Thread by @pmdfoster

It's out!!!! My #Brexit Briefing. This week, a Brexit upside -- viz. how UK could steal march on the EU by approving subsidies quicker. Wonky, but important. Stay with me/1

With help from: @instituteforgov @AlexanderPHRose
@jamesrwebber
@GeorgePeretzQC
ft.com/content/e6538c…

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC First the macro point, which that we are in an era when subsidies are more important than perhaps they once were.

#Covid19, the path to net zero, AI & the fourth industrial revolution...all of things see governments, including Tory ones, becoming more interventionist/2

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC Now regular readers will know that the #Brexit Briefing has spent quite a lot of time dwelling on the negatives of leaving the EU single market (yes, non tariff barriers to trade do exist, do matter)....but leaving the EU does present potential upside on subsidy controls/3

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC This is because the EU 'state aid' regime was designed to ensure a level playing field among 28 (now 27) national economies...of which the UK economy wasn't that representative. It was/is slow. Bigger awards can take 12 months+ to clear EU commission./4

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC The UK, says @AlexanderPHRose, can do better -- turning around these decisions in, say, 3 months could give us advantage with inward investors -- but only if we design a system that works well. This is what's now up for grabs. And it the success of #Brexit partly depends on it/5

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC The new UK system (designed from scratch, with legislation this autumn) must find a balance -- it needs to be both enabling and slicker than the EU state aid...but not such a free-for-all that uncertainty over whether grants will be challenged in courts paralyses the system /6

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC As @jamesrwebber says, we need to avoid sinking back into a too-prescriptive system that copies the ills of the EU state aid regime....while avoid the levels of uncertainty that creates a kind of "legal agoraphobia". Which is a cute phrase. And it's what we have now! /7

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC Why? Because #brexit regulars will recall that while the UK government (rightly) refused to accede to EU demand to copy/import EU state aid law...it DID sign up to some basic principles on subsidies being proportionate and limited AND agreed to create a Independent Authority /8

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC This week @instituteforgov @tompope0 @ellieshearer put out excellent report reviewing how those "principles" might inform a new, UK system and how that Independent Authority might work. Tl;dr there's a lot of latitude. /9

instituteforgovernment.org.uk/publications/t…

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer The first step in making the system slicker is making sure that the majority of subsidies -- 90 per cent -- don't even get captured by the system.

So create 'safe harbours' the mean smaller awards get greenlighted automatically - a better version of EU block exemptions /10

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer The second step is providing clear guidance. At the moment the 'six principles' are so woolly that lots of 'grantors' (local governments, arms-length bodies and quangos) are left scratching their heads. It pretty good chaos according to @AlexanderPHRose - and that needs fixing/11

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer Because subsidies are always a question of balance -- the 'good' that a subsidy does (in, say helping us achieve Net Zero and save the planet) versus the 'harm' in distorting the market. Grantors , particularly when teamed with private sector, need reasonable certainty it's OK/12

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer Which brings us to the question of the 'Independent Authority" which the UK agreed to set up (to satisfy the EU it won't be a free-for-all) but the terms and powers of that body were left extremely vague. Basic Qs were left unanswered. /13

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer Who should run the Independent Authority? What powers should it have? To what extent should those giving larger grants be required to seek its advice before making an award? And if they did, what legal protections would that advice provide? /14

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer Again, balance is key here. The IFG reckon the CMA @CMAgovUK is the right body - but Rose & Webber aren't convinced. As Rose says "The CMA is good at hunting down misdemeanours but not so good at finding constructive ways of approving projects”..we need more shepherd than cop/15

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer @CMAgovUK Given that #Brexit was always about 'taking back control' its clear the govt doesn't want to get it hands tied, and create a body that is obstructive -- but as @GeorgePeretzQC
points out, a rigorous body might actually be the Govt's friend /16

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer @CMAgovUK Because when a subsidy gets challenged as distorting in Brussels under the TCA (as will happen sooner or later) being able to show it was rigorously assessed will help... "far better than Kwasi Kwarteng just saying ‘I’ve looked at it and I’m satisfied with it’” as Peretz says /17

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer @CMAgovUK I can hear you all snoozling at the back there, but getting this subsidy control regime right is going to be key #Brexit Britain attracting investment and, where possible, stealing a march on the EU, even if the bloc's economies of scale will make it hard to compete/18

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer @CMAgovUK The UK is already behind, for eg, in the race to build/attract gigafactories for the transition to electric vehicles, partly because #Brexit uncertainty 2016-2020 seriously retarded investment. The govt has pledged £12bn in net zero investment...the pipes are primed with £££/19

@instituteforgov @AlexanderPHRose @jamesrwebber @GeorgePeretzQC @tompope0 @ellieshearer @CMAgovUK Those involved say that the Govt's consultation was pretty open-minded.

The #Brexit upsides have been hard to see -- hence the mad trade deal boosterism -- but this is an area where the Brexit 'take back control' vision has to be made to deliver a dividend. ENDS