Subsidy Control Bill (Second sitting)

Seema Malhotra Excerpts

Tuesday 26th October 2021 Public Bill Committees

[The Chair]

Would you like to make an opening comment?

Dr Barker: I would, yes. Probably the most important comment I can make to start is that, from IoD members’ perspective, we are seeking a subsidy regime that is easy to navigate; does not result in too much delay; and has predictable outcomes that are reasonably legally certain and are not challenged or reversed too often. Of course we want a nimble system, but we do not want one that is so nimble that decisions are vulnerable to challenge because the public body has perhaps not followed the right process. That would make the whole system too uncertain and unpredictable. That is the basic point underlying our perspective.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Q44 It is a pleasure to serve under your chairship, Ms Nokes.

Thank you for giving evidence to us today, Dr Barker. I shall start with a more general question about your view of the Bill and the regime as a whole. Where do you see the opportunity for small businesses to work towards the Government’s objectives of levelling up and net zero that have been talked about?

Dr Barker: I do think this is an opportunity. It provides a framework to undertake the type of policy approach that you describe, but as to whether it will actually be used for that purpose is still somewhat uncertain. Historically, the UK has granted subsidies to companies much less than the EU, for example. EU countries, the United States and Asian countries continue to use subsidies in a major way to encourage key areas such as semiconductors, artificial intelligence and quantum computing—the industries of the future. Despite the difficult historical experience that we had in trying to pick winners during the 1970s, we probably have to ask what it is that our more successful competitors have realised about the use of subsidies that we have not.

From the IoD’s perspective, our view is that we should recognise that an effective subsidy regime does have an appropriate role to play for small and medium-sized enterprises to build a tech revolution in the UK, and a green industrial revolution. That will require Government and business to work together, as to some extent they have during the pandemic. The subsidy regime will be part of that—the changes will not just happen spontaneously.

[Seema Malhotra]

Q You have said this week that grants—or subsidies—made under the global Britain investment fund should have more conditionality associated with them to ensure that they support long-term commitments into the UK as well as levelling up. Do you believe that that Bill does enough to set out those goals? Is even net zero sufficiently enshrined in how subsidies should be used and their impact evaluated?

Dr Barker: I do not think it does. At the moment, the framework that is being described is like an empty husk that could be used in a variety of ways. It does not really indicate how it will be used in a more detailed policy sense. Some aspects of the structure of the framework could get in the way of some of the policy agenda. The particular area where we have some concerns relates to compatibility with the levelling-up agenda. There is a clear principle in the Bill that any subsidy should not displace investment or business activity from one part of the UK to another, but you can see that having some potential conflict with the levelling-up agenda, which is trying to promote disadvantaged regions of the UK. You can see the potential for legal challenges occurring as one region says “Well, actually, you are not creating new business here, with these subsidies; you have actually displaced business activity from our region.” I think we could benefit, within the Bill, from more clarity to prevent that type of conflict from happening.

[Seema Malhotra]

Q In your view, how and where do you think that could be strengthened in the Bill? We have also heard from other witnesses on whether there should be an equivalent, or a successor, to the assisted areas map, which is currently used in the EU, and which we also had, in some form, as a predecessor. Do you think that, at the very least, we need something tighter around areas of economic disadvantage, and a definition of what that might be—levelling up also may be within regions, as well as between regions—to provide some clarity for businesses that may be in smaller areas of disadvantage, but in a region that is more prosperous?

Dr Barker: Yes. I think there should be scope to do that within the framework of the Bill. I do not have a very specific proposal on the wording of the legislation, but that displacement principle should certainly be qualified to the extent that it allows this kind of regional policy—or levelling-up agenda—to actually take place.

[Seema Malhotra]

Q Do you have any concerns relating to transparency? There is a sort of de minimis threshold suggesting that under £315,000, those subsidies will not be subject to the controls in the Bill; they will not be reported. Do you have concerns about what that could mean for knowing whether subsidies have actually been implemented—subsidies that may be supporting particular enterprises without the visibility of that for other businesses?

Dr Barker: We would like to see transparency throughout the system. It is important for everyone to have trust in the system. That applies to all the different processes that one might go through to win a subsidy; there are different processes identified, depending on the nature of the subsidy, from those requiring quite a detailed due-diligence process from the Competition and Markets Authority to those that, as you state, are on a kind of fast-stream process to subsidy.

Transparency is incredibly important. Competitor firms and other enterprises want to be able to see what sort of subsidy is being granted to their competitors; they want to see how that is justified and whether they might want to make some kind of legal challenge against that decision. If any of this process is seen as happening within a black box, where each subsidy decision is not properly justified and explained, that will simply create mistrust in the system and undermine it.

[Seema Malhotra]

Q Finally, on that point, do you think that £315,000 or £500,000 as a threshold for subsidies under a subsidy scheme is too high?

Dr Barker: I would not say whether it is too high or too low. I think that there should be transparency at every level of subsidy, but I think it is reasonable to have a threshold in defining a faster-track decision-making process. That seems reasonable but, regarding transparency, I do not think that should be related to the size of the grant.

[Simon Baynes (Clwyd South) (Con)]

Q Thank you for your time this afternoon, Dr Barker; it is much appreciated. I wanted to look at the part of the Bill to empower local authorities, public bodies and central and devolved Governments, particularly the public bodies aspect. Do you see this as a welcome broadening-out of the routes by which subsidies can be brought to business, not only through central devolved Governments but through local authorities and public bodies?

Dr Barker: That is potentially welcome, but now we are extending subsidy-granting powers to a large number of bodies—about 500 in total. That will create a requirement that each of those bodies understands the principles for granting the subsidy and the processes that need to be gone through. They need to have some degree of expertise to guide business through the process in a confident way. In practice, that will probably mean that the subsidy advice unit in the CMA will be called on a good deal from a lot of those bodies for advice, information and to try to get an indication of whether the process being followed is the right one.

I am slightly concerned that consulting the subsidy advice unit may become a kind of quasi-obligatory stage in the subsidy approval process. The question is, will that delay things? Will it take away the nimbleness of the system? Does the subsidy advice unit have the necessary resources to deal with the hundreds of public bodies that will be consulting it? That is an uncertainty and a concern.

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[The Chair]

We will now hear from George Peretz QC from Monckton Chambers in person. We have until 3 o’clock for this session. Could the witness please introduce himself for the record? If you would like to make a brief opening statement, please do so.

George Peretz: I am George Peretz QC. I practise at Monckton Chambers. I was the co-founder of the UK State Aid Law Association a few years ago and am currently also co-chair of the Joint Working Party of the Bars and Law Societies of the United Kingdom on Competition Law, and we have contributed to the debate on subsidy control as well.

