Oral Answers to Questions

Debate between Paul Scully and Bill Esterson

Wednesday 14th June 2023 Commons Chamber

[Bill Esterson (Sefton Central) (Lab)]

1. What steps she is taking with Cabinet colleagues to help tackle skills shortages in the technology sector.

[The Parliamentary Under-Secretary of State for Science, Innovation and Technology (Paul Scully)]

We know that digital skills are a vital building block for developing the workforce of the future, so we are working across Government with educators and employers to grow the pipeline of individuals entering the digital sector. Steps that we have taken include the launch of the Government and industry Digital Skills Council, the introduction of artificial intelligence and data science conversion courses with the Department for Education and the creation of new visa routes with the Home Office to attract international tech talent. We worked with the Department for Education on the launch of skills bootcamps in England and the Government will be investing up to £150 million in the programme, with free, flexible courses lasting up to 16 weeks in subjects such as software engineering, with a guaranteed job interview at the end.

[Bill Esterson]

In contrast to what the Minister says, more than £600 million of apprenticeship levy funding has been returned to the Treasury in the last year alone, enough to have funded more than 60,000 new apprenticeships. Labour will reform the system to create a growth and skills levy that can be used on a much wider range of training that businesses say they need. Will the Government address the chronic shortage of skills, match Labour’s ambition and give tech businesses what they need to thrive?

[Paul Scully]

I gave a long answer the first time, so I can give a shorter one this time. We are already acting in that space. On the apprenticeship levy, we always work with employers and supply chains throughout this country to ensure it works as effectively as possible for what businesses need.

Professional Qualifications Bill [Lords]

Debate between Paul Scully and Bill Esterson

Report stage
Monday 14th March 2022 Commons Chamber

[Bill Esterson]

I will speak to new clauses 3 and 4 tabled in my name, then briefly come back to the Government amendment and to amendment 3. During the progress of this Bill through the Lords, it became clear that it had been thrown together in a completely unsatisfactory way. The Financial Times described the way in which the Government introduced it as a

“chaotic handling of a post-Brexit regime for recognising the qualifications of foreign professionals”.

Remarkably, the Government admitted introducing the Bill to Parliament without knowing which professions were in scope. We argued in the Lords that we had to know who and what was in the scope of the Bill. It stands to reason that the relevant regulators and professions need to be aware of these changes. Having initially listed 160 professions and 50 regulators that would be affected by the legislation, the Government twice published a revised list, ultimately increasing the numbers to 205 professions and 80 regulators. Due to do the increased number of regulators in scope, the Government also had to publish an updated impact assessment, with the total cost to regulators increasing by almost £2 million. That is hardly the way to inspire confidence that the legislation will help businesses or skilled workers.

The Government were criticised from all sides in the Lords, including by those on their own Benches. Baroness Noakes said that the legislation had

“all the hallmarks of being a Bill conceived and executed by officials with little or no ministerial policy direction or oversight…we learn that the Bill was drafted with a far-from-perfect understanding of the territory that it purports to cover. This is no way to legislate.”—[Official Report, House of Lords, 22 June 2021; Vol. 813, c. 149.]

How can regulators and regulated professionals know where they stand when the Ministers responsible for the Bill do not even know themselves? When I raised this in Committee, the Minister responded that he had

“reservations about enshrining a list in the Bill.”

This was because of concerns about not knowing which professions were ultimately covered. He went on to say that the Government had committed to

“maintaining a list of regulated professions and regulators to which they consider the Bill applies, and to keep that list readily accessible and in the public domain.”––[Official Report, Professional Qualifications Public Bill Committee, 18 January 2022; c. 30.]

It is of course encouraging that the Minister has made such a commitment to maintaining a list. I am not asking Ministers to place a list of regulators on the face of the Bill, but for the certainty that regulators and professionals need to be able to operate with confidence, it is important that they now know whether they are within the scope or not, and that means maintaining the list that Ministers have agreed to keep in the public domain. Web pages can be deleted, links can be lost, and without an amendment requiring the maintenance of a list, there will be no legal duty on Ministers to do so. Indeed, if they decided on the day following the granting of Royal Assent to this Bill that they no longer wanted to publish the list on the gov.uk website, they could remove it. This amendment, which I will not be pressing to a vote, is a reminder that the Secretary of State and the Minister need to maintain the list in the public domain, as promised, for the benefit of the professions and professionals who need certainty. This should not be a controversial point, and I hope the Minister will confirm that that is indeed what will happen.

Turning to new clause 4, the Bill provides a framework to allow mutual recognition of professional qualifications between regulators and professional bodies in the UK and the equivalent organisations overseas. The provisions in clauses 3 and 4 will allow for the implementation of regulator-to-regulator mutual recognition agreements and of the recognition arrangements in new international trade agreements. As the Law Society tells us, the Bill will enable the mutual recognition agreement provisions in the UK-EU trade and co-operation agreement to be implemented. However, the Law Society also says that the provisions for mutual recognition agreements in the TCA are largely based on the EU-Canada comprehensive economic and trade agreement—CETA—but that in fact no mutual recognition agreements have been signed between the EU and Canada using the provisions in CETA in the three years since CETA came into force. The failure to use the provisions on which the Government are relying raises the concern that the provisions are not sufficient. To remind ourselves, this legislation, if applied effectively, might well help to address shortages in a multitude of professions, including the chronic shortage of nurses and vets.

In Committee, I asked the Minister how his Department would put in place the additional support, co-ordination and guidance needed to make the most of the provisions in the trade and co-operation agreement, especially if they are to form the benchmark for future free trade agreements. There is real concern that the model on which the provisions in the legislation are based will not deliver results. That is why I tabled new clause 4, which would oblige the Secretary of State to provide guidance to regulators on how to make the most of the provisions in the TCA.

The Minister has written to me since the Committee stage to say that BEIS has engaged with 20 regulators of professional bodies. It will be important to see that such engagement leads to the delivery of mutual recognition agreements using the template on which the Government are relying. The Minister referred in Committee to a limited pilot recognition arrangement programme. I would be grateful if he could explain how effective that pilot has been so far, and how he foresees its leading to the successful implementation of new regulations.

I shall turn now to what the Minister said about new clause 1. In Committee we tabled two amendments to address the concerns raised by the devolved Administrations. We asked for consistency from the Government in the way they approach this Bill. The consistency we asked for in one of the amendments involved a similar amendment to that included in the United Kingdom Internal Market Act 2020. I see from new clause 1, having read it a number of times, that it is consistent with what is in the internal market Act and I thank the Minister for listening to the concerns that we raised, even though the Government voted against our amendments in Committee.

The Minister has addressed the concerns about those matters on which the devolved Administrations can make recommendations. That is an improvement on the more “flexible” approach to consultation that he talked about in Committee. That informal approach would have left no formal consultation mechanism. We have heard reservations expressed by a number of hon. Members on that, and I trust that the Government will still seek consent, in the spirit of new clause 1, when applying the regulations that are relevant to the devolved Administrations.

Briefly, I can tell the hon. Member for Richmond Park (Sarah Olney) that we will be supporting amendment 3. Representation of the devolved Administrations on the board is an important principle, and something that we return to again and again in legislation. We believe that, in the interests of the devolution settlement, that is entirely appropriate.

[Paul Scully]

I thank the hon. Members who have taken part in this important debate. I will whip through each amendment in turn, starting with new clause 2.

I thank the hon. Member for North East Fife (Wendy Chamberlain) for tabling new clause 2, and I wish her well as she recovers from covid. I thank the hon. Member for Richmond Park (Sarah Olney) for speaking to the amendment. I remind the House that clause 16 sets out the definition of an appropriate national authority for the purposes of the Bill. It also sets out the concurrent powers for making regulations in areas of devolved competence.

These powers could be used by the Secretary of State or the Lord Chancellor if, for example, a profession falls within devolved competence but is regulated at UK level. I understand the strength of feeling about the concurrent powers in the Bill, but I have been clear that any regulation made by the UK Government that falls within devolved legislative competence will be limited in scope and will always be made in consultation with appropriate Ministers from the devolved Administrations. The Government listened carefully to the concerns raised in both Houses, undertook extensive engagement with the devolved Administrations and negotiated in good faith in relation to those concerns. I am grateful for the devolved Administrations’ constructive and well-spirited engagement.

Professional Qualifications Bill [ Lords ] (First sitting)

Debate between Paul Scully and Bill Esterson

Committee stage
Tuesday 18th January 2022 Public Bill Committees

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

It is a pleasure to serve under your chairmanship, Mr Pritchard. The Bill will replace the interim system for the recognition of professional qualifications that was put in place when the UK left the EU. That interim system can give preferential treatment to professionals within the European economic area and with Swiss qualifications. It has not been reciprocated by the EU, and will be superseded by our recent trade agreement with the EEA and European Free Trade Association states. It must therefore be revoked.

Clause 1 sets out the substance of a new recognition approach. It means that regulations can be made that require regulators to consider applications from individuals with professional qualifications and experience gained around the world. Regulators will determine whether an individual with overseas qualifications or experience has substantially the same knowledge and skills to substantially the same standard as demonstrated by the relevant UK qualification or experience. Equally, other relevant regulatory criteria must also be met—for example, regarding language proficiency or criminal record checks. The regulations would not alter the standards required to practise professions in the UK. No regulator would be pressured into accepting qualifications that did not reach UK standards. My officials have worked with all regulators affected by the Bill, and I am happy to report that the regulators support clause 1.

Where clause 1 is not exercised, regulators will be free to continue recognising qualifications from overseas in line with their existing powers and any reciprocal agreements in place. As a result of the condition in clause 2, there are only certain conditions under which a Secretary of State, the Lord Chancellor or a devolved Administration would be able to make regulations under clause 1. Action can be taken only where there is a clear public interest to do so—in this case, unmet demand for services. I hope that my explanation has provided further clarity on why the Government believe that that approach is necessary and proportionate. I assure the Committee that the regulators support the clause.

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to see you in the Chair, Mr Pritchard. Having a skilled workforce is essential for the economic success of our country, and the Bill will promote mutual recognition of professional qualifications, which will in turn increase the opportunities for many professionals from abroad to work here in Britain. We also need our high-class professional services professionals to have the opportunity to work abroad. The Bill matters both in addressing access here and in creating a potential for mutual recognition agreements for professionals to work abroad.

Whether it is for the billions that qualified professionals contribute to our economy—such as the £60 billion of gross added value that legal services are worth and the £5 billion in the export of legal services—or the societal contribution that nurses, doctors, veterinarians and others make to the fabric of our country, it matters greatly that we get the legislation right. Although the Bill has faced much scrutiny from colleagues in the Lords, there are areas where it could be amended to ensure that we in this House, as well as our colleagues in the devolved Administrations and the regulated professions, deliver the certainty that the Bill should provide to millions of professional workers.

We therefore encourage the Government to properly consult with the relevant regulators and professional bodies before making regulations, so that they can avoid the same shambolic approach that the Government took, for example, in the establishment of the Trade Remedies Authority, where the Secretary of State had to step in at the eleventh hour last year to prevent the disastrous removal of vital protections for our steel industry. Similarly, we encourage the Government to properly consult with the devolved Administrations, and provide appropriate reassurances to them that they will be appropriately consulted when regulations affect them, and that the Bill will not strip more powers from them when it comes into force. The relevance of the Trade Remedies Authority is that the Government opposed our amendment in Committee to then Trade Bill to include, among others, the devolved Administrations. Our amendments to today’s Bill would reassure the devolved Administrations that this legislation will not be another attempt by Westminster to seize responsibilities that were previously devolved.

