Consideration of Bill, as amended in the Public Bill Committee New
Clause 1 Exemption: agriculture ‘(1) The subsidy control
requirements in Part 2 of this Act do not apply to— (a) the giving
of an agricultural subsidy, or (b) the making of a subsidy scheme,
so far as it relates to the giving of agricultural subsidies. (2)
For the purpose of subsection (1), a subsidy is “agricultural” if
it is subject to the provisions of Part IV or Annex 2 of...Request free trial
Consideration of Bill, as amended in the Public Bill
Committee
New Clause 1
Exemption: agriculture
‘(1) The subsidy control requirements in Part 2 of this Act do
not apply to—
(a) the giving of an agricultural subsidy, or
(b) the making of a subsidy scheme, so far as it relates to the
giving of agricultural subsidies.
(2) For the purpose of subsection (1), a subsidy is
“agricultural” if it is subject to the provisions of Part IV or
Annex 2 of the Agreement on Agriculture.
(3) In this section “the Agreement on Agriculture” means the
Agreement on Agriculture, contained in Annex 1A to the Marrakesh
Agreement Establishing the World Trade Organization, done at
Marrakesh on 15 April 1994 (read with any adjustments necessary
for context).’ —(.)
This new clause exempts agricultural subsidies from the subsidy
control requirements.
Brought up, and read the First time.
18:23:00
(Aberdeen North) (SNP)
I beg to move, That the clause be read a Second time.
Madam Deputy Speaker ( )
With this it will be convenient to discuss the following:
New clause 2—Annual report on climate change impacts—
‘(1) The Secretary of State must once every 12 months lay a
report before Parliament setting out the impact of subsidies
granted in the preceding 12 months on the environment and climate
change.
(2) Any report under subsection (1) must include an assessment of
the impact of subsidies granted in the preceding 12 months on the
UK’s ability to achieve net-zero emissions by 2050.
(3) The first report must be laid before Parliament within 12
months of this Act being passed.’
This new clause would require the Secretary of State to lay an
annual report before parliament detailing the climate change
impacts of subsidies granted that year.
New clause 3—Post-award investigations—
‘(1) The CMA may conduct an investigation in relation to a
subsidy that has been granted or a subsidy scheme that has been
made.
(2) A decision under subsection (1) may be made in relation to
any subsidy or subsidy scheme in respect of which the CMA
considers—
(a) that there has or may have been a failure to comply with the
requirements of Chapters 1 and 2 of Part 2, or
(b) that there has or may have been a failure to comply with the
transparency obligations set out in Chapter 3 of Part 2.
(3) Where the CMA makes a decision to investigate a subsidy or
scheme under subsection (1), it must direct the public authority
to provide it with—
(a) any assessment carried out by the public authority as to
whether the financial assistance fell within the meaning of
“subsidy” or “subsidy scheme” for the purposes of this Act, and
the reasons for that conclusion,
(b) any assessment carried out by the public authority as to
whether the financial assistance if assessed to constitute a
subsidy or subsidy scheme would comply with the requirements of
Chapter 1 and 2 of Part 2 and the reasons for that
conclusion,
(c) any evidence relevant to those assessments,
(d) in a case where such assessments were not provided, the
reasons for the assessments not being provided,
(e) any information that the public authority failed to enter in
the subsidy database in accordance with Chapter 3 of Part 2,
and
(f) such other information as is specified in regulations under
section 60(8)(a).
(4) Where the CMA decides to conduct an investigation under
subsection (1), the direction given under subsection (3) must be
made before the end of 20 working days beginning with the day on
which the subsidy is given or the scheme is made.
(5) The CMA must send a copy of the direction given under
subsection (3) to the public authority and the Secretary of
State.
(6) The public authority must provide to the CMA the information
required under subsection (3) before the end of the information
period as defined in section 60(7).’
This new clause provides the CMA with the power to conduct a
post-award investigation where the public authority has or may
have failed to comply with its requirements.
Amendment 10, in clause 10, page 6, line 31,
leave out paragraph (a) and insert—
‘(a) is made by—
(i) a Minister of the Crown,
(ii) the Welsh Ministers,
(iii) the Scottish Ministers, or
(iv) a Northern Ireland department; and’.
This amendment allows devolved administrations to make
streamlined subsidy schemes.
Amendment 18, page 6, line 33, at end
insert—
‘(4A) A streamlined subsidy scheme may be made, in particular, to
support areas of relative economic deprivation.’
This amendment would allow for streamlined subsidy schemes to be
made for the purposes of supporting areas of deprivation.
Amendment 19, in clause 11, page 7, line 9,
at end insert—
‘(4) Before making regulations under this section, the Secretary
of State must seek the consent of the Scottish Ministers, the
Welsh Ministers and the Department for the Economy in Northern
Ireland.
(5) If consent to the making of the regulations is not given by
any of those authorities within the period of one month beginning
with the day on which it is sought from that authority, the
Secretary of State may make the regulations without consent.
(6) If regulations are made in reliance on subsection (5), the
Secretary of State must make a statement to the House of Commons
explaining why the Secretary of State decided to make the
regulations without the consent of the authority or authorities
concerned.’
This amendment would require the Secretary of State to seek the
consent of the Devolved Administrations before making regulations
under this section. Where such consent is not given within one
month, the Secretary of State may make the regulations without
that consent, but must make a statement to the House of Commons
explaining their decision.
Amendment 20, in clause 32, page 17, line 10,
at end insert—
‘(c) the subsidy database is subject to routine audit to verify
the accuracy and completeness of entries.’
This amendment requires the Secretary of State to ensure that the
database is subject to routine audit.
Amendment 1, in clause 33, page 17, line 21, leave
out “£500,000” and insert “£500”.
This amendment would reduce the threshold for entering subsidies
into the subsidy database from £500,000 to £500.
Amendment 2, page 17, line 24, leave out “one
year” and insert “one month”.
This amendment would require subsidies or schemes to be entered
in the database within one month of being made, rather than one
year, if given in the form of a tax measure.
Amendment 13, page 17, line 24, leave out
paragraph (a) and insert—
‘(a) if given in the form of a tax measure, an entry with a
provisional tax deduction value must be entered within one month,
and a final value entered within one month of the date of the tax
declaration, or’.
This ensures that tax measure subsidies are entered in the
subsidy database within one month.
Amendment 3, page 17, line 26, leave out “six
months” and insert “one month”.
This amendment would require subsidies or schemes to be entered
in the database within one month of being made, rather than six
months, if given in any form other than a tax measure.
Amendment 4, page 17, line 33, leave out “one
year” and insert “one month”.
See explanatory statement for Amendment 2.
Amendment 5, page 17, line 35, leave out “six
months” and insert “one month”.
See explanatory statement for Amendment 3.
Amendment 6, in clause 34, page 18, line 27,
at end insert—
“(j) the date the subsidy or scheme was entered onto the
database.”
This amendment would require the date a subsidy or scheme was
entered onto the database to be included in the information
public authorities are required to enter into the database.
Amendment 14, in clause 36, page 19, line 17,
after “requirements” insert
“with the exception of duties under section 33,”.
This amendment requires that subsidies under the minimal
financial assistance threshold are entered in the subsidy control
database.
Amendment 7, page 20, line 4, at end
insert—
‘(7) In this section, the reference to the subsidy control
requirements does not include the requirements as to transparency
in Chapter 3 of Part 2.’
This amendment requires that “minimal financial assistance”
subsidies are not exempt from the database transparency
requirements, while remaining exempt from other subsidy control
requirements.
Amendment 21, in clause 41, page 23, line 15,
leave out “£14,500,000” and insert “£500”.
This amendment would make section 33 applicable to SPEI subsidies
worth more than £500.
Amendment 22, page 23, line 16, leave out
subsection (b).
This amendment would make section 33 applicable to SPEI subsidies
worth more than £500.
Amendment 23, in clause 55, page 30, line 40,
after “State” insert
‘, the Scottish Ministers, the Welsh Ministers and the Department
for the Economy in Northern Ireland’.
This amendment extends the call-in powers under this section to
the Devolved Administrations.
Amendment 24, page 31, line 2, after “State”
insert
‘, the Scottish Ministers, the Welsh Ministers and the Department
for the Economy in Northern Ireland’.
This amendment relates to Amendment 23.
Amendment 25, page 31, line 7, after “State”
insert
‘, the Scottish Ministers, the Welsh Ministers and the Department
for the Economy in Northern Ireland’.
This amendment relates to Amendment 23.
Amendment 9, in clause 66, page 37, line 39,
leave out paragraphs (a), (b) and (c) and insert—
‘(a) all subsidies and subsidy schemes granted in the past 12
months, and
(b) an assessment of the extent to which they satisfy the subsidy
control principles and the energy and environment principles.
(2) Any report made under this section must be formally laid
before parliament by the Secretary of State.
(3) The Secretary of State must make an oral statement to the
House of Commons when any report under this section is laid.’
This amendment ensures that the annual report prepared by the CMA
includes all subsidies along with its assessment of the extent to
which they fulfil the 7 principles set out in the Bill. The
report also places a requirement for the Secretary of State to
report to Parliament when a report is laid.
Amendment 26, in clause 68, page 39, line 1,
at end insert—
‘(3A) The Chair of the CMA Board may appoint up to three
non-executive members to the Subsidy Advice Unit established
under subsection (1) in order to ensure that the Unit includes at
least one person with relevant experience in relation to each of
Wales, Scotland and Northern Ireland.’
This amendment would allow the CMA Chair to appoint up to three
non-executive members to ensure that the Unit includes at least
one person with experience in relation to each of Wales, Scotland
and Northern Ireland.
Amendment 8, in clause 70, page 39, line 35,
leave out subsection (2).
This amendment intends to allow individual subsidies given under
a subsidy scheme to be reviewed, without the requirement for the
broader subsidy scheme to be reviewed too.
Amendment 12, page 40, line 16, at end
insert—
‘(c) the Welsh Ministers,
(d) the Scottish Ministers, or
(e) a Northern Ireland department;’.
This amendment includes the devolved administrations in the list
of those who can apply to the Competition Appeal Tribunal for a
review of a subsidy decision.
Amendment 27, in clause 79, page 46, line 3,
at end insert—
‘(5A) Before issuing guidance under this section, the Secretary
of State must seek the consent of the Scottish Ministers, the
Welsh Ministers and the Department for the Economy in Northern
Ireland.
(5B) If consent to the making of the regulations is not given by
any of those authorities within the period of one month beginning
with the day on which it is sought from that authority, the
Secretary of State may make the regulations without that
consent.
(5C) If regulations are made in reliance on subsection (5B), 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.’
This amendment would require the Secretary of State to gain the
consent of the Devolved Administrations before issuing guidance
under Clause 79.
Amendment 15, in schedule 1, page 51, line 8,
after “concerns” insert
‘and areas of relative economic deprivation’.
This amendment includes areas of relative economic deprivation as
an example of the equity rationales that subsidies should
address.
Amendment 16, page 52, line 6, at end
insert—
‘(c) consistency with the United Kingdom achieving its net-zero
commitments established under the Climate Change Act 2008.’
This amendment adds consistency with the UK’s net-zero
commitments as a particular consideration for public authorities
before deciding whether to give a subsidy.
Amendment 11, page 52, line 6, at end
insert—
‘Net Zero
H Subsidies should not normally encourage behaviour which will
have a negative effect on the achievement of the UK’s net-zero
commitments.’
This amendment adds a subsidy control principle relating to the
UK’s net zero commitments.
Amendment 17, in schedule
2, page 52, line 15, at end insert—
‘(c) delivering the UK’s net-zero commitments established under
the Climate Change Act 2008.’
This amendment would ensure that subsidies related to energy and
the environment incentivise the beneficiary to help deliver the
UK’s net-zero commitments.
Thank you for calling me to speak in this important debate, Madam
Deputy Speaker. It is a delight to be present in this incubation
Chamber, where viruses from all around these islands—every corner
of them—can come to mix freely, so that we can return this toxic
cocktail to our constituents, constituencies and families. I am
delighted to be able to be physically present at this time.
I will speak briefly to new clause 1, which is in my name and
those of my colleagues, as well as the other amendments that
stand in my name. My hon. Friend the Member for Edinburgh North
and Leith () will fill in the rest of the
details and explain more about our rationale for the new
clause.
