Thank you Dame Eleanor; it is a privilege to serve under your chairship this afternoon.
We are now covering clauses 12 and 17, which deal with subsidies and VAT. These are complex areas of the legislation that speak to a lack of detail in the Bill and about what the Government will actually do in these areas, should the Bill proceed to statute. Clause 12 excludes article 10 and annexes 5 and 6 of the protocol. These are the EU state aid rules relating to goods and wholesale electricity trade between Northern Ireland and the EU. We can immediately see that there is an added complexity to this part of the protocol due to the fact that the electricity industry operates a single wholesale market across the whole island of Ireland. I am not aware that the Government want to try to unpick that—I do not want to give them any ideas—but it illustrates the tangled web that Ministers are creating with this Bill.
5 pm
Clause 12(3) simply says:
“A Minister of the Crown may, by regulations, make any provision which the Minister considers appropriate in connection with any provision of the Northern Ireland Protocol to which this section relates.”
Amendment 37, which is a probing amendment, would leave out “the Minister considers appropriate” and insert “is necessary” to turn the provision into an objective test. Considering the past actions of this Government, I am surprised that any Member is content to let Ministers make any provisions on a whim in such a hugely complex policy area.
The Delegated Powers and Regulatory Reform Committee shares this view. Its report on these clauses says:
“The Government’s justification is that the power allows them to take account of any possible future developments in this policy area. This is an inadequate justification because it does not explain why this should be done in regulations rather than by amending the Bill once enacted. Nothing is said about the sort of provision that could be made beyond the fact that it must be appropriate. Although the Memorandum notes that the effect of disapplying EU state aid law would mean the UK subsidy control regime applies, clause 12(3) read with clause 22(1) allows regulations to rewrite the position for Northern Ireland.”
In other words, the Government are giving themselves practically limitless scope to do whatever they want. What makes this even more frustrating is that subsidy
controls are an area on which there is a clear path forward to adapt the protocol, and it should be improved via the joint committee.
We all want our relationship with the EU to evolve, and the trade and co-operation agreement contains subsidy measures on which the Government and the EU have previously found common compromise. The Government are letting the EU off the hook by bundling everything into this Bill rather than engaging in the hard graft of negotiation and compromise to improve the protocol in a legal way as part of an agreed process.
Clause 17 is similar in how it looks to solve problems with the VAT application of the protocol. The Labour party has been clear that we would like to remove VAT from energy bills to tackle the Tory cost of living crisis on a UK-wide basis, and we have called on the Government to do that immediately. The protocol currently makes that harder to do in Northern Ireland, and it is something we would seek to negotiate. We have to talk to the EU, because the agreement the Government signed explicitly requires Northern Ireland to follow EU VAT rules on goods.
It beggars belief that the Government did not foresee VAT issues when they negotiated and signed the protocol. Neither can they argue that it is being implemented in a bureaucratic way, because VAT issues, by their nature, are bureaucratic and technical. Clauses 12 and 17, on VAT and subsidies, represent areas where we all want to see improvements in the protocol, but this Bill makes improving them harder to achieve because it pushes a negotiated solution further away.
Dame Eleanor, you will be pleased to know that my comments on this group are brief.