Give charities the highest allowances under replacement to EU state aid rules, membership bodies say

Membership bodies have called for charities to be subject to the highest permitted allowances under the regime that will replace EU state aid rules. 

In the Queen’s Speech this week, the government set out its policies and proposed legislative programme for the new parliamentary session, including a Subsidy Control Bill.

The main benefits of the bill would aim to create a UK subsidy control system free of “the EU’s burdensome state aid rules”, the government said in a briefing published alongside the speech.

“Free from the EU state aid regime, the government will introduce a Subsidy Control Bill that implements a domestic UK subsidy control regime to reflect our strategic interests and particular national circumstances, providing a legal framework within which public authorities make subsidy decisions,” the paper said. 

The bill is expected to enable public authorities to deliver bespoke subsidies that are tailored to local needs to support the UK’s economic recovery and deliver government priorities.

The government said it also wanted to empower local authorities, public bodies, and central and devolved governments to design subsidies that would deliver strong benefits for local communities.

No figures for how the new regime might work were set out in the briefing notes. 

The Charity Tax Group called for six principles to underpin any new subsidy regime that includes clearer guidance for charities, because the voluntary sector’s role within the UK economy is not directly mentioned in the government’s consultation document. 

The membership body also said there should be a general presumption that charities were not subject to subsidy controls where their activities are not business, and where charities were subject to subsidy controls the highest permitted allowances should be applied. 

Richard Sagar, policy manager at the Charity Finance Group, said: “We hope that the Subsidy Control Bill will provide clarity on when restrictions apply and whether it is appropriate at all for charities to be subject to them, given their purpose is to carry out public good.

“CFG will continue this work to try to ensure there is a general presumption that charities should be outside of the scope of the new regime where their activities are not business. 

“We also hope that the government provides charities with certainty on when the new rules might apply.”

Robin Osterley, chief executive of the Charity Retail Association, said: “Last year, EU state aid rules severely restricted the ability of larger charity retailers to access business closure grants when charity shops were required to close. 

“So it is welcome that the new bill introduces the possibility that grants provided during times of national emergency need not be subject to the full application of subsidy rules. 

“In the past, state aid rules have restricted the availability of funding for charitable activities and so the new subsidy rules need to be designed in a way that does not inadvertently block funding for charitable services.”

The membership bodies warned in March that charity shops were still being denied access to millions of pounds in government lockdown grants because confusion about EU state aid rules meant they were being wrongly applied.

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