[Seema Malhotra]

Q Thank you for coming in. I have a couple of questions that I want to put to you. I want to understand your view of the CMA’s powers in the Bill, such as whether the CMA should have the power to instigate an investigation or report on its own initiative. Currently, it is able to act only on those that are referred to it. Would it be desirable for the CMA to have further powers and, in your opinion, why would that be beneficial?

George Peretz: There is an issue about the position of subsidies that are not recognised by the granting authority as subsidies. It has always been true under EU state aid rules and World Trade Organisation subsidy rules, and it will be true under the definition of subsidy in the Bill, that there is room for considerable disagreement and argument about whether certain types of measures are subsidies at all. Two well-known examples are tax measures decisions by the tax authorities as to the tax treatment of particular corporations. If those are over-generous, they give rise to subsidies under WTO rules, EU rules and under the Bill. You also have situations where Government bodies enter into commercial transactions—loans, contracts or grants—that are over-generous. They are not the sort of transaction that a market operator would enter into, but the public authority wants to claim that they are the sort of transaction that a bank or another market operator would be prepared to enter into.

You will appreciate that there is scope in both of those areas for considerable argument and for genuinely different views to be taken about whether what is being done is a subsidy at all. You can certainly have such a situation, and these situations will arise fairly frequently when public authorities have to take a view as to what they are doing in granting a loan, or in the case of Her Majesty’s Revenue and Customs deciding on the tax treatment for a particular company, is a subsidy at all. They will quite often take the view that it is not, but that view will be contestable. Sometimes the view is completely wrong and the measure is in fact a subsidy. Those cases will not be placed on the transparency database, and it seems to me that there is a bit of an enforcement gap in dealing with them.

We have an obligation under the trade and co-operation agreement to ensure that things that are subsidies are dealt with properly as subsidies, so I think that there is a bit of a weakness. One thing that the CMA could be given the job of doing is, probably most easily, investigating on its own initiative, rather than necessarily in response to a complaint, cases where it looked as if there may have been a subsidy, but where a subsidy was not in fact placed on the transparency database. That would have to be on its own initiative because the whole starting point in the Bill is that things go on the transparency database, so if they have not other mechanisms do not really kick in.

[Seema Malhotra]

Q That raises quite a serious issue about possible gaps in the regime. Under clause 55, there is the opportunity for the Secretary of State to call in a proposed subsidy or subsidy scheme. Do you think that is sufficient under the scenario that you have outlined, whereby there may be an example of tax treatment that has the same effect as a subsidy but is not on the transparency database? In such a scenario, do you interpret the wording of clause 55 to be enough for the Secretary of State to call that in, or do you think the wording needs to be tightened to allow it to be clearer? For example, it might be something that appears to be a subsidy and would therefore go to the CMA, rather than what might happen under clause 71, which would be for it to go to the tribunal.

George Peretz: There is a lot in that, yes. It is also worth looking at clause 60, on proposed award referrals, because quite often these cases will arise after the measure has come into effect, so it will be a post-award referral. Clause 60 and clause 55, on call-in directions, both talk about the power of the Secretary of State to request a report in relation to a proposed subsidy or subsidy scheme. It is not entirely clear what happens in a case where the Secretary of State thinks there might be a subsidy scheme but is not actually sure. It is possible that he could make a reference in that situation. The first question for the CMA in either case would be, “Is what we are dealing with really a subsidy?” The granting authority will be saying, “No, it isn’t.” If the intention is for the Secretary of State to have powers to catch things that are subsidies but have not, for one reason or another, been placed on the transparency database, it would better for the wording to say something like, “a proposed subsidy or subsidy scheme, or something that the Secretary of State considers to be a subsidy or subsidy scheme.”

There is a second point behind both those provisions: whether it is right for that power to be held only by the Secretary of State, who is of course a politician. Realistically, politically, in what circumstances is the Secretary of State likely to be keen to scrutinise decisions of central Government? He may or may not, but clearly politics will come into that in a way that might not be entirely desirable. There is a wider argument, which I think I have made elsewhere, that it might be worth widening out the category of people who can make post-award referrals and call in directions, at least to include the devolved Ministers, but that is a slightly separate issue.

To return to your question, it seems to me that it is worth looking at the wording of clauses 55 and 60. Then there is the broader question of whether it should just be the Secretary of State who has that power.

[Seema Malhotra]

Q May I ask a final question on that? I think that has highlighted what seems to be the asymmetry between the powers of the Secretary of State and of the devolved Administrations in being able to call in and challenge subsidies. Do you think it is important to look at amending this area of the Bill? I am thinking about the need to have an integrated and lasting four-nation settlement. What do you think the consequences of not doing that will be?

Secondly, public interest bodies that you might normally expect to be able to look at and challenge decisions are currently not defined as interested parties. How important do you think it is to revisit the definition of interested parties?

George Peretz: There are two points there. One is the position of the devolved Governments, particularly in relation to clauses 55 and 60, vis-à-vis the position of the United Kingdom Government. The whole point of clauses 55 and 60—you can see it in the text—is that a reference is made to the CMA in situations where the measure creates a risk of negative effects on competition or investment within the United Kingdom. Plainly, the power is intended to catch a situation whereby the Secretary of State considers that a measure undertaken by the Scottish Government or Welsh Government creates highly distortive effects in England. One can see the possibility of that, but if that is the intention, it is hard to see why sauce for the goose is not sauce for the gander. In a situation where an English local authority, the Secretary of State or another UK Government body acting as an English Department does something that is designed to benefit England but causes serious concern in Scotland or Wales, why should the Welsh or Scottish Ministers not be able to do the same thing if the concern is with competition or investment within the United Kingdom? I find it slightly hard to see what the argument against that is.

A second, slightly different point is about the definition of “interested party”, which is in clause 70(7). This says that

“interests may be affected by the giving of the subsidy”.

“Interest” is a wide phrase—what does it cover? Is it just financial or commercial interests? I think any court, in construing that, will look at paragraph 6 of article 369 of the trade and co-operation agreement, which seems to be where this comes from. That refers to both parties being obliged to make sure that interested parties have a right to challenge. It then defines interested parties as including competitors, trade associations and a couple of other things. However, they are all people with very direct commercial interests in subsidies, most obviously competitors who feel that the subsidies will make life difficult for them when they compete.

When one goes back to article 369, the argument that we have put is that it does not cover bodies such as concerned next-door local authorities and the Scottish and Welsh Ministers. The Secretary of State is automatically defined as an interested party, so it is not a problem for him, but it would be a problem for any other Government authority in the United Kingdom that has concerns. There is then also an issue about whether the wider bodies concerned with public interest litigation would be able to claim an interest; it looks as if the intention is to exclude those from having the right to go to the CAT.

