Subsidy Control Assessments: Key SAU recommendations

Principle A can address either a Market Failure or an Equity Objective. The SAU noted some reports which focused on one element and made a cursory reference to the other, while they recognised only one needed to be addressed, they recommended that if both are referred to in an assessment, then both should be fully addressed against each Principle

When referring to Market Failures to consider and capture in the report the Externalities requirements covered in para 3.37-3.41* of the Statutory Guidance (*version Aug 2025)

Strategic or general references are to be avoided and to clearly identify Market Failure or Equity Objectives and describe and evidence them in line with the Statutory Guidance

For this Principle much of the SAU guidance focused on providing further detail and explanation to outline in depth why the subsidy is considered the minimum necessary, detail any negotiation, level of due diligence conducted

Explain how the grant figure was determined and why this was proportionate by demonstrating why a lower figure or partial repayment would be insufficient

Set out processes which verify how costs were the minimum necessary

Fully explain how the analysis of the necessary subsidy level was conducted, including details on how any information from the Recipient was scrutinised in determining the subsidy amount

As with Principle B the SAU guidance focused on providing clearer and specific detail to explain in both the shorter and longer term, what is considered to be the most likely outcome in the absence of the Subsidy

Where data analysis is used as the basis for a decision then to explain how the conclusion was determined by detailing and setting out any assumptions made and the modelling approach used, in forming the conclusion and making the decision

The SAU acknowledged the report had addressed other subsidy alternatives under this Principle however, recommended the assessment goes further and explain why other non-subsidy options (such as commercial loans or equity investments) were not considered appropriate to achieve the policy objective in the current market context

The SAU guidance helpfully explained how to address under this Principle costs that have already been incurred and how they may still be compliant with this Principle and be accounted for within the Subsidy. The guidance set out this could be achieved by explaining why the project would not go ahead without the subsidy and note any funding already incurred towards completion. Then to consider how discussions on the subsidy have impacted the recipient’s decision to begin incurring costs. As part of that assessment to define any costs considered outside of “business as usual” costs and why those costs satisfy the additionality test under Principle D

The SAU addressed a scenario where an existing subsidy may benefit the recipient with competitive dominance in the market prior to a future procurement. Here the SAU recommended to address within the assessment whether the subsidy gives a recipient any competitive benefits to enhance its position ahead of any future procurement

Under this Principle the SAU guidance on another report noted the assessment should consider and include details on the scale of the scheme relative to the overall size of the market (for example in percentage terms)

The SAU gave guidance in most reports against this Principle some of which is likely to be particular to individual circumstances such as guidance to consider and address the geographical and distributional impacts of co-location (if applicable) and wider effects (positive or negative) for business in the area

Other SAU guidance was more general and of benefit to all subsidy control assessments such as ensuring the balancing exercise is linked to the objectives in principle A

To differentiate between the direct benefits of the subsidy and any longer term benefits it may enable

To identify the negative impacts of giving the subsidy, rather than the negative impacts of the ‘do nothing’ scenario