Subsidy Control Bill

Lord Whitty Excerpts

Committee stage
Monday 7th February 2022 Grand Committee

It is for that reason that I am delighted to support these amendments and I hope that we will have a substantive answer from the noble Baroness the Minister, who knows the circumstances in Wales well. I hope that she will concede that there are issues here that need to be addressed in the context of Wales or Scotland or other parts of the United Kingdom and that, if this question cannot be resolved at this point, it is certainly one to which we should return in a substantive manner on Report.

[Lord Whitty (Lab)]

My Lords, I add my voice to the concern about how agriculture is being treated under this Bill. Of course, under the old European system, agriculture was excluded because all agriculture subsidy had to be consistent with the common agricultural policy. We are now moving into a situation where all four nations of the United Kingdom are considering how to change their agricultural policy from one being primarily to produce food on a competitive and effective basis to one that, while food production will still be important, also makes its contribution to the environmental demands, in particular in carbon reduction and management of water and soil.

That is very different from many of the other industries that will operate under this regime. We have a multiple problem here with agriculture. We have no previous history of consistency—well, the consistency was at the European level—and all other aspects were always devolved. We are going to have four different approaches to the new era in agriculture and all of them in their different ways will have a very heavy environmental dimension, so that the way in which the land is managed provides nature-based solutions to reducing carbon and to producing a food balance within the population that is more conducive to reducing carbon and for water and soil management.

Agriculture’s total exclusion from the regime—as this amendment appears to suggest—may not be necessary, but special treatment will be necessary. Before this Bill passes this House, I hope that the Government will respond by indicating that there will be different treatment for agriculture and respect for the four different nations and their different approaches.

[Lord McNicol of West Kilbride (Lab)]

My Lords, it is a pleasure to follow my noble friend Lord Whitty. I agree with all his comments. I am grateful to the noble Baroness, Lady Randerson, for tabling this amendment to enable further and deeper discussion on another of the many concerns that were raised by colleagues across the House at Second Reading.

As we have already debated, although relatively briefly, the new subsidy regime will operate alongside certain legacy schemes, including, but not limited to, basic payments given under the EU’s common agricultural policy. As we have heard, the Government’s decision to include agriculture and fisheries in the scope of the new subsidy regime is an interesting one. BEIS asserts that there is logic in applying the same rules across the board. While that might make sense in some areas, doing so raises other significant issues. As we have heard from my noble friend Lord Whitty, agriculture is fundamentally different and therefore so are the issues relating to the subsidies and the subsidy control systems. That is before we even touch on the issue of devolved responsibilities.

As we know from many hours following debates on the Agriculture, Fisheries and Environment Bills, these are areas of devolved competence. Some of those matters have been addressed in discussions on the UK-wide common framework arising from the Brexit process. However, due to Her Majesty’s Government’s treatment of subsidy control as an entirely reserved matter, there is no common framework on this topic, something that we have already touched on in Grand Committee and will be returning to in later groups.

Specific nations and regions of the UK have very different interests from those of their neighbours. Public authorities will of course be able to do what they deem appropriate in the context of overarching subsidy control principles, but this is one of the areas where we may end up seeing subsidy battles and/or legal appeals. If we can reach agreement in your Lordships’ House, then we may be able to reduce the chances of some of that happening. One potential solution to some of these issues may be for the Secretary of State to establish one or more streamlined subsidy schemes covering agriculture. I ask the Minister: is that one of the department’s intentions?

I want to ask a couple of practical questions that have been subject to initial exchanges between my advisers and the Minister’s office. I thank her office for that information, but it raises some questions. Is it the case that schemes already made under the Agriculture Act, for example, will be treated as legacy schemes for the purposes of this legislation? If the environmental land management scheme, which has already been rolled out, is treated as a legacy scheme but the Defra Secretary of State later introduces a separate agricultural scheme using powers under either Act, will that new scheme be subject to the subsidy controls? If the answer is yes, will that not make it harder for everyone involved to keep track of which requirements apply and when? If so, how exactly does the decision to include agriculture in the new subsidy control regime meet the target of making the new process more straightforward and less burdensome?