We have also tabled new clauses to strengthen certain aspects of the Bill. Having qualified professionals here in the UK contributing to our economy and social fabric is vital. It is therefore galling to see yet more shortages of skills across the country—shortages that, we hear today, are in the tens of thousands for nurses and carers. We know about the shortage of vets. All of those are covered by the Bill, as are driving instructors, who of course link to lorry drivers, where we have a significant and sustained set of problems. That is why we seek an obligation for the Government to provide a report to the House about what they are doing to tackle the skills shortages facing the country. We also seek additional certainty for workers who already have their professional qualifications recognised in the UK.

Finally, we seek certainty that a number of regulators and regulated professionals are covered by the Bill. When the Bill was in the Lords, it was clear how little effort and thought went into it from Ministers. It was truly shambolic. In fact, it was so shambolic that the Government’s own Minister, Lord Grimstone, said that the deep errors had made him feel “uncomfortable” and that he had listened to the criticism

“with a certain lack of enjoyment.”—[Official Report, House of Lords, 22 June 2021; Vol. 813, c. 160.]

Conservative peer Baroness Noakes said that

“it has all the hallmarks of being a Bill conceived and executed by officials with little or no ministerial policy direction or oversight.”—[Official Report, House of Lords, 22 June 2021; Vol. 813, c. 149.]

I hope that today’s Minister is giving a little more political direction and oversight than his colleagues have previously. How does he feel about the Bill? Is he, as his colleagues were, uncomfortable with it? Is he certain that the wrinkles have been ironed out?

This is an important piece of legislation, which will affect people’s lives and livelihoods, and every effort must be made to deliver the system that those in scope need. Lord Grimstone had the decency to accept the shortcomings of the Bill and of the Government, and in collaboration with Labour made the necessary amendments to put the Bill into better shape. I hope that today’s Minister will address the remaining concerns with us as we debate the amendments before us.

Question put and agreed to.

Clause 1 accordingly ordered to stand part of the Bill.

Clause 2

Power conferred by section 1 exercisable only if necessary to meet demand

[Bill Esterson]

I beg to move amendment 2, in clause 2, page 3, line 2, at end insert—

“(2A) In determining whether the condition in subsection (2) is met, the appropriate national authority must have regard to the availability of professional services in the regulated profession by reference to such factors as appear to the authority to be relevant including, but not limited to—

(a) the extent of delays in accessing professional services,

(b) the level of charges for services,

(c) available workforce data, skills needs or workforce modelling forecasts,

(d) vacancy levels or recruitment difficulties,

(e) whether the profession is on the occupation shortage list, and

(f) the views of the relevant regulator and of professional representative bodies.”

This amendment requires additional information to be taken into account by the appropriate national authority when deciding what regulations are to be made in accordance with the powers conferred under clause 1.

The reluctance to consult on matters of great importance to people’s lives and livelihoods is a flaw and a hallmark of how the Government operate. The Bill does not provide any obligation to consult the relevant regulators and other professional representative bodies when determining to make recommendations that will no doubt affect them and their members. How can that be right?

The second report of the Lords Delegated Powers and Regulatory Reform Committee stated clearly that it was

“surprised and disappointed that neither the Memorandum nor the Explanatory Notes…explain why Ministers will have no duty to consult before making regulations.”

The Minister should explain why not. As Conservative Baroness Noakes said to other peers, that

“goes to the heart of this Bill. BEIS did not consult on this Bill or any policy proposals. All it did was issue a rather strange call for evidence, some of the replies to which were really rather thin, and it then worked out its own policy and put out a statement of policy at the same time that it published the Bill.”—[Official Report, House of Lords, 22 June 2021; Vol. 813, c. 167.]

Failure to consult the relevant experts will only lead to mistakes and time wasted in trying to rectify those mistakes.

Furthermore, while the Bill was in the Lords, the Minister in that place said:

“I fully agree that it is important for the relevant national authority to engage with a range of stakeholders before making regulations. Because of the complexity of these matters, it would be the height of foolishness not to do that.”—[Official Report, House of Lords, 9 June 2021; Vol. 812, c. 1500.]

Does the Minister agree with his colleague that it would be “the height of foolishness” not to consult with the appropriate stakeholders? If he does, does he accept the need for the amendment?

[Paul Scully]

I thank the hon. Member for his amendment, which would alter the unmet demand condition in subsection (2). The amendment would require the appropriate national authority to consider a specific set of factors to determine whether that unmet demand condition had been met.

I agree that the appropriate national authority should be transparent when determining whether the unmet demand condition is satisfied. I also recognise that considering a combination of the factors set out by the hon. Member in the amendment would make a sensible determination of unmet demand. That is why the Government committed to publish specific guidance to support appropriate national authorities in their determination of unmet demand. Factors in the amendment would of course be part of that guidance anyway.

The other place agreed that that was appropriate, because setting matters out in guidance, rather than on the face of the Bill, will give the appropriate national authority the freedom to tailor its unmet demand assessment to the needs and circumstances of each profession. I expect that appropriate national authorities will be clear in showing how they have reached their determination. Their approach must withstand scrutiny.

For example, a devolved Administration is best placed to determine the factors relevant to assess whether there is unmet demand for a profession in an area of devolved legislative competence. It is important that they are able to decide how best to make such determinations, and are not forced to work through a list of prescribed factors in the Bill. I therefore hope that the Committee will agree that setting the factors out in guidance is more appropriate.

The amendment also refers to the gathering of views of interested parties. I agree that that is clearly of the utmost importance. Therefore, clause 15 sets out a duty to consult with regulators when appropriate national authorities are using the powers under clause 1. That will provide an opportunity for regulators to express their view on unmet demand and on the content of any resultant negotiations. Given that the Bill already legislates for that, I do not see the need to repeat such an obligation in clause 2.

The proposed amendment also extends the consultation to give regard to the views of professional bodies. I am sure that appropriate national authorities, as a matter of good practice, will look to liaise with such bodies where appropriate. I hope the Committee is reassured that measures are in place to guide the application of the clause and provide transparency of how decisions will be made, as the hon. Member rightly suggests is required, as well as appropriate engagement with key parties. There is no need, therefore, to set that out further in the Bill. As such, I ask the hon. Member to withdraw the amendment.

[Bill Esterson]

I am grateful for the Minister’s response. I come back to the point that the Lords Delegated Powers and Regulatory Reform Committee made—that this part of the Bill does not contain the duty to consult. I take his point about it being later in the Bill, but the point is, if the Government are happy to put it in later on, why is it missing here? We have not really had an answer, so we will test the will of the Committee.

Question put, That the amendment be made.

--- Later in debate ---

[Bill Esterson]

I am grateful to the Minister for describing the dedicated support team that the Department has set up. Will he give us some examples of the advice it has been able to give already? How many inquiries has it had from regulators or professional bodies?

[Paul Scully]

I will happily write to the hon. Gentleman with that detail. I have not been directly involved in that advice. None the less, we are here to talk about the amendment. The debate for today is whether we put that experience and advice on the face the Bill or have the existing structure, whereby that team is already offering that advice, is available and is stepping up with its experience to do so. That team regularly engages with regulators of professional bodies. It has published technical guidance on gov.uk. It is obviously going to be hard to quantify how many people have read and used that information, but information on how to seek recognition arrangements inside and outside the TCA is there.

The Department has also provided limited, targeted financial support to regulators seeking to agree recognition arrangements for a pilot recognition arrangements grant programme. I hope the hon. Member is therefore assured that the Government share the priority highlighted by his amendment and have already instituted support for regulated and professional bodies to make the most of the provisions in the TCA.

Clause 4 is part of our support for regulators as they pursue recognition agreements, ensuring that all regulators can take full advantage of international opportunities and enter recognition agreements at their discretion. Some regulators believe that they can already do so with their overseas counterparts and seize those opportunities. For example, the Financial Reporting Council has entered into a memorandum of understanding with the Irish Auditing and Accounting Supervisory Authority. If they can already enter recognition agreements, no further action is needed, but many regulators are currently considering recognition arrangements for the first time, and not all regulators have clear powers to enter them. Clause 4 can help. The Government are committed to supporting regulator recognition to fit legal agreements with the EU and beyond, and have taken action with that aim.

[Bill Esterson]

I am grateful to the Minister for his answers, which I will come back to. I commend my hon. Friend the Member for Newcastle upon Tyne Central for what she said about the importance of different professions, including her own, as part of the UK’s economic success, exporting around the world, gaining experience and returning it to this country. It is clearly in all our interests that we have good trade in services and facilitate that by supporting our professional services to trade internationally. She gave some excellent examples from across the professions of exactly why that matters and why it is a concern that we are relying on a clause that has not seen after three years any mutual recognition agreements signed up to in the corresponding EU-Canada agreement. That is the reason for the amendment and why we are raising this concern.

I am given a degree of assurance by the Minister that the dedicated support team is in place. I just gently say to him that, as the Minister, he really should have anticipated my question and probably pre-empted it by giving us some examples. I hope he is not going to blame his officials, because he should have asked for that information before, so that he could give us examples of the team in operation and told us how many inquiries there had been.

--- Later in debate ---

[Paul Scully]

Clause 8 is about increasing transparency by requiring regulators of professions in all parts of the UK to publish information on entry and practise requirements. Our evidence gathering found that the complex regulatory landscape is sometimes difficult for professionals to navigate, including in relation to transparency of information regarding entry into professions and application fees, so the clause requires regulators to make available the information about what qualifications or experience are needed, application processes, registration processes, how to continue to practise, ongoing training units and fees.

Question put and agreed to.

Clause 8 accordingly ordered to stand part of the Bill.

Clause 9

Duty of regulator to provide information to regulator in another part of UK

[Bill Esterson]

I beg to move amendment 3, in clause 9, page 8, line 12, at end insert—

“(6) Nothing in this section affects the establishment or operation of a common framework agreement relating to professional qualifications.

(7) A “common framework agreement” is any agreement between a Minister of the Crown and one or more devolved authorities as to how devolved or transferred matters previously governed by EU law are to be regulated.”

This amendment provides additional reassurances to devolved administrations that the Act does not affect the establishment or operation of common framework agreements which are devolved matters.

The amendment provides additional reassurances to devolved Administrations that the Bill will not affect the establishment or operation of common framework agreements, which are devolved matters—that is to say any agreement between a Minister and a devolved authority as to how devolved matters previously governed by EU law are to be regulated—relating to professional qualifications. It is important that when divesting powers to a devolved authority, we allow those powers to remain and do not seek to revoke them on a whim, buried in a Bill such as the one we are debating.

The position of the Labour Government in Wales is that assurances by Ministers in Westminster that they will not use powers granted to them without consultation with devolved Administrations is not good enough. If Ministers say they will do something, they should be prepared to put their commitments on the face of the Bill. Indeed, as the Welsh Government say, although the UK Government have stated that they do not intend to use the concurrent powers in the areas of devolved competence without the agreement of the relevant DAs, the provisions in the Bill do not reflect that, and the Secretary of State and Lord Chancellor would be able to exercise these powers in devolved areas without requiring any consent from Welsh Ministers. As representatives of the devolved Administrations are telling the Government, matters that were previously the preserve of the devolved Administrations, such as common framework agreements, should remain so.

[Paul Scully]

I thank the hon. Member for the amendment, which seeks to ensure that clause 9 does not affect the establishment or operation of a common framework. A framework for the regulation of professional qualifications is under development between the UK Government, the Scottish Government, the Welsh Senedd and the Northern Ireland Executive, to ensure a common approach on powers that have returned following our exit from the European Union and that intersect with devolved legislative competences. Those discussions are well advanced, and they are a testament to the collaborative and collegiate working between Administrations.

