 Welcome to the first meeting of 2022 of the Economy and Fair Work Committee, calling advice issued by Parliament authorities last month, this meeting will be held virtually. Our first item of business is the decision to take item C4 in private. Our members are content to take items in private. I'll move to the main item of business, which is an evidence session on the subsidy control bill, which is a UK Parliament piece of legislation. The UK Parliament is seeking the consent of the Scottish Parliament, as the bill has an impact on devolved matters and the executive competence of Scottish ministers. The bill was introduced to the House of Commons on 30 June 2021. Visions in the bill apply to all of the UK. The bill is continuing its passage through Westminster and I understand is scheduled for the second reading in the Lords next Wednesday. For the purpose of the bill, it is to establish a domestic subsidy control regime for the UK following exit from the EU and provide a legal framework for public authorities to make subsidy decisions. The Scottish Government lodged a legislative consent motion on 25 October, which has been referred to the committee to consider and report on. The Scottish Government does not recommend to the Scottish Parliament that it gives consent to the bill in its current form. The purpose of today's session is for us to hear views on the provisions of the bill and its impact in Scotland before taking evidence from the Scottish Government next week. I thank the witnesses for joining us today, and welcome Professor David Bell, who is chair of the Staring Group for the Replacement to the European Social Investment Fund in Scotland. Professor Stephen Fuller-Gill from Sheffield Palum University, councillor Stephen Peddle, Environment and Economy spokesperson, cosla, George Peret's Pussy mountain chambers. As always, I ask members and witnesses to keep questions and answers as concise as possible. I thank all the witnesses for joining us this morning. I start with an initial question. Thank you for the written submissions that we received from people who have given us evidence. You do talk about opportunities in the bill and the need for the bill to be introduced, but that seems to create attention with the opportunities that might be in flexibility and with the need for authorities to have a degree of certainty. Mr Peret, you had talked about in your submission that the changes would give us more flexibility and more speed and would give us advantages, but at the same time it would be a challenge for authorities who might present risk aversion, a degree of uncertainty and how the system will work when we compare it to what we previously had in the EU subsidy regime. Mr Peret, if you might be able to go first and talk about where you see some of the opportunities but where the tension and the difficulties and how the subsidy regime would operate and what that would mean for those who are trying to work within it. I think that the key difference between the two regimes is that, under the old EU state aid regime, you essentially had a system that was operated in practice that, if you were granting a subsidy that fit within what were called general block exemption, particularly general block exemption regulation but a couple of other ones as well. Those regulations set out various formal requirements for various types of subsidy, typically regulating the amounts, the percentage of the costs that were going to be met by the subsidy, the purpose of the subsidy, all sorts of other conditions. If you provided your subsidy met those conditions, you simply got on with it and the only legal check that you needed to do was to check that the formal requirements were satisfied. If, though you went outside those formal requirements in any way at all, then you were then subject to a typically fairly lengthy process or, first of all, persuading the United Kingdom Government because it had to be done through Whitehall to denotify the subsidy to the European Commission and then you had to get the European Commission's approval. That was a process that took effort and usually quite a lot of time. The current system under the bill works somewhat differently in that there are a few straightforward prohibitions on particular types of subsidy that we may discuss. In general, subsidies are permitted, provided that the authority has addressed its mind to and come to rational conclusions about various matters that are set out in the scheduled ones of the bill, the various principles. The only challenge to that is by way of judicial review to the competition appeal tribunal. What that means is—I think that one can characterise perhaps the difference between the two systems in this way—the EU system was very good at dealing with routine subsidies because all you needed to do was to check what you were doing fitted within the terms of the outlaw exemption regulations. It was not so good at dealing with anything that was novel or innovative or just fell outside the exemptions because if you just fell out the exemptions and failed to notify, your subsidy was unlawful. In contrast, the new UK regime is much better at dealing with novel subsidies that are, on any view, almost certainly justified on the basis of, pardon me, interest criteria, because it allows local authorities and public authorities to look through and just take a sensible view of that. It is much better at dealing with novel subsidies, but there is a problem in that if you are dealing with—if you are not comfortable in dealing with that—a checkbox exercise cannot be done. You have to go through the thinking process. When you are thinking about particularly smaller public authorities or public authorities doing fairly routine grants, that needs to do a thinking process rather than just to check boxes. That means that the UK regime is perhaps less good at dealing with regular subsidies. It is very important just to qualify that by saying that the subsidy control bill does contain a mechanism for what are called schemes and streamlined subsidy schemes. Those can be created by the Scottish Government. For example, they can be created by other types of public authority. Streamlined subsidy schemes can only be created by the UK Government, but those schemes may well end up forming during some of the jobs that the bloc exemptions did in the old EU regime, in that they will set out particular types of subsidy, and all the authority needs to do is to check that. However, we wait to see what the schemes will be, because that is obviously not on the face of the bill. It will be a matter of, in the case of streamlined subsidy schemes, the UK Government policy in relation to other schemes, the policy of the devolved UK Government and some other local authorities. Professor Fothergill, you also gave comment to the committee on some of the issues around uncertainty and the introduction of the new scheme. Do you want to comment on that line of questioning? I think that George Perl's assessment is broadly correct. We are moving from a system where there are some very hard-edged do's and don'ts in terms of what it could do in terms of routines such as, anyway, through to a system where, until we perhaps have some detail from the UK Government, which I suspect that we will not get as detailed a rule as we used to get from the EU, until we get some more rules or whether, if we don't, we are living within a system whereby the organisation that wants to make the subsidy will have to judge its proposed subsidy against a set of principles. That is obviously a rather more subjective process than judging proposed subsidy against some hard-edged criteria. The problem is that most public sector bodies, and certainly the local authorities that I work closely with, are risk averse. They don't want to be offering a subsidy, perhaps even giving them money, only to find that they have done something that is out of order and that is challenged and that they then have to reclaim the money, for example. Potentially, a lot of the players in this game will have to start hiring consultants and lawyers to make detailed assessments as to whether or not they can or cannot go ahead with a particular subsidy. That is shifting the burden, if you like, from central government or from what was the EU. It is shifting the administrative burden from the central state onto individual players in this game. That is going to be a real problem as we move forward. Councillor Hedl has been made up of local authorities. If you would like to come in, that is one thing for me. Compared to the previous system that we had with the EU, would a local authority be typically applying for EU subsidies to understand that it would go through the UK Government? Is that a scheme that you were engaged in already? Do you see any opportunities in the new model, or do you share the concerns that have already been expressed? That is for Councillor Hedl. Obviously, as local authorities, we would make use of subsidies through wider schemes, which were developed through our European partnerships in the various forms over the years. We would also benefit from direct application to structural funds programmes, particularly for infrastructure projects. If we look ahead to the new regime, there are certainly opportunities in the flexibility that is outlined here. However, those things are constrained by caution and capacity, as the two previous speakers have said. The capacity being to assess whether a new scheme is compliant with the principles, but not just the principles that are outlined and will be elaborated on through guidance, but the multitude of other trade arrangements that might be coming through, and the WTO rules that apply to that. The expectation is on the public authorities to be aware of those things and to judge any subsidy that they provide against the multitude of constraints. There will be capacity issues in authorities in being able to make that judgment, and that is inherently going to lead to caution. Our view in the cost list is that the caution—how we describe it best—would be best addressed through new statutory guidelines for specific sectors in areas that would be not dissimilar to the grant block exemptions and the other block exemptions that have been applied in terms of agriculture and fisheries in the past. Those guidelines need to be co-produced between the UK, the devolved and the local governments to share understanding and to make best use of the opportunities that we have. The other thing that can lead to uncertainty would be the use of the bill's proposed UK ministerial discretion to call in a subsidy. It would certainly be to a benefit if that was limited in some way, so the use of the call-in would be predictable, as we would try to make our subsidies. Thank you, councillor Heddle. You have highlighted some of the issues that other committee members will pick up on as we move through the meeting. Before I move on, I will give Professor Bell the opportunity to respond to