Subsidy Control Bill — House of Lords, 2022-01-19
Topic: Macroeconomics
Howard Leigh (Conservative, Centre-right): My Lords, I welcome the Bill. Clearly, we need to implement a much better new system for subsidies post the EU, and the Bill sets out a policy for the 500 or so public bodies which seek to give grants and subsidies in the UK. I believe that these amount to over £13 billion a year, so a huge sum of money. I draw your Lordships’ attention to my registered interests, in particular that I am the chairman in the House of Lords of the Campaign for Economic Growth, which I thank for its help with my remarks, as I do the ICAEW and Jonathan Branton at the DWF law firm A number of us have concerns about subsidies for businesses, particularly those that, frankly, do not deserve them, but we appreciate that the flexibility offered is important. My main concern is to understand where the focus on value for money is. Proportionate and necessary funding does not necessarily mean value for money. Can my noble friend the Minister assure us that value for money will be a key driver for subsidies? How will this be determined and assessed? The CMA is required to report on the effectiveness of the Act, but not the value for money of the subsidies, so who will do that There is a lot of nervousness that the principles are so open to interpretation that in the end it is the courts that will be kept very busy. So much of the detail will be in secondary legislation, which we really need to see as soon as possible. I suspect that many will want to go for CMA clearance well in advance, so can my noble friend confirm that the CMA will be resourced to handle this? On a stand-alone basis, the seven principles proposed seem reasonable and proportionate, and I am sure that if they were applied by my noble friend the Minister and his colleagues at BEIS, all would be well, but this is going to be used by all sorts of bodies which, frankly, could probably drive a coach and horses through these words if they had a mind so to do. We have seen some perverse decisions by some public bodies. I appreciate it is very difficult, but are Her Majesty’s Government considering further controls and restraints in situations where attempts are made to circumvent the intentions of these principles I will focus the rest of my remarks on how the restrictions in the Bill might affect start-ups and recovery companies. Clauses 19 and 20 refer to an "ailing or insolvent enterprise". I congratulate BEIS on using the word "enterprise" rather than "company", as in previous legislation. I am concerned, however, that, as currently worded, these clauses might restrict grants or subsidies to those businesses which might really need them; that is, those in trouble. Is my noble friend the Minister able to amplify what the Government are seeking to avoid in their determination not to help ailing businesses I do not think it is clear what an ailing or insolvent enterprise is. The helpful Explanatory Notes state: "An ailing or insolvent enterprise is one that would almost certainly go out of business in the short to medium term without subsidy." But in Clause 24 ailing companies are defined by three conditions. In addition to the one I have just mentioned, these are an inability to pay debts as due—fair enough—and where assets are below not just liabilities but "contingent and prospective liabilities". I need not remind my noble friend the Minister that under the new accounting rules, so much more needs to be disclosed as a liability than was ever the case before. I believe that these definitions are cut and pasted from the Insolvency Act and I just do not think they are appropriate Working out what is a prospective liability and making the computations required is not easy. What is meant by the "medium term"? Who is to say how many businesses will be able to look to the medium term with any certainty? Perhaps we need our old friend the monitor back, as we have seen in other legislation Clearly, we do not want a terminally ill business to be propped up artificially as someone’s pet project, but we also do not want to rule out businesses such as start-ups, which might otherwise fall foul of these definitions. I am particularly worried about new businesses that are stretched and have certain challenges. Although I think that the exemption for the owners of SMEs from putting money into their businesses is sensible, I can see that all the accounting requirements might be too much for a small business which needs help urgently I look forward to some helpful clarifications during the passage of the Bill and to debating these clauses with my noble friend the Minister, who, I am sure, will be working with Back-Benchers in his usual collaborative way.