All 2 Seema Malhotra contributions to the Subsidy Control Act 2022

Read Bill Ministerial Extracts

Wed 22nd Sep 2021
Subsidy Control Bill
Commons Chamber

2nd reading & 2nd reading
Wed 20th Apr 2022
Subsidy Control Bill
Commons Chamber

Consideration of Lords amendments & Consideration of Lords amendments

Subsidy Control Bill

Seema Malhotra Excerpts
2nd reading
Wednesday 22nd September 2021

(2 years, 6 months ago)

Commons Chamber
Read Full debate Subsidy Control Act 2022 Read Hansard Text Read Debate Ministerial Extracts
Seema Malhotra Portrait Seema Malhotra (Feltham and Heston) (Lab/Co-op)
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Let me start by saying that it is good to see the Secretary of State still in his place after last week’s reshuffle. I also wish to congratulate the new Ministers in his team on their appointments. However, I am sure I am not the only Member of this House who has noticed that there are now no female BEIS Ministers. While businesses across the country recognise the importance of balanced leadership at the top of their organisations, it is remarkable that BEIS seems to be moving in the opposite direction, and overlooking the important contribution that women Ministers make to ministerial teams and indeed to our economic debate.

To turn to the Bill, let me start by thanking the Secretary of State for his opening remarks, in which he laid out the subsidy control principles and talked about the need for autonomy, transparency and accountability in the new regime. Labour recognises the need for subsidy control legislation which establishes the framework for the UK’s post-Brexit regime. As of 1 January this year, EU state aid rules largely no longer apply in the UK. The EU-UK trade and co-operation agreement requires that the EU and the UK maintain their own independent systems of subsidy control. The UK also has to continue to comply with the World Trade Organisation’s subsidies and countervailing measures agreement. The Bill is therefore necessary for us to comply with our international obligations. More than that, however, it is necessary to protect the UK’s internal market and to ensure that public funds are being made available to businesses with the appropriate safeguards in place. That is why we will not be opposing the Bill tonight, but we are seeking to address significant gaps of concern during the passage of the Bill.

Jonathan Edwards Portrait Jonathan Edwards
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As my right hon. Friend the Member for Dwyfor Meirionnydd (Liz Saville Roberts) alluded to and as the hon. Lady will be aware, the Labour Government in Wales are taking the British Government to court on this issue. Will she explain why the Labour party here in Westminster is not showing solidarity with its colleagues back in Cardiff?

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Seema Malhotra Portrait Seema Malhotra
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I thank the hon. Member for his comments. I will be making a considerable contribution on the issues associated with devolution and our grave concerns about this Bill, which we would want to see corrected. They need to be addressed because we want legislative consent to be given and the concerns being raised by devolved Administrations to be addressed.

Much in this proposed regime reflects EU state aid rules, including the definition of a subsidy, the prohibition of unlimited state guarantees and the condition that subsidies should be justified on public interest grounds. Where the Bill significantly differs from the EU’s rules is in its departure from a pre-notification system, where subsidies had to be approved before they were granted. The Bill offers the potential of a quicker system where subsidies are not required to be approved in advance of being implemented, but are subject to a review and appeal system. We want this regime to be robust and to stand the test of time, but the new system will work only if it provides transparency, oversight and scrutiny, and there are key areas of the Bill where those are missing.

First, there are huge gaps in the Bill and crucial aspects are yet to be defined. The Bill may establish a regulatory framework of subsidy control, but it fails to provide any clear indication as to how and where the Government plan to see those subsidies being spent and at what scale. Labour is in favour of a subsidy system that backs British businesses and our economy, but it must operate in the context of a strong UK-wide industrial strategy, which for all intents and purposes is not nearly where it needs to be. Furthermore, there is no clear plan for how the new subsidy control regime will be used to support national priorities such as net zero. Much more needs to be joined up and coherent in the new regime.