the additional area of questioning. Is there anything additional that he would like to add? Well, I am not an expert on how the block grant exemptions worked and so on. Additional flexibility would be welcome. The issue of uncertainty, though, and getting clear guidance from the UK Government seems to be very important. When we discussed the replacement for European structural funds, we came to the view that a lot of local authorities would have difficulty in terms of capacity for applying for structural fund grants. Some are well-placed and others are struggling to keep on filling in forms and finding the right consultants and lawyers. We had come to the view that the regional economic partnerships should play an important role in bringing together economic development across different parts of Scotland. It was disappointing that, with the funds that have been released thus far, such as the community renewal fund and so on, the link has been direct from the UK Government to the Scottish local authorities in the sense that some of them just found the whole process of applying to costly, to time-consuming and was not a cost-effective exercise on their part. I am reinforcing the idea that, if you are going to go down to local authority level, the local authorities have to be very clear and incur minimal costs in putting together the appropriate documentation for subsidy application. I thank you very much for applying to the first areas. I will move on to Michelle Thomson, but other members will pick up on issues that have been raised so far. Good morning, everybody. We have got quite a few submissions about the potential impact on economic development. I note your, Professor Bell, about the difference between horizontal and vertical development that you point out in your submission. However, and it is perhaps a regret, we do not have a representative from the Scottish National Investment Bank on the panel this morning, which you will be aware of is a £2 billion investment over 10 years from the Scottish Government, so it is a serious amount of public money. They make it clear, if you allow me, just to check in their submission their concerns that fundamentally—I quote—it goes without saying that, if development banks are to be constrained to operating in areas of market failure, the new UK subsidy control regime must be at least as wide as its predecessor and offer sufficient discretion to public bodies and devolved administrations. I wanted to get your views on the Scottish National Investment Bank, in particular in that it seems to be a slightly different model, given that it was specifically set up to aid economic development in Scotland in a pretty key way, not least of all net zero, but I imagine that it is also, if this is the case for the SNP, it is also an issue for the British Business Bank, for example. Perhaps Professor Fothergill or Professor Bell might like to answer that question, first of all. That occurred to me while I was writing my piece that it is certainly not clear to me how the Scottish National Investment Bank will interact with competitions and markets authority, as far as investment, particularly—I mention in my paper the net zero ambition. It seems to me that this is one of the several areas that are left hanging and there needs to be some clarity. Since you mentioned the British Business Bank, that will be necessary for the UK as a whole, because it will have to know how its activities may be affected by the new bill. I do not know exactly how that will pan out, but it seems to me that there is a trade-off here about controlling state aid and other objectives that the UK and Scottish Governments might have. I do not know whether George knows whether anything like that would impact on the trade and co-operation agreement. Can you see that that could have a cooling-off effect for the Scottish National Investment Bank if it is fundamentally constrained to just market failure? From a risk perspective, the risk assessments will be tightly honed given the nature of what they are doing. Steve Fodegall said that there will be lots of consultants and lawyers employed to determine what exactly market failure is, although there are also distributional issues that can be raised. Nevertheless, if there is a lack of clarity around that, then, as other speakers have said, risk aversion might be the watchword. The relevant bodies will not take schemes forward that they would have otherwise done. I can see that George Perrex wants to come in at this point. I think that the way of thinking about it is this. I am afraid that I am not familiar with the details of the Scottish National Investment Bank, but any public authority that has got grant giving powers will have to do with the framework of the bill. The proposal is to give a particular company a tranche of money for training purposes or some other research and development. What is then got to do is look through the principles, and those will require it to ask of itself questions such as, is this money going to be paying for something that would have been done anyway, in which case it is unlikely to go through the principles? Is it going to distort competition? Is it going to have effects on other businesses that outweigh the benefits that it is going to produce? Is it value for money in a broad sense? Are there less expensive ways of achieving the objective of making sure that people are properly trained? All those questions fit one way or another within the scope of the principles, and that is what the Scottish National Bank would have to address its mind to. What is different under the new regime is that, unless a particular proposal fell within a scheme that might be set out by the Scottish Government, for example, or a streamlined subsidy scheme that would be set out by the UK Government, the bank would have to go through that process, whereas, under the old regime, it might have been able to say that this is a training aid that fits within the scope of the training aid exemption. In the general block exemption regulation, it ticks all the boxes. We do not actually have to think in any wider sense about the way in which the general principles apply to that particular aid. There are various commentators that have made that one problem with saying to local authorities or authorities such as the Scottish National Investment Bank is that you have to think about that problem for yourselves. In one sense, it is liberating that you reach that assessment and provide it with a reasonable view. You are going to be soundly based and immune to judicial review. You are going to be able to do it. On the one level, it is quite liberating. You do not have to get some bodies hitting in Brussels to approve it. On the other hand, it is also quite alarming, because that is a process of reasoning that some authorities are not particularly comfortable with doing. There may be a demand for expert economists and consultants of various lawyers, I am afraid, to help to guide them through that process. There are pluses and minuses. How do you think that we have ended up in a position where it is going to second reading later this month, I think, next week, and yet we still do not have that level of definition? It could potentially go all the way through in what is proposed at the moment that it is left to base to make the decisions. I do not want to put words in your mouth, but it seems to have the potential for bypassing ministers and UK Government, never mind the Scottish Parliament altogether. How on earth have we ended up in this position? Well, there is quite a lot of detail going to be filled in. It is also true, and we can perhaps discuss later, that the role of the devolved Governments in that process is, in some ways, unsatisfactory. I have written about that. I am sure that it is a matter of interest to the committee. What is going to matter on the ground for bodies such as the Scottish National Investment Bank or the Scottish Local Authority is going to be whether there are schemes or streamlined subsidy schemes that cover what they want to do. That is just an unknown, because what the bill does is that it just gives power to the UK Government, and in relation to schemes also to the devolved Governments, to make schemes. We have to wait and see what the schemes are and what they look like. The schemes themselves have to comply with the principles. It would be open to the Scottish Government to say that it would be good to have a scheme for the granting of subsidies for training purposes in certain types of training in Scotland. You can imagine a scheme and what would be some form of framework that would be set out, which said that local authorities in Scotland may grant, under the scheme, the following types of subsidy awards that would take the following boxes. That scheme itself could be subject to challenge in the competition appeal tribunal, and the scheme itself would have to be thought through in accordance with the principles. Are we satisfied that the sorts of grants that are going to be given under the scheme are necessary and that they do not duplicate what companies would already have done in terms of training their work? Is it going to distort competition in ways that are unacceptable? Is there a less expensive way of doing this that would not require the expenditure of so much public money? That sort of thinking process, which, to be frank, is a sort of thinking process that should be done anyway. Obviously, it is good public policy to be satisfied that you are spending public money in the most efficient way possible. A lot of this is stuff that people should be doing anyway. However, you have to think through that in a reasonable and abstract way. You might end up with a Scottish Government scheme that all Scottish local authorities could simply look at when they were thinking about giving grants to companies to train workers and if they ticked those boxes, they could give it. That would be within the control of the Scottish Government. The bill provides a framework for things to be done. Where we started with this, because I am keen that other people in the panel have the chance to come in as well, the detail to establish a scheme needs to be in place first and foremost. It appears that the detail, whether specifically for the Scottish National Investment Bank and its role of market failure and beyond, is not yet clearly established just before it, because I am aware that other people need to come in. Professor Fatherhill, was there anything or indeed anybody else, Mr Heidel, if you wanted to come in just on the comment of the Scottish National Investment Bank before I give way to other members? Yes, could I come in on this, please? First, can I just clarify where we are in terms of the legislative process down in Westminster? My understanding is that the bill has received its third reading in the comments, which means effectively that it has been passed. Of course, it has to work through the House of Lords. There may