The logic behind new clause 1 is that agricultural subsidies do
not fit neatly into subsidy control regimes. That has been
recognised by the World Trade Organisation, which is the reason
for its agreement on agriculture; it has been recognised by the
European Union, which is the reason for the common agricultural
policy; indeed, it has been recognised across the world. We, and
the Scottish Government, still have no idea why the UK Government
decided to go against the flow and include agricultural subsidies
in the Bill, rather than providing a separate arrangement for
them.
The new clause simply removes agriculture from the consideration.
It does not mean that we should not have a control regime of some
sort for agriculture, and it does not mean that we should not
have rules relating to agriculture. It means that agriculture
does not fit neatly here, and should not form part of the main
subsidy control regime in the Bill.
Amendment 10 relates to streamlined subsidy schemes. The change
for which we are asking would allow devolved Administrations to
make such schemes. Given that those Administrations have devolved
competences by law, it makes no sense that the schemes can only
be made by the Secretary of State in the UK Government. Obviously
we would like Scottish independence, but in the absence of a vote
on that, we are not asking for devolved Administrations to be
able to overstep their devolved competences. We are merely asking
for parity—for the ability of devolved Administrations to create
streamlined subsidy schemes. They would still only be able to do
that within their areas of devolved competence, and they would
still only be able to do it within their limited financial
envelopes. We are not asking for anything strange or unusual; we
are not seeking some sort of power grab; it is simply to do with
parity.
(Strangford) (DUP)
I understood from discussions I have had with the Minister in the
past that the intention was to give the regional Administrations
a say in this process so that their views could be taken on board
if necessary, but the hon. Lady seems to be saying that that will
not happen. Have I got it wrong, or have I got it right?
Some parts of the Bill give the devolved Administrations a say,
but many others do not. The key part concerns the issue of
interested parties, which I will explain in some detail
later.
Streamlined subsidy schemes can go through a “streamlined”
process rather than being made by, for instance, a local
authority in order to benefit organisations. We are not asking
for all granting authorities to have access to that process; we
are simply asking for parity of esteem for the devolved
Administrations, specifically on streamlined subsidy schemes.
The point that I was trying to make relates to farmers’ subsidies
and environmental schemes, which are critically important to
Northern Ireland, as they are to Scotland.
The hon. Gentleman is absolutely correct. We are asking for the
agricultural references to be removed from the Bill because we do
not think that this gives us, or any of the devolved
Administrations, the flexibility we need. The Welsh Government
have raised concerns similar to those raised by the Scottish
Government, particularly in relation to legislative consent. As I
said earlier, my hon. Friend the Member for Edinburgh North and
Leith will speak in more detail about agriculture in particular,
so it may be worth questioning her at that stage.
Let me now turn to the issue of tax declarations and the
transparency database. There is already a subsidy control
database, which is rubbish. There is very little on it because a
huge amount of information is missing. The Minister has made it
clear that this is a preliminary database, an interim measure,
and not the final database. We have had a degree of reassurance
from him that the new database will be better, but the way in
which the legislation is drafted—the number of exemptions, and
the length of time that authorities have to upload
information—causes us great concern. and was raised a number of
times in Committee.
Amendment 13 would amend clause 33 in respect of a local
authority or granting authority giving a subsidy in the form of a
tax measure—a tax rebate or tax reduction. To give a theoretical
example, if an authority says in April 2022, “We’re going to
subsidise this company by not having them pay a certain kind of
tax,” it does not have to put that on the database until the year
after it appears on a tax declaration. It can be made in April
2022, it can appear on the tax declaration first in April 2023,
and there would be no requirement to upload it to the database
until April 2024, which is almost two years after the subsidy was
made. By that time, an organisation that had been egregiously
damaged by the subsidy would have sunk—it would have gone
under.
18:30:00
There is no rationale for the two-year period. The Minister made
it clear that he was concerned that public authorities or
granting authorities would not be able to give an absolutely
accurate number for the tax rebate’s financial value. However, I
am clear—as are a number of Members across the Chamber—that an
indicative value would be better than no value at all. Having an
indicative value in the subsidy control database as early as
possible would provide the best opportunity for organisations to
challenge the subsidy as it was being given and before they went
under as a result of it.
Having been a local authority councillor for eight years, I am
well aware that, when a granting authority makes a subsidy or any
decision to do with funding, it knows how much it is funding. It
knows how much it is budgeting for it. It may not know the exact
number of pounds and pence, but it knows what size envelope it is
budgeting for that spend or, in this case, subsidy. Therefore,
the authority could very easily put on the database, “We expect
that it will not be more than £750,000,” or whatever the number
is. Given the way in which the Minister hopes the legislation
will work, I suggest that that would be a much more sensible way
to proceed than the two-year period in the Bill, which is frankly
ridiculous.
Amendment 3, which was tabled by the hon. Member for
Weston-super-Mare (), would introduce a one-month
declaration deadline for non-tax-related subsidies. Under the
Bill, there is a six-month period to upload a subsidy that is not
in the form of a tax measure and then only one month to challenge
it. That is backwards—it does not make sense.
If the Minister is saying that seven months is the right period
for the total length of time for it to be uploaded and for the
challenge to take place—he has raised a number of concerns about
not wanting the uncertainty to be prolonged—I suggest that the
balance is incorrect. I think the hon. Member for
Weston-super-Mare is also suggesting that, but he can speak for
himself. I think that, actually, the upload should happen much
more quickly so that the transparency data is available on the
database, and that there should be a longer period for challenge.
To my mind, it is not about increasing the seven-month period; it
is about rebalancing the seven-month period so that there is a
longer time for challenge and a shorter time for upload.
As I have said, granting authorities know how much they are
spending. They have to write a letter that says how much they are
spending. It would be the work of a few moments to put the
details from that letter on to the database at the same time. In
the interests of transparency, in the interests of having the
best possible legislation and in the interests of ensuring that
subsidies—this is surely the point of the Bill—can be made and
can be challenged when they need to be, the Minister needs to
consider these amendments seriously.
Next, I will talk about the amendments to the minimal financial
assistance provisions, about which I raised a number of concerns
in Committee as well. The Bill talks about minimal financial
assistance, which is when a subsidy is under a certain level.
Over a three-year period, an organisation cannot have a subsidy
of more than £315,000. If a granting authority is giving a
subsidy to company A, and it gives a subsidy of £100,000, it
knows that is below minimal financial assistance, so it knows it
does not need to worry about uploading it to the database —but
what if somebody else has already given that organisation a
£200,000 subsidy and somebody else has given it another £200,000
subsidy? The authority has no way of telling, because those all
come under the £315,000 limit, so not one of them requires to be
uploaded to the database.
That is a concern, because we could find granting authorities,
through no fault of their own, giving a subsidy to somebody who
is not eligible to receive a subsidy, a subsidy they should be
uploading on the subsidy database, because it comes over the
minimal financial assistance amount. The logic behind amendments
14 and 7 is ensuring that all subsidies, whether or not they are
under the minimal financial assistance level, require to be
uploaded to the database.
That is not about granting authorities’ necessarily having to
jump through a huge amount of extra hoops; it is about
transparency and the ability to monitor whether this legislation
is working as intended. It is also about the ability to ensure
that they are kept on the right side here and are not worried
about giving a subsidy to somebody and then finding themselves on
the wrong end of the law because they have accidentally pushed
somebody over the £315,000 without having any idea that they had
done so.
In the event that the grant is under £315,000, granting
authorities must send the company a letter to say, “This is a
subsidy that we are giving you. We are giving you a £100,000
subsidy.” It then rests with the company to say to a granting
authority, “Oh yes—we’ve had three of these letters.” It rests
with them; there is no ability for that to be stored anywhere
other than the company and the granting authority itself.
I represent Aberdeen North in Aberdeen city, which is bounded
with Aberdeenshire. There are a lot of people and organisations
and a lot of stuff happening between the two authorities.
Aberdeen city is surrounded by Aberdeenshire. It is not out of
the question that an organisation could be eligible for a subsidy
from both local authorities because of the work it does across
the boundary. That issue might arise because both local
authorities could be giving a subsidy—particularly because it
might not be uploaded in the subsidy control database until six
months later. That compounds the problem, even if the Minister
agrees to make the change to the MFA rules.
(Thirsk and Malton)
(Con)
The hon. Lady makes some very fair points, but to be fair to the
Government there are requirements under clause 37(6) for the
business to keep records of the subsidies received and report
them. That is probably in many ways more practical. That subsidy
might be given to all kinds of different subsidiaries of that
particular enterprise and therefore, even if she wanted local
authorities to determine what they had received in the past, it
would potentially be difficult to do so by checking against the
database. It makes sense to give the business some responsibility
for recording that.
Actually, what the legislation does is to give the business a
responsibility to keep the letter. It does not give the business
much more responsibility, in my mind, although I will go back and
have a look at the clause the hon. Gentleman points me to. I
think having the subsidy on the subsidy control database would
make all the difference, but if he wishes to come back in, he
can.
Clause 37(6) states:
“The enterprise must keep a written record detailing—
(a) that it has received a subsidy,
and
(b) the date on which it was given, and
(c) the gross value amount of the assistance.”
That to me indicates that it must keep a full record of what it
has received.
Once again, yes, it has to keep a full record, but it does not
have to show Aberdeen City Council that record. There is no
requirement on the company to be transparent about that record;
there is a requirement to keep it, but not to share it. Having it
on the database or adding the requirement to share that record,
should a granting authority ask in advance of granting a
subsequent subsidy, would make the difference we are asking
for.
However, that does not fix the issue in relation to transparency
of data and ensuring that the database and the scheme are working
properly. This was mentioned in the witness sessions. We need to
know whether this is working, and we will only know if it is
working if we have an idea of the subsidies being granted, even
if they are below the MFA threshold.
I said I would come on to the definition of interested parties.
Amendment 12 adds devolved Administrations to the list of
interested parties. Again, we discussed this at some length in
Committee and the Minister gave some assurances. I shall quote a
couple of questions that I asked and the response that the
Minister gave. I said:
“Does a devolved Administration’s interests include indirect
interests?”
I also asked:
“What if a number of organisations in their jurisdiction are
potentially affected by a subsidy given?”
The Minister answered:
“Yes. I would say that is a direct interest rather than an
indirect interest. Public authorities, including devolved
Administrations, may be interested parties.”––[Official Report,
Subsidy Control Public Bill Committee, 16 November 2021;
c.308-309.]
I am glad that he gave some clarity. It is sort of because of the
way the questions were asked that the Minister’s response was
slightly woolly. I would very much appreciate it if, when he
responds to the debate, he could make it absolutely clear from
the Dispatch Box that, in cases of indirect interests, devolved
Administrations are considered as interested parties.
Let us say that a subsidy was given somewhere else in the UK, or
even in Scotland, and that subsidy negatively affected the
chances of seven businesses in Scotland. I think that the
Scottish Government should be able to bring a request to the
tribunal to say that that needs to be looked at and that they
believe that that is an issue. Under the definition of interested
parties, it is only those people whose interests have been
affected. The Scottish Government’s interests would not have been
directly affected by that, but they would have been indirectly
affected. I was trying to tease out from the Minister that he
believed that, definitely, the Scottish Government or any of the
other devolved Administrations could bring a challenge on behalf
of organisations within their area. I am quite happy for that to
be limited to devolved competences even. However, if they are not
in the Bill as interested parties, we very much need that
commitment from the Minister. If they are not in the Bill as
interested parties, why is the Secretary of State included in the
Bill as an interested party? If the definition is wide enough to
cover all those areas—
The Secretary of State is not necessarily an interested party,
which is why he needs to be named in here; he might not be
affected. The hon. Lady’s point about being directly or
indirectly affected is covered under clause 70(7), which says
that an interested party means
“a person whose interests may be affected”.
That could be directly or indirectly, surely.
We discussed this at length, with a lot of banter, in Committee.
But I have a concern that the provision does not say “directly”
or “indirectly”. It does not make that as clear as it could. A
clear statement from the Minister at the Dispatch Box would give
me a level of comfort. I do not think that it is the intention of
the Government to exclude the Scottish Government, the Welsh
Government, or the Northern Ireland Assembly from making these
challenges, but I think that the Bill is written in a woolly
enough way that it potentially accidentally excludes them.
The hon. Lady has outlined the issue very well on behalf of the
Northern Ireland Assembly. This has to be an equality issue. If
it should happen that some other part of the United Kingdom
affects businesses in my constituency or in Northern Ireland,
equality is part of that. Should not the Minister and the
Government address the issue of equality for all those reasons as
well?
I completely agree that there is not a level of parity here.
