering the service.

Finally, I will comment on Amendment 36. I am also grateful to the noble Lord, Lord McNicol, for tabling this especially thought-provoking amendment. I understand that the noble Lord intends it to be a probing amendment and I will treat it as such. It raises some interesting questions about subsidies and the nature of the relationship they create between a public authority and a subsidy beneficiary.

The social value Act, from which I assume his amendment takes its inspiration, requires a public authority that is procuring the provision of services, goods or works to give weight to social value factors in what would otherwise have to be a strict value-for-money calculation. Authorities within the scope of that Act should consider whether it applies where a subsidised contract is awarded. In contrast, and perhaps paradoxically, the giving of public money in the form of a subsidy is not primarily a market-based or economic calculation. Of course there are economic duties, within this regime and in public spending controls, to ensure that a subsidy is efficient and effective.

However, the first requirement of this regime—the first condition that a public authority must satisfy before giving a subsidy—is, in essence, one of social value: what is the equity rationale? Is there a market failure and what is the benefit to wider society in providing this subsidy? I hope this answers the question of the noble Baroness, Lady Jones, on the same subject. Moreover, public authorities must conclude their assessment against the principles with the balancing test in principle G: that the beneficial effects of the subsidy should outweigh any negative effects. Of course, these duties fall on the public authority and not the beneficiary directly but, in considering the first and last principles, the public authority must consider the effect of the subsidy in the round.

If it were reasonably foreseeable that, in the actual purchasing of a good or service funded by subsidy, the beneficiary would be undermining the equity rationale for giving the subsidy or that it would somehow worsen another equity objective, then it is hard to see that the subsidy could satisfy either principle A or G. None of this is to say that a public authority cannot impose secondary requirements on a beneficiary, where the size and nature of a subsidy might lead it to do so. Many public authorities award subsidies through a written contractual arrangement that sets out the terms and conditions under which the financial assistance is given, and this would be the way to impose such conditions. But it would be disproportionate to require public authorities to impose social value conditions in all cases, particularly as the questions of equity are already built into the fabric of the regime.

As an aside, the noble Lord has also proposed that public authorities should be able to impose penalties if the use of the subsidy does not deliver the chosen social value purposes. As I have explained, it is not proportionate to require public authorities to impose these secondary requirements. However, let me reassure him that Clause 77 provides that if a subsidy is not used for its intended purpose, it can of course be recovered.

I am grateful to all noble Lords for putting forward their amendments and for the long subsequent discussion that has taken place, but I hope I have set out the reasons why I am unable to accept these amendments on behalf of the Government. In the light of the fulsome explanations I have provided, I hope that noble Lords will feel able to withdraw or not press their amendments.

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[Lord Purvis of Tweed (LD)]

Is it the view of the Minister that the powers under subsection (6) allow for delayed disclosure?

[Lord Callanan (Con)]

Yes, that is the subsection which provides the ability to publicise that fact—it is in subsection (6).

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[Lord Purvis of Tweed (LD)]

So the point the Minister is making, which is to have the legal ability to delay disclosure, is afforded under subsection (6). The deletion of subsection (7) then does not affect that power. It would mean only the removal of the ability for there to be no disclosure at all, because the power to delay disclosure would be under Clause 47(6). Is that correct?

[Lord Callanan (Con)]

We think that subsection (7) is important for financial stability and legal certainty but, as I have said on the other amendments in this group, I am happy to take this away and look at the matter further.

This is the very effect that assistance, and the direction that facilitates that assistance, would be deployed to avoid. Northern Rock serves as a clear example, where the revelation that the firm was in receipt of emergency liquidity assistance led to a run on the bank. That exacerbated its problems and, in the end, hastened its failure. Consequently, if disclosure of financial stability directions cannot be deferred, it would effectively render them unusable in situations where it is necessary to provide lending on a covert basis. Making a direction unusable in this way would be especially problematic if the success of the financial assistance was dependent on the use of a financial stability direction to disapply any of the requirements.

In relation to the specific statement being referenced in paragraph 16 of the report, as mentioned by the noble Lords, Lord Purvis and Lord Fox, that statement makes it clear that the concern is not about the risk of parliamentary defeat. The concern surfaced in the statement is the perception of stakeholders of a risk that non-approval could result in the rejection or undermining of the proposed subsidy. In that circumstance, the primary concern would not be in relation to a defeat in Parliament but that, as a result of that risk perception among stakeholders, the subsidy would be ineffective in the short term or even rejected by the proposed recipient. This would mean that the use of the power would not even get to the point of a vote.

The current drafting of Clause 47(7) provides a clear mechanism in law for delaying publication and a basis on which the Treasury can make the decision that the publication would undermine the purposes for which the direction was given. When the Treasury considers that publication would no longer undermine the purpose of the direction, it would at that time—this comes to the point made by the noble and learned Lord, Lord Hope—be required to publish that direction in accordance with the duty in Clause 47(6). Therefore, subsection (7) simply makes explicit the ability to delay publication where that publication would undermine the purpose for which the direction was given. It does not provide a means for the Government to avoid scrutiny indefinitely.

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[Lord Callanan (Con)]

It is very unfair of the noble Lord, Lord Fox, to suggest that I would not engage with his amendment. In this debate, I particularly enjoyed the noble Baroness, Lady Blake, using exactly the same argument that I will deploy against the amendment to argue somehow that she is in favour of it.