Although the amendment relates specifically to clause 9, let me reassure the Committee that we are committed to ensuring that the provisions in the Bill work alongside the common framework programme, and we will consider this as we develop the framework further. However, the common framework is a separate entity. The Bill does not constrain it in any way, and a reference to that effect on the face of the Bill is entirely unnecessary. I hope that reassures the hon. Member and that he will withdraw his amendment.

[Bill Esterson]

Well, that is not the view of the Welsh Government. [Interruption.] We could go into the support that the Welsh Government have given the UK Government recently on tests, but you might tell me to move on rather quickly, Mr Pritchard.

The point that the Welsh Government are making is that it is very important that confidence is retained and that there is no indication of the UK Government going into areas of devolved competence without agreement. The Bill is going through Parliament now. There is no indication of a final date on the wider negotiations and discussions that the Minister referred to. It would therefore be prudent to ensure that in areas such as the common framework, which the Government have committed to, they intend to follow such an approach. If so, they should have no concerns about the provision being in the Bill. On that basis, I would like to press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Paul Scully]

The clause details the extent and limits of the powers to make regulation provided to appropriate national authorities in the Bill. It is a framework Bill. The clauses are essential to ensure that the Bill works in practice and can carry out its intended functions. It details new powers that can be used to make supplementary, incidental or saving provisions. It also sets out where the Bill does not allow powers to make regulations to modify legislation. That ensures that the use of the Bill stays within its remit.

Question put and agreed to.

Clause 13 accordingly ordered to stand part of the Bill.

Clause 14

Protection of regulator autonomy

[Bill Esterson]

I beg to move amendment 4, in clause 14, page 11, line 13, at end insert—

“(6) Subsections (7) to (9) apply where the Secretary of State makes regulations as the appropriate national authority under this Act which extend to the whole of England and Wales, Scotland and Northern Ireland.

(7) Before making such regulations, the Secretary of State must—

(a) consult such persons as the Secretary of State considers appropriate, and

(b) following that consultation, seek the consent of the Scottish Ministers, the Welsh Ministers and a Northern Ireland department.

(8) If consent to regulations is not given by a relevant authority set out in subsection (7)(b) within the period of one month beginning with the day on which consent is sought from that authority, the Secretary of State may make the regulations without that consent.

(9) If regulations are made in reliance on subsection (8), the Secretary of State must publish a statement explaining why the Secretary of State decided to make the regulations without the consent of the relevant authority.”

This amendment obliges the Secretary of State to consult the devolved administrations where regulations affect a regulator that covers the whole of the United Kingdom.

The amendment obliges the Secretary of State to consult the devolved Administrations where regulations affect a regulator that covers the whole of the United Kingdom, and we will be pushing it to a vote. The amendment is important because there are some regulators that operate on a devolved basis—the Law Society, for example, because of the different legal systems across the nations of the United Kingdom. Another example is the Institute of Chartered Accountants in England and Wales, which is separate from the Institute of Chartered Accountants of Scotland. Those are two regulators covering different areas of the country.

In those cases the relevant devolved Administration must be consulted before regulations that affect that nation are made. There are also regulators that govern the whole of the United Kingdom, such as the Civil Aviation Authority or the Royal College of Veterinary Surgeons. Just as the Government should consult the devolved Administrations when making regulations that affect the individual nation, so too should they consult the devolved Administrations when a regulation is made that affects the whole of the United Kingdom.

The amendment does not give the devolved Administrations the power to overrule the Secretary of State. Withholding consent does not mean new regulations will not be introduced. Instead, it allows those devolved Administrations to make their representations, and it gives them a statutory right to argue their case to the Secretary of State and try to change his or her mind. If the Secretary of State still believes their course of action is the correct one, despite representations from the appropriate devolved Administration, in their authority as Secretary of State they will, of course, still be empowered to make regulations.

The amendment adopts the formula that was adopted in the United Kingdom Internal Market Act 2020, so we are asking for the Government to follow their own lead.

--- Later in debate ---

[Bill Esterson]

The hon. Member is right, of course. We may not agree entirely, but we are trying to hold the Minister and the Government to consistency with their own measures through our amendment. That is the spirit in which it is intended, with the one-month period in the amendment in which consultation should take place. It is an attempt to improve on a wholly inadequate and unacceptable situation, putting in some degree of consultation. I accept the difference of opinion between us on the ideal, but that is what we are trying to do with the amendment. His colleagues could have tabled an amendment to go further, but they have not done so in this case. Our amendment is what we can vote on.

It might seem odd for the Government to be inconsistent—now I come to think of it, perhaps it is not odd at all—and, in a rational world, we might expect them to take the same approach that they obligated just over a year ago, applying that consistently across post-Brexit legislation. That seems like a good idea to me. I wonder what the Minister thinks.

[Paul Scully]

I thank the hon. Member for the amendment, which seeks to require the Government to consult with appropriate persons and to seek the consent of the devolved Administrations when making regulations that extend to the whole of the UK, even when legislating in a reserved area. As the Government have set out repeatedly, it is absolutely not the Government’s intention to make regulations in relation to matters on which the devolved Governments could legislate without seeking their view.

Lord Grimstone has put that assurance on the record many times in the other place, including in correspondence with ministerial counterparts in the devolved nations. We are therefore not convinced that the amendment is preferable to the Government’s own, more flexible proposals, which Ministers of all four nations are now discussing.

Working with the devolved Administrations is the way to make the Bill operate best for all our UK nations. That is why I and Lord Grimstone wrote to our ministerial counterparts in the devolved Administration ahead of Second Reading, offering to put a duty to consult with devolved Administrations in the Bill. Thus far, Ministers in the devolved Administrations have rejected our offer, but our discussions are ongoing.

I hope that we will be able to reach an outcome that maintains the policy integrity of the Bill while giving all four nations of the UK the assurances that they need about the operation of the powers.

[Bill Esterson]

I wonder whether the Minister will clear something up for me. If he gets an indication from the devolved Administrations, is it his intention to come back on Report with a Government amendment to put that duty to consult into the Bill?

[Paul Scully]

That is exactly why we continue to discuss ahead of further stages of the Bill. As I say, we offered an amendment to provide for the duty to consult and to publish the outcome of the consultation. That was rejected by the Scottish and Welsh Governments. A rationale for the inclusion of the current powers and the reasons why a consent mechanism would not be possible on the face of this Bill were shared with the Welsh Government on 22 September. However, we will continue to work with the Welsh and Scottish Governments and the Northern Ireland Executive on that basis, to try to do everything we can to secure an agreement.

--- Later in debate ---

[Paul Scully]

I think we have made it clear with the devolved Administrations that we want to get as many agreements as we can, but we need to press on with this legislation. However, that is not the same as closing down the conversation. It is important that we do everything we can to work with them.

This amendment has some similarities to the Government’s own position, in that it advocates consultation. However, as with some of the other proposals that we have discussed, the amendment is somewhat less flexible and therefore less satisfactory than the Government’s own approach.

For example, the amendment is limited to regulations that extend across all four nations. What if the Lord Chancellor wished to make regulations under the Bill, or the regulations extended to only two or three nations of the UK? The amendment would oblige the Government to seek the consent of the devolved Administrations even when legislating in the reserved area that I have talked about.

Hon. Members will be aware that the Bill now includes a duty to consult regulators, which extends to regulators in the devolved nations. In addition to the consultation that we would normally undertake with devolved Administrations, wherever appropriate we will engage directly with those closest to the issues before making regulations.

I will continue to engage, as I have said, with my counterparts in the devolved Administrations to persuade them of the merits of the Government’s approach. I do not believe that the amendment is preferable to the Government’s approach, so I ask the hon. Member to withdraw it.

[Bill Esterson]

We have had an interesting series of exchanges. The hon. Member for Aberdeen South made the point well that we see this approach in Bill after Bill; indeed, we see it in clause after clause in Bill after Bill. We have already seen it in more than one clause today.

We have hit the nail on the head with the amendment, because we are calling for consistency. In the absence of a formally agreed commitment to wider consultation, if it was good enough 13 months ago to provide for a one-month period of consultation, with the Secretary of State having the final say after listening to representations or if representations were not forthcoming, why is it not good enough today? On that basis, I will press the amendment to a vote.

Question put, That the amendment be made.

--- Later in debate ---

[Paul Scully]

Clause 20 sets out procedural detail for the commencement of the provisions of the Bill. It stipulates the timings at which, and conditions under which, the various sections and sub-sections will come into force.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Short title

Amendment proposed: 1, in clause 21, page 15, line 11, leave out subsection (2)—(Paul Scully.)

This amendment removes the privilege amendment inserted by the Lords.

[Bill Esterson]

This poses the question of why the Government are proposing this amendment. Perhaps the Minister will explain why they are removing the provision which says that nothing in the Act will impose any charges on the public or on public funds. Does he expect that the Act will, indeed, incur costs to the public purse, perhaps to the regulators or those professionals working in the regulated sector? Will he provide assurances around what costs they now expect?

[Paul Scully]

The House of Lords maintains the approach that when a Bill is introduced in the Lords, it does not involve taxation or public spending, deal with non-domestic rates or council tax, or otherwise infringe financial privileges. The House of Lords does that via the privilege amendment. There is no equivalent for Bills that start in the Commons. We believe that it is appropriate—this is a technical move—to remove that privilege.

Amendment 1 agreed to.

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

--- Later in debate ---

[Paul Scully]

Clause 21 gives the short title of the Bill for references to it in future papers or bodies of work. The short title is the Professional Qualifications Act 2021.

Question put and agreed to.

Clause 21, as amended, accordingly ordered to stand part of the Bill.

New Clause 2

Skills shortages reporting

“In relation to any regulated profession falling under the provisions of this Act, the Secretary of State must lay before Parliament an annual report detailing any workforce shortages, including what measures are being taken to resolve the shortages.”—(Bill Esterson.)

This new clause obliges the Secretary of State to produce an annual report setting out which sectors are facing skills shortages and what measures are being taken to resolve the shortages.

Brought up, and read the First time.

[Bill Esterson]

We have serious shortages of skilled workers, so the new clause obliges the Secretary of State to produce an annual report setting out which sectors are facing skills shortages and what measures are being taken to resolve those shortages.

As the Royal College of Nursing notes, we went into this pandemic with 50,000 nursing vacancies in the UK, and we are likely to have lost far more nurses throughout. The British Medical Association has estimated a shortage of around 49,000 doctors and doctors in training across primary and secondary care. The Royal College of Veterinary Surgeons has identified a shortfall of nearly 1,000 vets. Meanwhile, professional services firms in the UK have warned of a growing shortage of white-collar workers as companies fight for top talent amid a global economic recovery from the coronavirus crisis.

There are shortages across the economy. HGV drivers have been given an enormous amount of attention because of their impact on supply chains—including, at times, with fuel suppliers, but more commonly with food. We have all noticed that our favourite food has sometimes not been available on supermarket shelves. I talked to the manager of a store in my constituency on Friday. He said that that is week to week, and it is down to shortages, including of drivers.

The role of driving examiners is covered in this Bill; there is an interdependency between what is in the Bill and what is not. It is essential that the Bill gets that right so that our country has the skills it needs, today and in the future. By requiring the Secretary of State to produce an annual report setting out the areas in which we face skills shortages, we will be able to see some of the more obvious shortages in advance, giving the Government some chance of mitigating the problems before they become a crisis.

[Paul Scully]

I thank the hon. Member for his new clause, which introduces a reporting requirement to set out the professions facing workforce shortages and the measures that are being taken to resolve those shortages. I would like to make it clear from the outset—much as Lord Grimstone, my colleague in the other place, has done—that the Bill is not solely about addressing UK workforce shortages, but about ensuing that professional qualification recognition works for the UK.

