Subsidy Control Bill

  Written evidence submitted by the Centre for Public Data to the Subsidy Control Bill’s Public Bill Committee (SCB04)  

  About us

 

The Centre for Public Data is a new non-partisan organisation with a mission to strengthen the UK’s public data. We aim to reduce gaps in data that harm civil society and business, and to support legislators and policymakers to improve data coverage and quality. We would be pleased to discuss any of these issues further.

  Summary of evidence

 

1. Although the Government has committed to creating a transparent and evidence-driven subsidy regime, the current Bill reduces transparency compared with the previous regime, and will mean that circa half of all subsidies awarded will not appear on the UK’s new central subsidy transparency database.

2. This will make it far harder for businesses to challenge unlawful subsidies, harder for analysts and Parliamentarians to monitor and scrutinise spending, and harder for analysts to improve future subsidy design. This is a particular problem since the regime now depends upon effective challenge by third parties.

3. We recommend amendments to require the publication of all subsidies of any size on the new transparency database. Crucially, as the transparency database already exists, this would not create significant new admin costs. In fact, it would actually reduce burdens on business, by reducing their record-keeping duties.

  Evidence

 

  Background: transparency in the subsidy regime

4. The Subsidy Control Bill proposes a new, flexible regime for how UK public authorities can award subsidies to businesses. In 2018, the UK spent about £8 billion on subsidies, and this is expected to increase.

5. The Government has committed to introducing a transparent and evidence-led regime. However, the Bill actually reduces transparency compared to the previous EU regime, while removing controls. Previously, all subsidies over €500,000 were legally required to be published on the EC’s Transparency Award Module [1] . Now, only subsidies in schemes worth over £500,000 are required to be published on the UK’s equivalent public transparency database [2] .

6. We estimate that before 2021, the recipients of circa £4 billion annually of UK subsidies were not published on any central database (if at all). [3] BEIS has confirmed that it has not monitored the use of smaller subsidies, and is not aware of any central database of such subsidies [4] .

7. Under the Bill’s proposals, the total value of subsidies not published on any central database is likely to increase substantially, as subsidy spending increases overall, and as the threshold for publication increases.

8. We believe there is no other legal requirement for UK public authorities to publish comprehensive data on subsidies (see below). Even if individual authorities do publish data by choice, incomplete data in many locations and diverse formats is unusable for real-world centralised monitoring and analysis - for example, an SME cannot check easily what subsidies its rivals have received, and an analyst cannot see which types of business have received subsidy across the UK.

9. Thus, if smaller subsidies are not included on the central transparency database, over £4 billion per year of public money is likely to be spent by authorities without meaningful central scrutiny or analysis. BEIS has confirmed that it has no plan to monitor smaller subsidies in future. [5]

Why this matters

10. BEIS has told us that its focus for transparency requirements is on the subsidies most likely to be distortive. We would challenge this: while individual smaller subsidies may not be distortive, they clearly can have a distortive effect en masse.

11. Much more importantly, the new flexible regime now depends on effective challenge by third parties. Businesses and other third parties cannot challenge subsidies they do not know about.

12. In addition, better transparency would help prevent cronyism and corruption under future governments of all colours.

13. Better data would also improve the evidence base on what works, allowing for more effective subsidy design in future; and it would improve public awareness of subsidies, increasing demand for and effectiveness of schemes.

14. BEIS have also asserted that including smaller subsidies would ‘reduce the effectiveness’ of the public dataset. This is clearly not the case, as smaller subsidies can easily be filtered out if required, and suggests little experience of real-world data analysis.

15. Improving transparency would be an opportunity for the UK to live up to its aspiration to be a world leader in subsidy transparency, and build an effective and genuinely evidence-driven regime.

Comparison with other public sector transparency thresholds

16. The Bill’s threshold is surprisingly high, and appears to have been set only by reference to the requirements of the EU-UK Trade and Cooperation Agreement. Across the UK public sector, legal thresholds for publishing transparency data on spending are much lower than the Bill’s threshold.

17. Local authorities are required under the Local Government Transparency Code to publish data on all expenditure over £500 [6] . (However, this cannot be relied on to cover subsidies, since it does not require subsidised loans or asset sales.)

18. Government departments are required to publish expenditure over £25,000, though only under non-statutory guidance [7] .

19. This Bill therefore appears to be out of step with other public sector thresholds, which have already been carefully evaluated on a cost/benefit basis.

20. Other countries routinely publish all subsidies, because of the benefits created by extra transparency, for example Spain [8] .

  Recommendations

21. We recommend two simple amendments to the Bill, to require the inclusion on the transparency database of:

a. all subsidies that are part of registered schemes, of any size (by removing clause 33(2) of the Bill)

b. all ‘minimal financial assistance’ subsidies, of any size (by adding a subsection to clause 36 of the Bill identical to subsection 43(5)).

22. The only extra burden this would create will be on public authorities, but this should be minimal since the database already exists and data reporting is largely automated.

23. Supporting this, the Government has assessed the extra cost of including all subsidies on the database is estimated at just £20,000/year across all UK authorities - though (surprisingly) this small cost is estimated to outweigh the benefits created by extra transparency [9] .

24. Such amendments would also reduce burdens on business, since clause 37 of the Bill creates a new legal burden whereby each business awarded subsidy must keep records of its own subsidies. It would be much simpler if this burden fell on the government, by requiring it to record all subsidies on the database, rather than businesses.

November 2021