Subsidy Control Bill (Seventh sitting)

Bill Esterson Excerpts

Thursday 4th November 2021 Public Bill Committees

[Seema Malhotra]

We have no further comments other than the issues we have raised already. We support clause stand part.

Question put and agreed to.

Clause 54, as amended, accordingly ordered to stand part of the Bill.

Clause 55

Call-in direction

[Bill Esterson (Sefton Central) (Lab)]

I beg to move amendment 52, in clause 55, page 30, line 29, after “Secretary of State” insert

“, the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland”.

This amendment extends the call in powers under this section to the Devolved Administrations.

It is great to see you back in the Chair, Ms Nokes, bright and early this time.

The amendment addresses the call-in powers as they relate to the devolved Administrations. We think that the power to call in is a good power to have in the Bill, but it needs to be consistent and apply to the devolved Administrations, not just to the Secretary of State.

Clause 55 allows the Secretary of State to request an assessment of a subsidy or subsidy scheme if the Secretary of State believes it could be breaking regulations or having negative effects on competition and investment in the United Kingdom. As we have said a number of times, it is important that the First Ministers and the Northern Ireland Department responsible have those same powers. It makes no sense that the Secretary of State should be empowered to call in Scottish, Welsh and Northern Irish subsidies that may damage English interests, but the Scottish, Welsh and Northern Irish leaders cannot call in subsidies that may damage the interests of their own nations. That is what we heard in the evidence sessions.

I start with the evidence from Thomas Pope, deputy chief economist at the Institute for Government, who told us that subsidy control

“affects devolved competence and the operation of policy in all four nations of the UK. I therefore think it is appropriate that there be better devolved representation.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 31, Q43.]

[Simon Baynes (Clwyd South) (Con)]

Will the hon. Gentleman give way?

[Bill Esterson]

The hon. Gentleman is wearing a mask, so I will give way.

[Simon Baynes]

In the previous discussions on this issue, the opinion of the Bill Committee seemed to be that these matters were the responsibilities of the Secretary of State. It therefore makes no sense to me to devolve those responsibilities to the devolved Administrations. In some of their comments, Opposition Members have fully accepted that these matters are the responsibility of the Secretary of State, because it is a reserved power.

[Bill Esterson]

Just because the Government keep winning the votes, which they always will do because they have a majority in Parliament and therefore on the Committee, that is not a reason for us to not make valid arguments. This is a slightly different point on our concerns about the failure to reflect the devolution settlement in the Bill. Call-in is a slightly different aspect of the powers needed for a functioning subsidy regime, and it is right that we are raising it at this stage of the deliberations.

[Robin Millar (Aberconwy) (Con)]

Will the hon. Gentleman give way?

[Bill Esterson]

The hon. Gentleman is wearing a mask, so I will give way.

[Robin Millar]

Is it not precisely the point that this does reflect the devolved agreement, because the Secretary of State has those reserved powers?

[Bill Esterson]

I think the hon. Gentleman missed the point I was making, but there we go. It is entirely appropriate, given that the regime is a four-nation regime, that the four nations have the powers of call-in to the CMA in the way that our amendment sets out.

[Robin Millar]

This is an important point, so I am grateful to the hon. Gentleman for giving way again so soon. There is no four nations concept within our constitution. We have one United Kingdom Government and three devolved Administrations. Four nations is something reserved for rugby matches and the vernacular—[Interruption.] Indeed, the rugby is six. It is not something within our constitution. He has referred to the four nations on several occasions, and on this occasion I feel it is important and relevant to make that point.

[Bill Esterson]

I suspect that more than one party would be very interested in repeating those remarks multiple times, certainly in two of the nations of this country. They are called nations within the devolved settlement; we have a devolution settlement that has “four nations” within it. It will be interesting to see how many times the hon. Gentleman is quoted saying that.

I will quote what George Peretz told us about why it matters that there should be a call-in power for all four nations:

“In a situation where an English local authority, the Secretary of State or another UK Government body acting as an English Department does something that is designed to benefit England but causes serious concern in Scotland or Wales, why should the Welsh or Scottish Ministers not be able to do the same thing if the concern is with competition or investment within the United Kingdom? I find it slightly hard to see what the argument against that is.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 44, Q63.]

I have not heard from either the hon. Member for Clwyd South or the hon. Member for Aberconwy an argument against what he told us last week.

Rachel Merelie, senior director for the Office for the Internal Market at the CMA, noted:

“It is really important that all granting authorities are treated fairly and equitably, regardless of whether they are in the devolved nations or in England.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 69, Q98.]

I am not the only one talking about the devolved nations by any means; we have it from the CMA.

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

Will the hon. Gentleman give way?

[Bill Esterson]

The hon. Gentleman does not have a mask on, so I will not. He will be able to make a speech afterwards, as I think one of his colleagues said.

The devolved nations of the United Kingdom cannot be treated as second class when it comes to economic matters that could have potentially monumental impacts on the proper functioning of their markets. The devolved Administrations must have equitable powers with the Secretary of State to call in subsidies where they could be damaging to their own economies.

