Ultimately, the purpose is to provide transparency so that, after the fact, the public and Parliament are informed on the subsidy that has been given. However, we maintain that it is important to keep the subsidy under the radar unless it would undermine the purpose for which it was given in the first place if it were publicised. The example of Northern Rock is the one that we quote, as it would potentially cause a run. I recognise the strength of feeling from the DPRRC and among noble Lords on these clauses. As I have said, I will look at them further before we get to Report—[Interruption.] I am happy to have satisfied the noble Baroness, Lady Jones, for a change.
Turning to some of the comments on why Clause 11 should stand part of the Bill, this clause enables the Secretary of State to make secondary legislation to define subsidies or subsidy schemes of interest or of particular interest. Again, I recognise that the power set out was criticised in the DPRRC’s report, and that it recommended that these definitions be on the face of the Bill. If I may briefly summarise the purpose of this clause, Part 4 of the Bill establishes the mechanisms for the referral of these subsidies and schemes to the subsidy advice unit. Voluntary referral will be available for subsidies or schemes of interest, while subsidies that are classified as subsidies of particular interest will be subject to mandatory referral. After referral, the public authority’s assessment of compliance with the subsidy control requirements will be evaluated by the unit, and a report containing its findings will be published. This is a pragmatic way of ensuring that additional scrutiny is given to potentially distortive subsidies. The clause therefore allows the Government to define these types of subsidies and schemes.
The noble Lord sought clarity on why the Government intend to set relevant criteria and thresholds in regulations, rather than in the Bill. Let me point out the illustrative regulations that the Government published last week, as well as the accompanying policy statement. I welcome any comments that noble Lords may have on these documents, of course, and stress that the Government will take careful note of the views expressed when developing these draft regulations. I hope that this provides further clarity and assurance on how the Government intend to use these powers.
The reason why the Bill takes a power to define these categories is because it is important that the Government are able to modify the criteria over time in response to market conditions, or the periodic reviews that will be carried out by the subsidy advice unit, to ascertain how the domestic control regime is working in practice. Both Houses will of course have an opportunity to debate any regulations in draft to ensure that the criteria for what constitutes “of interest” or “of particular interest” are robust and capture the right subsidies and schemes for additional scrutiny.
6.30 pm
Of course, I recognise that the same could be accomplished by putting the definitions in the Bill while taking the power to amend those definitions
through secondary legislation, as the DPRRC noted. The main reason why we have not done this is to ensure that feedback can be sought on the precise criteria to use, building on the more general responses to questions in the public consultation last year on which subsidies could be considered as particularly high risk. The illustrative regulations will afford us the opportunity to seek this input from noble Lords, the devolved Administrations and other stakeholders.
I do not believe that it would have been desirable to put these definitions in the Bill when we retained a level of open-mindedness about the precise definitions. I also do not believe that it would have been possible to seek granular responses before publishing the rest of the Bill and setting out the precise mechanisms and processes that apply to these two categories of subsidy. The illustrative regulations also demonstrate the lengthy and detailed nature of this policy, which would not fit easily into the Bill.
Finally, I will share some thoughts on why Clause 46 should stand part of the Bill. This clause sets out that activities conducted by or on behalf of the Bank of England in pursuit of monetary policy are not subject to the subsidy control regime. These measures were implemented by central banks in pursuit of monetary policy and have always been considered to be outside the scope of EU state aid rules. The EU and the UK confirmed in the joint declaration on monetary policies and subsidy control their mutual understanding that activities conducted by a central bank in pursuit of monetary policy are outside the scope of subsidy control provisions in the trade and co-operation agreement.
It is important that the position set out in the joint declaration is put beyond doubt in UK law. One of the Bank of England’s independent statutory functions is, of course, to maintain UK price stability and, subject to that, to support the economic policy of the Government. It is appropriate and necessary that the domestic subsidy control regime exempts monetary policy measures in pursuit of these objectives. The Bank has statutory independence for monetary policy of course, which is a crucial part of the macroeconomic framework. The exemption is consistent with and indeed reinforces the Bank’s independence in taking monetary policy decisions, as such decisions could become the subject of oversight and enforcement on subsidy control grounds.
To close, I look forward to no doubt substantial engagement with noble Lords further on these issues. Therefore, for the moment, I hope noble Lords feel able to let Clauses 11 and 46 stand part of the Bill, and that they will not press Amendments 15, 26, 30, 31, 32 and 50.