Subsidy Control Bill

Lord Thomas of Cwmgiedd Excerpts

Lords Hansard - Part 2 & Report stage
Tuesday 22nd March 2022 Lords Chamber

Moved by

[Lord Thomas of Cwmgiedd]

6: Clause 10, page 6, line 31, after “Crown” insert “of his or her own accord or by a Minister of the Crown upon a reasonable request to make such a scheme addressed to him or her by the Scottish Ministers, the Welsh Ministers or the Department for the Economy in Northern Ireland”

[Lord Thomas of Cwmgiedd (CB)]

My Lords, in moving Amendment 6, I shall also speak to Amendments 58 and 64 and deal with three issues relating to devolution. I am grateful for the support of the noble and learned Lord, Lord Hope of Craighead, the noble Lord, Lord Wigley, and the noble Baroness, Lady Randerson—although obviously she is not here—on Amendment 6, and of the noble and learned Lord and the noble Lords, Lord Wigley and Lord Fox, on Amendment 64. I shall deal with those two amendments first.

I think it can truly be said that Amendment 6 is a very modest amendment because, unlike what was before the Committee, it does not seek to give the devolved Governments the power to make streamlined subsidy schemes, nor to submit them to their own Parliaments, but simply seeks to make it clear that if a reasonable request is made to the Secretary of State for a streamlined subsidy scheme by one of the devolved Governments then the Secretary of State would make such a scheme and lay it before Parliament in due course.

There are two reasons for that. First, it seems completely wrong in principle for the Secretary of State of his own accord to be able to make streamlined subsidy schemes within an area of devolved competence —I hope that is not in dispute. Secondly, there can really be no justification, if the nations of our kingdom are to be treated on the basis of equality, for the Secretary of State, having the power qua Secretary of State and Minister for England, to have the privilege of making these schemes for England that cannot be made in devolved areas of competence for Wales, Scotland and Northern Ireland. I therefore find it extraordinarily difficult to see what the objection is to this in principle, unless of course there is a commitment by the Government to provide for that in some other way.

On Amendment 64, it is a risk to claim that I am making a second move for a modest amendment, but again, when this is looked at, it will be seen to be modest. It would require the Secretary of State to seek consent from the devolved Governments in respect of some of the regulation-making powers, but not all of them, and in respect of guidance. I think we have debated long enough why guidance is so important.

This amendment is modest for a second reason: it would require the Secretary of State to consult and try to seek agreement over the period of a month. Thereafter the Secretary of State would be free, provided that, as no doubt a reasonable Secretary of State would always do, he had good reasons for not being able to obtain that consent. Again, there may be other ways of achieving that result, and I look forward with interest to hearing what the Minister has to say. It is very difficult to see what objection there could be to this measure.

Amendment 58 raises a very different point. I tabled it simply because it raises an issue of considerable constitutional importance, and one certainly treated by the devolved parliaments and Governments as such. There has been extensive debate in the devolved Governments about it and quite a lot of academic criticism. As is known, this schedule to the Bill sets out an elaborate procedure under which subsidies that have been made under the primary legislation and passed by the devolved legislatures can be challenged in the ordinary courts for breach of the subsidy control and other principles. The position of the Westminster Parliament, which may itself be able to pass legislation that breaches those principles, is of course different because of the principle of parliamentary sovereignty. There is no way this House could constrain a future House from passing a scheme in favour of England or doing something in respect of England which breached the subsidy control principles. It would simply be answerable for breach of its international obligations assumed under the treaty, but that has not always been a treaty with which the Government have accorded full and sufficient attention.

The devolved legislation originally contained principles—and all the amendments have contained principles—that, where the powers of the devolved legislatures are constrained, any issues as to whether they are in fact constrained in legislation passed are remitted to the Supreme Court. This legislation moves away from that fundamental principle, and it is important to realise the considerable concern caused by this move. It arises because, where a court decides to set aside the decision of the elected representatives of the people, considerable concern is always expressed. That concern should be dealt with by a special process, and submitting it to the ordinary courts is not right.

