RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/EEC/33
10 April 2002
(02-1934)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1 Regarding the
Updating Notification of the EUROPEAN COMMUNITIES
(United Kingdom2)
The following communication, dated 9 April 2002, has been received from the Permanent
Delegation of the European Commission.
_______________
Advanced Technology Programme   
Q1. Is the amount budgeted an annual amount, a per project amount, or a per recipient
amount?  Does this amount vary?  If so, how does the amount vary?
Q2. You note that the programme will continue until the completion of existing projects.
When is that expected?
Q3. In what industries are there currently on-going projects?
Reply
This scheme has no live projects.
Business Connect Wales
Q1. You noted the means through which the funding under this programme is provided;
however, you failed to note to whom the funding is provided.  Can you please provide
information on the types of industries or companies eligible to receive funding under thisprogramme?
Reply
Funding is provided to Business Connect Wales Ltd only.  This is a company, limited by
guarantee, set up by the public sector partners of the Business Connect network - Welsh Development
Agency; Education, Learning Wales; Local Authorities: Enterprise Agencies; and the Welsh
Assembly Government (formally the National Assembly for Wales or Welsh Office).  The monies are
                                                     
1 G/SCM/Q2/EEC/30
2 G/SCM/N/60/EEC/Add.15G/SCM/Q2/EEC/33
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used to provide strategic management and coordination of the business information, advisory and
other support functions provided by Business Connect network in Wales.
Q2. Who develops the funding contracts under which funding is provided?
Reply
The development of the contracts is carried out by the partners shown in the answer to
question 1.
Q3. You noted that the form of the subsidy was ‘support...’  It is unclear whether this
support is in the form of a grant, a loan, interest subsidies or another form.  What exact formdoes the support take?
Reply
The "subsidy" is a grant to the Business Connect Wales Ltd
Civil Aircraft Research and Demonstration Programme
Q1. What are considered eligible uses for the funding under this programme?  How are
eligible uses decided?
Reply
CARAD is a national programme of grant-support for industry-led (and initiated) pre-
competitive research projects involving collaborati ons between industry, research organizations and
higher education institutions in core technologies underpinning large civil aircraft manufacture.
[Note: near-market research whose primary objective is development of a specific product or process
for commercial sale or use is not supported.]
Areas of research supported are: aerodynamics ; propulsion systems; advanced materials and
structures; aircraft systems.  For each project application precise reasons are required to justify the
incentive effect of the aid provided to non-SME [Small and Medium-Sized Enterprises] companies.For example, what would the CARAD grant cause to happen that would not otherwise occur, either
directly or by changing the climate of the fram ework in which businesses conduct their innovation
activities? and indicating for example, how and why the market is failing to take up the research
opportunity on its own and why it is important for the work to be carried out at all, and why other
sources of funding are not available to  the project.
CARAD is an open programme, i.e. it is responsive to applications against the scheme criteria
for support noted in the response to question 1 above.   Overall direction and prioritisation of the
Programme is determined by the Department of Trade and Industry after consultation with the sector,
including industry, research organizations, HEIs a nd other Government Departments, in the light of
national priorities.
Cardiff Bay Development Corporation
Q1. What industries are eligible to receive aid under this programme?  What are the
eligibility requirements?G/SCM/Q2/EEC/33
Page 3
Reply
All grants offered were property-related, and were essentially:
- Urban Investment Grant or  UIG (a developer's grant)
- Rent relief (for end users)- Conversion & Improvement Grants (for end-users)
- Amenity Grant (for environmental improvements)
All sectors, EXCEPT retail, were eligible to receive the first three types of grant above.
However, any business, including retailers could ap ply for amenity grants (e.g for stone-cleaning &
other improvements which had a value to the area/general public, not just to the business /property
owner).
Main eligibility criteria (except for Amenity Grant) were job creation or job safeguarding, and
investment in the designated area.