There should be because the Government recognise that the
Scottish Parliament has responsibility for some things—the
Government recognise that most days. They recognise that in
relation to the other devolved Assemblies, too. This is not about
any of those Administrations having a veto; it is simply about
the right to refer this to the Competition Appeal Tribunal in
order for it to be looked at. It is not about any of those
authorities being able to cancel subsidies, or to veto them in
any way. It is simply about being able to raise that challenge.
It is something that was raised by the witnesses in the Bill’s
evidence sessions, so it is not something that I have just
somehow invented, or that the Welsh Government have invented, or
that the Scottish Government have invented. It is a real worry
for people, so the more the Minister could say on this the
better.
I will not speak for too much longer. I have just one more
amendment—amendment 11—to cover. There are two
schedules—schedules 1 and 2—in relation to the subsidy control
principles. The subsidy control principles are set in the Bill,
and it is clear that they are the principles that authorities
need to look to in guiding the decision making about giving
subsidies. There are two schedules: one for the general
principles and one for the environmental principles, which relate
specifically to subsidies around energy and environmental
matters.
18:45:00
The general principles, as they are written, do not mention the
UK’s commitment to net zero or the most important challenge that
is happening anywhere. Covid is very important right at this
moment, but tackling climate change is vital for the futures of
us all and for the futures of our children. This Bill will not
stand the test of time if an attempt to tackle climate change or
at least to hold people to some level of account when it comes to
climate change and decision making is not in it.
Amendment 11 would add a final principle to the subsidy control
principles that states:
“Subsidies should not normally encourage behaviour which will
have a negative effect on the achievement of the UK’s net-zero
commitments.”
The amendment would not totally tie things down; it just says
that authorities granting subsidies should have regard to net
zero commitments in the subsidies they are giving. The subsidy
control principles are important because, should there be any
challenge or any referral to the CMA or the CAT, they will be
looked at—there will be a requirement to see whether the
subsidies met the subsidy control principles. I just do not think
we can allow the Bill to pass without saying that it is really
important that any decisions taken—remember, this is public
money—on the spending of public money in the form of subsidies
should have regard to our climate change obligations. I am
delighted that the Opposition have tabled similar amendments, and
I would be happy to support any of those that they look to
press.
The Bill is not perfect—in fact, it is far from perfect—and we
have a huge number of concerns. I am disappointed that the
Government have not tabled amendments at this stage to change the
Bill, because there was a lot of consensus on the Opposition
Benches and from the witnesses about some of the deficiencies
that we see in the Bill. If the Government are not willing to
listen to us, I hope they will listen to the voices of their
Members, who are similarly pushing for transparency on the
databases.
The key things that we are keen to look at are: the issue of
agriculture being included; the issue of net zero not being
included; the issues around transparency; and, finally, the
issues around parity of esteem, particularly with interested
parties. I hope that the Minister can give me some comfort from
the Dispatch Box on the last of those, to make clear for anyone
looking at this in the future that the devolved Administrations
are counted as interested parties when it comes to indirect, as
well as direct interests.
(Weston-super-Mare) (Con)
I rise to speak to the amendments in my name and that of my hon.
Friends. I start by saying that there is a great deal to support
about this Bill, and I think I mentioned that on Second Reading.
This Bill is vitally important, not just because it is required
under the terms of our leaving the EU, but because it does some
very important things to how the future subsidy control regime
will be applied. We have already heard that the central set of
principles is crucial. The notion of pre-approval and allowing
things to be done at pace to create a much less bureaucratic,
much more nimble, much more predictable regime is overall hugely
to be welcomed. I hope everyone will be able to sign up to
that.
The Bill also means that I hope we will be able to move to a
principle where we have as few exemptions and exceptions to our
subsidy control regime as possible. It is essential that we have
a subsidy control regime that does not allow loopholes through
which—I am sure the Minister would never dream of doing such a
thing—some less principled future Government might try to drive
any sort of measures through that might involve either cronyism
or economic distortions of any kind. It is essential that there
are minimal loopholes and that the Bill covers as evenly and as
predictably as possible the entire economy.
It is no accident that this country has had one of the lowest
levels of public subsidies granted in recent years under the
guise of the EU’s regime. For the free marketeers among us and
those who care about economic efficiency and productivity, that
should be a source of pride, and we should not be trying to
overturn or change that in future. In fact, I made that point in
the Government-commissioned competition policy review that I was
recently asked to do, which has a chapter specifically on subsidy
control that says that less is definitely more. It is far better
to do less in the area and therefore ensure more space for
companies and business leaders to compete on their organisations’
abilities and the quality of their products and services rather
than on whom they know in Government and, as a result, how much
rent and subsidy they can wring out of their political
connections. It is essential that we remember that, adhere to it
and persist with it as much as we can.
That is crucial, because the Bill done right ought to be a major
piece of post-Brexit dividend that we should seek to achieve as a
result of leaving the EU. If we get it right, we can have a
faster, more nimble and more economically rational way of dealing
with subsidies. We can keep the best of the objectivity that
everyone said we had under the EU but do it in a faster, more
digitally enabled and generally more modern, less bureaucratic
and less covered-in-red-tape fashion. Such a post-Brexit dividend
is here for the taking. It is waiting for us to pick it up off
the table, provided that we can do it correctly.
My concern—this is why I tabled amendments 1 to 8 —is that while
the Bill does an awful lot of that right, we may be about to make
one critical error. We have already heard the points about
transparency made by the SNP spokeswoman, the hon. Member for
Aberdeen North (). It is all very well to
pre-approve and to have a more flexible, faster and more nimble
approach, but that will work only if we have an army of armchair
auditors who can spot when something is going wrong and say,
“Hang on a second. This is a marvellous principle, but it isn’t
being adhered to in this case.” Without transparency, hon.
Members, people in our constituencies and the journalists who
pore over such things will not be able to do so until it is too
late. In a digitising economy, speed matters, too. If it cannot
be done before it is too late—or at all—companies will be driven
out of business. Once all that is left is rubble, the jobs are
lost and the investment is forgone, it is too late to come back
two years later—or even eight months later in fast-moving
sectors—and say, “We’re terribly sorry; we got this wrong.” We
need to be able to move rapidly and pick up things up as soon as
possible. That is why I tabled the amendments.
My hon. Friend makes a strong point about armchair auditors in
particular. As soon as the US published all loans of $150,000
under the paycheck protection program—its version of the
coronavirus business interruption loan scheme—$30 billion was
paid straight back to the US Treasury on the basis that companies
did not want that visibility. It was not that money was taken
fraudulently—perhaps it was taken inappropriately.
My hon. Friend makes a very good point. For those of us who worry
about the scale of subsidies, who take pride in ours being a
relatively low-subsidy country and economy and who want it to
stay that way—we do so because we care about competitiveness and
people competing only on the basis of their ability to please
their customers rather than whom they know in Government—that
must be the right approach. That American example of how
transparency can drive down subsidy levels is a good one.
Incidentally, it would be fascinating to see how that applies to
countries such as Spain, which have low thresholds for
declarations and therefore high levels of declarations. We can
follow that carefully.
(North East Bedfordshire)
(Con)
My hon. Friend is making a very useful speech, and I very rarely
say that in Parliament—not about him, but generally about
speeches here. Does he agree that the value of his amendments is
that they would increase the number of pieces of information we
have, and that the Government are missing the value of predictive
analytics in considering the way in which subsidies are or are
not working, as that can then be applied to other areas of
Government expenditure?
That is absolutely right. Transparency is of course about trying
to improve the productivity of our economy and avoiding
distortions of our economy, and of course it is also about trying
to reduce cronyism, but my hon. Friend is right to say that there
is a longer-term benefit in that we can then tell whether the
subsidies we are offering are any good: are they actually having
the effect we want them to have and can we learn from that? I am
afraid there is a long and ignoble history—we can all see this
and cite examples from Governments of all political types and
stripes in history—of politicians just getting it wrong and not
learning that extra data might very well achieve something. I am
afraid the old phrase that politicians are terrible at picking
winners but really good at picking losers applies here in spades,
and data and objectivity are essential in pricking that bubble
and avoiding that happening again.
The good news is that Ministers get it: Ministers are clear about
the value of transparency. They have said so to me and others. In
fact, the Minister said to me in a letter earlier in
December:
“Transparency is fundamental not only to the future subsidy
control regime but also to good governance more widely.”
That is absolutely right. So, the principle is clear: there is no
disagreement in any part of the House that this is the right
thing to do.
So, why are we not doing it? That has been covered partly in
Committee, but it bears being repeated here strongly and
forcefully. The EU regime which the Bill is supposed to supplant
has a series of transparency declaration thresholds. Everything
over half a million euros must be declared; there are thresholds
too for cumulative grants, which we heard about in the speech of
the hon. Member for Aberdeen North, although half a million euros
is the basic threshold. This Bill, however, says that everything
over half a million pounds has to be declared. Unless the
exchange rate has gone completely doolally in the last 10
minutes, that is a much, or moderately, higher level than half a
million euros, and as a result we will in the future be declaring
fewer subsidies under this transparency regime than we were in
the past, in spite of the fact that Ministers have rightly said
transparency is absolutely essential and a core principle with
which we all agree. We are not delivering on the central
principle on which everybody agrees, and that is why I have
tabled basically three groups of amendments. They do three
things, some of which we have already heard about; the hon. Lady
summarised them nicely, so I will not go through the detail
again.
The first group addresses amounts and says, “Look, we shouldn’t
just say we have to declare anything over half a million pounds;
we should be much more transparent than that.” If we are really
serious about trying to be world-class about this issue, let us
knock three zeros off that number: let us go for £500 instead.
What have we got to hide? What have we got to be scared of? Why
do we not just put it all out there and let people see? That
would be transformational, for the reasons I have just
described.
(Central Suffolk and North Ipswich) (Con)
My hon. Friend is making a very good speech and making very good
points. On the issue of transparency, surely it would be cheaper
as well as more transparent to do exactly what he says, because
when there is a digital system putting all this information
together it takes more time and money and reduces the
productivity of the staff involved if they have to sift through
what meets a certain threshold. Why not, as my hon. Friend says,
just put everything out there?
Absolutely; my hon. Friend makes an important point. Equally, the
point about cost goes more broadly than that too. We heard about
the cumulative threshold where, if a single company receives
multiple different grant applications or subsidies that
collectively go above £315,000 over three years, that is supposed
to be declared—but how will it be declared? The company is
supposed to keep the letters, but it does not necessarily have a
duty to declare it. The different subsidy granting organisations,
be they local authorities around the country or whatever, will
not necessarily know to talk to each other and will not know for
at least six months, or a year in some cases, whether someone
else has made those grants.
19:00:00
It would be enormously simpler if, instead of all that, we said,
“Do you know what? If it’s more than £500, put it on the subsidy
database within a month”, then everybody can see it. If someone
is about to grant another subsidy, they just have to look at the
subsidy database. They know if a company is going to go over a
threshold and what else it has, and they can do the comparison
easily and simply if they like.
To the point of my hon. Friend the Member for Central Suffolk and
North Ipswich (Dr Poulter), it would cut costs not just among the
granting organisations—the subsidy disher-outers—but dramatically
for the subsidy receivers too. All of a sudden, people would not
have to worry about whether they had all the letters about all
the subsidies that they had been granted by Aberdeen City Council
or Aberdeenshire Council. People would not have to keep them any
more, so that would not be a burden on their business. It would
not be a burden at all, because it would be on the subsidy
database. As the Bill stands, we are creating a burden on
businesses that we do not have to create. We can easily reduce
and remove it completely with this simple measure.
(Amber Valley) (Con)
Does my hon. Friend agree that there is a general presumption
that there should be more transparency about people receiving
money effectively from the taxpayer? We could have a strange
situation where if I am being paid £600 for grass cutting for my
local council, the council would publish the invoice on its
database, yet if I am receiving tens of thousands of pounds of
taxpayers’ money, it would not be published. Surely, that cannot
be the right balance.
That is absolutely right. Although I appreciate that there is a
technical distinction between amounts of subsidy and amounts of
general local authority spend, it is a very strong comparison. If
it is worthwhile recording £500 spend on anything by a local
council, why are subsidies so special and why should they be
different? If anything, because of the scope for potential
cronyism and other concerns, we should be tougher on subsidies
than on other kinds of spending. Let us at least make the
thresholds the same at £500, and then there can be no concern or
worry about it.
