Amendment 69

United Kingdom Internal Market Bill - Report (3rd Day) – in the House of Lords at 5:33 pm on 25th November 2020.

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Lord Thomas of Cwmgiedd:

Moved by Lord Thomas of Cwmgiedd

69: Clause 44, leave out Clause 44Member’s explanatory statementThis amendment is intended to remove provisions changing the legislative competence of the devolved legislatures to prevent devolved Acts making provision about the regulation of the provision of certain subsidies by public authorities.

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

My Lords, in a way this issue is much simpler because Clause 44 has been put in with one purpose only: to alter the devolution scheme. I intend to move that it be removed from the Bill and, if necessary, I will press this to a Division.

I ought to say from the outset that the regime of state aid is plainly necessary, and it is necessary to have one for the whole of the UK, as I will explain in a moment. It is necessary first to say a little about the background. Until relatively recently, the British Government’s stated position had been to retain the EU regime and put in place an independent body, such as the CMA, that would police it. Whether it was like the Commission or whether it was advisory was something to be worked out. Obviously, that would not have required any change to the devolution scheme because we would have been proceeding as we had during our membership of the EU.

However, the present Government decided to change that, and they intend to use Henry VIII powers to do so by statutory instrument. That instrument has been drafted and is no doubt to be debated soon. It has been considered by the Secondary Legislation Scrutiny Committee, which has concluded, and I think it important that noble Lords hear its conclusion:

The House will be aware of the Committee’s concern, raised on several previous occasions, that secondary legislation is being used to introduce policy changes about important issues which should more properly be the subject of primary legislation, thus affording a higher degree of parliamentary scrutiny. This is another such occasion and one on a subject that appears central to the UK’s negotiation position with the EU. We take the view that it is neither a welcome nor indeed acceptable use of secondary legislation”.

That is a clear intimation that we should look at this in a proper debate on state aid.

Obviously, that is for another occasion, but if that instrument is passed and the EU regime is revoked, the Government’s position is very simple, and we will live under this regime for the next several months—that is, the World Trade Organization rules will apply. We, as the United Kingdom, are bound by them as a matter of treaty obligations and the devolved Governments are bound to follow World Trade Organization rules in relation to subsidies. Of course, it will be without any direct policing authority, but that is the course that has been decided on, so there is no urgency about this issue and I will return to that in a moment. Of course, the position could change.

I very much hope that there will be a deal with the EU, and no doubt there is a prospect that a deal may deal with the subsidy regime, but at the moment we have to proceed on the assumption that, first, the current regime will be withdrawn, and that we will move to the WTO regime. That is the background.

Secondly, I emphasise again that this is not an amendment suggesting that the UK does not needed a regime. It is perfectly obvious that any internal market has to have a state aid regime, just as world trade has to have a set of state aid rules, weak though the WTO rules are on this issue. One cannot see a stronger argument for a properly thought through regime of state aid than in the recently published paper of the Institute for Government Beyond State Aid. It explains why it is necessary, how it should be done, what should be done before it is established and that it should be widely consulted on. Of course, there has been a lot of time to do this, but nothing has been done.

I think it must be accepted that the Government desire to proceed. Why they want to do so now is unclear, but they believe that they have hit a snag, which is the fact that for the time of our membership of the European Union we lived with the devolved Governments dealing with all these issues and, as I outlined in the previous debate, this competence is not reserved. Therefore, unashamedly, the Government want to use this legislation to alter the devolution settlements. Whereas in other parts of the Bill I have been critical of the fact that the Government are trying to do something by stealth, here what they are trying to do is much clearer. What they are trying to do is, if I may say so, not open dealing or being straightforward. They are trying to make state aid a reserved matter by the device of expanding or extending the competition policy reservation. If they wanted to do this properly, one would have expected it to be dealt with in a much more straightforward manner.