Secondly, the Bill in its current form does not provide a fair role for devolved Administrations—we have heard that in hon. Members’ interventions—in developing and implementing the new regime. We believe that changes must be made.

Thirdly, we are concerned that the Bill does not strike the right balance between efficiency and oversight, particularly regarding the role of the Competition and Markets Authority. Transparency is also severely lacking in the case of some subsidies, putting the country at risk of allowing damaging subsidies on the scale of hundreds of thousands of pounds, and allowing the use of public money to continue unknown and therefore unchallenged.

Although the Bill may propose a quicker subsidy regime, we want to understand further how the Government plan for those subsidies to be used, what will be brought forward from the contributions to the Government’s consultation and the response to it, and how that will manifest in the guidance to come.

We have heard the concerns about support for assisted areas or key British sectors and foundation industries, such as steel. As the Minister for Finance and Local Government in the Senedd asked in her letter to the Government:

“If areas that have suffered historical economic disadvantage will no longer have the right to greater flexibility of subsidy over other regions… what alternative approach does the Government propose to ensure that disadvantaged areas can compete on a level playing field?”

Is the equivalent to an assisted areas policy implied under the seven principles, for example, equity rationale or specific policy objectives? In that case, will the Government make that clear in the guidance? Public authorities that will transition to the new regime in our devolved Administrations need that clarity.

Parliament is right to be concerned that the Conservatives are more interested in levelling-up rhetoric than in actually levelling up. In March last year, the regional deprivation fund highlighted that clearly, which led to considerable debate in the House. The Government appeared to direct money not to areas that needed it most, but to areas that seemed to serve their interests. If the Government are truly committed to their levelling-up agenda and their plan for growth, they need to show it. The Secretary of State should publish their plans and detailed guidance on how the subsidy control regime will direct public funds to the communities and businesses that need it most, in the interests of genuinely levelling up in deprived areas and our wider economy.

We also know that the UK has historically spent far less on subsidies than its international counterparts. For example, in 2019 the UK spent just 0.38% of GDP on state aid, far lower than Germany, which spent more than three times that or Hungary and Denmark. Indeed, we were seventh lowest in the EU.

The Secretary of State does not have the strongest record on industrial strategy, given that he scrapped his predecessor’s plan and wound up the Industrial Strategy Council in March.

Andrea Leadsom Portrait Dame Andrea Leadsom
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Why does the hon. Lady equate the fact that the UK has an excellent track record of allowing businesses to stand on their own two feet rather than being bailed out with state aid with not having an industrial strategy? Surely we are backing capitalism as the way for everybody to become richer and be in work.

Seema Malhotra Portrait Seema Malhotra
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I will just leave the right hon. Lady with the Institute for Government’s feedback on the Government’s plan for growth, which was that it seemed more like a shopping a list than a prospectus. If those who independently look at what the Government are producing in terms of a plan and our industrial strategy make such comments, the Government would be wise to heed some of that feedback, in the interests of our country. I would like to be having a different debate. I would prefer to have a debate that was much more about content than on whether there is a clear plan.

Let me come back to my speech. We recognise the debate about whether the Government have a strong record on industrial strategy. Last week, the Confederation of British Industry urged the Government to

“build an economy of the future through catalytic public investments”

and to re-find its “role as market maker”. On research and development, innovation, regional growth and hydrogen—on which, perhaps, a strategy has since come forward—the CBI said that further action was needed for the UK

“to remain internationally competitive against peer nations where business investment levels–and public spending…far outstrips our own.”

Sufficiency of strategy is important here; it is not just about the publication of a document. There has been feedback on that, too.

We want to see well-designed, proportionate subsidies as part of the wider industrial strategy that we need to grow the businesses and industries of the future and to invest in our transition to net zero. Labour has also said that we must buy, make and sell more in Britain, as called for by our shadow Chancellor, my hon. Friend the Member for Leeds West (Rachel Reeves). That is part of how we can ensure resilience in our economy—the need for which has been highlighted only too starkly by the gas-price challenge and the CO2 challenge of the past week.

