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United Kingdom Internal Market Bill

Volume 808: debated on Wednesday 25 November 2020

Report (3rd Day)

Relevant documents: 24th, 36th and 29th Reports from the Delegated Powers Committee, 17th Report from the Constitution Committee, 8th Report from the Joint Committee on Human Rights

My Lords, I should inform the House that, on Monday, Amendment 34 was agreed in error. It was pre-empted by Amendment 31.

Clause 39: Enforcement

Amendment 62

Moved by

62: Clause 39, page 31, line 30, leave out “such” and insert “—

(a) each relevant national authority, and(b) such other”Member’s explanatory statement

This amendment would provide that the domestic administrations must be among the bodies consulted by the CMA in relation to its policy on enforcing information-gathering notices.

My Lords, during the Bill’s progress through Parliament, we have engaged extensively to ensure that it, and the Office for the Internal Market in particular, work for all parts of this country. We have always been clear that the Competition and Markets Authority will ensure the devolved Administrations are consulted on all important matters relating to the OIM. Following significant discussions with our devolved counterparts and noble Lords, we are pleased to introduce these two amendments, which will underscore the importance of the devolved Administrations in the operation of the OIM. The Government have emphasised throughout the introduction of the Bill that the UK internal market needs to work for all parts of this country, and these amendments are a testimony to this aim.

Amendment 62 ensures the CMA must consult the devolved Administrations when preparing or revising its policy on enforcing information-gathering notices. Alongside this, Amendment 63 will require the Secretary of State to consult the devolved Administrations over the level of fines that can be placed on bodies that do not comply with a CMA request for information. Both amendments give the devolved Administrations a significant say in the key operations of the OIM. These amendments will put beyond doubt this Government’s commitment to ensuring that the interests of the devolved Administrations are reflected in the governance of the OIM and that the OIM will continue to meet the interests of all parts of the United Kingdom.

I turn now to Amendments 62A, 63A and 63B, which seek to alter the CMA’s ability to effectively gather information. I reassure the House that, as highlighted in previous debates on the Bill, these penalty powers in Part 4 will not be commenced unless there is a clear and credible need for them—for example, to ensure that the OIM can gather credible and accurate information for its reporting and monitoring purposes. I believe this goes some way to addressing many of the concerns of the noble Baroness, Lady Bowles, regarding the design of the information-gathering and enforcement regime. This will ensure that such a regime will be well considered, based on clear evidence of need and proportionate to fulfil the OIM’s duties. I emphasise that the need for accurate, and up-to-date information is essential to ensure that the OIM’s reports and advice are credible, evidence-based and meaningfully capture the UK internal market landscape.

I recognise the concerns of the noble Baroness that small businesses should not suffer disproportionate burdens in complying with the law, and a definition of the penalty criteria of Clause 40 should apply only when investigating adverse effects in the UK internal market. To reiterate: the CMA will prioritise carrying out information-gathering on a voluntary basis. However, there may be circumstances in which a formal information notice is required. It is therefore vital the CMA is given the necessary legal powers to help ensure that this assistance is provided. These are all based on the existing powers of the CMA. Therefore, excluding one type of company from receiving penalties under the regime and narrowing the definition of the penalty criteria in Clause 40 would not be appropriate and hinder the effectiveness of the OIM in fully delivering monitoring across the whole of the UK internal market.

I remind noble Lords that the penalty regime is proportionate. Under the proposed penalty arrangements, any penalties imposed will reference a daily rate or a fixed amount, with limits on both charges. As I have said, the Secretary of State will want to consult all relevant persons before finalising the levels of penalties. This will help ensure fair management of penalties and I would expect the OIM to apply a sensible approach to implementing those penalties in line with its published policy statement. Removing the ability to impose a penalty against those qualifying as a small company under the Companies Act 2006 or when investigating regulatory provisions will set a precedent that compliance with an information notice is not always mandatory. I have made clear, and these new government amendments also make clear, that we will consult carefully on penalties and take concerns, including those of small businesses, into account to strike the right balance.

Clause 40 provides for a holistic, thorough approach to penalties, when evidence and consultation with other relevant persons necessitates it, by the CMA as OIM, whenever it needs a person to provide documentation to carry out its functions and it is clear that a voluntary approach will not work. For these reasons, I hope I have reassured noble Lords and hope the noble Baroness, Lady Bowles, will not move her amendments. I beg to move.

My Lords, I thank the Minister for some of the considerations on which he elaborated around some of the penalties, but I find it hard to accept this in principle. The information-gathering procedures in the Bill seem without any limit on them in the Bill—an unreasonable measure. To try to find a way to tackle that, I tabled three amendments. I thank the noble Baroness, Lady Altmann, and the noble Lord, Lord Vaux, for signing Amendment 62A on the small business exemption. From among the amendments, we hoped the Minister might consider adopting that one or come forward with a version for Third Reading.

Understanding why the penalty provision is unreasonable requires analysis of the background. Section 5 of the Enterprise Act 2002 gives the CMA an information-gathering function for obtaining, compiling and keeping under review information about matters relating to the carrying out of its functions; it does not give a fining power in order to compel businesses to respond. Such compulsion can come later, at a stage when a market study is undertaken, but the circumstances then are that some suspicion exists that businesses themselves have contributed to failures in the market. In contrast, Clause 38 of this Bill gives the CMA, in connection with reports under Clauses 31 to 34, or under Section 5 of the Enterprise Act when it concerns those clauses, the power to collect information and impose penalties on individuals and businesses in order to make them respond.

This power exceeds what the CMA can do for ordinary information gathering, and the provisions are a copy and paste of the powers that accompany the stronger measure of a CMA market study. But there has not been any corresponding copying of the other conditions that surround a market study; nor is it a comparable situation to a market study, because there is no suggestion that the things being investigated might be happening because of what businesses themselves are doing.

The powers in this Bill are about investigating regulations, which is entirely beyond the control of business, and there is no wrongdoing by business. These investigations are about circumstances created by legislatures and which legislatures wish to investigate. It is more comparable to a departmental consultation than to a market study, so what is the justification for coercing and burdening businesses, even if the Minister says there will be rules making that perhaps a bit less onerous? In Committee, the noble Lord, Lord Tyrie, said of these powers:

“The argument that they were derived from legislation the purpose of which was very different is well taken and might point to further amendment.”—[Official Report, 4/11/20; col. 726.]

That is the view of the recent, former chair of the CMA.

One of my amendments would delete the penalties clause, which is really what I think should be done, although I see little hope of persuading the Minister. My second attempt, Amendment 63B, tried to recreate some of the circumstances of a market study, but as the Minister recently confirmed that only regulations can be investigated, not business cases, it does not fit and it does not work. So my third attempt—Amendment 62A—concentrating where it really matters, exempts small businesses from the penalties. It uses the small business definition from the Companies Act, expanded to cover non-company structures. The Companies Act recognises that small businesses should have a lesser public interest burden by exemption from some filings and it recognises that in primary legislation—it does not rely upon regulations or codes of conduct. Why not apply similar logic here?

Small businesses do not all have the wherewithal to respond to onerous consultations, although many will help when they can, but the information requirements in this Bill can require work to be done or attendance at a given place, both causing financial loss. There is no compensation save travel expenses. Yes, there is a “without good reason” defence, but the smallest businesses cannot afford a legal challenge even if they knew of the defence.

Perhaps the CMA will be reasonable itself in setting its code of practice. The Minister hopes so, but there is no certainty, and a notice detailing applicable penalties is a frightening thing. Of course, it belongs to another culture, in which the CMA’s core functions require confrontation with business and suspicion that businesses and companies are doing wrong.

In Committee I asked the Minister what would constitute a reasonable excuse, giving a wide range of examples relative to small businesses. I got no reply, nor have I had a written reply despite having asked for one—although I know the Minister is very busy, not least writing to colleagues.

This is a huge encroachment on civil liberties and the freedom to conduct business. I hope that, at this 11th hour, the Minister will listen and come back with something at Third Reading to put in the Bill that reinforces the statements he has made. But, if there is not that prospect, this is a matter of deep principle—and I speak as somebody who ran a small business for 30 years—and I must give notice of my intention to call a vote on Amendment 62A if negotiations cannot proceed at Third Reading.

My Lords, I am delighted that my noble friend has listened to many of the concerns raised in Committee. I also welcome his saying that the Government will consult carefully on penalties, and the penalties will be limited. I thank him for saying that the needs of small businesses will be taken into account as well.

However, I cannot help but continue to support the amendment in the name of the noble Baroness, Lady Bowles, which I have added my name to, alongside the noble Lord, Lord Vaux, because the points she made seem most persuasive. She has clearly explained that the proposed penalty regime is not comparable with that of the current CMA, despite my noble friend indicating that it is.

The penalties under the CMA would apply in cases where firms are suspected of wrongdoing or unfair competition or practices. But it has already been acknowledged by my noble friends Lord True and Lord Tyrie that the Bill is concerned here merely with data gathering itself, such as would occur in consultations or calls for evidence, rather than information requests that follow from suspected failures. Therefore, I urge my noble friend the Minister to reconsider the position that many small businesses could find themselves in if information is demanded of them under these powers. It would take scarce corporate resources away from operating the business and is likely to pose significant difficulties for firms that do not have lots of employees available to comply with such an information request.

I point out to my noble friend the Minister from these Benches—as a member of a party that has always been the friend of small business and has promoted the value and virtue of people starting up businesses and running small firms themselves—that there is a significant risk here of imposing unreasonable burdens. I echo the call from the noble Baroness, Lady Bowles, for a meeting with him before Third Reading to see if we can find a form of words that the Government could accept, to avoid the need for a vote on Report.

I hope my noble friend understands that this is about a fear that the Bill imposes unreasonable and abnormal demands. For example, on pensions, the Pensions Regulator has not previously had the power to demand information from schemes unless it suspected wrongdoing. I hope we can find a way in this Bill to exempt small businesses from this burden and the potential threat of penalties.

My Lords, I have added my name to Amendment 62A, proposed by the noble Baroness, Lady Bowles. We owe her our thanks for bringing this important wrinkle in the Bill to our attention. She and the noble Baroness, Lady Altmann, have already eloquently set out the reasons why this amendment is needed, so I will not detain the House for too long.

The Bill creates draconian powers of investigation for the CMA, with associated penalties which, as we have heard, are much more suited to its duties of investigating market abuse. Indeed, as the noble Baroness, Lady Bowles, pointed out, the wording has actually been lifted from those duties. However, the purposes of the investigation set out in this Bill are very different from market abuse investigations. In this Bill they are investigations into the impacts of regulations or provisions made by the various national authorities. Businesses are not in this case being suspected of, or investigated for, market abuse, yet the Bill will mean that they will have to respond to notices subject to penalty as if they were.

Even if we reluctantly accept that these powers and penalties are appropriate—and I do not—we must surely ensure that the powers, and in particular the penalties, do not become an undue or unfair burden on business. I listened carefully to what the noble Lord the Minister had to say in this opening speech, and I am afraid that I do not think that the protections and the consultations that he mentioned go far enough in this case.

While larger businesses may be able to cope with such an investigation, small companies do not have compliance departments or in-house legal teams. They do not have the excess capacity to be able to deal with such investigations. Even in normal times, these investigations would be burdensome for small companies, and it is even more the case when they are trying to recover from the Covid crisis and at the same face up to the challenges that leaving the EU single market will create. This is no time to load additional burdens on to small businesses. Therefore, I urge the Minister to accept this simple—and, I had hoped, uncontroversial—amendment, or at least to come forward with some protections for smaller companies, as has been suggested.

My Lords, I very much welcome the opening statement from the noble Lord, Lord Callanan. I think he has proposed an improvement in the Bill, by adding further requirements for consultation with the devolved Administrations. That is for the good. I also have a great deal of sympathy with the amendment moved by the noble Baroness, Lady Bowles. I can see the argument that, if there are impediments to the internal market in a particular sector, the new body will require an information-gathering power, and if you have that power you have to have an enforcement power. It is welcome that the Minister says that these powers will be exercised in a voluntary and proportionate way. Yes, maybe—but I do think that there is a special concern about small businesses, to which I hope the Minister can find a way of responding positively in his reply.

I have to say—and I cannot resist the temptation to poke fun at the noble Lord, Lord Callanan, on this—that if such clauses had been proposed by the European Commission, we would have heard his screams of protest from the committee rooms of Brussels to the banks of the Tyne, which he represented, and he would have raised the roof on the wonderful auditorium of the plenary in Strasbourg. I can hear him now in excellent Brexiteer mode. Of course, now that Brexit has happened, these concerns are of no consequence. The truth is—and I think this is going to become clear—that for business Brexit means more and more bureaucracy, and this is what we are seeing in terms of the new customs arrangements and in terms of this Bill. There—I cannot resist making that point.

Having said that, there are many serious issues with this Bill. I regard it as a treaty-breaking, devolution-wrecking, United Kingdom-unravelling Bill. These are serious points for debate and many of the amendments we are considering this afternoon, I am afraid, contribute to those consequences. So I hope that a compromise can be reached on this matter before Third Reading and, on that basis, I will abstain in the Division.

The next speaker on the list, the noble Baroness, Lady Neville-Rolfe, has withdrawn. I call the noble Baroness, Lady McIntosh of Pickering.

My Lords, I am delighted to follow the noble Lord. Like him, I was surprised at the level of the penalties for these infringements. I join noble Lords who congratulated and thanked my noble friend the Minister for listening to concerns expressed at an earlier stage of proceedings and bringing forward Amendment 62. I will just ask: what form will the consultation by the CMA with the devolved Administrations take? How long will be allocated to it generally, along with the other bodies that are to be consulted?

Has the CMA taken a policy decision not to have on its board currently, as I read it, any representatives of the devolved Administrations? I notice that Jo Armstrong, for whom I have the highest regard, is represented. She is currently a commissioner with the Water Industry Commission for Scotland with whom I have had the pleasure to work for four or five years. But I do not see that any specific representatives of the devolved Administrations are there. Given the thrust and context of this Bill, it will be interesting to know if there is any policy principle as to why there are not. I know that my noble friend will say that that is a matter for the CMA, but it works under the guidance of the Secretary of State and the department, so I ask him to comment in that regard.

I echo the concerns raised by other noble Lords and I thank the noble Baroness, Lady Bowles, for her Amendments 62A, 63A and 63B. I ask my noble friend to consider to what extent the ask under Article 39 goes much wider than is currently envisaged in, I think, the Enterprise Act that forms the basis for these provisions. Against the background that these are quite substantive penalties, will the Minister be mindful of the debate that we have had, noting, in particular, the comments made by the noble Baroness, Lady Bowles, my noble friend Lady Altmann and the noble Lords, Lord Vaux and Lord Liddle? Will my noble friend have regard and perhaps pause at this stage and come forward with a further government amendment at Third Reading?

My Lords, I support the government amendments in this group, but I put my name down to speak in order to address the other amendments tabled by the noble Baroness, Lady Bowles of Berkhamsted. Like her, I am concerned about the heavy-handed penalties that could apply in respect of the CMA’s information powers under the Bill.

The CMA has extensive information powers under the Enterprise Act 2002, as the noble Baroness, Lady Bowles, explained, which are needed so that it can carry out its competition functions effectively, in particular in the face of companies or sectors that are resistant to one of the CMA studies. However, there has to be a serious question about the information powers put into the Bill in respect of the office for the internal market. It should be remembered there was no clear consultation on this during the summer, so the proposals have not had a lot of serious attention.

The OIM will of course be focused on the effectiveness of the internal market rather than the behaviour of companies or sectors. I understand that the OIM needs to build up a picture of intra-UK trade flows in order to understand the scope of what it is looking at, and it should have the ability to request that information. However, to back up that kind of information gathering with extensive penalties is not right. It stands in stark contrast with the Trade Bill, which sets up the possibility of requesting information from businesses in respect of international trade—but it is very clearly a request, with no compulsion. My noble friend Lord Grimstone of Boscobel confirmed that in Committee on the Trade Bill.

The office for the internal market may well want to gather information from the devolved Administrations or regulatory bodies within the devolved territories. For example, it could be looking at whether particular provisions have a detrimental effect. That sort of information gathering is largely within the public sector, and the enforcement provisions in Clauses 39 and 40 do not make sense in that context.

Can the Minister say who the “persons” in Clause 39, whom the Government expect to be served with a penalty notice, are? Could one of them be, for example, the First Minister in Scotland, or one of her Ministers? If not, why not? I suspect that the serious information that may need to be extracted at some stage will come from the devolved Administrations. Why should businesses, which will be the victims of any abuses of the internal market, be treated in the way envisaged in the Bill?

So I support the noble Baroness, Lady Bowles, in particular in her Amendment 62A to try to shield small companies from these powers. I listened carefully to what the Minister said in his introductory remarks, which were very helpful, but I remain concerned that the CMA will use inappropriately the powers given to it by the Bill. There are no safeguards against that, so I hope that my noble friend will take this away for further discussions between Report and Third Reading.

My Lords, I should declare an interest in that I have a partnership with my wife to look after 40 acres of woodland in Bedfordshire. I thank my noble friend on the Front Bench. I have worked on a great number of Bills in this and the other place, and it is good that when we discuss things in depth, right across the Chamber, problems are raised and the Minister listens. I welcome enormously Amendments 62 and 63.

However, I share the concerns of some other noble Lords about the implications of Amendment 62A. It raises questions that ought to be considered—although I am not in a position to repeat what my noble friend Lady Noakes said. I hope that the Minister has listened to the concerns expressed from both sides of the Chamber and will find a means of ensuring that what might be very unusual cannot happen. I am sure that my noble friend on the Front Bench is listening. Some consideration should be given to including Amendment 62A, or something comparable, in the Bill.

My Lords, I have to declare an interest, in the sense that, due to my IT incompetence, my name appeared in error on this list of speakers. Nevertheless, I have listened to the debate. It is not an area that I know anything at all about, but I am much taken with the amendment from the noble Baroness, Lady Bowles. My views were summed up by my noble friend Lord Liddle. I agree with him. The Minister has obviously tried to meet the requests of the House with his own amendments and, to that extent, we should be grateful. However, as I say, I really was not part of this debate but the noble Baroness, Lady Bowles, has my support.

My Lords, the next speaker on the list, the noble Lord, Lord Flight, has withdrawn, so I call the noble Lord, Lord Fox.

My Lords, many noble Lords have railed against the virtual process, but the serendipitous arrival of the noble Lord, Lord Rooker, is perhaps justification for having a virtual Parliament after all.

I thank the Minister and other speakers in this short debate. I should like to put this issue into context. Back in the day, when I worked in the real world, in many cases the sort of inquiry that we are talking about would have come across my desk. I worked for large international corporate companies and, even for us, it was difficult to find the resources to respond to some of these requests. So this is a real problem and Amendment 62A seeks to address a real issue that will genuinely cross the desks of small businesses in this country.

The Minister tried to corral these requests, saying that they would occur only when the office for the internal market needed credible and accurate information. Well, I trust that it always needs credible and accurate information, so that is no restriction on the office. He also talked about the word “proportionate”. I should correct the noble Lord, Lord Liddle: the Minister did not use the word “voluntary”. He said “proportionate”. This is not a voluntary process but a compulsory one, as it stands in the Bill. That is the problem. And proportionate to whom? Is it proportionate to the desire of the office for the internal market to get credible and accurate information, or proportionate to the fact that five, six or seven people occupy an important part of the market but do not necessarily have the resources to respond to these requests?

The Minister also said that only in a small number of cases did he expect that a formal information notice would be required. Well, that is where some of the clarification can come. What are the circumstances around which a formal information notice would be required? How do we ring-fence it and make sure that we understand what “proportionate” means in the context of this discussion? The Minister also said that leaving out, or giving this exemption to, small businesses would set a terrible precedent. However, my sense is that precedents have already been set in other Acts. I cannot remember exactly, but I think that the Corporate Insolvency and Governance Act has carve-outs for small businesses, and there are many other Acts in which small businesses already have carve-outs. So the precedent already exists; it is just a question of which precedent one chooses to select.

The nub of the problem is that the Minister said that the powers were carved out of the existing powers of the CMA. However, just as the noble Baroness, Lady Noakes, said, the powers are used for an entirely different purpose—to investigate and identify potential irregularities and law-breaking. That is not the nature of what we are saying.

When I entered this debate, I expected, for once, to be on the same side of the argument as the noble Baroness, Lady Noakes, and the noble Lord, Lord Naseby, and that proved the case. The noble Baroness, Lady Noakes, gave a very powerful and detailed explanation about why the Minister should be serious about this issue. It is absolutely true that the Trade Bill has taken a different route; it acknowledges that this information is essential but has gone down the route of gathering it voluntarily. If the Minister is in the business of precedence, perhaps that would be a better precedent for him to take.

It seems bizarre that a Conservative Government would push this level of red tape on the small, enterprising and innovative businesses of this country. It seems strange that we should be the flag carriers of this case, rather than the Minister, and it was important to hear the noble Baroness, Lady Noakes, pick this up.

