EC State Aid rules and procurement issues
17. Local authorities are reminded that all disposals must comply with the European Commission's State aid rules. The Commission's Communication on State aid elements in sales of land and buildings by public authorities (97/C 209/03) provides general guidance on this issue.
18. When disposing of land at less than best consideration that can reasonably be obtained, local authorities are viewed to be providing a subsidy to the owner, developer and/or the occupier of the land and property, depending on the nature of the development. Where this occurs, authorities must ensure that the nature and amount of subsidy complies with the State aid rules, particularly if there is no element of competition in the disposal process. Failure to comply with the rules means that the aid granted is viewed as unlawful and may result in the benefit being recovered with interest from the aid recipient.
19. If local authorities decide that the best way to deliver their services is by using arms-length external organisations, for example a trust or a Charitable Company Limited by Guarantee ( CCLG), they would need to strike a careful balance between potentially conflicting requirements associated with European Union ( EU) procurement; principles of charity law; issues associated with State aid; and the need to demonstrate that there would be a supply of services by the arms length organisation to the authority for VAT purposes.
20. It is considered that there are two strands of EU law by reference to which the arrangements relating to the supply of services by a CCLG to an authority could be regarded as outwith the scope of EU procurement requirements:
- The principles arising from the Altmark case - as relating to the provision of services of general economic interest; and
- The principles established through the Teckal case - which allow a contracting authority to enter into arrangements for the supply of services by a body controlled by that authority, providing certain requirements are met.
IMPORTANT: This is only intended as useful general guidance and is not of any legal effect. Local authorities will need to obtain their own legal advice on these issues if this is required, for the particular circumstances involved.
21. Scottish local authorities may obtain general advice and guidance on Procurement Procedures and EC State Aid Rules by contacting the Scottish Government's Procurement Policy & Best Practice Team or the State Aid Unit.
Crichel Down Rules
22. If the land has been acquired by or in the shadow of compulsory purchase powers The Crichel Down Rules 2 (which the Government has commended to Councils) state that the asset has to be offered back to the owner at market value (best price reasonably obtainable, including any special value 3 from a person with a special interest, such as a former owner).
Housing Revenue Account
23. It should be noted land or other assets held on the Housing Revenue Account ( HRA) will still require the consent of the Scottish Ministers under section 12 of the Housing (Scotland) Act 1987, though as set out in paragraph 6 disposals of houses are treated differently in that section 74 does not apply to them. Applications seeking Ministerial consent for disposals held on the HRA should be sent to the Scottish Government, Housing and Regeneration Division, Social Housing, Area 1-H South, Victoria Quay, Edinburgh, EH6 6QQ.