My Lords, welcome to the Grand Committee. Members are encouraged to leave some distance between themselves and others and to wear a face covering when not speaking. If there is a Division in the Chamber that we are not expecting, the Committee will adjourn as soon as the Division Bells are rung and will resume after 10 minutes.
Clause 10: Subsidy schemes and streamlined subsidy schemes
14: Clause 10, page 6, line 32, at end insert—
“(4A) A streamlined subsidy scheme may be made, in particular, to support areas of relative economic deprivation.”Member’s explanatory statement
This amendment would make clear that streamlined subsidy schemes may, among other things, be made for the purposes of supporting areas of deprivation.
My Lords, Amendment 14 was tabled by my noble friend Lord McNicol.
We always know in this environment that timing is everything. We must be extremely mindful when debating these elements of the Bill that today the Government published the levelling-up White Paper. It is critical that we bear that in mind as we discuss these important issues, particularly on economic deprivation. We must go back to the lengthy debate that we had on Monday and focus on the benefit that the work we will do here will bring to our communities across the United Kingdom, and focus on the purpose, on what really matters as a result of the improvements that we can make to the Bill. This is an illustration of the importance of joining up key pieces of legislation. Since coming down to the Palace of Westminster I have noticed that this is a work in process and this legislation is something that we can assist with.
Bearing that in mind and being very much aware that a lot of the work that has gone into the levelling-up White Paper has already been released in the media—many noble Lords, I am sure, have had sight of the proposals—I will concentrate on Amendment 14 and refer to the extended list of amendments that have come into this group since Monday afternoon.
As I said, the third group on Monday facilitated an interesting debate on economic deprivation and a number of related issues. It is worth returning to the topic today as the Minister’s responses were not convincing. There is more work to be done on these areas. Some of the amendments in this group go beyond a laser focus on economic deprivation, allowing us to probe slightly broader issues, such as whether and how the concept of social value, used in relation to procurement, will be applied to the subsidy regime. We are grateful to the GMB union for its input on these texts.
The noble Lord, Lord Lamont, made a very powerful contribution on Monday, making the point that areas of high deprivation need a degree of certainty, and that is one of the focuses that we need to bring to bear. Sadly, I have to say that, at first glance, the announcements on levelling up do not provide that certainty. The confirmation of various missions mentioned in the White Paper provides a marginally clearer idea of what the Government want to achieve, but we are still largely in the dark as to how the various 2030 targets will be met.
Amendment 23 in my name has been included in this group. That is a slightly odd grouping, and perhaps I should have pressed for my amendment to be de-grouped. I shall speak to it in a moment, but first may I endorse entirely the comments made in opening this debate? It is vital that we ensure a decent standard of living and income per head throughout these islands. It is not enough to compensate people for being deprived of many of the aspects of life that are valuable to them. We need the economy to be able to sustain populations at a level of income that enables them to get benefits of the sort that are enjoyed in, for example, south-east England.
Let us compare the GDP per head of Kensington and Chelsea and that of the valleys of Gwent, or of Anglesey. Chelsea’s figure is eight times higher. We need economic solutions, not just for Anglesey and Gwent but for the north-east of England, Lancashire and other areas—all the old industrial areas. We need to get the economies working, to ensure that the other benefits that the people of those areas have a right to expect can be delivered.
My Amendment 23 seeks to include in the Bill an assurance that nothing in it prevents a public authority from giving financial support aimed at achieving cultural or environmental objectives. I draw attention to my registered interests with regard to cultural dimensions in which my family is heavily involved. I do not think the amendment should be necessary, for it is a long-standing feature of the cultural scene that grants and subsidies are necessary to underpin activities that otherwise might not be viable. Clearly, in making grant payments to one body, organisation or even company, the Government are in effect giving it a competitive edge over others that do not get such support; the marketplace is hardly designed to support and sustain such activities. Yet many aspects of the arts are inevitably dependent on such interventions, and nothing in this legislation should be open to accusations of undermining cultural viability.