My noble friend Lady Bowles talked about the possibility of something being agreed for Third Reading. I am no expert in body language, but I saw a faint shaking of the head cross the Minister’s personage when my noble friend mentioned the idea of some sort of negotiation or compromise being reached in time for Third Reading. In light of what the Minister has heard, not just from this side of the House but from his staunchest supporters throughout the Bill, making serious and important comments about this issue, I ask that, whatever decision he comes to, he makes it very clear verbally. We are in a hybrid House, and not all of us can benefit from the subtle nuances of the Minister’s demeanour in working out whether he will or will not be negotiating at Third Reading. Can the Minister be clear about his intentions between now and Third Reading, then we can be clear about whether to vote in support of this amendment?

My Lords, partly for the reasons that the noble Lord, Lord Fox, has given, this has been an interesting debate, with some flying in without any original intent but also from across the House. It highlights many of the issues facing what was meant to be an “oh so easy” departure from nearly half a century of EU membership. Practices and rules within the EU developed over years, with input and experience from business and consumers and the experience of how things worked, and from Governments, regulators, courts and lawyers. As my noble friend Lord Liddle said, there were umpteen harrumphs, grumphs and complaints from the Minister and others who are not supporters of the EU, but the rules were created in that way. They were created by discussion, experience and by knowing what was needed when. They were not written hurriedly over the summer, as we know the Bill was.

The creation of an internal market, covering four parts of the UK with their own Governments and competences, needs as much careful thought, planning and, especially, consultation and joint decision-making as has worked so well across the EU as its single market developed. It is sad that some of these amendments need to be written into legislation—we hoped they would have been taken for granted. But we need to set down that the devolved authorities should, of course, be consulted at any stage of decision-making, and we therefore welcome Amendments 62 and 63 in the Minister’s name, and welcome this formalising of the devolved Administrations’ rights and roles.

The other issues raised by the noble Baronesses, Lady Bowles, Lady Altmann and Lady Noakes, are clearly accurate in their specific content. Our only problem with them, especially given the vital three issues in the Bill—Part 5, the Henry VIII powers and devolution—is that they are probably not the right subjects on which to ask the Commons to think again, but we would like to ask the Government to think again. There are some really big questions that we need the Commons to consider. Our fear is that sending Amendments 62A and 63B back to the Commons simply would not serve a purpose. It normally takes a nanosecond for them to be overturned there when, actually, we want to get the attention of the Minister and Government.

I have a slight problem with the idea of releasing small businesses from all penalties. We do not do that in other areas, in particular with health and safety. Offering a complete safe haven in all circumstances could be detrimental to consumers and employees—but that is a small point. More serious is the wider issue touched on by the noble Baroness, Lady Noakes, of whether these information-gathering powers are right. As the noble Lord, Lord Fox, said, the OIM is being shoehorned into the CMA, and the fit simply does not work. As a regulator, the office for the internal market would be better tailored to be independent, so it could develop rules, a code of practice or any penalties needed suited to the task in front of it, rather than brought over from elsewhere. We are going to discuss that later: the big issue of whether the OIM should indeed be part of the CMA.

My plea to the movers is not to put this to a vote today. My guess is that the Minister would prefer that, because he would be able to wait for the other place to overturn it, which is not what we want at all. I worry that it would detract from the big issues, but it would also not deal with the broader issue of how the OIM will work. For that reason, we do not support it. I do not think it is the right way of dealing with an important issue.

I make one further point on how devolution is to be strengthened, which is part of the noble Lord’s amendments. It is about recognising the devolved authorities, as we implement the plan in the Bill to make an internal market work. The Minister has protested throughout that the Government are committed to the common frameworks process and that they have not retreated from the principles under which they were set up in 2017. Ministers have said that they respect the hard work that has gone into making these frameworks over the last three years, and the way in which they are pioneering new ways of working between the four countries and the harmony, as well as harmonisation, that has emerged. They have reiterated praise of the common frameworks, at the same time as saying that they are inadequate, partial and need to be overtaken by the Bill, rejecting all evidence to the contrary and despite public concern that the Bill will lower standards and provide less certainty than the frameworks will.

We have heard that Ministers in Wales and Scotland have warned that the Bill

“To all intents and purposes … removes any incentives for the UK Government to continue engaging with the common frameworks.”

That is a serious concern, and it sounds as if the evidence is showing that that concern is right. According to the work of our Common Frameworks Scrutiny Committee, there are indications that the Bill is already having a chilling effect on the progress of achieving common frameworks.

In July, the Cabinet Office Minister Chloe Smith wrote to the noble Lord, Lord McFall, and to the Liaison Committee, saying that seven frameworks would be developed and agreed by the end of this year. In September, she reduced that to five. As of today, only two have been published, on nutrition and on hazardous substances. I am afraid that the others, even if published, will not have time to complete their parliamentary scrutiny by the end of the year.

Moreover, the Common Frameworks Scrutiny Committee is aware that, in the process of completing the task of making the frameworks, some—such as nutrition––are already coming up against the requirements in this Bill. No doubt there will be future examples of that emerging in the next few weeks. Will the Minister say, before the Bill progresses further, whether he will seek the advice of the Common Frameworks Scrutiny Committee on this emerging evidence of difficulties, so that we really do make sure that this Bill is not going to undermine but will support the work of the common frameworks?

I thank all noble Lords for their interventions on this subject; I understand the sincerity with which Peers have addressed it. However, as I said in my opening remarks, the amendments on which we have been able to get agreement put beyond doubt that the OIM will closely consult and work with the devolved Administrations on an equal basis, in the interests of all parts of the United Kingdom. These important changes ensure that the OIM’s policy on information-gathering and enforcement, including the level of penalties, will be carefully considered in consultation with the devolved Administrations. This will ensure greater transparency in decision-making and will help ensure that the OIM will be able to gather the accurate information it needs to independently assess and monitor the UK internal market. Of course, the Government have made it clear that reports carried out by the OIM each year will be made available both to this Parliament and to the devolved legislatures.

I reiterate a point I made in previous debates: to be clear, the penalty powers in Part 4 will not come into effect unless there is clear evidence that there is a need to do so in order for the CMA to fulfil its internal market functions. I believe that this provides the necessary assurances that any penalties regime will be proportionate and transparent.

In addressing some of the points made in the debate, I turn first to those made by the noble Baroness, Lady Bowles, and the noble Lord, Lord Fox, on precedent. I can certainly reassure noble Lords that the Bill sets out clearly the maximum limits to the level of financial penalties in Clause 40(6). They do not exceed those which the CMA can currently impose. Penalties and the enforcement regime are based on precedent, as set out in the Enterprise and Regulatory Reform Act 2013. As I mentioned in my opening speech, the justification for these powers is that, without such a deterrent in place, there is an incentive not to comply with information-gathering requests, and that runs the risk of not having completely accurate information supplied to the OIM.

My noble friend Lady Altmann gave the example of the Pensions Regulator. I can say that excluding an entire class of business from information-gathering requirements such as these does not have as firm a standing in precedent as the she suggests. The CMA acting as a reasonable public body will, of course, in all cases, take into account all relevant factors, whether on the face of the Bill or not, in considering how to act and whether to pursue penalties, if they have been commenced at all.

My noble friend Lady McIntosh asked about reasonable excuses. I am not sure whether it was she who asked me a similar question on Report on Monday, but as I said then, the CMA would set out in its statement of policy the clear steps and procedures regarding the enforcement of its information-gathering regime. The penalties will not be commenced until there is evidence that they are called for, and even then they will not be used except as a last resort, whatever the size of the business. The CMA will consult all relevant persons regarding its statement of policy. I am happy to confirm to my noble friend Lady Noakes that, as I said in Committee, the CMA will not be able to issue a financial penalty against—I am pleased to say—either this Government or any UK Government, or indeed the devolved Administrations.

My noble friend Lady McIntosh mentioned consultations. The Bill requires that Ministers should consult as a matter of fact before they exercise their delegated powers. As is normal for such legislation, it does not spell out in great detail how this must be achieved, but we will engage with the devolved Administrations as part of the process of normal policy development, by, for example, sharing draft SIs and publications, and co-operating on public-facing events wherever that is possible, and, in any case, more formally before a decision is made.

For all of the reasons that I have set out, I hope that noble Lords will accept the amendments that I have tabled and that the noble Baroness will not press hers. However, for the benefit of the noble Lord, Lord Fox, and to be absolutely clear and to put the matter beyond doubt, I am afraid that I have gone as far as I can go on these matters and I will not be reflecting further before Third Reading. Therefore, if the noble Baroness wants to test the opinion of the House, she should do so now.

Amendment 62 agreed.

Clause 40: Penalties

Amendment 62A

Moved by

62A: Clause 40, page 32, line 7, at end insert—

“( ) Penalties under section 39(1) or (2) may not be imposed on small companies, as defined in section 382 of the Companies Act 2006 (companies qualifying as small: general), or on partnerships or other businesses with similar criteria.”

In moving this amendment, I am sorry that the Minister is not prepared to negotiate further about small businesses. I am also sorry that the noble Baroness, Lady Hayter, and Labour do not seem to think that small businesses—which are the backbone of jobs and the economy in this country—are a sufficiently serious matter. I consider that allowing businesses to have the freedom to conduct their business without obstruction when they have done no wrong is quite a serious constitutional matter. Therefore, I wish to test the opinion of the House and to record my vote and those of my colleagues.

Amendment 63

Moved by

63: Clause 40, page 32, line 19, after “CMA,” insert—

“(aa) each other relevant national authority,”Member’s explanatory statement

This amendment would provide that the other domestic administrations must be among the bodies consulted by the Secretary of State about regulations setting the level of penalties for contraventions of information-gathering notices issued by the CMA.

Amendment 63 agreed.

Amendments 63A and 63B not moved.

We now come to the group beginning with Amendment 64. I remind noble Lords that Members other than the mover and the Minister may speak only once and that short questions of elucidation are discouraged. Anyone wishing to press this amendment or anything else in this group to a Division should make that clear in debate.

Clause 42: Power to provide financial assistance for economic development etc

Amendment 64

Moved by

64: Clause 42, leave out Clause 42

Member’s explanatory statement

This amendment is intended to remove the provision for a Minister of the Crown to provide financial assistance for economic development etc. anywhere in the United Kingdom.

My Lords, I rise to move this amendment to remove Clause 42 of the Bill. This amendment and Amendment 69, to which we shall come later and which stands in my name, deals with two clauses that are in some ways closely related. This clause authorises the UK Government to spend funds on the huge area of government expenditure—indeed, almost any aspect of government expenditure. Clause 44 deals with the quite separate question of state aid, and it is very important to keep them distinct. I make it clear in moving this amendment that I intend to press this to a Division.

First, I shall say a little bit about the clause. What is it for? The Conservative manifesto spoke of a shared prosperity fund which was intended to be a successor to the European Union regional structural funds. I looked on it as something that would strengthen the union by sharing the prosperity of our four nations. However, because it wore the word “shared”, it carried with it the connotation that the Governments of the four parts of the United Kingdom would share in the way in which it was distributed in accordance with the constitutional arrangements in place.

That such a fund would be greatly welcomed does not need to be stated. There are parts of the UK—and being here in Wales it is evident—that are far poorer than other parts of the United Kingdom, and investment is needed. Of course, we need to look carefully and in a structured way at how they are to be dealt with. I think we have—and I shall come to this later—some guidance published this afternoon in the Red Book, at box 3.1 on page 37. It is convenient for me to deal with that when I come to deal with the role of the devolved Governments.

There is one thing I ought to say—and I hate that this is something that will not come to pass. In Committee, the noble Baroness, Lady Bennett of Manor Castle, drew our attention to another term. She pointed out that in the European Union there were rules about funds allocated for the remediation of poverty and for equalling people up which had been made available to parts of the United Kingdom, including Wales. She pointed out that there would be detailed rules, and that Europe operated detailed rules. However, this shared prosperity fund still has no detailed rules, despite what is said in box 3.1, to which I have referred. She pointed out that the Americans have a term, pork barrelling, for this kind of fund. I would like to continue to call it a shared prosperity fund, because I believe in the union and in sharing the way our country is governed, and I hope that we will never have this aspect of American politics brought into our way of doing things but, plainly, there are dangers along those lines.

This clause is best analysed by asking eight questions. The first is why it is included in the Bill? As it stands, it is wholly separate from the other provisions we have been debating, which are to do with the internal market. The Bill is not concerned with the allocation of government powers to spend money between the devolved Governments and the Government of the United Kingdom with England. Secondly, what is its aim? I have addressed that: as was stated in the Government’s manifesto and now in box 3.1, it is intended to level up the divisions of society within the union and to help.

One immediately has to ask why this clause is needed. The Government have done city deals and have provided money, perfectly property, under our existing constitutional arrangements. Why do they need this power? If they were to provide the funds through the existing constitutional arrangements, this power would not be needed. The devolved Governments of Scotland, Wales and Northern Ireland would be involved and the spending programmes would go along the way they have always gone along, this fund being an additional fund provided from moneys no longer remitted to the European Union. Indeed, if it were to follow the lines of the city deals or its predecessors in the European Union, the Government would negotiate the other Governments, in the case of the devolved nations, or, in the case of England, the various regions and cities, what they felt the money should be spent on, consider it and make a decision. That is all perfectly feasible. So, yes, it is a very good idea to have a shared prosperity fund, and it needs no legislation.

The third question that one needs to briefly touch on is: what is the position at the moment? As my noble and learned friend Lord Hope of Craighead pointed out in Committee, paragraph 4(1) of Part III of Schedule 5 to the Scotland Act 1998 made it clear that the powers of

“giving financial assistance to commercial activities for the purpose of promoting or sustaining economic development or employment”

were not reserved but were within the devolved competence. The same is true in Scotland and Northern Ireland. It is therefore plain that the purpose of Clause 42 is to cut across the powers of the devolved Governments to provide financial assistance in areas such as economic development and commercial activities, though there are wider purposes.

Now we come to the critical question four: how does this relate to the devolution schemes? In Committee the Minister sought to reassure the House that the Government had an intention to work with the devolved Administrations. She said:

“This power, in addition to existing powers, will allow the UK Government to complement and strengthen the support given to citizens in Scotland, Northern Ireland and Wales, without taking away devolved Administrations’ responsibilities”.—[Official Report, 2/11/20; col. 596.]

She added, although I do not think that I need quote her at length, that this was all to be done by working with the devolved Governments. It appears from what was said that it was intended that this power would be exercised in co-operation with and dealt with through the devolved Administrations, but of course there is nothing in the clause in the Bill to say so. It is also plain that the power is being taken because the Government want additional powers to cut across the expenditure. So it plainly affects the devolution schemes.

This is now very much clearer from box 3.1. I am sure noble Lords will not mind me referring to a document that has only just been published and which they may not have in front of them. There is not one word in box 3.1, which purports to explain how this works, about the involvement of the devolved Governments. The box says that the fund

“will operate UK-wide, using the new financial assistance powers in the UK Internal Market Bill”.

It has one common theme with the European funding because it says:

“Investments and programmes will display common branding.”

Being in Wales, one is quite used to seeing what was done by the European Union; now, one assumes, that will be substituted by seeing what is being done by the UK Government. From going through what is in box 3.1, it is quite clear that this is to be a UK Government-run scheme dealing directly, with not a word about the devolved Administrations. One can say quite safely, now that box 3.1 has been published, that this cuts right across the current schemes of devolution. The fifth question is: will it do so? The answer to that, again, is plainly yes; as I read it in box 3.1, that is now clear.

Before having the benefit of that, I was able to read what the Prime Minister had said, as reported in the Financial Times, about the intention vis-à-vis Scotland. However, never being entirely comfortable about relying on a report in a newspaper that could be said to have taken remarks out of context, I had a look and found something else. I looked for, and was provided with, an article written by the Secretary of State for Wales last week in the Telegraph. By the Telegraph, I do not mean the Western Telegraph, the long-established and excellent paper that circulates in Pembrokeshire and west Carmarthenshire, but the Daily Telegraph, a paper that is much read here in the valleys of south Wales. In it the Secretary of State said:

“In the past week I’ve been meeting local authorities across Wales. They’re all hungry to play a greater role in smarter investment of this funding—distributing it to those best able to target the money to projects that will benefit their communities most.”

It is clear that this funding is designed to bypass the devolved Governments. The sixth question is: is this a return to “Westminster knows best”? Undoubtedly it is. I had hoped that that thought had died, but it is plainly very much alive.

The seventh question is: is this democratic? As it stands, it plainly is not; it strikes at the very heart of the devolution settlements and the choices that the people in Wales are entitled to make in their coming election. It will therefore enable the UK Government to spend funds in the way that they think best but which the people of Wales may have rejected. That is not democracy as I have known it. It is, in effect, giving legislative underpinning to the now discredited principle of “Westminster knows best”.

My eighth question is: is it efficient and effective to proceed in this way? The answer must be no. This is where I return to the fear expressed by the noble Baroness, Lady Bennett of Manor Castle. The current position, where the Government of Wales discuss and agree how funds are to be used—either in respect of city deals with the Government in London or, as regards the European funding, with the Commission—is that you have one overall policy, which is then administered and developed as a joint policy. One can see now that this clause is intended to provide divergence, to show that with cash there is a different way of doing things, and maybe to provide that cash, as one sees happening so much in the US, where it is thought to be to the electoral advantage of those providing the money.

It therefore seems to me that this clause, which is now much clearer as a result of box 3.1 in the Red Book, should not be in the Bill. If the clause had provided in terms that all this was to be done in conjunction with the devolved Governments then that would be quite a different matter, but it does not. I will seek to press this amendment to a Division to remove this clause, which is so destructive of our current scheme of devolution and hence to our union. I beg to move.

My Lords, it is a genuine pleasure to follow the noble and learned Lord. I admire how thoroughly he outlined his amendment, to which I have added my name. I inform the House that I believe Amendment 68 in my name is consequential to Amendment 64, so if Amendment 64 is agreed to by the House then I will move Amendment 68.

As the noble and learned Lord concluded his remarks, he hit on a fundamentally important point, about which we raised concerns in Committee and earlier, which have been reinforced by the Chancellor’s Statement today. Both before and during Committee, the concern was that the Government sought these financial powers to override one of the core elements of devolution: that expenditure on devolved areas in our devolved nations should be taken by the bodies accountable to them for those policy areas. As a member of five years’ standing of the Finance Committee in the Scottish Parliament, I know that that spending would come with agreed policy platforms, financial strategies and a degree of accountability.

The Government, I think, believe that the people owe loyalty to those who spend the money, and therefore the main priority is to identify the source of the money—not how it is delivered and not the accountability for it. However, as the noble and learned Lord raised, can the Minister clarify whether that is the case as she responds to the debate on these amendments?

If the Government have indeed announced their intention to override the devolution settlement and to use this Bill to deliver spending on devolved areas without the agreement of the devolved Administrations, that will indeed confirm the fears that we outlined, both at Second Reading and in Committee. I hope that the Minister will be able to say clearly that that is not the case, but I fear from the announcement that has been made today that it is.

The concern started because we had seen very little consultation with the devolved Administrations—or indeed English local authorities—on the spending powers that were to be in this Bill, and we had not been given any indication that these powers had been the result of consultation. There had been consultation on the replacement of EU structural funds, and that consideration was fairly extensive. But there was a mismatch between the consultation on how to repatriate the structural funds and the powers under this Bill, which are catch-all. Not only that, there surely could not have been consultation based on the manifesto commitment of the Government, which was to replace those funds with a skills fund—that was in the Conservative Party manifesto. So the powers that seem to be indicated go far beyond what the manifesto itself said, and indeed the results of the consultation on what the structural funds should be.

There is no reference in the Bill to what the delivery mechanism would be. The noble and learned Lord indicated quite clearly that, under the previous scheme—where, I remind the House, 76% of all European investment had been allocated to the member states—it was to be managed through the devolution settlement, and that management was through our existing frameworks. The current multiannual financial framework, from 2014 to 2020, which is coming to an end, was a UK partnership agreement. It gave granular detail—373 pages of it—of the fund: where it was going, the administration of it, how it was administered and how complementarity would be secured between the legitimate devolved policy areas. The Government have indicated that that approach is no longer fit for purpose because that was the European structural funds. Before we see announcements at a political level about the political intention, surely it is right that the Government publish the respective replacement process.

My party on these Benches and I, as a former Member of the Scottish Parliament, have never been opposed, since devolution, to the UK Government supporting schemes within Scotland. But that was under a recognition that it was linked to the correct competences of the UK Government. For example, in 2018, the UK Government supported the Edinburgh Fringe Festival in supporting artists to promote the United Kingdom around the world in one of the world’s premier cultural events. Local to home in my area, the wonderful Common Ridings used to be very familiar with receiving support from the local authority, the Scottish Government and the UK Government.

The point is not that the UK Government should be restricted from supporting reserved areas in the devolved countries, but that the policies for delivery of the replacement of the structural funds should be done under an agreed process. That agreed process seems to be set on its head now, with the Government believing that they will deliver the programmes, regardless of consultation, regardless of agreement and, more worryingly, regardless of an agreed framework for how these funds can be delivered.

