Subsidy Control Bill Debate
Full Debate: Read Full DebateDepartment: Department for Business, Energy and Industrial Strategy
Lord Fox
Main Page: Lord Fox (Liberal Democrat - Life peer)Department Debates - View all Lord Fox's debates with the Department for Business, Energy and Industrial Strategy
Wednesday 2nd February 2022
(2 years, 10 months ago)
Grand CommitteeRead Full debate Subsidy Control Act 2022 View all Subsidy Control Act 2022 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: HL Bill 84-II Second marshalled list for Grand Committee - (31 Jan 2022)
Lord Callanan (Con)
I do not want noble Lords getting mixed up. I was referring to the fact that schemes can be designed for the whole of the United Kingdom. The purpose of this clause is to prohibit direct subsidies where a business is paid a sum of money to move from area A to area B—let me finish this point—depending on the definition of the areas that we spoke about previously.
However, that is only for direct subsidies, of course. The attractiveness, training provisions et cetera that could exist or be subsidised in a different area might make it more attractive for that business elsewhere, but the idea is to avoid the situation in the US that I talked about, where they come along and give companies—I will not name them, but noble Lords know the examples I am talking about—huge amounts of money literally to get it to close down its operations in one state and move to another. That is what we are trying to avoid, but we fully accept that it is perfectly in order to increase the attractiveness of an area, show how wonderful it is and show what is available there, including trading provision, sites et cetera. However, we do not accept using direct financial assistance to move from one part to the next.
We have already published illustrative guidance. We will look at enhancing that further with more detail before we commence with the legislation. If it is drafted and ready in time, I will share it with the noble Lord, of course.
Lord Fox (LD)
Without labouring the point, but labouring the point, I want to come back to the point made by the noble and learned Lord, Lord Thomas, about the grey areas that appear to be here. This is not a hypothetical example—it is a real one without names—but imagine that you have an inward investor, possibly doubling down on an investment that has already been made. As part of the process of negotiating with that investor, government, whether national or local, determines that it is important to have a technology park where the investor’s suppliers are aggregated and work together to support the investor.
The level of support needed to create the system of suppliers that supports the inward investment, which is clearly of benefit to the region, and therefore to the country, is clear. However, it is also clear that, if arms are not twisted, they are also being bribed or given money to create that park, that environment, to make sure that the inward investor gets what they want when it comes to the investment. Is the Minister saying that this sort of process will be entirely legal even if Clause 18 remains in the Bill?
Lord Callanan (Con)
Yes, if they are an inward investor coming into the country and they do not already have an operation in another part of the country.
Lord Callanan (Con)
That is not the example the noble Lord quoted. My understanding is that, if they are just increasing the attractiveness of an area and there is no direct financial payment to the company to move from one area to the next, yes, that would be allowed. If that is not correct, I will write to the noble Lord, but that is certainly my understanding of how that would work.
As I explained, this prohibition puts down a marker that is intended to prevent the small class of disruptive but harmful subsidies, such as poaching and outright bidding wars. I suggest to the noble and learned Lord, Lord Thomas, that it would not be easy for such subsidies to circumvent this prohibition.
“(5) A streamlined subsidy scheme must be made or modified by regulations subject to the negative procedure.”Member’s explanatory statement
This amendment would require a streamlined subsidy scheme to be made by regulations, as recommended by the DPRRC.
Lord Fox (LD)
My Lords, they say that a change is as good as a rest, so the Minister should be very sprightly now, as these amendments bring a slight change of gear. The group consists of eight items, mostly on the same theme, with the exception of the clause stand part in the name of the noble Baroness, Lady Bennett. Because that is so different, in the interests of time and clarity I shall not speak to it, so I look forward to hearing more about it from her.
