Amendment 64

United Kingdom Internal Market Bill - Report (3rd Day) – in the House of Lords at 2:53 pm on 25th November 2020.

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Lord Thomas of Cwmgiedd:

Moved by Lord Thomas of Cwmgiedd

64: Clause 42, leave out Clause 42Member’s explanatory statementThis amendment is intended to remove the provision for a Minister of the Crown to provide financial assistance for economic development etc. anywhere in the United Kingdom.

Photo of Lord Thomas of Cwmgiedd Lord Thomas of Cwmgiedd Chair, Consolidation, &c., Bills (Joint Committee), Chair, Consolidation, &c., Bills (Joint Committee)

My Lords, I rise to move this amendment to remove Clause 42 of the Bill. This amendment and Amendment 69, to which we shall come later and which stands in my name, deals with two clauses that are in some ways closely related. This clause authorises the UK Government to spend funds on the huge area of government expenditure—indeed, almost any aspect of government expenditure. Clause 44 deals with the quite separate question of state aid, and it is very important to keep them distinct. I make it clear in moving this amendment that I intend to press this to a Division.

First, I shall say a little bit about the clause. What is it for? The Conservative manifesto spoke of a shared prosperity fund which was intended to be a successor to the European Union regional structural funds. I looked on it as something that would strengthen the union by sharing the prosperity of our four nations. However, because it wore the word “shared”, it carried with it the connotation that the Governments of the four parts of the United Kingdom would share in the way in which it was distributed in accordance with the constitutional arrangements in place.

That such a fund would be greatly welcomed does not need to be stated. There are parts of the UK—and being here in Wales it is evident—that are far poorer than other parts of the United Kingdom, and investment is needed. Of course, we need to look carefully and in a structured way at how they are to be dealt with. I think we have—and I shall come to this later—some guidance published this afternoon in the Red Book, at box 3.1 on page 37. It is convenient for me to deal with that when I come to deal with the role of the devolved Governments.

There is one thing I ought to say—and I hate that this is something that will not come to pass. In Committee, the noble Baroness, Lady Bennett of Manor Castle, drew our attention to another term. She pointed out that in the European Union there were rules about funds allocated for the remediation of poverty and for equalling people up which had been made available to parts of the United Kingdom, including Wales. She pointed out that there would be detailed rules, and that Europe operated detailed rules. However, this shared prosperity fund still has no detailed rules, despite what is said in box 3.1, to which I have referred. She pointed out that the Americans have a term, pork barrelling, for this kind of fund. I would like to continue to call it a shared prosperity fund, because I believe in the union and in sharing the way our country is governed, and I hope that we will never have this aspect of American politics brought into our way of doing things but, plainly, there are dangers along those lines.

This clause is best analysed by asking eight questions. The first is why it is included in the Bill? As it stands, it is wholly separate from the other provisions we have been debating, which are to do with the internal market. The Bill is not concerned with the allocation of government powers to spend money between the devolved Governments and the Government of the United Kingdom with England. Secondly, what is its aim? I have addressed that: as was stated in the Government’s manifesto and now in box 3.1, it is intended to level up the divisions of society within the union and to help.

One immediately has to ask why this clause is needed. The Government have done city deals and have provided money, perfectly property, under our existing constitutional arrangements. Why do they need this power? If they were to provide the funds through the existing constitutional arrangements, this power would not be needed. The devolved Governments of Scotland, Wales and Northern Ireland would be involved and the spending programmes would go along the way they have always gone along, this fund being an additional fund provided from moneys no longer remitted to the European Union. Indeed, if it were to follow the lines of the city deals or its predecessors in the European Union, the Government would negotiate the other Governments, in the case of the devolved nations, or, in the case of England, the various regions and cities, what they felt the money should be spent on, consider it and make a decision. That is all perfectly feasible. So, yes, it is a very good idea to have a shared prosperity fund, and it needs no legislation.

The third question that one needs to briefly touch on is: what is the position at the moment? As my noble and learned friend Lord Hope of Craighead pointed out in Committee, paragraph 4(1) of Part III of Schedule 5 to the Scotland Act 1998 made it clear that the powers of

“giving financial assistance to commercial activities for the purpose of promoting or sustaining economic development or employment” were not reserved but were within the devolved competence. The same is true in Scotland and Northern Ireland. It is therefore plain that the purpose of Clause 42 is to cut across the powers of the devolved Governments to provide financial assistance in areas such as economic development and commercial activities, though there are wider purposes.

Now we come to the critical question four: how does this relate to the devolution schemes? In Committee the Minister sought to reassure the House that the Government had an intention to work with the devolved Administrations. She said:

“This power, in addition to existing powers, will allow the UK Government to complement and strengthen the support given to citizens in Scotland, Northern Ireland and Wales, without taking away devolved Administrations’ responsibilities”.—[Official Report, 2/11/20; col. 596.]

She added, although I do not think that I need quote her at length, that this was all to be done by working with the devolved Governments. It appears from what was said that it was intended that this power would be exercised in co-operation with and dealt with through the devolved Administrations, but of course there is nothing in the clause in the Bill to say so. It is also plain that the power is being taken because the Government want additional powers to cut across the expenditure. So it plainly affects the devolution schemes.

This is now very much clearer from box 3.1. I am sure noble Lords will not mind me referring to a document that has only just been published and which they may not have in front of them. There is not one word in box 3.1, which purports to explain how this works, about the involvement of the devolved Governments. The box says that the fund

“will operate UK-wide, using the new financial assistance powers in the UK Internal Market Bill”.

It has one common theme with the European funding because it says:

“Investments and programmes will display common branding.”

Being in Wales, one is quite used to seeing what was done by the European Union; now, one assumes, that will be substituted by seeing what is being done by the UK Government. From going through what is in box 3.1, it is quite clear that this is to be a UK Government-run scheme dealing directly, with not a word about the devolved Administrations. One can say quite safely, now that box 3.1 has been published, that this cuts right across the current schemes of devolution. The fifth question is: will it do so? The answer to that, again, is plainly yes; as I read it in box 3.1, that is now clear.

Before having the benefit of that, I was able to read what the Prime Minister had said, as reported in the Financial Times, about the intention vis-à-vis Scotland. However, never being entirely comfortable about relying on a report in a newspaper that could be said to have taken remarks out of context, I had a look and found something else. I looked for, and was provided with, an article written by the Secretary of State for Wales last week in the Telegraph. By the Telegraph, I do not mean the Western Telegraph, the long-established and excellent paper that circulates in Pembrokeshire and west Carmarthenshire, but the Daily Telegraph, a paper that is much read here in the valleys of south Wales. In it the Secretary of State said:

“In the past week I’ve been meeting local authorities across Wales. They’re all hungry to play a greater role in smarter investment of this funding—distributing it to those best able to target the money to projects that will benefit their communities most.”

It is clear that this funding is designed to bypass the devolved Governments. The sixth question is: is this a return to “Westminster knows best”? Undoubtedly it is. I had hoped that that thought had died, but it is plainly very much alive.

The seventh question is: is this democratic? As it stands, it plainly is not; it strikes at the very heart of the devolution settlements and the choices that the people in Wales are entitled to make in their coming election. It will therefore enable the UK Government to spend funds in the way that they think best but which the people of Wales may have rejected. That is not democracy as I have known it. It is, in effect, giving legislative underpinning to the now discredited principle of “Westminster knows best”.

My eighth question is: is it efficient and effective to proceed in this way? The answer must be no. This is where I return to the fear expressed by the noble Baroness, Lady Bennett of Manor Castle. The current position, where the Government of Wales discuss and agree how funds are to be used—either in respect of city deals with the Government in London or, as regards the European funding, with the Commission—is that you have one overall policy, which is then administered and developed as a joint policy. One can see now that this clause is intended to provide divergence, to show that with cash there is a different way of doing things, and maybe to provide that cash, as one sees happening so much in the US, where it is thought to be to the electoral advantage of those providing the money.

It therefore seems to me that this clause, which is now much clearer as a result of box 3.1 in the Red Book, should not be in the Bill. If the clause had provided in terms that all this was to be done in conjunction with the devolved Governments then that would be quite a different matter, but it does not. I will seek to press this amendment to a Division to remove this clause, which is so destructive of our current scheme of devolution and hence to our union. I beg to move.

