All subsidies need to comply with the six principles as set out in the TCA. The six principles are:
1. Subsidies pursue a specific public policy objective to remedy an identified market failure or to address an equity rationale, such as social difficulties or distributional concerns ('the objective').
2. Subsidies should be proportionate and limited to what is necessary to achieve the objective.
3. Subsidies should be designed to bring about a change of economic behaviour of the beneficiary that is conducive to achieving the objective and that would not be achieved in the absence of subsidies being provided.
4. Subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy.
5. Subsidies should be an appropriate policy instrument to achieve a public policy objective and that objective cannot be achieved through other less distortive means.
6. Subsidies’ positive contributions to achieving the objective should outweigh any negative effects, in particular the negative effects on trade or investment between the parties.
All principles must be met and public authorities should use the assessment template (held within the supporting documents section at the top of this page) to record their consideration against each principle. Detail provided by public authorities in the principles assessment should be used to show that their proposed subsidy is targeted, proportionate and effective. There is a requirement to provide this to the UK government if asked as part of the consultation or remedial measures processes in the TCA or if they are subject to judicial review in the UK courts.
The new regime, coming into force late 2022, will introduce a seventh principle which looks at the impact of trade within the UK internal market.
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