I am tempted to say, “Here we go again”. The pattern we see here is one that we see with every Bill. First, the Government table new legislation absolutely riddled with secondary legislation. There is usually at least one case of secondary legislation allowing the amendment of primary legislation. Then the Delegated Powers and Regulatory Reform Committee steps forward and issues a report highlighting those issues and recommending remedies. Next, the Minister—in my area it is always the noble Lord, Lord Callanan—stands up, pleads the case for flexibility and sometimes, indeed increasingly, disputes Parliament’s competence to even make some of the decisions that will be required in the future. If we are successful through this process, some, although usually not all, the offending clauses get removed or modified. Lately, however, I detect an emboldened Minister. Increasingly—the ARIA Bill is an example—he uses the Dispatch Box to refute the arguments of the DPRRC.
We should be clear that this committee is an important senior committee of your Lordships’ House, and its report Democracy Denied? The Urgent Need to Rebalance Power between Parliament and the Executive stated that
“the principles of parliamentary democracy, namely parliamentary sovereignty, the rule of law and the accountability of the executive to Parliament”
should be at the heart of how a department approaches the delegation of legislative powers. The Bill falls far short of that objective, which is why there are so many amendments in my name in this group. I am also pleased to support the noble Lord, Lord McNicol, and the noble and learned Lords, Lord Judge and Lord Thomas, in Amendment 50, which seeks to deal with Clause 47, which is clearly the most egregious example of executive overreach.
I turn to the amendments in order. Amendment 15 would require a streamlined subsidy scheme to be made by regulation. Clause 10 allows Ministers to make streamlined subsidy schemes, which are defined opaquely in Clause 10(4). This demonstrates that Ministers consider that all subsidies within such a scheme comply with the Bill’s subsidy control principles and requirements. In practice, it means that if a public authority keeps within the limits of the scheme it is no longer required to consider the subsidy control principles or requirements when giving an individual subsidy. Streamlined schemes will be laid before Parliament after being made. They will not be subject to the negative or the affirmative procedure for regulations. The DPRRC report sets out a very good rationale for recommending that the power to establish streamlined subsidy schemes in Clause 10 should be exercised by regulation and that then the negative procedure would be appropriate, hence Amendment 15.
Next is a probing amendment to raise concerns about the definitions in Clause 11 being made by regulations, as also highlighted by the DPRRC. Clause 11 allows certain definitions to be defined by affirmative regulations rather than appearing in the Bill. These definitions are
“subsidy, or subsidy scheme, of interest”
and
“subsidy, or subsidy scheme, of particular interest”.
We have touched on this already. These definitions are important in determining the scope of the subsidies or the schemes that must be referred to the CMA under Clauses 52 to 64. The DPRRC is sceptical about the Government’s reasoning for leaving these definitions out of the Bill, and so am I. The DPRRC states:
“The power in clause 11(1) to define in regulations certain key terms is inappropriate and we recommend that it be removed from the face of the Bill.”
As a coda, and this is quite unusual, the DPRCC adds:
“Although we have been critical of the over-use of Henry VIII powers, we prefer to see key definitions appear on the face of the Bill—perhaps with a Henry VIII power to amend by affirmative regulations—rather than not appearing on the face of the Bill at all and always being a matter for regulations.”
That is an interesting twist, and one that is worth debating.
Amendment 26 addresses Clause 16(4) to (7) and seeks to require designations related to marketable risk countries to be made by regulations not by direction. Again, this is recommended by the committee.
Clause 16(4) is subject to neither the affirmative nor the negative procedure. The Government’s reason for having no parliamentary procedure is that they
“want to be able to act rapidly to allow short-term export credit finance where market factors may have rendered the list of marketable risk countries in need of amendment.”
One thing that the Covid crisis has demonstrated is that there is no barrier to the rapid tabling and approval of regulation. One thing that Brexit has demonstrated is that your Lordships’ House has a huge capacity to handle literally thousands of regulations when they are set before it. So any pleading that executive power is needed because Parliament cannot move fast enough is tosh, frankly—or, as the DPRRC puts it rather more politely,
“the Government can make rapid legislative changes by negative regulations or ‘made affirmative’ regulations. The idea that the making of regulations is inconsistent with the need to move quickly is fallacious. Negative and ‘made affirmative’ regulations can be made as quickly as can a direction.”