A number of other issues arise around devolved authorities, many of which have been touched on. We will come on to them when we look at the CMA but, if we do not make changes to the Bill as it is currently written, we could end up with a situation in which the devolved authorities have responsibility for these delegated areas but no oversight in the Bill—no engagement with the CMA or the subsidy advice unit—and will not be at the heart of the decision-making. I look forward to the Minister’s response.

Subsidy Control Bill

Lord Whitty Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

[Baroness Sheehan (LD)]

My Lords, I rise to speak to Amendment 63 in the name of the noble Baroness, Lady Boycott, to which I and the noble Lord, Lord Whitty, have added our names.

Before doing so, I want quickly to speak about Amendment 62, which I support. I recognise the less than complete nature of the assessment it advocates, namely the

“assessment by the CMA, on the basis of the reports it has prepared”.

However, those reports are limited to the voluntary or mandatory referrals referred to in paragraphs (a), (b) and (c). I also have some reservations about the reference to the legislation meeting its stated objectives; that is living in hope that a stated objective might actually appear in the Bill at some point.

I thank the noble Baroness, Lady Boycott, for her comprehensive introduction to Amendment 63; it leaves me with little to say. These subsidies will be used by hundreds of public authorities. According to figures I have seen, some 550 public authorities will be able to give out subsidies under this regime. Can the Minister confirm that figure? It is important that many of them fully grasp the importance of their decisions. The Government have said that meeting the net-zero target and levelling up will be policy objectives, but words are not enough. We need to be able to demonstrate that that is the case. This amendment would ensure that it is the case with respect to the net-zero target and other environmental targets. The amendment will be especially necessary if the Government resist that tabled by the noble Baroness, Lady Boycott, which would include a new principle to consider net-zero goals.

Clear and detailed monitoring and reporting of climate change risks and opportunities has been successfully implemented in other parts of our economic system—for example, by the FCA and the PRA through amendments to last year’s Financial Services Act, and by the Pensions Regulator through the pensions Act, also of last year. For the first time, the Pensions Regulator has published guidance on governance and the reporting of climate-related risks and opportunities. Such inclusions in those Acts really help to drive climate alignment across these sectors.

This Bill is an opportunity to do the same in relation to our subsidy control regime. Amendment 63 would allow the Government to continue to claim that they are a global leader on climate change.

[Lord Whitty (Lab)]

My Lords, I have added my name to Amendment 63 but I want to say a couple of things about Amendment 62 because, as we proceed through this Committee, it is clear that there is a bit of fuzziness about what exactly the role of the CMA is. Historically, the CMA and its predecessors have reported effectively on the nature of competition across the British economy but, of course, the issue of state intervention has been left to the European level. Some of us were slightly concerned that the CMA would take over that function after Brexit; in the end, I was sort of convinced that it should, rather than creating a whole new body, but it has to do a number of different things. It has to look after our trade obligations not only to the EU but in all the other trade agreements we have reached, in which we agreed that we will not unreasonably subsidise goods that are traded so as to undercut our trading partners. So, we have a big international obligation—one that can lead to retaliation and all sorts of problems arising with the WTO and other international bodies.

We have all that, but we also have the area of subsidies in the UK. This includes the delicate relationship between the UK Government and the Secretary of State acting for England, the devolved authorities and local authorities. It is a very complex area, and all this is to be landed on a new body within the CMA: the SAU. It is not yet clear whether it will have the resources, expertise and personnel to do that. We have gone along with this, but we need to be clearer on, for example, whether it is a regulator or an overseer and reporter on the activities of the public authorities that are giving subsidies and quasi-subsidies. As we debated earlier in the Bill, this involves a range of things—for example, preferential procurement. At the end of my contribution at Second Reading, I asked the Minister whether my county would be able to give preferential treatment to a local firm because it provided local employment, or whether it had to make sure that the neighbouring county of Wiltshire was not thereby being undercut.

