I am grateful to noble Lords. I know that time is getting on; hopefully I will have a chance to get through my remarks in the time we have available. This is an important debate and I recognise that, if it were not for the time, other noble Lords might also have wanted to intervene on the role of the Competition and Markets Authority in this new subsidy control regime.
I listened with particular interest to my noble friend Lord Lamont’s reflections on subsidy. In response, I would say that it is important to emphasise that the Bill does not, of course, replace our gold-standard mechanisms—my noble friend may have been responsible for many of them—for managing public money and for the transparency and scrutiny accorded to the UK Government’s spending decisions. I also note that we addressed the concept of market failure in the illustrative guidance we sent round; we believe that it is a fundamental part of the guidance that will be published before the regime comes into force.
Before I address the amendments, let me take this opportunity to lay out why we have taken the approach we have in the Bill as it stands; I hope that this will address the concerns of the noble Lord, Lord Purvis. We start from the knowledge that public authorities, in my view, take their statutory obligations seriously. The subsidy control principles and other requirements are straightforward and sensible, and we expect the vast majority of public authorities to comply with
these requirements in giving the overwhelming majority of their subsidies. This regime empowers public authorities to make subsidy control decisions without excessive bureaucracy or regulation of the kind that I think most people accept is found in the EU state aid system and nowhere else in the world.
With this in mind, we proposed the functions of the subsidy advice unit set out in the Bill for two closely related reasons: first, to support public authorities in giving the subsidies that are most likely to be distortive; and, secondly, to ensure that those subsidies are subject to additional scrutiny and transparency before they are given. As the noble and learned Lord, Lord Thomas, set out, we think that this is an extremely important role. Once a subsidy or scheme has been referred, the subsidy advice unit will not attempt to replicate the role of the public authority in giving that subsidy in the first place or deciding whether or not to give a subsidy. Of course, it will also not replicate the role of the Competition Appeal Tribunal in applying the law to every aspect of the case. The subsidy advice unit will not carry out its own independent evaluation of the impacts of the subsidy; nor will it come to a definitive judgment on the public authority’s legal assessment of whether the measure is a subsidy, to answer the question from the noble and learned Lord, Lord Thomas.
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The guidance will be thorough on this point. It will be a legal matter rather than something for the advisory unit if it comes to a dispute. The unit will provide a thorough and proportionate evaluation of the public authority’s own assessment of compliance, providing advice on both the methodology of the assessment and the design of the subsidy as it considers appropriate.
I do not believe there is a contradiction in saying that a full assessment of compliance is light-touch regulation for the public authority but could prove arduous to replicate for the subsidy advice unit. The SAU would be acting without the understanding and body of evidence that the public authority will have created in developing the subsidy in the first place. The SAU does not have the same margin of discretion that in my view a public authority ought to have over its own decision-making for its own functions, and for which it is both expertly and of course democratically accountable.
As I set out earlier today, most of the subsidies that are more potentially distortive can be identified in advance. That is why we will lay regulations to define those subsidies and schemes that either may or must be referred to the subsidy advice unit respectively.
I will defer again to the illustrative regulations and the policy statement that we published last month as an indication of our intentions here. However, as a safety net for unexpectedly concerning subsidies and schemes—we just had a debate on this in the previous round—we have provided for the Secretary of State to have the option to refer particularly concerning subsidies to the subsidy advice unit, either before or after they have been granted.
There is no intention to build up an extensive monitoring function within my department or the CMA to carry out this function. It is designed to catch a very small number of particularly worrying subsidies that could potentially cause undue harm to UK competition or to our international commitments where those come to the attention of the Secretary of State. As I have said, public authorities comply with their statutory obligations as a rule. This system therefore strikes the right balance. We will allow the public authority to make subsidy decisions quickly and with confidence to assist the development of their local economy.
Amendment 55A and so on would allow the call-in powers currently provided to the Secretary of State to be exercised by the SAU as well. I recognise noble Lords’ concerns that the system gives too great a responsibility to the Secretary of State—