In other words, it is tosh. This amendment would install a process of regulation rather than ministerial direction.
Amendment 30
“would remove the ability of the Treasury to amend the definition of ‘deposit taker’”.
Amendment 31
“would remove the ability of the Treasury to amend the definition of ‘insurance company’”.
Amendment 32
“would remove the ability of the Treasury to amend the definition of ‘insurer’”.
Clauses 25 to 27 give the Government the ability to revise certain definitions to cater for developments that cannot be anticipated at the time of the Bill’s enactment. By way of example, the definition of “deposit taker” in Clause 25 uses a standard definition found across the statute book. If this definition required amendment in some future primary legislation, it would be perfectly possible for that legislation to contain the necessary consequential provision to enable the definition in Clause 25 of this Subsidy Control Bill to be amended in due course. The same reasoning applies to the definitions of “insurance company” in Clause 26(4) and “insurer” in Clause 23(7). Amendments 30 to 32 would remove the ability to amend those definitions, which, clearly, would not hamper future changes.
Amendment 50, proposed by the noble Lord, Lord McNicol, and signed by myself and the noble and learned Lords I mentioned, would remove Clause 47, which aims to give the Treasury powers
“to keep financial stability directions secret from Parliament and the public, thereby enacting a recommendation of the Delegated Powers and Regulatory Reform Committee.”
As the committee states,
“clause 47 involves fundamental issues of government accountability and parliamentary scrutiny … Not only does the provision enable the Government to disapply a legislative provision—the Bill’s subsidy control requirements—by a direction that can be kept secret from Parliament, but the justification for the power not being subject to any parliamentary scrutiny procedure includes, according to the Memorandum, ‘the potential for non-approval by Parliament’”.
In other words, this has to be included because Parliament might not agree with it. That should give us pause for thought.
The DPRRC is clear on the malign nature of this clause. It says that
“clause 47 is extraordinary for several reasons … Parliament has no power to scrutinise and reject a Government direction suspending the application of the Bill’s subsidy control requirements … Parliament may be deliberately kept in the dark about the existence of such a direction if the Treasury elects to rely on clause 47(7) … One of the Government’s reasons for having no parliamentary procedure is that the potential for non-approval by Parliament would create uncertainty that the subsidy will continue to be available. In other words, because the Government might be defeated if the direction could be voted upon, there should be no parliamentary procedure and no vote.”
In conclusion, the committee recommends
“that clause 47(7) should be removed from the face of the Bill”,
which is what Amendment 50 would do.
I am sure the noble and learned Lords who follow me, and indeed the noble Lord, Lord McNicol, will be more erudite, but I leave this set of amendments with a final injunction that we should seek to uphold all the DPRRC’s recommendations, not just the most serious ones. Parliamentary power is being eroded, little by little, one piece at a time. We have to resist this. I beg to move.
Lord Fox (LD)
My Lords, this has been an interesting debate. The Minister said “for the moment”—perhaps for the moment.
I appreciate that the Minister has at least left his door ajar to some of this, but the body language, and indeed the language, still indicate that there is this cultural campaign to make sure that executive power is gathered where possible and that the legislature is pushed to one side. This is what the DPRRC referred to in its report; it is what we have to put up with in every piece of legislation. Actually, as I said, I get the sense that the Government are emboldened and keep going even further with this. I feel that your Lordships will have to consider where we go with this on Report.
I have a couple of observations. When a Minister says that something is too technical, I feel as though I am being tapped on the head and told that I should not worry about such things—this coming from the Minister who tabled the 17 technology areas for the security and investment Bill, which was one of the greatest aggregations of technical information that I have ever seen. The idea that we and Parliament are not capable of handling something that is “technical” is deeply patronising.
Turning the focus to Clause 47(7), nowhere in it are the words “delay”, “temporary” or “otherwise” used. If, as the Minister implied—said absolutely, in fact—the purpose is a temporary delay in what would otherwise be a fully transparent process, that is not what Clause 47(7) says. If that is what the Minister wishes to put to us, that is what it should say in the Bill, but it does not.
