It is a pleasure to speak in the debate. I start by acknowledging all the efforts in the other place, and
thank the peers, staff and civil servants who have helped to move the Bill along to this stage. I also thank colleagues on both sides of this House, including all the Opposition parties.
As Labour has outlined throughout the Bill’s progress, we support the principle of a quicker, easier subsidy regime now that we have left the EU. However, we recognise that any subsidy regime must provide sufficient transparency and accountability for the spending of billions of pounds of public money each year. We have also repeatedly raised our concerns that this regime has failed to match up to the Government’s levelling-up rhetoric. We are pleased to see that many of the Lords amendments, including our amendment to Lords amendment 13, will improve the Bill in some of those areas.
I turn briefly to areas in which we would have liked the Government go further, and I would be grateful for the Minister’s comments on these issues. The first is net zero. Labour has been clear that while this is framework legislation, it should not be an empty vessel. The Government should have used the opportunity of an independent subsidy policy to design a regime that supported their wider industrial policy and our national priorities. We were also disappointed that the Subsidy Control Bill was not published alongside a subsidy strategy. Net zero is a good example of this. The climate crisis is the greatest long-term threat facing our country and the world, and we need urgent action to drive down emissions. That is why, in Committee, we called on the Government to support our amendment to hardwire net zero into the principles that public authorities have to consider when awarding any subsidy or designing any scheme. There was cross-party and cross-Bench support in the other place for a similar amendment.
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The Government’s response was that the Bill already contains specific principles that apply to subsidies relating to energy and the environment, but that is far too narrow a view of climate impact. Net zero should be a consideration for public authorities on all subsidies, from public transport to supporting R&D in our energy intensive industries. In rejecting both amendments, the Government have missed an opportunity to use subsidy policy as a tool to achieve their net zero targets.
As I turn to the amendments, it would be remiss of me not to mention the recent scandal at P&O Ferries and the Bill’s implications, which I have raised with the Minister. P&O Ferries is owned by DP World, the operator of the Southampton and London Gateway shipping terminals. As of today, DP World is still a partner in the London Gateway freeport and is potentially set to benefit from £25 million-worth of public funding. The senior executives of that company have admitted to the House that they broke employment law. However, they will benefit directly from public funding of the Government’s new freeports.
Beyond freeports, P&O Ferries has received £15 million of Government support since the start of the pandemic, both through furlough and the freight subsidy scheme. As the Minister will know, UK public procurement law contains grounds that bar businesses from bidding for public contracts. To pick one example, a bidder can be excluded because they have breached national minimum wage legislation.
By contrast, the Bill affords no power to the Secretary of State or the public authorities to exclude DP World from the receipt of public subsidies. I would be grateful if the Minister set out in his response how he will ensure that subsidies are not provided to firms that do not meet minimum expectations, including complying with the laws of this country.
Finally on the areas that we have carried over from previous debates, on devolution, it is a disappointment that we have not seen more movement on powers for the devolved Administrations. The Minister will be aware that we will continue to push for that as the Bill becomes an Act and on its implementation.
On the financial thresholds for reporting, Labour has raised concerns throughout the Bill’s progression that the threshold of up to £500,000 for publishing subsidies on the database and the gobsmacking £14.5 million threshold for subsidies to services of public economic interest were far too high. There were cross-party efforts in Committee—including from Labour and colleagues who represent Aberdeen—to introduce greater transparency into the database. I also pay tribute, as the Minister has, to the hon. Members for Weston-super-Mare (John Penrose) and for Thirsk and Malton (Kevin Hollinrake) for their work in this important area.
In the Commons, the Government resisted calls to lower the monetary thresholds, but we were pleased that, in the Lords, Government amendments 14 and 25 took heed of Labour’s calls and lowered the threshold for publishing subsidies on the database to £100,000. Lords amendments 26 to 30 and 32 lower the threshold for publishing subsidies to services of public economic interest to £100,000. Although we welcome the reductions in reporting thresholds, we are concerned that Lords amendments 22, 33, 34, 35 and 37 allow them to be changed by the Government without good reason. Having accepted the premise of greater transparency, will the Minister explain under what circumstances the Government would seek to change the thresholds? Without a clear explanation, we are concerned about why the Government felt the need to keep those powers in reserve.
I turn to the time thresholds for uploading information on to the database. Throughout the Bill’s progression, Labour has been clear that the six-month deadline for publishing subsidy details on to the database was simply far too long. Without their publication, interested parties have no way of identifying subsidies that may be harmful. Six months is enough time for damaging subsidies to inflict significant harm on competitors and, more broadly, on British competition and investment. We therefore support Lords amendments 17 and 20, which reduce the publication deadline to three months, and Lords amendment 19, which states that any modifications made to subsidies also have to be uploaded within three months. Although Labour would go further in reducing those timeframes, we welcome the amendments.
