Subsidy Control Bill

Lord Wigley Excerpts

Committee stage
Wednesday 9th February 2022 Grand Committee

Actually, any subsidy or preferential procurement could impact on carbon emissions. Whether it relates to transport, public services, digitalisation or whatever, it can have an effect that is not primarily environmental, but with a fairly devastating environmental side-effect. We need to make sure that the regulation of our subsidies reflects the need to focus on that at every level. We need to get the CMA to report the aggregate outcome of its activities of the previous year. I strongly support the amendment from the noble Baroness, Lady Boycott.

[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.

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[Lord Bruce of Bennachie (LD)]

My Lords, I speak in support of Amendment 64, to which I have added my name. I also support Amendment 65, which my noble friend Lord German will address in more detail. Overall, and as has been said, this Bill has worrying implications for the devolution settlements. Just as the United Kingdom Internal Market Act may be used to impact the devolved Administrations unfairly—certainly, that is their concern—reserving the subsidy regime to the UK Parliament and the powers that have been given to the Secretary of State are causing alarm across the devolved Administrations.

The Government like to claim, and the Minister has made this point a few times, that leaving the EU gives the devolved Administrations more power and flexibility. Under the EU, they were constrained by the state aid rules that no longer apply. Now, they can pursue their own. That would be true if the UK Government were not introducing legislation that allows them to override the devolved Administrations, without even a requirement for consultation and with no reciprocal rights to challenge UK Ministers’ decisions as regards not only the UK but England.

Oversight of these two pieces of post-Brexit reserve-power legislation, which I would argue are draconian, has been allocated to the Competition and Markets Authority, which has been asked to acquire skills and experience that it does not yet have. It is important for us to recognise that this is new territory for the CMA.

Thomas Pope of the Institute for Government says that this Bill

“does not yet guarantee a Brexit success story. Gaps in the legislation could deny Parliament”—

I would argue are denying Parliament—

“a proper chance to scrutinise how the new system will work—and point to future rows between the UK government and the devolved administrations.”

He further points out that the regulations have no input from the devolved Administrations. The Minister keeps saying that he is consulting, but the devolved Administrations say it is not consultation at all. Pope argues that

“a successful system needs buy-in from all parts of the UK.”

That is absolutely the case. He went on to say that the Institute for Government’s report

“recommended that any regulations should be made in consultation with the devolved administrations”—

I emphasise the following—

“with the process preferably led by experts in the CMA. The government’s approach risks future clashes”.

These arguments have been further developed by George Peretz QC, who points out, as previous debates in this Committee have highlighted, that granting authorities need to test their subsidies against the effects on competition and investment, without reference to the wider issues—in other words, social and environmental implications, and the other issues we are discussing. It is a very narrow definition, which could lead to broader subsidy intentions being overridden. It is true that the TCA refers to the socioeconomic situation of the disadvantaged area concerned. How could the EU not agree to that, given the CAP and its own state aid rules? But there is no definition of what constitutes a disadvantaged area or what disadvantage is. We have discussed the lack of any area map in previous Committee debates.

Mr Peretz goes on to say that

“nothing in the Bill provides for the devolved governments to have any say in the appointment of CMA panel members who will, as part of the Subsidy Advice Unit, exercise the CMA’s powers under the Bill”,

such as they are, and

“there is no equivalent to the provisions of Schedule 3 to IMA20 that require the Secretary of State to seek the consent of the devolved governments before making appointments to the Office for the Internal Market”.

Why is that the case for the internal market Act but not the Subsidy Control Bill? Surely, consistency, at least, requires that. This amendment seeks to remedy this and, I suggest, for very good reason. As I said, the CMA is moving into new and unfamiliar territory. It is surely essential that it understands the needs of the devolved areas and can balance them across the UK.

The powers that the Secretary of State has, which are not reciprocated for the devolved Administrations, put the CMA in a potentially invidious position. If the Secretary of State seeks to challenge, for example, the livestock support regime of any of the devolved Administrations, he or she can do so—on so far unstated but potentially restricting grounds. If a Minister introduces a subsidy, let us say, for London which the devolved Administrations feel disadvantages them, they have no corresponding right to challenge. I would anticipate the argument of grandfathering current regimes and repeat what I said in the debate on agriculture earlier in the week: that, over time, the regimes may change as circumstances change and, at that point, they will not be grandfathered and may be subject to challenge. That is important to note.

