Subsidy Control Bill

Committee (3rd Day)

My Lords, 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 while we are sitting, the Committee will adjourn as soon as the Division Bells are rung and resume after 10 minutes. For the Committee’s information, we have no Members taking part remotely today.

Clause 33: Duty to include information in the subsidy database

Amendment 38

38: Clause 33, page 17, line 19, leave out paragraphs (a) and (b) Member’s explanatory statement This amendment removes the declaration exemption for individual subsidies given under a scheme, meaning those subsidies would have to be entered into the subsidy database.

My Lords, Amendment 38 stands in the name of my noble friend Lord McNicol. I declare my interest as vice-president of the LGA.

Just to revisit the context of this, I believe, very important group of amendments, we are looking at the broader context of accountability, probity and transparency in all things to do with public money, making sure that we do not leave any room at all for corruption or cronyism as we take the Bill forward. We will be considering the whole issue of individual subsidies under £500,000 being excluded from the database. Huge concern was expressed in the other place, at Second Reading and in Committee last week—across all parties, to be fair—and representing a range of different interests which had their comments noted through the consultation exercise that has taken place. We are very concerned at the lack of scrutiny provision also, bearing in mind that we are talking about a system depending on challenge without all necessarily having all the information.

I am extremely grateful to the noble Baroness, Lady Humphreys, and the noble Lord, Lord Lamont, for supporting various amendments in this group. I am very glad to continue discussions on transparency, as I have said, reflecting, as I am sure we all have, on the very interesting exchanges on related subjects in the last meetings. Taken collectively, these amendments will allow us all to see whether BEIS and the Government have updated their thinking on the transparency thresholds and exemptions since the Bill went through the Commons. I think we are all approaching this in a spirit of hope that some serious reflection has taken place on these very important matters.

If we are to have confidence in this new regime and the public authorities that use it, transparency measures will be hugely important. We all have personal experience in this area; every one of us will be familiar by now with the need for regular reporting requirements around official meetings, travel and gifts. All this is done in the spirit of making sure that none of us is above the scrutiny of the public, particularly where public money is a point of consideration. This is not down to any particular group or party; it is simply a practical demonstration of the importance of knowing how public funds are being utilised.

My Lords, I wish to speak to Amendments 39, 47 and 48 in the name of the noble Lord, Lord McNicol of West Kilbride, to which I have added my name; I also support the other amendments in this group. Taken together, these amendments would improve transparency in the awarding of subsidies and help to spot harmful ones. They would show where the new subsidy spending is working and give businesses the information they need to challenge potentially unlawful subsidies.

As the Bill stands, individual subsidies of less than £500,000 will be excluded from transparency in the subsidy database. As I said at Second Reading, if these rules continue to exist, they will allow for the possibility of multiple subsidies of less than £500,000 to be received by an enterprise. None of that would be published and there would be little other scrutiny.

Amendment 39 would reduce the threshold for entering subsidies into the database to £500 and would bring the subsidy scheme into line with transparency thresholds elsewhere in the public sector. Local authorities, for example, must publish all expenditure over £500, and grants by all government departments and arm’s-length bodies are now published annually by the Cabinet Office.

It has been argued that, in the case of these subsidies, a threshold of £500 is low—perhaps too low—but it is vital that the threshold is set at this level. According to the Centre for Public Data,

“a threshold of, for example, £100,000 would still create distortive incentives for authorities to cluster awards just below the threshold, still allow authorities to make unpublished multiple awards just below the threshold, and would exclude useful evidence for no reason.”

Sometimes, it seems that Governments believe that they own the funds they spend but, in reality, it is the taxpayer who will fund these subsidies. Lowering the transparency threshold will demonstrate to the UK taxpayer that harmful and wasteful subsidies will be identified.

My Lords, I rise briefly to offer Green group support for all these amendments, to which we might well have attached our names were we not caught in this massive legislative pile-up. I should declare my interests as a vice-chair of the LGA and of the NALC. With the amendments having been so comprehensively and effectively introduced by the noble Baronesses, Lady Blake and Lady Humphreys, I shall make just a few additional points.

