My Lords, in moving Amendment 66 I shall speak also to Amendments 72 and 78. In so doing, I thank the Minister for his earlier reply to the brief exchange on the interaction of this Bill with the internal market Act. I wish to probe some of that a little further.
Before I do, I wish to comment, as my noble friend Lord German did, on the letter that I gratefully received from the Minister, which corrected the previous omission of not answering the question in an earlier letter. Of course, one oversight is perfectly acceptable, but the
fact that, as the Minister said, the Government are unable to give per capita expenditure on the successor to the structural funds is curious. The Government were very capable of giving per capita expenditure in the spending review period for Scotland on 27 October in their press release, and on 15 December in their press release, but they seem singularly incapable of doing so when it comes to the successor to the structural funds. How are the Government able, on the one hand, to give per capita expenditure from the spending review as a whole, but not when it comes to the structural fund’s component of that? If they are unable to do that on the structural fund’s component, clearly, they are incapable of extrapolating the overall per capita expenditure. There is something rather fishy about that—fisheries, of course, is now part of this Bill—and we will be pursuing that pun further, for the benefit of the noble Lord.
The serious point is that the Government are not honouring their manifesto commitment. They are not matching EU funds and are trying to hide behind this risible “we will rise to” element of the spending review. As my noble friend said, I look forward to getting the per capita, like-for-like figures for Wales, England, Scotland and Northern Ireland. Until we get them, we will not be satisfied.
On Amendment 66, as was said earlier, the subsidies and schemes are able to be used under the principles of Schedule 1. Principle A allows a subsidy to be used for
“an equity rationale (such as social difficulties or distributional concerns).”
That is wider than simply identified market failure. Principle F goes on further in that
“Subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition”.
So they can impact on competition, but they should minimise that. As the Minister well remembers, the United Kingdom Internal Market Act reformed or amended the Scotland Act, the Government of Wales Act and that relating to Northern Ireland to define what distortive or harmful subsidies are, so their definition is already in statute. For example, under Sections 52 and 53 of the internal market Act,
“A subsidy is ‘distortive or harmful’ if it distorts competition between, or otherwise causes harm or injury to, persons supplying goods or services in the course of a business, whether or not those persons are established in the United Kingdom.”
The devolved Administrations have no wiggle room when it comes to their statutory obligations under the internal market Act, as regards distorting competition. The wiggle room comes in under the subsidy element to minimise competition. I want to probe which legislation they must follow when setting subsidy schemes—what will be the subsidy control Act or the internal market Act. The definitions are very clear.
The noble Lord, Lord Lamont, and others asked about the distortive elements. They are defined under the internal market Act. These are not somehow separate processes, because that Act defines what subsidies are. The second element is that Part 4 of Schedule 3 to the internal market Act excludes types of regulatory provisions. The Minister was categorical in saying that no subsidy scheme, regulation, statutory or regulatory provision that establishes a scheme under the Bill
would be considered under the internal market Act, but subsidy schemes are not excluded by Part 4 of Schedule 3, which lists the exclusions to the regulatory provisions. The legislation is perfectly clear about what is covered within the internal market Act and defines this in Section 30(8). There is no difference between subsidies or anything else. A regulatory provision
“means a provision … contained in legislation, or … not of a legislative character but made under, and given effect by, legislation.”
There is broad scope as far as that is concerned. It would be helpful to have a much clearer understanding of why the Government believe that a subsidy scheme is not a regulatory provision, statutory or otherwise.
Indeed, the Act goes further with regard to what is considered non-discrimination and what would be directly or indirectly discriminating for goods or services. The Minister knows that we debated this thoroughly on the internal market Act, which says that a statutory provision for goods
“is within the scope of … non-discrimination … if it relates to any … of the following … the circumstances or manner in which goods are sold (such as where, when, by whom, to whom, or the price or other terms on which they may be sold)”.
As we know and have discussed on previous groups, subsidies can have a relationship with the price of goods and services, and that is permitted under the subsidy Bill but absolutely prohibited under the internal market Act.
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Another element that relates to non-discrimination is
“the transportation, storage, handling or display of goods”.
A subsidy scheme can support the transportation, storage or handling of goods, but that would be prohibited under the internal market Act because it would not satisfy the non-discrimination principles.
When it comes to services, Section 21(2)(b) of that Act says:
“A regulatory requirement indirectly discriminates against an incoming service provider if … it puts the incoming service provider at”
a relative disadvantage. By definition, a relative disadvantage is one of the elements of a subsidy, and that will presumably be an area in which one can challenge. If you are a service provider wishing to provide services to a public body, and that public body is subsidising certain service providers, which is permitted under a subsidy scheme, that will be providing a relative disadvantage to another. As I see it—I am happy for the Minister to correct me—there is no carve-out in the internal market Act to say that a subsidy scheme would not be considered within that.
I suspect there would be quite a degree of confusion as to whether it is the Subsidy Control Bill or the internal market Act where these provisions are being put forward. I suspect that, if you are a public body and wish to circumvent the internal market Act, you would use principle A in Schedule 1 to define a social difficulty and principle F to say that you are
“minimising … negative effects on competition”
but recognise that there will be such effects. I am interested as to the interaction between the two.
My amendments suggest that either the internal market Act or the subsidy Bill should apply. Ultimately, it seems that we will be operating two markets. There
will be one market in the internal market Act for competition, for non-discrimination on market failure, for distortion and for geographic delineation, and there will be a separate market for the subsidy regime. I do not know how they interact—I am looking forward to the Minister telling me. One body may say that we are putting forward a measure that will distort competition and that it will be challenged under the office for the internal market, then we would say to that public body, “No, we recognise that, but it is for a social aim and we are minimising it, so we have a defence under the subsidy Bill”. I do not know how the office for the internal market or the CMA will judge that.
Secondly, I do not know how the CMA will publish its reports under its duty to consider the impact on the operation of the internal market. This refers to Amendment 72, which is the requirement that the bodies should work in an even-handed manner. I think there was an agreement that, when it comes to the CMA operating and reporting on the effective operation of the internal market of the United Kingdom, it should
“in carrying out its functions … have regard to the need to act even-handedly as respects relevant national authorities”.
That is the statutory requirement in Section 31(4) of the internal market Act. There is no equivalent in this Bill for how, when the CMA will report overall on the competition, it would
“act even-handedly as respects relevant national authorities”.
I believe it should, and therefore I would be grateful if the Minister could explain why he disagrees. I beg to move.