Motion G1 (as an amendment to Motion G)

United Kingdom Internal Market Bill - Commons Reasons and Amendments – in the House of Lords at 6:00 pm on 14 December 2020.

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Baroness Finlay of Llandaff:

Moved by Baroness Finlay of Llandaff

At end insert “but do propose Amendment 50E in lieu—

50E: Clause 50, page 41, line 27, at beginning insert—

“(A1) Subsections (1), (2) and (3) shall take effect when the Welsh Ministers, the Scottish Ministers and the Northern Ireland Executive have agreed with the Secretary of State a common framework applicable to the United Kingdom to regulate the provision of subsidies by a public authority to persons supplying goods or services in the course of a business or, if agreement cannot be reached, 18 months after the passing of this Act.””

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

My Lords, I shall speak to Motion G1 and move my Amendment 50E to Clause 50. At this stage I am minded to seek the opinion of the House, particularly because I wonder whether the House wants to have a conscience vote on some of these issues. I have found the Government’s response to our deliberations worrying. I remain concerned that the damage to the union that will come about as a result of their refusal to commit to a process of codesign of a future subsidy regime will come back to haunt us all.

We are of course a revising Chamber. We asked the Commons to think again, and after many hours of debate we gave clear messages through large majorities on key aspects of the Bill. We have seen some concessions and they were essential changes, but the huge problem of the current approach to the devolved Administrations remains unresolved. Given the Government’s current difficulties with the pandemic and unknowns over the end of the transition period, less than three weeks away, I fear that any stand-off with the devolved Administrations will compound and massively magnify them by fuelling the break-up of our union within only a few years. I say this because, as someone living in Wales and with family in Scotland, I see the Bill acting as a recruiting sergeant for separatist movements.

It is imperative to recognise the common frameworks, and we have signalled that clearly. As part of “taking back control”, the devolved institutions must have at least as much latitude—or call it “control”—as they felt they had within the EU to deal with the question of state aid. To establish durable intergovernmental working with the devolved Administrations, there must be clarity and certainty that the differing needs across the UK will be acknowledged and are seen as a joint responsibility that listens from the ground up and gives decision-making to the devolved Administrations.

As I understand it, neither Parliament nor the devolved Administrations had legislated on state aid in the past as these decisions were taken at EU level and regulations were directly applicable. Now that the EU mechanisms have been removed, it is still unclear where the decision-making now happens. State aid was not on the list of reserved powers and it has never been tested in the courts; indeed, such a test would do untold damage to relations between the constituent nations of the United Kingdom.

I hope I misheard the Minister, or that it was a slip of the tongue. If I heard him say “dissolved competence” instead of “devolved competence”, I am really worried.

My noble friends and I have listened to the objections that three years is too long to wait to put a framework in place, so we have reduced it to 18 months and I am currently minded to seek the opinion of the House on this. Eighteen months is scarcely longer than it would take the Government to consult on a framework and bring forward the legislation to enact it. This could be far speedier should the Government accept the offer from the Scottish and Welsh Governments to proceed rapidly on developing a clear process for them to be part of the codesign of state aid, establishing the consensus through a seat at the table from the outset of such deliberations.

Of course, I share the House’s clearly stated support, restated again today, for the common frameworks process. That is essential, and I do not wish to jeopardise that in any way, as we must move forward together. Yet I believe that the Government will try to say that state aid is already reserved—in fact, I believe that is what I have already heard—and that to include it in the common framework process might somehow jeopardise that position of constitutional principle.

I would be very happy to accept a clear assurance that the Government will make every effort to ensure that the consent of the devolved Governments to a subsidy regime will be secured and will make a statement to Parliament when introducing the necessary legislation if they should override that process. To summarise, I believe that this House will want to hear that the Government will seek to agree with the devolved Governments any new subsidy framework and will explain to Parliament whether they have succeeded or not and, if not, why not. I believe that that is the minimum we can expect. I beg to move.

Photo of Baroness Bowles of Berkhamsted Baroness Bowles of Berkhamsted Liberal Democrat

My Lords, I will speak to my Amendment 50F and Motion G2, which I may wish to move. I also support Amendment 50E and Motion G1. Amendment 50F looks to the stage at which there may be changes to state aid provisions, whether that be changes in definitions, remedies, or the scope of exemptions, or introducing conditions or time limits on approval. I agree with the Minister that at the moment they are gone, but might not alternatives be introduced, or some aspects reintroduced? I think that would also constitute a change.

