My Lords, I rise to move the government amendments in my name, with more than a modicum of delight, on the transparency of the new subsidy control regime. I have listened carefully to the arguments made for lowering thresholds and shortening the upload deadlines and, of course, I recognise the strength of feeling in the House on this matter. As a result, and as we said we would, the Government have gone back to first principles and reviewed the evidence base, ensuring the correct balance between administrative burdens on the one hand and transparency on the other.
As I set out in my letter to your Lordships on 15 March, the Government have published an updated impact assessment on the Bill which, using newly available data, assesses exactly that balance and has informed our approach to these amendments.
I will summarise the effects of this group of amendments. First, we have introduced a single threshold of £100,000, which applies across the vast majority of subsidy types. This is a substantial reduction of 80% from the original threshold of £500,000. Secondly, we have dramatically shortened the upload deadlines, reducing this by half for non-tax subsidy awards, so that subsidies will be visible on the database far sooner. We have retained the deadline for individual subsidy awards given as tax measures at one year. This is because a tax
declaration, which is necessary to calculate the subsidy award, can be amended for up to a year after the tax return is submitted. Reducing the deadline here would make the cost of uploading tax subsidy awards disproportionate to the value of transparency for them. Noble Lords have recognised in previous debates that tax subsidies are in a unique position. I hope the House also recognises that, where it has been possible to reduce upload deadlines, we have done so.
In addition, the Government have introduced powers to be able to further amend the thresholds and the upload deadlines. The Secretary of State can review the levels in due course and make further changes as suggested by the available evidence at the time. Such new evidence will come about through the subsidy advice unit’s experience of how the regime is operating and the reports that it makes. I commit that these levels will be reviewed following the publication of the first subsidy advice unit report on the operation of the regime. Importantly, these regulations are made by the affirmative procedure, so Parliament will have maximum opportunity to scrutinise any changes. I know that noble Lords will do so.
The third change is that we have introduced new obligations to require the upload of permitted modifications of a subsidy or scheme. Public authorities will now face the same obligations to upload even minor changes, with the same upload deadlines as for the original subsidy.
Fourthly, we have placed a duty on the Secretary of State to review the transparency database as he or she considers appropriate, thereby ensuring additional quality control. As I stated in Committee, the Government are now carrying out additional checks on the database and following up with public authorities where we find mistakes. This will of course continue. As public authorities become accustomed to the regime they will, naturally, become better at uploading accurate information first time.
Finally, we have introduced an amendment specifying that the Secretary of State may provide statutory guidance to public authorities on pre-action information requests; that is, the provision of information following a request about a subsidy decision to an interested party that is considering whether to ask the Competition Appeal Tribunal to review the subsidy.
It is expected that any such guidance will encourage public authorities to discuss potential disclosure requirements with the beneficiary before the subsidy is given. This will help concerns about the confidentiality or commercial sensitivity of information disclosed in response to a pre-action information request to be addressed without unduly delaying or preventing the provision of sufficient information to potential challengers.
The overall effect of Amendments 18, 19, 21 to 44, 59, 60 and 62 in my name, taken together, will mean that we have a highly transparent subsidy control regime—far more so than existed under the EU state aid rules. Interested parties will be able to see subsidies they can challenge as well as numerous subsidies which are not challengeable under subsidy control requirements but whose publication is nevertheless in the public interest.
The new impact assessment reflects that the cost of lowering the threshold across the different subsidy types to £100,000 would have an administrative cost of £1.6 million over 10 years. This is not negligible, but the administrative costs of lowering the threshold further would be even greater. For example, a threshold of £25,000 per award would lead to a cost of just under £8 million, and a threshold as low as £500 per award—as was suggested by previous amendments—would be almost double that figure at just over £14 million. This has informed the Government’s decision on where to draw the most appropriate balance.
On the effects of shortening the upload deadlines, the impact assessment highlighted how there are unlikely to be significant cost burdens in reducing the upload deadline for non-tax subsidies from six to three months. However, lowering it below three months would have associated costs, as public authorities need to prioritise the gathering, checking and uploading of necessary information over other tasks they have. These costs will vary between public authorities.
The impact assessment also indicates that there would be disproportionate costs in relation to the uploading of tax subsidies to a shorter timeframe because of their unique nature, so the upload limits for tax subsidies in the Bill remain at 12 months, as I outlined earlier.
Before I conclude, I will address Amendment 20 from the noble Lord, Lord McNicol, which seeks to require the cumulation of subsidy awards within a scheme for the purposes of transparency. I recognise that this amendment would not represent a major change and I hope I can take from that that he is supportive of the package of changes the Government have made on transparency. None the less, my view is that it is seeking to solve a problem that does not really exist, creating an unnecessary administrative burden for public authorities.
I would first like to be very clear that the transparency obligation thresholds apply to subsidies, not payments. If a single subsidy to one enterprise for one purpose has been divided into multiple instalments, it remains as one subsidy and would need to be uploaded to the database if its total value was over £100,000. Any public authority trying to avoid the transparency requirements in this way would already be in breach of its obligations regardless of this amendment. I will ensure that this is reflected in the guidance so that public authorities are absolutely clear on this point.
I can see three possibilities for an enterprise to receive multiple awards under £100,000 for the same scheme, and none of them would justify the amendment. The first is entirely legitimate and they are simply separate subsidies. Perhaps different branches of the same business receive high-street regeneration subsidies for different towns in the same local authority. It is worth noting that some schemes will be made by a different public authority from the one giving the subsidy. For example, streamlined subsidy schemes are made by the UK Government but will be used by other public authorities, so the same enterprise could receive a subsidy under one scheme but from two different public authorities. I cannot see that this is a particular problem. In any case, the scheme itself will be on the database and subject to challenge in the CAT as provided for in the Bill.
The second possibility is that the public authority is trying to circumvent the transparency requirements simply to avoid the burden of having to upload its entirely legitimate subsidies, and is giving two separate subsidies under the scheme when it might have otherwise just given one. We can probably rule that out. There is no incentive for a public authority to do that: uploading an award on the transparency database will be a far more straightforward task than trying to parcel out a single subsidy into two different subsidies of £99,000 or less.
The third possibility is that the public authority is trying to game the transparency requirements to evade scrutiny because it believes that the subsidy is not compliant with the terms of the scheme and would be challenged if it came to light. Again, I find it hard to imagine that this is a tactic that any public authority in the UK would be so blatant as to deploy, and it would not be in compliance with the Bill requirements in any event. Should the subsidy lead to significant harms, it is highly likely to become apparent through other means, whether that is the recipient’s accounts, a press release, or other transparency mechanisms such as the local government transparency guidelines. A series of £99,000 awards would perhaps start to look suspicious when they came to light, which they inevitably would.
Overall, the requirement to cumulate awards within schemes for the purposes of transparency is a disproportionate response to a problem that I do not believe will arise in practice. It would add an unnecessary administrative burden to legitimate subsidies in the first category, and I cannot see that it would make much difference to the hypothetical nefarious public authority in the third category, since its attempts to game the system would probably breach the subsidy control requirements.
Therefore, I hope the noble Lord will not move his Amendment 20 and will agree to support, along with the rest of your Lordships’ House, my extensive package of transparency amendments. I beg to move.
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