I say “right to go to the CAT” because there is a subsidiary question, which is if the definition of interested parties is confined to and is rather narrower than the caste of people who would normally have the ability to challenge public law decisions such as this in the judicial review courts, as I think it may be, there would be an argument open to someone who was not an interested party—a public interest group—to go to the High Court and say they have a right to challenge this decision as a matter of ordinary public law. They would say that because they do not have standing under the Subsidy Control Bill to go to the CAT, they have no alternative remedy. It seems to me to be quite likely that the courts would accept that argument. I am not entirely certain that that is what is intended. If it is intended that all subsidy control appeals go to the CAT, I am not sure that is really achieved.

[Stephen Kinnock]

Q I have two questions, Mr Peretz. The first is around the idea of assisted area maps; do you think there is a connection between the need for an assisted area map and the commitments that were made in the TCA? The joint declaration on subsidy control policies within the TCA says:

“Subsidies may be granted for the development of disadvantaged or deprived areas or regions. When

determining the amount of subsidy, the following may be taken into account: the socio-economic situation of the disadvantaged area concerned; the size of the beneficiary; and the size of the investment project.”

I would be interested in your view as to whether that constitutes an actual obligation to have an assisted area map, or some way of defining disadvantaged areas based on the terms of the TCA?

My other question was around article 10 of the Northern Ireland protocol; I am sure you will not be surprised to hear that, we have discussed it many times. What is your sense now of the state of play around article 10 of the Northern Ireland protocol? To what extent could it be interpreted so broadly as to effectively drive a coach and horses through this legislation?

George Peretz: I will deal with the regional aid map first. The schedule to the TCA is permissive. It allows the parties to do things: it does not require them to do anything. If the UK Government just did not think that regional aid was appropriate at all, they are entirely free not to do it—ditto the EU. There is also a bit of a danger in holding on to old state aid law thinking. The position of regional aid maps in the state aid law regime was there because there was a basic prohibition on state aid unless it went through the process of going to the Commission and getting cleared, unless it fell within block exemptions. Regional aid maps played their role within the block exemptions. They meant that if you were giving a grant that fell within the conditions of regional aid in certain areas, you could give grants in an area that benefited from assisted area status that you would not be allowed to give, for example, in Guildford without going through the process of notification and clearance. If you did it in an assisted area, you could just do it without going through that process.

Structurally, that does not really fit into the new regime, because it does not have that basic prohibition element in it. Instead, it requires all public authorities to think about the principles, which will inevitably apply in a somewhat different way. They are bound to be affected by the region in which they are given. For example, the principle in paragraph A(b) of schedule 1—

“address an equity rationale (such as social difficulties or distributional concerns)”—

will apply very differently in the Welsh valleys than in Guildford, because the social difficulties and distributional concerns are different.

One possibility that could arise under the structure of the Bill is that the Government might well issue streamlined schemes that make reference to the areas concerned—something that a streamlined scheme could certainly do. They could say, “This scheme applies,” and effectively there is automatically no risk of the CMA having to look at it, and you do not have to go through the process of thinking about the application of the subsidy control principles for grants in Pontypridd, as you would were you making the grant in Guildford. That is where something like the regional aid map might come back in, but it is not in the Bill; it will depend on what the Government decide to do about streamlined subsidy schemes.

I have probably written far too much on article 10. The current state of play is that, if I am advising a client such as a local authority or a subsidy recipient, my immediate problem is that I have to look at two sets of guidance—one issued by the European Commission and one by the Department for Business, Energy and Industrial Strategy—that in some important respects tell me very different things. If I am advising a client who is the prospective recipient of a grant from an English local authority, but my client sells a significant quantity of goods in Northern Ireland, the Commission guidance essentially tells me that article 10 is likely to apply. The BEIS guidance tells me that it is unlikely to apply. I am capable of making up my own mind about that, but I would obviously have to draw my client’s attention to the different guidance, and if it ever got to court the court would be entertained with the different guidance and would have to decide what to do, so there is a difficulty.

The fundamental problem is the effect on trade test. Assuming that it is meant to mean the same sort of thing as it means in the EU state aid law rules, which is probably, though not certainly, right, it catches an awful lot of things. It famously caught the question of whether taxi cabs in London could drive in bus lanes, according to the European Court, even though one might struggle to see quite why that affected trade between member states.

The real problem is that the European Court has consistently upheld reasoning on effect of trade, which is extremely thin, based on assumptions, and it does not really include much of what any economist would recognise as economics. An effect on trade has been deduced and that makes it a bit difficult. The boundary line is therefore just obscure. The Bill effectively says that anything that falls under that regime is excluded from the Bill, but you do have the problem that the boundary line is not very clear.

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[The Chair]

We will now hear from Jonathan Branton, partner at the DWF Group; Alexander Rose, director at the DWF Group; and Richard Warren, head of policy and external affairs at UK Steel. They are all here in person. We have until 3.40 pm for this session. Can the witnesses please introduce themselves in turn for the record—perhaps we will go left to right, starting with Mr Rose—and give a brief opening statement? I will then move to Seema Malhotra for questions.

Alexander Rose: I am Alexander Rose. I am a director at DWF working day to day on subsidy control.

Jonathan Branton: Hi. I am Jonathan Branton, a partner at the DWF Group. I have been head of competition and practising in this area for over 20 years. I have spent a long time in Brussels.

Richard Warren: I am Richard Warren, head of policy and external affairs at UK Steel, which is the trade association representing the steel industry in the UK. The steel industry is a recipient of various forms of state aid approved under the EU regime, so we have an active interest in the system that replaces it.

[Seema Malhotra]

Q Thank you to our witnesses for coming in today. We are very appreciative of your time. I will ask two questions to cover the areas that you have commented on. First, I am interested to know your view on the question of transparency in the Bill around decisions that are made on how challenges might be brought if there are concerns about subsidies and their impact. Secondly, more positively, what might the opportunities be for the Bill and its regime? What would success look like in terms of how it positively affects the areas that we, on both sides of the House, are interested in, such as levelling up and the transition to net zero? Will the scheme actively support delivering them?

Richard Warren: I would probably be best placed to start with the opportunity side of things, rather than transparency. As we see it, the opportunity for the Bill, briefly, is that it creates a more flexible and light-touch regime, which I am sure many of your witnesses have already spoken about.