My Lords, it is a pleasure to follow the noble Lord to pick up, and indeed support, many of the points he made about geographical inequality, and to tease out a bit further from our debate on the first day of Committee the Government’s refusal to link any form of geographical basis to the proposal on deprivation, as with others.
As the noble Baroness, Lady Blake, indicated, we are now going through parts of the White Paper on levelling up, and I am sure that the struggling communities across many parts of England will be relieved to hear that they are going to get more politicians. It brought back some memories. When I was a youngster, there was the proposal for more politicians in the north-east of England but with no extra money—a proposal for what we might call a north-east assembly. There was a very outspoken MEP in that region at the time—one M Callanan, I think he was called. I remember reading him in the Chronicle and seeing him on Tyne Tees telly. He said—I paraphrase—that with more politicians without any budget, the Government were desperately seeking to shore up their flagging regional devolution campaign. How times have changed.
Well, I think the proposals for the White Paper are cheaper, because there is no money attached to them at all.
The Government’s position is that, to maintain the level of EU structural support, £1.5 billion a year must be distributed. I will not quibble about some of the details, but let us take it as read that £1.5 billion a year must be distributed. The Government promised that there would be no shortfall. There were two references in the manifesto that stated so:
“a UK Shared Prosperity Fund to ensure that the people of the UK do not lose out from the withdrawal of EU funding”.
The Minister stated so when he led on the repeal of the structural fund SI, and he stated so again on Monday in Committee.
We, national devolved Governments and local authorities thought that this was a straightforward commitment to replace the previous funds without there being a loss of funds, but no. On page 74 of the spending review, the weasel words “rise to” were inserted. The Government stated that, to ensure that the people of the UK did not lose out from the withdrawal of EU funding, the investment would need to be £4.5 billion in this spending review period, but, as they stated on page 74 of the spending review, it is £2.6 billion over the next three years—a cut of £1.9 billion, cutting support in areas most in need. The cuts in the coming years are a staggering £1.1 billion.
As the noble Lord, Lord Wigley, said, nor has there been any commitment to replicating per-person investment support. Under the previous schemes, investment was £130 per person in England, £180 per person in Scotland, £280 per person in Northern Ireland and £780 per person in Wales, reflecting the areas identified for particular need. I would like the Minister to write to me about what the proposed per-person investment will be for 2022. That is when we will know whether indeed we are losing out from the withdrawal of EU funding.
My Lords, I sat here on Monday on the first day of Committee and I wondered how much of the replying Minister’s speech was written already—that is, Ministers were not responding to any of the good sense or good words that they heard from this side of the Room. It struck me that that should be seen as a little more important than it was on Monday.
This is an important group, because it is asking what we want to use the subsidies for, rather than just saying, “How do we want to control subsidies?” Supporting areas of deprivation has to be a core principle in our subsidy schemes and everything the Government do. We are very lucky now; we have a department for levelling up and we have a White Paper. Apparently, the White Paper points out how unequal the UK is. If you measure it on any economic or social metric, it is incredibly unequal. We have to ask: what have the Government been doing for the past 12 years? Of course, they are a Conservative Government, so clearly the levelling-up agenda is to mop up all the damage they have done in the past 12 years. Tackling deprivation and inequality will take a lot more than fine words, and streamlining subsidy schemes that are tailored to overcoming deprivation would be a good start.
Similarly, we should be making it easy for public authorities to support cultural and environmental objectives. I support noble Lords who have spoken so far, and I will be interested to hear the Minister’s response to Amendment 23, tabled by the noble Lord, Lord Wigley, on this point, because it would be a great shame if the Bill were to interfere with achieving cultural and environmental objectives. We should concentrate on calculating social value as articulated in Amendment 36, tabled by the noble Lord, Lord McNicol of West Kilbride, as this is still a fledgling area of procurement practice and was one of the features of David Cameron’s early years as Prime Minister when he was still trying to do some good. The Government seem to have stalled on social value since then. If we can improve the methodology for calculating social value and properly embed it in procurement and subsidy schemes, every pound spent by the public sector will have a much greater benefit for our communities. It will help to tackle deprivation, benefit the environment and create flourishing local authorities. I hope the Minister can explain what the Government are doing to advance the social value agenda.
