Business secretary unveils plans for post-Brexit subsidy system for UK firms

Kwasi Kwarteng says local authorities, public bodies and devolved administrations will be empowered to make aid decisions by following a set of nationwide principles
Kwasi Kwarteng arrives at the Cabinet Office Photo PA

By Jim Dunton

03 Feb 2021

The Department for Business, Energy and Industrial Strategy has published proposals for a UK-wide subsidy system for companies that will replace the EU state-aid regime following Brexit.

It said the new arrangements would dump the previous “prescriptive” system for one that allowed the UK to be “more dynamic” in supporting businesses – including innovative research-and-development-focused industries – to create jobs across England, Scotland, Northern Ireland and Wales.

BEIS said that under the proposed system, local authorities, public bodies and the devolved administrations in Edinburgh, Cardiff and Belfast would be empowered to decide if they could issue taxpayer subsidies by following a set of UK-wide principles. 

It said the principles would ensure subsidies were designed in such a way that they delivered strong benefits and good value for money for the UK taxpayer, while being awarded in a timely and effective manner.

BEIS said the new system – which will be overseen by a new independent regulator – would be designed to be more flexible, agile and tailored to support business growth and innovation as well as maintain a competitive market economy and protect the UK internal market. It added that the system would also guard against wasteful spending.

Business secretary Kwasi Kwarteng said the proposals – which are the subject of an eight-week consultation – would help the government to deliver on key priorities, such as levelling up economic growth in the regions, tackling climate change and recovering from the coronavirus pandemic.

“This is a significant milestone on our historic journey as an independent, sovereign nation,” he said.

“Our new, more flexible system will empower public authorities and devolved administrations, and ensure fair competition for businesses across the UK.

“Now we have taken back control of our money and laws from the EU, we want to use our newfound freedoms to propel the UK to the forefront of innovation and help create the jobs of the future, while also making the UK the best place to start and grow a business.

“With a modern, tailored approach to supporting businesses, we will also be able to press ahead with our long-term ambitions to tackle climate change and to level up opportunity as we build back better from the pandemic.”

BEIS said the new system would ensure the UK honoured its international obligations under World Trade Organisation rules, the UK-EU Trade and Cooperation Agreement and other free trade agreements. It insisted the regime would “not be a return to the 1970s approach of government trying to run the economy or bailing out unsustainable companies”.

The consultation on the proposals seeks views from businesses and public authorities on a number of areas. They include whether the UK should apply its own additional principles on subsidy control, on top of those set out in the UK-EU Trade and Co-operation Agreement, and the possible roles and responsibilities of the independent body that will oversee the new system.

The consultation is open until 11.45pm on 31 March.

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