The real issue is how should we now proceed, and there are three alternatives. The first, obviously, is to leave this clause in the Bill. I will come back to that in a moment. The second is to work out a policy and enact it by primary legislation. The third is to use the common frameworks. I shall deal with the second of those suggestions first.

If there is to be a state aid policy, it cannot be denied that it would need widespread consultation. If we were to go down this route, the Government would need to carefully craft legislation and bring it before Parliament. If, in such legislation, there is a need to change the devolution settlements, that can be in the Bill so that we know what is required and how it can be dealt with. That is one solution. There is absolutely no reason why we cannot do that, because we will be living under a World Trade Organization regime in the interim and the devolved Governments will be bound by that.

Secondly, to my mind a much more attractive way forward is to use a common framework. I regret that this matter came up in Committee very late on a night when, as the Minister will remember, we were all fairly exhausted at the end of the debate on Part 5. I hope he will recall that I then suggested that maybe one way forward was a common framework.

Having the privilege of being a member of the Common Frameworks Scrutiny Committee, I raised the question of a common framework with the Counsel General for Wales, Mr Jeremy Miles, and the Cabinet Secretary for the Constitution, Europe and External Affairs in the Scottish Government, Mr Michael Russell. They expressed a view that this was a way forward. Last night the Counsel General wrote in very clear terms, and I hope that the letter has safely reached the Minister and many others. He made it clear that state aid had always featured on the list of common frameworks but there had been no progression. He continued:

“The Welsh Government has been clear that it would wish there to be a single state aid subsidy control regime for the whole of the United Kingdom, or at least for Great Britain if the Northern Irish protocol makes this impossible, provided it is co-designed by all the Governments which have to implement it. I therefore wish to make a clear and unequivocal offer on behalf of the Welsh Government. If the Government will remove Clause 44 and agree without prejudice to its legal position to participate in discussions on a legislative framework on state subsidy control, we will commit in good faith to work intensively on such a framework on a tight timetable to reach agreement within three months of the Government tabling a proposal, or in any event by 31 March next year. In the meantime, we will commit to not put forward any primary or secondary legislation to the Senedd which in any way touches on the regulation of state aid subsidies until these discussions have concluded.”

So there is a plain offer of a way forward on the table. That is the second alternative.

The third alternative is to proceed with this clause. I urge noble Lords to take the view that it would be quite wrong to do so. At this stage there is no clear knowledge of what the policy will be. It is not clear what changes, if any, need making to the devolution settlements. The appropriate time to make such a change would be with the policy properly devised and the powers that are needed.

I urge noble Lords to take the view that tackling all this now, with this proposal to change the devolution settlements without a policy by this back-door device of altering the competition reservation, is wrong. It would be better by far to work out what is needed and, if possible, to proceed by a common framework, because that will produce a legal regime with no doubt proper enforcement powers across the UK. We should not put this in at the tail end of a Bill without proper thought as to the context. There is time to do this: the WTO regime will tide matters over until a common framework is agreed or until there is legislation. I therefore move the amendment and I will be prepared to test the opinion of the House on this matter.

Photo of Lord German Lord German Liberal Democrat 5:45 pm, 25th November 2020

My Lords, I am grateful to the noble and learned Lord, Lord Thomas of Cwmgiedd, for putting forward so much detail behind this amendment, which clearly lays out the course of action that could be dealt with and also talks about the way the Government propose to take these matters forward. I think that my job is to amplify some of his points and perhaps to extend them as well. I refer to the offer from the Welsh Government, which I presume has also been made by the Scottish Government at the same time: that was the indication I received last night, and perhaps the Minister could confirm that this letter from Scotland has been received as well.

