Subsidy Control Bill

Lord Lamont of Lerwick Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

[Lord Callanan (Con)]

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

[Lord Lamont of Lerwick (Con)]

Again, before the Minister sits down, I have a couple of questions. I apologise to him for this, but we have had the benefit of actually seeing his words written down in Hansard. Some of the phrases he came out with were quite dense and intricate, and I was rather puzzled by two points. The first was when he talked about the functions of the SAU. He said that it was intended

“to support public authorities in giving the subsidies that are most likely to be distortive.”—[Official Report, 7/2/22; col. GC 383.]

I am puzzled by the word “support”, and puzzled that we would want to support the ones that are most distortive. I am sure I am misunderstanding it, but I would like the Minister to explain.

[Lord Callanan (Con)]

I will have to look back at those remarks myself. It is possible that I was misinterpreted at the time, but I will have a look and come back to the noble Lord.

[Lord Lamont of Lerwick (Con)]

Let me also read out a second bit that I felt was particularly incomprehensible. If anybody in the Committee can understand it, I will be very impressed. I will read it slowly. The Minister said:

“I do not believe there is a contradiction in saying that a full assessment of compliance is light-touch regulation for the public authority but could prove arduous to replicate for the subsidy advice unit.”—[Official Report, 7/2/22; col. GC 383.]

[Lord Callanan (Con)]

I think that speaks for itself. I stand by those words.

[Lord Callanan (Con)]

Yes. Subsidy is not a regulated provision within the scope of the UK provisions. We are debating this in a future grouping, so we will no doubt be able to come back to it, but my advice is that it is not.

[Lord Lamont of Lerwick (Con)]

My Lords, I am very grateful to all those who spoke in the debate and supported my Amendments 55A, 57A and 57B. I am grateful in particular to the noble and learned Lord, Lord Thomas, who made a very powerful speech about the need for an independent evaluation of subsidies. The noble Lord, Lord Purvis, pointed out that, if we had an independent assessment, it would increase the possibility of consistency in the whole regime, which I thought was a very important point. The noble Lord, Lord McNicol, made the point that it was completely counterintuitive, after everything that had been said about the control of subsidies, not to have an independent evaluation. So I hope that there is quite a degree of support in the Committee for these amendments.

I do not think that the Minister today really explained why we could not have an independent regulator. He said that it would require a certain scaling up of resources. Well, obviously, it would. He said that it would become more like a regulator, rather than whatever else it is. Well, we want it to be a regulator—that is the whole point—with control of subsidies. But I really did not feel that he had made out a case against. He told us what the SAU does, but he did not explain why it would be wrong for it to do more things or to be scaled up and become a proper regulator.

The reason why I was particularly interested in the two passages that I put to the Minister—he is going to write to explain them to me—is that the more I listened to him, the more it became clear to me that the general line in this Bill is, “Public authorities know what they are doing, so let them, by and large, get on with it. Maybe somebody will object; they have 28 days. Don’t make it any longer because a lot of them might object; just give them 28 days. But by and large public authorities know what they are doing, so we want them just to get on with it”.

The Minister said that the SAU would not carry out its own assessment of compliance. Is that enough? It seems as though what it is going to do is extremely limited: it is just going to examine process. The Minister said:

“The SAU would be acting without the understanding and body of evidence that the public authority will have created in developing the subsidy”.


That is, the public authority will know more than the people who are checking the subsidy. Is that really the right way round? It seems to me a real Alice in Wonderland to call this control of subsidies, when those who have actually invented the subsidy and paid the money know more about it than the people who are regulating them—and this is admitted by the Minister at the same time. The Minister also said:

“There is no intention to build up an extensive monitoring function within my department or the CMA”.—[Official Report, 7/2/2022; cols. GC 383-4.]


Surely, that is exactly what we need. If we are talking about the control of subsidies, how can we have it without monitoring subsidies? That becomes even weaker when you consider what has been referred to again and again in Committee about the 28 days.