The Bill lacks in not only vision but key details and scrutiny. The Institute for Government has expressed concerns about the ability of this House and the other place properly to scrutinise the new subsidy control regime, given the important issues that are being left to secondary legislation or guidance. The Institute for Government claims that the gaps left in the Bill by the Government

“could deny Parliament a proper chance to scrutinise how the new system will work”.

The Government’s own impact assessment says:

“There are considerable unknowns—because key features of the regime will be defined later in secondary legislation or statutory guidance. The analysis of the regime’s impact is also based on historical data when UK public authorities had to comply with the EU State aid regime.”

The impact assessment also says:

“We should expect the behaviour of public authorities”—

perhaps the Secretary of State was alluding to this when he talked about culture change— “and the resulting distribution of subsidies to change under the new regime—although it is not possible to forecast how this will change.”

We are yet to hear how the Government plan to define categories such as subsidies “of interest” and “of particular interest”—categories that will determine which subsidies are voluntarily or mandatorily referred to the Competition and Markets Authority. Such definitions are to be determined not now, but through secondary legislation, in respect of which Parliament is given less opportunity to scrutinise the Government’s decisions. To aid scrutiny, which I believe the Secretary of State will want to be to the standards we would want in this House for a regime that will stand the test of time, he should set out the timeline for consultation on and the publication of secondary legislation that covers critical aspects of the new system.

Simon Baynes Portrait Simon Baynes (Clwyd South) (Con)
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Will the hon. Lady say why no Labour Back Benchers are present in the Chamber? If this issue means so much to the Labour party, why is it not properly represented in the debate?

Seema Malhotra Portrait Seema Malhotra
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I have been involved in extensive discussion with my colleagues, and they will want to make significant contributions in Committee to address the gaps in the Bill. We continue to work on that.

As I was saying, the Secretary of State should set out the timeline for consultation on and the publication of secondary legislation that covers critical aspects of the new system. I know the House will want to see that in good time.

Public bodies have faced significant difficulties since the start of this year precisely because of the lack of guidance on how to interpret the subsidy control principles agreed in the trade and co-operation agreement, so clarity on how public authorities should demonstrate that their subsidies comply with those principles will be an important part of the subsidy regime. I am sure the Secretary of State will agree that we will want to see some decisions being made in the interests of how we recover and how we are to grow our economy for the future.

On the important issue of devolution, most importantly of all we are concerned that the Bill has not taken the four-nations approach that is essential for an effective UK-wide subsidy control regime. For example, the balance of the power to challenge between the Secretary of State and the devolved Administrations is asymmetric. I am sure that the Secretary of State has heard those representations made to him directly. Twelve months ago, the shadow Secretary of State stood at this Dispatch Box and warned the Prime Minister of the risks of undermining with policy decisions the devolution settlement that has been part of our constitution for two decades and is vital to our Union. However, on the evidence of the legislation before us, it appears that a shift in mindset and thinking has not been a part of how the Government have brought forward this legislation, and we hope that they are going to listen to the concerns that we and other Members are raising.

Stephen Flynn Portrait Stephen Flynn (Aberdeen South) (SNP)
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Let me make a point that almost follows on from the intervention of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). If Labour Members are so concerned about the devolution settlement, why do they not vote against the Bill?

Seema Malhotra Portrait Seema Malhotra
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The hon. Member will have heard my earlier remarks; although we have considerable concerns, we believe that the Bill is vital to us meeting our international obligations and we want it to pass. However, there are significant gaps and issues that must be addressed in Committee. I hope that he will work with Labour on those matters, so that the regime that comes out of this process is one that reflects the four-nations approach that I just articulated.