The first collection of amendments is about the amount. The
second collection of amendments, about which we have already
heard a bit from the hon. Member for Aberdeen North, is about
speed. As I have mentioned, in today’s digitising economy,
publishing details of a subsidy potentially almost two years
later, or even six months later, could be way too late. A company
could have gone under if it had been faced by a successfully
heavily subsidised competitor in its local area. Jobs will have
been destroyed, wealth will have been destroyed, investment will
have been forgone and, most importantly, the reputation of that
local economy as a free, fair, sensible level-playing-field place
to do business will have been damaged.
Clearly speed matters today, and it will matter more and more as
our economy moves faster through digitisation. It makes no sense
at all, therefore, to allow six months, and in some cases even
longer, for those subsidies to be declared. When someone dishes
out a subsidy, a letter has to be sent to the person receiving
it, so in most cases they could put the subsidy on to the
database at the same time—they could probably do it
electronically if they had the right interface. I am suggesting
that that could happen within a month; it could probably happen
within days, but let us be generous and kind, and give people a
bit of space.
I will expand on the point about tax-related subsidies. It is
true, as we heard, that a tax-related subsidy can take almost two
years to be recorded and to become transparently visible under
the current proposals. I cannot see any reason why that should be
the case, not just for tax-related subsidies but for anything
else at all. In general, for most tax-related subsidies, we can
do it immediately because we know the value with some certainty
right up front. If I am giving someone a subsidy as a reduction
on their business rates, I know how much the value of that
subsidy is going to be on the day it comes out, so I can put that
out on the subsidy database right there and right then. The same
goes for most other kinds of tax-related subsidies, such as
subsidies on VAT or whatever it may be.
Only for a very small number of tax-related subsidies would there
be uncertainty for any length of time. As we have already heard,
and I think this is absolutely right, it is perfectly possible to
come up with a good estimate to begin with, and I do not think it
works—it is not an adequate piece of logic—to turn around and
say, “Well, because we don’t know precisely what this particular
subsidy amount will be, we should not reveal it at all.” That is
making the best the enemy of the good, and the trouble with that,
and with saying that we are therefore not going to put anything
out, is that we do not end up with the best or the good. We end
up with something that is actually pretty dreadful, because we
are keeping it secret for up to two years. How does that make
sense when, as we have already heard, we can estimate it very
accurately? In fact, in many cases these things are done in
bands, and we can certainly say, at the very least, that it will
be roughly in this or that band. Even if we get it wrong, we can
still correct it later, and people know it is there, what it was
and roughly how much it will have been. That will have allowed
challenge, if necessary.
Specifically on the issue of uploading subsidies to databases and
challenging such subsidies, the only way in which a subsidy will
be overturned anyway is if the subsidy was given incorrectly—if
it was against subsidy principles or was distortive in some
way—so surely this has no effect on the vast majority of
subsidies, except that it means they will be uploaded much more
quickly. However, in the case of subsidies that are wrong, bad
and going to cause problems, surely the quickest possible time is
better so that we would be able to see them.
That is absolutely right. It is not just about whether a
particular subsidy breaches those principles, but as the hon.
Member rightly points out, it is also a question of whether we
can then spot that a pattern of cronyism is emerging. If a
particular local council was giving out grants to its mates, we
could see that much faster. That may not be breaching the subsidy
control principle, but you can bet your bottom dollar that people
would want to know about that and that the most almighty stink
would be created.
That brings me on to the final group of my three groups of
amendments, which is about the ability to challenge and check
individual items or individual examples of a subsidy within a
broader subsidy scheme. At the moment, if someone registers a
subsidy scheme under the terms of the Bill, dishes out subsidies
under that subsidy scheme and then basically ignores the terms of
the subsidy scheme or misapplies them in some terrible
way—because of cronyism, because they are just doing a bad job,
or even fraudulently—nobody, under the terms of the Bill, can
challenge the individual decisions being made. That cannot be
right, and it seems daft. All I am saying is that we need to be
able to challenge individual examples within a broader scheme,
otherwise this transparency mechanism or challenge mechanism will
be fundamentally flawed.
That is the modest proposal. So far, I have not heard a single
argument that unpicks the logic of that. As far as I can see,
there are three Departments of Government with a dog in this
fight. There is , who is in charge of the Brexit
dividend, and he ought to be thoroughly in favour of this because
of the opportunity it offers. There is the Secretary of State for
Business, Energy and Industrial Strategy—he was here briefly just
now, and I hope he will be back later—who is of course a good
free marketeer and is thoroughly committed to improving
productivity, so he should be in favour of this, too. Finally,
there is the Chancellor of the Exchequer, who is the guardian of
taxpayers’ money. As I have said, we should be taking pride in
the fact that we are one of the least heavily subsidising
economies in the developed world, and we certainly were when we
were part of the EU, so I cannot see that he is going to be
objecting to it either.
As I sit down, I therefore just ask the Minister to please
explain the logic behind opposing any of the arguments that not
just I but others have been advancing. Will please explain who on
earth thinks this is a bad idea, because I cannot find them or
see them and I do not think anybody knows who they are?
(Edinburgh North and Leith)
(SNP)
I rise to speak in support of all the amendments and new clauses
in the names of my hon. and right hon. Friends and myself, but
specifically new clause 1. I am aware that the Cabinet Secretary
for Rural Affairs and Islands has already written to the
Secretary of State for Environment, Food and Rural Affairs
specifically on this matter.
To begin with, I will tell a little story to illustrate that the
apprehensions around this issue were long-standing, even before
the United Kingdom Internal Market Act 2020 passed into being,
and now appear to be fully justified, especially when we take
into consideration the principles of mutual recognition and
non-discrimination contained in that Act. In late November
2020—on St Andrew’s Day, rather ironically—in the debate on the
statement on the agricultural transition plan, I asked the
Secretary of State for Environment, Food and Rural Affairs for
assurances that the Bill, as it was then, would have absolutely
no impact on Scotland’s ability to set support in Scotland
independent of the system chosen for England. He responded that
Scotland and the other devolved authorities
“will have more freedom than ever before to design a policy that
they judge to be right for them. We will set up a joint group
across the UK to do market surveillance, to ensure that there is
not disturbance to the internal market”.—[Official Report, 30
November 2020; Vol. 685, c. 42.]
The House will note that there was no answer to my question in
that reply. However, shortly afterwards the Secretary of State
reassured a fellow Conservative MP who had expressed fears on
behalf of farmers in his English constituency that food
production might not be supported under the new English scheme
and that his farmers could
“be undercut by farmers, including in the devolved nations, who
are subsidised for food production or by area, not just for
stewardship”.—[Official Report, 30 November 2020; Vol. 685, c.
50.]
I wondered how he could give any such assurance if he intended
keeping the UK Government’s nose out of our agricultural support
choices, but I ken noo.
As my hon. Friend the Member for Aberdeen North () has mentioned, at the
heart of the problem is the broad recognition that agricultural
subsidies do not fit neatly into standard subsidy control
regimes. That is why agriculture has its own separate subsidy
control arrangements in the EU through the common agricultural
policy, and in the World Trade Organisation through the agreement
on agriculture. Equally, while the trade and co-operation
agreement has provided interim rules on subsidy control in the UK
since Brexit, it does not apply to subsidies subject to the
provisions of part 4 or annex 2 of the WTO agreement on
agriculture, which relate to most agricultural subsidies.
The Scottish Government have asked the UK Government repeatedly
why agriculture is included in this new regime when it is not
included in most standard subsidy control regimes, but I
understand that to date no satisfactory reason has been given.
The Minister has responded that a majority of respondents to the
Department for Business, Energy and Industrial Strategy
consultation thought it should be included, which seems jolly
fair-minded of the Minister, we might think. On the other hand,
the UK Government have so far chosen to ignore the serious
concerns raised by the Scottish and Welsh Governments. The UK
Government have refused to share the consultation responses with
our Government, even the anonymised ones, which makes it even
more difficult for Ministers and civil servants to understand the
reasoning behind this decision or at least to assess whether the
responses were weighted and, if so, how. The only reply that I
have seen from the Government’s response to the consultation is
that this hitherto accepted exemption has been removed in order
to maintain a “consistent approach” and a broad sectoral scope.
So it is some sort of tidying-up exercise, apparently.
Taken all together, this ratchets up what were considerable
levels of concern to—I think it is fair to say—alarm not just in
the Scottish and Welsh Governments and other devolved
Administrations but in organisations such as the National Farmers
Union of Scotland. There is less concern from the National
Farmers Union of England. I wonder why that might be. It is worth
reminding ourselves that the high percentage of less favoured
areas in Scotland’s agricultural land—some 86%—is almost directly
reversed in England, where it is only 12%. We have unique
agricultural conditions and practices, so the need for a support
system that recognises and understands that and takes it fully
into account is vital.
19:15:00
As the National Farmers Union of Scotland said in its submission
to the subsidy controls consultation, financial support for
agricultural and rural development remains critical if a vast
array of policy objectives, including producing food to the
highest standards and addressing climate and biodiversity
challenges, are to be achieved. It is almost as though the UK
Government learned no lessons after the tortuous arguments over
convergence funding that the Bew review eventually clarified to
Scotland’s benefit—but surely not.
I realise that this will not be of particular interest to farmers
in, say, Wiltshire, but it is of great interest to those of us in
Scotland who treasure the more remote and rural areas of Scotland
and want them to flourish. We see support for our farmers and
crofters as an investment in those communities’ futures. For
every pound invested by Government, many times that is spent by
farmers and crofters. That fuels jobs and our economy, and builds
food security, which given the UK’s reliance on imports for, give
or take, 40% of our food, and the recent impact of the disastrous
Brexit on supplies, should make us all think again. We consider
it vital that the Scottish Government—indeed, the devolved
Administrations more widely—retain the ability to support
agricultural businesses as they see fit for the foreseeable
future. This, as the NFUS makes clear, relates to the proposed
regime’s potential impact on policy development in a devolved
area.
I very much sympathise and agree with the argument the hon. Lady
is putting forward. In Northern Ireland we have the highest
quality products, we have an export market that we want to
retain, and we want to retain food security as well. She referred
to the National Farmers Union of Scotland; the Ulster Farmers
Union is also committed to retaining that. Does she agree that
the Minister should consider this very seriously, with that in
mind?
Yes, very much so. I agree with the hon. Gentleman because the
excellent food produced in Scotland is also to be taken into
account. I hope the Minister is listening carefully to what I am
saying and will take it into account when he speaks. I would be
interested to hear his point of view.
There is a risk that schedule 1 will constrain Scotland’s ability
to tailor future policies to the needs of Scottish agriculture.
There are concerns about how the regime will work for legacy
common agricultural policy schemes delivering income payments and
coupled support, and doubts about whether clauses 48 and 81 will
allow devolved Governments to make changes where required in
order to develop and progress agricultural policies in future.
Additional difficulties and potential for legal challenge are
created over what could effectively be the avoidable
double-banking of subsidy control schemes through the application
of the new regime. The Scottish Government are also concerned
about the principle that a subsidy that does not unlawfully
distort international law could still be challenged, as set out
in our Cabinet Secretary’s letter to the Minister,
“on the basis that it does not minimise negative effects on
competition or investment in the UK which is a principle that
goes beyond the minimum required under the TCA”.
Apart from those numerous concerns, the inclusion of agriculture
could dramatically weaken the role of what has been the agreed
common frameworks process in this area, which was put in place
specifically to manage policy divergence within the UK and any
impacts that that might have on the UK internal market. I have
been told that no other state in the world includes agricultural
payments as subsidies. While I am not entirely sure that that is
the case, it is certainly highly unusual. In May, the Minister
indicated to the Cabinet Secretary that he was prepared to work
on bespoke solutions in the regime that would recognise the
particular needs of the agricultural sector, but there has been
nothing so far and, I repeat, no real explanation of how it is
all supposed to actually work. Perhaps it has been filed in the
“too hard” bin, along with many other devolved Administrations’
concerns, or the “can’t be bothered” bin—I am not sure.
If agriculture is left in this Bill, that could create serious
problems for devolved Governments in the delivery of their own
policies on food production. If the Government are serious about
protecting devolution, they will abandon their plans. I urge the
House to hear the concerns voiced by Scotland’s devolved
Government—I am sure we are going to hear from the Welsh
Government as well, and potentially from the Northern Ireland
Assembly—and support the inclusion of new clause 1.
I rise to speak briefly in support of the amendments tabled by my
hon. Friend the Member for Weston-super-Mare (). I will particularly address
amendments 1 and 8, which are about something brutally simple:
scrutiny and transparency. The Government are rightly approaching
this through their obligation to meet the competition
requirements of the European Union. For that purpose, £500,000
would perhaps be the right level.
