Registration of an Economic Development Subsidy Scheme to Facilitate Compliance with Post-EU Subsidy Control Legislation
Argyll and Bute Council · 11 September 2025
Back to Environment, Development and Infrastructure Committee — 11 September 2025 and its agenda
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ARGYLL AND BUTE COUNCIL ENVIRONMENT, DEVELOPMENT AND INFRASTRUCTURE COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH 11 SEPTEMBER 2025 REGISTRATION OF AN ECONOMIC DEVELOPMENT SUBSIDY SCHEME TO FACILITATE COMPLIANCE WITH POST-EU SUBSIDY CONTROL LEGISLATION 1.0 EXECUTIVE SUMMARY 1.1 The purpose of this paper is for members of the Environment, Development and Infrastructure Committee to approve the registration of a subsidy scheme to facilitate the delivery of economic development projects and ensure legal compliance with subsidy control legislation. The proposed subsidy scheme documents can be reviewed in Appendix 1 and Appendix 2 of this paper. 1.2 A subsidy is where a public authority provides support to a business, or other organisation. Any such assistance is subject to an assessment under control legislation. An important point to note is that the registration of a subsidy scheme does not in itself confer any subsidy on any organisation or spend or commit any council funds or resources – it is simply an administrative tool which will facilitate compliance when the council chooses to grant subsidy. All subsidies will still be subject to assessment, consideration, and often legal oversight, using existing council processes. 1.3 Should the committee not approve the registration of this scheme, forthcoming projects will continue to be potentially subject to a full and lengthy individual assessment process as well as a 30-day challenge period with resulting delays and staff resource implications. 1.4 The registration of the proposed subsidy scheme will significantly reduce the administrative burden on council officers and partners. It will also reduce delay. This is a significant efficiency, and will allow the council to be nimbler, taking advantage of project and funding opportunities in a less bureaucratic way. 1.5 It is recommended that Members of the Environment, Development and Infrastructure Committee: • Consider and note the Argyll and Bute Economic Development Subsidy Scheme document, see Appendix 1 and the associated Principles Assessment document see Appendix 2. • Endorse that a subsidy control scheme be registered with the Competition and Markets Authority (CMA) called the ‘Argyll and Bute Council’s Economic Development Scheme’.
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ARGYLL AND BUTE COUNCIL ENVIRONMENT, DEVELOPMENT AND INFRASTRUCTURE COMMITTEE DEVELOPMENT AND ECONOMIC GROWTH 11th SEPTEMBER 2025 REGISTRATION OF AN ECONOMIC DEVELOPMENT SUBSIDY SCHEME TO FACILITATE COMPLIANCE WITH POST-EU SUBSIDY CONTROL LEGISLATION 2.0 INTRODUCTION 2.1 A paper was originally presented to the Directorate Management Team of Development and Infrastructure in May 2021, outlining the significant changes in subsidy control legislation which came about as the Brexit transition period ended on the 31st of December 2020. It asked that the changes be noted and recommended various actions including the setting up of an internal officers’ Subsidy Control Working Group to lead on work in this area. 2.2 Since this paper, a new regime has been introduced in the form of the Subsidy Control Act 2022. The internal officers’ Subsidy Control Working Group has been working to increase awareness of the legislation across the council, supporting officers to assess subsidies against the legislation where needed, and keeping up to date with changes to procedure and practice in the area. 2.3 As with any new area of legislation, there is significant uncertainty, and best practice is developing within both the council and public authorities across the UK. Members of the internal officers’ Subsidy Control Working Group have been working collaboratively to share best practice, particularly as part of a working group organised by the Scottish Local Authorities Economic Development (SLAED) Funding Group and a subsidy control sub-group established for the Highlands and Islands Regional Economic Partnership (HIREP). 2.4 Following the departure of the UK from the European Union (EU), a new Subsidy Control Act (2022) created a domestic subsidy control regime in the UK, replacing EU State Aid legislation. The act places significant duties on public authorities (including the council) when granting subsidy in order to ensure the UK remains compliant with its international legal obligations and to further its strategic interests. 2.5 Subsidy can take the form of a grant, a tax break, a loan or guarantee on favourable terms, or the use of facilities or provision of services below market price. Such subsidies are commonly used by the council to meet its objectives, such as encouraging economic development, delivering community facilities, or supporting organisations and enterprises carrying out activity which benefits communities across Argyll and Bute. Much of the external funding which is provided to or