This clause proposes a major recentralisation of power. It is a far cry, for those of us who live in Wales, Scotland or Northern Ireland, from the cry of bringing back our laws, because state aid is currently not a reserved power, despite the Government’s protestation that it is and always has been. Annexe 1 of the Explanatory Notes for the Bill clearly lays out that it is not a reserved matter, but the Bill, of course, makes it say so. I reiterate at the start that we on these Benches want to see a single state aid regime for the whole United Kingdom, but that regime has to be to a design on which all four parts of the United Kingdom have collaborated. If they are not prepared to do this, as this clause lays out, they will not get a legislative consent Motion from either of the devolved Parliaments or from the Northern Ireland Assembly. In fact, in his letter to the Secretary of State for BEIS yesterday, the Counsel General for Wales said:

“Even if we resolve all the other issues, this alone”— that is, this clause—

“would make it impossible for me to recommend legislative consent to the Bill as it now stands.”

That is crucial, because it says something about the relationship that this clause makes between the four nations of this United Kingdom. It is not a way to respect our devolution settlement and, importantly, not a way to respect the union we have within the United Kingdom.

EU state aid policy is established through the Treaty on the Functioning of the European Union, and directly applicable regulations following on from that treaty. That was in place of having directives that would have required us to transpose these matters into UK law. In response to the House of Lords report on state aid, the Government said:

“We note that in practice the existing EU rules have always been sufficiently flexible to allow the UK to make innovative aid interventions when necessary.”

So the Government do not believe that there has been a problem in the way that this operated with the EU, and now they are intent on eating their own words, bringing back the rules, converting them into a straitjacket regime and not providing the flexibility that the countries in our union previously enjoyed. They also add that it would be “harmful” if this were dealt with in any other way.

A more co-operative and consensual approach is needed. The clause we are seeking to remove assumes that divergence will happen, and decrees that there shall be no divergence. Blunting and reducing the power of the devolved authorities is deemed to be a price worth paying so that the UK Government alone can determine the route they wish to follow in directing the new regime. Yet we do not know what this regime will look like. There is no sign of the detail or the choices the Government propose to take.

What this clause does, no matter what consultation the Government may eventually engage in, is drive their own agenda—an agenda that primarily has to support England. That, by the way, is no way to provide business with the certainty it is seeking. In fact, the lack of clarity at this stage prolongs the uncertainty; but it need not be like this.

We need to make progress on a UK framework for subsidy control. Again, this is another framework agreement which needs to be put in place. At the moment, without such a framework, it could easily be said that the Government are making it up as they go along. What is needed is a dialogue, not the “take it or leave it” policy that this clause entails—a policy which may well end up in the courts and will certainly amplify the feeling that the union of the United Kingdom is not respected.

Yesterday’s letter from the Welsh Government’s Counsel General, which the noble and learned Lord, Lord Thomas of Cwmgiedd, referred to, provides the UK Government with a route to a sensible solution. It recognises the ability in the EU to have variance in subsidies where there is an identified need. I must point out to noble Lords that many of us will remember that this was the case before we became members of the EU. I remember the arguments and debates on UK regional aid and regional assistance, and dividing the areas of the country up where aid could be given in greater amounts. That historical message was that there would be differences and distortions; of course, subsidies provide distortions, but they were provided for very good reasons. They were proposing to make a difference where the needs were greatest—where poverty and economic need were greatest—and so it was provided it in that way.

I can say, as somebody who had to operate within that framework as an economic development Minister, having to talk about these matters with Brussels simply to identify the boundaries, the flexibility, as the UK Government themselves say, was great indeed to manage that work. I believe we are seeing this clause put the cart before the horse—devising the policy before putting the legislation in place is what we are looking for, and that is what this amendment does.

All the devolved Governments have made it clear that they are prepared to work at pace with the UK Government to design a new subsidy regime. I would be grateful if the Minister in replying could tell us how the Government will respond to the offer from the devolved Governments. I also note that there must be unease on the Government’s side about this clause, since I have noticed that no other speaker, apart from the Minister, has come forward to support it.

Removing this clause from the Bill provides the opportunity for dialogue and the drawing up of a new subsidy regime for the UK. As the noble and learned Lord, Lord Thomas of Cwmgiedd, said, we already have a replacement in place temporarily until that is put back and the regime determined. I do hope that the Government will accept the offer from the devolved Governments as the right way forward and, as a gesture of good will, I would be grateful if they would therefore consider withdrawing this clause, supporting this amendment and, in so doing, strengthening the relationships between the various parts of our union.