The EU system, certainly the way we view it, effectively says, “State aid or subsidy is banned, except for a list of things that you’re allowed to do.” The new UK regime seems to take the opposite approach and says, “Basically everything is allowed apart from a select list of things that we ban.” At least ostensibly or theoretically, the Bill, as we see it, sets out a regime that will give us considerably more flexibility and room for manoeuvre in what we are able to do.

Some of the regimes that we are recipients of—the most beneficial for the UK steel sector—are around some of the subsidies and exemptions we receive on the costs of renewables and carbon taxes in relation to electricity prices. That is a really big issue for the steel sector. The UK steel sector pays between 80% and 100% more for its electricity than its counterparts in the EU. Those exemptions have reduced our electricity prices. There is a still a big gap, but they are really important to improving competitiveness in the UK.

The system in the EU has a very complicated, convoluted way of saying, “You can do this. If you introduce this scheme, you have to follow this rule. You can’t do this. This is the percentage that you are allowed to reward, etc. etc. etc.” Now the UK may choose to follow that, and it may not simplify the rules, but at least theoretically it can say, “I don’t have to follow any of your rules. I have a complete clean slate to redesign the process,” and award the compensation or the exemption in a targeted fashion that is most beneficial to the UK sector. Without giving too many other examples, although I have a long list if people want to hear them at a later date, the main benefit is that the framework is transparent.

The second element is the process for providing approvals if a local authority or national Government want to introduce a scheme. From our perspective, it is a lot more light touch and a lot more straightforward. There are a number of examples that we can give where the UK introduced or tried to introduce a system to benefit the steel industry. It was either blocked by the EU Commission or it said, “You need to go back and change this regulation.” You have actually got examples where state aid had been stuck in consideration or investigation for two years before eventually being given up on by member states. The process where you can actually approve schemes should be a significant benefit.

The final thing I would say before handing over to others on the panel is that that is all theoretical and I am sure questions will be posed at a later point. I think probably the biggest barrier to the use of state aid in the UK has not necessarily been the EU rules, although they have proven tricky at times. It has perhaps been a culture in the UK that says that state aid is not necessarily what we want and perhaps a last resort. The data bear that out; we tended to use about a third of the amount of state aid that Germany has and about half the amount that France has used. The proof of the pudding will be more in the answer to whether there is a different approach or a different cultural approach within the UK to wanting to use state aid.

Jonathan Branton: Shall I pick up? First, to talk about the opportunity, it is really important to set the context of the Bill in the fact that we already have a new regime away from the EU regime. The opportunity of the Bill is to take forward the regime that has come out of the trade and co-operation agreement, which is already in force and in use. The fundamental point is how the Bill takes that and improves upon it to help to pursue the UK’s interests in a safe and secure way.

The TCA has already diverged massively from the EU state aid regime and created a whole lot of flexibility and ability to do things at speed, which is supposedly what the UK is particularly interested to secure. In terms of the opportunity presented by the Bill, there is an opportunity to improve upon that framework to make it better fit for purpose to monitor and secure a subsidy-controlled platform in the UK in a way that preserves competition, but also enhances the ability of Government and various different public authorities up and down the land—I do not just mean central Government, but regional government and local government—to influence policy and to make active interventions in order to achieve positive outcomes. There is an enormous opportunity to do that better, but also a risk of compromising some of the freedoms and flexibilities that have been achieved by the TCA in the first place. It is important to put that in context.

In terms of transparency, that is one of the bedrocks of an effective regime if you look at it from the perspective of maintenance of competition and the ability of third parties to come forward and to be able to challenge that subsidies have been carried through in a clear and effective way, through sound decision-making and appropriate thought as per the commitments within the TCA to respect the common principles that have been set out.

For the level playing field to be preserved, if you like, it is vital that there is a remedy, an enforcement system. That system can only come out when there is public knowledge of what is going on. Such public knowledge is also generally seen to enhance decision making on account of the scrutiny that it necessarily brings to the process as a result. Primarily, the main point of the transparency is to enable people to come forward and say, “Okay, this particular subsidy has created a negative effect,” and make sure that that is scrutinised by a suitably empowered authority, in this case the national courts.

Transparency is super important to that process. What has happened already is that there are commitments to transparency via the TCA—those are minimum commitments that the UK has made—and they must be respected because they are international commitments. What has happened in practice, however, is that a national transparency register has been established, but when you look at that register and at the relevant rules around it, you do not see that it is functioning well.

A lot of the entries there at the moment look somewhat incomplete, and you will notice that lots of the entries have a zero for the amount of money that is committed, all of which leads to an inability for the market to be able to see what is actually going on. If you cannot see what is going on, you do not know what to challenge, or even if to challenge.

The other point about the transparency register is its brevity, frankly. Given how long the new regime has been in force, which is the best part of 10 months, and given the number of public authorities that are out there making interventions on this, that and the other form, it is clear that not everything that has been awarded in that 10 months is in that register—not by a long shot. Something is going awry in terms of the implementation of that particular transparency register.

[Seema Malhotra]

Q Specifically on what is in there—I am conscious of the time—are there recommendations you would make, based on that experience, around what may need to be tightened up within the Bill? That would be quite helpful, because there are questions about the de minimis threshold, about whether an entry should take six months, and about how long things should be open to challenge.

Jonathan Branton: On the challenge point, I think one month is too short, because that requires people to be extremely alert about checking things. The database is not readily searchable. It does not send prompts when particular information is put on at a sectoral level. If you were keeping an eye on it, you would have to be checking it every other day to see that something was coming forward about which you were concerned.

In terms of searching for amounts and dates on which things have been recorded, all that is not regulated. What we really need—I will hand over to Alex in a second as I know he has strong views on this—is something that sets out in very clear detail exactly what needs to come in on every entry. Then, in practice, when you actually come to making those entries, it must require you to put in the correct answers to those questions in order for the entry to go live on the website. If that does not happen, you should get pushed back. That is clearly not working well enough.

Alexander Rose: As Jonathan says, essentially, the key piece of information on that website is the date the entry is made, and the reason that is so important is that the challenger has as little as a month to challenge once that information is placed on the website. To put some numbers on what Jonathan said, first and foremost there are only 501 entries. There are a lot of subsidies, so there is no way that only 501 subsidies have been awarded since 11 pm, 31 December 2020.

Secondly, of those 501, some 257 are recorded as having a zero or nil value. In order to bring a digital review—

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Q How many, sorry?

Alexander Rose: Two hundred and fifty seven out of 501. In order to bring a digital review challenge, you are probably going to have to spend between £25,000 and £40,000, so if you are seeing a nil value, you are very unlikely to bring a claim.

