Open consultation

Refining the UK subsidy control regime: consultation document

Published 26 November 2024

General Information

Consultation details

Issued: 21 November 2024

Respond by: 21 January 2025

Enquiries to:

[email protected]

Audiences:

The government seeks views from businesses and business representative organisations, public authorities, legal advisers and all other parties interested in subsidy control.

Territorial extent:

United Kingdom

How to respond

Complete the survey.

Or email to: [email protected]

Your response will be most useful if it is framed in direct response to the questions posed, though further comments and evidence are also welcome.

Confidentiality and data protection

Quality assurance

This consultation has been carried out in accordance with the government’s consultation principles.

Confidentiality and data protection

Information you provide in response to this consultation, including personal information, may be disclosed in accordance with UK legislation (the Freedom of Information Act 2000, the Data Protection Act 2018 and the Environmental Information Regulations 2004). If you want the information that you provide to be treated as confidential, please tell us but be aware that we cannot guarantee confidentiality in all circumstances. An automatic confidentiality disclaimer generated by your IT system will not be regarded by us as a confidentiality request.

We will process your personal data in accordance with all applicable data protection laws. See our privacy policy.

Context

Background

1. The Subsidy Control Act 2022 (the Act) created a new domestic subsidy control regime, designed to suit the needs of the UK. The Act has been in force since 4 January 2023. The regime enables public authorities, including devolved governments and local authorities, to give subsidies that are tailored to their local needs, and that drive economic growth, while minimising distortion to competition.
2. The Department for Business and Trade (DBT) is the UK-wide policy owner for subsidy control. It is responsible for the overall functioning of the regime, including providing guidance to public authorities on compliance with our domestic and international subsidy control obligations, working with other UK government departments and conducting appropriate monitoring and evaluation to support the effective implementation of the regime.
3. We are now consulting on refinements to 2 areas of the UK subsidy control regime:
   • changing the thresholds for referral of subsidies to the Competition and Markets Authority (CMA)
   • creating new streamlined routes for public authorities to use to deliver subsidies more quickly and easily in specific circumstances

Thresholds for mandatory referral of subsidies to the CMA

4. The subsidy control regime includes 2 distinct categories of subsidy or subsidy scheme that have been identified as having greater potential to lead to distortive effects:

• subsidies or schemes of interest (SSoI)
• subsidies or schemes of particular interest (SSoPI)

The thresholds for these categories are set out in the Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022.

5. Subsidies over £10 million, or over £1 million but cumulating to over £10 million with other related subsidies over the previous 3 financial years, are deemed subsidies of particular interest (SSoPI) ^{[footnote 1]}, and must be referred to the CMA. A subsidy scheme is a scheme of particular interest if it allows for one or more subsidies of particular interest to be given under it.^{[footnote 2]}

6. Public authorities intending to give or make a SSoPI have a statutory obligation to refer it to the CMA before they do so, providing an assessment of the subsidy or scheme against the principles set out in the Act.^{[footnote 3]} The Act requires the CMA to evaluate all SSoPI assessments referred to them.^{[footnote 4]}

7. Subsidies between £5 million and £10 million outside of sensitive sectors are deemed subsidies or schemes of interest (SSoI). Public authorities intending to give or make SSoI may voluntarily refer their assessment of the subsidy or scheme to the CMA for review before the subsidy or scheme is granted or made.^{[footnote 5]} The CMA can choose whether to accept SSoI referred to them, and guidance is available on the principles they will follow when making such decisions.^{[footnote 6]}

8. Subsidies or schemes of particular interest (SSoPI) have a higher potential risk of distortion and negatively impacting competition or investment in the UK, or international trade and investment.