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

My Lords, I speak in support of this amendment, elegantly explained by my noble and learned friend Lord Thomas of Cwmgiedd. I am pleased to follow the noble Lord, Lord German, who amplified his points.

Yesterday, as already referred to, the Welsh Government’s Counsel General wrote to the Secretary of State at BEIS about Clause 44. That letter demonstrates clearly that the Welsh Government are seriously committed to trying to save the union of the United Kingdom and recognise the need to secure the internal market. Their offer to work intensively with the Government is clear and unequivocal.

The Welsh Government have consistently put forward imaginative and thoughtful proposals about how to move the constitutional debate forward. Indeed, in Brexit and Devolution in June 2017, the Welsh Government championed the idea of common frameworks, subsequently taken up by Whitehall. If I may quote, they said:

“From the outset of the debate about our collective future outside the EU, the Welsh Government has recognised a need to develop UK frameworks. It is clearly important that no new barriers to the effective free movement of goods and services within the UK are created as a result of EU withdrawal. The development of UK frameworks should be taken forward immediately on the basis of negotiation and agreement among the four UK administrations.”

This paper suggests a qualified majority voting system within a reformed intergovernmental system, where a decision endorsed by the UK Government plus one of the devolved Governments would be sufficient to break any logjam, thus addressing head on the issue of one nation wielding a veto. Last year, the Welsh Government’s comprehensive analysis in Reforming our Union championed shared governance, describing taking responsibility for codesigning legislation and policy where devolved and reserved competences intersect. It asserted that

“devolution is concerned with how the UK as a whole should be governed, with proper account taken of the interests of all of its parts. It is a joint project between England, Wales, Scotland and Northern Ireland, based on a recognition of our mutual inter-dependence, which therefore requires a degree of shared governance.”

It foregrounded common frameworks, seeking a common approach, shared delivery systems and joint governance arrangements that should be developed on a collaborative and consensual basis. So, the intervention from the Counsel General is not an opportunistic response to this Bill but the continuation of a patient, crystal clear commitment to common frameworks at the heart of intergovernmental relations.

Over these three days of debates, Members across the House have recognised the importance of these frameworks. The Welsh Government and, I believe, the Scottish Government are not arguing to be left alone to design and implement their own rulebooks for government subsidies. They would be mad to do so. In a free-for-all between Governments of these islands to attract and hold on to investment, the UK Government would be bound to win, because they have much more significant financial resources and can set their own budget. Rather than arguing to have an equal role in designing a fair system all can work within, they are committing to do this on a timetable compatible with the one the Government have set themselves and to take no legislative action in this space until at least autumn 2021.

This is surely beyond reasonable doubt. If the efforts to reach agreement fail, the Government will have to introduce primary legislation to define the new subsidy regime, subject to the same constraints there are now, in order to achieve a coherent regime. We have repeatedly been told that this Bill does not diminish the powers of the devolved institutions, yet all we see and hear defies that. This clause explicitly and openly alters the devolution settlement by adding to the list of reserved matters in the Government of Wales Act and the other devolution statutes. I therefore urge your Lordships to support its removal from the Bill.

Photo of Baroness Randerson Baroness Randerson Liberal Democrat Lords Spokesperson (Transport)

Clause 44 says it unequivocally: the UK Government, also parading as the English Government in this Bill, are specifically removing from the devolved Administrations their power to provide state aid, by inserting it as a specific reservation or excepted matter in each of the devolution Acts. When I said in earlier debates that the Government were using the Bill to roll back devolution, the Minister insisted that devolved Administrations were being given additional powers. We have already seen in these debates that the Government are using the Bill to sideline and undermine the common frameworks, which have been well established as the basic foundation for the future internal market. At the same time, the Bill removes any incentive for devolved Administrations to develop improved standards. Removing from the devolved Administrations the powers over state aid is fully in line with the thrust of the Bill, which is a barely disguised attempt to emasculate devolution.

