State Aid (EU Exit) Regulations 2019 — House of Lords, 2019-03-14
Topic: International Affairs
Robert Stevenson (Labour, Centre-left): I am grateful to the noble Lord for the intervention. I will come on to that; I was quoting a definition only to prove that it did not actually work. He has made my point for me—perhaps I will shorten that bit of my speech. I was going on to say that the rules do not work in practice, because they have been applied to a number of very different activities. There is a definition—it is not very clear what it means in practice—and it applies to the particular issue of competition between states, and we will not have that situation. Within this, of course, there are a number of variations, one of which we have already touched on. It is generally recognised that state aid can do more than simply reduce distortions in competition. It can enhance public welfare, address inequalities, allow for investment in research and development for which there is no direct benefit to individual companies—which is probably therefore a public good—and address inequalities across various areas and regions. These do not fit very well into the definition, yet they happen and have continued to do so. Broadly speaking, the state aid rules are not really designed to prevent states aiding the enterprises that operate within those states; they aim for state aid to be targeted. Is that one of the issues that will be carried forward in these new regulations, should they be applied and there be no deal? If that is the case, we are talking about a slightly different way in which the Government will be operating to preserve some of the elements being transferred. I could list a number of issues under which state aid has been offered that would exemplify that If we are going to accept that state aid has in the past been used, under the general block exemption regime, for regional aid, to help SMEs, to support research and development, to support the environment and for cultural and other reasons, we have to accept that the issues are broadly interpreted. I am anxious to get on the record whether the Government see this historical use of state aid in a European context as the basis on which future state aid arrangements will be made in this country, whether done directly by the UK or by devolved Administrations If you look at European spending on state aid, the UK is significantly below the median level and well below the average. It was said in the IPPR document I talked about that, "UK spending on state aid as a percentage of GDP in 2016 was 0.36 per cent, significantly lower than the EU average (0.69 per cent) and far lower than other western European countries such as Germany (1.31 per cent), France (0.65 per cent), and Denmark (1.63 per cent)" State aid should presumably be appropriate to the need that has been defined, but if UK expenditure were on the same level that France spends we would be spending £6 billion more. If we were to raise it to the same level as Germany, we would be spending £19 billion more; if to the same level as Denmark, £25 billion more. These are huge sums of money, and we do not need to spend much time thinking about what would happen to that. Previously, that would have been money funded out of the European budget, in a sense, but obviously that can only come from taxation raised in member countries. If we are bringing this home and bringing back control, we will also have to think about where the resources for that would come. Is there any intention to set a budget figure for what state aid will be, going forward, if these regulations come through? Can the Minister speculate about where the indicative level of spending will be What happens after Brexit if we leave on a no-deal basis? Clearly, some of the issues here will work whether we leave with or without a deal. With a deal there will be implications, not just from the transition period but particularly—this is relevant to debates we had only yesterday—on the question of Northern Ireland. If we are working on a backstop arrangement, there are some specific rules, which I am sure the Minister will want to acknowledge, relating to how state aid rules will apply in Ireland, particularly with reference to differential practices across the border. Can the Minister give us some information about how that would happen? If there is no deal, we are back in WTO territory; those are the only rules that generally apply to the use of targeted financial subsidies. They are not as far-reaching or as enforceable as the EU rules, because the EU’s state aid rules come with significant penalties for those who breach them. They will place limits on government, but they are not nearly as bad, so there would be no barrier in a no-deal, WTO environment for the Government to take forward a spending programme which would encourage more spending on state aid in a way which would be helpful to their overall arrangements.