My Lords, I now turn to the amendments on the office for the internal market and the subsidy control grouping.
First, I want to emphasise that Part 4 establishes the office for the internal market within the Competition and Markets Authority, which is, in our view, a natural home for the OIM, given its existing technical expertise that is highly relevant to the operation of the UK internal market. But, as I have set out, the office for the internal market will be independently governed within the CMA, and Schedule 3 sets out a carefully balanced set of governance arrangements which guarantee that independence and ensure a meaningful role for the devolved Administrations through the appointments process to the OIM panel. This gives the devolved Administrations a proper voice, while guaranteeing that the OIM can operate without delay or obstruction if four-nation consensus cannot be reached on appointments.
The Government have listened carefully to the discussions in this House and have acted, tabling a number of pragmatic and constructive amendments throughout Part 4. These make it clear that the OIM will work in the interests of consumers and ensure that it will operate in the interests of all parts of the United Kingdom and on an equal basis towards the four UK Administrations. This is further to the significant change put forward previously, requiring the Secretary of State to seek consent from all Administrations within a one-month timeframe, based on proposals developed originally by the Welsh Government. This change provides yet another enhancement for the devolved Administrations in the appointment process, which, as I have explained, fully reflects the even-handed approach to governance that runs throughout Schedule 3.
I hope your Lordships can appreciate that the Government have listened and moved accordingly. However, I cannot support your Lordships’
Amendments 57 and 61, which go further than this, requiring direct devolved Administration appointments to the CMA board. As already set out here and in the other place, it is the OIM panel that will undertake the work of the OIM. The CMA board is responsible for the operations of the organisation as a whole, which otherwise fall wholly within reserved competence. It is therefore not appropriate for the devolved Administrations to make appointments to the CMA board, as those board members would, in consequence, be involved in a range of reserved matters with no relation to the OIM functions set out in Part 4.
With regard to Amendment 50, your Lordships will be aware that this has invoked a financial privilege claim and has not been agreed to by the other place. Although this of course is sufficient in itself, I will remind your Lordships’ House that there is a consultation forthcoming on this matter of subsidy control. It would be premature and unjustified to agree to confer specific regulatory functions on the OIM in respect of subsidies before the wider details of any legislative UK domestic subsidy control regime—including the appropriate mechanism for oversight and enforcement—have even been developed and brought before Parliament, let alone agreed.
However, I have listened to concerns regarding the decision to have the CMA perform these duties, and I am pleased to announce that the Government have tabled Amendment 50B, which will require the Secretary of State to review, after between three and five years and in close consultation with the devolved Administrations, the appropriateness of, effectiveness of and potential alternatives to the CMA carrying out its Part 4 functions. This will allow Ministers from all Administrations to closely consider the CMA’s performance and the pros and cons of continuing with the CMA as the delivery vehicle for the Part 4 functions. This proposal makes it clear that the Government are committed to ensuring due diligence on the CMA’s new functions and facilitating further scrutiny by all Administrations.
This amendment requires the devolved Administrations to be consulted as the review is carried out—but it goes further, giving the Administrations the right to consider and make representations on the draft report itself, and requiring the Government to fully consider those views. Subsection (5) rules out an unlimited obligation to consider repeated rounds of representations that could block the review, but I want to be clear that the Government will consider all views offered in good faith. I note for the benefit of noble Lords that this final point applies equally to Clause 50—to which I will now turn—which reserves to the UK Parliament the exclusive ability to legislate for a UK-wide subsidy control regime in future.
I was pleased to note in the debate on Report that many noble Lords did in fact recognise the importance of maintaining a consistent approach in what is a nationally significant area of economic policy. In addition, I welcome the devolved Administrations’ support for the principle of a unified approach to subsidy control throughout the United Kingdom. For these reasons, the Government believe it is right that we retain the provisions for the reservation of subsidy control in the Bill.
Now we have left the EU, it is important that we continue to take a coherent approach to the system that governs how public authorities subsidise business across the UK. I reiterate that this reservation is not about sources of funding or who makes decisions on individual subsidies across the UK. This reservation will ensure that any future system we put in place to regulate against the distortive or harmful effects of spending on subsidies then applies to the whole of the UK.
A unified approach to that overall framework will reduce uncertainty for UK businesses and prevent additional costs to supply chains and consumers. As such, continuing our UK-wide approach to subsidy control and confirming it in law remains the best way to ensure that we continue to take a consistent approach to regulating the harmful effects of subsidies across the United Kingdom.
To be clear, all UK public authorities are and will remain responsible for their own spending decisions on subsidies—how much, to whom and for what—within any overall subsidy control regime. This reservation is not seeking to change public authorities’ responsibilities for spending decisions. However, the wider rules which they operate should continue to be consistent across the United Kingdom.
I acknowledge the concerns that some of your Lordships have raised in previous debates regarding the principle of reserving a policy area in advance of the forthcoming consultation the Government have committed to publish. However, this reservation is a necessary step to ensure that, if a legislative regime were introduced, it would apply then to the whole of the UK. Given that this is a national issue, the future subsidy control mechanism should be the responsibility of the UK Parliament to determine.
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On the recent proposition from the Welsh Government suggesting that potential divergences could be managed through common frameworks, to be clear, the common frameworks programme was designed to operate in policy areas where regulatory powers previously held at EU level intersect with devolved competence. State aid has never been devolved and as such, has never been included in the common frameworks programme. Therefore, the approach suggested by the Welsh Government and set out in the amendment tabled by the noble and learned Lord, Lord Thomas, would not be appropriate.
I reiterate that this reservation will not change the devolved Administrations’ position in practice. It is important to remember that the devolved Administrations have never previously been able to set their own subsidy control rules, as this was covered by the EU’s state aid framework. We will continue to work closely with the devolved Administrations on the shape of a future domestic subsidy control regime in advance of any proposals being brought before the UK Parliament for consideration. The forthcoming consultation will provide an opportunity for us to work together on an approach to subsidy control which works for all four nations. We recognise the importance of maintaining a constructive and collaborate relationship with the devolved Administrations, as it is in all our interests to ensure that a new regime works for the whole UK. However,
I have listened to concerns regarding the role of the devolved Administrations in the development of proposals for a new subsidy control regime. To directly address these concerns, the Government have tabled an amendment setting out our commitment to engage with the devolved authorities on the Government’s response to the UK subsidy control consultation.
This amendment ensures that before publishing any relevant report relating to the outcomes of the UK subsidy control consultation, the Secretary of State will provide a draft of the proposed response to the devolved authority, inviting it to make representations. The Secretary of State will then consider any representations and determine whether to alter the report in the light of that consideration. This proposal makes it clear that the UK Government are committed to involving the devolved Administrations in the forthcoming development of proposals for a UK-wide subsidy control regime.
I hope that your Lordships agree that the reservation of subsidy control is the best way to support the running of the UK’s internal market. For the reasons I have set out, I hope that noble Lords will accept the Motion to reinsert Clause 50 into the Bill and accept Amendment 51B. I cannot accept Amendments 50C, 51, 57 and 61, and urge your Lordships to disagree to them. I hope that this House can accept the Government’s amendments on the OIM and subsidy control respectively.
I beg to move.
Motion L1 (as an amendment to Motion L)