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administered by the council, often in the millions of pounds per year, is subject to subsidy control legislation. 3.0 RECOMMENDATIONS 3.1 It is recommended that Members of the Environment, Development and Infrastructure Committee: • Consider and note the Argyll and Bute Economic Development Subsidy Scheme document, see Appendix 1 and the associated Principles Assessment document see Appendix 2. • Endorse that a subsidy control scheme be registered with the Competition and Markets Authority (CMA) called the ‘Argyll and Bute Council’s Economic Development Scheme’. 4.0 DETAIL 4.1 The new subsidy control regime obliges the council to consider if many activities it undertakes may be considered subsidy under the law and, if they are, to undertake a time-consuming process of assessment prior to registering subsidy on a transparency database managed by the CMA. Subsidy on this database is then subject to a 30-day period in which they are open to legal challenge. This process can take weeks or months, adding significant delays to projects, potentially even putting them at risk should they be time sensitive; for example where external funding is time-limited. It also time-consuming for council officers and is specialised work often involving multiple officers and advice from the legal and regulatory support colleagues. It will often need sign-off at a senior level. 4.2 Recognising the work involved, the legislation allows for the registration of a subsidy scheme. A scheme is an administrative framework which, once registered, allows multiple subsidies to granted under it (if they fit the definitions and conditions of the scheme). The scheme itself must be uploaded on to the transparency database and is subject to a single 30-day challenge period. However, subsequent subsidies registered under the scheme are not subject to challenge and can undergo a much faster and simpler internal process of assessment. 4.3 The purpose of schemes under the legislation is to provide this streamlined route for compliance, and as a result, the advantages have been recognised by many local authorities. At the time of writing, public authorities have registered 1,299 subsidy schemes. This includes a significant number of schemes by Scottish local authorities, and schemes for comparable purposes, such as that set up to administer the Belfast City Deal. Council officers have been working closely with such authorities to ensure the sharing of best practice and advice. 4.4 In December 2024, the SLAED Funding Group suggested the creation of a subsidy control scheme to be registered by the Scottish Government which could be used by all public authorities working in the Highlands and Islands Regional Economic Partnership area when undertaking subsidy activity to undertake community economic development.
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4.5 Argyll and Bute Council officers were involved in this HIREP working group and worked collaboratively to draw up and scheme and the necessary scheme documents over the early part of 2025. Unfortunately, when the scheme (known as the Highlands and Islands Community Empowerment Subsidy Scheme – HICESS) was at an advanced stage, it become apparent that the Scottish Government Subsidy Control Unit was unable to register the scheme as originally intended. As the Scottish Government is the only body that can register schemes for use by a range of public authorities at a national level by law, this left the original plan for the HICESS scheme at an impasse. 4.6 Given that so much work had already been undertaken to create the scheme documents, and the fact that much of it is easily transferable, several public authorities who are members of the Highlands and Islands Regional Economic Partnership have decided to modify the draft HICESS scheme and register it individually for their own use. So far, Highlands and Islands Enterprise has registered a scheme. It is understood other local authorities are also progressing this but Argyll and Bute Council would be the first to do so. 4.7 Preparing a scheme involves drawing up a scheme document (Appendix 1), which would be made publicly available on the CMA transparency database at the time of registration of the scheme. A detailed principles assessment (Appendix 2) must also be undertaken and is held internally. These have been created by adapting work previously undertaken for the HICESS scheme and are appended as noted. The proposed Argyll and Bute Economic Development Subsidy Scheme would have the following policy objectives: • Mitigate the regional inequality and socio-economic disadvantage experienced in Argyll and Bute, recognising the region’s distinctive culture and unique challenges. • Support the delivery of Argyll and Bute Council’s Economic Strategy 2024-2034 and the associated short-term Action Plan 2025-2028 (which is updated annually). • Preserve and create new employment to retain population across the region, strengthening communities and underpinning the region’s place-based approach to development. • Contribute to the Scottish Government’s National Strategy for Economic Transformation (NSET) vision for a wellbeing economy thriving across economic, social and environmental dimensions and its ambition to promote entrepreneurial activity in every sector in our economy. 4.8 Subsidies proposed under the scheme must be assessed to be delivering these objectives, as well as meeting detailed eligibility and compliance requirements set out in the documents. A third document, internal scheme guidance, will be drawn up to assist council officers in the process. This will be integrated with existing processes, such as those being developed as part of the Project Pipeline. This will introduce further efficiencies as the subsidy control process continues to be integrated into developing internal project planning processes.
