Yorkshire council leader fears new post-Brexit business subsidy scheme could widen inequalities

Business Secretary Kwasi Kwarteng announced plans for a long-term replacement to the European Union's state aid regime, signalling a break away from Brussels' rules post-Brexit.

It is hoped the new scheme will allow the UK to be more dynamic in helping businesses, and that it will encourage job creation and growth.

Local authorities, public bodies and the devolved administrations will be able to decide if they can issue subsidies to businesses, following UK-wide principles, under the plans.

But two political leaders in South Yorkshire have called for more detail as the Government consults with businesses and the governments in Scotland, Wales and Northern Ireland on the proposals.

Ministers say the changes will not be a return to the 1970s approach of government trying to run the economy or bailing out unsustainable companies.

According to the Department for Business, Energy & Industrial Strategy, pre-Brexit public authorities had to follow a bureaucratic, detailed set of EU controls and may have needed prior approval from the European Commission before providing vital funds to viable businesses or pursuing key domestic policy objectives.

Mr Kwarteng said: "This is a significant milestone on our historic journey as an independent, sovereign nation. Our new, more flexible system will empower public authorities and devolved administrations, and ensure fair competition for businesses across the UK.

"Now we have taken back control of our money and laws from the EU, we want to use our newfound freedoms to propel the UK to the forefront of innovation and help create the jobs of the future, while also making the UK the best place to start and grow a business.

"With a modern, tailored approach to supporting businesses, we will also be able to press ahead with our long-term ambitions to tackle climate change and to level up opportunity as we build back better from the pandemic."

Chris Read, Labour leader of Rotherham council, said he wanted to know if councils were still expected to fund themselves by the business rates of the firms they are being asked to subsidise.

He said: "This was always part of the problem with the localised business rates scheme, places with a strong economy could afford to give discounts to new businesses and make their economies even stronger, a virtuous cycle of investment and revenue, whilst those with relatively weak economies, like us, would have been placed at even greater disadvantage, potentially widening the gap.

"Of course there are various sorts of business subsidies already in existence but you have to be really careful how you create and fund those incentives otherwise you create opportunities for nepotism at best, and worsen fundamental economic inequalities at worst."

Dan Jarvis, Mayor of the Sheffield City Region, said: “Government support to help businesses grow and create jobs is welcome and urgently needed as the country looks to recover from the COVID pandemic, however we need to see the detail before drawing firm conclusions.

"In South Yorkshire, we have a strong record in attracting world-leading companies to our region and have a pipeline of firms who want to locate here. We’ve achieved this because investment decisions were taken by local leaders for our communities and businesses.

“Rather than letting Metro Mayors and local leaders take back control, funding and powers are being clawed back into Whitehall. The £4billion Levelling Up Fund announced in last year’s Spending Review will be controlled by Ministers in Whitehall, and local authorities will have to compete against each other for limited, one-off pots of funding.

"It’s clear that we cannot level up the North and attract new investments into regions when decisions are being made centrally in Westminster. This needs to change as a matter of urgency.

"If there is a real desire and willingness to level up the North, then powers and resources must be given to Metro Mayors and local leaders, who know their businesses and communities best.”