Putting those comments to one side, I am sure that we will come back to this unless the Minister mobilises the full forces of righteousness and comes back with some meaningful amendments. I beg leave to withdraw Amendment 15.
Amendment 15 withdrawn.
Lord Callanan (Con)
That issue is not covered by these amendments, but I will come back to the noble Baroness in writing.
Lord Fox (LD)
My Lords, those on this side welcome these three amendments. It is always hard to get those first government amendments out; after then, you can keep them coming, Minister. We have one or two suggestions about what you might like to put in them.
It is good to have a consistent approach; indeed, a consistent approach to how you value a subsidy is a good starting point. Perhaps we can then have a consistent approach to how local authorities evaluate the need for a subsidy, and to how they are regulated and managed within areas. Consistency is what we are calling for. This is clearly the first baby step towards having a control system operated from a level playing field.
Lord McNicol of West Kilbride (Lab)
I echo the points of the noble Lord, Lord Fox: it is interesting to see government amendments at this early stage, even though none of these issues was raised at Second Reading. Likewise, we are not going to oppose any of these amendments.
Similarly, not just on consistency but on transparency, a good number of amendments were tabled in Committee on which we are more than happy to work with the department and the Minister to bring them back on Report. This will hopefully deal with a number of issues on which we have concerns, so that we do not object to them at that point.
Baroness Sheehan (LD)
My Lords, I added my name to Amendment 24. I also support Amendment 21, which is closely related, and Amendment 68, which has real implications in addressing limits on enforcement for subsidies that may have been misdirected. I thank the noble Lord, Lord McNicol of West Kilbride, for tabling these amendments and for his very able introduction of them.
To my mind, Amendments 21 and 24 have been tabled to try to establish why the Government wish to disapply the subsidy control principles and the energy and environment principles from a subsidy merely because it has been given under a subsidy scheme. According to the excellent Library briefing on the Bill, the Government have said that a subsidy scheme is a means for public authorities to award a number of subsidies to enterprises on a discretionary basis, as opposed to awarding subsidies on a case-by-case basis to individual enterprises. To use the Minister’s words, the Government want to try to create a “minimally burdensome” scheme. It would make it quicker and easier for subsidies to be given if this were to be the case.
As drafted, the Bill says that subsidy schemes must be made by a public authority only if the subsidies provided for by the scheme will be consistent with the subsidy control principles laid out in Schedule 1—I hope noble Lords are still with me; I think it will make sense in Hansard—or, where relevant, the energy and environment principles laid out in Schedule 2. That is all well and good. A subsidy made under a subsidy scheme must comply with the principles laid out in Schedules 1 and 2, so you would think it would be open to review on that basis and enforceable as such. But you would be wrong, because Clause 12(2) states that
“‘subsidy’ does not include a subsidy given under a subsidy scheme.”
Why? It does not make any sense. Hence Amendment 21 is needed to take out this nonsense, so that the subsidy control principles can apply to all subsidies.
Similarly, Amendment 24 would remove Clause 13(2) so that the energy and environment principles can also apply to all subsidies. Given that there is a threshold for transparency and accountability of about £500,000 for subsidies given under a subsidy scheme, that will very quickly add up to millions of pounds, for which, as the Bill is currently drafted, there will be no scrutiny. That would not serve businesses or the Government.
Amendment 68 is necessary because Clause 70(2) says that the CAT cannot be asked to review a subsidy decision if the subsidy was given under a subsidy scheme; only the subsidy scheme itself can be reviewed. That makes a nonsense of the enforcement regime because no route will then exist to review whether a subsidy complies with the subsidy scheme. To the question of when a subsidy is not a subsidy, the answer is when it is given under a subsidy scheme. Surely the Minister can see the absurdity of such a position. Every subsidy must be available for review if necessary. That is why these amendments are necessary. I thank the noble Lord, Lord McNicol of West Kilbride, for tabling them.
