Levelling up the UK: the role of state aid

Covid-19, rising unemployment and discussions around the recovery have taken up most of the news recently, with only occasional reports about Britain’s negotiations with the EU.  

Yet with 10 weeks to the end of the transition period and not a deal in sight, talks appear to be stuck on what kind of rules for state subsidies the UK will follow from January 2021: its own new regime, EU rules or WTO rules. 

Workers and businesses across the UK need the government to secure a good trade deal with the EU that supports local jobs and businesses.  

This should be based on a level playing field that ensures employment rights for UK workers remain in line with those in the EU. 

That’s why the TUC is publishing a new report, which sets out how a new state aid regime can both be compatible with that aim and support industrial policy - and the communities that are set to suffer most from the UK’s exit from the EU. 

Trade unions would welcome government intervention along five broad principles: 

1) Support decent jobs through social clauses in public procurement. 

Government should use procurement to support jobs by:  

• identifying opportunities in advance,  

• building capacity to bid and deliver through the supply chain, and 

• using intelligent, social value procurement to secure employment, labour standards, skills and environmental outcomes. 

In addition to promoting good employment standards, social value procurement has been used by some councils as part of a strategy to develop local economies.  

Community wealth building initiatives by councils such as Salford, Newham and Preston have sought to maximise procurement spend across public bodies in their local area to help develop local supply chains.  

We need the government to actively encourage and facilitate these initiatives to deliver on its commitment to level up the country. 

2) Promote accountability through transparency. 

Given the scale of government outsourcing, it is concerning that neither the Cabinet Office nor the Treasury have reliable or complete data on contracts in Whitehall.  

No consolidated data exists for the NHS, local government or the devolved administrations.  

We recommend the creation of a central repository of contracts to ensure the system is at arms-length from politicians who can have competing visions and a tendency to fall hostage to political pressure.  

And a new report from the Institute for Government views a state aid regime in the national interest because it would help ensure good value for public money and limit the risk of harmful ‘subsidy races’ in the UK. 

3) Use strategic funds in support of regional development, decent work and employment standards with a key role for trade unions. 

We welcome the government’s commitment to maintain EU structural and investment funding levels through the UK Shared Prosperity Fund.  

As a minimum, the government should commit to continuing the current total allocation, ensure that any change in formula does not result in a real term reduction in money to any area and adopt a social partnership approach to administering and monitoring the Fund. 

Criteria for the allocation of funding should focus on decent work - with demonstrable workforce impacts around employment standards, pay, wellbeing, skills and workers’ voice. 

4) Target support for industries and companies and their long-term development - with conditions attached. 

The government has already played a vital role in keeping businesses from going under and saving jobs - and the TUC understands the importance of government support for business at this critical time.  

It is imperative, however, that this support leads to changes in corporate practice.  

Government support must be conditional on businesses supporting decent jobs, recognising unions and contributing to the UK economy and tax base. 

Bailouts for companies should be delivered in a way that enables the government to influence corporate behaviour, by taking equity shares in exchange for its support.  

This would help ensure that company resources are used responsibly and fairly. 

5) Get a trade deal that benefits jobs by maintaining a level playing field with the EU. 

The UK government should prioritise securing a good trade deal that supports jobs and businesses, based on a level playing field that ensures UK employment rights remain in line with the EU.  

A progressive state intervention in support of jobs, businesses and inclusive growth is compatible with a trade relationship based on a level playing field, and this should be the priority of the UK government - particularly given the uncertain state of our economy. 

We can build back a better economy with decent work at its heart.  

The government should negotiate a good deal with the EU that helps us make that a reality.