Anyway, let us explore the amendment as it was tabled, because I think we will all agree that it is a particularly ridiculous amendment. However, I thank the noble Lords, Lord Purvis and Lord Fox, for putting it forward. Essentially, the amendment seeks to prevent subsidies being given where there is a political motivation or influence. I will not engage with some of the broader points noble Lords made about transparency and things like that because we will come on to those points later in the debate, but I will take the amendment as it is printed. I suspect that what both noble Lords actually meant to say is that they seek to prevent improper political influence over subsidy decision-making. On that, we completely agree, of course. However, as I will argue, I do not believe that this amendment is necessary to achieve that.

First, there are already a number of safety nets in the Bill which will help to prevent improper political influence over subsidy decision-making. Any subsidy, unless exempted, must meet the subsidy control principles, including remedying an identified market failure or addressing an equity rationale. In addition, the subsidy must be limited to what is necessary to achieve it. A subsidy which had improper political influence would struggle to meet those principles.

Secondly, Clause 77 prevents the misuse of subsidies, and a public authority may recover a subsidy from the beneficiary where it has been used for a purpose other than the purpose for which it was given. Even outside the subsidy control requirements, a subsidy must meet value-for-money tests, which help to ensure that public spending is being made appropriately. For UK government spending, this is governed by the Treasury Green Book—all those in government who have to engage with the Treasury will know how rigorous it is in implementing that—and, of course, all the principles set out in Managing Public Money. They will be generally applicable to all public authorities in the UK, although the devolved Governments have their own detailed rulebooks, as is right. Finally, a subsidy granted for an improper purpose may give rise to judicial review on public law grounds.

More broadly—this comes back to the point that the noble Baroness, Lady Blake, made, even though, bizarrely, she was arguing in favour of the amendment—it is unclear how a public authority might avoid any political motivation whatever. I do not think that that would be desirable. When the noble Baroness, Lady Blake, was in a position of authority on Leeds City Council, her authority, or a devolved Government, for example, was or would have been democratically elected. I assume that when she stood for election with her party she set out her political priorities. She might have said that where a subsidy was appropriate she wanted to stand for election on that basis. It is right and proper that she should have been able to do that where the subsidy met the subsidy control principles. It would be almost impossible for any democratically elected local authority or a devolved Government to avoid any political influence. We are all politicians, some of whom were democratically elected. This applies to central and local government.

All subsidies have a degree of political motivation or influence because they are desired to achieve a public policy objective on which people stand for election and which will have been set by a public authority with democratic accountability. Let us pursue the example from the noble Baroness, Lady Blake. If she stood for election on Leeds City Council with a commitment to, for instance, provide subsidised transport in rural parts of Leeds—I think Leeds has some rural areas—it might have been appropriate to provide a subsidy to a bus operator. That commitment will have been made at a political level as the result of her manifesto in a political election. That would have been a politically motivated subsidy, but I think we would all agree that, in the circumstances, that would have been wholly appropriate and presumably useful for that particular area.

I hope that I have demonstrated that the amendment is unnecessary. The wording is clearly seriously flawed. I therefore hope the noble Lord will be able to withdraw it.

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister and to my noble friend Lord Fox and the noble Baroness, Lady Blake. This very short debate has been illustrative because, some of the flippancy aside, it addressed the vulnerabilities that could arise from a lack of transparency in certain areas of subsidy schemes. There is absolutely no intention to prevent anybody standing to represent people in their area and to argue the case for their area. That is absolutely fundamental and a positive. I did it. I fought hard to keep structural funds in the south of Scotland. I will fight the fact that that money is now being taken away by the Minister’s Bill. That is something I will fight for. I will be very passionate for it, and I will hold the Conservatives to account for taking those funds away from the Scottish borders.

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[Lord Callanan (Con)]

We are not necessarily against adding new data points, but it depends what they are. Of course, as I mentioned earlier, all subsidies will need to benefit the British public and be well delivered. But of course there is the WTO provision that we need to be careful about, particularly in the context of the TCA and the action that is being launched against us. I will not go any further into the prohibition because I see that the noble Lord is going to ask me about it.

[Lord Purvis of Tweed (LD)]

I have a separate point, on the principle of adding on the issue of local content and domestic goods. I understand and entirely agree with what the Minister said about the WTO prohibition of subsidy schemes that are prejudiced against non-domestic or non-local content. But of course the recipients, if they are manufacturers and exporters, will also have to categorise their own goods under the rules of origin, under both the TCA and the WTO, for all our FTA agreements—so that data will be there. I think that there is a great benefit to having, across key sectors where the Government want to identify whether there is market failure, the knowledge base regarding the level of domestic production. It is not a case of directing the subsidy towards it, which would contravene WTO rules; it is building up that knowledge base that will help overall industrial policy, which would be a positive—especially when it comes to regional production and manufacturing in certain areas.

Secondly, while I agree with the Minister about the discrimination, we can of course use countervailing measures, as the Minister knows—so, in relation to that knowledge base for domestic products, the WTO allows us to particularly support domestic production when it comes to countervailing measures. So, again, that would be information that the Government would find useful to have.

[Lord Callanan (Con)]

I understand the noble Lord’s point, but I go back to the fact that this prohibition exists for a good reason. I accept his point about additional data points that could be incorporated at very little cost, but of course he is picking on particularly narrow subsidies that might be given to the manufacturing industry. His points about rules of origin are for separate schemes under the TCA. I will think about his points.

But the prohibition exists for a good reason and is reflected in Clause 17. Of course, if all countries were to subsidise local content, world trade would be unduly distorted, and UK firms would suffer as a result, so that is why we as a country have signed up to these agreements at both WTO and EU TCA level. It is essential that all members of the WTO play by the same rules, which include a prohibition of local content and export subsidies. The UK does not provide, and does not intend to provide, subsidies that are prohibited by the WTO or under the TCA. I make that point clear.

