Shotton Steelworks: 125th Anniversary
Stephen Kinnock Excerpts(2 years, 11 months ago)
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Mark Tami
Really.
After John Summers’ death in 1876, the business began to expand under the leadership of his son Harry, who joined forces with three of his brothers, grew the business and opened the Hawarden iron works on the banks of the River Dee in 1896. With a 250-strong workforce and the installation of eight steam-driven rolling mills, galvanising pots, annealing furnaces and corrugating equipment, that was the beginning of the Shotton Steel plant that we know today.
Workers travelled from all over the country, such was the production demand, and by 1902 Harry Summers had turned the plant’s attention to steel production, with the site in Shotton being recognised as a leading steel manufacturer by 1909. John Summers and Sons was now the largest manufacturer of galvanised steel in the country, with a site covering 60 acres and employing 3,000 workers.
One of only two strikes in the works’ history caused major disruption to production between 1909 and 1910. The dispute concerned the contract system, whereby at each mill one person—the contractor—employed ten others on a piecework system. It was common for workers to be paid according to favouritism, rather than the hours they actually worked or their productivity.
Mark Tami
I can only agree with my hon. Friend.
Believe it or not, there was even the idea that some received payment in the local pub by way of a pint or two of beer. As a result, many joined the Steel Smelters Union in protest, and to avoid industrial action the Summers family drew up a deal with the disgruntled workers. However, the deal failed to avoid industrial action, as the contractors protested against it, with daily picketing at the factory gates. The dispute came to end in December 1910, following a mass address to the workforce by Harry, who agreed to replace the ad hoc contract system with the direct payment of wages—progress, indeed.
Following this period of uncertainty, Shotton focused its efforts on the first world war, producing thousands of steel sheets for the trenches, Nissen huts and shell making. Despite jobs in production remaining strictly for men, many women entered the site for the first time to carry out clerical work. In the immediate post-war years, Shotton Steel maintained its success, with the workforce rising to some 5,800. The period between the two world wars saw considerable change in both production techniques and global demand, with a general decline in demand for black and galvanised sheets, which at one time accounted for 98% of Shotton’s production. Disruption continued during the great depression following the Wall Street crash and Black Friday, when two thirds of Shotton’s workers lost their jobs and the plant closed its doors, not to open again until 1933.
During the second world war, Shotton Works operated at full capacity, producing 2.2 million tons of black and galvanised sheets for various uses. Most notably, as I am sure people will remember—I do not know whether they will remember at first hand—there were the Anderson air raid shelters, which saved many lives during the blitz. Unlike in the first world war, women were now employed in the labs, packing departments and cranes, making up about 1,000 of the workforce. Harry Summers died shortly before the end of the war, but he has always been remembered fondly:
“A more fearless, a more honest and more straightforward man it would be hard to name”,
as Richard Summers wrote in his obituary of Harry.
His Royal Highness Prince Philip, the Duke of Edinburgh, officially opened the first phase of the plant’s post-war development scheme in 1953, giving the plant additional space. At that time, steel consumption by the UK car industry had increased by 88%, creating a dramatic rise in demand. Under Harold Wilson’s Labour Government, Shotton moved to public ownership under the British Steel Corporation, employing 12,000 people out of the 270,000 British Steel Corporation employees nationwide. That figure, if we think of the workforce today, shows the dramatic change.
While this marked the end of the Summers’ ownership, for generations after the family name remained synonymous with Shotton. The Summers family had guided the company to become a world leader in steelmaking, putting Deeside on the global stage. I know that many people, even now, still refer to it as Summers’s—the name has lived on.
The 1970s were dominated by disputes over plans to phase out iron and steelmaking at Shotton, as part of the Government’s deep-seated review of the British Steel Corporation. Following several protests and backroom negotiations, led by the workers action committee, in May 1977 the British Steel Corporation removed proposals for the termination of iron and steelmaking at Shotton. With trading prospects looking brighter, the review was put on hold until 1982.
Sadly, rising oil prices and declining demand for strip mill products brought the review forward to 1979, resulting in a plan to end iron and steelmaking at the plant by 1981. Around 6,400 jobs were to be phased out following an agreement between the British Steel Corporation and trade unions. No community in living memory had faced the prospects of such a substantial and rapid loss of jobs—I think it was the place where the largest number of jobs were lost on a single day in a single plant anywhere in western Europe. As a result of only the second period of industrial action in its history, some 7,000 workers clocked off in December 1979, never to return other than for counselling. The heavy end closure was eventually complete in 1981.
The workers action committee, which had fought hard for the retention of iron and steelmaking at the works since 1972, formally disbanded its campaign, which was probably the longest in British industrial history. It had been successful to the extent that Government decisions were reversed on two occasions, with the British Steel Corporation withdrawing its closure proposal totally at one time. Despite the eventual loss of jobs, the Shotton campaign is regarded by many in this place, trade unionists and others as a model of collective resistance. By peaceful demonstration, reasoned argument and persuasion, the men and women of Shotton won support and sympathy at the highest level of Government. I put on record my thanks and, I am sure, that of everyone at Shotton, to Lord Jones, now in the other place, who led delegations and campaigns and spoke many times in this place and the other place, and continues to do so, in support of Shotton and how vital it is to the area.
Towards the close of the century, Shotton’s productivity saw strong growth, with modern equipment and processes, an increasing product range, and high-quality performance. Shotton was the centre of Britain’s coated steel production once again. By the time the Corus Group was formed to run the Shotton plant in 1999, productivity had tripled compared with 1986 levels. Corus was acquired by the Tata Steel group in 2007, and despite global financial challenges, the works remained profitable and forward thinking. With a focus on high-value products, the works achieved a record level of profitability within 10 years. Today, Shotton’s primary markets are construction and consumer products, supplying global brands such as Airbus, Jaguar Land Rover, IKEA and Wickes. As I said, it employs around 800 people.
