Britain on Wednesday announced a new post-Brexit subsidy regime but vowed no return to 1970s-style state control and bailing out of failing companies.
State aid was a key sticking point of the tortuous negotiations for a trade agreement with the European Union, following Britain’s departure from the bloc last year.
Wrangling over so-called “level playing field” terms governing fair competition proved troublesome, until an 11th-hour agreement was made in December last year.
The UK government billed the changes as a “quicker and more flexible” alternative to the “bureaucratic” EU state aid regime, saying it will drive economic growth in priority areas.
“The new UK system will start from the basis that subsidies are permitted if they follow UK-wide principles — delivering good value for the British taxpayer while being awarded in a timely and effective way,” it said.
“These UK-wide principles will allow public authorities to deliver subsidies where they are needed without facing excessive red tape.
“The system will not be a return to the failed 1970s approach of government trying to run the economy, ‘picking winners’ or bailing out unsustainable companies.”
The government said the new subsidy regime will apply to the devolved administrations in Scotland, Wales and Northern Ireland.
But it plans to prevent “displacement” — awarding of subsidies that could lead to jobs and economic activity moving from one part of the country to another, as commonly happens among states in the US.
Brexit exposed deep fault lines across the UK. Scotland, which voted against leaving, has seen a surge in nationalist support and renewed calls for independence.
And Britain has so far failed to implement separate trading arrangements for goods transported to Northern Ireland, prompting threats of reprisals from Brussels.
Pro-UK unionists in Northern Ireland want the protocol governing trade there to be scrapped, arguing that checks on goods threaten its place in the wider union.
One EU official said the British changes to state-aid rules were expected but Brussels would nevertheless be watching developments closely to see how far they go.
“We knew it was coming. That’s why there are the level playing field provisions in the TCA (trade and cooperation agreement),” the official told AFP.
The official said the proposals, submitted in a bill to parliament, were a “first step” towards Britain implementing its Brexit commitments.
“But it’s still very early in the process. The bill needs to go through parliament (and) only sketches out key elements while others will need to be defined.”
Britain has set up an independent authority to regulate competition law as a counterpart to the role previously managed by the European Commission, with both bodies upholding common principles.
Courts on each side will decide trade remedies in the event of unfair subsidies.