I believe in the advantage of global trade—not just the WTO rulebook, but the global connections and markets that promote prosperity and growth worldwide, and specifically in the UK. Global supply chains allow British businesses to use inputs that are the best and most cost-effective in the world. Certain companies and industries may in some cases have their own targets for local content or for something similar—that is indeed what we have done under the contracts for difference schemes, but others are watching these commitments closely—or there may be a commitment to use products from the local area. However, those commitments would not be tied to the giving of a subsidy in any way, and as a result should not be included in a subsidy database entry.

I think I have dealt with most of the points raised. I had some additional points I wanted to make to back up what I have said, but my Whip tells me we are on a hard stop for a couple of minutes’ time. Are there any particular points raised in the debate that I have not dealt with? I think I have dealt with them all and explained our position—so, as we have agreed with most of his points, I hope that the noble Lord, Lord McNicol, will feel able to withdraw his amendment.

Economic Crime: Planned Government Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Monday 31st January 2022 Lords Chamber

[Lord Callanan (Con)]

There are indeed a number of positive elements to legislating on this issue. One of them is the issue highlighted by the noble Lord. However, we are again dealing with hypotheticals: something that may happen in good time. As I keep saying, we are committed to pursuing this legislation, but I am afraid I am going to sound a bit like a broken record when I say I cannot give a commitment at this stage to noble Lords on when we might be able to do it.

[Lord Purvis of Tweed (LD)]

The latest full accounts of Aquind Ltd give its directors as Mr K Glukhovskoy and Mr A Temerko. Four years ago, the Minister was a member of the board and at that time it had a controlling entity in the British Virgin Islands. It now has a controlling entity in Luxembourg. The last set of accounts showed a loss of more than £3 million and it paid no tax, yet it was able to find £213,000 for donations to the Conservative Party. Will the Government’s measures, which they say are urgent, also address the source of the wealth of controlling entities registered in the Virgin Islands—or, indeed, Luxembourg?

[Lord Callanan (Con)]

I thank the noble Lord for his fascinating question.

Subsidy Control Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage
Monday 31st January 2022 Grand Committee

[Lord Purvis of Tweed (LD)]

As I understand it, the guidance states that every authority now needs to define for itself what a social equity is as far as deprivation is concerned, even taking into consideration what relative that would be. It says:

“Public authorities must use supporting evidence which … should include measures or statistical indicators set against appropriate comparators”.


That suggests that every public authority defining its own scheme will have to provide its own statistical basis and definitions. How will the CMA judge those against others? Given that there will be no commonly agreed areas of social deprivation, is it not likely to create even more bureaucracy and confusion if every public authority has to make its own definitions and provide its own necessary material and statistical basis?

[Lord Callanan (Con)]

It is for the CMA to provide guidance on those matters but for the authorities themselves to determine whether the subsidy in question is justified. Then, but only if it is challenged against the principles in the Act, will the CAT be empowered to make a judgment on whether it is in compliance with the specific provisions in the Act.

--- Later in debate ---

[Lord Callanan (Con)]

I am grateful to all noble Lords who took part in this debate. The noble Baronesses, Lady Sheehan, Lady Hayman and Lady Jones, raising their favourite subject brought me a great sense of déjà vu—the feeling that I have been here before and will no doubt be here on many occasions in future. Nevertheless, it is important to highlight the crucial issues of our net-zero commitments, climate change and environmental protection.

Before I address the individual amendments, I will explain further the approach that we have taken in this Bill towards the vital subject of energy and environmental protections. As noble Lords are aware, the Subsidy Control Bill sets out a new approach that is tailored to the needs of the UK. Broadly, it addresses two objectives: first, to facilitate compliance with our international commitments, including the subsidy control provisions in the EU–UK Trade and Cooperation Agreement; and, secondly and perhaps more importantly, to ensure that markets in the UK function effectively and that we minimise the domestic distortive effects of subsidies.

However, in respect of energy and environmental objectives, it would be fair to say that our approach is slightly different. In this area, the UK’s existing commitments, regulations and practices are extensive and world-leading, from the Environment Act principles to support for Sizewell C and the clean heat grant. Given all this, I believe that we already have the right framework in place.

As a result, our primary objective in respect of the energy and environment principles is to fulfil our international obligations—specifically, to implement the provisions in the TCA. These are good, common-sense principles; it will not be a challenge for UK public authorities to comply with them. I am not trying to suggest that they have been included reluctantly or that they do not have this Government’s full endorsement, but, equally, we have not sought to introduce further requirements or extend the scope more widely than required because we believe that energy and environment rules in general should apply to all kinds of policy-making, regulation and funding, rather than having specific provisions just for one tool in the toolbox. This brings me to the question asked by the noble Baroness, Lady Jones, on why nuclear has been excluded from the principles set out in Schedule 2; I will come on to that in more detail.

I will start with Amendments 7 to 10, all of which would amend Schedule 1. I thank the noble Lords, Lord McNicol and Lord Whitty, and the noble Baronesses, Lady Sheehan, Lady Jones of Moulsecoomb, Lady Bennett of Manor Castle—I see that she is not with us—and Lady Boycott, for tabling and putting their names to the respective amendments.

Schedule 1 sets out the subsidy control principles that public authorities must consider for any subsidies that they award or subsidy schemes that they make. These common-sense principles will ensure that subsidies and schemes offer value for money while addressing important public policy objectives in the United Kingdom. Public authorities will need to consider the effects of subsidies in the round before awarding them. The areas currently listed under principle G are those that subsidies inherently affect: competition, investment and trade. Other negative effects should be considered for the purposes of principle G only in so far as they are relevant.

