DBT has published two new guides outlining the main components of the subsidy control framework.
Before deciding to give a subsidy or making a subsidy scheme, public authorities must ensure they are compliant with the Subsidy Control Act 2022 (the Act).
Section 12 of the Act states that authorities must consider the subsidy control principles and be of the view that their subsidy or subsidy scheme is consistent with those principles.
On 9 December 2024, the Department for Business and Trade (DBT) published two new guides outlining the main components of the framework to help authorities comply with the subsidy control principles:
- Subsidy control principles assessment guide (for subsidies other than SSoIs or SSoPIs).
- Subsidy control principles assessment guide for SSoIs and SSOPIs.
(For clarity, 'SSoIs' refers to subsidies or schemes of interest, and 'SSoPIs' refers to subsidies or schemes of particular interest.)
When to use the guides...
DBT is recommending that public authorities use these new guides when documenting their principles assessment.
Also, an important point to flag is that these guides replace the subsidy control principles assessment template, so the assessment should now be structured according to the numbered headings in the applicable guide (which follows the existing four-step approach), consulting the relevant parts of the statutory guidance along the way (with the relevant parts of statutory guidance helpfully flagged at each step in the guides).
This reflects how the Subsidy Advice Unit (SAU) have been structuring their reports on subsidies and schemes which have so far been referred, so I imagine part of the purpose of the guides is to create consistency in structure between public authority assessor and SAU reviewer, perhaps to facilitate efficiency.
Evidence, evidence, evidence...
There is an emphasis on providing and referencing evidence as appropriate, which may include the business case or other internal/external documents.
This picks up on a theme coming out of SAU reports in the assessments they have thus far reviewed of, at times, a lack of direct and specific evidence to support the principle being considered. Any temptation to make broad statements in the assessment should be avoided.
Where policy context is useful, an explanation of how this fits with the specific policy objective of the subsidy or subsidy scheme is needed.
The guides also recommend explaining how any contradictory or inconsistent evidence was considered and the decision-making process for determining what evidence and analysis is proportionate for the subsidy or subsidy scheme in question.
Proportionality – when it comes to the rigour of analysis and quality of supporting evidence of the assessment – is to be considered according to the size and potential distortive impact.
Get drafting asap...
There is also a recommendation to get drafting early – begin an initial draft of the principles assessment early on in policy development so that the design of the subsidy can reflect insights gained.
For the most part both guides follow the same general structure, going through the four steps and setting out points to be considered for each, and by reference to the relevant subsidy control principle(s).
However, when it comes to SSoIs and SSoPIs, there is an additional component to step 3 to be considered, entitled the 'market assessment' (identifying the immediate affected market(s) and related markets of the subsidy) – this allows for a more robust assessment of the distortive impacts that a subsidy may have and is a tool commonly used in competition law analysis. This is particularly appropriate when assessing larger subsidies such as SSoIs and SSoPIs which DBT states in the guide as having the greatest potential to distort competition and investment.
Only the SSoI/SSoPI guide refers to the section 13 of the Act i.e. the requirement on the public authority to consider the energy and environment principles before deciding to give a subsidy or make a subsidy scheme in relation to energy and environment. The omission from the other guide is presumably an oversight as section 13 applies to any subsidy or subsidy scheme in relation to energy and environment (not solely SSoI/SSoPI).
Overall, the guides are sending out the message that the subsidy control principles assessment needs to be specific, not just explaining 'what', but focusing on the 'how', the 'why' and the 'when' (as an example, when it comes to defining the policy objective, this should also include targets and timeframes).
The guides are short and mostly clear, and I think a welcome addition for public authorities and practitioners alike!
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
