Subsidy Control Bill

Lord Hope of Craighead Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

[Lord German (LD)]

My Lords, I have attached my name to Amendment 65 and want to examine the cash and resources which the Government intend to put into the CMA.

Talking of cash and resources, I was very disappointed to read the Minister’s letter to my noble friend Lord Purvis today, in which he says of a previous debate about money:

“I regret that I am not in a position to confirm the per capita allocation of the UK shared prosperity fund in each nation at this stage. However, I emphasise that the Government is meeting its manifesto commitments in Scotland, Wales and Northern Ireland. The fund will match previous EU funding in real terms for all these places.”


The letter says that the fund will match previous funding, but it also emphasises that they are meeting their manifesto commitments. How on earth can you say that you are meeting your manifesto commitments when you cannot tell us whether you are giving £780 per head to Wales in the way that it was described, as a per capita allocation? Clearly, having a per capita allocation is how you judge whether you are meeting your manifesto commitments. I am very disappointed that the Government say that they are meeting their commitment but are unable to provide the figures to show that they are doing so. I hope they will rectify this swiftly.

Turning to the CMA and its resources, we were very fortunate some years ago to receive evidence from the CMA on its readiness to take part in the new world we were entering. However, it is very important to separate out the CMA’s need for resource to carry on its traditional functions of mergers, acquisitions and so on. The chair of the CMA said then, regarding the non-subsidy side:

“We will be involved in much bigger and arguably more complex cases than we typically deal with. We will have to deal with mergers. We will also be involved in the enforcement cases. The extra workload, the complexity and the likely litigation that follows such cases ... implies significant expansion in our activities.”


The chief executive then said:

“We expect a 30-50% increase in mergers coming our way. However, these will tend to be bigger and more complex mergers. On the antitrust side we think we will do between five and seven large extra antitrust cases a year. That will mean an increase of at least 50% on our current workload in that area.”


Between the two of its own size, it is clear that the CMA found that cash was very important.

The chair went on:

“The key point on resources … is that we need approval for the extra cash that we need … We need the cash, but then we need the time to attract and recruit the talent and get them up to speed in terms of the work. We need to start having action relatively soon, given the timescales that we are talking about.”


Given that this was a few years ago, the timescales are now upon us because this Bill is where it all happens. On state aid, he said:

“We have no experience in this area … It would add, I would emphasise, to the expansion that we have to undertake anyway”—


that is, on the other side of the CMA’s work—

“and we would have to find the skills … given the lack of experienced people in the UK itself. It would be a challenge”.

The key challenge identified was the recruitment of lawyers. How is that going? As far as I can tell, lawyers do not come cheap and, with respect to my colleagues behind me, good lawyers come even less cheaply. It is a matter for the CMA to have the appropriate lawyers. At one point, the chief executive said that they are difficult to find and that

“we are now thinking about expanding our office in Scotland, to tap into talent there.”

So it will have talent from Scotland but no representation regarding the decision-making powers of the board—but there we are. He went on:

“We want to see where talent is and what we can do to attract people and keep them in the CMA.”


The price of the challenge was that of finding appropriate salary levels.

In replying, can the Minister tell us how much money, in raw terms, has been put into both sides of this equation: into the traditional work of the CMA, which has now fallen upon it because we have left the European Union; and into the subsidies side? How many new lawyers has the CMA been able to attract? At the time, the chair said that there are lawyers working in private practice

“who are well experienced … in dealing with state aid applications”

on the side of the role now needed by the CMA. How many lawyers with this sort of experience have now been recruited, and at what level? Earlier, the noble Lord, Lord Lamont, talked about the need to have experience on the side of the regulator that is greater than the experience of the people operating the subsidies. We will need lawyers who are even more skilled and who have the greatest skill in managing this sort of operation. I repeat: I suspect that they do not come cheap.

In replying, can the Minister outline specifically where and when the recruitment will take place, how much money is on either side of the equation and whether the Government have a deadline for making sure that all the resources are in place? Also, I will continue to pursue my claim: can the Minister tell me when the Government will match the £780 per head that was promised and is now in the letter?

[Lord Hope of Craighead (CB)]

My Lords, I want to add to that list of questions. Does the Minister have any information on where the CMA is to be based? It is one thing if it is in London, and quite different if it is in Cardiff, Glasgow, Birmingham or Manchester, for example. One of the concerns is the constant pressure that the devolved Administrations have against the south-east and London-based administrations. If there were some way in which the CMA could locate itself further away from the south-east and closer to other areas, that would at least be to some advantage.