Net-zero and climate change considerations are not inherent to all subsidies. Placing additional emphasis on climate change in principle G, or adding an additional principle H, could lead to public authorities having to do bespoke, possibly onerous, assessments for every single subsidy awarded or subsidy scheme made, even when it has no meaningful impact on net-zero targets.

I turn now to Amendment 11 to Schedule 2. Schedule 2 sets out that energy and environment subsidies must aim at one of two objectives: first, delivering a secure, affordable and sustainable energy system and a well-functioning and competitive energy market; or, secondly, increasing the level of environmental protection compared with the level that would be achieved in the absence of that subsidy. I would have thought that the noble Baroness, Lady Jones, would support that. This amendment would add a third aim, specifying that subsidies in relation to energy and environment should incentivise the beneficiary to help to deliver the UK’s net-zero target.

As I have said—there is no disagreement among us here—I and the Government entirely agree that net zero is of critical importance. Indeed, the Government published their Net Zero Strategy last year. The Government have already announced new subsidy schemes that promote net-zero objectives, are compliant with the interim subsidy control regime and, of course, ensure good taxpayer value at the same time. These include schemes such as the clean heat grant, which will help consumers to overcome the high up-front costs of low-carbon heat and will build supply chains for low-carbon heat ahead of the introduction of regulations for existing buildings off the gas grid, which we will come to later in the decade.

However, I do not believe that it is necessary to add an additional aim in Schedule 2, principle A. Sustainability and environmental protection are explicitly mentioned in the principle already, and it is clear that progressing our net-zero priorities would fall into these categories. Adding a further requirement on all subsidies and schemes, on top of those existing principles and regardless of whether the subsidy or scheme has a specific net-zero aim or impact, is not necessary given the existing comprehensive set of regulatory requirements on public authorities. I have mentioned several of these already but they include the legally binding environmental targets in the Environment Act, for example. It could even disincentivise other valuable subsidies that improve environmental protections but would not have a direct net-zero component.

[Lord Purvis of Tweed (LD)]

The Minister and the Government have been consistent in saying that moves are unnecessary, specifically because of principle G, but principle G says that

“beneficial effects (in terms of achieving their specific policy objective) should outweigh any negative effects”.

The “beneficial effects” are the achieving of the “policy objective”, so if the policy objective has nothing whatever to do with sustainability—it could well be market support in one area—then only beneficial effects with regard to that “specific policy objective” will be taken into consideration. There will not necessarily be beneficial impacts on sustainability, net zero or climate because the beneficial effects are very narrowly defined under principle G. So the necessary element still stands because the Government have restricted beneficial effects only to those linked with the original policy objective.

[Lord Callanan (Con)]

I think we discussed this earlier. I am really not sure of the point the noble Lord is trying to make.

Amendments 12 and 29, tabled by the noble Baronesses, Lady Boycott and Lady Sheehan, and the noble Lord, Lord Whitty, would prevent subsidies that would relieve their beneficiaries from their liabilities as a polluter. Provision already exists in the Bill to protect the “polluter pays” principle for any subsidy in relation to energy and environment. Principle B in Schedule 2 sets this out explicitly:

“Subsidies in relation to energy and environment shall not relieve the beneficiary from liabilities arising from its responsibilities as a polluter under the law of England and Wales, Scotland or Northern Ireland.”


Clause 13(3)(b) ensures that a public authority

“must not make the scheme unless it is of the view that the subsidies provided for by the scheme will be consistent with those principles.”

As I have previously set out, it is right that the provisions in the “polluter pays” principle apply only where they are relevant. That principle has long-standing foundations in UK law—including, most recently, in the provisions of the Environment Act 2021, which I also covered earlier.

Amendment 33 would prohibit subsidies for fossil fuels, including those subsidies that fall within the definition used by the IMF for fossil fuel subsidies. This would include subsidies for fossil fuel development and for the construction of new unmitigated fossil fuel-powered electricity generation, either in the UK or abroad. The principles in Schedule 2 to the Bill will help ensure that energy and environment subsidies contribute to optimal outcomes for UK citizens, recognising the importance of a secure, affordable and sustainable energy system and increasing levels of environmental protection.

I am fully in agreement with the noble Baroness, Lady Sheehan, that inefficient fossil fuel subsidies encourage wasteful consumption, reduce our energy security, impede investment in clean energy sources and undermine efforts to deal with the threat of climate change. However, I cannot accept this amendment because unabated gas-fired generation currently plays a critical role in keeping Great Britain’s electricity system secure and stable. New-build gas generation capacity will continue to be needed to ensure security of supply until clean alternatives are deployable at scale.

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[Lord Purvis of Tweed (LD)]

Will the Minister address the points about how the regulated asset base will be considered—I understand his comments about that—and specifically about support for the small reactor scheme for Rolls-Royce?

[Lord Callanan (Con)]

The noble Lord makes some valid points on the RAB mechanism, which will be debated in full on the upcoming nuclear Bill, but I will write to him on the specific points, particularly about support for the SMR reactors he talked about. I point out that existing subsidy schemes are of course excluded from the Bill. No doubt he will want to ask what happens if we want to award a similar subsidy in the future.

In my view, the energy and environment principles provide helpful support to our energy, environmental and climate change ambitions, but they are not the main engine of those ambitions. Finally, to answer the other questions of the noble Baroness, Lady Jones, on community energy—not really a matter for the Bill—and the Government’s approach to net zero, I am very happy to follow that up and write to her with the details. We are fully in favour of community energy projects, but of course they have to pay their share of the costs towards the network, as all other projects do if they wish to be connected to the national grid. I will write to her with the details and follow up with the noble Lord, Lord Purvis, on SMRs and the basis of nuclear subsidies.

