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On 19 January 2022, the second reading of the Subsidy Control Bill is scheduled to take place in the House of Lords.

The bill would establish a new domestic subsidy control regime following the UK’s departure from the EU. Before giving a subsidy, public authorities would have to be satisfied it was compatible with subsidy control principles defined in the bill. Certain subsidies would be prohibited. Public authorities would have to publish details of subsidies they had given, but some subsidies would be exempt from transparency requirements, including those below £315,000 and subsidies to services of public economic interest below £14.5m. Subsidies of ‘particular interest’ and those called in by the secretary of state would have to be referred to the Competition and Markets Authority (CMA) for a non-binding report on their compliance with the subsidy control requirements. Subsidies of ‘interest’ could be referred to the CMA on a voluntary basis. The Government has not yet defined the terms subsidies of interest or particular interest. The CMA would not have an enforcement role, but the secretary of state and interested parties could apply to the Competition Appeal Tribunal (the CAT) for a review of a decision to give a subsidy. The CAT could consider applications on a judicial review basis only, rather than reviewing the merits of the subsidy.

Under article 10 of the Northern Ireland Protocol, EU state aid rules continue to apply to subsidies related to trade in goods and the single electricity market that affect trade between Northern Ireland and the EU. The bill would not apply to subsidies that are subject to article 10. However, MPs have questioned how public authorities and subsidy recipients would know which regime should apply. The Government is in discussions with the EU over article 10.

A handful of minor government amendments were made at committee stage in the House of Commons. At report stage, the bill was not amended. Three non-government amendments were defeated on division, to do with exempting agricultural subsidies from the bill, seeking devolved consent for defining subsidies of interest/particular interest, and including net-zero commitments in the subsidy control principles. MPs from across the House raised concerns about the transparency requirements for recording subsidies on the database.

Labour supports the need for a post-Brexit subsidy control system. However, it argues the bill is not backed up by a strategy for how to use subsidies to achieve strategic objectives such as net zero or levelling up, and that it does not provide a fair role for the devolved administrations. The Scottish and Welsh Governments have said they are unable to recommend legislative consent for the bill, pointing to a lack of powers for the devolved administrations in comparison to those of the secretary of state. The regulation of harmful or distortive subsidies is a reserved matter, but the Government is seeking legislative consent for parts of the bill that would alter devolved competence.

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