Subsidy Control Bill

Lord Thomas of Cwmgiedd Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

Moved by

[Lord Thomas of Cwmgiedd]

67: Clause 70, page 39, line 33, after “decision” insert “or, where the CMA has made a report on a subsidy or subsidy scheme after a referral under section 53, 57 or 61 in respect of which a subsidy decision has been made, the CMA”
Member’s explanatory statement
The purpose of the amendment is to give the CMA standing to exercise enforcement powers through the Competition Appeal Tribunal in respect of decisions on subsidies where it has made a report.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I rise to deal with an amendment in relation to what I would call the broad powers of making this Act work. Whether we call it regulation or self-regulation, there has to be a system of compliance. We looked at one, disclosure, and earlier we looked at the CMA’s role. Now it is the CAT’s turn and, before we conclude tonight, we will look at the role of the High Court and the Court of Session on enforcement against the devolved legislatures.

I was going to say something about the Minister’s remarks relating to what he sees as the role of the CMA, but the noble Lord, Lord Lamont, has dealt with this. I think it is only fair to the Minister to allow him to come back and explain what he said, in slightly more detail, about the role of the CMA. Obviously, the role of the CMA relates very closely to the role of the CAT.

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[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?

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Of course, I am therefore unable to accept amendments that go so completely against the grain of this regime. I suspect that I have not convinced noble Lords, but I have done my best, and therefore hope that they feel able not to press their amendments.

[Lord Thomas of Cwmgiedd (CB)]

I have one question for the Minister on the hard economics of recovery of damages. Will there be recovery of damages against authorities that give subsidies wrongly? Secondly, has any estimate been made about the likely recoveries?

[Lord Callanan (Con)]

Yes, of course, they would be able to recover damages if a party had suffered a loss. I do not think that we have any estimates of likely figures at this stage but, if we have them, I shall certainly share them with the noble and learned Lord.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I thank all noble Lords who has taken part in this debate. If we are embarking on a new regime, we must make certain that it is effective—not because of whatever the EU says but for the good of our own nation and economy. Without an effective regime, this will not work.

We have taken different approaches—and I am extremely grateful to all who supported this amendment. The noble Lord, Lord Lamont, took the point of principle: who is going to look after those who make the decisions, particularly the Government? Who is going to refer them? Litigating against a Government, who have a bottomless pit, is very difficult—and, of course, there are political considerations against doing so.

The noble Lord, Lord Fox, asked what sort of regime this was, and whether there was a regulator. Whatever the Minister might say, the CMA is a kind of regulator in the market—unless the Minister is to say that there is no regulation at all. But this is law, so someone must have to enforce it.

Then there is the problem that I have referred to, of hard economic reality. Is it realistic to accept private enforcements? The benefits have been shown by the noble and learned Lord, Lord Hope: that we really need a body of case law to strengthen the regime, and the importance of that will become apparent later.

For all those reasons, I am afraid that I am one of those whom the Minister has not managed to persuade, but I do not think that he thought he had. But I beg leave to withdraw the amendment.

Amendment 67 withdrawn.

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Moved by

[Lord Thomas of Cwmgiedd]

69: Clause 70, page 40, line 16, at end insert “, the Scottish Ministers, the Welsh Ministers or a Northern Ireland department”
Member’s explanatory statement
The purpose of this amendment is to remove any doubts about the position of the devolved governments being interested parties.

[Lord Thomas of Cwmgiedd (CB)]

I am going to be very brief about this. The point emerged in the earlier remarks of the noble Lord, Lord Bruce, and deals with the question of standing. I want to deal only with the technical point. It is obvious that where the Minister, qua his responsibility as the Minister for England, grants a subsidy, the position of the devolved Government should be exactly the same as if the Minister in England were able to challenge a decision of the devolved Government. There should be parity. We have talked a lot about equity, which I shall return to, but it seems that there is no equity.

The short point of this amendment is to try to ensure there is no dispute about standing. Standing sometimes causes very serious difficulties. If, however, the Welsh or Scottish Government felt that the action of the Secretary of State or some authority in England was disadvantaging people or a particular enterprise in Wales or Scotland, they should surely have the standing to bring that to the CAT. If, for the reasons I have already adumbrated, private enforcement is not successful—and the Minister has said nothing to persuade me that it will be—this is even more reason to have more custodians of the public interest looking to ensure that our noble and other Ministers in London actually stick to the principles of the Bill. I beg to move.