Photo of Lord Lexden Lord Lexden Deputy Chairman of Committees, Deputy Speaker (Lords) 3:00 pm, 25th November 2020

I should inform the House that if Amendment 64 is agreed to, Amendments 66 and 67 cannot be called.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

My Lords, it is a genuine pleasure to follow the noble and learned Lord. I admire how thoroughly he outlined his amendment, to which I have added my name. I inform the House that I believe Amendment 68 in my name is consequential to Amendment 64, so if Amendment 64 is agreed to by the House then I will move Amendment 68.

As the noble and learned Lord concluded his remarks, he hit on a fundamentally important point, about which we raised concerns in Committee and earlier, which have been reinforced by the Chancellor’s Statement today. Both before and during Committee, the concern was that the Government sought these financial powers to override one of the core elements of devolution: that expenditure on devolved areas in our devolved nations should be taken by the bodies accountable to them for those policy areas. As a member of five years’ standing of the Finance Committee in the Scottish Parliament, I know that that spending would come with agreed policy platforms, financial strategies and a degree of accountability.

The Government, I think, believe that the people owe loyalty to those who spend the money, and therefore the main priority is to identify the source of the money—not how it is delivered and not the accountability for it. However, as the noble and learned Lord raised, can the Minister clarify whether that is the case as she responds to the debate on these amendments?

If the Government have indeed announced their intention to override the devolution settlement and to use this Bill to deliver spending on devolved areas without the agreement of the devolved Administrations, that will indeed confirm the fears that we outlined, both at Second Reading and in Committee. I hope that the Minister will be able to say clearly that that is not the case, but I fear from the announcement that has been made today that it is.

The concern started because we had seen very little consultation with the devolved Administrations—or indeed English local authorities—on the spending powers that were to be in this Bill, and we had not been given any indication that these powers had been the result of consultation. There had been consultation on the replacement of EU structural funds, and that consideration was fairly extensive. But there was a mismatch between the consultation on how to repatriate the structural funds and the powers under this Bill, which are catch-all. Not only that, there surely could not have been consultation based on the manifesto commitment of the Government, which was to replace those funds with a skills fund—that was in the Conservative Party manifesto. So the powers that seem to be indicated go far beyond what the manifesto itself said, and indeed the results of the consultation on what the structural funds should be.

There is no reference in the Bill to what the delivery mechanism would be. The noble and learned Lord indicated quite clearly that, under the previous scheme—where, I remind the House, 76% of all European investment had been allocated to the member states—it was to be managed through the devolution settlement, and that management was through our existing frameworks. The current multiannual financial framework, from 2014 to 2020, which is coming to an end, was a UK partnership agreement. It gave granular detail—373 pages of it—of the fund: where it was going, the administration of it, how it was administered and how complementarity would be secured between the legitimate devolved policy areas. The Government have indicated that that approach is no longer fit for purpose because that was the European structural funds. Before we see announcements at a political level about the political intention, surely it is right that the Government publish the respective replacement process.

My party on these Benches and I, as a former Member of the Scottish Parliament, have never been opposed, since devolution, to the UK Government supporting schemes within Scotland. But that was under a recognition that it was linked to the correct competences of the UK Government. For example, in 2018, the UK Government supported the Edinburgh Fringe Festival in supporting artists to promote the United Kingdom around the world in one of the world’s premier cultural events. Local to home in my area, the wonderful Common Ridings used to be very familiar with receiving support from the local authority, the Scottish Government and the UK Government.

The point is not that the UK Government should be restricted from supporting reserved areas in the devolved countries, but that the policies for delivery of the replacement of the structural funds should be done under an agreed process. That agreed process seems to be set on its head now, with the Government believing that they will deliver the programmes, regardless of consultation, regardless of agreement and, more worryingly, regardless of an agreed framework for how these funds can be delivered.

I jotted down in my notes before this debate that I hoped that the Government would bring forward proposals that could be introduced in the Commons, so that if this amendment is passed and we take out Clauses 42 and 43, we would be able to see at least some clarity as to how the Government intend to deliver on the replacements for the funding mechanisms as a result of consultation. The announcement today is alarming. I hope that the Minister can reassure me that that is not the case and that, if these clauses are taken out, the Government will recognise that they should bring back proposals.

If there is a case for powers necessary to deliver the expenditure, and which do not already exist—although I have indicated that, in many respects, they do and have worked perfectly well—let the Government bring it forward. But this clause is not the case, as the noble and learned Lord indicated. I hope that the Minister has listened and will be clear in her winding up. If that is not the case, the House will be justified in removing these clauses at this stage, effectively forcing the Government to come back and bring forward their proposals for us to consider them further.

Photo of Baroness Finlay of Llandaff Baroness Finlay of Llandaff Deputy Chairman of Committees, Deputy Speaker (Lords) 3:15 pm, 25th November 2020

My Lords, it is a great pleasure to follow the noble Lord, Lord Purvis of Tweed, who has repeatedly shone a light into dark corners of this Bill, and to follow my noble and learned friend Lord Thomas of Cwmgiedd.

I strongly support Amendment 64 and Amendment 65, to which I have put my name. It has become increasingly apparent that Clause 42 would enable the Government to work around, rather than work with, the devolved Governments, in particular replacing the regional development funding, which has been so significant here in my own country, Wales, in addressing endemic problems such as economic inactivity and lack of skills. After all, the Government can already provide funds to support devolved matters, providing they do so in partnership with the elected Governments.

In that surprising article last week in the Daily Telegraph, already referred to, the Secretary of State claimed:

“For the first time, this money will be able to be spent by people who have been directly voted for by the people of Wales. People who know the local communities best, and who can develop coherent proposals that are aligned with broader UK-wide priorities.”

It is astonishing that this Government seem to have ignored the group of stakeholders endorsed by the Welsh Local Government Association and the majority of its members, convened—but not commanded—by those directly elected to the Welsh Senedd to develop a framework for regional investment to determine the spending priorities for this funding.

But of course we now have the Chancellor’s statement and can see in box 3.1, as referred to by my noble and learned friend Lord Thomas, the heads of terms of the UK shared prosperity fund. It states, with reference to additional funding in 2021, that the Government will provide such funding to communities using the new financial assistance powers in this Bill. This seems to bypass the elected Welsh Government by inviting local authorities to directly bid to central government. Perhaps the Minister will confirm whether I have understood correctly or not.

I am afraid this Government’s record is to spend on things that have always been the Government’s responsibility. Think of the rail infrastructure: the electrification of the Great Western main route was cut short at Cardiff, despite all the arguments in favour of extending west. Then there are major energy projects, such as the tidal lagoon or broadband, where the Welsh Government had to invest huge funds, including from the EU—which the Minister seems to loathe—to make good the underinvestment by Whitehall. Some suggest that this looks deliberately timed to be before the elections to the Senedd and the Scottish Parliament, and to drive a wedge through the devolved nations’ ability to consider their whole-population needs.

The history of the £3.6 billion towns fund, which relied on Ministers selecting which towns would receive funding, does not inspire confidence. The National Audit Office and the Public Accounts Committee were not convinced by the rationale behind these choices. The committee said:

“The justification offered by ministers for selecting individual towns are vague and based on sweeping assumptions. In some cases, towns were chosen by ministers despite being identified by officials as the very lowest priority (for example, one town selected ranked 535th out of 541 towns).”

The Minister may try to provide reassurance that this Government would not use the powers in Clause 42 to undermine the political priorities of the elected Government in Wales. But once on the statute book, this clause would open the way for future Governments of any colour to ride roughshod over an elected devolved Government. Clause 42 undermines the devolution settlement, which has functioned well for the last two decades. The clause should be removed.

Amendment 65 is an intelligent and thoughtful proposal from the noble Lord, Lord Stevenson of Balmacara, to depoliticise the allocation of funding to replace the EU structural funds to reflect economic and social need, not political expediency. It gives an appropriate role to the devolved Governments, while recognising that this is UK funding designed to level up regions with weaker economies in line with the Government’s own declared aspirations. If the Minister is unable to accept Amendment 64 and remove the offending clause in its entirety, I call on the Minister to settle for this compromise amendment, which will allay suspicions that the Government want to manipulate regional funding for their own ends rather than address objective, clear economic priorities.

