The OFT's approach to assessing State subsidies

NERA report (43 pages, PDF) for the OFT on the analysis of the competition effects of subsidies. The report suggests that competition effects should be analysed as part of a comprehensive cost-benefit analysis along the lines of HM Treasury's Green Book. This analysis would not be intended to provide any assurance of compliance with the State aid rules under Article 87 of the EC Treaty.

The report proposes a two-stage approach. The first stage would apply filters to exclude schemes that are small compared to some absolute and market share thresholds, or that are non discriminatory. The second stage would be a detailed analysis, but the report does not provide much detail of what this would entail besides instructing subsidy providers to "determine whether the proposed subsidy will enhance overall welfare" and referring to the OFT's suggestions for State aid control.

No detail is provided of the legal basis or status of the work, or of any opportunity to comment on the suggestions in the report.

The Government replied to this document through a DTI paper in May 2006.

Update, January 2007: This consultancy report has been (quietly) replaced by this OFT/Treasury document. Only NERA's case study appendix (39 pages, PDF) seems to remain on the OFT website.

Update, October 2008: The link above is (now) to a backup copy of the NERA report, in an attempt at making the timeline of this matter comprehensible.

For further information or advice please contact Franck Latrémolière.

Filed under OFT, State aid.

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