I jotted down in my notes before this debate that I hoped that the Government would bring forward proposals that could be introduced in the Commons, so that if this amendment is passed and we take out Clauses 42 and 43, we would be able to see at least some clarity as to how the Government intend to deliver on the replacements for the funding mechanisms as a result of consultation. The announcement today is alarming. I hope that the Minister can reassure me that that is not the case and that, if these clauses are taken out, the Government will recognise that they should bring back proposals.

If there is a case for powers necessary to deliver the expenditure, and which do not already exist—although I have indicated that, in many respects, they do and have worked perfectly well—let the Government bring it forward. But this clause is not the case, as the noble and learned Lord indicated. I hope that the Minister has listened and will be clear in her winding up. If that is not the case, the House will be justified in removing these clauses at this stage, effectively forcing the Government to come back and bring forward their proposals for us to consider them further.

My Lords, it is a great pleasure to follow the noble Lord, Lord Purvis of Tweed, who has repeatedly shone a light into dark corners of this Bill, and to follow my noble and learned friend Lord Thomas of Cwmgiedd.

I strongly support Amendment 64 and Amendment 65, to which I have put my name. It has become increasingly apparent that Clause 42 would enable the Government to work around, rather than work with, the devolved Governments, in particular replacing the regional development funding, which has been so significant here in my own country, Wales, in addressing endemic problems such as economic inactivity and lack of skills. After all, the Government can already provide funds to support devolved matters, providing they do so in partnership with the elected Governments.

In that surprising article last week in the Daily Telegraph, already referred to, the Secretary of State claimed:

“For the first time, this money will be able to be spent by people who have been directly voted for by the people of Wales. People who know the local communities best, and who can develop coherent proposals that are aligned with broader UK-wide priorities.”

It is astonishing that this Government seem to have ignored the group of stakeholders endorsed by the Welsh Local Government Association and the majority of its members, convened—but not commanded—by those directly elected to the Welsh Senedd to develop a framework for regional investment to determine the spending priorities for this funding.

But of course we now have the Chancellor’s statement and can see in box 3.1, as referred to by my noble and learned friend Lord Thomas, the heads of terms of the UK shared prosperity fund. It states, with reference to additional funding in 2021, that the Government will provide such funding to communities using the new financial assistance powers in this Bill. This seems to bypass the elected Welsh Government by inviting local authorities to directly bid to central government. Perhaps the Minister will confirm whether I have understood correctly or not.

I am afraid this Government’s record is to spend on things that have always been the Government’s responsibility. Think of the rail infrastructure: the electrification of the Great Western main route was cut short at Cardiff, despite all the arguments in favour of extending west. Then there are major energy projects, such as the tidal lagoon or broadband, where the Welsh Government had to invest huge funds, including from the EU—which the Minister seems to loathe—to make good the underinvestment by Whitehall. Some suggest that this looks deliberately timed to be before the elections to the Senedd and the Scottish Parliament, and to drive a wedge through the devolved nations’ ability to consider their whole-population needs.

The history of the £3.6 billion towns fund, which relied on Ministers selecting which towns would receive funding, does not inspire confidence. The National Audit Office and the Public Accounts Committee were not convinced by the rationale behind these choices. The committee said:

“The justification offered by ministers for selecting individual towns are vague and based on sweeping assumptions. In some cases, towns were chosen by ministers despite being identified by officials as the very lowest priority (for example, one town selected ranked 535th out of 541 towns).”

The Minister may try to provide reassurance that this Government would not use the powers in Clause 42 to undermine the political priorities of the elected Government in Wales. But once on the statute book, this clause would open the way for future Governments of any colour to ride roughshod over an elected devolved Government. Clause 42 undermines the devolution settlement, which has functioned well for the last two decades. The clause should be removed.

Amendment 65 is an intelligent and thoughtful proposal from the noble Lord, Lord Stevenson of Balmacara, to depoliticise the allocation of funding to replace the EU structural funds to reflect economic and social need, not political expediency. It gives an appropriate role to the devolved Governments, while recognising that this is UK funding designed to level up regions with weaker economies in line with the Government’s own declared aspirations. If the Minister is unable to accept Amendment 64 and remove the offending clause in its entirety, I call on the Minister to settle for this compromise amendment, which will allay suspicions that the Government want to manipulate regional funding for their own ends rather than address objective, clear economic priorities.

My Lords, I am pleased to support Amendment 64, moved by the noble and learned Lord, Lord Thomas of Cwmgiedd, to leave out Clause 42. I agree with him and with the noble Baroness, Lady Finlay, in her pertinent comments in support of that amendment. If, however, we do not succeed in removing this provision from the Bill or succeed with Amendment 65, the Bill most certainly needs to be amended to meet the widespread criticism, expressed in the devolved legislatures and, only last Friday, in the Western Mail—if I may quote it rather than the Telegraph—which stated in its editorial’s headline:

“This plan is a direct threat to devolution.”

And it is just that.

I wish to speak to Amendment 67 in my name, which addresses the issue at the heart of the Welsh Government’s misgivings and those of my party, Plaid Cymru. It revolves around the linked questions of what replaces the European regional funding, of which Wales has been a major beneficiary over the past few decades, and who controls the expenditure priorities for any replacement funding coming from the UK Treasury.

The need for this amendment can be properly appreciated only if it is considered in the context of the immense benefit Wales has secured from the European Regional Development Fund and the European Social Fund over the past two decades. Wales is not the only part of the UK that has benefited; Scotland, Northern Ireland, Cornwall, Merseyside and South Yorkshire have also received significant investment. However, it has been Wales—in particular, the area known as West Wales and the Valleys—that has received the most significant level of investment. There is a good reason for this or, I should say, an understandable reason, for it is bad news, not good news: West Wales and the Valleys, the area which includes most of the old coal mining, slate quarrying and marginal land farming in Wales, is, sadly, one of the poorest regions in the entire European Union. The GDP per head of population in this area has been below 75% of the EU average. We were entitled to European funding due to persistent, long-term economic poverty, which the UK Government had, for most of the 20th century, failed to address—and certainly failed to eradicate.

The system utilised by the European Union established the criteria, framework and ground rules of the funding programme, each round of which lasted seven years. The Welsh Government put forward their proposed investment programme, which had to be agreed with the EU authorities in Brussels. The Welsh Government provided matched funding, which had to be additional to the normal spending budgets. That principle of additionality caused some controversy in the early days, with the UK Treasury reluctant to make additional funds available until it was instructed to do so by the EU regional commissioner—one Michel Barnier, God bless him.

The detailed rollout of the programme was, and still is, overseen by WEFO—the Welsh European Funding Office. The funding has been used for a range of projects, two of which I was involved in: the creation of the Galeri performing arts centre in Caernarfon and the management centre of the business school of Bangor University, both assisted by some £6 million of European funding. They could not have gone ahead without it. Both projects have been tremendously successful, as I know both the noble Baroness, Lady Humphreys, and the noble Lord, Lord Hain, can testify.

The third round of this European programme is still running. For the period 2014-2020, the operational programme is worth some £3 billion to Wales. At the time of the Brexit referendum, leave campaigners stressed repeatedly that the funding coming from Brussels would be replaced in full—I repeat, replaced in full—by money from the Treasury in London. I well remember, as I am sure many noble Lords do, being told that the funding emblazoned on that Brexit battle bus—the claimed Brexit bonus of £350 million per week—would, in just a fortnight, fund the annual replacement cost of the European Regional Development Fund and the European Social Fund money coming to Wales. Of course, we were told that the Welsh Government would be fully in control of its use. Those were the promises made, on which basis Wales—regrettably, to my mind—voted to leave the European Union. The time has come to redeem those promises, and Amendment 67 facilitates that commitment.

Amendment 67 seeks to establish the principles that will safeguard the funding coming to Wales and, likewise, to Scotland and Northern Ireland from funds denoted in Part 5 of the Bill. Specifically, the amendment provides that funding should reflect need, not some ad hoc arbitrary criteria, nor a Barnett-type formula, which has been repeatedly condemned by committees of this House yet was used again today in another place by the Chancellor of the Exchequer in the Autumn Statement. Funding on a needs-based distribution, related to the GDP per head of population, would be the basis. In that way, it respects the pattern of distribution of European regional funding—a pledge made during the referendum. Amendment 67 requires the Minister to bring forward a needs-based formula to be approved by order, subject to the affirmative resolution procedure, and provides for the Minister to secure the agreement of the devolved Governments to the content of that order. The amendment also proposes that each annual figure be presented as part of a three-year rolling programme, to ensure that coherent, long-term investment programmes can be secured and the money is not frittered away on short-term fixes.

We have heard a lot during the passage of the Bill about the fears in Cardiff, Edinburgh and Belfast of a power grab by the UK Government, taking away from the devolved Governments powers they currently enjoy. The Government respond, of course, that there is no such power grab and the devolved Governments will retain the powers they currently exercise. This amendment puts those assertions to the test. Either the devolved Governments retain the power to determine capital expenditure projects in their territories, or they do not. If they do not, it will be a flagrant violation of the commitments made during the Brexit referendum and the last general election. If the Government insist on retaining the rights to impose capital expenditure projects on and in Wales, it will set alarm bells ringing. There have been press reports of projects such as the construction of reservoirs in Wales, which is an incendiary topic, given our experience over the past century.

Of course, there may be joint projects of mutual interest, but those must be negotiated by the respective Governments, not imposed by Westminster and Whitehall. The days of imperial diktat have long since gone; if there was one dimension which could trigger an avalanche of support for the independence movements, it would be such an approach by Westminster. It is my fear that this Bill, without amendment along the lines that I propose, heralds such a retrograde step—a rolling-back of the freedom we have enjoyed within a European context and its replacement by Westminster central direction of the sort that Wales suffered in the bad old days before devolution. Amendment 67 is in the interest of establishing a stable harmony between the nations of the UK and I urge the Government to accept it.

My Lords, I preface my remarks by saying that what will replace the European structural funds is a matter of interest not only to the devolved Administrations but to the regions, such as Yorkshire, as well. I was fairly agnostic about this group of amendments before the debate commenced but now I think that the noble and learned Lord, Lord Thomas of Cwmgiedd, and the other noble Lords who tabled these amendments have done the House a great service.

In the briefing on the spending review, the emphasis now appears to be much more on UK-wide spending. It states:

“The Spending Review takes advantages of our departure from the EU to benefit the union. We will ramp up funding, so that total domestic UK-wide funding will at least match EU receipts … for the introduction of the UK Shared Prosperity Fund, we will provide additional UK funding to support our communities to pilot programmes and new approaches. We will also deliver £1.1 billion to support farmers in Scotland, Wales and Northern Ireland, £20 million to support fisheries—and we will build one freeport in each part of the UK.”

It goes on to say that the spending review is UK-wide and refers to the UK shared prosperity fund and the shared rural network. Although I welcome the funding that has been announced, it is incumbent on us today to find out whether, in the words of the noble Baroness, Lady Finlay, the Government are now working around the devolved Administrations rather than with them.

I am particularly concerned with one aspect relating to economic development, which I hope is relevant to this group of amendments. England and Defra have clearly stated that they are committed to phasing out direct payments to farmers from 2021, but the new system involving an environmental land management scheme will not be in place until 2024. As I understand it, however, the Scottish Minister has announced that direct payments to farmers will be retained for the foreseeable future. That begs the question of what the impact on economic development will be for English farmers as opposed to Scottish farmers and whether that will potentially distort the market between England and Scotland. That would seem to flout the principles of mutual recognition and non-discrimination, which we have heard so much about during the Bill’s passage.

I welcome this debate. I am particularly supportive of Amendments 64 and 67, both of which have been spoken to so eloquently by their authors. I urge my noble friend the Minister to say how the payments under the shared prosperity fund will be distributed. Obviously, I would add a rider that Yorkshire would like to have its fair share of that fund, but it is incumbent on my noble friend to state whether we are departing from what we have become accustomed to under devolution or whether this is simply a red herring.

My Lords, I support Amendment 64, which seeks to remove Clause 42 from the Bill. I thank the noble and learned Lord, Lord Thomas of Cwmgiedd, for tabling such an important amendment and for his excellent explanation and analysis of its intent.

Clause 42 empowers the UK Government to provide financial assistance for economic development in any area of the UK. At the outset, I want to make it clear that I have absolutely no objection to the UK Government making investments for economic development in Wales—nor, I believe, would anyone else in Wales. It is the intrusion into devolved powers that is so offensive. Those of us who live in the Objective 1 area of West Wales and the Valleys understand that our economy is weaker than those in other areas of the UK and that we live in one of the poorer regions of Europe. We have appreciated the EU’s investment in the past 20 years; for example, the investment in the A55, which provides such a vital transport link across north Wales, and the projects that we have seen come to fruition under the rural development fund.

In my contributions on Second Reading and in Committee, I said that investment in our region is desperately needed—it was before we received Objective 1 funding and it will be when it ends—but this clause gives the Government extraordinary powers to act in areas of devolved competence and in areas where the EU structural funds have never operated. It is extremely disappointing that, throughout this clause, there is no mention of consultation, joint planning of schemes, joint programmes of work or joint management of projects—all examples of the collaborative approach to investment programmes initiated by the EU that we have become used to. There appears to be no clear setting of objectives, other than, I suspect, that the Government’s prime objective is to see projects in the UK—in the Prime Minister’s words—emblazoned with the union flag. I have no problem with that either. In West Wales and the Valleys we are used to seeing EU blue flags or plaques on projects. They are an indication that the needs of our area have been recognised, and so it would be with the union flag.

There is, however, still no clarity on how needs will be determined and recognised in the UK under the shared prosperity fund, whether projects will be imposed or applications sought and, crucially for us in Wales, what impact there would be on our financial settlement. We still do not know whether a UK Government investment in a road-building programme, for example, would lead to a reduction in the Barnett allocation, or whether projects imposed on us would be financed by loans that require repayment by the Welsh Government. All this curtails the Senedd’s ability to deliver on its objectives and will have an impact on its ability to deliver on its manifesto commitments.

Of all the attacks on the devolution settlements in this Bill, this is probably the most blatant—so much so that the powers and responsibilities of our Parliaments do not even merit a mention. It is another example of the introduction of a new constitutional settlement by stealth, as I referred to in my speech on Monday. It is another item to add to the list of examples fuelling the interest in independence, which, under this UK Government, is reaching a level never seen before in Wales. People are witnessing the performance of an almost colonial Government emanating from Whitehall and comparing it with the more progressive Government and Senedd we see in Wales—a progressive Senedd that voted last week to allow councils to change the electoral system for local elections by introducing the STV system and open up the franchise for local elections to 16 and 17 year-olds in addition to their existing rights to vote in Senedd elections; importantly, it supported voter participation by paving the way for automatic voter registration.

I must admit, I am surprised that, after listening to concerns expressed by the noble and learned Lord in Committee and hearing the support for his stance from other noble Lords, the Government have not come back on Report with an amendment of their own that recognises and ameliorates the impact of this clause on the devolved Parliaments.

In a Bill about the regulation of the UK internal market, this clause and its assault on the devolution settlements has no place, and I support Amendment 64 to remove it. I hope that the noble and learned Lord will be minded to call a Division on the amendment. If he does, he will have the support of these Liberal Democrat Benches.

My Lords, I will speak first to government Amendment 66, on how the power in Section 42 will be used. There is a very welcome statement that there is to be an annual report, which can be fully debated in Parliament. We had some discussions about this in Committee, and this amendment is very welcome.

Turning to Amendment 64, I hope that the noble and learned Lord, Lord Thomas, will not find it offensive if I allude to the fact that I used to own ferrets. Ferrets are beautiful animals, very ingenious and very inquisitive—but of course they have one failing. Sometimes they succeed in catching or flushing out rabbits, but quite often they turn around, get distracted and think of something far less important. Listening to the noble and learned Lord’s introduction to his amendment, it was based, according to him, on finding in paragraph 3.1 of the Red Book something that he thought was relevant to this debate on Clause 42.

I am sufficiently brave to suggest that he has perhaps forgotten what the basic elements of this Bill are. On the front page, it says:

“To make provision in connection with the internal market for goods and services in the United Kingdom … to authorise the provision of financial assistance by Ministers of the Crown in connection with economic development, infrastructure, culture, sport and educational or training activities and exchanges”.

This is what the whole Bill is about. So here we have before us an amendment which is a pretty wide-sweeping reversal of that primary purpose of the Bill. A whole new concept is being proposed in this new clause, at a time when the whole country faces massive challenges arising from Brexit.

After five days looking exhaustively at the Bill in Committee, lo and behold, here we are on Report, and this pretty revolutionary amendment is put forward. For me it is basically pre-empting the role of the Chancellor of the Exchequer and the Government of the day. It does not matter what the colour of the Government is: in structural terms it pre-empts the Westminster Government, setting up a whole new semi-department, with little oversight and, frankly, huge costs. There does not seem to be any constraint on it at all. In my judgment it is way outside the scope of the Bill and should be rejected.

My Lords, in his very clear and crisp outline of the reasons for his Amendment 64, the noble and learned Lord, Lord Thomas of Cwmgiedd, referred to my speech in Committee about pork barrelling. The noble and learned Lord helpfully informed us about box 3.1 in the Red Book, which I have not yet had a chance to read but which seems deeply revealing about the Government’s clear political intentions. The smell of roast meat is certainly in the air.

Government Amendment 66, offering retrospective annual transparency, is a slight improvement on the Bill, but so slight that I find the words “slightly better than nothing” rather hard to get out. Considerably better improvement is offered by Amendment 65, in the name of the noble Lord, Lord Wigley, which provides stronger democratic control and devolved Administration involvement. However, that is clearly the opposite of the Government’s apparent intention, as the noble Baroness, Lady Finlay of Llandaff, demonstrated, using their own words. I agree with the noble Baroness, Lady McIntosh of Pickering, that this is also of great interest to the English regions, whether Yorkshire, which I hope will soon have a democratic parliament of its own, or Cornwall, which has similar ambitions.

Many of the issues have already been well canvassed, so I will not repeat them, but I will finish by remarking on the words of the noble and learned Lord, Lord Thomas, who reflected that he and I have different views on the union. As a Green, I believe in local decision-making, with power and resources going upwards only when absolutely necessary. The best decisions are made democratically and, of course, the devolved Administrations have far more democratic structures than Westminster. Those decisions should be made by the people affected by them.

I believe in self-determination, and of course support the Scottish Greens’ position on independence. I note that last month the Wales Green Party voted that, in the event of a referendum on Welsh independence, the Wales Green Party

“commit to campaigning in favour of seceding from the United Kingdom.”

I remember that very soon after I came into the House —I can date it back to about a year ago—the noble Lord, Lord Wigley, coined, I believe, the neat phrase about Wales becoming “indy-curious”. Everything I hear says that that position has moved on significantly.

I know that your Lordships’ House, and the Government, are firmly pinned to unionism. Despite my different position, I will offer some advice to those holding that view. Seizing more control and trying to take back power and resources from devolved Administrations might seem like a way of taking control and getting a tighter grip on the nations of the so-called United Kingdom, but the effect is likely to be the opposite. Squeezing harder will push nations further away.

So why am I offering this advice if my view is the opposite? Because, when the independence move or moves come, I hope that they can be done in a friendly, co-operative manner, with the kind of political, consensual approach more typical of the representatives of the devolved Administrations than of Westminster—as we hoped the move out the European Union could have been managed once the decision was made. Now, 36 days from the end of the transition period, with the nation in a state of great uncertainty, let us learn from that experience—and I can promise the Green group’s support for all the moves to try to ensure that power and resources stay with the devolved Administrations.

My Lords, I support Clause 42 and Amendment 66, but I do not support the various other amendments in this group, and in particular I wish to speak against Amendment 64, which seeks to remove the financial assistance power from the Bill.

I have been very concerned, throughout this Bill and again today, at the way in which grievances about devolution have been elevated into some kind of holy crusade which sees only evil in the UK Government. Noble Lords supporting various amendments on this theme have often alleged that the Government are playing a dangerous game with the devolution settlement and that this Bill represents a major power grab which must be resisted. I believe that the only people threatening the constitutional settlement on devolution are those who have set their face against—or at least ignored—the existence and value of our United Kingdom and our precious union.

I have also heard a lot of wishful thinking about the UK as a federation of equal states, which it is not. Many noble Lords have been pretending that “the UK Government” is synonymous with “an English Government”—which is also far from the truth. If there is a gap or weakness, it is that the UK Government and UK Ministers act mainly in the interests of the whole of the United Kingdom, and England gets left a bit to one side.

The Government have been consistent and clear that they intend to act in the interests of levelling up the whole of the United Kingdom. The actions of my right honourable friend the Chancellor of the Exchequer in today’s expenditure review are testament to that, and I say to the noble and learned Lord, Lord Thomas, that it is a very fine blue book—a Red Book, I believe, is normally reserved for a Budget Statement.

The UK Government will always act in the interests of the whole of the United Kingdom, and it is disingenuous of noble Lords to paint a picture of a domineering Government trying to strip powers away from the devolved nations. No powers at all are going to be taken from the devolved nations. Devolved Administrations still have the same powers to spend their money as at present.