The EU state aid provisions were indeed the subject of a statutory instrument recently, and they end at the end of the transition period. But, as the Minister has informed us previously, the UK will follow WTO rules and consult and report on whether any wider scope is to be introduced. If the outcome is a recommendation for going wider—some kind of policy change—it begs the question of how it will be introduced.

My proposal is not made instead of consultations and approvals with the devolved Administrations, which we support; it is in recognition that the full range of public authorities and businesses are affected wherever they may be. Therefore, the detail of how any post-consultation policy change is implemented is of significant interest.

The withdrawal Act was used to make the changes that happen at the end of the transition period. But it would seem inappropriate for that to be used for any new policy. A new policy other than moving to the WTO default should surely have the scrutiny of primary legislation.

I know the Minister may say that how policy is to be implemented can be a point in consultation, but my submission is more constitutional than convenience. Parliament should be able to scrutinise and amend, and to spot those weaknesses and problems that this House in particular has the experience to iron out, especially at the first time around of making independent, post-Brexit state aid rules.

Therefore, my Amendment 50F seeks to put on the face of the Bill that changes to the test for harmful subsidy remedies, the scope for exemptions or the conditions or time limits on approvals may not be done by regulation. I do not seek to prevent policy change being made by the Secretary of State; I am just saying that, at least first time around, it should be made by primary legislation. It may be that the Minister can put my mind at rest, and I await his response with interest.

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 will speak briefly in support of the eloquent and persuasive speech of my noble friend Lady Finlay in moving the amendment in Motion G1. First, I thank the Minister for his letter of Friday, which makes clear the Government’s wish for a constructive and collaborative relationship with the devolved Governments on state aid control and that the clause does not cut across the power of the devolved Governments to provide state aid or to determine how it is provided; it seeks only to restrict the distortive effects. With those thanks comes one short observation and two questions.

My observation is this: the proposal is very modest and not to the devolved institutions’ liking because, at the end of the period put forward in this amendment, it would nevertheless reserve a matter that the devolved Governments are right in saying is devolved. Of the many strengths of the proposal, it would provide a means for agreeing the regime and ensuring that it does not go forward without any risk of unilateral attack by a devolved institution. Surely the prize of agreement and strengthening the union is worth having.

I now pose my two questions to the Minister. First, the devolution statutes are now all framed based on reserved powers. That means that, if the UK Government have not reserved something, it is devolved. The power to control state aid is not reserved. If it were, these amendments would be unnecessary. This amendment therefore plainly changes the devolved settlements by removing a power that the devolved Governments have and transferring it to the UK Government. In those circumstances, I ask why the UK Government would not work together with them, consult them before the Bill was produced and try to find a common solution to that which I have always accepted as an absolute necessity: a unified state aid control regime. I fear it is an example of Westminster saying that it knows best, rather than working with the devolved Administrations.

Secondly, if the desire was to work together but, at the same time, provide a means of subsidy control, why, when changing the scheme of devolution, was a commitment not made in the Bill to work together with the devolved Administrations to develop the new regime? These questions seek to show that much could have been done to proceed in a way that strengthens the union, for that is the point of these amendments: to ensure that the UK Government work together with the devolved Administrations.

It is therefore necessary to ask the Minister a general question: how serious are the UK Government in their claims that the devolved legislatures and Governments will be fully involved in developing the subsidy regime? There are many important questions, particularly the role of the CMA as an independent regulator and not an adviser to the UK Government. I am grateful to the Minister for his letter and the constructive conversations we have had, but I join the noble Baronesses in asking for these further assurances and hope we receive them.

Photo of Baroness Fookes Baroness Fookes Deputy Chairman of Committees, Deputy Speaker (Lords)

I have received a request to speak from the noble Lord, Lord Adonis.

Photo of Lord Adonis Lord Adonis Labour

My Lords, before I address the specific amendments in the names of the noble Baronesses, Lady Finlay and Lady Bowles, I will make an observation on the ruling from the Deputy Speaker on the previous group, when the noble and learned Lord, Lord Thomas, sought to withdraw his amendment. It directly relates to this because, for all I know, the same might happen in this case, too. I put on record for future discussions the question of why, as is the normal practice of the House, amendments are not the property of the House once they have been moved.

I understand that was the case when, on 26 November, the noble Lord, Lord Woolley, moved his amendment in the ping-pong on the Parliamentary Constituencies Bill. He sought to withdraw it, but other noble Lords were not content that he should and the House then voted on it. I do not understand the difference between what happened on 26 November on the Parliamentary Constituencies Bill and what happened today when the noble and learned Lord sought to withdraw his amendment. I think this is quite an important point about the procedure of the House and whether, on significant issues of this kind, the House, rather than an individual noble Lord, has responsibility for amendments that have been moved.