Clause 1 allows appropriate national authorities to act where there is unmet demand, ensuring that regulations have the processes in place to assess overseas professionals who might help to alleviate that. That is not a replacement for the Government’s skills strategy. In this instance, the Bill is one part of a means to meet unmet demand or shortages. The Bill does not undercut, nor will it replace, the work that the Government are undertaking to support home-grown skills.

The Government already publish information on workforce shortages. For example, the shortage occupation list is a publicly available document comprising professions and occupations that experts at the Migration Advisory Committee deem to be in shortage. Given that workforce shortages are already documented in such a way, with expert input, and with the next shortage occupation list review taking place this year, there is no need for the Secretary of State to also publish a report on professions in shortage.

I turn to the request to report on the measures that are being taken to address workforce shortages. The Government have set out an ambitious reform programme in the “Skills for jobs” White Paper, focusing on giving people the skills that they need in a way that suits them. For example, the lifetime skills guarantee is already being delivered through a wide range of activities, from short, flexible, employer-led bootcamps to the skills accelerator, and by enabling providers to have more control over budgets and funding levels. As Members can see, the Government are already undertaking a great deal of work on both identifying workforce and skills shortages and developing approaches to tackling them. A requirement in the Bill for the Secretary of State to publish a report on workforce shortages would be unnecessary, and it would result in the duplication of work that was being undertaken elsewhere in the Government. I therefore ask that the amendment be withdrawn.

[Bill Esterson]

The Minister referred to skills development. When I meet businesses around the country, as he does, that is often the first item on the agenda. There is great concern about the shortage of technical skills, some of which are covered by the Bill and some not. Parity of esteem within that wider skills agenda is at the heart of what businesses are calling for. Any measure that can be taken to improve understanding, address shortages and find a long-term approach to developing skills—by training people in this country in technical and vocational areas, and by valuing technical learning and the development of skills as much as we do academia—is key.

Where we have shortages, it makes sense to have a systematic approach to addressing them. I read out the figures earlier for what things were like before the pandemic. They have become worse as a result of the pandemic, and they have been exacerbated by the gaping holes that the Government have left in the trade and co-operation agreement with the EU. The Government have belatedly acknowledged some of that, including by adding care workers to the shortage occupation list, which I asked about in a written question a few months ago. There is clear recognition of the need to address these skills shortages. The amendment would put in place a system for the professions covered by the Bill to put that the Government in the strongest possible place to identify and address the shortages. It seems to me that that would be a valuable tool, rather than the Government’s more fragmented approach—the Minister explained it very well—which is one reason why we have shortages. We will press the amendment to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Paul Scully]

I thank the hon. Gentleman for the amendment. It has been previously considered in the House of Lords, both in Committee and on Report; we turn to it once again. I can confirm that professionals who have already had their qualifications recognised in the UK will be able to continue to rely on those recognition decisions. The revocation of the EU-derived system for recognising qualifications will not impact on the ability of professionals with existing recognition decisions to continue practising in the UK. Nothing in the Bill, nor the regulations anticipated under it, will interfere with or reverse such decisions. Professionals with recognition decisions will need to meet any ongoing practice requirements, but that is for the relevant regulator to determine, so the Bill does not make commitments in those areas.

Regulations commenced in clause 5 will include saving and transitional periods, to ensure that professionals’ existing recognition decisions continue to be valid, and applications made before revocation comes into effect through the commencement regulations will continue to be assessed under the relevant EU-derived recognition laws. It is possible to make similar provisions in regulations under clause 6, so we believe that this matter is best dealt with through the saving provisions in the secondary legislation. That is consistent with the approach that the UK Government and devolved Administrations took when amending EU legislation on recognition of professional qualifications in order to prepare for leaving the EU in the first place. As I have assured the Committee, the Bill also respects the protections in place for existing recognition decisions that are born from the UK’s international agreements. I therefore ask that the amendment be withdrawn.

[Bill Esterson]

There was an interesting admission from the Minister that he thought that secondary legislation could achieve what we are aiming for with the amendment. My concern is that a significant part of our professional workforce have a recognition of their qualifications in the UK. Hearing his words, I doubt that they would feel particularly confident or certain of their future, because although he may have no intention to use the lack of confirmation in the Bill, one of his successors may take a rather different view. That is why professional workers and their employers want confidence. We all know the importance of confidence and certainty for our economy, let alone for the individuals who are subject to the amendment and on whom everybody relies, which is why we will press the amendment to a vote.

Question put, That the clause be read a Second time.

--- Later in debate ---

[Bill Esterson]

I am grateful to my hon. Friend, who has explained very neatly with that example why the new clause is important. Due to the increased number of regulators in scope of the legislation, the Government also had to publish an updated impact assessment, with the total cost to regulators increasing by nearly £2 million. That is hardly the way to inspire confidence that the legislation will help businesses or skilled workers.

The Government were criticised from all sides in the Lords, including by those on their own Back Benches. Baroness Noakes said that

“it has all the hallmarks of being a Bill conceived and executed by officials with little or no ministerial policy direction or oversight...we learn that the Bill was drafted with a far-from-perfect understanding of the territory that it purports to cover. This is no way to legislate.”—[Official Report, House of Lords, 22 June 2021; Vol. 813, c. 149.]

My Labour colleague Baroness Hayter said of the list:

“I understand that it has taken BEIS a little time to get it right. I think we have had two updates of the list, with some regulators added and some gone. I see that the pig farmers have gone from the latest list and the aircraft engineers have also disappeared, as have analytical chemists. However, we have in their place chicken farmers, schoolteachers and waste managers—so it seems that the Government can turn flying pigs into chickens.”—[Official Report, House of Lords, 9 November 2021; Vol. 815, c. 1696.]

I thought that was a good line then, and I still think it is a good line today—and so do the Government!

How can regulators and regulated professionals know whether they have equivalence when the Ministers who are responsible for the Bill do not even know themselves? At Committee stage in the Lords, my Labour colleagues Baroness Hayter and Baroness Blake tabled amendments to encourage Ministers to remove any suggestion of doubt as to which professions were covered by the Bill by placing a list of such professions and their regulators in the Bill and giving Ministers the authority to amend that list as necessary. The Opposition realise that Ministers have subsequently published a full list on the gov.uk website. However, there is no duty on the Minister to regularly maintain and update that site. The new clause places an obligation on the Secretary of State and his Department to maintain the website and, as necessary, update it, giving professions and professionals the certainty they need.

[Paul Scully]

As I rise for the final time, I thank you for your chairmanship, Mr Pritchard. I thank the hon. Member for the new clause. The Government recognise the need for clarity on who meets the definitions in the Bill. It is for that reason that officials carried out a comprehensive exercise last year across Government, as well as with the devolved Administrations and with the regulators, to determine who the Bill applies to. That extensive engagement culminated in the list of regulators and professions affected by the Bill being published on gov.uk on 14 October 2021—officials are now maintaining that list. We spent a lot of time over that period saying that we were going to publish the list. We have had a series of webinars to which all regulators were invited, and we continue discussions.

The amendment seeks to commit the Government to maintain and publish a list of regulators. Although I understand the desire for transparency, I have reservations about enshrining a list in the Bill. A list of regulators alone does not provide clarity on which regulated professions are affected by the Bill. It might be that organisations that meet the definition of regulator for one or more regulated professions also have responsibilities and functions for professions that do not meet the definition. Listing the regulators would leave it open to interpretation whether it is all or just some of those professions that are affected. If it was some, it would be unclear which were affected.

For example, the Institute of Chartered Accountants in England and Wales regulates statutory audits and is a profession to which the Bill applies. It also regulates chartered accountants, a profession to which the Bill does not apply. The proposed amendment would not provide clarity in regard to which of the professions is a regulated profession in the Bill. As a result, publishing the list of regulators in such a way risks confusion. That is why the Government have committed instead to maintaining a list of regulated professions and regulators to which they consider the Bill applies, and to keep that list readily accessible and in the public domain. I hope hon. Members are assured that the Government are already delivering that action. It is on the record that the list of regulators and regulated professions will be maintained, so there is no need to further state it in the Bill. I hope the new clause can be withdrawn.

Finally, as well as thanking you, Mr Pritchard, I thank the officials, the Clerks, the Doorkeepers and the Whips, and indeed Opposition Members for the way that they have engaged in the process.

[Bill Esterson]

I am grateful to the Minister; I shall accept his assurances. And I thank you, Mr Pritchard. It is a shame that we will not get to see the other Chair in action; we have denied Ms Bardell her moment in the Chair.

I thank the officials, the Doorkeepers, and the Government Members who sat there quietly and dutifully maintaining their Trappist vows—with the exception of the hon. Member for Calder Valley, who had to be woken up earlier in the proceedings. I thank the Minister and Opposition Members for attending. I beg to ask leave to withdraw the motion.

Clause, by leave, withdrawn.

Question proposed, That the Chair do report the Bill, as amended, to the House.

Draft Small Business, Enterprise and Employment Act 2015 and Pubs Code Etc. (Amendment) Regulations 2021

Debate between Paul Scully and Bill Esterson

Tuesday 11th January 2022 General Committees

[Paul Scully]

I will not tempt you to intervene.

I agree with the hon. Member for Sefton Central about the importance of pubs to our communities and the social value they offer, so it is really important that we get the balance right. I think the code was drafted in such a way that we can balance the rights and protections of tied tenants against the property rights of pub owners to ensure that they can operate the tied pub estate and secure rents on their investment while keeping the pubs in full flow for and on behalf of the community.

On parallel rent assessment, we share the aim to achieve informed decision making. I take the hon. Gentleman’s point about who actually responded to the consultation but stakeholders reinforced their concerns about additional complexity for tenants and the possible increased cost associated with providing a parallel rent assessment. Stakeholders provided valuable insight into the recruitment processes, the additional support provided particularly for tenants new to running a tied pub and the use of break clauses during the early stages of the tied agreement to enable the parties to end the commercial contract. We are working with the PCA on its tied tenants’ survey to find out more about tenants’ understanding of the terms. As the hon. Gentleman said, it is not only about people accessing the proper process in the first place, but their Pubs Code rights and what informed their decision to enter into a tied tenancy agreement in the first place.

[Bill Esterson]

My question about parallel rent assessments was trying to tease out how a tenant can make such a judgment call and what is the best way forward financially. What is the Minister’s answer to the question that many tenants pose about how they can make that judgment call without being given a parallel rent assessment, so that they can then compare between the tied and non-tied option?

[Paul Scully]

Doubts were expressed about the parallel rent assessment by tenant representatives as well, but I take the point that we must understand exactly what type of information prospective tenants need to enter into that relationship. That is why we will work with the PCA on its tenants’ survey to get to grips with that and achieve that understanding before we go further.

We believe that the amendments to the Pubs Code are proportionate in terms of improving the practical operation of the code. I appreciate the Opposition’s support for our pubs and achieving the right balance for all parties, notwithstanding the hon. Gentleman’s wish to go further on parallel rent assessments. We believe that the proposed changes improve things for tenants without placing undue constraints on pub-owning businesses, particularly at such a difficult time for the tied pubs and the hospitality sector. I am pleased to commend the measure to the Committee.

Question put and agreed to.

Subsidy Control Bill (Seventh sitting)

Debate between Paul Scully and Bill Esterson

Thursday 4th November 2021 Public Bill Committees

[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 ---

[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.

