UK’s Subsidy Control System Looks Great, But the Devil’s in the detail

The UK government provides subsidies through financial help, for example, loans, grants or tax credits. Several sectors benefit from the government’s generous financial incentives, from health insurance to technology, housing, education, electric vehicles, and sustainable solutions.

In 2020/21, around £258 billion was spent on grants, representing about 23% of all spending by the UK government. The increased government spending on subsidies has been the cause of much hue and cry over the years. Regardless, the trend has continued to see an upward trajectory, with the UK government borrowing jumping to £20bn in September.

However, the introduction of the Subsidy control system in the latter part of October, which will come fully into force on 4 January 2023, seems to be an attempt at controlling the cost of subsidies which have been spiralling out of control in recent years.

The subsidy control system comprises a set of regulations to control the amount of money that goes towards subsidies and ensure that the money is spent in a way that is most beneficial to the economy and the UK citizens. 

Will the subsidy control system succeed?

Gareth Smythe – the CEO of Hilton Smythe a firm specialising in business sales; has put forth his two cents on the matter and expressed reservations:

“Whilst this looks like a fantastic scheme that will allow devolved administrations and local authorities to deliver subsidies to local businesses, the devil is always in the detail. If the scheme operates anything like some of the COVID assistance that was left to local authorities to manage, the scheme could be little more than a news headline. Some local authorities were poor at making businesses aware of grant entitlement during COVID; from our experience, some authorities even made it difficult for businesses to obtain. Hopefully, the government will ensure the regime gets to businesses that benefit through a proactive effort rather than a silent benefit that only a few hear of.

In a Nutshell

The impact of this new system is yet to be fully seen, but if successful, it could help to save the government millions of pounds every year, which could be used to fund other essential services. It could also help to level the playing field between large and smaller businesses, as the latter are often at a disadvantage when claiming subsidies. Only time will tell whether the new subsidy control system will be successful, but it is undoubtedly a step in the right direction.

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