I think this is about more than competition; it is also about
cronyism and, potentially, fraud. My hon. Friend put it well when
he talked about armchair auditors. Time and again, information
about things going wrong is brought to the attention of
parliamentarians like me by members of the public and members of
the press. The more we give people access to such information,
the more likely we are to clamp down on any suggestions of
cronyism. Although most are ill-founded, it is important that we
clamp down on any suggestions of cronyism and of fraud.
I agree with my hon. Friend that we should lower the threshold
for reporting and registering on the database from £500,000 to
£500. That seems an enormous difference, but consider what we
know already. The easiest place to look is the furlough scheme
and the bounce back loan scheme. The National Audit Office
estimates that some £26 billion may have been lost in those
coronavirus loan schemes, not all of it through fraud—some of it
was through non-repayment of debt, or defaults. Nevertheless, a
significant proportion of the moneys granted to businesses, which
were effectively a subsidy, might have gone missing. The
Government rightly put together a huge new team of people within
Her Majesty’s Revenue and Customs, with an investment to the tune
of £100 million, to try to clamp down on it by investigating the
potential for fraud.
Alongside that, it would be a simple requirement for the database
to include every single subsidy over £500 for the armchair
auditors, the press, the public and—another important
component—the whistleblowers. People within an organisation often
do not know what subsidies the business may have received, but
they might be able to identify the moneys as inappropriate and
alert the authorities to that effect. Some 43% of all crimes are
now economic crimes, and 40% of those are brought to light by
whistleblowers, so it is hugely important that they have access
to this information so they can scrutinise what is happening
within these businesses.
My hon. Friend the Member for Weston-super-Mare asked why would
we not do this? One answer might be bureaucracy and cost—we are
not big believers in bureaucracy and unwanted, unneeded cost, and
we rightly want to make our system simpler, not more complicated,
for businesses—but the requirement to publish on the database is
negligible. As others have said, businesses have to issue a
letter anyway, so putting five bits of information on a database
is not exhaustive. The impact assessment suggests that the total
cost of doing it annually will be only £20,000 extra, which is
insignificant in terms of the cost of red tape, but the benefits
are huge.
As I mentioned in my earlier intervention, the US had much lower
levels for reporting than we did. Our level was €500,000 for
telling the EU who received benefits from the loan schemes, and
it was done quite late in the day, after the loans were received
by businesses. In the US it was $150,000, which effectively
brought about a $30 billion return of moneys to the US
Treasury because those businesses were embarrassed to be
receiving the moneys inappropriately.
Another reason we are not doing this is that, when the British
Business Bank looked at the coronavirus business interruption
loan scheme and the bounce back loan scheme, it felt it should
not report on this because it might be likely to lead to
“speculation about the Recipients’ financial position”.
I do not agree. Even if it were true, we are already putting on
the database loans over €500,000. Are we saying only businesses
below that level would have that problem? That is clearly not the
case. A lot of businesses that received coronavirus business
interruption loans over £500,000 were quoted on AIM, for example,
including my own business. I draw the House’s attention to my
entry in the Register of Members’ Financial Interests, although I
am no longer associated with that business in any meaningful
capacity, as it was subject to a takeover earlier this year. I
would have no problem at all with the loan we took under the
CBILS programme being declared on a database so people could see
it. The reasons we were taking it were quite obvious and I do not
think it brought our financial position into question at all.
Clearly, in the desperate times we were in, most people would see
that we were going after desperate measures in terms of insurance
policies, which the loan was to most companies. I do not see that
as a valid reason for preventing the declaration to the database
being completed for all subsidies down to that £500 level.
I will refer quickly to amendment 8. Allowing individual
challenge to individual decisions under a subsidy scheme is
another check and balance—another way to ensure money is being
handed out appropriately. I think all these amendments make
sense, which is why I have signed them all. To give the public,
the press and Parliament access to the database is a crucial
step. I do not think it would be a bureaucratic issue at all for
the people responsible for it. I know we have spoken about it,
but I urge the Minister to look at this again and to table such
amendments at a later stage, if they are not accepted today.
(Dwyfor Meirionnydd)
(PC)
Diolch yn fawr, Dirprwy Lefarydd. It is interesting to hear the
hon. Member for Weston-super-Mare () describe this Bill as part of
a post-Brexit dividend. For many of us from the devolved nations,
it actually bodes ill. It bodes ill in relation not just to key
devolved competencies, but to questions about whether this
negates the power of public procurement and, particularly,
whether it undermines the levelling-up agenda. We would expect to
see more principles in operation than we currently do,
particularly when we compare this with the regimes we worked with
and complained about, but were familiar with, under the European
arrangements.
My party, Plaid Cymru, will support new clause 1, proposed by the
hon. Member for Aberdeen North (), which would exempt
devolved agricultural subsidies from the subsidy control
requirements. This is a vital new clause that protects our
farmers and ensures that the devolved nations can continue to
tailor support to local requirements and priorities. I do not
think I need to persuade anybody in this Chamber that UK
agriculture is highly regionalised in its type, its significance,
the impact it has on its local economies and whether it requires
region-specific subsidy for its needs.
I am very much aware of that for the less favoured areas,
representing as I do the constituency of Dwyfor Meirionnydd,
which is very much an upland area. I have whole communities
watching these legislative developments with some concern. I know
the farmers’ representatives from Wales, Scotland and Northern
Ireland are equally concerned about the implications of what, on
its face, appears to be a fairly technocratic Bill, but none the
less sets a precedent for the sort of legislation we see coming
out from the trade and co-operation agreement in the United
Kingdom Internal Market Act 2020.
In Wales, where more than 80% of land is used for agricultural
purposes and farmers are the bedrock of our rural communities,
guardians of our natural environment and protectors of our
cultural identity, subsidies are vital to protecting that legacy.
The latest farm business survey showed that subsidies provide on
average 30% of upland cattle and sheep farms’ income. Leaving
their fate to a Westminster Government set on securing
questionable trade deals that boost UK GDP by 0.01% to 0.03%
while at the same time sacrificing our farmers is clearly
unacceptable. Equally, without this new clause, the Bill would
pre-emptively tie the hands of the Welsh Government as they look
to establish a new, post-EU subsidy regime. I therefore urge hon.
Members across the House to support the clause to protect our
farmers, as well as amendment 11 on net zero commitments.
I also extend my support to the amendments tabled by the
Opposition, including amendments 19, 23 and 26, which would
extend the rights of the devolved Governments. Although I believe
that they could, and possibly should, be strengthened by
recognising the value of the co- production of guidance, they
nevertheless address somewhat some of the Bill’s governance
issues. As we have seen time and again, the Government play hard
and fast, and make the rules up as they go along. That is why
such guarantees as are offered by the amendments are so
important.
19:30:00
My point about the value of co-producing subsidy rules speaks to
two wider issues: the role of public procurement in supporting
levelling up and the Government’s conduct when developing the
Bill. First, the Bill wrongly assumes that the UK economy is a
level playing field, deserving therefore of a level subsidy
regime. The UK is one of the most regionally unequal countries in
the west. That is supposedly being addressed by the Government’s
levelling-up agenda.
My party, Plaid Cymru, has long advocated greater public
procurement to nurture local businesses in underserved and
peripheral areas of the UK. This highly local and nuanced policy,
which is recognised in the new co-operation agreement between my
party and Welsh Labour, but too often ignored by the Treasury, is
vital in delivering levelling up. The Bill’s restrictions on
local procurement are therefore economically damaging and
contrary to the needs of the levelling-up agenda. I urge the
Government to reconsider.
My second point—namely, the Government’s conduct when consulting
the devolved Governments on the Bill—helps explain why Wales and
Scotland have not given consent to the Bill. It is
important to reiterate that in this place, because we will hear
it again. It does matter if what is being produced here is
creating discord with the devolved Governments.
In July, the Welsh Government stated that the Bill undermines
“the long-established powers of the Senedd and Welsh
Ministers”
in devolved areas, including
“economic development, agriculture and fisheries.”
They concluded that the Bill was too “high-level”, lacked
“sufficient granularity” and, worse, meant that the powers being
given the Secretary of State had
“little scrutiny from the UK Parliament and no scrutiny available
to Welsh Ministers or the Senedd”—
our Parliament in Wales. The Labour Minister for Finance in Wales
put it more bluntly:
“Despite suggestions from the UK Government that detailed
engagement has been undertaken, the Bill only reflects the narrow
interests of the UK Government.”
In sum, the Bill asks the devolved Governments to sign a blank
cheque, with no explicit provision for further scrutiny or
input.
This is yet another power grab that undermines not only
devolution but the levelling-up project the Government are
allegedly so keen to promote. It simply is not good enough, and
it speaks to an unconstructive disdain for the rights and
responsibilities of the devolved nations from the Government. The
Bill is an assault on devolution, wilfully ignorant of the needs
of the national economies of the UK or the role of public bodies
in advancing them, and has been prepared by an out-of-touch
Government that is overly centralised. It is a mistake that we
are set to make again in the Professional Qualifications Bill. As
such, my party will not support the Bill before us and I urge
Members across the House to oppose it in favour of a more
co-operative and informed subsidy regime.
(Richmond Park) (LD)
It is a pleasure to contribute to this very thoughtful debate. I
do not share the enthusiasm of the hon. Member for
Weston-super-Mare () for Brexit as a whole;
nevertheless, I support his comment that if this is to be one of
the benefits of leaving the European Union, it is important that
we get it right, especially since all the other benefits seem
disappointingly slow to materialise.
I support many of the hon. Gentleman’s comments about
transparency: it is important that the information is made
available. He is right that it will improve the efficiency of
subsidies if we can see who is getting them and understand where
they are being applied. I valued the intervention from the hon.
Member for Thirsk and Malton () about what has happened
in the United States, and that is an important point to consider.
It is important to think about the effectiveness and efficiency
of subsidies, and the use of taxpayers’ money.
This will be a new subsidy regime for the UK. The more
information that is available to the widest number of people, the
more we will be able to see as a country—not just the
Government—what is and is not an effective subsidy. We will be
able to see what has worked, what has played a role in driving
investment to underdeveloped regions and what has helped to build
new sectors of the economy. It is so important that that
information is available. More particularly, I support the moves
of the hon. Member for Weston-super-Mare to move the threshold to
£500, because, where subsidies can distort markets, it will have
a disproportionate impact on smaller businesses. That is why
moving the threshold in the way that he proposes is so
important.
May I back the hon. Lady up by saying that it is about not just
smaller businesses, but local economic effects? Something that
may, on a large scale, be distortive for the entire national
economy may be distortive at a much smaller level for a
particular city region or a particular town. I hope that she
agrees with that point as well.
I absolutely do, which is why it is so important to get this
level of oversight at the much smaller threshold that the hon.
Gentleman is proposing. Potentially, within the gap between the
£500 that he is proposing and the £500,000 that the Government
are proposing, there will be a great deal of market-distorting
subsidy, and it will be up to competitors who have been
disadvantaged to challenge or to bring their own court cases
against those subsidies. If they do not have knowledge about how
they are personally being disadvantaged, what can they possibly
do about it? That is why that point is so important.
My new clause 2 is about climate change. I welcome the comments
made by the hon. Member for Aberdeen North () about the importance of
this matter in her excellent opening speech. There are the seven
principles against which the subsidies will be assessed, and also
the nine energy and environmental principles. What I am
disappointed about is that they do not add up to a broader
commitment to using public money to fight climate change. I can
only amplify what the hon. Lady said about it being our key
public challenge at this time, covid notwithstanding.
The Liberal Democrats would have welcomed the opportunity to put
the transition to net zero at the heart of the UK’s subsidy
regime, and for the Government to have used every tool at their
disposal to make the transition as swiftly and painlessly as
possible, and we can see how public subsidies can help to achieve
that.
New clause 2 provides for an annual report to Parliament
detailing the climate change impacts of subsidies granted that
year. This would have been an important mechanism for reviewing
the extent to which subsidies are being used to stimulate or to
de-risk investment in the green economy. We look to the private
sector to drive much of the innovation that we need to see and to
create the consumer markets for our net zero future, but the
Government must do all they can to encourage the private sector
to prioritise reducing emissions alongside creating economic
value.
Public subsidies are an important part of the levers available,
and taxpayers need to see that they are being used effectively.
