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What are the EU rules about state aid?

 |  May 21, 2019

By Reality Check team, BBC News

Trade unions have been calling for the government to help British Steel, which has asked for emergency financial support.

Labour leader Jeremy Corbyn has previously said that Brexit could be an opportunity to pump more cash into British industry.

He said that European Union (EU) rules restricted so-called “state aid”, so Brexit could make it easier for the British government to support the British steel industry.

But other EU member states, such as France and Germany, spend far more than the UK on state aid despite also signing up to the same single market rules, so are they really an obstacle?

And leaving the EU may not mean an end to rules.

Other state-aid restrictions would be likely to apply to post-Brexit Britain, such as World Trade Organization rules and the terms of any future trade deal with the EU.

What is state aid?
State aid is financial assistance given by the government to companies or other organisations that has the potential to distort market competition.

The aid can be in the form of direct cash grants or indirect aid – such as preferential borrowing rates or tax credits.

Under EU rules, member-state governments are allowed to provide state aid only with approval from the European Commission.

For example, in 2015 the UK government submitted plans to provide a subsidy to Drax power station to convert one of its units from coal to biomass fuel.

Following an investigation, the commission ruled in favour of the scheme.

There are exceptions to the rules. For example, governments can provide aid for broadband infrastructure without prior approval. And aid worth less than 200,000 euros (£175,000) over three years is exempt.

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