Select Committee on European Legislation Third Report


STATE AID

10.   We consider that the following raises questions of political importance, but make no recommendation for its further consideration:--

Department of Trade and Industry

(17587)	Draft Council Resolution on State Aid.
Legal base:	None required, but the Resolution is to be adopted on the basis of unanimity.

Background
10.1  We have received from the Minister for Industry (Mr Knight) an Explanatory Memorandum dated 7 November describing a proposed Council Resolution on state aid. As the draft Resolution did not originate with the Commission, an official text has not been published; but the Minister has sent us a copy of an unofficial draft, which we are prepared to use for the purposes of scrutiny.

  The subject matter of the Resolution

10.2  The Minister explains that the draft Resolution's main purpose is to gain political agreement for detailed discussion at official level about options for reforming the EC state aid control régime, with a view to improving its efficiency and effectiveness. The Minister says that the options for reform include possible new regulations in the field of state aid, but that there are at present no firm legislative proposals.
10.3  The Minister says that the Resolution is likely to contain points which:
--recall the main issues on state aid agreed by the Industry Council last year, namely to improve transparency and legal certainty; to improve the conditions for competition; to enhance coherence between competition policies and other EU policies in relation to state aid; and to reinforce state aid control mechanisms;
--acknowledge the high level of state aid in the Community;
--affirm that it is necessary to promote the reduction of state aid in order to improve conditions of competition;
--agreement to the early start of detailed discussions on means to improve legal certainty, predictability and consistency, including possible regulatory measures;
--clear statement that discussions on options for reform would be without prejudice;
--to call on the Commission to prioritise its workload and to establish an accessible database of cases where it has reached a publishable decision;
--to call on the Commission to report back to the Council in one year.

  The Government's view

10.4  The Minister says that the Government is firmly in favour of a strong state aid régime. He says:
"The increase in the volume and complexity of state aid cases means that the current system is under strain with consequent risks for the effective application by the Commission of the state aid rule. At this early stage, the proposed discussions would be broadly based and without prejudice. The talks are for the prospect of future action which would strengthen the state aid régime."

  Conclusion

10.5  We consider that this draft Council Resolution raises matters of political importance. There are clearly widely different approaches within the Community on this subject of state aids to industry. Whilst some industries in some countries remain heavily dependent on state aids, competition is prejudiced and true costs may be difficult to determine.
10.6  We would appreciate a copy of the Council Resolution as agreed, and information from the Government on the outcome of the discussions referred to in paragraph 10.2 above, whether or not legislative proposals are foreshadowed.

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Prepared 2nd December 1996