Government issues guide for public authorities on giving subsidies

The Department for Business and Trade has published a guide for public authorities on assessing whether a subsidy or scheme is consistent with the principles of the Subsidy Control Act 2022.

The document, Subsidy control principles assessment guide, is for use by public authorities preparing to give subsidies other than subsidies or schemes of interest (SSoIs) or subsidies or schemes of particular interest (SSoPIs). There is a separate assessment guide for SSoIs and SSoPIs.

The Department says the guide is “to assist with documenting your evidence, analysis and conclusions of your principles assessment for subsidies and subsidy schemes.

“When you are completing the assessment, the rigour of analysis and the quality of supporting evidence should be proportionate to the size and potential distortive impact of the proposed subsidy or subsidies given under a scheme.”

The Department recommends completing an initial draft of the assessment early in the policy development process so that the public authority can apply insights from the assessment process to design a more effective and less distortive subsidy.

The guide says public authorities should state what evidence has been used for each component of the assessment and reference this appropriately throughout. “This may involve cross-referencing to specific sections of the associated business case or other internal or external documents.”

Additionally, it is recommended that authorities explain their approach to:

• how they considered contradictory or inconsistent evidence in coming to conclusions under each component of the assessment
• how they decided what evidence and analysis was proportionate for the subsidy or scheme being referred

“It is important to address the components of the assessment directly, describing relevant supporting evidence. You should avoid broad statements,” it says.

“On some occasions, it may be useful to provide the policy context, including any central government programmes, and clearly explain how they fit with the specific policy objective.”

The guide covers four steps in detail:

• Step 1: Identify the policy objective, ensuring it addresses a market failure or equity concern, and determine whether a subsidy is the right tool to use
• Step 2: Ensure that the subsidy is designed to create the right incentives for the beneficiary and bring about a change
• Step 3: Consider the distortive impacts that the subsidy may have and keep them as low as possible
• Step 4: Carry out the balancing exercise

The guide can be viewed here.