Subsidy control: guidance

Principles assessment

All subsidies need to comply with the seven principles as set out in the Act. The principles are:

A.  subsidies should pursue a specific policy objective in order to remedy an identified market failure, or to address an equity rationale (such as local or regional disadvantage, social difficulties or distributional concerns)

B. subsidies should be proportionate to their specific policy objective and limited to what is necessary to achieve it

C. subsidies should be designed to bring about a change of economic behaviour of the beneficiary. That change, in relation to a subsidy, should be conducive to achieving it’s specific policy objective, and something that would not happen without the subsidy

D. subsidies should not normally compensate for the costs the beneficiary would have funded in the absence of any subsidy;

E. subsidies should be an appropriate policy instrument for achieving their specific policy objective and that objective cannot be achieved through other less distortive means

F. subsidies should be designed to achieve their specific policy objective while minimising any negative effects on competition or investment within the United Kingdom

G. subsidies’ beneficial effects (in terms of achieving their specific policy objective) should outweigh any negative effects, including in particular negative effects on competition or investment within the United Kingdom, and international trade or investment. 

All principles must be met and public authorities should use the four step assessment template (held within documents section at top of this page) to record and evidence their consideration of 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.  Further detail on how to complete a principles assessment and subsidy design can be found in Chapter 3 and Annex 2 of the Subsidy Control Statutory Guidance.

There is a requirement to provide a completed principles assessment in the event of any complaint being raised or if subject to judicial review in the UK courts.  Further detail on this can be found in Chapter 13 of the Subsidy Control Statutory Guidance.

Energy and environment principles

Subsidies and schemes in relation to energy or the environment must be assessed against a further set of energy and environment principles. These additional principles are essential to ensure compliance with the UK’s international obligations, specifically the Trade and Co-operation Agreement with the European Union.

Principles A and B are applicable to all energy and environment (E&E) subsidies, whereas all other E&E principles apply only to specific kinds of subsidies, or subsidy schemes. Principles C – G cover:

• subsidies for electricity generation adequacy, renewable energy or cogeneration
• subsidies for electricity generation adequacy
• subsidies for renewable energy or cogeneration
• subsidies in the form of partial exemptions from energy-related taxes and levies
• subsidies that compensate electricity-intensive users for increases in electricity costs
• subsidies should be assessed against the E&E principles using the template provided (held within documents section at top of this page) with reference to Chapter 4 of the Subsidy Control Statutory Guidance