Dominic Cummings’s free-for-all on state aid may mean it’s No Deal
Dominic Cummings wants a minimalist post-Brexit state aid regime without a statutory UK regulator, according to a report this week in the Financial Times. His plan would allow the British government, as well as devolved administrations, to subsidise companies without a national or international framework overseeing them.
There would instead be a non-statutory “watchdog-type body” to “provide ‘persuasive force’ in the event of any egregious behaviour.” In essence, it would be a a quango with no teeth.
Cummings, the Prime Minister’s main adviser, has long had an appetite for government subsidies, particularly to companies conducting scientific research. He blogged last year that these subsidies “would create powerful self-reinforcing dynamics that would give Britain real assets of far, far greater value than the chimerical ‘influence’ in Brussels meetings rooms.”
His rejection of regulatory oversight will be greeted with open hostility in Brussels, however. The EU is adamant that the UK should sign up to some level playing field provisions, including a state aid framework, to prevent unfair competition. Theresa May’s withdrawal agreement adopted the provisions in their entirety, but they were negotiated away by Boris Johnson. The matter has since been a major sticking point in trade talks.
Brexiteers believe that the EU’s position is deeply discriminatory to Britain. “The Canada-EU deal is a framework to use. They didn’t have to sign up to a level playing field,” a Conservative backbencher told Reaction. But Canada did agree to have shared oversight of subsidies. “There is a permanent, state-controlled arbitration system,” said Pieter Cleppe, an EU policy analyst.
“I think people in the UK should look at this again,” Cleppe added. “If you think it through, there’s an intense trade between Britain and mainland Europe. If you want to protect that trade, some kind of agreement not to subsidise each other’s competitors seems the obvious thing to agree. Otherwise France can suddenly start subsidising competitors when they export to Britain. It wouldn’t work properly.”
Britain’s geographical and economic proximity to the continent means the prospect of unfair competition looms much larger in UK-EU trade talks than it did in the EU’s talks with Canada or Japan. The consequence is that, if Cummings’ plan is a serious proposition, it will likely ensure a no-deal Brexit.
“The Cummings plan would be unlikely to allow a subsidies dispute resolution mechanism that would be robust enough for the EU to accept”, said a source from the former Department for Exiting the EU.
It could also damage the Union. The Internal Market Bill states that Westminster can impose a state aid framework “should it decide to do so”. Cummings’ plan would allow devolved administrations to impose their own subsidy regimes. In a plausible scenario, the SNP could unfairly subsidise Scottish businesses over their English competitors.
There are also problems for Northern Ireland. The Prime Minister agreed in his withdrawal agreement renegotiation to allow Northern Ireland to continue to follow EU level playing field provisions. A move to fully diverge from the EU’s rules would therefore mean diverging from Northern Ireland, requiring extra checks on goods crossing the Irish Sea.
For these reasons, it is difficult to believe that the UK would in reality adopt a free-for-all approach to state aid. Instead, this leak is likely to be a negotiating ploy.
The more likely outcome is that the UK ends up somewhere in the middle, with the EU’s level playing field as a default and negotiated carve-outs for sectors of specific interest to Downing Street, such as science.
Either way, this looming row demonstrates how high the stakes will be in the final stages of the negotiations.