We also support Lords amendment 16, which sets a three-month deadline for uploading tax schemes on to the database. However, Lords amendments 15 and 18 still provide public authorities with one year to upload a tax subsidy on to the database and one year to upload modifications in relation to tax subsidies. Will the Minister explain why there is still a nine-month difference between the deadlines for publishing tax subsidies and publishing tax schemes? Why are the Government allowing such a long period for modifications in relation to tax subsidies?
On the issue of audit, as well as calling for the publication deadlines to be reduced, Labour called for the Secretary of State to take ownership of the transparency database and what is uploaded on to it. In their White Paper on Companies House reform, the Government recognised the dangers associated with creating a register without a regulator, yet they risk making the same mistakes. The information uploaded and published on the database is crucial to alerting interested parties to potentially damaging subsidies. If the information on the database is not accurate or complete, there is no transparency or accountability.
Lords Amendment 13 goes some way to ensuring that the Secretary of State reviews the database, but we are concerned that that amendment is too vague. It does not make it clear what the purpose of the review is, who will conduct it or how regularly. Labour has tabled amendment (a) to Lords amendment 13, which clarifies that the purpose of the review is for the Secretary of State to ensure the accuracy and completeness of the information in the database. Amendment (a) has been tabled in a constructive spirit to clarify the legislation.
Although improvements have been made to the database—as we acknowledge— since the evidence we heard in Committee about its serious deficiencies, practitioners continue to have concerns. The name of the granting authority is currently not included in all entries. That is clearly a major gap, as it is the key piece of information that an interested party wishing to challenge a subsidy in the very short window available to them needs.
I turn to the Lords amendments on the Competition and Markets Authority. Lords amendments 41 and 42 mandate that the CMA lays its first report on the regime three years after the Bill commences and its second report three years after that. I spoke about increasing the frequency of the CMA’s reporting in Committee and I am pleased to see that that has been taken up.
We also support Lords amendments 43 and 49. However, under the Bill, the CMA has the power to report only on subsidies and schemes that are reported to it. As we have heard from experts, that leaves a black hole for accountability where a public authority wrongly concludes that it is not granting a subsidy. Such payments will not be published on the database and interested parties will therefore not be able to challenge them. In Committee, Labour tabled new clause 3, which would have given the CMA the power to investigate subsidies that may be of concern and subsidy schemes on its own initiative. Unfortunately, the Lords amendments have failed to address that issue.
There has been some progress on the issue of regional economic disadvantage during the Bill’s passage in the other place. As the Minister will have heard, there was anxiety from the devolved Administrations and Members across this House about the implications of the loss of assisted areas. The Bill, as introduced, contained no measures to ensure that subsidies could and would be used to reduce economic disadvantage between and within the regions and nations of the UK.
On Second Reading and in Committee, I stressed that the Bill failed to live up to the Conservatives’ levelling-up rhetoric. I am therefore pleased that the Lords tabled Lords amendment 9, which removes the relocation prohibition on subsidies that work to reduce social and economic disadvantages.
Labour also tabled an amendment to schedule 1 that would have explicitly added addressing a local or regional disadvantage as a policy objective that subsidies can pursue. That was voted down in the Commons, but I am pleased it was accepted by the Government in the other place with Lords amendment 50. The more than 300 pages of the levelling-up White Paper do not reference subsidies once, but I look forward to the Government publishing details of how subsidy policy will be used to achieve the White Paper’s objectives.
We support Lords amendments 1 and 4 relating to subsidy schemes and subsidies of interest. We are concerned, though, about when the streamlined subsidy schemes will be put in place. The schemes will be important for granting authorities to avoid unnecessary bureaucratic workloads, so when will the details be published?
Practitioners have expressed concern to us that clause 70(2) is not clear enough on the power to challenge an individual subsidy made under a scheme, or on when the clock starts ticking on that period of challenge. As drafted, the Bill appears to indicate that a damaging subsidy can be made, say, two years after a scheme is set up. As the deadline for challenging the scheme itself would have passed, there would be no mechanism for interested parties to challenge such a harmful subsidy. Is the Minister aware of that problem and is he taking any action to address it?
Finally, we support all the technical amendments—Lords amendments 2, 3, 10 to 12, 5 to 8, 39, 40, 44 and 51 —and the greater scrutiny they add to the Bill. However, Lords amendment 46 allows the Secretary of State to rely on consultation carried out before the Bill receives Royal Assent when issuing guidance. Ongoing engagement with public authorities and business is critical, and I hope the Minister can reassure the House that the Government will not be ducking this obligation.
Labour recognises the need for this legislation, which is necessary to meet our international obligations and, more than that, to protect the UK’s internal market and to ensure public funds are made available to firms, with appropriate safeguards put in place. The Lords amendments may not go as far as we hoped in some cases, including on devolution, but they significantly strengthen the Bill by providing the scrutiny and oversight Labour has called for from the beginning. However, it is regrettable that some concerns, including on the CMA’s powers and net zero, have not been addressed.
Well-designed, proportionate subsidies are a critical part of an effective industrial strategy to grow the sectors of the future and to invest in our transition to net zero. The Government now need to bring forward a plan to make that happen.