be some amendments, but with the sort of majority that the Government has in the comments, what we are looking at now is an almost finished act of Parliament. That being the case, the lack of detail in the bill is very worrying, because a lot does hang on the detail guidance that ministers will issue no doubt as a statutory instrument. It is important to impress the Westminster Government that, before all of that guidance is finalised, it should put it out of consultation. Those would be the detailed rules that would circumscribe what the Scottish Investment Bank and many other players could or could not do, but it is not defined carefully in the bill. It is a big leap from where we are in the bill almost the act through to some final rules being issued by ministers. There is far too much arbitrary discretion there without consultation, not just with the devolved administrations, but with a wide range of interesting players. It is important that the Scottish Government impresses on Westminster that there should be a draft issued for consultation on all of those points. I noticed when you appeared in front of the Bill Committee in Westminster, you stated, and I quote from the point of view of the devolved administrations, for example, that the passage of the bill will still leave them pretty much in the dark as to what they can and cannot do. That was 26 October. Do you still stand by that observation that you made at that point? Absolutely, I do. In fact, if anything, the discussions that I have had with civil servants since that point in time worry me even more, because I think that they are a little bit wedded down in London to saying here are the principles and get on with the job, which is really not enough. Although they are talking of issuing at least some guidelines, the wording that I picked up is that, oh well, there will be anything as detailed as the old EU rules. It is all very worrying. There will be guidelines, possibly without consultation, and with inadequate detail attached to them. The more pressure that is put on Westminster and Whitehall to be participative in the game, to be open and to seek views, the better the outcome will be. Thank you. I am aware of times. Thank you. I was going to move on to Maggie Chapman. Maggie does have questions about consultation. I understand that Mr Heddle would like to come in, but I am sure that Ms Chapman will invite her to speak. Good morning to the panel and thank you for joining us. If I can just follow on that theme of consultation and exploring a little bit more from your different perspectives, not only what needs consulted on but who should be the key players. Obviously, we know that the Scottish Government has a clear interest here, but so do local authorities. Can I bring Stephen in? You said that you wanted to respond to that point earlier. In one of your earlier comments, you talked about co-production of the rules and guidelines. Can you just unpick that a little bit more and give us a better understanding of exactly who should be the co-producing players in that? How do we need to do to make sure that we get that as clear as possible? Stephen Heddle, first, if that is okay. Yeah, thanks very much. I will just organise my volume in his notes here. I mean, I suppose that this does very much follow on from the points made by the previous speakers in response to the last question around the adequacy or the current consultation and how the gaps and guidance are going to be filled in. Certainly, the amendment that COSLS produced is deliberately specific and limited in the hope that it can be accepted, but it specifies that we feel that the devolved Administrations local government and the other persons that the Secretary of State should be consulted should be consulted. We are coming from a position where under the European States rules the development of any changes were subject to extensive consultation. There were statutory mechanisms in place that involved local government, particularly through the committee of the regions. We would hope that any arrangements that would be made in respect of the subsidy control bill and the way that it is enacted would be no worse than the previous arrangements. Indeed, in 2018 local government was given an undertaking that a consultative mechanism that would involve us would be set up and we are still waiting to see that happen. Just thinking about the wider issues that are here, I think that the issue of the common frameworks and how they play into this has not been developed in the conversation so far. We would certainly be keen to see more use made off that. I hope that there is a development field and we have seen it happening so far in procurement and air quality waste. That is welcome, but the thing that is not welcome is the absence of involvement in local government in that, because some of those areas are where, essentially, our devolved competencies are where it falls upon us to deliver the change, and we would imagine the subsidies related to that. The system as it stands is not good. We need to beef this up in terms of the involvement of the devolved Administrations, and we need to beef it up in terms of local government, and then beyond to the other public bodies, because the issues that were raised earlier by the Scottish National Investment Bank, which we hoped was going to be key to delivering our climate ambition, which is the point that was raised by Professor Bell, are equally valid. The situation as it stands is completely unformalised in terms of the consultation. We would appreciate some formalism to it so that we know that it is definitely going to happen, and not just be in the gift of personalities. That is essentially the substance behind two of our amendments as proposed. Thank you very much, Stephen. That is really helpful. I know that David Wants to come in, and I am happy to hear from David. I wonder if I can pick up something that you said earlier, David, and maybe you can address that point as well. You spoke about, in relation to Michelle Thompson's questions around SNP specifically, and Stephen mentioned that as well, with respect to strategic decisions around net zero ambitions. Can you tease out for us a little bit about what auditors we need to do to make sure that we can actually get the legislation that we need that is flexible enough, open enough, that allows us to make the regional or local strategic decisions that we need to make around industrial strategy that never mind anything else? David, to you. It seems to me that it is not immediately obvious how net zero or ambitions towards net zero and the sort of industrial implications that they are of marry up with the principles that George has mentioned by which whatever schemes are eventually arrived at are going to be made. One of the very important issues that it would be good for the Scottish Government to seek clarity on with the UK Government about the way that the principles and the UK Government's own ambitions towards net zero can be compatible. As everyone else has said, there is a lot that is not said in the current drafting. The other point that I would make following on from Stephen, who I was involved with in terms of extensive consultation that we did around the replacement for the European structural funds prior to nothing much, because the UK Government has still to specify where that particular train is actually going to go. In addition, we have mentioned SNP, the local authorities, but it is also true that in many ways the economic development structure in Scotland is different from that in England in particular. I would mention, for example, the development agencies, which we haven't mentioned yet, and they will be uncertain about what their role will be going forward. It also feels development Scotland, which obviously has a big role in providing training. In our consultations, we heavily involved the SCVO as well, and they were heavily involved with the previous EU funding regimes. However, how their activities may or may not interact with state aid rules is not clear. However, those are the kinds of bodies that should be being consulted, it seems to me, as well as the obvious candidates, the local authorities and so on. Thanks, David. That is really helpful. I wonder if I can move on and link to this. I suppose that one of the gaps that I might have missed it, but there does not seem to be any way of dealing with dispute, any ISDS equivalent or inter-regional way of dealing with dispute. I wonder if, Steve Pothergill, if you had anything that you wanted to say on that and how we draw voices around that to ensure that we get dispute mechanisms, we get a way of dealing with technical and strategic issues in the space. When you are referring to dispute, I thought at first that one part of Britain might contest what another part of Britain might do. Certainly, one of the principles that the Government has set out is that any subsidies should not be damaging to the coherence of the internal market. What they are trying to stop there—I think that we have a point here—is the game of subsidy races between different parts of the UK. They do not want a situation where Scotland puts in a bid to offer certain amounts of money, but Wales offers more, and England comes back with even more, and Scotland has to offer even more money. Certainly, everybody in this game will have to look over their shoulder at that seventh principle in the list, which is about avoiding subsidy races. The real worry about disputes is the one that I was trying to get at a little bit earlier, which is that, from the point of view of a risk-averse public body, they will not want to be challenged on their actions. In fairness, under the old EU regime, the general bloc exemption regulations covered the vast majority of the subsidies that were made available by all sorts of public bodies to private sector companies. Therefore, there was no dispute if you were within the rules. However, in the absence of something similar, the door is left open to dispute. There are perhaps two levels to that. Definitely, we do not want the subsidy races, but it is the dispute on individual awards being contested, which I think is a real worry here. I will leave it there. I will now bring in Fiona Hyslop, who will be followed by Alexander Bryn. Our committee's responsibility is to decide whether we want to recommend approval of legislative consent. Despite the fact that the bill is so far down the line, it is of importance to all of us in the Parliament. There are three specific points here. The bloc exemption is to be replaced by streamlined subsidy schemes, which the Scottish Government is not going to be involved in establishing. If there was co-production, does the panel agree that some of those disputes could be removed? Secondly, disputes, as we have heard, could be within the UK between Governments trying to subsidise particular projects. Again, we need some potentially common frameworks of setting the rules of the game to