I am afraid that this amendment is a long and complex one and I will not attempt to go through it because it had to go through all those hoops. I have raised it because it seems quite impossible for us to pass this piece of legislation without noting what we are doing. Although I can see the hour—this is not the time for a debate on important constitutional principles—I very much hope that raising this issue now will give the Government pause to think about this and for this House to debate in future how we deal with the problem of ensuring that, when the people of Wales, of Scotland and of Northern Ireland for reasons of quite complicated constitutional doctrine have made a decision through their legislatures, that should be questioned only by a very senior court, through a process that is carefully thought through. We will need to return to that in due course.

Those are the reasons why I have put forward these three amendments, and I beg to move.

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[Lord Callanan (Con)]

There is a difference in principle here. Subsidy control is a reserved matter. Under the memorandum of understanding, we have said that we will set up a mechanism that the Scottish Government can use to challenge schemes. Of course, any streamlined scheme would be approved by this Parliament anyway. In any practical political environment, there is no way that the UK Government will want to set up a parallel scheme to subsidise agriculture and fisheries, which are devolved competences, when the Scottish Government already have similar schemes in the same area.

As I have said, the devolved Administrations will of course continue, as they have always done, to make subsidies and subsidy schemes using the resources that they have. It is important to note that this Bill does not provide any resources for any schemes, and the court would need to look at the facts of the case on legality grounds in the light of the requirements of Schedule 3 to the Bill. This is, in my view, comparable to other circumstances in which devolved primary legislation is reviewed on legality grounds, such as the Human Rights Act or the United Kingdom Internal Market Act. Importantly, and in contrast to the review of the Competition Appeal Tribunal for other subsidies, the court could not consider common-law public law grounds alongside the requirements of the subsidy control grounds.

For all the reasons I have set out, I hope that the noble and Lord will not press his amendments.

[Lord Thomas of Cwmgiedd (CB)]

I am grateful to all noble Lords who have spoken in this debate and for the various points that have been made; I hope it is not discourteous if I try to summarise them without individual attribution.

Fundamentally, this union is not going to hold together unless there is an acceptance of equality of treatment, and this Bill drives a coach and horses through that. One illustration suffices: if this Parliament, for England, makes a subsidy scheme that infringes the subsidy control principles, then those overseas cannot challenge it, but they can challenge what is done in Wales, Scotland and Northern Ireland. That is not equality. A second, more vivid example of equality is the ability to make streamlined subsidy schemes. Part of the difficulty we face is that all of this is for future legislation, but we are now trespassing into the constitution.

What has emerged from the questions that the Minister has tried to answer is this: where are we going in areas of devolved competence? He says that no Government would want to do it, but we are a country governed by the rule of law, and the law ought to be clear as to the constitutional responsibilities of the Government of the United Kingdom and of England and the constitutional responsibilities and powers of the devolved nations. This has not been thought through, as is evident from the Minister’s reply. I do not criticise him, because we do not have the detail of the streamlined subsidy schemes so that we could see how this would work.

Thirdly, we are trespassing into dangerous constitutional areas. I am sure that many lawyers will not accept that, if the Government tried to make a streamlined subsidy scheme that infringed on devolved competence, it would be challenged, because that would be made under subordinate legislation and would not have the equivalent status of an Act of this Parliament. It is a great misfortune that we have not thought all of this through.

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[Lord Fox (LD)]

I rise on behalf of the noble Lord, Lord Lamont, to move Amendment 47 and also speak to Amendments 48 to 50. I had never expected to be the noble Lord’s stunt double but I do not regret it at all. As on many issues, the noble Lord and I agree that the role of the CMA requires boosting so that, as he said at Second Reading, it can police the control of the regime. It is a shame that he is not here to speak on his own account as he would do so with much more vigour and verve than I, but we both see these amendments as analogous to the independence that was given to the OBR and the Bank of England. If the Government genuinely want to control subsidies, as the title of the Bill suggests, there should be greater independent enforcement instead of what is a pretty weak SAU.

