Subsidy Control Bill (Tenth sitting)

Kirsty Blackman Excerpts

Tuesday 16th November 2021 Public Bill Committees

[Kirsty Blackman (Aberdeen North) (SNP)]

I beg to move amendment 23, in clause 70, page 40, line 12, at end insert—

“(c) the Welsh Ministers,

(d) the Scottish Ministers, or

(e) a Northern Ireland department;”.

This amendment intends that devolved administrations are included as interested parties regarding calling in of subsidy decisions.

[The Chair]

With this it will be convenient to discuss amendment 71, in clause 70, page 40, line 12, at end insert—

“(c) the Scottish Ministers,

(d) the Welsh Ministers, or

(e) the Department for the Economy in Northern Ireland.”

This amendment would include the Devolved Administrations within the definition of an interested party.

[Kirsty Blackman]

Thank you, Ms Nokes, for your forbearance in continuing to chair these sittings for us; we appreciate it.

It strikes me that there are three really important things in the Bill. The first question is this. What is a subsidy, and when can and cannot a subsidy be awarded? Actually, we have had not much disagreement across the Committee about what constitutes the answers to those points. The second question, which we have raised a number of concerns about, is this. How do we know what has been awarded? Specifically, we have raised a number of issues about transparency, how transparency will work and whether the transparency measures being suggested are adequate. The third question is how subsidy decisions can be challenged. The Bill and this system, the subsidy control regime, will not work if there is not a mechanism for a challenge to be made. That seems to me to be the third of those three important areas.

We have suggested amendment 23, which is specifically about the definition of interested parties. The Bill says that “interested party” means

“a person whose interests may be affected by the giving of the subsidy or the making of the subsidy scheme in respect of which the application under subsection (1) is made, or…the Secretary of State”.

The Minister has been clear a number of times that being too prescriptive about some things and including too many things risks suggesting that we are not including others. If the measure includes a, b and c, potentially an imaginary d would be excluded, because it explicitly says a, b and c.

The legislation talks about “interested parties” as those people who have been affected, but it also includes the Secretary of State, so presumably, in the Government’s eyes, the Secretary of State has a specific role whether or not he or she has an interest or the Government have an interest in whatever it is that has been subsidised. The Secretary of State has the ability to request a call-in whether or not they have an interest. The Minister has spoken at some length—indeed, a number of people have—about the asymmetry of the legislatures in the UK, and there is an asymmetry of legislatures. Westminster has reserved powers and, as we have seen in the United Kingdom Internal Market Act 2020 and various other power grabs, the ability to override some of the devolved competencies. We are not disagreeing that there is an asymmetry, but there is a requirement and a recognition that we have devolved legislatures that have a very important role to play in not just the economic development but the wellbeing of their citizens under whatever the devolved competencies are.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

Is the hon. Lady not defining that exactly as the legislation is set out? The devolved legislatures have an important role to play. Therefore they are an interested party. That is the point; it does not need to be set out specifically.

[Kirsty Blackman]

In that case, it does not need to be set out specifically that the Secretary of State is an interested party. There would be no need to include the Secretary of State if the Bill applied equally to any of the devolved legislatures whether or not they had a direct interest or whether or not their interests would be affected. It may be the case that the Scottish Parliament’s or the Scottish Government’s interests are not affected by something but that the interests of a significant number of businesses in Scotland are affected, in which case it would be completely reasonable for the Scottish Government or Scottish Ministers to be included, as we have suggested in the amendment; we have also referred to Welsh Ministers and “a Northern Ireland department”. The aim is specifically to catch the issue that has just been made clear. Sometimes the devolved institutions will not have a direct interest that affects the operation of their Parliament, but they might have an interest on behalf of the wellbeing of their citizens or the economic development of the places they represent. Subsection (7)(a), which defines interested parties, does not go far enough to allow those institutions to raise concerns about potential issues. If the concern does not affect them directly, it seems they are excluded from raising it.

I understand the point made earlier by the Minister about the Competition Appeal Tribunal and how it may define interested parties, but there is a definition of interested parties in the Bill. I feel it is too narrow to include other interested parties such as Scottish Ministers, unless they are directly affected.

Legislatures need to be responsible. We need to take action on behalf of our citizens, and to be able to take that action. Given that these institutions are democratically elected and there have been votes that resulted in the creation of the institutions, we must recognise that the devolved legislatures have a stake and a responsibility—a place to fill in supporting their constituents. This is not about trying to say that the Scottish Government are better than the Westminster Government—I mean, they are, obviously, but the amendment is not about fighting to change the power structure of the UK. It would simply allow Scottish Ministers, Welsh Ministers and the relevant Northern Ireland Department to take their place and be able to exercise their right to protect the people, the businesses and the countries they are elected to represent.