As George Peretz points out, the result looks distinctly unbalanced. For example, if the Welsh Government decide to grant a subsidy to which the Secretary of State objects, perhaps on the basis of its impact on England, the Secretary of State may be able to refer it to the CMA and will have standing to challenge it before the CAT. The Secretary of State may also be able to issue guidance that recommends against types of subsidy that the Welsh Government might have in mind, guidance to which the CMA and the Welsh Government have to have regard. On the other hand, if the Secretary of State grants subsidies to businesses in England or, using his or her powers under Section 50 of the internal market Act, to businesses in Wales to which the Welsh Government have objections, none of those possibilities are open to the Welsh Government. I rest that case, because it is crucial.

The Minister may argue that, as with the Monetary Policy Committee of the Bank of England, members are appointed to the CMA for their expertise rather than their geographical base, but he is ignoring that no such expertise yet exists for the new regime. It is surely imperative that, from the outset, the CMA is fully conversant with the needs of the devolved Administrations and that administering the regime evolves in a way which is sensitive to them. The Minister knows my opposition to separatism and nationalism, but I am a passionate home ruler and believe that the devolution settlements should be upheld and not eroded.

The Minister will assert that these are reserved powers—he has done it several times already during this Committee—and are based on the sovereignty of Westminster and not on a federal system which we do not have, or even a devolved consensus. To disregard the devolved Administrations, regardless of where the legal and constitutional power lies, is reckless. The Government are putting the union at risk in the way they are proceeding with this Bill by using reserved powers and failing to recognise the sensitivities. To say to the devolved Administrations, “You have more freedom than you had under the EU, but we’re having reserved powers that will qualify, test or challenge that freedom” is a two-edged sword that does not stack up. Right now, the mood in the devolved Administrations is that they do not trust the Government’s intentions, not yet knowing what they are.

[Lord Wigley (PC)]

My Lords, I am delighted to follow the noble Lord and agree with almost all the comments that he made—not entirely, but almost. In particular, I am glad to support Amendments 64 and 65, proposed earlier by the noble Lord, Lord McNicol, and have added my name to both of them.

My feeling—and this is really what the noble Lord was speaking about a moment ago—is that we are building a grit creation machine here. We are creating the grit that will cause difficulties as the wheels of this operation move forward. I do not think that is what the Government really want to do.

I well remember being on a committee chaired by the noble Lord sitting next to me a couple of years ago, when we were questioning the CMA’s role in these matters. We found that the CMA, quite legitimately, had very little experience of dealing with devolved dimensions. This was not a criticism of it; that was not its role. It still does not. We should therefore ensure that we build the necessary talent and experience into the relevant units or committees of the CMA that can at least advise on these matters, but it seems that we want to tie the hands of the CMA. It does not have that background; it has no obligation to work in close proximity to the devolved regimes under the Bill. It should certainly find a way of doing that if it wants the operation to go smoothly, otherwise problems will arise.

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[Baroness Bloomfield of Hinton Waldrist (Con)]

I think the noble Lord might have to declare an interest on that front, but we will let that lie. I will have to write to him with the specifics on this. Obviously, recruitment is an ongoing process that will continue throughout the next year.

[Lord Wigley (PC)]

Before the Minister sits down, I have what is meant to be a helpful question. Given that there may be a need for expertise in certain areas in the work of the CMA—expertise it does not have in house—could staff be taken on on a secondment basis to overcome the restriction in subsection (4) referred to earlier? This would provide the expertise for the duration necessary in undertaking specialist areas of investigation. I do not expect an immediate answer, but perhaps the Government might consider it.

[Baroness Bloomfield of Hinton Waldrist (Con)]

The noble Lord makes a very interesting point. It does have operational independence, and I am sure that is something it would be able to consider.

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I believe it should, and therefore I would be grateful if the Minister could explain why he disagrees. I beg to move.

[Lord Wigley (PC)]

My Lords, I shall speak to Amendment 72, which I think is linked with this amendment. It refers to the responsibility of the CMA to act in an even-handed manner when carrying out its functions, particularly with regard to the Scottish Ministers, the Welsh Ministers and a Northern Ireland department.

I ask the Minister how on earth one can reject the requirement to act on an even-handed basis. It seems common sense that any action by the CMA would have to be on an even-handed basis. If that is the case, what is the problem with including these words in the Bill? If the argument is that the CMA may not sometimes act on an even-handed basis, that needs further exploration, which perhaps we can come to at a later stage; but if the Government are rejecting Amendment 72, I would like the Minister to clarify on what possible basis they can do so.

[Baroness Blake of Leeds (Lab)]

My Lords, I am grateful to the noble Lord, Lord Purvis, for tabling these amendments. At Second Reading and over the past three and a half days of Committee, we have repeatedly come back to how the new subsidy regime interacts with the broader provisions contained in the United Kingdom Internal Market Act.

