Clause 71

Subsidy Control Bill – in a Public Bill Committee at 2:15 pm on 16th November 2021.

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Time limits for applications under section 70

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

I beg to move amendment 74, in clause 71, page 40, line 31, at beginning insert—

“Except where subsection (1A) applies,”.

This amendment is linked to Amendment 75.

Photo of Caroline Nokes Caroline Nokes Chair, Women and Equalities Committee, Chair, Women and Equalities Committee

With this it will be convenient to discuss amendment 75, in clause 71, page 40, line 33, at end insert—

“(1A) Where a public authority has not complied with its duties under section 33(1), an application to the Tribunal under section 70 in respect of a subsidy decision must be made by sending a notice of appeal before the end of six months beginning with the date on which it is established that the section 33(1) duty has not been complied with.”

This amendment provides for an extended period of challenge where a public duty has not complied with its section 33 duties.

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

The clause amends the Competition Appeal Tribunal rules to establish the time limits for making an application to the CAT for a review of a subsidy control decision. Interested parties must send their notice of appeal to the CAT within one month of the relevant date. The tribunal may not extend the one-month time limit unless there are exceptional circumstances.

As we have already stated, we believe very strongly that public authorities should have a clearer statutory duty to upload full and accurate information to the subsidy database. Where a public authority fails to comply with that duty, there should be consequences. The regime requires a better incentive for public authorities to upload accurately and fully. Evidence from DWF, which I will not repeat at length again, revealed how many of the entries currently uploaded to the database are far from complete or accurate.

Amendments 75 and 74 would provide a statutory consequence where a public authority has not complied with its duty to upload information to the database, as set out in clause 33(1): namely, an extended challenge period of six months from the date on which it is established that the clause 33 duty has not been complied with. In our view, that would create a strong incentive for public authorities to upload information to the database promptly, comprehensively and accurately. Transparency is central to the new regime, and protecting it is at the heart of the amendments.

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

Clause 71 sets out the time limits for an interested party to apply to the CAT for a review of a decision to grant a subsidy or make a subsidy scheme. It is important to strike a balance between allowing sufficient time for a subsidy scheme or award to be challenged and giving confidence to the subsidy beneficiary that the subsidy decision can no longer be challenged, and that they can make use of that subsidy.

The Government believe that the appropriate balance is the one-month limitation period, generally counted from the date on which the subsidy or subsidy scheme is published on the database. The hon. Member for Feltham and Heston has tabled amendments to that general time limit, which we will discuss later. I understand that the amendments are intended to extend the period for challenging a subsidy when a public authority has not properly fulfilled its transparency obligations. It may be useful to begin by clarifying how the clause would work in cases where the transparency requirements are not met.

Clause 71 already provides a powerful incentive for public authorities to properly fulfil their transparency obligations. If they do not, there is no transparency date for the purpose of rule 98A subsection (2), so there is no limitation period for when an interested party can seek a review of the subsidy in the CAT. In other words, if there is a non-trivial failure to comply with the transparency obligations in clause 33, the subsidy or scheme could not just be challenged six months after it is made; it could potentially be challenged at any time.

In view of that, amendment 74 may not have the desired effect of increasing the opportunity to challenge such a subsidy scheme; in fact, it would limit it. In practice, the effect of the amendment would depend on the interpretation of when it is established that a public authority has breached its obligations to upload a subsidy to the transparency database. If the intention of the amendment is that there should be an extended limitation period when a public authority makes a transparency upload after the deadline, I understand the logic of that intention, but extending the limitation from one month to six months in that scenario would not be consistent with the nature of that regime.

We expect high levels of compliance with the regime, so it is not necessary to introduce this kind of punitive measure. Crucially, the prolonged uncertainty that could be created by a very small delay in uploading the subsidy to the database would unfairly hurt the beneficiary of a subsidy when the fault would lie with the public authority that had failed to make a timely upload to the transparency database. The increased uncertainty for the subsidy beneficiary would be considerable.

The statutory deadline for uploading a subsidy is six months for most subsidies, and 12 months in the case of a subsidy in the form of a tax measure. If a public authority failed to accurately upload a subsidy within six months, and an interested party then had six months from the late upload to challenge the subsidy, the subsidy would be at risk of challenge for at least a year, or 18 months in the case of a tax subsidy. Depending on how they are interpreted, the amendments would either be counterproductive or unnecessarily punitive in harming the interests of a party that may not be at fault.

