Subsidy Control Bill

Simon Baynes Excerpts

2nd reading
Wednesday 22nd September 2021 Commons Chamber

[Seema Malhotra]

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 (Clwyd South) (Con)]

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]

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.

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[Stephen Flynn]

I welcome the hon. Gentleman’s intervention. It does not put a stain on all of politics; it puts a stain on the Conservative party, where it firmly belongs, because Conservative party donors and friends have gained the most from this pandemic when it has come to contracts. [Interruption.] Conservative Members can argue all they want, but the facts are as clear as that.

Now, to the Bill before us; we got a little side-tracked there. It is important to look at the wider context of the Bill: the present situation, the past regime, and what is to come, which of course is what the Bill sets out. Let us look first at what is in place at this moment in time. As I see it, and as I think all of us in the Chamber will see it, we left the European Union, but we left to a system of nothing. We do not actually have an effective system at the moment. Indeed, I think it was the Institute for Government that deemed the current system to be completely ineffective.

That is understandable. Of course, a public body looking at what it is going to be doing does not want to break any rules, so if it does not have a full understanding of what the rules are, it will obviously err on the side of caution. In many ways, that might be an argument for the Bill. I can certainly understand why that may be the case, and that was what the shadow Minister, the hon. Member for Feltham and Heston (Seema Malhotra), intimated in terms of meeting international obligations and the like. I do not think anyone would necessarily disagree with that.

Let us reflect slightly on where we have come from in relation to state aid. Some of this has been touched on already by Members on both sides of the House, but there is one specific aspect of it that I think needs to be aired properly. It was mentioned by the former Foreign Secretary, the right hon. Member for Esher and Walton (Dominic Raab), at the Dispatch Box during Prime Minister’s questions earlier, and again by the Secretary of State—perhaps not directly, but he certainly inferred it—that state aid was a problem of unelected bureaucrats in Brussels. Yet if we look at the facts before us, 95% of all state aid measures did not even go near the European Commission’s desk, so we are almost fixing a problem that did not exist in the terms that the Government think it did, irrespective of how much they want to make Brussels seem like the bad guys.

I appreciate, though I disagree with, the stance of some Conservative Members—the hon. Member for Weston-super-Mare made this point, as I think did the right hon. Member for South Northamptonshire (Dame Andrea Leadsom) when she was in her place—that we did not, when we were in the European Union, make the most of what we could do under state aid regulations. However, the facts are that, under those terrible state aid regulations, we invested but a third of what the Germans invested, and a fraction of what others invested, so the big bad guys in Brussels were not so bad after all. Yet we left that arrangement for a system that, at this moment in time, is completely ineffective.

That brings us to the next stage, as represented by this Bill. As I see it, the Bill’s objectives are to enable strategic interventions to support economic recovery, levelling up and net zero. That is not wholly different from the EU state aid rules, which were, of course, to support the environment and innovation. The one slight difference, however, is that the EU state aid rules had a specific remit for the EU regional aid system, whereby people advocated money to be directed to less developed regions.

I have to say that I am a little surprised that there are not a few more red wall Tories present, whose regions could be described as—[Interruption.] The hon. Member for Stoke-on-Trent North (Jonathan Gullis) is waving at me; I am sure he will seek to intervene on me in due course. If I were a Conservative Back Bencher representing a constituency in the north of England, I would be deeply concerned about this aspect of the Bill. Although the Government say that the objective of the Bill is to level up, it contains no detail at all. It says that the Secretary of State will come back, subsequent to the Bill, to provide the detail on how levelling up will work. More importantly, we have walked away from a system that put money directly into less developed regions.

[Simon Baynes]

I am a Conservative Back Bencher representing a red wall seat in north Wales. The previous EU system was very biased against regional and localised issues of deprivation. It went for large areas, but there are plenty of areas in north-east Wales that require the same amount of help as was gifted under the European system. I would argue that the new system is much more direct, much more localised and much more effective.

[Stephen Flynn]

I admire the hon. Member’s optimism, but I am not quite sure where he has read that, because, of course, the Bill does not have that detail. He is hoping that the Secretary of State will subsequently provide that detail, but the Bill does not make that clear.

Another extremely important point that the Bill does not make clear is in relation to relocation subsidies. Essentially, the Government are saying that they will not relocate subsidies to areas with a more significant problem. They might want to level up—to use their term—but that is not going to happen under the terms of the Bill.

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[Simon Baynes (Clwyd South) (Con)]

I welcome the Bill, particularly as a Welsh Member of Parliament, because it will provide the framework for a new, UK-wide subsidy control regime. This will, for the first time, enable authorities, including the devolved Administrations and local authorities, to deliver bespoke subsidies that are tailored to local needs. I want to reinforce that point because it has been a key part of the discussion, in reference to the EU subsidy areas. In my opinion, those regions were not targeted enough. Large parts of Wales were not included in them, despite having areas of deprivation. The Bill will apply to the parts of Wales where need is greatest.

The Bill is also essential—the UK internal market is essential to our prosperity. Trade with the rest of the UK is worth more than trade with the rest of the world combined to Scotland, Wales and Northern Ireland. That is especially the case in Wales, where Welsh businesses purchase more from the rest of the UK than from Welsh businesses plus the rest of the world.

The Bill promotes accountability through a standardised, UK-wide database. Transparency and simple comparison will provide accountability across the UK. It must be stressed that reporting by the devolved Administrations is often absent or uses different criteria, which prevent like-for-like comparisons. For example, the Welsh Government do not publish waiting list times for all NHS procedures, unlike other parts of the UK.

The Bill promotes the Government’s levelling-up objectives. The UK is built on local communities, not just Belfast, Edinburgh, Cardiff and London. Building up and streamlining local authorities’ partnership with the UK Government are key to strengthening the Union. Speaking as a Welsh Member of Parliament, I have to say that the Welsh Government are not the easiest organisation to deal with for those living in north Wales and looking for Government help. Their focus is very much on south Wales. The message from the debate that giving money and subsidy control to the Welsh Government will mean that money is spread across the Principality is incorrect. I was interested by the remarks of the hon. Member for Carmarthen East and Dinefwr (Jonathan Edwards). He should be fair and recognise that Plaid Cymru is riding two horses in negotiating an agreement with the Welsh Government in Cardiff, yet criticising the Welsh Labour party while here. Plaid Cymru Members need to recognise that they cannot have it both ways.

The Bill benefits the devolved Administrations, too. That message has not come across strongly enough in the debate. It lowers costs and streamlines decision making, including for the devolved Administrations. Streamlined subsidy administration ensures that the devolved Administrations can roll out their own regimes at lower cost and greater speed. The UK internal market competition distortion principle will protect the devolved Administrations and the English regions from being pushed into competition spirals with neighbouring authorities.

I am pleased to back the Government on the Bill, which takes back control from the EU, allows us to deliver on the British people’s priorities, strengthens the Union and gives confidence and certainty to businesses and investors. It will enable local authorities across the UK to play an equal role, rather than everything always being put in the centre, in London and in the devolved Administrations. We need to enable the whole country, at a local level, to become involved and provide the dynamic to create a better life for all our citizens.