Stephen Flynn Portrait Stephen Flynn
- Parliament Live - Hansard - - - Excerpts

I appreciate the hon. Member’s remarks and I admire her confidence in being able to get the Government to address Labour’s concerns, but let me just be clear: is it the Labour party’s position that this Bill—irrespective of the damage it does to devolution—should pass?

Seema Malhotra Portrait Seema Malhotra
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Perhaps the hon. Member will allow me to continue with my remarks, because he has not quite represented our position. It is important that we continue the debate and detailed scrutiny of the Bill. The remarks that I am about to make may provide him with some reassurance on this issue.

Sammy Wilson Portrait Sammy Wilson
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Does the hon. Member accept that a regime of control is important for all the devolved areas of the United Kingdom: first, because it is a safeguard against richer regions being able to subsidise more heavily than poorer regions; and secondly, because it is a safeguard against central Government issuing subsidies that could affect the devolved regions? We need a strong regulatory regime.

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Seema Malhotra Portrait Seema Malhotra
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The right hon. Member makes an important point. I will make some points in that regard later in my remarks.

As I was saying, on the evidence of the legislation it appears that the Government have not reflected in the Bill a true four-nations approach in order that we have a UK-wide subsidy regime that commands the confidence and support of all parts of the UK. We do not contest that subsidy control is a reserved matter, but we recognise and support the requirement on public authorities to consider the impact of a subsidy on competition or investment within the UK. It is important for the Secretary of State to make it clear to the House why there is such a limited role for the devolved Administrations in the development of this new regime. They are not even required to be consulted beforehand on advice given by the Secretary of State on the implementation of subsidies.

Under the legislation, the Competition and Markets Authority’s new subsidy advice unit will play an important role in protecting the UK’s internal market, yet the Bill provides no formal role for the devolved Administrations in appointing members to the new unit. Remarkably, the Bill is even less generous than the United Kingdom Internal Market Act 2020, which at least requires the Secretary of State to seek the consent of the devolved Administrations before making an appointment to the Office for the Internal Market. Can the Government not see how this flies in the face of a four-nations approach?

It is imperative that the devolved Administrations be involved in the development of secondary legislation and in the amendments to the Bill. Even more worryingly, the powers given to the Secretary of State and First Ministers are significantly asymmetric. Although the Secretary of State is explicitly able to challenge Scottish, Welsh and Northern Irish subsidies that may damage English interests, no complementary power is given to First Ministers. Unlike the Secretary of State, the devolved Administrations seem unlikely to be able to challenge English subsidies that may be perceived to be causing harm to Scottish, Welsh and Northern Irish interests. Will the Secretary of State clarify whether this is correct, or is it his intention that First Ministers would be considered as interested parties for the purposes—

Andrea Leadsom Portrait Dame Andrea Leadsom
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Will the hon. Lady give way?

Seema Malhotra Portrait Seema Malhotra
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I have given way to the right hon. Lady already and I hope she will not mind if I continue my remarks.

Will the Secretary of State clarify whether it is the Government’s intention that First Ministers, or public interest groups, be considered interested parties for the purposes of being able to bring forward a challenge to a subsidy decision—if so, why will the Government not put that in the Bill?—or will a challenge have to be made via the Secretary of State?

This is not where the devolution challenges end. Perhaps the Secretary of State could clarify his remarks on Northern Ireland, because, as I understand it, under article 10 of the Northern Ireland protocol, EU state aid rules must apply to subsidies that affect trade between Northern Ireland and the EU. This affects not only subsidies granted in Northern Ireland but subsidies granted throughout the UK. There is a risk—unless the Secretary of State wants to correct me—that article 10, taken alongside the new subsidy regime, could cause legal or practical difficulties, particularly if the UK and EU disagree on what affects EU-Northern Ireland trade.

Kwasi Kwarteng Portrait Kwasi Kwarteng
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I thought that I could not have been clearer on this precise point in my opening speech. I repeat: it is clearly no longer necessary for Northern Ireland to be subject to the EU state aid regime, and that is precisely why we proposed a change to the Northern Ireland protocol in order to bring all subsidies within scope of the domestic regime.