Similar issues apply to these two amendments. The essential issue in respect of both is the one that was at stake in respect of the previous amendment in the name of the noble and learned Lord, Lord Thomas: are we prepared to accept from Ministers assurances on consultation when, to be absolutely blunt, we do not entirely trust their bona fides, or do we think that the right thing to do is to put on the face of the Bill requirements for consultation?

The issue in respect of state aid is more serious. As the noble and learned Lord has just stressed, and as the noble Baroness, Lady Finlay, noted in her opening remarks, the issue of state aid and subsidies is not, under the devolution Acts, reserved to the United Kingdom Government. It not being reserved to the United Kingdom Government, the presumption should therefore be that it is devolved, and, that being so, it is absolutely right and reasonable that the devolved Governments should formally, on the face of the legislation, be required to be consulted before new rules on state aid are made. Therefore, the amendment of the noble Baroness, Lady Finlay, is absolutely appropriate, as it would require the consent of the devolved Ministers within a period of 18 months, so she has a process for resolution if agreement cannot be reached. I also support the amendment in the name of the noble Baroness, Lady Bowles, which would require the process by which changes are made to be subject to explicit parliamentary debate and consent.

These are not small issues. I know that, as always at this stage of Bills, there is a desire to try to hustle things through at the end, but these are fundamental issues relating to the devolution settlement and its relationship to Brexit in the years ahead. It is absolutely right that we should spend time in this House debating these fundamental constitutional issues and not take vague assurances from Ministers, many of whom—let us be absolutely frank—do not particularly believe in devolution.

I suspect that that is true of the Minister who is addressing the House today. I know him well enough to say that I do not think he particularly believes in devolution and would like the chance to row it all back and simply decree things from the centre. I give him the benefit of my respect for him. I do not think that he does any of the waffle, saying that they are going to consult SNP Ministers in Edinburgh and Labour Ministers in Cardiff and take their advice seriously. That is not how he does politics; he does politics from the centre, just like the Prime Minister, who said that devolution was “Blair’s biggest mistake”, letting the cat out of the bag as to what he really thinks. I think that this Minister probably takes the same view.

That is all the more reason why this House and Parliament should not simply accept vague assurances made by the Minister and the Prime Minister about consultation on devolution. We should rightly fear that what will happen is the ripping up of fundamental principles in respect of devolution as part of this Brexit mania, in which people seem to believe that only things decided by UK Ministers sitting in Whitehall offices should happen within the territory of the United Kingdom. If that happens—and the noble Baroness, Lady Finlay, and the noble and learned Lord, Lord Thomas, were absolutely right to say it—we will see the systematic undermining of the devolution settlement, and that could fundamentally destabilise the Government of the United Kingdom.

Therefore, big, centrally important constitutional principles are at stake here, and I will strongly support both the noble Baronesses, Lady Finlay and Lady Bowles, if they press their amendments to a vote. It is very important that noble Lords are on the record as to their position when it comes to defending and taking forward the devolution settlement in our United Kingdom.

Photo of Lord Fox Lord Fox Liberal Democrat Lords Spokesperson (Business, Energy and Industrial Strategy) 6:15, 14 December 2020

My Lords, I can assure the noble Lord, Lord Adonis, that we on these Benches are not keen to hustle this through; we are keen to see one or other of these amendments put back so that we can continue to have the discussions in this area that we need.

I shall speak briefly to both amendments, starting with Amendment 50F, as put forward by my noble friend Lady Bowles. The Minister said that the amendment limited Parliament’s scope. Au contraire, it would make sure that Parliament was in the driving seat of any significant changes. State aid is clearly important—so important that the Government are prepared to crash the entire economy to maintain control of it. If state aid is so important, Parliament and not Ministers or the Secretary of State should be in the driving seat. That, briefly, is what my noble friend Lady Bowles’s amendment seeks.

On Amendment 50E, in the name of the noble Baroness, Lady Finlay, even through the attenuation of the virtual system, her passion for and understanding of devolution, her understanding of the union and the threat she sees posed to it by the overall communication atmosphere created by this Bill and other things—a view which many of us share—rang through her speech. It is clear that, without co-creation, as she called it, that threat to the union remains strong. The Minister should heed the noble Baroness and, whether or not she presses her amendment, look at ways of genuinely bringing on board the devolved authorities so that there is shared ownership of this important process. If either proposer presses their amendment, we will support them.

