- The value of the subsidy is £75 million. The purpose of the subsidy is to enable BMW to modify its plant in Oxford, for the purposes of producing new electric MINI models.
- Our key takeaways from the Subsidy Advice Unit (SAU) report are:
- DBT failed to demonstrate the existence of positive and negative externalities (core to DBT’s market failure case) and failed to identify any equity objective. As per Principle A, subsidies must seek to address one or the other.
- DBT only explored one alternative instrument for the purposes of Principle E – a commercial loan. The assessment would have benefited from further consideration of alternative options for addressing the policy objective.
- DBT could have explained in more detail how the counterfactual was selected (and evidenced that selection).
- DBT could have explained how certain claims made by BMW (presumably relied upon by DBT) were assessed to be credible.
- The assessment would have benefited from further explanation as to how mechanisms described as ensuring proportionality (e.g. ringfencing, clawback and penalty provisions) actually show proportionality.
- DBT should have considered the Statutory Guidance in more detail, and applied that guidance, when explaining how the subsidy is designed to minimise negative effects on competition and investment. There are “significant areas for improvement” in this regard.
- Finally, turning to Principle G (the balancing exercise), DBT could have explained how the claimed positive effects of the subsidy relate to the stated policy objectives. DBT could also have included “a more systematic consideration of negative effects” of the subsidy.
Department of Business and Trade, BMW
Posted in Subsidy Advice Report Tracker.