Q2. Is aid under this programme contingent in an y way on a firm’s intention to export its
product out of the area?
Reply
Grant aid was not in any way contingent on export potential.
Q3. How is it decided whether the grant must be repaid on the sale of capital assets, which
were acquired using the grant?
Reply
Clawback provisions were part of every grant offer.  They were usually time-related e.g. a
business had to agree to trade & create employment in the UDA for a minimum number of years,
otherwise the grant was 100 per cent repayable.
However, only UIG resulted in a capital asset being created using grant money.  The UIG was
supposed to fill the gap between higher development costs and the estimated lower end-value of thedevelopment (e.g. building on landfill/poor sites incurring additional build costs) which meant
development was not commercially viable without grant.
If the developer sold the development, UIG was repaid according to a formula which took
account of the current value of the development, and the proportion of grant/total development.
This UIG clawback was triggered by sale of the asset in a specified period, or, if no sale
occurred, at the end of the period a new valuation was undertaken and clawback was calculated using
that (i.e. a sale was deemed to have occurred).
In its lifetime CBDC did clawback grants in all the above categories.
Company Development Programme
Q1. Can you please clarify what an LEDU growth company is?G/SCM/Q2/EEC/33
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Reply
A LEDU growth company can be defined as a company in the manufacturing or tradeable
services sector with normally fewer than 50 employees and which is actively growing.
General Industrial Collaborative Projects
Q1. You noted that the funding under this programme “may” be on a tapering basis per
year.  Can you please explain what factors determine whether funding is on a tapering basis per
year?
Q2. Is the amount budgeted an annual amount, a per project amount, or a per recipient
amount?  Does this amount vary?  If so, how does the amount vary?
Q3. You stated that there was no expected termination date.  If funding is on a tapering
basis per year, and if no new applicants have been accepted since September 1993, it would
seem that there would be a specific time period when the funding would essentially end.  Canyou give an estimate of that time period?
Reply
There remains only one “live” project for this scheme and that ended on 28/02/2002.
Highland Equity Capital
Q1. When was the one investment made?
Reply
September 1997.
Highland Opportunity Limited
Q1. In what way is the loan linked to free technical and business advice?  Is this advice
provided by the State or by private companies?
Reply
The loan applicant is interviewed by a business counsellor to establish the commercial
viability of the applicant's proposal.  Sometimes , for example with fishing industry applicants, a
technical advisor will review the proposed fishin g equipment for suitability to the business proposal.
This advice is provided through Highland Opportunity staff or consultants.
Q2. How is the discretionary interest rate determined?
Reply
The discretionary interest rate for loans is decided by the Board of Directors, and as a general
rule it is set at a level below the prevailing commercial bank lending rates.  At present the
discretionary interest rate is 5 per cent per annum of outstanding amount. In the special case of
Employment Loans, where no more than 25 per cent of total funding is State Aid, the loans are
awarded interest-free as part of the Highlands and Islands Special Transitional Programme within the
European Regional Development Fund.G/SCM/Q2/EEC/33
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Q3. Is the amount budgeted under this programme an annual amount, a per project
amount, or a per recipient amount?  Does this amount vary?  If so, how does the amount vary?
Reply
The amount budgeted is an annual amount which varies according to receipts, write-offs and
expenditure to leave an amount available for lending.
Home Shipbuilding Credit Guarantee Scheme
Q1. Do the shipowners pay a premium or some other form of fee to become part of this
programme?  If so, how is that determined?
Reply
Owners pay a predetermined guarantee fee of 2/3 per cent for loans of 8.5 years or less, 0.8 per cent
for loans of more than 8.5 years up to 10 years, and 1 per cent for loans of more than 10 years up to
12 years.
Industrial Development Board (IDB) - Property Development Agreement
Q1. Is the outcome of the property development agreement a grant that is provided to the
property developer?