In its 125-year history, Shotton has remained resolute, and it is still one of the largest employers in Alyn and Deeside, fostering hundreds of livelihoods. We can reflect on the history, but we should not dwell on it, because the next 125 years are just as important as the first, if not more important. This Government must step up their support for the UK steel industry, which continues to face critical challenges. A decade of Government indifference and failure to take action has caused the UK steel industry to nosedive by a fifth—a £1 billion hit to our economy. Since 2010, UK steel production has plummeted by 21.5%, which is 20 times the average among other European countries.
We are all experiencing the dramatic rise in gas prices, which hits Shotton hard because it relies mainly on gas for its energy. When we compare our gas and electricity prices with those in other countries—they are 60% cheaper in Germany and 51% cheaper in France—it is a miracle that we have a steel industry at all.
Stephen Kinnock
As my hon. Friend the Member for Newport East (Jessica Morden) rightly pointed out, there is a family of steelmaking plants in Wales, Port Talbot obviously being the hub, and we send birthday greetings to Shotton. The integrated nature of the steelmaking process means that the energy costs for Port Talbot, which are the highest in Wales, are crucial for the entire steelmaking process in Wales. As my right hon. Friend the Member for Alyn and Deeside (Mark Tami) has rightly pointed out, we are trying to compete with one hand tied behind our back, because the Government’s inaction is leaving us with massively higher energy costs than our European partners and neighbours.
I hope the Minister does not say, “Well, we pay the energy intensive industries compensation fund,” because these energy price disparities exist after that fund has been provided. Let us please not hear that line again from the Government. Does my right hon. Friend agree that this is the No. 1 priority? We are just asking for a level playing field. We have talked about the past, but the present and the future are so much more important. Unless we get this sorted, we are going to be uncompetitive for another year, two years or even 125 years.
Mark Tami
Once again, I agree. I am also very concerned that the Government only ever seem interested in the steel industry when we are in crisis. When there is a crisis, suddenly the Government are all over the steel industry, and the moment it drops out of the headlines, so does the Government’s interest in it. That is just not acceptable. As my hon. Friends have said, the danger is that, at some point, the industry—or significant parts of it—will fall over. My hon. Friend the Member for Aberavon (Stephen Kinnock) made the point that without Port Talbot, there is a danger that there would not be a Shotton either. That is a point that the Government really need to grasp.
There is no mention of steel in the Government’s latest Budget or their so-called plan for growth, and their industrial strategy has effectively been scrapped. There has been a total failure to support environmental targets with investment that could boost decarbonisation in the industry. Funding from the clean steel fund has been delayed until 2023 and, as I have said, the issue of high energy prices has been completely ignored. All we ever get is, “Oh, it’s nothing to do with us. Have a look at Ofgem; maybe they can do something.” That is not acceptable.
Labour’s analysis shows that 24p of every pound spent on steel for Government infrastructure projects was spent outside the UK in 2017-18, meaning that Shotton and other plants throughout the UK have been left behind. The Government are making an utter mockery of their pledge to “level up” with such actions, which leave behind steel areas completely. Stronger “buy British” steel targets could create and safeguard around 50,000 jobs, and boost the economy by £4.4 billion. Vitally, it would also lower the environmental damage of steel imports. True levelling up would consist of more than just rhetoric. It is clear that we need decisive action and decisive planning. We heard only a couple of days ago in the other place that steel for our warships and our submarines is being imported, with the argument being, “We don’t have it in this country.” We do not have it in this country because we were not told soon enough that the plants could start producing what was needed. The end result is that we are importing steel to build warships and submarines. That is how stark the position is and how stark the Government’s failure is.
As well as taking action to secure the next 125 years of production at Shotton, we must also reflect on the role Shotton is taking in the fight against the climate and ecological crises we face—a point raised earlier. We need a green plan for steel and we need it to be supported by the Government. I want Shotton steelworks to become the first carbon-neutral plant in the UK. Shotton has been central to much progress in UK steelmaking for more than a century, so it would be fitting for the plant to lead the country’s decarbonisation efforts. Fortunately for us in Wales, the Welsh Labour Government are already taking the first vital steps to support Shotton’s path to becoming carbon neutral. The manufacturing action plan for Wales, a collaborative effort made between Industry Wales, trade unions and representatives from the manufacturing sector, is central to that progress. First Minister Mark Drakeford is stepping in to take action in pursuit of a prosperous, green and equal economy.
The Tata Steel group has been clear that decarbonisation and securing a green approach to steelmaking are top priorities. Shotton is already playing a key role in the fight against climate change through the application of its products in the construction of “active” buildings, which produce more energy through renewables than they consume. There is scope for more progress, and we must support and encourage Tata with that. Many critics argue that decarbonisation and economic growth in the steel industry are mutually exclusive, but with the right financial backing and strategic approach, Shotton can lead the UK steel industry to being carbon neutral and continue to support jobs in north Wales.
We hear a lot from the Government that hydrogen is the future. It may well be the future, but it is not currently the present and it will not be the future unless we invest in it. It is not going to happen by accident that one day we wake up and the steel industry and other industries suddenly have plentiful supplies of hydrogen, it works and everything is fine. We need to be ploughing investment into research now, otherwise we will fall further behind and we are already falling behind our European neighbours.
The steel industry in Alyn and Deeside is the very fabric of our area.
Stephen Kinnock
The point on hydrogen relates to the discussion we were having about energy costs. An electric arc furnace approach or a hydrogen-based approach takes even more energy, power and electricity than the current gas-fired approach. If we do not get the energy costs issue sorted, it will completely hamstring our efforts towards decarbonisation.
Energy-intensive Industries
Stephen Kinnock Excerpts(3 years ago)
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Stephen Kinnock (Aberavon) (Lab)
My hon. Friend is giving an excellent speech. It appears that some Members on the Government Benches seem to see steel as a sunset industry. In fact, nothing could be further from the truth. It is at the cutting edge of innovation. New alloys are being developed all the time. We need to emphasise the fact that this is a future-facing industry.