Photo of Lord Wigley Lord Wigley Plaid Cymru

My Lords, I am pleased to support Amendment 64, moved by the noble and learned Lord, Lord Thomas of Cwmgiedd, to leave out Clause 42. I agree with him and with the noble Baroness, Lady Finlay, in her pertinent comments in support of that amendment. If, however, we do not succeed in removing this provision from the Bill or succeed with Amendment 65, the Bill most certainly needs to be amended to meet the widespread criticism, expressed in the devolved legislatures and, only last Friday, in the Western Mail—if I may quote it rather than the Telegraph—which stated in its editorial’s headline:

“This plan is a direct threat to devolution.”

And it is just that.

I wish to speak to Amendment 67 in my name, which addresses the issue at the heart of the Welsh Government’s misgivings and those of my party, Plaid Cymru. It revolves around the linked questions of what replaces the European regional funding, of which Wales has been a major beneficiary over the past few decades, and who controls the expenditure priorities for any replacement funding coming from the UK Treasury.

The need for this amendment can be properly appreciated only if it is considered in the context of the immense benefit Wales has secured from the European Regional Development Fund and the European Social Fund over the past two decades. Wales is not the only part of the UK that has benefited; Scotland, Northern Ireland, Cornwall, Merseyside and South Yorkshire have also received significant investment. However, it has been Wales—in particular, the area known as West Wales and the Valleys—that has received the most significant level of investment. There is a good reason for this or, I should say, an understandable reason, for it is bad news, not good news: West Wales and the Valleys, the area which includes most of the old coal mining, slate quarrying and marginal land farming in Wales, is, sadly, one of the poorest regions in the entire European Union. The GDP per head of population in this area has been below 75% of the EU average. We were entitled to European funding due to persistent, long-term economic poverty, which the UK Government had, for most of the 20th century, failed to address—and certainly failed to eradicate.

The system utilised by the European Union established the criteria, framework and ground rules of the funding programme, each round of which lasted seven years. The Welsh Government put forward their proposed investment programme, which had to be agreed with the EU authorities in Brussels. The Welsh Government provided matched funding, which had to be additional to the normal spending budgets. That principle of additionality caused some controversy in the early days, with the UK Treasury reluctant to make additional funds available until it was instructed to do so by the EU regional commissioner—one Michel Barnier, God bless him.

The detailed rollout of the programme was, and still is, overseen by WEFO—the Welsh European Funding Office. The funding has been used for a range of projects, two of which I was involved in: the creation of the Galeri performing arts centre in Caernarfon and the management centre of the business school of Bangor University, both assisted by some £6 million of European funding. They could not have gone ahead without it. Both projects have been tremendously successful, as I know both the noble Baroness, Lady Humphreys, and the noble Lord, Lord Hain, can testify.

The third round of this European programme is still running. For the period 2014-2020, the operational programme is worth some £3 billion to Wales. At the time of the Brexit referendum, leave campaigners stressed repeatedly that the funding coming from Brussels would be replaced in full—I repeat, replaced in full—by money from the Treasury in London. I well remember, as I am sure many noble Lords do, being told that the funding emblazoned on that Brexit battle bus—the claimed Brexit bonus of £350 million per week—would, in just a fortnight, fund the annual replacement cost of the European Regional Development Fund and the European Social Fund money coming to Wales. Of course, we were told that the Welsh Government would be fully in control of its use. Those were the promises made, on which basis Wales—regrettably, to my mind—voted to leave the European Union. The time has come to redeem those promises, and Amendment 67 facilitates that commitment.

Amendment 67 seeks to establish the principles that will safeguard the funding coming to Wales and, likewise, to Scotland and Northern Ireland from funds denoted in Part 5 of the Bill. Specifically, the amendment provides that funding should reflect need, not some ad hoc arbitrary criteria, nor a Barnett-type formula, which has been repeatedly condemned by committees of this House yet was used again today in another place by the Chancellor of the Exchequer in the Autumn Statement. Funding on a needs-based distribution, related to the GDP per head of population, would be the basis. In that way, it respects the pattern of distribution of European regional funding—a pledge made during the referendum. Amendment 67 requires the Minister to bring forward a needs-based formula to be approved by order, subject to the affirmative resolution procedure, and provides for the Minister to secure the agreement of the devolved Governments to the content of that order. The amendment also proposes that each annual figure be presented as part of a three-year rolling programme, to ensure that coherent, long-term investment programmes can be secured and the money is not frittered away on short-term fixes.

We have heard a lot during the passage of the Bill about the fears in Cardiff, Edinburgh and Belfast of a power grab by the UK Government, taking away from the devolved Governments powers they currently enjoy. The Government respond, of course, that there is no such power grab and the devolved Governments will retain the powers they currently exercise. This amendment puts those assertions to the test. Either the devolved Governments retain the power to determine capital expenditure projects in their territories, or they do not. If they do not, it will be a flagrant violation of the commitments made during the Brexit referendum and the last general election. If the Government insist on retaining the rights to impose capital expenditure projects on and in Wales, it will set alarm bells ringing. There have been press reports of projects such as the construction of reservoirs in Wales, which is an incendiary topic, given our experience over the past century.

Of course, there may be joint projects of mutual interest, but those must be negotiated by the respective Governments, not imposed by Westminster and Whitehall. The days of imperial diktat have long since gone; if there was one dimension which could trigger an avalanche of support for the independence movements, it would be such an approach by Westminster. It is my fear that this Bill, without amendment along the lines that I propose, heralds such a retrograde step—a rolling-back of the freedom we have enjoyed within a European context and its replacement by Westminster central direction of the sort that Wales suffered in the bad old days before devolution. Amendment 67 is in the interest of establishing a stable harmony between the nations of the UK and I urge the Government to accept it.

Photo of Baroness McIntosh of Pickering Baroness McIntosh of Pickering Conservative 3:30 pm, 25th November 2020

My Lords, I preface my remarks by saying that what will replace the European structural funds is a matter of interest not only to the devolved Administrations but to the regions, such as Yorkshire, as well. I was fairly agnostic about this group of amendments before the debate commenced but now I think that the noble and learned Lord, Lord Thomas of Cwmgiedd, and the other noble Lords who tabled these amendments have done the House a great service.

In the briefing on the spending review, the emphasis now appears to be much more on UK-wide spending. It states:

“The Spending Review takes advantages of our departure from the EU to benefit the union. We will ramp up funding, so that total domestic UK-wide funding will at least match EU receipts … for the introduction of the UK Shared Prosperity Fund, we will provide additional UK funding to support our communities to pilot programmes and new approaches. We will also deliver £1.1 billion to support farmers in Scotland, Wales and Northern Ireland, £20 million to support fisheries—and we will build one freeport in each part of the UK.”

It goes on to say that the spending review is UK-wide and refers to the UK shared prosperity fund and the shared rural network. Although I welcome the funding that has been announced, it is incumbent on us today to find out whether, in the words of the noble Baroness, Lady Finlay, the Government are now working around the devolved Administrations rather than with them.

I am particularly concerned with one aspect relating to economic development, which I hope is relevant to this group of amendments. England and Defra have clearly stated that they are committed to phasing out direct payments to farmers from 2021, but the new system involving an environmental land management scheme will not be in place until 2024. As I understand it, however, the Scottish Minister has announced that direct payments to farmers will be retained for the foreseeable future. That begs the question of what the impact on economic development will be for English farmers as opposed to Scottish farmers and whether that will potentially distort the market between England and Scotland. That would seem to flout the principles of mutual recognition and non-discrimination, which we have heard so much about during the Bill’s passage.

I welcome this debate. I am particularly supportive of Amendments 64 and 67, both of which have been spoken to so eloquently by their authors. I urge my noble friend the Minister to say how the payments under the shared prosperity fund will be distributed. Obviously, I would add a rider that Yorkshire would like to have its fair share of that fund, but it is incumbent on my noble friend to state whether we are departing from what we have become accustomed to under devolution or whether this is simply a red herring.

Photo of Baroness Humphreys Baroness Humphreys Liberal Democrat Lords Spokesperson (Wales)

My Lords, I support Amendment 64, which seeks to remove Clause 42 from the Bill. I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, for tabling such an important amendment and for his excellent explanation and analysis of its intent.

