I beg to move, That the Bill be now read a Second time.
The Government are determined to seize the opportunities arising from Brexit. Now that the UK has left the European Union and we are no longer bound by the EU’s regime, we have the freedom to develop a new, bespoke system of subsidy control for the UK that delivers on our national priorities. Before the UK joined the European economic community, as it was then called, there was no framework at all. That absence contributed, I think, to Governments pursuing a failed economic approach with Whitehall trying to run the economy. They distorted competition, often by bailing out unsustainable industries and attempting to pick winners. The regime that the Government have set out in the Bill will help public authorities to deliver subsidies where they are needed, without facing excessive bureaucracy or lengthy pre-approval processes.
One of the industries that I hope will benefit from the Bill is the steel industry. As my right hon. Friend will know from frequent and very welcome engagements with me on the issue, Liberty Speciality Steels in Stocksbridge is a key employer in my constituency. While we were in the EU, the industry had access to the EU’s research fund for coal and steel. Now that we have left, £182 million is due to be returned to the UK. Will my right hon. Friend look into the possibility of ringfencing that money, given that it has been raised from levies on the steel industry rather than through general taxation, so that we can have a UK fund for innovation in UK steel?
In her brief time in the House, my hon. Friend has been an impressive and focused campaigner on behalf of her constituents and the wider industry. As she knows, I am a particular fan of the steel industry, and want to seek a sustainable future for it here in the UK. I cannot give any budgetary guarantees, as she will appreciate, but this system does give us much more flexibility than was the case previously.
May I make a little more progress? Many other colleagues want to speak.
This is a Bill that promotes autonomy, transparency and accountability. It will empower hundreds of local authorities, as well as the devolved Administrations and other public authorities, to take control, allowing them to design subsidies to meet local needs while also meeting national policy objectives.
I am grateful to the Secretary of State for giving way to me now. I wanted to pursue his earlier comment. The Conservatives appear to be perpetuating a gift for blaming the EU for everything, to all intents and purposes, and it is no surprise that we have heard a little more of that today. We must bear it in mind that the UK was known for underutilising EU state rules—we were ranked 22nd out of 28 member states in 2018—and it could be suggested that that was due to Conservative ideology rather than to any intrinsic problem.
This Bill will steamroll devolved competence. Does the Secretary of State agree that it reflects a new Conservative ideology, which is deliberately dismantling the powers of devolved Governments and their accountability as elected Governments per se?
That was a rather lengthy intervention, if I may say so, although I do not want to entrench on the Chair’s prerogative. As the right hon. Lady will appreciate, the Bill is a function of our leaving the EU. We are not trying to rehearse the arguments of Brexit; we were doing that long before she was elected to the House. I was certainly involved in those debates.
The Bill sets out a regime founded on seven clear and transparent principles. According to those principles, the subsidy must be designed to remedy a market failure. It must be designed to bring about a change in behaviour. It cannot normally cover costs that would have been funded in any case. It must be appropriate, proportionate, and designed to minimise any distortions to competition and investment in the United Kingdom. Finally, the public authority giving a subsidy must carry out a balancing test, and proceed only if the benefits of the subsidy outweigh any distortions to UK competition and investment, and to international trade.
Those principles will be supported by guidance for all to see. That will ensure that public authorities fully understand their legal obligations, and will make clear which subsidies are permitted and prohibited and under what circumstances.
I do not agree with the hon. Gentleman’s description of what the Bill does. If he listens to the rest of my remarks, he may well hear further clarification. Of course, as is always the case, many of these issues will be discussed in Committee if the Bill’s Second Reading receives the assent of the House.
Public authorities will be empowered to make their own assessment of whether a new subsidy meets the requirements of the regime and, in the vast majority of cases, to proceed directly to granting that subsidy. For the first time, the decision on whether to grant a subsidy will always fall to the granting authority itself. For the largest subsidies, or those that present the highest risk of distorting competition, it is worth recalling that the default process under the EU state aid regime could last between nine and 12 months, and that that often determined whether a project could happen or not. Under the new regime, a new body, the UK subsidy advice unit, must publish its report within 30 working days. That is in huge contrast to the nine-to-12 month period under the EU.
Liz Saville Roberts mentioned ideology. One ideology that I hope will always hold firm on this side of the House is that of not wasting taxpayers’ cash. Is the Minister comfortable with the situation in which local authorities and devolved Administrations could grant subsidies of hundreds of thousands of pounds without having to publicly declare them? Would we not be better with a much lower threshold, so that public scrutiny could always be in place?
Local authorities have to declare spending at much lower levels than the figure that my hon. Friend has just put forward. Clearly, transparency is at the centre of what we are trying to achieve. Instead of a year, the whole process will take only a few weeks. It will be a much quicker process and it will allow public authorities to act with far greater agility than before. However, I do not believe that the transparency will be in any way compromised. This is an area that will give more flexibility while not diminishing accountability. In fact, it will enhance accountability because, under the EU state aid regime, there was no way we could change the rules in any way.
At the same time, this is a regime that will provide certainty and confidence to businesses within the UK, and also to those among the foreign investment community who are keen to invest in the UK, by protecting against subsidies that risk distorting competition or causing harmful economic impacts. And of course, the regime will operate alongside our usual, traditional stringent spending controls to ensure the best use of public money.
Does the Minister not see the inherent flaw in his argument about levelling up and treating the whole of the United Kingdom as one, in so far as Northern Ireland will be subject to a dual subsidy regime: the state aid rules imposed by article 10 of the protocol and the Bill that is going through today? So any subsidy that a public authority Northern Ireland wishes to give will be subject to the very one-year scrutiny that he is talking about, whereas a public authority in the rest of the United Kingdom will have it cleared within 20 days, thereby placing any attempt to attract business to Northern Ireland at a disadvantage.
That is precisely why I am addressing this precise point in my speech, if the right hon. Gentleman will allow me. We are setting out the detail of a UK regime that is far from simply adhering to the EU, and it will clearly no longer be necessary for Northern Ireland to be subject to the EU state aid regime. That is precisely why we have proposed the change to the Northern Ireland protocol to bring all subsidies within scope of the domestic regime.
The Bill, as hon. and right hon. Members should know, has been informed by a public consultation, which showed broad support for the Government’s proposals. The Government also held a second consultation with the devolved Administrations as we reached the end of the policy work and the considerable time that we spent trying to get the Bill shipshape. That second consultation showed clearly that the UK Government and the devolved Administrations agreed on the fundamentals of the regime, including the seven principles, the objectives for the regime, and the need to respect the devolution settlements and support levelling up.
As I said, there is agreement on the fundamentals of the regime. The seven principles are not contested; they are agreed across the devolved Administrations and the UK Government. I am not privy to the exact motivation of the devolved Administration in this case but, as far as the general principles are concerned, there is a wide measure of consensus.
It is worth reminding the House that the devolved Governments will have more control over subsidies than they have ever had before. Previously, it was Brussels that made the decisions about which subsidies could be granted to support viable businesses. Now, with this Bill, it will be for the elected Governments in Edinburgh, Cardiff and Belfast to make those decisions.
During the trade and co-operation agreement negotiations and the creation of this new regime, ministerial colleagues, officials and I have worked closely with the devolved Administrations, and I thank those Administrations and the officials and Ministers here in Westminster for their considered and constructive input to the development of this policy.
As somebody who has represented a border constituency for the past 16 years, I have become increasingly concerned about the additional levels of subsidy that the Welsh Government can give to businesses on the border, putting our Shropshire businesses at a disadvantage. Will the Secretary of State address that point, please?
As I have stressed, this regime has been discussed extensively with the devolved Administrations. Clearly we have conflicting views, but I believe the Government have worked constructively with the devolved Administrations and we feel that, along with our localism agenda, this is a step in the right direction. Compared with where we were for nearly 50 years in the EU state aid regime, this Bill is a significant improvement and enhancement that represents much greater devolution in this area than we have ever seen before.
Is my right hon. Friend as afraid as I am that the nationalists in Scotland will use any opportunity to be different and will impose big, generous subsidies to artificially support their own businesses simply to try to ensure that the English feel hard done by because it suits their agenda of separatism? That is not, in any sense, in the interest of the taxpayer.
My right hon. Friend makes a legitimate and correct observation about the general obstructionism we sometimes see. There are seven principles outlined in the Bill, however, and one of them is not to distort the UK internal market, so what she says would clearly raise issues.
Our emphasis in this regime is on transparency, accountability and, of course, agility. This all means that we will not simply be replicating the European Commission’s role in the process, requiring a central body in Brussels to sign off on specific subsidies. In other words, the UK Government did not go to great lengths to secure autonomy from the European Union on subsidy control only to reimpose the same old EU rules months later. That is not what this is about. I hope hon. Members will agree that outside the EU we will have the opportunity to do things differently. We did not leave the EU simply to settle back into the old ways of thinking and into the way things were done before. Those days are over.
I strongly believe that making the most of this new regime will need a culture change, not just in public bodies, devolved Administrations and local authorities but in central Government. It will be a culture change to take more responsibility for our own decisions, not simply outsourcing difficult decisions to the European Commission as we did for nearly 50 years. It will mean that we can be more accountable to the electorate for when and how taxpayers’ money is spent, and that we will be more agile in distributing public resources.
The Bill will ensure that our new subsidy system will maintain a competitive, free-market economy that has been central to the UK’s economic prosperity and success for decades. In that spirit, I commend the Bill to the House.
Let me start by saying that it is good to see the Secretary of State still in his place after last week’s reshuffle. I also wish to congratulate the new Ministers in his team on their appointments. However, I am sure I am not the only Member of this House who has noticed that there are now no female BEIS Ministers. While businesses across the country recognise the importance of balanced leadership at the top of their organisations, it is remarkable that BEIS seems to be moving in the opposite direction, and overlooking the important contribution that women Ministers make to ministerial teams and indeed to our economic debate.
To turn to the Bill, let me start by thanking the Secretary of State for his opening remarks, in which he laid out the subsidy control principles and talked about the need for autonomy, transparency and accountability in the new regime. Labour recognises the need for subsidy control legislation which establishes the framework for the UK’s post-Brexit regime. As of
As my right hon. Friend Liz Saville Roberts alluded to and as the hon. Lady will be aware, the Labour Government in Wales are taking the British Government to court on this issue. Will she explain why the Labour party here in Westminster is not showing solidarity with its colleagues back in Cardiff?
I thank the hon. Member for his comments. I will be making a considerable contribution on the issues associated with devolution and our grave concerns about this Bill, which we would want to see corrected. They need to be addressed because we want legislative consent to be given and the concerns being raised by devolved Administrations to be addressed.
Much in this proposed regime reflects EU state aid rules, including the definition of a subsidy, the prohibition of unlimited state guarantees and the condition that subsidies should be justified on public interest grounds. Where the Bill significantly differs from the EU’s rules is in its departure from a pre-notification system, where subsidies had to be approved before they were granted. The Bill offers the potential of a quicker system where subsidies are not required to be approved in advance of being implemented, but are subject to a review and appeal system. We want this regime to be robust and to stand the test of time, but the new system will work only if it provides transparency, oversight and scrutiny, and there are key areas of the Bill where those are missing.
First, there are huge gaps in the Bill and crucial aspects are yet to be defined. The Bill may establish a regulatory framework of subsidy control, but it fails to provide any clear indication as to how and where the Government plan to see those subsidies being spent and at what scale. Labour is in favour of a subsidy system that backs British businesses and our economy, but it must operate in the context of a strong UK-wide industrial strategy, which for all intents and purposes is not nearly where it needs to be. Furthermore, there is no clear plan for how the new subsidy control regime will be used to support national priorities such as net zero. Much more needs to be joined up and coherent in the new regime.
Secondly, the Bill in its current form does not provide a fair role for devolved Administrations—we have heard that in hon. Members’ interventions—in developing and implementing the new regime. We believe that changes must be made.
Thirdly, we are concerned that the Bill does not strike the right balance between efficiency and oversight, particularly regarding the role of the Competition and Markets Authority. Transparency is also severely lacking in the case of some subsidies, putting the country at risk of allowing damaging subsidies on the scale of hundreds of thousands of pounds, and allowing the use of public money to continue unknown and therefore unchallenged.
