Move over State Aid - make room for the Subsidy Control Bill

Published on
3 min read

At the end of the Brexit transition period last year, the EU’s State Aid regime ceased to apply in the UK. Since then we have had to rely on a few rather general paragraphs in the Trade and Cooperation Agreement between the UK and the EU. The announcement of a new Subsidy Control Bill is welcome in removing this uncertainty. It also marks a new phase in the UK’s post-EU future and, many hope, a more flexible and responsive approach to supporting businesses with public funding.

Why do we need a subsidy control system?

The EU-UK Trade and Cooperation Agreement (the TCA) deals with subsidy controls, requiring each of the EU and the UK to have in place “an effective system of subsidy control”. The system must include a set of principles, such as proportionality, that will be applied in meeting a defined objective. It can be designed independently, but must be implemented in law in a way that allows the legality of an individual subsidy to be determined.

Following a period of consultation, the Government has introduced a Subsidy Control Bill to Parliament. You can access the bill and follow its progress here.

How will the new system work?

The policy background is explained in the press release and the consultation response “Government response to the consultation on subsidy control.  A flexible, principles-based approach for the UK”.

The policy objectives for the Bill include:

  • quicker and more flexible support, compared to what is seen by many as a slow and bureaucratic EU system
  • devolved administrations and local authorities empowered for the first time to decide if they can issue subsidies by following UK-wide principles
  • ability to focus on key domestic priorities, such as levelling up economic growth across the UK and driving a green industrial revolution.

The new system will move towards a system where most subsidies can be granted if they comply with a set of principles, without the need for referral to the Competition and Markets Authority. Safeguards will be included. The Bill proposes to:

  • prohibit the awarding of subsidies that will result in the relocation of jobs and economic activity from one part of the UK to another – known as ‘displacement’
  • ban unlimited government guarantees to businesses as well as subsidies granted to “ailing or insolvent” enterprises where there is no credible restructuring plan
  • introduce two specific categories of subsidies - Subsidies of Interest and Subsidies of Particular Interest – for which granting authorities may undertake more extensive analysis to assess their compliance with the principles. These remain to be defined in detailed regulations.

Various exemptions are planned, relating to small amounts (envisaged at less than £315,000 over three years), and for natural disasters and emergencies, for example.

The Government intends to introduce the regime in 2022.

 

Find out more about our subsidy control and competition law services.

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