Storm Arwen

Debate between Lord Callanan and Lord Purvis of Tweed

Thursday 2nd December 2021 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I associate myself and these Benches with the points made so eloquently by the noble Baroness, Lady Hayman of Ullock, both now and at Questions earlier. Her frustration is representative of the many people who must declare an interest in this issue. When I came down from the Borders last Monday, I had no power in my house; when I arrived back there on Friday there were eight outages that evening and no power overnight on Saturday. However, I was one of the lucky ones because I had some power on Sunday.

I hope that the disproportionate effect on rural areas will be the key lesson in the post-incident review to which the Government have committed. For those living in Kincardine who still lack reliable power, there should be an equivalent test: how would this place treat it if it were Knightsbridge? We are asking people to do the same: to work from home, provide services and care for people. There should be no difference between a resident in Knightsbridge and a resident in Kincardine in the 21st century, especially during a pandemic when people want to be carers or to work from home.

I noticed in the Statement that the Minister had been in Berwick, so I declare my second interest. It is my hometown and where my mum and dad still live. I know that the Minister knows the north-east extremely well as he is a northerner; actually, he is a north-easterner. It is unsettling when you speak to elderly relatives who are genuinely scared about what is happening and are vulnerable due to what happens afterwards. The lack of support for vulnerable communities in rural areas has been shocking in this regard.

The question will be: who has the primary responsibility? I know that many local authorities and their staff have worked extremely hard over this time; I saw it for myself with the local authority for the Borders, and the farmers and others who cleared roads and supported people. Many people in these communities are also first responders and, during this situation, have been checking on vulnerable residents in local authorities. However, certainly in the Borders, local authorities have been extremely frustrated with the electricity companies due to their lack of communication with customers; this was outlined eloquently before.

I will say one thing to the Minister with regard to the Statement. Some people in the north-east of Scotland have had not only their power supply but their mobile phone masts go down. Many communities have now been passed over to voice through broadband phones, as in my house, but there has been no communication at all. Therefore, the Statement giving an indication that people should dial 105 from their landline or mobile when they have no mobile phone coverage is—how should I say this?—insensitive, to say the least. I do not know how the Minister will do it but one lesson that we must learn is how to have civil contingencies when so much now relies on mobile and electricity networks.

My other question relates to power lines. In a former life, before I was elected in the Borders, I worked for David Steel when he was an MP. I strongly remember the awful length of the power cuts then. I know about the modernisation of the network in the north of England and Scotland.

Do we stress test the local networks? We stress test banks and other institutions, but is there a lack of legislative power for the Government to insist that companies stress test their networks so we know that, when it comes to what could well be more frequent events, the networks have been graded on a stress-test basis? This has given a lot of people a lack of confidence in the network and many of the companies.

The final thing I would say is that we have seen through bitter experience—certainly in the Borders and other areas, and in the north-west of England—that there have been improvements in flood warning systems and the way communities are able to operate. These systems have been put in place so that, when flood alerts are indicated, the public bodies and the private sector are prepared. But it seems as though we are not learning from those experiences with floods when it comes to electricity outages. I would be grateful to know what the post-incident review scope is and, in particular, how customers, consumers and communities themselves can feed into it when they are back to having reliable energy supplies.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Callanan) (Con)]

My Lords, I thank both noble Lords for their contributions. Let me state that I totally share their frustration and annoyance. Storm Arwen has brought severe weather to many parts of the north of our country, and those in the north of England and Scotland have suffered the most. Many have been without power for several days, and we totally understand their frustration, annoyance and indeed fury. I am not immune to that, as someone who comes from that part of the world as well. Let me reiterate that we are all working incredibly hard to ensure we can return to normality as soon as is humanly possible.

Yesterday, my Secretary of State stated in the Commons that restoring power across the entire country is a “grave concern” of ours, and a top priority and focus for the Government. Officials are in constant contact with the distribution network operators to understand their response, and operators have a mature and successful programme of sharing and deploying qualified resources to those areas most in need. My Secretary of State is having daily calls with local resilience forums, including the various chairmen in the north of England, to discuss the ongoing response. The Government continue to reinforce that, if additional support is needed by the industry, it needs only to escalate it to senior officials. Let me say to the noble Baroness, Lady Hayman, that the Government remain in constant regular communication with the distribution network operators, to ensure that communication—which, frankly, has been lamentable in many cases—is up to speed.

In the case of Northern Powergrid, I understand its phone lines are now operating properly; obviously there were problems with calls initially. Waits are now down from several hours to a few minutes, so people can now contact it.

The scale of the restoration effort that engineers are facing is enormous. The storm brought down trees and debris on to power lines, and wind speeds were exceptional. Since the storm hit, on Friday 26 November, over 4,000 engineers have been working round the clock to repair damage in very difficult conditions. Nearly 800 generators have been deployed to provide people with emergency power, and I am pleased to report to the House that, so far, over 98% of those affected by the storm—more than 964,000 customers—have had their power supply restored so far. I totally accept that that will be no compensation whatever to the few thousand who are still without power. As of 4 pm today, that was about 15,000 households, and that includes about 9,000 in the north-east, focused around the Wear Valley, Eastgate and north Northumberland; about 3,000 in the north-west, especially in the north Peak District and the south lakes areas; and a little under 3,000 across north Scotland, mostly in Aberdeenshire and Perthshire.

