The Subsidy Advice Unit

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.

In this article, we will be looking at the role of the newly established Subsidy Advice Unit.

What is the Subsidy Advice Unit and what are its functions?

The Subsidy Advice Unit (SAU) is newly created body which is part of the Competition and Markets Authority (CMA). It is responsible for discharging the CMA’s  functions and powers under the SCA. As the name suggests, the SAU has an advisory rather than a decision-making role. It has two primary functions:

1. to advise and support public authorities as they make decisions in respect of the granting of subsidies, in particular, ensuring that a robust assessment is undertaken for subsidies that have a greater potential to distort competition (see Part 7 of our Subsidy Control Bitesize articles); and
2. to monitor and report on the operation and effectiveness of the SCA, and That being said, the SAU does have powers of enforcement, albeit these are rather limited.

The SAU’s advisory role

The SAU will be asked to advise where:

• a public authority is considering granting a subsidy or scheme of particular interest (SSOPI) by way of a mandatory referral;
• a public authority is considering granting a subsidy or scheme of interest (SSOI) by way of a voluntary referral;
• the Secretary of State (SoS) refers a subsidy or scheme to the SAU after it has been made (a post-award referral) where the SoS considers either that there has (or may have) been a failure to comply with the subsidy control requirements, or that there is a risk of negative effects on competition or investment in the UK;

The SCA sets out the processes for each of the above referrals which the SAU must follow. Save for in the case of voluntary referrals, the SAU is required to produce a report detailing its evaluation of the public authority’s assessment of the subsidy, along with any advice on how this could be improved, or whether the subsidy could be modified to ensure compliance with the subsidy control requirements.

The SAU’s monitoring role

The SAU is required to periodically review the effectiveness of the new subsidy regime and produce a report on the outcome of each review. The first review period will cover the initial three years after the implementation of the SCA, up to 31 March 2026. The second, will examine the following three years, after which each review period will be five years.  It has been recognised that in order to fulfil this role, the SAU will need access to information it would not otherwise have available to it through the referral process. Consequently, the SAU has been granted information-gathering powers under the United Kingdom Internal Market Act 2020 (UKIM) to obtain information from public authorities. This includes enforcement powers where such information is not forthcoming, and powers to issue penalties where a person has, without reasonable excuse, failed to comply or intentionally obstructed or delayed the gathering of the required information.

The UKIM requires the SAU to publish a Statement of Policy detailing how it will undertake enforcement of its information-gathering powers and what factors the SAU will use to decide the nature and amount of any financial penalty imposed. The SAU’s Statement of Policy can be found here.

Commentary

The SAU has a very limited role and powers under the new subsidy control regime. Whilst the advisory role could prove useful to public authorities, any advice given by the SAU is non-binding and ultimately the public authority will be the one making the decision on whether the grant the subsidy or not. In some way, this is to be welcomed, as it gives public authorities greater autonomy than under the previous EU State aid regime, where it was necessary for certain subsidies to be notified to and approved by the European Commission before they could be granted. This also means, however, that risk of challenge sits with the public authority as the decision-maker.

If you have any further or specific queries in relation to the subsidy control, please do get in touch with our Public Sector Team.