Clause 32 - Subsidy database

Subsidy Control Bill – in a Public Bill Committee at 9:25 am on 2nd November 2021.

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Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy) 9:25 am, 2nd November 2021

I beg to move amendment 34 in clause 32, page 17, line 10, at end insert—

“(c) the subsidy database is subject to routine audit to verify the accuracy and completeness of entries.”

This amendment requires the Secretary of State to ensure that the database is subject to routine audit.

Photo of Virendra Sharma Virendra Sharma Labour, Ealing, Southall

With this it will be convenient to take amendment 39 in clause 33, page 17, line 27, at end insert—

“(3A) A public authority must ensure that all entries made under this section are accurate and complete”.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

It is a pleasure to serve under your chairship, Mr Sharma, and to debate amendments 34 and 39.

The clause provides that the

“the Secretary of State must make arrangements for the provision of a database of subsidies and subsidy schemes for the purposes” of transparency as required by the trade and co-operation agreement—the TCA. The database must be accessible to the public free of charge, and public authorities who are obliged to upload details of subsidies or schemes should be enabled to do so. The Secretary of State may direct the Competition and Markets Authority to take on responsibilities for maintaining the database in the future.

Clause 32 mandates the Secretary of State to arrange for the database to be set up, and we support the creation of the database. We recognise that it is vital for there to be transparency over subsidies in the new regime. However, we are again concerned that key details are missing from the Bill. In order for it to function effectively, the legislation should require public authorities to make sure that their entries on to the database are accurate and complete. This is particularly important given that interested parties will use information on the database to assess whether subsidies meet the subsidy control principles and, if not, whether they should be challenged before the Competition Appeal Tribunal. Surprisingly, the Bill does not contain any obligations on local authorities or public authorities to make accurate and complete declarations. I hope the Minister will agree that that is a gap in the legislation and is one that we need to see addressed.

To resolve the problem, Labour has proposed amendment 39, which would establish an explicit duty on public authorities to ensure that their entries on the database are accurate and complete. That is the least we should expect, but I am afraid that the evidence suggests that not all entries entered even over the past 11 months have been accurate or complete. In many cases, they have not been either.

Secondly, the Bill does not place the database under any order or control mechanism. Whose responsibility is it to verify that the information on the database is accurate and complete? Again, given that the information entered on the database is crucial for effective transparency of the regime, does the Minister not agree that this is a significant gap? If the database does not have any regular audit function and if inaccurate or incomplete information entered on to it is not checked, this poor information may lead to misguided legal challenges or, indeed, to harmful subsidies failing to be addressed. The other consequence is that it reduces overall confidence in the database and the information in it. Over time, that would undermine the regime.

In the evidence given on Tuesday 26 October, Alexander Rose of DWF said that since 11 pm on 31 December 2020 only 501 subsidies had been entered on the database. He highlighted that

“of those 501, some 257 are recorded as having a zero or nil value. —[Official Report, Subsidy Control Bill Public Bill Committee, 26 October 2021; c. 52, Q73.]

He gave some frankly shocking examples of schemes that had not been accurately reported. He also questioned the database’s completeness and said that there was no way that only 501 subsidies had been awarded since the entries began.

The Minister may also remember the example of the Tees Valley Capital Grant Scheme. It was listed as having been posted on the website on 1 April 2020, but the website did not even exist on 1 April 2020. Given how vital subsidy entries will be to ensuring that subsidies meet the principles, it is clear that such complacency cannot be allowed to govern the new database under this regime. We need to get it right from the start. Expectations therefore need to be clear and they need to be defined in law. Let us remind ourselves that this is public money. Faith in the system requires good-quality information that is accurately reported, and we need to ensure that there will be a value for money check on the subsidies being proposed.

As the current database is clearly not working for those purposes, it is vital to address that point. Part of this may be about the design of the website for data entry itself, but the expectations of Parliament need to be clear on public authorities. It should be understood that there will then be real consequences if the database contains inaccurate information. We cannot control that if it is deliberate, but we need to put the safeguards in place so that the subsidies are used as intended.

Amendment 34 would ensure that the database was subject to routine auditing. We are open to discussions with the Government and stakeholders on which body is best placed to conduct such an audit. However, we believe that ultimately the responsibility lies with the Secretary of State to ensure that the database contains accurate information and is fit for purpose. I hope that the Government recognise the importance of both amendments in ensuring that the new regime is effective and transparent.