Subsidy Control Bill (Eighth sitting)

Debate between Paul Scully and Bill Esterson

Thursday 4th November 2021 Public Bill Committees

[Bill Esterson (Sefton Central) (Lab)]

It is good to see you back in the Chair, Mr Sharma. The hon. Member for Aberdeen North makes a good point, which we reiterate, about amendment 5, which we will come to because of its relation to our amendments to clause 64.

[Paul Scully]

On the point made by the hon. Member for Aberdeen North, in the previous sitting we talked about UK competition and investment. It simply emphasises the point about UK competition and investment. It does not have any significant effect, because it is already captured in the guiding principles. We want to make sure that there is absolute clarity for businesses and public authorities with clause 62.

--- Later in debate ---

[Paul Scully]

If a scheme can contain a subsidy of interest or particular interest, that scheme becomes a scheme of interest or particular interest, depending on the circumstances. That is therefore very much the case.

In answer to some of the points made by the hon. Member for Sefton Central on hiding subsidies and distorted payments, we have the basic level of how to treat public money—the statutory obligations on those public authorities that we discussed earlier—but the schemes themselves do not provide a back door for potentially multiple subsidies; public authorities have to consider the principles of the scheme, in the same way as they would for individual subsidies. They must not make a scheme if they judge that any subsidy within that scheme conflicts with any of the principles.

The decision to make the scheme has exactly the same risk-based scrutiny of the potential challenges as the decision to award a subsidy—especially those schemes of particular interest, which are called in by the Secretary of State and must be referred to the subsidy advice unit.

[Bill Esterson]

I want to tease out some information from the Minister. He used the phrase “risk-based scrutiny”, but I get no sense of what, if there is abuse of a scheme, the mechanism is to ensure that the subsidies within the schemes are not applied in a distorted way or in a way that misuses public money. That is the bit that I do not get.

[Paul Scully]

The scheme itself will be challengeable.

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

--- Later in debate ---

[Paul Scully]

Clause 64 provides for a limited number of exemptions from some or all of the provisions on the referral of subsidies and schemes to the subsidy advice unit. Subsections (1) and (2) exempt from the provisions of chapter 1 of part 4 various subsidies or schemes where either the subsidy control principles, prohibitions and conditions do not apply or it would otherwise be inappropriate for the provisions on referrals to apply. Subsection (3) confers a reserve power on the Secretary of State to exempt subsidies or schemes from the mandatory referral requirements where there are urgent and certain exceptional circumstances that mean that it is in the public interest that the scheme or subsidy can be given without the delay that would result from a referral. The power does not exempt the subsidy or scheme from the subsidy control requirements under part 2 of the Bill. It will still be necessary for the public authority to comply with the duty to apply the principles and other requirements.

[Bill Esterson]

We have debated the amendment and the need for the change to this clause. We have tested the will of the Committee already and will not oppose clause stand part.

Question put and agreed to.

Clause 64, as amended, accordingly ordered to stand part of the Bill.

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

Subsidy Control Bill (Sixth sitting)

Debate between Paul Scully and Bill Esterson

Tuesday 2nd November 2021 Public Bill Committees

[Bill Esterson (Sefton Central) (Lab)]

It is a pleasure to see you back in the Chair this afternoon, Ms Nokes. We have no objections to the clause.

Question put and agreed to.

Clause 40 accordingly ordered to stand part of the Bill.

Clause 41

Subsidy database: exemption for SPEI assistance

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

[Paul Scully]

Services of public economic interest are vital services that without Government subsidy would not be supplied in the appropriate way by the market, or in some cases would not be supplied at all. It is important that public authorities can support the delivery of vital public services using those subsidies. The clause exempts certain services of public economic interest subsidies from the transparency requirement in clause 33 to upload the subsidy on to the database. There are two categories of exemption.

First, clause 41(1)(a) provides that a subsidy for a service of public economic interest of less than £14.5 million is exempt from the obligation to upload. Secondly, even where the subsidy for a service of public economic interest is £14.5 million or more, it is exempted from transparency obligations if it has been given for certain activities listed in the clause, including hospital care, social housing or airports with fewer than 200,000 passengers annually. Subsection (2) details that, when calculating the value of the subsidy, the gross cash amount should be used, or, if the subsidy is not provided in cash, the gross cash equivalent.

[Bill Esterson]

We do not believe that the clause should stand part. That is consistent with our approach to the problems with the lack of content on the database and the lack of transparency. The clause outlines that subsidies of less than £14.5 million given to SPEIs are exempt from having to be published on the database. As my hon. Friend the Member for Feltham and Heston laid out in her comments on clause 38, we understand that the subsidies to services of public economic interest should not have to obey the subsidy control requirements, but we cannot see why they should not be published on the database. I also do not think I heard the Minister explain why the £725,000 threshold applies in clause 38. Perhaps he could answer that in his response.

The bigger question on the clause is why the Government have chosen to exclude payments to services of public economic interest from the database at all. The Minister talked about transparency. Why is there no transparency for these payments? The Government’s recent track record is—as the Public Accounts Committee put it—one of enormous sums of money being given with no apparent return in the case of Test and Trace, and hundreds and millions of pounds-worth of contracts going to people with connections to Government Ministers or other connections to Government. In the case of Andrew Mills, who was an adviser to the Board of Trade, a company that he set up last year assisted in the awarding of a £252 million contract to Ayanda Capital, but a significant proportion of the personal protective equipment that it supplied turned out to be unusable. That was very wasteful and inefficient, but the process was very lucrative for individuals with such connections.

That is why transparency is so important. Recent history has given the country the impression that the Government are reluctant to engage in proper transparency. That is not a place in which anybody on this Committee should want to be. It feels at times that the Government fail to grasp that subsidises are financed by public money and that they should therefore be subject to appropriate transparency and scrutiny. We have discussed that a number of times. Subsidies to SPEI enterprises are no exception. Although they may go towards enterprises that differ from other subsidy recipients, they are still financed by public funds and should therefore still be subject to transparency, and the public should still be able to access information about them. These are much larger sums of money.

If that does not happen, subsidies given to SPEIs risk being abused and given to inappropriate recipients—including, as we have seen over the past year and a half, those with connections to the Conservative party. During last week’s evidence session, Professor Rickard told us:

“Through transparency, we can get better compliance and better value for money”.––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 21, Q24.]

Does the Minister disagree with that analysis? Can he tell us what drawbacks he sees to subjecting subsidies given to SPEI enterprises to more transparency?

We agree with Professor Rickard that better transparency reduces corruption, reduces cronyism and leads to better value for money. The clause unnecessarily reduces the transparency for subsidies that could amount to tens of millions of pounds—perhaps more in some cases. As such, the clause should not stand part of the Bill and we will vote against it.

[Paul Scully]

For the sake of completeness, and with your indulgence, Ms Nokes, I go back to the question about why the threshold in clause 38 is set at £725,000. As part of the consultation response, the Government set out that we would convert the special drawing rights sums in the trade and co-operation agreement to a fixed value in pounds. Setting that exemption threshold at a fixed sterling amount is simpler than having a moving SDR threshold affected by currency fluctuations, and so it was fixed to give certainty for public authorities and recipients.

We have discussed that subsidies granted for public services are unlikely to be unduly distorted. The very reason they are needed is that other providers are unable or unwilling to provide a necessary service—for example, ferry links between Scottish islands, and bus services in rural areas—at a reasonable cost. The lower risk of distortion justifies a higher transparency threshold, which has been set at £14.5 million. SPEI subsidies for less than that amount are unlikely to be distorted.

We are striking a balance between minimising administrative burdens and requiring an appropriate level of transparency. Such services were also exempt from transparency rules under the EU state aid system. We are seeking to minimise administrative burdens where possible, and it would not be appropriate to impose new, unnecessary transparency requirements. Does that mean that they are not transparent? No, it does not. They must be awarded in a transparent manner, as clause 29 stipulates, which means that the subsidy is given through

“a written contract or other legally enforceable arrangement”.

Public authorities would normally publish those contracts, and it is good practice to do so. Indeed, the examples that the hon. Gentleman gave earlier about accusations of and concerns about the perception of cronyism were available because the spending decisions had been made public at a point in time. Spending decisions by councils, including Labour ones, up and down the country, above £500, are available on spreadsheets, which people can go to and drill down.

--- Later in debate ---

[Bill Esterson]

I beg to move amendment 45, in clause 42, page 23, line 43, at end insert—

“(1A) Before making regulations under subsection (1), the Secretary of State must seek the consent of the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland.

(1B) If consent to the making of the regulations under subsection 11(A) is not given by any of those authorities listed in subsection (1A) within the period of one month beginning with the day on which it is sought from that authority, the Secretary of State may make the regulations without that consent.

(1C) If regulations are made in reliance on subsection 1(6B5), the Secretary of State must make a statement to the House of Commons explaining why the Secretary of State decided to make the regulations without the consent of the authority or authorities concerned.”

This amendment would require the Secretary of State to seek the consent of the Devolved Administrations before making regulations under this section. Where such consent is not given within one month beginning on the day in which it is sought, the Secretary of State may make the regulations without that consent, but must publish a statement explaining their decision.

So much confusion today, in so many ways, in dealing with the Bill and in some of what is going on in the Bill, Ms Nokes, but there we are. It is all set to make the afternoon go by in a more entertaining fashion.

As with many aspects of the Bill, the clause fails to take into consideration the important role that the devolved Administrations have in state aid governance. The ability to impose regulations unilaterally by secondary legislation, without seeking the consent of the devolved Administrations, is inconsistent with the approach that Labour has sought to instil in Committee—to consider the devolved Administrations as public authorities equal in responsibility for state aid to the responsibilities of the Secretary of State.

Devolved Administrations are on balance more likely to understand what subsidies will be most beneficial for their respective nations than the Secretary of State. That includes such matters as setting the value thresholds for the minimal financial assistance and services of public economic interest assistance exemptions, as well as the transparency exemption for SPEI assistance. Last week, Daniel Greenberg told us in evidence that

‘throughout the Bill, you see “Secretary of State, Secretary of State, Secretary of State”—all powers of HMG—and you think, “Hold on, the devolved institutions are also public authorities. They appear in the list of public authorities in clause 6, so why is it that they do not also share Secretary of State powers?”’––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 61, Q80.]

We of course understand the role of the Westminster Government in the creation and operation of the UK subsidy regime, but preventing the devolved Administrations from creating streamlined schemes undermines their important role in our democratic infrastructure, as well as their responsibilities for their respective nations. We therefore seek to amend clause 42 to allow Welsh Ministers, Scottish Ministers and the Northern Ireland Department to require the Secretary of State to seek the consent of the devolved Administrations before making regulations under the clause. Where such consent is not given within one month, beginning on the day on which it is sought, the Secretary of State may make the regulations without it but must publish a statement explaining the decision. We believe that the amendment would help to increase the effectiveness of subsidies across the UK and respects the role of the devolved Administrations.

[Paul Scully]

The Government welcome the ongoing interest that the devolved Administrations have in the Bill, and that the Opposition have in this area. We understand how important it is to set the right thresholds for minimal financial assistance and services of public economic interest assistance, and to set the right reporting threshold for SPEI subsidies. Setting the appropriate thresholds for those categories of subsidy is key to balancing the administrative burden on public authorities, ensuring that proportionate levels of transparency are met and that we remain in line with our international obligations.

The hon. Member for Sefton Central will be aware that in the Government’s response to the consultation on subsidy control we committed to considering whether the threshold at which agricultural subsidies should be classed as minimal financial assistance should be different from that for other subsidies. That decision will be taken after further consideration, before the Bill comes into force. It is right that the regulations under the clause are scrutinised. The Bill provides for that by requiring that they will be subject to the affirmative procedure and will be debated and approved by both Houses in draft before they can be made. The UK Parliament is the right place to scrutinise any regulations made under the clause.