I want to concentrate on how this Bill affects Wales, and Clause 44 refers to the Government of Wales Act 2006. In relation to this issue, that Act says:

“The First Minister may give financial assistance (whether by way of grant, loan or guarantee) to any person engaged in any activity which the First Minister considers will secure, or help to secure, the attainment of any objective in the Minister’s functions.”

In Field 4 of Schedule 5, it lists economic development as one of those functions.

It is important to put Welsh devolution in context. It has grown considerably over the years, but at the start, in 1998, the Assembly did not have full legislative powers. It was essentially an executive body to which were transferred the powers previously held by the Secretary of State for Wales. In the original 1998 Act those powers are listed and specifically include the transfer of a number of existing bodies, including the Welsh Development Agency, which was established in the 1975 Act, when the noble and learned Lord, Lord Morris of Aberavon, was Secretary of State. The WDA became hugely important under the Conservative Government, as Welsh industry was hit by the closure of mines and steelworks. The Act lists its powers as including financial assistance for regeneration and development, the provision of sites and premises for industry, and more. That includes, for example, the provision of support in kind, such as land, which is also considered state aid. In due course, in 2006, the Welsh Government decided to take the powers of the WDA into the Welsh Government themselves. Clearly, those powers have been operated within the framework of EU legislation on state aid.

So that is the legal history of the situation. Now I will turn to how it has actually been handled in practice. I know a fair amount about it because I was there —in the Assembly for 12 years and for three years as Welsh Minister, then in the Wales Office for three years, during which I took the Wales Act 2014 through this House. More recently, I have been a member of our own EU Internal Market Sub-Committee and am now a member of the Common Frameworks Committee. Over the years, I have developed a clear picture of where the power currently lies, and I have no doubt that the Welsh Government have the power to grant state aid, as it lay within EU rules. Their economic development powers are, after all, almost meaningless without it.

Anyone in doubt that the Welsh Government, the UK Government and the EU have all considered that the Welsh Government had state aid powers should look at the Welsh Government website, which has a detailed description of what state aid is and the official registration process required by EU law. It lists the schemes that have been accepted and registered according to the general block exemption scheme, for instance. Among listed Welsh schemes are funding to support superfast broadband, SME development, the Wales Screen Fund, the Development Bank of Wales, a maritime and inland ports scheme, and many more, going back over the years.

You might wonder why the Government are so keen on grabbing responsibility for state aid, because over the years the UK Government have been considerably less keen than many other EU countries on using state aid to support industry. Even within the UK, the devolved Administrations have a more generous record than the Government have in relation to England. But think it through and it is obvious: power lies where the money is. Clause 44 is yet another piece of the jig-saw designed to strip devolution of meaningful powers. The UK Government may still retain their aversion to state aid, but by holding that power centrally, it means the devolved Administrations lose their economic levers.

This is a deceitful, centralising Bill—deceitful because, by sleight of hand, under the guise of promoting competition, the Government are unravelling devolution. I think they thought that they would slip it under the radar at a time of major public crisis, caused by Covid and by the failure, even at this late stage, to get a Brexit deal. However, by the size of the votes here today, the Minister can report back that it has not worked and we have noticed.

There is, as noble Lords have explained in some detail, an offer from the devolved Administrations to work positively together to establish a UK-wide structure in which the devolved nations can participate fully. I hope that the Minister will accept this offer with grace because, otherwise, they are on course for a constitutional stand-off.

Photo of Lord Purvis of Tweed Lord Purvis of Tweed Liberal Democrat Lords Spokesperson (International Trade) 6:00 pm, 25th November 2020

My Lords, it is a great pleasure to follow my noble friend, with the very great experience and knowledge that she has on this issue. Given the fact that all four speakers so far in this group have been from Wales, I thought that, to avoid a degree of market distortion across the United Kingdom, there should be a little bit of northern balance. All I wish to do is to endorse the points that they have so ably made.