9. The regulations governing mandatory referrals include a list of sensitive sectors, for which the threshold for mandatory referral to the CMA is £5 million rather than £10 million (or £1 million but cumulating to £5 million with other related subsidies within the previous 3 financial years). ^{[footnote 7]} The current list of sensitive sectors is:

• manufacture of basic iron and steel and of ferro-alloys (SIC code 24.10)
• aluminium production (SIC code 24.42)
• copper production (SIC code 24.44)
• manufacture of motor vehicles (SIC code 29.10)
• building of ships and floating structures (SIC code 30.11)
• manufacture of motorcycles (SIC code 30.91)
• manufacture of air and spacecraft and related machinery (SIC code 30.30)
• production of electricity (SIC code 35.11)

10. The Secretary of State for Business and Trade has the power under the Act to “call in” subsidies or schemes for review by the CMA, where those subsidies or schemes may warrant a review but do not meet the mandatory referral threshold.^{[footnote 8]}

11. Regardless of whether a referral is mandatory or voluntary, after acceptance of the referral, the CMA will produce a non-binding report for public authorities within 30 working days (in normal circumstances).^{[footnote 9]} This report may, where relevant, identify and recommend ways in which the assessment of the subsidy or scheme against the relevant subsidy control principles may be improved. CMA recommendations are not binding on public authorities.

12. Since the Act entered into force in January 2023, a greater number of subsidies or subsidy schemes have been referred to the CMA under the mandatory referral threshold (SSoPI) than was anticipated, however no subsidies of interest have yet been voluntarily referred. High inflation in recent years has led to increased project costs, which may have contributed to the mandatory referral threshold capturing more subsidies and schemes than originally intended.

11. We are seeking views on whether the current thresholds for mandatory referral are appropriate, to ensure the subsidy control regime is working effectively.

Questions

Question 1: What in your view should the threshold for mandatory referral of subsidies of particular interest be? Please include any supporting evidence for the appropriateness of your suggested threshold. For context, the current threshold is £10 million.

Question 2: What in your view should the threshold for mandatory referral of subsidies of particular interest be where the subsidy or scheme concerns a sensitive sector? Please include any supporting evidence for the appropriateness of your suggested threshold. For context, the current threshold is £5 million.

Question 3: Do you consider that the existing list of sensitive sectors is appropriate? Should any sectors be added to, or removed from, the list? Please give reasons. 

Question 4: What in your view should the threshold for voluntary referral of subsidies to the CMA be? For context, the current thresholds mean subsidies between £5 million and £10 million can be referred voluntarily.  

Question 5: Do you have any other comments or views on the CMA referral process?

Streamlined routes

14. The Act allows ministers to create streamlined routes, a type of subsidy scheme which is pre-assessed by DBT, applicable to all public authorities across the UK, and not subject to review by the CMA.^{[footnote 10]}

15. Currently 3 streamlined routes exist, which have been in effect since 9 January 2023, covering the following areas:

• research, development and innovation
• energy usage
• local growth

1. Streamlined routes are voluntary mechanisms that can be used by UK public authorities to give certain subsidies. There is no need to assess subsidies given under a Streamlined Route against the subsidy control principles, providing they comply with conditions set out in the streamlined route. One of the benefits of streamlined routes is that they promote confidence and enhanced legal certainty to public authorities and businesses undertaking projects that are high-frequency and low risk and aligned to UK priorities.

2. To help public authorities interpret and comply with the streamlined routes, guidance on each route is available. Public authorities are strongly advised to consider the guidance documents when deciding to give subsidies under a streamlined route.

3. The power to create new streamlined routes was built into the Act, and this may present an opportunity to help public authorities navigate the regime more effectively. New streamlined routes would support public authorities by expediting ‘everyday’ subsidies in low-risk areas, allowing resources to be focused on principles assessments for higher risk, more distortive subsidies.

4. Initial scoping work, including with other departments, has identified several potentially viable options, including ‘community regeneration’ and ‘arts and culture’. The government would welcome views on those 2 potential areas, as well as any other areas which could be suitable for a streamlined route.

Questions

Question 6: Have you used the existing streamlined routes? If you have, how would you describe your experience? If you have not, why not?  

Question 7: Would you support the creation of a new streamlined route focused on community regeneration? If so, what would you like to see a route cover?

Question 8: Would you support the creation of a streamlined route focused on arts and culture? If so, what would you like to see a route cover? 