There is no need to extend the challenge period for non-disclosure of a subsidy that ought to have been disclosed because that period is already potentially indefinite. An extended challenge period for a subsidy or scheme that has been uploaded late to the transparency database would add little to the existing strong incentives for a public authority to make a timely upload, and it would create an unreasonable amount of uncertainty for the subsidy beneficiary. It would undermine the balance that we have set between certainty and allowing interested parties to challenge potentially unlawful subsidies. For those reasons, I ask the hon. Lady to withdraw the amendment.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy) 2:30 pm, 16th November 2021

I thank the Minister for his comments—I think he picked up on some of the issues that we were raising. He gave the example of a public authority not acting in line with its duties, meaning that those in receipt of a subsidy could end up waiting for longer. That could be administrative error, and nothing to do with the subsidy, but we would not know.

I think it is fair to say that the amendment is not perfect, but we wanted to make a general point about time limits, which we want to look at in the round, and about how the whole regime can work fairly. On this occasion, I will not press the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

I beg to move amendment 73, in clause 71, page 40, line 33, leave out “one month” and insert “three months”.

This amendment would extend the period for interested parties to submit an application for review of a subsidy to three months.

The amendment would extend to three months the period for interested parties to submit an application for review of a subsidy. We think that is extremely important, because as it stands, interested parties would have one month from the publication of a subsidy or scheme on the database, or from receiving requests for information from the public authority in respect of a subsidy or scheme, to bring a challenge before the CAT.

That is an extremely short timeframe. Uploads to the database could be made on July 22, for example, or on December 16, when we rise for recess. I do not want to suggest that there might be attempts to reduce opportunities for scrutiny and challenge by timing uploads to the database, but at the end of July, for example, there are school holidays, and even Parliament does not return until September. One month can be a very short time for scrutiny and challenge, especially at particular times of the year, and it is about what is chosen to be published and when.

Labour recognises the importance of giving subsidies legal certainty in this quicker, more flexible regime. However, given that public authorities will have six months or even a year to publish subsidies on the database, why will interested parties be given only one month to challenge them? Once the one-month period has elapsed, there will be no other routes for challenging subsidies and schemes. That means that if interested parties are not given the appropriate amount of time to consider new subsidies and schemes, damaging subsidies or schemes will face no risk of challenge. That seems extremely risky, and I hope the Minister recognises that.

Jonathan Branton, a lawyer at DWF, summarised this and said:

“I think one month is too short, because that requires people to be extremely alert about checking things.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 52, Q73.]

People can get busy and have other deadlines for two, three or four weeks. It seems to be an extraordinarily short time that may create inefficiencies in other areas, as people ask, “What subsidies have come out? How quickly should I be checking?” This is about making sure there is a fair, well-scrutinised and effective regime. We need to get the balance right between providing legal certainty and ensuring damaging subsidies can be effectively challenged. It feels as if the balance is not right at the moment in the context of this regime and how it is designed in the Bill.

We propose to correct the balance in amendment 73, which would give interested parties three months to bring a subsidy or scheme before the CAT. In doing so, there would be more time to consider subsidies and their effects. It would give interested parties and public authorities a fair chance to ensure a challenge can be brought, still within a limited amount of time, and the balance between that and legal certainty can be effective.

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

The clause sets out the time limits in which the interested party must make an application to the CAT to challenge the subsidy. It is important to set that limit so that we can give legal certainty to public authorities and subsidy beneficiaries. Ongoing lack of legal certainty can be a strong disincentive for public authorities giving legitimate subsidies and for the enterprises agreeing to receive them.

For example, a subsidy could take the form of a loan guarantee for a capital investment, such as buying new machinery. Members will appreciate that a beneficiary would be naturally reluctant to go ahead with buying that machinery for as long as there is a possibility that the subsidy decision could be quashed and a recovery order made.

It is right that subsidies can be challenged and that interested parties have sufficient time limits to consider that challenge, but we must not create such prolonged uncertainty that it acts as a brake on legitimate subsidies. That is the balance that we have struck in the Bill with the limitation period, which is generally one month from the date the subsidy or scheme is uploaded on the transparency database.

It is also important to note that an interested party can make a pre-action information request to a public authority. The limitation period is then extended until one month after the public authority has responded. Since the pre-action information request gives the public authority up to 28 days to respond, in practice, the limitation period can run for two or three months after the publication of the subsidy or scheme on the database.