My Lords, I rise to move Amendment 25A in my name. I shall not speak to any other amendments, because to some extent I am here as an amateur among experts. I have one point to make, which I hope I can do quite quickly. However, I support the general trend from my noble friend’s introduction and other noble Lords who have spoken.
I was unable to speak at Second Reading, because if I had I would have missed the sleeper to Cornwall, which I have to take. I am sorry about that. Many questions that come up are about how and what can replace the different bits of the EU competition regime. I got to know it quite well and got either to like or love it but at least to deal with it. My amendment covers everything that I think are subsidies, although when one looks at the definition of subsidies in the Bill it is unclear whether it covers a one-off payment or a series of payments or even what in the transport world is called the public service obligation. Perhaps somebody will refer me to where I have got it wrong in that instance.
In all these things, there seems to be nothing in the Bill about whether any particular subsidy, whatever anybody is talking about, is value for money or whether it has gone through the government procurement rules, which, in simple terms, means that it has gone out for three quotes or something like that. There may be many instances where that is not appropriate. I worry about whether this is just giving a blank cheque to Ministers or any local authority that chooses without any of the checks and balances. It may go to the CMA in the end, but to start with it is not there. This afternoon, we have been debating the PPE issue. I am not suggesting that was about the urgency for procurement. On the other hand, the urgency has long since passed, and that leaves a nasty taste in some people’s mouths.
My other reason for raising this is that I have been involved in a levelling-up plan for a ferry to the Isles of Scilly, which some noble Lords know about. The local authority applied for £48 million from the levelling-up fund to be given to one private company without any tendering. The noble Baroness, Lady Vere, has been very helpful and has tried to put my mind at rest that government procurement rules will be looked at here. However, there are two issues. I think they apply to many procurement issues that come into the category of subsidy control.
My Lords, I oppose the question that Clause 18 stands part of the Bill. We have had an excellent debate so far on how the Bill fits with assisting disadvantaged areas. It feels quite appropriate to have these discussions on the day the levelling-up White Paper is being discussed in another place.
What runs through all these discussions on disadvantaged areas is that the UK is one of the most geographically unequal major economies. As the noble Lord, Lord Lamont, stated in Committee on Monday, that has only worsened over the last three decades. We need to throw everything at this problem, which is why noble Lords are keen to see more definition on how the Bill will help disadvantaged areas, given that subsidies provide a key part of the mechanism to enable levelling up.
Clause 18 relates to the relocation of activities and states:
“A subsidy is prohibited by this section—
I repeat, prohibited—
“if … it is given to an enterprise subject to a condition that the enterprise relocates all or part of its existing economic activities”.
Of course, we need measures to prevent gaming the system and internal competition. However, this clause appears to be rather a blunt instrument to achieve this end and goes against the flexible nature of the Bill. There are many productive relocation projects that could contribute well to levelling up, and that need not be unduly distortive of competition in so doing, but which would be made much more difficult by the presence of this clause in the legislation. We already see government departments moving out of London into the regions. Inevitably, we need the same to happen for some business investments, too, if the Government are serious about levelling up.
I do not see why the Bill would want to prevent subsidies for productive relocation projects moving into disadvantaged areas, which could be a boost in many instances to the levelling-up agenda. This has already given rise to concerns that it will adversely affect the ability of LEPs and local authorities to use grants and other forms of subsidy to relocate. The question then becomes: how do we prevent issues with internal competition if we do not want this to become a free-for-all?
My Lords, I appear to have come into this argument about consistency between the noble Lord behind me and my noble friend Lord Purvis. It strikes me that, if this Government are intent on getting a coherent policy, they must have one fitting with the other.
My noble friend just talked about the figure of £780 per head. I will not argue in greater detail what I said during a previous day of debate in Committee, but I also want, in answer to a Written Question and Oral Questions, a statement from this Government that Wales will receive, pound for pound, what it received from the European fund. My target is £780. If the Minister could indicate in his reply whether the Government are still intent on reaching that target—and if so, when —that would be helpful.