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[Lord Wigley (PC)]

Could my noble colleague clarify his thinking with regard to subsidies to the steel industry? Clearly, such subsidies could have far-reaching effects on the environment. To make a judgment on that would require people with an intricate knowledge of the steel industry and the background and significance of subsidies in that sector. At what level should that decision be taken?

[Lord Whitty (Lab)]

My Lords, that is probably a question for the Minister rather than for me, but, clearly, the decision on, for example, the Cumbrian coal mine, which is to feed into the steel industry, is an incredibly complex issue which will not be resolved by the narrow criteria of whether it enhances or undermines competition. The noble Lord is correct in that respect, because it would also have a considerable effect on carbon emissions.

[Baroness Jones of Moulsecoomb (GP)]

My Lords, I shall speak to Amendments 62 and 63. Amendment 62 seems pretty basic post-legislative scrutiny, so I am not quite sure why it is not in the Bill already. The Government are bringing in this legislation and it makes sense for the Competition and Markets Authority to report on whether the legislation works in practice. That is fairly fundamental, is it not? If it does not, then, obviously, we can improve the legislation; if it does, then the Government can pat themselves on the back. The amendment should have been in the Bill. I am expecting the Minister to say, “Yes, of course, we’ll write it in now.”

On Amendment 63—I wish I had added my name to it; I agree with everything that we have heard so far from noble Lords—I have said before that we should have a provision such as this in every single piece of legislation. As the noble Lord, Lord Whitty, just said, it is basic to what the Government claim to care about. The principle should underpin everything that they do. We know that the scale and size of the net-zero problem is huge, and the Government will need a lot of help. They will need a lot of private and public investment, and it will involve a lot of changes to government taxation and spending.

Any aspect of government that thinks that the climate emergency is not part of its remit is not thinking hard enough about it. We need both the whole of government and the whole of society to address the work on the climate and ecological emergencies. Every Bill that comes through here, every tax levied and every pound of government spending should move us towards net zero. There is an environmental saying: doing nothing risks everything. The Minister will say that the Government are doing a lot. I would argue that they are doing bits and pieces, so the saying could be: doing bits and pieces risks everything as well. We need a coherent approach.

I was asked whether I would still like a meeting with the Minister. Yes, I would, and I would like to throw down a little challenge. If the Minister or his team can come up with any issue that is not relevant to our climate emergency, I will be happy to argue how it is relevant. I look forward to that meeting, and I might bring some heavyweights with me.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

It is the Government’s position that five-yearly reports are sufficiently frequent to take a view of how successful this is. They are the appropriate tool to conduct a review of the environment and energy principles. Clause 65 provides an achievable timescale for delivering complex and substantive analysis of this sort. To ask that we prepare something every year would be an unnecessary burden on the whole subsidy control regime and the structures we have put in place to support this.

The CMA will have the ability to gather all the information needed to conduct such an analysis for these five-yearly reports, through Clause 67. These are powers that the CMA will not have in relation to its annual reports. I therefore humbly request that the noble Baroness withdraw the amendment.

[Lord Whitty (Lab)]

The other day, we discussed the inclusion of agriculture in the Bill, but the Government have made it clear that, basically, the future of all agriculture subsidy will be environmental objectives. The Minister’s reply to my noble friend’s amendment suggests that she agrees that agriculture should not really be covered by this approach, or that it should at least be treated substantially differently. What she has said, effectively, is that we cannot judge the environmental side; we have to approach it in the same way as every other sector.