I put my name to this amendment, and if the noble and learned Lord, Lord Thomas of Cwmgiedd, presses it and the House agrees, the Government have an opportunity now to bring back a more considered proposal as a result of some consultation. None of the speakers in this group has indicated that it is easy. If it was easy, agreement would have been reached at the outset. It is about being aware that the frameworks update highlighted that one of the four areas of dispute around where the competences lie with this power being repatriated is state aid. It is obvious that it was not a straightforward situation of saying that this had been uniquely a United Kingdom responsibility—so by definition, it is an issue.

It is also perfectly clear from all speakers that, without there being an understanding about the tests, de minimis levels, the administration and the type of ministerial direction that has existed up to now—without clarity as to how all that will go forward—any Minister in a devolved Administration will quite rightly be concerned about what impact this will have on the economies of the powers that they do have under the devolved competences.

I just wish to reinforce the point that the letter from Jeremy Miles to Alok Sharma, which I read, made a very fair offer. We share the concern that, without there being a further set of discussions to seek a degree of common ground on a framework agreement about how this will operate in the future—which there is time to do, because the Government have indicated that they are seeking to effectively have a window under the WTO approach, and there is consensus that that will be respected—this is potentially the way forward.

I hope that, although often it may not seem so, the Minister will see defeat as a bit of a silver lining in order for him to come back with a more considered approach, to take the Welsh offer and to allow us to consider the Government’s position from a degree of consensus and agreement. I support the noble Lords who have spoken on this group so far.

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, like the noble Lord, Lord Purvis, I agree with the case that has been made so well by the previous speakers. I put my name to the amendment put forward by the noble and learned Lord, Lord Thomas, and we would support him if he chooses to divide the House.

It is very simple: we agree that there has to be a UK-wide policy on state aid—or subsidy, if that is what it is to be called. The question that hangs around but never seems to get answered is: why has it not yet been articulated what this policy would be? It cannot be a question of timing. This suggests yet another shroud of mystery that surrounds this increasingly perplexing Bill.

It is certainly a novel way of developing policy for a Government to remove policy that is in force and that everybody knows and understands, increasing the uncertainty and making it more difficult for businesses. However, as the noble and learned Lord, Lord Thomas, said in his opening speech, the statutory instrument removing the current rules—taking us out of the current system that has been operating for a great number of years—has already been laid and will be debated next week, and we will not be able to stop it.

We therefore seem to be heading towards WTO rules, which are not well respected and do not seem to be applied properly, and there is no policing or organisational structure in which they can be dealt with properly. If that is where we are, we would at least have a period of stability during which we can sort out how we want to set up the rules that will apply to the internal market and how, if necessary, they are to be policed. This could all be part of the yet-to-be-announced deal with the EU—and it may be that is the case, because it is clear that this is a significant area of interest within the negotiations. But without any further detail on that, it is hard for us to speculate.

However, as others have said, the Welsh Government have come forward with an extraordinarily generous offer to expedite work on a common framework that relates to state aid and make a voluntary agreement to pause any legislation that would impinge on that in the intervening period. That is almost too good an offer, and I hope that the Minister has an adequate response to it.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I thank noble Lords who have contributed to another admirably brief debate. We are making good progress this afternoon.

As I outlined in Committee, Clause 44 reserves to the UK Parliament the exclusive ability to legislate for a UK-wide subsidy control regime. I greatly enjoyed the many contributions on this matter. I particularly liked the suggestion of the noble Lord, Lord Purvis, that I should take defeats as a silver lining, which prompts the obvious response that the Liberal Democrats have been defeated in the last three general elections and therefore have some experience of that.