To confirm, all customers who have faced electricity distribution issues caused by Storm Arwen will have their power restored before Christmas—there was no truth in the rumours Members were referring to this morning. We expect to have the vast majority of those customers connected within one week. We know people are desperate to return to normality, and my department has been reassured that power will be restored, as I said, to the majority of customers by the end of this week, at the latest.

On the lessons learned, I thank the people who have borne with us during these difficult times and give a final reassurance that everyone involved is straining every sinew to ensure that they are reconnected as quickly as possible. We will ensure that all the appropriate lessons have been learned and, if such a storm happens again, that we are as resilient as we possibly can be.

The noble Baroness, Lady Hayman, asked about compensation. Ofgem, the independent regulator, sets service levels that companies must meet, with rules on how quickly network operators must restore power. It also sets compensation payments for consumers if those standards are not met, as they clearly have not been in these circumstances. I will ensure that Ofgem puts maximum pressure on the companies for those compensation payments to be made as swiftly and speedily as possible.

Regarding vulnerable consumers, those who have reached state pension age can register as priority service customers with their network operator, and will then be prioritised in terms of support, including to rural communities. We are working with the network operators to reduce vulnerabilities in future and to ensure that the network is as resilient as possible to these disruptive events. We intend urgently to review the exercise with the network operators to stress test the appropriate systems and will be able to share the terms of reference for review once the incident is over. We can then finalise the appropriate scope. Ofgem will also consider whether there is need for any further regulatory investigation.

The noble Lord, Lord Purvis, made a very good point about people not being able to get in touch when mobiles are down. The priority service register means that when outages occur, operators will already be able to locate the most vulnerable affected people and help them. They set up strategic hubs in the disrupted areas to aid communication with other customers, but I totally accept that these are often sparsely populated areas, and often rural areas with poor transport and communication links. Many network operators did their best in difficult circumstances.

Covid-19: Vaccine Production

Debate between Lord Callanan and Lord Purvis of Tweed

Thursday 17th June 2021 Lords Chamber

[Lord Callanan (Con)]

I thank my noble friend for his comments and he makes a very good point, the same point that I made earlier. Production of these vaccines is technically complicated, particularly the mRNA vaccines. There are not really any other production facilities outside the West in the property of big pharmaceutical companies that are able to produce them. It is not a question of simply waiving the IP rights and allowing anybody to produce them.

[Lord Purvis of Tweed (LD)]

My Lords, paragraph 10 of the G7 communiqué refers to 700 million doses being made available from domestic productions, over half of which have gone to other G7 countries. Uganda, for example, is paying three times as much as the EU and the UK for the AstraZeneca vaccine because of the limit and because it is not using the WHO Technology Access Pool. Will the Government think again and open up access to technology and know-how in order to allow other countries to increase domestic production, so that they pay the same to AstraZeneca as the UK is paying?

United Kingdom Internal Market Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Report stage & Report: 2nd sitting (Hansard) & Report: 2nd sitting (Hansard): House of Lords
Monday 23rd November 2020 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, I am grateful for what the Minister said in referring to the noble Baroness, Lady Boycott, and to his correspondence with my noble friend Lord Fox and me.

I consulted the House of Lords Library on how the Minister’s letter referring to the sale of coal—not its use—interacts with the Air Quality (Domestic Solid Fuels Standards) (England) Regulations, which this House passed on 7 October and which are the governing legislation. The regulations specifically ban the supply and sale of coal and wet logs in England. One concern is that the Bill would not ban such sales if the goods originated in Wales, Scotland or Northern Ireland, where bans are not in place. That is clear; in fact, the Minister’s letter confirmed that this issue falls within the scope of mutual recognition. In addition, the other terms of the regulations bring this issue within the scope of indirect discrimination.

However, more concerning is that the regulations have been made but are not yet in effect—they come into effect on 1 May 2021—so the Bill will take effect before them. That is a requirement under this legislation, so the regulations the House passed banning the sale of coal and wet logs in England will have no effect because they are now within the scope of the Bill. Clause 5(3) states:

“A relevant requirement … is of no effect”.


Can the Minister clarify that, regardless of whether this is allowed or not, the ban in England will have no effect because of this legislation?

[Lord Callanan (Con)]

Again, it is about the difference between sale and use. England can proceed to ban a sale in England but if the sale is allowed in Wales, it could still take place under the mutual recognition principle; but, presumably, use would be prohibited. My letter explains this in great detail.

United Kingdom Internal Market Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage & Committee: 3rd sitting (Hansard) & Committee: 3rd sitting (Hansard): House of Lords
Monday 2nd November 2020 Lords Chamber

[Lord Callanan (Con)]

I think we are just going to have to differ on this one. We do not want to be returning to the House to create unnecessary difficulties and disagreements in the future; we want to ensure that, before any of these difficulties arise, we have put in place, as in the rest of the Bill, a framework that covers the whole of the United Kingdom to regulate how we will manage and control these issues in the future. That is all we are seeking to do. I understand the points that noble Lords are making. There are differently regulated professions in some parts of the UK already; we accept that and that the status quo is there, but we think that, in future, these things are best regulated on a UK-wide basis, and we want no new barriers to trade to emerge.

[Lord Purvis of Tweed (LD)]

My Lords, this has nothing to do with powers repatriated from the European Union; it has everything to do with our internal United Kingdom approach. When was the last time that a professional body regulated by law was established where the Government considered there to be major barriers across the United Kingdom?

[Lord Callanan (Con)]

The noble Lord will be well aware that there is European directive on this subject, and mutual recognition of professional qualifications, so, even in the EU law space, it is accepted that the nations of the EU have different ways of recognising different professional qualifications. I commend Amendments 107 and 108 to the House.

