The Department for Business, Energy and Industrial Strategy (BEIS) has set out plans for a new UK-wide subsidy control system, to replace the EU state aid regime, which it says will provide more flexible and tailored financial support to businesses
Under the proposed UK system, local authorities, public bodies and the devolved administrations in Edinburgh, Cardiff and Belfast will be empowered to decide if they can issue taxpayer subsidies by following a set of UK-wide principles.
BEIS said these principles will ensure subsidies are designed in such a way that they deliver strong benefits and good value for money for the UK taxpayer, while being awarded in a timely and effective way.
The new system is intended to be more flexible, agile and tailored to support business growth and innovation as well as maintain a competitive market economy and protect the UK internal market. At the same time, it will help protect against wasteful spending.
Business secretary Kwasi Kwarteng said: ‘Our new, more flexible system will empower public authorities and devolved administrations, and ensure fair competition for businesses across the UK.
‘Now we have taken back control of our money and laws from the EU, we want to use our newfound freedoms to propel the UK to the forefront of innovation and help create the jobs of the future, while also making the UK the best place to start and grow a business.
‘With a modern, tailored approach to supporting businesses, we will also be able to press ahead with our long-term ambitions to tackle climate change and to level up opportunity as we build back better from the pandemic.’
BEIS stated that the system will ensure the UK honours its international obligations under World Trade Organisation (WTO) rules, the UK-EU Trade and Cooperation Agreement signed at the end of last year, and other free trade agreements, and that it will not be a return to the 1970s approach of government trying to run the economy or bailing out unsustainable companies.
The department is to hold a consultation seeking views from businesses and public authorities on a number of areas, including whether the UK should apply its own additional principles on subsidy control, as well as those set out in the UK-EU Trade and Co-operation Agreement.
The consultation will look at how best to ensure transparency across the system; the possible roles and responsibilities of the independent body that will oversee the new system; how this independent body could have some role in supporting enforcement of the principles, alongside normal judicial review standards; and how the system could seek to introduce exemptions consistent with the UK’s international obligations, such as ensuring subsidies of low value, those given to support natural disaster relief or in response to global economic emergencies.
BEIS said that a UK-wide subsidy control regime will ensure that subsidies do not unduly distort competition within the UK’s internal market. For example, it will ensure that a Welsh firm is not unfairly undercut or disadvantaged by a subsidy decision in England, and vice versa. It will also mean that big companies cannot play off the regions, nations, towns, and cities of the UK against each other in a competition to benefit from taxpayer subsidy.
As set out in the UK Internal Market (UKIM) Act 2020, the business secretary will provide a draft of the proposed response to this consultation to devolved authorities and consider any representations they may have before a final response is published.
The consultation will run for a minimum of eight weeks. Subject to the outcomes of this consultation, the government will bring forward primary legislation to establish in domestic law a system of subsidy control that works for the entirety of the UK.