On 3 February this year the government launched its subsidy control consultation. The aim of the consultation is to design a new approach to the award of business subsidies in the UK. This follows the end of the EU state aid rules, which ceased to apply when the post-Brexit transition provisions ended on 31 December 2020. 

The Subsidy Control Bill is currently making its way through Parliament, with businesses invited to submit their views on the proposals in writing to the Public Bill Committee now. The Public Bill Committee is due to meet on 26 October 2021, with the expectation that it will report by 18 November 2021. 

The potential impact on the UK economy of the proposed consultation is not to be underestimated. This year alone, over £1.6billion of subsidies have been paid out in the form of grants or loans under a plethora of different schemes including Covid-19 business grants, and for a wide-variety of stated purposes, from infrastructure to environmental protection, culture and heritage to aviation, sport, regional development and housing.   

For those unfamiliar with the consultation, the foreword to the consultation paper states that the new regime "will set out a clear and transparent set of principles and guidelines, ensuring that public authorities at all levels of government fully understand their legal obligations, and which will allow businesses to make long-term investment decisions on that basis. At the same time, we will avoid burdening public authorities with undue bureaucracy, and seek to maintain their freedom to act swiftly in response to economic emergencies or natural disasters."

More specifically, the objectives for the Subsidy Control Bill are to:

  • Empower local authorities, public bodies, and central and devolved governments to design subsidies that deliver strong benefits for the UK taxpayer.
  • Enable public authorities to deliver subsidies that are tailored and bespoke for local needs to support the UK’s economic recovery and deliver UK Government priorities such as levelling up, achieving net zero and increasing UK R&D investment.
  • Provide certainty and confidence to businesses investing in the UK, by protecting against subsidies that risk causing distortive or harmful economic impacts, including to the UK domestic market.
  • Contribute to meeting the UK’s international commitments on subsidy control, including its international commitments at the World Trade Organisation, in Free Trade Agreements and the Northern Ireland Protocol.

In seeking to meet those objectives, the Subsidy Control Bill 

  • sets out subsidy control principles which granting authorities must observe
  • exempts certain low risk subsidies from the Subsidy Control Bill’s requirements
  • prohibits certain subsidies which are generally not compliant with the UKs international obligations, and places requirements on other subsidies
  • sets out additional administrative requirements, such as a requirement to publish information on a subsidy database
  • introduces a more detailed assessment for high risk subsidies.

The Subsidy Control Bill also establishes a Subsidy Advice Unit in the Competition and Markets Authority which will have an advisory role in relation to certain subsidies given by public authorities, including devolved Scottish, Welsh and Northern Ireland administrations and local authorities. Its advice will be non-binding and the ultimate decision to go ahead with a subsidy will rest with a granting authority. The Subsidy Advice Unit will also monitor and oversee the working of the regime.

The enforcement of the UK regime will be through the Competition Appeal Tribunal, which will effectively hear judicial reviews against subsidy decisions of a public authority. Given the amounts at stake, we anticipate that there will be a flurry of challenges as both industry and the public authorities acclimatise to the new regime.

The Subsidy Control Bill’s provisions are neutral about which sectors of industry or policy priorities would benefit from more subsidies. Decisions about the level of subsidies remain the competence of granting authorities. However, the Subsidy Control Bill does give the Government the power to publish detailed guidance, where it could address such priorities.

More information on the Subsidy Control Bill, including guidance on how to submit your views to the Public Bill Committee can be found here: Have your say on the Subsidy Control Bill - UK Parliament.