Seema Malhotra Portrait Seema Malhotra
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I thank the Secretary of State. Indeed, I did hear those comments in his opening remarks. I was seeking to clarify the issue because I do not think it is clear across the House, and it is important that it is tested and made clear in the course of the passage of the Bill.

Crucially, what is the Government’s intention if the Bill does not receive legislative consent from Scotland, Wales and Northern Ireland, as has been requested?

Deidre Brock Portrait Deidre Brock (Edinburgh North and Leith) (SNP)
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Is the hon. Lady suggesting a four-nation approach whereby any one of the nations has a veto over decisions taken by those four nations that they feel are not in their interest?

Seema Malhotra Portrait Seema Malhotra
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I am not clear why the hon. Lady refers to a veto. I think we are talking about the symmetry of powers in terms of being able to bring forward a challenge. I hope that makes the point clear.

Seema Malhotra Portrait Seema Malhotra
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If it is okay, I want to move on because I am conscious of time, but the hon. Lady may want to make her point in her own remarks.

Finally, on the issues of oversight and enforcement, while well-designed subsidies can support Government objectives and foster growth and opportunity, there are risks too. Subsidies can distort markets, undermine competition and unfairly discriminate between businesses. Effective oversight and enforcement are critical to the success of our subsidy control regime, yet they are lacking in certain areas of the new regime. The Bill does not provide enough certainty as to the definition of “interested parties” that are able to challenge a subsidy. Does that definition extend to local authorities and devolved Administrations?

There are also concerns about the limited powers of the CMA’s new subsidy advice unit under the Bill. We are pleased that a trusted independent regulator is being given key responsibilities. However, as the Bill stands, the CMA lacks any power to instigate an investigation on its own initiative or to take enforcement action. This requires careful consideration, particularly when transparency issues around the Bill are taken into account.

Jonathan Edwards Portrait Jonathan Edwards
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Will the hon. Lady give way?

Seema Malhotra Portrait Seema Malhotra
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I am sorry but I will move on. I have taken an intervention from the hon. Member, so perhaps he can make his own contribution.

The Government have stipulated that subsidies under £315,000 over three years will not have to be reported on the subsidy database. However, there is an issue, also raised by the hon. Member for Thirsk and Malton (Kevin Hollinrake), about the threshold and reporting. In the consultation on the Bill, the Government asked whether there should be a minimum threshold of £50,000 below which no subsidies would need to be reported, and 64% of those who responded agreed on that threshold of £50,000. On that general point, what are the Government’s plans for reporting, oversight and accountability arrangements for subsidies below that threshold? I am sure they will want to ensure transparency in how public money is being spent and to whom it is going.

On the decision made for a six-month time limit to upload subsidies to the subsidy database, there was a discussion in the consultation on whether that period should be shorter, or three months. What was the reason for deciding on six months? That seems rather a long time for a decision to be uploaded and therefore in the public domain. If interested parties and the Secretary of State are not made aware of smaller subsidies or those that are uploaded—they have a month to bring a challenge—there will be no opportunity to prevent them going forward, even if they are harmful. The CMA may be able to produce reports on such subsidies, but it will not be able to enforce any of its recommendations. Does that not expose a significant transparency gap in the Bill? The Government could choose to have further reporting requirements. I urge them to review the CMA’s role alongside the necessary transparency requirements for subsidies.

Labour recognises the need to develop a post-Brexit subsidy control regime in line with the UK’s international commitments. There are benefits from a more flexible and speedy subsidy regime, but we have serious concerns about gaps in the Bill that we will look to address during its passage. Those include unanswered questions on the operation of the new regime, its enforcement and oversight, and the role of the devolved Administrations. We want to see legislation that establishes an effective UK-wide subsidy regime that commands confidence across the country. The Bill gives the Government and other public authorities greater powers to provide subsidies. It is an important Bill, but the gaps in it must be addressed.