Clause 42 creates the power to grant financial assistance across the UK so that it is put beyond doubt that the UK can replicate the sorts of financial flows that existed when the EU took money from the UK and graciously gave a bit of it back to us to use in the way it decided. In future the UK Government will make those decisions about how UK money is directed, rather than Brussels. The guiding light will be the needs of the UK as a whole, although I am sure my noble friend the Minister will confirm that there will be extensive discussions with and the involvement of the devolved Administrations.

Clause 42 talks about financial assistance but let us be clear: this is simply public expenditure. Public expenditure is sourced within the overall fiscal policies of the United Kingdom as set by the Chancellor of the Exchequer. It will be financed by UK taxation or UK borrowing, both of which are carried out by Her Majesty’s Treasury as part of its UK-wide economic policies. These are not matters for the devolved Administrations, however much they might wish otherwise.

Noble Lords really should be careful what they wish for. If Clause 42 is removed from the Bill, noble Lords will remove the mechanism the Government have chosen to funnel public money into their agenda to level up the whole of the UK. How do noble Lords think that the devolved Administrations will get the kinds of money that used to flow via the EU without Clause 42?

Of course, the Government have powers, in general terms, under the appropriation Act to decide upon and distribute public expenditure, but it is a well-known rule and general practice to take a specific legal authority for major expenditure that will be made on a recurrent basis. So the result of taking Clause 42 out of the Bill may well be that the large sums that the devolved nations expected to receive will disappear. Is that really what the noble Lords promoting Amendment 64 want to achieve?

My Lords, I again partly apologise to noble Lords because I intended to speak on later amendments and to support the noble and learned Lord, Lord Thomas, on Amendment 69. I will settle for Amendment 64.

I take exception to the definition of the Long Title from the noble Lord, Lord Naseby. Whichever way we read it, it is about devolved matters in the United Kingdom. We have only to look at the definition of infrastructure in Clause 42 to see that it absolutely covers devolved matters. His was a bit of a cheap shot at the noble and learned Lord, Lord Thomas, to try to imply that this was inconsistent with the Long Title.

My other beef is one I have had in the past regarding Wales and the Barnett formula. I have never understood why the people of Wales, including the politicians, have never risen up. Some years ago I was a member of the Select Committee that looked at the Barnett formula. It was abundantly clear that Wales had been cheated for years. If the Barnett formula was based on need, rather than population, Wales would be on about a third more than it is now. We told leading MPs about this, but I have never noticed any great kickback. Wales has been short-changed under Barnett for years. There is no easy answer to that.

The noble and learned Lord, Lord Thomas, was absolutely bang on in delivering the information from box 3.1 out of the Red Book at the beginning of the debate. I thought his eight questions were incredibly telling. I would use the term “pork barrel”, because that is what it is about. The Chancellor of the Exchequer, whose Statement I heard earlier, made it quite clear that the spending of this money relied on the consent of the constituency Member of Parliament, although I understand that the Treasury might have disowned this since. I tweeted, saying that it is incredibly dangerous for constituency Members of Parliament to be involved in executive functions. Local councils are always involved in executive functions; Members of the House of Commons are not. It is incredibly dangerous territory for them to get involved in, particularly in view of incidents that arose in the past.

I understand that the Treasury might have backpedalled a little on that, but it shows the thought process of those who constructed the Statement today, which is intricately involved with the Bill: destroy devolution, open up the pork barrel and give money to your friends based on the constituency MP. That cannot be a good form of governance. It cuts across devolution massively, whichever way anyone defines it. I have said before that my experiences have been at Defra and MAFF before devolution, then at the Food Standards Agency, which was a four-nation, non-ministerial department at the time. Whitehall has never really done devolution and never really understood what was happening. It has taken a while even for the House of Commons to become clear about the quite distinct advantages of devolution. It all went wrong, of course, when the proportional electoral system gave a majority Government. That is not supposed to happen, but neither, on the other hand, is first past the post designed to give coalitions, which is what we had in 2010. You cannot base the future construct of the constitution on such whims.

Governments come and go and will not be there for ever, but I very much agree with what the noble Baroness, Lady Bennett of Manor Castle, said: with devolution now under acute and very massive threat, there is no question but that this will push the independence movements of Wales and Scotland wider and further, particularly in Scotland, where it is stronger. I cannot see a solution to it. I think that we are heading headlong towards the break-up of the union. I will fight like hell to stop that and a lot of people will. The problem is, keeping the fight in words and debate. We are heading for the destruction of our country, without any policy announcement, a clear vote or a manifesto commitment. It is being done by subterfuge and backhanders.

In my view this is the direct effect of the Bill, particularly these attacks on devolution. Amendment 69 covers the same for Clause 44; they are two sides of the same coin. I was going to speak about Amendment 65, but I will leave that to my noble friend. This fundamental attack on devolution, with the push to break up the United Kingdom, is a much more serious affair than has been recognised by your Lordships’ House, where it has been recognised more than in the House of Commons. We need to send a signal to the elected House that our country, our constitution and the make-up of the union are under direct threat as a result of the Bill.

My Lords, I am very pleased to follow the noble Lord, Lord Rooker, but I could not disagree with what he said more. The threat to our United Kingdom results from the power grab being attempted by devolved authorities, led by nationalist parties, of powers that were never theirs in the first place.

Amendments 64 and 68, in the names of the noble and learned Lord, Lord Thomas, and the noble Lord, Lord Purvis, strike at the very heart of the Bill by removing the Government’s powers to make provisional assistance for infrastructure projects. Many such projects need to be provided across the whole United Kingdom in a coherent and consistent manner. I greatly respect the opinions of both noble Lords, but the devolution settlement that the noble and learned Lord, Lord Thomas, talked about is different from one that properly preserves the UK internal market.

I welcome Amendment 66, in the name of my noble friend Lord Callanan, which seeks to allay the concerns of noble Lords about these clauses. I would have expected your Lordships to be pleased that my noble friend has proposed that the Government “must” make an annual report to Parliament. Amendment 65, in the name of the noble Lord, Lord Stevenson, pre-empts the Government’s announcement about how they intend to set up and run the shared prosperity fund, which is to take over the functions of the EU structural funds. As my noble friend Lord Greenhalgh said in a Written Answer on 10 August:

“The fund will bind together the whole of the United Kingdom, tackling inequality and deprivation in each of our four nations.”

In this regard, I think the fund should not be restricted by powers that may be exercised by the devolved authorities to any greater extent than the EU structural funds have been restricted until now.

This amendment is far too prescriptive, and it is, of course, inconceivable that the Secretary of State would not discuss disbursements from the fund in the same way that European officials have hitherto discussed disbursements with both the UK Government and the devolved authorities. Nevertheless, I share the concern of the movers of these amendments that there is now little time before the EU structural funds are consigned to history as far as the UK is concerned, so I hope that the Minister will tell us when she expects that the Government will announce exactly how they intend to operate and distribute the new fund?

My noble friend Lady McIntosh of Pickering told the House that a Scottish Minister had stated that Scotland intends to continue direct payments to farmers rather than introducing something similar to the ELM scheme. Of course, this is a slightly different—though related—matter, but it clearly shows why it is so important to maintain a coherent internal market in the United Kingdom.

The noble Lord, Lord Wigley, talked about “the bad old days before devolution”. Does he remember that less than 25% of the electorate of Wales supported even the limited degree of devolution at that time? The noble Lord’s Amendment 67 seems to me to be aggressively nationalistic. The noble Baroness, Lady Bennett of Manor Castle, spoke in favour of what Baroness Thatcher called “subsidiarity”—but I have not heard her, or the noble Lord, Lord Wigley, or other noble Lords opposite criticise the EU as it moves to centralise and harmonise fiscal and other powers at the expense of the nation states.

My Lords, once again, this has been a very widespread and high-quality debate. To the Minister, who has not had the benefit of the soap opera that you tend to have on Report, I say that we have reached the point that—here I agree with the noble Viscount, Lord Trenchard—is the meat of this Bill. At Second Reading, in Committee and on Report, many of your Lordships asked why this Bill was necessary. Of course, there was the political and negotiating posturing that came with Part 5, but I put it to your Lordships that one of the central, driving reasons for this Bill is exactly what we are discussing here today: it is so that central government can get its hands on this money and administer it through whatever means it sees fit, because there is no detail on that administration —here, again, I echo the point made by the noble Viscount, Lord Trenchard.

Some people called it pork-barrel; I would perhaps call it a hobby horse. We saw the benefit of the Prime Minister’s attempts at hobby horses when he was the Mayor of London: we saw the amount of public money that was spent on “Boris Island”, the green bridge and the Emirates wire crossing of the Thames. These are just small potatoes compared to what we could look forward to.

In her speech, the noble Baroness, Lady Noakes, characterised those of us on these Benches and in Her Majesty’s Opposition as, somehow, thinking that the Government are evil in this. I make it absolutely clear to the noble Baroness and the Minister that I do not think that she is evil, and we do not have a policy of thinking that the Government are evil. However, we do think that the Government are wrong, and we are allowed to do so. Many of the speeches on the Benches opposite have also been factually wrong on the subject of devolution, and I will correct some of those facts.

However, I will err on the side of giving the benefit of the doubt, because I do not believe that the people who drafted this Bill misunderstood devolution in the way that many of the speeches we have heard today have. I believe that there is a very deliberate attempt in this Bill to bypass the processes that have become normal in devolved government and, unless we see actual details as to how this will go forward, this suspicion will only get greater.

Very recently, the Government introduced the notion of the role of local councils. This has come along only in the last 24 to 48 hours in relation to their possibly getting involved in the process of disbursing. I can only assume that it is the antidote to the Prime Minister’s loose lips around devolution, but perhaps the Minister can explain what role the Government see in any future disbursement process for local councils—and, if there is not one, perhaps they can disabuse us of that as well.

My noble friend Lord Purvis set out how the multiannual financial framework works. In answer to the noble Baroness, Lady Noakes, who said that the devolved authorities are not having financial powers taken away from them, I say that they most definitely are, because they had functions under EU structural funds and state aid within the fiscal framework which are being withdrawn.

I am afraid that the noble Baroness was similarly wrong on the subject of public finance and tax. If you happen to live in Scotland, as my noble friend Lord Purvis will tell you on many occasions that he does, you pay Scottish income tax, which is set by the Scottish Government: it is a different tax. Perhaps the noble Baroness, Lady Noakes, would acknowledge that there are differences across this country in the fiscal arrangements for the people who live in the nations of the United Kingdom. Those differences arise through the devolved process, which, somehow, is now being withdrawn and pulled back by this Government under the misapprehension that, by being seen to spend this money, they will somehow become popular. That is not the way to be popular, and it will fail. The noble Lord, Lord Naseby, spoke about ferrets. My experience of ferrets is that they usually bite the people who are handling them—so perhaps he should be warned.

I have one final point, which is a question that I really do want an answer to—it is not a rhetorical question. The noble Baroness, Lady McIntosh, raised the interesting point about how the markets could get distorted. I would like the Minister to explain the role of the office for the internal market in this. As we have discussed in previous amendments, considerable powers are being vested in the OIM, not least Clause 31 powers, so can the Minister confirm that the OIM will be able to investigate the UK Government’s use of the powers that they seek in Clauses 42 and 43 to investigate whether this distorts the market? Can the Minister also confirm that devolved authorities will be able to request such an investigation from the CMA?

My Lords, I am going to say much the same things as the noble Lord, Lord Fox, but I will focus a little on my Amendment 65, which has been supported by the noble Baroness, Lady Finlay, as well as offering support from the Opposition Benches for Amendment 64 in the name of the noble and learned Lord, Lord Thomas, and—if it is treated as consequential—Amendment 68.

The last time she joined us, the noble Baroness, Lady Penn, responded to my amendment on the shared prosperity fund with a very full and useful speech, part of which the noble and learned Lord, Lord Thomas, has already quoted. It was helpful to hear, because it was so clear what the purpose behind the new approach to the shared prosperity fund was to be. Although she may have to slightly change the way she expresses it when she responds in a few minutes, she confirmed, stressing the collaborative nature of the future, that this would

“allow the UK Government to complement and strengthen the support given to citizens in Scotland, Northern Ireland and Wales, without taking away devolved Administrations’ responsibilities.”

That is all good stuff, but she went on to say—this was not quoted by the noble and learned Lord earlier—that

“the response to Covid has shown how the UK Government … can save jobs and support communities. This could only have been delivered strategically and at that scale by the UK Government.”

That interesting formulation has been much explored during this debate. I do not think the Minister will find much support across the House for that statement.

The Minister went on to say:

“The UK Government are uniquely positioned to level up across every part of the UK”. —[Official Report, 2/11/20; col. 596.]

That also needs to be challenged. It is the sort of thinking from which comes the “Westminster knows best” process, which has been criticised, and spending decisions being taken against the advice of those in the best position to know about them. As the noble Lord, Lord Fox, said, this may lead to follies of the type of the garden bridge and, perhaps, the much-mooted bridge between Scotland and Northern Ireland, which seems to be the answer to the Northern Ireland protocol problem.

I will talk a little about Amendment 65. I was grateful to my noble friend Lord Rooker for talking about the work done in your Lordships’ House on a critique of the Barnett formula. He is absolutely right: if that formula had been replaced by something of a different nature, the funding levels in Wales and Scotland would have changed, because of inward immigration to Wales and external emigration from Scotland. There has been a change in the population levels which has not been reflected in settlements. The system does not command much love and affection, let alone support.

The proposal in Amendment 65 challenges the Government to think again about how they might wish to do the shared prosperity fund. If it is not clear, because the drafting is somewhat complicated, it is based on a model to which the closest analogue would be the Low Pay Commission. Despite allegations to the contrary, it weighs heavily on subsidiarity and proportionality as the principles under which it might be set up. Under the proposal in Amendment 65, it is the Secretary of State who sets the level of the fund, it is clearly the Government’s funding and their authority to set a level every year for that is not, in any sense, taken away. What the amendment does is to mandate consultation and provide an alternative, needs-based basis for judging the bids. As set out in proposed new subsection (11), this approach looks at an area’s proportion of children below the poverty line, low income, economic weakness, the age structure of the population, the impact of the pandemic and the impact of climate change—something we might want to consider more fully, though it has also been picked up today.

I thank the noble Baroness, Lady Finlay, for her kind words. For anyone in the Official Opposition to be ruled as “intelligent and thoughtful” is almost too much to take, but it probably rules out any further consideration of my amendment. It would not do to be seen to be endorsing that, would it?

As the noble Lord, Lord Purvis, said, if Amendments 64 and 68 are passed, there will be a bit of a hole in the Government’s thinking on this area. They might want to think again about how do to that by looking at this amendment, certainly in the context of the responses to the now notorious box 3.1. I congratulate the noble and learned Lord, Lord Thomas, on being able to adapt his speech to take account of the fact that he could have had only a few minutes to look at that box. His critique of it was spot on. As the noble Baroness, Lady Finlay, said, box 3.1 is based on the assumption that the Government will receive the new financial assistance powers in this Bill—it says so straight out, at the beginning. It is also interesting that this is clearly a top-down approach:

“The government will develop a UK-wide framework for investment in places receiving funding and prioritising: investment in people … investment in communities … investment for local businesses”.

There is nothing exceptional or egregious about the list of things to do, but the idea that there is a top-down approach jars with everything we have been doing in the last 20 years to develop a much more responsive, local environment.

It trumpets:

“Places receiving funding will be asked to agree specific outcomes to target within the UK-wide framework. They will then develop investment proposals to be approved by the government among a representative stakeholder group.”

What on earth does this all mean? However, it does say something that we might celebrate:

“Investment should be aligned with the government’s clean growth and net zero objectives.”

Is this the first time that the Government are prepared to accept publicly that there is a case for maintaining existing high environmental standards and net-zero objectives? If so, why is that not also being applied in the Bill to market access principles and the derogations from legitimate aims which the Government were dead against only a few days ago.

The whole approach being taken in this is redolent of what the noble Lord, Lord Fox, suggested was an attack on the devolution settlement and it must be opposed. This is not the way we do things. Amendment 65 is an attempt to think outside the box for the shared prosperity fund, but it is based on an assumption that there will be a continuation of the way in which devolution has worked. I hope that, when she comes to respond, the Minister will say that we are wrong about this, and that the Government’s proposals reaffirm their commitment to the devolution settlement. Their current proposals have exposed a centre that seems unable to listen and outlying areas that do not feel they are being consulted.

This power grab, and the rather ignoble assertions made by the Minister the first time round, exposes a key divide between us. Why do all the important things that she identified have to be done from the centre, when existing mechanisms allow these bodies, which have far greater knowledge of what is happening locally, to spend the resources more effectively? As I said in response to an earlier amendment about the common frameworks, it is now patently obvious that the Bill is actually about gathering powers, which should be devolved, to a relatively insensitive centre which is trying to imprison a multinational country composed of vibrant, diverse regions, with diverse histories and needs, into a straitjacket of a unitary state. We can, and need to, do better than that.

My Lords, I begin by reminding noble Lords of the purpose of this part of the Bill. The power to provide financial assistance supports the Government’s determination to deliver on the commitments on which they were elected: levelling up and delivering prosperity across the whole United Kingdom, and strengthening the ties that bind our union together. It provides for a unified power that operates consistently UK-wide—one which will allow for strategic investment throughout the UK, underpinning the Government’s determination to see all parts of the UK flourish. It makes sure that we meet our manifesto commitment to deliver a UK shared prosperity fund which allows the Government to invest in communities across England, Scotland, Wales and Northern Ireland. Previously, in many of these areas, the EU mandated how our money had to be spent, with little say from elected politicians in the United Kingdom. The UK Government intend to take a much more collaborative approach in delivering any funding that replaces EU programmes.

In this context, I will speak to Amendments 64 and 68, which seek to remove Clauses 42 and 43. The noble and learned Lord, Lord Thomas, asked why such a power should be included in this Bill. The ability of the UK Government to invest in and support businesses and communities in all parts of our union, as these clauses provide for, helps to achieve a stronger and fairer internal market. Indeed, this is the argument the EU makes on the role of European structural and investment funds in strengthening the European single market. It is right that, as we leave at the end of the transition period, the UK Government have the right tools to make sure the whole country can benefit from investment which strengthens communities, economies and connectivity within and between all parts of the UK.

Another point of focus from noble Lords, including the noble Lords, Lord Purvis and Lord Fox, the noble and learned Lord, Lord Thomas, and the noble Baroness, Lady Finlay, among others, was the role of the devolved Administrations and other local partners, including local authorities. Let me be clear: this power is in addition to the devolved Administrations’ existing powers. It will allow the UK Government to complement and strengthen the support given to citizens, businesses and communities in Scotland, Northern Ireland and Wales. It does not take away responsibilities from the devolved Administrations. Rather, the power will enable the UK Government to deliver investment more flexibly and dynamically and in collaboration with the devolved Administrations and other partners.

We have taken a collaborative approach to investment with devolved Administrations already, for example through our successful city deals programme, as noble Lords have talked about. The UK Government intend to continue to work in this spirit of partnership with stakeholders. We will make sure that this new power can facilitate UK government support for projects, making it far more responsive and responsible for addressing the needs of communities and businesses throughout the country.

We have seen how important this can be. Colleagues on these Benches and in the other place have already noted that our experiences of Covid-19 have demonstrated the value of a responsive UK Government. The noble Lord, Lord Stevenson, questioned the support in this House for that statement; I tend to disagree, unless the party opposite does not support the furlough scheme and the Bounce Back Loan Scheme that have protected thousands of jobs and businesses across the UK during this pandemic. To make sure that the UK Government can deliver on this ambition for all parts of the UK, I hope these amendments will be withdrawn or not pressed.

Turning to government Amendment 66, we listened carefully to the debate by noble Lords on this part of the Bill in Committee, where questions were asked on how the clause would operate. Through Amendment 66, the Government seek to introduce a requirement in Clause 43 to report annually to Parliament on the use of this power to provide financial assistance. This would put a requirement in legislation to provide a summary on the use of the power for scrutiny by parliamentarians, other key partners and the wider public. This is in addition to the scrutiny role that Parliament already performs for public spending through voting on the spending allocations, as part of the estimates process and in line with the principle of the PAC concordat.

This requirement makes sure that key partners, including devolved Administrations, have transparency on where funding under the power has been directed. Any future funding decisions are subject to fiscal events. Accordingly, the requirement added by Amendment 66 requires a summary of the use of the power in the previous financial year. I hope your Lordships’ House will agree that this government amendment improves the opportunity for Parliament to see and scrutinise financial assistance provided under the power in Clause 42.

I will now discuss Amendments 65 and 67. Amendment 65 would mean that this new clause would seek to establish a UK shared prosperity fund commissioner, whose primary task would be to make recommendations for the disbursement of the UK shared prosperity fund. Amendment 67 would mean that financial assistance for economic development would be managed and administered through the devolved Administrations. As I have said, this power to provide financial assistance is wider than any single fund or organisation. It will ensure that the UK Government are well positioned to deliver financial assistance, following the end of the transition period, and to replace EU structural funds. It is crucial that the UK Government can use successor funds to invest strategically and have the additional flexibility needed to invest across the whole UK that this power provides. These amendments, including the establishment of a commissioner, would curtail that flexibility. In addition, decisions on governance for the fund should not be made through legislation.