It seems to me that consistency is also about the way in which the subsidy regime might work. How subsidies have been applied in the past is important. I quote by way of example the case of both sides of the Severn Bridge. One is in Wales, the other is in England. A major UK company relocated from the Welsh side to England. Having reflected on it, the Welsh Government spent a considerable amount of money preparing the site which the company had vacated and turning it into something that became a possible, and certainly large-scale, logistic hub into which a major British company relocated, again moving from one side of the Severn Bridge to the other. That was allowed, because basically what we were seeing was economic development potential and the available subsidy regime being used to the full.
However, I do not understand how this subsidy Bill will mean that companies can relocate or move, except by indices that, we are told, are now not consistent with the subsidy regime. It is therefore difficult for a member of the public or a public body trying to think how they will sort out their subsidy regimes from now on to make certain decisions about the future. Perhaps the Minister can provide us with some certainty on what relocation means, because without a map, a plan or boundaries, where does it stop? Where does it start? Does it mean that both sides of the Severn Bridge are in the same government economic plan and can be at both ends at the same time?
My Lords, the Government are anxious to reduce regional inequality and to promote greater equality, but it is difficult to understand how that it is going to happen without the economy seeing some relocation. The Government’s plans today involve taking money away from the home counties and transferring it to the north of England. That puts them in a political quandary, because if they do not deliver material results in the red wall seats and they have also alienated their blue wall seats, they may find themselves losing on both fronts. That is a problem for them, but from the country’s point of view we want to see those inequalities being reduced. My question to the Government is how they think this can be achieved if any suggestion of relocation is prevented.
20 of 256 shown
We have staggering examples of discrepancy in funding. For example, transport in London and the south-east of England received £882 per head in the year 2019-20, while in the north-east it was only £315 per head. Analysis in the Guardian of funds allocated so far through the future high street fund, the community renewal fund and the towns fund also suggests that the wealthiest parts of England are being allocated, in some cases, up to 10 times more money per capita than poorer and, I have to say, often Labour-controlled councils—that point is perhaps best discussed alongside Amendment 35 later today. IPPR North points out that funds allocated to the north thus far amount to an investment of £32 per head, which compares to a £413 per person fall in annual council service spending between 2009-10 and 2019-20. We also have the comments from the National Audit Office, which suggest that grants from two different funds were not based on evidence. We very much want levelling up to be a reality and would support proposals being brought forward that would achieve this end. We have to make sure that, through the work that we are doing in this Bill, we contribute to that end.
Amendment 14 would make clear that streamlined subsidy schemes can be made to support areas of economic deprivation. This would not be a requirement, but would focus the Secretary of State’s mind once the new regime is up and running. Clarity would support the goals of facilitating quicker and more efficient awards of low-risk subsidies. I am sure the Minister will talk up the inbuilt flexibility of the new system, but here is an opportunity to send a signal to the communities that we want to help. I am sure that the noble Lord, Lord Ravensdale, will make the case for his Clause 18 stand apart amendment, which looks at relocation subsidies through an economic development lens, but I hope that Amendments 27 and 28 will at least give us some clarity on how that prohibition will work. Are we talking about movement within or between local authorities, regions and nations of the UK, or does it depend on context? The current drafting is not clear, and this kind of area should not be left to guidance and therefore to different interpretations.
Amendments 34 and 36 seek to move the discussion on to the social value to be derived from subsidies, which might be an alien concept to some considering this legislation. We must avoid always viewing matters purely in terms of the economic bottom line. We all want to create jobs and fuel economic growth, but there is a need to do that in a fairer manner, ensuring job security, good pay and strong employment rights across all sectors and, of course, as we have already discussed, ensuring that we bring in environmental benefits.
In recent years, the Government have spent billions of pounds subsidising a wind sector that sustains a relatively modest number of jobs and has not always supported UK suppliers, including the steel industry. Wind is an increasingly important part of the energy mix, and key to reducing emissions. It is clearly worthy of subsidies, if that is what it takes to make cleaner forms of energy more attractive, and of course to create new jobs. However, the TCA, and international agreements, give scope for the inclusion of social objectives when giving subsidies. We want to understand whether the Government intend to use that flexibility, and if so exactly how.