Photo of Kirsty Blackman Kirsty Blackman Scottish National Party, Aberdeen North

It is nice to be here again, Mr Sharma. Thank you for chairing the Committee.

This is an important part of the Bill. It is vital that the database is as full as possible and that people can find the information that they need. The points that were made in the evidence sessions about searching through the database were also incredibly important. There need to be search terms that people can use so that they can look through the database to find the information that they need. The regime will work only if people can find subsidies that are relevant. Improvements to the search function need to be among the other improvements.

I got the Library to put together some figures. As of 26 October, there were 501 subsidies on the database, but 245 of them—nearly half—did not have an amount specified. I know that this is a precursor system and it is not yet fit, but that shows how important it is that we have a framework and the details in place so that public authorities know what information they need to provide and that anyone wanting to challenge the information is able to find that information on the site. So 245 entries did not specify an amount, but about £1.6 billion is currently registered on the database. In addition, 138 entries did not specify where they are from—whether that is England, Scotland, Wales or Northern Ireland—but given the way challenges are likely to work, and given principle F in schedule 1 about competition within the United Kingdom, it is incredibly important that the entries make it clear where they are from and where the subsidy has been given. The principles include a requirement that a subsidy does not affect competition between the regions. It is therefore important that that is one of the criteria that the Secretary of State specifies.

The links on the database are an absolute nightmare. If we go to any of the subsidies, it says, “Click here for more information”. Some of the links take us just to, but other links take us to a local authority landing page. That is not right. It does not give us the details of the scheme. It would be more helpful if people were required to upload the details on to the website for the database rather than having the freedom to upload the details on to their own website. They could put them on their website and then take them down the next day. Even if there were a checking process when the information first went up, they could immediately remove it. Having the backroom systems in place so that there is enough space and server capacity on the website to store all the information would be incredibly helpful and probably provide better transparency.

I just want to pull out a couple of further things from the statistics that the Library provided. Of the subsidies recorded on the database that specify the region they are from, 30% are from England. I refuse to believe that only 30% of the subsidies that have been given in the UK since the system was started were in England. Some 21% were from Scotland, and I also refuse to believe that 21% of the subsidies that were given in the UK were given in Scotland. That just cannot be possible.

I completely agree with the amendments that have been proposed. I am not looking to argue with the Minister about the requirements set out and the strength of the database; I am just looking to ensure that the guidance that authorities have to abide by is very strong. I would rather there be too much information on the website than not enough to enable people to mount their challenges. We will come to this later, but there will be very little time for people to make a challenge. They should therefore not have to spend quite a while rummaging around trying to find the details that would enable them to make an informed challenge. I would be keen to hear the Minister make it clear that he intends a significant amount of information that is as accessible as possible to be on the website. People should be able to search the website and, if possible, a system should be in place to ensure that authorities that do not upload full information face a slap on the wrist. They should face some sort of sanction or negative consequence for failing to do their duty.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

It is a pleasure to serve under your chairmanship, Mr Sharma.

Clause 32 sets out the obligation for the Secretary of State to provide a database for subsidies and subsidy schemes, so that public authorities can adhere to the transparency requirements set out in the Bill, including those in clause 33. We have discussed the operational subsidy database. That was put in place to ensure the UK would be able to meet its international subsidy reporting obligations from 1 January 2021. It will continue to be adapted over the coming months to ensure it is fit for purpose for the future subsidy control regime.

The Government are committed to digital best practice in the monitoring and development of this database and all the databases that we oversee. The database uses the service standard specified by the Government Digital Service. The contract we have with our supplier is flexible—both to implement this Bill and to ensure that we can make improvements as we monitor and evaluate how it is being used.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

Will the Minister clarify his comments on digital standards? There are two key issues here. One is the content and the functional design of the database. The other is the technical design and the ease of use of its search facilities and so on. Will he comment on the quality of what can be searched for and on the duty to include accurate information on the database? Will he say a little more about how he sees them being delivered?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

: I will try in my remarks to develop some of the issues with public authorities and their statutory duties.

We have made minor improvements since the database came online in March and we will make changes in the coming months. We will reflect on what has been said in the Committee and throughout the Bill’s passage and by stakeholders and public authorities.