To reassure Members present, I reiterate that we have had numerous discussions with Ministers and officials in the Scottish Government, the Welsh Senedd and the Northern Ireland Executive while drafting the Bill, and since its introduction. We are committed to engaging regularly with the devolved Administrations, taking account of their views, as the Bill progresses through Parliament and in the run-up to its implementation. That includes engagement on the thresholds for those categories of subsidy, both in the round and on a sector-specific basis, so I ask that the hon. Member withdraw the amendment.

[Bill Esterson]

I have to pick the Minister up on this: he thanks Members for our ongoing interest in the Committee’s deliberations, and the devolved Administrations for their interest. Come on. We are supposed to have a four-nation system. I think it is a bit more than just showing ongoing interest. Perhaps he can tell us the result of the discussions and the consultation feedback on the clause. What was the devolved Administrations’ response? Did they say that they were happy with the clause, or did they want to be in a position to give their consent before the implementation of its provisions? Certainly from what I have seen, they would want the ability to give consent, notwithstanding the importance of the UK-wide system that is in place and the Westminster Government’s role. I would be interested in his response.

[Paul Scully]

I think we have established that subsidy control is a reserved matter. It will be subject to debate, but none the less it is a reserved matter, and it is therefore right that subsidy control policy is made and voted for here in Parliament, which is why I talked about the scrutiny. Parliament is the place to do this. We have engaged on a number of occasions on various aspects of the Bill—34 times at official level and 10 at ministerial level. On top of that, in response to the consultation the different devolved Administrations came up with different views on a number of issues. There was no one consistent view in a number of areas. There are provisions in the Bill that engage the legislative consent motion process, and we hope that the devolved Administrations will not only agree that the Bill is important, but give it their legislative consent.

--- Later in debate ---

[Paul Scully]

Clause 42 allows the Government to make certain amendments to the total value thresholds for the exemptions in chapter 2 of part 3, which have been set at the conversion rate between special drawing rights, International Monetary Fund reserved currency, and the pound. The UK-EU trade and co-operation agreement, the TCA, sets the threshold for minimal financial assistance, SPEI assistance, SPEI transparency exemptions and the total value thresholds of SPEI. That means that if the exchange rate changes significantly, the Government may need to amend the thresholds of the Bill to remain compliant with the TCA.

In addition, the EU and the UK may agree to change the special drawing rights amounts set out in the TCA, so the Government must retain the ability to amend the exemption total value thresholds. The Government must have the ability to lower the total value thresholds in response to any new international agreements. Clause 42 also provides a power to specify a lower threshold for minimal SPEI assistance and SPEI transparency exemptions for categories of subsidies. Essentially, these international obligations are why the previous debate is superfluous. Ultimately, the UK Parliament is the right place to discuss changes to thresholds to make sure that we continue to meet our international obligations. I commend the clause to the Committee.

Question put and agreed to.

Clause 42 accordingly ordered to stand part of the Bill.

Clause 43

Natural disasters and other exceptional circumstances

[Bill Esterson]

I beg to move amendment 46, in clause 43, page 25, line 16, at end insert—

“(3A) The Scottish Ministers, the Welsh Ministers, and a Northern Ireland department may request the Secretary of State to declare a natural disaster or another exceptional circumstance in Scotland, Wales, and Northern Ireland.

(3B) If the Secretary of State refuses a request made under section (3A), he must make a statement in the House of Commons outlining the reasons for his refusal.”

This amendment allows the devolved administrations to ask the Secretary of State to declare a natural disaster or exceptional circumstances, so that the exemptions listed in Clause 43(1) applying to Scotland, Wales, and Northern Ireland may apply. If the Secretary of State refuses a request for exemption, this amendment requires him to make a statement to the House of Commons.

Amendment 46 allows the devolved Administrations to ask the Secretary of State to declare a natural disaster or exceptional circumstances so that exemptions listed in clause 43(1) applying to Scotland, Wales and Northern Ireland may apply. If the Secretary of State refuses a request for exemption, the amendment requires them to make a statement to the House of Commons. To reiterate the point I made in the last debate, we are determined to ensure that the role for the devolved Administrations in the administration of their own nations is respected and considered. Of course, we agree that the subsidy regime sits with the Westminster Government, because it is a UK-wide system, but on matters as important as states of natural disaster, devolved Administrations should always be consulted.

Members will appreciate that natural disasters are not political by nature. A natural disaster does not discriminate who it targets and where it affects. By that logic, devolved Administrations, which are just as likely as anywhere else to experience natural disaster, should be granted powers to request that the Secretary of State declares a natural disaster or exceptional circumstance so that the exemptions listed in clause 43(1) may apply. We believe the amendment would respect the role of devolved Administrations in managing their response to disasters effectively, while still ensuring the Secretary of State has the final say.

--- Later in debate ---

[Paul Scully]

Natural disasters such as floods, fires and other exceptional circumstances can arise that require subsidies to be given at pace, to compensate for the damages caused. The clause allows the Secretary of State to publish a notice to declare that exemptions from the subsidy control requirements apply in respect of a natural disaster or other exceptional occurrence. That will allow public authorities to give subsidies that compensate for the damage in a timely manner.

The hon. Member for Aberdeen North is right that not all such emergencies would apply across the whole of the United Kingdom. In many cases, the natural disaster in question would be localised to a specific place or region. Although it is the responsibility of the Secretary of State to declare that the exemption applies, subsidies using the exemption may be given by different public authorities, such as UK Government Departments, local authorities, agencies and, of course, the devolved Administrations. Public authorities are empowered to design subsidies in the most appropriate way to address the damage caused for their specific local needs. The Secretary of State does not need to approve the subsidies given under the exemption, once the natural disaster or other exceptional occurrence has been declared. The existing processes in the Bill already ensure that this type of subsidy can be given across the UK, by the devolved Administrations or other devolved authorities.

If a natural disaster or other exceptional circumstance occurred within the area of any of the devolved Administrations, it would of course be open to that Administration to request that the Secretary of State trigger the exemption, if the Secretary of State has not already done so. If the conditions for the exemption were fulfilled, the Secretary of State could then seek to publish a notice as soon as possible.

The clause is limited to very narrow circumstances to avoid creating an over-broad exemption to the domestic subsidy control regime that could damage UK competition and investment, and our ability to fulfil our international obligations. It is therefore appropriate that the Secretary of State has sole responsibility for determining when the criteria for triggering the exemption have been met. The Secretary of State must publish and lay in Parliament a notice to trigger the use of the exemption. That will ensure that the Secretary of State exercises the power in a transparent and accountable way. I request that the hon. Member for Sefton Central withdraws the amendment.

[Bill Esterson]

I should point out that the amendment does not seek to give the devolved Administrations the power to declare a state of emergency, which I think was implicit in the Minister’s remarks. They would ask the Secretary of State to use his or her power to do so, not have the power themselves. The hon. Member for Aberdeen North made the point about transparency well. I am satisfied that the point has been made satisfactorily and that the Minister has taken it on board, and I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

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

[Paul Scully]

Clause 43 enables public authorities to award subsidies to compensate for the damage caused by a specified natural disaster or other exceptional occurrence without having to apply the majority of the subsidy control requirements. The subsidies awarded under the clause would be exempt from the principles, prohibitions and requirements, but the transparency requirements would still apply. Before the exemption can be used, the Secretary of State must publish a notice declaring that a natural disaster or other exceptional occurrence has happened and that this exemption applies, and that notice must be laid in Parliament.

--- Later in debate ---

[Paul Scully]

Amendment 1 clarifies that the transparency requirements in chapter 3 of part 2 of the Bill will apply to subsidy awards that are given after the Bill comes into force, but that are provided under legacy schemes. The transparency requirements for this class of subsidy are consistent with those for other in-scheme subsidy awards—that is, there is an obligation on public authorities to upload the details of awards given under published schemes that are of more than £500,000 in value.

The amendment provides legal certainty around the transparency obligations on public authorities, which are set out in the guidance on the UK’s international subsidy control commitments. It will impose no transparency requirements on subsidies given under legacy schemes to those sectors that are excluded from the relevant chapter of the trade and co-operation agreement. Those fall under three categories: agricultural subsidies in the scope of the World Trade Organisation agreement on agriculture, subsidies in relation to the trade of fish and fish products, and subsidies to the audio-visual sector.

Amendment 2 sets out a full definition for the agreement on agriculture, which is referred to in amendment 1. That ensures a clear exemption for subsidies subject to the relevant provision in the agreement on agriculture, which is consistent with the UK’s obligations under the trade and co-operation agreement.

Amendment 1 agreed to.

[Bill Esterson]

I beg to move amendment 47, in clause 48, page 27, line 6, at end insert—

“(2A) On the date on which the Act is passed, the Secretary of State must make a statement to the House of Commons regarding the applicability of Article 10 of the Northern Ireland Protocol to subsidies given and schemes made by public authorities in each part of the United Kingdom.”

This amendment would require the Secretary of State to make a statement to the House of Commons regarding the applicability of Article 10 of the NI Protocol on the date on which the Act is passed.

The amendment would require the Secretary of State to make a statement to the House of Commons on the applicability of article 10 of the Northern Ireland protocol on the date on which the Act is passed. Clause 48 provides that the requirements of the subsidy control regime do not apply to subsidy schemes that are subject to the Northern Ireland protocol. The Minister will suggest, I imagine, that this gives comfort to public authorities and avoids the double jeopardy of both regimes applying to a subsidy scheme—I take that from what he and the Secretary of State said on Second Reading.

If the Minister were to say that, he would be assuming that there is clarity on which subsidies and schemes are subject to the protocol. On this vital question that public authorities will need to interpret, there is no agreement between the UK Government and the European Commission. There is significant uncertainty about the extent of the reach back—that is, where EU state aid rules will continue to apply across the UK. Where a subsidy is applied in Wales, Scotland or England has consequences in Northern Ireland. George Peretz told us in last Tuesday’s evidence session,

“if I am advising a client such as a local authority or a subsidy recipient, my immediate problem is that I have to look at two sets of guidance—one issued by the European Commission and one by the Department for Business, Energy and Industrial Strategy—that in some important respects tell me very different things.”—[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 46, Q64.]

His final assessment was:

“It is all a bit of a mess.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 48, Q67.]

We should all note that the European Union published proposals to address problems with the Northern Ireland protocol a fortnight ago. That is a step in the right direction, although the proposals it put forward do not address the state aid subsidy issue. In contrast, on Second Reading on 22 September, the Secretary of State suggested

“we have proposed the change to the Northern Ireland protocol to bring all subsidies within scope of the domestic regime.”—[Official Report, 22 September 2021; Vol. 701, c. 338.]

Here we are six weeks later, and we are no clearer about the status of the negotiations with the EU. I hope the Minister will set my mind at ease and tell us what the UK proposals are to solve the problem that George Peretz set out so well in evidence last week.

Let us remind ourselves: the Government negotiated the Northern Ireland protocol and signed it, so they now have a duty to make the protocol work, just as they have a duty to make Brexit work. It is no good threatening to rip up an agreement that the Prime Minister himself signed just two years ago, and certainly not without something to put in its place. Perhaps the Minister can confirm when he last discussed these issues with his European counterparts, and the timeline on which he expects there to be clarity on article 10 of the protocol and its impact on the Bill.

The purpose of the amendment is to require the Secretary of State to provide a statement on

“the applicability of Article 10 of the Northern Ireland Protocol to subsidies given and schemes made by public authorities in each part of the United Kingdom.”