Some of those are going to be schemes, and I will bring out some of the schemes on that website at the moment. SC10261, the Tees Valley Capital Grant Scheme, is listed as having been posted on the website on 1 April 2020, but the website did not exist on 1 April 2020. SC10388 is a real estate grant of £675,000 in Girton in Cambridgeshire—I picked this one because it is the last—and that one does not have a date at all. There is no way that somebody wanting to challenge would be able to know that date unless, as I have personally done, they have been saving the spreadsheets and comparing them.

Now, essentially, what we have here, therefore, is a mousetrap that is lacking a spring. Unfortunately, the Bill does not fix that. The way to fix it is at clause 32, which relates to the database, and it must expressly say that there needs to be two things. First and foremost, that information has to be included—the date it is actually entered and/or modified. Secondly, I think you need to end up having a search function that gives you three pieces of information. You need to have the date an entry was entered or modified; the name of the funder, because that is currently not searchable; and the name of the beneficiary, which is on there at the moment. Those are the three key pieces of information. The other element is, in order to capture that scenario where people simply are not putting into the database, you need to have some sanction if you fail to put it on.

The other issue that needs to be considered is that, at the moment, you have up to six months to put that information on the database. A large enough subsidy could make a business insolvent within that six months, so it feels to me that the period needs to be shorter. Likewise, the period to challenge needs to be longer. There is no obvious reason for having a shorter period for what is rightly described as the most important piece of post-Brexit legislation than for a planning permission judicial review. It should be longer. The next point is that there should be some level of sanction if that information is not put online. For example, maybe a sensible level would be the challenge period is extended to six months.

Jonathan Branton: The challenge period is not validly started if the right information is not put online. That is one way of looking at it. If it is not validly started, it never ends.

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[The Chair]

Thank you. I will move to Seema Malhotra, please.

[Seema Malhotra]

Q Thank you, Mr Greenberg, for coming to give evidence. We have had some representations to suggest that there could be an incompatibility between, for example, the economic competence of devolved Administrations and the way in which the Bill’s regime is set out. What is your view of the schedules, the interpretation of economic competence and, in schedule 3 I think, the application of principles and the definitions of what is included in primary legislation—which can obviously be more than Westminster—in relation to devolved Administrations and the Bill?

Daniel Greenberg: Thank you. Chair, would it be convenient if I answered that question by contextualising it in the overall structure of the Bill and said a few words about how devolution appears in the Bill not on the surface, but underneath it, and requires to be brought in in relation to the principles mentioned?

[The Chair]

I think that would be very helpful, thank you.

Daniel Greenberg: Where I would like to start is to look at the shape of the Bill by reference to the concept of subsidy as set out in the Bill. I hope that the Member who asked me the question forgives me: this is an answer to your question. It will be slightly long, but I am hoping that at the end I will have answered most of the questions on devolution that Members have.

To take you back to what a subsidy is, we can see in clause 2 that the focus of the Bill is inevitably on things that affect the United Kingdom as a whole, or things that go on within the United Kingdom between the different components and parts of the United Kingdom. If we look at subsection (1)(d)—page 2, lines 16 to 21 —it explains a lot about the shape of everything that follows in the Bill.

I keep mentioning “shape”, because I want the Committee to understand that the Bill inevitably reflects macroeconomic policy. That is what it is there to do. Inevitably, there will be lots of connections, co-ordination, consultation and interaction of lots of different kinds—I will come back to some specifics soon—under the surface of the Bill. It may be that the question I have just been asked and other questions on devolution arise because, on its surface, the Bill is arguably a little short on explanation of some of the systems and mechanisms that will inevitably be required to go on underneath the surface in order to reflect the economic competencies of the devolved Administrations and the devolved legislatures.

To put it in a nutshell, everything that is required by way of accommodating, reflecting and understanding those devolved competences and powers is capable of taking place with the shape of the Bill as it is now, but it perhaps needs to be brought out more, either on the face of the Bill or in the explanatory materials.

Chair, I hope I am not yet trespassing on your patience. Am I still close enough to the question to be allowed to continue?

[The Chair]

indicated assent.

Daniel Greenberg: I mention explanatory materials because I expect that as well as the principles in schedule 3, you may want to ask me about the relationship between the United Kingdom Internal Market Act and this Bill, and indeed the relationship between this Bill and the Northern Ireland protocol, all of which are key devolution areas. It is arguably surprising that the relationship between the Bill and the internal market Act is not addressed more expressly on the face of the Bill, but whether or not it is addressed expressly, the shape of the Bill allows it to be accommodated. I do not know whether as a Committee, as you move forward, the interplay between the sides will encourage the Government to put more of this on the face of the Bill, but what I do think is that all members of the Committee may consider whether the explanatory notes could helpfully be enlarged to explain how these different mechanisms fit together.

Coming back to the specifics of the question, because the shape of the Bill is about subsidy that is macroeconomic, it has to focus on international obligations, and international obligations are obligations of Her Majesty’s Government. That brings us to the next point: throughout the Bill, you see “Secretary of State, Secretary of State, Secretary of State”—all powers of HMG—and you think, “Hold on, the devolved institutions are also public authorities. They appear in the list of public authorities in clause 6, so why is it that they do not also share Secretary of State powers?” The answer is very simple: when you are dealing with international obligations of the UK, that has to be dealt with by central Government but, again, doesn’t that have to be done in consultation with the devolved Administrations? Of course it does. With co-ordination with the devolved Administrations? Of course it does. With mechanisms for encoding that co-ordination and consultation into the way the Bill operates? Of course.

At the moment, I am absolutely sure that the Government intend that to work under the Bill, and it can work under the Bill. Whether that could be shown more on the surface of the Bill or in the explanatory notes is a matter for the Committee. Does that help at all?

[Seema Malhotra]

Q Yes, that is very helpful. Just coming back to the specific point that we have heard from the Welsh Government about whether there can be interference with the economic competence that the Welsh Government have—that is one example—is your view that it need not be incompatible, but that needs to be made clearer?

Daniel Greenberg: The extent to which it needs to be made clearer is obviously for the Committee as it proceeds through the Bill. That is why I specifically mention explanatory material, because I would remind the Committee that it is so much easier to have things made clear in explanatory notes, explanatory memorandums, memorandums of understanding, quasi-legislation generally and explanatory material than it is to secure an amendment to the shape of the Bill, particularly because the simple answer to the question you were implying—“Could these powers be used to interfere with devolved autonomy?”—is “Of course they could. No question.” The question for you, therefore, is “Are there mechanisms by which they will not be used to do that?” Clearly, this sits alongside the United Kingdom Internal Market Act. It does not repeal that Act. It sits alongside the Northern Ireland protocol. Clearly, the Government expects and intends for them to operate in unison. The question for you is: can that dovetailing be addressed more expressly?