minimise those disputes. Is there anything in the bill that allows for that now? My understanding is no, so we need guidance that has not even been published yet. Thirdly, and perhaps this is for George Parrott and Professor Followill, individuals or individual companies taking judicial review decisions. What difference would the proposed scheme make to them? Does it make it easier or more difficult for individual companies who feel that they have been disadvantaged from a competition point of view? Should Scotland be involved in the streamlined subsidy schemes, is there a way of ensuring that the Scottish Government and the Scottish Parliament can be involved in that inter-geographical administration dispute and calling powers to the Scottish Government? Is there a way of allowing that in a similar way to Bays? Thirdly, about individual companies deciding that they want to take something to judicial review, does the new scheme give them more advantage or disadvantage compared to the European set-up? First, we can come to Professor Parrott and then to Professor Fothergill. Is the other panelist going to indicate that he wants to come in on that? I am not a professor, so I think that we are straight to the other ones. Let me take those three questions. On your question on Scottish Government's role in streamlined subsidy schemes, I think that there are two points. First, it is important to distinguish between two types of scheme set out in the bill. One is what you might call ordinary subsidy schemes, which the Scottish Government has power to do, and some local authorities have power to do, as well as the UK Government. That has the effect that we were talking about earlier, in terms of providing a framework within which other authorities or the Scottish Government itself can then go on to make particular awards that fit under a particular framework. That is something that the Scottish Government can do. What it cannot do is streamline subsidy schemes, which are in particular category schemes. That can only be done by the UK Government, and it has to place the scheme before the Westminster Parliament, but that is all done down in London. What is the difference between a streamlined scheme and an ordinary scheme? The essential difference is that the streamlined scheme does not ever have to go through the competition and market authority process, whereas an ordinary scheme may need to go through that process, depending on what the size of it is. That is the critical difference. The question is whether the Scottish Government and presumably the Welsh Government and the Northerish Government would have power to make streamlined subsidy schemes. Obviously, that is a political question. The Government's position on that is to say that subsidy control is a reserved matter in relation to all the devolved legislatures. Therefore, it is appropriate for Westminster only to have that competence. Ultimately, that is a political question. Your second question was about how disputes between Governments work here. One can sort of deposit the idea that there might be a subsidy given by the Scottish Government that the Welsh Government did not like very much to take that example and thought would have adverse effects in Wales. What could the Welsh Government do about that? There are a number of possibilities. It may be that the type of award was one that was capable of being—I had to be sent to the CMA, in which case there would be discussion because he would be in front of the CMA. It might be something that could be referred by the Secretary of State to the CMA, in which case the Welsh Government would have to go to the Secretary of State and say, we are really concerned by what the Scottish Government is doing. Would you like to send it to the CMA, please? The Secretary of State could then do that. The CMA, under the bill, does not decide itself, but it issues a report on the compatibility of the proposed measure with the principles and the way in which the Scottish Government has gone through the process. Its report is likely to be highly influential. It would be a quite courageous decision, in most circumstances, by a public authority to go ahead with the grant, even when the CMA strongly thought that it was not justified. In principle, it might be open to doing it, but it might in practice be quite brave. That is one way in which it might have a dispute. It may be that the process that was not gone through the Welsh Government—the war was about to be given—could then apply to the Competition Appeal Tribunal for traditional review. When I wrote my article, which I sent a link to, it was not at that stage at all clear to me that the devolved Governments, or in any sub-national authority, local authorities, would actually have standing to bring challenges to the Competition Appeal Tribunal because of the definition of interested party in Clause 17. As the bill has gone through Parliament, the minister has made it very clear that that definition is not intended to be narrower than the usual definition of who has standing in public law cases, which might be slightly different in Scotland from what it is in England, but is fairly broad. He specifically said that local authorities and devolved Governments would have standing to challenge decisions of other public authorities if they were concerned that it would have effects in their area. The Welsh Government would have standing if it could demonstrate that it was concerned about effects on businesses in Wales. That has put those concerns somewhat on one side. That is another way in which disputes might be resolved. That brings me to the order of two individuals. That process of challenge and the Competition Appeal Tribunal is also one that is open to individuals as well who are concerned that an award might have been given, which simply does not comply with its under-control principles. It is important to emphasise that this is a judicial review challenge. The question is not, has the public authority just got a policy decision wrong? The question is, has it gone beyond what is a reasonable decision for a public body to make? You are looking for a fundamental error in reasoning, something that simply cannot possibly be right no matter what view you take, or an error of law, or the other sort of basic grounds or an error in procedure, the basic grounds for judicial review. It would not be enough simply to say that we disagree with take my example of the Welsh Government or a private party challenging a decision of the Scottish Government to build a subsidy. It would not be enough for them to say that we just disagree with that. We think that the principles should have been interpreted so as to forbid this award. On the contrary, we are necessary to say that the reasoning of the Scottish Government here just does not stack up. There is some sort of fundamental error here. Quite how the CAT is going to approach that task is going to be quite interesting. The CAT tended to take quite a stand-off approach, a hands-off approach, to reviewing decisions by regulators on technical matters of competition regulation, such as on motor control, for example, because it is dealing with impartial regulators. The difference here is that the CAT is going to be told by anybody appealing that there are enormous political pressures that the opponent will almost inevitably say for the authority to find that the principles were satisfied in this particular case. The politicians were saying that there is something that they really want to do. Public authorities granting aid are not really impartial regulators. They are quite rightly and obviously political borders with political agendas and quite how the CAT will approach its task. That is going to be quite interesting. Thank you very much. Of course, Bays is in the same position, because they end up being judge, jury and also subsidiser. Can we also bring in Professor Fosigill in this? I would quite like to hear from Professor Valmeration to Nexio on agriculture and what the implications might be because they are devolved competencies. Professor Fosigill, please. Okay, thanks. Fiona, can I try to answer your three questions with two answers that actually really apply to all three of the questions that you posed? I think that at the core of all of this, to avert, avoid, minimise disputes, we need guidance and we need detailed guidance. The second answer is that we also need consultation on the guidance. I say consultation rather than co-decision making. I know that it is probably a little touchy in the context of the Scottish Government and the Scottish Parliament, but in practice, given that there are so many players in this game who would have an interest in the final rules, there is a question of where you would all the line in terms of who would be brought in if it was co-decision making. We have to get agreement amongst all the four nations of the UK, what about the local authority players beyond the devolved national administrations, etc. I think that meaningful consultation requires that Westminster and Whitehall genuinely want to listen to what everybody is saying from around the country. Under all the EU state-aid rules, there is a lot of consultation. The EU consulted on establishing the rules and further down the line, in the context of regional investment, for example. The UK Government consulted on drawing up and assisting the area market and consulted even on a drafted assisted area map. Through consultation, you do, in practice, tend to work towards something that carries everybody with you. The combination of the consultation and the detailed guidance should head off a lot of the dispute. Professor Bell, if I can come to the decision to include agriculture in the subsidy, when it has been separate, agricultural subsidy is a devolved matter. The subsidy control bill is a result of Brexit, but I do not think that even supporters of Brexit would necessarily think that Brexit should remove or limit reduced powers of devolution. What are your thoughts about the implication for that, particularly when the nature of Scotland's agriculture is quite distinct, so we may need particular subsidies? On net zero, we heard from local authorities yesterday in the net zero committee that it is essential that private funding at scale will be needed, along with public funding, to tackle net zero. In terms of net zero, that would require a streamlined subsidy scheme, because to tackle private emergency, state subsidy will have to be swift, smart and strategic. Does the subsidy control bill lend itself to good policy making and good results in the years of agriculture and net zero from your experience with devolution over at this period? Professor Bell—I think that I would just echo what Steve Fotherbill said, that in a sense, we have stuff in here that is not really clearly enough to find yet, and that we need to engage—it would be desirable if we engaged in a sequence of meaningful consultations with the UK Government or base