Amendment 39, tabled by the hon. Member for Feltham and Heston, and amendment 34, tabled by the hon. Member for Aberdeen North, focus on ensuring the accuracy of the information that is available on the database.

Amendment 39 would require public authorities to ensure that their database entries are accurate and complete. Amendment 34 would create a new obligation on the Secretary of State to subject the database to routine audit to ensure that entries on the database were accurate and complete. Although I agree wholeheartedly that it is important that the information on the database is correct and complete, the amendments are unnecessary for several reasons.

First, the obligations on public authorities set out in clause 33 are clear. If an authority uploaded data that was inaccurate or incomplete, its statutory obligations simply would not have been discharged properly. Amendment 39 is therefore superfluous.

The incentives faced by public authorities also mean that there is no need for amendment 34. If the public authority does not properly fulfil its obligation to upload the required information, the clock for the end of the limitation period does not start, so the subsidy or scheme could be challenged indefinitely. This gives public authorities an in-built incentive to ensure that the information that they upload is timely, complete and accurate.

Photo of Kirsty Blackman Kirsty Blackman Scottish National Party, Aberdeen North

Who decides whether the information is complete and that the clock has started, or does that happen only in the event of a challenge? How does somebody who is challenging know that, even though they are outside a month, it does not matter because the clock has not started?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

Effectively, it is for the challenge. It is a loose framework. It is not like the state aid regime, where permission has to be sought and waited for before going ahead with a subsidy. It looks back at the subsidies and schemes that have been made. I shall return to the database and the issues raised about its integrity and accuracy, which I hope will illustrate some of the points.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

The Minister has stated, in effect, that public authorities that do not protect information might not be in line with their statutory responsibilities. I am not clear where, in the Bill as drafted, there is a requirement on public authorities to ensure that all entries that they place on the database are accurate and complete. It is fine to say that a public authority must ensure that an entry that it makes must be maintained on the subsidy database for six years, beginning on the date the entry is made, but where is the requirement for the information to be accurate and complete?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

It is as with every statutory duty placed on a public authority. The Bill contains a statutory obligation on public authorities to upload subsidies on the transparency database—in most cases, within six months. With any breach of statutory duty—whether it is on the face of the Bill or otherwise—a public authority can be challenged in judicial review in the courts. That is why I say that the amendment is superfluous: the net effect is exactly the same.

Members referred to the Teesside scheme. The reason the database was not live on 1 April 2020 was that that was the date when the scheme was set up rather than when the subsidy was paid. Subsidies that are not part of the scheme are dealt with differently.

On the database being full of gaps and of poor quality, in the evidence sessions Professor Rickard described it as “excellent”. It is worth noting that the database is still a relatively new tool. It continues to be developed to ensure that it is fit for the purposes of the new subsidy control regime. We are open to suggestions on how it can be improved and we expect to make further improvements in the coming months before the new domestic regime comes into force next autumn.

We have heard examples about the number of zeros. At the moment, the database is unable to show subsidy schemes and awards that follow. The ones with a zero are part of the scheme and are dealt with differently. An enhancement to the database is planned for the coming months that will show scheme-only entries, which will get around the issues that arose previously.

On the other issues—geography or some of the information that the hon. Lady was talking about earlier that may want to be challenged—any person who wants to challenge a scheme or subsidy or to find out more about data that is not on the database can put in a pre-action information request. Again, that stops the clock. The six-month period is not affected by that, because someone can make such a request, get that information and judicially review it later.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy) 9:45 am, 2nd November 2021

I am finding the logic of what the Minister is proposing quite difficult to follow. With the requirement for completeness and accuracy, we could prevent a lot of wasted time and money, possibly on the part of public authorities or enterprises that may consider a challenge on the basis that information was incomplete, where a public authority may decide not to put information on the database completely. It is important, given the functions in the Bill and the powers to be exercised, that we have as accurate and complete information as possible. There is no point in saying that judicial review or a pre-action protocol may be used later to correct information that was not provided earlier. That strikes me as building huge inefficiency into a system that could be more efficient and more accurate and could better achieve the Government’s intended outcomes. The Minister has not answered where the duty is on a public authority to ensure that its entries are accurate and complete. It is not here in writing.