Although the Bill may propose a quicker subsidy regime, we want to understand further how the Government plan for those subsidies to be used, what will be brought forward from the contributions to the Government’s consultation and the response to it, and how that will manifest in the guidance to come.
We have heard the concerns about support for assisted areas or key British sectors and foundation industries, such as steel. As the Minister for Finance and Local Government in the Senedd asked in her letter to the Government:
“If areas that have suffered historical economic disadvantage will no longer have the right to greater flexibility of subsidy over other regions… what alternative approach does the Government propose to ensure that disadvantaged areas can compete on a level playing field?”
Is the equivalent to an assisted areas policy implied under the seven principles, for example, equity rationale or specific policy objectives? In that case, will the Government make that clear in the guidance? Public authorities that will transition to the new regime in our devolved Administrations need that clarity.
Parliament is right to be concerned that the Conservatives are more interested in levelling-up rhetoric than in actually levelling up. In March last year, the regional deprivation fund highlighted that clearly, which led to considerable debate in the House. The Government appeared to direct money not to areas that needed it most, but to areas that seemed to serve their interests. If the Government are truly committed to their levelling-up agenda and their plan for growth, they need to show it. The Secretary of State should publish their plans and detailed guidance on how the subsidy control regime will direct public funds to the communities and businesses that need it most, in the interests of genuinely levelling up in deprived areas and our wider economy.
We also know that the UK has historically spent far less on subsidies than its international counterparts. For example, in 2019 the UK spent just 0.38% of GDP on state aid, far lower than Germany, which spent more than three times that or Hungary and Denmark. Indeed, we were seventh lowest in the EU.
The Secretary of State does not have the strongest record on industrial strategy, given that he scrapped his predecessor’s plan and wound up the Industrial Strategy Council in March.
Why does the hon. Lady equate the fact that the UK has an excellent track record of allowing businesses to stand on their own two feet rather than being bailed out with state aid with not having an industrial strategy? Surely we are backing capitalism as the way for everybody to become richer and be in work.
I will just leave the right hon. Lady with the Institute for Government’s feedback on the Government’s plan for growth, which was that it seemed more like a shopping a list than a prospectus. If those who independently look at what the Government are producing in terms of a plan and our industrial strategy make such comments, the Government would be wise to heed some of that feedback, in the interests of our country. I would like to be having a different debate. I would prefer to have a debate that was much more about content than on whether there is a clear plan.
Let me come back to my speech. We recognise the debate about whether the Government have a strong record on industrial strategy. Last week, the Confederation of British Industry urged the Government to
“build an economy of the future through catalytic public investments” and to re-find its “role as market maker”. On research and development, innovation, regional growth and hydrogen—on which, perhaps, a strategy has since come forward—the CBI said that further action was needed for the UK
“to remain internationally competitive against peer nations where business investment levels–and public spending…far outstrips our own.”
Sufficiency of strategy is important here; it is not just about the publication of a document. There has been feedback on that, too.
We want to see well-designed, proportionate subsidies as part of the wider industrial strategy that we need to grow the businesses and industries of the future and to invest in our transition to net zero. Labour has also said that we must buy, make and sell more in Britain, as called for by our shadow Chancellor, my hon. Friend Rachel Reeves. That is part of how we can ensure resilience in our economy—the need for which has been highlighted only too starkly by the gas-price challenge and the CO2 challenge of the past week.
The Bill lacks in not only vision but key details and scrutiny. The Institute for Government has expressed concerns about the ability of this House and the other place properly to scrutinise the new subsidy control regime, given the important issues that are being left to secondary legislation or guidance. The Institute for Government claims that the gaps left in the Bill by the Government
“could deny Parliament a proper chance to scrutinise how the new system will work”.
The Government’s own impact assessment says:
“There are considerable unknowns—because key features of the regime will be defined later in secondary legislation or statutory guidance. The analysis of the regime’s impact is also based on historical data when UK public authorities had to comply with the EU State aid regime.”
The impact assessment also says:
“We should expect the behaviour of public authorities”— perhaps the Secretary of State was alluding to this when he talked about culture change— “and the resulting distribution of subsidies to change under the new regime—although it is not possible to forecast how this will change.”
We are yet to hear how the Government plan to define categories such as subsidies “of interest” and “of particular interest”—categories that will determine which subsidies are voluntarily or mandatorily referred to the Competition and Markets Authority. Such definitions are to be determined not now, but through secondary legislation, in respect of which Parliament is given less opportunity to scrutinise the Government’s decisions. To aid scrutiny, which I believe the Secretary of State will want to be to the standards we would want in this House for a regime that will stand the test of time, he should set out the timeline for consultation on and the publication of secondary legislation that covers critical aspects of the new system.
I have been involved in extensive discussion with my colleagues, and they will want to make significant contributions in Committee to address the gaps in the Bill. We continue to work on that.
As I was saying, the Secretary of State should set out the timeline for consultation on and the publication of secondary legislation that covers critical aspects of the new system. I know the House will want to see that in good time.
Public bodies have faced significant difficulties since the start of this year precisely because of the lack of guidance on how to interpret the subsidy control principles agreed in the trade and co-operation agreement, so clarity on how public authorities should demonstrate that their subsidies comply with those principles will be an important part of the subsidy regime. I am sure the Secretary of State will agree that we will want to see some decisions being made in the interests of how we recover and how we are to grow our economy for the future.
On the important issue of devolution, most importantly of all we are concerned that the Bill has not taken the four-nations approach that is essential for an effective UK-wide subsidy control regime. For example, the balance of the power to challenge between the Secretary of State and the devolved Administrations is asymmetric. I am sure that the Secretary of State has heard those representations made to him directly. Twelve months ago, the shadow Secretary of State stood at this Dispatch Box and warned the Prime Minister of the risks of undermining with policy decisions the devolution settlement that has been part of our constitution for two decades and is vital to our Union. However, on the evidence of the legislation before us, it appears that a shift in mindset and thinking has not been a part of how the Government have brought forward this legislation, and we hope that they are going to listen to the concerns that we and other Members are raising.
The hon. Member will have heard my earlier remarks; although we have considerable concerns, we believe that the Bill is vital to us meeting our international obligations and we want it to pass. However, there are significant gaps and issues that must be addressed in Committee. I hope that he will work with Labour on those matters, so that the regime that comes out of this process is one that reflects the four-nations approach that I just articulated.
I appreciate the hon. Member’s remarks and I admire her confidence in being able to get the Government to address Labour’s concerns, but let me just be clear: is it the Labour party’s position that this Bill—irrespective of the damage it does to devolution—should pass?
Perhaps the hon. Member will allow me to continue with my remarks, because he has not quite represented our position. It is important that we continue the debate and detailed scrutiny of the Bill. The remarks that I am about to make may provide him with some reassurance on this issue.
Does the hon. Member accept that a regime of control is important for all the devolved areas of the United Kingdom: first, because it is a safeguard against richer regions being able to subsidise more heavily than poorer regions; and secondly, because it is a safeguard against central Government issuing subsidies that could affect the devolved regions? We need a strong regulatory regime.
The right hon. Member makes an important point. I will make some points in that regard later in my remarks.
As I was saying, on the evidence of the legislation it appears that the Government have not reflected in the Bill a true four-nations approach in order that we have a UK-wide subsidy regime that commands the confidence and support of all parts of the UK. We do not contest that subsidy control is a reserved matter, but we recognise and support the requirement on public authorities to consider the impact of a subsidy on competition or investment within the UK. It is important for the Secretary of State to make it clear to the House why there is such a limited role for the devolved Administrations in the development of this new regime. They are not even required to be consulted beforehand on advice given by the Secretary of State on the implementation of subsidies.
Under the legislation, the Competition and Markets Authority’s new subsidy advice unit will play an important role in protecting the UK’s internal market, yet the Bill provides no formal role for the devolved Administrations in appointing members to the new unit. Remarkably, the Bill is even less generous than the United Kingdom Internal Market Act 2020, which at least requires the Secretary of State to seek the consent of the devolved Administrations before making an appointment to the Office for the Internal Market. Can the Government not see how this flies in the face of a four-nations approach?
It is imperative that the devolved Administrations be involved in the development of secondary legislation and in the amendments to the Bill. Even more worryingly, the powers given to the Secretary of State and First Ministers are significantly asymmetric. Although the Secretary of State is explicitly able to challenge Scottish, Welsh and Northern Irish subsidies that may damage English interests, no complementary power is given to First Ministers. Unlike the Secretary of State, the devolved Administrations seem unlikely to be able to challenge English subsidies that may be perceived to be causing harm to Scottish, Welsh and Northern Irish interests. Will the Secretary of State clarify whether this is correct, or is it his intention that First Ministers would be considered as interested parties for the purposes—
I have given way to the right hon. Lady already and I hope she will not mind if I continue my remarks.
Will the Secretary of State clarify whether it is the Government’s intention that First Ministers, or public interest groups, be considered interested parties for the purposes of being able to bring forward a challenge to a subsidy decision—if so, why will the Government not put that in the Bill?—or will a challenge have to be made via the Secretary of State?
This is not where the devolution challenges end. Perhaps the Secretary of State could clarify his remarks on Northern Ireland, because, as I understand it, under article 10 of the Northern Ireland protocol, EU state aid rules must apply to subsidies that affect trade between Northern Ireland and the EU. This affects not only subsidies granted in Northern Ireland but subsidies granted throughout the UK. There is a risk—unless the Secretary of State wants to correct me—that article 10, taken alongside the new subsidy regime, could cause legal or practical difficulties, particularly if the UK and EU disagree on what affects EU-Northern Ireland trade.
I thought that I could not have been clearer on this precise point in my opening speech. I repeat: it is clearly no longer necessary for Northern Ireland to be subject to the EU state aid regime, and that is precisely why we proposed a change to the Northern Ireland protocol in order to bring all subsidies within scope of the domestic regime.
I thank the Secretary of State. Indeed, I did hear those comments in his opening remarks. I was seeking to clarify the issue because I do not think it is clear across the House, and it is important that it is tested and made clear in the course of the passage of the Bill.
Crucially, what is the Government’s intention if the Bill does not receive legislative consent from Scotland, Wales and Northern Ireland, as has been requested?
Is the hon. Lady suggesting a four-nation approach whereby any one of the nations has a veto over decisions taken by those four nations that they feel are not in their interest?
I am not clear why the hon. Lady refers to a veto. I think we are talking about the symmetry of powers in terms of being able to bring forward a challenge. I hope that makes the point clear.
If it is okay, I want to move on because I am conscious of time, but the hon. Lady may want to make her point in her own remarks.
Finally, on the issues of oversight and enforcement, while well-designed subsidies can support Government objectives and foster growth and opportunity, there are risks too. Subsidies can distort markets, undermine competition and unfairly discriminate between businesses. Effective oversight and enforcement are critical to the success of our subsidy control regime, yet they are lacking in certain areas of the new regime. The Bill does not provide enough certainty as to the definition of “interested parties” that are able to challenge a subsidy. Does that definition extend to local authorities and devolved Administrations?
There are also concerns about the limited powers of the CMA’s new subsidy advice unit under the Bill. We are pleased that a trusted independent regulator is being given key responsibilities. However, as the Bill stands, the CMA lacks any power to instigate an investigation on its own initiative or to take enforcement action. This requires careful consideration, particularly when transparency issues around the Bill are taken into account.
I am sorry but I will move on. I have taken an intervention from the hon. Member, so perhaps he can make his own contribution.
The Government have stipulated that subsidies under £315,000 over three years will not have to be reported on the subsidy database. However, there is an issue, also raised by Kevin Hollinrake, about the threshold and reporting. In the consultation on the Bill, the Government asked whether there should be a minimum threshold of £50,000 below which no subsidies would need to be reported, and 64% of those who responded agreed on that threshold of £50,000. On that general point, what are the Government’s plans for reporting, oversight and accountability arrangements for subsidies below that threshold? I am sure they will want to ensure transparency in how public money is being spent and to whom it is going.