I have a number of direct questions to channel from the noble Lord, Lord Lamont, before I speak on my own account. It is worth noting that on 7 February, the Minister said that

“the Bill does not, of course, replace our gold-standard mechanisms … for managing public money”.

The noble Lord would like to know: to what mechanisms was the Minister referring? I am looking forward to the answer to that question as much as is the noble Lord himself. As the Minister highlighted at the time, and as is the view of the noble Lord, Lord Lamont, balancing the current budget while having national debt on a declining trend does not deal with the micro issues such as distortions of competition caused by subsidies. That is clearly true. I wonder on my own part why the Minister brought that up. The final point is that the Minister went on to say that

“public authorities … take their statutory obligations seriously … we expect the vast majority of public authorities to comply with these requirements”.—[Official Report, 7/2/22; col. GC 382.]

The interpretation of that is that public authorities, including the Government, are to police themselves. This is not an enforcement mechanism; it is incredibly weak.

For my own part, I would say that this is strong criticism from a former Chancellor of the Exchequer and hits at the heart of the Bill. To that end, I think that we deserve a serious and studied answer from the Minister, which I am sure we will get. This centres around the self-policing, public reporting mechanism that, essentially, has been adopted. What we have are amateur regulators and citizen detectives. It is clear that this is not the way to police something as important as a subsidy regime.

In addition to the amendments from the noble Lord, Lord Lamont, I am delighted to support Amendment 55 in the name of the noble and learned Lord, Lord Thomas of Cwmgiedd. Throughout this and previous debates, his dedication to the cause of trying to bring some structure to this legislation should be commended by us all. In many ways, this amendment sits somewhere between the positions of the noble Lord, Lord Lamont, and the Government. As we would expect from the noble and learned Lord, Lord Thomas, it also addresses some serious devolution issues. I am really looking forward to hearing him set out how this amendment will solve some of the problems we have encountered throughout our debates.

A lot of those problems are based around the asymmetry that both the noble and learned Lord, Lord Thomas, and my noble friend Lord Purvis raised on a previous set of amendments. There is an asymmetry here: the Secretary of State in London can call in the CMA, whereas the authorities in Edinburgh, Cardiff and Belfast cannot do the same thing. This is at the core of the problem that people have. When we hear, in response to the request by the noble and learned Lord, Lord Hope, what the stymie on getting legislative consent is, I suspect the problem—one of the central issues—will be a version of that. Addressing that would go a long way towards bridging the gap to getting legislative consent, which I hope is the Minister’s objective.

That said, I will speak no longer and look forward to the noble and learned Lord, Lord Thomas, explaining his Amendment 55 much better. I beg to move Amendment 47.

[Lord Thomas of Cwmgiedd (CB)]

My Lords, I will speak to Amendment 55. I first thank the noble and learned Lord, Lord Hope of Craighead, and the noble Lords, Lord Wigley and Lord Fox, for their support. The amendment has two purposes, one of which has been outlined by the noble Lord, Lord Fox, dealing with the position of the CMA. The second is to deal with the position of the devolved Governments and legislatures.

I ought to deal first with the position of the CMA. Although I co-signed amendments with the noble Lord, Lord Lamont, before Committee, the amendments he put down did not include two of them; I am not sure why. I have restored them all, because it seems to me that, on analysis, if the Bill is to be regarded as a serious attempt to uphold the rule of law and not as a piece of window dressing to satisfy our international obligations, we need to look more carefully at the position.

There are three methods of enforcement. The first is to have transparency and force disclosure. We know of the force that has; the effect of sunshine as a disinfectant is well recorded in history.

