My Lords, I apologise to the noble Baroness for my over-eagerness to speak in this debate, and thank my noble friend the Minister for introducing this Bill. I declare my interests as stated in the register.
This Bill fulfils an obligation placed on the Government by the TCA, and is intended to clarify what our independent state aid rules will be going forward. The UK is currently bound by its obligations as a member of the WTO, and those contained in the TCA and other trade agreements. In general, I welcome the Bill, which is intended to provide a less cumbersome version of what we have been subject to as an EU member—although, as my noble friend Lord Forsyth has already pointed out, we are still ignorant of a lot of the detail and guidance. Maybe, when we finally receive that, the Bill may not be quite so uncumbersome as we have expected.
Under EU law, all subsidies had to be approved by the European Commission. As your Lordships are aware, as an EU member state the UK has, rightly, been more sparing in its use of state aid compared with most other member states, spending around 0.4% of GDP on state aid—about half the proportion spent by France and less than one-third of the German figure.
In devising the new regime, the Government have tried to find the right balance between the need to eliminate scope for political interference and anti-competitive market distortion, and the conflicting need to provide a process that is nimble, easy to negotiate and fair. As long as applications follow the core principles, public authorities will be empowered to take decisions which will assist economic recovery and national strategies, such as levelling up and net zero. Damaging subsidies which achieve little beyond keeping failing companies alive for longer than the market would otherwise permit are prohibited.
Members of another place were right to reject the proposed amendment to principle G, which would have required public authorities to give too much weight to possible negative effects of subsidies on the UK’s net-zero commitments. This could have caused them to look less favourably on subsidies designed to achieve entirely unrelated objectives, such as high street regeneration or the provision of training opportunities for young people.
The seven subsidy control principles are in fact broadly similar to those under which the EU system operates, and six of them are derived from the TCA. Principle F is a sensible new addition, which seeks to minimise any negative effect on competition and on foreign and domestic investment in the UK’s internal market. It is crucial that the Bill gives effect to the
internal markets Act, which stipulates that the regulation of state subsidies is a reserved matter that must be consistently applied across the whole United Kingdom. The excellent Library briefing covers this question in some detail.
Several noble Lords have expressed the view that the Bill is unfair to the devolved Administrations. However, I am struck by the comment of Mr James Webber, a state aid lawyer, that the Bill in any event gives the devolved Administrations much greater freedom to make spending decisions and craft economic interventions than they would have had if the UK had remained an EU member state. Can the Minister confirm that the Government’s policy is that those powers which were held centrally by the EU should now be held centrally by the UK Government, to avoid an incoherent and inconsistent approach between the four nations of the UK? Can he also explain whether a similar approach will be taken both to subsidies contained in devolved primary legislation and to those given by public authorities? The Bill introduces, in Clause 76, the concept of a “promoter” whose views may or may not correspond to the views of a legislature as a whole.
Lastly, can the Minister tell the House whether the Government take seriously the concerns about transparency expressed by my honourable friend John Penrose and others? Surely, he has a point in suggesting that, without adequate transparency, a lack of compliance with the subsidy principles might not be spotted until it is too late, or not at all, and companies could be driven out of business. At £500,000, surely the threshold for entering subsidies into the database is much too high. Would not a figure of £100,000 be more appropriate? I look forward to hearing the Minister’s views on this and other matters.
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