On the decision made for a six-month time limit to upload subsidies to the subsidy database, there was a discussion in the consultation on whether that period should be shorter, or three months. What was the reason for deciding on six months? That seems rather a long time for a decision to be uploaded and therefore in the public domain. If interested parties and the Secretary of State are not made aware of smaller subsidies or those that are uploaded—they have a month to bring a challenge—there will be no opportunity to prevent them going forward, even if they are harmful. The CMA may be able to produce reports on such subsidies, but it will not be able to enforce any of its recommendations. Does that not expose a significant transparency gap in the Bill? The Government could choose to have further reporting requirements. I urge them to review the CMA’s role alongside the necessary transparency requirements for subsidies.
Labour recognises the need to develop a post-Brexit subsidy control regime in line with the UK’s international commitments. There are benefits from a more flexible and speedy subsidy regime, but we have serious concerns about gaps in the Bill that we will look to address during its passage. Those include unanswered questions on the operation of the new regime, its enforcement and oversight, and the role of the devolved Administrations. We want to see legislation that establishes an effective UK-wide subsidy regime that commands confidence across the country. The Bill gives the Government and other public authorities greater powers to provide subsidies. It is an important Bill, but the gaps in it must be addressed.
I am seriously pleased to see the Bill coming forward. It is much needed, not just because, as Seema Malhotra pointed out, it is a fulfilment of our international obligations, but because, as the Secretary of State rightly said, before we went into the EU and had any kind of proper subsidy control regime, it was pretty much a free-for-all and I am afraid that, no matter who was in government, broadly speaking, the lack of rules was terrible.
Politicians on all sides and of all stripes over an extended period have a dreadful track record in yielding to temptation, particularly when they are being lobbied hard by someone pleading desperately for this or that piece of help—it’s just one more wafer-thin subsidy, sir. We give way. We all do—it is only human—and it is a long proven fact that politicians are terrible at picking winners, but losers are really good at picking politicians. It is therefore essential that, as we come out of the EU, we have our UK-only version of a rules-based system in place. The Secretary of State is right to move towards that, even if we did not have those international obligations to deliver it.
I am also pleased to see the seven principles that are the core of the approach, backed up by various other environmental principles as well. They start with the notion that there must be a market failure before any form of taxpayers’ cash can start to be dished out. We can all think of businesses in the past—perhaps even today—that would have liked nothing better than to reach their sticky fingers into the taxpayers’ pockets and extract some cash to make their lives better, their shareholders’ lives simpler and their management’s lives easier. It is therefore absolutely right that the Secretary of State has limited his own freedom—and, more particularly, that of his successors—so that we can have, we hope, a consistent approach and we will not have open season for Government failure. We always talk about market failure in this place, but that principle is crucial for avoiding Government failure in future.
That is a point I made in the Government-commissioned report I was asked to write by the Secretary of State’s predecessor on competition policy. Self-denial is absolutely essential to make sure that we do not start splashing around taxpayers’ cash in an unproductive way and subsidising commercially hopeless cases because they have good lobbyists. The trouble is that the more hopeless they are but the deeper pockets they have and the better lobbyists they have, the harder it is to avoid that kind of temptation.
This is a welcome and necessary Bill, and it is vitally important. As my right hon. Friend Dame Andrea Leadsom said earlier, I do not think we should have any truck with the notion that we were not one of the most prolific users of subsidies when we were still part of the EU. We ranked relatively low in the league table against other countries in the EU in our use of subsidies, and as a free marketeer I think that should be a badge of honour. It shows that we are in general allowing capitalism to run and allowing capitalist animal spirits to move resources, investment and productive assets around our economy in the most efficient way to drive our economic growth. Ultimately, it is that economic growth that pays for the public services we all care about, and that we all need and rely on as well. So yes to capitalism and yes to avoiding distortions, discriminations and, dare I say it, potentially the risks of political favouritism if we do not have these rules in place and a rules-based system. I am delighted that this Bill is here, and it establishes some really important principles for all of us.
There is one small fly in the ointment, which I will mention now. I do not want to try your patience, Madam Deputy Speaker, by going into things that will I am sure be properly covered both in Committee and on Report. I will mention the principle at this stage—it has already been mentioned by my hon. Friend Kevin Hollinrake and by others—and it is the point about transparency. The Secretary of State has made that a central point, and he is absolutely right to say that he wants to establish the UK as one of the leading examples of subsidy transparency in, I think, the world. I may be misquoting him slightly, but I am sure the principle is one he would sign up to.
That is an absolutely core piece because if we do not have such transparency—if we cannot see what these subsidies are or we cannot see what they are until it is too late—how on earth are we to know that this excellent new set of rules-based principles are being followed properly or not? Sunlight is the best disinfectant, as we all know, and exposing this to public scrutiny cannot be bad. Because we are setting up this rules-based system, we should have nothing to hide. If we are worried about transparency, that is always a bad sign in the first place. Therefore, the central principle, which the Secretary of State and his fellow Ministers have already enunciated, is entirely the right one.
My concern is therefore not with the principle that the Secretary of State has enunciated; it is whether or not this Bill will actually deliver the principle in the way he hopes. This is a technical concern, not one of principle at all, but the technical concern is real. We have left the EU, but the EU’s basic rules for disclosure required us to disclose subsidies of above €500,000. The new Bill, as we have heard, has a variety of different exemptions, but broadly speaking it requires us to disclose subsidies of above £500,000. That means we will be disclosing fewer subsidies in future than we were under the EU because the threshold is higher. It is not the only threshold; there are other thresholds. One of them is even higher still, at £725,000, for public interest subsidies of one kind or another, which I think is for subsidising things such as buses and social housing. All those things may very well need subsidies, but why are we being secretive about it? Why should we not make this public?
There are very specific exclusions for inclusion on the central database. Would my hon. Friend extend his argument to consideration of those excluded items as well?
There are a couple of exclusions that I think make an awful lot of sense. For example, there is an exclusion about national security, which I hope everybody on all sides of this House would sign up to. However, in principle, to follow and frank the principle that the Secretary of State has rightly put across about how we want to be the most transparent about our use of subsidies—because it will show that we are following those rules, and that we are letting capitalism rip and therefore that productive assets are being used in the most effective way without distortion—in general there should be fewer exclusions, with only the minimal number of exclusions that is safe, although I completely accept that there will need to be some. There is no reason why we should worry about disclosing pretty much any subsidy, particularly because local councils, for example, already have to report anything they spend above £500. They already take records, keep notes, and publish those details, and it would be peculiar to say that although they have to declare spending above £500, they do not have to declare subsidies above £500,000. I am not sure that is terribly consistent.
The Secretary of State has rightly pointed out that when subsidies are notified they have to be turned round and approved or disapproved by the CMA within 30 days. That is entirely right. We need a prompt, nimble, and agile response in order for our economy to work in a prompt, nimble and agile way. It therefore seems odd, if I may put it politely, that we are allowing subsidies not to be registered for up to six months after they have been made. We will therefore have fewer subsidies declared, in a way that does not match what local councils already have to declare. Councils already have to keep such information and data; it is not something they will have to start doing from scratch, and all they will need to do is paste it on to a central database. They also do not have to put it out for six months. These are small technical tweaks, but they are central to delivering on the principle, which the Secretary of State rightly enunciated.
Is the hon. Gentleman concerned that a subsidy could be well in place for six months but then there would be a challenge period of 30 days? If there was a reasonable challenge and another body had lost out, would it not be a bit late?
The right hon. Gentleman is right, particularly because in the modern digitising economy, everything is moving faster and faster every year. Even if that issue was not a problem before—and I think it probably would have been—it certainly would become one in future. There is scope for tightening that part of the Bill technically, so as to deliver on the principles that the Secretary of State has rightly enunciated regarding timing, the degree of transparency and the level of disclosure. As we will have nothing to hide, we should not hide it; we should get it all out there and ensure that it is available.
My hon. Friend makes some strong points, and I absolutely agree with those about transparency. One objection to lowering the threshold to a few hundred pounds rather than £0.5 million might be the burden of red tape attached, but, as I understand it, the costs for having a database that includes pretty much every subsidy—about £20,000 per annum—are minimal.
My hon. Friend makes an important point. Indeed, he has led me to the final point in my speech. He is right to say—I know Ministers in the Department have this instinctively in the marrow of their bones—that we must not turn this into some bureaucratic red tape burden. Indeed, one chapter in the report that I was asked to write about competition policy refers to reducing red tape burdens. We all understand that too much of that will slow down even the best company and reduce its competitiveness compared with companies in other countries, so he is right to be concerned.
In this case, however, doing what I suggest should reduce the red tape burden rather than add to it. That is because one of the other exemptions, which I think is £325,000, is for a cumulative set of subsidies. If I have three or four subsidies granted by three or four different local councils, or perhaps by a devolved Government and some local councils, and they cumulatively add up to £325,000 over a three-year period, that has to be declared and everyone has to keep track of that. Under the existing Bill, individual councils making those grants will not be keeping that record. They will not be able to, because they will not know what the other councils have done. The companies that are getting those grants will have to keep their own records for three years. That is a business burden that we will create if we do not change the Bill right now.
If we just said instead, “There’s one central public database and everything gets put on it; no company has to keep any records whatsoever because it’s all out there and it’s visible, searchable, clear and transparent,” there would be no extra business burden at all and, as my hon. Friend the Member for Thirsk and Malton just pointed out, there would be minimal extra public burden, because the local councils, devolved Administrations and Government Departments keep these records anyway. All they would have to do is extend the print range on their spreadsheets slightly further down the page, or organise their automatic file uploads a little more simply, so the burden would be minimal. If we did it that way round rather than what is currently in the Bill, we would avoid creating a new red tape burden.
With that, I will do something unusual for a politician and shut up. This is a good Bill, it is an essential Bill, and it does some really important things. I am really pleased to see it come forward. My right hon. Friend the Secretary of State is doing precisely the right thing, in the right way. We have one concern about detail; with any luck, I am sure that can be ironed out.
It is a pleasure to follow John Penrose, who gave a fair tour de force of the Bill. I admired his concern about transparency, which was perhaps ironic, given that he sits on the Conservative Benches. The Tories have quite happily dished out billions of pounds worth of contracts to their donors and friends for wasted personal protective equipment throughout the pandemic, but I guess that in real terms, transparency comes and goes depending on—
Has the hon. Gentleman bothered to read the National Audit Office report, which specifically says that Ministers had no involvement in any procurement decision? Will he put that properly on the record? All he is doing by making those points is trashing the name of the whole of politics, not just that of the Conservatives. It is a complete nonsense, and he should admit it.
I welcome the hon. Gentleman’s intervention. It does not put a stain on all of politics; it puts a stain on the Conservative party, where it firmly belongs, because Conservative party donors and friends have gained the most from this pandemic when it has come to contracts. [Interruption.] Conservative Members can argue all they want, but the facts are as clear as that.
Now, to the Bill before us; we got a little side-tracked there. It is important to look at the wider context of the Bill: the present situation, the past regime, and what is to come, which of course is what the Bill sets out. Let us look first at what is in place at this moment in time. As I see it, and as I think all of us in the Chamber will see it, we left the European Union, but we left to a system of nothing. We do not actually have an effective system at the moment. Indeed, I think it was the Institute for Government that deemed the current system to be completely ineffective.
That is understandable. Of course, a public body looking at what it is going to be doing does not want to break any rules, so if it does not have a full understanding of what the rules are, it will obviously err on the side of caution. In many ways, that might be an argument for the Bill. I can certainly understand why that may be the case, and that was what the shadow Minister, Seema Malhotra, intimated in terms of meeting international obligations and the like. I do not think anyone would necessarily disagree with that.
