I agree. Personally, I am fully in favour of cultural institutions transferring out of London. I will address the relocation point in my later remarks.
This grouping spans several clauses of the Bill but, in responding to the amendments, I will keep coming back to the central refrain that I iterated on Monday as well. The Bill regulates the giving of subsidies where there is a market failure or an equity rationale, with the intention of minimising distortions to competition, investment and trade. It is intended to be a flexible and minimally burdensome regime that applies to subsidies of all types and in all policy areas. As such, my central contention that applies to a lot of these amendments is that there is no need to privilege or exempt certain sectors or highlight certain objectives. Nor is it for the Bill to dictate rigidly the purposes for which public authorities should use subsidies or how they should achieve their purposes.
Clause 10 concerns the creation of subsidy schemes and streamlined subsidy schemes. A streamlined subsidy scheme is made by a Minister of the Crown for the
purposes set out in the Bill. Amendment 14 would clarify that the Government may create streamlined subsidy schemes for the purposes of supporting areas of relative economic deprivation. Specifying particular policy objectives at this stage on the face of the Bill may in fact lead to the power to create streamlined subsidy schemes being interpreted in an unduly narrow way in the future.
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Concerns might also be raised, on the back of this, about why other desirable policy areas are not mentioned in the Bill as potential streamlined subsidy schemes—and whether their absence may suggest that the Government have deprioritised that policy objective. The Government fully support actions to assist areas of deprivation and facilitate the levelling-up agenda. Indeed, I will ensure that our streamlined subsidy schemes collectively reflect the importance that we attach to levelling up.
The Bill does not restrict the policy objectives that a streamlined subsidy scheme can pursue. We do not want to restrict it unnecessarily to one policy objective, however advantageous that policy may be. The new domestic subsidy control regime will give authorities the flexibility to deliver subsidies where they are needed to support economic growth, without facing excessive bureaucracy or lengthy pre-approval processes. The Government will also publish guidance to make it clear how the principles should be applied by public authorities when considering subsidies that advance the levelling-up agenda, or that promote the economic development of relatively disadvantaged areas.
As for Amendment 23, I entirely agree with what the noble Lord, Lord Wigley, said in his contribution and his intervention, and with the sentiment expressed on this amendment by the noble Baroness, Lady Jones—that the continuing support of our nation’s cultural and environmental objectives is of the utmost importance. I hope that I can give him the reassurance that he sought that the new domestic regime will facilitate subsidies in aid of cultural or environmental goals. Any well-designed subsidy or scheme with these at its core should not experience any difficulty in complying with the regime’s common-sense principles or other requirements.
As I have previously noted, principle A states that public authorities may give subsidies only to pursue a policy objective which either remedies a market failure or addresses an equity concern. Subsidies pursuing cultural or environmental objectives would almost always comply with this principle. Indeed, the illustrative guidance published last week on the application of the subsidy control principles—I appreciate that the noble Lord may not have had an opportunity to look at it yet—provides examples of subsidies targeted at environmental issues and the preservation of cultural sites as measures addressing forms of market failure. Furthermore, it states that subsidies targeted at extending access to cultural or educational amenities would be an example of an equity objective.
It is important that subsidies and schemes, including those with cultural or environmental goals, also comply with the remaining principles. These ensure, for example, that subsidies are not excessively large, that they minimise distortion to UK competition and investment, and
that they are designed to bring about a change in the behaviour of the recipient. Of course, not all cultural and environmental funding will fall within the new regime’s definition of a subsidy. However, where it does, it will need to comply with the subsidy control principles I have outlined, but we do not believe that this would be particularly difficult.
The amendment would not meaningfully change the ability of public authorities to use well-designed subsidies to fund art, culture and environmental protection—if that is what they choose to do—because that path is already smooth. It could, however, become a loophole for subsidies and schemes to avoid complying with the basic principles. In certain circumstances, it could hinder the UK’s ability to fulfil our international commitments, particularly those under the trade and co-operation agreement with the European Union—of which the noble Lord is so supportive.