One of the most popular hashtags in my rather busy Twitter feed is #LandofCronies. There is grave public concern about corruption, cronyism and the nature of decision-making on government spending. Indeed, I put it to the Minister that these amendments collectively could be a great protection for Ministers in future, enabling them to say, “Here’s the transparency. What we’re doing is very clear and very obvious.” I note that in the other place such diverse and broadly respected organisations as the Centre for Policy Studies, the Adam Smith Institute and Transparency International backed similar amendments and that the Financial Times has warned that the new planned flexible regime could pose a “significant risk” and

“On the altar of speed, it has sacrificed scrutiny”—

it being the Government.

We are in a very interesting situation whereby the subsidy regime, having been under the control of EU rules and the UK having traditionally provided much less public funding than most other countries—around £8 billion a year—is now about to increase dramatically just as the controls utterly fall away. This is about showing people what is done; it is democracy and transparency in action. There is broad support for these amendments, so I would be delighted to hear the Minister express that the Government are moving in this direction.

My Lords, I support these amendments. I support the aim of a more flexible scheme than the EU has, and I welcome the Government’s commitment to introduce transparency to their new subsidy scheme, but, as others have explained, this Bill potentially reduces transparency.

The amendments in this group had strong support in the other place, not least from our honourable friends John Penrose and Kevin Hollinrake. I also thank the Centre for Public Data, which has worked with them to provide information to help the Government achieve what they want to achieve perhaps in a better way, which is what these amendments may enable to be done.

I support the use of subsidies to achieve the levelling-up agenda and the net-zero agenda. I think that we all realise that regional growth and infrastructure need an extra boost now. However, can the aim of reducing central control of subsidies and relying on transparency, so that interested parties can challenge subsidies that they believe are unlawful, be achieved by a process whereby those interested parties will not know that there is a subsidy unless it is more than £0.5 million and there could be a series of subsidies just below that which could amount to quite substantial sums? It would help me understand how this aim could be realised if the transparency that I think we could rely on cannot be achieved because the database does not include a record of those very subsidies that are meant to be challenged. I suggest that this seems somewhat illogical, and I urge my noble friend either to bring back his own amendments on Report or to consider accepting these amendments.

I just want to add one very brief word. In a number of the amendments today and on Wednesday, we are really concerned with the movement from the regime that has existed in the EU to a regime more of self-policing. All these amendments interlock, and at the end of the day we will need to pull them together and see how we effect for this country a proper and workable regime.

This amendment deals with one court—the court of public opinion—and we shall turn to the CAT and the Competition and Markets Authority in due course, but it seems to me that, on each of these, the Government have an option. They have to do something to make the move away from the control of state subsidies in the way that the EU did to a more liberal and generous regime. But experience ought by now to have told this Government that, unless there are clear transparency and other mechanisms in place, we will end up with something that will cause more of a problem than we had under the old system. I warmly support these amendments.

My Lords, I shall speak to these amendments very briefly. This has been a bipartisan debate, and there is a consensus across the Committee that amendments along these lines can improve the working of the Bill and make it more acceptable in the court of public opinion. I urge the Minister, if he cannot accept the amendments as they stand today, to consider at least bringing forward his own amendments at the appropriate time.

My Lords, I was not intending to speak to this set of amendments until I received the Minister’s letter—this time before the Committee started rather than during it, which is a great step forward. Unfortunately, the letter creates a problem for me because what I understand from the debate seems not to be represented in this letter, so perhaps the Minister can explain.

On the issue of subsidy schemes, the letter states:

“As my noble friend Baroness Bloomfield stated during the Committee session, all schemes must be uploaded to the transparency database”—

and I understand that to be true, so the scheme will go up on the database. The letter continues:

“This database will be freely accessible and is a key part of the new subsidy control regime, enabling the public and any interested parties to see which subsidies have been awarded, and to whom.”

But my understanding is that people will be able to see only those subsidies that exceed the limit, whereas the implication of the letter is that all subsidies will be accessible to everyone freely via the database. I would like the Minister to acknowledge that that is not the case, whether they are within a scheme or stand-alone, and this letter is therefore incorrect.

