Subsidy Control Bill

Lord Fox Excerpts

Committee stage
Monday 7th February 2022 Grand Committee

[Lord Wigley (PC)]

My Lords, I shall speak to these amendments very briefly. This has been a bipartisan debate, and there is a consensus across the Committee that amendments along these lines can improve the working of the Bill and make it more acceptable in the court of public opinion. I urge the Minister, if he cannot accept the amendments as they stand today, to consider at least bringing forward his own amendments at the appropriate time.

[Lord Fox (LD)]

My Lords, I was not intending to speak to this set of amendments until I received the Minister’s letter—this time before the Committee started rather than during it, which is a great step forward. Unfortunately, the letter creates a problem for me because what I understand from the debate seems not to be represented in this letter, so perhaps the Minister can explain.

On the issue of subsidy schemes, the letter states:

“As my noble friend Baroness Bloomfield stated during the Committee session, all schemes must be uploaded to the transparency database”—


and I understand that to be true, so the scheme will go up on the database. The letter continues:

“This database will be freely accessible and is a key part of the new subsidy control regime, enabling the public and any interested parties to see which subsidies have been awarded, and to whom.”

But my understanding is that people will be able to see only those subsidies that exceed the limit, whereas the implication of the letter is that all subsidies will be accessible to everyone freely via the database. I would like the Minister to acknowledge that that is not the case, whether they are within a scheme or stand-alone, and this letter is therefore incorrect.

[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.

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[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.

[Lord Fox (LD)]

I have a brief question because £14.5 million is a curious number. There is no reason why it should be a round number in millions, but it is strange. Can the Minister explain the genesis of that particular number? Also, could I be cc’d into the Minister’s reply to the important question asked by the noble Lord, Lord McNicol, on the subject of what is in and what is out?

[Lord Callanan (Con)]

Indeed. The noble Lord, Lord Fox is clearly not tired of receiving letters from me, so I will happily copy him into the letter that I send to the noble Lord, Lord McNicol. I will have to come back to him on his question about the £14.5 million. I will include that in yet another letter—or maybe even the same one.

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[Lord Lamont of Lerwick (Con)]

My Lords, I added my name to these amendments in the name of the noble Lord, Lord McNicol. I shall not weary the Committee by repeating the points that he made, but I strongly agree with him. I added my name just because I was puzzled and regard as unfair the imbalance between the time given to public authorities to list subsidies and the very short timetable for people to object to them. I do not see why it should take six months to make public what has been done, while one month seems an extraordinarily short time for somebody to challenge it. As may have been said when I was unfortunately out of the room trying to get on PeerHub, one could easily imagine circumstances where perhaps the website was not working very well, and a few days were missed. “It never happens,” the Minister says. Well, we shall see. That would be a first in public sector computers.

There seems to be an imbalance here. What is sauce for the goose ought to be sauce for the gander—or is it the other way round? Six months is certainly far too long and one month is far too short. I agree with everything that the noble Lord, Lord McNicol, said.

[Lord Fox (LD)]

My Lords, during the debate on the previous group, the noble Baroness, Lady Altmann, asked, “How will they know?” This amendment seeks the answer to the question: how will they know in time? As the noble Lord, Lord McNicol, said, because of the limits of reporting, we are talking about very sizeable subsidies that could exist with a competitor company for up to a year before a person is able to find out what their company is competing against. I am sure that the Minister would understand that that is not a fair situation, and it is within the gift of the Government to make it fairer.

Both noble Lords spoke about the imbalance; that is, a long time to report it and a short time to appeal it. One would almost think that the Government were seeking to discourage the process of challenging subsidies. I am sure that that is not the Minister’s aim and therefore the best way of expressing that aim is to redress that balance.

Reflecting on the last debate and this one, I think that we are in a bit of a mess around reporting—or, indeed, we are not but the Government are. On the one hand, we have the database with the six-month time limit and a very high ceiling; on the other hand, we have local authority websites with a three-month time statute and a much lower ceiling, and potentially we have FoIs—although the problem is that you need to know something exists before you can FoI it. The Government have therefore knowingly or unknowingly set up a multiple market for information.

If I am a business and I need to know what is happening in my sector, the Minister will say that this information is freely available. It is freely available on a pull basis. I shall have to employ someone to go out there regularly to check whether the information exists, where it is and what is happening in my sector. If I am a small business in a market where the receipt of subsidy could affect my business, I shall have to employ an extra person or part of an extra person to do that. This does not seem a sensible way of dealing with the issue. A central database with a shorter time span and a lower value ceiling would be the best way to help businesses thrive.

[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.

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[Lord McNicol of West Kilbride (Lab)]

My Lords, it is a pleasure to follow my noble friend Lord Whitty. I agree with all his comments. I am grateful to the noble Baroness, Lady Randerson, for tabling this amendment to enable further and deeper discussion on another of the many concerns that were raised by colleagues across the House at Second Reading.

As we have already debated, although relatively briefly, the new subsidy regime will operate alongside certain legacy schemes, including, but not limited to, basic payments given under the EU’s common agricultural policy. As we have heard, the Government’s decision to include agriculture and fisheries in the scope of the new subsidy regime is an interesting one. BEIS asserts that there is logic in applying the same rules across the board. While that might make sense in some areas, doing so raises other significant issues. As we have heard from my noble friend Lord Whitty, agriculture is fundamentally different and therefore so are the issues relating to the subsidies and the subsidy control systems. That is before we even touch on the issue of devolved responsibilities.