[Seema Malhotra]

I had a question about the Northern Ireland protocol, but I am conscious of the time.

[The Chair]

I will bring in Kirsty Blackman and come back to you if there is time.

--- Later in debate ---

[The Chair]

Thank you. Seema Malhotra, did you want to come back in?

[Seema Malhotra]

Q I did. You referred to one of the contextual pieces of legislation. There is the Northern Ireland protocol as well. There has been some debate about whether the Bill is compatible and whether there could be legal challenges to subsidies, particularly in Northern Ireland, and whether that could have an impact on subsidy schemes that are UK wide. I would be grateful for your interpretation of the legal framework on that.

Daniel Greenberg: You are not asking me for a compatibility opinion, and I would not give you one, but I will draw your attention and the attention of the Committee to a point for your consideration as you go forward, which is to be sure that you understand the focal points of the protocol in relation to this Bill.

Primarily, we have to have regard to article 6 of the protocol and remind ourselves that the protocol is designed to ensure that it does not prevent market access within the UK and that the international requirements and commitments are protected. One of the issues about article 6 is that it does have the kind of mechanism that we were discussing before, because the protocol has of course the Joint Committee, which is going to be very significant.

So you start off by looking at article 6. You ask yourself, “Will those protections be consistent with this Bill, and how will the Joint Committee be capable of applying its mechanisms in a way that join up with the mechanisms that you develop in relation to the Bill?”

Then we move to article 10, which in substantive terms is the key article for you, because it deals with state aid. The question to ask in relation to compatibility is this: is there anything in the Bill that insists upon a measure, in respect of measures that affect trade between Northern Ireland and the Union, that being the test in article 10? As I have already said—I am perhaps slightly risking something close to an opinion here—I do not see anything, because the mechanisms of the Bill are deliberately so wide.

Perhaps it is helpful to say that we often have this in law. You look at something and you say, “Hold on—the Minister could exercise that in a way that is incompatible with human rights and the protocol.” That does not matter—that is not the question. The question is, “Would the Minister be obliged to exercise it in a way that is incompatible?” If the Minister would not be obliged to exercise it in a way that is incompatible, then in itself it is not incompatible, and your next question is, “Do we have mechanisms built in to make sure that the powers are only exercised in the way that is compatible?” That is article 10.

Finally, on the article 16 safeguards and the exception, which was of considerable controversy earlier on this year, that looks at economic, societal or environmental difficulties that are liable to persist and allows unilateral action as safeguarding measures in relation to those difficulties. I think you will want to ask yourselves, not is this compatible—it clearly is—but how continued compatibility would be assured in a case where the article 16 safeguards were being invoked. For me, that is the more interesting question for you.

[The Chair]

Thank you very much for your contribution, Mr Greenberg. That brings us to the end of the session.

Examination of Witness

Rachel Merelie gave evidence.

[The Chair]

Q We now hear from Rachel Merelie, senior director for the Office for the Internal Market at the Competition and Markets Authority, who is appearing virtually. We have until half-past four for this session. Could the witness please introduce herself and give a few short opening remarks?

Rachel Merelie: Thank you for the opportunity to appear in front of this panel. As you say, I am the senior director for the Office for the Internal Market at the Competition and Markets Authority, but perhaps more relevant for you today is that I am the senior responsible officer for the project to set up the subsidy advice unit, should the Bill make its way through Parliament in its current form.

I want to make a couple of opening remarks. Obviously, we will operate within the framework set by the Government and by Parliament. The role that we have been given is an advisory one. I know that Members understand that, but it is really important and relevant to us. We have two particular roles to fulfil. One relates to the review function. We will have a very targeted review of the most complex and potentially distortive subsidies that we are asked to look at. The second is a more general and wider monitoring function. We will look at the way in which the regime is operating on a five-yearly basis, so that will enable us to look more generally at the subsidy control regime.

My second point is that in order to fulfil our functions we need to ensure that we have access to the appropriate information. We will have information-gathering powers in relation to the wider monitoring function, and we believe that with appropriate definition of the information to be supplied by the public authorities we should have the appropriate information to undertake our review functions. Should our role change, we would want to ensure that we had the appropriate powers.

[Seema Malhotra]

Q Thank you for giving evidence today. May I ask a couple of questions on the CMA’s current powers, and whether there is arguably a case for some extension of them? In relation to the CMA not having the power to instigate a report or investigation by its own initiative, would there be circumstances in which you could see it as beneficial for the CMA to proactively undertake an investigation? For example, something may not be explicitly described as a subsidy by a public authority but seems to have the same effect and is therefore potentially in question. Secondly, what is your assessment of the additional resource and capacity that the CMA will need to fulfil its obligations under the new regime, and do you have any concerns on that?

Rachel Merelie: As you know, that wider role is not what is currently envisaged. Under the current proposals, we can look only at the subsidies of interest and subsidies of particular interest that are referred to us, although as I mentioned in my opening remarks we have a wider monitoring role, which will allow us to take a broader view on the regime as a whole. We can, of course, also look at subsidies that are called in by the Secretary of State, so that might to some extent help to address the question of subsidies that we might want to look at, as you referred to.

Were we take on a broader role, looking at things under our own initiative, as you were discussing, we would have to really understand the implications of that in terms of resources, as you mentioned, and the powers that we have. Ultimately, of course, it is not really for us to decide. It will be for Government and Parliament to decide whether that is a role that you want to give us. I think that was your first point. Could you remind me what the second point was?

[Seema Malhotra]

It was about whether there is sufficient resourcing.

Rachel Merelie: Yes, of course. We have been given money in the 2021-22 settlement to take on a number of new functions. Previous witnesses referred to the fact that the CMA has three new functions that we are currently setting up. We have the Office for the Internal Market, the Digital Markets Unit, and potentially the subsidy advice unit. We were given a sum of money in the 2021-22 settlement to start to staff up and resource all three of those functions. We now have a bid in for the spending review for the next three years, and we should hear more about that formally tomorrow.

[Seema Malhotra]

Q To follow up, in relation to the internal market and the digital services market, is their membership drawn in the same way, solely from within the CMA? Do you have the option of involving external experts to fill any gaps? I have a slightly different question: when you talk about the access to information that you might need, are there sufficient mechanisms to ensure the accuracy of information posted on the database? Do you have views about what information needs to be on the database? Should there be an auditing process, whether random or otherwise, to ensure the accuracy of the information that is being put there?

