State Aid Conference for Scottish Local Authorities

1
State Aid Conference for Scottish Local
Authorities

• Scottish Local Authorities
• State Aid Cover
• Scottish Government State Aid Unit
• October 2007

2
What is State aid?

• State aid refers to any assistance or subsidy
  given by a Member state which distorts or
  threatens to distort competition
• European Commission has sole competence

3
LA State aid schemes

• SME Block exemption
• Investment aid
• Consultancy
• Research Development
• Training Block Exemption
• Regeneration
• Support for property development projects
• Support for land remediation
• Historic Environment
• Partnership Support (housing)
• 
  SECTORAL RESTRICTIONS APPLY

4
Approved state aid schemes

• Support specific objectives
• Aid goes to a project, not directly to a firm
• Set of eligible costs
• Maximum aid intensities ( of eligible costs)

5
Definition of a small/medium sized enterprise

• Less than 250 employees
• Annual turnover less than 50m
• and / or
• Annual balance sheet less than 43m
• Autonomous (less 25 owned by non-SME)

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SME Block Exemption Investment

• Investment in tangible and intangible assets
  relating to
• setting up of a new establishment
• extension of an existing establishment
• fundamental change in the product or production
  process of an existing establishment
• SMEs only
• NOT routine replacement

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SME Block Exemption - Investment contd

• Eligible Costs land, buildings, plant,
  machinery, intangible assets
• ASSISTED AREAS
• Regional aid limit 10 (up to 30 max)
• NON ASSISTED AREAS
• 15 small sized companies
• 7.5 medium sized companies

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Assisted Areas Aid Map 2007-13
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SME Block Exemption Consultancy Trade Fairs

• Participation at trade fairs up to 50 of costs
• 1st time attendance at fair only
• Maximum support per fair - 15,000
• Consultancy support up to 50 of costs
• must be non-routine consultancy
• Not export aid

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Export Aid

• Generally export related activities are not
  allowable under the State aid regulations
• Aid to export-related activities, namely aid
  directly linked to the quantities exported, to
  the establishment and operation of a distribution
  network or to other current expenditure linked to
  the export activity.

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SME Block Exemption Research Development

• Aid can be loans, grants and guarantees
• Fundamental Research 100
• Industrial Research 60
  
• Pre-competitive Development 35
• Eligible costs personnel costs, instruments,
  equipment, consultancy etc

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Training

• Specific Training directly and principally
  applicable to the employees present or future
  position. Qualifications and skills have limited
  transferability.
• General Training Qualifications and skills are
  largely transferable to other firms and fields of
  work. Improve employability.

13
Training Block Exemption

• Eligible costs include trainer and trainee
  personnel costs, supplies, depreciation of
  equipment

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RegenerationScottish Property Support Scheme

• Construction of new buildings and/or the
  renovation and conversion of existing buildings
  for commercial purposes
• Speculative and bespoke developments
• Different conditions apply depending on size of
  beneficiary and type of development
• Beneficiaries - SMEs throughout Scotland, large
  firms in assisted areas only

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RegenerationScottish Property Support Scheme

• Regional aid/SME aid scheme
• Aid cannot exceed appropriate ceiling
• Number of mechanisms
• development grant
• development financing aid
• subsidised loans, interest rates
• development services
• Transparent aid only

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RegenerationSupport for Land Remediation

• Supporting the remediation of contaminated,
  brownfield and derelict land
• Dereliction Aid Grant aid up to 100 of
  eligible costs.
• Relocation Aid Grant aid up to 30 (10 SMEs)

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RegenerationHistoric Environment Regeneration
Scheme

• Grants for repair, restoration and rehabilitation
  of ancient scheduled monuments, historic parks
  gardens, listed buildings etc
• Up to 100 of costs

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RegenerationPartnership Support for Regeneration

• Minimum necessary gap funding to develop housing
  for owner and rental occupation.
• Maximum amount of grant is 60 of project costs
  in areas where it may be required from a social
  or regenerative perspective.

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RegenerationDirect Development (N657/1999)

• NOT STATE AID
• Public body directly acquires and/or develops
  business property for sale or lease
• To redress market failure in the market for
  business property development
• Purchase/sale/lease at market prices
• Sales conducted at less than market value require
  individual notification

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RegenerationEnvironmental Regeneration
(N546/A/2000)

• NOT STATE AID
• Reclamation of derelict land for 'soft end use'
  only eg public open space
• NOT for hard end use (ie offices, commercial,
  leisure, housing etc)
• Public procurement rules for works
• If land value increases, this amount must be
  repaid
• Polluter pays principle

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Cumulation of aids

• If an enterprise is receiving aid from several
  sources this aid must be cumulated
• The total amount of aid received by a recipient
  in respect of a single project must not breach
  the appropriate aid ceilings
• Structural Funds must also be cumulated
• Cant top up with De Minimis

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Social Enterprises

• Just because measure has social aim does not
  exclude it from State aid rules
• Undertaking
• Both public and private bodies can be an
  undertaking
• definition "any entity involved in economic
  activity, irrespective of legal status"
• Charities, trusts, credit unions, housing
  associations etc. can all be caught by state aid
  rules

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Non Domestic Rates Relief

• General measures open to all undertakings across
  Member State ? not State aid
• Selective exemption from charges, ie by sector or
  region, can distort competition ? State aid
• Operating aid allowed only in exceptional
  circumstances.

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Culture Tourism

• No automatic exemption or guidelines
• Aid could be approved directly on Article 87.3.d
  of the Treaty
• Commission decisions indicate
• Small museums probably not undertakings
• Tourism attractions can affect trade between MS
  depending on scale/size

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Broadband

• State aid issues arise when the public sector
  provides support for broadband roll-out.
• Well defined market failure must exist. There
  are no quick fixes and need to consider State aid
  issues early.
• Number of schemes approved for UK and other MS.

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Annual Returnsreporting requirements

• European Commission
• Article 88(1) allows Commission to keep aid
  schemes under review
• Annual scheme expenditure requested. Failure to
  submit annual reports could breach terms of
  approval
• Commission have overall control - up to and
  including abolition of aid schemes where breaches
  found
• World Trade Organisation
• Detailed report requested every two years by the
  WTO on State aid expenditure per scheme.

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Annual Returns reporting requirements

• Your responsibilities
• Keep a record of annual spend under each scheme
  used
• Complete EC annual report spreadsheet each May
• Complete WTO report spreadsheet
• Advise SAU if local contact changes

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State Aid - Key Points

• Consider state aid at an early stage
• Consult relevant State Aid advisors
• Comply with conditions of approved schemes
• Be aware of the risks of implementing unapproved
  aid

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• Scottish Local Authorities
• State Aid Cover
• Any Questions?
• Scottish Government State Aid Unit
• October 2007