on how that is all going to play out in practice. I was quite surprised that agriculture was included, and it seems to me that in England and Scotland, the subsidy schemes for agriculture are going in different directions. Neither of them are entirely clear as yet. In England, clearly, the public money or public goods approach is meeting with some resistance and some significant debate about how it might change the nature of agriculture in England. We do not know yet what will happen in Scotland, but there are, as you say, significant differences in that agriculture plays an important social role in our remote rural areas, and whether funding schemes that do not necessarily have a public goods aspect to them would run into difficulties with the bill that is currently laid out is not clear, because we have not had the consultation or the further detail on the scheme. The same applies to net zero, although you do not want to encourage subsidy races between different parts of the UK in terms of getting the renewable sector up and running. It is, as you say, pretty likely that there will have to be some injection of public funds into the sector to encourage change at speed. We basically have to know how that can be done within the particular bill and how it will play out in practice. We do not have enough detail yet. We do not know how a streamlined scheme might be devised that would meet both the principles included in the bill and, at the same time, the objective of getting to net zero as quickly as possible. I should hand back to the convener for a time-wise, but if Councillor Hedl has any comments on that, he might be able to bring them in in answers to some of my colleagues. I think that I should hand back to you. Thank you, Ms Hyslop. I will bring in Alexander Burnett, who is followed by Colin Beattie. It is unfortunate for the members to come later in the meeting, but if I could ask members to be concise on their questions, that would be helpful. Thank you very much, convener. I apologise to the panel for taking you back to the beginning of the meeting. My question was a supplementary to the first one. There appears to be a consensus that the rules on state aid proposed as they are an improvement on the previous rules. Obviously, it is notwithstanding any further improvements that could be made. However, if I could ask two questions—the first to Stephen Heddle—in the causalist submission, you say that the previous EU regime could have a lowest common denominator effect, which sometimes constrain public funding. Can you explain a bit more about that and give an example of whether that negative effect has been removed under the current proposals? For the second question to Professor Fothergill and echoing Fiona Hyslop's comments on the purpose of his session, Professor Fothergill, you say that the alternative will be unhelpful three-for-all. Can you explain what the impact would be of not signing up to the scheme? Stephen Heddle, first. In terms of the lowest common denominator effect, I think that we were to reflect on the reality that the rules were designed to be applicable to 28 extremely different geographies in economies. And, necessarily, given the way that they were designed, that only the things that fit within the rules could go forward, they were necessarily going to be more restrictive than the more permissive regime that we are moving to now that is just applicable to the United Kingdom. So, clearly, there is far more flexibility available under the schemas proposed, and the reality of that flexibility is, of course, going to be completely governed by the regulation that is associated with it and the guidance that is associated with it and the confidence that the public bodies have in bringing forward their own subsidy proposals within that. So, yes, absolutely, the subsidy control bill replacing the state-age regulations is an opportunity that we are excited and optimistic about. Obviously, that has to be caveated in. It is also dependent on the resources that we have available to us from either of our Governments, speaking from the perspective of the local Government. In terms of an example, I am probably struggling to find an example that would be appropriate to really illustrate the point. I certainly know from my own experience in previous employment that I worked for the Highlands and Islands Enterprise to administer a small scheme, so I have some experience of the state-age regulations that I supplied. However, coming from an island community, we often ran into a situation that we would love to have applied a subsidy that would not have distorted the common market and would not even have distorted the market in Caithness, I confirm that. However, because the rules that have drawn up were more appropriate to land-based geographies, the lack of distortion was not really recognised. That is a small and specific example, but if you wish, we can come back to you with more specific larger examples. That is fine, thank you very much and very helpful. As you say, whilst for guidance is one thing, the money to the resource behind it will be, I am sure, a subject of debate for many years to come. Professor Fothergip, on the consequences of the not-fining, you can go back to the basics. Subsidy control or EU state-age rules are a good thing. We have to be aware all the time that it is public money being dispersed to private sector companies. There is a cost to all of this, but at the same time, if subsidies are used in a measured, targeted way, they can help to deliver objectives that we all wish to achieve—more R&D, more training, more investment and growth in less prosperous regions, the pursuit of the green agenda, etc. There is a role for subsidy control. We need a system of this sort. I use the words free for all in my written submission as being the horrible alternative. Let me explain what that alternative might look like. First, everybody would be operating in darkness not knowing what they could or couldn't do. Secondly, it would open the door to all sorts of backdoor political lobbying and favouritism—those with the best connections and the loudest voice would be the best place to get the most money. It would also open the door to subsidy laws, which I mentioned earlier. One part of the country can be another part, and the subsidy gets bid up and up and up. In principle, subsidy control is a good thing. I now have been a great serious critic of the EU state-aid rules. They were very useful, but it is undoubtedly the case that now that we are moving away from the EU rules, we have the opportunity to do things either better, particularly at the edges. However, we must not throw that opportunity away by not having some of the detail in there that makes a whole system properly operational. The subsidy control is good and free for all bad. Thank you very much. I do not have any further questions. I do not know that Professor Bell o dweud wrth gwrs? Felly wrth gwrs, rydw i ddweud eu cyllid yn ffrimbod. Ddiddolch yn ei ddweud y clywbodaeth yr aethol. Rydw i ddod, mae gennym detiol i ddweud ddweud i ddweud o rhywg ar y cyflwymingau gydaenol fel ei ddalfodol o element ar ddweud, ond dwyn nhw i ddweud o ei ddweud i ddweud o ddweud i ddweud i ddweudio i ddweud i ddweud, o ddweud o rhaid i ddweud i ddweud i ddweud of a definite commitment to an assisted areas map, and how it should be developed. What are the implications if we do not have one? I would like to ask Steve Foddergill, who I know has a close interest in that, to perhaps respond first. Let me kick off by saying that we have an assisted area map long before the UK joined the European Union. The history of assisted area maps in the United Kingdom goes back to the 1930s. We have always used an assisted area map as an important tool of regional economic development. It is about helping to target investment by private sector companies in the places, the less prosperous places, that most need that investment and the new jobs. It has been a very useful tool of regional economic development over the years. It has brought tens of hundreds of thousands of jobs to the less prosperous parts of the country. It has enabled some of the less prosperous parts of Scotland and the rest of the UK to attract inward investment that might otherwise have gone abroad. The subsidy control bill soon to become act does not specify that we should have an assisted area map in future. It does not rule us out. However, it is hard to see how the UK Government can meet its objective of pursuing levelling up, which I interpret as bringing the less prosperous areas closer up to the national average. It is hard to see how it can pursue that objective without incorporating some measure to favour investment more and public support for investment more in some places rather than others. If you do not have an assisted area map, the honest outcome and the danger is that you end up treating Kilmarnock no more favourably than you treat Kensington or Sutherland no more favourably than you treat Sowie, which really gets us no nearer to the objective of helping the less prosperous areas. It is a tool—it is the only tool—at the road economic development, but it is very useful to target development in the less prosperous parts of the country. At the present point in time, under the old EU map—well, I am not quite sure whether it is still in force—I assume that it is no longer in force now, around about a quarter of the UK population had assisted area status on the map. In Scotland, it was 41 per cent of the Scottish population. I think that if we were moving to a wholly UK-driven map, we could increase those percentages quite a bit to reflect the quite widespread extent of disadvantage. It would not be unreasonable to push it to 60 or 70 per cent, I am sure, in Scotland. However, we do need that mechanism in there to try to target investment in the places where investment is needed most. That is the logic behind the assistance area map. If Westminster decides not to produce an assisted areas map, how are we going to determine the areas where that level of aid should be directed? In those circumstances, there will be no rules stopping public sector bodies giving as generous subsidies in the less prosperous parts of Scotland. You would lose that facility to support the less prosperous parts of the country. You would be working against the objective of levelling up. I think that David Bell wants to come in at this point. I am speaking from Sutherland. The issue of how you determine assisted areas or not is a highly contested area. We have had schemes drawn up that have been associated with some of the funding that has gone around recently, such as the community renewal fund, the levelling up fund. It was done without much consultation by MHCLG and that implicitly allowed certain parts of the UK preference in the bidding rounds over other parts of the UK. I am sure that Highland was on the same level as London City, which seems a bit unusual. With those kinds of