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Analysis

We lose control of much of our state aid policy

by Sam Ashworth-Hayes & Hugo Dixon | 20.11.2019

Boris Johnson is boasting he has negotiated a great divorce deal. The truth is that he has given Brussels everything it wants, including the right to vet lots of our state aid. 

British governments have in the past championed tough EU state aid rules. That stops other countries subsidising their companies and competing unfairly with our firms. But it’s one thing to help set the rules; quite another to surrender economic power to an entity we will no longer be able to influence.

The Northern Ireland Protocol says EU state aid law will apply to the whole of the UK “in respect of measures which affect that trade between Northern Ireland and the Union which is subject to this Protocol.” (Article 10). 

This wording means huge chunks of state aid in Great Britain would be caught by EU rules, not just aid in Northern Ireland (NI), as both George Peretz QC and MLex have pointed out. The sort of things that could be covered include:

  • Corporate tax breaks for the whole UK which, by definition, would include NI.
  • Aid to British banks that lend money in NI – say if there was another financial crisis.
  • Subsidies to car makers with factories on the mainland that sell their models in NI.
  • Hand-outs to suppliers of raw materials, such as energy, if used by companies in NI.

Seven pages of the protocol are needed merely to list the EU state aid rules that would apply to the whole UK. (See Annex 5). And as Peretz noted in an earlier article: The European “Commission has powers to declare Acts of Parliament that confer state aid to be unlawful: and where that happens, they are of no effect.”

What’s more, the UK wouldn’t be able to implement aid decisions that were caught by the rules until the Commission had first given its approval. Note how, if Brexit goes ahead, the EU will be our rival. We would be giving it the power not just to vet our policies; it could potentially use for its own benefit the detailed information we’d need to provide every time we wanted to make a grant that was caught by what Johnson has agreed.

At the moment, the Commission turns a blind eye to much of the state aid poured into Northern Ireland. The need to maintain the peace may mean that attitude continues when it is part of a non-member state. It wouldn’t give the EU a reason to overlook state aid for manufacturers in Birmingham and Sunderland – that ship their goods across the Irish Sea – or to avoid taking advantage of the information given to it by Westminster.

The Tories may say they are not keen on subsidising industry anyway. But they have said they may give hand-outs to companies to cushion the blow of Brexit – and who knows what other economic headwinds we may face in the decades to come? The Labour Party should also be worried, given that it generally favours an activist industrial policy. 

If Johnson wins the election and rams through his “oven ready” surrender deal, it’s our goose that will be cooked.

The headline and excerpt were updated on December 3