Rachel Merelie: Perhaps I will start with the second question. The database is being set up by the Department for Business, Energy and Industrial Strategy and it is not something that the CMA or the subsidy advice unit will be operating—at least at the moment there is no intention for that to be the case. Our focus will be on those very specific, more complex subsidies—the subsidies of interest and of particular interest—rather than the wider set of subsidies that are contained on the database, although you are right that we will want to look more broadly when we undertake our monitoring role. Because we have the information gathering powers we have been given for that, I think we will be able to gather relevant information when we need to, to get a wider understanding of the subsidies that have been awarded.

Your first question was around governance and the way in which the Office for the Internal Market and the subsidy advice unit had been set up. You are right that they are slightly different, in the sense that the Office for the Internal Market has a chair and a panel that are in the process of being appointed by BEIS. There is an opportunity for the devolved Administrations to offer their views on the appointments of the chair and the panel members. That is entirely appropriate; we are talking about a function that is inherently involved in understanding the trade and relationships between the four nations.

For the subsidy advice unit, what is currently envisaged is a sub-committee of the board, so we would have the opportunity to draw on board members, non-execs, panel members and others, as well as the staff from around the four nations. It is important to emphasise that the CMA does have staff in all four nations, and a growing presence across the UK. We think that is incredibly important to be able to run the subsidy advice unit properly.

[Seema Malhotra]

Q May I come back on two brief points? There is not a requirement to have representation from all four nations, as far as I understand. That seems to be slightly at odds with the UKIM set-up, which has been a cause of concern for what needs to have a four-nations approach and buy-in. Would it be a concern to you if there was that requirement in the Bill? Secondly, the question I do not think I heard an answer to was, where should there be a function for either audit or checking of the accuracy of information put on the subsidy database? Would that need to be within BEIS rather than the CMA?

Rachel Merelie: Perhaps, again, I will pick up on the second one first. Yes, at the moment, given that the database sits within BEIS, it would be most appropriate for that sort of checking function to be part of its remit. Obviously, if it were decided for that database to sit with the CMA, we would need to have the requisite resources and powers associated with it.

On representation from all four nations, as you say, there is currently no formal requirement in the Bill. The CMA, as I said, is a pan-UK body. It does have good relationships across all four nations, and is very used to working with them. We are not the policy makers here—that is important to underline—we take on board and do our best to implement the policy set by the Government and by Parliament.

[Kevin Hollinrake]

Q If you have a monitoring requirement, you would think the obvious place for you to go to look at would be the database, yet we heard evidence earlier that fewer than half the entries on that database even have a figure for how much subsidy has been allocated. Is that not a concern to you, because how else will you gather the information other than looking at the database?

Rachel Merelie: That is a very good question. I think we will need to understand how that database is operating, and I am sure you are right; that will be one of the ways in which we will gather information. We may also be going directly to public authorities to ask them questions. I guess we would also be doing some market analysis, some desktop analysis, and so on, of how the subsidy regime is operating more widely. I think there will be a number of different ways in which we gather information, but you are absolutely right—the database will be an important part of that.

--- Later in debate ---

[Kevin Hollinrake]

Q I realise that your primary focus is going to be very large schemes—not hundreds of thousands of pounds, but millions of pounds. Nevertheless, somebody has to monitor the smaller stuff as well to make sure that people are not abusing the system. I do not see how anybody can monitor that. To monitor that, you would have to monitor every local authority in the country and stitch all their contributions together against a certain entity.

Rachel Merelie: In the way the Bill is currently set up, that wider monitoring on a day-to-day basis is not something that we will be involved in.

[Seema Malhotra]

Q I want to come back on a couple of points. This is in relation to helping make sure that there is a regime that commands confidence and provides the information to public authorities, which are engaging with some of this activity for the first time. To what extent do you think more needs to be done to engage with public bodies and prepare them to be able to grant subsidies effectively and efficiently to enterprises under the regime? It is likely that a lot of that burden could end up with public bodies approaching the subsidy advice unit. Are you factoring that in to how you see the unit working, or do you think that some of that needs to be done elsewhere?

Rachel Merelie: That is a very good question. I am sure that you are right—there will be quite a process to educate and support the public authorities as they embrace the new regime. I think that a lot of this will come from central Government and the guidance that they will publish. The subsidy advice unit, I suspect, will need to flesh out that guidance with respect to the very large subsidies and the information that we will need to carry out our assessment. We are keen to work with public authorities to make sure that they understand what will be required. Yes, we are aware of the need to do that guidance, which is one reason why, I suspect, it will take a little time between Royal Assent and the commencement of the Act, as there will be a need to get that guidance and detail out there and give confidence to those who want to operate under the regime to do so.

[Seema Malhotra]

Q Would you see that being done in a slightly more structured way through the guidance? Otherwise, the likelihood is that you will have a lot of approaches and potentially more voluntary referrals than you might expect, because the earlier information, advice and guidance is not helping to address some of the questions. Public bodies will engage with this—local authorities in particular give rise to concern—and will be doing this for the first time.

Rachel Merelie: I think the guidance will be incredibly important. Doubtless, there will need to be a series of roundtables and communication with public bodies to ensure that there is as good an understanding as there can be. The other point to emphasise is that this is going to be a bit of a learning experience for everyone in the first days of the operation of the new regime. We cannot expect it all to work entirely smoothly from day one, although we will do our very best to make that happen. There will be a need as time goes on to adjust, to iterate and to develop our processes.

[Seema Malhotra]

Q On fast-cycle learning and the effectiveness of the scheme, do you think that there are merits in the five-year report being produced to a shorter timetable, with greater frequency—for example, three years? You may have a view on that—I am just raising it as an issue. Five years seems a long time, particularly with a new regime, in which to look at how well it is working.

Rachel Merelie: Yes, I can see that as a question. At the moment, the Bill allows for the Secretary of State to ask for advice more frequently or when required. There may be an argument that says that we will provide some advice on a shorter timescale than five years, with the set point being the five-year report. Again, that is a question that we are entirely open to discussing further.

[Seema Malhotra]

Q I am conscious that we have only two minutes so, while I can, I will ask whether you have concerns about your ability to scrutinise subsidy schemes if subsidies under those schemes are less likely potentially to be on the database. Do you have concerns about the transparency of subsidy schemes from the perspective of any single role?

Rachel Merelie: I think that this is an area where quite a lot more work needs to be done to understand the relationship between the subsidy schemes, the individual subsidies and the information that we will have to analyse. I do not have concerns at the moment, but that is partly because this is a pretty early stage in articulating how that will work.

[The Chair]

Thank you, Ms Merelie, for your evidence this afternoon. That was beautifully timed, and we will now move on to the final panel.

Examination of Witness

Ivan McKee gave evidence.

