New Subsidy Control Regime is becoming reality
19 May 2022
We previously wrote about the proposed new subsidy control regime when the Subsidy Control Bill (the Bill) was published last year. You can read that article here. The Bill received Royal Assent on 28 April 2022 and will be known as the Subsidy Control Act 2022 (the Act). It is expected to come into force in autumn 2022.
In this note we take a brief, high-level look at some of the aspects of the new subsidy control regime.
The DBEIS’s press release announcing that the Bill received Royal Assent, remarks that the new subsidy control regime will “boost the economy, put the UK on the front foot in emerging industries, helping growth and jobs”. All well and good.
Under the new subsidy control regime public authorities must assess whether to award a subsidy against a set of seven principles (the Principles) which are set out in Schedule 1 of the Bill. This is similar to what they will have been doing under the interim subsidy control regime when assessing a proposed subsidy against the six principles of the Trade and Cooperation Agreement.
The Bill gave the Secretary of State power to issue guidance, to which public authorities must have regard. At the beginning of the year, some Illustrative Guidance (the Guidance) was published and the Government has said that it will publish further final guidance “sufficiently in advance of the new regime’s commencement”.
We hope the final guidance will clearly signpost the process to be followed when assessing a proposed subsidy against the Principles (currently a four step process in the Guidance) and how this assessment should be documented and evidenced to comply with the law. There are elements of economic/market assessment involved as well as policy, not just complying with the law. This potentially makes the assessment and overall analysis of a proposed subsidy quite complex. Being mindful of how many small (as well as more significant) subsidies some local authorities, for example, award in the form of grants, we hope the process will enable public bodies to allocate resources/time for the assessment that are proportionate to the value of the subsidy and without unnecessary administrative burden.
Other points of interest include the useful exemptions from assessing the subsidy against the Principles in the case of ‘minimal financial assistance’ and for services of public and economic interest assistance (SPEI), in Part 2, Chapter 2 of the Bill. The threshold for ‘minimal financial assistance’ is £315,000 over three financial years and for SPEI it is £725,000 over the same period.
Although these exemptions don’t require subsidies to be assessed against the Principles, there are procedures that must be complied with by both the public authority and the recipient to fulfil the exemption requirements. There are other exemptions, including one for where there has been a natural disaster or other exceptional occurrence and the Secretary of State has published a notice saying that the exemption applies to that disaster or occurrence.
One final thing to note is that, as proposed in the Bill, there will be an independent body, the Subsidy Advice Unit (SAU), within the Competition and Markets Authority. The SAU will have an advisory role and will provide reports (with recommendations where appropriate) on proposed subsidies following both mandatory and voluntary pre-award referrals by public bodies. Enforcement of the new regime will be through the UK’s courts and tribunal system. The jurisdiction to judicially review the award of subsidies will sit with the Competition Appeal Tribunal.
The content of this article is for general information only. It is not, and should not be taken as, legal advice. If you require any further information in relation to this article please contact the author in the first instance. Law covered as at May 2022.