Secondly, there is the need for the CMA to investigate. It seems to me that without the CMA having powers of investigation, you do not have a properly independent system of enforcement compliant with the rule of law. It cannot be right to leave enforcement to those giving subsidies. You must have someone independent and objective in making the investigation. That is a requirement of the way in which all investigations are carried out; they have to be independent and impartial. I simply do not understand why the CMA cannot be allowed to conduct investigations that it thinks should be carried out, not merely those that the Secretary of State wants carried out or that are referred to it. Of course it will carry out the investigations referred to it by the Secretary of State independently, but it does not have the necessary power to do it where it thinks it is in the interests of enforcement.

For a similar reason it seems clear that, as was proposed in the amendments in Committee, the CMA ought to have powers of enforcement before a CAT—this is where it differs slightly from the amendments put forward by the noble Lord, Lord Lamont. Again, independent powers of enforcement are essential. The Secretary of State will have some powers, as will those who say they are injured as a result of what has happened. But that is essentially, to take an analogy with the ordinary enforcement system, a system of effectively private prosecution. My experience of private prosecutions has always been that, unless they are funded for extraneous and charitable purposes, such as is done by the RSPCA, or there is money in it by obtaining a conviction for those who are businessmen interested in getting a private prosecution, it is unlikely that there will be private enforcement. There is no doubt that this kind of enforcement action is extremely expensive. Therefore there is a real risk that there will not be much effective enforcement and that such effective enforcement as there is will be directed only at what I would call big money cases. Having a justice system that deals only with big money cases is recognised to be no just system at all.

The noble Lord, Lord Lamont, put it very pithily by creating Juvenal: “Quis custodiet ipsos custodes?” It seems to me that that summarises it in four words. There must be someone independent, both to investigate and to bring a matter before the courts if necessary, who can ensure that the Secretary of State and others uphold the rule of law. That is all I wanted to say about the position of the CMA.

On the second purpose of the management, I can deal with that briefly. It is an important question even at this hour of night, because it raises the issue of equality between our nations. I spoke at length about this when proposing the amendments in respect of seeking the consent of the devolved authorities and giving them certain powers, but this is an egregious example of inequality. Whereas the Secretary of State qua Minister responsible for England and the giving of subsidies in England can refer matters dealt with by, say, the Welsh, Scottish or Northern Ireland Governments to the CAT, there is no equality the other way round. That seems a fundamental flaw in this part of the Bill. It could be remedied by an undertaking by the Secretary of State that, if he was asked by the devolved Governments to make a reference, he would do so, and I very much hope that the Minister will be able to give such an undertaking.

What is important about these issues of equality is that they matter in two respects: first, that there is equality, but also that there is seen to be equality, and the equality between the nations is fundamental to the union. Secondly, there is the purpose of the amendment relating to the devolved authorities—this differs from the amendments in the name of the noble Lord, Lord Lamont. It seeks to make clear that the devolved Governments will always be interested parties for the purposes of appearance before the CAT. Again, this could be clarified. It would be far better if this was done in legislation, but at least it could be taken some way by the Minister making this clear.

I am sorry to have spoken at such length at this hour of night but these are important points of principle. They go to the rule of law and the position of the CMA, but also go to the equality between our nations and the survival of our union.

[Lord Hope of Craighead (CB)]

My Lords, I have added my name to this amendment. We should pay tribute to the noble and learned Lord, Lord Thomas, for his insight on the importance of enforcement to make the system work. His two points do not need repetition but the first, about the role of the CMA, begs a question. Why should the CMA not have the powers that are being referred to in this amendment? As far as the equality issues are concerned, the question is: why not? One point in the amendment that particularly appeals to me is the reference to interested parties. All the bodies mentioned there—the CMA and the three devolved Governments—are interested parties. It may be that, as the jurisprudence of the system works its way through the process, this will be established; but it is far better to have it made clear at the beginning, so that its position is plainly established, and the enforcement process can be put through in a proper manner. Paying tribute as I do to the noble and learned Lord, I entirely support his amendment.