The UK’s new domestic subsidy control regime came into force on 4 January 2023, introducing a new way in which subsidies are determined and regulated.
We will be publishing a series of bitesize briefings which seek to explore the nuances and features of the new regime as set out under the Subsidy Control Act 2022 (“SCA”) and accompanying regulations.
There are three routes for assessing subsidies, being:
In this article, we will be looking at the Streamlined Routes.
Streamlined Routes, or Streamlined Subsidy Schemes under the SCA are types of subsidy schemes which are made by Government for the benefit of public authorities. Such schemes must be laid before Parliament which then has 40 days to object to the scheme by the passing of a resolution. The transparency requirements ensure public authorities will be made aware as and when Streamlined Routes are created alongside guidance to help illustrate the scheme requirements.
The Streamlined Routes have been purposefully established for those subsidies that are: (i) at low risk of causing market distortions; (ii) promote UK strategic policy objectives; and (iii) which can be judged by the Government as being compliant with the subsidy control regime.
To ensure all subsidies awarded under the Streamlined Routes are compliant, specific eligibility criteria will be incorporated.
While Streamlined Routes are available to use in particular cases, use of them will not be compulsory. Public authorities are still entitled to award individual subsidies or develop their own schemes after carrying out principle-by-principle assessments.
Streamlined Routes are intended to be a faster way in which compliant subsidies can be granted, and the Government considers that they have the following benefits:
The Government made the following Streamlined Routes on 4 January 2023 which were laid before Parliament on 9 January 2023:
The purpose of this Streamlined Route is to facilitate subsidies for research, development and innovation projects. Similarly to the GBER under the EU State aid rules, this route contains three categories of research: feasibility studies; industrial research and experimental development projects, and small and medium sized enterprises RD&I support, which each being defined to cover certain areas of research and development. As with the GBER, subsidies under each category can only be used to fund specific eligible costs, and there are limits on the amount of subsidy that can be given, and what percentage of eligible costs can be subsidised (the “Subsidy Ratio”). There is also the opportunity to increase the Subsidy Ratio in certain circumstances, such as where effective collaboration occurs, although this depends on the category of research that the subsidy falls under.
The purpose of this Streamlined Route is to facilitate subsidies that will help achieve net zero strategic objectives through three main areas: Energy Demand Reduction; Green Heat Networks; and Green Skills Training. Again, these areas are further defined in the scheme documents and accompanying Streamlined Routes Guidance published by the Government in December 2022. It is important to note that this Streamlined Route does not prevent public authorities from carrying out their own subsidy control assessment against subsidies that help achieve net zero objectives via other means. The intention is that the Streamlined Route will help public authorities facilitate subsidies that align with these three main areas. Again, as with the RD&I Streamlined Route, there are certain limits imposed on the giving of subsidies under this route, including restrictions on the total award available for a project. Subsidies can also only be used to fund certain specified eligible costs and the Subsidy Ratios available vary depending on the size of the enterprise.
The final Streamlined Route aims to help public authorities give small subsidies to start-ups and small and medium sized enterprises (“SMEs”). This includes two categories of support: (1) support to SMEs for business development projects; and (2) support for the employment of workers with disabilities and disadvantaged workers. All start-ups and SMEs are eligible for the first category, whilst any enterprise of any size in any sector may receive subsidies under the second category of support. Again, both categories have specific eligible costs that can be funded, and the concept of a maximum total award for a project and the concept of Subsidy Ratios also apply.
The Streamlined Routes are intended to be a faster way for public authorities to demonstrate the compliance of a subsidy, but we would question whether this is actually be the case. Even though there is no need to refer such subsidies to the Subsidy Advice Unit (thus potentially accelerating the assessment process), an assessment of a subsidy under a Streamlined Route is in our view much more extensive than an assessment under the subsidy control principles. This is because such a subsidy would have to fit neatly into each route which has very specific requirements. The benefits of a subsidy falling within a Streamlined Route are very limited, and the application of the requirements for each route is not as simple as the Government suggests. Whilst the Government has confirmed that the Streamline Routes are not intended to replace the General Block Exemption Regulation (“GBER”) under the EU State aid rules, the Streamlined Routes have a number of similarities with the exemptions available under the GBER, and public authorities will likely be familiar with a number of requirements under the Streamlined Routes when considering whether their subsidy can be compliantly given under a Streamlined Route.
Further information on the Streamlined Routes and Government Guidance is available here.
If you have any further or specific queries in relation to the subsidy control regime, please do get in touch with our Public Sector Team.
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