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Kirsty Blackman Portrait Kirsty Blackman (Aberdeen North) (SNP)
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It is great to hear the thoughtful contributions from that Tory Bench, although not from the Treasury Bench, I hasten to add. The hon. Member for Amber Valley (Nigel Mills) and I have spoken in many debates together, and I always appreciate his forensic assessments of the details in the Bills before us. I hope that he will be on the Committee, and I hope that I will be too.

First off, I want to ask a couple of questions about what the Secretary of State said, because I am immensely confused by a couple of the things that he said. First, he said that the devolved Administrations were broadly happy with the Bill. If they are broadly happy, why have the Welsh Government said that they object to five of the six parts of the Bill? One out of six does not equate to “broadly happy”. In fact, I get the impression that they really do not like it and are not happy about it.

We have not seen what the Scottish Government are saying about the legislative consent motion, but I cannot imagine that they will be terribly happy with the power grab that is occurring as a result of the Bill. So I am quite confused by what the Secretary of State said. Does he mean that the devolved Administrations are broadly happy with having a state aid regime? Does he mean that they are broadly happy with the detail of the Subsidy Control Bill? I do not know. I do not understand what he is saying, because it does not seem to be coherent with what the Welsh Government have said in public about this.

The other thing that I am really confused about is what the Secretary of State said about the EU state aid provisions no longer applying to Northern Ireland. I thought he said something about article 21 of the Northern Ireland protocol, but maybe he meant article 16. I am not sure what he meant. In terms of the planned changes to state aid application in Northern Ireland, he seemed to be saying that the new subsidy control regime would apply there and that the UK Government were seeking some sort of change to an article in order to ensure that that happened. I am not aware of any publicity around the UK Government asking the EU for a change, but if that has happened, why have we not heard about it?

Could we please have a bit more information on this? We have the trade and co-operation agreement and we have the Northern Ireland protocol, but how do the UK Government expect these measures to apply in Northern Ireland without us breaking either the agreement or the protocol? That does not make sense. If the Secretary of State was making that important an announcement, you would think he would do it in a ministerial statement rather than as an aside during the Second Reading of this Bill. I would be really keen to hear a bit more information about what this actually means.

Seema Malhotra Portrait Seema Malhotra
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The hon. Lady is absolutely right about the confusion that has been raised. Does she agree that it is important that the Government clarify what they are suggesting has changed in relation to article 10 of the Northern Ireland protocol and whether it has been dropped on the basis of this Bill? Should they not also tell us whether their proposal has been negotiated with the EU, and what the status of those discussions and any agreement might be?

Kirsty Blackman Portrait Kirsty Blackman
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Absolutely. If we as a country can suddenly renege on our international obligations and agreements, why cannot Scotland hold an independence referendum next week? The UK has agreed to these agreements and it would be great, when the Minister speaks at the end of the debate, if he could explain exactly what is going on. This is serious enough for a Minister to be making a separate statement to the House, because it is such an important matter for the people of the UK and particularly for the people of Northern Ireland.

My hon. Friend the Member for Aberdeen South (Stephen Flynn) spoke eloquently about the levelling-up agenda, and I agree that the red wall Tories elected in the north of England should be jumping up and down about this—we are jumping up and down about it, as the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) suggested—because it explicitly excludes us from doing anything that may disadvantage any other area of the UK. In schedule 1, principle F says:

“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”

And principle G says:

“Subsidies’ beneficial effects…should outweigh any negative effects, including in particular negative effects on competition or investment within the United Kingdom; international trade or investment.”

That reference to international trade or investment confuses me.

The principles try to level the playing field across the UK, so there can be a subsidy in Manchester only if a person in the south of England would not move their company as a result.

