New grant scheme to support UK jobs and businesses, boost the economy and strengthen the union

  • A new UK-wide grant control system announced today to provide faster and more flexible support to UK businesses after we leave the EU
  • decisions previously subject to approval by unelected EU bureaucrats will be decided in the UK
  • decentralized administrations and local authorities empowered for the first time to decide whether they can award grants following the UK-wide principles

UK businesses will be able to benefit from financial support through a new grant control system following our departure from the EU.

The subsidy control bill presented to parliament today takes advantage of the opportunity of leaving the bureaucratic EU state aid regime to create a new subsidy system that can enable key national priorities , such as leveling 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 state aid regime that governed the awarding of grants – such as grants, loans and guarantees. In the EU system, all grants except those falling under a ‘block exemption regulation’ had to undergo a long bureaucratic process to be notified and approved in advance by the European Commission, which delayed access of vital funds to viable businesses in a timely manner.

The new UK system will assume that grants are allowed if they follow UK-wide principles – offering value for money to the UK taxpayer while being delivered in a timely and efficient manner. These UK-wide principles will allow public authorities to provide grants where they are needed without facing excessive bureaucracy.

The system will not be a throwback to the failed approach of the 1970s when the government tried to run the economy, “pick winners” or bail out unsustainable businesses.

Decentralized governments will for the first time be empowered to decide whether they can award grants following a UK-wide set of principles. Previously, decentralized administrations were subject to the prescriptive EU state aid regime that governed the powers of elected governments in Edinburgh, Cardiff and Belfast to support viable businesses.

The new system will prohibit the granting of subsidies which will result in the relocation of jobs and economic activities from one part of the UK to another – what is known as ‘displacement’. This will help strengthen the Union and level the country as a whole by preventing ‘grant races’ between public authorities competing to attract the same business.

For example, this will ensure that a Welsh company is not unfairly compromised or disadvantaged by a grant decision in England, and vice versa. It will also mean that big business cannot pit UK regions, nations, towns and cities against each other in a competition for taxpayer subsidies – protecting the vibrant free market economy and competitive edge that has been at the heart of our national prosperity. for decades.

UK Business Secretary Kwasi Kwarteng said:

Today we are seizing the opportunities to be an independent trading nation to support new and emerging UK industries, create more jobs and make the UK the best possible place to start and grow a business.

We want to use our new freedoms as an independent and sovereign country to empower UK public authorities to provide financial support – without facing red tape.

While the new UK system will be more nimble and flexible, I have been clear that we will not go back to the failed 1970s approach of government trying to run the economy, pick winners or bail out unsustainable businesses. Each grant must deliver significant benefits to local communities and ensure value for money for the UK taxpayer.

Today’s bill marks a clear departure from the EU state aid regime and will ensure that our new grant system will keep the UK’s market economy competitive and free, which has been at the heart of our economic success and national prosperity for decades.

The UK taxpayer and the UK’s competitive and free market economy will be further protected by prohibiting unlimited government guarantees to businesses as well as grants to ‘distressed or insolvent’ businesses where no plan exists. credible restructuring, although we are no longer bound by EU Definitions restrictions that unfairly penalized start-ups and small businesses.

Under the new regime, enforcement will take place through the courts and tribunals of the United Kingdom. The competence to judicially control the allocation of subsidies will be attributed to the Competition Appeal Tribunal (CAT).

UK Business Secretary Paul Scully said:

The UK’s new bespoke grant system will be simple, nimble and based on common sense principles – without excessive bureaucracy.

Our modern regime will support the UK government, decentralized administrations in Edinburgh, Cardiff and Belfast, and local authorities to quickly and strategically support our economic recovery while ensuring a consistent and level playing field for grants across the country.

In order to protect UK competition and investment and to minimize distortions due to specific subsidies, the new system will introduce two specific categories of subsidies – interest subsidies and special interest subsidies – for which the authorities competent authorities may undertake a more in-depth analysis to assess their compliance with the Principles.

The new regime will help meet the UK’s international commitments to control subsidies, in particular by following the World Trade Organization (WTO) rules in this area, and those of free trade agreements (FTAs). – by maintaining our place on the international scene.

The Subsidy Control Bill sets out the key elements of the new national subsidy control regime in primary legislation. Further details on implementation and guidance will be provided in due course. The scheme will come into effect in 2022 subject to parliamentary approval.

The UK government has always been clear that the regulation of subsidy control is a reserved matter. The UK Internal Market Act (UKIM) 2020 specifies that only the UK Parliament should legislate for the regulation of grants. UKIM also helps to ensure that there is no legal confusion or ambiguity regarding the interpretation of the state aid elements in the Northern Ireland Protocol.

Today’s announcement follows a consultation earlier this year in which the UK government sought advice from businesses, public authorities, including decentralized governments, and others on the future shape of the new subsidy control system. The response to this consultation was released today.

Notes to Editors

A grant is a financial contribution using public resources that confers a benefit on a specific recipient. This could include, for example, a cash payment, a loan with interest below the market rate, or a guarantee. The grants are administered by all levels of government in the UK.

As of January 1, 2021, the UK has been meeting subsidy control commitments set out in its free trade agreements with other countries, including the provisions of the UK Trade and Cooperation Agreement and the EU and WTO rules on subsidies, as well as the relevant provisions of the Northern Ireland Protocol. How we implement our international commitments into UK law is a national decision and the new grant control system announced today builds on and aligns with these commitments.

The new Subsidies Advisory Unit will be created within the Competition and Markets Authority.

To further streamline the new system, the government is exempting a limited set of subsidies from the control principles, such as those required to safeguard national security and subsidies granted temporarily to deal with emergencies such as flooding. As is currently the case, all subsidies will still be subject to WTO rules.

To ensure this new system works in all parts of the UK, the UK government has worked closely with decentralized administrations throughout this process, including sharing the consultation response document ahead of its publication and taking into account the representations of decentralized administrations.

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