Jessica Morden
I thank my hon. Friend. It is absolutely true to say that steel is a future-facing industry, which will help us build back the economy after the pandemic and help us power a green industrial revolution. That is as true now as ever.
Stephen Kinnock (Aberavon) (Lab)
It is a pleasure to serve under your chairship, Ms Nokes. I congratulate the hon. Member for Stoke-on-Trent South (Jack Brereton) on securing this very important debate.
Manufacturing is the backbone of the British economy, but it is a backbone that has been dangerously damaged in recent decades. By failing to back our manufacturing sector, successive Conservative Governments since 2010 have only succeeded in offshoring jobs. As a result, they are ripping the heart out of our local communities, while also offshoring our carbon emissions. The Government’s No.1 priority should be to do whatever it takes to support and regenerate our manufacturing sector.
Steel is the cornerstone of that manufacturing sector, and it will continue to be so for decades into the future. Steel is the homes that we live in, the vehicles that we drive and the offices that we work in. Steel will build the smart cars and the wind turbines that power our economy forward. The Government appear to believe that steel is a sunset industry, but nothing could be further from the truth. The steel industry is a hotbed of innovation and pioneering technology.
Tata Steel is the largest private sector employer in my constituency, and the company is absolutely determined that there should be a future for UK steelmaking, while also recognising the importance of decarbonisation. It recognises that for UK steelmaking to enjoy a prosperous future, the industry needs support and partnership from the UK Government, first by working with the industry to manage a pathway to net zero on both public and private investment, but also by the Government levelling the playing field in order to ensure that the industry is competitive against its European counterparts.
Let us be clear—the current energy spike has played havoc with energy-intensive industries.
Sir William Cash (Stone) (Con)
The hon. Gentleman is making a first-class speech. I was brought up in Sheffield and lived there for 20-odd years. I know what he is talking about and he is completely right. I am not going to make a speech, but I want to congratulate him.
Stephen Kinnock
I thank the hon. Member for his kind words.
Let us be clear—the energy spike has played havoc. November 2021 prices peaked at 50 times the 2020 average, at £2,000 per megawatt hour. The monthly average wholesale costs are 50% higher than in Germany. These extraordinary electricity prices are leading to smaller or completely eliminated profits, and thus to less reinvestment and even pauses in production for some companies. Higher electricity prices also act as a disincentive for investment from international steel companies, with the UK being seen as a less favourable investment environment than other places.
The potential for a widening price gap between the UK and our European competitors means a loss of market share, both in the UK and in key export markets. That is why it is utterly self-defeating for Ofgem to recommend that network energy prices rise even higher. The Business, Energy and Industrial Strategy Committee has rightly called for the steel industry to be exempt from this price hike; let us hope that Ofgem, the Secretary of State for Business, Energy and Industrial Strategy and the Minister, who is in his place today, will take heed of the Committee’s recommendations.
Other European countries have taken quicker and more expansive action than the British Government by offering support to energy-intensive industries. As has already been mentioned, the Portuguese Government have announced a minimum 30% reduction in network charges for industrial users. The Italian Government have pledged over £4 billion to eliminate renewable levies on gas for industry and electricity for small and medium-sized enterprises. In Spain, we have seen tax cuts and the temporary reduction in extraordinary profits made by energy companies, including extending the existing suspension of a 7% power generation tax through year end. They will also cut their special electricity tax from the current 5.1% to 0.5%.
What we need to see in this country now is the provision of 100% compensation for costs of carbon in electricity bills, through a carbon price floor and a UK emissions trading scheme, up from the current 75% allowed for under EU state aid rules. We need to provide 85% compensation for the capacity market fee and an 85% reduction in network costs, in line with France and Germany, as well as full exemptions for the renewable levies or the introduction of additional compensation.
The Minister will point, of course, to the energy-intensive industries compensation fund, but that was half a decade ago, and the gap I have just described exists after that fund is taken into account. We have had enough of warm words; we must now commit to levelling the playing field for our steel companies. It is the least British workers in industrial communities deserve. What a contrast between the Government’s dithering and Labour’s bold and ambitious £3 billion steel renewal fund. In that fund, we pledge serious investment while the Chancellor had absolutely nothing to say about steel in the Budget. It is a dereliction of duty and makes a mockery of the Government’s so-called levelling-up policies. Tragically, successive Conservative Governments have failed to support our steelworkers and their families and communities. What a contrast with our party and our steel unions, which truly grasp the central importance of the steel industry to the past, present and future of our country. Let us hope that the Government will at some point recognise the need to unleash a modern manufacturing renaissance, with steel at its heart.
Subsidy Control Bill (Eleventh sitting)
Stephen Kinnock Excerpts(3 years ago)
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Paul Scully
I will speak first to amendment 82. As I have previously stated in addressing other amendments to this clause, the power to issue statutory guidance in clause 79 will allow the Government to add greater colour and detail to public authorities on how to comply with the requirements.
This amendment would require the Secretary of State to gain the consent of the devolved Administrations before issuing guidance, but since subsidy control is a reserved policy matter, it is right that the UK Government do not need to seek the formal consent of the devolved Administrations before issuing guidance. I should reiterate that the Bill as currently drafted already says:
“Before issuing any further guidance … the Secretary of State must consult such persons as the Secretary of State considers appropriate.”
I believe that is the right approach for guidance relating to a reserved policy area.
Stephen Kinnock (Aberavon) (Lab)
Which persons does the Minister think the Secretary of State should consider to be appropriate?
