Subsidy Control Bill (Sixth sitting)

Stephen Kinnock Excerpts

Tuesday 2nd November 2021 Public Bill Committees

[Paul Scully]

Clause 36 establishes the minimum financial assistance—or MFA—exemption and the value threshold for awarding subsidies under the exemption. That exemption allows subsidies to be given without having to comply with the subsidy control requirements, and clause 37 sets out the procedural requirements to use that exemption.

Before awarding an MFA subsidy, a public authority has to provide the intended beneficiary with an MFA notification. That must set out that the subsidy is proposed to be awarded as MFA, the value of the prospective subsidy and it must request confirmation that the enterprise will not exceed the MFA threshold. The public authority can only award the subsidy when it has received this confirmation. When awarding an MFA subsidy, the public authority must give the intended beneficiary an MFA confirmation, which is a written statement confirming that the subsidy has been awarded through the MFA exemption, the gross value amount of the subsidy and the date on which the subsidy was awarded. The beneficiary must keep a record of this information for three years, beginning on the date on which the subsidy was awarded.

[Stephen Kinnock (Aberavon) (Lab)]

Clause 37 refers to the enterprise needing to keep a written record. How will the public authority know that the enterprise is keeping that written record?

[Paul Scully]

That would be for challenge, should the overall subsidy be challenged in a court through judicial review. The public authority should exercise its statutory obligations.

[Stephen Kinnock]

Just to clarify, we are taking it from the enterprise based on trust?

[Paul Scully]

It works both ways. If I were an enterprise receiving a subsidy, such as minimum financial assistance, I would want to make sure that I was doing my own due diligence, and public authorities do. Any businessman would know that there are legal implications and legal requirements of running a business. It should be the case that it works both ways.

There are interlocking elements within the framework that ensure that both public authorities and enterprises are doing their own due diligence. The procedural requirements will make sure that enterprises receive subsidies only through the MFA exemption when they are genuinely entitled to do so, while still minimising the administrative burden associated with awarding a subsidy. I commend the clause to the Committee.

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[Paul Scully]

I think we have established that subsidy control is a reserved matter. It will be subject to debate, but none the less it is a reserved matter, and it is therefore right that subsidy control policy is made and voted for here in Parliament, which is why I talked about the scrutiny. Parliament is the place to do this. We have engaged on a number of occasions on various aspects of the Bill—34 times at official level and 10 at ministerial level. On top of that, in response to the consultation the different devolved Administrations came up with different views on a number of issues. There was no one consistent view in a number of areas. There are provisions in the Bill that engage the legislative consent motion process, and we hope that the devolved Administrations will not only agree that the Bill is important, but give it their legislative consent.

[Stephen Kinnock]

The Minister keeps saying that the UK Parliament is the right place to deal with this, and we actually agree—that is the sentiment behind the amendment. All the amendment asks is that the UK Government adopt a collaborative approach by checking with the other public authorities, but, if the UK Government feel that they should proceed as originally intended, they should go ahead with it within one month. We are not divided on the question of whether the UK Parliament is the right place to do this. What we are saying is that a collaborative approach would deliver better results for everybody. The Minister should not use the argument that the UK Parliament is the best place to do this, because we actually agree with that.

[Paul Scully]

The devolved Administrations remain one of the key areas—perhaps the key area—where the subsidies will be given. We are not substantively changing the spending powers of the devolved Administrations, or indeed of any public authority.

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The Government are in intensive discussions with the EU with the aim of delivering significant changes to the Northern Ireland protocol, including article 10. Although it would be inappropriate to comment on the talks at this time, it is worth pointing out that the status and applicability of article 10 at the time the Bill is passed will depend heavily on them. The guidance on article 10 will keep pace with the outcome of the talks.

[Stephen Kinnock]

Will the Minister confirm that this legislation cannot be passed by this House until there is clarity on article 10 of the Northern Ireland protocol? There seems to be a big gap in understanding on the definition of an at-risk good. Any company headquartered in Great Britain, when deciding whether it might be at risk as regards a good going into the European Union, will be unclear on that point. Until the EU and the UK Government have come to that clarity, this legislation is unworkable.

[Paul Scully]

I disagree. This framework, which is a bare-bones framework, as I have said, has to work with whatever is in the Northern Ireland protocol, whatever is negotiated. That is why, for the reasons I have said, I talked about the reach-back provisions, which are never perfect. We know that the Northern Ireland protocol is not perfect, but it is a negotiated view. That is why, in those intensive discussions, we are looking at delivering significant changes and trying to improve an imperfect situation.

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[Paul Scully]

The regime has been specifically worked through so that there is no double jeopardy, as the hon. Member for Sefton Central described at the beginning. They have to deal with one or the other. Clearly, as I said, the one they would deal with depends on the framework of the company, the ownership of the company, and whether it deals in electricity or services, because different rules clearly apply. None the less, as the negotiated provision is constituted, they would only have to apply to apply to one or the other. If it is state aid, they do not then need to worry about domestic subsidy control, and vice versa. The Command Paper clearly stated that we believe that we can bring it under domestic subsidy control, although that is not being negotiated yet, so that is clearly not the situation at this moment in time.