Clause 42 empowers the UK Government to provide financial assistance for economic development in any area of the UK. At the outset, I want to make it clear that I have absolutely no objection to the UK Government making investments for economic development in Wales—nor, I believe, would anyone else in Wales. It is the intrusion into devolved powers that is so offensive. Those of us who live in the Objective 1 area of West Wales and the Valleys understand that our economy is weaker than those in other areas of the UK and that we live in one of the poorer regions of Europe. We have appreciated the EU’s investment in the past 20 years; for example, the investment in the A55, which provides such a vital transport link across north Wales, and the projects that we have seen come to fruition under the rural development fund.

In my contributions on Second Reading and in Committee, I said that investment in our region is desperately needed—it was before we received Objective 1 funding and it will be when it ends—but this clause gives the Government extraordinary powers to act in areas of devolved competence and in areas where the EU structural funds have never operated. It is extremely disappointing that, throughout this clause, there is no mention of consultation, joint planning of schemes, joint programmes of work or joint management of projects—all examples of the collaborative approach to investment programmes initiated by the EU that we have become used to. There appears to be no clear setting of objectives, other than, I suspect, that the Government’s prime objective is to see projects in the UK—in the Prime Minister’s words—emblazoned with the union flag. I have no problem with that either. In West Wales and the Valleys we are used to seeing EU blue flags or plaques on projects. They are an indication that the needs of our area have been recognised, and so it would be with the union flag.

There is, however, still no clarity on how needs will be determined and recognised in the UK under the shared prosperity fund, whether projects will be imposed or applications sought and, crucially for us in Wales, what impact there would be on our financial settlement. We still do not know whether a UK Government investment in a road-building programme, for example, would lead to a reduction in the Barnett allocation, or whether projects imposed on us would be financed by loans that require repayment by the Welsh Government. All this curtails the Senedd’s ability to deliver on its objectives and will have an impact on its ability to deliver on its manifesto commitments.

Of all the attacks on the devolution settlements in this Bill, this is probably the most blatant—so much so that the powers and responsibilities of our Parliaments do not even merit a mention. It is another example of the introduction of a new constitutional settlement by stealth, as I referred to in my speech on Monday. It is another item to add to the list of examples fuelling the interest in independence, which, under this UK Government, is reaching a level never seen before in Wales. People are witnessing the performance of an almost colonial Government emanating from Whitehall and comparing it with the more progressive Government and Senedd we see in Wales—a progressive Senedd that voted last week to allow councils to change the electoral system for local elections by introducing the STV system and open up the franchise for local elections to 16 and 17 year-olds in addition to their existing rights to vote in Senedd elections; importantly, it supported voter participation by paving the way for automatic voter registration.

I must admit, I am surprised that, after listening to concerns expressed by the noble and learned Lord in Committee and hearing the support for his stance from other noble Lords, the Government have not come back on Report with an amendment of their own that recognises and ameliorates the impact of this clause on the devolved Parliaments.

In a Bill about the regulation of the UK internal market, this clause and its assault on the devolution settlements has no place, and I support Amendment 64 to remove it. I hope that the noble and learned Lord will be minded to call a Division on the amendment. If he does, he will have the support of these Liberal Democrat Benches.

Photo of Lord Naseby Lord Naseby Conservative

My Lords, I will speak first to government Amendment 66, on how the power in Section 42 will be used. There is a very welcome statement that there is to be an annual report, which can be fully debated in Parliament. We had some discussions about this in Committee, and this amendment is very welcome.

Turning to Amendment 64, I hope that the noble and learned Lord, Lord Thomas, will not find it offensive if I allude to the fact that I used to own ferrets. Ferrets are beautiful animals, very ingenious and very inquisitive—but of course they have one failing. Sometimes they succeed in catching or flushing out rabbits, but quite often they turn around, get distracted and think of something far less important. Listening to the noble and learned Lord’s introduction to his amendment, it was based, according to him, on finding in paragraph 3.1 of the Red Book something that he thought was relevant to this debate on Clause 42.

I am sufficiently brave to suggest that he has perhaps forgotten what the basic elements of this Bill are. On the front page, it says:

“To make provision in connection with the internal market for goods and services in the United Kingdom … to authorise the provision of financial assistance by Ministers of the Crown in connection with economic development, infrastructure, culture, sport and educational or training activities and exchanges”.

This is what the whole Bill is about. So here we have before us an amendment which is a pretty wide-sweeping reversal of that primary purpose of the Bill. A whole new concept is being proposed in this new clause, at a time when the whole country faces massive challenges arising from Brexit.

After five days looking exhaustively at the Bill in Committee, lo and behold, here we are on Report, and this pretty revolutionary amendment is put forward. For me it is basically pre-empting the role of the Chancellor of the Exchequer and the Government of the day. It does not matter what the colour of the Government is: in structural terms it pre-empts the Westminster Government, setting up a whole new semi-department, with little oversight and, frankly, huge costs. There does not seem to be any constraint on it at all. In my judgment it is way outside the scope of the Bill and should be rejected.

Photo of Baroness Bennett of Manor Castle Baroness Bennett of Manor Castle Green

My Lords, in his very clear and crisp outline of the reasons for his Amendment 64, the noble and learned Lord, Lord Thomas of Cwmgiedd, referred to my speech in Committee about pork barrelling. The noble and learned Lord helpfully informed us about box 3.1 in the Red Book, which I have not yet had a chance to read but which seems deeply revealing about the Government’s clear political intentions. The smell of roast meat is certainly in the air.

Government Amendment 66, offering retrospective annual transparency, is a slight improvement on the Bill, but so slight that I find the words “slightly better than nothing” rather hard to get out. Considerably better improvement is offered by Amendment 65, in the name of the noble Lord, Lord Wigley, which provides stronger democratic control and devolved Administration involvement. However, that is clearly the opposite of the Government’s apparent intention, as the noble Baroness, Lady Finlay of Llandaff, demonstrated, using their own words. I agree with the noble Baroness, Lady McIntosh of Pickering, that this is also of great interest to the English regions, whether Yorkshire, which I hope will soon have a democratic parliament of its own, or Cornwall, which has similar ambitions.

Many of the issues have already been well canvassed, so I will not repeat them, but I will finish by remarking on the words of the noble and learned Lord, Lord Thomas, who reflected that he and I have different views on the union. As a Green, I believe in local decision-making, with power and resources going upwards only when absolutely necessary. The best decisions are made democratically and, of course, the devolved Administrations have far more democratic structures than Westminster. Those decisions should be made by the people affected by them.

I believe in self-determination, and of course support the Scottish Greens’ position on independence. I note that last month the Wales Green Party voted that, in the event of a referendum on Welsh independence, the Wales Green Party

“commit to campaigning in favour of seceding from the United Kingdom.”

I remember that very soon after I came into the House —I can date it back to about a year ago—the noble Lord, Lord Wigley, coined, I believe, the neat phrase about Wales becoming “indy-curious”. Everything I hear says that that position has moved on significantly.

I know that your Lordships’ House, and the Government, are firmly pinned to unionism. Despite my different position, I will offer some advice to those holding that view. Seizing more control and trying to take back power and resources from devolved Administrations might seem like a way of taking control and getting a tighter grip on the nations of the so-called United Kingdom, but the effect is likely to be the opposite. Squeezing harder will push nations further away.

So why am I offering this advice if my view is the opposite? Because, when the independence move or moves come, I hope that they can be done in a friendly, co-operative manner, with the kind of political, consensual approach more typical of the representatives of the devolved Administrations than of Westminster—as we hoped the move out the European Union could have been managed once the decision was made. Now, 36 days from the end of the transition period, with the nation in a state of great uncertainty, let us learn from that experience—and I can promise the Green group’s support for all the moves to try to ensure that power and resources stay with the devolved Administrations.

Photo of Baroness Noakes Baroness Noakes Conservative 3:45 pm, 25th November 2020

My Lords, I support Clause 42 and Amendment 66, but I do not support the various other amendments in this group, and in particular I wish to speak against Amendment 64, which seeks to remove the financial assistance power from the Bill.

