If the noble Lord is going to write my speeches, he might as well write them for my noble friend Lord Lamont, as well. The answer to the question of my noble friend Lord Lamont, through his spokesman, is the Green Book and Managing Public Money guidelines; I suspect as an ex-Chancellor he knows that very well indeed—probably better than we do.
Government Amendments 52 and 53 to Clause 65 have been tabled to address your Lordships’ concerns regarding the frequency of the CMA’s monitoring reports under Clause 65. Instead of mandating a report within five years of the implementation of the regime, the amendments require an initial report after only three years, subsequently followed up by a further report after another three years. Subsequent reporting will then revert to a five-year cycle.
I hope noble Lords will agree that the publication of these two initial reports will be sufficient to keep Parliament and the public informed of how the new subsidy control regime is functioning, and to assist in setting best practice going forward. As a result of these changes, I have also tabled two consequential amendments to clarify how these new initial reports will interact with other provisions in the Bill. These are Amendments 54 and 63.
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While the changes we are proposing will extend the life of the regulation-making powers under Part 4 from six to seven years, we believe this is a sensible extension allowing important observations on the regime from the subsidy advice unit, or indeed others, to be considered by the Government in the early years of the regime. I hope that noble Lords’ concerns have been addressed by these amendments and that they can find their way to supporting them as part of the Bill.
Turning to the amendments tabled by my noble friend Lord Lamont, I will not—noble Lords will be pleased to know—repeat at length points that I made in Grand Committee on the rationale behind the approach to enforcement laid out in the Bill, but the subsidy advice unit plays a fundamental role in the regime. By publishing reports on the subsidies and schemes that are most likely to be distortive to competition, investment and trade, it provides in-depth transparency and scrutiny that will support interested parties, including the Secretary of State, in bringing challenges in the Competition Appeal Tribunal.
It is important to underline that the vast majority of these reports will concern subsidies and schemes that meet the criteria set out in our definitions for subsidies and schemes of particular interest, which must be referred to the SAU, and subsidies and schemes of interest, which a public authority may choose to refer. These criteria will ensure that proper scrutiny is given to subsidies that are high value, that are in sensitive sectors, or that have certain characteristics that are more likely to lead to disproportionate distortion.
The advantages of setting out these criteria in advance are multiple. First, it allows the Government to consult widely on them, and to accumulate and publish their evidence base. A further advantage of providing these criteria in regulations is to minimise the need to carry out extensive and time-critical monitoring of prospective subsidies, and to analyse their level of risk on a case-by-case basis. The Government have no intention that this will be done on a routine basis by either my department or the SAU. Setting the criteria in advance is more predictable for public authorities and recipients and reduces the incentive for them to fly under the radar to avoid an unwanted pre-award referral. Finally, a fundamental advantage of providing these criteria in regulations is to make it absolutely clear that mandatory referral applies to UK Government subsidies as much as those given by other public authorities.
The Secretary of State’s powers to direct a subsidy to the SAU represent merely a safety net for the very rare event that a prospective subsidy does not meet the specified criteria for mandatory referral, but nonetheless appears concerning, or could benefit from the scrutiny of an SAU report. It is right to have this fallback, not least in view of our international obligations. But the call-in powers are not fundamental to the operation of the regime. The success of our subsidy of interest and of particular interest regulations will be measured by the infrequency with which this power is used.
Specifically on my noble friend’s amendments, as I have explained above, this role for the Secretary of State is of relatively minor importance in the context of the new regime. But this minor role is one that requires the political responsibilities of a Minister, not a regulator. A Minister of the Crown, acting in their capacity as a Minister for the whole of the UK and with responsibility for ensuring that the UK meets its international obligations, can exercise discretion in a way that a statutory body cannot. The CMA could not take on this function without compromising not only the agile character of the new regime but the primacy of the subsidy of interest and of particular interest regulations.