[Baroness Randerson (LD)]

My Lords, I will be equally brief. The omission of Ministers of the devolved Governments at this stage of the Bill is stark and astonishing. It immediately begs the question why, because the devolved Governments are specifically mentioned elsewhere in the Bill, although they are not given equality of treatment. Here, they are simply omitted. As indicated by the noble and learned Lord, Lord Thomas of Cwmgiedd, we need clarity here.

We particularly need clarity because there is equality of treatment on issues such as common frameworks. There could well be a conflict between what has been agreed by the UK Government in that context and what is in the Bill. I look forward to the Minister’s response.

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[Lord Callanan (Con)]

The legislation is UK-wide so it will apply in Northern Ireland but, clearly, the absence of the Assembly will make it extremely challenging to get the Executive’s consent. However, we certainly will continue to engage with officials.

I want to give some context on all the engagement we have done. Since July 2020, BEIS Ministers and officials have had 75 meetings in total with their counterparts in the devolved Administrations. These are not just talking shops, as has been implied, but sessions of meaningful engagement. For example, our engagement has included sharing draft objectives and building-blocks for the new subsidy control regime; sharing both the Government’s consultation and the consultation response ahead of publication; and sharing our illustrative guidance and regulations in advance of publication, as well as continued engagement as this Bill passes through Parliament. This engagement will need to continue as the regime is implemented. In fact, at this very moment, officials are working with their counterparts on a memorandum of understanding that formally sets out a mutually agreed process for engagement on the crucial next phase of policy development and implementation.

Moving back to the detail of the amendments before us, I will start with Amendment 69. Again, I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, for moving the amendment, which is supported by a number of noble Lords. It would give the devolved Administrations the ability to challenge any subsidy in the Competition Appeal Tribunal, whether their interests have been affected or not. As was confirmed at the Dispatch Box in the other place, the devolved Administrations—or, indeed, any other public authority —will generally be able to apply to the CAT to review a subsidy decision where the interests of people in the areas in which they exercise their responsibilities may be affected by that subsidy. This would be a good opportunity to correct what I said on Monday: this is not exactly the same position as the Secretary of State.

The fact that the devolved Administrations are not named in this clause is by no means intended to exclude them or any other party whose interests may genuinely be affected by the granting of a subsidy. Clearly there will be limits, and the interests of the devolved Administration or local authority in a particular subsidy cannot be totally tenuous. However, the broad definition in the Bill gives the CAT maximum discretion so that, whatever the facts of the case might be, it can deem the right people as interested parties.

The reason why the Secretary of State has universal standing to challenge a subsidy, in contrast to the devolved Administrations and local authorities, is that he or she—whoever occupies that office—is responsible for the overall operation of the subsidy control regime and, as I keep saying, for the UK’s compliance with our international agreements in this reserved policy area. Neither of those reasons apply to the devolved Administrations or local authorities. It is wrong to suggest, as some noble Lords have suggested previously, that simply because the devolved Administrations exist, the Secretary of State’s horizons and duty of care are limited only to England.

It is also worth mentioning that the Government expect that the Secretary of State would use this ability only in exceptional circumstances where, in his or her view, a subsidy threatens the whole integrity of the subsidy control framework or our compliance with international agreements. It would be inappropriate to legislate that the devolved Administrations are an interested party in all cases, implying that the Secretary of State does not carry out his or her role as the responsible Minister for the subsidy control regime for everyone in all parts of the United Kingdom.

I turn now to Amendment 79, tabled by the noble Lords, Lord German and Lord Wigley. I am glad that the noble Lords referred to the recommendations of the Review of Intergovernmental Relations through the amendment. The UK Government take these co-operation mechanisms with the devolved Administrations, as set out under this review, very seriously, and we are always open to ways of strengthening these relationships. We are open to using the intergovernmental relations structures to resolve any disputes, in accordance with the IGR principles. That said, this amendment would in effect bypass a number of earlier stages in the dispute resolution process, which has already been agreed between the UK Government and all devolved Administrations. Escalation to the Council is the last resort. As I mentioned on Monday, we are also working closely with the DAs to establish a formal process for raising case-specific concerns with the department once the regime is up and running.