[Baroness Bloomfield of Hinton Waldrist (Con)]

My Lords, Clause 68 requires that the CMA establishes a new committee of its board called the subsidy advice unit for the purposes of undertaking the subsidy control functions set out elsewhere in the Bill. I recognise that nothing I can say at the Dispatch Box will completely allay the fears of the DAs that this is a power grab or that we have malevolent intent in all this. All I can say is that the Government are very well aware of these issues. We talk about them constantly and will endeavour to continue the dialogue as we go forward on many fronts.

To return to these amendments, the subsidy advice unit will be a specific committee within the CMA dealing with subsidy control. It will comprise exclusively staff and members of the CMA. In this instance, “members” of the CMA refers to, among others, the chair and individuals who sit on the CMA board, the CMA panel of competition experts and the office for the internal market panel and its chair; “staff” refers to the civil servants employed by the CMA.

Amendment 64 seeks to allow the CMA chair to appoint to the subsidy advice unit non-executive members

“with relevant experience in relation to each of Wales, Scotland and Northern Ireland.”

The CMA was chosen as the home of the subsidy advice unit because of its experience and credibility in acting as a regulator and adviser in matters of competition and consumer law on a UK-wide basis. In carrying out its new functions under the SAU, the CMA will continue to act as it always has successfully, with the whole of the UK in mind.

It is notable that the amendment does not make any mention of “relevant experience” in relation to England, perhaps implying that the CMA already has an excess of England expertise but a deficit in relation to the other parts of the UK. I cannot possibly agree with the noble Lord on that point, if indeed that was the implication.

The amendment is unnecessary because the CMA can and does already recruit to the unit personnel with “relevant experience” in relation to all its functions, various different markets and all parts of the UK. The CMA has an excellent track record of recruitment and retention of staff and members from across the UK, and currently employs staff in Belfast, Cardiff, Edinburgh and London. The CMA has already undertaken external recruitment to a number of posts in the SAU. These were advertised on a location-neutral basis and were open to applicants willing to be based in any of the CMA’s existing offices. It is unnecessary to impose excessive and unhelpful complexity on the CMA’s recruitment process when it has already proved quite capable of finding persons with the “relevant experience” to carry out its functions.

I turn to Amendment 65. Part 4 of the Subsidy Control Bill represents an important pillar of the new domestic regime. The additional flexibility that public authorities will enjoy to design bespoke subsidies and schemes and quickly bring them to fruition to address identified policy problems must be balanced by a proportionate mechanism to provide an appropriate degree of scrutiny. This scrutiny will be crucial for the most potentially distortive subsidies and schemes, which is why the SAU has been given a role in advising public authorities before they award the most potentially distortive subsides or schemes. In response to the noble Lord, Lord Bruce, I say that neither the SAU nor the Secretary of State will be able to block a subsidy being awarded.

The CMA will also have the role of monitoring the efficacy of the entire regime through a periodic review and report to Parliament. This will ensure appropriate oversight and scrutiny of the regime by Parliament to confirm that it remains relevant to the needs of the whole of the UK.

Amendment 65 requires that the Secretary of State must undertake an assessment of the CMA’s capacity to fulfil its new functions under Part 4 of the Bill and make a Statement to both Houses on their findings. If the Secretary of State finds that the CMA is not sufficiently resourced, their report to Parliament must also outline the steps the Government intend to take to address this. I appreciate the noble Lord’s intention and that this is a probing amendment to ensure that the CMA is properly prepared to carry out its new statutory functions. I therefore offer the following statement on preparations for the new subsidy advice unit.

The CMA was allocated funding of some £20.3 million at the spending review in 2020 to establish three new functions within the CMA: the subsidy control function, the office for the internal market and the digital markets unit. Following the 2021 spending review, this budget of around £20.3 million will be maintained for the next three years. The CMA will continue to allocate funding in the 2022-23 financial year to reflect the estimate of resources needed to establish the new subsidy advice unit. This estimate reflects both the functions set out in the Bill on introduction, and the estimated number of subsidies and schemes of interest and particular interest that would be referred to the SAU.

