Greater clarity needed on the Government's subsidy control policy

• Letter from Baroness Donaghy to Paul Scully MP
• Inquiry: State aid and the level playing field
• EU Internal Market Sub-Committee

In February and March, the House of Lords EU Internal Market Sub-Committee heard evidence on the nature and purpose of so-called 'level playing field' provisions in trade agreements, as well as the Government's and EU's negotiating approaches to the specific areas of labour protection, environmental protection and (in particular) state aid. The Committee also considered options for a UK-EU compromise on state aid, alongside the opportunities and challenges associated with designing a UK state aid or subsidy control policy.  

Key points

Level playing field

• Broadly speaking, level playing provisions are commitments not to lower levels of regulation below commonly agreed 'reference points'—usually, international standards. The inclusion of some form of level playing field provision in a future UK-EU trade deal is therefore not controversial in itself.
• The Committee raises several questions about the type of level playing field provisions being sought by the Government in negotiations with the EU. For example, what provisions does the Government have in mind as ‘typical' of existing trade agreements? And what laws and standards should serve as a ‘reference point' to measure regression from current levels of labour and environmental protection?

State aid

• Troublingly, none of the Committee's witnesses thought that the Government had a clear understanding of what state aid provisions it had signed up to in the Protocol on Ireland/Northern Ireland. Renegotiating these provisions as part of the future relationship agreement with the EU should be a key UK priority.
• Some of the EU's existing trade agreements contain provisions on subsidy control that combine WTO subsidy rules with significant inputs from the EU state aid framework. There is therefore scope for the UK and EU to agree a set of common rules on subsidy control that could give the UK and EU reassurance about each other's use of subsidies, without tying the UK to the EU state aid regime.
• The detail of the Government's planned subsidy control regime remains, as yet, unknown. The Committee raises a number of questions about the future operation of this regime, and notes the opportunities associated with shaping it around the UK's economic and industrial policies.
• It remains unclear whether the Competition and Markets Authority (CMA) will play a role in the UK's future subsidy control framework. The Committee expresses concern that this uncertainty has put the CMA in a challenging position. 

Further information

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