‘EU’s state aid rules put the brakes on Britain’
As continental subsidies soar, car maker asks why can’t we do the same?
BRITAIN’S peers in Europe spend more than twice as much on state aid to business as the UK, according to figures compiled for The Mail on Sunday.
The study by leading economic research group Oxera shows that Britain spent on average €95 (£70) a year per head of population on state aid to business and industry between 2009 and 2014, compared with €235 in France and €240 in Germany. The average across the EU is €165 per head, also well above the UK figure.
Germany and France are the two biggest spenders on state aid in Europe and also the economies most similar to the UK in size.
The research was compiled from European Commission data on state aid spending that it had approved.
While Britain’s spending was significantly lower than that of France and Germany over the whole of the six-year period, Germany’s spending soared to €500 a head in 2014, the latest year for which figures are available. Oxford-based Oxera said that this could be due to rules introduced that year on how green initiatives were reported.
Germany’s high level of state aid is due in large part to its support for renewable energy and energy saving measures. The biggest chunk of Britain’s state aid is also on green measures, though it remains far less than that of Germany.
The figures come as the upcoming referendum on membership of the EU has once again raised the often cited argument that the UK cannot help its industry because of state aid rules from Brussels. Hopes for a rescue of Tata Steel’s UK division are mired in concerns over state aid.
Government investment to keep Tata’s British steel operations open could be contested under EU state aid rules, as could recent proposals from the Government to make special provision in law to allow the Tata Steel pension fund to change its terms to members.
This weekend former Government adviser and owner of the Leedsbased Ginetta sportscar business Lawrence Tomlinson told The Mail on Sunday that EU rules were holding back the British motor industry. He said: ‘You can feel the restrictions we get, things like state aid, the number of times that businesses are refused funding due to European state aid law. Well, the Americans don’t have state aid law, they just help their businesses grow.
‘The Americans gave Tesla cars half a billion dollars developing the electric car. We wouldn’t have thought about that over here because it would be state aid.’
According to a report in the Los Angeles Times, South African-born Elon Musk’s firms, which include electric car maker Tesla, have received $4.9billion (£3.5billion) in government support. Musk described the report as ‘incredibly misleading’.
Tomlinson also cited the case of the steel industry, where the US government recently announced a huge 522 per cent tariff on imported Chinese steel to help protect its industry from cheap imports. The tariff comprises a 266 per cent antidumping levy and a 256 per cent anti-subsidy duty.
Tomlinson said: ‘If the steel industry is struggling the Americans won’t let it go bust. They subsidise it. So why should we be restricted?’
Nicole Robins, senior consultant at Oxera and a specialist in state aid, said the fact that billions of euros is granted to companies every year by EU countries showed that state aid is not banned outright, but is possible through complex rules.
‘There are four criteria which define whether government spending is state aid,’ said Robins. ‘Is public money being spent? Is the measure selective – is it targeted at a single company or a small group of companies? Does it give an advantage to the companies receiving it? And does it distort competition or distort trade within the EU?’
All of the spending detailed by Oxera met all four of these criteria, and so required approval by the European Commission. Robins said such approvals were granted when the aid could be shown to be for some wider public good.
She added: ‘To be approved you also need to demonstrate that it is limited to the minimum amount necessary and that it is a real incentive. That is to say that the investment would not have been done at all without the state aid.’
So, does Britain’s lower spending on state aid mean we are less profligate and more genuinely a free market economy than our European neighbours – or are we simply missing a trick?