I want to clarify a point that the Minister made about the Tees Valley Capital Grant Scheme. The scheme might have started on a particular date, but if the date listed on the database is eight months prior to the database existing, that is not accurate. It can be listed, but it should also be possible to say when a scheme might have started. There are different parts to the information, so ensuring its accuracy is important. Other parts of the Bill hinge on the date when something is listed, so that cannot be inaccurate—it would have a knock-on effect on the actions that can be taken and the powers that people have.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

The scheme that we are referring to was created under the state aid rules—under an entirely different regime when we were still a member of the framework. It is additional information rather than subsidy control—specifically, UK subsidy control. Payments are still being awarded, despite the fact that it was an EU state aid scheme in the first place.

On the public authority duty, we are looking at similar aims. I used the word “superfluous” because public authorities clearly have a statutory duty and a requirement to carry out statutory duties. If we put something on the face of the Bill, the net result will be the same. How do you challenge someone who does not want to adhere to their statutory duties? You judicially review them.

That is why the Bill does not provide for any sanction for the failure to upload a subsidy. There is a strong incentive to do so, because the sooner the subsidy scheme or stand-alone subsidy is uploaded, the sooner the limitation period for digital review under the cap will expire. The Bill sets out the statutory obligation on public authorities to upload subsidies on to the transparency database, in most cases within six months.

Any breach of a public authority’s statutory duty can be challenged by judicial review, which is why the amendments are, although worthy in their aims, superfluous to the requirements of the Bill. I therefore ask that amendment 34 be withdrawn.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

I have listened to the Minister. Our difficulty is that the amendments seem to be fundamental to the integrity of the whole regime.

The Minister alluded to obligations on local authorities. I cannot see any in writing. I shall not press amendment 39, as I would like further to explore whether there are, by proxy, obligations on which we can look to draw. If not, I would like to bring this back at a later stage.

The requirement for a routine audit to verify the accuracy and completeness—a duty of the Secretary of State under clause 32—is fundamental. That gap is not filled elsewhere and we should like to press the issue today.

Question put, That the amendment be made:

Division number 6 Subsidy Control Bill — Clause 32 - Subsidy database

Aye: 7 MPs

No: 9 MPs

Ayes: A-Z by last name

Nos: A-Z by last name

The Committee divided: Ayes 7, Noes 9.

Question accordingly negatived.

Question proposed, That the clause stand part of the Bill.

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

The clause requires the provision of the subsidy database to ensure that the subsidy control regime is transparent and facilitates compliance with our international commitments. It must be available to the public free of charge. Public authorities will be able to upload certain subsidies to the database to meet their obligations under clause 33. The Secretary of State is clearly responsible for providing the subsidy database, and if appropriate the Secretary of State may direct the Competition and Markets Authority to carry out this function on his or her behalf.

I should clarify that the five-year reporting cycle that we discussed earlier was chosen to correspond roughly with a standard parliamentary term and, for consistency, with the monitoring reports of other bodies, such as the Office for the Internal Market. There might be circumstances when reporting within a shorter time period is desirable, such as in the early stages of the new regime, enabling the Secretary of State to assess how well it is bedding in.

The database is a key part of the new subsidy control regime, enabling the public and interested parties to see which subsidies have been awarded and to whom.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy)

I thank the Minister for his remarks. I have made a number of comments on clause 32. He will appreciate why we feel that there are areas to address, but fundamentally we think that the clause is important.

The principle of the database being accessible to the public free of charge is important, but I reiterate the points made by the hon. Member for Aberdeen North about searchability. Useability is an additional consideration alongside accessibility, and it should be referred to in further regulations or guidance.

I understand that when the Secretary of State directs the CMA to perform duties on his or her behalf, the powers go to the CMA as a whole. It might be assumed, however, that the subsidy advice unit in the CMA will take on those duties, so will the Minister clarify whether he expects that to be done by the unit or another team in the CMA?

Photo of Paul Scully Paul Scully Parliamentary Under-Secretary (Department for Business, Energy and Industrial Strategy), Minister of State (London)

I thank the hon. Lady. We agree on useability. We will look at making the changes to the database, not least because of the Committee’s reflections and those in further parliamentary stages, but also because of the real-time conversations with people using the database—not only people putting data on, but people wanting to read it.

The subsidy advice unit in the CMA will be responsible for the use of the database and delegation. Expertise may be brought in, but it will be for the subsidy advice unit to work on the database on behalf of the Secretary of State.

Question put and agreed to.

Clause 32 accordingly ordered to stand part of the Bill.