I have been very concerned, throughout this Bill and again today, at the way in which grievances about devolution have been elevated into some kind of holy crusade which sees only evil in the UK Government. Noble Lords supporting various amendments on this theme have often alleged that the Government are playing a dangerous game with the devolution settlement and that this Bill represents a major power grab which must be resisted. I believe that the only people threatening the constitutional settlement on devolution are those who have set their face against—or at least ignored—the existence and value of our United Kingdom and our precious union.

I have also heard a lot of wishful thinking about the UK as a federation of equal states, which it is not. Many noble Lords have been pretending that “the UK Government” is synonymous with “an English Government”—which is also far from the truth. If there is a gap or weakness, it is that the UK Government and UK Ministers act mainly in the interests of the whole of the United Kingdom, and England gets left a bit to one side.

The Government have been consistent and clear that they intend to act in the interests of levelling up the whole of the United Kingdom. The actions of my right honourable friend the Chancellor of the Exchequer in today’s expenditure review are testament to that, and I say to the noble and learned Lord, Lord Thomas, that it is a very fine blue book—a Red Book, I believe, is normally reserved for a Budget Statement.

The UK Government will always act in the interests of the whole of the United Kingdom, and it is disingenuous of noble Lords to paint a picture of a domineering Government trying to strip powers away from the devolved nations. No powers at all are going to be taken from the devolved nations. Devolved Administrations still have the same powers to spend their money as at present.

Clause 42 creates the power to grant financial assistance across the UK so that it is put beyond doubt that the UK can replicate the sorts of financial flows that existed when the EU took money from the UK and graciously gave a bit of it back to us to use in the way it decided. In future the UK Government will make those decisions about how UK money is directed, rather than Brussels. The guiding light will be the needs of the UK as a whole, although I am sure my noble friend the Minister will confirm that there will be extensive discussions with and the involvement of the devolved Administrations.

Clause 42 talks about financial assistance but let us be clear: this is simply public expenditure. Public expenditure is sourced within the overall fiscal policies of the United Kingdom as set by the Chancellor of the Exchequer. It will be financed by UK taxation or UK borrowing, both of which are carried out by Her Majesty’s Treasury as part of its UK-wide economic policies. These are not matters for the devolved Administrations, however much they might wish otherwise.

Noble Lords really should be careful what they wish for. If Clause 42 is removed from the Bill, noble Lords will remove the mechanism the Government have chosen to funnel public money into their agenda to level up the whole of the UK. How do noble Lords think that the devolved Administrations will get the kinds of money that used to flow via the EU without Clause 42?

Of course, the Government have powers, in general terms, under the appropriation Act to decide upon and distribute public expenditure, but it is a well-known rule and general practice to take a specific legal authority for major expenditure that will be made on a recurrent basis. So the result of taking Clause 42 out of the Bill may well be that the large sums that the devolved nations expected to receive will disappear. Is that really what the noble Lords promoting Amendment 64 want to achieve?

Photo of Lord Rooker Lord Rooker Labour

My Lords, I again partly apologise to noble Lords because I intended to speak on later amendments and to support the noble and learned Lord, Lord Thomas, on Amendment 69. I will settle for Amendment 64.

I take exception to the definition of the Long Title from the noble Lord, Lord Naseby. Whichever way we read it, it is about devolved matters in the United Kingdom. We have only to look at the definition of infrastructure in Clause 42 to see that it absolutely covers devolved matters. His was a bit of a cheap shot at the noble and learned Lord, Lord Thomas, to try to imply that this was inconsistent with the Long Title.

My other beef is one I have had in the past regarding Wales and the Barnett formula. I have never understood why the people of Wales, including the politicians, have never risen up. Some years ago I was a member of the Select Committee that looked at the Barnett formula. It was abundantly clear that Wales had been cheated for years. If the Barnett formula was based on need, rather than population, Wales would be on about a third more than it is now. We told leading MPs about this, but I have never noticed any great kickback. Wales has been short-changed under Barnett for years. There is no easy answer to that.

The noble and learned Lord, Lord Thomas, was absolutely bang on in delivering the information from box 3.1 out of the Red Book at the beginning of the debate. I thought his eight questions were incredibly telling. I would use the term “pork barrel”, because that is what it is about. The Chancellor of the Exchequer, whose Statement I heard earlier, made it quite clear that the spending of this money relied on the consent of the constituency Member of Parliament, although I understand that the Treasury might have disowned this since. I tweeted, saying that it is incredibly dangerous for constituency Members of Parliament to be involved in executive functions. Local councils are always involved in executive functions; Members of the House of Commons are not. It is incredibly dangerous territory for them to get involved in, particularly in view of incidents that arose in the past.

I understand that the Treasury might have backpedalled a little on that, but it shows the thought process of those who constructed the Statement today, which is intricately involved with the Bill: destroy devolution, open up the pork barrel and give money to your friends based on the constituency MP. That cannot be a good form of governance. It cuts across devolution massively, whichever way anyone defines it. I have said before that my experiences have been at Defra and MAFF before devolution, then at the Food Standards Agency, which was a four-nation, non-ministerial department at the time. Whitehall has never really done devolution and never really understood what was happening. It has taken a while even for the House of Commons to become clear about the quite distinct advantages of devolution. It all went wrong, of course, when the proportional electoral system gave a majority Government. That is not supposed to happen, but neither, on the other hand, is first past the post designed to give coalitions, which is what we had in 2010. You cannot base the future construct of the constitution on such whims.

Governments come and go and will not be there for ever, but I very much agree with what the noble Baroness, Lady Bennett of Manor Castle, said: with devolution now under acute and very massive threat, there is no question but that this will push the independence movements of Wales and Scotland wider and further, particularly in Scotland, where it is stronger. I cannot see a solution to it. I think that we are heading headlong towards the break-up of the union. I will fight like hell to stop that and a lot of people will. The problem is, keeping the fight in words and debate. We are heading for the destruction of our country, without any policy announcement, a clear vote or a manifesto commitment. It is being done by subterfuge and backhanders.

In my view this is the direct effect of the Bill, particularly these attacks on devolution. Amendment 69 covers the same for Clause 44; they are two sides of the same coin. I was going to speak about Amendment 65, but I will leave that to my noble friend. This fundamental attack on devolution, with the push to break up the United Kingdom, is a much more serious affair than has been recognised by your Lordships’ House, where it has been recognised more than in the House of Commons. We need to send a signal to the elected House that our country, our constitution and the make-up of the union are under direct threat as a result of the Bill.

Photo of Viscount Trenchard Viscount Trenchard Conservative

My Lords, I am very pleased to follow the noble Lord, Lord Rooker, but I could not disagree with what he said more. The threat to our United Kingdom results from the power grab being attempted by devolved authorities, led by nationalist parties, of powers that were never theirs in the first place.

Amendments 64 and 68, in the names of the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Purvis, strike at the very heart of the Bill by removing the Government’s powers to make provisional assistance for infrastructure projects. Many such projects need to be provided across the whole United Kingdom in a coherent and consistent manner. I greatly respect the opinions of both noble Lords, but the devolution settlement that the noble and learned Lord, Lord Thomas, talked about is different from one that properly preserves the UK internal market.

I welcome Amendment 66, in the name of my noble friend Lord Callanan, which seeks to allay the concerns of noble Lords about these clauses. I would have expected your Lordships to be pleased that my noble friend has proposed that the Government “must” make an annual report to Parliament. Amendment 65, in the name of the noble Lord, Lord Stevenson, pre-empts the Government’s announcement about how they intend to set up and run the shared prosperity fund, which is to take over the functions of the EU structural funds. As my noble friend Lord Greenhalgh said in a Written Answer on 10 August:

“The fund will bind together the whole of the United Kingdom, tackling inequality and deprivation in each of our four nations.”

In this regard, I think the fund should not be restricted by powers that may be exercised by the devolved authorities to any greater extent than the EU structural funds have been restricted until now.

This amendment is far too prescriptive, and it is, of course, inconceivable that the Secretary of State would not discuss disbursements from the fund in the same way that European officials have hitherto discussed disbursements with both the UK Government and the devolved authorities. Nevertheless, I share the concern of the movers of these amendments that there is now little time before the EU structural funds are consigned to history as far as the UK is concerned, so I hope that the Minister will tell us when she expects that the Government will announce exactly how they intend to operate and distribute the new fund?