If the term “interested parties” covers everybody, including those who have an indirect interest, then it does not make sense to include the Secretary of State in the definition. However, if the term “interested parties” does not include Scottish Ministers, the Welsh Ministers and the relevant Northern Ireland Department, we have a really big problem. This is not how devolution is intended to work; it is intended that those institutions can support their constituents.

I would appreciate it if the Minister will look at the issue. It is likely I will consider pressing the amendment, because it is such an important issue. As I said, this is one of the three most important parts of the Bill. The devolved legislatures absolutely should have the right to have subsidy decisions called in. This is not a power that is going to be used every five minutes. It is not like anybody is going to be challenging the decisions or looking for assessments on a regular basis—that is not how it is going to work. If the UK Government are committed to levelling up and the principles in the Bill of looking at competition throughout the United Kingdom and the effects of subsidies, it is really important that the three devolved Administrations have this power.

[Kevin Hollinrake]

Does the way that the amendment is drafted not mean that Scottish Ministers, Welsh Ministers and the relevant Northern Ireland Department could interfere or be an interested party even though they had no interest? For example, a Scottish Minister could intervene in something that was happening in Wales, which has no relevance—they would have no interest at all. Is that the intention—that a Scottish Minister can intervene in a subsidy scheme in any part of the United Kingdom, even though it does not directly affect Scotland?

[Kirsty Blackman]

Yes, because that is the point of the Bill. The point of the legislation is to make sure that we do not have those subsidy races. As was made clear on Second Reading, Members want a situation in which there are not subsidy races and in which they can ensure that the best decisions are being taken for their area. If the hon. Gentleman, the local authority in his constituency or the Secretary of State felt that something in his constituency was being affected negatively because of the actions of the Scottish Government or the Northern Ireland Department in granting a subsidy, I would expect the Secretary of State to consider calling that in. If the hon. Gentleman made representations to the Secretary of State on behalf of organisations in his constituency that might not want to go through the process of employing lawyers to get it called in, but are genuinely affected, surely that is one reason why the Secretary of State may be included.

[Kevin Hollinrake]

The hon. Lady makes my point for me. If something were affecting North Yorkshire, I would be an interested party already, because that is how it is defined.

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[Kirsty Blackman]

No, the hon. Gentleman would not be an interested party, because the Bill states that an interested party is

“a person whose interests may be affected by the giving of the subsidy or the making of the subsidy scheme”.

The hon. Gentleman’s interests are themselves not affected. His constituents’ interests are affected—

[Kevin Hollinrake]

That is the same thing.

[Kirsty Blackman]

It is not the same thing, and that is the point that I am making. That is why either the definition of an interested party needs to change, or we specifically include those people whose direct interests may not be affected but whose indirect interests—whose responsibilities towards their constituents and their country—are affected as a result. In such circumstances, therefore, the hon. Gentleman would not be an interested party. I cannot see how his interests possibly could be affected, going on the reading of the legislation, although his constituents’ interests would be affected. If that is how we want the measure to operate—which is how I would like it to operate—I would very much like it to operate in the way that he is suggests.

[Kevin Hollinrake]

My interests are my constituents’ interests, and vice versa, so why would my interests not be affected if my constituents’ interests were affected?

[Kirsty Blackman]

The Bill states:

“a person whose interests may be affected by the giving of the subsidy”.

The hon. Member’s interests would not be affected by the giving of the subsidy, his constituents’ interests would be. If the Minister, when he speaks, confirms that a Member’s interests cover all the interests of his constituents, can define the interests of the Scottish Government, Welsh Ministers and the Northern Ireland Department or can say absolutely that, for example, a Northern Ireland Department’s interests cover the interests of businesses and constituents within its jurisdiction, I will be delighted that the hon. Member for Thirsk and Malton is correct. That is what I would like it to say but, as drafted, that is not what the Bill says.

There is therefore a gap, an issue with not enough people being able to make that challenge and in those democratic institutions not having that right. As the Minister said, it is not a foregone conclusion that such things would go through, that the CAT would look at the subsidy decision and say, “Oh, the Secretary of State has referred this, so they are definitely correct and the subsidy is definitely wrong.” That is not how it would work. The CAT is an independent organisation and it will be making those decisions.

On the specific point about people who have the ability to refer subsidy decisions, however, I think that those people with indirect interests on behalf of their constituents or the areas that they represent should have the right to make that referral—and for the CAT to make the decision after that. Again, that will not lead to a significant increase in the number of challenges to come forward, but if the Government are committed to levelling up and to the Subsidy Control Bill regime working as it is intended to work, changes have to be made to the clause. Amendment 23 was the best way that I could see of making the changes to ensure that those interested parties with indirect parties would be able to fulfil adequately their roles to work on behalf of the people who elected them.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

It is a pleasure to serve under your chairship, Ms Nokes. I thank the hon. Member for Aberdeen North, who laid out some very strong arguments for amendment 23. I will speak briefly to amendment 71, which is very similar.