[Baroness Bloomfield of Hinton Waldrist (Con)]

On the specific point about agriculture, I do not know whether the letter addressing those points has been issued yet. I can say that 99.5% of subsidies given to the agriculture industry in the UK would not fall within the remit of the subsidy; they are lower. We do not have the data for Scotland or Wales, but it captures only the very largest subsidy given to the very largest farms. That may include some in Scotland with that sort of acreage—

Subsidy Control Bill

Lord Whitty Excerpts

Lords Hansard - Part 1 & Report stage
Tuesday 22nd March 2022 Lords Chamber

Moved by

[Lord Whitty]

3: Schedule 1, page 53, line 6, at end insert—
“(c) progress towards targets under section 1 of the Climate Change Act 2008 (UK net zeroe emissions target), and section 5 of the Environment Act 2021 (environmental targets).”Member’s explanatory statement
This amendment requires public authorities to consider whether proposed subsidies would have any negative effects on progress towards the UK’s legally binding net zero and environmental targets.

[Lord Whitty (Lab)]

My Lords, I shall also say a few words about Amendments 51 and 61 in this group. I do so in lieu of the noble Baroness, Lady Boycott, who, unfortunately, has to be at a funeral this afternoon. I declare my interests as set out in the register but in particular a very new one, which is that I have become a director of Peers for the Planet.

This amendment is pretty straightforward. It says that our climate change strategy, our net-zero strategy, about which the Government have been very clear, should be taken into account in their subsidy policy. It is odd that it is not in the Bill, either in Schedule 1, which we are discussing, or virtually anywhere. However, we are lucky tonight because the Minister is of course also Minister for many aspects of net zero. I therefore assume that my amendment will be received with acclaim by the Government Benches. They might think they have a better form of words that they want to bring forward later, but I think my form of words is fairly clear.

We are on Schedule 1 to the Bill, which is headed “The Subsidy Control Principles”. That a flagship policy of the Government which has been said by Ministers time and again should apply across all government policy is not included in that schedule is very odd indeed, and it must surely be an oversight. Even more surprising, it is not referred to in Schedule 2, which relates to energy and efficiency principles, because that is mainly about energy policy. There is a reference which could be said to be relevant, which is to subsidies directed towards the reduction of carbon use and to help decarbonisation, but those are specific subsidies. What my amendment is concerned about is that all subsidy schemes should take into account their implications for our target zero policy and climate change objectives.

I would find it difficult to think the Government could reject that. Ministers have said on many occasions that it is one of our most important policies and strategic commitments. The Public Accounts Committee has recently said that all government departments must take it into account, and that includes new legislation. This is substantial new legislation which may not obviously directly affect climate change, but everything indirectly affects it. Subsidies after all, whatever their form, are about interfering with the market to get a different outcome. It would be odd indeed if the Government did not accept that, if the market was moving in the direction which was more or less in line with our climate change agenda, we should not intervene with a subsidy which reversed it or at least offset it. We are not saying that every subsidy has to be directed at climate change, but the implications have to be taken into account when considering the validity of that subject.

I am expecting a positive response from the Government. I do not think it would cost them a lot in terms of the overall nature of the Bill, but it would give credibility to the overall policy that our net-zero targets should be followed through across the whole of government and all public authorities. If the Government reject it, I will find that very difficult to accept, and I think we would wish to test the opinion of the House. I hope that the Government will be reasonable and either come up with their own wording or just accept the wording which the noble Baroness, Lady Boycott, and I are proposing. I beg to move.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I rise with great pleasure to follow the noble Lord, Lord Whitty, who has powerfully and clearly introduced this group of amendments. I will offer the Green group’s support for Amendments 3, 51 and 61. Were we not in a state of continual juggling of different Bills, I am sure that we would have attached one of our names to them.

Amendment 3, on which the noble Lord indicated he is likely to test the opinion of the House, is particularly important in considering the negative effects. I am influenced in that view by a visit I made yesterday to a village called North Ferriby and a site threatened with the development of an enormous Amazon warehouse, with significant environmental effects. From those environmental effects flow effects to people’s lives and well-being. It is the absolute reverse of levelling up in that it is making people’s lives much worse. It is clear that, when talking about economic development, there is inadequate consideration of local environmental effects and the broader effects on the state of our world.

