A new study shows that most local authorities will struggle to demonstrate they meet the necessary criteria for awarding subsidies that help create employment by encouraging local businesses to grow and become more sustainable.
The researchers say that communities would benefit if the Government were to expand the scope of categories of subsidies that are automatically allowed, known as ‘streamlined routes’.
Lead researcher Prof Andreas Stephan, from UEA’s School of Law, said: “Both the Conservative government and Labour are now committed to putting more spending power in the hands of communities most in need.
“It is promised that these measures will deliver more jobs, better services and more opportunities for local people – which would in turn help grow the economy and ‘level up’ areas of the UK. Local targeted subsidies are key to achieving this.
“The devolution of spending power could reduce regional inequality if public authorities have the freedom and confidence to award beneficial subsidies that best serve their cities and regions.
“To ensure that subsidies benefit the local economy, a new system has been introduced that requires authorities to ensure their spending decisions meet a set of criteria.
“But this research shows that most authorities will likely struggle to demonstrate they meet the criteria - making it less likely good subsidies will be offered to local businesses.”
Prof Stephan studied the design of the new UK subsidy control system, including comparisons with the World Trade Organisation, and the EU State Aid system the UK was bound by as a Member State.
He said: “This study shows that greater certainty can be achieved by expanding the scope of ‘Streamlined Routes’ – categories of subsidies that are automatically allowed.
“This is important because subsidies have significant potential to achieve a range of important goals – in particular, reducing regional inequalities and making the economy more sustainable.
“Spending initiatives from central government tend to be inefficient because different regions have different needs and local authorities waste money and time bidding for central funds.
“Local authorities are best placed to spend money in ways that benefit local people and businesses.
“There is a need to ensure this money is spent wisely and in ways that are not harmful, but the new system lacks certainty and could discourage good subsidies.”
‘Will the New UK Subsidy Control Regime Help ‘Level Up’ the Economy?’ is published in the Modern Law Review.
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