What is it?
· On 30 June, the UK Government introduced the Subsidy Control Bill, the post-Brexit framework for a new, UK-wide ‘subsidy control’, or state aid, regime. The bill’s second reading is yet to be scheduled.
· This regime will enable “public authorities, including devolved administrations and local authorities, to deliver subsidies that are tailored and bespoke for local needs to deliver government priorities such as levelling up and achieving net zero carbon, as well as supporting the economy’s recovery from COVID-19.”
· Business Secretary Kwasi Kwarteng MP has said the government was using its “newfound freedoms” following Brexit to “empower public authorities across the UK to deliver financial support – without facing burdensome red tape”.
What will it do?
· Dubbed “the most important bit of post-Brexit legislation yet”, the new and complex bill will replace EU-wide state aid rules, which require member states to seek approval for government assistance to firms. The Subsidy Control Bill will crucially bypass the need to gain unanimous approval from 27 EU member states to release financial supports to failing businesses or industries.
· Ministers say the new bill allows for more agile, targeted, rapid, and timely interventions, but warned it does not “signal a return to the failed 1970s approach of government picking winners or bailing out unsustainable companies". The EU, however, is concerned the UK may distort competition by failing to ensure firms operate on a level playing field. However, government officials have said they don’t expect the overall level of UK state aid to increase significantly.
· However, the new subsidies scheme will be a pillar of the Tories’ ‘levelling up’ agenda and supporting fledgling industries like clean energy and green tech. How this plays out with Tory backbenchers who are more ideologically opposed to state intervention remains to be seen, though.
· The new Subsidy Advice Unit, within the Competition and Markets Authority, will monitor and report on the regime and report on certain subsidies and schemes.
What does it mean for Northern Ireland?
· Northern Ireland was a net beneficiary of EU funding as a member. EU structural funds helped support cross-border, cross-community, and large-scale capital investment projects. Sectors like agriculture especially benefitted from EU funding.
· Coupled with the loss of EU structural funds, and with the UK’s proposed replacement the Shared Prosperity Fund likely to be much less generous, a new and more agile state aid regime may be crucial in supporting a Northern Irish economy coming out of the pandemic. Blooming sectors like hydrogen or suffering industries like aviation – which are vital to the wider NI economy – could potentially be in line to benefit from the Subsidy Control Bill.