Our debate in Committee on this clause served to highlight that, while some noble Lords might disagree on the approach taken, we all recognise the importance of ensuring that the UK continues to take a clear and consistent approach to subsidy control as we move away from EU state aid rules. The Government have always been clear in their view that the regulation of state aid—the EU’s approach to subsidy control—is a reserved matter. The Government are clear that they want to maximise the economic opportunities available to us when we are no longer bound by EU state aid rules. To achieve this economic ambition, it is important that, as now, we take a coherent approach to the system that governs how public authorities subsidise businesses across the United Kingdom. Reserving subsidy control is the best way in which to guarantee that a single, unified subsidy control regime could be legislated for in future.

In previous debates, there has sometimes been a misplaced conflation between the devolved spending powers and the systems that regulate the potentially harmful and distortive effects of this spending. To be clear, these are two distinct and separate responsibilities. Although the devolved Administrations can and should make spending decisions on subsidies, the wider rules in which they operate are, and should continue to be, consistent across the whole nation. In response to the intervention from the noble Baroness, Lady Randerson, I reiterate that the reservation does not change the devolved Administrations’ position in practice. They have never previously been able to set their own subsidy control regime, as this was covered by the EU state aid framework, but they will continue to make their own spending decisions on subsidies as they do currently.

The effect of the amendment would be to create unacceptable uncertainty regarding the extent to which subsidy control is a reserved or devolved competence. That would potentially give rise to inconsistency if there were different regimes to regulate subsidies across the UK. Ultimately, it could undermine fair and open competition across our internal market and inevitably discourage investment in the United Kingdom, bringing additional costs to supply chains and consumers.

The reservation will enable the UK to design a bespoke subsidy control regime that meets the needs of the UK economy. The Government have been clear that any future domestic regime will operate in a way that works best for all UK businesses, workers and consumers. In the coming months, as I said in Committee, we intend to publish a consultation on whether we should go further than our World Trade Organization and international commitments, including whether further legislation on this subject is necessary.

The noble and learned Lord, Lord Thomas, referred to the statutory instrument that will remove redundant EU state aid rules from the domestic statute book at the end of the transition period. We have laid that to provide legal certainty for businesses, going forward.

I reassure noble Lords that we will continue to listen closely to views in this important policy area. During these past few weeks of debate, issues about specific elements of the UK’s future approach have been raised, including, but not limited to, the precise definition of subsidies and the enforcement of any future subsidy regime. These are all important points that must be considered carefully and properly through the consultation process that we will have. Although we are reserving subsidy control, I make it clear that we will continue to work closely with the devolved Administrations on the shape of any future domestic subsidy regime. UK Government officials will continue to meet with their devolved Administration counterparts on a regular basis. We recognise the importance of working constructively and co-operatively in this policy area, and it is in all our interests that a new regime works for the whole of the UK.

The noble and learned Lord, Lord Thomas, and the noble Lord, Lord German, referred to the letter that we received this morning from Jeremy Miles. As far as I am aware, having checked furiously with the Bill team in my office and various teams in my department, we have not received a similar letter from the Scottish Government. We welcome the Welsh Government’s support for maintaining a unified approach to subsidy control across the UK. We agree that the UK Government and devolved Administrations should work constructively and co-operatively in this policy area, to design an approach to subsidy control that meets the needs of the UK economy. We have always been clear that it is a reserved matter, and that the reservation of subsidy control is necessary to ensure that we continue to take a uniform approach. State aid is not included in the common frameworks programme, so we do not believe that would be an appropriate way forward either. However, we are grateful for the Welsh Government’s constructive engagement with this issue, and for their offer to find a practical way through. We are keen to continue discussions in this spirit. Going forward, we have committed to consulting the DAs on the design and scope of any future control regime.

For the reasons that I have set out, I am unable to accept this amendment. I hope that noble Lords can withdraw it.

Photo of Baroness McIntosh of Hudnall Baroness McIntosh of Hudnall Deputy Chairman of Committees, Deputy Speaker (Lords) 6:15 pm, 25th November 2020

My Lords, I have received one request to ask the Minister a short question for elucidation, from the noble Lord, Lord Liddle.

