EUROPEAN COMMISSION CONSULTATION ON DRAFT GUIDELINES ON REGIONAL
STATE AID FOR 2014 – 2020.
CONSULTATION REPSONSE FROM THE HIGHLAND COUNCIL, SCOTLAND.
The Highland Council welcomes this opportunity to contribute to the discussion on proposed
reforms to Regional Aid guidelines (State Aid) for the 2014-2020 programming period.
Highland Council recognises and supports the Commission’s aim of achieving greater
efficiency and effectiveness of Regional Aid and in ensuring that such assistance is used to
deliver positive development in addressing economic disparities within both member states
and the EU. In light of this the Council is of the opinion that the current proposals focus too
much on reducing aid and too little on promoting territorial cohesion and ensuring that
Regional Aid is use to assist deliver the EU2020 objectives.
The consultation document is extremely detailed and to bring focus to the Council’s
response, this submission will highlight four key points that are priorities for Highland in that
they have the potential to address permanent handicap and promote economic development
in our region; a region where GDP remains below the average of the European Union; percentage population coverage for regional aid; the application of population density criteria
at NUTS 2 and /or NUTS 3 level; aid to large enterprises in (c) areas and retaining maximum
permitted aid levels for SME’s.
Percentage Population coverage.
The Council welcomes the recent announcements by Commissioner Almunia indicating that
population coverage in the revised guidelines will remain at 45%, rather than the 42%
indicated in the draft proposals. This will offer member states necessary flexibility to address
development needs in their own territories and to better act to tackle difficulties resulting
from the unprecedented economic conditions that have emerged over the past five years.
Low Population Density Regions
On low population density areas, the Council is of the opinion that the threshold for low
density should apply at NUTS2 level. Applying the population density threshold only at
NUTS3 level provides only partial coverage of the Highlands & Islands when the whole
region suffers the development handicap and higher costs associated with low population
density. Small pockets of higher population density within this large NUTS2 region do not
materially change the development challenges of the whole. Applying the 12.5 person per
square kilometre population density threshold at NUTS2 level will allow a coherent, region
wide response to the development issues of a large, sparsely populated, insular and
peripheral region.
Aid to Large Enterprises
Investments by large enterprises play a key role in the development of regions like the
Highlands, often acting as significant drivers of economic growth. Furthermore, many
investments by large enterprises in regions like Highland are of SME scale and as such have
little distortive effect on trade. Experience to date, shows that such investments are often
dependent on the availability of an aid incentive to offset the higher development costs
associated with “classic” Article 174 regions like the Highland. (mountainous, insular,
sparcity of population and peripheral). Therefore, to assist the future development of such
regions, the Council requests that both regional and operating aid to large enterprises
continues to be eligible in 107 ( 3 ) (c ) areas.
An inability to offer aid to large enterprise investments may undermine attempts to secure
major business investment for the region and will undermine development efforts in the
region. It will constrain the region’s contribution to meeting EU2020 objectives. Highland
and the wider Highlands & Islands has major renewable energy potential which will only be
realised with extensive investment, much of this likely to come from large enterprises
The Council recognises the concerns of the Commission on support for large enterprise and
the negative impact it can have on competition. However, the Council believes that any
potentially distortive impact of such investments can be mitigated through rigorous
assessment of the “incentive” effect of aid. The assessment of additionality is currently and
should remain an integral part of any development funding appraisal process.
Aid Levels for SMEs
Highland Council supports the retention of the 40/30% SME aid levels. This will enable a
flexible response by public authorities to incentivise SME investment and that the scale of
such investments entails little risk of market distortion. The flexibility of the current aid levels
is particularly necessary in current circumstances to encourage business investment in
regions such as Highland with any reduction in aid intensities raising the spectre of
insufficient incentives being available to impact on investment decisions.
I trust that the comments above both find favour and prove useful in consideration by the
Commission on future Regional Aid Guidelines. Should you wish further clarification on the
points raised, please do not hesitate to contact, Mr Gordon Summers, Principal European
Officer, Chief Executive’s Office, Glenurquhart Road, Inverness IV2 5PW
[email protected] or telephone 00 44 (0)1463b702508.