assisted area maps, there is an issue of who gets to decide the map and what indicators do they use to determine the map. GDP has been a very common measure used by the EU for many years. Of course, the Scottish Government is putting an emphasis on wellbeing as part of its overall objectives. If you end up with lots of indicators and not much clarity about who is making the decisions, you can end up with massive disputes. You need some kind of mechanism that, if you are going to design a map—I am not saying that you should not because you might not want to spread your funding too thinly—you have to have a mechanism that will be robust in order to do that. You should also bear in mind that not all a subsidy might necessarily be area-based or place-based, although there is a strong case for that. Some might be industry-based, so you would try to support a particular industry, irrespective of where it was located. Perhaps that supported your net-zero objective. You have, for example, in Grampian, an area that was certainly, until recently, very prosperous, but probably an area that one might well want to support because it has huge potential as far as promoting the net-zero objective. You have questioned the criteria that could be used in order to determine when a subsidy is a map. Surely we have templates that were in use before, or even the EU template? I think that the thing probably to do is to do something pretty simple. The more you complicate it, the more you end up inviting conflict, I suspect, over decisions. The EU has used GDP per head and a threshold level of that for many years. That would certainly be a proposal that would be worth arguing about. I think that Stephen Heddle wanted to come in. I recently asked about that, although I probably cannot do the justice to this issue. I think that Steve Fawrgill and my colleague Dr Pazors-Vidal did in their submission to the comments inquiry, which addressed that point very well. Obviously, COSLA is one of our amendments. We propose a definition for assisted areas, being an area awarded subsidy system, such as additional investment, economic activity and so on, to compensate for severe limitations in attracting and maintaining economic activity. In doing so, we accept that there are regional disparities, and it would seem reasonable to map that so that the intervention can be targeted in a transparent way. The idea of levelling up without assisted areas map could lead us to a situation where we are levelling down, and we have a lowest common denominator situation if we do not have a means to achieve the levelling up agenda, to achieve territorial cohesion, as it was known back in the EU days. Associated with that, I noticed in the submission from the Law Society Scotland that they make a reference to Darticle 174, which means specific reference to islands. I speak as an islander here. It was not just islands, it was islands in areas of economic disadvantage. That helps to provide elucidation or a definition around assisted areas. Steve Foster-Gill said that assisted areas are not a construct of EU. It has been on the go for almost 100 years. It could be argued that the UK foisted on the EU. We accept that the assisted areas maps for the EU perhaps were not perfect, but that does not mean that the UK could not develop a better one, because we certainly have the available data to do so. We have got almost down to street level in terms of economic data. The quality of the data and availability of the data is not the issue, but the arguments would come around what the indicator should be to determine what the economic disadvantage would be. The GDP is always chosen because it is the one that everybody uses in the past. I argue for the regional connectivity index. I do not think that we would want to specify anything today, but I think that the idea of an assisted area map would be beneficial to aid in transparency in avoiding the accusation of pot barrel politics that is associated with the pilots for the leveling up fund. Indeed, it would help us in our potential arguments in the future, with the European Union around the degree of consultation and systematicness of the schemes that were proposed and the rationale for the schemes, because I anticipate that that will happen. Do you agree that the point that was made is that the highlands are on the same status as London? I do not know if I have misinterpreted that, but it seemed that in the leveling up process, the highlands were put on the same level as London. Is that your shaking your head there? Maybe you can clarify. The number of things is going on here. First, if we have an assisted area map in future, it does not mean to say that all subsidies have to be shoehorned within that map. You can have certain sorts of subsidies that you can do in some places rather than others. It would not include spending more widely across the whole of Scotland and the whole of the UK, for example, on green initiatives. The second point that I would like to make is that the community renewal fund, the leveling up fund, the election of priority areas that the Westminster Government engaged in for both of those two funds was deeply flawed. If highlands and islands were treated in the same way as large parts of London, that was really quite wrong. However, the experience of developing and using an assisted area map in the UK has been quite positive in the past. The key to getting a successful map is consultation and asking about what is the best principles and consulting on the draft map. The maps that we have operated under EU rules were largely but not exclusively drawn here in the UK and within a framework set by the EU, but they were drawn here in the UK. Through that process of consultation, we arrived at something that was broadly acceptable to most people. Not everybody got on the map who might have liked to have got on the map, but it was not a huge source of dispute and contention once it was in place. I am sure that we could go through the same process again here in the UK if the UK Government was willing to engage, one, in having a map and two, in consulting, in drawing up the map. Okay, thank you. Mr Beattie, I'm afraid I'll have to make progress and Jamie Halcro Johnston is interested in questions in the same area. I'll move over to Jamie. The initial time, I think, the panellists were advised with 11 o'clock. I do have three members who still wish to come in, so I hope that the panel are content to remain with us for a bit longer. I'll invite Jamie Halcro Johnston. Thanks very much, convener. Good morning to the panel. I'll keep mine brief. I've got one question and one supplementary, so I'll start with a supplementary to the last one. If I can put it to councillor Heddle, it's good to see another Orcadian on the panel again. I hope that that will continue as well. I was just wondering, on the basis of the engagement side and the consultations side, obviously the Scottish Government has a position. We've got the minister coming in, I think, next week. What consultation has there been with COSLA or with Orkney Islands Council and the local councils in Scotland on the bill and the Scottish Government's response? In terms of the formal consultation, we've been involved in a degree of discussion with the UK Government. I think that this is a level consultation that isn't formalised, and it kind of gets us back to the point that, as we develop the guidance and the schemes that are associated with it, it would certainly be beneficial to actually have a degree of consultation that is formalised. Again, this is the substance or two of the COSLA amendments. In terms of the discussion with the Scottish Government, I'm sure that there's been extensive officer discussion. Political discussion between myself and the Scottish Government is largely in this forum. As COSLA, we'd be happy to discuss this further with the Scottish Government going forward. We can always consult better, we can always confer better, and we'd be happy to facilitate that from my perspective. Thank you very much, Stephen. Can I ask a question of Professor Bell and George Perret? We've seen hundreds of millions of pounds of Scottish Government money and support, both directly and through loans going to a number of different companies over the past year, to name a few. Obviously, Presswick, GFG Alliance, and others, Ferguson Marine. One of the issues that's been raised time and time again has been scrutiny of these particular agreements and transparency. I was just wondering if you could advise how this new bill might impact on scrutiny of deals like these going forward. Could it impact on the existing deals, such as those that I've mentioned, given that they will still be further support, either agreed or likely to be agreed for some of these particular organisations? Do you think that greater oversight perhaps within the bill, or to be included within the bill, is important? If I can go to, as Professor Bell said first, then to George Perret. I would defer to George Perret on the issue of whether those deals might be referred. My guess is that they probably might be grounds for doing so after the bill is passed. In terms of the principle, I agree that greater scrutiny, because you will always have some things that don't work. That is not a riskless activity in which to engage, but there are always grounds, given that it is public money, taxpayer money, that those schemes should be fully scrutinised. A case made as to how those fit within some overall industrial or economic strategy, it seems to me. I mean no position to comment on any of those particular schemes that you were talking about. I think I made two points. One is that the bill does contain provisions on transparency. That's a subsidy database on which all subsidies and all subsidy schemes have to be recorded. The precise information that's going to have to be placed on that database is going to be determined by regulations by the Secretary of State. In principle, there's provision for quite detailed information to be required to be put on the transparency register. Until that information is placed on the register, the time limit for challenging a subsidy or subsidy scheme doesn't begin to run, so there's some incentive for the public authority to get moving and put the information on the database. So, there should be, in principle, access to information by third parties, anybody who's interested, as to exactly what has been given to a particular company and why and other information about that, which is obviously a good thing. Precisely what is going to go on the database remains to be decided by the Secretary of State in regulations. One concern that I have, though, is that one issue that very often arises out of projects of the kind that you are talking about is whether it's a subsidy at all. Quite often, what a public authority says is that this isn't a subsidy, because we are simply giving a loan or support on market terms. Under the old state aid regime, that was