I thank the noble Lord, Lord Berkeley, for his Amendment 25A, which would require public authorities to consider value for money before giving a subsidy or making a subsidy scheme and, where applicable, to consider making subsidies subject to competitive tendering processes. In the light of this amendment, I think he has missed his vocation in Her Majesty’s Treasury. The foundation of the new regime is a set of clear common-sense subsidy control principles. These principles are fundamentally aimed at reducing harmful distortions to domestic competition and investment, as well as trade or investment between the UK and other countries, which can arise from the giving of subsidies. These principles also support public authorities to award subsidies that deliver strong benefits and good value for money for taxpayers. For instance, principle C requires that subsidies be designed to bring about
“a change of economic behaviour of the beneficiary”,
while principle G states:
“Subsidies’ beneficial effects … should outweigh any negative effects”.
The subsidy control principles also support competitive processes for awarding subsidies, where possible. The recently published illustrative guidance states that public authorities should consider implementing an award process which involves at least some element of competition between potential recipients. While I agree with the comment of the noble Lord today that it is important to ensure value for money in public spending, I emphasise that this scheme is not a subsidy for existing public spending control and value-for-money tests, and that he can rely on Her Majesty’s Treasury to impose those tests on all public spending under the Treasury’s Green Book and the principles set out in Managing Public Money.
As I have previously said, this Government do not want unnecessarily to interfere in the spending decisions of democratically elected public bodies. Public authorities, including the devolved Administrations, are best placed to make decisions about the funding of projects that they deem to be priorities in their areas. This is why the new subsidy control regime is designed to empower public authorities to design subsidies in a way that is tailored and bespoke for their local needs, without facing excessive bureaucracy.
Moving on to Amendments 27 and 28, I start by stating the purpose of Clause 18. Clause 18 is a prohibition on subsidies that are explicitly contingent
on the recipient relocating—that is, to receive the subsidy, the recipient must cease activity in one area and move to a new area. It is meant to capture examples of outright poaching of an entire business from one area to another of the type that we often see between states in the US. This clause puts down a marker and is intended to prevent a very small class of subsidies that would disrupt the internal market and constitute a serious waste of public money. The prohibition is not intended to capture subsidies that may substantially improve the attractiveness of investment in a specific area and thereby have the indirect effect of recipients relocating. Expansion into a new area would not be prohibited, nor is it intended to prevent those subsidies aimed at levelling up. I understand that this last point is of particular interest to the noble Lord, Lord Ravensdale, and I shall come back to it in my comments on why Clause 18 should stand part of the Bill.
On Amendments 27 and 28 from the noble Lord, Lord McNicol, I know that he is not looking to amend this provision but is instead looking for greater clarity about how it will work and what constitutes an “area” for the purposes of the prohibition. The term is intentionally left undefined and, informed by guidance, public authorities will apply a common- sense interpretation of it. Where a public authority gives a subsidy that is conditional on the recipient ceasing its activities in one area and moving to another, they will need to show that the move is genuinely within the same area. Factors that will be relevant to that assessment include existing definitions of an area, such as county, unitary or mayoral combined authorities’ boundaries, but public authorities will also need to consider other interpretations. The illustrative guidance that we published last week sets out some questions that public authorities should ask themselves as they consider the geographic and distributional impacts of subsidies and as they consider levelling-up objectives more widely. This will be supplemented by further guidance that will be published well in advance of the regime’s commencement. As I have said, the clause is designed purely to prevent poaching and subsidy races between public authorities in which context the definition of “area” will at that time be quite clear. However, fixing local authority areas at this stage risks creating arbitrary geographic distinctions that do not necessarily work in every case.
Going back to the question from the noble Lord, Lord Ravensdale, about whether Clause 18 should stand part of the Bill and picking up on the contribution of the noble and learned Lord, Lord Thomas, I hope these clarifications have shown the utility of this prohibition.