Supporting housing and care – the new subsidy control system


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State aid law enabled public bodies to provide support to social/affordable housing and care through what was termed the 'SGEI Decision' (SGEI being Services of General Economic Interest). Since 1 January state aid law no longer applies to new funding/support in Great Britain. It has been replaced by a UK Subsidy Control system. This insight explains how support such as grant and discounted land can still continue to be given by the public sector.

The new UK Subsidy Control system recognises (as did state aid law) that certain general interest services such as social housing, health, social care require public subsidies/funding. The new subsidy control system terms these as services of public economic interest (SPEIs). 

However, it is important to ensure that any funding decisions taken since the start of the year are made in accordance with the new regime to ensure that they are compliant and do not become subject to recovery under the new provisions.

Following the UK's departure from the European Union, State aid law no longer applies in the United Kingdom (save for under the Northern Ireland Protocol). However under the terms of the UK-EU Trade and Cooperation Agreement (the TCA) both parties have committed to implementing their own subsidy control regimes in accordance with the agreed principles set out in the TCA chapter on subsidy control.  To date, this has entailed for the UK's part the direct incorporation of the TCA provisions into UK law - including the concept of SPEIs (TCA Article 3.3) – under the European Union (Future Relationship) Act (generally referred to as EUFRA) .  Article 3.3 defines SPEIs as tasks in the public interest (including public service obligations) which are assigned to economic actors (not unlike SGEIs).

As with SGEIs any subsidy granted to the economic actor must be limited to what is necessary to cover the net cost of discharging the task and a reasonable profit.  Other similar principles to the SGEI regime are a prohibition on cross subsidy of the economic actor's other activities and a requirement to publish details of any subsidy exceeding 15 million SDRs.  There is also still a specific SPEI "de minimis" level of 750,000 SDRs which can be received by an economic actor over a rolling three year period without the rules applying. (SDR is a notional currency unit managed by the International Monetary Fund).

One element of the new regime to be aware of is that SPEI subsidies must follow the general principles for all subsidies set out in the TCA Article 3.4, save to the extent that the principles would obstruct (either in law or in fact) the performance of the assigned public interest task.  Public bodies granting SPEI subsidies are therefore advised to complete the template in the BEIS guidance to record the extent to which the principles apply and how they have been satisfied. The UK will implement a transparent data base for subsidy. We would strongly recommend that organisations keep a record of subsidy granted or received from 1 January to upload to that data base when it is operational.

There is currently no formal equivalent to the SGEI "entrustment" provisions stipulating how the task is to be assigned to an economic actor, though in practice this is likely to be done to comply with the TCA requirement to appoint/assign a SPEI in advance and in a transparent manner.  However, it remains to be seen whether following consultation the UK government will introduce more detailed legislation on subsidy control, and SPEIs in particular, so watch this space for any further updates.

The TCA only applies if a Subsidy (including a SPEI) could effect trade between the UK and the EU. In the absence of case law (or statutory guidance) we would recommend that organisations seek to comply with SPEI requirements as if the TCA applied. Other UK free trade agreements may also be relevant if they also reference SPEIs.

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