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[The Parliamentary Under-Secretary of State for Business, Energy and Industrial Strategy (Paul Scully)]

It is a pleasure to serve under your chairmanship, Ms Nokes. I appreciate the contributions of the hon. Members for Aberdeen North and for Feltham and Heston. As we have heard, the amendments are almost identical in effect, so I will discuss them together.

Who has standing to challenge subsidy decisions is an important question that we considered carefully when drafting the Bill. The definition of an interested party, which covers any person whose interests may be affected by the subsidy or scheme in question, is intentionally broad and in many instances could capture the devolved Administrations. As I said in relation to the previous amendment, the rule on standing in the clause is not intended to exclude any party whose interests may genuinely be affected by a subsidy.

None the less, I hope that hon. Members will agree that it is necessary to have some limit on who can bring a challenge, so that the CAT can dismiss various challenges, whether they are vexatious or not. That is necessary to ensure that useful subsidies are not held up without good reason. The absence of a list or further explanation is not intended to exclude any party whose interests may genuinely be affected by a subsidy. On the contrary, the broad definition gives the CAT the maximum discretion so that, whatever the facts of the case may be, it can deem the right people to be interested parties. Depending on the case, that could certainly include one of the devolved Administrations.

Opposition Members have suggested that because the Secretary of State has default standing to bring a challenge there is an unequal situation that prejudices the interests of Scotland, Wales and Northern Ireland. That is simply not right. The Secretary of State has not been designated an interested party to act in the interests of one part of the UK. It is therefore not necessary that there should be some sort of balance, with other actors also having default standing. This is a reserved policy area and, as such, the Secretary of State’s responsibilities and interests are UK wide.

The Secretary of State is always deemed an interested party so that they can challenge any subsidiary they feel would be incompatible with the subsidiary control framework and because, as a member of the UK Government, they are responsible for the compliance of subsidies granted in all parts of the UK with our international obligations. The Government expects that the Secretary of State would use this ability only in exceptional circumstances where, in their view, a subsidy would threaten the integrity of the subsidy control framework, which protects competition and investment within the UK and helps to meet our international obligations. It is just as likely that the Secretary of State would challenge a subsidy given by an English local authority that prejudiced a Scottish business, as it is that they would challenge a Welsh subsidy that prejudiced an English business.

The intention of the clause is to allow a default right to stand as an interested party to challenge subsidies, while reserving a specific role for the Secretary of State to oversee the whole system and ensure compliance with international agreements. It is not appropriate or necessary for any other public authority to have the same standing. I have talked a lot about devolved Administrations, but to cover the point made in the exchange between the hon. Member for Aberdeen North and my hon. Friend the Member for Thirsk and Malton, an interested party could be any of those public authorities, including local councils or any awarding body. As we discussed in the previous group of amendments, that interest is wider than direct financial interest. For that reason, I ask the hon. Lady to withdraw her amendment.

[Kirsty Blackman]

The Minister has not really answered the key question that would be helpful in order to ensure that interested parties are as broad as the hon. Member for Thirsk and Malton and I think it should be. Does a devolved Administration’s interests include indirect interests? Let us say that the Scottish Parliament was to come forward to the CAT and ask for something to be reviewed on the basis that it would affect seven businesses throughout Scotland. Is that included in the definition of persons of interest who may be affected? What if a number of organisations in their jurisdiction are potentially affected by a subsidy given? That subsidy may be given in Scotland; this is not necessarily an inter-nation argument. It could be that a local authority in Scotland gives a subsidy and the Scottish Government are not happy about it because it could negatively affect seven different businesses. Is that included? Is that covered by the definition of interested parties?

[Paul Scully]

Yes. I would say that is a direct interest rather than an indirect interest. Public authorities, including devolved Administrations, may be interested parties. That is why we are keeping the definition wide—because it includes their responsibilities as well as a direct interest for the public authority or the devolved Administration itself.

[Kirsty Blackman]

The Minister has made the clarification to say that it includes responsibilities. Obviously, the devolved Administrations have responsibilities for lots of things in various areas. That is incredibly helpful. I still would like to see amendment 23 in the Bill and I would like to press it to a vote.

Question put, That the amendment be made.

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[Seema Malhotra]

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.

[Kirsty Blackman]

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.

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[Paul Scully]

In addition to the ordinary judicial review remedies available under clauses 72 and 73, clause 74 gives the CAT the power to make a recovery order. It may order recovery of some or all of a subsidy if it finds that a subsidy or scheme was made in breach of the subsidy control principles, prohibitions and other requirements. The effect of the order will be to require the relevant public authority to recover the subsidy from the beneficiary. The method of recovery, the amount to be recovered and the timeframe for recovery will be for the CAT to determine.

