Which way forward for regional aid control?

EU Competition Policy control of regional aid is in an interregnum. In a policy area which is often contentious because it constrains domestic support for business, the Commission is pondering reforms to State aid control against the backdrop of wider EU priorities in its ‘budget for the future’.

There is, however, currently no ‘grand plan’ for State aid reform; instead the Commission is proposing to roll forward the current State aid control framework into the start of the new budgetary period. This ends nearly 20 years of alignment in the Cohesion Policy and regional State aid calendars. Instead, the emphasis of competition policy is on retaining the current rules while the Commission takes stock of how well they have performed and what needs to be changed. Against this background, this review highlights a number of issues which affect the future of regional aid control.

General Block Exemption Regulation (GBER) – prolongation and ‘fitness check’. The GBER is the cornerstone of State aid controls and was due expire at the end of 2020. However, the ‘fitness check’ required started too late for a new Regulation to come into force by the start of 2021, necessitating a prolongation – proposed to be to 31 December 2022. Two main concerns about a prolongation are reflected in feedback from Member States. First, complications arising from different calendars for Cohesion and State aid policies – and why not extend for three years align to the end of N+3? Second, the bureaucracy involved in re-reporting existing schemes with no proposed changes other than the date of their validity.

The Regional Aid Guidelines (RAG) are also set to be extended for two years. The Guidelines will be substantially unchanged in this period, but the Commission in effect proposes an extension of the ‘a’ regions in 2021-22, since those over the qualifying threshold (likely including Estonia and several Czech and Polish regions), would remain eligible alongside newly qualifying ‘a’ regions (likely Molise in Italy and the Province of Luxembourg in Belgium). Member States would also have the opportunity to revise ‘c’ areas, but subject to existing population ceilings. Interestingly, absent Brexit, the UK would see an expansion of ‘a’ regions (probably including South Yorkshire, Lincolnshire, parts of outer London and Southern Scotland) – see map. In the meantime, a targeted consultation on the RAG has been carried out with Member State feedback expressing concern at future spatial coverage and the complexity of the rules, especially in relation to aid for large firms and sectoral definitions.

One justification for extending the RAG is to enable the Commission to assess the implementation of the regional aid in relation to the new requirements for transparency and evaluation. The transparency requirement under the GBER has resulted in an extensive dataset, but analysis of the information is complicated by definitional issues and differences in approach between countries. The Commission is currently assessing the utility of this requirement in 2020. The current RAG and GBER gave the Commission scope to impose an evaluation plan on particularly large or novel schemes. Some 14 regional aid schemes have been subject to such plans, but the evaluation of the Norwegian regionally-discriminating social security concession is the only one to have been finalised. Given the time lags involved in the outstanding studies, it remains to be seen what impact they might have on future aid approvals. The Commission is also reviewing the evaluation requirement in 2020 in advance of proposing reforms to the RAG and GBER.

This blog is based on the study “Regional State Aid Control: does it need rebooting or re-routing?”  by Fiona Wishlade. It was undertaken for the European Regional Policy Research Consortium and was presented at the 40th Annual Conference in Scotland on 31 September – 2 October 2019. 

For more information contact Fiona Wishlade

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