Let us take, for example, the nine environmental and energy
principles. In the past few months, we have seen a tremendous
concern about our energy sector, and it is easy to imagine a
scenario where subsidies are being granted to improve energy
resilience and energy supply. Such goals might make sense in the
short term as they are in line with the principles, but when we
are making short-term decisions about subsidy use, it is really
important that we step back and look at the longer-term impact of
some of those decisions. We need to take the opportunity every
year to make sure that, regardless of the short-term decisions
that sometimes need to be made, we are nevertheless continuing
along the path towards net zero—the challenge that the Government
have set for themselves. To have that separate net zero/climate
change consideration of the total use of all of our subsidies
would be an important check for the Government to make sure that
they are progressing towards net zero in the way that they
should
In short, this Bill would have been much improved by enabling
greater scrutiny of the subsidies granted. I regret that the
Government are not doing more to enable that.
(Feltham and Heston)
(Lab/Co-op)
It is a pleasure to follow some powerful speeches on Report
tonight. I share the frustration of the hon. Member for Aberdeen
North () that we could well have
moved forward with some of the issues we debated in Committee
with some amendments brought forward by the Government. Some of
the robust debate we had in Committee led to looking at how we
could address those issues more quickly. I acknowledge the
contributions from the hon. Members for Weston-super-Mare () and for Thirsk and Malton
(). I will be talking about
their amendments later in my speech, but we have discussed at
length transparency and the ways in which we need to reform this
regime in order for it to be the most effective it can be. I wish
to make a brief remark about new clause 1 before carrying on
further. I hear the concerns raised by the hon. Members for
Aberdeen North and for Edinburgh North and Leith (), and the right hon. Member
for Dwyfor Meirionnydd (), because they are
important, particularly in relation to legacy subsidies in
agriculture, as well as future subsidies. The Minister will need
to make sure that he can respond clearly to the concerns that
have been raised, and we will certainly be listening closely on
that.
It is a pleasure to speak to our amendments—new clause 3, on
post-award referrals, and amendments 15 to 27. I will also speak
in support of similar and, in some cases, identical amendments to
those tabled by Labour in Committee, which I was pleased to see
have been influential in colleagues’ consideration of the Bill. I
refer in particular to amendments 1 to 8, which were tabled by
the hon. Members for Weston-super-Mare and for Thirsk and Malton,
and amendments 10 and 12, which were tabled by the hon. Member
for Aberdeen North. There are only slight differences from our
position in Committee, and I am sure that today’s debate will
also help consideration of the Bill in the other place.
Amendments 13 and 14 are similar to amendments 2 and 7, and are
consistent with our significant concerns on transparency and
accountability, which we raised in Committee. New clause 2,
tabled by the hon. Member for Richmond Park (), is also consistent with the
position on net zero leadership that we set out on Second Reading
and in Committee. We are not actively supporting two
amendments—we are more neutral on them: amendment 11, which has
similar intentions and principles but is slightly weaker than our
amendment 16 and which runs the risk of being unclear for local
authorities to implement; and amendment 9, where we understand
the intention to broaden what the Competition and Markets
Authority reports on. However, arguably it would not have the
information on all subsidies, as most would not be notified to
it, so this provision could be impractical and create a
significant burden. However, in Committee we also provided
suggestions on how the CMA’s annual report could be strengthened
and what areas it could report on. We had a considerable debate
on that, including in respect of the CMA reporting on where it
had identified non-compliance with the principles and examining
the geographical spread of subsidies that had been notified to
it.
Labour recognises the need for this legislation, which
establishes the framework for the UK’s post-Brexit subsidy
control regime. It indeed allows for quicker subsidies to be
granted to businesses, which we support. We recognise that a
system of subsidy control is important to ensure that public
funds are made available to businesses, but with appropriate
safeguards in place. Where we departed from the Scottish National
party in Committee is that we also believe that the Bill is
necessary to protect the UK’s internal market. We are speaking to
our amendments today on two main strategic areas: the purpose of
subsidies; and the way in which the new regime will operate. I
will deal first with the purpose and the use of subsidies.
Subsidies and their controls should be an integral part of a
strong, long-term industrial strategy, promoting growth and
supporting industry, jobs and prosperity across the country. We
want to see our foundation industries such as steel supported,
and we want to see a plan for how we can buy, make and sell more
in Britain.
(Aberavon) (Lab)
It was an honour and pleasure to serve with my hon. Friend on the
Bill Committee. Does she agree that the strategic purpose of a
Bill such as this must be about supporting areas of greater
economic deprivation and that therefore there is a glaring hole
at the middle of this Bill, which is that it does not have that
clear, proactive strategic purpose?
I thank my hon. Friend for his contributions in Committee and for
that very important point, which I will come on to. We know that
the assisted areas map is not part of the UK’s regime, but there
has to be a way to deal with the principle of that, which is how
to ensure resources are targeted to the areas where they are most
needed.
19:45:00
As I was saying, subsidies and their controls must form part of a
long-term industrial strategy. Our approach for such a long-term
industrial strategy has been to call for long-term investment,
clarity for our transition to a green economy and a serious
levelling-up agenda. These pledges are integral to our £28
billion a year climate investment pledge.
We recognise that this is framework legislation, but it is
missing clear direction or a plan on how subsidies should be
used. What are the goals of the UK Government? We know there is a
glaring hole in Government strategy: their industrial strategy,
which seems to have been watered down and is hard to even find on
their own website.
There are two areas on which we believe the Bill should be more
vocal: it should more clearly require public authorities to
consider the impact of subsidies and schemes on achieving our net
zero commitments; and tackle inequality both between and within
nations and regions of the UK. Labour’s amendments 16 and 17
would ensure that subsidies and schemes under the legislation
were consistent with the UK’s net zero targets. Amendment 16
would ensure that all public authorities should consider the
impact of subsidies on achieving the UK’s net zero commitments.
COP26 highlighted starkly how strong committed action across
Government is needed if the UK is to reach its net zero targets.
Unfortunately, as the Bill stands, the commitment to net zero is
not enshrined in the new regime. Quite frankly, that is not good
enough. We need firm resolutions and firm policy commitments to
achieve net zero and subsidies are no exception.
Labour tabled amendments 15 and 18 to ensure the Bill explicitly
states that subsidies and streamlined subsidy schemes can be used
for the purpose of reducing regional inequality. Under EU state
aid rules, subsidies could be, and indeed were, targeted at areas
of economic deprivation, significantly aiding struggling regions.
Labour recognises there were some drawbacks to the EU’s assisted
area map, but it did, as my hon. Friend the Member for Aberavon
() said, direct resources to
areas of most need. The Government should not waste the
opportunity the Bill brings to ensure we can target areas of
economic deprivation.
I am listening carefully to the hon. Lady. I am sure everybody
here would agree with the principle of trying to level up,
particularly in parts of the UK outside London and the
south-east, but can she address the point I was making about
politicians having a long and really pretty awful record in
picking losers? How does she think that, under her proposal,
things are going to be different this time?
I do not think it is about us picking losers or winners at all.
This is about us using the data, understanding where there are
areas of greatest need and having that as part of a data-led
levelling-up agenda. Given that the Government have created a
specific Department for levelling up, Labour is surprised that
that mandate is not clear and that the hon. Gentleman does not
have the answers he needs to have a framework that gives
confidence that we are applying resources to areas of greatest
need. To be frank, the Government’s record on that is not very
strong. The Bill should be explicit that supporting areas of
deprivation should fall squarely within the subsidy control
principles.
On improving the way the new regime will operate, there is a
serious lack of transparency in the Bill on how public money is
spent and how value for money can be assessed.
Does the hon. Lady not agree that the problem with amendment
16—the net zero amendment —is judging what is consistent with the
net zero commitments? I have a Westminster Hall debate tomorrow
—at 4 o’clock if anybody has nothing better to do and wants to
tune in. On greenwashing, for example, it is incredibly difficult
to ascertain what complies with net zero when there is so much
noise around this. We need to improve in that area. Is this not
really a charter for lawyers to take these subsidies to court
time and again? Is not that the problem with her amendment?
I thank the hon. Member for his intervention. We have agreed with
many of his amendments. What he has just said actually lends even
greater weight to wanting to make sure that that is a
consideration and that we have the resources to support that.
Perhaps he will talk to those on his own Treasury Bench about
this, because we would have hoped that by now there would be a
clearer road map for how the country is supposed to move forward
to achieving our net zero commitments. He will know as well as I
do that many small businesses have been crying out for a road map
to net zero to know what can make the most difference, how to
assess it and how to look at whether they have a decarbonisation
strategy that is fit for purpose. So I think he is lending weight
to our argument that we need something in the legislation to help
drive the processes behind that. People want answers and want to
know they are doing the right thing and making the right
investments on our road map to net zero.
I was referring to the serious lack of transparency in the Bill
around how public money is spent and value for money can be
assessed. There is no requirement to report subsidies below
£315,000 over three years. An unlimited number—an unlimited
number—of subsidies up to £500,000 could be made under a scheme
and not one would need to be reported, as long as the scheme
itself apparently is reported. That is not good enough. The
argument that this is in order to be consistent with the EU fall
because the thresholds in the EU state aid regime were in the
context of a very different regime; they were in the context of a
scheme of pre-notification, where scrutiny took place before the
allocation of the subsidy, not a permissive regime that
challenges subsidies after they have been granted. In that
context, we must think differently about what we seek to import;
we are not importing the whole environment around how those
decisions were made in the past.
The Minister has previously stated that we are in a position to
be able to change those thresholds—it is not a matter of can’t;
it is a matter of won’t. The hon. Member for Weston-super-Mare
() said very cleverly: if this
is so obvious and the Minister agrees with transparency, why are
we not doing it?
During covid, we have seen Ministers wasting money on crony
personal protective equipment contracts. I could spend my entire
speech talking about this, but my main point is that that would
have remained hidden from the public and from Parliament without
ongoing freedom of information requests. Transparency on public
expenditure—who is paying out, how much is being given, who it is
going to and what it is being used for— are basic questions that
we should know answers to as a matter of routine on subsidies
being paid by our Governments, local authorities or other public
authorities. Greater transparency, not less, should underpin the
system of self-assessment by public authorities that sits at the
heart of the Bill and our responsibility to the taxpayer.
The Centre for Public Data has made it clear that greater
transparency would help ensure the honesty, consistency and
efficiency of the system. It is also essential that interested
parties—be they competitors, other public authorities or groups
acting in the public interest—are able to challenge subsidies
that they believe are distortive or unfair.
On the subsidy database, we support amendments 1 to 8 on
transparency and reducing the threshold for the requirement to
report on the database. This includes subsidies made under a
scheme referred to in amendment 1. As the Bill stands, subsidies
made under a scheme with a value of less than £500,000 do not
have to be entered on to the database. There is no convincing
reason for that, and it is in the public interest that all
subsidies under a scheme be published. Worse still, a scheme can
be registered with little information so that there will be no
overall transparency for a scheme under which millions of pounds
of taxpayers’ money could be spent without scrutiny.
Amendment 8 in the names of the hon. Members for
Weston-super-Mare and for Thirsk and Malton amends clause 70,
which currently provides that, where a subsidy is made under a
scheme, the decision to grant an individual subsidy cannot be
reviewed. The amendment suggests that the response given by the
Minister in Committee was not reassuring enough.
This set of amendments also reduces the timeframes in which
subsidies must be entered on to the transparency database and the
timeframes in which any modifications must be uploaded. Members
will be aware that the Bill currently requires subsidies or
schemes to be entered on to the database within six months of
being made or within one year in the case of a tax measure. We
argued in Committee that there was a need to reduce those
timeframes. Having longer makes it more likely to result in an
incomplete or inaccurate entry, because officials may leave or
records may be lost. We heard evidence from Jonathan Branton, a
legal expert in the area, who said,
“I have yet to hear a…persuasive case for why you need that long
to publish…an award.”––[Official Report, Subsidy Control Public
Bill Committee, 26 October 2021; c. 58, Q79.]
Amendments 21 and 22 were intended to bring all services of
public economic interest subsidies with a value of more than £500
into the scope of transparency requirements. We do not understand
why such subsidies—those up to £14.5 million or all those in the
case of hospital care, adult social care and certain public
transportation services—should be excluded from transparency
requirements. With respect to amendment 6, we firmly support the
need for the date of the subsidy to be entered on to the
database. There should be no ambiguity about the day that the
clock starts to tick for the period in which a challenge can be
brought.
If the Minister wants to try to argue that greater transparency
would lead to higher costs and more red tape for public
authorities, that does not hold up to scrutiny either, because
they have that information and they are used to reporting their
expenditure above £500. That point was made on Second Reading as
well by the hon. Member for Weston-super-Mare. When giving
evidence in Committee, Dr Roger Barker of the Institute of
Directors said that
“there should be transparency at every level of
subsidy”.––[Official Report, Subsidy Control Public Bill
Committee, 26 October 2021; c. 37, Q48.]