Let me also stress that there is no need to incorporate this provision into the Bill for disputes to be able to come under the IGR structures. Moreover, I do not anticipate that there will be any great need to refer matters of interpretation to those structures. It is important to bear in mind that there is of course a distinction between case-specific dispute, which is a matter of legality, and a public authority’s compliance with its legal obligations, for which the proper place to resolve such disputes is ultimately the CAT and a dispute or discussion between Governments on their roles and responsibilities.

There is little scope for that type of confusion over the roles and responsibilities of the UK Government on one hand and the devolved Administrations on the other in this regime. The Secretary of State for Business has responsibility for the overall operation of the regime and the UK’s compliance with its international agreements. The UK Government may also create streamlined routes to encourage subsidies that further their strategic priorities. In all other respects, UK government departments and the Secretary of State himself are in the same position as the devolved Administrations. They are public authorities within the scope of the Bill. UK government departments are treated in exactly the same way as any other public authority. All public authorities are similarly subject to the Bill and empowered by it.

As I said earlier, my officials continue to have a regular set of meetings with their DA counterparts on all subsidy control matters; these will continue, along with regular ministerial engagement. Where there is a need for dispute resolution, that dispute will come into the ambit of the agreed intergovernmental relations process.

I recognise the strength of feeling in relation to Amendment 69 in the name of the noble and learned, Lord Thomas, but I simply do not agree that either that amendment or the other would be a necessary or useful addition to the Bill. Therefore, with respect, I urge the noble and learned Lord to withdraw his amendment.

[Lord Thomas of Cwmgiedd (CB)]

I thank all noble Lords who have spoken in this short debate; I do not want to lengthen it with a long reply. I will say only one thing. The Minister has not really answered my noble and learned friend Lord Hope’s question as to the meaning of “aggrieved”. It seems to me that one area in which the devolved Administration may wish to get involved is where a decision is made that does not directly affect their interests but they feel that the decision is wrong in principle and may set a bad precedent. It is that reason—their interest as Governments in upholding the rule of law and the operation of this—that I do not believe was answered by the Minister’s statement, but I will read it carefully. In the meantime, I beg leave to withdraw my amendment.

Amendment 69 withdrawn.

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73: Clause 78, page 45, line 15, leave out from second “of” to end of line 16 and insert “financial assistance provided, or schemes for the provision of financial assistance made, by means of primary legislation.
(2) Nothing in this Act applies to the giving of any such assistance, or to the making of any such schemes, except so far as provided for by that Schedule.”Member’s explanatory statement
This amendment clarifies that the subsidy control requirements under the Bill apply in the case of financial assistance provided directly by primary legislation only so far as provided for by Schedule 3 to the Bill.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I rise to speak to two amendments that have a relationship I shall endeavour to explain as rapidly as possible, bearing in mind the hour. Amendment 73A relates to Schedule 3 and deals with the very extraordinary powers in this Bill, giving the High Court the power to overrule primary legislation of the devolved legislatures. This is a very real problem. I shall speak largely from the point of view of the judiciary and what we are intending to do.

Before I turn to that, I would say that, if we look at agriculture or anything else where there is an attempt by the four Governments of the UK to agree something that deals with the support of subsidies, it is extraordinary that anything that is legislated for in England is exempt, but what is legislated for elsewhere is not. There is a constitutional reason for that, and I know what the Minister will say, but it is not a matter of practical reality or public perception. It is important that we consider this.

The first extraordinary part of this is that power is given not to the Competition Appeal Tribunal but to the High Court or the Court of Session in Scotland. To my mind, it is worrying that you give to a first-instance court the power to overrule a decision and an Act of a democratically elected primary legislature. Normally, these matters would go to the Supreme Court. Secondly, and much more importantly, is it right that we should put our judges in a position to make decisions about what are effectively the principles in the Bill? People may remember something called the Human Rights Act and the very broad powers it is said to give judges to make decisions. That has had a degree of criticism. Why do we want to do this in a piece of legislation where the phrases are so ill defined? I shall come to that in the second amendment I intend to speak to. We should exercise the greatest degree of care in giving judges the right to overrule the legislature. I am not certain about the extent to which there has been widespread consultation with the judiciary about this, or with others, but this is the first and very significant step.

