Welcome Local Authority State Aid Guidance Local Authority Champions Network European Structural Funds, Local Authorities and State aid European Commission SGEI Consultation Temporary Framework and the Economic Recovery Plan State aid Transport Specialist

In this edition of the State Aid Newsletter, we will cast our eyes over support available to the Scottish Local Authorities, spend time looking at the latest European Commission work on Services of General Economic Interest and the Temporary Framework, and introduce you to a new member of the State Aid team.

As always, if you have any questions on these or any other State aid issues, you can check our informative website or contact us by email.

Local Authorities across Scotland are responsible for delivering a diverse range of important services, and this, as well as the trend towards developing alternative delivery models means it is more important than ever that Local Authority employees are aware of how State Aid regulations may affect their work. 

This year alone, the State Aid Unit has advised Local Authorities on issues including: urban regeneration; broadband projects; credit unions; support to local businesses; apprenticeship schemes; sale of land, and sports and leisure trusts.

The recently updated guidance note offers an introduction to State aid tailored to Local Authorities. Of particular interest will be the list of Schemes notified to the European Commission which Scottish Local Authorities are authorised to use. These cover some of the most common areas of involvement for Local Authorities, and are a useful starting point when seeking to establish if your intervention is State Aid compliant.

If you know of a colleague who may benefit from some State aid knowledge, mention the guidance note to them - people are often surprised that State Aid may have an impact on their work. As always, more detailed advice is available by contacting the State Aid Unit.

ESTABLISHMENT OF A STATE AID NETWORK FOR SCOTTISH LOCAL AUTHORITIES

Since its establishment in 1999, the State aid unit has had significant involvement with Scottish local authorities.  This involvement has been in the form of analysis and advice on a range of local authority policy proposals and interventions, specialist; tailored workshops on discrete areas of State aid, bi-annual newsletters, and general awareness raising presentations to local authorities (both individually and collectively) across Scotland. 

As awareness raising is a significant objective of the Unit, and given the ever changing
landscape of State aid, we have considered how best to ensure that Scottish local
authorities are kept up to date with current developments and best practice - to be able
to promote awareness and understanding of State aid in their own organisations.  To this
end, we have been working with representative bodies such as SLAED and COSLA to
establish a network of local authority state aid champions, which will meet with the Unit,
at least biannually, to discuss state aid issues and share best practice.

Given the complexity and wide range of issues covered by State aid, the constitution of the network requires a range of expertise to represented, at an appropriate level of experience.  Not in anyway meant to be an exhaustive list, we have identified the following areas from where we think this could be reflected:

• Local Economic Development
• Legal
• Finance
• European Funding

Our objective is to have as many Scottish local authorities represented as possible.
Whilst we appreciate that full participation may not be possible, we have been seeking
representation from as wide a range of authorities as possible, which will fairly
reflect distinctions across Scotland i.e. rural/urban/large/small.

At this early stage we are seeking to identify a list of appropriate individuals to join the network.  If you would be interested in participating in this network please contact Niall Davidson or call 0300 244 1181.

European Structural Funds, Local Authorities, and public match funding.

You are no doubt aware that Scottish local authorities increasingly provide the public match funding in the awarding of European Structural Funds.  But did you know that the EC's State aid rules can apply to both streams of funding?  And the implications where they do?  Take our step-by-step tour of public match funding, European Structural Funds, State aid, and retaining your sanity. 

First stop, TFEU central : 

Is it aid ?  To determine this, you'll need to apply the five State aid 'tests'.  For those who like 'fun facts', these are set out under Article 107 of that snappily named document, the Treaty on the Functioning of the European Union (TFEU).  For those wanting a quick reference, the State Aid Unit website has a handy guide for LAs.   

Note that the tests should be applied to all elements of the public funding to be awarded to a project.  So Structural Funds, whilst originating in the EU, come under Member State control and count as State resources (meeting the first 'test') and their status must also be considered by the relevant administrative body i.e. ESEP or HIPP.   

Next stop (only in use at certain times), the Grey Area :

Sometimes it is not clear whether all the 'tests' are met or not.  For example, whether public funding is going to an undertaking or whether it will provide an advantage, or affect trade at EU level.  The State Aid Unit can help.