Subsidy Control Bill

Seema Malhotra Excerpts
Consideration of Lords amendments
Wednesday 20th April 2022

(1 year, 11 months ago)

Commons Chamber
Read Full debate Subsidy Control Act 2022 Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Commons Consideration of Lords Amendments as at 20 April 2022 - (20 Apr 2022)
Paul Scully Portrait Paul Scully
- Parliament Live - Hansard - - - Excerpts

Indeed, yes. Levelling up does not exclude any one area of the United Kingdom. It also does not exclude levelling up within regions; that is really important. This legislation only provides the framework; the levelling-up fund, the shared prosperity fund and other measures that can use the framework will, I am sure, benefit the hon. Gentleman’s constituency and Northern Ireland as a whole. It is really important that we get this right.

I am happy to report that we produced Lords amendments 1, 5 to 8, 10 to 12, 39 and 40 to respond to concerns about the Bill in the 17th report of this Session by the Delegated Powers and Regulatory Reform Committee. Lords amendment 1 addresses a concern with clause 10. Parliamentary scrutiny of streamlined subsidy schemes made under clause 10 has been strengthened by giving either House the ability to annul any streamlined schemes after they have been made, by applying the negative procedure.

Lords amendments 5 to 8 replace the direction-making power in clause 16 relating to the designation of marketable risk countries with a power to make regulations for the same purpose. Lords amendments 10 to 12 relate to the powers in clauses 25 to 27 to change definitions in secondary legislation. Those powers will be removed. Finally in this group, Lords amendments 39 and 40 address concerns raised by the DPRRC about secrecy regarding the financial stability direction-making power in clause 47. These amendments make it clear that such directions will need to be published in due course. In addition, the Economic Secretary to the Treasury has written to the Public Accounts Committee and the Treasury Committee to commit to notifying the Chairs of those Committees confidentially about the use of a financial stability direction.

I turn to Lords amendments 41 to 43 and 49, relating to the Competition and Markets Authority and the Subsidy Advice Unit. Although the Secretary of State could already direct the SAU to complete a monitoring report for a specified time period under clause 65(4), these amendments make specific provision in the Bill for more frequent scrutiny in the early years of the new regime. Instead of mandating a report within five years of the implementation of the regime, the tabled amendments require an initial report after only three years, to be followed up with a further report after another three years. After that, reporting will revert to a five-year cycle. The Secretary of State will retain the ability to direct that a report be made at a specified period after the publication of the second three-year report. The sunsetting provisions in clause 87(6) have been extended so that they take effect after the second three-year report. Lords amendments 2 to 4 and 48 are minor and technical in nature. They clarify definitions under clauses 11 and 82.

In summary, this substantial package of amendments represents an improved set of measures that will strengthen the new domestic subsidy control regime and make it more transparent and accountable. There will now be greater transparency of subsidies awarded, and improved oversight and monitoring of the regime by Parliament and the CMA. I am grateful to colleagues in both Houses for their hard work on, and attention to, this important Bill. They have helped to bring about these improvements, which I hope will be endorsed by Members from across this House.

Seema Malhotra Portrait Seema Malhotra (Feltham and Heston) (Lab/Co-op)
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It is a pleasure to speak in the debate. I start by acknowledging all the efforts in the other place, and thank the peers, staff and civil servants who have helped to move the Bill along to this stage. I also thank colleagues on both sides of this House, including all the Opposition parties.

As Labour has outlined throughout the Bill’s progress, we support the principle of a quicker, easier subsidy regime now that we have left the EU. However, we recognise that any subsidy regime must provide sufficient transparency and accountability for the spending of billions of pounds of public money each year. We have also repeatedly raised our concerns that this regime has failed to match up to the Government’s levelling-up rhetoric. We are pleased to see that many of the Lords amendments, including our amendment to Lords amendment 13, will improve the Bill in some of those areas.

