22 September 2021

When it comes to subsidies, there really is a silver bullet

By John Penrose MP

The rather boringly named Subsidy Control Bill starts its journey through Parliament today. But in spite of the soporific handle, it does something rather important: it replaces all those clunky, bureaucratic EU subsidy rules with a much simpler, quicker, lighter-touch set of UK ones instead. It should mean we can be faster, more nimble and more competitive in international export markets as a result. 

So what’s the problem? Well, nothing, if only everyone sticks to the rules. But subsidies are a heady drug, both for politicians in ministries and town halls up and down the country, and for companies who’d love the chance to dip their hands into taxpayers’ pockets as well. So you don’t need a crystal ball to work out that the risks are pretty high that sooner or later somewhere, somehow, someone will try to cut corners and game the system.

Luckily, there’s a silver bullet: a remedy that will keep everyone on the straight and narrow. If it’s automatic that we publish details of every subsidy, everywhere, then we’ll all know who’s getting what. It will be obvious if any councils or ministries aren’t following the rules, or if some firms are creaming it while others are being ignored. The scope for political favouritism will be zero, and it will be easy to work out which grants or loans have paid off by helping British firms become internationally competitive, and which haven’t.  

Fortunately, ministers say they agree. They’ve promised to make the UK into ‘a world leader in subsidy transparency’, which is really welcome news for anyone worried their hard-earned taxes might be frittered away by commercially hopeless political favourites.

It’s not just ministers either: there’s an amazingly broad, cross-party coalition of supporters for extra transparency, ranging from anti-corruption groups like Transparency International, Spotlight on Corruption and the Campaign for Freedom of Information, to free-market think tanks like the Adam Smith Institute, the Taxpayers’ Alliance and the Centre for Policy Studies.

The trouble is, the silver bullet could turn out to be a damp squib. Because the boringly named bill actually turns out to be less transparent than the EU rules which it is replacing. The EU says any subsidy worth more than about £425,000 has to be published, but the new bill raises the threshold to £500,000. So we will be exposing fewer grants and subsidies to public scrutiny in future, rather than more. And they don’t have to be declared for six months either, by which time it will be too late to put things right if we need to.

Even more irritating, the new system will be clunky and create lots of red tape for businesses too. That’s because every time they apply for a grant or loan, they will have to declare whether they’ve had any others already, in case it takes them over the threshold for public declaration and scrutiny. So they will have to keep detailed records for years, which is bureaucratic and complex. And the people dishing out the grants won’t know if the applicants are telling the truth unless they audit those records, which is even more bureaucratic. Nimble and efficient it ain’t. 

Fortunately, there’s a better way that’s quick, cheap and easy to do. If we ask every public body that offers a subsidy of more than £500 (yes that’s right; not £500,000) to publish it immediately in a preset format, then we will have an instant public subsidy register. The impact would be huge, because you or I or anyone else would be able to search the new database to make sure the rules were being followed and the system was fair. Companies wouldn’t have to keep detailed records either, and officials wouldn’t have to audit them, because the information would be accurate and already available whenever they wanted to check. It would deliver ministers’ promise to make us ‘a world leader in subsidy transparency’ and it would cost buttons. What’s not to like? 

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John Penrose is the Conservative MP for Weston-super-Mare.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.