--- Later in debate ---

[Lord Purvis of Tweed (LD)]

My Lords, I apologise for detaining the Committee; I know I spoke at length on this group. Can the Minister clarify something that he said at the outset? I heard him say that responses to the consultation supported the Government’s proposals for the CMA having this role, but I have the White Paper and the consultation in front of me. No one asked; the Government did not ask. The CMA is not mentioned at all, as I think the noble Baroness, Lady Noakes, indicated. In fact, questions 3 and 4 do not refer to the CMA, and in the entire section the CMA is not mentioned. To resolve this, would the Government publish the consultation responses before Report, or can the Minister clarify in his remarks that he may have inadvertently misled the Committee?

[Lord Callanan (Con)]

I will certainly check that, and of course I will respond to the noble Lord if that proves incorrect. We obviously proposed the creation of the office for the internal market in the White Paper and said that we were interested in views—the noble Lord, Lord Purvis, shakes his head but I think we did. I will clarify that for the noble Lord in writing, in one of the many letters that I will be sending him. I definitely remember having discussions at the time of the White Paper with many noble Lords whom I spoke to during the consultation. We certainly discussed at the time how the creation of a new body would best monitor the function and effectiveness of the UK internal market process in the context of the White Paper, but I will certainly clarify that for the noble Lord in writing.

United Kingdom Internal Market Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage & Committee: 2nd sitting (Hansard) & Committee: 2nd sitting (Hansard): House of Lords
Wednesday 28th October 2020 Lords Chamber

[Lord Purvis of Tweed (LD)]

The Minister did not explain why services from the Isle of Man to the rest of the United Kingdom will be considered within the United Kingdom internal market, but goods coming from the Isle of Man are outside the single market. There are many service providers from the Isle of Man. In fact, financial services are probably a bigger part of the Isle of Man economy than goods for export. I would be grateful if the Minister could explain this. The Minister did not respond to my point about whether these regulations apply to the services that citizens receive for higher education. This is very important within Scotland.

My point to the Minister, I believe, justifies my argument on the good working relationship across the four nations on fertilisers and pesticides. The Minister referenced the justification for the government amendment about the need to work in emergencies. Paragraph 1 of Schedule 1 already has exclusions from market access principles for threats to human, animal and plant health. Emergencies were already covered. The amendment that the Government brought forward was not on emergencies; I looked at the regulations that it covers, which are in paragraph 9 of Schedule 1 on fertilisers and pesticides. The Bill will allow the Scottish Government, and a Welsh Government or UK Government acting for England, to make a different judgment on the advice they get from the single regulator about the safety of a pesticide for, as the Minister Paul Scully said, “movement and use”.

So, if English farmers, under the authority of the regulations in the Bill, decide to use fertilisers on crops—barley—that are unsafe in the view of the Scottish Government, the Bill will allow the Scottish Government to prevent that barley from being used in Scottish distilleries. The Minister said that the whole purpose of the Bill was to prevent that from arising. So he has managed to undermine the entire intent of his argument at Second Reading, which was that the purpose of this legislation was to prevent a barrier from a different decision being made on safety grounds. If this amendment, which the Government brought forward, allows for different decisions to be made on the safety of pesticides used in different parts of the UK, I hope the Minister will reflect on what he said about the justification for the Bill.

[Lord Callanan (Con)]

I understand the point the noble Lord is making, but I think we are talking at cross purposes. It would allow provisions on unsafe products, but the provisions would be based on advice from the common regulator—so presumably the authorities in England would draw the same conclusion. It does not allow a Minister to dream up a definition of “unsafe” and implement provisions on that.

On the noble Lord’s first point, if he will forgive me, I will write to him.

United Kingdom Internal Market Bill

Debate between Lord Callanan and Lord Purvis of Tweed

Committee stage & Committee: 1st sitting (Hansard) & Committee: 1st sitting (Hansard): House of Lords
Monday 26th October 2020 Lords Chamber

[Lord Purvis of Tweed (LD)]

My Lords, while I am grateful that the Minister has confirmed to me that a piece of legislation that has been made fully compliant with our single market—the deposit return scheme—will now come into scope under this legislation, because it is not yet in force in Scotland, that will be of very significant concern to Members of the Scottish Parliament, who legislated in good faith in a perfectly legal way. This Government have now said that that will come into scope, contrary to the market access principles, because it will not be able to be afforded protection if it is challenged in court because of the lack of environmental objections. I take the Minister’s point that he believes that it will be brought under the scope of market access principles, so I would be grateful if he could write to me to explain how indeed that will happen. If it is under a framework, we are back to exactly where we started, which is that the best approach on all these aspects is a framework.

That leads me to the question that I wish to ask him, because he did reply to the question that I asked about the status of the agreement made between the UK Government and the devolved Administrations on the framework agreement. In the document of September 2020 on the framework analysis, the Government repeated what that agreement was. I will quote from it again for the Minister: it was to

“maintain, as a minimum, equivalent flexibility for tailoring policies to the specific needs of each territory, as is afforded by current EU rules”.

The document goes on to say:

“These principles continue to guide all discussions between the UK Government and the devolved administrations on common frameworks.”


What is the basis of that document and that commitment, given what the Minister has just said in responding on this group: namely, that that is an ill-fitted set of agreements because we are now out of the EU? What is the status of the agreement that was made over the frameworks?

[Lord Callanan (Con)]

Well, as I have said before to the noble Lord, we remain completely committed to the framework process and we remain committed to frameworks that have already been agreed—but we see this legislation as complementary to that, as it underpins the entire framework process. As I said to him with regard to the deposit return scheme, if it comes into force when it is predicted to do so, then indeed it will be covered by the market access principles, but we are confident that the deposit return scheme can be brought into effect in full compliance with the market access principles.