Lord Fox (LD)
My Lords, it is with great pleasure that I follow my noble friend Lady Sheehan and the noble Lord, Lord McNicol, in support of these amendments. Subsidy schemes seem to be designed as monoliths with no granularity at all. Why is that one of the central theses of this Bill? What possible advantage do the Government seek to gain, other than the ability to hide what money is going to whom? To those of us on this side of the Committee, that appears to be what is going on.
Amendment 21 would ensure that subsidy schemes cannot be used to hide subsidies that would, if they were stand-alone subsidies, be reported, as my noble friend set out. It is clear to all three of us that there is huge scope for significant and expensive subsidies to be hidden in these schemes. That seems to be the only reason why this is in the Bill. I am sure that the Minister will want to explain the reasons, because that must be the response to these amendments. I am sure that we will all be happy to throw our hands up if we are wrong and there is a hugely important reason why this is needed for the operation of the subsidies.
Amendment 24, co-signed by my noble friend, would require individual subsidies given under the subsidy scheme to be judged against the energy and environment principles. Once again, we are back to Monday evening, when my noble friend Lord Purvis posed a question regarding principle G in Schedule 1. The noble Lord, Lord Callanan, got to answer it; I suppose that this time it is the turn of the noble Baroness, Lady Bloomfield. During that debate, the Minister seemed to make it clear that sustainability considerations are indeed implicit in every aspect of the Bill. He suggested that, by implication, there must be some benefit for these things to be legal, but there is no explicit reference to that. I apologise if I am putting words in his mouth because principle G says the opposite. Therefore, rather than repeat what I have said, I have invented another one of my little examples, for which I apologise in advance.
Let us say that I have won a subsidy to expand my pottery business. As part of the submission, I cite increased employment and increased local sourcing of services as the beneficial effects that investment in my pottery business would bring. Nothing in the schedule or the rest of the Bill says that I have to benefit the environment by using less energy. If I am successful, I employ 30% more people and use 30% more local services, therefore achieving the scheme’s objectives, while also using 30% more energy to fire my products. That would appear to be how the Bill will work. Therefore, we need Amendment 24 to include consideration of the environmental impact that that subsidy would bring. It is very simple.
Amendment 68 would allow individual subsidies given under a subsidy scheme to be reviewed. Once again, it is cracking open the monolith and being able to look at the granularity within a scheme. Again, it follows my initial points: we need to be able to see inside these schemes for transparency to be available.
Baroness Bloomfield of Hinton Waldrist (Con)
I thank the noble Lord, Lord McNicol, for tabling Amendments 21, 24 and 68. Perhaps it would be helpful if I started by explaining the status of subsidy schemes in the Bill and why the Government have taken this approach.
Public authorities that seek to give multiple subsidies have three options available to them. First, they can consider each subsidy separately and assess its compliance with the principles and the other requirements in the Bill. Secondly, they can set up a scheme—that is to say, they can identify a group of possible subsidies, with defined parameters, and ensure that any possible subsidy within that group complies with the subsidy control requirements. Thirdly, they can use a streamlined subsidy scheme or another scheme where a public authority—perhaps the UK Government or one of the devolved Administrations—has already assessed that defined group of possible subsidies as compliant with the requirements.
Clauses 12 and 13 place a duty on public authorities to consider the subsidy control principles and the energy and environmental principles respectively before deciding whether to give an individual subsidy or make a subsidy scheme. A public authority cannot go on to give the subsidy or make the scheme unless it is of the view that it is consistent with the principles, including the energy and environmental principles the noble Lord, Lord Fox, emphasised. Once created, public authorities can then award multiple subsidies under that scheme with the confidence that they comply with the subsidy control principles.
