Businesses across the UK will be able to benefit from financial support thanks to a new subsidy control system following our departure from the EU.
The Subsidy Control Bill introduced to Parliament today seizes the opportunities from having left the EU’s bureaucratic State aid regime to create a new system for subsidies that can enable key domestic priorities, such as levelling up economic growth across the UK and driving our green industrial revolution.
Previously, when the UK was a member of the EU, the UK followed the EU’s State aid regime which governed the awarding of subsidies – such as grants, loans and guarantees. 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.
The new UK system will start from the basis that subsidies are permitted if they follow UK-wide principles – delivering good value for the British taxpayer while being awarded in a timely and effective way. These UK-wide principles will allow public authorities to deliver subsidies where they are needed without facing excessive red tape.
The system will not be a return to the failed 1970s approach of government trying to run the economy, ‘picking winners’ or bailing out unsustainable companies.
The devolved governments will be empowered for the first time to decide if they can issue subsidies by following a set of UK-wide principles. Previously, the devolved administrations were subject to the EU’s prescriptive State aid regime which governed the powers of elected governments in Edinburgh, Cardiff and Belfast to support viable businesses.
The new system will prohibit the awarding of subsidies that will result in the relocation of jobs and economic activity from one part of the UK to another – known as ‘displacement’. This will help strengthen the Union and help level up the entire country by preventing ‘subsidy races’ between public authorities competing to attract the same business.
For example, it will ensure that a Welsh firm is not unfairly undercut or disadvantaged by a subsidy decision in England, and vice-versa. It will also mean that big companies cannot play off the regions, nations, towns, and cities of the UK against each other in a competition to benefit from taxpayer subsidy – protecting the dynamic and competitive free market economy that has been central to our national prosperity for decades.