10 State aid "scoreboard ":
Autumn 2010
| (32333)
17721/10
COM(10) 701
| State aid scoreboard: Autumn 2010 update
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| Legal base | —
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| Document originated | 1 December 2010
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| Deposited in Parliament | 13 December 2010
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| Department | Business, Innovation and Skills
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| Basis of consideration | EM of 21 December 2010
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| Previous Committee Report | None
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| To be discussed in Council | No date set
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| Committee's assessment | Politically important
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| Committee's decision | Cleared
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Background
10.1 The Commission reports twice yearly on state aid and state
aid issues, the main aim of recent reports ("scoreboards")
having been to consider to what extent Member States have responded
to the Lisbon Strategy, particularly the specific commitments
agreed at the Stockholm European Council in 2001 to show a downward
trend in the level of state aid relative to Gross Domestic Product
(GDP) while redirecting aid from specific sectors to "horizontal"
objectives, such as research and innovation. This latest update
focuses on the state aid situation in the 27 Member States for
the year 2009 together with the underlying trends, and it also
looks at the state aids related to the financial crisis, the steps
taken to simplify the state aid rules, and their enforcement.
The current document
State aid in 2009
10.2 The Scoreboard reports that the total of state aid granted
by the 27 Member States in 2009 was €427.2 billion, with
aid measures related to the financial crisis accounting for €353.9
billion of this total. Other aid amounted to around €73.2
billion, with industry and services accounting for €58.1
billion, agriculture and fisheries €11.8 billion, and transport
(other than railways) €3.3 billion. Excluding financial crisis
measures, the five largest grantors of aid[46]
account for 68.2% of the total, and, if financial crisis measures
are included, the UK was the largest grantor (€124 billion)
followed by Germany, France, Belgium and Greece.
Trends and Patterns of State aid expenditure in the Member
States
10.3 The Scoreboard notes that, from a long-term perspective,
levels of state aid had been falling, from about 2% of GDP in
the 1980s to around 0.5-0.6% in the years 2003-2007, largely due
to economic growth, a reduction in aid to the coal industry, and
post-Accession adjustments in the new Member States, allied to
a general recognition that higher aid levels hinder the efficient
allocation of resources. Due to the response to the financial
and economic crisis, overall EU aid levels in 2007 to 2009 went
up to 3.6% of GDP, but, excluding the crisis measures, they stood
at 0.62% of GDP in 2009: although this represents a slight increase
compared with 2008, it remains within the average for 2000-2007,
suggesting that Member States are continuing to exercise discipline
in this area.
10.4 The Commission observes that state aid for horizontal
purposes, such as environmental protection and regional development,
is usually considered to be better suited to addressing market
failures and less distorting than ad-hoc measures or aid for specific
sectors. It notes that the general long term trend is for a higher
proportion of aid to be granted for horizontal objectives, with
aid of this kind accounting for €48.7 billion or 84% of aid
to industry and services (compared with about 50% in the mid-1990s).
The three main objectives were regional aid (24%), aid for environmental
protection (23%) and aid for research, development and innovation
(18%). In 2009, aid for non-crisis rescue and restructuring aid
amounted to about €398 million, compared with an average
of €872 million in 2006 -2008.
State Aid related to the Financial Crisis
10.5 The Commission notes that, since October 2008,
it has taken a number of steps under Article 107(3)(b) TFEU to
provide guidance to Member States on the provision of state aid
to support financial institutions and address problems faced in
the real economy in the current financial crisis. It says that
the coordinated action by Member States to support banks along
with the introduction of crisis-specific state aid rules helped
to contain the financial sector and limit distortions of competition
within the single market. The Commission adds that most Member
States provided aid to their financial institutions, and that,
between October 2008 and October 2010, it took around 200 decisions
on such measures, with the maximum volume of total crisis support
to financial institutions approved amounting to €4,588 billion
(which in some cases involved the entirety of a Member State's
bank deficits) . The bulk of the support (€3,485 billion)
came in the form of state guarantees, followed by recapitalisation
measures (€546 billion) and impaired asset relief interventions
(€402 billion). However, the Commission points out that not
all of the aid approved was provided by the Member States, the
nominal amount of crisis support actually implemented in 2009
being €1,106 billion, compared with €1,236 billion in
2008. Of this, the state aid element for 2009 is estimated at
€351 billion, which the Commission says is significantly
lower than the nominal amount of aid because it constitutes only
a fraction of the guaranteed amounts (also, real budgetary expenditure
materialises only when a state guarantee is actually drawn upon).
10.6 The Commission says that Member States were
also enabled to mitigate the effects of the financial crisis on
the real economy under the Temporary Framework which it adopted
at the end of 2008 (though the Framework does not apply to companies
in difficulty before the crisis). The total aid element of all
the measures granted under the Framework in 2009 was €2.2
billion, of which 55% was in the form of a subsidy of up to €500,000
per company, whilst guarantees represented 12% of the total.
Simplification of State aid rules
10.7 The Commission recalls that Member States are
obliged to notify all state aid measures prior to implementation,
and that a "3-stream system" to state aid decision-making
(involving block[47]
and de minimis exemptions, and standard and detailed assessments)
has been developed, applying a degree of control which reflects
the potential impact on competition. The Commission says that,
whilst the number of block exemption measures has increased significantly,
the majority of individual schemes or cases still notifiable are
subject to standard assessment, with the most detailed assessment
being carried out in four out of 16 risk capital cases, nine out
of 30 cases involving research and development and innovation,
and only one out of 59 regional aid cases.
10.8 Additionally, in September 2009, the Commission
introduced a simplified procedure allowing compatible aid to be
approved within an accelerated time period of one month, based
on a complete notification from the Member State. The other part
of the simplification package was the Code of Best Practise for
the conduct for state aid control procedures, based on a joint
commitment of the Commission and Member States to achieve more
streamlined and predictable procedures at each step of the investigation,
thereby resulting in faster decisions.
Enforcing the state aid rules
10.9 A state aid measure is considered to be unlawful
under Article 108(3) of the Treaty if a Member States implements
it before it has been approved by the Commission, and, if illegal
aid is found, it usually has to be repaid with interest. The Scoreboard
reports further progress in the recovery of illegal and incompatible
aid, with €12 billion having been recovered since 2000, and
the total number of cases pending recovery falling to 54 compared
with 94 at the end of 2004, and 11% of unlawful aid being unrecovered
compared with 75% at the end of 2004.
The Government's view
10.10 In his Explanatory Memorandum of 21 December
2010, the Minister for Employment Relations, Consumer and Postal
Affairs at the Department for Business, Innovation and Skills
(Mr Edward Davey) says that there are no direct policy implications
from this document, which is intended to increase transparency
and to emphasise the need for Member States to continue their
efforts to reduce the level of state aid, and to ensure that it
is better targeted. On the broader state aid reform issues, the
Government strongly supports an effective state aid regime and
is committed to the European Council's aim of less and better
targeted state aid. He adds that, as the Commission continues
to review the effectiveness of its rules and procedures, the UK
will continue to engage with it positively to help ensure the
delivery of its policy goals, especially taking into account current
economic instability.
Conclusion
10.11 In clearing this document, we are drawing
it — like previous scoreboards — to the attention
of the House as a useful summary as regards state aid policy.
46 Germany €15.3 billion, France €11.7 billion,
Spain €4.9 billion, Italy €4.6 billion, and UK €3.3
billion. Back
47
In such cases, individual approval from the Commission is not
required in advance, unless the application exceeds a certain
threshold. Back
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