--- Later in debate ---

[Paul Scully]

I think I get the general gist of where the hon. Lady is going with that point. That is why, rather than trying to define them as not complying, we are trying to define them specifically at the outset, hence the regulations that we will be putting forward, but there is plenty of opportunity to have that discussion.

[Bill Esterson]

The hon. Member for Aberdeen North correctly made the point that the amendment asks for a limited set of powers. I set that out using the evidence. We should follow the evidence of people who are experts on these subjects. We had a range of very good witnesses, who set out why there should be the sorts of powers that we are proposing. I cannot help think that there will be occasions when the Secretary of State is making awards. If he, as it says in the Bill, is making those awards, is there not a potential conflict of interest if there is not another way of providing that call-in if there is perceived damage in the other three nations? The Minister might want to respond to that point.

The amendment makes a limited request. The Minister talked about requests to the Secretary of State for a call-in, but a request is not the same as a power. Unless there is that power—potentially in the case of a conflict of interest where the Secretary of State is the awarder—there is a limit to the way the Scottish, Welsh and Northern Irish Administrations can ensure there is a fair application of the system in terms of call-ins. I would be grateful if the Minister could come back on this point about the potential conflict of interest where the Secretary of State is the awarder in relation to the use of call-in powers.

[Paul Scully]

As I say, the Secretary of State will be acting on behalf of the UK Government. Subsidy control is a reserved power, as we established in the debate for the United Kingdom Internal Market Act 2020 that we had at length at the end of last year. None the less, there is no special treatment for the Department for Business, Energy and Industrial Strategy. There was plenty of opportunity through the publication of the advice and the reason for call-ins, and any enforcement that may need to be done through the Competition Appeal Tribunal to highlight that potential. None the less I think there were enough checks within the structure to avoid that. I hope the hon. Member will withdraw the amendment.

[Bill Esterson]

I do not think that we got an answer to my question. There is still the concern that if the Secretary of State says no and there are legitimate concerns in the three nations, there needs to be the additional limited opportunity of call-ins. We will push the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Kirsty Blackman]

I was going to ask a question about this clause, and the Minister has managed to make me even more confused. Subsection (1) states:

“A public authority may request a report from the CMA before giving a subsidy, or making a subsidy scheme, of interest.”

It does not state that, additionally, any other subsidy may be referred to the CMA under a voluntary referral. It might elsewhere in the legislation, but it does not at this point.

My concern was that it relates only to subsidies “of interest”—subsidies of particular interest are covered by mandatory referral, and that is fine—but for subsidies that fall outside the category of interest, perhaps because interest is narrowly drawn by the regulations when interest is set, there seems to be no way for those public authorities to refer them voluntarily to the CMA, as the legislation is drafted. It would be good if they could.

Let us say that “particular interests” and “interests” are defined by the Government, that goes through the affirmative procedure, we have a discussion, and the definitions are agreed. Accidentally, however, something is left out of the category of interest—because we do not think of everything—and a local or public authority discovers the anomaly and thinks to itself, “Do you know what, I should refer this to the CMA voluntarily, because I think it probably should be included in the schemes of interest, but in the way that the legislation is written, it does not fall under that”, so it tries to make a voluntary referral. It cannot, however, because it may make a voluntary referral only in the case of something that is of interest.

There is a bit of a gap. Authorities should be able to make that voluntary referral, whether it is a scheme of interest or not. There is a concern. As to what the Minister said, absolutely, if the Secretary of State has a concern additional to the interest section, that would be fair enough and make a difference, or if the authority itself decides that it should be referred to the CMA. I do not think that that will be a huge amount of extra work. Authorities will not refer themselves to the CMA for fun; they will do so when they feel that there is a reasonable chance that what they are considering doing is contentious.

I will not vote against the clause, because voluntary referrals are a good thing, but I do not think that it goes as far as the Minister suggested it goes—unless I have missed something.

[Bill Esterson]

I was not entirely clear which clause the hon. Member for Aberdeen North was speaking to. We are still on clause 55 stand part—but it was a very good speech on the next clause, so we now know what she will say.

We expressed our concerns in the debate on our amendment. I hope that the Minister will reflect on those concerns and consider whether greater strength is needed in this clause and, similarly, I suspect, in clause 56—when we get to that debate.

--- Later in debate ---

[Seema Malhotra]

We agree that in such cases, the subsidy or scheme in question should be treated as if it were part of a mandatory referral to the CMA. We have no issues with this clause, and will vote for it to stand part.

Question put and agreed to.

Clause 58 accordingly ordered to stand part of the Bill.

Clause 59

CMA report following mandatory or voluntary referral

[Bill Esterson]

I beg to move amendment 53, in clause 59, page 33, line 13, leave out paragraph (a).

This amendment removes the power for the Secretary of State to amend this section by regulation.

[The Chair]

With this it will be convenient to discuss amendment 54, in clause 59, page 33, line 17, leave out subsection (6).

