ANNOUNCEMENT 29 Apr 2009In April 2009, the British government announced a change to private-sector financial support.
NUMBER OF INTERVENTIONS
the letter from the EC to the UK - Brussels, 14.05.2009 C(2009)3982. Available from < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N257_2009 >
the letter form the EC to the United Kingdom - Brussels, 14.08.2009 C(2009)6433. Available from : < http://ec.europa.eu/competition/elojade/isef/case_details.cfm?proc_code=3_N460_2009 >
On 29 April 2009, the UK authorities notified the Temporary aid scheme for granting aid in the form of loans with subsidized interest rate ("Temporary aid in the form of Subsidised Interest Rate" - State aid N 257/2009).
The scheme is based on Article 87(3)(b) ECT, as interpreted by Paragraph 4.4.2 of the Commission communication "Temporary framework for State aid measures to support access to finance in the current financial and economic crisis" (the Temporary Framework). The aid is provided in the form of subsidized public loans.
The UK authorities identified the common budgetary ceiling of GBP 8 billion for the implementation of this notified measure (N 257/2009) and the aid measures "Temporary aid in the form of loan guarantees" (N 71/2009) and "Temporary aid for the production of green products" (N 72/2009).
The potential beneficiaries of the scheme are SMEs and large enterprises (around 500).
The Commission stated that the notified measure constitutes State aid within the meaning of Article 87 (1) of the EC Treaty and gave the following assessment:
"State resources are involved in the notified scheme since the subsidized loans are made available from State resources. The measure is selective since it will be granted only to a limited number of firms located in the United Kingdom. The measure confers an advantage by relieving the beneficiaries of costs which they would have to bear under normal market conditions since, without the intervention by the State, the borrowers would obtain loans only at higher costs, if at all. The favouring of certain undertakings means that competition is distorted or threatened to be distorted. The measure affects trade between Member States since the scheme is not limited to beneficiaries which are active in sectors where no intra-community trade exists." (par. 24-27 of the letter from the EC to the UK - Brussels, 14.05.2009 C(2009)3982 ).
Article 87(3)(b) of the EC Treaty enables the Commission to declare aid compatible with the Common Market if it is "to remedy a serious disturbance in the economy of a Member State." This aid has to be applied restrictively and must tackle a disturbance in the entire economy of the Member State according to the interpretation of the Article 87(3)(b) by the Court of First Instance.
The Commission referred to its Communication on the financial crisis (Temporary Framework) and concluded that the Measure complies with the conditions laid therein. Therefore, despite the measure constituting State aid pursuant to the Article 87(1) EC, it is compatible with the Common Market according to the Article 87(3)(b) EC Treaty. The Commission raises no objections against the measure at issue and authorizes it as emergency intervention in the face of the current financial crisis. (par. 29-34 of the letter).
Amendment to the scheme "Temporary aid in the form of subsidised interest rate" - State aid N 460/2009
On 29 July 2009, the UK authorities notified an amendment to the existing scheme (see above).
The proposed amendment provides selective assistance to firms operatingin the housing construction sector. Prior to the credit crunch, a numberbanks invested heavily in the property sector including housing and nowconsider themselves over-exposed to the sector. The lack ofavailability of loan finance is reported to be one factor in the currentslowdown in UK housing delivery. While banks try to reduce thisexposure, the UK government seeks to maintain housing supply andemployment in the construction sector.
The UK authorities stated that they wished to add the Housing and Regeneration Act 2008 to the list of Acts forming the legal basis of the scheme '...'. TheActwas added to allow a new Government Agency, the Homes and Communities Agency, to give support. The UK authorities explained that it had always been their intention that as many sectors as possible should benefit from the scheme within the budget limits. (par. 2 of the letter form the EC to the United Kingdom - Brussels, 14.08.2009 C(2009)6433 )
Except for the legal basis, all other elements of the approved scheme remain unchanged.
The EC concludes that the notified amendment does not alter the assessments from the original measure. For these reasons, the Commission considers that the notified measure is in conformity with the Temporary Framework and considers it to be compatible with the Treaty on the basis of Article 87(3)(b). (par. 10 of the letter)
A state measure in the GTA database is assessed solely in terms of the extent to which its implementation affects the extent of discrimination against foreign commercial interests. On this metric, the state aid proposed here is discriminatory.