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4.9 The potential benefits to registering the scheme are significant and are recognised by council officers who work with subsidy, such as those involved in grant-giving and in delivering externally funded infrastructure or community development projects. The advantages are that subsidies issued under a scheme can: • Undergo the necessary assessment to ensure compliance with subsidy control legislation much more quickly and with less staff resource than those which would need to be assessed and registered individually, significantly reducing delays. • Allow the council and partners receiving subsidy to have more confidence that they are in compliance with the law. • Allow well-informed decisions to be taken sooner, internally, and also remove the need for the compulsory 30-day challenge period which can cause delays. • The streamlined process, when undertaken with guidance and support from the Argyll and Bute Council Officers’ Subsidy Control Working Group, can be delivered by a wider range of council officers with less need for specialist input. 4.10 The scheme also potentially significantly reduces risk. The subsidy control scheme itself is subject to a 30-day challenge period, meaning its robustness is tested at this stage. Subsequent subsidies issued under the scheme are not then subject to individual legal challenge. The council must still ensure that any subsidies are compliant with the scheme (and indeed internal auditing), and ensure due diligence is undertaken. Robust internal processes and support are available to ensure this. However the result is a significant reduction in the risk of legal challenge, improving confidence in decision-making and preventing delays. 4.11 The proposed scheme would run for 10 years from the point of registration. A review of the scheme, its effectiveness, and the subsidies issued under it would be undertaken at five years and any necessary changes made. An unlimited number of subsidies could be issued under it, although an overall monetary cap is given, both for individual subsidies awarded under the scheme and for the scheme as a whole. The scheme therefore has potential to deliver benefits over a significant period of time and across multiple projects. 5.0 CONCLUSION 5.1 The registration of an Argyll and Bute Economic Development Subisidy Scheme has the potential to result in significant efficiencies when delivering subsidies of various kinds over the next ten years. It will cut bureaucracy significantly, ensure legal compliance, and aid decision-making. The scheme has come about as a result of effective collaborative working between the council and other public authorities and can be considered an example of best practice within the area of subsidy control. 6.0 IMPLICATIONS 6.1 Policy – aligns with the Argyll and Bute Economic Strategy 2024-34 and associated short-term Economic Strategy Action Plan, 2025-2028, National Strategy for Economic Transformation vision for a wellbeing economy thriving across economic, social and environmental dimensions and its ambition to promote entrepreneurial activity in every sector in our economy and potential ongoing implications for the
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council’s Economic Development Subsidy Control Scheme aligned to revised legislation and/or policy. 6.2 Financial – potential implications on subsidy which may be awarded in future. 6.3 Legal – a new subsidy control scheme must be legally compliant, and then there may be on-going potential implications as subsidy is awarded. 6.4 HR – assessments will be undertaken by existing staff. 6.5 Customer Service – none. 6.6 Risk - the proposal should have positive implications for risk, as legal risk will be reduced through using the proposed subsidy control scheme, as long as all procedures and conditions are followed. 6.7 Climate Change – none. 6.8 Fairer Scotland Duty - the Fairer Scotland Duty, Part 1 of the Equality Act 2010, came into force in April 2018. The duty places a legal responsibility on particular public bodies in Scotland, such as Argyll and Bute Council, to pay due regard to (actively consider) how they can reduce inequalities of outcome, caused by socio- economic disadvantage, when making strategic decisions and how this has been implemented. This is integral to the Argyll and Bute Economic Development Subsidy Scheme policy objectives. 6.9 Equalities (protected characteristics) - all activities will comply with all Equal Opportunities policies and obligations. 6.10 Consumer Duty - all activities will comply with the council’s Consumer Duty. 6.11 Island Communities - none. 6.12 Children’s Rights and Wellbeing – none. Kirsty Flanagan, Executive Director responsible for Development and Economic Growth Policy Lead for Business Development: Councillor Math Campbell-Sturgess 23rd July 2025 For further information contact: Fergus Murray, Head of Development and Economic Growth Tel: 01546 604293 and e-mail: fergus.murray@argyll-bute.gov.uk Ishabel Bremner, Economic Growth Manager Tel: 01546 604375 and e-mail: ishabel.bremner@argyll-bute.gov.uk Kevin Grant, Senior Development Officer, UK and External Policy Team Tel: 01546 604491 and e-mail: kevin.grant@argyll-bute.gov.uk
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APPENDICES Appendix 1: Argyll and Bute Economic Development Subsidy Scheme, Scheme Document (draft) Appendix 2: Argyll and Bute Economic Development Subsidy Scheme, Principles Assessment (draft)