--- Later in debate ---

[Lord Callanan (Con)]

My noble friend is putting me in the very difficult position of choosing which noble Baroness is correct. If I might venture to say, on the measures she has quoted my noble friend is correct. The Bill has no effect on minimum pricing of alcohol; that is excluded as a policy area, as are all pre-existing measures. This would also apply to carrier-bag prices. The Bill provides clarity and certainty for businesses, which is what we seek.

[Lord Purvis of Tweed (LD)]

My Lords, I take it as a little chink of victory that the Minister found it difficult to say whether he agreed with his noble friend or me. I will secure that as an achievement of the day, if he does not mind. I will return in a future group to minimum unit pricing and single-use carrier bags, because I am not convinced about that position.

I suspected that the Minister would refer to pesticides, so I took the liberty of reading the Health and Safety Executive’s board report on the framework, which has now been agreed, on pesticides and maximum residue levels. That agreement has been reached, so the concern the Minister is putting forward, of a threat to the operation of the single market, does not exist. That will be a UK-wide provision, and the regulations for Scotland are about policing it. The approach of the HSE has been well established for many years, and the regulation required to police this in Scotland is quite different from what the Government are asserting, which is the exercise of a power that would effectively prohibit goods from entering a Scottish market. That is notwithstanding the fact that if it concerns what is ultimately used for produce such as whisky, it is an industry standard, based on the minimum base that would be taken. The chemicals and pesticides framework from Defra and HSE has been resolved, so perhaps the Minister should stop using this an example. It is not convincing.

Regarding the office for the internal market, the Minister has now said something new: that the CMA, the parent body of the OIM, is involved in existing disputes under the Joint Ministerial Committee’s memorandum of understanding that was agreed after devolution. This will be news to the CMA. Can the Minister repeat that the CMA has a role in the Joint Ministerial Committee’s disputes, under the memorandum? That is what he said in response to the question, but it is not the case. As outlined in the Bill, the OIM has no role in disputes. If the Minister is saying that the dispute resolution mechanism for the internal market is the JMC memorandum of 20 years ago that was agreed for devolution, it simply will not work, because it does not provide for the operation of the single market.

[Lord Callanan (Con)]

The noble Lord asked a number of questions, and I am sure he will be quick to write to me if I do not answer all of them. On the famous subject of barley and pesticides, he is correct, but the whole point about frameworks is that they are voluntary agreements. Any one of the Administrations can walk away at any time. We are committed to agreeing voluntary frameworks and will continue to take part in those discussions and advocate them, but the point of this legislation is to provide a legislative underpinning for all of the work taking place on frameworks.

Could the noble Lord remind me what the other questions were?

[Lord Purvis of Tweed (LD)]

I am grateful to the Minister and may well be writing to him on that basis, as he predicted. Can he clarify what the intended role of the office for the internal market will be under the CMA? In a previous answer, he indicated that it has a role in the dispute resolution mechanism in the devolution memorandum of understanding. My understanding is that it does not. Which is the case? If the intention is that the OIM has a role in the dispute resolution mechanism, there is no reference to that in the legislation.

[Lord Callanan (Con)]

The purpose of the office for the internal market is to provide advice, reports and monitoring to all four Governments and legislatures. It will have no direct role in dispute resolution, which will be a matter for the Joint Ministerial Committee to discuss.

Covid-19: Financial Markets

Debate between Lord Callanan and Lord Purvis of Tweed

Wednesday 25th March 2020 Lords Chamber

[Lord Callanan]

I thank the noble Lord for his question. He is right to draw attention to the profiteering from a small number of retailers. We are aware of that and are looking urgently at what legal powers and frameworks are in place in order for us to do something about it. We will not hesitate to take any action that is required. With regard to his second point, I am afraid that, sad to say, a small number of unscrupulous and callous individuals will always seek to take advantage of any crisis.

[Lord Purvis of Tweed (LD)]

My Lords, I think we are all very grateful to the noble Lord, Lord Bates, for tabling this question. The Prime Minister’s comments at Prime Minister’s Questions were welcome; he said that the Government are considering further legislative proposals to address the very point about profiteering. The gaming of the financial services sector is often hidden from the public eye but is just as insidious as those people who seek to make profit out of a national emergency. Perhaps the figures that the Minister referred to reflect the fact that a number of weeks ago the European Securities and Markets Authority limited the capacity for short selling, which included the UK, and the UK Financial Conduct Authority quite rightly banned the short selling of 140 Italian and Spanish stocks, aware that this is a considerable issue. The noble Lord, Lord Bates, referenced other countries: South Korea has banned short selling for six months and limited buy-backs, and Spain has banned them for a month. If they are able to take preparatory action, it is quite right that the UK does so as well. The Minister referred to what a high bar might be; this emergency is a high bar to take precautionary action to ensure that the very many families and households who will suffer this emergency for months and potentially years to come will not see those within the financial services sector profiteering from their pain.

[Lord Callanan]

A ban has already been imposed on the short selling of stocks because regulators in their own individual countries have imposed bans. A small number of European countries like the ones he mentioned have imposed bans on short selling, and of course the London authorities have then reflected that in our own regulation. Most of the major trading houses have not yet instituted bans, but this is something that we are looking at closely. The FCA has the powers to restrict and prohibit short selling if that is required. We are keeping this under constant review and there is no evidence that it has contributed to the fall in the market. Moreover, as I have said, the level of short selling over recent days has in fact been declining.