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

My Lords, I agree with others who have spoken that this has been an interesting debate. It is clear that good discussions have taken place between Ministers and the movers of the amendments, which is a good sign and reflects changes.

The Government have made a concession and a commitment to extensive consultation prior to bringing forward proposals for their state aid regime. That is a major change compared to where we were at the start of this Bill, which we welcome.

Like the noble and learned Lord, Lord Thomas, we agree that control of state aid and the regime which underpins it must lie at the UK level, but, as we discussed when debating a recent regret amendment to the statutory instrument referred to by the Minister, we think that policy development in this area has been quite bizarre. How on earth Parliament is expected to opine on state aid rules without first knowing what those state aid rules might be—whether we are continuing where we were, whether we are changing to WTO or whether it is somewhere in between—is beyond me; it is not the way we normally do things, as we made clear in that debate. I imagine, and it has been said by others, that it is because this issue is still at the heart of the never-ending discussions in Brussels about the future of the EU free trade agreement. We may begin to see progress once that is resolved, but we are where we are, and we are moving to World Trade Organization rules—much discredited—on 1 January and have yet to consult on an appropriate state aid regime. This is not the way we should do things.

However, we on this side of the House accept that Ministers have given assurances at the Dispatch Box, and they have been repeated today, that spending on state aid, as opposed to the control of policy on it, is an issue that has to respect the devolution settlement. It needs to be done in a way which brings forward the consultation and the seeking of consent that have been discussed by just about everybody who has spoken today. However, a final assurance from the Dispatch Box is required to take the trick on this matter. If the Government repeat that they will make every effort to work consultatively and seek the consent of the devolved Administrations, I do not think that this is right amendment on which to divide the House on this issue or the right time to do it, so we would not support that.

The noble Baroness, Lady Bowles, on the other hand, is moving ahead of the game, looking to future changes and asking how they would be introduced. She is right that these are big decisions that need to be thought through very carefully. If they are to be slipped through in some form of secondary legislation, they will not achieve the scrutiny and debate that they should. She makes some good points about that, and about the gap that will emerge if there is no primary legislation, let alone the need for consultation and discussion with those who have to implement the legislation once it is brought in. Although I discussed it with the noble Baroness prior to this evening’s debate, I suspect that this amendment has been picked up too late to be included in the Bill at this time. As she said, however, it would be good to hear the Minister set out his plans at the Dispatch Box. Again, if he does so, I would not be prepared to divide the House on this issue.

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

My Lords, I have once again listened carefully to the points made in the debate today. It is always particularly entertaining to listen to the noble Lord, Lord Adonis, who has once again benefited us with his Brexit prejudices. I give some advice to the noble Lord: he just needs to accept that we had a referendum on this subject as well as a general election that was mainly devoted to it. He really needs to use his considerable talents in other areas and get on with his life. The issue is settled; we are leaving the European Union. I respect his ideas and opinions, but he lost. As a Conservative from the north-east, I know when I have lost an election, and there have been plenty of them in the past.

Regarding devolution, in my previous job I chaired the Joint Ministerial Committee with the devolved Administrations on ongoing EU business. I attended many meetings with both Scottish and Welsh Ministers. Of course, we did not always agree on the outcomes or the issues, but we certainly had a very good personal relationship. I listened to their concerns very closely, as indeed they listened to mine; as I said, we had a good working relationship.

I reiterate, first, that I welcome the shared consensus in this House to continuing the UK-wide approach to subsidy control and confirming this in law. While I am grateful for the time and the effort that has been devoted to scrutinising this provision as is right for your Lordships’ House—perhaps too much time and effort, but we are where we are—it is important to note that we have asked the other place, the elected Chamber, to think again on the relationship between subsidy control and common frameworks. It has been clear that subsidy control does not fall within the common frameworks programme, and that any undue delay is not something to be supported. I hope that noble Lords will be able to respect that decision. I recognise the concerns of the Welsh and Scottish Governments, but I reiterate that the noble Baroness’s amendment is not the best way forward. This amendment is inconsistent with the reservation clauses that both Houses have now agreed should remain in the Bill.

I also reiterate that state aid has always been reserved and, as such, has never been part of the common frameworks programme. This amendment seeks to reverse a decision which has already been made. We need to move forward on this issue as I have indicated, and this will be done through the forthcoming consultation.

The noble Baroness, Lady Finlay, asked me for an assurance that we will make every effort to get devolved Administrations’ support. Amendment 51B demonstrates that the Government are committed to maintaining a constructive, collaborative relationship with the devolved Administrations, as it is in all our interests to ensure that a new regime works for the whole of the United Kingdom. We hope that this amendment will enable us to discuss and resolve any such issues before the publication of any consultation response, and we will commit to listen very carefully to the devolved Administrations’ concerns.