[Stephen Kinnock]

I am grateful for the Minister’s indulgence. On a point of clarity, clause 48(2) states:

“The subsidy control requirements do not apply to…a subsidy given, or a subsidy scheme made, in accordance with Article 10 of the Northern Ireland Protocol”.

My interpretation of that is that the only show in town is article 10 of the Northern Ireland protocol—that that trumps the subsidy control regime. Is that not the case? I thought he said in his introductory remarks that the default position in all this is the state aid regime under the Northern Ireland protocol.

[Paul Scully]

As I say, if something comes within state aid, whether it is goods or logistics, it may be the case, but neither one nor the other trumps it. There is no double regulation. Either it comes under state aid or it comes under domestic law—[Interruption.] That is what is there within the protocol, and there are certain things that just do not appear under the protocol.

Clearly, we will continue to keep the House informed of progress made relating to the Northern Ireland protocol. I do not want to go down the rabbit hole of coming out with individual examples that may then be redundant as the talks continue at pace. We want to make sure we continue to keep the House informed and, as such, I consider that section 48 of the United Kingdom Internal Market Act 2020 already makes provision for a statement of the application of article 10 of the Northern Ireland protocol by way of statutory guidance—[Interruption.] The Government have already given the guidance and I do not see any need to place an additional requirement on the Secretary of State to make a statement to the House of Commons regarding the applicability of article 10 of the Northern Ireland protocol. I request the hon. Gentleman withdraws the amendment.

[Bill Esterson]

I think the pings you just heard were all the different legal opinions on the application of the subsidy control regime on EU state aid, Ms Nokes. The Minister found a number of different ways of phrasing the same problem: it all depends, it is one or the other, or he cannot give individual examples. I am afraid that is what it all boils down to.

[Stephen Kinnock]

It is an absolute shambles.

[Bill Esterson]

My hon. Friend the Member for Aberavon uses the word shambles. It is hard to disagree given the Minister’s answer. Until that is addressed, it undermines the operation of the regime, which risks legal challenge.

On the point about individual examples, businesses face the potential of legal challenge if they do not get this right. They are not going to know which regime. We were starting to get an answer there, in that if the subsidy is under the terms of the Northern Ireland protocol, it is state aid. However, even there the Minister could not be entirely clear. It goes back to my initial question: what proposals are the Government putting forward to address this? What is in the Secretary of State’s words on Second Reading, where he was extremely confident that the matter would be addressed, as the hon. Member for Aberdeen North and I both said in our opening remarks? What do the Government think is going to work? What is it from their discussions with their EU counterparts that suggests a way forward? We still have not had that from the Minister and that underlines exactly why the amendment is so important in giving the Government until the day on which the Bill passes into law to address exactly how the operation will apply.

To go back to the words of George Peretz, there are two sets of guidance and two sets of legal opinion. He, as a lawyer, could advise on the same situation, with the awarding body on the one hand and the business on the other, on which regime might apply. Until that is addressed, we have a real problem with the legislation and the existence of the two different subsidy regimes will cause a real problem for the effective use of subsidies to support businesses in the regions and nations of our country.

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[Bill Esterson]

We have heard spectacularly from the Minister the failure of the Government to explain how the regime will operate or to come forward with answers to questions asked during the debate on our amendments. There is little to add to what has been said already.

[Stephen Kinnock]

Briefly, for the record, I am deeply uncomfortable with this part of the legislation. It leaves businesses across the length and breadth of the country in a total state of confusion about which parts of the provisions apply to them and which are under article 10 of the Northern Ireland protocol. I genuinely think it would be a dereliction of duty by the Committee to allow the clause as drafted to stand part of the Bill. Whether we press it to a vote does not matter—we lose the votes all anyway—but I want to put it on the record that that would be a dereliction of duty.

[Bill Esterson]

I reassure my hon. Friend that we will indeed be pressing clause stand part to a vote. He is right: businesses need certainty. We are coming out of a once-in-100-year global pandemic, and they need all the support that they can get. This regime should give that support, but it cannot do so if there is that massive uncertainty at the heart of it, whether this regime or a different one should apply. The Government have not addressed that and they need to get on and address it—

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[Bill Esterson]

I am interested in the answer to that question as well, given that in the last 11 years of Conservative Government we have not seen the investment in new nuclear that was needed to meet our climate obligations.

[Stephen Kinnock]

It was all coming from China.

[Bill Esterson]

Indeed. The role of China in our nuclear industry is a point well made by my hon. Friend. I hope that we will see significant investment in new nuclear as a result of the regulations, if that is what the Government intend. Perhaps the Minister will give an indication of their intentions, because without investment, we will not hit our obligations. Nuclear is, of course, a longer-term project because it takes so long to get going. I remind Members that we have significant targets to hit by 2030, and unless we are talking about small modular reactors, nuclear reaches beyond that timeframe. Can the Minister enlighten us on any plans?