Paul Scully
I think that would depend on what the guidance is, especially with changes to guidance, because this is clearly looking at the wider future. I will come back to engagement, because attaching a formal consent mechanism to the clause could slow and inhibit the issuing and updating of statutory guidance, so it is important that the Government are able to update guidance quickly, should circumstances change—for example, due to the development of new UK case law—and delaying changes would be unhelpful for public authorities and subsidy recipients alike. That said, we have engaged extensively with the devolved Administrations in developing the policy for the new subsidy control regime and will continue to work closely with them while developing the guidance in the way I described in the previous clause. It is in all our interests to ensure that the regime works for the whole of the UK and enables the UK’s domestic market to function properly.
Stephen Kinnock
The Minister has confirmed that consultation with the devolved Administrations has taken place. Does he therefore consider that the devolved Administrations are persons that would be considered appropriate by the Secretary of State for consultation?
Paul Scully
It is really important that we continue to engage with the devolved Administrations—with the Welsh Senedd, the Scottish Government and the Northern Ireland Assembly. The key issue we are talking about here, though, is that the consent mechanisms contained in the amendment may risk delay, and may change the dynamic of the fact that subsidy control is a reserved matter. None the less, as I say, it is really important that we continue to work closely with the Welsh Senedd, the Scottish Government and the Northern Ireland Assembly, because we have to make sure that this Bill works for the UK as a whole, and for every part of the UK as well.
Amendment 86, which has also been tabled by the hon. Member for Feltham and Heston, would, as I said, require the Secretary of State to seek the consent of each of the devolved Administrations before making regulations under the Bill. The amendment would not require the Secretary of State to obtain that consent before making regulations, but if it was not forthcoming, the Secretary of State would be required to make a statement to the House explaining why they chose to proceed with the regulations regardless. However, as I noted while addressing the previous amendment, since subsidy control is a reserved policy matter, it is right that the UK Government do not need to seek the formal consent of the devolved Administrations before making regulations creating streamlined subsidy schemes or issuing guidance.
However, again, I am absolutely clear about the importance of engaging with the devolved Administrations as the Bill progresses through Parliament, as well as the process towards implementation and beyond. That engagement will, and has to, continue as we develop guidance and draft regulations. Throughout, the Government will take into account the specific needs and concerns of authorities and other interested parties. Furthermore—we will discuss this issue further in relation to clause 91 and the commencement provisions of this Bill—we are committed to ensuring the timely passage of the necessary regulations to ensure commencement of the Bill as soon as possible. I therefore ask the hon. Lady to withdraw the amendment.
Seema Malhotra
I thank the Minister for his comments, and I agree with his statement that this regime needs to work for the UK as a whole: I think that is something on which we all agree. I am not quite clear, though, on whether the Minister is saying that there is an incompatibility between the reserved competence and seeking consent, because I am not sure that there is. If there was, we would not have had evidence—including from Daniel Greenberg, parliamentary counsel—about how there could be some co-ordination mechanisms and consultations in and around how the Bill operates.
Stephen Kinnock
To fortify the argument that my hon. Friend is making, the Minister claimed that our amendment would force the UK Government to seek the formal consent of the devolved Administrations, but that is not the case. It would require consultation, but if consent is not given, the UK Government can go ahead with their original plan anyway. Just for the record, we are not saying that formal consent should be given: it is simply a requirement for consultation.
Seema Malhotra
My hon. Friend is correct, and that is the reason I wanted to make this point. I do not think that the arguments the Minister has made about risking delay and changing the dynamic are really arguments against this amendment, which clearly says that
“Before making regulations under this Act, the Secretary of State must seek the consent of the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland…If consent to the making of the regulations is not given by any of those authorities within the period of one month”—
so this is not an extensive delay—
“beginning with the day on which it is sought from that authority, the Secretary of State may make the regulations without that consent”,
but it will be on the record that consent was sought.
Thirdly, the amendment says that
“If regulations are made in reliance on subsection (7B), the Secretary of State must publish a statement explaining why the Secretary of State decided to make the regulations without the consent of the authority or authorities concerned”.
I cannot see anything in the amendment that is incompatible with the fact that this is an area of reserved competence. It simply seeks transparency on where there may be disagreements and why. In my view, that is part of how we have a mature relationship between Westminster and the devolved Administrations—not everyone is always going to agree, but they should be included and views on how the Bill is implemented should be respected. Being able to disagree on the record is, I think, part of how our democracy should be working.
Subsidy Control Bill (Fifth sitting)
Stephen Kinnock Excerpts(3 years ago)
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Paul Scully
There has been a great deal of interest in the thresholds at which the transparency obligations apply, so I will explain some of the detail and logic of those thresholds. Transparency is an important part of the subsidy control regime and key to the enforcement provisions.
As we have heard, interested parties must be able to see subsidies in order to determine whether they may be affected and whether they wish to challenge the subsidy award or subsidy scheme. Any challenge will be made in the Competition Appeal Tribunal through that judicial review. The database is a vital tool in that. To serve its purpose, the aim of the database should always be to enable interested parties to see the subsidies that they may wish to challenge. It is not designed to be a general database of public authority spending; other tools are already available elsewhere for greater financial transparency in that regard and are not limited to subsidies. The transparency requirements in the Bill have therefore been designed to focus solely on those subsidies and schemes that can be challenged on subsidy control grounds.
The Bill provides for various reasons why a subsidy or scheme cannot be challenged on subsidy control grounds, such as a subsidy award given under a published scheme not being able to be judicially reviewed in the CAT on subsidy control grounds. That is because the scheme itself is assessed against the subsidy control principles and is challengeable, rather than the award under the scheme. Another example is minimal financial assistance subsidies, which are considered too small to cause undue distortions. They therefore do not have to adhere to the subsidy control principles and other requirements. Those subsidies do not need to be on the subsidy control database.
The transparency of subsidy awards has costs as well as benefits. Providing the data would create an administrative burden for public authorities, including small local authorities, in addition to the imposed costs for those using the database if excessive, irrelevant or potentially poor-quality data is provided that interested parties have to sift through. Another thing about the impact on public authorities is the cumulative impact. We find that transparency requirements in general tend to fall on a small number of people in local authorities and other public bodies. That is why there is a relatively high bar or threshold—because of that cumulative burden on a few people in local authorities.