[The Chair]

We are going to hear from Ivan McKee, the Scottish Government Minister for Business, Trade, Tourism and Enterprise, who is appearing virtually. We have until 5 pm for this session. Would the witness introduce himself for the record and give us a few opening comments?

Ivan McKee: Thank you very much, Ms Nokes. Thank you for the opportunity to set out the views of Scottish Ministers on the proposed legislation. For the record, my name is Ivan McKee. I am the Scottish Minister for Business, Trade, Tourism and Enterprise.

I look forward to taking questions, but would like to briefly outline a few concerns that the Scottish Government have about the Bill. The first is the sweeping powers of the Secretary of State, which ignore the devolution settlement and do not grant the equivalent powers to Scottish Government and other devolved Administration Ministers. The second concern is the absence of formal regulatory and enforcement arrangements. The third is the inclusion of agriculture and forestry in the provision. Those are our main concerns, but I am happy to take questions from members of the Committee.

[Seema Malhotra]

Q Thank you very much, Mr McKee, for giving evidence to our Committee today. First, what is your overall view of the regime? Do you see any advantages in moving away from the way the EU state aid regime operates? Could there be more freedoms for devolved Administrations?

Secondly, what do you see as the impact of moving away from more formal assisted areas on the ability of the Scottish Government to support more deprived regions? Would you say that there could be flexibility in the Bill to enable you to make those decisions as you might wish, in line with Scottish Government objectives?

Ivan McKee: First, for the record, it is well known but it is worth stating that leaving the European Union was a mistake and we look forward to the day, hopefully in the not-too-distant future, when we can rejoin the European Union and all the advantages that it gave to Scotland and, frankly, the rest of the UK.

As for the specifics of the Bill, given that we are where we are, we recognise the need for a Bill, notwithstanding the concerns I have raised already. Many of the specifics have still to be nailed down. As we see the final shape of it emerge, we will comment on the specifics.

As for being able to support different parts of Scotland, given that we have responsibility for economic development in Scotland, clearly we are keen to be able to do that. The EU rules obviously allowed different parts of Scotland to be treated differently depending on the circumstances and allowed us to make decisions on how we saw fit to spend money and take action within those rules. It was a slightly different system, but we do not see any specific advantages to the current proposals in this Bill.

[Seema Malhotra]

Q Thank you very much for those answers. As you will be aware, concerns have been raised that the role, voice and powers of the devolved Administrations within the regime may not be strong enough, particularly for a four-nations approach. It has been suggested that that should be addressed and the Bill strengthened. Are there specific areas that you would say need to be strengthened?

Ivan McKee: A four-nations approach clearly has to take recognition of areas of devolved responsibility, be that for agriculture, forestry, fisheries, environment, economic development and so on. A range of areas on which the Bill impinges are devolved under the settlement. So clearly that is a concern.

I suppose another concern about the Bill’s general operation is the lack of the option, or requirement, under the EU regime for pre-notification or advance approval. In advance of an award or a subsidy being made, that gave certainty that it was aligned with the rules in place. The absence of that in this Bill creates a great deal of uncertainty as to what is allowable and what is not in advance of any subsidy decisions being made.

[Robin Millar (Aberconwy) (Con)]

Q It is a pleasure to be here with you in the Chair, Ms Nokes.

Welcome to this Committee of the UK Government, Mr McKee. We are discussing a UK Government instrument and within that there are provisions made for the role of the devolved Administrations. Clause 10 gives the devolved Administrations scope to set their own scheme of subsidies. Is that your understanding? Do you feel that that provides the Scottish Government with the powers to do what they need to do?

Ivan McKee: No, because the Secretary of State has powers over devolved areas that Scottish Government Ministers do not have, and that impinges on the devolution settlement. That settlement is quite clear on areas that are reserved and devolved, and it is the Scottish Government and Scottish Ministers who have the power to act and operate in those devolved areas. The Bill gives those powers to the Secretary of State and the UK Government, but it does not give equivalent powers to Scottish Government Ministers to operate likewise in devolved areas.

--- Later in debate ---

[Kevin Hollinrake]

It was my point, though. Thank you.

[Seema Malhotra]

Q We had some discussion about clause 70(7)(a), and there is some point of clarification about the definition of “interested party”, which I do not think is fully clear in relation to the devolved Administrations, but either we agree on the need for the Bill to be taken forward, I hope with some significant improvements, or there is a view that that cannot be achieved. I want to come back on a couple of points that you made, Mr McKee, that I was not fully clear on. The first is on being prepared to be involved in discussions, the question being what outcomes would be achieved. Do you feel clear at the moment on what specific changes, whether in relation to call-in powers, an obligation to consult or consent, you would want to see inserted in the Bill to meet some of those concerns? It would be very helpful to understand specifically what they were. Perhaps that could be in writing afterwards.

Secondly, I was not fully clear on what your view was in relation to local authorities. It seemed that it was more for the Scottish Parliament to decide what local authorities in Scotland may or may not do, rather than local authorities across the UK being able to make subsidies if they felt that they were in line with the subsidy control principles, and beneficial for their area. I was slightly confused on what your view was about local authorities being able to make subsidy decisions in Scotland. Perhaps you could come back on both those points, and put in writing what specific changes you want to see.

Ivan McKee: On the specifics of what our asks would be, I am very happy to put that in writing. In broad terms, it centres around, as I said, the requirement to not have the Secretary of State able to operate in devolved areas, as per the devolved settlement, and for the Scottish Government and Scottish Ministers to be able to do that. For us to have equivalent powers as it refers to devolved areas would be the ask, in broad terms. I have outlined some of that verbally, but I am very happy to come back to the Committee in writing with the details on specifically what that means.

Local authorities have always been able to grant aid within the rules that exist, so effectively nothing changes there. What changes with regard to the Bill is the authority that it gives the Secretary of State that it does not give in devolved areas to Ministers in the devolved Administrations. That is our concern.

[Kirsty Blackman]

Q Nice to see you, Ivan. My question is about the priorities and the fact that we are being asked to take on trust an awful lot of the stuff that is coming forward in regulation and guidance. Given the current track record of the UK Government and their relationship with Scotland, trampling over the Scottish Parliament, do you think that it is likely that the regulations and guidance that come through will be in any way suitable or tailored to the needs of Scotland, or do you think that they are likely to be done for the benefit of the UK?

Ivan McKee: Experience has shown us over recent years that the commodity of trust is in short supply. We would be very concerned if the issues that we are talking about were not dealt with in the Bill. I think we would be in a very difficult place if we were relying on guidance that might come out later to give us the comfort that we require that this was not a challenge to the devolution settlement, and the powers of the Scottish Government and Scottish Ministers.