Subsidy Control Bill — House of Lords, 2022-01-19
Topic: Government Operations
Martin Callanan (Conservative, Centre-right): I thank all noble Lords for their engagement ahead of today’s debate and their contributions this evening on this important Bill. It has been a good debate, despite the relatively late hour. I apologise to our two Green ladies, but I am not responsible for the timings, which were primarily driven by the time that the House dealt with previous business. However, we have had some informed and thoughtful speeches from all sides, which have given me much food for thought. I am particularly fascinated by this emerging unholy alliance between my noble friend Lord Forsyth and the noble Baroness, Lady Jones, who are at opposite ends of the political spectrum. I look forward to seeing how long this lasts when confronted with the reality of politics. It will be fascinating to see, and will no doubt give great amusement in Committee A number of noble Lords raised concerns regarding the role of the devolved Administrations. I thank the noble Baronesses, Lady Blake of Leeds and Lady Bryan, the noble and learned Lord, Lord Thomas of Cwmgiedd, and the noble Lords, Lord Whitty, and Lord Bruce of Bennachie, for their considered contributions. I emphasise that the devolved Administrations are and will remain responsible for the spending decisions on devolved subsidies within any subsidy control system. We have produced a Bill that not only protects but strengthens our union, through the creation of a single, coherent framework that empowers public bodies across all four nations to design subsidies that are tailored to local needs. It is in all our interests to ensure that the regime works for the whole United Kingdom and enables the UK’s domestic markets to function properly and efficiently, which is precisely what this Bill does It is important that I draw attention again to the point that Ministers and officials have engaged in and continue to engage extensively with the devolved Administrations on the new regime. Such discussions have also been paramount in informing the policy development from the outset. This is not to say that we have agreed to everything. Clearly, we have not—there are some areas of disagreement. However, our proposal aligns with their views on the majority of issues, including the regime’s objectives, their foundational principles and the need to respect the devolution settlement and to enable support for levelling up. Therefore, we hope that the devolved Administrations can understand and support our approach and that ultimately, they will give their legislative consent A number of noble Lords raised the issue of the Secretary of State’s powers within this Bill, but they are limited and appropriate. The regulation of subsidies is a matter reserved to the UK Parliament, and the Secretary of State therefore has responsibility to ensure that the new regime is enforced consistently across the whole of our United Kingdom. The Secretary of State must also ensure that the UK is compliant with our international obligations A number of noble Lords across the House have also raised concerns about transparency. I reassure my noble friend Lord Forsyth and the noble Viscount, Lord Chandos, that my department is working on a programme of improvements to the subsidy database. These will be completed soon and will address a number of the specific concerns raised here and in the other place. The Government will continue to reflect carefully on the points raised today and will engage further on our findings with parliamentarians in both Houses as the Bill progresses. With regard to secondary legislation and the regime’s guidance, I thank the noble Baroness, Lady Blake, the noble and learned Lord, Lord Thomas, and other noble Lords for their contributions. To directly address the point made by my noble friend Lord Forsyth and the noble Lord, Lord Bruce, around this Bill being a framework, I draw attention to the testimony provided by the parliamentary counsel for domestic legislation in the House of Commons, Daniel Greenberg. He emphasised the need for the Bill to take the form that it does in order to give the flexibility for the ongoing relationships between the different powers concerned by the substance of the Bill As I mentioned earlier in response to the intervention by my noble friend Lord Forsyth—I am sorry if I gave him the impression that he was not permitted to intervene; he was entirely right to do so if he wished—and also addressing the point made by the noble Lord, Lord Fox, we will shortly publish a package of illustrative products that will set out much more information on the regime. We have been keen to ensure that relevant stakeholders have had the appropriate opportunity to provide input in the development of these regulations and guidance. They will be published early next week in time to support the Grand Committee debate of the Bill and will include draft regulations on subsidies of particular interest and guidance on the application of the principles. The final guidance will be made available in advance of the new regime’s commencement to ensure that public authorities understand it and can prepare for it On the specific request raised by the noble Lord, Lord Purvis of Tweed, on future impact assessments, I can assure him that we will produce further such assessments where appropriate, and we will provide more information on that in due course A number of noble Lords raised questions around net zero. I reassure the House—in particular, the noble Lord, Lord Ravensdale, and the noble Baronesses, Lady Bennett and Lady Sheehan—that the Bill supports our net-zero goal. The principles provided under the Bill are common sense and clearly support the UK’s priorities on net zero and on protecting the environment. An explicit principle on net zero, in our view, is therefore not necessary A number of noble Lords also commented on levelling up and disadvantaged areas. I reassure the House that this Bill supports the Government’s levelling-up agenda. It gives public authorities the flexibility to grant subsidies where they are best served to support economic growth in local places, but without the excessive bureaucracy or pre-approval processes. This directly addresses the proposal of an assisted area map such as those under the EU state aid regime, a point made by the noble Lords, Lord Ravensdale, Lord Fox and Lord McNicol. These maps were a necessary feature of the EU state aid regime, in which subsidies were prohibited unless specifically permitted. Assisted area maps were therefore required to facilitate an exemption for subsidies addressing regional inequality The UK’s domestic regime is fundamentally different, and it is aligned with the rest of the world. It is a permissive regime that allows public authorities to assess for themselves whether their subsidy or scheme can be given by reference to the sets of principles that I outlined earlier and of prohibitions and requirements. I can therefore reassure the noble Lord, Lord German, and the noble Baroness, Lady Bennett, that the absence of a dedicated regional aid exemption does not mean that public authorities are any less able to give aid or to address regional inequality. As long as a subsidy is justifiable on policy grounds, such as addressing regional inequality, and the public authority considers that it is compliant with the basic set of principles and prohibitions, then it can indeed be given I move on to the vital subject of Northern Ireland and points raised by my noble friend Lord Forsyth, the noble Lords, Lord Purvis and Lord Dodds, and the noble Baroness, Lady Hoey. In relation to the Bill’s interaction with Northern Ireland, I reiterate that the UK will of course continue to be a responsible trade partner that respects its international obligations, and our commitments made under the Northern Ireland protocol are no exception. There will be no double regulation of subsidies. Subsidies that are subject to the protocol, which complies with EU state aid rules, will be exempt from the requirements of this new domestic regime. Under current arrangements, subsidies within the scope of the Northern Ireland protocol of the withdrawal agreement in respect of goods and wholesale electricity markets, which affect NI-EU trade, will still need to comply with EU state aid rules. Subsidies for services will ordinarily comply with the more flexible UK domestic subsidy regime The noble Lord, Lord Purvis, also referred to technical guidance, noting that in specific circumstances it may be useful for companies to keep separate accounts. This is one possible way to demonstrate that a subsidy given in Great Britain is not being used to cross-subsidise a subsidiary in Northern Ireland, but it is not a legal requirement and nor is it relevant to all companies I can reassure the noble Lord, Lord Dodds, that, subject to negotiation with the EU, the intention is that all types of subsidy would be within scope of the domestic regime. The Government will create streamlined routes for public authorities across the UK to award subsidies that help achieve UK-wide priorities. We will continue to work closely with the DAs while developing this policy both at official and ministerial level, and we are committed to continue our close engagement on this with the devolved authorities.