On 11 March 2024, the Subsidy Advice Unit ("SAU") agreed to review the proposed Green Freeports in Scotland Subsidy Scheme developed by the Scottish Government and the Department for Levelling Up, Housing and Communities ("DLUHC") (the "GFP Scheme").
Legislative context
The Subsidy Control Act 2022 ("the Act"), which has been in force since 4 January 2023, conferred new powers on the Competition and Markets Authority to review and provide independent advice on certain types of subsidies or schemes which have particular potential to distort competition. It exercises those functions through its Subsidy Advice Unit. We have previously written about SAU reports on subsidies by Dundee City Council and the Department for Business and Trade.
Subsidy schemes are "umbrella" arrangements under which individual subsidies can be given. Provided that the scheme complies with the procedural and substantive requirements of the Act, individual subsidies are "pre-cleared" as long as they meet the conditions of the scheme. Generally a scheme made by a public authority can only be used by that authority and not others, but the UK and devolved governments can make schemes for use by other public authorities. This is the first such scheme to be made by the Scottish Government.
Subsidies and subsidy schemes that are "of particular interest" as defined in the Subsidy Control (Subsidies and Schemes of Interest or Particular Interest) Regulations 2022 must be referred to the SAU – see our previous blog here for more on subsidies and schemes of interest and particular interest. Subsidies that are simply "of interest" as defined in those regulations may be referred to the SAU but this is at the discretion of the public body giving the subsidy. In both cases the SAU's role is exclusively advisory.
The Scottish Government and DLUHC have concluded that the GFP Scheme qualifies as a scheme of particular interest because there is the potential for subsidies of greater than £10m being awarded to qualifying enterprises. A referral to the SAU was therefore mandatory.
Green Freeports in Scotland Subsidy Scheme
In January 2023, following a competitive bidding exercise, the Forth Green Freeport and the Inverness and Cromarty Firth Green Freeport were selected as the locations for Scotland's first "Green Freeports", areas which will be eligible for particular incentives aimed at boosting innovation and inclusive growth, creating new green jobs, and supporting economic transformation.
The designated Green Freeports involve a range of reserved and devolved tax levers in combination with seed capital funding to eliminate obstacles to private sector investment in Green Freeport locations. In particular, qualifying enterprises will be entitled to a variety of relief measures including:
- Land and Buildings Transaction Tax relief;
- non-domestic rates relief;
- first year capital allowance on plant and machinery;
- zero rate of secondary National Insurance contributions for employees;
- enhanced structures and buildings allowances; and
- seed capital funding.
The cost of the GFP Scheme, between tax reliefs and seed capital, is estimated to be £118 million.
The referral process
Following referral, the SAU must review the assessment that the Scottish Government and DLUHC have undertaken of whether the GFP Scheme complies with the subsidy control principles set out in the Act, and publish a report detailing its observations and advice in relation to that assessment.
Third parties with an interest in the subsidy, for example public bodies that may intend to give subsidies using the scheme, potential subsidy beneficiaries, and competitors of potential beneficiaries, may make representations to the SAU – those who wish to do so face a deadline of 5pm on 26 March 2024. The SAU has provided further guidance on making such representations.
Following receipt of the third party submissions, the SAU will have until 24 April 2024 to publish its report.
If you have any questions in relation to the above, or in relation to the UK subsidy control regime more generally, please get in touch with Jamie Dunne, Charles Livingstone or your usual Brodies contact.
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