Stephen Kinnock (Aberavon) (Lab)
Does the Minister not agree that, with public trust in politics and Government at an all-time low, the more transparency that we can have in the system, the better it will be to build trust in the new subsidy control regime? Does he not recognise the serious risk of cronyism and that sunlight is the best disinfectant? Therefore, let us have the maximum transparency, and let us drop this clause from the Bill, as requested by my hon. Friend the Member for Feltham and Heston in her amendment.
Subsidy Control Bill (Sixth sitting)
Stephen Kinnock Excerpts(3 years ago)
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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.
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.
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.
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.
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.
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.
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—
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.
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?
Subsidy Control Bill (Fourth sitting)
Stephen Kinnock Excerpts(3 years ago)
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Paul Scully
Obviously, the Government welcome the devolved Administrations’ ongoing interest in the Bill, and we continue to engage with them on a regular basis. In coming up with this framework, I think we have had at least 34 official-to-official engagements and 10 or so ministerial-to-ministerial engagements with the devolved Administrations. It is important that we continue that spirit of discussion, because we have to set the right definitions for the subsidies of schemes of interest or particular interest.
Having those appropriate definitions is really important to ensure that the subsidy advice unit is focused on the subsidies and schemes that are most likely significantly to distort competition and investment in the UK, or that may do the same to our trade with other countries. It also means, as we have heard, that regulations made under clause 11 may need to be amended quickly in the event that economic conditions change rapidly, for example. A requirement to seek the consent of the devolved Administrations each time the power is used risks introducing significant delays into the process.
Stephen Kinnock (Aberavon) (Lab)
I thank the Minister for his comments. As the Institute for Government has made clear in its commentary on the Bill,
“a successful system needs buy-in from all parts of the UK…any regulations should be made in consultation with the devolved administrations…government must take a collaborative approach to writing the regulations that will determine how the system will actually work.”
The Minister has made the argument himself, really. In his opening comments, he rightly praised the work that has already taken place, as well as all the conversations—the 34 official-to-official meetings and the 10 Minister-to-Minister meetings—that are happening. That precedent has already been set, and there is clearly a commitment on all sides for that to continue.
The Minister also made the point about urgency, but surely one month is a reasonable timeframe within which to check and consult that we are on the right course, and, if the Governments are still not in agreement, to proceed as the reasonable compromise in our amendment sets out.
Paul Scully
The spirit is certainly there, but I do not want to bind future Administrations to a requirement to respond in emergency situations.
Seema Malhotra
I hear what the hon. Gentleman says, and that is indeed what it is probably trying to do, but the problem is not only that it potentially undermines levelling up; it could also undermine and challenge the Government’s freeport policy. In the Queen’s Speech and the 2021 Budget, the UK Government announced eight new freeports in England, which are intended to promote regional regeneration and job creation and to become hotbeds of innovation. However, it is notable that no mention of freeports was made in the Government’s consultation on subsidy control policy, which closed on 31 March.
Under the Government’s freeport policy, significant subsidies, particularly tax reliefs, move to a particular site. In fact, they are conditional on a relocation. Are these tax reliefs—enhanced capital allowance, enhanced structures in building allowance, business rate relief and relief from national insurance contributions—which are conditional on relocating to a freeport, prohibited or not by clause 18? We heard significant reservations about clause 18 from our expert witnesses on Tuesday. As Jonathan Branton from DWF Group put it:
“Having a prohibition in the Bill, even a badly worded one, is potentially too blunt a tool, which might backfire.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 56, Q77.]
Amendment 13 would mean that the prohibition in clause 18 would not come into force until the Secretary of State has laid before Parliament a report that explains how the provision is consistent with both reducing deprivation across the UK and the Government’s freeport policy. This modest amendment is designed to ensure that the Government have properly considered the impact of the clause 18 prohibition on tackling regional inequality and on the freeport policy. However, we are not convinced at the moment that sufficient thought has been given to that impact.
Beyond our concerns about whether the Government have considered the impact of this provision on their claimed commitment to levelling up across the UK, there are also questions about how public authorities should interpret the clause 18 prohibition. Specifically, the prohibition applies where a subsidy is conditional on moving all or part of the economic activity from one area of the UK to another, but I cannot see where we have had a definition of “area”. Will the Minister explain whether “area” refers to a nation of the United Kingdom, a region, a local authority, a town, a village or any or all of the above? What about a council subsidising a business to move from one part of a local authority to another? There might be perfectly sensible and sound economic and regeneration reasons to do that—for example, to make way for an infrastructure project—but presumably this would be caught by clause 18. Therefore, it is arguably prohibited. Will the Minister clarify the interpretation of the current wording of clause 18?
Stephen Kinnock
My hon. Friend is setting out very clearly the rationale for our amendment. I would add, in response to the comments from the hon. Member for Thirsk and Malton, that this is about incentivising and ensuring that the measure is used in a positive way.
Our concern is that the wording of the clause is a very blunt instrument. It could be interpreted by a business that was looking to invest in either Middlesbrough or Mayfair that already has a base in Mayfair as a disincentive against favouring an investment in Middlesbrough. That would surely fundamentally undermine the Government’s own levelling-up agenda. The amendment would reassure businesses that they can be incentivised to invest in Grimsby rather than Guildford, without it being a binary choice between one or the other—it is much more nuanced.
Seema Malhotra
My hon. Friend is absolutely right to put the amendment in those terms—it seeks to bring clarity. The Minister will probably appreciate that these are complicated questions for enterprises that may be in receipt of subsidies for positive reasons that meet the objectives of the regime and public policy goals. Clarity for public authorities in granting those subsidies is also important, ensuring that they are not subject to challenge when they genuinely want to achieve positive outcomes, but would be caught under the fairly blunt definition in clause 18. I look forward to the Minister’s response.