Noble Lords are, however, right to seek progress on the UK shared prosperity fund. The Covid-19 pandemic presented exceptional circumstances, and it is right that our focus and priorities shift accordingly. The Government have conducted a one-year spending review to prioritise the response to Covid-19 and focus on supporting jobs. However, in these challenging times it is important we do not lose sight of our long-term objectives. I reassure my noble friend Lord Trenchard that investment under EU structural funds peaks next year and will tail off until 2023, with spending in each of England, Scotland, Wales and Northern Ireland remaining higher than the annual average.

To ensure a seamless transition from EU structural funds into the UK shared prosperity fund, we announced additional spending today in the spending review to help local areas prepare over 2021-22 for the introduction of the UK shared prosperity fund, supporting our communities to pilot programmes and new approaches. As noble Lords have also referenced, we have published the heads of terms setting out our plans for the shared prosperity fund.

The noble and learned Lord, Lord Thomas, asked whether the spending would be efficient and effective. The bureaucratic burden of EU programmes meant that places have had to wait a long time before they received any funding. Places typically see no investment in their communities until at least a year after the programmes have started. The provision of additional funding next year will be quick and responsive; it will be phased in as EU investment declines.

The heads of terms also set out that there will be two portions of the fund: one targeting places most in need to support people and communities to open up new opportunities; and a second targeted differently at people most in need through bespoke employment and skills programmes, again tailored to local need. As the noble Lord, Lord Stevenson, noted—I hope the noble Baroness, Lady Bennett, who had not seen the spending review document, will take some reassurance from this—the terms also state that investment should be aligned with the Government’s clean growth and net-zero objectives.

We have not taken back control over investment to hoard it in Whitehall or to roll over EU prescriptions on how we invest in our local economies. Local places across the UK will be able to shape investment to reflect their needs. This means a strong role for local partners across the UK. The UK Government intend to work with devolved Administrations and local communities to ensure this power is used to best effect and that the UK shared prosperity fund supports citizens across the UK. This includes engaging with local authorities and devolved Administrations, as well as wider public and private sector organisations. I reassure noble Lords that the Government have held 26 engagement events across the UK on plans for the shared prosperity fund, including 16 events in devolved Administrations, and that UK government officials regularly speak with their counterparts in the devolved Administrations to discuss the design and operation of the fund to ensure it supports every part of the UK.

Further details on additional funding for next year will be published in a prospectus in the new year. We will set out further details on the UK shared prosperity fund in the UK-wide investment framework, to be published in the spring. A multiyear profile will be set out at the next spending review.

The short answer to the noble Lord, Lord Fox, on his final question on the role of the office for the internal market is no. It looks only at Parts 1 to 3 of the Bill and relevant effects, so it would not look at decisions under this power.

Given the further details I have set out today, I encourage noble Lords not to press their amendments.

My Lords, I have received requests to ask a short question from the noble Lord, Lord Liddle, the noble Baroness, Lady Finlay of Llandaff, and the noble Lords, Lord Fox and Lord Purvis of Tweed. I call the noble Lord, Lord Liddle, to ask a short question for elucidation.

My Lords, I strongly support the Government’s levelling-up agenda but, having listened to the noble Baroness, they seem to have a fundamentally different approach to how this should be achieved from what has been a shared consensus for the last 20 years or so. We all thought the way to achieve levelling up, economic development and all the other things mentioned in Clause 42 was through devolution, bringing economic powers closer to the people. That was the logic of Scottish and Welsh devolution and the logic of the Chancellor of the Exchequer in the Cameron Government, George Osborne, who promoted the northern powerhouse, the Midlands engine and all the rest. The Government now seem to be saying, “We want to run the show centrally”. Is that so?

Do the Government not recognise that all this talk about the EU directing how the funds were spent is nonsense? I was very involved with the North West Development Agency; we directed how the funds were spent from that agency. Are the Government not proposing to weaken the powers that the devolved bodies have over structural funds? Finally, is it not the case, as I have been told—someone made a cursory reading of the Red Book—that next year the Government are allocating £220 million to the shared prosperity fund, which is a far lower sum than was available under the EU structural funds?

I am not sure that the noble Lord’s first questions cover points that we have not covered in this debate already but, for clarity, this does not change the devolution settlements. We are talking about a UK-wide investment programme that will work in collaboration with the devolved Administrations, local partners and local authorities.

I am very happy to clear up the noble Lord’s point about £220 million. That is in addition to money that is still coming through the EU structural funds, which will continue to flow until 2023. As I believe I said in my speech, each of the nations will continue to receive the same level of funding, if not a bit more. That first year of funding is for pilot projects and to aid the transition to the shared prosperity fund, which will then ramp up and there will be a multi-year settlement for that fund in the next spending review.

The noble Baroness, Lady Noakes, said to be careful what you wish for. She intimated that, in the event of Clause 44 being deleted from the Bill, the shared prosperity funding being discussed might be withheld completely. Can the Minister state clearly, with a simple yes or no, whether it is indeed the Government’s policy that, without Clause 44, the funding will be withheld or diminished?

My Lords, I do not think that I can go any further than what has been announced in the spending review today: that it is the Government’s intention to use the powers under this Bill to deliver the shared prosperity fund.

My Lords, I thank the Minister for attempting to answer my final question but I fear that she may have been wrongly advised. Clause 31 states:

“The CMA may from time to time undertake a review”.

Subsection 1(b) certainly points to “Parts 1 to 3”, as in the Minister’s answer. However, subsection 1(a) says that such a review can refer to

“the internal market in the United Kingdom”,

which is a far broader swathe than the narrow answer given just now.

While I am up and reading the legislation, subsection (2) states:

“The CMA may receive and consider any proposals that may be made or referred to it for undertaking a review”.

Can the Minister confirm that the devolved authorities are one of the bodies that can request such a review of the whole UK internal market as in Clause 31(1)(a), rather than the answer that was just given?

The noble Lord will probably be unsurprised to know that the advice I have received has not changed in the short time since he asked his further question. I will commit to reviewing that advice; if any part of it was not accurate, I will write to the noble Lord. My understanding is that those reviews do not refer to the powers in this Bill, and whether the devolved Administrations or others can refer matters to the CMA for review relates to other parts of this Bill.

The Minister gave a number of examples of how the UK Government are currently able, under their powers, to fund UK priorities across all parts of the United Kingdom. The Government do not have the legislative powers to spend on devolved areas within devolved competencies. What powers are the Government seeking to have by January next year for them to spend on devolved policy areas in our devolved nations?

The Government are seeking the power under this Bill to spend across the whole of the United Kingdom in the areas set out in the Bill. The operation of the £220 million announced at the spending review will start from the next financial year and the full shared prosperity fund will begin the year after. More detail on how that will operate will be set out in due course.

I thank all noble Lords who have spoken in this interesting debate. I apologise to the noble Baroness, Lady Noakes, for referring to the document published today as the Red Book instead of its true colour which, as one sees on the screen, is blue. I was misled by the heading Google has for it, which is the Red Book.

However, Google had another use because it took up a point made by the noble Lord, Lord Naseby, and alerted me to the fact that the great and late Senator McCain had a member of staff who would go through Bills before Congress and find where there were pork-barrel provisions. He was known as the ferret, so ferrets do have great uses in politics.

To return to the points made, it is clear from the debate that we all share a number of objectives: first, to have a more prosperous United Kingdom; secondly, to spend the money wisely; and thirdly, to spend it in a way that is effective and goes to those areas that need it. We all believe that such spending and levelling up will benefit the union. However, there is profound disagreement as to the way in which this should work with our devolution settlement. It seems to me from the response given to my noble friend Lord Purvis of Tweed and from the Minister’s speech that only one conclusion can be drawn from what the Minister is saying and that these powers are needed not to spend the money outside the areas of devolved competence but to spend it in the areas of devolved competence. That is the aspect that fundamentally divides us and is fundamentally wrong about this clause. It seems to me that, given the Minister’s position and the clarity that comes through her statements, this is a direct attack on devolution under the guise of some other words. Therefore, I seek to press to a Division the amendment that I tabled to remove this clause, which is so destructive of our union.

Amendment 65 not moved.

Clause 43: Financial assistance: supplementary

Amendments 66 and 67 not moved.

Amendment 68

Moved by

68: Clause 43, leave out Clause 43

Amendment 68 agreed.

We now come to the group consisting of Amendment 68A. I remind noble Lords that Members other than the mover and the Minister may speak only once, and that short questions of elucidation are discouraged. Anyone wishing to press this amendment to a Division should make that clear in debate.

Amendment 68A

Moved by

68A: After Clause 43, insert the following new Clause—

“State aid and the Office for the Internal Market

(1) Within the period of six months beginning with the day on which section 30 comes into force, and within the existing budget, the Secretary of State must by regulations establish the Office for the Internal Market (“the OIM”) as independent of the CMA.(2) The Secretary of State must consult and seek the consent of Scottish Ministers, the Welsh Ministers, and the Department for the Economy in Northern Ireland on appointments to the OIM.(3) Following public consultation about the United Kingdom’s state aid provisions and with the consent of the Scottish Ministers, the Welsh Ministers and the Department for the Economy in Northern Ireland the Secretary of State may by regulations make the OIM the competent body for—(a) investigating harmful and distortive subsidies and subsidy races made by any administration within the United Kingdom and relating to harm in the United Kingdom;(b) recommending to the Secretary of State and the Devolved Administrations changes to the test for a harmful subsidy, remedies, the scope of exemptions and time limits on approvals;(c) recommending changes in its powers and functions.(4) After two years and before three years, beginning with the day on which section 30 comes into force, there shall be a review of the competences of the OIM.(5) Regulations under this section are subject to the affirmative resolution procedure.”

My Lords, the amendment in my name and that of the noble Lord, Lord Stevenson, borrows much from other amendments tabled in Committee and on Report, and credit is due to the authors of those amendments.

This amendment has three purposes. The first is to take the OIM out of the CMA after six months and set it up independently, using the budget already allocated for that purpose. For appointments to the OIM the Secretary of State must consult and seek the consent of Scottish and Welsh Ministers and the Department for the Economy in Northern Ireland.

The second purpose is enabling, not compulsory. It is to allow the OIM to become the competent body to investigate harmful and distorted subsidies and subsidy races made by any Administration within the United Kingdom that relate to harm within the United Kingdom. This can happen only after public consultation about state aid provisions, which the Government have already said will take place, and requires the consent of the devolved Administrations. The OIM will also, subject to the devolved Administrations’ agreement, be empowered to make recommendations to the Secretary of State for changes to the tests for harmful subsidies, and to its powers and functions. Finally, there is to be a general review of the competence of the OIM between three and five years after Section 30 comes into force.

The changes, following the devolved Administrations’ agreement, can be brought about by affirmative regulation. Overall, the amendment solves the problem of the unsatisfactory location of the OIM in the CMA and gives a vision for the consensual evolution of the OIM in its investigations of subsidy effects.

We have already debated, in Committee and since, why the CMA is not the right body. The mismatch stems from three sources. First, the CMA is expert in matters that are reserved, not devolved. Secondly, the CMA deals largely with disturbances to the market caused by market participants, whether that be through anti-competitive activities such as cartels, or through market concentration—which is culturally very different from looking at the actions of Administrations as they affect markets in the context of devolution. Thirdly, the tie to BEIS does not make it neutrally positioned in how it is embedded, or perceived, no matter what its objectives may be.

To some extent this proposal follows the TRA precedent of setting up in one location and spinning off, utilising whatever preliminary work has been done. Furthermore, if there is to be a body to examine subsidies —and it is an ‘if’ that can develop in the light of experience—an independent OIM, specialising in the workings of devolution, would seem the right home. As required, I give notice that it is my intention to test the opinion of the House on this amendment. I beg to move.

I support this amendment, the remarks of the noble Baroness, Lady Bowles, on these matters, and the need to have the OIM and CMA working at arm’s length. I have spoken several times on the need to have an office of the internal market that is at arm’s length from all government and is responsive to the needs and reservations of every nation—Wales, Scotland, Northern Ireland, and, yes, England. I would prefer the OIM to be required to obtain the consent of all four nations, but I accept the wording in this amendment as a significant step in the right direction. I am very happy to support it and to vote for it if a vote is taken.

The noble Lord, Lord Flight, does not appear to be present in the Chamber and the noble Baroness, Lady McIntosh of Pickering, has withdrawn from this group, so I call the noble Lord, Lord Naseby.

My Lords, I cannot support this amendment. We had a considerable debate on the OIM in Committee. There are already too many examples in the United Kingdom of where a service can be challenged, one way or the other, particularly in the financial services area, where there is the Financial Services Authority and the appeal mechanism of the Financial Ombudsman Service.

My experience is in the area of what are called doorstep loans. There is, of course, a rogue element, and that must be dealt with, but genuine operators have been servicing that market for decades, including the credit unions and two or three other companies of the highest repute. However, at some point the FSA may say that what they are doing is absolutely right, while five minutes later somebody has appealed and the ombudsman says the opposite.

We must have a uniform, single agency to deal with. The decision made by the Government to put the OIM underneath—for want of a better phrase—the CMA is absolutely right. This amendment would be a retrograde step that would confuse everybody.

My Lords, as the Minister knows, I am a strong supporter of the Bill and believe that it is important to allow the UK’s internal market to function, but I genuinely believe that the location of the office for the internal market is problematic. I fully support the OIM itself, as it will be essential to monitor the effectiveness of the UK’s internal market. However, the CMA is the wrong place for it at the wrong time.

It is the wrong place because monitoring the internal market is a radically different activity from the core functions of the CMA. To oversimplify, the CMA is focused on businesses which can and do behave badly on competition. By contrast, the office for the internal market will not target individual businesses or sectors; its targets will end up being the Administrations of the devolved nations or their regulators if they act in a way that undermines the internal market. Businesses trying to trade throughout the UK should be the beneficiaries of the OIM’s work, not the villains. Most of the CMA’s battles are fought on legal and economic analysis, which are often big battles with a lot at stake but a world apart from the kind of political battle in which CMA may find itself pitted against one of the devolved Administrations.

In Committee, I said that putting two different activities into a single organisation ran the risk of that organisation being a jack of all trades and master of none. Having thought about that further, it is potentially worse. If the CMA and the OIM get embroiled in long political feuds about restrictions on trade within the internal market, it could be very damaging to the CMA’s focus, which may take away from the attention it gives to its core competition-based work. We may end up throwing the baby out with the bath water. It is also the wrong time to put the OIM into the CMA, given the significant increase in size as it takes on additional activities following our departure from the EU. Organisations that try to take on too much and do too many things at once often end up achieving very little.

For those reasons, I support creating the office for the internal market as a separate body. I cannot, however, support the amendment in the name of the noble Baroness, Lady Bowles of Berkhamsted, because it has gone beyond the simple purpose of setting up an independent OIM and has strayed into state aid, with its own version of how that may be taken on in future. That goes too far.

My Lords, I support the main thrust of the amendment, as I explained in Committee when leading a debate on my amendment, for which there was considerable support across the House. There is a good case for establishing a UK office for the internal market, but the CMA is the wrong home, for all the reasons that my noble friend Lady Noakes articulated so well. The CMA operates with values—notably a deep suspicion of the good business can do and an aggressive approach to enforcement—that are not appropriate to the new office.

Subsections (1) and (2) of the proposed new clause come from an earlier amendment which, frustratingly, was not moved, and are on the right lines. However, the proposed subsection (3) is not sensible. If any of the devolved Administrations withhold consent for appointments on whatever grounds, the whole purpose of the new office could be stymied. One is reminded of President Trump and the World Trade Organization, when unexpected and unforeseen actions by an elected officeholder—in this case, the President—in an advanced and democratic country came close to wrecking the operations of a major component of the global economic order. We would be foolish voluntarily to run such a risk.

It may be argued that it is unlikely the devolved Administrations will act like President Trump or that this is an issue of the same order. I would retort that, five years ago, it was deemed impossible by all informed observers that a US President would act as he has towards the WTO. Life can contain surprises, and we act foolishly if we unnecessarily set up arrangements that risk being sabotaged.

Accordingly, I call on the Minister to agree to bring forward an amendment at Third Reading that incorporates proposed new subsections (1), (2) and (5) of Amendment 68A, which seem entirely sensible and widely supported. I regret that I cannot support Amendment 68A as it stands.

My Lords, I regret that I do not believe that the noble Lord, Lord Flight, was here for the start of the debate and, therefore, cannot speak. His name has already been called.

I apologise. The noble Lord, Lord Flight, told me that he was here at the start of the debate, but that is not so. I am sorry, Lord Flight. In that case, I cannot call you, as you were not here at the start of the debate.

My Lords, the debate on this amendment has been relatively short, but the Minister should not conclude from that that it is unimportant. The reason why the debate has been short is that it crystallises points that have recurred since Second Reading, through Committee and in various discussions on other groups of amendments, around the basic suitability of the CMA as a home for the OIM. That is the central point.

I am pleased to follow the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, whose analysis of the concerns around the location of the OIM I completely concur with. They conclude that they do not necessarily like the full nature of this amendment, and I respect that point. This amendment is the culmination of several other attempted amendments but, without it, we will not get the focus on this issue that we need from the Minister. Even though it may be a bitter pill to swallow for the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, we need to get somewhere to concentrate minds—and this is the amendment.

It was ably set out by my noble friend Lady Bowles, and I know that the noble Lord, Lord Stevenson, will also set out a good case, so I will not point to any more issues. I simply say that this is a really important issue, which will colour the culture of the market in this country and how it is run. I had not considered the point brought up by the noble Baroness, Lady Noakes, that it may also jeopardise the CMA’s current role, which is a good point and well made. This is an important amendment to get behind. Noble Lords on the Liberal Democrat Benches will vote for this amendment when it is put, and I hope that other noble Lords, who find problems with some words in this amendment, will stave that to one side and consider that, without it, we cannot change the culture of how the market will be run in future.

I am going to disappoint the noble Lord, Lord Fox, as I will not go through my arguments at length, because they have been made so well by the noble Baroness, Lady Bowles, and the noble Lord, Lord Wigley. I put on record my absolute support for the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, who, while they have comments about the detail of the amendment, support the principle of it. I am grateful to them for that.

It is a simple proposition: the internal market must work and be seen to work for all and, therefore, must have buy-in and support from all. It should not favour one geographical area or country over another. It is important that we do not upset the balance struck in the CMA and its functions. The noble Baroness, Lady Noakes, is right that there may be an adverse impact on the CMA, if it is forced to take on something that is not its primary purpose. Thirdly, the devolved Administrations need to be part of the organisation, its process and appointments.

There are reservations about proposed new subsections (3) and (4) in the amendment. It is beyond our hopes, but perhaps the Minister will consider bringing forward an agreed amendment at Third Reading. If he did, we would support it but, if he will not do that, we will support the noble Baroness if she tests the opinion of the House.

I thank noble Lords who participated in the debate, particularly for their brevity. This is, I suspect, a simple difference of opinion, but I will give it a go anyway.

In previous groupings we have discussed the detail of how the office for the internal market would be governed, including the composition of its board, and so noble Lords will be delighted that I am not going to go through all that again. I have set out consistently in this House why the CMA was chosen as, in our view, the most appropriate body to undertake the new UK internal market oversight functions. The CMA has an outstanding international reputation as an independent regulator and is already equipped with highly relevant economic expertise, necessary to undertake its new functions in the context of the operation of the UK market. Moreover, the CMA has well-established relationships with all the Administrations, with offices in London, Edinburgh, Belfast and Cardiff. This UK-wide presence will help ensure that the OIM will work in the interests of all parts of the United Kingdom.

However, we have made it clear that some bespoke arrangements for the OIM will be necessary, in recognition of the focus on devolved matters. As provided for in the Bill, the OIM will be able to benefit from the CMA’s existing expertise and operate within its overall framework, while having its own functions and powers, including distinct governance arrangements such as the OIM panel and task groups. The Government have recognised that some degree of separation is vital and have developed proposals for the OIM accordingly. I wish to strongly emphasise that the distinct statutory objective for the OIM, and for the targeted adaptation in the Bill of the CMA’s statutory framework, enshrines this separation from the outset.

On Monday, we had a good debate on the composition of the board and the role of the devolved Administrations in appointments. The Government have taken a number of reasonable and pragmatic steps to secure the appropriate balance between ensuring that the devolved Administrations have a real say and that the appointment process is not held up unduly—that would, of course, be risked by the amendment.

Finally, I would like to discuss in a little more detail how this amendment would seek to propose a new role for the OIM regarding subsidy control. I recognise that the amendment reflects a desire for reassurance on the enforcement of any future UK subsidy control regime. However, we believe that it risks undermining and prejudging the outcome of the forthcoming consultation that we have announced. This consultation will inform our future approach to subsidy control, including the role of oversight and enforcement.