Let us reflect slightly on where we have come from in relation to state aid. Some of this has been touched on already by Members on both sides of the House, but there is one specific aspect of it that I think needs to be aired properly. It was mentioned by the former Foreign Secretary, Dominic Raab, at the Dispatch Box during Prime Minister’s questions earlier, and again by the Secretary of State—perhaps not directly, but he certainly inferred it—that state aid was a problem of unelected bureaucrats in Brussels. Yet if we look at the facts before us, 95% of all state aid measures did not even go near the European Commission’s desk, so we are almost fixing a problem that did not exist in the terms that the Government think it did, irrespective of how much they want to make Brussels seem like the bad guys.
I appreciate, though I disagree with, the stance of some Conservative Members—the hon. Member for Weston-super-Mare made this point, as I think did Dame Andrea Leadsom when she was in her place—that we did not, when we were in the European Union, make the most of what we could do under state aid regulations. However, the facts are that, under those terrible state aid regulations, we invested but a third of what the Germans invested, and a fraction of what others invested, so the big bad guys in Brussels were not so bad after all. Yet we left that arrangement for a system that, at this moment in time, is completely ineffective.
That brings us to the next stage, as represented by this Bill. As I see it, the Bill’s objectives are to enable strategic interventions to support economic recovery, levelling up and net zero. That is not wholly different from the EU state aid rules, which were, of course, to support the environment and innovation. The one slight difference, however, is that the EU state aid rules had a specific remit for the EU regional aid system, whereby people advocated money to be directed to less developed regions.
I have to say that I am a little surprised that there are not a few more red wall Tories present, whose regions could be described as—[Interruption.] Jonathan Gullis is waving at me; I am sure he will seek to intervene on me in due course. If I were a Conservative Back Bencher representing a constituency in the north of England, I would be deeply concerned about this aspect of the Bill. Although the Government say that the objective of the Bill is to level up, it contains no detail at all. It says that the Secretary of State will come back, subsequent to the Bill, to provide the detail on how levelling up will work. More importantly, we have walked away from a system that put money directly into less developed regions.
I am a Conservative Back Bencher representing a red wall seat in north Wales. The previous EU system was very biased against regional and localised issues of deprivation. It went for large areas, but there are plenty of areas in north-east Wales that require the same amount of help as was gifted under the European system. I would argue that the new system is much more direct, much more localised and much more effective.
I admire the hon. Member’s optimism, but I am not quite sure where he has read that, because, of course, the Bill does not have that detail. He is hoping that the Secretary of State will subsequently provide that detail, but the Bill does not make that clear.
Another extremely important point that the Bill does not make clear is in relation to relocation subsidies. Essentially, the Government are saying that they will not relocate subsidies to areas with a more significant problem. They might want to level up—to use their term—but that is not going to happen under the terms of the Bill.
Does my hon. Friend agree that, in fact, the Bill does the opposite of levelling up, in that it refuses to allow anything to happen in disadvantaged areas that will disadvantage rich areas? That is how the Bill is written—it is in schedule 1F.
The Bill’s key objectives also include net zero. Again, there is no detail on net zero or how the Government intend to subsidise its delivery. We are being told to just believe—to hope on a whim and a prayer—that the Government will do this, that they will deliver. Let us look at that from a Scottish perspective. Let us look at the Government’s record. As the Minister and, indeed, others in this Chamber know only too well, Scottish renewables projects, which are key and fundamental to reaching net zero, pay the highest grid charges in the entirety of Europe. In the UK—on these islands—renewables projects in the south-east of England get paid to access the national grid, whereas renewables projects in Scotland have to pay to do so.
That is a vital point that will come forward in the next couple of months, when the Scottish islands could be providing as much as is coming across from some of the European interconnectors at present. On subsidies, Sammy Wilson made a good point on enforcement. In part 5, an “interested party” is defined in clause 70(7) as “the Secretary of State” while others are just people who “may be affected”. Should not Scottish Ministers, Welsh Ministers and Northern Ireland Ministers be specifically outlined? Or is this something seen as being granted by London and London only, leaving London to make arbitrary decisions on subsidies? My hon. Friend makes the point very powerfully that producing renewable energy in certain parts elicits a subsidy, while in other parts it is penalised.
Absolutely. My hon. Friend makes that point incredibly well and I will come on to that clear power grab from the UK Government.
To finalise the point in relation to net zero, the UK Government are telling us that we should trust them. Well, we don’t and we won’t.
The second objective of the Bill I want to touch on briefly relates to empowering devolved Governments—I mean, come on! Empowering devolved Governments. We are going to have a subsidy advice unit set up, a new independent body that will sit within the remit of the Competition and Markets Authority, yet the devolved nations have no say, no input at all whatever, in the role of that organisation or, indeed, who sits on the board. So of course that is not the devolved nations being involved as they should be. [Interruption.] Jonathan Gullis says it is independent, but of course that is not the case. Was it not the former Prime Minister who had a role in appointments to the board of the CMA, or have I got that incorrect? I think what he is referring to in terms of an independent body is the subsidy advice unit. Of course that is, but it sits within the remit of the CMA—that is the point I am making. The devolved nations have no role in that body. Those are two very separate but important points that am sure he will come to reflect on.
The biggest and most concerning aspect relating to the devolved nations is the fact that when a public body in Scotland or Wales decides that it wants to invest in a project, the UK Secretary of State, irrespective of whether the project relates to devolved areas, can choose to call them in under the remit of the CMA. That is a clear step into devolution.
We could have a situation where somebody in England decides to set up something on the Welsh border or Scottish border without, seemingly, the powers of Scottish or Welsh Ministers, or even the Scottish Government, to try to remove the attention of Westminster. That is like the Scottish Government setting something up across the North channel almost in direct competition with Northern Ireland, with perhaps Northern Ireland not having the power of equivalence that it appears to be giving to the supremacy at Westminster, which I think is very wrong.
From the Opposition Benches this afternoon, we are hearing a lot about asymmetry. In particular, we are hearing about a lack of involvement and so on. I will not make any points about sovereignty—I do not wish to go down that road—but I will make a simple observation and perhaps the hon. Gentleman can comment on it. Was that not the case when we were a part of the EU? We were directed into things. We did not have the same control he seems to think that they should have now.
The hon. Member makes his point in his own way, but let me be clear. How can I put this? We do not think that the system that operated within the EU was one that we should have turned our back on. What did we turn our back on it for? Let me answer that briefly, as a slight anecdote: it was for Brexit—the chaos of Brexit. Food shortages, staff shortages, trade barriers, the chaos that we see—
The hon. Member has had his say, and I am sure that he will make further contributions later.
Conservative Members come to this Chamber and tell us that Brexit will solve everything, but of course it has not; it has only made things worse for working people in our society. What we have before us, in no uncertain terms, is a Bill that undermines devolution, following on from the United Kingdom Internal Market Act 2020 and the shared prosperity fund. If they want to protect their Union, they are doing a damned good job of destroying it. Do some more!
It is a pleasure to speak in this debate and to follow Stephen Flynn. I echo my hon. Friend John Penrose in broadly welcoming the Bill’s direction, and indeed its existence; I think that we need a robust subsidy control regime and I am glad that we are putting one in place.
I largely welcome the Government’s central decision to put parameters and rules in place and then trust public authorities to follow them, rather than having a very strict consent regime that would then become slow and cumbersome. I think that that is the right way to go, but it is intriguing to read the Bill and find a control regime that applies only if there is a
“subsidy…of interest or particular interest”,
neither of which terms is defined. At some point, a future Secretary of State could end up with quite a controlling regime by defining “particular interest” as any subsidy of more than half a million pounds, and then we would be back where we were.
It would be interesting to hear what the Minister thinks a “particular interest” might be and what the criteria might be for going into it, so that we know roughly where the line will be drawn, where the discretion for authorities is, and where we will start to expect mandatory or voluntary referral for advance clearance. I do not object to that process, because one of the key things for any subsidy regime is getting certainty so that when a business receives a subsidy, it knows that the rules have been followed, that it is entitled to it, and that there will not be a claim in six months’ or a year’s time that ends up with its having to repay the subsidy and being in worse distress than at the start. Having a regime with clearly drawn lines, so that everyone knows where they are and knows that once something is given it will stick, is hugely welcome. When we consider the Bill in more detail, it would be helpful to know where the line of discretion will be drawn.
The quid pro quo of a regime without intrusive up-front clearance is that we must have transparency on what is being paid, so that everyone knows that it is consistent with the rules and that some public authorities around the country are not misinterpreting them or, heaven forbid, deliberately doing things that they should not be doing. Clearly a risk in any subsidy regime is money being paid out in unlawful ways, so we want to be able to identify that situation pretty quickly.
The hon. Gentleman is making some excellent points. I think that a Bill’s Second Reading is the time to test the arguments. He mentioned transparency, and a colleague of his debated a similar point with the SNP Front-Bench spokesperson, my hon. Friend Stephen Flynn. The crux of it comes back to the state aid point. In the European Union, there were 27 or 28 states and a very defined gamekeeper among all those poachers, namely the European Commission. The concern that I think SNP Members share is who the gamekeeper is and who the poachers are. Are the UK Government playing both gamekeeper and poacher in regards to subsidy? I am testing the arguments in this debate, but over time the Government will need to address the point and be very clear that they are not taking both sides, as poacher and gamekeeper.
I think that I understand the hon. Gentleman’s point. One attraction that I think the EU system had for the Treasury and occasionally for some politicians was that they could say, “We’d love to give you a grant to save your business, but tragically we’re not allowed to under EU rules,” when actually they did not want to because they knew it was not the right thing to do, so it was handy to have somebody else to blame. I think the Bill sets out that the CMA is the body that will or will not give clearance. It will not be Ministers doing that, so if the hon. Member wants a gamekeeper in this situation, I think it is the CMA.
But is the CMA not a body of Westminster construction, as opposed to being a body of the Union?
Well, there are many Parliaments in this United Kingdom at the moment, and we know that each and every one should have the same voice. If this is the poacher and gamekeeper Parliament, surely that is a problem for Northern Ireland, Scotland and Wales—that is the argument that I would postulate.
I think it is fair enough for a UK single market to have a single regulator that decides a subsidy regime to ensure that the application of the rules is consistent across the whole of that single market. The hon. Gentleman wants to go back into the EU single market, which has a single regulator which decides things across the whole of that its single market. He does not seem to accept that the EU single market should have the same arrangement.
I am grateful to my hon. Friend, but I think we should move on from this point before we lengthen the debate into something that we do not want.
As I was saying, a transparency regime enabling us to see promptly what is being paid to whom and for what reason, and what the expected outcomes are, is of key importance. I agree with what my hon. Friend was saying earlier: a regime in which we have to wait six months for a disclosure, and then only of amounts over half a million pounds, has the wrong balance. I think that is where we end up with concern over subsidies, and scandals brewing, and then a lurch back towards more of a clearance regime. I urge the Government to rethink those points.
We are not expecting public authorities to be handing out huge numbers of subsidies after half an hour’s consideration. The rules that we are introducing are fairly strict. There will have to be some careful consideration of any proposed subsidies to ensure that those rules have been met, and there are processes for checking that the person who is being paid has not already exceeded a certain threshold. It is not a half-hour, quick and dirty process; there is plenty of time to gather the information that is needed to declare the subsidy, which can then, pretty promptly, be put on to what I suspect will be a simple database form that the CMA, or whoever, will put in place. I do not think it is an intrusive burden to have to say, “Here is what we gave to whom and why.”
I should add that I would like it to be possible to see the identity of the beneficial owner of the entity that has received the subsidy on the database, so that we can see who is really benefiting, rather than seeing some obscure, lower-down subsidiary name, which would make it not very easy to trace by going through the whole system who has been getting what from different public authorities.
Let me suggest as a comparison the furlough scheme, which is essentially a subsidy being given to businesses to pay their employees’ wages. We have published the names, in a range of bands starting with £1 to £10,000, of employers who have received that subsidy during the pandemic. I think that if we can publicise the details of employers who have received up to £10,000, we can justify publishing the name of anyone who has received a subsidy that has gone through a due process, down to a much lower level than £500,000, without its being unduly damaging to their commercial confidential interests. I think that someone involved in the process of asking for money from the taxpayer should accept and welcome that transparency. There should be nothing to be ashamed of, nothing to hide: if that money is needed for a good purpose, there is no reason why we should not know about it. I urge the Government to make some changes in that regard.
