Institute for Government report on the design of a new UK subsidy control regime.

The subsidy control consultation closed two months ago. And the subsidy control bill, announced in the Queen’s speech, is expected soon. In the meantime, a report from the Institute for Government, Taking Back Control of Subsidies, published at the end of last month, looks at how the government can design an effective subsidy control regime to prevent harmful subsidies and encourage beneficial ones while minimising legal uncertainty and bureaucracy.

The report argues that a system that relies solely on public bodies self-assessing their subsidies for compliance with broad principles, without a prominent role for a regulator, will not be effective. The new subsidy control system is also a source of potential tension between the UK and devolved governments, and a system without the devolved administrations’ support could be undermined from the start.

To make the new system a success, the new IfG report recommends that:

  • The system includes clear and detailed guidance to help governments and public bodies comply with the rules and to direct subsidies towards UK priorities.
  • A ‘safe harbours’ route for smaller subsidies. These are tightly defined rules which, if complied with, guarantee that the subsidy is legal. This is crucial if smaller subsidies are to proceed as or more smoothly than under the EU system.
  • The Competition and Markets Authority (CMA) be appointed as the system’s regulator to provide advice before subsidies have been offered and to challenge subsidies that are harmful or waste taxpayer money.
  • The CMA’s governance should be reformed to ensure formal board representation to the devolved administrations.
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