Subsidy control
Scope
1. This section gives guidance on current subsidy control rules (previously European Commission (EC) State aid rules). It applies to subsidies provided by any-body to which the Scottish Public Finance Manual (SPFM) is directly applicable.
Key points
2. This guidance applies to all public authorities who grant subsidies and are responsible for ensuring they understand the UK’s commitments and comply with the obligations in relation to awarding subsidies from 1 January 2021.
3. The EU State aid regime was effectively revoked from UK law from 1 January 2021 except in limited circumstances (under the Northern Ireland Protocol and certain other cases set out in the UK-EU Withdrawal Agreement) and subsidy control provisions are now covered by the UK-EU Trade and Cooperation Agreement (TCA) and the UK’s international obligations including various Free Trade Agreements and those arising as a consequence of World Trade Organisation membership. This position may be subject if the UK Government establishing its own domestic subsidies control regime: a UK wide consultation on this is set to take place in the first half of 2021.
4. Subsidy control should be considered as early as possible in the policy development stage.
5. The Scottish Government’s Subsidy Control Team should be consulted on proposals being awarded under the new subsidy control regime.
Background
6. In general terms, and for the purposes of our international commitments, a subsidy is a measure which:
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is given by a public authority. This can be at any level – central, devolved, regional or local government or a public body
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makes a contribution (this could be a financial or an in-kind contribution) to an economic actor, conferring an economic advantage that is not available on market terms. Examples of a contribution are grants, loans at below market rate, or a loan guarantee at below market rate or allowing a company to use publicly owned office space rent free. An economic actor is anyone who puts goods or services on a market and could be a government department or a charity if they are acting commercially
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affects international trade. This can be trade with any World Trade Organisation member or, more specifically, between the UK and a country with whom it has a Free Trade Agreement. For example, if the subsidy is going towards a good which is traded between the UK and the EU. Please note that you are not being asked whether the subsidy could harm trade but merely whether there could be some sort of effect. Subsidies to very local companies or a small tourist attraction are unlikely to be caught as this is unlikely to affect international trade.
All of these tests must be met for a measure to be a subsidy. Department of Business, Energy & Industrial Strategy have produced guidance.
Compliance
7. All subsidies provided by bodies subject to the requirements of the SPFM should comply with the UK’s international trading obligations. It is the responsibility of both policy makers and aid administrators to consider subsidy control and ideally this should be done as early as possible in the policy development stage, in consultation with the Subsidy Control Team. Any prohibited subsidies may result in judicial review, clawback of the subsidy and ultimately tariffs being imposed.
Subsidy Control Team
8. The Subsidy Control Team should be consulted on all proposals which may have subsidy implications. The Team can help make an early assessment of whether a proposed project or policy objective could be considered a subsidy. The Subsidy Control Team can also advice on reporting obligations and guidance on undertaking a subsidy principles assessment.