My Lords, further to that point, I wish to ask a couple of questions. First, on a factual issue—I have been struggling to find this—what has the typical award been for relatively small schemes that will operate under the Bill? I am familiar with schemes in my former constituency, either under LEADER+ or a number of other schemes, where there was not a single award over £500,000 but there was transparency as to who received it, because that is basically along the principles on which local authorities operate. So my question, really, is: what piece of legislation will trump the duty that the noble Baroness, Lady Blake, referred to? If a local authority has a duty to publish, then ordinarily if it receives a grant through, for example, the levelling-up fund—on which the Minister wrote to me; I thank him for his letter and look forward to the answer to the question on a separate occasion, as I have replied to his office to highlight an omission from it—what will be the primary duty on the local authority as far as making that information public is concerned? Will it be under the duty on the local authority to publish subsidies greater than £500,000, or, if it is defined as a subsidy scheme, will it not be under such a duty?

However, my specific question is: how will this Bill interact with the Freedom of Information Act? The only way that any enterprise or anybody would be able to find out what the award is if it is under £500,000 would be to submit a freedom of information request. I have not seen anything in this legislation which excludes elements of the Freedom of Information Act, and I therefore assume that all elements of the Freedom of Information Act will apply. If that is the case, it is rather pointless having a £500,000 limit for publication if you can get all this information by issuing an FoI request. If the Minister’s response is, as I expect, that the whole thrust is to have less burden on our public bodies for the administration of this scheme, I wonder which is less burdensome: simply publishing what is already used under the e-claims scheme—I understand that most applicants under these schemes will be through the e-claims schemes, and therefore it is a press of a button to publish the information for an award—or responding to an FoI request. If I were a member of a public body, I know which one would be far less burdensome for me. I wonder whether the Minister agrees.

I am grateful to the noble Lord, Lord McNicol, for his amendment, which was moved so ably by the noble Baroness, Lady Blake. I am delighted that the noble Lord, Lord Fox, received my letter before the Committee this time. I will have to learn the lesson that it prompts more questions from him during the debate. It is obviously better if the noble Lord receives the letter after the debate has taken place—I am joking, of course. We always endeavour to get him the information he has looked for as early as possible.

The amendments, taken together, seek to introduce a common threshold for transparency for subsides that are not challengeable on subsidy control grounds because they are not subject to the main requirements in the Bill. They include subsidies given under schemes, minimal financial assistance and subsidies for services of public economic interest.

I say at the start that I am well aware of the debates that occurred in the other place on this important issue, which were alluded to by a number of speakers, and I recognise the strength of feeling behind the calls for greater transparency. I am sure noble Lords are aware that my colleague Minister Paul Scully committed the Government to review the evidence collected as part of the consultation alongside that provided by witnesses to the Committee about the transparency provisions. Officials continue to review the available evidence base and I commit to updating the noble Lord, Lord Fox, and all other Members of the Committee before Report about where we have got to in that review, and I will update Members on the cost impact of the different options as soon as possible.

Transparency of subsidy awards is an important part of this control regime and is a key tool to support the enforcement provisions. It is essential that interested parties are able to see subsidies to determine whether they may be affected and whether they wish to challenge the subsidy award or subsidy scheme to which the noble Lord, Lord Purvis, referred. Of course, the database is a vital tool in providing this transparency. The aim of the database should always be to enable interested parties to see those subsidies that they may wish to challenge. However, it has not been, and should not be, designed to be a general database of public authority spending. Other tools for general public authority financial transparency exist elsewhere, and I think the noble Lord, Lord Purvis, would accept that uploading additional data represents a cost to public authorities, and of course that is ultimately borne by taxpayers.

I thank the Minister for giving way. Just on the point about challenge and that if a subsidy is below the £500,000 it will be part of a scheme, I think he said before that if it was given as part of the subsidy scheme, it would have to meet the seven principles; it would be good if that could be clarified. Probably more importantly, however, is whether a one-off subsidy that is less than the individual subsidy limit—the £315,000—has to meet the principles. My understanding from some of the earlier discussions in the other place is that that was not confirmed or clarified. Can the Minister clarify whether a subsidy that is less than £315,000 has to meet the seven principles or the other energy principles?

Yes, of course. All subsidies need to meet the principles—this discussion is about what parts of those are published. If a subsidy is awarded under the scheme, then the scheme principles would also need to comply with the subsidy control principles.