Stephen Kinnock
I have a brief question. Why would the Government not want to make it a condition? Either the Bill is an empty vessel that will just regulate certain activities or it has a public policy objective. Schedule 1 clearly states that public authorities must explain and assess the policy objective behind the subsidy.
If the policy objective of the Bill is levelling up, why would the Government sometimes not want to actually give public authorities the opportunity and ability to make it a condition of a subsidy for an entity to relocate to another part of the country that will benefit from the investment? I can understand that sometimes it should not happen and sometimes it should, but amendment 18 offers a more nuanced position where it can be explicitly said, “For reasons of levelling up, we are driven by this policy objective and we want the opportunity to incentivise accordingly.”
Paul Scully
Basically because this is a framework Bill. The policy objective of the Bill specifically is not levelling up. It enables levelling up through the framework, but it is the spending and subsidy themselves that are the policy objectives we are talking about. That is why schedule 1 refers to having to explain those policy objectives. Ultimately, this is a framework Bill that allows a permissive approach to subsidy, rather than the opposite—the state aid regime that we had when we were a member of the EU. The Government are fully committed to making sure that the UK subsidy control regime does support disadvantaged areas and facilitates the levelling-up agenda.
As part of the broader consideration that public authorities are required to undertake when assessing a subsidy, the subsidy has to be compliant with the principles within the Bill, and the wider impacts of the subsidy on competition and investments in other parts of the UK must be taken into account. We will publish guidance to make clear how this requirement should be applied by public authorities when considering subsidies that advance the levelling-up agenda or promote the economic development of relatively disadvantaged areas.
I welcome the interest in freeports, which are one of the Government’s flagship programmes to support levelling up and economic recovery. They are there to encourage new investment and create new businesses. The freeports offer follows the subsidy control principles set out in the Bill. They are an example of the UK Government levelling up economic growth across the UK—a strategic interest, which the domestic regime has been designed to reflect.
Bill Esterson
I am grateful to the hon. Gentleman for intervening. I think he is rather missing the point, which I tried to explain the first time around. I am making the point that the Government showed no interest in what was going on with Morrisons, nor the merits of what was happening.
Coming back to steel, the Government have belatedly woken up. Before I was intervened on, I was actually going to say that perhaps there are signs of improvement on this front. The Government have shown some interest in improving things, because there are amendments in the Budget that would give the Secretary of State for International Trade powers to overrule the recommendations of the Trade Remedies Authority. I am therefore mildly hopeful that we are seeing an improvement in policy and approach from the Government on that measure alone.
Stephen Kinnock
My hon. Friend is making some very important points. We have clearly sparked a debate about what constitutes critical national infrastructure and what constitutes businesses that are vital to our national security and our national interest. We can certainly have a debate about businesses operating at the consumer end of the spectrum, but there are other examples. The steel industry is an obvious one, but look at the issues around AstraZeneca and the attempted hostile takeover by Pfizer; look at Arm, or at the way in which private equity is taking over our defence industry. Our country has become the capital of the world for hostile foreign takeovers. We have more than any country in the OECD, and we face a world in which aggressive Chinese-backed investment vehicles and businesses are looking to take over businesses that are potentially coming out of the pandemic distressed and vulnerable.
Stephen Kinnock
National security is at the heart of our magnificent amendment. Let us not carry on being up for sale to everybody.
Subsidy Control Bill (Second sitting)
Stephen Kinnock Excerpts(3 years, 1 month ago)
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Bill Esterson
Q
Dr Barker: That is right. The CMA is increasingly playing a central role in many aspects of our economic life, and we are asking it to do more and more, not least in the digital space. It would be incredibly beneficial to this new regime if the CMA and its advice unit had the capacity to really assist the process.
Stephen Kinnock (Aberavon) (Lab)
Q
Dr Barker: They are aware of this issue in each of the devolved nations. The IoD as a whole does not take a view, for example, on whether the subsidy regime should be a devolved matter or a reserved matter for the UK central Government, but they certainly are concerned to ensure that that does not get in the way of a levelling-up agenda that could be very needed in, and very beneficial to, a country such as Wales.
Stephen Kinnock
Thank you. It is a question about aid intensity: you will be well aware that under the European Union rules, there were ceilings for how much state aid could be put into businesses, particularly small and medium-sized enterprises, according to certain themes. If you look at the regional aid theme, for example, the ceiling for SMEs was set at a 10% to 20% supplement. Do you think that the ceilings for aid intensity should be raised in the legislation—that is obviously not in the Bill and will probably end up being in the guidelines—so that you can make the kind of contribution that would make a difference to the business choices and models that are being put in place, rather than just putting money into something that would probably be happening anyway?
Dr Barker: I feel that this framework should permit the flexibility to allow those kinds of changes. Policy priorities will change over time and the Bill must not be so rigid so as not to permit that. It needs to offer a flexible framework.
The Chair
I will bring the Minister in now—I ask him to be conscious that Kirsty Blackman also wants to come in.
Seema Malhotra
Q
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
“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.
Bill Esterson
Q
George Peretz: We have touched on a couple of the main issues. The devolution issue that we have discussed is quite important. There is an issue with enforcement, particularly in relation to measures that are not regarded by the public authority as being subsidies, but are just a grey area—and that view could simply be wrong—and how those are dealt with. The Bill does not really address on its face how those will be dealt with. One can sort of work out how they are likely to be dealt with but it would be better if that situation was more expressly catered for and dealt with.
There is an enforcement problem in that, ultimately, unless the Secretary of State decides to refer things to the Competition and Markets Authority—of course, there will be cases where things have to go to the CMA—the mechanism does very much rely on private enforcement by, at the moment, interested parties, who are going to be commercial operators and probably not public interest ones or local authorities. You cannot always rely on commercial operators to enforce things like this. There are all sorts of reasons why they may not. Quite a lot of commercial operators are hoping for the same subsidy themselves, so they will keep quiet, or they get the same subsidy themselves and will therefore be quiet, whereas actually there is a real public interest problem.
