8. To ask the Scottish Government in what circumstances it would provide support to a business in situations where legal advice stated that doing so could breach state aid rules. (S6O-01117)
European Union state aid rules included a comprehensive pre-approval process to ensure compliance prior to any aid being given by Scottish ministers. Interested parties could challenge any award with the European Commission to determine whether any support should be deemed as illegal aid. Sole competence on illegal state aid sat with the European Court of Justice.
By contrast, the new United Kingdom subsidy control regime lacks legal certainty, as it does not have a pre-approval process, despite Scottish ministers advocating for that. The absence of such a process increases uncertainty for granting authorities, making the potential for challenge more likely, which has a detrimental effect on business support. The Scottish Government would, of course, seek to act lawfully at all times, including when providing support to businesses.
In recent weeks, a national newspaper reported sources alleging that the Scottish Government had been advised that its deal with the GFG group for the management of the Lochaber smelter could be in breach of state aid rules. Although the Scottish Government has asserted that the arrangements are not in breach of the rules, it has not addressed the core point on whether advice to that effect had been received, and a risk highlighted. Can the minister give a clear answer on that point? Did the Scottish Government receive advice at any stage that the arrangements that were made with the GFG group might violate state aid rules or otherwise create a legal risk for the Government in its management of the facilities at Lochaber? If so, why was that advice ignored?
The Lochaber guarantee is compliant with EU state aid rules and was approved by the Scottish Parliament Finance and Constitution Committee. The Scottish Government received independent advice in 2016, showing that the fee charged to GFG was on market terms and that the transaction overall was state aid compliant. The guarantee is compliant with EU state aid rules, because it contained no subsidy and therefore did not require EU approval. The actions taken by the Government have, of course, ensured that the operation in Lochaber continues to operate and provide jobs to people locally.