My Lords, each year, the CMA is required by the Enterprise and Regulatory Reform Act 2013 to prepare a report on its activities and performance that year. The report must be sent to the Secretary of State and laid before Parliament.
Clause 66 requires that the CMA include details within its annual report of any subsidies and schemes which have been referred to the subsidy advice unit in that year. This includes referrals made on both a mandatory or voluntary basis, including those made by the Secretary of State, and it is designed to mirror the level of detail required for information on the CMA’s other functions. This information will help to provide transparency as to the number and types of subsidies and schemes referred to the subsidy advice unit. Among other things, it will help both the CMA and Parliament to understand whether the subsidy advice unit is operating as expected and has the appropriate resources to fulfil its functions.
Amendment 62 would add the requirement for the CMA to set out an assessment on the extent to which the regime is meeting its stated policy objectives. On this matter, it is important to draw a clear distinction between the purpose of the CMA’s reporting under this clause, as opposed to the more in-depth review and reporting that it will do under Clause 65. The effect of this amendment will be to combine the purpose of these two distinct categories of report, and in doing so place an unnecessary burden on the CMA in producing its annual report.
In response to the question of the noble Baroness, Lady Blake, on what effect the CMA reports will have, the monitoring reports will already be published for all to see. The Bill contains numerous provisions for amending specific aspects of the regime though secondary legislation. This ensures proper parliamentary scrutiny of any proposed changes to the regime. The purpose of the subsidy advice unit’s regime-level monitoring function is to provide an objective source of information about the functioning of the new system. This feeds into the Government’s objective of monitoring and continuous improvement for the regime, while also providing confidence in the regime to stakeholders and the public across the UK. Requiring more frequent monitoring reports from the CMA, with improved scrutiny and transparency, might indeed seem attractive but in reality, it could cause the opposite effect to that intended by the noble Baroness, resulting in more superficial reports that will be less useful in assessing the overall effectiveness of the subsidy regime.
The information required by Clause 66 is designed to sit within the CMA’s existing reporting requirements. The annual report is a descriptive and limited tool for the CMA to publish key information about its workload and resources and to ensure that it is moving towards achieving its own organisational objectives across all its functions. This report must include summaries of its significant decisions, investigations or other activities carried out during the previous year.
As currently drafted, the requirements under this clause similarly require summary descriptive information in relation to the subsidy advice unit’s functions, which will give an indication of how those functions are being used and whether it has the appropriate resource to fulfil the demand for those functions. This should be placed in contrast to the five-yearly reports specific to the subsidy advice unit under Clause 65, which will provide the CMA with the opportunity to publish a substantive analysis of the operation of the regime and the subsidy advice unit’s role within that regime. Of course, the CMA may include further data or case studies on subsidy control in its annual report if appropriate. Clause 66 is only a minimum list of the information that it will be required to include.
Under the Enterprise and Regulatory Reform Act, the CMA must also include a survey of developments in relation to all its functions, which may include developments within the subsidy control regime that the CMA deems of significant enough importance to publish, and thereby inform Parliament. The Government’s position is that the five-yearly reporting under Clause 65 is the appropriate place for the CMA to provide an assessment of the regime’s performance. The five-yearly report provides for an appropriate timescale for producing such assessments and the CMA is empowered under Clause 67 to gather information for this purpose. This will provide the CMA with the time and resources necessary for the subsidy advice unit to provide for a considered review of the subsidy control regime.
Amendment 62 also requires that the SAU produce its assessment only
“on the basis of the reports it has prepared”.
It is our view that any assessment of the regime’s performance will need to take a much wider view of the regime than only that part of it to which the SAU has reported that year. That is why the five-yearly reporting requirement in Clause 65 has been drafted to give the CMA the scope and power it needs to consider the matter thoroughly. Supplementing those powers with additional requirements in the annual report may only lead to the production of an assessment that is relatively narrow and partial, and that does not have the benefits of a more extensive review over a longer period.
I support the view that there may be circumstances in which we need more analytical and evaluative information more frequently than every five years. I would like to reassure the Committee that the Secretary of State has the power under Clause 65 to direct the SAU to produce a report for a specified period. It is also worth noting that, under the Enterprise and Regulatory Reform Act, the Secretary of State already has the power to request a report or advice from the CMA on any matter relating to its functions.
Regarding parliamentary scrutiny, there should be no reason for any committee of this House or the other place to wait for the CMA’s reporting under either Clause 65 or Clause 66 in order to take a close look at the subsidy advice unit’s functions. It is always open to noble Lords and honourable Members of the other place to examine this regime and the SAU through the usual process of parliamentary committee.
Amendment 63 would expand the scope of the CMA’s annual report to include an assessment of the effect that the regime is having on the UK’s ability to achieve its net-zero carbon emissions goal, set out in the Climate Change Act 2008, and the targets set under the Environment Act 2021.
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While I understand the noble Baroness’s aim to ensure that this legislation will not hinder the UK’s ability to achieve its net-zero goal or environmental targets, I must urge her to reconsider this amendment. I say in response to the concerns of many noble Lords, including the noble Baronesses, Lady Boycott, Lady Sheehan and Lady Jones, and the noble Lord, Lord Whitty, that I recognise their position. For reasons of time, I will not repeat the arguments set out in previous Committee sessions, or those in my noble friend Lord Callanan’s letter to the noble Baroness, Lady Jones: that the UK’s framework to address climate change and protect the environment is strong as it stands.
It is also worth mentioning that robust reporting requirements are already in place for considering progress towards meeting Environment Act targets. The Government must report annually on whether the natural environment has improved, including on whether progress has been made towards targets. The office for environmental protection will also scrutinise the Government’s progress towards targets annually, providing recommendations if it believes better progress could be made in improving the natural environment.
Turning to the amendment, the CMA’s annual review function is not an appropriate tool for addressing the noble Baroness’s concerns. The amendment would probably be prohibitively disruptive to the delivery of the CMA’s annual report. As I have already described, the CMA’s annual report is intended to be a descriptive and limited tool for the authority to inform Parliament of its workload and resources, and to ensure that it is moving towards achieving its own organisational objectives. A review of the subsidy control regime’s effect on carbon emissions and the Government’s environmental targets would necessarily require a significant assessment of this aspect of the regime, with the inclusion and explanation of technical details and nuances that are wholly unrelated to the rest of the CMA’s functions. The inclusion of such an assessment in the CMA’s annual reporting is unlikely to be helpful to Parliament in scrutinising the CMA’s functions or reviewing the progress towards the goal of net zero, or indeed to the Government’s environmental targets.
This is not to say that the subsidy advice unit will never take into account the regime’s potential effect on the UK’s net-zero commitment. This regime will support our net-zero target by facilitating strategic subsidy interventions with minimal bureaucracy and delay. This includes the energy and environment principles in Schedule 2 to the Bill, which could be used to aid public authorities in the granting of subsidies which support the UK’s priorities on net zero and protecting the environment. As I have set out, the subsidy advice unit will be charged with the responsibility of reviewing the operation of the entire regime every five years under Clause 65. This will include the effect of the energy and environment principles in Schedule 2.
The Government take their net-zero commitment and environmental targets seriously and this Bill will support those aims by giving public authorities—