New subsidy control system will support UK jobs, boost the economy

Under the new rules, the devolved administrations and local authorities will, for the first time, decide whether to issue subsidies by following UK-wide principles, delivering good value for the British taxpayer while being awarded in a timely and effective way.

Previously, the devolved administrations were subject to the EU’s prescriptive state aid regime that governed the powers of elected governments in Edinburgh, Cardiff and Belfast to support viable businesses. Under the EU system, all subsidies except those under a “Block Exemption Regulation” had to undergo a lengthy bureaucratic process of being notified to and approved by the European Commission in advance, delaying vital funds from reaching viable businesses in good time.

These UK-wide principles will allow public authorities to deliver subsidies where they are needed without facing excessive red tape, creating a level playing field for subsidies across the entire country.

Small-Business Minister Paul Scully said under the EU’s state aid regime, the UK was bound by excessive bureaucracy and lengthy pre-approval processes.

“However, now we have the flexibility to better support businesses to grow and thrive, in a way that suits the interests of UK industries and supports the levelling-up agenda,” he said.

The new regime is expected to come into force in autumn 2022.

The new system will prohibit subsidy races in which public authorities try to outbid each other’s subsidies to attract investment and will also give public authorities the flexibility to design subsidies according to local needs, including giving subsidies that target localised and regional inequalities.

The new rules will help foster a vibrant free-market economy in the UK by banning unlimited government guarantees to businesses as well as subsidies granted to “ailing or insolvent” enterprises where there is no credible restructuring plan.

The UK’s new system will also contribute to meeting the UK’s international commitments on subsidy control, including its international commitments at the World Trade Organization and in free trade agreements.