I was intrigued by the remarks about the way in which taxation policy can elide with the subsidy regime. There are quite a few cut-outs for taxation situations which I guess make sense, but I think there could be a role here. If we are giving individual taxpayers very generous tax deals, letting them off liabilities that they may owe for reasons that may not necessarily be entirely technically robust—as people have feared before—I see no reason why those should not count as subsidies and therefore be published through this regime, in order to get around that horrible situation in which we know that deals are being done but we do not know who the beneficiaries are. I think that it would be an interesting legal challenge to establish whether they are caught by these rules.
My final remark—I think—concerns the exclusion of subsidies for purposes of national security. I have absolutely no objection in principle to our being unable to publish everything that is spent in relation to national security, but those words—
“for the purpose of safeguarding national security”— constitute a very broad definition. We have hit a problem with the freedom of information rules in this regard. Some authorities have an incredibly broad interpretation of what that means. I think it was the West Yorkshire fire and rescue service that would not publish a response to an FOI request about the vehicles it had bought in case someone could somehow clone them and thus get into its premises. I hope that the Government are not expecting to have such a ridiculously broad definition of national security that we cannot in any circumstances see the subsidy given to any defence company, or police authority, or fire and rescue authority. Given that energy security is probably a national security issue, presumably no energy subsidy could be published. I suspect that some creative people around the country could find all manner of ways of making the broad definition “for the purposes of national security” exempt almost anything from these rules. I hope that we can be clear in Committee about the sort of things we think we should not publish, and about where the line should be drawn as to what we can see. If we have too many exemptions from these rules, we will end up weakening confidence in the system. We could end up with scandals that could lurch us away from the fast-moving, flexible system that the Government want in order to get aid where it is needed fast. We could end up back in a cumbersome, slow and bureaucratic system to try to avoid the scandals that we could see from a lack of transparency.
It is great to hear the thoughtful contributions from that Tory Bench, although not from the Treasury Bench, I hasten to add. Nigel Mills and I have spoken in many debates together, and I always appreciate his forensic assessments of the details in the Bills before us. I hope that he will be on the Committee, and I hope that I will be too.
First off, I want to ask a couple of questions about what the Secretary of State said, because I am immensely confused by a couple of the things that he said. First, he said that the devolved Administrations were broadly happy with the Bill. If they are broadly happy, why have the Welsh Government said that they object to five of the six parts of the Bill? One out of six does not equate to “broadly happy”. In fact, I get the impression that they really do not like it and are not happy about it.
We have not seen what the Scottish Government are saying about the legislative consent motion, but I cannot imagine that they will be terribly happy with the power grab that is occurring as a result of the Bill. So I am quite confused by what the Secretary of State said. Does he mean that the devolved Administrations are broadly happy with having a state aid regime? Does he mean that they are broadly happy with the detail of the Subsidy Control Bill? I do not know. I do not understand what he is saying, because it does not seem to be coherent with what the Welsh Government have said in public about this.
The other thing that I am really confused about is what the Secretary of State said about the EU state aid provisions no longer applying to Northern Ireland. I thought he said something about article 21 of the Northern Ireland protocol, but maybe he meant article 16. I am not sure what he meant. In terms of the planned changes to state aid application in Northern Ireland, he seemed to be saying that the new subsidy control regime would apply there and that the UK Government were seeking some sort of change to an article in order to ensure that that happened. I am not aware of any publicity around the UK Government asking the EU for a change, but if that has happened, why have we not heard about it?
Could we please have a bit more information on this? We have the trade and co-operation agreement and we have the Northern Ireland protocol, but how do the UK Government expect these measures to apply in Northern Ireland without us breaking either the agreement or the protocol? That does not make sense. If the Secretary of State was making that important an announcement, you would think he would do it in a ministerial statement rather than as an aside during the Second Reading of this Bill. I would be really keen to hear a bit more information about what this actually means.
The hon. Lady is absolutely right about the confusion that has been raised. Does she agree that it is important that the Government clarify what they are suggesting has changed in relation to article 10 of the Northern Ireland protocol and whether it has been dropped on the basis of this Bill? Should they not also tell us whether their proposal has been negotiated with the EU, and what the status of those discussions and any agreement might be?
Absolutely. If we as a country can suddenly renege on our international obligations and agreements, why cannot Scotland hold an independence referendum next week? The UK has agreed to these agreements and it would be great, when the Minister speaks at the end of the debate, if he could explain exactly what is going on. This is serious enough for a Minister to be making a separate statement to the House, because it is such an important matter for the people of the UK and particularly for the people of Northern Ireland.
My hon. Friend Stephen Flynn spoke eloquently about the levelling-up agenda, and I agree that the red wall Tories elected in the north of England should be jumping up and down about this—we are jumping up and down about it, as Dame Andrea Leadsom suggested—because it explicitly excludes us from doing anything that may disadvantage any other area of the UK. In schedule 1, principle F says:
“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom.”
And principle G says:
“Subsidies’ beneficial effects…should outweigh any negative effects, including in particular negative effects on competition or investment within the United Kingdom;
international trade or investment.”
That reference to international trade or investment confuses me.
The principles try to level the playing field across the UK, so there can be a subsidy in Manchester only if a person in the south of England would not move their company as a result.
For balance, does the hon. Lady accept that principle A says:
“Subsidies should pursue a specific policy objective in order to remedy an identified market failure”?
If there is market failure and certain regions of the United Kingdom are disadvantaged because of their distance, history, lack of skills, lack of resources or whatever it happens to be, principle A allows subsidies to be used for levelling up.
Principle F rejects that, so which one has primacy? Which one is the most important? If they directly disagree with each other, is it more important that we can do what is said in principle A or is it more important that we can do what is said in principle F?
I think the subsidy regime should be used in the same way as the EU state aid regime, which focuses on regions that need additional support. Whatever this Conservative Government say—we will not believe them anyway, given the amount of lies we have been told—it is not the case that this regime assists levelling up; it does the opposite. If they want to assist levelling up, they should design a regime that ensures different areas can have different subsidy regimes that benefit their local area even though they may disadvantage other areas.
The hon. Lady may have identified this herself already, but freeports, for example, allow businesses to relocate and benefit from different taxation regimes. Such businesses are treated more beneficially in how they operate and in their cost of operation. Does she accept that freeports do exactly what she is setting out?
Freeports are not covered by the subsidy regime we are talking about today. They are a separate thing. I can say from the Back Benches that I am not particularly keen on freeports, but the idea is that there is a wall around the port—the guidance specifically says that there has to be a physical barrier around the area—and there is a different taxation regime within that wall. I am yet to be convinced of the economic benefits that will come as a result.
We hope to have green ports in Scotland, and the failure of the UK Government to agree that we can pay the real living wage and focus on net zero within those green ports means that the freeport system, as it stands, is not nearly as advantageous as it could or should be. Even though the freeport system is set up to encourage such things, I have not seen evidence that it will actually do so, particularly given the rejection of the key principles we want to put in place.
It is unclear that the UK Government have a strategy to replace the EU’s successful regional structural funding for Wales, Northern Ireland and many parts of the highlands in Scotland. Such funding and state aid go hand in hand, and they are seen as different things. Indeed, the freeports are seen as a different thing. There needs to be something else to go with this for areas of the UK that are disadvantaged by policy set in the south-east of England for the south-east of England.
Absolutely. We need to replicate the good things we had in the EU, the things that supported different areas. A system has been put in place to ensure that different parliamentary constituencies can get money from the UK Government, but it is super-interesting that the constituencies the Government have chosen to put at the top of the list are those constituencies represented by Conservative MPs, rather than the constituencies with the highest levels of deprivation. The difference is dramatic.
It is hugely concerning that, if the UK Government are left to do so much in this Bill by guidance, as set out in clause 79, we are going to have a situation where the Secretary of State will have significant control and flexibility without even having to come through door of this House. The Bill says that the Secretary of State is going to issue guidance about
“the practical application of—
(a) the subsidy control principles;
(b) the energy and environment principles;
(c) the subsidy control requirements in Chapters 2 and 3”.
I am clear that there needs to be detailed guidance, but we should be at the stage where we are scrutinising it. When we come to the evidence sessions in Committee, the people before us should be able to talk about the guidance. I get that some of the regulations are going to be made by the affirmative resolution and some by the negative resolution, but my major concern is not those that are going to be made by resolutions in this House; it is those that are going to be made by guidance.
Let us we look in detail at some of the stuff in this Bill. Schedule 2 says:
“Subsidies in relation to energy and environment shall be aimed at and incentivise the beneficiary in—
(a) delivering a secure, affordable and sustainable energy system and a well-functioning and competitive energy market, or
(b) increasing the level of environmental protection compared to the level that would be achieved in the absence of the subsidy.”
I am keen to know what “environmental protection” means. What does it mean? It is not in there. We do not know what it means because we have not seen the guidance that the Secretary of State is going to be allowed to produce on their own without running it past this House.
The same applies in respect of
“a secure, affordable and sustainable energy system and a well-functioning and competitive energy market”.
Does that mean a well-functioning and competitive energy market for those people who buy and sell energy, or for the consumer? Does it mean for the person who is being hit by those higher fuel bills or for the people trading gas on a daily basis? I do not know what it means because we do not have that information. If the Government were willing to provide us with the guidance, and we had access to it and seen it, we would be able to ask questions and comment on the specificity of the guidance. When we have experts come before the Committee, we would be able to hear their expert opinion on it, but we cannot, because we do not have the guidance. It is really unfortunate that, on Second Reading, when we are deciding whether or not the Bill should go forward, we have not got the information we need in order to do that.
I want to make a couple more points about energy. One of my colleagues mentioned the transition charges. The subsidy regime that is being set up says, “We can’t have one part of the UK advantaged over another part of it.” However, it also says, “No subsidy can negatively affect interconnectors.” So we will still have a situation where energy from the EU is allowed to come into the UK—the companies are not paying any charges for using our network—yet people who have wind farms in Scotland are paying £5.50 per unit of energy. And those in Wales are being paid £2.80 per unit of energy. That system was created when fuel was driven around in vans and had to be driven to places that then used the power. One of my colleagues said that there is an incredible level of disinterest among those on the Government Benches about dealing with transmission charges. I appreciate that some of them have considered it, but a Minister has not stood up to say, “You are right. This is a travesty and we need to fix it.” We would really like a commitment on that, particularly if this Bill is going to give protection to interconnectors but no protection to those wind farms in the north of Scotland that are being charged an absolute fortune.
I want to talk about the Labour party’s position on the Bill, as I am really disappointed that it is not willing to vote against it. It is important for it to do that. We are going to vote against it. I am on the left. I appreciate all the things that the Labour party has done in the past, but I have spent six years getting increasingly frustrated by the failure of the Labour party to oppose this Tory Government and to stand up even for the Welsh Government at this point. This is really unfortunate. I do not understand at all why the Labour party is not voting against this tonight. We are voting against it. I am not going to support this Bill, as I do not think it should get its Second Reading. I say that for reasons of the power grab, the massive inadequacies in the Bill and the fact it is going to do the opposite of levelling up—it is going to entrench the inequality we already have.
I welcome the Bill, particularly as a Welsh Member of Parliament, because it will provide the framework for a new, UK-wide subsidy control regime. This will, for the first time, enable authorities, including the devolved Administrations and local authorities, to deliver bespoke subsidies that are tailored to local needs. I want to reinforce that point because it has been a key part of the discussion, in reference to the EU subsidy areas. In my opinion, those regions were not targeted enough. Large parts of Wales were not included in them, despite having areas of deprivation. The Bill will apply to the parts of Wales where need is greatest.
The Bill is also essential—the UK internal market is essential to our prosperity. Trade with the rest of the UK is worth more than trade with the rest of the world combined to Scotland, Wales and Northern Ireland. That is especially the case in Wales, where Welsh businesses purchase more from the rest of the UK than from Welsh businesses plus the rest of the world.
