I am today updating Parliament on Government plans for a subsidy control regime to replace the EU state aid rules at the end of the transition period on 31 December this year.
From 1 January, the Government will follow the World Trade Organisation rules for subsidy control. These are the internationally recognised common standard for subsidies. The rules apply to goods, not services. They ban subsidies that are dependent on either how much a company exports to other countries or the use of domestic goods over imports. For all other subsidies, they provide a mechanism to resolve disputes between countries. These rules are designed to facilitate an effective international trading system and are followed by the vast majority of countries.
Before the end of this year, the Government will publish guidance for UK public authorities to explain these rules and any related commitments the Government have agreed in free trade agreements.
The Government will also publish a consultation in the coming months on whether we should go further than those existing commitments, including whether legislation is necessary. As our approach will affect businesses and all public authorities that grant subsidies with taxpayers’ money, including the devolved Administrations, we will take the necessary time to listen closely to all those voices and to create a system that promotes a competitive and dynamic economy throughout the UK.
We will shortly lay secondary legislation to remove redundant EU state aid rules from the domestic statute book at the end of the transition period. This will provide the necessary legal certainty for businesses.
The UK Internal Market Bill, which I am introducing into Parliament today, will set out that the UK Parliament alone should legislate for the regulation of subsidies, and will ensure that there is no confusion or ambiguity in UK law about the interpretation of the state aid elements in the Northern Ireland protocol.
As regards this Government substantive approach, one of the benefits of having left the EU is that we have the opportunity to design our own subsidy control regime, in a way that works for the UK economy. The EU’s state aid system is designed for the particular circumstances of the EU, in which it is the responsibility of the Commission, as an independent authority, to police against subsidies distorting competition between EU member states within the single market. This approach is not suitable for the UK in the future and indeed their particular approach has not been followed in other advanced economies.
We are very clear nevertheless that we do not intend to return to the 1970s approach of Government trying to run the economy or bailing out unsustainable companies. We do not believe that the Government of a modern, competitive market economy should stand in the way or prevent adjustment to underlying market conditions. That is and will remain our guiding philosophy.
Equally, just as other countries do, the UK will need a modern system for supporting businesses to grow and thrive in a way that suits our interests and is consistent with a dynamic and competitive economy. As we rebuild and recover from covid, and given the broader uncertainty in the economic environment as a result, we must also maintain flexibility to support and bolster the UK’s strategic interests, and to be able to intervene faster and more easily when it is necessary to do so.
Subsidy control is an important issue in the negotiations on our future relationship with the EU. The Government have always been clear about its position: we are seeking a precedented trade deal, similar to those the EU has previously agreed with countries like Canada. Such free trade agreements do not prescribe the specifics of either party’s subsidy control arrangements, but instead provide for transparency in subsidies granted and for appropriate means of settling disputes between them. We have proposed such arrangements to the EU and we believe this is the right way forward. We will not give away our ability to determine our laws and funding arrangements in this area in an international treaty: the UK’s subsidy arrangements are a matter for people across the UK and Parliament, now and in the future.