14 STATE AID
(26875)
12695/05
COM(05) 436
| Commission Communication: Consultation on state aid for innovation
|
| Legal base | —
|
| Department | Trade and Industry
|
| Basis of consideration |
Minister's letter of 20 December 2005 |
| Previous Committee Report |
HC 34-x (2005-06), para 11 (16 November 2005) |
| To be discussed in Council
| None planned |
| Committee's assessment | Politically important
|
| Committee's decision | Cleared
|
Background
14.1 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.[43]
In this Communication the Commission asks interested parties for
their views on possible improvements to the rules on state aid
for innovation. When we considered the document in November 2005
we noted it deals with an important area of policy and seems to
be a proposing a straightforward approach to rule setting. But
we said that before considering the matter further we should like
to see the Government's response to the consultation paper and
have confirmed that what we had been told about the UK Presidency's
view of the Communication was also the Government's view of the
UK interest.[44]
The Minister's letter
14.2 The Parliamentary Under-Secretary of State for Employment
Relations and Consumer Affairs, Department of Trade and Industry
(Mr Gerry Sutcliffe) now sends us a copy of the Government's response
to the Commission. The first part of the paper addresses the seven
questions in the Commission's introductory section and in that
on principles governing control of state aid for innovation. The
Government's comments include that it:
- is encouraged by the Commission's overall approach;
- agrees that preservation of competition should
be the first priority when designing effective systems to foster
innovation in the Community;
- welcomes the Commission's acknowledgement that
state aid is one of many tools that are available to target market
failures and stimulate competition;
- agrees there may be specific market failures
that warrant public intervention;
- would support changes to the rules on State aid
that increase legal certainty, establish criteria to target aid
more effectively, and simplify the regulatory framework;
- supports the focus firstly on improving the general
business environment and second on supporting risk-taking;
- notes in relation to innovation that the issue
is how to address the shortcomings in the current legal framework
so as to promote activities that support risk-taking and experimentation,
entrepreneurship and that improve the general business environment
for innovation and to help bridge the gap between technological
knowledge and the market;
- agrees the Commission should build on the existing
framework for research and development, together with the Risk
Capital Guidelines, the Environmental Guidelines and the general
Block Exemption, rather than devising a new instrument specifically
for innovation;
- questions relying exclusively on a rules based
approach to aid for innovation;
- would favour a block exemption for small aids
to small and medium sized enterprises (SMEs);
- notes that promotion of innovation and entrepreneurship
is an important element of regional economic policy but comments
that provisions proposed by the Commission are primarily horizontal
and should be designed to tackle market failures wherever they
arise and allow the minimum necessary funding to address them;
- accepts the importance of poles of excellence
and clusters to an economy but feels that these largely develop
organically;
- comments that start-ups and SMEs are more affected
by market failures than more established and larger firms and
agrees that the main focus should be on aids to SMEs ; and
- welcomes the encouragement of innovation intermediaries.
14.3 The Government concludes this section of its
response by saying:
"Finally, the concept of innovation is an
organic one, that is difficult to define, and the approach to
aid for innovation will need to evolve over time to reflect this.
We look forward to the opportunity to comment on more detailed
proposals as they emerge from the Commission. We would also suggest
that the Commission keep any new innovation related provisions
under regular review."
14.4 The remainder of the Government's response makes
detailed comments on the issues raised in the other two sections
of the Commission's Communication related to supporting risk taking
and innovation and a supportive business environment for innovation.
14.5 The Minister also confirms that what we had
been told about the UK Presidency's view of the Communication
was also the Government's view.
Conclusion
14.6 We are grateful to the Minister for the information
he has given us. We note that the Government's response to the
Commission is generally supportive of its intentions and confirms
our initial view that Commission's Communication represents a
straightforward approach in this important policy area. We have
no further questions and clear the document.
43 See (26643) 10083/05 + ADD 1: HC 34-vi (2005-06),
para 18 (19 October 2005). Back
44
See headnote. Back
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