known as the market economy investor principle, it's got an equivalent under the bill—I forget the clause number at the top of my head—but the bill itself makes it clear that if a public authority is behaving as a private bank would behave in terms of giving a loan or investment on market terms, that is not a subsidy. The problem is quite often that the dividing line between whether a public authority is really behaving as a private investor board is not free from argument. You have experts reaching genuinely different views on that question, depending on what assumptions they make. It seems to me that there is at least a danger that, in some cases, a public authority is maybe rather too eager to say to themselves, well, we are just behaving as a private bank would and perhaps finding some expert to opine that yes, they aren't behaving just as a private bank or a private investor would. In circumstances where that judgment is actually open to a really serious question, perhaps ought to be made more public. What the public authority would do in that case is to say, well, we are not granting a subsidy. There is nothing to go on the transparency database. One of the problems with the bill is that it is very unclear how that particular type of issue is ever going to be caught. In the EU regime, there is the European Commission, which acts as a universal policeman. If somebody goes to it and says, well, we think that something has been done, which is in fact a state aid and it doesn't have gone through the appropriate procedures, the European Commission can and will come down like a kind of bricks on that. It's got power in an investigation. There's no equivalent here. Unless you've got a quite active, engaged complainant that is prepared to try and dig and spend some money on getting information that won't be through the transparency database because it won't be on the transparency base, you may have a problem. Of course, there are other ways of getting information, of course, for even information act, et cetera, but they tend to be a bit slower. The concern that you have at the moment is that there isn't that single body, as there would have been previously, to be able to determine whether you're not operating in a way that any normal bank would be, because you're taking perhaps on a risk that a normal bank wouldn't take or you're putting in terms that a normal bank wouldn't put in. Yeah, because there isn't the universal policeman. There's no policeman here in the way that European Commission pleases the state aid regime. The CMA has no power to investigate of its own motion, something like that. What you'd be reliant on in the sort of case that I'm talking about, where a public authority wrongly says, actually, this isn't a subsidy at all, we're just behaving as a private investor would. If that success is wrong, then how do you catch it when you're reliant on some third party, some private person acting for its own interests saying, hang on, we have objections to what is going on, we're concerned that what's being done is, in fact, a subsidy, doing a bit of digging and then threatening to go to court and then being prepared to take it to court. So you're relying on there being some private actor that's prepared to put up its own time and money to pursue this type of case. Now, in some cases there will be, there'll be obvious competitor that's deeply concerned about what's going on, but in other cases there won't. Thank you, that's extremely helpful. Thank you. I'll now bring in Colin Smyth to be followed by Gordon MacDonald. Good morning to the panel. Can I return briefly to the sixth principle in schedule one of the bill relating to competition and investment in the UK? I also want to touch on clause 18 of the bill, which covers prohibit and relocation being a condition of a subsidy. I represent the south of Scotland, so there are many businesses based close to the Scotland-England border, and it's also obviously the gateway to Northern Ireland, so it's not uncommon for a business to relocate premises either side of the border, just a few miles apart. As I said, clause 18 of the bill prohibits relocation being a condition of a subsidy. So can I ask the panel the views on the extent to which this clause in the whole sixth principle could impact specifically on businesses and support agencies close to the border? I'm conscious of time, so maybe I could put that question to Mr Peretz, as I know that this is something that he touched on and he's written the evidence, but if any other member of the panel wishes to come in at this point, I'm sure they'll indicate in the chatroom. Yes, first of all on clause 18, it's my reading of it, and that is actually confirmed by the minister's statement about what it means in the public bill committee, is that it is actually fairly limited. It only applies in a situation where the granting authority says, for example, it is a condition of the money that we are giving you to locate this factory here, that you close down your factory somewhere else. Because if all the condition is we give you money and you build a factory here, that doesn't attract clause 18, even if the economic reality is that because the factory is going to be built in the area of the granting authority, some other factory and some other part of the United Kingdom is going to be closed down. So you don't look at this through a lens or economic reality, you just look at what the terms of the grant are, and it's only if the grant says you must not just only locate your factory here, but you must also close down the factory that you've currently got somewhere else. But it's going to be caught. Now, that seems to me to be extremely unlikely scenario in practice. I mean, granted, there's no reason why a granting authority would ever insert that sort of condition, particularly if it knows that if it does so, it's likely to attract clause 18. So I don't think clause 18 is actually in the end particularly important, indeed, I sort of rather wonder why it's there. The principle on trade and investment in other parts of the United Kingdom, I mean, one has to stand back and remember what's all that's about, what that means is that if an authority, say, the Scottish borders local authority, decides to give some money to a company which is planning to locate some activity in people's homes, one of the things it does have to think about is what the effect of that may be, not just on its own area, but possibly on Northumberland. But what it's required to do is to address its mind to that problem. It's got to think about what that effect might be, and then it's got to then look at the principles of a whole and say, well, bearing all of this in mind, easily suggest that grant that we want to proceed with, and the answer might be yes or no. I mean, it could be perfectly rational to say, yes, we do accept that there's going to be a bit of an adverse knock-on effect in a neighbouring area, but when we're looking at everything in the round, this is still the right thing to do to achieve the public policy objectives that we've got, and if that reasoning is sort of pretty soundly based and based on proper evidence that's been taken and things have been thought about, then it ought to survive judicial review, which is then the, and scrutiny by the Competition and Markets Authority, which is the only sort of recourse that somebody who's upset about that can take. That's very helpful. I haven't seen any indication from any other member of the panel if they want to come on that, or I'll really just move on to my second question then. Related to issues around internal market displacement, in the reverence to the committee, Highlands and Islands Enterprise Express concerns about how far and on what scale internal market displacement assessments are going to be needed, because this could have a detrimental impact on smaller community-based projects. South of Scotland Enterprise also highlighted that the current regime makes it easy to confirm an award as a need, but the proposals in the bill, especially principal seven, makes a non-subsidy inclusion less likely unless that project is very clearly non-commercial, but the vast majority of projects will always be commercial. Could I ask the panel what they believe the potential impact could be of the new regime on funding for smaller-scale innovative community-based projects? Maybe I could start with Councillor Heddle, given his experience in the Highlands, but again if any other member of the panel wants to come in, I'm sure they'll indicate. Thank you very much for that question. Could I, with your indulgence, also just elucidate on my early response to Jimmy Halcro Johnston regarding the consultation around the subsidy control bill? I should have said that, of course, I've been in continual discussion with the Scottish Government as officers on the wider issue of replacement EU funding, of which this issue is part through David Bell's group looking at the replacement EU funding, so I'm happy to make that point. On your specific point here, on the impact that this might have on smaller schemes, particularly the requirement for internal market displacement assessments, this is indeed a concern because it brings us back essentially to the capacity question and the capacity of the smaller bodies in the smaller areas to be able to respond to this requirement and to develop subsidies that can be applied to our communities. I'm unclear, I have to admit, on how the subsidy control bill is going to apply to community enterprises and community projects. I look forward to the guidance around that. We can look back to the increased thresholds, which the Government is de minimis, and the fact that this is greater is certainly welcome. Of course, there's still cumulative over three years, so we're talking about a £300,000 grant being applied over three years, which does not translate into a potentially vast subsidy. It's absolutely an issue of capacity, which is potentially a disadvantage on the smaller areas that need to develop those schemes in particular. It brings us back again to our assisted areas map, which would enable such things to be progressed more transparently. Certainly, we're looking keenly to see what the guidance is going to say, because the way we've been progressing in the past, being due to the existence of things such as block exemptions, is equivalent to that. Some streamlined projects that would be applicable to our areas are essentially what we're relying on to be able to keep up in terms of developing the projects for our communities. Thank you. I'll now bring in Colin MacDonald, the Gordon MacDonald. Thanks, convener. I knew who you meant. Three very quick questions given the time constraints we've got. The first one in relation to inward investment. Scotland has been very successful since 2014 in being the most popular area for inward investment outside of London. Given the earlier conversations that we've had regarding the subsidy control bill, I'm