As we know, the Government have clearly classified subsidy control as a reserved matter, but there a number of sectors where local or devolved interests may conflict with the wider interests of the internal market Act. The Government repeatedly come back to the notion that the new regime should facilitate the smooth functioning of the internal market. However, if we return to Monday’s discussions about Northern Ireland’s unique position and the inclusion of agriculture, we have to accept that those issues have raised more questions than answers when it comes to how the new regime will balance competing interests.

It is fair to say that some of the responses that we have had thus far have not been entirely convincing, and some of the answers given by the Minister seem to have highlighted the complexity of the issues that we are discussing and, therefore, the need to raise the matters in these amendments.

The wording “even-handedly”, as raised in Amendment 72 and used in other legislation, is particularly interesting. What is the Minister’s personal interpretation of that? How will it be administered and who will make the judgments, if it is deemed that unfairness is built into some of the decisions that are made?

We are repeatedly told when debating this Bill as well as when discussing whole rafts of government policy in other areas that there is a commitment to devolution and that is the most important thing—but, in the same breath, the Government say that subsidies must not undermine the internal market. How can both those statements be true?

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[Lord German (LD)]

My Lords, I rise to speak to my Amendment 79, which neatly follows the questions of the noble and learned Lord, Lord Thomas of Cwmgiedd, about standing.

On 13 January, the following fanfare was announced from Downing Street:

“Prime Minister to chair new council with devolved governments”.

The No. 10 press release described this as a

“Landmark agreement on how UK government and devolved governments will continue to work together”,

and how an agreement on this “has been reached”. It promised “new ways of working”, “Reaffirmed principles” of

“mutual respect, maintaining trust and positive working”

and formalised a “council”, led by the Prime Minister, “overseeing strengthened working”.

I am going to come to the document that lies behind the press release in a moment. Of the five things the Government say this is going to achieve, they end with the principle about conflict resolution:

“Resolving disputes according to a clear and agreed process”.

I am trying to seek consistency in this Bill, which has been severely criticised for the relationships it is trying to and has to build with the devolved Administrations. At the same time, we have another document, setting up more machinery of government, which will look at resolving disputes. I understand that resolution of disputes is in the common frameworks procedure, but there is very little in the Bill about how the devolved Administrations can resolve disputes. I suspect—I am pretty certain—that there will be a lot of criticism over the coming months and years from the devolved Administrations.

In the document which lies behind the Prime Minister’s announcement, about the review of intergovernmental relations, there is a two-page section in which the first paragraph states:

“No Secretariat”—


it is an independent secretariat managing the council—

“or government”—

and that is all Governments in the United Kingdom—

“can reject the decision of a government”—

again, that is any Government—

“to raise a dispute.”

So this is a dispute mechanism which has clearly been put in place by the Government to provide an opportunity for the Administrations to raise their disputes. I do understand that if it is enshrined in law, if the legislation is there, it makes it trickier, but as the noble and learned Lord, Lord Thomas of Cwmgiedd, asked, what happens when somebody wants or objects to an interpretation, particularly that of the Secretary of State, and this process escalates?

The Bill contains a lot of procedures which could well lead to a dialogue between the devolved Administrations and the Secretary of State. There is also a huge amount of what is called “guidance”—which we shall come to later—and a number of documents are going to emerge which will perhaps put flesh on the bones of some of the things we have been talking about in the Bill.

My question is this: will this arrangement announced by the council and by the Prime Minister, no matter what this Bill comes to and no matter what the processes described in it are, allow, as the intergovernmental relations document states, any Government to bring a dispute before all the other Governments? There are 30 or 40 lines and another page about how that dispute has to be resolved and the use of an independent secretariat.

If the right relationships as described in the document from the Prime Minister were built into this Bill, I would rather hope that it would minimise the necessity for such a dispute mechanism to arise. My test of this is to ask the Minister the following question. Given the announcement, and given the availability of this procedure, is there anything that he can see apart from the legislation before us that a devolved Administration could not refer to this council? If that is so, there is a strong case for making it easier for the devolved Administrations to engage through the mechanisms of this Bill without having to go through all the processes which would lead to the dispute mechanism outlined by the Prime Minister. I am asking for consistency, and I hope that the Minister can provide it.

[Lord Wigley (PC)]

My Lords, I am delighted to support the amendment put forward by the noble and learned Lord, Lord Thomas of Cwmgiedd, and agree strongly with the points that he made in opening this short debate. The devolved regimes must surely be in a position in which they can be regarded as interested parties. It stands to reason that that must be the case in certain circumstances, and there must be provision within legislation for those certain circumstances to be looked after in the context of this Bill.