A transparent system is important, but so is the quality of the
data contained in it. That is why we tabled amendment 20, which
would require the Secretary of State to ensure that the subsidy
database is subject to routine audit to verify the accuracy and
completeness of entries. That would incentivise complete and
accurate reporting and provide a mechanism for putting errors
right.
In Committee, we heard clear evidence that the database in its
current form contains significant inaccuracies and gaps in the
data entered. Expert witnesses suggested that not all subsidies
were being entered, as just 501 subsidies were recorded in the
best part of 10 months. Of those entries that had been recorded,
more than half had a zero or nil value, so either the database is
not fit for purpose or the entry of data by public authorities
has not been up to scratch—or both.
If the database is not subject to any oversight or control, and
if inaccurate or incomplete information entered on to it is not
checked, poor-quality information is likely to lead to misguided
legal challenges or to harmful subsidies failing to be addressed.
We want to be constructive on this point, which is why the
amendment is drafted in a way that permits the Secretary of State
to decide who should undertake the audits and how they can be
done most effectively.
On devolution, this is not a fair four-nations Bill. As it
stands, regulations and guidance can be developed without seeking
the consent of the devolved Administrations; only the Secretary
of State can call for subsidies to be assessed by the CMA; and
there are no requirements for the devolved Administrations to be
represented on the CMA’s new subsidy advice unit. That is
important because we need a system that commands the confidence
of all four nations.
The devolved Administrations should be given a genuine voice in
developing and implementing the new regime. The Minister’s
response in Committee to our concerns and those of the devolved
Administrations was that he had had a number of meetings with the
devolved Administrations and would keep talking to them. I would
be grateful if he could provide an update on those
discussions.
Amendments 23 to 25 would provide Scottish, Welsh and Northern
Irish Ministers with the power to call in subsidies or schemes
under clause 55. Currently, only the Secretary of State has the
power to issue a call-in direction, triggering a report to the
CMA. On that basis, the CMA’s reports are not binding on a public
authority. The harm of extending the call-in power to the
devolved nations is not clear to us. Why is the Secretary of
State empowered to call in Scottish, Welsh and Northern Irish
subsidies that may damage economic interests in England but the
Scottish, Welsh and Northern Irish leaders cannot call in
subsidies that they believe can cause economic harm in their
nations?
20:00:00
Our amendment 19 would require the Secretary of State to
“seek…consent of…Scottish Ministers…Welsh Ministers and the
Department for the Economy in Northern Ireland”
before making regulations under clause 11. The Minister may
recognise our amendment as it reflects precisely the equivalent
consent mechanism that exists under the United Kingdom Internal
Market Act 2020. As Members will know, this Bill is a piece of
framework legislation, with lots of questions left to secondary
legislation. Clause 11 is important because it allows regulations
to be made defining subsidies “of interest” and “of particular
interest”. Those important definitions should not be left to
secondary legislation, but if they are going to be set by
regulation, we believe that the devolved Administrations should
be given a formal role in the process of setting the terms.
Amendment 27 would require the Secretary of State to seek the
consent of the devolved Administrations before issuing guidance
under clause 79 for similar reasons. Our amendment 26 would
provide the chair of the CMA board with the power to appoint
three non-executive members to the subsidy advice unit to ensure
that the unit’s leadership has relevant experience of Wales,
Scotland and Northern Ireland.
The purpose of our new clause 3, on the role of the CMA, is to
allow the CMA to conduct post-award investigations on subsidies
and schemes on its own initiative. There is a gaping hole where
payments that are in fact subsidies are not reported as such by a
public authority, possibly through genuine misinterpretation of
the rules or as part of a wilful attempt to get around them.
These may be subsidies that are damaging and distort competition
but have not been picked up by interested parties or the
Secretary of State, so they can go on unchallenged. The CMA
should have the backstop power to be able to carry out an
investigation and report.
In relation to that, the Minister may also want to respond to
amendment 12 on the definition of “interested party” under the
Bill. The proposals establish which parties have the standing to
make an application to the Competition Appeal Tribunal to
challenge a subsidy. There was considerable uncertainty on that
point, which leaves this open to further debate. Does the
definition provide standing only to parties whose commercial
interests have been affected? We tabled an amendment to include
explicitly the devolved Administrations in the definition of an
“interested party”. Rather than leaving that to the courts,
Parliament’s will should be made clear.
We in the Labour party have taken a constructive approach to
scrutinising the Bill. Subsidies are a critical tool to
supporting our vital interests, but we need a clearer plan for
the use of subsidies and much stronger transparency and
accountability on spending public money. If public authorities,
our four nations’ businesses and the public are to have
confidence in the new system of subsidy control and in the new
regime to deliver the outcomes for our economy and society, the
Bill requires significant improvement. I hope that the Minister
will respond favourably on the points that we have raised
today.
The Parliamentary Under-Secretary of State for Business, Energy
and Industrial Strategy ()
I thank hon. Members across the House for the informed debate on
the Bill and will try my best to respond to their comments in the
few moments that I have.
A number of amendments have been tabled on the topic of
transparency, which I take really seriously. My Department is
working on a programme of improvements for the subsidy database.
To name just two examples, we are resolving the technical glitch
that meant that subsidies were uploaded with a zero value.
Additionally, we are developing an update to add the data for
upload to the information published on the database. Officials
will actively look at further improvements over the coming months
and in advance of the new regime coming in.
The Government intend to review again the evidence collected as
part of the consultation alongside that provided by witnesses to
the Committee about the transparency provisions. We will reflect
carefully on the points raised so far and engage further on our
findings with parliamentarians in both Houses as the Bill
progresses. I know the strength of feeling in the House on this
matter, and we will consider carefully what further action we
could take to address those concerns if they come back in the
Lords.
I start with the amendments that would reduce the threshold at
which subsidies are uploaded. The transparency provisions seek to
minimise the administrative burdens and costs to public
authorities while ensuring that information is available on
subsidies that must meet the substantive subsidy control
requirements. That is an important tool to aid interested parties
to challenge potentially harmful subsidies. However, the
amendments would create an additional administrative burden for
public authorities, including small local authorities.
Paradoxically, they could make it harder to identify in the
database the most potentially harmful subsidies that are eligible
to be challenged in the Competition Appeal Tribunal. Many small
subsidies will also be publicly available via other transparency
tools. Such data may not be perfectly formatted, but it does go
far wider than subsidies.
In relation to services of public economic interest, there was
broad support from consultation respondents for the application
of different transparency measures. The contracts must meet the
specific requirements set out in clause 29. That is why the
database requirements are different for those subsidies.
May I just caution my hon. Friend? I think the paraphrase of his
argument about the size of the subsidy database is that big
databases are less transparent than small ones. That is clearly
bonkers and not right, and I do not think it stands up to any
scrutiny. He may be arguing that that is okay because other
databases will have the information and that it can all be
compared and contrasted, but that works only if the data is in a
common format that allows for mutual searching, and there is no
such plan for that. May I gently caution him about pushing that
argument too far? I do not think it will stand much strain in the
Lords.
All I would say is that it is easy to hide something in plain
sight, but the subsidy transparency database is being developed
under the Cabinet Office’s standard system for all Government
databases. I have talked before about interoperability, and we
would expect to be able to link those databases and to scrape
them in the future.
Dr Poulter
I echo the transparency concerns raised by my hon. Friend the
Member for Weston-super-Mare (). I welcome the Minister’s
commitment to allowing the other place to look at this area, but,
to reassure some of us, will he please outline the transparency
tools that already exist?
I am not sure in terms of transparency tools. What I am saying is
that we will ensure that the database is eventually interoperable
with other databases. We clearly want the subsidy database to
have enough easily accessible, searchable fields to allow people
to make meaningful use of the data.
I turn to the amendments that seek to reduce the time period to
upload subsidies to the database for both tax and non-tax
subsidies to one month. The risk of a deadline as short as a
month is that public authorities are more likely to make
mistakes. Although it is possible to correct data, that creates
an additional administrative burden for public authorities.
Inaccurate or otherwise poor data would also undermine public
confidence in the database.
A short deadline is particularly challenging for tax subsidies,
which are often calculated from the information provided in a tax
declaration, which the beneficiary is entitled to change within
the 12 months following its due date. That is true, for example,
of the Government’s research and development subsidy scheme for
small and medium-sized enterprises, where quarterly uploads to
the database are planned for the hundreds of subsidies above
£500,000 that are awarded every year. Significantly more resource
would be required to upload to the database more frequently and
to make corrections to previous uploads as required. I note the
proposal to require an initial upload of a tax subsidy as an
estimate. However, I believe that more changes and revisions to
the database would cause confusion.
On auditing the database, I share hon. Members’ desire to make
the database as accurate as possible, and my Department is
already taking steps to improve data quality. However, a new
obligation to subject the database to a routine audit is
unnecessary because the system already incentivises accurate
entries. Public authorities may not have fulfilled their
obligation to make an entry on the database if that entry is not
accurate, so the limitation period for a challenge would not
start until a correct entry was made. Public authorities must
therefore take responsibility for their own data. Ultimately, it
would not be a good use of taxpayers’ money to have central
Government officials independently verifying every piece of
information provided by public authorities. As for the
requirement to include the subsidy upload date in the list of
requirements for the database that may be included in
regulations, I entirely agree that that is useful data. As I have
said, we are currently developing an update so that that is part
of the publicly available information on the database.
Let me now deal with amendments that raise important points about
the nature of the subsidy control regime, and especially about
the role of the subsidy advice unit. The SAU’s job is to be an
impartial adviser in respect of the most potentially harmful
subsidies and schemes. The regime places clear duties on public
authorities that are awarding subsidies. It will be for those
authorities to assess whether they are compliant with the regime.
That is not the SAU’s job. It will only review public
authorities’ assessments in a relatively small number of cases
that have the potential to be the most distortive. New clause 3
would require the SAU to monitor and investigate subsidy
activity, and amendment 9 would require it to list all subsidies
annually, whatever their size, along with an assessment of their
compliance. Both would involve a fundamental shift in the unit’s
role, to an intrusive, investigatory one.
I fully expect that there will be high levels of compliance with
the regime, and that public authorities will take their statutory
duties seriously. Of course, failure to fulfil these duties would
expose public authorities to legal challenge, and would create
unnecessary uncertainty for beneficiaries. Members will
appreciate the resource burden that monitoring and assessing all
subsidies would involve, and will recognise that not only is it
entirely disproportionate to the risks that the amendments seek
to address, but it would distract from the SAU’s proper
focus.
Amendment 26 would allow the CMA chair to make appointments to
the subsidy advice unit to bring greater experience in relation
to Scotland, Wales and Northern Ireland. The CMA’s staffing is an
internal matter, but I note that job vacancies for the new unit
are currently being advertised in all four capitals of the
UK.
Amendment 8 proposes that subsidies granted under schemes should
be open to challenge in the Competition Appeal Tribunal. Schemes
represent an important efficiency for public authorities. They
allow similar or identical subsidies to be given on the basis of
a single, comprehensive assessment against the principles. A
scheme should not be made unless the public authority believes
that the subsidies given under it will be consistent with the
principles. It would therefore be unnecessary for subsidies
granted under schemes to be eligible for review by the tribunal.
However, if there were a question as to whether a subsidy given
under a scheme really met the terms of the scheme, that subsidy
could be challenged in the tribunal on the basis that it should
be treated as a stand-alone subsidy.
Let me deal next with the amendments relating to the role of the
devolved administrations. The UK Government have engaged
regularly with the DAs on the design of a UK-wide subsidy control
regime, and we will continue to listen carefully to their views.
None the less, it is important to reiterate that subsidy control
is a matter reserved to this Parliament. That is because we need
a UK-wide regime to prevent distortions harmful to competition,
and to facilitate compliance with our international obligations.
I fundamentally believe that the amendments are inappropriate for
a reserved policy matter. The Secretary of State will act in the
interests of all parts of the UK.
Amendment 12 concerns who can challenge a subsidy decision. I can
clarify that: the devolved administrations, or local authorities,
would generally be able to apply for the review of a subsidy when
people in the areas for which they are responsible might be
adversely affected by it, but there is no reason for the DAs to
be able to challenge subsidies that have only a tenuous
connection with the interests of people in those areas.