However, I rise chiefly to speak to Amendment 5 in my name. Rather than trying to stop damage, this amendment is trying to lead the Government in a positive direction, which could help them deal with some of the issues facing them today and will be tackled by the Chancellor tomorrow.

Amendment 5 is all about helping small-scale community energy projects to make a big impact in the energy system. In Committee, the Minister suggested that community energy is not within the scope of the Bill, but I hope we might see a broader response today, and at least a positive response and acknowledgement from the Minister that this is a huge lacuna in government policy that desperately needs to be filled.

This amendment adds community energy to the list of circumstances that may be used to determine a subsidy, where the generator is a community energy project. What we see is that the rural community energy fund is soon winding down, despite its success. The Minister and I have, in another context, discussed the lack of any other community energy schemes, despite the Government’s promises to deliver them.

You might ask, “Why would subsidies be needed?” The fact is that community schemes often need early-stage seed funding to get them to the stage where they can seek investment. Without that, many communities, desperately keen to set up their own scheme, are never able to get one off the ground. What we are talking about is perhaps something like an electric car club, where a community can generate its own energy. I saw this in Stroud a few years ago: solar panels on the roof of a doctor’s surgery powered an electric car club car. This had all been supported by community investment and was run by the community, with the nature of the project being chosen by the community.

It is clear that this can unlock more than £64 million in private capital investment. It is an incredible opportunity for public money to kick-start a community-led green revolution. Importantly, thinking about the levelling-up agenda, this means that communities with money can put it into their local community and get the money circulating around that community. This is a cost-effective way of unleashing the possibility of many new green jobs.

I am not expecting the amendment to pass today, but there is a huge opportunity here. The crisis the Government are facing is clear: the cost of living crisis and concern, particularly in the context of the tragic situation in Ukraine, about energy self-sufficiency. But there is energy all around us: energy from the sun, the wind and people within communities desperate to help tackle the climate crisis and meet the needs of their own communities. Let us make sure that we have a subsidy scheme that can support all that physical and human energy and put it to good purposes to improve the lives of us all and our environment.

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I stress to noble Lords that the UK’s existing commitments and practices in relation to this critical priority are extensive and world leading, including, for instance, the various principles set out in the Environment Act which Ministers must give regard to when making policy. I believe, therefore, that we already have the right framework in place. For the reasons that I have set out, I hope that the amendment can be withdrawn.

[Lord Whitty (Lab)]

My Lords, I cannot really hide that I am deeply disappointed by the Minister’s response. One modicum of comfort, if that is the phrase, is that he did say that guidance to public authorities would include a reference to the climate change objectives. I therefore can see no possible reason for him rejecting Amendment 61 on that basis.

On the central issue, the Minister referred to all the existing mechanisms, and there are important existing mechanisms and commitments, but the Climate Change Committee has said to the Government time and again that every new policy ought to include a cross-reference to climate change targets. This is an enormous area of new policy that, rightly or wrongly, we have taken back from the European Union so that we control the levers of power for a new era. Yet the Government stumble at the first hurdle and do not put it in this very important legislation. I do not understand the logic.

To be fair to the Minister, he wants all these things delivered, as the Government appear to do. This is not to say that they override all other policies and objectives, but they should be part of the balance when these things are being considered. There is a danger, in rejecting such amendments to this important legislation, that the interpretation out there—which in a sense has been fed by the media over the last few days—will be of a backing off from commitments to climate change within government circles.

The Government are missing the point and missing a trick here. If they want to reassert that they are still on schedule to deliver the government commitments and the net-zero strategy to which the Minister is committed, that should be in this important legislation. I hope I am wrong, but in order to ensure that this House at least has a chance to give its view on these matters, I am prepared to put this issue to the vote tonight. I beg to move.

