The Subsidy Advice Unit (SAU) is responsible for reviewing and advising on the provision of both Subsidies and Schemes of Interest (SSoI) and Subsidies and Schemes of Particular Interest (SSoPI).
These are subsidies which are considered to have a higher risk of distorting competition or trade within the UK or internationally. The SAU’s role is to evaluate a public authority’s assessment of the subsidy against the subsidy control principles set out in schedule 1 of the Subsidy Control Act. The SAU also advises on how the public authority’s assessment could be improved, or how the subsidy can be modified to ensure compliance with the principles.
We take a look at some hints and tips for the SAU voluntary and mandatory referrals processes:
Subsidy control is a new regime and many public authorities are unfamiliar with the process. Therefore, it is beneficial to have a pre-referral discussion with the SAU and consider the subsidy control principles in more detail. Public authorities are also encouraged to engage with other Government departments, in particular, the Department for Business and Trade which has responsibility for subsidy control policy, including maintaining the transparency database.
It’s important that public authorities follow the statutory guidance when preparing their subsidy assessment, to understand the type of evidence required. Any information provided to the Subsidy Advice Unit in a referral should not be redacted.
The subsidy needs to be assessed against all seven subsidy control principles, including the additional energy and environment principles where applicable. There should be an equal amount of up-to-date evidence to support each principle. This is likely to be a mixture of quantitative and qualitative data.
Principle A requires the policy objective to be clearly defined and specific to remedying a market failure or addressing an equity rationale. Citing a large number of policies that do not directly relate to the market failure or equity rational, is not persuasive.
Principle G requires the beneficial effects of achieving a specific policy objective, to outweigh negative effects on the market. Public authorities need to clearly consider and describe the potential impacts on the market and what steps they have taken to mitigate these impacts.
Where a subsidy involves a package of services these should be differentiated, considered separately and assessed in turn.
The Secretary of State may call in a subsidy, if it considers there is a risk that the subsidy would not comply with subsidy control or negatively affect the market. There is no detailed guidance, however the risk of call-in is potentially higher with high value subsidies and/or those given to sensitive sectors.
The SAU doesn’t track the actions that public authorities take, following the publication of SAU reports. Therefore, it is a public authority’s responsibility to review the reports and consider whether there are any short comings that could result in a legal challenge. The SAU is aware that there has been at least one instance where a public authority has decided not to give a subsidy as a result of the SAU’s evaluation.
All referrals received to date have been on a mandatory basis. Therefore, it remains to be seen if public authorities start to use the voluntary referral service for SSoI and whether any further streamlined routes are introduced in the future.
The SAU will publish its first monitoring and evaluation report in autumn 2023, and the Competition Market Authority will report into the effectiveness of the Subsidy Control Act in 2026. The Department for Business and Trade will also publish further guidance when required. Feedback has also been requested on the transparency database, which the Government is considering improving.
Ashfords has considerable experience of advising on subsidy control - a series of bitesize articles is available here. We also offer training on the subsidy control regime, including further hints and tips based on our experience.
If you have any queries, or would like to discuss training needs for your public authority, please contact the public sector team.
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