It seems to me that the SAU is far too weak for this really to be a Subsidy Control Bill; it ought to be renamed the “Support of Subsidies Bill”, because that is actually what it is. The reality of the Bill is that it is not attempting to control subsidies at all; it is just giving expression to the undertakings that the Government gave on Brexit in the TCA. I see the Minister smiling, although I shall not refer to that again. The Government gave assurances that were embodied in the TCA about not having subsidies that might distort competition with the European Union, so we have to have a control mechanism, and it is this Bill. But there is also a national interest in having proper competition and control of subsidies, and I do not think, frankly, that the Bill does that. It is far too weak. But having made my points and not persuaded the Minister, I look forward very much to the letter he is going to write to me explaining what he said. With that, I withdraw my amendment.

Amendment 55A withdrawn.

--- Later in debate ---

There is a second consideration. Private individuals are not only influenced by money. They may be influenced by political or other considerations so that they do not want to challenge something that is obviously wrong. It must be in the public interest for an independent person—here, the CMA—to be able to challenge such a scheme.

[Lord Lamont of Lerwick (Con)]

Would the noble and learned Lord make it clear that he envisages, through this mechanism—or route, as he describes it—that the CMA would be allowed to challenge the Government?

[Lord Thomas of Cwmgiedd (CB)]

Yes, indeed; that was my third point. The noble Lord has made it most eloquently in one sentence so I need not make it any further.

My last point on this is simply that the time limit is very short. It will be difficult for private litigants to decide that they want to bring a case. The CMA will be well aware and can act within the time limit. For all those reasons, I beg to move that this amendment be inserted into the Bill.

[Lord Lamont of Lerwick (Con)]

My Lords, I have added my name to this amendment, which was so powerfully and eloquently moved. Its purpose is to give the CMA standing to exercise enforcement powers through the CAT.

To some extent, this amendment overlaps with the amendment I moved earlier. I strongly agree with what was said about the limitations of relying on people who are affected by subsidy decisions to challenge them within the tight time limits that we have debated. I have already said, probably at too great length, that there needs to be much more independent enforcement.

I do not want to go over all the points I made earlier but, just in case some of the Committee thought I was overegging or inventing it, I want to refer to what the Financial Times said about this Bill. It carried an article on 2 July headed:

“The UK carves a risky new path on state aid.”


It went on to acknowledge what the Government have claimed as the great advantage of the new system—that it is speedier and more flexible—but commented:

“On the altar of speed, it”—


the Government—

“has sacrificed scrutiny. This is worrying from a government that has shied away from accountability and spent lavishly on contracts.”

It went on:

“The government envisages public bodies largely having a free hand in deciding whether subsidies comply with broad principles.”


I mentioned this point earlier: really, the regime seemed to amount to allowing public authorities to do whatever they wanted, and the assumption was that public authorities knew the law and would therefore observe it.

Finally, the FT said:

“The combination of a light-touch system and an interventionist government willing to spend lavishly on special projects creates dangers of a distortive spending spree—and of ministers becoming vulnerable to lobbying by vested interests.”


That is one of the problems. I am not in any way questioning the integrity or motives of the Government, but it is so easy for vested interests to have an undue influence on these decisions and it is a slippery road down to the politicisation of subsidies. I very much think that we need to move one way or another, whether it is by the route that the noble and learned Lord, Lord Thomas, so eloquently laid down or the one that I referred to earlier. We need to move to more arm’s-length, independent and effective enforcement.

When he spoke in reply to my earlier amendment, the Minister said the Government will not refer themselves to the CMA, as though that were perfectly obvious. It may be perfectly obvious that no one would do that, but in a sense they ought to. There ought to be a mechanism by which a Government are referred to the CMA.

When I first got into the House of Commons, I used to come and listen to debates here. People always gave Latin tags. I am sure that if Lord Boyd-Carpenter or Derek Walker-Smith, Lord Broxbourne, were examining this Bill today, their Latin tag would be “Quis custodiet ipsos custodes?”—who will guard the guards? I am sure everybody knew that already. That is the principle. Who is going to contain and limit the Government?

