Claim
Boris Johnson promised new state aid rules for the UK after Brexit, saying that the current EU system made it more difficult for the government to protect the British steel industry in 2015.
He also said it caused issues for councils running “school buses and buses for the disabled, which suddenly seemed to fall foul of EU state aid rules”.
Background
There are a number of EU rules governing the amount of financial assistance that a country can provide to companies or organisations that has potential to distort free market competition – known as state aid.
Member states are only allowed to provide assistance with approval from the EU commission, although some exemptions apply.
The Conservatives said the government was prohibited from supporting the British steel industry in 2015 until approval was given by the EU. It said the 50-day time lag cost the steel industry £6.2m and other energy-intensive industries as a whole £41.1m.
Reality
The shadow transport secretary, Andy McDonald, said the Conservatives “sat on their hands and used state aid as an excuse” during the 2015 steel crisis.
This is a view backed up by the law firm Berwin Leighton Paisner, which told a Lords committee the government had “sought to hide behind the state aid rules as a reason for not pursuing interventions”.
The government has not typically intervened as much as it could within the EU rules. According to the left-leaning IPPR thinktank, Britain could treble state aid spending to industry without breaching them.
Trade experts also say that about 95% of state aid measures do not need to be notified to the EU commission, despite the Conservative claim.
On school buses, there have been cases where contracts have been challenged. The Irish government paid €160m a year to a state-owned transport company, an agreement deemed in breach of state aid rules. No compensation was however demanded because the deal predated the rules.
Derbyshire county council was found to have breached state aid rules with a school bus contract for a community firm, though it was later ruled by the EU as allowable.
The UK may need to abide by EU state aid rules in order to strike a free trade agreement with Brussels, according to experts.
World Trade Organisation rules could also restrict government interventions.
Peter Holmes, a trade expert at University of Sussex, said: “EU and WTO state aid, subsidy rules and public procurement rules make it unlikely a post-Brexit government could do much that would exceed the freedom of manoeuvre we have now.”
Verdict
Johnson is right that EU state aid rules make it more difficult for the UK government to intervene in the economy. However, future trade deals will constrain the changes he can make, while Britain has also failed to use the latitude under the current rules under the Tories.
