United Kingdom Internal Market Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage & Committee: 5th sitting (Hansard) & Committee: 5th sitting (Hansard): House of Lords
Monday 9th November 2020 Lords Chamber

Leon Brittan was our United Kingdom commissioner in charge at the time. He did a magnificent job. We worked together for the United Kingdom on the distortion of French and Italian bids hiding behind state aid to our disadvantage. We abided by the rules but we lost. Cossor Electronics, a UK company in Harlow, was bidding for the air traffic control contract for the Hong Kong airport. We suspected that their bids went through research and development projects; make of it as you will, it was wrong. At this instance, we felt the hideous effects of distorted competition when the EU integration process had hardly begun. That is why I ask your Lordships to support these amendments: to have research and development incorporated into this Bill now, regardless of our EU position, to safeguard unfair state aid in any future international contracts. I beg to move.

[Lord Thomas of Cwmgiedd (CB) [V]]

I speak to oppose the inclusion of Clause 50 in the Bill. It is important to distinguish between what I spoke about on the last occasion the Bill was before the House: under Clause 48, what regime is to govern EU structural funds in future. This clause deals with state aid.

Both clauses have one thing in common: they seek to alter the devolution schemes as they stand, for economic development powers are devolved. For example, in respect of Scotland, paragraph 4(1) of Part 3 of Schedule 5 to the Scotland Act makes that clear. The position at present, therefore, is that it is for Scottish Ministers, Welsh Ministers and Ministers in Northern Ireland to determine what financial assistance is provided, in the same way as they determine how the structural funds are dealt with.

State aid is of obvious, considerable importance. It can help to address market failures and provide incentives for research and development, of which the noble Baroness, whom it is a privilege to follow, has spoken. They also deal with areas where the Government want to deal with strategic objectives, such as promoting the use of green technologies or promoting more sustainable agriculture.

Of course, state aid can be harmful if it is not directed in the same way; that is why there must be some form of regime in respect of state aid. The present position on state aid is, as we remain part of the European Union regime, that the devolved Governments make the decisions within the EU regime. In consequence—and it has been during the whole period of devolution—state aid is not a reserved matter. It is devolved.

The British Government’s stated position had been to retain the EU regime and put in place an independent body to police it in place of the Commission, as has happened in respect of other parts of the regime that still governs us but will not do so for much longer. That obviously would not have required any change to the devolution scheme. However, the present Government have decided to change this. They intend to use their Henry VIII powers to do so by statutory instrument. However, they have not consulted on what they want to put in its place, and seek agreement and the views of industry and others, in particular the devolved Governments. As in the other parts of this Bill, the UK Government want to do so without reference to working with the devolved Governments within the devolution schemes. However, in this case, they have hit the snag to which I have referred: they lack the power to do so. State aid and schemes are not reserved.

Clause 50, therefore, seeks to make state aid a reserved matter by what I regret to call a “device” of extending the competition reservation so that it can be used, in effect, to direct policy on state aid. This is not the way to proceed. A regime for state aid subsidies is needed unless, within the current negotiations, we agree to some arrangement that mirrors those of the EU. As is clear from the recently published IfG paper, Beyond State Aid, there are many reasons why a state aid regime is essential, but we need a properly thought-through regime before we legislate, including thinking through the role of the regulator. Such proposals should have been set out before we considered such a clause as this. They should have been consulted on and agreed with all the relevant interests—businesses, universities and others.

Furthermore, the regime to be put in place would have to command the confidence of the devolved Governments, who are responsible, under the devolution schemes, for economic development. Bodies within England also have economic development responsibility. After all that consultation, it should have been determined how this would best be implemented. One way of proceeding would be a common framework with an independent regulator such as the CMA, but a decision would have to be made on the kind of regulator wanted. Would it be the kind of light-touch regulator that some have suggested, with an advisory role, or one with policing powers? If it was a light-touch regulator, to whom would it report—to the UK Government only or to the devolved Governments as well?

Tackling all of this without a policy and through the back door is wrong, as I see it. That course of action also has long-term implications. Proceeding in this way will set policy on the legal basis that it is designed to avoid anti-competitive practices. It will not be based on a forward and positive way of setting out a policy based on looking for economic development.

Therefore, in opposing the inclusion of this clause in the Bill, in short, it is wrong to change the devolution arrangements in this way and without any consultation about the future regime, let alone agreement on it having been reached. I have no doubt that we need a competition regime and that it will need some kind of advisory or other independent policing body. However, we should do this in the proper way and not rush to do it by putting a clause such as this in the Bill. It should not stand part of the Bill.

[The Deputy Chairman of Committees (Lord Alderdice) (LD)]

The noble Lord, Lord Purvis of Tweed, has withdrawn, so I call the noble Baroness, Lady Finlay of Llandaff.