Public authorities and recipients need and deserve certainty on this issue.

[Kirsty Blackman]

The hon. Member for Sefton Central used the quote I was going to use from the Secretary of State, who was really pretty clear that the new subsidy control regime that we are discussing is the one that will apply across the United Kingdom. That was the point the Secretary of State was making—that this is the only subsidy control regime that will apply across the United Kingdom. That seems pretty factually incorrect, not least for Northern Ireland but, as the Opposition Front Bench spokesperson pointed out, for other parts of the UK where that trade will end up going to the EU.

The very least the Government could do is to ensure that a formal statement is made, because if we are relying on what Government Ministers have said in the course of either debates in the House or statements, we do not know the answer. We have been told a number of different conflicting things. I get that this is a movable feast and that there is no final decision on exactly how it will work. That is why the amendment is so reasonable. It specifically says that the applicability statement will need to be made on

“the date on which the Act is passed”.

Presumably, by the date on which the Act is passed we will have some idea of which regimes will apply in Northern Ireland. We have spoken very little about Northern Ireland specifically during the course of this Committee but, when the Minister talks about giving certainty to enterprises and public authorities, it seems to me that Northern Ireland is in a unique position where there is no certainty at all. People literally do not know which regime will apply.

It is all well and good to say, “We will consult with people and ensure that they see the guidelines in advance of having to put them in the subsidy control database,” but the fundamental issue of which regime they are complying with has not yet been answered in a way that would stand up to any kind of scrutiny. The amendment is completely reasonable and, if the Minister does not want to accept it, he should be clear with us and with the organisations concerned, particularly in Northern Ireland, about how he and the Secretary of State will explain to them which regime they will be operating under.

--- Later in debate ---

[Bill Esterson]

I reassure my hon. Friend that we will indeed be pressing clause stand part to a vote. He is right: businesses need certainty. We are coming out of a once-in-100-year global pandemic, and they need all the support that they can get. This regime should give that support, but it cannot do so if there is that massive uncertainty at the heart of it, whether this regime or a different one should apply. The Government have not addressed that and they need to get on and address it—

[Paul Scully]

We are—

[Bill Esterson]

No—[Interruption.]

--- Later in debate ---

[Bill Esterson]

I understand the hon. Lady’s concerns, but there is such a big problem with what is set out, it is right for us to register our objection by voting against the clause.

[Paul Scully]

All I can say is that we were asked to go through a whole load of examples, which would not be helpful in giving that certainty. What will be helpful is the negotiations that are continuing at the moment. As it happens, the subsidy control framework before us works within either system: the one that we wish to negotiate, the result that we wish to have, or the situation we have at the moment. Subsidies that fall within the scope of the Northern Ireland protocol of the withdrawal agreement and which affect Northern Ireland-EU trade, such as on goods and wholesale electricity markets, will need to comply with EU state aid rules, including on services, otherwise they come under the domestic subsidy control regime. That is about as clear as we can be, but negotiations are happening at the moment.

--- Later in debate ---

[Bill Esterson]

Indeed. The role of China in our nuclear industry is a point well made by my hon. Friend. I hope that we will see significant investment in new nuclear as a result of the regulations, if that is what the Government intend. Perhaps the Minister will give an indication of their intentions, because without investment, we will not hit our obligations. Nuclear is, of course, a longer-term project because it takes so long to get going. I remind Members that we have significant targets to hit by 2030, and unless we are talking about small modular reactors, nuclear reaches beyond that timeframe. Can the Minister enlighten us on any plans?

[Paul Scully]

Subsidies or subsidy schemes for nuclear energy will be required to assess against the main subsidy control principles in schedule 1. Removing the clause would require those projects to be assessed against the additional energy and environmental subsidy control principles. The clause is in line with our various international obligations under the trade and co-operation agreement with the European Union.

I do not want to start speculating on what will happen with future nuclear investment, but we have legislation coming forward tomorrow.

Question put and agreed to.

Clause 51 accordingly ordered to stand part of the Bill.

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

Subsidy Control Bill (Fourth sitting)

Debate between Paul Scully and Bill Esterson

Thursday 28th October 2021 Public Bill Committees

[Paul Scully]

I said that the clause does not prevent local authorities from offering subsidies to support regeneration. None the less, we will supply more support through guidance, because we want to give public authorities the confidence to apply subsidies in that scenario and similar ones.

The purpose of the clause overall is to prohibit wasteful subsidies that serve only to poach economic activity from one area to another. I must say, the ears of the good people of Guildford must be burning after their third mention in a couple of days—

[Bill Esterson (Sefton Central) (Lab)]

What about the good people of Mayfair?

[Paul Scully]

As Minister for London, I do not think that this is aimed at the good people of Mayfair.

We do not want to prevent levelling-up subsidies that attract investment to disadvantaged areas. The clause achieves that by prohibiting subsidies that explicitly require enterprises to relocate existing economic activities from one area of the UK to another, where that relocation would not have occurred without the subsidy. We have said that. The amendment, however, risks delaying the commencement of the clause, which might allow subsidies to be granted that could poach economic activity from disadvantaged areas.

--- Later in debate ---

[Paul Scully]

That is exactly right. Look at subsidy control regimes around the world. Witnesses in the evidence sessions focused on America and the subsidy race between various states, which is exactly what we are trying to avoid through this sensible and proportionate measure. Accordingly, we believe that requiring the Secretary of State to report to Parliament on clause 18’s consistency with the Government’s strategic priorities to do with supporting deprived areas and freeports is not necessary. The new UK domestic regime is designed to ensure that disadvantaged areas have maximum freedom and reassurance to receive levelling-up subsidies that best suit the characteristics of the area. I request that the amendment be withdrawn.

[Bill Esterson]

It is great to see you back in the Chair, Ms Nokes.

Clause 18 is crystal clear about preventing the use of subsidies to enable businesses to move from one location within the UK to another. The example of the high street is crystal clear, as is the example of the freeports. I will come back to the point about promoting new investment in freeports shortly.

The Minister talked about issuing guidance to go with the provision. That is the way the legislation has been crafted, which I think we can all understand. However, guidance will always be open to interpretation, and what takes priority? Is it the primary legislation—the very clear statement set out in clause 18 that a subsidy is prohibited if

“the relocation of those activities would not occur but for the giving of the subsidy”?

How is that overcome by the guidance? That is the point that all Opposition Members who have spoken have tried to get to, whether with the example of the regeneration of high streets or that of freeports.

The Minister talked about the justification for freeports and the support that the Government have given. My hon. Friend the Member for Feltham and Heston made the point that freeports were not part of the consultation for the legislation, and they are ruled out by the clause. It could not be much clearer.

On the point about freeports being just about new investment, the evidence base—the report published by the UK Trade Policy Observatory, and the commentary by Adam Marshall when he was director general of the British Chambers of Commerce—shows all too clearly that they are exactly about relocation and displacement, and all the things that the Minister said that they should not be about. His point that they do not deliver displacement from one deprived area to another is undermined by the evidence base provided by the UKTPO and the British Chambers of Commerce.

I am afraid that we have not had an adequate answer from the Minister on how all those circles will be squared, and how the primary legislation of clause 18, which he wants to go through unamended, will not override attempts to use subsidies to support local areas in the examples that we have given him and that he says we should not worry about. I am afraid it comes back to a point that we have made a number of times, and will continue to make, I suspect, through the Committee’s deliberations: specific statements need to be added to the Bill to provide reassurance and to make the framework a much more workable system of subsidy.

Without that, things will be left wide open. As much as the Minister defends the Government’s freeport policy, notwithstanding the analysis that I have given from those experts, and claims that local authorities will be able to sort their high streets, and despite his response to my hon. Friend the Member for Aberavon about supporting more deprived areas otherwise, I am afraid that without additional content going in at this stage, or on Report, or in the House of Lords, we will be left in a position where the framework will leave awarding bodies open to judicial review because of the uncertainty and the contradiction that will almost inevitably be left in place between the primary legislation of clause 18 and whatever he puts in guidance.

--- Later in debate ---

[Bill Esterson]

Thank you, Ms Nokes. That intervention rather makes the point that I was making in the previous debate about the need for definition in the Bill around what we mean by various terms and the need to avoid leaving things open to chance in guidance and interpretation. I take the hon. Gentleman’s point, but this is why we need a bit more clarity in primary legislation.

Continuing with the steel industry, not least because we took evidence from UK Steel, if some support is not given in the short term to the UK steel sector to support its decarbonisation and reduce the massive energy costs associated with the industry, we could soon see steel, which is a vital strategic industry for the UK, facing imminent threat. I do not think anybody disagrees on the strategic importance of the steel industry at a national level.

In the evidence sessions, Richard Warren spoke about the costs of renewables and carbon taxes in relation to electricity prices:

“The UK steel sector pays between 80% and 100% more for its electricity than its counterparts in the EU. Those exemptions have reduced our electricity prices. There is a still a big gap, but they are really important to improving competitiveness in the UK.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 50, Q72.]

He made the point that it was in the national interest to support the industry. He said:

“Net zero or low-carbon forms of steel production will add anything from 30% to 50% to the costs of steel production”.

On the cost of steel production, he said:

“If other countries are not moving at precisely the same speed or putting the same constraints on their industries, you will need some sort of intervention to correct that market failure.”––[Official Report, Subsidy Control Public Bill Committee, 26 October 2021; c. 57, Q77.]

That is why we think there is a very strong case for putting this provision into primary legislation.

More widely on the issue of net zero, this point is backed up by the written evidence from the Institute for Government, which says that it is

“sensible to require some additional process to ensure that the subsidy is designed well.”

That was in relation to major infrastructure that could contribute towards net zero. That is what our amendments are trying to achieve, and it is why we think they are so important.

Anything that is in the national interest or the interests of national security demands an additional level of support and attention, including attention to the way it is worded. Again, I am afraid we come back to the point that not having this set out in primary legislation creates weaknesses, and leaves the prospect of challenge and of the regime not operating as well as it should.

[Paul Scully]

As we have heard, amendment 14 relates to clause 19. The Bill provides that in order to give either a rescuing or a restructuring subsidy, the public authority giving that subsidy must be satisfied either that it contributes to the objective of the public interest by

“avoiding social hardship or preventing a severe market failure”,

or that there are

“exceptional circumstances that justify the subsidy”

despite that test not being met. The amendments would specify that those exceptional circumstances would include the protection of critical national infrastructure, industries of strategic national importance and, in the case of amendment 15, national security.

I fully agree that public authorities should be allowed to grant necessary and appropriate rescue and restructuring subsidies in order to protect critical national infrastructure, national security, and industries of strategic national importance. I am therefore pleased to be able to provide reassurance to the hon. Member that, as it stands, the Bill does so. The reasons are twofold: first, clause 45 contains a general exemption from all subsidy control requirements for the giving of a subsidy with the purpose of national security. Secondly, the conditions set out in clauses 19 and 20 will allow for rescue and restructure subsidies in order to protect critical national infrastructure and industries of strategic national importance. In my view, many hypothetical rescue and restructure subsidies for those purposes could in principle meet the first test in clause 19(4)(a) and clause 20(5)(a) of being in the public interest by

“avoiding social hardship or preventing a severe market failure”.

Where that condition is not met on the facts, but there are other exceptional circumstances in play, clauses 19(4)(b) and 20(5)(b) already provide for exactly that situation, so it is not necessary to attempt an exhaustive list of potential exceptional circumstances that could be relevant to the clause. That would risk unduly influencing public authority behaviour. On the one hand, it risks encouraging inappropriate rescue and restructure subsidies in circumstances that are not genuinely exceptional on the facts, and where they could have excessive harmful effects on domestic competition. On the other hand, it could discourage the use of rescue and restructure subsidies in circumstances that are genuinely exceptional and merit such interventions, but are not specifically listed in the Bill.

