Thread by @GeorgePeretzQC

Some comments on the subsidy/State aspects here (this is the clearest and probably, given @tconnellyRTE’s record and deep understanding of the issues, one of the most reliable, accounts of the current state of play).

https://twitter.com/tconnellyrte/status/1335121069498380289

What seems to have happened is that the EU has agreed that a subsidy need not be cleared first by an independent regulator before it can legally be granted.

That is a key aspect of EU rules - albeit very importantly tempered in practice by block exemptions that automatically approve aid falling within them - in normal years the overwhelming bulk of aid is granted that way.

For aid that falls outside an exemption the need to get it approved first can cause delay (though NB the Commission can move fast and a UK regulator should be able to move a bit faster).

But note that if a regulator can order the reversal of a subsidy after it is granted (and if there is to be a regulator that is more than a toothless commentator it must be able to do that) the absence of a prior clearance requirement may not be worth much (or even harmful).

That’s because, if there’s a risk of reversal, any well-advised recipient will get the regulator’s view before accepting a subsidy: no point in accepting the subsidy and spending your own money on top of the rug could be pulled under you later.

And if for some reason it can’t do that, a prospective recipient may well refuse to accept a subsidy at all rather than take that risk: defeating the policy.

So the apparent EU concession may not actually help the UK much, in practice.

As for third party rights, these are rarely used but can be useful where a regulator won’t act (though JR of a regulator who has wrongly cleared a subsidy or failed to act also works). Useful for UK firms and not just EU ones, I’d add.

This further passage makes (I think) an important point I have been going on about: a UK regime based on its own concept of “subsidy” (taken from the WTO definition, probably) and with public policy exceptions won’t be much different from Article 107 TFEU, in practice.

Note in particular that the WTO definition extends to tax measures. Of course it does: a tax break to all widget-makers is the same as a cash grant to all widget-makers. So a clash between tax policy and subsidy rules is a feature, not a bug, of any coherent subsidy regime.

Where the tax policy is in a tax statute, that raises issues in a system where no constraint can be placed on Parliament’s ability to legislate. Though that can be managed (eg by allowing a regulator to point out that a tax rule is a subsidy and giving Ministers power to amend).

And the (now deleted) provisions of the IM Bill on subsidy control shows that the current government has no problem with constraining the power of devolved parliaments to grant subsidies by tax rules (or anything else).

This is the current UK position. (A slight inaccuracy by Tony here: it’s a statutory instrument - purportedly made under the Withdrawal Act - not a draft Bill).

NB that getting an entirely new UK regime that complies with subsidy obligations in the FTA, has a regulator, but makes real changes from EU State aid rules will - to put it mildly - be tricky.

I suspect EU State aid rules will have to roll over for some months, if there is an agreement, until a new regulator and regime can be set up. (The current government should have used this year to do that: so only itself to blame here.)

Anyway, we will have to see. Lots of magician’s patter around: though I’d trust Tony more than almost anyone to ignore it and see how the trick is actually being done.

“State aid”

“if the rug”

For a detailed review of where we are, including the current UK government’s veering around like a shopping trolley on the point, see competitionlawinsight.com/incoming/state…