Third stop, State aid schemes :

Just determining that a measure is State aid isn’t the end of the line however.  State aid needs to be awarded in compliance with the EC’s scope to do so.  The good news is that Scottish local authorities already have a number of EC approvals to readily award a wide variety of aid.  These can be viewed here.

Fourth stop, European Structural Funds :

If the local authority match funding and the Structural Funds element both constitute State aid, no double funding of the same eligible project costs can occur.  Put simply, if Structural Funds are to, say, support a new investment project by an SME, then the local authority match funding must be 'woven in' to ensure that the maximum aid intensities allowed by the EC for this type of support are respected.  These will be set out in the approved schemes under which funding is to be awarded.  For example X159/2008, Support for Regional investment, SME investment and Employment aid investment for Scottish local authorities and X654/2009 and X664/2009 for Scottish Structural Funds.  Find out more here.

Final stop, the Unit's Guidance for Local Authorities :                                          . 

This information, and much more, can be accessed in the overall bespoke document Guidance for Local Authorities.

Commission Consults Member States on the Services of General Economic Interest (SGEI) package.

On 10 June 2010 the European Commission launched a public consultation with a view to assessing the application of the 2005 SGEI package.

Since the launch of both the Decision and the Framework there has been much debate across Member States as to what constitutes an SGEI. The EC carried out their first scoping exercise on the use of the SGEI package, across Member States, in 2008. The reports submitted by Member States are now available on the Commission website. The UK submitted a report which contained extensive information on SGEI operating across Scotland.

The Commission aim to produce an evaluation report based on its knowledge of
the operation of the SGEI Package, together with the results of the 2008 scoping
exercise conducted by the Commission and in light of the information received
through the current public consultation which is open until 10.09.2010.

Details regarding the Consultation and a questionnaire can be found here. The results of this public consultation will serve as a basis for evaluating the 2005 Package and for eventually proposing improvements:

The UK will be providing a response to the EC and Scotland will be contributing to the report. An email with further information on the Consultation will be issued by the State aid unit shortly. However, should anyone have any comments or questions then please contact Catriona Syme or call 0300 244 1186.

The Temporary Framework (TF) formed part of the European Commission’s Economic Recovery Plan, developed in response to the recent economic downturn.  The broad aims of the TF were to ensure there was sufficient bank lending to companies and to allow companies with liquidity problems due to the crisis to benefit from temporary relief through a limited grant.  Another aim was to encourage companies to continue investing into a sustainable future, including the development of green products.  The UK notified four schemes under the Temporary Framework in April 2009 and are currently in force.

The use of the notified measures under the TF has been mixed in Scotland (and across the UK).  By far the most used measure has been Small Amounts of Compatible Aid, which has helped provide businesses with much needed finance (up to €500,000) during this difficult period.

In October 2009 Member States submitted a first report on the application of the Temporary Framework, which was followed up by a new questionnaire from DG Competition to Member States in order to gather further and more updated evidence on the use of the TF.  With the TF due to expire at the end of this year, the previous UK Government stance was to discontinue the TF at this point – however, the SAU advocated a slightly different line to this, arguing for a more phased withdrawal based on our understanding of the experience of the Scottish public sector.

While we don’t yet know what the new UK administration’s stance will be, we would like to know more about your experience of the TF.  Have you found it useful?  Do you think a more phased withdrawal of the scheme is the best way forward?  The answers to these questions will help us to formulate a clear Scottish line on this issue, as we anticipate a ramping up of activity later this year.  Please let us know your views.

NEW TRANSPORT STATE AID SPECIALIST JOINS THE STATE AID UNIT

Due to the increasing number of complex transport State aid cases that the SAU have become involved with over the last few years, it became clear that a specialist resource was needed to cope with both the volume and complexity of this area of work

After a successful assessment centre, Stuart Strachan was appointed  to
the post and  joined us earlier this month. Stuart will work closely with
colleagues across the Transport sector in Scotland, to help identify State
aid risks and provide innovative solutions to State aid problems.

Stuart is looking forward to making contact with transport colleagues over
the next few months and plans to run a series of seminars, workshops and
presentations on transport State aid, where he is looking forward
to meeting everyone and “spreading the State aid message”.

In the meantime, any specific transport related State aid enquiries should be emailed to the State Aid Unit’s mailbox.