My Lords, let me first thank the noble Lord, Lord Dodds, and the noble Baroness, Lady Hoey, for this amendment. I know that the noble Lord has strong feelings on the protocol and he and I have discussed it many times before. I have also discussed it with the noble Lord, Lord Empey, throughout the progress of our various pieces of Brexit legislation. I know the issues that are involved, and I will hopefully be able to update the noble Lord on our interpretation of the provisions and where I think we have got to—although there is a limit, as I am sure the noble Lord will understand, on what I can say.
I start by emphasising that preventing undue distortion or economic disadvantage to any part of the United Kingdom is one fundamental objective of this regime. Subsidies are inherently distorting, but this Subsidy Control Bill exists to ensure that public authorities minimise those distortions and economic disadvantage, ensuring that the benefits of the subsidy outweigh any negative effects.
Public authorities will need to consider this in making their decisions about whether the subsidy should be given and how it should be designed. That particularly affects any negative effects in parts of the United Kingdom other than the target area of the subsidy, but it also includes the effects on international trade or investment where the public authority may have less incentive to take those disadvantages into account in its ordinary decision-making processes.
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As the noble Lord is aware, Clause 48 makes clear that in specific, limited cases EU state aid rules apply to subsidies that affect trade in goods and wholesale electricity between Northern Ireland and
the European Union. Subsidies for services will ordinarily comply with the more flexible UK domestic subsidy regime that we are discussing here. In answer to the questions from the noble Lords, Lord Dobbs and Lord Empey, and my noble friend Lord Lamont, and to the concerns about when a subsidy given in Great Britain is in scope of the Northern Ireland protocol, I can confirm that subsidies in Great Britain will, as my noble friend Lady Bloomfield said, be subject to the terms of the protocol only if there is a genuine and direct link to Northern Ireland, which cannot be hypothetical or presumed. Indeed, a subsidiary could be an example of such a link.
This was underlined in the Commission’s unilateral declaration of December 2020. Our position is set out in our statutory guidance first published on 31 December 2020. These subsidies are entirely exempt from the domestic subsidy control regime, so where a subsidy that currently falls within scope of the Northern Ireland protocol is given, it will not have to follow the processes outlined in this Bill, but we recognise that even this does not go far enough. In respect of certain subsidies, Northern Ireland faces a disadvantage.
Therefore, as noble Lords are aware, for this reason, and despite the Northern Ireland protocol applying only in the limited circumstances that I outlined, we are currently in intensive discussions with the EU with the aim of delivering significant changes to the Northern Ireland protocol, including to Article 10. I understand, and I hope the noble Lord will accept, that I cannot comment on the detail of these talks at this time, but it is worth pointing out that the status and applicability of Article 10 at the time the Bill is passed will heavily depend on the outcome of these talks. The guidance on Article 10 and Clause 48 will keep pace with the outcome of those talks. Going back to the point made by the noble Lord, Lord McNicol, I do not believe that there is any utility in pausing the passage of the Bill.
The Government are seeking to prevent any unfair economic disadvantage to Northern Ireland in two ways: first, by proposing this new domestic subsidy control regime, which requires public authorities to consider distortions and economic effects in Northern Ireland or any other part of the UK before giving a subsidy, and, secondly, by negotiating with the European Commission with the intention of establishing that only one set of rules should apply across the entirety of the United Kingdom.
Finally, the way that the noble Lord has phrased this amendment means that it would disapply the subsidy control requirements of the Bill applying in Northern Ireland when certain conditions are met, which I am sure was not his intention as he said that this is a probing amendment. This disapplication would not be permitted under the existing trade and co-operation agreement, and therefore I hope that the noble Lord will understand that I currently cannot accept the amendment.