As we have heard, amendment 76 would make it compulsory for the CMA’s annual report to include details of all recovery orders made in that year, including the names of the public authority, the beneficiary and the amount to be recovered. I support the objective of ensuring that the process of reporting and managing recovery orders is transparent and accountable; however, this intent is already met by the process as it stands in the Bill. Recovery orders, by their nature, will be made public, and enforcement mechanisms exist to ensure that they are followed. Accordingly, there is no need to give the CMA this additional reporting duty.

[Kirsty Blackman]

It would be useful if the Minister clarified how recovery orders are made public and how we can find that information.

[Paul Scully]

I will happily do so. Recovery orders are given during a hearing by the Competition Appeal Tribunal to a public authority if that public authority is found to have given a subsidy that breached the subsidy control principles, prohibitions and other requirements. The cases heard by the CAT are usually held in public, with any ruling later published on the tribunal website alongside a transcript of the hearing. The names of the public authority and the beneficiary, and the amount to be recovered, would ordinarily all be published within that for recovery orders.

I was at the CAT a couple of weeks ago, and I saw the virtual courtroom where a hearing about the takeover of Newcastle United was recently held. The hearing was viewed by 35,000 people—mainly Newcastle supporters, I suspect. According to the president of the CAT, more people watched it than attend, on average, the games of all but 15 of the premier league teams. There is a good degree of interest in the CAT’s decisions, which will be publicly available.

[Kirsty Blackman]

I am really glad that the CAT is so open and transparent. It should therefore not be that difficult for the CMA to put in its annual report the results of all the recovery orders that are published on the website.

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[Seema Malhotra]

I thank the Minister for his comments. He is right that recovery orders are published alongside hearings, but they are not collated, and it is not possible to see them easily in one place in order to understand collectively what is going on. If we want to know where things are not going well and what is happening across the regime from an end-to-end point of view, it is important to have that information not just publicly available, but easily accessible.

[Kirsty Blackman]

Does the hon. Member agree that it is very difficult for us to know what is coming up in the CAT unless we are looking at its website on a regular basis, so the transparency that we need as parliamentarians to see that the Bill is working effectively is not adequately fulfilled by the CAT’s current reporting duties?

[Seema Malhotra]

I thank the hon. Member for her comment, and she is right. When we develop legislation and introduce a regime, it has to stand the test of time and last beyond the time we spend in our individual roles. In five or 10 years, the Minister might have become Prime Minister.

[Seema Malhotra]

Others are starting their campaigns, so perhaps the Minister also will do so.

We need to think about making such information more easily accessible. We thought about whether the CMA should publish it simply because if we have data on the regime as a whole, it should not be too onerous to find a way of reporting some of it, perhaps in partnership with the Competition Appeal Tribunal. To enable us to see what is going on and where there are recovery orders, that would be useful alongside other information that we talked about, such as geographical information, so that we have an end-to-end view.

[Kirsty Blackman]

I have just one more thing to add on this. Clause 65 covered monitoring and reporting on subsidy control, and the five-year report that will be published. Does the hon. Member agree that if the annual report will not cover instances of recovery orders because they are not the responsibility of the CMA, the CMA’s review of the efficacy of the subsidy control regime would be an appropriate alternative place to report on them?

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[Paul Scully]

The clause confers on public authorities the right to recover a subsidy that has been used for a purpose that is different from the one for which it was given. Public authorities give subsidies with a specific purpose in mind. They will determine whether the subsidy complies with the subsidy control principles in the Bill. They will reference the purpose for which the subsidy has been given. Many public authorities award subsidies through a written contractual arrangement that sets out the terms and conditions under which the financial assistance is being given; this is likely to state the purpose for which the assistance is being given.

[Kirsty Blackman]

I am sorry to interrupt the prospective Secretary of State mid-flow, but I have a question. Does the clause apply to subsidies below the de minimis threshold?

[Paul Scully]

I will come to that in a second.

It is good practice for the contractual arrangements to contain a mechanism allowing public authorities to recover a subsidy if the terms and conditions are breached, including whether the subsidy is misused. However, not all subsidies are given through contractual arrangements, and those may not have a mechanism to recover the subsidy if it is used for a different purpose. Public authorities may have other private law rights that enable them to recover the subsidies in those circumstances. The clause is designed to avoid any uncertainty by conferring on public authorities a right to recover subsidies used for a purpose other than that for which they were given. The new right to recover is enforceable as if it were a contractual right and does not affect any other remedies that might be available to the public authority with respect to the award of the subsidy in question.

[Paul Scully]

May I write to the hon. Member for Aberdeen North on her question? I am not sure whether the clause will apply, but I will write to her.

[Kirsty Blackman]

Thank you.

Question put and agreed to.

Clause 77 accordingly ordered to stand part of the Bill.

Ordered, That further consideration be now adjourned.—(Michael Tomlinson.)