Reply
Yes.  Discretionary financial support is paid to the property developer and will be negotiated
on the basis of a “shortfall contribution” representing the demonstrated difference between the
developer’s total development costs and the current market value of the completed building.
Q2. You say that the programme intends to provide assistance for private sector property
developers.  Are the buildings then leased or pu rchased by the IDB?  Or are they purchased or
leased by separate companies?
Reply
IDB has not leased or purchased any of the buildings completed under the PDA scheme.
Normally the buildings are purchased or leased by the client company and in speculative builds under
the PDA scheme if no tenant found during the 5 year control period the developer can retain the
building or sell it on.
Leader II Programme in Wales
Q1. Has this programme been terminated?
Reply
The payments position for Leader II is the same as any other 1994-99 programme - sponsors
are permitted to claim for expenditure defrayed up to 31/12/01.  Sponsors then have until 31/03/02 to
get audit certified claim forms to us. However, no projects could have been approved after 31/12/99.G/SCM/Q2/EEC/33
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Link Initiative
Q1. Are there specific industries, which are targeted under this programme?  Or are all
companies in all industries eligible to apply for benefits under this programme?
Reply
The answer is that "all companies in all indus tries are eligible to apply, including foreign-
owned companies".
LEDU Selective Financial Assistance
Q1. How is it determined whether the aid und er this programme will take the form of a
grant, loan, or equity?
Reply
By negotiation.
Q2. How is the ‘minimum amount necessary  to ensure that the project can succeed’
determined?  If the project fails on initial try, will more financing be provided to ensure that itsucceeds?
Reply
No.
Q3. On what terms are loans offered under this programme?
Reply
Government Concessionary rate.
Q4. Must each recipient of aid under this progra mme repay the aid (in the case of a loan) in
a certain time period?
Reply
Yes.
Q5. Is there a maximum amount of financing over which LEDU will not provide?
Reply
Not more than 40 per cent of costs.
Q6. You state that the programme is “-  targeted on new projects which have the prospect of
viability, and on existing businesses which can demonstrate that they are export orientated,
provide a substitute for imports, offer a novel pro duct or service and/or satisfy an unfilled local
market opportunity.”  Therefore, this programme appears to meet the criteria of Articles 3.1(a)
and (b) of the SCM Agreement.  What are your plans for phasing out this programme?G/SCM/Q2/EEC/33
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Reply
None at this time as the need for this programme still exists
LEDU - Buying Time
Q1. Is the government involved in the restructurin g of the business as it ‘buys time’?  If so,
in what way and to what degree?
Reply
Yes - Liaising with the firm and othe r private sector sources of finance.
Q2. Is the total amount budgeted an annual amount?
Reply
Buying time budget approx. £100,000 per annum in total.
NETS (New Entrants Training Scheme)
Q1. It is unclear from the programme notification whether the funds from this programme
are provided directly to the new entrant, or to the Countryside Agency which then would use
the funds to run the programme.  Could you please clarify exactly to whom the funds are
provided?
Reply
The Countryside Agency as part of its grant in aid from DEFRA uses the funding to run this
New Entrants' Training Scheme programme of craft training.  The funds are not provided directly to
the new entrant ie the apprentice.  The assistance is  in the form of a structured rural apprenticeship
which fills a gap in national training provision.   The Countryside Agency therefore grant aids
external training providers to train apprentices employed by small rural firms working in a number of
targeted *crafts and rural trades and who are located in the English countryside.  The grant in aidcovers the cost of the tuition, materials, skills assessment and the reimbursement to the apprentices of
their travel and accommodation costs whilst away being trained.
NB The Countryside Agency will be withdr awing support for the NETS programme in
March 2004.
*  We target those craft and rural trade sectors that are either small and hence vulnerable or
where access or the suitability of training is difficult for young people working in small firms located
in the more remote parts of the English countryside. Trades include thatching, wheelwrighting,
blacksmithing, woodworking, furniture making, tr aditional upholstery, saddlery and agricultural
engineering.
