Devolved governments will be able to issue subsidies following EU departure

Devolved governments will be given the power to issue subsidies following Britain’s departure from the EU.

Under the new Subsidy Control Bill, the Scottish Government will now be able to decide which businesses to support with taxpayer subsidies – a decision previously requiring approval from the EU.

Following Brexit, the devolved governments will also now be able to decide if they can issue subsidies by following a set of UK-wide principles.

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The Bill will also ban the awarding of subsidies that would result in the relocation of jobs and economic activity from one part of the UK to another.

The devolved governments will be empowered for the first time to decide if they can issue subsidies following Brexit.

A subsidy is a financial contribution using public resources and can include a cash payment, a loan with interest below the market rate, or a guarantee.

They are administered by all levels of government in the UK.

UK business secretary Kwasi Kwarteng claimed the move would ensure good value and benefits across the UK.

He said: “Today we’re seizing the opportunities of being an independent trading nation to back new and emerging British industries, create more jobs and make the UK 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 UK to deliver financial support – without facing burdensome red tape.

“While the UK’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.

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“Every subsidy must deliver strong benefits for local communities and ensure good value for money for the British taxpayer.

“Today’s Bill marks a clear departure from the EU State aid regime and will ensure our new subsidy system will maintain the UK’s competitive, free market economy that has been central to our economic success and national prosperity for decades.”

The UK Government claims the Bill will help strengthen the Union by preventing “subsidy races” between public authorities competing to attract the same business.

It also claims the move will allow Holyrood and local authorities to design subsidies tailored to local needs and deliver them quicker without red tape.

Under the Bill, Scottish firms are also protected from being unfairly undercut or disadvantaged by a subsidy decision in England, Wales or Northern Ireland, and vice-versa.

It will also mean that big companies cannot play off the regions, nations, towns, and cities of the UK against each other in a competition to benefit from taxpayer subsidy.

The move comes after extensive consultation between the two administrations.

UK business minister Paul Scully said: “The UK’s new bespoke subsidy system will be simple, nimble, and based on common-sense principles – free from excessive red tape.

“Our modern regime will support the UK Government, devolved administrations in Edinburgh, Cardiff and Belfast, and local authorities in swiftly and strategically supporting our economic recovery while ensuring a consistent, level playing field for subsidies across the entire country.”

Under the new regime, enforcement will be through the UK’s courts and tribunal system, with reviews through the Competition Appeal Tribunal.

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