I turn briefly to areas in which we would have liked the Government go further, and I would be grateful for the Minister’s comments on these issues. The first is net zero. Labour has been clear that while this is framework legislation, it should not be an empty vessel. The Government should have used the opportunity of an independent subsidy policy to design a regime that supported their wider industrial policy and our national priorities. We were also disappointed that the Subsidy Control Bill was not published alongside a subsidy strategy. Net zero is a good example of this. The climate crisis is the greatest long-term threat facing our country and the world, and we need urgent action to drive down emissions. That is why, in Committee, we called on the Government to support our amendment to hardwire net zero into the principles that public authorities have to consider when awarding any subsidy or designing any scheme. There was cross-party and cross-Bench support in the other place for a similar amendment.

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Paul Scully Portrait Paul Scully
- Parliament Live - Hansard - - - Excerpts

I thank all hon. Members for their engagement throughout the passage of this Bill and for their contributions this afternoon. I am glad that there has been broad consensus, albeit with some questions, which I will try briefly to address. The importance of that new independent subsidy control regime has been clear throughout the passage of the Bill and it was evident again today, so I thank hon. Members for their broad support.

Let me respond to the question from the hon. Member for Feltham and Heston (Seema Malhotra) about P&O and that kind of example. Clearly, we are shocked by the action of P&O Ferries and angered by the lack of empathy and consideration it has demonstrated towards its employees. The Government are continuing to work to establish whether P&O Ferries or DP World are in breach of any requirements of them as partners in the Thames and Solent freeports. Speaking more generally, I can confirm that the Bill ensures that public authorities can recover a subsidy where it has been misused, but it is important to note that the purpose of a subsidy is to achieve specific change in behaviour to facilitate a specific policy objective; it is not to give the Government ongoing leverage over how a company conducts its affairs. It is for other areas of law to set out the limits of what is acceptable corporate behaviour. None the less, because the subsidy is there to have that specific policy objective, we will make sure that that policy objective is met as best we can. However, it is difficult to enforce—

Seema Malhotra Portrait Seema Malhotra
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I am grateful to the Minister for his consideration of this point, but will he clarify whether a company that breaks the law and does not meet minimum standards on employment law, on environmental law or in other areas could still be in receipt of public subsidies through the subsidy control regime?

Paul Scully Portrait Paul Scully
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It is difficult to come up with the examples, but in essence a subsidy is there to determine a particular policy objective. We would want to partner with businesses and companies that are most likely to deliver those policy objectives: reliable partners. Clearly, ones that are in breach of the kind of examples that the hon. Lady mentions are less likely to be those reliable partners. Technically, she is correct, but this is about how we enforce something, probably after the event; similarly, had we given P&O Ferries a subsidy last year, we probably would not have been able to get that subsidy back. That is the difficulty with enforcement after the event. None the less, the sentiment is absolutely there: we do not want to be partnering with unreliable companies to achieve our policy objectives.

Paul Scully Portrait Paul Scully
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We will work out how the subsidy control regime is working; it is part of what I will come back to in a moment about the CMA’s approach to reporting back how the regime is working. We have to make sure that this is watertight—excuse the pun—if we are going to go down the road of making sure that we can recover any subsidies. I suspect that other areas of law will be better suited to approaching that, rather than specifically dealing with it within this framework Bill.

Seema Malhotra Portrait Seema Malhotra
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I am conscious of time, but let me make this brief point, for clarity. There is an important distinction between companies or businesses with which the Government may be working to achieve policy objectives, and their eligibility still to receive public subsidies, potentially to the tune of hundreds of thousands of pounds or millions, where they have explicitly even admitted to this House that they have broken employment law. There is an important distinction here about how public money could be spent and about rewarding those who have behaved badly.

Paul Scully Portrait Paul Scully
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I thank the hon. Lady for her intervention. This is what I mean about using other areas of law; other areas testing the value of the use of public money will be better suited for addressing exactly those points, but I very much take the one she makes.