You will get situations with quite small companies who are concerned about subsidies being given to a much bigger competitor. They will understandably be reluctant to annoy both the granting authority, probably, and the bigger competitor. There are also the inevitable costs and risks of litigation. In a new regime, those costs and risks are greater, because various points have to be sorted out and decided in the first few cases until you get some case law on it. So inevitably the risks and costs are greater. There is more chance that you will end up in the Court of Appeal on a point than there would be once the regime has bedded in.
All of those will be quite off-putting to a lot of private enforcement. Ultimately, that is the keystone on which the whole enforcement mechanism depends, because if nobody brings challenges to this, public authorities will often get away with pretty sloppy reasoning and genuflection to the principles rather than serious engagement with them. I think that is a concern.
Simon Baynes
Q
Alexander Rose: Absolutely. In terms of improving, you are starting from a relatively low base, so it is quite easy. There are plenty of databases, but ultimately it is about service functions. For example, I receive updates every day from Government on what they are doing. That kind of technology is there and it is ready to be put in place.
Jonathan Branton: I would second that. It is really difficult to argue against transparency and say, “Why wouldn’t you have transparency about the dispensation of public money in this way?” There is an overwhelming case for having a strong database that is searchable by whatever means anybody wants to search it, quite frankly. You can insist on that and be very plain. All the enforcement and strength flows from that later.
Stephen Kinnock
Q
We will achieve net zero in this country only if our steel industry transitions towards it. Mr Warren, what kind of state aid support do you think would be needed for that? Do you think there should be more explicit guidance in the Bill about how to achieve the transition to net zero as part of this overall strategy?
Jonathan Branton: I will start with the levelling-up question. I think you were asking whether it is possible to do something there without the equivalent of a regional aid map. The short answer is yes. You do not have to have a map of the country with shades of different colours for different levels of qualification in order to do something similar. The point is to give some form of preference or favouritism to areas based on some kind of measure of comparative disadvantage.
You could quite easily do that if you established a series of criteria. If you found that a given area had exhibited one or more of those criteria—and there would obviously need to be quite some thought given to what they were—that would be a means establishing that somewhere is regionally disadvantaged. Obviously, you can layer that with all sorts of different complications and grades of disadvantage, if you wish. That might be complicated or overly political, but you can establish the fundamental point of something being disadvantaged or not by reference to, I would like to think, a set of criteria, which would not be too hard.
For the relocation point, the wording in the Bill talks about something prohibiting subsidy that was given as a condition of relocation. In some ways, to my mind, that invites somebody to give a relocation that is not a condition, but achieves it anyway. Maybe that is just lawyers being cynical. Perhaps it is not fit for what it seeks to achieve, but is that a good thing anyway? I have seen a number of situations where a relocation has taken place, which has been positive for several reasons—perhaps someone relocates to make physical space for an infrastructure project, for example. Linking that back to levelling up, relocations can be advantageous and good in the grand scheme of things, and definitely positive for redistributing wealth. Having a prohibition in the Bill, even a badly worded one, is potentially too blunt a tool, which might backfire.
Alexander Rose: I have a slightly different position on clause 18. I think the way to resolve it would be to put in a value figure—maybe £20 million. I also agree that relocations can be hugely beneficial. Schedule 1 outlines the common subsidy principles and paragraph F is designed essentially to avoid competitions developing within the internal market.
I think that the issue trying to be resolved here is avoiding what would be regarded as a distortive subsidy. The way to deal with that is to define distortive subsidy and say that that would then be referred to the CMA, or however that works. That leaves you with the potential to include a replacement additional principle—you mentioned levelling up and net zero. I note that the strategy announced last week requires all civil servants to take account of net zero, yet these rules will be used by more than 550 public bodies. That is a great opportunity to instil that kind of thinking in every single subsidy.
Jonathan Branton: Without necessarily preventing them.
Richard Warren: To answer very briefly, yes, undoubtedly decarbonisation of the steel sector will require considerable subsidy or state aids, however we wish to term it. In sectors such as the power sector, we see billions of pounds’ worth of subsidy to decarbonise, and the steel sector will need precisely the same. Net zero or low-carbon forms of steel production will add anything from 30% to 50% to the costs of steel production, depending on which route you go down. If other countries are not moving at precisely the same speed or putting the same constraints on their industries, you will need some sort of intervention to correct that market failure.
There are two key areas where we would like to see additional movement. Again, I come back to competitive electricity prices. Fixing the issue there will require some sort of intervention. Secondly, we need pretty hefty support for capital investment in carbon capture and storage, hydrogen or even new electric arc furnaces. That will require hundreds of millions of pounds of investment.
On your final point about whether we need anything further in the Subsidy Control Bill to direct us towards that, I think that the light-touch approach is the right way to go. It does not exclude the Government from doing anything and it leaves open a huge number of options.
For example, the clean steel fund of £250 million that we hope will be confirmed in the spending review tomorrow is perfectly legitimate under the current regime. Maybe under the EU system, which says, “You can do this, you can’t do that”, you would have had to go through a more complicated approvals process. By the time you start introducing explicit requirements for certain industries, you will get a bunfight where everyone wants something mentioned in the Bill. You may end up down a route of, “If it’s not mentioned, maybe we shouldn’t be doing it”, so I think that the light-touch approach is the best way to go.
Kevin Hollinrake
Q
Jonathan Branton: I think probably yes. In terms of the small amounts of financial assistance, it is basically double what the EU’s de minimis has been. The feedback I have had so far across the piece is that the doubling has been a sensible, long overdue move. Frankly, that has been set by reference to what the TCA sets anyway, so we do not have a lot of flexibility to play around with that. Setting it at a fixed, sterling level is immediately sensible. There can be no debate about that.
In terms of the transparency, yes, you have to draw the line somewhere and the £500,000 seems like a sensible, rounded figure. I certainly do not have a strong view that it should be put at a different level—not yet, anyway.