Amendment 36 draws on the concept of social value, which authorities are compelled to consider under the Public Services (Social Value) Act 2012 when undertaking procurement exercises. Do the Government plan to include similar provisions in the Bill?
There are a great many questions for the Minister to answer on this group. I hope that he will be able to address most of the points today, but I would be pleased to receive further written answers if that is more appropriate. I do not wish to pre-empt other contributions this afternoon, but it feels as if there is much more work to be done in these areas before Report.
Equally, the objectives of environmental policy must also, surely, be exempt from any restrictive limits placed on public bodies from maximising our ability to reach environmental targets. This is a probing amendment, and I trust the Minister can give me the assurance I seek.
I was genuinely interested in what the Minister said on Monday about the geographical delineations referenced in Amendment 14 with regard to areas of need. He said, and he was specific in his language, that there was a differing approach from that used by the levelling-up fund. I then looked at the levelling-up fund methodology, which states that the methodology used is
“to develop an index of priority places for the Levelling Up Fund.”
Furthermore,
“any comparison of need between places in different nations should be made using a consistent set of GB-wide metrics only.”
The levelling-up fund is using an index of priority places based on need. To be consistent, that is GB-wide, and all authorities, when they are putting forward their bids for the levelling-up fund, will be clear as to what status they are in with regard to the index of priority.
So far, that is clear. However, the Government have said that there is no link between the two. The conclusion might be that this Bill is not linked with the levelling-up approach, but that is not what the Minister said at Second Reading. He said:
“Under this regime, public authorities at all levels of government will be empowered to give subsidies to help address regional disadvantages, supporting our levelling-up aims.”—[Official Report, 19/1/22; col. 1712.]
So the aims are the same, but if there is no methodology to support a scheme’s aims of addressing regional disadvantage under this Bill—in other words, inequalities —how will levelling up actually be achieved? The CMA will only have the ability to review a scheme’s legality under this Bill; it will have no scope to help to address and support our levelling-up aims. Who will do that? Which body will consider whether this Bill is “supporting our levelling-up aims”, as the Minister said at Second Reading?
The Minister might say that they are completely distinct and that the fund will operate completely distinctly from the subsidy regime. I looked at the levelling up-fund prospectus, which states categorically at paragraph 6.9 that all applicants to the levelling-up fund
“must also consider how they will deliver in line with subsidy control (or State Aid in Northern Ireland) as per Government guidance … This will be tested as part of the appraisal process and monitored thereafter.”
How, and by whom? If every application to the levelling-up fund is to be considered in the context of this Bill, they are linked. If the Government are making the case for having a regional index for that fund, for which all applications have to satisfy this Bill, but this Bill says that there will be no index or any regional aspect, how on earth will this be monitored with regard to meeting the levelling-up aims?
My final point refers to further amendments to Clause 18 on markets. The Minister has been at pains to say that there will be no definition of “local market”. I question how all the Government’s different considerations will be satisfied if there is to be a review of the impact on local markets without there being an index such as the levelling-up fund. I simply do not know why the Government have made the clear distinction between this Bill and the levelling-up approach, which they say has to be consistent with the Bill. I hope the Minister will be able to clarify those points.
The first is: should it be given at all, and has the amount applied for been properly calculated? Has the authority gone out for competitive tenders or can it demonstrate that it is value for money? Secondly—this is often more difficult—is there a better way of doing it? I have given the example of Scilly, where a better way would be to do it with one ferry rather than two, for half the price. That is not part of a levelling-up application. On the other hand, somebody should be looking at things like this to make sure that the Government, or the taxpayer, are getting value for money.
That could apply to many projects which noble Lords have mentioned on levelling up, including no doubt the railway projects in the regions which my noble friend talked about. It would help me to understand whether there is any check in the Bill involving value for money and going out to competitive tendering, or not, to demonstrate that that has been done before a decision is taken to go ahead.