Amendment 10 would allow the devolved administrations to create
streamlined subsidy schemes. All public authorities in the UK
will be able to use such schemes, but they will function best
when they apply throughout the UK. In any case, all public
authorities will be free to create subsidy schemes for their own
purposes, and primary public authorities, such as the DAs, will
be able to create schemes for the use of local authorities and
other public bodies within their remit. As for amendment 27, the
Bill already requires the Secretary of State to consult such
persons as they consider appropriate before issuing any guidance.
Attaching a formal consent mechanism to this clause risks
delaying the issuing and updating of guidance.
New clause 1 would exempt agricultural subsidies and schemes
within the scope of the World Trade Organisation agreement on
agriculture from the requirements of the new domestic regime.
Having agriculture covered by the same single, coherent framework
as other sectors will protect competition and investment within
agriculture, while securing consistency for public authorities
and subsidy recipients. The Bill’s design ensures that public
authorities are empowered to give subsidies that best fit their
local needs, whether that means supporting innovation in
pharmaceuticals or innovation in farming. I therefore do not
agree that agriculture should be exempt from the regime.
Let me now turn to the amendments dealing with net zero.
New clause 2 would require the Secretary of State to report
annually on the impact of all subsidies granted in the previous
year on the environment and climate change. This would represent
a significant administrative burden, not least on smaller public
authorities, and would discourage them from granting subsidies in
the first place. There are also long-standing existing
obligations on public authorities to collect this information in
specific circumstances, and therefore this amendment is
unnecessary.
Amendment 11 would add another principle to schedule 1 centred on
net zero, but net zero is not inherent to all subsidies. A great
number of subsidies will not have a meaningful impact on the UK’s
emissions. A requirement for public authorities to assess all
subsidies against net zero is therefore disproportionate.
Amendment 16 would add an explicit net zero test to the balancing
test principle in schedule 1. The terms of the balancing test are
not limited to negative effects on trade or investment within the
UK, or to international trade and investment, so this amendment
is also unnecessary.
Finally, on levelling up, amendment 18 would establish that
streamlined subsidy schemes can be made for the purpose of
supporting areas of deprivation. The Bill allows the Government
to create streamlined subsidies for any purpose, not least for
levelling up, so this amendment is unnecessary, but I certainly
commit to ensuring that streamlined subsidy schemes collectively
support public authorities in delivering levelling-up
objectives.
The first subsidy control principle specifies that subsidies
should pursue a policy objective that either remedies a market
failure or addresses an equity rationale. Clearly, relative
economic deprivation would fall into that category, so these
amendments are unnecessary.
I am grateful for the constructive engagement of hon. Members on
both sides of the House, but I cannot accept the amendments
tabled for this debate. Consequently, I ask hon. Members not to
press them.
Finally, I thank the team that prepared the Bill: Jamie Lucas,
Jess Blakely, Carmen Suarez, Jane Woolley, George Kokkinos,
Hannah Swindell, Sam Naylor, Joe Smith, Matilda Curtis, Dharmesh
Jadavji, Steve Huntington, Kerry Mattingly, Anthony McDonough,
Tim Beaver, Christian Garrard and Josephine Sherwood.
Question put, That the clause be read a Second time.
Division 146
13/12/2021 20:16:00
The House divided:
Ayes: 31
Noes: 292
Question accordingly negatived.
Clause 11
Subsidies and schemes of interest or particular interest
Amendment proposed: 19, page 7, line 9, at
end insert—
“(4) Before making regulations under this section, the Secretary
of State must seek the consent of the Scottish Ministers, the
Welsh Ministers and the Department for the Economy in Northern
Ireland.
(5) If consent to the making of the regulations is not given by
any of those authorities within the period of one month beginning
with the day on which it is sought from that authority, the
Secretary of State may make the regulations without consent.
(6) If regulations are made in reliance on subsection (5), the
Secretary of State must make a statement to the House of Commons
explaining why the Secretary of State decided to make the
regulations without the consent of the authority or authorities
concerned.”—(.)
This amendment would require the Secretary of State to seek the
consent of the Devolved Administrations before making regulations
under this section. Where such consent is not given within one
month, the Secretary of State may make the regulations without
that consent, but must make a statement to the House of Commons
explaining their decision.
Question put, That the amendment be made.
Division 147
13/12/2021 20:30:00
The House divided:
Ayes: 180
Noes: 292
Question accordingly negatived.
Schedule 1
The subsidy control principles
Amendment proposed: 16, page 52, line 6, at
end insert—
“(c) consistency with the United Kingdom achieving its net-zero
commitments established under the Climate Change Act
2008.”—(.)
This amendment adds consistency with the UK’s net-zero
commitments as a particular consideration for public authorities
before deciding whether to give a subsidy.
Question put, That the amendment be made.
Division 148
13/12/2021 20:42:00
The House divided:
Ayes: 178
Noes: 292
Question accordingly negatived.
Third Reading
Queen’s consent signified.
20:53:00
The Secretary of State for Business, Energy and Industrial
Strategy ()
I beg to move, That the Bill be now read the Third time.
I pay tribute to my hon. Friend the Minister for his leadership
and diligence in steering the Bill through this House. I
recognise the contribution of all the officials in my Department
whose outstanding work has advanced us to this point. I thank
you, Madam Deputy Speaker, and your colleagues for all the work
you have done. I extend my thanks to all the House staff who have
made sure that everything has gone as one might expect.
This Bill is a hugely important piece of legislation. It
establishes a subsidy control system that has been designed by
and for the UK. It demonstrates the Government’s clear commitment
to seize the opportunities arising from Brexit. For the first
time, the decision on whether to grant a subsidy will fall to the
granting authority itself. At the heart of the regime is a set of
clear and proportionate principles that will be underpinned by
guidance.
Local authorities, public bodies and the devolved Administrations
in Edinburgh, Cardiff and Belfast will be empowered to decide if
they can issue taxpayer-funded subsidies by acting consistently
with the principles outlined in the legislation. That includes a
principle specifically designed to minimise distortions to UK
competition and investment. The new regime will help to unlock
potential so that all areas of the UK feel the benefits of
targeted subsidies. That includes investment in skills,
infrastructure, new technologies, and research and
development.
With agreement, in Committee, the Government made some technical
changes to the provisions to provide clarity in certain areas.
Those included ensuring that the transparency requirements apply
to subsidies under legacy schemes subject to certain exemptions
and that the content of the CMA’s post-award report is consistent
with that of its pre-award report.
There has been a thorough debate, including today, about specific
elements of the regime. I welcome the recognition on both sides
of the House of the need for the Bill. The new subsidy control
regime will ensure that the UK maintains a competitive free
market economy, which is fundamental to our national prosperity,
while protecting the interests of the British taxpayer. The
debate will continue through the remaining stages of the Bill as
it passes to the other place and we will of course be mindful and
attentive to that continuing debate. On that basis, I commend the
Bill to the House.
20:56:00
(Stalybridge and Hyde)
(Lab/Co-op)
It is a privilege to come to the Dispatch Box for the first time
as the shadow Secretary of State for Business, Energy and
Industrial Strategy. This is an important Bill. On the face of
it, it is a technical matter, as our exit from the European Union
and single market means that a replacement for the former state
aid rules is a legal and practical necessity. However, the debate
we have had about how the new regime will be used shows that it
is much more important than that.
I thank all hon. Members who have worked on the Bill,
particularly my hon. Friends the Members for Feltham and Heston
() and for Sefton Central
() for their work in Committee.
I repeat the Secretary of State’s thanks to all the Clerks and
ministerial officials for getting it ready.
The current Government’s economic record sadly combines the worst
of everything. Our long-term growth forecasts are low, our taxes
are high, our productivity is appalling, inflation is growing and
our trade is shrinking. In short, the Conservative Government
have created a high-tax, low-growth economy, so the country needs
a plan for growth if we are to generate the living standards and
public services that the British people rightly expect.
Therefore, how the powers and responsibilities that are contained
in the Bill will be used is of major interest to us all.
I want to see some ambition from the Government—not just big
talk, but real delivery. Throughout the Bill’s passage, we have
tried to tease out the outlines of their strategy, or some
indication of their plans, but we are none the wiser, mainly
because they do not seem to know what they want to do. For any
industrial policy to be successful, its focus must be the long
term and its fundamental objectives should be cross party to give
industry and firms the reassurance that they need to invest for
the future.
This Government cannot even agree with what former Conservative
Governments proposed and adopted as policy just a few years ago.
I have still heard no clear reason from them as to why the
previous industrial strategy and bodies such as the Industrial
Strategy Council have been abolished. It smacks of the
fundamental short-termism and lack of seriousness that infects
the whole Government. That matters because for the powers
contained in the Bill to work, they have to be a part of a
coherent strategy. I do not believe that we have that.
I do not believe in corporate welfare; it is not the Government’s
job to bail out firms that are not viable or to distort fair
competition in markets. But I do believe that there is a huge
role for the Government in partnering with industry to meet our
national objectives, particularly on net zero. A good example of
where that support is needed is our energy-intensive sector,
which has a significant carbon footprint domestically but which
compares favourably to the same industries in other countries
when international comparisons are made. I want to see from the
Government a coherent and effective strategy to use the powers in
this Bill to support these industries because, without that, all
we will do is offshore our emissions by making these sectors
uncompetitive. At present, we have a Government who are willing
to intervene, but whose approach is best described as completely
scattergun. I know some Conservative Members are converts to
economic intervention, but they have skipped the part where that
intervention needs to be driven by purpose, rather than
short-term political expediency. Michael Heseltine put it best
when he said that the Government appear to have “no coherent
approach” and the Prime Minister is just
“lurching from crisis to crisis.”
That is harsh criticism, but it is fair.
In many ways we will not be able to judge the success or not of
this legislation until we have learnt more about how the
Government intend to use it. Quite simply, the Government must do
better. If they had taken our amendments, and those of other
colleagues here today, on board, that would have substantially
improved what we are being presented with on Third Reading. It
would have given us greater transparency to show where public
money is going and a commitment that any subsidies help the UK
achieve the net zero targets, and ensured that the nations and
regions have the powers they need to make the new regime a
success. It is a real regret that those amendments are not part
of the Bill, but I hope members in the other place will take
these arguments up.
To return to my opening remarks, although the Bill is not the one
we would have proposed, it is clearly a necessity. We will
therefore not be opposing it on Third Reading. However, in the
months and years ahead, it will only have meaning for the British
people if it is combined with the kind dynamic and coherent
policy agenda that so far has eluded this Government at every
level.
21:01:00
I want to start with a few thanks. I thank staff member Dr
Jonathan Kiehlmann and my hon. Friend the Member for Aberdeen
South () for their assistance on the
Bill. I also thank—this shows the seriousness with which Scotland
treats this—Cabinet Secretaries , and , who have all taken an
interest in the Bill and in trying to improve it. We recognise
that it is an incredibly important regime and we have significant
concerns about it. I wish briefly to comment on amendment 19,
which we voted for. We did so not because it was perfect but
because it would have made the Bill marginally better than it is
currently. So the amendment is not something we would necessarily
back wholeheartedly, but it is better than the current Bill as
drafted. I thought it would be best to make that clear.
The three major concerns we continue to have about the Bill
relate to the inclusion of agriculture. Agriculture is not
included in subsidy control regimes elsewhere and I do not
believe we have heard enough justification from the Minister or
the Secretary of State to understand why they have chosen to
include agriculture in this scheme. We believe that the scheme is
not transparent enough. Indeed, the hon. Member for
Weston-super-Mare () tabled a number of amendments
to that effect, as did a number of other colleagues across the
House. There are significant concerns about the transparency of
the subsidy control database in particular, but that also applies
to the subsidy regime more widely. I hope that the Government
will take these things into account and will consider them as the
Bill moves on to further consideration in the other place.
The last issue we have is about climate change, which should form
part of the key principles. I know that the principles can be
updated, including by future Governments, but, for the Bill to
stand the test of time, reaching our net zero targets should have
been put at its front and centre. I appreciate the Opposition
tabling an amendment to that effect. The Liberal Democrats did
the same, as did we. This is so important and we feel that the
Minister and the Secretary of State are abdicating some
responsibility on that.
Lastly, I wish to thank the Minister for his clarification in
relation to interested parties. I very much appreciate him saying
what he said at the Dispatch Box on the role of devolved
Administrations when it comes to interested parties. That will
make a difference to the operation of the Bill and I appreciate
that he did that.
21:04:00
I am very pleased that there have been as many contributions as
there have been. I look forward to taking the Bill forward, as
does my hon. Friend the Minister.
Question put and agreed to.
Bill accordingly read the Third time and passed.
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