Subsidy Control Act: Considerations for CIL Charging Authorities
Updated: Nov 3
Introduction
On 28th April 2022 The Subsidy Control Act (the ‘SCA’) was enacted and the Subsidy Control Regime began on 4 January 2023. The SCA replaces the EU State Aid rules and sets a legal framework to ensure benefits can be derived from public authority subsidies, whilst ensuring that measures are in place to protect against economic distortion of competition and trade.
The CIL Guidance was updated in January 2023, to include a new section on Subsidy Control, and signposts to further government guidance documents which provide details on the implications of the Act for both public authorities and recipients of public funding. The updated CIL guidance explains that the newly introduced Subsidy Control regime has potential implications for CIL because of the ability to grant reliefs and exemptions from the levy charge.
The Application of CIL for Infrastructure Projects
From our work with CIL charging authorities, and in discussion with legal experts, we have found that the regime will have implications for the application of CIL for infrastructure projects. This blog therefore delves a little further into the Subsidy Control Regime to highlight some key points that CIL charging authorities may consider when assessing CIL spend and bids for CIL funding, against the Subsidy Control regime requirements. In a recent conversation with leading planning and infrastructure junior barrister shortlisted by Legal 500 as its Junior Barrister of 2022, Christiaan Zwart (39 Essex Chambers), we understand that proceeding with payments of CIL to infrastructure providers, without first considering the subsidy control principles may represent a risk to a public authority under the provisions of the Act[1].
As a result, we have given thought as to how CIL charging authorities may assess bids for CIL spending against the Subsidy Control Act requirements, at the earliest stage possible, and in the most streamlined and efficient way.
A Matrix Approach
Using a matrix approach makes it possible to consider a number of CIL spending bids against the Subsidy Control Act requirements in a clear and streamlined way. The matrix approach that we have used includes the key assessment stages in one column, and adjacent columns provide space to test each bid. There is space for a factual description of the CIL scheme and also for clear conclusions setting out the results of the assessment against the subsidy control requirements.
The result of this approach offers the opportunity to present a clear narrative and audit-trail to show how each CIL spending bid scheme has been tested and considered.
The key stages in the matrix are as follows:
Stage 1: Is the payment defined as a subsidy?
This question is split into four, as described on pages 24-27 of the Statutory Guidance for the United Kingdom Subsidy Control Regime (Subsidy Control Act 2022).
It will be important to give consideration against each test, guided by the examples provided in the Statutory Guidance. A factual narrative of the consideration of the scheme against the test should be noted in the matrix.
If you answered ‘yes’ to all of the questions, then the payment is considered to be defined as a ‘subsidy’ and therefore further consideration is required. Move to Stage 2.
Stage 2: Review the subsidy against Schedule 1 subsidy principles of the SCA.
The matrix provides an overview of the subsidy control principles, but this is not intended to replicate the assessment template which is provided within the Subsidy Control Principles Assessment Template produced by the government, and can be found here. Again, the matrix will provide space for a factual overview of the scheme considered against the Subsidy Control principles, to ensure a clear audit trail.
Stage 3: Is the subsidy exempt under Minimal Financial Assistance (section 36 of the Subsidy Control Act)?
It is also possible that a subsidy is exempt under Minimal Financial Assistance. However, under this exemption, rules apply (see Chapter 7 of the Statutory Guidance), which will require proformas to be completed by the recipient, and payments to be monitored to ensure they do not, cumulatively, exceed a threshold amount.
Use of the Matrix
Once the matrix has been drafted and completed, it may be used to make recommendations regarding CIL spend on specific infrastructure schemes, ensuring that the recommended CIL spend has been considered against the Subsidy Control Act. In time, the use of this approach will assist with screening CIL bids, and shape the information requested, through bid questionnaires.
This approach is not intended to replicate governance guidance, or to be used in place of the commissioning of legal advice. However, the aim is to signpost readers to updates to the CIL Guidance and to statutory UK guidance on the Subsidy Control Act. The intention is also to encourage CIL charging authorities to consider the Subsidy Control Act at the earliest stage possible in considering CIL spend.
Interested? Contact us to obtain a copy of the draft matrix template.
How we can help
DAC Planning provides specialist support in infrastructure planning.
For a discussion on how we can assist you, please get in touch with the team:
admin@dacplanning.com / 01206 259281
This information is for general informative purposes only. Whilst every effort has been made to ensure its accuracy, DAC Planning accepts no liability whatsoever for any direct or consequential loss arising from its use.
[1] Section 12 of the Subsidy Control Act.