The answer is that the Bill already covers these aspects. I turn to the subsidy control principles in Schedule 1, where principle F states:
“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom”,
while principle G states:
“Subsidies’ beneficial effects … should outweigh any negative effects, including in particular negative effects on … competition or investment within the United Kingdom.”
These two principles already cover, in my mind, the issues of negative effects on competition or investment within the UK. I therefore believe there is a case that Clause 18 is not required, because if a relocation subsidy was distortive of competition, it would be caught by those two principles in Schedule 1.
In addition, I want to pick up on Amendments 27 and 28, as spoken to by the noble Baroness, Lady Blake, on the meaning of area in Clause 18. For example, are moves within the same local authority permitted or not? We may need some more definition of what comprises an area in Clause 18.
I can see the intent behind Clause 18, but there are existing protections to achieve these ends in the Bill. If implemented, it could present a risk to the levelling-up agenda through a blanket prohibition on productive relocation projects. So far in Committee, the Minister has made the point that this is a framework Bill and will support levelling up through the subsidies that it will enable, but surely we do not want it to have a clause within it that could directly work against levelling up. I look forward to the Minister’s response on this and would welcome further discussions with him on this aspect of the Bill to ensure that it is coherent with the Government’s wider strategy.
I want to say a few words about the SPEI schemes and ask the Minister some questions about them. In principle, such schemes are helpful and permissive because they follow on from the EU’s SGEI scheme, but there are two differences between the European scheme and the scheme proposed in this Bill. The first is that the SPEI must reflect the principles in Schedule 1, of which principle F is a new one. This amplifies the question I asked just now about whether, without access to a methodology for location, it will be possible to determine the issues raised by principle F. The second difference concerns the need for public interest objectives to be placed as an obligation for the companies concerned—that is, the companies that provided the delivery of goods and services or actually delivered them—in future.
To understand that need, how are we to measure what public good or public service obligation is? That is not yet reflected in the content of the Bill, and I wonder whether the Government will make it clearer, especially as we are probably not talking about the exempt ones but of that lower limit up to £700,000 and then further to £14.5 million. These are important features of any economic development plan for any area. The schemes currently captured by the SPEI rules include housing, rural transport services and some aspects of health. My question to the Minister is: how much broader could SPEI schemes go? The public good could span a wide regime of operations. In the light of two examples, I will ask the Minister how a scheme could be tested and whether he could treat these examples as a means of achieving an understanding of the intention behind this proposal in the Bill.
The amendments in the name of the noble Lord, Lord McNicol, are trying to establish a level of detail that we do not yet have. It is essential to have that detail, either in the Bill or in further explanation from the Government, of what schemes could be involved and use these services. Those services could be provided under current expenditure or from capital expenditure for projects that are needed.
I want to work on leisure centres, and arts centres or concert halls. Leisure centres used to be very much a local authority activity, but they are critical to providing a social good in ensuring the good health of communities. Therefore, many local authorities have now turned to the private sector to build, and sometimes to run, these centres. Would an SPEI scheme be available for that sort of operation?
It is similar for arts centres, which are frequently multipurpose halls now. As well as concert halls, they are perhaps homes for orchestras and community centres. Not only concerts but a whole lot of activities occur in them. Having a regime that provides a subsidy means that ticket charging can be affordable across the community. In places such as London, it is possible not to have a subsidy, because the audience will clearly pay far more for their tickets than they would in other parts of the country.
Given the disparities in the regions and nations of our United Kingdom, it is important to understand how these things will work in practice. A number of these multipurpose halls may well have a resident artist, an orchestra, a teaching capability or an education facility. In fact, it would be easy to demonstrate a public good, but they will need support or a subsidy. Will an SPEI scheme apply equally to them, provided that the public good stands up? It could be said that the availability of affordable tickets for the general population is important, no matter where it comes from.
In conclusion, this section of the Bill needs further explanation, simply because it could be used to great effect by local authorities and the devolved Administrations. Unfortunately, it does not mean that they will have a subsidy to offer, certainly not in Wales, unless the Government can match the £780 a head that we had until last year.