The Government have been clear that the UK will have its own approach to subsidy control; we want a modern system for supporting British business in a way that fulfils our interests. The amendment is therefore premature, as it seeks to confer specific regulatory functions on the OIM in respect of subsidies before the wider details of any legislative UK domestic subsidy control regime, including the appropriate mechanism for oversight and enforcement, have been developed and brought before this House or the other place.

On another point that we will discuss in more depth in our next debate, the Government’s view is that state aid—the EU’s approach to subsidy control—is a reserved matter. Therefore, the effect of the amendment’s provisions for consent from the DAs would be to create unacceptable uncertainty over the extent to which subsidy control is a reserved or devolved competence. As an issue of national importance, it should be treated in the same way as other nationally significant areas of economic policy, which are reserved. Having a single unified approach to subsidy control across the United Kingdom is vital to ensure that we continue to have fair and open competition across our internal market.

Finally, proposed new subsection (4) would require a review of the OIM’s competences within two or three years after Clause 30 enters into force. I recognise the need to ensure that the CMA’s new functions are undertaken effectively, but the broadness of this proposed review is unprecedented and unhelpful.

For the reasons that I have set out, therefore, I am obviously unable to support this amendment. I ask—perhaps more in hope than in expectation—the noble Baroness to withdraw her amendment.

My Lords, I thank all those who have participated in this short debate. Some very telling points have been made, yet again, regarding separating the OIM from the CMA.

As noble Lords will know, this is not the first amendment to include proposed subsections (1), (2) and (5); indeed, we had hoped to be able to vote on that amendment, but the timing did not work. I will not conceal from your Lordships that this amendment was constructed so that we had something to vote on.

It is important. The parts that extract the OIM from the CMA are immediately functional. The rest is written so that it is fail-safe—and perhaps, as the noble Baroness, Lady Neville-Rolfe, astutely pointed out, it may never happen. It does not stop there being some further primary legislation to make it happen, but, of course, there are restrictions on what it is possible to put in when there are identical amendments already tabled. Therefore, this is not the end of the road on the wording of this amendment, but it does a lot more good than harm by inserting it into the Bill at this stage. I wish to test the opinion of the House.

My Lords, we now come to Amendment 69. I remind noble Lords that Members other than the mover and the Minister may speak only once and that short questions of elucidation are discouraged. Anyone wishing to press an amendment to a Division should make that clear in debate.

Clause 44: Regulation of distortive or harmful subsidies

Amendment 69

Moved by

69: Clause 44, leave out Clause 44

Member’s explanatory statement

This amendment is intended to remove provisions changing the legislative competence of the devolved legislatures to prevent devolved Acts making provision about the regulation of the provision of certain subsidies by public authorities.

My Lords, in a way this issue is much simpler because Clause 44 has been put in with one purpose only: to alter the devolution scheme. I intend to move that it be removed from the Bill and, if necessary, I will press this to a Division.

I ought to say from the outset that the regime of state aid is plainly necessary, and it is necessary to have one for the whole of the UK, as I will explain in a moment. It is necessary first to say a little about the background. Until relatively recently, the British Government’s stated position had been to retain the EU regime and put in place an independent body, such as the CMA, that would police it. Whether it was like the Commission or whether it was advisory was something to be worked out. Obviously, that would not have required any change to the devolution scheme because we would have been proceeding as we had during our membership of the EU.

However, the present Government decided to change that, and they intend to use Henry VIII powers to do so by statutory instrument. That instrument has been drafted and is no doubt to be debated soon. It has been considered by the Secondary Legislation Scrutiny Committee, which has concluded, and I think it important that noble Lords hear its conclusion:

“The House will be aware of the Committee’s concern, raised on several previous occasions, that secondary legislation is being used to introduce policy changes about important issues which should more properly be the subject of primary legislation, thus affording a higher degree of parliamentary scrutiny. This is another such occasion and one on a subject that appears central to the UK’s negotiation position with the EU. We take the view that it is neither a welcome nor indeed acceptable use of secondary legislation”.

That is a clear intimation that we should look at this in a proper debate on state aid.

Obviously, that is for another occasion, but if that instrument is passed and the EU regime is revoked, the Government’s position is very simple, and we will live under this regime for the next several months—that is, the World Trade Organization rules will apply. We, as the United Kingdom, are bound by them as a matter of treaty obligations and the devolved Governments are bound to follow World Trade Organization rules in relation to subsidies. Of course, it will be without any direct policing authority, but that is the course that has been decided on, so there is no urgency about this issue and I will return to that in a moment. Of course, the position could change.

I very much hope that there will be a deal with the EU, and no doubt there is a prospect that a deal may deal with the subsidy regime, but at the moment we have to proceed on the assumption that, first, the current regime will be withdrawn, and that we will move to the WTO regime. That is the background.

Secondly, I emphasise again that this is not an amendment suggesting that the UK does not needed a regime. It is perfectly obvious that any internal market has to have a state aid regime, just as world trade has to have a set of state aid rules, weak though the WTO rules are on this issue. One cannot see a stronger argument for a properly thought through regime of state aid than in the recently published paper of the Institute for Government Beyond State Aid. It explains why it is necessary, how it should be done, what should be done before it is established and that it should be widely consulted on. Of course, there has been a lot of time to do this, but nothing has been done.

I think it must be accepted that the Government desire to proceed. Why they want to do so now is unclear, but they believe that they have hit a snag, which is the fact that for the time of our membership of the European Union we lived with the devolved Governments dealing with all these issues and, as I outlined in the previous debate, this competence is not reserved. Therefore, unashamedly, the Government want to use this legislation to alter the devolution settlements. Whereas in other parts of the Bill I have been critical of the fact that the Government are trying to do something by stealth, here what they are trying to do is much clearer. What they are trying to do is, if I may say so, not open dealing or being straightforward. They are trying to make state aid a reserved matter by the device of expanding or extending the competition policy reservation. If they wanted to do this properly, one would have expected it to be dealt with in a much more straightforward manner.

The real issue is how should we now proceed, and there are three alternatives. The first, obviously, is to leave this clause in the Bill. I will come back to that in a moment. The second is to work out a policy and enact it by primary legislation. The third is to use the common frameworks. I shall deal with the second of those suggestions first.

If there is to be a state aid policy, it cannot be denied that it would need widespread consultation. If we were to go down this route, the Government would need to carefully craft legislation and bring it before Parliament. If, in such legislation, there is a need to change the devolution settlements, that can be in the Bill so that we know what is required and how it can be dealt with. That is one solution. There is absolutely no reason why we cannot do that, because we will be living under a World Trade Organization regime in the interim and the devolved Governments will be bound by that.

Secondly, to my mind a much more attractive way forward is to use a common framework. I regret that this matter came up in Committee very late on a night when, as the Minister will remember, we were all fairly exhausted at the end of the debate on Part 5. I hope he will recall that I then suggested that maybe one way forward was a common framework.

Having the privilege of being a member of the Common Frameworks Scrutiny Committee, I raised the question of a common framework with the Counsel General for Wales, Mr Jeremy Miles, and the Cabinet Secretary for the Constitution, Europe and External Affairs in the Scottish Government, Mr Michael Russell. They expressed a view that this was a way forward. Last night the Counsel General wrote in very clear terms, and I hope that the letter has safely reached the Minister and many others. He made it clear that state aid had always featured on the list of common frameworks but there had been no progression. He continued:

“The Welsh Government has been clear that it would wish there to be a single state aid subsidy control regime for the whole of the United Kingdom, or at least for Great Britain if the Northern Irish protocol makes this impossible, provided it is co-designed by all the Governments which have to implement it. I therefore wish to make a clear and unequivocal offer on behalf of the Welsh Government. If the Government will remove Clause 44 and agree without prejudice to its legal position to participate in discussions on a legislative framework on state subsidy control, we will commit in good faith to work intensively on such a framework on a tight timetable to reach agreement within three months of the Government tabling a proposal, or in any event by 31 March next year. In the meantime, we will commit to not put forward any primary or secondary legislation to the Senedd which in any way touches on the regulation of state aid subsidies until these discussions have concluded.”

So there is a plain offer of a way forward on the table. That is the second alternative.

The third alternative is to proceed with this clause. I urge noble Lords to take the view that it would be quite wrong to do so. At this stage there is no clear knowledge of what the policy will be. It is not clear what changes, if any, need making to the devolution settlements. The appropriate time to make such a change would be with the policy properly devised and the powers that are needed.

I urge noble Lords to take the view that tackling all this now, with this proposal to change the devolution settlements without a policy by this back-door device of altering the competition reservation, is wrong. It would be better by far to work out what is needed and, if possible, to proceed by a common framework, because that will produce a legal regime with no doubt proper enforcement powers across the UK. We should not put this in at the tail end of a Bill without proper thought as to the context. There is time to do this: the WTO regime will tide matters over until a common framework is agreed or until there is legislation. I therefore move the amendment and I will be prepared to test the opinion of the House on this matter.

My Lords, I am grateful to the noble and learned Lord, Lord Thomas of Cwmgiedd, for putting forward so much detail behind this amendment, which clearly lays out the course of action that could be dealt with and also talks about the way the Government propose to take these matters forward. I think that my job is to amplify some of his points and perhaps to extend them as well. I refer to the offer from the Welsh Government, which I presume has also been made by the Scottish Government at the same time: that was the indication I received last night, and perhaps the Minister could confirm that this letter from Scotland has been received as well.

This clause proposes a major recentralisation of power. It is a far cry, for those of us who live in Wales, Scotland or Northern Ireland, from the cry of bringing back our laws, because state aid is currently not a reserved power, despite the Government’s protestation that it is and always has been. Annexe 1 of the Explanatory Notes for the Bill clearly lays out that it is not a reserved matter, but the Bill, of course, makes it say so. I reiterate at the start that we on these Benches want to see a single state aid regime for the whole United Kingdom, but that regime has to be to a design on which all four parts of the United Kingdom have collaborated. If they are not prepared to do this, as this clause lays out, they will not get a legislative consent Motion from either of the devolved Parliaments or from the Northern Ireland Assembly. In fact, in his letter to the Secretary of State for BEIS yesterday, the Counsel General for Wales said:

“Even if we resolve all the other issues, this alone”—

that is, this clause—

“would make it impossible for me to recommend legislative consent to the Bill as it now stands.”

That is crucial, because it says something about the relationship that this clause makes between the four nations of this United Kingdom. It is not a way to respect our devolution settlement and, importantly, not a way to respect the union we have within the United Kingdom.

EU state aid policy is established through the Treaty on the Functioning of the European Union, and directly applicable regulations following on from that treaty. That was in place of having directives that would have required us to transpose these matters into UK law. In response to the House of Lords report on state aid, the Government said:

“We note that in practice the existing EU rules have always been sufficiently flexible to allow the UK to make innovative aid interventions when necessary.”

So the Government do not believe that there has been a problem in the way that this operated with the EU, and now they are intent on eating their own words, bringing back the rules, converting them into a straitjacket regime and not providing the flexibility that the countries in our union previously enjoyed. They also add that it would be “harmful” if this were dealt with in any other way.

A more co-operative and consensual approach is needed. The clause we are seeking to remove assumes that divergence will happen, and decrees that there shall be no divergence. Blunting and reducing the power of the devolved authorities is deemed to be a price worth paying so that the UK Government alone can determine the route they wish to follow in directing the new regime. Yet we do not know what this regime will look like. There is no sign of the detail or the choices the Government propose to take.

What this clause does, no matter what consultation the Government may eventually engage in, is drive their own agenda—an agenda that primarily has to support England. That, by the way, is no way to provide business with the certainty it is seeking. In fact, the lack of clarity at this stage prolongs the uncertainty; but it need not be like this.

We need to make progress on a UK framework for subsidy control. Again, this is another framework agreement which needs to be put in place. At the moment, without such a framework, it could easily be said that the Government are making it up as they go along. What is needed is a dialogue, not the “take it or leave it” policy that this clause entails—a policy which may well end up in the courts and will certainly amplify the feeling that the union of the United Kingdom is not respected.

Yesterday’s letter from the Welsh Government’s Counsel General, which the noble and learned Lord, Lord Thomas of Cwmgiedd, referred to, provides the UK Government with a route to a sensible solution. It recognises the ability in the EU to have variance in subsidies where there is an identified need. I must point out to noble Lords that many of us will remember that this was the case before we became members of the EU. I remember the arguments and debates on UK regional aid and regional assistance, and dividing the areas of the country up where aid could be given in greater amounts. That historical message was that there would be differences and distortions; of course, subsidies provide distortions, but they were provided for very good reasons. They were proposing to make a difference where the needs were greatest—where poverty and economic need were greatest—and so it was provided it in that way.

I can say, as somebody who had to operate within that framework as an economic development Minister, having to talk about these matters with Brussels simply to identify the boundaries, the flexibility, as the UK Government themselves say, was great indeed to manage that work. I believe we are seeing this clause put the cart before the horse—devising the policy before putting the legislation in place is what we are looking for, and that is what this amendment does.

All the devolved Governments have made it clear that they are prepared to work at pace with the UK Government to design a new subsidy regime. I would be grateful if the Minister in replying could tell us how the Government will respond to the offer from the devolved Governments. I also note that there must be unease on the Government’s side about this clause, since I have noticed that no other speaker, apart from the Minister, has come forward to support it.

Removing this clause from the Bill provides the opportunity for dialogue and the drawing up of a new subsidy regime for the UK. As the noble and learned Lord, Lord Thomas of Cwmgiedd, said, we already have a replacement in place temporarily until that is put back and the regime determined. I do hope that the Government will accept the offer from the devolved Governments as the right way forward and, as a gesture of good will, I would be grateful if they would therefore consider withdrawing this clause, supporting this amendment and, in so doing, strengthening the relationships between the various parts of our union.

My Lords, I speak in support of this amendment, elegantly explained by my noble and learned friend Lord Thomas of Cwmgiedd. I am pleased to follow the noble Lord, Lord German, who amplified his points.

Yesterday, as already referred to, the Welsh Government’s Counsel General wrote to the Secretary of State at BEIS about Clause 44. That letter demonstrates clearly that the Welsh Government are seriously committed to trying to save the union of the United Kingdom and recognise the need to secure the internal market. Their offer to work intensively with the Government is clear and unequivocal.

The Welsh Government have consistently put forward imaginative and thoughtful proposals about how to move the constitutional debate forward. Indeed, in Brexit and Devolution in June 2017, the Welsh Government championed the idea of common frameworks, subsequently taken up by Whitehall. If I may quote, they said:

“From the outset of the debate about our collective future outside the EU, the Welsh Government has recognised a need to develop UK frameworks. It is clearly important that no new barriers to the effective free movement of goods and services within the UK are created as a result of EU withdrawal. The development of UK frameworks should be taken forward immediately on the basis of negotiation and agreement among the four UK administrations.”

This paper suggests a qualified majority voting system within a reformed intergovernmental system, where a decision endorsed by the UK Government plus one of the devolved Governments would be sufficient to break any logjam, thus addressing head on the issue of one nation wielding a veto. Last year, the Welsh Government’s comprehensive analysis in Reforming our Union championed shared governance, describing taking responsibility for codesigning legislation and policy where devolved and reserved competences intersect. It asserted that

“devolution is concerned with how the UK as a whole should be governed, with proper account taken of the interests of all of its parts. It is a joint project between England, Wales, Scotland and Northern Ireland, based on a recognition of our mutual inter-dependence, which therefore requires a degree of shared governance.”

It foregrounded common frameworks, seeking a common approach, shared delivery systems and joint governance arrangements that should be developed on a collaborative and consensual basis. So, the intervention from the Counsel General is not an opportunistic response to this Bill but the continuation of a patient, crystal clear commitment to common frameworks at the heart of intergovernmental relations.

Over these three days of debates, Members across the House have recognised the importance of these frameworks. The Welsh Government and, I believe, the Scottish Government are not arguing to be left alone to design and implement their own rulebooks for government subsidies. They would be mad to do so. In a free-for-all between Governments of these islands to attract and hold on to investment, the UK Government would be bound to win, because they have much more significant financial resources and can set their own budget. Rather than arguing to have an equal role in designing a fair system all can work within, they are committing to do this on a timetable compatible with the one the Government have set themselves and to take no legislative action in this space until at least autumn 2021.

This is surely beyond reasonable doubt. If the efforts to reach agreement fail, the Government will have to introduce primary legislation to define the new subsidy regime, subject to the same constraints there are now, in order to achieve a coherent regime. We have repeatedly been told that this Bill does not diminish the powers of the devolved institutions, yet all we see and hear defies that. This clause explicitly and openly alters the devolution settlement by adding to the list of reserved matters in the Government of Wales Act and the other devolution statutes. I therefore urge your Lordships to support its removal from the Bill.

Clause 44 says it unequivocally: the UK Government, also parading as the English Government in this Bill, are specifically removing from the devolved Administrations their power to provide state aid, by inserting it as a specific reservation or excepted matter in each of the devolution Acts. When I said in earlier debates that the Government were using the Bill to roll back devolution, the Minister insisted that devolved Administrations were being given additional powers. We have already seen in these debates that the Government are using the Bill to sideline and undermine the common frameworks, which have been well established as the basic foundation for the future internal market. At the same time, the Bill removes any incentive for devolved Administrations to develop improved standards. Removing from the devolved Administrations the powers over state aid is fully in line with the thrust of the Bill, which is a barely disguised attempt to emasculate devolution.

I want to concentrate on how this Bill affects Wales, and Clause 44 refers to the Government of Wales Act 2006. In relation to this issue, that Act says:

“The First Minister may give financial assistance (whether by way of grant, loan or guarantee) to any person engaged in any activity which the First Minister considers will secure, or help to secure, the attainment of any objective in the Minister’s functions.”

In Field 4 of Schedule 5, it lists economic development as one of those functions.

It is important to put Welsh devolution in context. It has grown considerably over the years, but at the start, in 1998, the Assembly did not have full legislative powers. It was essentially an executive body to which were transferred the powers previously held by the Secretary of State for Wales. In the original 1998 Act those powers are listed and specifically include the transfer of a number of existing bodies, including the Welsh Development Agency, which was established in the 1975 Act, when the noble and learned Lord, Lord Morris of Aberavon, was Secretary of State. The WDA became hugely important under the Conservative Government, as Welsh industry was hit by the closure of mines and steelworks. The Act lists its powers as including financial assistance for regeneration and development, the provision of sites and premises for industry, and more. That includes, for example, the provision of support in kind, such as land, which is also considered state aid. In due course, in 2006, the Welsh Government decided to take the powers of the WDA into the Welsh Government themselves. Clearly, those powers have been operated within the framework of EU legislation on state aid.

So that is the legal history of the situation. Now I will turn to how it has actually been handled in practice. I know a fair amount about it because I was there —in the Assembly for 12 years and for three years as Welsh Minister, then in the Wales Office for three years, during which I took the Wales Act 2014 through this House. More recently, I have been a member of our own EU Internal Market Sub-Committee and am now a member of the Common Frameworks Committee. Over the years, I have developed a clear picture of where the power currently lies, and I have no doubt that the Welsh Government have the power to grant state aid, as it lay within EU rules. Their economic development powers are, after all, almost meaningless without it.

Anyone in doubt that the Welsh Government, the UK Government and the EU have all considered that the Welsh Government had state aid powers should look at the Welsh Government website, which has a detailed description of what state aid is and the official registration process required by EU law. It lists the schemes that have been accepted and registered according to the general block exemption scheme, for instance. Among listed Welsh schemes are funding to support superfast broadband, SME development, the Wales Screen Fund, the Development Bank of Wales, a maritime and inland ports scheme, and many more, going back over the years.

You might wonder why the Government are so keen on grabbing responsibility for state aid, because over the years the UK Government have been considerably less keen than many other EU countries on using state aid to support industry. Even within the UK, the devolved Administrations have a more generous record than the Government have in relation to England. But think it through and it is obvious: power lies where the money is. Clause 44 is yet another piece of the jig-saw designed to strip devolution of meaningful powers. The UK Government may still retain their aversion to state aid, but by holding that power centrally, it means the devolved Administrations lose their economic levers.

This is a deceitful, centralising Bill—deceitful because, by sleight of hand, under the guise of promoting competition, the Government are unravelling devolution. I think they thought that they would slip it under the radar at a time of major public crisis, caused by Covid and by the failure, even at this late stage, to get a Brexit deal. However, by the size of the votes here today, the Minister can report back that it has not worked and we have noticed.

There is, as noble Lords have explained in some detail, an offer from the devolved Administrations to work positively together to establish a UK-wide structure in which the devolved nations can participate fully. I hope that the Minister will accept this offer with grace because, otherwise, they are on course for a constitutional stand-off.

My Lords, it is a great pleasure to follow my noble friend, with the very great experience and knowledge that she has on this issue. Given the fact that all four speakers so far in this group have been from Wales, I thought that, to avoid a degree of market distortion across the United Kingdom, there should be a little bit of northern balance. All I wish to do is to endorse the points that they have so ably made.

