Cities and regions need state-aid rules to be simplified and greater legal certainty for public services

kr1The impact of the EU's state-aid controls on local and regional public services was the topic of a draft opinion adopted by the members of the Commission for Economic Policy (ECON) of the European Committee of the Regions (CoR) at their external meeting in Krakow on 21 June. Markus Töns, who drafted the report, is calling for a simplification of state-aid rules, legal certainty and more flexibility for local and regional authorities. He is also advising that social public services should not be subject solely to competition and market rules.

Public services, also called services of general economic interest (SGEI), play a prominent role in growth and employment and are often the condition for further public and private investment. Local and regional authorities are central actors in ensuring that SGEIs meet the standards and quality demanded by citizens. The opinion argues, however, that EU law governing state aid in relation to SGEIs has become too detailed and complex often hampering the regional and local authorities' effort to ensure sustainable public services for their citizens in a timely manner.

"In particular, smaller local and regional authorities lacking the resources and capacity to follow developments at the EU level. This prevents them not only from making their voices heard in the on-going debates, but also from taking advantage of the special conditions available for SGEIs under the EU state-aid rules. We must not forget that local and regional authorities are heavily affected by state aid rules and reforms like the general General Block Exemption Regulation or the Almunia package ", said Markus Töns, who is a member of the North Rhine-Westphalia regional assembly.

Mr Töns calls for further reduction of red tape, more guidance and coordinated procedures from the European Commission and the Member States and for more dialogue. He also suggests that public investment should not be limited to competition principles and criteria of economic efficiency, especially when dealing with social services.

However, he welcomes the European Commission's move to recognise that public aid for local infrastructure or services would have very little impact in other Member States and only marginal effects on cross-border investment. Following the 'notice of the notion of state aid' this means that they do not fall within the scope of EU state-aid rules and do not need prior authorisation.

"In my experience, the vast number of SGEIs at local level are measures with purely local effect. What we still need is more legal certainty for local and regional authorities when deciding which activities they can support without breaching the rules. This includes further objective criteria as well as a limitation of the appeals period to five years, which should only be lodged by parties directly financially affected," said Mr Töns.

In addition, members of the ECON commission suggest that European state-aid schemes should move towards giving local and regional authorities more discretion over the conceptualisation of SGEI. The definition of SGEIs needs to reflect new developments and social services such as assistance to refugees or digital infrastructure, as well as a wider definition of social housing. They also hope that future international agreements that aim at market liberalisation will guarantee the exemption of SGEIs and will not prejudice the right of the EU, its Member States and their local authorities to themselves regulate or to provide services themselves.

The members of ECON also adopted opinions on the European Deposit Insurance Scheme and the Action Plan on VAT. All three opinions will be submitted for adoption to the CoR plenary session in October 2016.

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