The purpose of clauses 19 and 20 is to prevent aimless bail-outs of failing enterprises, while allowing public authorities to provide temporary rescue support for enterprises that it is in the public interest to rescue and restructure. Those subsidies should not be undertaken lightly, in order to maintain a competitive free-market economy and facilitate compliance with our international obligations, including those in the TCA with the EU. As such, I ask the hon. Member to withdraw his amendment.

[Bill Esterson]

I am grateful to the Minister for drawing the Committee’s attention to where the points covered by our amendments exist elsewhere in the Bill. I have reservations about the strength of those clauses, which I explained in my speech and will not revisit, but there is reference to the protection of national security in the Bill. Whether it is adequate, time will tell. I know that the Minister or a member of his team will bring these measures forward in secondary legislation. We think they are better in primary legislation and that there should be more detail at this stage, but we accept the assurances the Minister has given, and we will not push the amendment to a vote. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

--- Later in debate ---

[Paul Scully]

The clause prohibits restructuring subsidies to ailing or insolvent enterprises unless four specific conditions are met. This clause does not apply to deposit takers or insurance companies. Again, the enterprise must have prepared a restructuring plan and, unless there are exceptional circumstances, a restructuring subsidy must only be offered if it is in the public interest. Restructuring subsidies can only be given to enterprises that are small or medium-sized, and they must also be contingent on an enterprise’s not having received a restructuring subsidy before, or five years having passed since it did, although there are exceptions to that.

[Bill Esterson]

The Opposition do not oppose this clause.

Question put and agreed to.

Clause 20 accordingly ordered to stand part of the Bill.

Clause 21

Restructuring deposit takers or insurance companies

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

[Paul Scully]

The clause sets out specific conditions for subsidies for the purpose of restructuring ailing or insolvent deposit takers or insurance companies.

[Bill Esterson]

The fact that subsidies should not be given to ailing or insolvent banks, insurance companies or other deposit takers unless certain conditions are met, such as that the subsidy is given on the basis of a restructuring plan that is likely to restore long-term viability, is an eminently sensible measure that we are content to see in the Bill. We also recognise that such companies should receive subsidies only when they have contributed to their restructuring costs from their own resources. We are pleased to see the clause included in the Bill. There are some concerns relating to this clause that I will come to in clause 24, but I think they are better dealt with there.

Question put and agreed to.

Clause 21 accordingly ordered to stand part of the Bill.

Clause 22

Liquidating deposit takers or insurance companies

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

[Paul Scully]

The clause prohibits subsidies for insolvent deposit takers or insurance companies that are unable to demonstrate credibly that they can be restored to long-term viability, unless they are able to satisfy specific conditions.

[Bill Esterson]

We are happy to support clause 22.

Question put and agreed to.

Clause 22 accordingly ordered to stand part of the Bill.

Clause 23

Liquidity provision for deposit takers or insurance companies

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

[Paul Scully]

The clause sets out specific conditions for subsidies that are for the purpose of supporting liquidity provisions to ailing or insolvent deposit takers or insurance companies.

[Bill Esterson]

We support clause 23.

Question put and agreed to.

Clause 23 accordingly ordered to stand part of the Bill.

Clause 24

Meaning of “ailing or insolvent”

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

[Paul Scully]

The clause defines “ailing or insolvent” in relation to the giving of rescue and recovery subsidies to deposit takers, insurance companies and enterprises. The definition of ailing or insolvent in this Bill incorporates both domestic and international terminology. It combines the existing concept of insolvency in UK law with the wider concept of ailing or insolvent agreed in the TCA. The definition is compliant with our international commitments and has a strong basis in British law. Subsections (1)(b) and (c) use the existing insolvency test in the Insolvency Act 1986. Subsection 1(a) uses the TCA definition of “ailing or insolvent”. An enterprise being unable to pay its debts or the value of its assets being less than its liabilities are British tests for declaring an enterprise “insolvent”. Subsection 1(a) builds on this by extending the tests to include enterprises that are “ailing or insolvent”—those which would go out of business in the short to medium term without subsidies.

Subsection (2) allows the Secretary of State to make regulations on what is meant by

“would almost certainly go out of business in the short to medium term without subsidies”.

While the definition of “insolvency” reflects existing domestic law, “ailing” has no such domestic definition. A narrow power such as this allows the Secretary of State to make further provision on the meaning of ailing, should that be necessary.

[Bill Esterson]

We recognise the importance of clauses 21 to 27. We have some questions about the definitions of “ailing” and “insolvent”. The definitions of those terms in the Bill are arguably more demanding than those under EU state aid rules, which require an enterprise to be almost certain to go out of business in the short or medium term, and to be unable to pay its debts as they fall due; also, the value of its assets must be less than the amount of its liabilities. Why have the Government chosen broader definitions for ailing and insolvent enterprises than those in the regime that is being replaced?

Alexander Rose from DWF raised concerns that these broader definitions risk harming tech and research-and-development heavy start-ups because they require significant expenditure before they start making profits. As I am sure many Members will know, that can be months, if not years. Can the Minister explain what consideration has been given to these broader definitions where they relate to start-ups that are capital-intensive for significant periods before profits are made? What are the Government going to do with the regime to ensure that start-ups are not harmed by the legislation? I am sure that the Minister agrees that it is sensible to support our innovators and to allow them to take the time to become profitable. It will be interesting to see how he intends to do it. We need to be competitive internationally, which is crucial for an export-led recovery.

The same point applies to scale-ups, a point Rolls-Royce made in its written evidence. It has that concern about start-ups, and quoted some case law from the Supreme Court saying that courts should be careful not to leap to conclusions when asked to apply the test about insolvency, and that allowance should be made for debts when the maturity date is some time in the distance. Is the difference between liabilities that are due in the short term and long-term liabilities and debts picked up in the primary legislation? How is the Minister planning to ensure that a distinction is made between short-term and long-term liabilities?

Interestingly, Rolls-Royce made the point about national security, going back to our earlier debate. In addition to mentioning what we raised before, it asked about dual use. What is the Government’s plan on subsidies where dual use includes national security investment and non-national security investment, which is common in areas such as aerospace?

[Paul Scully]

The Bill is clear that an ailing or insolvent enterprise is one that would almost go out of business in the short to medium term without subsidies. Importantly, this definition applies only to the giving of rescue and recovery subsidies. I hope my opening remarks help the hon. Gentleman’s understanding of where we go in some of the definitions. Just to repeat: subsection (2) allows the Secretary of State to make regulations on what is meant by

“would almost certainly go out of business in the short to medium term without subsidies”.

While the definition of insolvency reflects existing domestic law, “ailing” has no such domestic definition. Therefore, there is allowance for the Secretary of State to make further provision on the meaning of “ailing”, should that be necessary. We went down that route because the EU’s “undertaking in difficulty” test is disliked by stakeholders, is highly prescriptive and in some cases prevented the giving of subsidies to viable businesses with a longer route to market and profitability. These were businesses such as medical technology firms and start-ups. The definition that we are using has a much more restricted application, but where it does apply it provides greater flexibility while also preventing the use of subsidies to bail out unsustainable companies.

The hon. Gentleman talked about national security exemptions as well. We are going to get on to—

[Bill Esterson]

Before the Minister moves on, I want to tie down the difference between short-term and long-term liabilities. From my dim and distant accountancy past, there seems to me to be quite a good definition for this from insolvency legislation—from memory. We may have other accountants with us who can confirm or deny that. Does the hon. Gentleman know that that is the kind of distinction that the Secretary of State is likely to make in regulation?

--- Later in debate ---

[Paul Scully]

The clause establishes conditions on subsidies granted to air carriers for the operation of routes. Subsidies not meeting one of those conditions are prohibited by the clause.

[Bill Esterson]

We recognise that subsidies to an air carrier for the operation of a route should be prohibited unless certain conditions are met, and those conditions are listed. I cannot help noting the irony of the reduction in taxes on travel for short-haul flights, and the fact that one can get a ticket from London to Glasgow for COP26 for £45 on the railway and it is about £145 to fly. That is possibly going slightly beyond the scope, other than to say that again this is not consistent with what the Minister said earlier about the intention of travel, so to speak, on moving towards net zero.

--- Later in debate ---

[Bill Esterson]

Yes, there is the irony that the Government are requiring delegates to COP26 to show their method of travel to the conference. I hope that we will see subsidies supporting rail travel. In my constituency, I have been long campaigning for a rail link from the port of Liverpool rather than a new road, and in the run-up to COP26 that would make sense, rather than concentrating on air travel. There is a serious point that we need to use the subsidies to support rail and low-carbon transport, and reduce the reliance on, and support that the Budget gave for, air travel.

Question put and agreed to.

Clause 28 accordingly ordered to stand part of the Bill.

Clause 29

Services of public economic interest

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

[Paul Scully]

The clause sets out the requirements for giving subsidies for services of public economic interest.

Oral Answers to Questions

Debate between Paul Scully and Bill Esterson

Tuesday 15th December 2020 Commons Chamber

[Paul Scully]

I was self-employed, running companies, for most of the 25 years that I was working before I was elected to this place; there but for the grace of God go I. I will continue to reflect the views of the self-employed in conversations with the Treasury. I also speak to the hospitality sector every single week and will be doing so later today. We have allocated £40 million extra to wet-led pubs, in addition to extending the moratorium on rent evictions and legal processes facing tenants, the VAT cut and the business rates relief.

[Bill Esterson (Sefton Central) (Lab)]

What assessment he has made of the level of greenhouse gas emissions generated by (a) imports to and (b) exports from the UK.

--- Later in debate ---

[Paul Scully]

I know the hospitality business in York has been affected, as it has around the country. Yes, we will continue to look at this and, when the data allows, we will move York and other areas into more forgiving tiers. For the hospitality sector—as I say, it welcomes Government support, largely, but wants customers—this is what is going to help the pubs, bars and restaurants in York and beyond to be able to survive and thrive.

[Bill Esterson (Sefton Central) (Lab) [V]]

Many freelancers and self-employed people have had little or no financial support. They do not qualify for furlough, for the self-employed scheme or for business grants. With billions of pounds being returned in tax relief for business rates by the major retailers, why are Ministers not using that money, as the retailers are suggesting, to support those hundreds of thousands of people who have had little or no financial support so far?

Oral Answers to Questions

Debate between Paul Scully and Bill Esterson

Tuesday 10th November 2020 Commons Chamber

[Paul Scully]

The right hon. Lady raises a really important point. As well as having regular meetings with the hospitality and retail sectors about the immediate future, we also have the Retail Sector Council and the Hospitality Futures Group, an industry-led a group, which we participate in fully to make sure that we can address such long-term concerns.

[Bill Esterson (Sefton Central) (Lab)]

What recent assessment he has made of which business sectors have been most affected by the covid-19 outbreak.

Oral Answers to Questions

Debate between Paul Scully and Bill Esterson

Wednesday 11th March 2020 Commons Chamber

[Paul Scully]

My hon. Friend is working on a modern “silicon Stoke”, and to get that he needs modern working practices. Flexible working helps people with a range of needs to remain in and to access work, including mothers, carers and parents. We want to give everybody a choice to determine how best they can balance their home and work life, including fathers. Flexible working can give them that choice, which is why we are keen to do more.

[Bill Esterson (Sefton Central) (Lab)]

6. What recent discussions she has had with the Secretary of State for Health and Social Care on improving life expectancy among women living in disadvantaged areas.