I put my name to this amendment, and if the noble and learned Lord, Lord Thomas of Cwmgiedd, presses it and the House agrees, the Government have an opportunity now to bring back a more considered proposal as a result of some consultation. None of the speakers in this group has indicated that it is easy. If it was easy, agreement would have been reached at the outset. It is about being aware that the frameworks update highlighted that one of the four areas of dispute around where the competences lie with this power being repatriated is state aid. It is obvious that it was not a straightforward situation of saying that this had been uniquely a United Kingdom responsibility—so by definition, it is an issue.

It is also perfectly clear from all speakers that, without there being an understanding about the tests, de minimis levels, the administration and the type of ministerial direction that has existed up to now—without clarity as to how all that will go forward—any Minister in a devolved Administration will quite rightly be concerned about what impact this will have on the economies of the powers that they do have under the devolved competences.

I just wish to reinforce the point that the letter from Jeremy Miles to Alok Sharma, which I read, made a very fair offer. We share the concern that, without there being a further set of discussions to seek a degree of common ground on a framework agreement about how this will operate in the future—which there is time to do, because the Government have indicated that they are seeking to effectively have a window under the WTO approach, and there is consensus that that will be respected—this is potentially the way forward.

I hope that, although often it may not seem so, the Minister will see defeat as a bit of a silver lining in order for him to come back with a more considered approach, to take the Welsh offer and to allow us to consider the Government’s position from a degree of consensus and agreement. I support the noble Lords who have spoken on this group so far.

My Lords, like the noble Lord, Lord Purvis, I agree with the case that has been made so well by the previous speakers. I put my name to the amendment put forward by the noble and learned Lord, Lord Thomas, and we would support him if he chooses to divide the House.

It is very simple: we agree that there has to be a UK-wide policy on state aid—or subsidy, if that is what it is to be called. The question that hangs around but never seems to get answered is: why has it not yet been articulated what this policy would be? It cannot be a question of timing. This suggests yet another shroud of mystery that surrounds this increasingly perplexing Bill.

It is certainly a novel way of developing policy for a Government to remove policy that is in force and that everybody knows and understands, increasing the uncertainty and making it more difficult for businesses. However, as the noble and learned Lord, Lord Thomas, said in his opening speech, the statutory instrument removing the current rules—taking us out of the current system that has been operating for a great number of years—has already been laid and will be debated next week, and we will not be able to stop it.

We therefore seem to be heading towards WTO rules, which are not well respected and do not seem to be applied properly, and there is no policing or organisational structure in which they can be dealt with properly. If that is where we are, we would at least have a period of stability during which we can sort out how we want to set up the rules that will apply to the internal market and how, if necessary, they are to be policed. This could all be part of the yet-to-be-announced deal with the EU—and it may be that is the case, because it is clear that this is a significant area of interest within the negotiations. But without any further detail on that, it is hard for us to speculate.

However, as others have said, the Welsh Government have come forward with an extraordinarily generous offer to expedite work on a common framework that relates to state aid and make a voluntary agreement to pause any legislation that would impinge on that in the intervening period. That is almost too good an offer, and I hope that the Minister has an adequate response to it.

I thank noble Lords who have contributed to another admirably brief debate. We are making good progress this afternoon.

As I outlined in Committee, Clause 44 reserves to the UK Parliament the exclusive ability to legislate for a UK-wide subsidy control regime. I greatly enjoyed the many contributions on this matter. I particularly liked the suggestion of the noble Lord, Lord Purvis, that I should take defeats as a silver lining, which prompts the obvious response that the Liberal Democrats have been defeated in the last three general elections and therefore have some experience of that.

Our debate in Committee on this clause served to highlight that, while some noble Lords might disagree on the approach taken, we all recognise the importance of ensuring that the UK continues to take a clear and consistent approach to subsidy control as we move away from EU state aid rules. The Government have always been clear in their view that the regulation of state aid—the EU’s approach to subsidy control—is a reserved matter. The Government are clear that they want to maximise the economic opportunities available to us when we are no longer bound by EU state aid rules. To achieve this economic ambition, it is important that, as now, we take a coherent approach to the system that governs how public authorities subsidise businesses across the United Kingdom. Reserving subsidy control is the best way in which to guarantee that a single, unified subsidy control regime could be legislated for in future.

In previous debates, there has sometimes been a misplaced conflation between the devolved spending powers and the systems that regulate the potentially harmful and distortive effects of this spending. To be clear, these are two distinct and separate responsibilities. Although the devolved Administrations can and should make spending decisions on subsidies, the wider rules in which they operate are, and should continue to be, consistent across the whole nation. In response to the intervention from the noble Baroness, Lady Randerson, I reiterate that the reservation does not change the devolved Administrations’ position in practice. They have never previously been able to set their own subsidy control regime, as this was covered by the EU state aid framework, but they will continue to make their own spending decisions on subsidies as they do currently.

The effect of the amendment would be to create unacceptable uncertainty regarding the extent to which subsidy control is a reserved or devolved competence. That would potentially give rise to inconsistency if there were different regimes to regulate subsidies across the UK. Ultimately, it could undermine fair and open competition across our internal market and inevitably discourage investment in the United Kingdom, bringing additional costs to supply chains and consumers.

The reservation will enable the UK to design a bespoke subsidy control regime that meets the needs of the UK economy. The Government have been clear that any future domestic regime will operate in a way that works best for all UK businesses, workers and consumers. In the coming months, as I said in Committee, we intend to publish a consultation on whether we should go further than our World Trade Organization and international commitments, including whether further legislation on this subject is necessary.

The noble and learned Lord, Lord Thomas, referred to the statutory instrument that will remove redundant EU state aid rules from the domestic statute book at the end of the transition period. We have laid that to provide legal certainty for businesses, going forward.

I reassure noble Lords that we will continue to listen closely to views in this important policy area. During these past few weeks of debate, issues about specific elements of the UK’s future approach have been raised, including, but not limited to, the precise definition of subsidies and the enforcement of any future subsidy regime. These are all important points that must be considered carefully and properly through the consultation process that we will have. Although we are reserving subsidy control, I make it clear that we will continue to work closely with the devolved Administrations on the shape of any future domestic subsidy regime. UK Government officials will continue to meet with their devolved Administration counterparts on a regular basis. We recognise the importance of working constructively and co-operatively in this policy area, and it is in all our interests that a new regime works for the whole of the UK.

The noble and learned Lord, Lord Thomas, and the noble Lord, Lord German, referred to the letter that we received this morning from Jeremy Miles. As far as I am aware, having checked furiously with the Bill team in my office and various teams in my department, we have not received a similar letter from the Scottish Government. We welcome the Welsh Government’s support for maintaining a unified approach to subsidy control across the UK. We agree that the UK Government and devolved Administrations should work constructively and co-operatively in this policy area, to design an approach to subsidy control that meets the needs of the UK economy. We have always been clear that it is a reserved matter, and that the reservation of subsidy control is necessary to ensure that we continue to take a uniform approach. State aid is not included in the common frameworks programme, so we do not believe that would be an appropriate way forward either. However, we are grateful for the Welsh Government’s constructive engagement with this issue, and for their offer to find a practical way through. We are keen to continue discussions in this spirit. Going forward, we have committed to consulting the DAs on the design and scope of any future control regime.

For the reasons that I have set out, I am unable to accept this amendment. I hope that noble Lords can withdraw it.

Can the Minister reflect a bit more on what he has just said about treating this issue as a matter for common frameworks? It sounded as though he wanted a co-operative solution to this problem, one that would bring all the devolved Administrations into a common framework. However, at the end, he said that it is not appropriate—but why not? He has not given a satisfactory answer to that question. I remember challenging the noble Lord, Lord True, in an earlier debate at Report, on whether the Government had changed their policy on common frameworks and were no longer taking them seriously. I got a very vigorous shaking of the head from the noble Lord, Lord True. Would this not be a perfect example of how common frameworks were still being taken seriously by the Government, and would it not resolve a real problem that the Government have had?

The Minister talked about unacceptable uncertainty, but frankly, the unacceptable uncertainty about state aid has come from this Government. Mr Dominic Cummings had one view of state aid, as against the traditional Conservative view. That is where the uncertainty came from. Now that he has gone and now that he is out, thank goodness, we have an opportunity to create a sensible common policy. There is a need for balance, and it must be sensible. The best way is through a common framework in co-operation with the devolved Administrations.

I am not sure whether that was a question or a speech in the wrong place—but I take the noble Lord’s point. I think he is getting issues conflated. The common frameworks programme of course is a programme of work with diffuse levels of power and ultimately it is not clear where regulation lies. To resolve those matters on a cross-UK basis, there is no doubt in our mind where the proper operation of these powers is—state aid, or rather subsidy control, is a reserved matter for the UK Government. However, we have said that we want to work collaboratively. We want to work with the devolved Administrations and of course, as we have said, we will consult closely with them on any new policy that we develop and indeed on whether legislation is necessary. But, given my general support for the framework and the Government’s support for the framework programme, I do not believe that it is appropriate for this matter to be included in the framework programme.

I will be brief, as obviously it would be very unfair if the Welsh were totally to outnumber everyone else in the number of speeches delivered this evening. I thank all noble Lords for their contributions to an interesting, though short, debate.

First, it is very encouraging that there is complete consensus on the need for a single subsidy regime for the internal market. There is no doubt about that. Secondly, there must be a consensus that at the moment this is not something that the UK Government have power over—otherwise this clause would be unnecessary. It is not a reserved matter and therefore under the devolution schemes it is a matter for all the devolved Governments. Thirdly, it is clear that there is no uncertainty. The Government are taking us out of the EU regime, assuming the instrument is passed, and we will go into the WTO regime—so that is the regime for the foreseeable future.

The real question is: are we going to go forward by diktat from Whitehall and Westminster or are we going to go forward by consensus? An obvious way of going forward is a common framework. I regret to say that I cannot agree with the Minister that a common framework is inappropriate. It is absolutely appropriate, because it will cater for the kind of divergence that will be allowed in the subsidy regimes. This is a matter of acute importance to people such as fishermen and those involved in agriculture. We need to know what level of divergence is permissible and negotiate that.

Finally, a decision has to be made on the role of the CMA. I moved amendments earlier this week in relation to the CMA simply because I imagine it will have to be the policeman of this regime. But what is it to be? Is it to be an adviser? Is it to have a central role? Or are things to be laid out in a common framework?

I therefore say that this clause ought to be removed. Get the policy right first. Try it by common framework and let us go forward on that basis. Therefore, I want to take the opinion of the House on the appropriate means of going forward—and the appropriate means is taking this clause out of this Bill.

Clause 46: Further provision in connection with the Northern Ireland Protocol

Amendments 70 to 72

Moved by

70: Clause 46, page 37, line 2, leave out subsection (1) and insert—

“(1) Section 11 ceases to have effect when Articles 5 to 10 of the Northern Ireland Protocol cease to apply.”Member’s explanatory statement

This amendment is consequential on the removal of Part 5 (Northern Ireland Protocol) at Committee Stage.

71: Clause 46, page 37, line 7, leave out “except the amendment made by subsection (3)”

Member’s explanatory statement

This amendment is consequential on the removal of Part 5 (Northern Ireland Protocol) at Committee Stage.

72: Clause 46, page 37, line 13, leave out subsection (3)

Member’s explanatory statement

This amendment is consequential on the removal of Part 5 (Northern Ireland Protocol) at Committee Stage.

Amendments 70 to 72 agreed.

My Lords, we now come to the group beginning with Amendment 73. I remind noble Lords that Members other than the mover and the Minister may speak only once and that short questions of elucidation are discouraged. Anyone wishing to press this or any other amendment in this group to a Division should make that clear in the debate.

Amendment 73

Moved by

73: After Clause 46, insert the following new Clause—

“Joint Ministerial Committee on European Negotiations: agreement of regulations

(1) Regulations to be made under any provision of this Act must be brought before the Joint Ministerial Committee on European Negotiations for discussion and agreement before they may be laid before Parliament.(2) If the Joint Ministerial Committee on European Negotiations do not agree to the regulations, the Secretary of State must lay before Parliament the reasons for the disagreement, and table a motion in both Houses of Parliament to debate the regulations and disagreement before they are approved.”Member’s explanatory statement

This new Clause seeks to ensure the Joint Ministerial Committee on European Negotiations, representing all four nations, have sight of the regulations made under this Bill.

My Lords, I am happy to move Amendment 73. It is the same sort of amendment that I moved in Committee, when my noble friend Lord True was kind enough to say that it was a unionist type of amendment and, therefore, could be considered. Since then, the Government have accepted a number of situations covered by my amendment. It has therefore probably served its purpose and I do not propose to put it to a Division.

However, it illustrates what I am anxious to achieve: a degree of co-operation between the devolved Administrations and the Government of the United Kingdom, which will put the Bill in a much happier situation than it appeared to be in at first sight. A good deal has happened already. I just hope that they will go a little further.

I am under a certain restraint, because my computer has decided to restart without giving me any notice. I may not be able to speak at all when my turn comes at the end of this group but, if not, I end in that spirit.

It is a pleasure to follow the noble and learned Lord and we are grateful that he is more reliable that his technology. In Committee and with this amendment, he has suggested to—and sought to persuade—the Government that there is merit in them thinking again about further consultations on developing the frameworks to the extent that, where they can reach their limit, there would then be the legislative requirement within this Bill.

I will speak to Amendment 75, in my noble friend Lord Fox’s name, which tries to put forward a structure for these discussions and, in effect, to codify it within this legislation—providing that framework, as it were, for the talks that should happen. In so doing, I will display what some colleagues in the House consider my usual characteristic of being rather pernickety—to which I say mea culpa. In our amendment, we reference the “Joint Ministerial Council”; it should refer to the Joint Ministerial Committee, so I admit that that was an error in the drafting.

When we started Committee, we had heard reflections at Second Reading and the concerns of the devolved Administrations about this Bill. At this stage, there is no need to rehearse the concerns; we have done so in Committee and on Report. Ministers—the noble Lords, Lord True and Lord Callanan, and the noble Baroness, Lady Bloomfield, in particular—have been very willing to meet with us and discuss this. We have not always been in agreement; nevertheless, personally speaking, I am grateful for the opportunities to discuss some of these issues with the Ministers.

Ultimately, the House has made the decision that we have not been persuaded by many of the Government’s arguments. Even today, key elements of the legislation have been excised, such as those on spending and subsidy powers. From the government Benches, the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, indicated that it was not appropriate for the OIM to be in the CMA. In a whole series of areas, this House has taken a view that we are concerned about how the Bill had been drafted.

Fundamentally, one of the themes has been a genuine ongoing concern, not fully addressed by government amendments on consultation, that the powers which the Government are taking under this legislation will damage, rather than strengthen, devolution. In particular, they will put at risk one of the areas where we have seen consensus not only within the parties in this House but within the nations and the UK Government: namely, that the frameworks process has been positive, notwithstanding a pause and a disagreement. The amendment of the noble Lord, Lord True, which this House passed with a large majority, the reference that the noble and learned Lord, Lord Mackay of Clashfern, indicated with his amendments and our amendment show that we also wish for that process to see its natural conclusion.

At this stage, we believe there is merit in seeking support for a further set of discussions at a plenary session of the Joint Ministerial Committee, which can agree the principles of the market access and an intergovernmental relationship that will put this on a sound footing for many years to come. That is why we are asking the House to consider a proposal that we believe will allow there to be agreement and consensus, but not a veto.

This is the final thing that I will say. We accept that the operation of the UK market is a shared UK aspect, but it will be a complex set of discussions and potentially contentious. That is why in this amendment we have sought a mechanism to prevent a veto but to allow consensus to be brought about. I know that my noble friends Lord Bruce of Bennachie and Lord Fox will cover the details. Personally, having gone through all the stages of the Bill, I will say that while we recognise Ministers’ willingness to be open, as I have indicated, there is still a case to be made for one further opportunity to seek consensus.

My Lords, I put my name to my noble and learned friend Lord Mackay of Clashfern’s amendment out of admiration for him and for the way in which he has sought positively to contribute to our debates on the Bill, both in Committee and on Report. All his contributions have been informed by his passionate unionism. He is a truly remarkable man. He was a most revered Lord Chancellor and, of course, had he lived in Edinburgh in the Age of Enlightenment he would have been one of the adornments of that age. We are extremely fortunate to have him as a Member of your Lordships’ House.

I say to my noble friend Lord True that my noble and learned friend Lord Mackay has indicated that he does not wish to push his amendment to a Division because he is appreciative of the recognition of the importance of the union displayed by my noble friends Lord True and Lord Callanan, and indeed all those who have spoken from the Front Bench. However, and I say this on my own account, while I completely understand why my noble and learned friend does not want to divide on this amendment, and I admire him greatly for all that he has done, I still believe that the union is in peril, and it is terribly important that my noble friends on the Front Bench take most carefully into account all that has been said today on the subject of the union. All the amendments have been informed by a great love for the union, a recognition that it is at risk and a passionate, consuming desire to ensure that the most successful union in European history does not come to grief.

If, when he comes to wind up, my noble friend Lord True could emphasise his own devotion to the union, that would be a reward to my noble and learned friend Lord Mackay for his persistence, and a recognition from your Lordships’ House of the esteem in which we hold him.

It is a pleasure to follow Lord Cormack, who has neatly demonstrated in this last group on Report how much this has been a cross-party, cross-House effort. There may be many things that we disagree on, but what has been broadly agreed is that the Bill is not currently fit for purpose. We have seen that again and again, with very strong votes for the amendments put forward by your Lordships’ House from a wide range of directions. It is fitting that, in opening this group, the noble and learned Lord, Lord Mackay of Clashfern, demonstrated the House’s persistence in the face of technological challenges, which has been a great credit to the House right through this debate and, indeed, through the entire Covid-19 pandemic.

I will speak briefly to Amendment 75, introduced by the noble Lord, Lord Purvis of Tweed, to which I have attached my name, as have the noble Lords, Lord Fox and Lord Wigley. I shall not go through it in detail; it is a very detailed amendment, but that reflects of the nature of this debate and the issue of trust. Your Lordships’ House has heard again and again, including in reports from its respected committees, of great concern about details, plans and policies not being put in the Bill. This is one more amendment that seeks to tackle that. Looking at the overview of this, your Lordships’ House has, perhaps slightly ironically, been standing very firm as a defender of devolution and democracy. We will almost certainly return to this again and I urge all Members of this House to stand up for these issues, which are crucial for the future of the United Kingdom, whatever shape that might take.

My Lords, I am glad to have the opportunity to speak in this group of amendments and to follow the noble Baroness, Lady Bennett, who has made a massive contribution to our work on the Bill. As I have stated in previous debates, the House would be well advised to listen to the words of the noble and learned Lord, Lord Mackay of Clashfern. Time after time, he has alerted the House to the need to find an acceptable compromise on these matters. In particular, Amendment 75, in the name of the noble Lord, Lord Fox, to which I have added my name, serves that purpose. The amendment addresses the need to have a coherent framework for the work of the Joint Ministerial Committee and to provide a mechanism for when there may be disagreements. The noble Lord, Lord Purvis, stated that this amendment provides for any opportunity to achieve a consensus where that is possible—an excellent aspiration.

Likewise, the noble Lord, Lord Cormack, stressed tonight, as he has before, the need to find ways of co-operating. As I am sure he would be glad to hear, I add that my main objective in seeking greater powers for Wales is not primarily to demolish the union, but to change it into something that better serves the interests of our respective countries. That means giving greater power and being prepared to be flexible, something that has not been entirely apparent in the Government’s attitude to the Bill.

There clearly has to be some mechanism for dealing with situations where there is a disagreement among our four nations. It should have been the duty of the Government to find an acceptable solution, but they have failed to do so. I therefore believe that we should give MPs in the other place an opportunity to address this matter again by writing an amendment along these lines into the Bill.

My Lords, I am delighted to follow the noble Lord, Lord Wigley. I endorse everything that my noble friend Lord Cormack said about our noble and learned friend Lord Mackay of Clashfern.

I have not spoken in general terms about the union. Suffice it to say that, as a Scot by birth with a Scottish father, who made her maiden speech next door on the Scotland Bill, I care passionately about this area. I lend my support to the terms of the amendment as set out by my noble and learned friend. I urge my noble friend Lord True to show the same spirit as our noble friend Lord Callanan when he accepted many of the areas, identified by the Law Society of Scotland in earlier parts of the Bill, on which we felt that the Government should consult. I am just disappointed that those fell to the terms of consent being sought. I am not sure that is appropriate in all those circumstances.

We must not lose sight of the fact that the Scottish Parliament withheld its consent to this legislation. It behoves the Government to move as far as possible and to consult. I am mindful of the old BT advert: it is good to talk. By talking and consulting, many misunderstandings are removed. It also behoves the Government to ensure that the common frameworks are allowed to reach their natural conclusion in the areas that are already well advanced. I wish my noble and learned friend Lord Mackay and his amendment the best, and hope that our noble friend Lord True might be magnanimous and come forward with something similar at the next stage.

