Market Study - Public Subsidies
The Government has responded to the OFT study on public subsidies and competition (see below) which concluded that although guidance was in place gaps remained. The OFT proposed that UK policy appraisal be amended to ensure that competition factors were taken into account when designing a subsidy.
The OFT report “UK Guidance on how to assess the competition effects of subsidies” published in January, to which Government is now responding, sets out the changes that could be made to national guidance to enable subsidy providers to assess the likely effects of a subsidy on competition.
Background
24 Nov 2004 The OFT has published a report on public subsidies. The report develops an analytical framework for determining the likely competition distortions caused by subsidies and identifies the need to improve aspects of the current approach to controlling subsidies.
The OFT will now undertake further work on this issue, using specific case studies, to provide Government with detailed recommendations on how subsidies affect competition in practice, and how to design subsidies so that their impact on competition is minimised.
The study identifies four broad areas to be considered more specifically in the second phase of the study:
• in what way the economic basis of the EC rules on state aid should be strengthened to take better account of the potential for competition distortions to arise - the Government should continue to press for such changes to the rules;
• whether national guidance on subsidy design and appraisal should include competition considerations;
• whether subsidy providers should have monitoring procedures in place that assess the impact of the subsidy on competition;
• whether central government and devolved administrations should collate and publish more detailed data on the subsidies provided across the UK.
The report can be found on OFT’s website at:
http://www.oft.gov.uk/shared_oft/reports/comp_policy/oft750.pdf
The Department for Business, Enterprise and Regulatory Reform has a general interest in OFT's market studies and co-ordinates Government responses where those studies make regulatory recommendations. The Government is now working with the OFT to take forward Phase 2 of their work to develop more specific recommendations. This will include case studies of specific subsidies.
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