There is an extraordinary constitutional provision that has to deal with whose rationale is looked at. I do not want to go into the details of that, because that is more a subsidiary point, and I bear in mind the time—but there is an extraordinary constitutional innovation in the clauses in this part of the schedule.

Of course, it might be said of these principles—and I think this is possibly the Minister’s line—that all of this is very vague and there are not going to be many challenges, so do not worry. However, I am afraid people have left provisions in legislation on that basis and it has come back to bite them. What would worry me about this is if something enshrined in the decisions of the Scottish, Welsh or Northern Irish Parliaments or Assemblies, is challenged by someone. What about it happening in the field of agriculture? Someone who is importing goods would have the right to initiate this sort of action, with its very serious constitutional consequences, whereby a judge would have to make a decision, quite often, I imagine, in relation to the principles that are so ill defined.

That takes me neatly to my second series of amendments, which deal with the definitions and status of guidance. I will leave the noble Lord, Lord German, to deal with the question of whether the guidance is binding. It seems unarguable to me that it is not binding.

What I am much more interested in—this highlights the difficulties caused by Schedule 3 and the construction of the Bill as a whole—is the Minister’s power to give guidance as to the meaning. Ordinarily, it is Parliament that decides what something means and, if it does not, it leaves it to the judges. Sometimes, it is put in secondary legislation. However—this is extraordinary—here we are putting the meaning of the wording into guidance.

There are two fundamental problems with that. First, we have visited the word “equity” on a number of occasions—I might call it a word for all seasons—but, even at this late hour, I feel that I ought to refer to John Selden’s famous note about equity. He said:

“Equity is a roguish thing: for law we have a measure, know what to trust to; equity is according to the conscience of him that is Chancellor, and as that is larger or narrower, so is equity. ‘Tis all one as if they should make the standard for the measure we call a foot, a Chancellor’s foot; what an uncertain measure would this be? One Chancellor has a long foot, another a short foot, a third an indifferent foot: ‘tis the same thing in a Chancellor’s conscience.”


I refer to that because it is the essence of the problem with the word “equity”. With the utmost respect, I believe that this Committee ought not to shirk its responsibilities in defining what is meant by this and how it applies in certain circumstances. It might be said, “Well, we are constrained by the fact that these are taken directly from the TCA”, but is that in fact a constraint—or do we hanker for the way in which these vague principles were left to the judges in Luxembourg? Do we want to give our judges that pleasure as well? I doubt it, but I am not sure that it has been fully thought through.

It therefore seems to me that we ought to look at this very carefully. There is the constitutional principle in relation to the Minister being able to give guidance on meaning; it plainly is not binding but he should not be giving such guidance because that is a matter for the courts or Parliament. Parliament should not shirk its responsibility to define what some of these things mean. We should not leave it to judges—unless, of course, there is a hankering for, as they do in Europe, leaving things to the judiciary in Luxembourg. This time, however, it would be the judiciary in Westminster, Edinburgh or possibly Belfast—but not possibly in Cardiff.

[Lord German (LD)]

My Lords, it is always a pleasure to talk after the noble and learned Lord, Lord Thomas of Cwmgiedd, who manages to enlighten us all with observations that might have passed us by if we had not had the wonder of his words.

In Amendment 74 in my name, which would amend Clause 79, I treat “non-binding” as a sine qua non. The reason I put it in was to allow us to have a discussion and debate about the whole extraordinary clause on guidance. All I seek, of course, is for the Minister to agree that it is non-binding. I am sure that he will do so because all the facts speak for themselves, but there is a high head of steam building up in this Committee about the way in which guidance is being used. I will come back to the spearheading on that and how it has moved on but, basically, this Bill has what we call—Parliament also uses this phrase—“have regard to” guidance. This is a problem because it places an expectation that the guidance will be followed unless there are cogent reasons for not doing so.

Subsections (5) and (6) of Clause 79 give the game away a bit. Clause 79(5) says

“the Secretary of State must consult such persons as the Secretary of State considers appropriate”

before making the guidance. What is appropriate is not specified. Clause 79(6) says:

“A public authority must have regard to guidance issued under this section.”


“Must” is very important in this respect.