The European Commission last week gave its approval to the Government’s temporary business energy support scheme, the major measure in Budget 2023 that set aside a reservoir of €1.2bn for energy bill subsidies. The European approval means that the taps can be opened on this much-needed support.
The reason European approval was needed in the first instance is because of the infamous state aid rules. These provide that an EU member country cannot give companies within their territories any support which might confer an unfair advantage over a similar operation in another EU country.
State aid approval is a cumbersome bureaucratic process and can look unfair. These difficulties were uniquely highlighted in the €13bn state aid tax case concerning Apple’s operations in Ireland which, after more than six years, is yet to be finally concluded.
Even if the state aid rules may seem to thwart Government policy, adherence to the rules is part and parcel of the cost of doing business with a block of (by and large) like-minded countries. Up until relatively recently, the trend was towards co-operation and simplification in trade and regulation between countries.
But, even before the pandemic and the increased East-West tensions, of which the illegal attack on Ukraine is the worst example, the atmosphere of co-operation was beginning to dissipate.
Elements of the EU-Canada Comprehensive Economic and Trade Agreement (Ceta) are being implemented, but the final ratification process, as highlighted in the recent Supreme Court case taken by Patrick Costello TD, is not yet complete.
The OECD-sponsored agreement on the taxation of large multinational companies is being held up on many fronts, not least because it needs a high degree of trust among revenue authorities. A proposed trade agreement between the EU and the US, known as the Transatlantic Trade and Investment Partnership, has unravelled completely.
And, of course, Brexit has been the most stark rejection by any country of cross-border co-operation among trading partners.
The continuing development of cross-border cooperation within the EU itself is notable if only because it bucks this trend.
It was often difficult to see if the constraints like state aid rules and tariff and pricing arrangements were generating any real economic benefit, and thus improved living standards.
However, growth forecasts from the OECD published last week seem to suggest that, while the outlook for most developed economies is not tremendous, Britain seems to be faring less well than might be expected. It is impossible not to conclude that its self-imposed constraints on trade with the EU post Brexit are more in the nature of a levy on its economy rather than a Brexit dividend.
If, as it seems, adherence to EU rules does deliver some trading payback, it can also provide the Irish Government with some political cover to refuse funding demands for various sectoral interests. It is easier to blame the EU Commission than the parsimony of the Irish Cabinet. In the case of the temporary business energy support scheme, the delay in its implementation up to now has been the main problem.
Now that scheme is fully up and running, all businesses which had been affected by the surge in energy costs should make a claim.
As with all Government subsidies, terms and conditions apply. One particular item to watch for is that any monies received are not tax-free. The cash flow benefit of the energy subsidy far outweighs this longer-term concern.
- Brian Keegan is director of public policy at Chartered Accountants Ireland