News, Policy & Media

09Sep

HMG publishes post-Brexit state-aid proposals

The Government has set out its plans for a new approach to subsidy control and state aid in the post-Brexit landscape. The UK will be following WTO subsidy rules and other international commitments from the 1st January 2021 according to Business Secretary Alok Sharma.

WTO rules are an internationally recognised common standard covering financial assistance granted by governments and public authorities to companies. The UK has been following the EU state aid rules up until now, these are managed by the European Commission and seek to prevent subsidies distorting competition between member states. The UK will have the opportunity to design its own subsidy control regime according to its own needs once the Transition Period ends. Government ministers have made it clear that the strategy is not to return to the 1970s-style approach of trying to run the economy or bail out unsustainable companies. Rather, it will be based on the competitive market economy not standing in the way or preventing adjustment to underlying market conditions.

WTO are used by the majority of countries across the world, ensuring an effective international trading system. They have been in operation for over 25 years, and ban subsidies that are dependent on either how much a company exports, or the use of domestic goods over imports. 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 extract taxpayer subsidy – therefore ensuring a dynamic and competitive market economy throughout the UK.

Business Secretary Alok Sharma commented on the plans: “As we take back control of our money and laws from the EU, we have a unique opportunity to design our own subsidy control regime in a way that works businesses, workers and consumers.” The Secretary stated that he wants to work “closely hand in glove with businesses and public authorities across all parts of the United Kingdom to consider see how best we can use these new freedoms.” Guidance on these rules is expected to be published before the end of the year for public authorities and devolved administrations. A public consultation will be published in the coming months to ask whether the UK should be beyond its international commitments, including on the need for further legislation.

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