This amendment is a consequential amendment linked to Amendment 53.

[Bill Esterson]

We have concerns about the way the clause allows the Secretary of State to use regulations to affect the content and form of CMA reports. This is a question of the CMA’s independence. On the Competition and Markets Authority website, it describes itself as

“an independent non-ministerial department”.

The CMA’s work

“is overseen by a Board, and led by the Chief Executive and senior team. Decisions in…investigations are made by independent members of a CMA panel.”

In contrast, the clause would empower the Secretary of State to amend, by using regulations, the content of the CMA’s reports. It is very hard to see how this is anything other than a direct contradiction of the principle of independence, baked into the CMA’s set-up.

The timing of the change, given the shameful proceedings in the Commons Chamber yesterday, leaves the suspicion that it is, again, about removing the principle of independence from the heart of the CMA’s role. We saw this with the Prime Minister’s own adviser on ministerial standards, Sir Alex Allan, resigning because of the breach of the ministerial code, and we saw it yesterday with members of the ruling party scrapping the rules or attempting to scrap the rules on MPs’ conduct because one of their own was found guilty of what the Standards Committee described as an “egregious” breach and then wanting to scrap the role of the independent standards commissioner.

[Robin Millar]

Will the hon. Gentleman give way?

[Bill Esterson]

Of course, they will all want to intervene—

[The Chair]

Order. May I remind hon. Members to stay within the scope of the Subsidy Control Bill?

[Bill Esterson]

Thank you, Ms Nokes. On that basis, it will probably not be wise to take the interventions. I am using these things as an example of the ruling party’s attempts to remove independence. The CMA is also supposed to be independent. We have seen a desire to break the rules and then just remake the rules in the main Commons Chamber, and I fear that now we may be seeing something similar—we need to ensure that we do not see something similar—when it comes to the independence of the CMA in its role with regard to the subsidy control regime.

Without amendment, the clause will allow the Government to rewrite the contents of an independent report if there is any warning that it will say something that they do not like. That is not how independence works, and it is not good government. Our amendments would remove the power for the Secretary of State to do that. It would remove the power to edit reports published by the CMA, and it would ensure that the independence of the CMA stays as it is.

[Kirsty Blackman]

I have just a brief question. This clause lays out things that reports following mandatory or voluntary referrals “must” include and some things that the reports “may” include. Can the Minister confirm that the reports may also include things not mentioned here and that the additional things that would be included would be at the discretion of the CMA? If it can include only the musts and the mays in the clause, it will not be able to include anything else that the CMA considers would be relevant in the report. Given that the Minister has stressed the independence and expertise of the CMA, it would be sensible to confirm that it can include matters that it feels are relevant, whether or not they are explicitly mentioned in the Bill.

[Paul Scully]

The CMA is independent and will use its expertise. I think that we have crossed wires here, because actually the clause allows the Secretary of State to talk about the content of the report but not to textually amend an independent report. That is not what we are talking about here, which is what is within scope of the report—to ensure that it can actually do it. This is to be able to give additional transparency and scrutiny in the regime itself. The clause allows him to make provision about the content and form of the report, but, as I said, not to change the text of an independent report.

Any changes to the content of the report must be made by the affirmative procedure. That is core to the subsidy control regime, because if the Government believe that the process needs to be refined, it is only right to have parliamentary scrutiny of it. By contrast, any specification as to the form of the report would be a technical regulation, for which the negative procedure is appropriate. Amendments 53 and 54 remove that possibility, except by future primary legislation.

As I say, removing the mechanism for amending or enhancing the baseline for SAU reporting that is set out in clause 59 would unnecessarily tie the hands of the SAU and future Governments seeking to improve the referral process based on the experience and expertise that is gathered over time through the functioning of the new regime. As set out in clause 67, the power to change the content of the report may be exercised only for a period of one year following the publication of SAU’s first report under clause 65.

As I have set out, however, changing the form of the report is a technical matter, so it is appropriate for the regulations to be subject to the negative procedure. I therefore request that the hon. Member for Sefton Central withdraws the amendments.

[Bill Esterson]

Clause 59(4)(a) uses the phrase

“amend subsection (1), (2) or (3) to make provision about the content of the CMA’s report”.

The Minister used the terms “text” and “content” interchangeably, which highlights our concern. Using secondary legislation, the Secretary of State is able to give himself the power to amend CMA reports. That is the problem—that is what overturns the power.

[Kirsty Blackman]

The Minister did not answer my question about additional information that the CMA may include in a report that is outwith the scope of the Bill. It does not fall under part 2; it falls under something else that the CMA thinks is relevant and should be in the report. Does the hon. Gentleman agree?

[Bill Esterson]

The Minister did not answer the hon. Lady’s question, so maybe he can do that after I finish my summing up, which will not take much longer.

We will push the amendment to a vote, because the Minister did not address our concerns about removing the independence of the CMA.

Question put, That the amendment be made.