[Lord Fox (LD)]

My Lords, I rise to speak to Amendment 71 in my name. I thank the noble Lord, Lord Lamont, and the noble and learned Lord, Lord Thomas of Cwmgiedd, for their support. I acknowledge that anything I say is unlikely to carry the weight of those two authoritative Peers, so your Lordships will be pleased to hear that I will be brief.

The noble and learned Lord, Lord Thomas, raised the issue of private enforcement. It is intriguing to me that the Government should choose private enforcement to police something as important as a subsidy regime. They do not use private enforcement to police their income tax regime or all manner of important economic activity, yet they have chosen this route. They have explicitly decided to eliminate the devolved authorities, councils and LEPs from the process of enforcement and have added a 28-day deadline to that private enforcement process, which makes it almost impossible for private individuals to enforce in a timely manner. One would think that enforcement was perhaps not at the forefront of the Government’s objectives when looking at the Bill, and nothing so far has convinced me that the Government are interested in enforcing.

At Second Reading, the noble Lord, Lord Lamont, let out the cri de cœur: who will enforce the Bill? The answer is clear: no one. There is an informal system of bringing to book that will ensure that very little enforcement goes on. Yet if we look somewhere else in the CMA, the Digital Markets Unit is pre-emptively calling the big techs in and dealing with issues under its orbit. It is not that the CMA cannot do it; it is that the Government have decided not to let it do it.

Both these amendments—the one in my name and the other—seek to give a role for the Competition Appeal Tribunal to pre-emptively deal with transgressions. What are the Government frightened of in this? I do not think that the Minister has so far articulated a valid reason as to what is wrong with enforcing the Bill. If the Government think it is important to have the Bill, why not enforce it?

I used one example: the CMA’s own digital markets unit. It is clear that regulators all over are acting pre-emptively. Look at the Pensions Regulator. It can proactively go in and do things, so it is not as if we do not do it in this country. Generally, the regulator can act pre-emptively, except in this case. It is not clear to me what is behind the Government’s decision to do that. My key objective for Amendment 71 is for the Minister to very clearly articulate to the Committee why this subsidy regime should not be policed.

--- Later in debate ---

[Lord Callanan (Con)]

I thank the noble and learned Lord, Lord Thomas, and my noble friend Lord Lamont for tabling Amendment 67. I also thank them and the noble Lord, Lord Fox, for Amendment 71. Before addressing the two amendments in turn, I will offer some context. We have discussed at length the conception of the new domestic control regime as envisaged by the Government. We have heard criticism to the effect that the regime is, in the view of the protagonists, lacking in robust enforcement.

Of course, international comparisons are somewhat beside the point for our UK-specific approach. It is worth while bearing in mind, though, that the mere fact of establishing a coherent regime for the purposes of subsidy control would place the UK somewhere near the top of the list of the most comprehensive subsidy control regimes. Outside the European Union, no other international partner or competitor will enjoy such a comprehensive and transparent approach to the regulation of subsidies.

[Lord Lamont of Lerwick (Con)]

Is the reason for that not that the EU insisted on it, and that is why the Bill is being brought forward—not to be effective but to strike agreement with the EU?

[Lord Callanan (Con)]

This legislation was predicated in the TCA, as my noble friend points out. We are of course meeting our obligations. One of the purposes of this legislation is to meet our international obligations, not just under the TCA but with other trade agreements that we might strike as well.

In our view, an interventionist regulatory role is not necessary for the effective scrutiny of subsidies and would be detrimental to the smooth development and deployment of subsidies where they are needed. I have confidence that public authorities will take their statutory obligations under this regime very seriously and, in fulfilling those obligations, public authorities will be supported by comprehensive guidance. As a result, I do not anticipate that breaches will be by any means a common occurrence. My noble friend referred to the EU state aid regime, which is a different system, but it is revealing of public authorities’ attitudes to their obligations that since 1999, the European Commission has ordered UK public authorities to recover aid on only four occasions.