We all agree that the UK Government and devolved Administrations should work constructively and co- operatively in this policy area. That is why, as I have said, the UK Government have set out an amendment that commits to consulting them. The amendment ensures that, before publishing any relevant report relating to the outcome of the UK subsidy control consultation, the Secretary of State will provide a draft of the proposed response to the devolved Administrations, inviting them to make representations. The Secretary of State will then consider any representations and determine whether to alter the report in light of that consideration. If after all that we decide to legislate, it will, of course, come to this House.

This process will ensure that the devolved Administrations’ voices are heard, but it avoids creating the unnecessary delays and confusion that a legislative requirement to try to agree a common framework would introduce. Potentially waiting 18 months for a UK-wide system to be agreed would create uncertainty for UK businesses and damage our efforts to promote the UK’s economic recovery. For these reasons, I respectfully suggest that the approach put forward in the amendment from the noble Baroness, Lady Finlay, is not appropriate at this time.

I reiterate that Amendment 50F, in the name of the noble Baroness, Lady Bowles, is premature in so far as it seeks to determine particular aspects of the UK’s future approach to subsidy control. This amendment would seek to limit Parliament’s ability to legislate in this policy area and undermine the forthcoming consultation that we have committed to publish in the coming months. I can say to the noble Baroness, Lady Bowles, that we will consult on whether to go further than those existing commitments, including, as she asked me, on whether primary legislation is necessary. We want a system that promotes a competitive and dynamic approach to our economy throughout the UK.

As I set out earlier, state aid rules will not apply to the UK from 1 January as they currently do. This issue was debated and agreed by both Houses in the recent state aid revocation SI debate, in which the noble Baroness took part. The SI provides absolute legal certainty on this point. The EU’s state aid rules, as the noble Baroness well knows, were designed to meet the needs of the single market in the EU. The Government have always been clear that the UK will have its own approach to subsidy control; we want a modern system designed to support British business in a way that fulfils all our interests.

The forthcoming consultation remains the best way in which to design the details of a future UK-wide approach to subsidy control. The Government’s commitment to consulting the DAs on this matter reflects the importance of moving forward in a collaborative and constructive manner. For all those reasons, the Government cannot agree with Amendments 50E and 50F, and I invite both noble Baronesses not to press them to a Division.

Photo of Baroness Finlay of Llandaff Baroness Finlay of Llandaff Deputy Chairman of Committees, Deputy Speaker (Lords) 6:30, 14 December 2020

My Lords, I am most grateful to all noble Lords who have spoken in this debate. I start by commenting on the amendment proposed by the noble Baroness, Lady Bowles. She highlighted the constitutional issues here and that this is ahead of its time.

As my noble and learned friend Lord Thomas of Cwmgiedd said, we need a unified state aid scheme and we need something in the Bill to strengthen and not weaken the union, because the devolved Administrations must be fully involved. I appreciate the passion of the noble Lord, Lord Adonis, for supporting the devolved Administrations. The noble Lord, Lord Fox, made some very important points about who is in the driving seat and heard clearly and reiterated the threat that some of us see to the union, as well as the need for co-creation. I appreciate very much the support that he has offered.

The noble Lord, Lord Stevenson, is right that there has been a good discussion, but I am not convinced that we have really heard enough from the Minister. While the Minister certainly works with the devolved Administrations—and I am not disputing that—I was listening very carefully for the words that “consent” would be sought over agreements and that there would be “agreement”. Simply consulting is not enough; one can consult and then reject and ignore whatever is said.

Being at a distance in the hybrid House, it is difficult to feel the atmosphere in the Chamber or know what the feeling of the House is. Some may disagree, but my feeling is, from where I am now, that many in the House are unionists and feel passionately that we must not jeopardise that union and must strengthen, however we can, the working between the devolved Administrations and Westminster. Therefore—hesitantly, but I feel that there is a need for it—I wish to test the opinion of the House, because I wish to give all Members of the House, whichever Bench they sit on, the opportunity to vote according to their conscience over the threat that this poses to the union going forward. I beg to move.

Ayes 142, Noes 241.

Division number 3 United Kingdom Internal Market Bill - Commons Reasons and Amendments — Motion G1 (as an amendment to Motion G)

Aye: 142 Members of the House of Lords

No: 241 Members of the House of Lords

Aye: A-Z by last name

No: A-Z by last name

Division conducted remotely on Motion G1

Motion G1 disagreed.