My noble friend Lady McIntosh of Pickering told the House that a Scottish Minister had stated that Scotland intends to continue direct payments to farmers rather than introducing something similar to the ELM scheme. Of course, this is a slightly different—though related—matter, but it clearly shows why it is so important to maintain a coherent internal market in the United Kingdom.

The noble Lord, Lord Wigley, talked about “the bad old days before devolution”. Does he remember that less than 25% of the electorate of Wales supported even the limited degree of devolution at that time? The noble Lord’s Amendment 67 seems to me to be aggressively nationalistic. The noble Baroness, Lady Bennett of Manor Castle, spoke in favour of what Baroness Thatcher called “subsidiarity”—but I have not heard her, or the noble Lord, Lord Wigley, or other noble Lords opposite criticise the EU as it moves to centralise and harmonise fiscal and other powers at the expense of the nation states.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy) 4:00 pm, 25th November 2020

My Lords, once again, this has been a very widespread and high-quality debate. To the Minister, who has not had the benefit of the soap opera that you tend to have on Report, I say that we have reached the point that—here I agree with the noble Viscount, Lord Trenchard—is the meat of this Bill. At Second Reading, in Committee and on Report, many of your Lordships asked why this Bill was necessary. Of course, there was the political and negotiating posturing that came with Part 5, but I put it to your Lordships that one of the central, driving reasons for this Bill is exactly what we are discussing here today: it is so that central government can get its hands on this money and administer it through whatever means it sees fit, because there is no detail on that administration —here, again, I echo the point made by the noble Viscount, Lord Trenchard.

Some people called it pork-barrel; I would perhaps call it a hobby horse. We saw the benefit of the Prime Minister’s attempts at hobby horses when he was the Mayor of London: we saw the amount of public money that was spent on “Boris Island”, the green bridge and the Emirates wire crossing of the Thames. These are just small potatoes compared to what we could look forward to.

In her speech, the noble Baroness, Lady Noakes, characterised those of us on these Benches and in Her Majesty’s Opposition as, somehow, thinking that the Government are evil in this. I make it absolutely clear to the noble Baroness and the Minister that I do not think that she is evil, and we do not have a policy of thinking that the Government are evil. However, we do think that the Government are wrong, and we are allowed to do so. Many of the speeches on the Benches opposite have also been factually wrong on the subject of devolution, and I will correct some of those facts.

However, I will err on the side of giving the benefit of the doubt, because I do not believe that the people who drafted this Bill misunderstood devolution in the way that many of the speeches we have heard today have. I believe that there is a very deliberate attempt in this Bill to bypass the processes that have become normal in devolved government and, unless we see actual details as to how this will go forward, this suspicion will only get greater.

Very recently, the Government introduced the notion of the role of local councils. This has come along only in the last 24 to 48 hours in relation to their possibly getting involved in the process of disbursing. I can only assume that it is the antidote to the Prime Minister’s loose lips around devolution, but perhaps the Minister can explain what role the Government see in any future disbursement process for local councils—and, if there is not one, perhaps they can disabuse us of that as well.

My noble friend Lord Purvis set out how the multiannual financial framework works. In answer to the noble Baroness, Lady Noakes, who said that the devolved authorities are not having financial powers taken away from them, I say that they most definitely are, because they had functions under EU structural funds and state aid within the fiscal framework which are being withdrawn.

I am afraid that the noble Baroness was similarly wrong on the subject of public finance and tax. If you happen to live in Scotland, as my noble friend Lord Purvis will tell you on many occasions that he does, you pay Scottish income tax, which is set by the Scottish Government: it is a different tax. Perhaps the noble Baroness, Lady Noakes, would acknowledge that there are differences across this country in the fiscal arrangements for the people who live in the nations of the United Kingdom. Those differences arise through the devolved process, which, somehow, is now being withdrawn and pulled back by this Government under the misapprehension that, by being seen to spend this money, they will somehow become popular. That is not the way to be popular, and it will fail. The noble Lord, Lord Naseby, spoke about ferrets. My experience of ferrets is that they usually bite the people who are handling them—so perhaps he should be warned.

I have one final point, which is a question that I really do want an answer to—it is not a rhetorical question. The noble Baroness, Lady McIntosh, raised the interesting point about how the markets could get distorted. I would like the Minister to explain the role of the office for the internal market in this. As we have discussed in previous amendments, considerable powers are being vested in the OIM, not least Clause 31 powers, so can the Minister confirm that the OIM will be able to investigate the UK Government’s use of the powers that they seek in Clauses 42 and 43 to investigate whether this distorts the market? Can the Minister also confirm that devolved authorities will be able to request such an investigation from the CMA?

Photo of Lord Stevenson of Balmacara Lord Stevenson of Balmacara Opposition Whip (Lords), Shadow Spokesperson (Digital, Culture, Media and Sport), Shadow Spokesperson (Business, Energy and Industrial Strategy and International Trade)

My Lords, I am going to say much the same things as the noble Lord, Lord Fox, but I will focus a little on my Amendment 65, which has been supported by the noble Baroness, Lady Finlay, as well as offering support from the Opposition Benches for Amendment 64 in the name of the noble and learned Lord, Lord Thomas, and—if it is treated as consequential—Amendment 68.

The last time she joined us, the noble Baroness, Lady Penn, responded to my amendment on the shared prosperity fund with a very full and useful speech, part of which the noble and learned Lord, Lord Thomas, has already quoted. It was helpful to hear, because it was so clear what the purpose behind the new approach to the shared prosperity fund was to be. Although she may have to slightly change the way she expresses it when she responds in a few minutes, she confirmed, stressing the collaborative nature of the future, that this would

“allow the UK Government to complement and strengthen the support given to citizens in Scotland, Northern Ireland and Wales, without taking away devolved Administrations’ responsibilities.”

That is all good stuff, but she went on to say—this was not quoted by the noble and learned Lord earlier—that

“the response to Covid has shown how the UK Government … can save jobs and support communities. This could only have been delivered strategically and at that scale by the UK Government.”

That interesting formulation has been much explored during this debate. I do not think the Minister will find much support across the House for that statement.

The Minister went on to say:

“The UK Government are uniquely positioned to level up across every part of the UK”. —[Official Report, 2/11/20; col. 596.]

That also needs to be challenged. It is the sort of thinking from which comes the “Westminster knows best” process, which has been criticised, and spending decisions being taken against the advice of those in the best position to know about them. As the noble Lord, Lord Fox, said, this may lead to follies of the type of the garden bridge and, perhaps, the much-mooted bridge between Scotland and Northern Ireland, which seems to be the answer to the Northern Ireland protocol problem.

I will talk a little about Amendment 65. I was grateful to my noble friend Lord Rooker for talking about the work done in your Lordships’ House on a critique of the Barnett formula. He is absolutely right: if that formula had been replaced by something of a different nature, the funding levels in Wales and Scotland would have changed, because of inward immigration to Wales and external emigration from Scotland. There has been a change in the population levels which has not been reflected in settlements. The system does not command much love and affection, let alone support.

The proposal in Amendment 65 challenges the Government to think again about how they might wish to do the shared prosperity fund. If it is not clear, because the drafting is somewhat complicated, it is based on a model to which the closest analogue would be the Low Pay Commission. Despite allegations to the contrary, it weighs heavily on subsidiarity and proportionality as the principles under which it might be set up. Under the proposal in Amendment 65, it is the Secretary of State who sets the level of the fund, it is clearly the Government’s funding and their authority to set a level every year for that is not, in any sense, taken away. What the amendment does is to mandate consultation and provide an alternative, needs-based basis for judging the bids. As set out in proposed new subsection (11), this approach looks at an area’s proportion of children below the poverty line, low income, economic weakness, the age structure of the population, the impact of the pandemic and the impact of climate change—something we might want to consider more fully, though it has also been picked up today.

I thank the noble Baroness, Lady Finlay, for her kind words. For anyone in the Official Opposition to be ruled as “intelligent and thoughtful” is almost too much to take, but it probably rules out any further consideration of my amendment. It would not do to be seen to be endorsing that, would it?

