Apologies; I thought that the noble Lord, Lord McNicol, was going to speak there. I thank the noble Lords, Lord Ravensdale and Lord McNicol, the noble Baronesses, Lady Blake and Lady Randerson, and the noble and learned Lord, Lord Thomas, for tabling Amendments 4, 4A, 5, 5A, 6 and 25.
Let me go back to first principles. The Bill establishes a clear, flexible set of rules for granting subsidies for all public authorities in the United Kingdom. Its central function and purpose is to reduce harmful distortions to domestic competition and investment—as well as to trade and investment between the UK and other countries, of course—which can arise from the giving of subsidies. The new domestic regime will not, however, instruct public authorities on which policy objectives they should direct subsidies towards, so long as they remedy a market failure or address the much-discussed equity concerns.
We are not in the business of interfering with the policy decisions of democratically elected public bodies in Scotland, Wales, Northern Ireland or elsewhere in the United Kingdom. In keeping with this, the new subsidy control regime will empower public authorities to design subsidies in a way that is tailored and bespoke for their local needs, without facing excessive bureaucracy in order to do so. That is why we have provided clear guidance that supports public authorities, and which they must consider, to support them in choosing the appropriate indicators because we believe that they are the ones who are best placed to make those final decisions.
Turning first to Amendments 4 and 25, I thank the noble Lord, Lord McNicol, for his amendments; the noble Baroness, Lady Sheehan, put her name to Amendment 4. However, it is my view that Amendments 4 and 25 go against the grain of the Bill. Taken together, they would provide for the Secretary of State to make, by regulations, a strategy that sets out how subsidies should be used by all public authorities to support the delivery of various other strategies. They would then require public authorities to consider the subsidy strategy before awarding a subsidy or making a subsidy scheme. The UK Government have developed various strategies for specific policy issues and will continue to do so. This is where and how the Government will articulate and develop a coherent approach to issues such as net zero and levelling up.
To take an example, in March last year, the Government published a policy paper on how they will build back better, setting out plans to support growth through significant investment in infrastructure, skills and innovation. The Government will also soon publish a levelling-up White Paper—eagerly awaited by the noble Baroness, Lady Blake, no doubt—articulating how bold new policy interventions will improve opportunity and boost livelihoods across the country as we recover from the pandemic. On the points made by the noble Baronesses, Lady Blake and Lady Sheehan, the shared prosperity fund will ramp up to £1.5 billion per year in 2024-25 and total funding will, at a minimum, match the size of EU funds in all nations each year. The Government will publish further details of the fund in due course.
The Committee should bear in mind that subsidies are but one possible tool in the toolbox for supporting strategic public priorities. It is not necessary for the UK as a whole, or even the UK Government, to have an overarching strategy for the provision of subsidies, much in the same way as there is no need for a broad strategy on the use of regulatory levers. Strategies should focus on how to tackle the major issues, rather than the specific tools through which we may address them. A subsidy strategy could well risk steering public authorities towards using subsidies inappropriately or indiscriminately.
It is imperative that public authorities give proper consideration, on a case-by-case basis, to whether the subsidy they propose is the appropriate instrument for achieving any given policy objective. In many cases, there may be more appropriate measures which a public authority can deploy. To take an example dear to the heart of the noble Baroness, Lady Jones, meeting our net-zero targets will involve leveraging a mixture of public interventions, including but not limited to regulation, the emissions trading scheme and public procurement, as well as appropriate and carefully targeted subsidies.
I will now address Amendment 5, tabled by the noble Lord, Lord McNicol. Subsidy control principle A allows public authorities to address inequality and disadvantage through the use of subsidies. It states:
“Subsidies should pursue a … policy objective”
that either remedies a market failure or addresses
“an equity rationale (such as social difficulties or distributional concerns).”
Amendment 5 seeks to include areas of relative economic deprivation as an example of an equity rationale that may be addressed through subsidies. I welcome the noble Lord’s support for levelling up and his interest in ensuring that the subsidy control regime provides for this. I can assure him, however, that the Bill already facilitates the use of subsidies to support areas of relative economic deprivation.
The concept of equity rationale set out in principle A unquestionably covers investment in areas of relative economic deprivation. It is my view that guidance is the best place to provide further examples of legitimate policy objectives for subsidies and, more broadly, to address the practical application of those principles. The Government recently published illustrative guidance on the application of the subsidy control principles. This elaborated on the meaning of an equity objective:
“Equity objectives seek to reduce these disparities between different groups in society or geographic areas.”