I was delighted to have the opportunity to add my name to Amendment 79 put forward by my colleague, the noble Lord, Lord German. I support the points he made in regard to it. The need for some indication to the devolved regimes that they are partners has surely come out of the debates we have had in the last three or four sittings of this Committee. It is time that the Government found some way of indicating that they are prepared to work on a partnership basis. These two amendments pave the way for that, and I hope the Government can respond positively.

[Lord Hope of Craighead (CB)]

My Lords, I put my name to Amendment 69 as well, and I support exactly what my noble and learned friend Lord Thomas of Cwmgiedd said about it.

It is worth noting that the definition of “interested party” has to be read together with Clause 70(1). The point is that to apply to the Competition Appeal Tribunal you have to be two things: an “interested party” and “aggrieved”. The definition takes you part of the way there. I am thinking in particular of the Secretary of State, who is an interested party but in order to apply has to demonstrate that in some respect he or she is aggrieved by the making of the subsidy decision.

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This head of steam is building in this House and a campaign is emerging, spearheaded by Conservative Members. I hope the Minister will not allow this Bill to fall into the “naughty list” category that they are assembling. I look forward to his explanation of the significant use of guidance in the Bill and particularly the recognition that this guidance is expected to be followed.

[Lord Wigley (PC)]

My Lords, I was delighted to hear the speech of the noble and learned Lord, Lord Thomas, who raised matters of considerable importance to which we will undoubtedly have to return on Report. I support the comments made by my friend, the noble Lord, Lord German.

I shall not speak at length. We have been over and over, time after time, the question of the relationships with the devolved institutions, so I ask the Minister this simple question: will the Secretary of State give an assurance that, in every instance where guidance may have an implication for the Welsh, Scottish or Northern Ireland Governments, he will actively consult them prior to issuing the guidance?

[Lord Berkeley (Lab)]

My Lords, I rise to speak briefly to my Amendment 80, which is a probing amendment. It is grouped with this lot of amendments, but it is a different subject, and I will try to be as quick as I can.

It relates to Clause 85, headed “Crown application”, which provides that the Act will apply to the Crown, but excluding Her Majesty in her private capacity, Her Majesty in right of the Duchy of Lancaster, and the Duke of Cornwall. I am afraid that this continues the debate about the uncertainty of the role of the Duke of Cornwall and the Duchy. It is one little hobby-horse that I have been pursuing for many years, and I apologise for that. I refer noble Lords who want to get into the detail to the Second Reading of my Private Member’s Bill, the Duchy of Cornwall Bill, on 26 October 2018, which seems a long time ago.

Since the Duchy of Cornwall says that it is in the private sector—I am assuming that the Duke and Duchy are synonymous—why should the Duke of Cornwall or the Duchy be given special treatment in this Bill? No other big landowner or property owner is allowed special treatment. I understand why Her Majesty in her private capacity and the Duchy of Lancaster are, but the Duchy of Cornwall says on its website:

“The Duchy of Cornwall is a … private estate … established by Edward III in 1337.”


This was confirmed in the second-tier tribunal in 2016, after a Mr Michael Bruton had claimed that the Duchy was in the public sector and therefore needed to do an environmental study on putting Japanese oysters into the Helford river in Cornwall, which it owned. In the First-tier Tribunal, Mr Bruton had won, largely because the Duchy’s representative said, “To all intents and purposes, we believe we are above the law”, which is quite an interesting statement. Of course, the Duchy then appealed to the next-tier tribunal and, not surprisingly, with all the free legal advice it gets from the Government, it won. The tribunal’s decision was:

“The Duchy of Cornwall is not a public authority for the purposes of the Environmental Information Regulations 2004.”


Why should the Duchy of Cornwall be treated differently from anyone else—any of us—to whom this Act will apply? If the Minister is not able to answer that question today, perhaps he could write to me. He might want to contact the Duchy itself. I warn him that the last time I raised this, in the leasehold reform Bill debates about three or six months ago, the Minister agreed to write to the Duchy of Cornwall, the Duchy of Lancaster and the Crown Estates about the leasehold reform Bill. We got good responses from the Duchy of Lancaster and the Crown Estates but, as far as I know, no response from the Duchy of Cornwall.

I do not think that right, because the Duchy of Cornwall must have given views on this Bill and I would like to know what it said. Did it send a letter? Did the Minister have correspondence? If so, can he put it in the Library? If he did not, how was this decision made? I think it very unfair that the Duchy of Cornwall—probably uniquely among big estates in this country, whatever their rights and wrongs—should be given this special treatment, for it means an exemption to the Bill.