Unlike the Secretary of State, the SAU is a statutory body which can exercise only the functions given to it under legislation. Consequently, it cannot exercise discretion in the same way that the Secretary of State can. To carry out these functions, the SAU would be required to scale up considerably to conduct the level of oversight and monitoring needed to fulfil the duty that this amendment would place on it. Therefore, I hope that my noble friend will be able to withdraw his amendment—through his spokesman.
Amendment 55, tabled by the noble and learned Lord, Lord Thomas, would extend the powers in Clauses 55 and 60 to the devolved Administrations and the Competition and Markets Authority. It would have the effect of extending the power to direct public authorities to request a CMA report and to refer a subsidy or subsidy scheme that has been made to the CMA. It would also mean that the DAs and the CMA would be able to automatically apply to the Competition Appeal Tribunal to review a subsidy decision. For the DAs, extending these powers ignores the different roles the DAs and Secretary of State will play within the regime, and indeed the differing roles they play within the constitutional framework of the UK.
I have said this before, but I will repeat that it is the settled will of Parliament that subsidy control is a reserved matter. The UK Government have overall responsibility for the proper functioning of the subsidy control regime across the whole UK. It is also the UK Government who have the responsibility for our compliance with our international obligations in this area, including the TCA.
Furthermore, it is only the Secretary of State who will have, front of mind, issues such as the caseload and resource available to the SAU. Of course, it is important that the considerations of the DAs are taken into account regarding the call-in of subsidies. Noble Lords should be assured that the Secretary of State would take such requests seriously and consider them appropriately on their merits. I can provide the reassurance to both the noble and learned Lords, Lord Thomas and Lord Hope, that work has already begun with the DAs on formalising this process through the continued work on the memorandum of understanding with the DAs to set out in writing that, where such requests are received, they will be considered with due care, attention, and respect by the Secretary of State.
As regards the ability of the DAs to challenge subsidies in the CAT, the noble Lord should be reassured that there is no disadvantage to the DAs. As I have said, this is a reserved policy area, so the Secretary of State has a unique set of responsibilities in this regime—to ensure its good operation for the benefit of every part of the UK. Therefore, the Secretary of State has default standing to ask the CAT to review a subsidy so that he or she can protect those two interests. The DAs do not share the same responsibilities and it follows that it is neither necessary nor appropriate that they should have the same standing.
Crucially, though, that does not mean that the DAs cannot ask the CAT to review a subsidy decision. Anyone whose interests may be affected by the giving of a subsidy can do so, including one given by the Secretary of State in England to address—I hope—the
noble and learned Lord’s concerns. As I have previously said, that includes the DAs where the interests of people in the areas from which they exercise their responsibilities may be affected by a subsidy. I am not sure what reason there is for the DAs to have standing where those interests may not be affected by a subsidy. For all the reasons I have stated, I hope that the noble Lord can withdraw his amendment.
I will address the amendment of the noble Lord, Lord McNicol, to extend the initial limitation period for challenging a subsidy in the CAT from one month to two. The limitation period is set as it is to strike a balance between the need to give an opportunity to challenge subsidies and creating prolonged uncertainty for public authorities and beneficiaries that will act as a brake on legitimate subsidies. However, as I have just outlined, the CMA will be undertaking a review of the regime and publishing a report—now after three years—which will be presented to Parliament. As set out in Clause 65, this report will include a review of the effectiveness of the operation of the Act, as part of which the CMA will be able to consider the effects of the limitation period on the successful operation of the regime.
I turn to Amendment 56 tabled by the noble Lord, Lord McNicol, supported by the noble Lord, Lord Fox, on the question of whether subsidies given under the scheme should be subject to challenge in the CAT. We debated that extensively in Committee, and the House will be pleased to know that, given the lateness of the hour, I will not repeat the arguments I made then. But this does not mean there is absolute protection for a subsidy purportedly given under the scheme. An interested party can argue that a subsidy does not in fact meet the terms of the scheme and can challenge it as a stand-alone subsidy. I therefore hope that the noble Lord will be able to withdraw his amendment. I would like to move my amendments and hope others will not press theirs.