Subsidy Advice Unit reports on subsidy assessment

The Subsidy Advice Unit (SAU) has published its latest report since the Subsidy Control Act 2022 came into force. The report related to a subsidy by the Arts Council of England to English National Opera, which was intended to address a viability gap which would affect English National Opera’s ability to deliver its planned programme and to support planning associated with developing a new base and a new business model.

This was the SAU’s first report on an individual subsidy, with the preceding two reports relating to subsidy schemes. Whilst the report is non-binding on the Arts Council of England, it contains very useful information for other public bodies, looking to award subsidies under the new regime, which will assist them in undertaking robust assessments against the subsidy control principles.

The SAU concluded that, generally, Arts Council England had engaged with the subsidy control principles and used evidence to support its conclusions in relation to each of the principles. However, the report found that the assessment would have been stronger if:

The reasoning behind conclusions in the assessment had been more clearly explained.
The assessment had made better use of statutory guidance in order to express the market failure and strengthen explanation of relevant policy objectives.
There had been a more detailed assessment of the situation that was likely to arise if the subsidy were not provided and of the additional projects and activities that were likely to result from provision of the subsidy.
There had been a more detailed assessment of the positive and negative effects of the subsidy.

The report made recommendations as to how Arts Council England could have strengthened its assessment in respect of each of the principles.

Principle A

The relevant policy objectives relating to the specific subsidy should be linked with any long-term strategies and high-level objectives.

Principle B

Evidence should be provided to show how the level of a subsidy has been determined and how the impact of different levels of support on the recipient has been considered.

Principle C

Assessments should set out clearly, for each of a grant recipient’s activities, what the recipient would do in the absence of a subsidy.

Principle D

Subsidies should not be used to cover day-to-day operational funding. Therefore, it should be clearly defined which activities are considered to be “additional” activities arising from the subsidy. An assessment of principle D should outline specific activities, and associated costs, that are taking place as a result of a subsidy.

Principle E

A strong assessment of principle E would focus systematically on how a proposed subsidy, and alternative approaches, achieve specific policy objectives.

Principle F

Consideration of a subsidy’s effects on competition or investment should closely reflect the UK Government’s Statutory Guidance on Subsidy Control. Public bodies should undertake an assessment of the extent to which a subsidy’s features and characteristics may have the potential to lead to distortive effects, including in relation to the relevant questions and factors set out in the Statutory Guidance.

Principle G

Public bodies should address whether there are any negative effects on international trade or investment, as well as on competition and investment in the United Kingdom.

There has been a significant rise in the number of referrals accepted by the Subsidy Advice Unit in the last few weeks, which will undoubtedly result in further comments by the SAU on how public bodies can strengthen their assessments against the subsidy control principles.

Can we help?

If you need assistance with undertaking an assessment of a subsidy against the subsidy control principles, or indeed any aspect of the new regime, please contact Geldards’ Public Sector team who would be happy to assist.