By making a scheme instead of assessing multiple individual subsidies against the principles, public authorities will save themselves the administrative time and effort—ultimately equating to taxpayers’ money—it takes to consider any assessment, even one that is light touch and common sense. Schemes also provide a way for public authorities to grant subsidies with greater confidence and security because anyone wishing to make a challenge in the Competition Appeal Tribunal must do so to the scheme itself within the limitation period of one month following publication of information about the scheme on the transparency database. That one month period can be extended by a pre-action information request. We believe that this strikes the right balance between facilitating proper scrutiny of the scheme and removing any perpetual threat of challenge, which can make public authorities more reluctant to give, and recipients more hesitant to accept, beneficial subsidies.
Noble Lords will be aware that this subsidy control regime presents a new approach tailored to the specific needs of the United Kingdom. I do not believe that it is generally useful to justify elements of the Bill on the grounds that they correspond to how things used to be done in the EU state aid system, but it is helpful to underline that public authorities have been making use of subsidy schemes for the purposes of administrative simplicity for a long time. Although the EU mechanisms for decision-making and challenge were quite different, public authorities that gave subsidies in compliance with pre-approved schemes generally did not need to obtain further approval for each individual subsidy under a scheme and could proceed to give those subsidies with confidence.
I also add, as the noble Lord, Lord McNicol, pointed out, that transparency is very important. Subsidies given under schemes over £500,000 must be uploaded on the transparency database under the Bill as it stands. We believe that the £500,000 threshold represents an appropriate balance between minimising the administrative burden and requiring subsidy transparency in the public interest.
Baroness Bloomfield of Hinton Waldrist (Con)
I take the noble Baroness’s point on that. I would like to discuss it with the team when I have had a chance to look into it more thoroughly.
As I have just set out, under the terms of Clause 70, an interested party may not submit an application for the Competition Appeal Tribunal to review a decision to give an individual subsidy under a scheme. This is to ensure that scrutiny and challenge occur at the scheme level. The noble Lord’s amendment would enable applications for review to be made to the Competition Appeal Tribunal for individual subsidies granted under a subsidy scheme without the requirement for the broader subsidy scheme also to be reviewed.
Lord Fox (LD)
I am glad that the Minister has come to this point. Earlier on, I think I heard her say that transparency on a subsidy would raise the potential for a challenge to happen, but the whole system of policing this is through challenge, so how can challenge happen if invisibility is the result of this?
The Minister was suggesting that you can challenge only the overall scheme, not the individual granularity of a scheme within it, but that flies in the face of the central principle of the Bill which is that if I am a business and another local business gets a subsidy, I can challenge that through the CMA, assuming that there are grounds for it. If I do not know that my local competitor is getting that money because its subsidy is locked inside one of these schemes, I cannot challenge it. So the Minister is correct: transparency will lead to more challenge and that is the purpose of the systems put in place within the Bill. We need some working through of this from the Minister—it may not be now but perhaps in writing—because it seems that there are two things working in opposite directions.
Baroness Bloomfield of Hinton Waldrist (Con)
Given that the whole structure of the subsidy regime is to have the overarching scheme, compliant with all the principles contained in the Bill, and then a series of other subsidies given within that, if you increase the likelihood of challenge and therefore reduce people’s confidence in it, why would a local authority or a government body give a subsidy? Why would there be any incentive for them to give a scheme? While we are wholly appreciative of the importance of transparency, there is a balance to be struck here. Perhaps we could make more progress and I can write to the noble Lord.
Lord Fox (LD)
It was the Government who chose to put the principle of challenge on the face of the Bill. The noble Lord, Lord Lamont, and I are coming to the idea of creating a body that can police those things. Perhaps that would solve some of the problems that the Minister suggested—but those problems are central to the way in which the Government have decided that subsidies should be policed under the Bill.
Lord Fox (LD)
My Lords, it is a great pleasure to follow that speech by the noble Baroness, Lady Blake. I was reassured by some of things she said about how the Nolan principles are being applied at the local level—that that is her experience is reassuring. Of course, it brings this Bill into focus again.