My Lords, I am speaking in support of Amendment 75, and I recognise the constructive intentions behind Amendments 73 and 76. I want to be clear that I have not been persuaded in any way of the case for this Bill. It is wrong in almost every respect, and that is why it has been substantially amended: I think the House takes a similar view. Of course, I have supported amendments that mitigate its worst effects, but I view with growing despair the failure of the Government to grasp just how negative and dangerous is the thrust of this Bill.

The Bill is clearly driven by an ideological and deluded belief that the UK Government can negotiate trade deals more far-reaching and radical than have been achieved within the EU and that, in doing so, they do not wish to allow the existing devolution arrangements to account for any friction in the process. Of course, however, Part 5 of the Bill destroys the negotiating capacity of the Government, who have had no experience of negotiating trade deals in more than 40 years, by advertising in advance their preparedness to set aside unilaterally any agreements that they might sign. The trouble is that the Government seem completely oblivious to the friction that will result from unilaterally overriding decision-making under the devolution settlements.

It has been argued repeatedly that decisions involving the devolved Administrations should be based on seeking agreement. The principles behind the common frameworks have been met with wide support and approval, and I welcome their inclusion in Amendment 76 in the name of the noble Lord, Lord Stevenson of Balmacara. However, there is still a serious lacuna in the process for reaching agreements across the four nations, and Amendment 75 addresses this. The amendment also seeks to utilise the joint ministerial committee, which, in practice, has not been used enough, but which could be an effective means of producing a dispute-resolution process.

The problem at the moment is that the default position leaves it to UK Ministers—who, of course, are also English Ministers—to have the final say. It is not desirable for any one of the four nations to have a veto on achieving agreement. We are quite clear about that. That is why a premium should be placed on seeking agreement wherever possible. Where it is not possible, however, there needs to be a mechanism that is seen to be fair and collaborative and not one-sided. That might involve qualified majority voting, which I have advocated on a number of occasions. However, this amendment proposes not a solution but a mechanism for finding one. My noble friend Lord Purvis, in previous contributions, alluded to the Australian example where the mechanism was unanimously agreed by all the state premiers, but decisions relied on qualified majority voting.

This Bill will do immense damage to the union and to what is left of Britain’s good standing in the world, which this Government seem determined to destroy. Amending it is only damage limitation, but Amendment 75 would go a long way to help. I support it: it is a mechanism by which we can find solutions to disagreements among our four nations that do not allow for veto but do seek consent and will have the support of all the component parts of the union, apart from those who have no desire to maintain it. Many of us want this union to survive and to be effective: this kind of amendment is a way to try to ensure that.

My Lords, my noble and learned friend Lord Mackay of Clashfern made some powerful arguments on this subject in Committee. As he said, the UK internal market is not a fixed law, like the law of the Medes and Persians. He made a great contribution, together with the noble and learned Lord, Lord Hope of Craighead, in bringing the common frameworks programme into being in 2017.

I believe that the nationalist-led Administrations in Scotland and Wales, by arguing that powers that have been held by the European Commission in maintaining common frameworks at a European level should not return to Westminster but should be returned to the devolved authorities, are acting against the economic interests of their stakeholders. They might want to increase the powers of the institutions of which they are members, but they do not give enough consideration to the damage to the UK internal market that their power grab threatens to cause.

The return of powers from Brussels was supposed to herald a return to a simpler, clearer, rules-based regulatory system, but the transposition of EU law into UK law is proving more complicated than it should have been, with every statutory instrument having to set out in detail the differences in application between the four constituent nations.

The Government have made clear their continuing commitment to the common frameworks process, and the House should give that more recognition. In an earlier debate my noble friend Lord Naseby rightly said that this Bill is not the place—and it is certainly not the right time—to undermine the drive of the Bill, which seeks to ensure that the UK Government have the necessary powers to ensure that the internal market remains intact, which is so necessary for us to make a success of leaving the EU.

My noble friend Lady Noakes has also spoken powerfully about the need for the Government and the devolved Administrations to consider the needs of all British businesses, and indeed consumers. A majority of British businesses trade only within the UK, as do some 90% of SMEs. Let us not shoot ourselves in the foot by legislating to tie the hands of the Government in their most important task of ensuring that there are no internal market barriers to trade that would reduce choice and increase costs for all our citizens.

My noble friend Lord True has made it clear that the Government see this Bill as complementary to the common frameworks programme. He clearly stated that the devolved authorities would be able to continue to innovate and regulate in devolved policy areas, subject to the overriding need to prevent internal protectionist barriers.

My noble and learned friend Lord Mackay and my noble friend Lord Cormack are both strong supporters of the union, and I welcome the fact that the Government have made gestures to accommodate the concerns they put forward. Against that background, I agree with my noble and learned friend that we can be optimistic that the joint ministerial committee will in any case be able to agree on these matters, and I understand why he has indicated that he will not move his amendment.

I cannot support Amendments 75 and 76, which would damage our ability to prosper as an independent country in the years ahead.

My Lords, it is a pleasure to follow my noble friend Lord Trenchard, who has contributed so much to the different stages of this Bill. Once again, it has also been a great pleasure to support my noble and learned friend Lord Mackay of Clashfern as he tries to prompt the Government to outline a process of devolved consultation on any major disputes in the creation of regulations or statutory instruments that future Administrations will consider adequate to the task under this Bill.

Almost all the issues discussed today fall very much into the area that recalls the off-the-cuff remark that slipped from the lips of my right honourable friend the Prime Minister, which he has since spent some time trying to explain in any way that fits with government policies going forward. Speaking as a Scotsman, however, I believe that the First Minister of Scotland should take some comfort from what the Prime Minister said and the fact that as devolution has progressed she has been able to move many Scots institutions and practices—never as far as she might like, but always in the direction that she would like, towards an independent nation. The situation in Wales has not been the same; it has been much healthier. Naturally, this is the approach that we can expect the First Minister to use with any future changes, and it presumably explains the lack of consent from that area.

Like my noble friend Lord Cormack, today I wish to support a Government who aim to maintain a United Kingdom. The Government are looking for support and settlements in structures and frameworks that can support devolution within, and as part of, the United Kingdom. In supporting my noble and learned friend, we are all seeking a truly robust mechanism that has the possibility of overcoming disagreements at the highest level. The debates in your Lordships House today are more and more an illustration of the levels of disagreement that will have to be solved.

In Committee, my noble friend the Minister in his reply gave some idea and suggestions of the criteria that the Government have in mind for resolving disputes at a more mundane level. Some of it sounded quite good, as far as it went. Disputes such as those he outlined are frequently liable to comprise very technical elements, and the Government would like to resolve these at a departmental level, or, as they say, at as low a level as possible—whatever that is.

In Committee, my noble and learned friend Lord Mackay insisted that his suggestion for working these things out through the Joint Ministerial Committee on EU Negotiations was exactly what is needed. However, he is hoping that the amendments the Government have now introduced will move it some way in that direction.

In his response in Committee, my noble friend the Minister enticed us—and it was repeated at a briefing I received today—with the thought that there is in train a revision of the workings of the Joint Ministerial Committee, where already

“The proposal for reforming the formal process for avoiding and resolving intergovernmental disputes was jointly drafted”.—[Official Report, 2/11/20; cols. 529-30]

Having said that, the Minister was then asked by the noble Lord, Lord Purvis of Tweed—who has also prompted us today—whether we would be given some indication of what this reform contained, as it is of consequence to our consideration of disputes under this Bill. But the Minister would not be drawn, and we are being asked to consider this Bill without this knowledge and without the proper mechanism. It sounds as if the Government are going to rely on some political bargaining somewhere along the line.

I have another question of clarification for my noble friend the Minister. Will the Competition and Markets Authority—which is above political interference —and its office of the internal market task force be given the support they need to face disputes in a court of law? That appears to be where this is all heading.

My Lords, this has again been a high-quality debate. It is an honour to follow the noble Duke, the Duke of Montrose, who spoke with great wisdom. In offering Her Majesty’s Government support, that support was heavily nuanced with some important questions, which I look forward to hearing the Minister answer.

In the previous debate, on Amendment 69, the noble and learned Lord, Lord Thomas of Cwmgiedd, set the question of whether it was diktat versus consensus. It is the same with group. I am pleased to speak in a group which has heard the contribution of the noble and learned Lord, Lord Mackay, and I share in the admiration of the noble Lord, Lord Cormack, for his contribution. He painted a rather half-full picture of where we have got to in the Bill, and the noble Lord, Lord Cormack, was a little more half-empty. I am afraid that I side with the concerns of the noble Lord, Lord Cormack. Those concerns were further illustrated by my noble friend Lord Bruce, who set out the flaws and problems that remain with the Bill.

I am speaking to Amendment 75, in my name, and I am grateful for the support of my noble friend Lord Purvis of Tweed, the noble Baroness, Lady Bennett, and the noble Lord, Lord Wigley. Overall, my noble friends have been very clear and helpful in setting out the purpose of this amendment. It is essentially to help drive a process whereby the consensus that the noble and learned Lord, Lord Thomas, talked about in the last group can be delivered—an explicit process.

Why do we need an explicit process? One thing that has come through the Bill, and through amendments brought by both Ministers, is an acknowledgement of the need for consultation. However, as we heard from the noble Lord, Lord Empey, who was here just a few minutes ago and I am afraid is not here now, one Minister’s consultation is not necessarily one recipient’s feeling consulted. There is a process that is called consultation, whereby people are informed marginally before the general public, and then there is genuine consultation. All Governments practice both these forms of consultation.

Amendment 75 sets out a process whereby consensus is driven, rather than relying on the Minister or the Government of the day, whether this one or future ones, to deliver that consensus around the Joint Ministerial Committee. That process has been set out, as I said, by my colleagues. The purpose is, in a sense, to bookend the amendment of the noble and learned Lord, Lord Hope. After Part 5 discussions, we started these discussions with the amendment of the noble and learned Lord, Lord Hope, which pushed the common frameworks to the forefront of how the future internal market should be organised. Amendment 75 seeks to put in place a process by which this can happen and, as my noble friend set out, avoids the pitfall of a veto.

The noble Lord, Lord Cormack, said that he had concerns about the union. I have concerns about the union. It is only by delivering a truly consensual process that is seen to be transparent and set out, rather than optional, for people, that that danger can start to be averted. That is why I will be pressing Amendment 75 to a vote—unless, of course, there is a damascene conversion on the Benches opposite.

My Lords, like others, I congratulate the noble and learned Lord, Lord Mackay, on his campaign. The Government have listened to it and that has resulted in a number of good and important changes to the Bill. He exerts great influence on our work, and long may it continue.

I admire the thinking that has gone into Amendment 75, in the name of the noble Lord, Lord Fox, and his supporters. It proposes a response to another of the gaps that we keep encountering in the Bill—the need to reform the JMC system and the need for a mechanism for getting agreement, with particular reference, in this case, to the market access principles, about which we have different views. This may not be the time to bring this particular proposal in, but it shows us the way forward and I hope that that will influence the Government’s thinking in other ways and in other parts of our political consciousness.

Amendment 76, in my name, was intended as a fallback, in case our plans for ensuring that the common frameworks programme was made the centrepiece of the process for agreeing the rules required to underpin the UK internal market fell by the wayside. However, this House has strongly supported the amendments of the noble and learned Lord, Lord Hope, on the common frameworks, and we hope that, in time, we can persuade the Government that they can and should do likewise.

I am less sure that we have persuaded the Government about the damage they will do to the devolution settlement if they do not change tack on how state aid is to be organised and their current top-down plans for the shared prosperity fund. I urge them to reflect on the opportunity they have been given by the votes today, but I do not think Amendment 76 will actually take the trick that it was intended to in this case, so I shall not be pressing it to a vote.

My Lords, I must say that any computer that tries to silence my noble and learned friend Lord Mackay of Clashfern should be carried to the top of the Old Man of Hoy and dropped from a very great height, hopefully with destructive power—unless any environmentalist thinks that that is a serious suggestion; it is a figure of speech. Those who are not familiar with the Old Man of Hoy should understand that it is an extremely high stack in a very beautiful part of the country. It is very hard to climb, too; I have never attempted it—you only have to look at me to see that.

These amendments have difficulties because they would all introduce, in our judgment, a serious risk of the internal market system not being in place at the end of the transition period. That is a serious consideration in our contention. I agree with my noble friend Lord Trenchard, with his great experience of business—indeed, of business with Japan—that a secure, stable and functioning market is part of the bedrock of our union. It is a unionist principle that we should have a common functioning market; I think that that is assented to by almost all of those who have spoken in our debates. Of course, I repeat my personal commitment and this Government’s commitment to the union. My party has always been a unionist party, and we remain as such.

Coming back to the amendments, in our judgment, a considerable delay would undermine business certainty and consumer confidence at a time when it is vital that the economy is able to bounce back in the Covid recovery phrase, about which my right honourable friend the Chancellor spoke so eloquently earlier today.

Amendment 73, as others have said, absolutely underscores the honourable intent of the noble and learned Lord, Lord Mackay of Clashfern. We have had a meeting of minds on that. I am grateful for his kind words; I can certainly assure him that he has been a great influence in securing constructive change, as have other noble Lords in the course of these debates. I can affirm that the union will remain at the heart of the Government’s objectives. I am grateful for his withdrawing the amendment with the comments and, indeed, warnings that he set around that withdrawal because of the clear limitations—I will come on to these—of linking any proposal to the Joint Ministerial Committee.

For that reason, I will move on to Amendment 75, which specifies a process of debate and consent that must be achieved with the devolved Administrations through the joint ministerial council before the market access principles can take effect. This process would add an unacceptable delay to the implementation of the market access principles when the very reason for the Bill that we are here to discuss is to provide certainty to businesses from 1 January 2021, when the European structure falls away. The objective to provide certainty as powers flow back from the European Union is not new or rushed; indeed, efforts have been made to discuss this over a lengthy period. I must remind your Lordships that, sadly, the Scottish Government walked away from the internal market project in spring 2019. However, there has been continuing, positive and helpful engagement at official, and indeed ministerial, level since then. I do not share the pessimism, suspicion or doubt of a number of your Lordships that our union cannot prosper with this internal market after January 2021.

There is a valid question on how governance and disputes relating to the internal market should be dealt with through intergovernmental machinery; my noble friend the Duke of Montrose alluded to our earlier discussions on this. As I updated your Lordships earlier in these discussions, the Government are looking with the devolved Administrations at reforms to the Joint Ministerial Committee structure. The intent is to move on through the joint intergovernmental relations review.

This review will deliver the overarching architecture to support the delivery of improved and effective engagement with the devolved Administrations at all levels of government—as my noble friend the Duke of Montrose alluded to—from officials upwards and, if necessary, the consideration of cross-cutting issues above departmental level. I repeat what I said earlier: this is not complete, but work is progressing positively in this respect. I think that all the various Administrations would accept that. We welcome further discussions with the DAs on finalising the format of these engagement structures, including to complement those relating to the internal market, and I look forward to reporting back to this House on our finalised governance structures when we have concluded the review, which, as I have said, we aim to do by the end of the year.

In addition, as set out in my letter to colleagues prior to Report, the Government propose that a meeting be held in the new year with devolved counterparts once the Bill becomes law to agree a programme of official and ministerial-level engagement on the—my brief says “operationalisation”; can you imagine such a thing?—implementation and operation of the Bill. This includes determining the practical arrangements to deliver our commitment to meet Ministers in the devolved Administrations annually, as undertaken on this Bill, to review the operation of the UK internal market as supported by Parts 1 to 4 of the Bill, including new developments that might require the use of such delegated powers. This annual meeting will be just one of the regular intergovernmental meetings between BEIS Ministers and officials on other portfolio matters, such as the Covid-19 response.

On Amendment 76, I do not mean to disparage the noble Lords, Lord Fox and Lord Purvis of Tweed; indeed, I thank them for their openness and engagement in the process so far. I was going on to thank the Labour Party for its engagement, and I never want to give unintended offence to anyone in your Lordships’ House.

I thank the noble Lord, Lord Stevenson, for what he said; I am grateful for the engagement and discussions that we have had on this and the common frameworks programme. His amendment seeks to create a link between the common frameworks programme and the market access principles. While it is true that the internal market provisions and common frameworks programme are complementary, as we have tried to persuade your Lordships—that is how the Government see it—it is not appropriate to create a link with the common frameworks programme in that specific way in this amendment. I will not go on at length because the noble Lord has said that he does not intend to press it, but I underline that I appreciate the strength of feeling in the House on common frameworks, which I and other Ministers continue to reflect on. In saying that, I will not undertake to come back to this House on Third Reading, so if any noble Lords wish to test the opinion of the House on this issue, it would have to be at this point.

I assure noble Lords that the Government remain committed to the common frameworks programme. The processes established in it will work with future intergovernmental relations machinery. As the noble Lord, Lord Stevenson of Balmacara, pointed out, with the inclusion of the amendment of the noble and learned Lord, Lord Hope—although the Government did not and do not accept it—your Lordships have ensured that common frameworks will be discussed in another place; no doubt we will have opportunities to consider it further. I think that was the spirit in which the noble Lord, Lord Stevenson, was withdrawing his amendment. I appreciate that and offer him those words of assurance.

The process proposed in his amendment and Amendment 75 undermines the purpose of the market access principles, which are designed to provide underpinning certainty that the UK internal market will continue to function in all circumstances. These amendments would create uncertainty about whether and when the market access principles would apply. Leaving businesses to manage this uncertainty and friction is not acceptable. Indeed, it undermines the core purpose of the Bill of providing businesses with certainty that they can continue to trade across the UK at the end of the transition period. For these reasons, the Government cannot support these amendments and I hope the noble and learned Lord will withdraw his amendment.

My Lords, I am glad to be able to speak to noble Lords, although I cannot now see them. I appreciate what has been said. I do not think it necessarily involves uncertainty about the principles, as my noble friend Lord True suggested. I think it could be quite clear that the principles apply, except so far as they are modified by the common frameworks agreements. That does not in any way make them uncertain. If it were needed, some kind of notice that a common frameworks decision was to become part of the internal market rule would possibly deal with that if it had to be dealt with, but it is perfectly reasonable to think that the common frameworks could work as part of the arrangements in such a way that the results of agreements in the common frameworks are put into effect in the UK internal market rule.

I agree that the internal market is fundamental to the union of the United Kingdom. As has been said, it was the rule right from the first day of the union. I entreat the Government to think carefully about how to engage the common frameworks policy in the rule of the common market in a way that is acceptable and does no harm. I cannot see that it does any harm. It makes it all the more constructive. The internal market rule is a living instrument, which should accommodate degrees of innovation that might well bring forward the whole market in due course. I shall not press my amendment, as I indicated, because I think the Government have already done what I wanted in most of the situations where it would be suitable. I beg leave to withdraw the amendment.

Amendment 73 withdrawn.

Amendment 74 not moved.

Clause 50: Extent, commencement and short title

Amendment 75

Moved by

75: Clause 50, page 39, line 5, at end insert “, subject to subsection (3A).

(3A) A statutory instrument containing regulations under subsection (3) may not appoint a day for the commencement of Part 1, 2, 3 or 4 until the following requirements are met—(a) the requirement in subsection (3B), and(b) the requirement in subsection (3C) or the requirement in subsection (3D).(3B) The requirement in this subsection is that the Prime Minister must convene a plenary session of the Joint Ministerial Council in order to seek agreement of the market access principles set out in section 1(2).(3C) If an agreement on the market access principles is reached at the conclusion of the Joint Ministerial Council session, the requirement in this subsection is that the Secretary of State must lay before Parliament a memorandum of understanding which sets out—(a) details of the agreed principles; and(b) proposals for the establishment of an agreed dispute resolution mechanism relating to the internal market in the United Kingdom for any disputes among the Secretary of State, the Welsh Ministers, the Scottish Ministers, and a Northern Ireland department.(3D) If unanimous agreement is not reached at the conclusion of the Joint Ministerial Council session, the requirement in this subsection is that the Secretary of State must lay before Parliament a report outlining—(a) why unanimous agreement could not be reached; and(b) proposals for the operation of the internal market in the United Kingdom in light of the fact that an agreement under subsection (3B) was not reached unanimously.”

My Lords, it has been very helpful to hear the Minister. His description of the intergovernmental discussions is very important and we wish the Government good speed on that. If the Minister or his colleagues can keep us updated on the progress of those very important discussions, we would be grateful.

On Amendment 75, the Minister made great play about the timetable, but it should be noted that the Bill does not affect any existing legislation on day one. Furthermore, the devolved authorities have agreed to a standstill arrangement. The Minister is creating a false timetable pressure on your Lordships. I do not believe that your Lordships need to be constrained on time for this.

In conclusion, the noble and learned Lord, Lord Mackay, spoke about the internal market as a living, breathing, changing process. To run that, there needs to be a structure with the JMC and the devolved authorities. Amendment 75 would set in place one way of doing that and I am sure we would be very happy to discuss other ways of doing that with the Government if they have ideas. To put that pressure on, I would like to test the will of the House.

Amendment 76 not moved.

Amendment 77

Moved by

77: Clause 50, page 39, line 6, leave out subsection (4)

Member’s explanatory statement

This amendment is consequential on the removal of Part 5 (Northern Ireland Protocol) at Committee Stage.

Amendment 77 agreed.