11 State aid
| (26875)
12695/05
COM(05) 436
| Commission Communication: Consultation on state aid for innovation
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| Legal base | — |
| Document originated | 21 September 2005
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| Deposited in Parliament | 30 September 2005
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| Department | Trade and Industry
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| Basis of consideration | EM of 18 October 2005
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| Previous Committee Report | None
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| To be discussed in Council | None planned
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| Committee's assessment | Politically important
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| Committee's decision | Not cleared; further information awaited
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Background
11.1 As part of the Community's competition policy, state aid
is, subject to certain exceptions, banned. The Commission is responsible
for regulating and enforcing state aid policy. To this end it
has in place a number of measures clarifying its state aid policy.
Earlier this year the Commission began a consultation on its wider
plans for a five-year programme of reform of state aid policy.[32]
The document
11.2 In this Communication the Commission asks interested parties
for their views on possible improvements to the rules on state
aid for innovation. It poses 20 questions to which it would like
responses.
11.3 The Commission asserts that innovation is a
central issue for the Community in delivering growth and job creation
and that state aid policy can contribute to a more innovative
economy — by preserving competition as a driver of innovation
and by providing a framework of state aid rules that, in addressing
market failures that hamper the innovation process, foster innovation.
However, it adds that state aid policy can only be a limited response
to the problem of unsatisfactory innovation in the Community,
because many of the issues cannot be solved by state aid and too
much aid can frustrate the innovation process by undermining competition.
11.4 The Commission outlines the principles that
govern state aid for innovation — it may be authorised if:
- a well-defined market failure
exists;
- an aid instrument targets the identified market
failure, is appropriate and proportionate and has an incentive
effect; and
- distortion of competition and the effect on trade
are limited.
11.5 The Commission suggests the innovation-related
activities that might require support are:
- those that support risk-taking
and experimentation and that help bridge the gap between technological
knowledge and the market; and
- those (business services and infrastructure)
which improve the general business environment for innovation.
And in an annex it categorises problems affecting
innovation in the Community as:
- lack of common rules and standards,
such as on free movement of researchers and innovators or patent
protection;
- weaknesses in financial and labour markets;
- non-functioning product markets;
- insufficient policy coordination; and
- general systemic inefficiencies, such as excessive
bureaucracy in government funding, poor industry-academia interaction
and risk aversion.
11.6 The Commission says that developing a new separate
framework for state aid for innovation is unnecessary and out
of line with the objective of simplifying state aid rules. Instead
it identifies a number of innovation-related activities to address
the market failures that hamper innovation and proposes, subject
to the results of the consultation, to integrate new rules into
the general rules on state aid, mainly in a framework for research
and development and innovation but also in the guidelines for
risk capital, the environmental guidelines and in the general
block exemption.[33]
The Government's view
11.7 The Parliamentary Under-Secretary of State for
Employment Relations and Consumer Affairs, Department of Trade
and Industry (Mr Gerry Sutcliffe) tells us the UK Presidency:
- strongly supports an effective
state aid regime;
- is committed to the European Council aim to reduce
state aid as a percentage of Gross Domestic Product and to re-direct
aid towards horizontal objectives of common interest, including
economic and social cohesion;
- believes state aid can play a positive role in
supporting economic development where it is used to tackle the
causes of economic under-performance;
- supports the Commission's broad aim of stimulating
innovation and entrepreneurship in the Community;
- agrees with the focus in the document on improving
the general business environment and supporting risk-taking;
- welcomes the Commission view that state aid is
just one of a number of ways of tackling the problem of unsatisfactory
innovation in the Community and that a broad policy approach is
needed; and
- considers innovation is an evolving concept and
encourages the Commission to maintain a flexible approach to aid
for innovation.
11.8 The Minister says the Government is consulting
interested parties while preparing its response to the Commission's
request for views, which is asked for by 21 November 2005.
Conclusion
11.9 The Commission's consultation deals with
an important area of policy and seems to be a proposing a straightforward
approach to rule setting. But before considering the matter further
we should like to see the Government's response to the consultation
paper. At the same time we should like confirmation that what
we have been told about the UK Presidency's view of the Communication
is also the Government's view of the UK interest.
11.10 Meanwhile we do not clear the document.
32 See (26643) 10083/05 + ADD 1: HC 34-vi (2005-06),
para 18 (19 October 2005). Back
33
State aid granted in conformity with the block exemption conditions
is automatically considered compatible with the common market. Back
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