Subsidy Control Bill

Lord McNicol of West Kilbride Excerpts

Committee stage
Wednesday 2nd February 2022 Grand Committee

[Lord German (LD)]

The Minister has mentioned the question of guidance twice. Guidance is not law, of course, unless it is. It exactly what it is meant to be: guidance. Given the importance of guidance to the question of what an area is, would it be possible for this guidance to be issued, even in draft form, before we conclude this Bill, so that we can at least know what is in the Government’s mind?

[Lord McNicol of West Kilbride (Lab)]

Just to take both earlier points, if the Secretary of State defined an area as the whole of the United Kingdom, and that covers it, part of the subsidies could be used to move businesses inside the whole of that area. If that is the case, it defeats the whole purpose of it, does it not?

[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.

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[Lord Purvis of Tweed (LD)]

My Lords, I support my noble friend Lord Fox and will add a couple of points. First, on the streamlined schemes, there is the potential for them to be very major and, in effect, a policy driver in themselves. But if they are laid and are not in an order, which we would have the ability to scrutinise, they will not necessarily come with an equalities or impact assessment. It will be a fundamental weakness if they are simply laid. It goes against the grain of what we have been trying to argue, which is for good-quality proposals that come with equalities assessments. It will bypass that and that is a retrograde step.

On the ability to amend without there also being scrutiny, I point out, having checked on legislation.gov.uk, that there are 15 references to deposit-takers in other legislation and 34 references to insurers. What the Government propose is simply to amend primary legislation and a suite of other measures. The area of confusion for me is that there is also legislation that relates to Scottish insurance, which could be changed by a Secretary of State without there being proper scrutiny of that either.

My final point relates to the element of secrecy in Clause 47(7). The Government seem to be proposing that we go back to a situation of hue and cry, in which measures by the Treasury that could be supporting individual businesses will never be reported. We will know only if there are whistleblowers, if people are raising concerns and they have that knowledge. We saw to our cost with the Libor-fixing situation what can happen when there is a lack of transparency and reporting. It is simply not good enough. When I was a member of the Finance Committee of the Scottish Parliament, we had mechanisms for our committee to meet in private when Finance Ministers were able to say, either on the grounds of national security or during the economic crash, that there were reasons why information would not be made public at that point. We were briefed and there would, subsequently, be a report that Parliament could have. There are other mechanisms for secrecy than this approach.

Finally, I have been a Member of two Parliaments for 18 years now. I never thought I would read a parliamentary committee highlighting this statement:

“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.”


This provision should not progress. It is as simple as that.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I am grateful to the noble Lord, Lord Fox, for tabling these amendments. As we have heard, they reflect the bulk of the DPRRC’s recommendations. I also thank the noble and learned Lords, Lord Judge and Lord Thomas of Cwmgiedd, and the noble Lord, Lord Fox, for signing Amendment 50, even if it was not to support me but the recommendations of the DPRRC.

The DPRRC took the unusual step of voicing its concerns for Clause 47(7) at first, rather than working through the Bill and its clauses in turn. That goes to highlight even further its real concerns, specifically around issues of transparency and secrecy. We will come on to further amendments on transparency and try to open this up because, as we have heard, when you shine a light on the decisions being made, they are put under scrutiny. Issues and concerns can be brought to the fore so that we do not, as the noble Lord, Lord Purvis, said, end up relying on whistleblowers.

Taking the point made by the noble Lord, Lord Purvis, it may be that the immediate release of certain directions and information could have undesirable consequences in terms of market behaviour, but there must be other ways of taking it forward. The noble Lord has touched on one of them at the Scottish Parliament, where meetings were in private but the information was subsequently released.

At Second Reading, the Minister said:

“However, we will of course take into account the findings from the Delegated Powers and Regulatory Reform Committee’s report and we will review accordingly.”—[Official Report, 19/1/22; col. 1712.]


I know we are all sitting here waiting to see if any of those will be enacted, and I very much look forward to the Minister’s response. The words of the DPRRC have been quoted but it is worth putting on the record points 13 and 14 in its 17th report, which say that:

“We do not recall any other occasion where the Government have argued that one reason why Parliament should not be able to scrutinise delegated legislation is because the Government might be defeated on it … Neither have the Government cited any precedent where the ability to disapply a legislative provision (here, the Bill’s subsidy control requirements) can be achieved by a direction that can be kept secret from Parliament.”


With that, I look forward to the Minister’s response.

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[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.

[Lord Callanan (Con)]

I am happy to see that the Liberal Democrats believe in consistency and to work with the opposition parties when amendments are required, as appropriate.

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Moved by

[Lord McNicol of West Kilbride]

21: Clause 12, page 7, line 19, leave out subsection (2)
Member’s explanatory statement
This amendment would require individual subsidies given under a subsidy scheme to be judged against the subsidy control principles.