The estimated case load of around 20 cases of both categories per year was arrived at using the methodologies set out in the Bill’s impact assessment. There is unavoidable uncertainty in this estimation, since the SAU’s referral functions are new and unprecedented. However, Her Majesty’s Government remain confident that this represents a reasonable estimate based on the best available evidence.

In terms of recruitment, to establish the SAU, the CMA has estimated that approximately 50 new posts will need to be created across all its professions. The CMA has recently undertaken external recruitment to fill several policy and project management posts in the subsidy advice unit, as well as allocating resource internally. The CMA will continue to recruit to its pools of economist, legal and business adviser resource over the coming months. The CMA is looking to recruit staff with a range of skills and experience, which includes building on its core competition expertise, as well ensuring the necessary skills in areas such as stakeholder engagement.

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[Lord Hope of Craighead (CB)]

My Lords, one problem that legislators always face is the inability to look with complete clarity into the future. Trying to predict with any degree of accuracy how this system will work is almost impossible. The advantage of the proposal that my noble and learned friend Lord Thomas is advancing is that if cases go to the CAT, gradually there will be a build-up of decisions that will begin to add extra guidance that we cannot provide in the legislation. This is the way the law works in many fields.

It is that aspect that appeals to me. Gradually, through a series of decisions in various situations, the CAT will be able to add an extra dimension to the way in which this system has tended to work. There is a value in this. I think the word “enforcement” is perhaps rather pointing in the wrong direction. It is more like building up decisions, a category or a case law that would act as guidance for further cases, so that one does not constantly have exactly the same problem being advanced. We would be able to say that there is a decision by the CAT that tells us the answer in that particular situation. Decisions of that kind can be helpful, and I hope very much that the Minister will see value in what my noble and learned friend Lord Thomas is proposing.

[Lord McNicol of West Kilbride (Lab)]

We welcome the tabling of these two amendments, which move us on from the composition and core investigatory powers of the CMA towards enforcement or, to use the word of the noble and learned Lord, Lord Hope, “guidance” of subsidy decisions, via the Competition Appeal Tribunal. The two amendments in this group aim to achieve similar things but by different means.

In relation to Amendment 67 from the noble and learned Lord, Lord Thomas of Cwmgiedd, the CMA would have the option to refer matters to the CAT. That is a sensible proposition, and we are more than happy to support it. It seems counterintuitive to have a body tasked with investigating or looking at whether due process was followed when the subsidy was awarded, only for a separate person or entity to be left to initiate enforcement proceedings. Even if an interested party were to use the SAU’s output as a basis for referring the matter to the CAT, how much weight does the Minister think such a report would carry? As an entirely separate entity, would it be reasonable for the CAT to disregard or override any of the SAU’s findings?

Amendment 71 from the noble Lord, Lord Fox, takes a slightly different approach. It gives the CAT the powers to pre-emptively investigate subsidies if it believes that an award is not consistent with the principles of the Bill. I am more than happy to support this amendment. Whichever approach is taken, it is clear that all involved need greater clarity on how disputes will play out. I will not repeat the points made by the noble Lord, Lord Lamont, but independent enforcement will bring clearer and better oversight to the Bill.

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[Lord Wigley (PC)]

My Lords, I am delighted to support the amendment put forward by the noble and learned Lord, Lord Thomas of Cwmgiedd, and agree strongly with the points that he made in opening this short debate. The devolved regimes must surely be in a position in which they can be regarded as interested parties. It stands to reason that that must be the case in certain circumstances, and there must be provision within legislation for those certain circumstances to be looked after in the context of this Bill.

I was delighted to have the opportunity to add my name to Amendment 79 put forward by my colleague, the noble Lord, Lord German. I support the points he made in regard to it. The need for some indication to the devolved regimes that they are partners has surely come out of the debates we have had in the last three or four sittings of this Committee. It is time that the Government found some way of indicating that they are prepared to work on a partnership basis. These two amendments pave the way for that, and I hope the Government can respond positively.

[Lord Hope of Craighead (CB)]

My Lords, I put my name to Amendment 69 as well, and I support exactly what my noble and learned friend Lord Thomas of Cwmgiedd said about it.

It is worth noting that the definition of “interested party” has to be read together with Clause 70(1). The point is that to apply to the Competition Appeal Tribunal you have to be two things: an “interested party” and “aggrieved”. The definition takes you part of the way there. I am thinking in particular of the Secretary of State, who is an interested party but in order to apply has to demonstrate that in some respect he or she is aggrieved by the making of the subsidy decision.