To some extent the amendment is idealistic, but look at it the other way round. What is the converse of this amendment? It is that we allow a Bill to go through that will be subjected to huge political manipulation and little transparency. We have already seen that the Government are not averse to using political direction to spend literally billions of pounds. I ask the Minister to put himself in the boots of the Opposition, because the Bill that he is creating is one that future Governments will have to use. If the Minister, if he were listening, were to put himself—
Lord Fox (LD)
Sorry; I withdraw that. If the Minister were sitting in the opposition seat and opposing this Bill—or, indeed, opposing its use—he would, I am sure, find it very difficult. That is why it is to the enormous credit of Her Majesty’s loyal Opposition that they are standing hard against this Bill. I am sure that they harbour a view that, in time, they will find themselves in government and the temptation for them—indeed, for any Government—to use these powers would be quite high. It is therefore to the Opposition’s credit that, together, we are seeking to put some transparency into this.
At Second Reading, I said that the more flexibility and opacity there is in the subsidy system, the more opportunity there will be for subsidies to be directed for political purposes. I did not use the phrase “pork barrel” but I should have, because there is no other way of explaining how almost seven-eighths of the £1-billion English towns fund goes to Conservative-held seats. There is no way to explain how that money goes there other than political direction. I am sure that the Minister will tell me that there is a formula. There is a formula for almost anything; if you know what you want to create, you build the formula to achieve it. We are already seeing that. I assume that schemes like that will be rolled into a subsidy scheme so that we never see the granularity by seat. This is perhaps our last chance to point to that evidence before it all gets rolled up and aggregated so that we cannot disassemble it.
As we look at this Bill, we should look at the future of subsidies in this country, not the short-term gain for a political party. That is what we are seeing at the moment: a short-term gaming, or potential gaming, of the subsidy system. That is why this amendment was moved and why we have had an interesting short debate on it. I will be interested to see whether the Minister decides to engage at all, because sometimes he just does not. If he does decide to engage, I will be very interested to hear what he has to say.
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 McNicol of West Kilbride (Lab)
My Lords, I shall speak also to the other three amendments in this group. Without wanting to do the Minister’s job for him, let me start by acknowledging that there is a rolling programme of improvements to the subsidy database which I think all sides would acknowledge does not yet meet the standards one would expect a database of this importance to meet. Irrespective of that rolling programme of improvements, the introduction of a new subsidy control regime affords us an opportunity to look again at how subsidies are reported by public authorities so that they can be looked at by possible economic competitors and the public at large and be held to a higher account. The most obvious and effective way of ensuring the database fulfils its purpose is to ensure that it is subject to periodic audits with any recommendations being acted upon within a reasonable timeframe. We see no reason why the Minister would not want to accept Amendment 37. As the Government have freely admitted, the quality of the data has not been sufficient.
I turn to Amendments 44, 45 and 46. I thank the noble Lord, Lord Fox, for putting his name to them. Amendment 44 would require relevant authorities to include in the entry to the database the exact date on which the information was submitted. One of the fundamental differences from the previous scheme, the European state aid scheme, was that agreements were made before the scheme came into effect. The flipside of this is that that obviously speeds it up, but the schemes or the subsidies will already be in place. Putting into the database the specific date on which the information was submitted will again help with the transparency around it. It is hard to think of any case against such a requirement so I hope the Minister will be able to confirm that. It increases transparency and provides clarity for those gathering the information from the database. It may also allow identification of those authorities that are particularly good or bad at submitting their entries.
Amendment 45 would require information on domestically sourced content to be posted on the database. While Clause 17 prohibits subsidies contingent on the use of domestically produced content, nothing in the WTO provisions or elsewhere, including the TCA, would prevent basic reporting requirements. Some organisations, including the GMB trade union, believe that regular reporting of the use of domestic content could drive—but, importantly, not compel—contractors to make better use of UK supply chains. Indeed, in specific cases such as steel procurement, the Government have set a benchmark of 60% domestic content for the offshore wind sector, so some of these requirements already exist. Putting them inside the database and shining a light on them could help encourage more.