Photo of Lord Liddle Lord Liddle Labour

Can the Minister reflect a bit more on what he has just said about treating this issue as a matter for common frameworks? It sounded as though he wanted a co-operative solution to this problem, one that would bring all the devolved Administrations into a common framework. However, at the end, he said that it is not appropriate—but why not? He has not given a satisfactory answer to that question. I remember challenging the noble Lord, Lord True, in an earlier debate at Report, on whether the Government had changed their policy on common frameworks and were no longer taking them seriously. I got a very vigorous shaking of the head from the noble Lord, Lord True. Would this not be a perfect example of how common frameworks were still being taken seriously by the Government, and would it not resolve a real problem that the Government have had?

The Minister talked about unacceptable uncertainty, but frankly, the unacceptable uncertainty about state aid has come from this Government. Mr Dominic Cummings had one view of state aid, as against the traditional Conservative view. That is where the uncertainty came from. Now that he has gone and now that he is out, thank goodness, we have an opportunity to create a sensible common policy. There is a need for balance, and it must be sensible. The best way is through a common framework in co-operation with the devolved Administrations.

Photo of Lord Callanan Lord Callanan Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy)

I am not sure whether that was a question or a speech in the wrong place—but I take the noble Lord’s point. I think he is getting issues conflated. The common frameworks programme of course is a programme of work with diffuse levels of power and ultimately it is not clear where regulation lies. To resolve those matters on a cross-UK basis, there is no doubt in our mind where the proper operation of these powers is—state aid, or rather subsidy control, is a reserved matter for the UK Government. However, we have said that we want to work collaboratively. We want to work with the devolved Administrations and of course, as we have said, we will consult closely with them on any new policy that we develop and indeed on whether legislation is necessary. But, given my general support for the framework and the Government’s support for the framework programme, I do not believe that it is appropriate for this matter to be included in the framework programme.

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

I will be brief, as obviously it would be very unfair if the Welsh were totally to outnumber everyone else in the number of speeches delivered this evening. I thank all noble Lords for their contributions to an interesting, though short, debate.

First, it is very encouraging that there is complete consensus on the need for a single subsidy regime for the internal market. There is no doubt about that. Secondly, there must be a consensus that at the moment this is not something that the UK Government have power over—otherwise this clause would be unnecessary. It is not a reserved matter and therefore under the devolution schemes it is a matter for all the devolved Governments. Thirdly, it is clear that there is no uncertainty. The Government are taking us out of the EU regime, assuming the instrument is passed, and we will go into the WTO regime—so that is the regime for the foreseeable future.

The real question is: are we going to go forward by diktat from Whitehall and Westminster or are we going to go forward by consensus? An obvious way of going forward is a common framework. I regret to say that I cannot agree with the Minister that a common framework is inappropriate. It is absolutely appropriate, because it will cater for the kind of divergence that will be allowed in the subsidy regimes. This is a matter of acute importance to people such as fishermen and those involved in agriculture. We need to know what level of divergence is permissible and negotiate that.

Finally, a decision has to be made on the role of the CMA. I moved amendments earlier this week in relation to the CMA simply because I imagine it will have to be the policeman of this regime. But what is it to be? Is it to be an adviser? Is it to have a central role? Or are things to be laid out in a common framework?

I therefore say that this clause ought to be removed. Get the policy right first. Try it by common framework and let us go forward on that basis. Therefore, I want to take the opinion of the House on the appropriate means of going forward—and the appropriate means is taking this clause out of this Bill.

Ayes 315, Noes 230.

Division number 4 United Kingdom Internal Market Bill - Report (3rd Day) — Amendment 69

Aye: 315 Members of the House of Lords

No: 230 Members of the House of Lords

Ayes: A-Z by last name

Nos: A-Z by last name

Division conducted remotely on Amendment 69

Amendment 69 agreed.

Clause 46: Further provision in connection with the Northern Ireland Protocol