Subsidy Control Bill (Eleventh sitting)

Debate between Stephen Kinnock and Paul Scully

Thursday 18th November 2021 Public Bill Committees

[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.

Subsidy Control Bill (Sixth sitting)

Debate between Stephen Kinnock and Paul Scully

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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

--- Later in debate ---

[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.

Subsidy Control Bill (Fifth sitting)

Debate between Stephen Kinnock and Paul Scully

Tuesday 2nd November 2021 Public Bill Committees

[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 (Fourth sitting)

Debate between Stephen Kinnock and Paul Scully

Thursday 28th October 2021 Public Bill Committees

[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.

--- Later in debate ---

[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.

Oral Answers to Questions

Debate between Stephen Kinnock and Paul Scully

Tuesday 25th May 2021 Commons Chamber

[Stephen Kinnock (Aberavon) (Lab)]

What plans he has to bring forward legislative proposals to outlaw fire and rehire practices.

[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

The Department engaged with ACAS to hold discussions in order to generate evidence about the use of fire and rehire. ACAS officials have shared their findings with BEIS officials. It is right and proper that we give this evidence full consideration, and we will communicate our next steps in due course.

--- Later in debate ---

[Paul Scully]

There is a huge difference between our employment law and that of Germany and Spain, in so much as theirs is very much more rigid—it lacks flexibility and that is reflected in the job figures and the job growth we have had in this country. The Government remain committed to bringing forward the employment Bill, where parliamentary time allows. We want to protect and enhance workers’ rights as we build back better from the pandemic.

[Stephen Kinnock [V]]

Fire and rehire has been used against supermarket staff who worked through lockdown to keep our country running, and the practice has now spread into schools, with teachers being threatened with the sack unless they agree to worse terms and conditions. Does the Minister agree that it is completely unacceptable that our key workers, who have sacrificed the most in our national effort against covid, are the very people now being threatened by these bully-boy fire and rehire tactics?

[Paul Scully]

I have said repeatedly that bully-boy tactics are absolutely unacceptable, but if it is a matter of a choice over protecting jobs in the first place, that is the flexibility that we need to check, based on the evidence, and ACAS has gone a long way to providing that evidence.

Oral Answers to Questions

Debate between Stephen Kinnock and Paul Scully

Tuesday 15th December 2020 Commons Chamber

[Paul Scully]

I thank my hon. Friend, who has raised the issue about weddings and events with me on a number of occasions. We continue to work with the Treasury to see what more we can do to support the hospitality sector as a whole. I am really looking forward to working with the weddings taskforce, which has been set up by the sector itself, to see what a covid-19 secure wedding looks like and how we can introduce that when the health science allows.

[Stephen Kinnock (Aberavon) (Lab) [V]]

  The GMB, Unite and Unison trade unions are fighting hard for workers who are being fired and then rehired on worse terms and conditions. What is the Secretary of State doing to ensure that companies such as British Gas are negotiating in good faith with the workforce, not imposing these completely unacceptable practices on them?