It further states that subsidies targeted at
“Levelling up a deprived or disadvantaged area”
would be an example of an equity objective. I would be very happy to discuss this further ahead of Report with the noble Lord, Lord McNicol, and my noble friend Lord Lamont as I am keen to ensure that the intention here—that regional disadvantage is an example of equity rationale—is clear.
The amendments tabled by the noble Lord, Lord Ravensdale, raise a number of similar issues. I am glad of the opportunity to address those as well. A Bill for regulating the granting of subsidies for all purposes, in all policy areas, is not the place to articulate a levelling-up strategy. There will be plenty of time to debate that when the White Paper is published. The purpose of his amendment is to ensure that subsidies to remedy regional disadvantage are permitted under this regime, and on that point I hope I can give him complete reassurance.
As I have mentioned, this is an inherently permissive regime; there is no default prohibition on subsidies. I confirm again that addressing regional disadvantage is an equity rationale for the purposes of principle A, and one that would therefore justify the giving of a subsidy. In contrast to the EU state aid regime, there is no need for central government to set out maps or other metrics of deprivation in the Bill to permit levelling-up subsidies. By empowering public authorities at all levels of government to give subsidies that are designed by them to meet the needs of the places for which they are responsible, the Bill will undoubtedly be an important enabler of the Government’s levelling-up agenda.
However, the subsidy control regime is distinct from it. It is not directly through this Bill or regulations made under it that the Government will pursue their programme to level up the UK. It is perhaps also worth noting that, just like the EU state aid regime, the Bill is concerned with regulation; it is not a source of funding. No doubt there will be lots of debates at other times and in other places about the appropriate level of funding, but I submit that Committee on the Bill is not the place to have those debates. Everything is in its place. This is a flexible and permissive subsidy control regime. Although it facilitates levelling up, it is not the place to define it and it should not be seen as the main vehicle for pursuing it.
6.30 pm
Finally, I am grateful to the noble and learned Lord, Lord Thomas of Cwmgiedd, and the noble Baroness, Lady Randerson, for tabling Amendment 6. As I have set out, we are not recreating the EU’s state aid regime, so the logic that followed from the EU’s approach does not follow from ours. Delineation, through maps, of disadvantaged areas was a necessary feature of the EU’s regime. It was only through an exemption defined using those maps that giving certain types of subsidies was permitted.
However, it is no longer necessary to use our domestic subsidy control regime to delineate areas that qualify for extra support. That is because this regime does not create any default prohibition on subsidies that might prevent such support being given. Moreover, the Bill is not directly related to the metrics used to assess eligibility for the levelling-up fund, the UK shared prosperity fund, the towns fund and other levelling-up money. Instead, it will be for public authorities at all levels of government to identify areas of need in the areas for which they are responsible and to give subsidies accordingly. We are not going to be creating barriers to support in one area simply to create artificially more favourable rules for another. Levelling up is about increasing the prosperity of the whole United Kingdom; of course, there will be targeted support for the most disadvantaged areas, but, as the Prime Minister has said, levelling up is not a jam-spreading operation.
Of course, we will produce guidance which supports public authorities to deliver subsidies in support of levelling-up objectives that comply with the requirements in the Bill. I hope that the illustrative guidance we published last week provides at least some reassurance on this front. To directly answer the point made by the noble and learned Lord, Lord Thomas, it is not for the CMA or the CAT to rule on whether a specific subsidy is a worthwhile intervention or whether businesses in Hartlepool should have access to more favourable subsidies than those in Hull; neither do I believe it is for the UK Government acting alone, nor for agreement between the UK Government and the devolved Administrations as part of a common framework. Making a decision on whether a specific subsidy is the appropriate mechanism to address the specific needs of a particular disadvantaged area is the proper role of the public authorities which are either elected or have other well-established methods of accountability, as well as working under stringent public spending controls and other duties effectively to manage public money.
The role of the CAT will be to determine whether the public authority has complied with the statutory requirements set out in the Bill, not to do a merits review of the actual decision to grant a subsidy. For its part, the CMA will advise public authorities on their compliance with the regime. If a public authority gives a subsidy to what it considers a disadvantaged area, and provided that the public authority’s actions are reasonable, this regime will not see the courts giving a view on whether the area is necessarily disadvantaged or not. Therefore, for the reasons I have set out, I hope that the noble Baroness, Lady Blake, will feel able to withdraw her amendment.