As the noble Lord, Lord Purvis, said, if Amendments 64 and 68 are passed, there will be a bit of a hole in the Government’s thinking on this area. They might want to think again about how do to that by looking at this amendment, certainly in the context of the responses to the now notorious box 3.1. I congratulate the noble and learned Lord, Lord Thomas, on being able to adapt his speech to take account of the fact that he could have had only a few minutes to look at that box. His critique of it was spot on. As the noble Baroness, Lady Finlay, said, box 3.1 is based on the assumption that the Government will receive the new financial assistance powers in this Bill—it says so straight out, at the beginning. It is also interesting that this is clearly a top-down approach:

“The government will develop a UK-wide framework for investment in places receiving funding and prioritising: investment in people … investment in communities … investment for local businesses”.

There is nothing exceptional or egregious about the list of things to do, but the idea that there is a top-down approach jars with everything we have been doing in the last 20 years to develop a much more responsive, local environment.

It trumpets:

“Places receiving funding will be asked to agree specific outcomes to target within the UK-wide framework. They will then develop investment proposals to be approved by the government among a representative stakeholder group.”

What on earth does this all mean? However, it does say something that we might celebrate:

“Investment should be aligned with the government’s clean growth and net zero objectives.”

Is this the first time that the Government are prepared to accept publicly that there is a case for maintaining existing high environmental standards and net-zero objectives? If so, why is that not also being applied in the Bill to market access principles and the derogations from legitimate aims which the Government were dead against only a few days ago.

The whole approach being taken in this is redolent of what the noble Lord, Lord Fox, suggested was an attack on the devolution settlement and it must be opposed. This is not the way we do things. Amendment 65 is an attempt to think outside the box for the shared prosperity fund, but it is based on an assumption that there will be a continuation of the way in which devolution has worked. I hope that, when she comes to respond, the Minister will say that we are wrong about this, and that the Government’s proposals reaffirm their commitment to the devolution settlement. Their current proposals have exposed a centre that seems unable to listen and outlying areas that do not feel they are being consulted.

This power grab, and the rather ignoble assertions made by the Minister the first time round, exposes a key divide between us. Why do all the important things that she identified have to be done from the centre, when existing mechanisms allow these bodies, which have far greater knowledge of what is happening locally, to spend the resources more effectively? As I said in response to an earlier amendment about the common frameworks, it is now patently obvious that the Bill is actually about gathering powers, which should be devolved, to a relatively insensitive centre which is trying to imprison a multinational country composed of vibrant, diverse regions, with diverse histories and needs, into a straitjacket of a unitary state. We can, and need to, do better than that.

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip) 4:15 pm, 25th November 2020

My Lords, I begin by reminding noble Lords of the purpose of this part of the Bill. The power to provide financial assistance supports the Government’s determination to deliver on the commitments on which they were elected: levelling up and delivering prosperity across the whole United Kingdom, and strengthening the ties that bind our union together. It provides for a unified power that operates consistently UK-wide—one which will allow for strategic investment throughout the UK, underpinning the Government’s determination to see all parts of the UK flourish. It makes sure that we meet our manifesto commitment to deliver a UK shared prosperity fund which allows the Government to invest in communities across England, Scotland, Wales and Northern Ireland. Previously, in many of these areas, the EU mandated how our money had to be spent, with little say from elected politicians in the United Kingdom. The UK Government intend to take a much more collaborative approach in delivering any funding that replaces EU programmes.

In this context, I will speak to Amendments 64 and 68, which seek to remove Clauses 42 and 43. The noble and learned Lord, Lord Thomas, asked why such a power should be included in this Bill. The ability of the UK Government to invest in and support businesses and communities in all parts of our union, as these clauses provide for, helps to achieve a stronger and fairer internal market. Indeed, this is the argument the EU makes on the role of European structural and investment funds in strengthening the European single market. It is right that, as we leave at the end of the transition period, the UK Government have the right tools to make sure the whole country can benefit from investment which strengthens communities, economies and connectivity within and between all parts of the UK.

Another point of focus from noble Lords, including the noble Lords, Lord Purvis and Lord Fox, the noble and learned Lord, Lord Thomas, and the noble Baroness, Lady Finlay, among others, was the role of the devolved Administrations and other local partners, including local authorities. Let me be clear: this power is in addition to the devolved Administrations’ existing powers. It will allow the UK Government to complement and strengthen the support given to citizens, businesses and communities in Scotland, Northern Ireland and Wales. It does not take away responsibilities from the devolved Administrations. Rather, the power will enable the UK Government to deliver investment more flexibly and dynamically and in collaboration with the devolved Administrations and other partners.

We have taken a collaborative approach to investment with devolved Administrations already, for example through our successful city deals programme, as noble Lords have talked about. The UK Government intend to continue to work in this spirit of partnership with stakeholders. We will make sure that this new power can facilitate UK government support for projects, making it far more responsive and responsible for addressing the needs of communities and businesses throughout the country.

We have seen how important this can be. Colleagues on these Benches and in the other place have already noted that our experiences of Covid-19 have demonstrated the value of a responsive UK Government. The noble Lord, Lord Stevenson, questioned the support in this House for that statement; I tend to disagree, unless the party opposite does not support the furlough scheme and the Bounce Back Loan Scheme that have protected thousands of jobs and businesses across the UK during this pandemic. To make sure that the UK Government can deliver on this ambition for all parts of the UK, I hope these amendments will be withdrawn or not pressed.

Turning to government Amendment 66, we listened carefully to the debate by noble Lords on this part of the Bill in Committee, where questions were asked on how the clause would operate. Through Amendment 66, the Government seek to introduce a requirement in Clause 43 to report annually to Parliament on the use of this power to provide financial assistance. This would put a requirement in legislation to provide a summary on the use of the power for scrutiny by parliamentarians, other key partners and the wider public. This is in addition to the scrutiny role that Parliament already performs for public spending through voting on the spending allocations, as part of the estimates process and in line with the principle of the PAC concordat.

This requirement makes sure that key partners, including devolved Administrations, have transparency on where funding under the power has been directed. Any future funding decisions are subject to fiscal events. Accordingly, the requirement added by Amendment 66 requires a summary of the use of the power in the previous financial year. I hope your Lordships’ House will agree that this government amendment improves the opportunity for Parliament to see and scrutinise financial assistance provided under the power in Clause 42.

I will now discuss Amendments 65 and 67. Amendment 65 would mean that this new clause would seek to establish a UK shared prosperity fund commissioner, whose primary task would be to make recommendations for the disbursement of the UK shared prosperity fund. Amendment 67 would mean that financial assistance for economic development would be managed and administered through the devolved Administrations. As I have said, this power to provide financial assistance is wider than any single fund or organisation. It will ensure that the UK Government are well positioned to deliver financial assistance, following the end of the transition period, and to replace EU structural funds. It is crucial that the UK Government can use successor funds to invest strategically and have the additional flexibility needed to invest across the whole UK that this power provides. These amendments, including the establishment of a commissioner, would curtail that flexibility. In addition, decisions on governance for the fund should not be made through legislation.

Noble Lords are, however, right to seek progress on the UK shared prosperity fund. The Covid-19 pandemic presented exceptional circumstances, and it is right that our focus and priorities shift accordingly. The Government have conducted a one-year spending review to prioritise the response to Covid-19 and focus on supporting jobs. However, in these challenging times it is important we do not lose sight of our long-term objectives. I reassure my noble friend Lord Trenchard that investment under EU structural funds peaks next year and will tail off until 2023, with spending in each of England, Scotland, Wales and Northern Ireland remaining higher than the annual average.

To ensure a seamless transition from EU structural funds into the UK shared prosperity fund, we announced additional spending today in the spending review to help local areas prepare over 2021-22 for the introduction of the UK shared prosperity fund, supporting our communities to pilot programmes and new approaches. As noble Lords have also referenced, we have published the heads of terms setting out our plans for the shared prosperity fund.

The noble and learned Lord, Lord Thomas, asked whether the spending would be efficient and effective. The bureaucratic burden of EU programmes meant that places have had to wait a long time before they received any funding. Places typically see no investment in their communities until at least a year after the programmes have started. The provision of additional funding next year will be quick and responsive; it will be phased in as EU investment declines.

