Lord Dodds: Northern Ireland will miss out on flexible UK approach to state aid due to the NI Protocol
The Subsidy Control Bill currently going through Parliament doesn’t sound very exciting but it is another example of where the Northern Ireland Protocol has the potential to cause real damage to Northern Ireland’s economy over the medium to long term.
The UK is setting up a new more flexible state aid, or subsidy control regime as it is known, which is outside EU rules.
However, under Article 10 of the protocol the subsidy control regime in the bill would apply to only about 50% of the financial support that will be provided to Northern Ireland with the remainder continuing to fall within the scope of EU state aid rules.
This applies mainly to the manufacturing of goods.
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Northern Ireland will be forced to adhere to the strict rules and conditions of EU law on things such as no expansions, maximum grant rates, only new establishments and so on, and when the projects are large or outside the scope of the exemption regulations Northern Ireland will have to seek European Commission approval.
Effectively, we have two regimes which are very different in policy terms and practical effect.
Under the UK scheme, things will be automatically approved unless specifically prohibited. In Northern Ireland, we are subject to EU rules, under which everything is prohibited unless approved.
They are very different policies, and two different systems are going to operate in one country.
In July 2021 the government published its Command Paper arguing that the Trade and Cooperation Agreement and the provisions of this bill “provide a more than sufficient basis to guarantee that there will be no significant distortion to goods trade between the UK and EU, whether from Great Britain or Northern Ireland, thus making the existing provisions in Article 10 “redundant in their current form”.
Lord Frost said in his statement on December 17 2021 that “Northern Ireland businesses are facing unjustified burdens and complexity, and the government cannot deliver aid to Northern Ireland, for example for Covid recovery support, without asking for the EU’s permission”.
Since assuming responsibility from Lord Frost, the foreign secretary, Liz Truss, has said that the UK’s position on the protocol, and with regard to the issue of Article 10, has not changed.
If negotiations do not result in the objectives set out in the government’s Command Paper, which is very likely, the government must take action on it own account to protect Northern Ireland’s economy.
Otherwise there will be no level playing field across the UK when it comes to state aid.
Northern Ireland will be at a disadvantage compared to other parts of the UK when competing for inward investment.
Other parts of the UK could be much more attractive as a location for investment as a result of not having to wait for the European Commission to grant formal approvals.
In Northern Ireland, approvals will take significantly longer than the new timescales envisaged in the bill for the rest of the UK.
Other areas could have far fewer conditions or restrictions and might well receive greater levels of funding than would be possible under the EU regime in Northern Ireland, which prohibits subsidies greater than 50%, whereas under the bill subsidies may be proportionate but no maximum is specified.
The only answer to this potential catastrophe is to bring all subsidies across all of the UK within the domestic UK regime.
The Business Secretary agreed during debate in the Commons.
If EU law continues to apply to Northern Ireland, it is hard to envisage that there can be any mitigation.
There is certainly nothing in the bill currently going through Parliament that would ease the problems that Northern Ireland will face in this regard.
I tabled a probing amendment during the Committee stage of the Bill in the House of Lords to tease out these issues but was told that because of the protocol it was not possible to table one which would bring Northern Ireland fully into line with the rest of the UK.
The reality is that the interaction of the protocol with the new Great Britain state aid regime has the potential to impact very negatively on the development of the economy of Northern Ireland.
It is another reason why the protocol must go.
• Lord Dodds is a DUP peer and former deputy leader of the party. He was MP for North Belfast from 2001 to 2019
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