Clause 71 also makes it clear that in exceptional circumstances, the tribunal may extend the time limits for bringing a challenge, but this amendment would extend the general window for bringing a challenge from one month to three months. That is too long. It is longer than the challenge periods available in other areas where business decisions are dependent on the decisions of public bodies, such as procurement and planning decisions, where the limitation periods are 30 days and six weeks respectively. In those areas, the harmful effects of prolonged uncertainty have been recognised through the shorter challenge periods available. The same reasoning applies in the subsidy control context. If the general limitation period for challenging subsidy decisions were extended to three months, as the amendment proposes, public authorities and subsidy beneficiaries could, in practice, have to wait as long as five months before having reasonable legal certainty about a subsidy. That is far too long. It is important to allow sufficient time for those affected by subsidy decisions to submit their claim, while ensuring that public authorities and beneficiaries can proceed to implement subsidy decisions with certainty once they are made. The Government believe that the timings provided for in the clause strike an appropriate balance between those two objectives. I therefore request that the hon. Member withdraw the amendment.

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

I thank the Minister for his comments. I was intending to press the amendment to a vote, but there is a wider question about how we improve the balance regarding how this amount of time is used within the framework of the Bill. Should public authorities be given a shorter time in which to upload, to allow more time for a challenge to be brought? The same amount of time would have elapsed, but that could be a far better framework for the regime.

In the light of the comments made and the consideration that we need to look at this as a whole, I will not press the amendment to a vote today, but we intend to return to this. It will be important for the certainty that we want to see and the transparency we need. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Photo of Kirsty Blackman Kirsty Blackman Shadow SNP Spokesperson (Economy)

I rise to speak to amendment 31 in clause 71, page 40, line 36, leave out ‘one month’ and insert ‘6 months’.

This amendment allows CAT referrals a longer period to be made.

This is a pretty similar amendment, as it is about extending the length of time in which a challenge can be brought before the CAT. I wholeheartedly agree with what the shadow Minister has just said. If the Minister’s greatest concern is ensuring that the period of uncertainty is not increased, there remains an issue about the balance. We could ensure that that level of uncertainty existed for the same length of time but the balance was correct, so public authorities could upload these things very quickly, making the total challenge period shorter. That balance needs to be changed.

On amendment 31, the Opposition have made pretty much all the arguments I was going to make, so I will not take up too much of the Committee’s time. More than one amendment has been tabled on the matter, as well as on the database and its timings, and a number of comments were made in the witness sessions about the balance in the Bill not being right. I hope that the Minister will take on board the strength of feeling and give consideration to changing that balance by reducing the amount of time available for people to put things on the database and increasing the amount of time allowed for organisations to challenge. I therefore have no wish to move the amendment.

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

I will just say that I always take on board and reflect on everything that the hon. Member for Aberdeen North says—and, indeed, other colleagues as well.

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 amends the Competition Appeal Tribunal Rules 2015 to set out the time limits in which an interested party must make an application to the CAT to review a subsidy decision. It is important to provide for time limits within which a challenge may be brought against a subsidy decision. It is important to allow sufficient time for those affected by subsidy decisions to submit their claim, while ensuring that public authorities and beneficiaries can proceed to implement subsidy decisions with certainty once they are made. We believe that the timing provided in the clause strikes the appropriate balance between those objectives.

The one-month limitation period starts only once the subsidy or scheme is published on the subsidy transparency database, but the limitation period for challenging decisions can be extended in certain circumstances. The first is where an interested party makes a pre-action information request. That will give the interested party a further month to bring their challenge, starting from when the pre-action request is responded to. Clause 76 enables an interested party to gather more information before deciding whether to challenge a subsidy decision and gives the public authority the opportunity to explain its decision, which may cause the interested party to decide that litigation is unnecessary.

The limitation period will also be extended where the Secretary of State refers the subsidy or scheme to the subsidy advice unit under clause 60. The interested party will then, again, have a further month to bring its challenge, starting from when the post-award referral report is published. Finally, the CAT has the discretion to extend the time limits set out in clause 71.

Photo of Seema Malhotra Seema Malhotra Shadow Minister (Business, Energy and Industrial Strategy) 2:45 pm, 16th November 2021

Notwithstanding our concerns that the right balance has not been struck, we will not vote against clause stand part.

Question put and agreed to.

Clause 71 accordingly ordered to stand part of the Bill.