As we know from many hours following debates on the Agriculture, Fisheries and Environment Bills, these are areas of devolved competence. Some of those matters have been addressed in discussions on the UK-wide common framework arising from the Brexit process. However, due to Her Majesty’s Government’s treatment of subsidy control as an entirely reserved matter, there is no common framework on this topic, something that we have already touched on in Grand Committee and will be returning to in later groups.

Specific nations and regions of the UK have very different interests from those of their neighbours. Public authorities will of course be able to do what they deem appropriate in the context of overarching subsidy control principles, but this is one of the areas where we may end up seeing subsidy battles and/or legal appeals. If we can reach agreement in your Lordships’ House, then we may be able to reduce the chances of some of that happening. One potential solution to some of these issues may be for the Secretary of State to establish one or more streamlined subsidy schemes covering agriculture. I ask the Minister: is that one of the department’s intentions?

I want to ask a couple of practical questions that have been subject to initial exchanges between my advisers and the Minister’s office. I thank her office for that information, but it raises some questions. Is it the case that schemes already made under the Agriculture Act, for example, will be treated as legacy schemes for the purposes of this legislation? If the environmental land management scheme, which has already been rolled out, is treated as a legacy scheme but the Defra Secretary of State later introduces a separate agricultural scheme using powers under either Act, will that new scheme be subject to the subsidy controls? If the answer is yes, will that not make it harder for everyone involved to keep track of which requirements apply and when? If so, how exactly does the decision to include agriculture in the new subsidy control regime meet the target of making the new process more straightforward and less burdensome?

A number of other issues arise around devolved authorities, many of which have been touched on. We will come on to them when we look at the CMA but, if we do not make changes to the Bill as it is currently written, we could end up with a situation in which the devolved authorities have responsibility for these delegated areas but no oversight in the Bill—no engagement with the CMA or the subsidy advice unit—and will not be at the heart of the decision-making. I look forward to the Minister’s response.

[Lord Fox (LD)]

My father spent half his working life milking other people’s cows and the other half milking cows in a small, tenanted farm. Farming is a way of life across the United Kingdom. You must be committed to it to make it work, so people are anxious when they see this subsidy scheme in such turmoil.

At Second Reading, the Minister said that including agricultural subsidies in the subsidy control regime would

“help to protect competition and investment”—[Official Report, 19/1/21; col. 1749.]

in agriculture and fisheries. First, will the Minister acknowledge that the agricultural subsidy scheme has much wider objectives than simply competition and investment? There is a range of social and other economic benefits that the schemes are supposed to be designed to protect. Secondly, how does including agricultural and fisheries subsidies in the subsidy control regime protect competition and investment better than leaving them where they are: outside the scheme?

[Lord Purvis of Tweed (LD)]

My Lords, I wish to ask the specific question of how, if this Bill includes all agricultural support without the delineated areas we have discussed previously in Committee—such as for upland farmers and areas with less favoured status—it will interact with the internal market Act.

My noble friend Lady Randerson specifically referenced hill farmers. I represented many hill farmers; I will debate with my noble friend separately the merits of Welsh lamb as opposed to Scottish Borders lamb, but it is fairly obvious which is the superior product. The point is that specific subsidy support for the type of production rather than the end product is allowed under the subsidy scheme because upland farms have less favoured area status. It was delineated.

However, the Government proposed under the internal market legislation that no discrimination would be allowed on any of the end product—the lamb. We allowed that discrimination because of the less favoured area status for hill farming. I question whether, if all this is now wrapped into the subsidy Bill, this is open to challenge in terms of competition and non-discrimination, as specific support for the production of one product—lamb—will be provided to certain farmers in certain areas but will not be available to others who do not have less favoured area status.

This Bill removes all those delineated areas. Presumably, all that is now within scope of the internal market Act. That means, I think, that none of this area of support can have the assured status that it did beforehand. I strongly support my noble friend’s efforts to get clarity on this.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

The public authorities can devise their own schemes according to their own policy priorities, as long as they comply with the principles of the Bill.

[Lord Fox (LD)]

Let me give a specific example. Herefordshire County Council decides, within the seven principles of the Bill, to subsidise the production of beef in Herefordshire, brands it “Herefordshire beef from Hereford animals”, and then markets it in Aberdeenshire at a rate that undercuts Aberdeen Angus or whatever it is that my noble friend Lord Bruce is peddling in his area. It seems to me that this Bill puts in place a chaotic situation that cannot be managed. We do not know what an area is, we are allowing flexibility for any authority to take action as long as it sits within the seven principles, and then we are going to rely on the CAT to adjudicate. Is this really what the Government have in mind?

[Baroness Bloomfield of Hinton Waldrist (Con)]

I think a lot of this overlaps with the internal market Act, which we will debate at length on a later group of amendments. All I can say is that the set of principles will cover the position of the Herefordshire farmer.

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[Lord Bruce of Bennachie (LD)]

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

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

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

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

[Lord Fox (LD)]

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

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[Lord Callanan (Con)]

Do we have time to finish?

[Lord Fox (LD)]

I think we are comfortable starting again on Wednesday and giving this proper time.

[Lord McNicol of West Kilbride (Lab)]

The noble Lord, Lord Lamont, has yet to respond as well. It will not take long on Wednesday.