[Lord McNicol of West Kilbride (Lab)]

My Lords, we understand the Government’s desire to keep the subsidy control regime as straightforward as possible so that public authorities at all levels can respond to events as they arise. The Minister knows that we generally support these aims but, as we made clear at Second Reading, we have real concerns about the lack of transparency and accountability. The three amendments in this group have been tabled to look at that. The issue of transparency concerns individual subsidies given under a subsidy scheme not showing as transparently as others on the database or elsewhere.

Amendments 21 and 24 would require individual subsidies inside a scheme to be judged against the subsidy control or energy and environmental principles, as appropriate; I thank the noble Baroness, Lady Sheehan, for putting her name to Amendment 24. The Minister may tell us that removing both Clause 12(2) and Clause 13(2), as the amendments outline, is unnecessary, as Clause 12(3) and Clause 13(3) state that the schemes should not be made unless an authority is “of the view” that the individual subsidies “will be consistent with” the principles. However, being “of the view” that something is consistent with the rules is not the same as specifically stating it or judging that it has been defined within the rules.

More importantly, the lack of transparency arising under the subsidy schemes could be vast. Individual subsidies—large amounts of money or support—could be hidden; they would not be shown and would not be transparent if they are within the schemes. The first two amendments look to set that out.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

I understand the point the noble Lord is making, but I suggest we would do better to continue this discussion with officials, and come back to him and to the whole Committee in writing.

Making individual subsidies granted in line with the terms of a subsidy scheme eligible for review by the tribunal would undermine a key benefit of creating a scheme—which, as I was saying, would be the administrative simplicity for public authorities, including the security that subsidies can be granted under the terms of a scheme without additional challenge or assessment. However, I fully recognise noble Lords’ underlying concern that schemes could be used to shield unlawful subsidies from challenge. If a subsidy purports to be part of a scheme but does not comply with its terms, an interested party may indeed bring a challenge. This would be on the basis that the subsidy should not enjoy the protection of the scheme but was instead a stand-alone subsidy where the public authority did not consider the subsidy control principles.

[Lord McNicol of West Kilbride (Lab)]

On that point, how would another business or organisation know the subsidy existed if it was part of the scheme?

[Baroness Sheehan (LD)]

May I intervene too, on the same point? If a business does know about a subsidy and thinks it is unfair, it cannot go to the public authority and ask for a review. The bar is so high that the review can only be at the level of the scheme—which the business had nothing to do with designing. The public authority would have to do it. The business has no comeback.

[Baroness Bloomfield of Hinton Waldrist (Con)]

Every grant made over £500,000 will be visible. Noble Lords may be arguing that that bar is too high, but maybe we will come to that at a later stage.

[Lord McNicol of West Kilbride (Lab)]

The fundamental point remains: how do people know that the subsidy has been given if it is part of a scheme? They cannot challenge it.

[Baroness Bloomfield of Hinton Waldrist (Con)]

If it is over £500,000 it will be visible.

As I was saying, a challenge would be on the basis that that the subsidy should not enjoy the protection of the scheme but was instead a stand-alone subsidy where the public authority did not consider the subsidy control principles. The CAT could be asked to determine that question. If the CAT finds that the subsidy ought to have been treated as a stand-alone subsidy, it could also be asked to determine whether the relevant subsidy control requirements had been met.

It is also important to note that subsidies given under the schemes may be subject to other obligations and other forms of challenge. A public authority that gives a subsidy in breach of its general public law duties may be challenged through the judicial review process in the general courts, even if the subsidy is given under a scheme. And of course, if the scheme is substantially changed beyond the parameters set out in Clause 81 on permitted modifications, it must be reassessed and uploaded to the transparency database, and can again be challenged. For the reasons I have set out, and with the caveat that we shall return to some of these questions, I ask that, for the moment, the amendment be withdrawn.

[Lord McNicol of West Kilbride (Lab)]

As we have said in the back and forth of the discussion on these three amendments, there are still a number of real concerns about the subsidy schemes: how they operate and, more importantly, how they can be challenged and dealt with. I will withdraw Amendment 21 at this stage, but I seek some conversations with the department and the ministerial team before we progress to Report.

Amendment 21 withdrawn.

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Moved by

[Lord McNicol of West Kilbride]

37: Clause 32, page 17, line 8, at end insert—
“(aa) the subsidy database and its contents are subject to routine audit, and” Member’s explanatory statement
This amendment would require regular audits of the subsidy database to ensure its contents are of appropriate quality.

[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.

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[Lord McNicol of West Kilbride (Lab)]

I thank the Minister for his response. It was really nice to hear him agree with many of the points that we raised. I just need to encourage a bit more of a hard commitment to amend the Bill, rather than a verbal agreement. I do not think anyone on this side was arguing in favour of prohibition. I was simply outlining the idea of getting the information on to the database, not about using it for a prohibition. No one was arguing that point. As for the changes, I suppose I should take one out of four, but I hope we will be able to bring forward some more. I beg leave to withdraw the amendment.

Amendment 37 withdrawn.