Draft State Aid (EU Exit) Regulations 2019

Martin Whitfield Excerpts

Wednesday 10th April 2019 General Committees

[Kelly Tolhurst]

The hon. Gentleman may be referring to the commitment, made by my noble Friend in the other place, to write to the Committee. He still plans to do so. The Government’s position is that state aid is a reserved matter.

[Martin Whitfield (East Lothian) (Lab)]

The Minister referred to the regulations being UK-wide and mentioned the devolved Administrations in Scotland, Wales and Northern Ireland. In the light of the Government’s contention that state aid is a reserved matter, can she share with the Committee the Scottish and Welsh Governments’ responses to the draft regulations?

[Kelly Tolhurst]

I thank the hon. Gentleman for his intervention requesting further clarity. We consulted the devolved Administrations before laying the draft regulations. It is true that there is a lack of agreement with the devolved Administrations on whether state aid is a reserved matter. We maintain that it is. The statutory instrument will bring over EU regulations so that they work in a domestic setting. We are not proposing any changes.

The European Commission’s powers will be transferred to the CMA. That will not result in fewer powers or less involvement for the devolved Administrations. Under the domestic regulations, they will still be responsible for submitting their own state aid requirements directly to the CMA. They will not lose any powers that they have at the moment.

[Martin Whitfield]

I am grateful for that clarification. It is therefore the case that, in essence, the devolved Administrations have the responsibility but not the authority, and they run the risk of having punitive damages found against them should it be decided that they are exercising state aid.

[Kelly Tolhurst]

No, I am afraid I disagree. Currently, the devolved Administrations are responsible for aid givers, and they will potentially be aid givers. Under current EU regulations, the devolved Administrations have to notify the Commission of the giver of that aid. The SI will not change that. In a no-deal situation, the CMA will act as the notified body. There is no change. I disagree with the hon. Gentleman’s statement, but I respect his attempt to push that point and get further clarification.

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[The Chair]

I am grateful for your point of order, Mr Esterson. The documents before the Committee are the draft State Aid (EU Exit) Regulations 2019 and the accompanying explanatory memorandum. If there is Government correspondence relating to the content of those documents, that is a matter for the Minister to explain to the Committee, but it is not seminal to the draft regulations before us today.

[Martin Whitfield]

Further to that point of order, Mr Hanson. I draw attention to paragraph 7.15 of the explanatory memorandum, which discusses the role of the courts. Specific reference is made to the Court of Session in Scotland as an arbiter in this matter. That seems somewhat to conflict with the answers I have received from the Minister, and it goes to the heart of this.

[The Chair]

Again, I refer the hon. Gentleman to the document before the Committee. The Minister has ownership of it, and it is for her to explain its contents. If there are queries about responsibilities or intergovernmental correspondence, it is for her to explain that to the Committee, and it is then for the Committee either to support or to reject the regulations, based on the evidence she brings forward.

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[Martin Whitfield]

I wonder whether the Minister will address the exemptions. With respect to Horizon 2020, with an uncertain no-deal departure date—or, we hope, no no-deal departure—what will happen where people have submitted applications but have not heard or are in the process of appealing decisions? With respect to the specified EU projects in schedule 2, what is the position on our contribution to CERN? CERN has always stood outside the EU, but our contribution is a Government-funded payment within the EU. How would the state aid rules apply to that?

[Kelly Tolhurst]

The draft regulations are not intended to stop any existing schemes in a no-deal situation, which is why we have the exemption list. The Treasury has been clear that all the projects that were committed to prior to EU exit will be honoured. I cannot go into detail about the specific project the hon. Gentleman mentions, because I do not have all the details to hand, but I am happy to give him further clarification on that.

I emphasise that the intention of the draft regulations, and the reason for including those projects in schedule 2, is to ensure that there are no unintended consequences of transposing the EU regulations and that state aid recipients have clarity and understand what will not be subject to state aid. I point out that in 2017, under the current state aid regime, 97% of state aid issued in the UK was pre-exempt. I commend the draft regulations to the Committee.

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[Martin Whitfield]

Before my hon. Friend progresses through the explanatory memorandum, may I draw him back to the extent and territorial application of the statutory instrument? We talked earlier about the negotiations with the devolved Administrations, and the Minister said there was some concern—I apologise if I misquote her—about the quality of the discussion. Will my hon. Friend set out his understanding of how the devolved Administrations view the statutory instrument? Is he able to enlighten the Committee on that?

[Bill Esterson]

My hon. Friend is quite right to pursue that point further. I prepared a section of my speech on that, and I will pick up his point in detail when I reach it. I have identified some additional points from what he said earlier and the Minister’s reply.

Paragraph 6 of the explanatory memorandum covers the legislative context. It lists no fewer than 14 pieces of legislation affected by the regulations and underlines just how much of a challenge it is for the Committee to scrutinise these changes, which are vast in scale and have far-reaching consequences. The volume of legislation listed in paragraph 6.4 demonstrates why it simply is not possible for us to say whether the regulations deliver the technical changes the Minister claims are being made. It is not that she is wrong; it is that I have no way of telling whether she is right or wrong. That is an important distinction. [Interruption.] I am perfectly capable of reviewing the legislation, as the hon. Member for Burton points out. Unlike him, I do not have the legal background—

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[Martin Whitfield]

It is a great pleasure to serve under your chairmanship, Mr Hanson, and to follow my hon. Friend the Member for Bassetlaw. I will take a couple of minutes to explore the situation around devolved authorities and this statutory instrument. I will focus on Scotland, from which, if I understand my hon. Friend the Member for Sefton Central correctly, there has been no formal response, but where there is great disquiet about the direction of the SI.

[Bill Esterson]

I have no way of knowing whether there has been a formal response, because the Government have not published anything.

[Martin Whitfield]

I am grateful for that clarification. I understand the Government’s position: they say the matter is reserved, for which the authority is the “Frameworks Analysis: Breakdown of areas of EU Law that intersect with devolved competences in Scotland, Wales and Northern Ireland” from 9 March 2018; but under the devolved model in Scotland, everything not in the schedule to the devolution Act is devolved to the Scottish Parliament. Where in that schedule is the matter reserved to this place?