The introduction of the new UK subsidy control regime in 2023 brought with it a range of challenges for organisations distributing public money – mainly central and local government, but also non-department public bodies and charitable funders – as well as grant applicants, as they got to grips with compliance.
The Department for Business and Trade (DBT) recently closed a consultation, ‘Refining the UK subsidy control regime’. Having worked with many clients who have been grappling with the regime – engaging with the Subsidy Advice Unit within the Competition and Markets Authority (SAU) for larger subsidies, and navigating compliance for smaller grants, we put together a response calling for a range of refinements.
Our key suggestion was to wholeheartedly welcome the proposal to introduce more ‘streamlined routes’, for community regeneration, arts and culture, and beyond. Here’s a look at what we fed back:
The consultation proposes the idea of new streamlined routes for community regeneration and arts and culture.
We welcome these suggestions. Streamlined routes offer public authorities and funding recipients a degree of assurance that they’re complying with the regime, without having to refer to the SAU.
- Community regeneration furthers economic growth and breaks down barriers to opportunity. Here are a few instances in which we think a streamlined route could be beneficial:
- Community regeneration projects where profits are subject to an asset-lock which restricts their use to the local community.
- Community regeneration projects which focus on health, sport and leisure; building safety; and perhaps affordable housing, which are unlikely to have a material distortive economic impact.
- Community regeneration projects which address local financial inclusion, such as funding for credit unions, community development finance institutions, and affordable finance providers.
- The positive impact of arts and culture provisions are well established, as well as the associated economic impacts and improved opportunities for the public. We think that streamlined routes could include:
- Arts and culture projects operating under an asset-lock that promote arts and culture for the public good (e.g. arts charities), which do not operate on a fully commercial basis and depend on public funding to make arts accessible even where they do charge visitors for access or tickets.
- Arts and culture projects of national importance.
- Arts and culture projects with an education purpose.
- Arts and culture projects aimed at disadvantaged communities (as audiences or participants).
- We also think that sports, leisure and recreational projects similarly may benefit from a streamlined route.
Each of these would need careful thought and further work, but there is a significant opportunity here for the subsidy control regime to be simplified in areas where there is no real risk of economic distortion, making life easier for public authorities (and for organisations using public money for the public benefit). Of course, any projects which are at risk of having a material distortive impact could fall outside the streamlined routes, through appropriate financial thresholds.
Other suggestions for how the subsidy control regime could be improved
As it currently stands, the regime allows too much room for uncertainty for public authorities and recipients of public funds. This can result in delays in public funding, significant resources spent on navigating and meeting requirements, and overly cautious risk-based clauses built into the contract terms for recipients of subsidies. With all this in mind, we are nervous about the suggestion of increasing the mandatory threshold for referrals to the SAU: as things currently stand, SAU reports are one of the few areas offering public authorities and recipients an insight into how to apply the regime.
The regime could be improved through greater support from DBT and/or the SAU, greater capacity within public authorities to engage with and skill-up in the new regime, wider and less prescriptive streamlined routes to enable public authorities to act with confidence (as suggested for community regeneration and arts and culture), and a significantly improved transparency register.
If your organisation needs help with navigating any element of the subsidy control regime, Bates Wells can help. Get in touch with Suhan Rajkumar or Lindsay Draffan to discuss.
The material in this article is provided for guidance and general information only and is not intended to constitute legal or other professional advice upon which you should rely. In particular, the information should not be used as a substitute for a full and proper consultation with a suitably qualified professional. Please do contact the Bates Wells team if you require further information.