Alexander Rose: The £500,000 is for schemes. I think that the question ultimately is that if you amend clause 70(2) in order to address this gap in terms of, essentially, accountability, you will need some level of incentive to use schemes. It appears that transparency has been chosen as that route.
Personally, I think that the £500,000 seems quite high, but you do need some kind of incentive; otherwise, people will not go down the route of using schemes, when clearly a decision has been made that that is a good idea.
Subsidy Control Bill (First sitting)
Stephen Kinnock Excerpts(3 years, 1 month ago)
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Kirsty Blackman (Aberdeen North) (SNP)
Q
“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”
Can I ask you both if that sounds like it is meaningful, and if it is meaningful, what does it mean?
Dr Pazos-Vidal: I assume that the first question was addressed to me. We have had a number of discussions, it is true, in the preparation of the Green Paper and the consultation, and some of this work was facilitated by other organisations, such as ones you are going to speak to later today. I think when we are talking about consultation, we are talking about consultation as something that is structured, something that is predictable, something that has more accountability and something that approaches corporate action to a certain extent. That is something that in the UK is far more touch and go compared with other countries. I think this is an opportunity, on something as potentially economically and politically sensitive as this, to have a much more structured system of consultation, rather than the issue of a local approach. That sometimes works fine—no problem—and I have said to myself that perhaps we could possibly do that many times over the years. Here it is a rather serious matter that is also very political as well, and we should have a very predictable and pre-set system. I should have mentioned that there is a precedent in the UK with the Localism Act 2011. Part 2 deals with subsidies and passing down funds from the EU. At the time, we negotiated a system of proper consultation with local government, in this case from the UK Government, so perhaps that is an issue at present that we can look at in terms of implementing this Bill.
Professor Fothergill: Subsidies are something that you should only use sparingly and where they really deliver something that is beneficial. That is why we need the principles that are set out in the legislation. Indeed, it is hard to see how we can get away from those principles that are set out in the legislation, because all bar one are embodied in the trade and co-operation agreement that was signed with the EU last December. The additional point that the UK Government have added is basically to stop one area entering into a bidding game with another area within the UK, and that, in a sense, is a sensible addition. These are meaningful principles: you use subsidies sparingly, but you use them where they really can deliver something that you think is socially and economically valuable.
Stephen Kinnock (Aberavon) (Lab)
Q
Professor Fothergill: The detail is not there in the legislation. It is all to be determined; it will follow in the guidance, one presumes. Under the old EU rules, the aid intensity ceiling varies from scheme to scheme and from place to place, but if we were talking about regional investment aid, for example, the maximum aid you could give in the top tier of assisted area was 30% for a larger business. It actually rose to 50% for a very small business, but the problem that we had under the old EU rules was that in the lowest category of assisted area, which covered most of the assisted areas in England, the ceiling for regional investment aid was only 10%. Frankly, at 10%, that is very marginal and very unlikely to make much of a difference to business decisions. If a decision is that marginal, really, come on: is it going to tip the balance? Incidentally, the EU has recently raised that lower threshold to, I think, 15%.
Kevin Hollinrake (Thirsk and Malton) (Con)
Q
Professor Fothergill: The 10% to 15%?
UK Gas Market
Stephen Kinnock Excerpts(3 years, 2 months ago)
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Kwasi Kwarteng
As my hon. Friend knows and has expressed, there are geopolitical elements to this in terms of the reliance of a large part of Europe on Russian gas. I am here to reassure people about a common misconception. We are not dependent at all on Russian gas. The gas sources are as I have described—50% are local, 30% are from Norway and about 18% are from LNG, which comes from all around the world—so I want to minimise the notion that we are somehow at the mercy of Russian gas policy.
Stephen Kinnock (Aberavon) (Lab)
This crisis is causing steelmakers across the country to suspend their operations during periods of the day when the costs of power are peaking at thousands of pounds per megawatt-hour. Can the Secretary of State assure the House that he is engaging with the steel industry to ensure that this crisis does not end up crippling our steel industry, which of course underpins our entire manufacturing sector?
Kwasi Kwarteng
The hon. Member knows that I am constantly engaging with the steel sector—in fact, I resuscitated the Steel Council as one of my first acts when I was appointed Secretary of State—and I am always in ongoing conversations with it. I have, I feel, made a contribution to making sure that we can have this industry on a sustainable basis, but I am very happy to talk to the hon. Member, among other colleagues.
Oral Answers to Questions
Stephen Kinnock Excerpts(3 years, 4 months ago)
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Amanda Solloway
As previously stated, the Secretary of State for BEIS will have until 8 September 2021 to take his decision on whether to grant development consent on this proposal.
Stephen Kinnock (Aberavon) (Lab)
The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Amanda Solloway)
I thank the hon. Member for raising this important topic again after engaging in a recent Westminster Hall debate, and I know how passionately he cares about this subject. I know, too, that he will have welcomed the Government’s action on trade safeguards to protect our steel sector and jobs. We are also working closely with the Steel Council, reformed by the Secretary of State, on important matters such as decarbonisation, a sustainable future and procurement.
Stephen Kinnock
For as long as anyone can remember, steel MPs, trade unions and employers have been urging the Government to do something about industrial energy costs, and yet our steelworkers still face prices that are 86% higher than their French competitors, and that is after the Government’s compensation scheme has been factored in. With Ofgem planning to hike network charges even higher, what action is the Minister taking to block this potential hammer blow and to enable our steelworkers to compete on a level playing field?
Amanda Solloway
Since 2013, we have provided more than £500 million in relief to the steel sector. On 14 June, we published a consultation on the future of the compensation schemes, which will close on 9 August. Network charging, however, is a matter for Ofgem as the independent regulator, and decisions on its targeted charging review are for it to make. Government continue to engage with Ofgem to inform our understanding of the reform’s policy implications.