The assessment framework

Question 1

Introduction

Answer 1

To assist public authorities in designing subsidies and subsidy schemes that are consistent with the subsidy control principles, the statutory guidance provides a four-part assessment framework to help public authorities ensure that a subsidy is consistent with these principles

Question 2

Assessment framework step 1:

Answer 2

Identifying the policy objective, ensuring it addresses a market failure or equity concern, and determining whether a subsidy is the right tool to use.

Public authorities may only give a subsidy to pursue a specific policy objective that remedies a market failure or addresses an equity concern (redistributing resources between different groups or areas more fairly), or both.

Question 3

Assessment framework step 2:

Answer 3

Ensuring that the subsidy is designed to create the right incentives for the beneficiary and bring about a change

Public authorities should first assess what would happen in the absence of the subsidy (in other words, determining the baseline for assessing change).

They will then need to show how the subsidy will lead to a change in the economic behaviour of the beneficiary (and therefore brings about something that would not have occurred without the subsidy) which assists with achieving the policy objective.

Question 4

Assessment framework step 3:

Answer 4

Considering the distortive impacts the subsidy may have and keeping them as low as possible.

Public authorities should demonstrate how the subsidy is proportionate and has been designed to minimise any negative effects on competition and investment within the United Kingdom while allowing it to meet the policy objective.

This should include details of how the public authority has considered the following subsidy characteristics (where relevant):

Question 5

Assessment framework step 4:

Answer 5

Carrying out the balancing exercise whereby the public authority must establish that the benefits of the subsidy outweigh its potential negative effects

This will involve the public authority assessing the subsidy’s expected benefits (as they relate to the policy objective) and its anticipated negative effects, including in particular, negative effects on competition and investment within the UK, and international trade and investment.

This assessment may involve both quantitative and qualitative elements.

In carrying out their assessment, public authorities must ensure that the depth of their analysis of a subsidy or subsidy scheme (that is, the assessment of its compliance with the subsidy control principles) is commensurate with the size and the potential distortive impact of the subsidy, or subsidies given under the scheme.