The Bill promotes accountability through a standardised, UK-wide database. Transparency and simple comparison will provide accountability across the UK. It must be stressed that reporting by the devolved Administrations is often absent or uses different criteria, which prevent like-for-like comparisons. For example, the Welsh Government do not publish waiting list times for all NHS procedures, unlike other parts of the UK.
The Bill promotes the Government’s levelling-up objectives. The UK is built on local communities, not just Belfast, Edinburgh, Cardiff and London. Building up and streamlining local authorities’ partnership with the UK Government are key to strengthening the Union. Speaking as a Welsh Member of Parliament, I have to say that the Welsh Government are not the easiest organisation to deal with for those living in north Wales and looking for Government help. Their focus is very much on south Wales. The message from the debate that giving money and subsidy control to the Welsh Government will mean that money is spread across the Principality is incorrect. I was interested by the remarks of Jonathan Edwards. He should be fair and recognise that Plaid Cymru is riding two horses in negotiating an agreement with the Welsh Government in Cardiff, yet criticising the Welsh Labour party while here. Plaid Cymru Members need to recognise that they cannot have it both ways.
The Bill benefits the devolved Administrations, too. That message has not come across strongly enough in the debate. It lowers costs and streamlines decision making, including for the devolved Administrations. Streamlined subsidy administration ensures that the devolved Administrations can roll out their own regimes at lower cost and greater speed. The UK internal market competition distortion principle will protect the devolved Administrations and the English regions from being pushed into competition spirals with neighbouring authorities.
I am pleased to back the Government on the Bill, which takes back control from the EU, allows us to deliver on the British people’s priorities, strengthens the Union and gives confidence and certainty to businesses and investors. It will enable local authorities across the UK to play an equal role, rather than everything always being put in the centre, in London and in the devolved Administrations. We need to enable the whole country, at a local level, to become involved and provide the dynamic to create a better life for all our citizens.
It is a pleasure to participate in this debate. I thank the Minister for his engagement on the Bill; it was useful to discuss the seven principles in detail beforehand. We welcome the fact that the Bill has been introduced, that there is a proposal to replace the EU subsidy regime and that the Government are making provision for it, but I put it to the Government that what is in the Bill is really only half of what we need if we are to have an effective and adequate UK subsidy regime.
The first thing missing relates not so much to what is in the Bill but what should stand alongside it: an effective industrial strategy. The Bill makes it clear that the purpose of the regime is to guide the awarding of grants for strategic purposes, but we do not know what the strategy looks like because we do not have an industrial strategy that identifies our key sectors and industries. As Kirsty Blackman put it so succinctly, we are not even entirely sure which regions of the UK we most want to support. Any subsidy regime that is not accompanied by a clear industrial strategy is really only half the picture, because we just do not know where the public support might best be directed.
As a number of Members have already said—I defer in particular to John Penrose and the points he made—the key thing missing from the Bill is transparency. What subsidies will be paid to whom? Without that level of transparency, we will have no real scrutiny of the decisions made. Quite apart from all the other related points that have been made, the key thing for me is how we can measure the value or impact of subsidies if we do not have a clear idea of exactly what subsidies are being paid to whom and for what purpose. How can we be certain that those subsidies reach the right people, organisations, regions and sectors, and that they provide the kind of targeted support that we want? Without clarity and transparency, we cannot properly evaluate what the taxpayer subsidises.
The point about the scrutiny of individual subsidy decisions has been made a number of times. There has been much discussion about the CMA’s role, but it strikes me that although the CMA will have a role to play in scrutiny, it will have no enforcement role. It is probably right that the CMA will be consulted not on every particular subsidy but just on those that are of interest, but for it to be asked to look at subsidies of interest but have no enforcement role seems to me to be a bit of a waste of time. It also highlights the fact that no overall independent body will assess the subsidy regime and whether subsidies have been awarded according to the principles outlined in the Bill. Who will hold the various local authorities to account for ensuring that the principles have been adhered to? There does not seem to be a role for any independent body.
Without an industrial strategy, clear data on which bids are successful and an independent body to provide guidance, how much faith can individual businesses, or their lenders or investors, have in their likelihood of success? How can confidence be built among investors who bid for a subsidy? How can they assess their likelihood of success? The Bill will lead to inefficiency in the system, because it will discourage businesses that might have had a good chance of getting a subsidy if only they had had all the information available when making their bid, and the available subsidies will perhaps then be given to businesses that do not have such a good case.
I refer again to the hon. Member for Weston-super-Mare, who used the term “unproductive”. As a member of the Public Accounts Committee, I care as deeply as any other Member in this place that we get good value for taxpayers’ money. It seems to me that without clarity, guidance or an overarching industrial strategy, there is a real danger that subsidies will be awarded behind closed doors, without clarity. That would make for the inefficient allocation of resources, which we all want to avoid.
The only restraint on subsidies that this legislation allows for is the threat of legal action by competitors who might have missed out. Without that clear information about who is getting a subsidy and what for, it seems the information simply is not going to be available for those legal challenges to be mounted. How will affected businesses know that they have been disadvantaged and how will they be able to gather sufficient information to mount an effective legal challenge? None the less, that legal challenge appears to be the only effective restraint on how subsidies are handed out.
Through this Bill, the Government seem to have constructed a regime that will enable secret payments without scrutiny or challenge. It does not provide enough of a route to challenge or anyone to hold to account in order to ensure that the principles are being observed. To be honest, it surprises me that this Government, who already have a reputation for cronyism, would not take greater care to ensure that those perceptions were not perpetuated.
It is a pleasure to speak in this debate and to listen to the various arguments on both sides of the House.
I am a committed free marketeer and have been in business for most of my life, and I do not think that I have ever accepted a Government subsidy—other than perhaps last year under the coronavirus business interruption loan scheme. I would be interested if the Minister could reflect on whether that would qualify under this legislation. I do not really believe in subsidies, but a world without subsidies requires a perfect free market and we do not have a perfect free market. We do not have the perfect consumer, the perfect market competition or the perfect provision of small and medium-sized enterprise finance. At times, a Government absolutely need to step in and provide subsidies where there is market failure, so I welcome this legislation and the vast majority of its provisions.
Does the hon. Member think that the Government, under these new terms, will provide more subsidies than they did under EU state aid, or the opposite?
I know that is the hon. Member’s question, but I think it is the wrong question. For me, the key question is whether the subsidy is going to spend taxpayers’ money well. We can claim success not just by giving more money away than was wasted, but when the taxpayers’ money that is used proves fruitful. We should not be disappointed that we have had one of the lower subsidy levels of the countries compared today. We should be proud of believing that our businesses should stand on their own two feet. Nevertheless, I do support on occasion the Government and other public authorities providing subsidies in certain areas and for certain things.
I welcome the Bill. I know that the Minister will ensure that it receives good scrutiny and passes through its different stages. I echo the comments of my hon. Friend John Penrose, in that my key point is about having a greater level of scrutiny and transparency. The No. 1 reason for transparency is that, as my hon. Friend said, Governments of all shades are pretty poor at picking winners, so it is important that Governments and public authorities are held to account for their decisions to grant subsidies, which are taxpayers’ money and must therefore be spent well.
Sarah Olney made an important point about cronyism. Some of the claims of cronyism in procurement that we have heard today are unsubstantiated and have been shown to be inaccurate in the National Audit Office report. People who claim otherwise bring shame on every single Member of this House; it is a flawed method of political point scoring that is deeply unhelpful. The National Audit Office clearly said that Ministers were not involved in procurement decisions.
Nevertheless, I believe in scrutiny and complete transparency, particularly when significant amounts of money—up to half a million pounds in some schemes, as we can see from the legislation—can be handed out by a local authority or devolved region, without scrutiny. Some local authorities have better reputations than others when it comes to spending money, so it is really important that we can see exactly what local authorities and devolved Administrations are doing. My right hon. Friend Dame Andrea Leadsom brought up this point. If we do not see a level of scrutiny, different parts of the country could try to use different means of creating some advantage, or indeed try to raise grievances, which is something that we hear not too infrequently in this place.
I absolutely support the proposal to reduce the threshold for scrutiny and transparency from the current level of £500,000, or £315,000 for cumulative subsidies outside a scheme, to a much lower level of £500. As a businessperson myself—I declare an interest—I would have no objection to declaring any taxpayers’ money we had received in our business. I think the only time we have ever received it was through the furlough scheme and the coronavirus business interruption loan scheme, which we returned without drawing on it. If we are taking taxpayers’ money, we should be accountable for it, whatever level it is at. I think the only objection that could be raised to a much lower limit would be creating red tape, but according to the research I have seen, there is a minimal amount of red tape and a minimal amount of cost—about £20,000. This simplifies matters in many areas.
In all the different cases where things have gone wrong—I deal with lots of cases of fraud and malpractice in all kinds of different financial markets—the key element of scrutiny and transparency in identifying wrongdoing has usually come from members of the public, who are perhaps closer to the ground than our regulators. If the database is made fully public, we are more likely to pick up on wrongdoing. Members of the public, and members of the press, do a fantastic job in tracking down this kind of wrongdoing.
I urge the Government to look at the threshold and bring it down to a much lower level. Aside from that, I welcome the Bill and look forward to the comments of my hon. Friend the Minister.
In principle, we welcome this Bill. First, it represents an opportunity for us to introduce subsidy control regimes that are specific to the United Kingdom and are not influenced by Brussels and the wider European interest, hence sometimes actually detrimental to our own country. It is an important part of the whole Brexit process that we have this independence.
Secondly, it is important that we have a nationally controlled regime. As one who speaks from a region of the United Kingdom, of course I want an even playing field when it comes to the application of subsidies. Some regions are richer than others and will therefore have more money to be put into subsidies than others. Some areas may have more political influence. That is partly why I find some of the objections raised by Opposition Members very odd. For example, a Minister in central Government could introduce subsidies for constituencies in a way that is beneficial to the electoral interests of his own party—the governing party—and we need a control regime that enables that kind of decision to be challenged.
My only concern about the Bill—perhaps the Minister will clarify this later; it has been raised by Members already—is that the challenge function seems to be limited to either the Secretary of State or to interested persons. As far as I can see in any definitions that have been given in the Bill, interested persons would not include Ministers from any of the devolved Parliaments or Assemblies in the United Kingdom. In fact, the only such definition is in clause 8, which refers to businesses and enterprises. The Minister needs to clarify this. If he wants to argue that this is a robust control regime, then the ability to make referrals must not just rest with the Secretary of State. It must also rest with devolved Administrations, who have interests in how subsidies may be used, particularly by central Government Departments or Ministers. Others may want the challenge function so that they can make mischief. If the Minister is serious about saying that we want to have an effective UK-wide regime, it must be clear that the function is available to all interested parties across the UK.
I come specifically to the Northern Ireland issue. Of course, in Northern Ireland the control of subsidies will not be totally under the Competition and Markets Authority or the tribunals. We will operate a dual regime under the withdrawal agreement and the Northern Ireland protocol. On state aid and its controls, it is quite clear:
“The provisions of Union law listed in Annex 5”— a whole list of EU rules is there—
“shall apply to the United Kingdom, including with regard to measures supporting the production of and trade in agricultural products…in respect of measures which affect that trade between Northern Ireland and the Union which is subject to this Protocol.”
The Secretary of State said in answer to the Opposition spokesperson and, I think, the Scottish National party representative that, as far as the Government are concerned, it is clear that Northern Ireland is covered by the Bill, but the only way in which Northern Ireland can be totally within its provisions is through the removal of article 10.
I know it is a lengthy Bill, but I have read through it and I do not find any reference to article 10 being altered, removed or changed. Perhaps the Minister can point that out to us later on. I would welcome that, by the way; in fact, I would be overjoyed, and people in Northern Ireland would be overjoyed if that is hidden somewhere in the Bill in words that I do not understand, have not spotted or whatever. If it is there, please point it out. There will be great rejoicing in Northern Ireland as a result.
The hon. Member made that point, and I was not sure whether she was supportive of the withdrawal of article 10 or appalled at the prospect because the EU opposes it. The one thing I did notice, however, was that she was appalled that there should be any interference in the role of the Government in Scotland to make subsidy decisions. If that is the case, she should be equally appalled for policy makers in Northern Ireland and welcome any unilateral decision by the Government here at Westminster to give them the same freedom.