Question 9: Are there any other frequently awarded subsidies with low risk of distortion that you distribute or receive, that you consider could be more effectively conducted through a streamlined route?

Other considerations: Public Sector Equality Duty (PSED) and environment principles policy statement

1. The government is considering the impacts that amending the thresholds for mandatory referral of subsidies to the CMA or creating new streamlined routes would have on persons who have a protected characteristic, in accordance with the Public Sector Equality Duty. In doing so, the government has considered the evidence set out in the government’s response to previous subsidy control consultations.

2. We will continue to analyse equalities impacts and we welcome any views and evidence that respondents may have to assist this analysis.

3. The Environment Act 2021 requires ministers to have due regard to the environmental principles policy statement when making policy. We are considering the potential environmental effects of the proposed changes in line with our statutory obligations and welcome any views or evidence that respondents may have to assist with this analysis.

Question 10: We invite respondents’ views on whether changing the threshold for mandatory referral of subsidies to the CMA, or whether existing or future streamlined routes, may have any potential impact on people who share a protected characteristic (age, disability, gender re-assignment, marriage or civil partnership, pregnancy and maternity, race, religion or belief, sex (gender) or sexual orientation), in different ways from people who do not share those characteristics. Please provide any evidence that may be useful to assist our analysis of these impacts.

Other comments

23. We would also be interested in views on the operation of other aspects of the subsidy control regime.

Question 11: Do you have any other suggestions for how the subsidy control regime could be improved?

Consultation questions

Question 1: What in your view should the threshold for mandatory referral of subsidies of particular interest be? For context, the current threshold is £10 million.

Question 2: What in your view should the threshold for mandatory referral of subsidies of particular interest be where the subsidy or scheme concerns a sensitive sector?  For context, the current threshold is £5 million.

Question 3: Do you consider that the existing list of sensitive sectors is appropriate? Should any sectors be added to, or removed from, the list? Please give reasons. 

Question 4: What in your view should the threshold for voluntary referral of subsidies to the CMA be? For context, the current thresholds mean subsidies between £5 million and £10 million can be referred voluntarily. 

Question 5: Do you have any other comments or views on the CMA referral process?

Question 6: Have you used the existing streamlined routes? If you have, how would you describe your experience? If you have not, why not?  

Question 7: Would you support the creation of a new streamlined route focused on community regeneration? If so, what would you like to see a route cover?

Question 8: Would you support the creation of a streamlined route focused on arts and culture? If so, what would you like to see a route cover? 

Question 9: Are there any other frequently awarded subsidies with low risk of distortion that you distribute or receive, that you consider could be more effectively conducted through a streamlined route?

Question 10: We invite respondents’ views on whether changing the threshold for mandatory referral of subsidies to the CMA, or whether existing or future streamlined routes, may have any potential impact on people who share a protected characteristic (age, disability, gender re-assignment, marriage or civil partnership, pregnancy and maternity, race, religion or belief, sex (gender) or sexual orientation), in different ways from people who do not share those characteristics. Please provide any evidence that may be useful to assist our analysis of these impacts.

Question 11: Do you have any other suggestions for how the subsidy control regime could be improved?

Next steps

The government will consider responses to this consultation and produce a response within 12 weeks of the close of the consultation.

1. The Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022, 3(2)  ↩

2. The Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022, 3 3(6). ↩

3. Subsidy Control Act, S.52(1)-(2). ↩

4. Subsidy Control Act, S.53(1)-(2). ↩

5. Subsidy Control Act, S.56(1) ↩

6. Subsidy Control Act, S.57(1)-(2). Guidance is available at: https://www.gov.uk/government/publications/guidance-on-the-operation-of-the-subsidy-control-functions-of-the-subsidy-advice-unit ↩

7. The Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022, 3(3). ↩

8. Subsidy Control Act, S.55(1)-(3). ↩

9. Subsidy Control Act, S.53(3)-(6). ↩

10. Subsidy Control Act, S.10(1)-(11), noting the Act uses the term “streamlined schemes” rather than “streamlined routes”. ↩