just wondering what impact that could have on Scotland's ability to attract foreign investment, given that it has to take into consideration competition impacts across the UK. The second point is that we talked about how the Scottish or Welsh Government could approach the Secretary of State if it had concerns about subsidies being awarded elsewhere. Given that the Scottish Government has responsibility for economic development, by having to go to the Secretary of State, is that not undermining the devolved settlement? Lastly, on membership of the CMA subsidy advice unit, how can we ensure that the membership reflects the four Governments in the UK and should devolve Governments' other say or an input into the membership of that unit? Can I go to Mr Perez first, please? I mean, quite a few political questions, of course. I entirely see the case for saying that the Scottish Government should itself have powers to refer to the competition and markets authority, which is what we're talking about, in cases where the Secretary of State can. The amendments to that effect were put forward in the House of Commons by the SNP and the Labour Party spokesman on the Public Bill Committee. They were voted down by the Government's position on that, because this is a reserved matter. It's entirely appropriate for these powers to be reserved to the UK Secretary of State, acting as they say, in the interests of the whole United Kingdom. Their position is well in a case where the Scottish Government did have such concerns, it could go to the Secretary of State and the Secretary of State, we are assured, would take those concerns very seriously. I mean, whether you accept all of that or not, seems to be essentially a political judgment. As to the competition and markets authority appointments, yes, that's confined to the Secretary of State. Again, the point made by the minister when amendments to the effect that the devolved Government ought to have a hand in appointments to the subsidy advice unit was to repeat the line that this was the UK reserve competence, but it did add that the CMA, as you probably know, does have now fairly sizable offices in Edinburgh and in Cardiff, and I think in Belfast, but certainly in Edinburgh and Cardiff, and that it would be, and I mean, as a matter of practice, I'm sure the CMA will recruit people with, you know, to those offices with some eye on the, you know, on the politics of this, and think about who it puts on the, you know, whoever it's staffing and so on, and will engage with, and I'm sure it will engage with the devolved Governments. But whether that is enough is, again, a political question. And is it, do you have any concerns about Scotland's ability to attract foreign investments projects into Scotland? Well, I don't see that Scotland's, I mean, you know, its ability to do that was always constrained in the old regime by state aid rules under the new regime that we've controlled by the subsidy control rules. These are in some respects, as we were saying right at the beginning of this session, you know, make it easier in some ways for the Scottish Government to do that. It can reach a view applying the principles as to whether the investment is very broadly, you know, in the public interest, it achieves a public policy objective, is a value for money, isn't getting somebody to do something that they would have done anyway, all these tests that one has in the principle for all of which are good public policy tests, and provided that the Scottish Government comes to the conclusion that yes, all these were happy that the principles are all complied with, it can go ahead and give the money and, unlike the old regime, it doesn't have to, you know, wait for potentially for either conform to the block exemption regulations, which could be quite constraining, or wait for the European Commission to approve it, which could take some time. It can just go ahead and do it, and if there's been a challenge, it can defend that, but if the challenge is on judicial review grounds, which makes it much easier to defend against that sort of challenge. So I don't see, I think it would be hard to make the claim that it may necessarily made it harder for the Scottish Government to attract, to take measures to attract investment to Scotland. I think there are pluses and minuses. Professor Ford would go. The first two of Gordon's points about inward investment and about potential concerns about subsidies elsewhere and how that might fit in. I think that the way forward here is to get an assisted area map in place, because a key tool in delivering inward investment to the places that you need inward investment has been able to offer bigger subsidies in some parts of the UK than in others. That's precisely what the assisted area map has done. In Scotland it's been operationalised through the regional selective assistance scheme, operated by Scottish Enterprise, for example. It's the tool to make sure that you get inward investment the way you need it. It's also the tool to release what everybody else does in the system, because in the absence of an assisted area map, there's nothing to stop the most prosperous parts of southern England chipping in with as generous a financial offer as someone in Scotland might offer. At the mapping place, all of that will be easier. Thank you very much. I don't know if anybody else wants to come in on that. No, if not, that's me, thank you. Thank you very much, Mr MacDonald. Mr Peris, in one of the recent answers, said that it was quite a political question. I suppose that this one is. We have the minister in front of us next week. In recommending that we don't approve the legislative consent motion, the minister has said that the first concern is the sweeping powers of the Secretary of State, which ignore the devolution settlement and do not grant the equivalent powers to Scottish Government and other devolved administrations. I wonder if the finalists feel that that is a fair assessment of the bill, given the discussion that we've had this morning. I might be asked Professor Bell to comment first of all. You could argue that there's some hyperbolic language in there. If you were to strip that out, do you agree with the underlying concern that has been expressed by the Scottish Government? I think that it reflects perhaps frustration at the lack of detail here. The lack of scheme or lack of a pathway to developing and fast-stream schemes and how other bodies, other than the UK minister, might be consulted on all of that. I guess that there's a level of frustration associated with all of that and on issues such as the role of the CMA. It has a presence in Scotland, but it's not entirely clear whether it will—how responsive it might be to anything other than UK ministry in terms of its interactions with different parts of the UK, the lack of the assisted area map that we've talked about. I suspect that part of the reason for the frustration is to do with the lack of detail that we have been speaking about this morning, and that it appears that the Secretary of State might be able to fill in at will post the passing of the act, and that might be detrimental to Scotland. It possibly might not, but being in a state of uncertainty might make one defensive about it. Do you have a view on the previous question that Gordon MacDonald asked that Mr Peratt responded to? The issue around the asymmetric balance of power when it comes to making complaints to the CMA. Mr Peratt said that the UK Government would argue that it will take forward issues in the best interest of the UK as a whole, but the concern is that it will have a focus on English subsidies, and there is no equivalent power for Scotland or Wales to make representation of their unhappy with allowance awards that have been made in England. The defence of the UK Government appears to be in the interests of the UK, and nobody should be concerned about that. Is that the correct understanding of the situation? That is my understanding. Again, if there is a degree of scepticism about that, I cannot comment whether that is justifiable or not, but it would seem to me that there has to be some possibility for the devolved Administrations to have some recourse if they feel that activities in England are undermining their competitiveness or their own markets. Thank you. Councillor Heidel, you have indicated that you would like to come in before we finish. I support the statements that Professor Bell made. In the absence of any detail at present, of course, any of the devolved Administrations or public authorities are entirely entitled to be circumspect about what might happen. In this discussion, we have all been fairly united in saying that absolutely we need better consultation, we need better co-production of the way that that is taken forward and to get the best guidance, to get the best assisted areas mapped and to get the best implementation of the new subsidy control regime. Yes, absolutely, we should have more input from the devolved Administrations and local government and other public bodies as appropriate. As to what format it might take, absolutely, I would say that that would seem sensible, but the organisations that should have input into the subsidy advice unit should also have input into the CMA. The idea that the devolved Administrations have the ability to call in schemes seems not unreasonable. The ability to veto such proposals, I cannot see that ever happening, but I think that, to come back to the point, for the best guidance, the best map and the best implementation, we need to have the buy-in and shared responsibility for the way that the regime goes forward and that requires measures that have been previously outlined. Thank you. Mr Peretz, you wish to come in. Councillor Heddle mentioned the issue of the ability to veto. Can you comment on that as well? I know that you have previously commented on the asymmetric power issue. The point that I was going to make is that, in a sense, the past pass on all of this was going to say sold, but that is not the right word, because the devolved Government has all resisted it quite strongly, was taken by the internal market act, which made subsidy control a reserved matter. Before that, the position was almost certainly that it was not a reserved matter. I mean, it just was not listed in the list of reserved matters, probably because, as a member of the EU, it would have been slightly pointless to do so. It was not even the UK competence at that stage. In a sense, what we are seeing is the working out of a legislative step that was already taken in the internal market act, and it is just a logical consequence of that, is that it is a UK competence, so the involvement of the devolved Governments is necessarily somewhat reduced. Thank you. That is helpful. I thank all the panellists this morning for providing their time with their expertise. That has been much appreciated. We will now move into private session for the remaining item on the agenda.