I honestly do not have a view on whether it is a good or bad thing. I am just utterly confused, because I do not think that the Government have the power to do it. I want to know what they mean so that I can work out whether I oppose it or not. I do not know what they are saying.
Of course, the Government have the power to do it under article 16 where it is deemed that provisions in the withdrawal agreement are damaging economically to Northern Ireland. I cannot think of anything more damaging to Northern Ireland than a subsidy regime that applies in the rest of the United Kingdom but which can be stopped from applying in Northern Ireland.
Let me give some examples of how conflict between the dual systems could operate. One of the principles outlined in schedule 1 is that subsidies should be proportionate—there is no fixed percentage; it is simply that they be proportionate—but under the EEA-EU state aid regime, subsidies cannot be more than 50%. For example, if a subsidy is made available to a firm in Scotland that could equally be looking at Northern Ireland, Scotland would have the advantage of saying that it is so important to Scotland and fits in with its objectives that it will give it a subsidy equal to 70%—that may even be accepted under the control regime in the rest of the United Kingdom. However, Northern Ireland would be excluded from seeking to attract that firm on the basis that the EU state aid rules say it cannot go over 50%. That is one way in which the dual system is going to be a disadvantage.
Another example is that the EU refuses to allow state aid to be given where it is simply for expansion, but under the principles outlined in schedule 1, a subsidy of that nature could be given in the rest of the United Kingdom. We could find that a subsidy complies with the control regime in GB, but does not comply with EU state aid rules in Northern Ireland, so placing Northern Ireland at a disadvantage.
On the EU state rules—and the Secretary of State said it—one of the reasons for bringing forward our own control system is that it can be more flexible and quicker. In fact, I think he said that a decision could be made within 30 days, but under EU state aid rules, there has to be a standstill period that can last up to a year. The Secretary of State said that in the House today. Again, when it comes to attracting businesses by using subsidies in Northern Ireland—even if we could match the subsidy available in England, Scotland and Wales, or wherever else somebody is trying to attract the firm—the slowness of the process, imposed by the fact that we are subject not only to the control regime in the rest of the United Kingdom, but to EU state aid rules, could mean that we find that a firm simply says, “Well, we can get a decision quicker in England, Scotland or Wales, and that is where we are going”, and Northern Ireland would be disadvantaged.
That is one of the reasons why no fiddling about with regulations is going to make a difference here. If Northern Ireland still remains firmly under article 10 of the withdrawal agreement, state aid rules apply there and the dual system has to apply there, then this is not a case, as someone has said, of trying to control the subsidy race, because Northern Ireland cannot even enter the race. We will be spectators of the race, stopped from entering it by the provisions of article 10 and the requirement for Northern Ireland to remain under the state aid rules.
Lest people think that this is just an issue for Northern Ireland—they may say, “Well, tough! That was what happened with Brexit.”—let me say that this is the elephant in the room and the issue has not been addressed in this Bill. Those state aid rules apply to trade between Northern Ireland and the Union, but any subsidies to a firm that operates through Northern Ireland into the EU, even though it is based in England, Scotland or Wales—or might even trade into the EU through Northern Ireland—will also be caught up in this.
The issue of the reach of the state aid rules has not been addressed in this Bill, and it is not just an academic argument. It is not even just for subsidies that may be given to firms in England, Scotland or Wales; this can also affect the international trade deals that the Government do with the rest of the world.
For example, British Sugar has challenged the deal made by the Secretary of State that allows 250,000 tonnes of sugar cane into the United Kingdom tariff free. That has been challenged by British Sugar on the basis that it represents unfair competition in the European market. British Sugar sells on the European market. It uses sugar beet, and tariff-free sugar cane would give Tate & Lyle an advantage. That is being challenged in the courts, and article 10 has been cited. If we are to ensure that a subsidy control regime does not disadvantage one part of the United Kingdom, or catch some of the subsidies that may be made available to firms located in other parts of the United Kingdom, rather than in Northern Ireland, article 10 is all-important. It is important for the Minister to provide clarification on that.
I have spoken to officials in the Department for the Economy in Northern Ireland. They have said—it is quite clear why—that they are finding it difficult to get information about how this scheme will work. So much of the Bill depends on new regulations being made. The general headlines are there, but the regulations need to be made. For example, what is an interested party, and will the Minister regulate to widen the scope of that? What about guidance for the subsidy and the person of interest, or about subsidies of particular interest? We do not know which subsidies are likely to be of particular interest, but that will be made by regulation. The Bill is peppered throughout with indications that such things will be clarified by regulations from the Minister, and that is important when it comes to the operation of subsidy control. We are dealing with the Bill, yet we are blind to some of the issues that need to be addressed.
Another issue is the time allowed for appeal or challenge, which is 30 days. I do not want the same long drawn-out process that the EU has, but 30 days in which the subsidy is registered or placed on a database is particularly short. Why has that period been selected, especially since getting information together for such a challenge might be that much more difficult? Lastly, the tribunal has significant powers, but it is how those powers will be used that is important. When the Bill comes to Committee, it is important that many of these issues are addressed.
From a Northern Ireland perspective, I hope that the promise made from the Dispatch Box is correct. If it is, I would love to see where that is being delivered in the Bill. If not, I would say that the Bill does not deal with some of the factors that have caused the greatest distortion of trade when it comes to the application of subsidies, namely a dual regime in Northern Ireland—a regime that allows the European Court of Justice to make those decisions. The promise made by the Minister in his opening speech that the Bill represents the freedoms we have thanks to Brexit is not quite true. The Bill still leaves a significant foothold in the United Kingdom for Brussels and the European Court of Justice when making final decisions about subsidies that apply in Northern Ireland, or about subsidies that are given to firms in England, Scotland or Wales, but that may fall under the EU state aid regime because, through their trading in Northern Ireland, they impact on the European market.
Order. Before I call the next speaker, let me say that it would appear that the Division bell is not operating properly in Speaker’s Court, and that those in the offices in that part of the Palace might not hear the bell properly. I hope hon. Members will not rely entirely on hearing the Division bell to know that there is a Division taking place. It is not unusual for there to be a Division. There may or may not be one when we conclude this debate, but it is not unusual that there should be a Division when we have Second Reading of a Bill.
For new Members who have not quite got it yet, if a Division takes place, it will take place immediately after the concluding speech by the Minister. In this case, the Minister is the Under-Secretary of State for Business, Energy and Industrial Strategy, Paul Scully, so if anyone is in any doubt as to when a Division might take place, if there is one, it will be after they see the hon. Gentleman’s name on the Annunciator. If they watch out for that, it will not matter that they cannot hear the Division bell, because they will know that a Division is likely, and on their monitor it will say “Division”.
I hope that that will help to prompt people to know that a Division might take place. I have no idea when that might be. I can only tell hon. Members that it will be at 7 o’clock at the latest; it depends on how long the hon. Member for Sutton and Cheam speaks at the Dispatch Box. But first, we have Robin Millar.
Thank you, Madam Deputy Speaker. I sense a restlessness among colleagues, so my comments will be brief, and the moment we are all waiting for, when the Under-Secretary of State for Business, Energy and Industrial Strategy, my hon. Friend Paul Scully, gets to his feet, will be upon us shortly.
It is a pleasure to follow Sammy Wilson. Northern Ireland is a part of the United Kingdom, and it is only right and proper that UK law and a UK subsidy regime must prevail in that part of the United Kingdom. I hope, indeed, that they will be rejoicing on the streets. My understanding is that the Government have, in effect, made it clear that article 10 of the protocol is redundant, given that the subsequent trade and co-operation agreement establishes a framework of mutual recognition of state aid rules, with which the Bill complies. Perhaps the Minister will clarify that in his remarks.
I want to make a point about how the Bill supports devolution. We have heard Opposition Members refer—not universally, but on a couple of occasions—to how the Bill damages devolution. There is much that could be said about the gaps between the way the world is viewed by Opposition Members and the way it is viewed by Government Members, but one such gap has come through during this debate in the constant references to things that are missing. I suggest that that gap indicates different ways of looking at things: while Government Members are happy to set down principles within which business can flourish and prosper, it seems to me from the comments made today that Opposition Members are looking for a high degree of prescription about what can and cannot be done. Those are different ways of looking at the world.
Let me make it clear that I am a supporter of the principles behind devolution. I want to draw out three principles in particular: local leadership, broader accountability and shared prosperity. Sadly, the first, local leadership, has never really been fully realised in north Wales. To us, devolution has led to decision-making powers flowing south to Cardiff bay. In Scotland, too, we have seen a centralisation of powers, with decision-making powers drawn from the regions to Holyrood and reserved to the Government there.
As just one example—I could give many—we saw that in the disbursal of EU funds. Only 9% of EU funds spent in Wales made it as far as local authorities for decision making; the majority were decided on and spent from Cardiff bay. England has its own problems and challenges in this area, but, by contrast, the figure in England was 36%: four times as much money and decision making flowed out into the local authorities and the regions from Westminster. That is a telling tale, because the sense in north Wales is still that Cardiff is distant and remote—accusations that are typically laid against this place. The Bill will help to address that and give local authorities and even the devolved Administrations freedom to set up targeted, effective and practical schemes in their area.
I must say, though, that something has changed in the air in north Wales since the arrival of this Government in Westminster. The sense of alienation is starting to evaporate. Those who know the area of the world I am talking about will know that in the Conwy valley and Aberconwy, the morning mists start to roll down the valley at this time of year, and they are starting to evaporate now thanks to the Government’s involvement.
There is much that I could say about how the United Kingdom Internal Market Act 2020 has changed things, but I will not, for reasons of time. I will say, though, that the prospect of inbound UK Government funds has rapidly mobilised my own council, Conwy County Borough Council. It is engaging with communities and leaders on their thoughts and plans for delivering change, and I am grateful for the support and engagement of its leader, Councillor Charlie McCoubrey, and the economy portfolio holder, Councillor Louise Emery. For my part, I have been meeting local councils, organisations, residents and business leaders in the community to seek their thoughts and advice, and there is no shortage of them.
The second principle that I would like to draw attention to is accountability. I welcome the universal reporting database being introduced through clause 33. My hon. Friend John Penrose gave a tour de force on the benefits of the transparency that it will bring and even prescribed fresh air and sunshine to bring benefits to businesses.
The different reporting systems that exist in different parts of the UK have often clouded transparency and obscured comparisons. Wales and Scotland have different reporting regimes in many different areas—we have heard reference to patient waiting lists—and during the pandemic we have seen different local responses only causing further confusion. Key universal systems avoid such inconsistency, and the database provided for in the Bill will be one of those. They allow for public transparency and comparable information about how money is being spent in the UK.
I thank the hon. Member. He said at the start of his speech that he respected devolution and believed in the principles of devolution, yet throughout his speech all he has done is criticise it, to the point where he is now criticising local authorities in Scotland. Far be it from me to defend a Tory-led local authority in Aberdeen, but why is he criticising local authorities, and how does that marry with his support for devolution?
I thank the hon. Gentleman for his intervention, but I am not sure what he was listening to. Not one word of criticism of local authorities has passed my lips. I was explicit in starting my speech by addressing the principles of devolution. I suspect that he may be confusing the principles of it with the practice of it that he sees in Scotland. Accountability is important, and it has been allowed to slip, but I believe that the Bill addresses that by supporting and encouraging it.
The third and final principle that I want to mention is shared prosperity, which the Bill will support. Aberconwy has seen an impressive recovery from the pandemic, and according to some reports Llandudno has experienced the fastest recovery of any town in the UK. I pay tribute to those who are working so hard in their businesses, from Glenn Evans and his team at the Royal Oak in Betws-y-Coed to Clinton and his team at the Blend coffee shop on Clonmel Street in Llandudno. Right across Aberconwy, it is people like them who make that economic recovery a reality. We owe them a debt of thanks and gratitude for their hard work—it is not we in this place but they who make the difference, and I am grateful to them for it. The prospect of additional funds and subsidies coming their way—coming our way, into Aberconwy, directed by local leaders and businesses—provides the potential to capitalise on that endeavour, help economic recovery and bring forward the promise of a locally delivered prosperous future.
