State Aid (Revocations and Amendments) (EU Exit) Regulations 2020

Baroness Bowles of Berkhamsted Excerpts

Wednesday 2nd December 2020 Lords Chamber

[Baroness Bowles of Berkhamsted (LD) [V]]

My Lords, this has been an interesting short debate. If the Minister did not already know it from the UK internal market Bill, how state aid—if such a thing is to exist as a definition in future—is to work is a sensitive and significant matter of public policy that merits primary legislation. The changes go beyond what would be permitted under the withdrawal Act. I will concentrate on the mainstream state aid point, although I am sure that the Minister will appreciate that I have seen the amendments to recognise third-country state aid instruments as core tier 1 equity for bank capital. If only there had been such clarity all round.

The problem is that, given the double whammy of, “delete all and maybe start something else—or maybe not”, as we are told in connection with this statutory instrument, and the attempted power grab without consultation in the UK internal market Bill, it all looks like a high level of disregard for stakeholders and devolution, or a high level of disorganisation, or both. The truth of the matter seems to be that policy is at the mercy of trade agreements on the one hand and the avowed distancing from all things EU on the other. It is not even an attempt to cherry pick. There are some cherries to pick, not least the ones that we put into the legislation.

By now, one would have hoped for the emergence of some ideas on alternative shape; if this is how the negotiation is proceeding with the EU, I am not surprised that it got stuck. So instead of an independent policy we have a hole that might or might not get filled. That hole is carved out by secondary legislation, which is a major policy change. Does this mean that, from January, public authorities can start to make subsidies, secure in the knowledge that if they fit within the WTO rules—which means among other things a free-for-all on services—there will be no retrospective prohibition, interruption or comeback? How will that sit in making trade deals if it has already started?

Paragraph 10 of the Explanatory Memorandum says that there have been technical discussions with the devolved Administrations. I find that interesting, given the onslaught against the UKIM Bill. Can the Minister explain more about those technical discussions? Paragraph 11 says that there will be guidance given about the new subsidy control arrangements, but paragraph 12 indicates that, indeed, all that public authorities need to worry about are the WTO rules. Will that guidance include any forward-looking advice beyond compliance?

I do understand that contraction of geographical scope of the state aid rules is sensible, but maybe there could have been a general continuation of the principles until completion of the consultations or some other commitment to co-ordination, not least because of Northern Ireland. Now there will be notional freedoms but concern that it may be temporary or governed solely by Treasury stinginess. The Business Secretary has said—reported, for example, in the Financial Times on 9 September—that the,

“guiding philosophy remains that we do not want a return to the 1970s approach of picking winners and bailing out unsustainable companies”,

and some of that is indeed now in the Japan trade agreement. Is there an intention to enforce that on public authorities and devolved Administrations, or are they being given free rein to see how it works out?

The noble Lord, Lord Stevenson, has proposed in his amendment that the policy be delayed until after the consultation, when devolved Administrations are on board and the legislative context in which state aid rules sit is more certain. These Benches can broadly agree with those sentiments. We think that the Government’s approach to state aid policy, and the wider context of the UKIM Bill, has been deeply unsatisfactory, with important details left undetermined and the devolution settlements neglected. We will, therefore, be supporting the amendment.