Finally, Amendment 46 would require authorities to demonstrate the terms and conditions of their subsidy schemes. When I first read it, I thought Amendment 46 may well have fitted into the group we dealt with three groups previously, but because it is relevant to the database it probably sits within this debate. The argument, however, is very similar to the debate we had three groups ago.
All the amendments are intended to improve the quality of the database and the amount of information available to practitioners operating in that field. Interestingly, Chapter 3 of the Bill is headed “Transparency”, so a bit more transparency may help.
One point not covered by the amendments, but to which we may well come back, is that the chapter on transparency, especially Clause 34, uses the word “may” a lot. To take one example, Clause 34(3), at line 28, says:
“In relation to subsidy schemes, the regulations may require a public authority’s entry to include”.
When the Minister responds, I wonder whether he could give us just a bit more detail. These are partly probing amendments but, on the use of “may”, when would those regulations and requirements on the public authorities have to be followed and when would they not have to be followed? Again, I think the use of “may” in there does not help. With that, I beg to move.
Lord Fox (LD)
My Lords, I rise to speak to Amendments 44, 45 and 46, to all of which I have added my name. It is a pleasure to follow the noble Lord, Lord McNicol. Amendment 44 requires the date a subsidy scheme is entered into to be put into the database, Amendment 45 is about domestically sourced content and Amendment 46 is about other areas of specifying the date. All three of these amendments come together to play to the word that we have been using in these groups, which is “transparency”.
I shall briefly focus on Amendment 45 because it is an interesting point. The nature of what we are talking about hinges around Clause 17(1), which I assume is a WTO-driven point that we cannot favour domestic content over external content. I accept that we need to follow WTO rules. However, as the noble Lord, Lord McNicol, said, that does not stop us collecting the data. Why collect the data if you do not have an actionable need to use it? Therefore—never mind the subsidy that is running, for which we are collecting the data—if it turns out that all that subsidy leads to imports only rather than domestic benefit to the supply chain, when we come to extending or repeating that subsidy or using it in a similar way in another sector, I assume that it is perfectly legal within WTO for the Government to take the benefit and the learnings of that data, having of course given themselves the power to collect it through Amendment 45, to modify future schemes which would still be legal within WI and benefit the domestic supply chain. WI? Jam for all. I meant WTO.
It is a legal question. The Minister may not have the answer straightaway. That data having been collected, I assume, and I would like confirmation, that it is perfectly legal to use that data to design repeat or future schemes so that the UK economy benefits more from that subsidy. That is my main question on these amendments.
Lord Callanan (Con)
I am grateful to the noble Lord, Lord McNicol, for these amendments. I think we have much more consensus on the principles. I shall start with Amendment 37. I think we agree that the database should be as accurate as possible. There was an extensive debate in the other place about the quality of the database and the requirements on public authorities when uploading to the database. As was set out there, the database is relatively new and, as the noble Lord acknowledged, it continues to be developed. My department has been working on a range of improvements and we continue to review how it operates. I genuinely welcome any feedback that noble Lords have now or in future on how it can be improved.
Since Report in the other place, our officials have launched an initiative to follow up with public authorities where the information on the database is vague or the links provided go to a landing page rather than providing the necessary detail about a subsidy. In addition, where the subsidy control team receives information about schemes that have been made, that information is now cross-referenced with what is on the database to ensure that it is correct. More broadly, the Government are committed to best practice when it comes to public data, and the subsidy database uses the service standards specified by the Government Digital Service.
Lord Fox (LD)
I understand the Minister’s sensitivity, and I thank him for his answer. I was putting it the other way around: having had a scheme that, it turns out, really benefits only the international market, as the data tells you, that data can then be used to decide not to have a similar scheme. So it is a question not necessarily of designing a new scheme but of not committing the same mistake again because the data gives you the ability to make those decisions. That was the point that I was trying to make.
On the previous issue, I am sure that the Minister will already know that the impact assessment says that the cost of adding more data points is minimal, so there is no cost in financial terms, although obviously there is some administrative cost.