Of course, there is much to do. Other principles set out in part 2 of the Bill ensure that our internal market operates freely and without hindrance, avoiding the subsidy race that has already been referenced between different parts of the UK. Other parts of the Bill reduce bureaucracy and—again, I make this point—enable decision making by devolved Administrations in a targeted and effective way, faster and in a way that they could never do before.
Finally, I support the Government’s hopes for the Bill that it will enable a thriving competitive economy and, in north Wales, lead to the kind of investment that we want to see in renewable energy, road, rail and broadband connectivity, and, I hope, even a freeport. It is because I believe the Bill delivers on the principles of devolution and makes possible a prosperous future in Aberconwy that I will be voting in support of its Second Reading.
It is a pleasure to respond to the debate, which in general has been a very considered and well-informed debate with some excellent contributions. We heard from the SNP spokesperson, Stephen Flynn, Kirsty Blackman and Sarah Olney about the many gaps in the Bill, while Sammy Wilson highlighted concerns over the Northern Ireland protocol, which I will also mention in my contribution. Even the contributions from the Government Benches highlighted some of the issues and challenges with the Bill.
I start by echoing the concerns raised by my hon. Friend Seema Malhotra in her excellent contribution at the start of the debate regarding the lack of female representation on the Business, Energy and Industrial Strategy ministerial team. It is disappointing not to see balanced leadership, particularly in a Department working on such critical issues as increasing diversity in science, technology, engineering and maths and increasing start-up businesses among female entrepreneurs.
We recognise the need for legislation in the area of subsidy control to meet our commitments under the trade and co-operation agreement, and to ensure subsidies are provided to businesses with appropriate safeguards in place. It is clear that the current temporary arrangements are insufficient and have not provided the clarity that businesses and public bodies need. We also recognise that a new regime will allow local authorities and others to make some subsidy decisions more quickly under a simplified process than under the EU regime, and it is welcome that we are moving away from a system of advanced notifications towards one of self-assessment against a set of common principles. However, there are substantial issues with the Bill that have been raised in this debate.
Considering some of the procurement practices during covid, particularly for personal protective equipment, is my hon. Friend not concerned about the lack of definition around subsidies of “interest or particular interest”, which might create the appearance or the actuality of cronyism, considering the Government’s record?
As always, my hon. Friend raises an excellent point. Indeed, he anticipates a couple of points I will be making. It is certainly the case that we should not leave this Government to define their own procurement principles. The Bill as it stands leaves a significant amount to secondary legislation. The balance between the efficiency of the system and the need for effective oversight, and, most importantly, the role for the devolved Administrations in developing and implementing the new system, are all important gaps.
First, as with previous Bills, including the National Security and Investment Act 2021, important aspects are left to secondary legislation. Public bodies need guidance on how to interpret the subsidy control principles, as we heard from Members during the debate. There is also little clarity on how the Bill will support the UK’s most deprived regions, which is something that was built into the EU state aid regime through the assisted areas system. The Bill was a key opportunity to spell out what levelling up actually means, but the Government have not risen to that challenge.
Secondly, there needs to be a balance between oversight and efficiency. An expedient system is vital, but we must be clear that any subsidy regime comes with the risk of market distortion and unfair discrimination, which is why the ambiguity regarding interested parties is a concern. It is also important to consider the role of the CMA’s subsidy advice unit and particularly to ask whether its lack of investigative and enforcement powers is appropriate. We will work with the Government to ensure that the right balance is struck. I hope that the Minister will provide more clarity when he winds up.
Finally, our most serious concern about the Bill relates to the role for the devolved Administrations in the new system. We have heard from Members across the House, as we did during the passage of the United Kingdom Internal Market Bill, that yet again the Government have given the matter little consideration. The Secretary of State’s intervention on that point did not provide the clarity that he seemed to think.
We recognise that subsidy control is a reserved matter, but the wider context cannot be ignored. Devolved Administrations have important powers in the area of economic development, so the Government need to tread carefully. Leaving so many areas to secondary legislation only means that there will be no requirement on the Secretary of State to consult the devolved Administrations when developing the system. The same point applies to the Secretary of State’s ability to call in subsidies. We are clear that the devolved Administrations must have an explicit role in developing and implementing the UK’s subsidy regime as part of a four nations approach.
I am afraid not. I have to make progress and I have very little time. [Interruption.] The hon. Member has intervened on a number of occasions, and I am afraid that I need to make progress.
We recognise the need for the Bill to replace the insufficient current arrangements, but although it significantly increases the speed and ease with which public bodies can grant subsidies, the key question, as we have heard again and again, is what the Bill is for. We have still not had an answer. As my hon. Friend the Member for Feltham and Heston said, we lag behind our G7 neighbours in granting subsidies to our businesses. Speeding up the system will benefit businesses only if there is a proper plan in place. That is where an industrial strategy could step in, providing the framework for the Government to set priorities, target deprived areas and boost business investment.
Labour has set out a plan to make, sell and buy more in Britain. From green jobs in manufacturing electric vehicles and offshore wind turbines to FinTech, digital media and film, we must grow businesses and industries that are fit for the future. The use of well-designated, proportionate subsidies would be critical to that plan. Instead, thanks to the Secretary of State’s ideological aversion to industrial strategy, we have no clarity on how or where public money will be spent. I urge the Minister to give close consideration to the points that we have raised.
It is a pleasure to respond to Seema Malhotra and to follow Chi Onwurah. I thank all hon. Members who have spoken in this important debate. I aim to respond to as many of their points as possible in the time available—I know that we have further business—but I would like to begin by quickly reminding the House of what the Bill signifies and what it will achieve.
The Bill is the very first subsidy control framework designed by the UK for the UK. It will be flexible and agile, allowing all public authorities to design subsidies that deliver strong benefits across the whole UK. For the first time, in all instances, public authorities will decide whether to grant a subsidy. The Bill will provide certainty and confidence to businesses investing in the UK. It will enable public authorities to deliver strategic interventions that will support our economic recovery and deliver on the priorities of the British people, such as levelling up.
We have talked a little about scrutiny; the hon. Member for Newcastle upon Tyne Central spoke about scrutiny of secondary legislation and guidance. I am glad that my hon. Friend Simon Baynes raised the issue of the lack of scrutiny in this debate. It is nice that the Opposition have found a couple of Back Benchers to come and join the debate, but it is outrageous that we have had so little input from Opposition Members.
This Bill will strengthen our Union by protecting our internal market through a single coherent framework that fully complies with our international obligations. On that note, I thank the hon. Members for Feltham and Heston, for Aberdeen South (Stephen Flynn) and for Aberdeen North (Kirsty Blackman) for their points. To ensure that the new regime works for all parts of the UK, we look forward to continuing to work closely with the devolved Administrations, as we have throughout its development, as the Bill passes through Parliament. We hope that the devolved Administrations can understand and support the approach that we have taken, and will give their legislative consent. I can say to the SNP Members who spoke earlier that to date we have had 30 meetings with the devolved Administrations on an official-to-official basis to discuss the Bill, and 10 at ministerial level.
We also heard a bit about the devolved Administrations’ input into guidance. Obviously an agreed framework is needed before there is something to give guidance for, and we have made that clear in discussions with our devolved Administration colleagues. We will continue to work with them as we work through that guidance.
The Minister will have noted the concern of the Welsh Government about the fact that the agriculture and fisheries subsidies will be within the scope of the UK subsidy regime as a result of the Bill. We have already heard today a member of the Minister’s party express concern about his local farmers being undercut by devolved Governments’ support for their farmers. Can the Minister assure us that this Bill and the United Kingdom Internal Market Act 2020 will not be used to interfere with decisions by the devolved Governments on devolved matters such as agriculture?
We have consulted on agriculture, fisheries, and sanitary and phytosanitary measures. There was no particular agreement among the devolved Administrations, but some people raised those issues.
The Bill introduces a permissive framework. It is totally different from the EU state aid regime, which is the only regime of its kind in the world. No other country, no other trading bloc, has such a restrictive regime, whereby authorities must ask permission and then wait for months to receive it. The Bill flips that on its head. A public authority can give support where it feels the need for it, and only the most distortive levels of support will then be challenged and go through the courts.
Let me turn to some of the issues raised by the hon. Members for Feltham and Heston and for Aberdeen North, and by Sammy Wilson in relation to how this interacts with the Northern Ireland protocol. I reiterate that the UK will continue to be a responsible trade partner that respects our international obligations. However, as the Secretary of State for Business, Energy and Industrial Strategy said in his opening speech, the robust subsidy regime that the Government propose makes it clear that there is no need for EU state aid rules to continue to apply in Northern Ireland, and that all subsidies will be within the scope of the domestic regime. This framework has to work with whatever is involved in our international obligations. However, as the right hon. Member for East Antrim will know, the Command Paper gives the details of that, and I should love nothing more than to hear of rejoicing in his constituency.
The Minister argues that the robust regime should mean that there is no need for EU state aid to apply because there is already sufficient scrutiny of any subsidy regime. Does he not accept that the fact remains, as far as the EU is concerned and as far as the law states at present, that the EU state aid rules still have to apply in Northern Ireland?
I refer the right hon. Gentleman to the Command Paper, and assure him that those negotiations will continue.
The hon. Members for Feltham and Heston and for Aberdeen South raised the important question of how the Bill helps deliver on our priorities to level up opportunity in this country, ensuring that every region and nation benefits from growth. I can reassure Members throughout the House that our new regime will give authorities the flexibility to deliver subsidies where and when they are needed to support economic growth, without facing excessive bureaucracy or the same lengthy pre-approval processes that they faced while we were members of the EU. In response to points raised by the hon. Members for Feltham and Heston and for Aberdeen South, I would highlight that assisted area maps are not the only way of addressing inequalities. A map can be a blunt instrument, making it difficult to address inequality and disadvantage within regions.
I also want to respond to concerns raised by my hon. Friend John Penrose on whether the domestic regime would allow Ministers to resist the siren call of ever greater intervention in the market, and whether it would be sufficiently rigorous compared with the EU’s prescriptive and prohibitive rules. I want to reassure the House that the regime in this Bill is indeed robust. It operates alongside the UK’s existing spending controls—the Treasury controls—which are subject to significant parliamentary control. The Government have no intention of propping up unsustainable or failing businesses, nor will future Governments be able to do so.
The hon. Member for Feltham and Heston was right to say that it is vital that there is independent oversight of the UK’s domestic subsidy control regime. The subsidy advice unit will provide advice that is genuinely useful to public authorities in designing their subsidies and assessing them against the regime’s requirements.
My hon. Friend Nigel Mills talked about advance approval. As I say, this is a permissive regime, so this is not about advance approval; it is about advice that public authorities will be able to take. On the Secretary of State’s referral powers in relation to the subsidy advice unit, he will not be able to overturn decisions unless they relate to security issues or international obligations. The regulation of harmful and distortive subsidies is reserved to the UK Parliament. The Secretary of State therefore has a responsibility to ensure that the new regime is enforced consistently across the UK.
The hon. Member for Feltham and Heston and my hon. Friends the Members for Weston-super-Mare and for Thirsk and Malton (Kevin Hollinrake) raised points on the importance of transparency in the regime. Our regime strikes a proportionate balance between minimising the administrative burden for public authorities and gathering more data. I think this is more about an issue with the interoperability of databases themselves, rather than about legislation. The guidance that we will work on will help public authorities and recipients to understand the practical application of the regime and what they will need to do to comply with it.
To conclude, I want to thank right hon. and hon. Members for their contributions to an excellent and informative debate today. I strongly believe that the new UK subsidy control regime that the Bill sets out will help us to deliver key Government objectives, protect jobs and make the UK the best possible place to start and grow a business. I look forward to discussing the Bill further in Committee, but for now I commend it to the House.
Question put, That the Bill be now read a Second time.