New post-Brexit state aid rules could make it harder to help firms in disadvantaged parts of Wales, according to the Welsh Government.
But º£½ÇÊÓƵ Business Secretary Kwasi Kwarteng said the new arrangements would cut out “red tape†and enable financial support to be delivered more quickly. Announcing the º£½ÇÊÓƵ Government’s legislative proposals, Mr Kwarteng said the Subsidy Control Bill would replace EU-wide state aid rules, which require member states to seek approval for government assistance to firms.
He said: “We’re seizing the opportunities of being an independent trading nation to back new and emerging British industries, create more jobs and make the º£½ÇÊÓƵ the best possible place to start and grow a business.
“We want to use our newfound freedoms as an independent, sovereign country to empower public authorities across the º£½ÇÊÓƵ to deliver financial support – without facing burdensome red tape.
“While the º£½ÇÊÓƵ’s new system will be more agile and flexible, I have been clear that we will not return to the failed 1970s approach of the government trying to run the economy, picking winners or bailing out unsustainable companies. Every subsidy must deliver strong benefits for local communities and ensure good value for money for the British taxpayer.â€
Mr Kwarteng said safeguards would be put in place to ensure that devolved government departments and local authorities do not engage in bidding wars of support that could cause a relocation of businesses and jobs from one part of the º£½ÇÊÓƵ to another.
He added: "Our new subsidy system will underpin support for jobs, business growth and innovation in every part of Wales, with º£½ÇÊÓƵ and Welsh Governments being able to deliver financial support through a flexible system that is tailored to the needs of the º£½ÇÊÓƵ and not the needs of the EU.â€
The º£½ÇÊÓƵ Government is exempting a limited set of subsidies from the control principles, such those required for safeguarding national security and subsidies granted temporarily to address emergencies such as flooding.
As is the case now, all subsidies will still be subject to World Trade Organisation rules.
The new system will prohibit the awarding of subsidies that will result in the relocation of jobs and economic activity from one part of the º£½ÇÊÓƵ to another – known as ‘displacement’.
For example, it said it will ensure that a Welsh firm is not unfairly undercut or disadvantaged by a subsidy decision in England, and vice-versa.
It will also mean that big companies cannot play off the regions, nations, towns, and cities of the º£½ÇÊÓƵ against each other in a competition to benefit from taxpayer subsidy.
But a Welsh Government spokeswoman said: “We have tried to proactively engage with the º£½ÇÊÓƵ Government throughout the process and it is therefore disappointing that this Bill appears to only reflect the narrow political interests of the º£½ÇÊÓƵ Government rather than the wider needs of the whole of the º£½ÇÊÓƵ.
“Wales has always been able to decide for itself how and where to provide support to businesses.
“This Bill removes previously available options to address regional disadvantaged areas through the Assisted Areas map, which allowed us to provide support to the poorest regions of Wales so that they could compete on a level playing field with wealthier regions in England.
“It is vital that the º£½ÇÊÓƵ Government follows through on its commitment to support necessary investment in every part of the º£½ÇÊÓƵ rather than using the new subsidy control regime as an opportunity to concentrate new opportunities in the more prosperous parts of the º£½ÇÊÓƵ, widening regional inequality. We will analyse the details of this Bill, but it should not constrain the devolved powers of Welsh Ministers or act as a tool to reverse devolution through the back door.â€
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A new unit to issue advice on operating the new regime will be set up within the existing Competition and Markets Authority – but the CMA will have no powers to prohibit the granting of support.
The º£½ÇÊÓƵ will still be subject to World Trade Organisation rules and any decisions made can be contested in law courts.
A º£½ÇÊÓƵ Government spokesman said: “The Bill seizes the opportunities from having left the EU’s bureaucratic state aid regime to create a new system for subsidies that can enable key domestic priorities, such as levelling up economic growth across the º£½ÇÊÓƵ and driving our green industrial revolution.
“Previously, when the º£½ÇÊÓƵ was a member of the EU, the º£½ÇÊÓƵ followed the EU’s state aid regime which governed the awarding of subsidies – such as grants, loans and guarantees. Under the EU system, all subsidies except those under a ‘block exemption regulation’ had to undergo a lengthy bureaucratic process of being notified to and approved by the European Commission in advance, delaying vital funds from reaching viable businesses in good time.
“The new º£½ÇÊÓƵ system will start from the basis that subsidies are permitted if they follow º£½ÇÊÓƵ-wide principles – delivering good value for the British taxpayer while being awarded in a timely and effective way.
“These º£½ÇÊÓƵ-wide principles will allow public authorities to deliver subsidies where they are needed without facing excessive red tape.â€
Jurisdiction to judicially review the award of subsidies will be given to the Competition Appeal Tribunal (CAT).
