Documents considered by the Committee on 19 January 2011 - European Scrutiny Committee Contents

10 State aid "scoreboard ": Autumn 2010



COM(10) 701

State aid scoreboard: Autumn 2010 update

Legal base
Document originated1 December 2010
Deposited in Parliament13 December 2010
DepartmentBusiness, Innovation and Skills
Basis of considerationEM of 21 December 2010
Previous Committee ReportNone
To be discussed in CouncilNo date set
Committee's assessmentPolitically important
Committee's decisionCleared


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.


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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