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It is a little surprising to me that this amendment was not grouped with Amendment 2, in the name of my noble friend the Minister, which has been so warmly received on all sides. It is likely to achieve exactly what the noble Baroness and the noble Lord, Lord Bruce, would like to see, so I do not support this amendment.

[Lord Whitty (Lab)]

My Lords, I will say a couple of words in support of the amendment and widen it slightly. In Committee, we argued that agriculture had to be dealt with somewhat differently. Clearly, the most acute issue is those on the uplands and other disadvantaged areas. It is right that this amendment addresses that and that the Government—at least in words, if not in the Bill—accept that this will have to be the case.

There is another aspect to it. If we drive those farmers out of business and there is no farming on the uplands and other disadvantaged areas, relatively well-heeled organisations will buy that land, claim they are reforesting it or engaging in some other form of environmentally desirable activity and receive a government grant for it—but in the meantime they will destroy the communities, the culture and the whole nature of our upland areas.

I add the proviso that, as the new schemes come in, the subsidy policy will have to be reconciled with other aspects of agricultural policy. It will not be a simple area. As the noble Duke just referred to, the SIs we have seen so far do not give us any clear indication of the way that policy will develop. This will be an ongoing issue between the subsidy regime and the agricultural support scheme.

[Lord McNicol of West Kilbride (Lab)]

My Lords, I am grateful to the noble Baroness, Lady Randerson, for tabling Amendment 4 and wish her well in her recovery from Covid—it seems that working on BEIS Bills is a Covid-risky business for us all. I also thank the noble Lord, Lord Bruce, for introducing the amendment.

On our Benches, we have been puzzled by the Government’s decision to include agriculture and fisheries in the new subsidy control framework. These are complicated sectors already governed by their respective post-Brexit Acts of Parliament. Given the complex nature of agriculture, I imagine it will be high up on the list of streamlined subsidy schemes created by the Secretary of State or by devolved authorities with approval.

There are genuine concerns around the Government’s approach to the withdrawal of CAP funding and the seven-year transition to environmental land management schemes, ELMS. We support ELMS and the UK Government and devolved Administrations having far greater flexibility than that afforded under the CAP. Nevertheless, as the NFU president Minette Batters has made clear in recent comments, these are challenging times for UK food producers. There has been a worrying long-term trend in the agricultural sector, as my noble friend Lord Whitty just stated, with smallholdings being snapped up by ever-growing larger conglomerates. We take no issue with the bigger producers being present in the UK, but we are concerned about the ever-increasing squeeze on family farms and hill farmers, who struggle to make a living without stable subsidy support.

I am sure the Minister will tell us that this amendment would raise all sorts of unintended consequences, not least that it would fundamentally undermine the ability of the Welsh Government to support their farming sector. However, due to Her Majesty’s Government’s treatment of subsidy control as an entirely reserved matter, there is not a common framework on this topic. This was already touched on in detail in Grand Committee. Specific nations and regions of the UK may have very different interests from those of their neighbours.

Public authorities will of course be able to do what they deem appropriate in the context of overarching subsidy control principles, but this is one area where we may end up seeing subsidy battles and/or legal appeals. Ultimately, this is an opportunity for us to say that, where agricultural subsidies are given, public authorities should have particular regard to issues around the hardship and profitability concerns of smaller producers. As with Amendment 3, we do not believe this text in Amendment 4 precludes any public authority from awarding any particular subsidy; it merely adds an additional consideration to the decision-making process.

Amendment 4 may not instantly solve the problems faced by Welsh farmers, for example, but let us remember that in terms of the Welsh sheep industry something like 90% of the breeding stock fall within upland areas and 70% are in what are known as severely disadvantaged areas. These farms are a crucial part of the British landscape and, while they may not be as profitable as others, there is a public interest in preserving them. We will listen very carefully to the noble Baroness’s arguments, but at this time we are minded to support Amendment 4.