The heads of terms also set out that there will be two portions of the fund: one targeting places most in need to support people and communities to open up new opportunities; and a second targeted differently at people most in need through bespoke employment and skills programmes, again tailored to local need. As the noble Lord, Lord Stevenson, noted—I hope the noble Baroness, Lady Bennett, who had not seen the spending review document, will take some reassurance from this—the terms also state that investment should be aligned with the Government’s clean growth and net-zero objectives.

We have not taken back control over investment to hoard it in Whitehall or to roll over EU prescriptions on how we invest in our local economies. Local places across the UK will be able to shape investment to reflect their needs. This means a strong role for local partners across the UK. The UK Government intend to work with devolved Administrations and local communities to ensure this power is used to best effect and that the UK shared prosperity fund supports citizens across the UK. This includes engaging with local authorities and devolved Administrations, as well as wider public and private sector organisations. I reassure noble Lords that the Government have held 26 engagement events across the UK on plans for the shared prosperity fund, including 16 events in devolved Administrations, and that UK government officials regularly speak with their counterparts in the devolved Administrations to discuss the design and operation of the fund to ensure it supports every part of the UK.

Further details on additional funding for next year will be published in a prospectus in the new year. We will set out further details on the UK shared prosperity fund in the UK-wide investment framework, to be published in the spring. A multiyear profile will be set out at the next spending review.

The short answer to the noble Lord, Lord Fox, on his final question on the role of the office for the internal market is no. It looks only at Parts 1 to 3 of the Bill and relevant effects, so it would not look at decisions under this power.

Given the further details I have set out today, I encourage noble Lords not to press their amendments.

Photo of Lord Fowler Lord Fowler Chair, House of Lords Commission, Lord Speaker, Chair, House of Lords Commission

My Lords, I have received requests to ask a short question from the noble Lord, Lord Liddle, the noble Baroness, Lady Finlay of Llandaff, and the noble Lords, Lord Fox and Lord Purvis of Tweed. I call the noble Lord, Lord Liddle, to ask a short question for elucidation.

Photo of Lord Liddle Lord Liddle Labour

My Lords, I strongly support the Government’s levelling-up agenda but, having listened to the noble Baroness, they seem to have a fundamentally different approach to how this should be achieved from what has been a shared consensus for the last 20 years or so. We all thought the way to achieve levelling up, economic development and all the other things mentioned in Clause 42 was through devolution, bringing economic powers closer to the people. That was the logic of Scottish and Welsh devolution and the logic of the Chancellor of the Exchequer in the Cameron Government, George Osborne, who promoted the northern powerhouse, the Midlands engine and all the rest. The Government now seem to be saying, “We want to run the show centrally”. Is that so?

Do the Government not recognise that all this talk about the EU directing how the funds were spent is nonsense? I was very involved with the North West Development Agency; we directed how the funds were spent from that agency. Are the Government not proposing to weaken the powers that the devolved bodies have over structural funds? Finally, is it not the case, as I have been told—someone made a cursory reading of the Red Book—that next year the Government are allocating £220 million to the shared prosperity fund, which is a far lower sum than was available under the EU structural funds?

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip) 4:30 pm, 25th November 2020

I am not sure that the noble Lord’s first questions cover points that we have not covered in this debate already but, for clarity, this does not change the devolution settlements. We are talking about a UK-wide investment programme that will work in collaboration with the devolved Administrations, local partners and local authorities.

I am very happy to clear up the noble Lord’s point about £220 million. That is in addition to money that is still coming through the EU structural funds, which will continue to flow until 2023. As I believe I said in my speech, each of the nations will continue to receive the same level of funding, if not a bit more. That first year of funding is for pilot projects and to aid the transition to the shared prosperity fund, which will then ramp up and there will be a multi-year settlement for that fund in the next spending review.

Photo of Baroness Finlay of Llandaff Baroness Finlay of Llandaff Deputy Chairman of Committees, Deputy Speaker (Lords)

The noble Baroness, Lady Noakes, said to be careful what you wish for. She intimated that, in the event of Clause 44 being deleted from the Bill, the shared prosperity funding being discussed might be withheld completely. Can the Minister state clearly, with a simple yes or no, whether it is indeed the Government’s policy that, without Clause 44, the funding will be withheld or diminished?

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip)

My Lords, I do not think that I can go any further than what has been announced in the spending review today: that it is the Government’s intention to use the powers under this Bill to deliver the shared prosperity fund.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy)

My Lords, I thank the Minister for attempting to answer my final question but I fear that she may have been wrongly advised. Clause 31 states:

“The CMA may from time to time undertake a review”.

Subsection 1(b) certainly points to “Parts 1 to 3”, as in the Minister’s answer. However, subsection 1(a) says that such a review can refer to

“the internal market in the United Kingdom”,

which is a far broader swathe than the narrow answer given just now.

While I am up and reading the legislation, subsection (2) states:

“The CMA may receive and consider any proposals that may be made or referred to it for undertaking a review”.

Can the Minister confirm that the devolved authorities are one of the bodies that can request such a review of the whole UK internal market as in Clause 31(1)(a), rather than the answer that was just given?

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip)

The noble Lord will probably be unsurprised to know that the advice I have received has not changed in the short time since he asked his further question. I will commit to reviewing that advice; if any part of it was not accurate, I will write to the noble Lord. My understanding is that those reviews do not refer to the powers in this Bill, and whether the devolved Administrations or others can refer matters to the CMA for review relates to other parts of this Bill.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade)

The Minister gave a number of examples of how the UK Government are currently able, under their powers, to fund UK priorities across all parts of the United Kingdom. The Government do not have the legislative powers to spend on devolved areas within devolved competencies. What powers are the Government seeking to have by January next year for them to spend on devolved policy areas in our devolved nations?

Photo of Baroness Penn Baroness Penn Baroness in Waiting (HM Household) (Whip)

The Government are seeking the power under this Bill to spend across the whole of the United Kingdom in the areas set out in the Bill. The operation of the £220 million announced at the spending review will start from the next financial year and the full shared prosperity fund will begin the year after. More detail on how that will operate will be set out in due course.

Photo of Lord Thomas of Cwmgiedd Lord Thomas of Cwmgiedd Chair, Consolidation, &c., Bills (Joint Committee), Chair, Consolidation, &c., Bills (Joint Committee)

I thank all noble Lords who have spoken in this interesting debate. I apologise to the noble Baroness, Lady Noakes, for referring to the document published today as the Red Book instead of its true colour which, as one sees on the screen, is blue. I was misled by the heading Google has for it, which is the Red Book.

However, Google had another use because it took up a point made by the noble Lord, Lord Naseby, and alerted me to the fact that the great and late Senator McCain had a member of staff who would go through Bills before Congress and find where there were pork-barrel provisions. He was known as the ferret, so ferrets do have great uses in politics.

To return to the points made, it is clear from the debate that we all share a number of objectives: first, to have a more prosperous United Kingdom; secondly, to spend the money wisely; and thirdly, to spend it in a way that is effective and goes to those areas that need it. We all believe that such spending and levelling up will benefit the union. However, there is profound disagreement as to the way in which this should work with our devolution settlement. It seems to me from the response given to my noble friend Lord Purvis of Tweed and from the Minister’s speech that only one conclusion can be drawn from what the Minister is saying and that these powers are needed not to spend the money outside the areas of devolved competence but to spend it in the areas of devolved competence. That is the aspect that fundamentally divides us and is fundamentally wrong about this clause. It seems to me that, given the Minister’s position and the clarity that comes through her statements, this is a direct attack on devolution under the guise of some other words. Therefore, I seek to press to a Division the amendment that I tabled to remove this clause, which is so destructive of our union.

Ayes 323, Noes 241.

Division number 2 United Kingdom Internal Market Bill - Report (3rd Day) — Amendment 64

Aye: 323 Members of the House of Lords

No: 241 Members of the House of Lords

Ayes: A-Z by last name

Nos: A-Z by last name

Division conducted remotely on Amendment 64

Amendment 64 agreed.

Amendment 65 not moved.

Clause 43: Financial assistance: supplementary

Photo of Lord Russell of Liverpool Lord Russell of Liverpool Deputy Chairman of Committees 4:52 pm, 25th November 2020

My Lords, Amendments 66 and 67 have been pre-empted.

Amendments 66 and 67 not moved.