Q2. You say that this programme takes the form of ‘direct assistance.’  Does this mean that
the funds are provided in the form of a grant?
Reply
Direct assistance means that it is the training th at is provided directly to small firms and their
apprentices - not funding.  Funds are provided by the Countryside Agency to the external trainingG/SCM/Q2/EEC/33
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providers to deliver the New Entrants Training Scheme directly to the apprentices and other
employees of small rural firms working in the crafts and rural trades.   Small firms receive no direct
grant in aid, they benefit from the higher level of skill and productivity gained by their apprentices as
a result of their training on the NETS craft training programme.
Offshore Supplies and Service Company Assistance for Research
Q1. Are the SMEs which receive assistance under this programme allowed to market or
otherwise profit from the new developments which are made using the funds under this
programme?
Reply
The SMES receive the assistance to accelerate development work and so bring to market
sooner the products or services arising from the work of the project.  They are expected to market the
products or services.
Q2. You note that the maximum support is 50 per cent.  How is the amount that each project
will receive determined?  Can companies continue to receive funding on a yearly basis?
Reply
Part of the appraisal process is a negotiation of the minimum amount which will cause the
project to proceed.  Contributions are generally lower than the 50 per cent limit.  Companies can re-
claim the agreed percentage of their expenditure onc e they can confirm that the costs have been paid.
Generally claims are presented after periods of three months until the project is completed.  The grant
is a contribution towards the costs of the specific project and only the costs related to the project areacceptable.
Q3. Are companies which receive funding under this programme required to work with
other companies or institutions to research new developments?
Reply
No.  Companies are encouraged to do so and it is considered to be a positive aspect of any
application if collaboration with other companies or with research organisations (eg Universities) is
included, as long as it can be justified as part of the project.
Regional Enterprise Grants for Innovation (RIG Only)
Q1. Can you please clarify what is meant by the phrase that the programme “requires
evidence of additionally”?
Reply
RIN is, as the report states, part of SMART Wales together with the SMART and SPUR
schemes.  Additionally is required for SMART and SPUR but not for RIN. In the context of regional
grants "additionally" means that we require evidence that the project could not proceed without a
grant.G/SCM/Q2/EEC/33
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Regional Selective Assistance in Great Britain
Q1. Is this scheme used to entice companies or industries to locate or build in certain areas
of Great Britain?
Reply
RSA is used to encourage investment in capital and employment in disadvantaged regions of
Great Britain. All projects must meet the criteria of the scheme.
Q2. Is there a limit to the amount of funds a firm may receive under this programme?  If so,
what is that limit and how is it determined?
Reply
The amount of grant that can be awarded under the scheme is subject to the limits set out in
the Commission's Regional Aid Guidelines.
SCEEMAS
Q1. When was this programme terminated?
Reply
March 1999.
Scottish Enterprise
Q1. Does Scottish Enterprise receive all the funding from this programme and then passes it
on to other organizations?
Reply
Yes.
Q2. Are all enterprises and industries eligible for assistance under this programme?
Reply
Yes, but restricted sectoral rules are respected.
Q3. You note that assistance is provided thro ugh grants, loans, guarantees etc... paid to
firms.  Does Scottish Enterprise provide and oversee the disbursement of these funds?
Reply
Yes
Sector Challenge
Q1. When was this programme terminated?G/SCM/Q2/EEC/33
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Reply
The first (and last) round of Sector Challenge was in 1997, and the winners were announced
on 29 May 1997.  Subsequent rounds were cancelled by the new Labour Government in early 1998,
following the Comprehensive Spending Review, but  nothing formal was released.  There were 186
winning projects, 181 of which took place, the vast majority of which have been completed.  The few
remaining are due to be completed this FY.
WDA Business Advisory Services
Q1. When was this programme terminated?
Reply
The Programme has not been formally terminated but has been superceded and where
business advice is offered, this operates in accordance with the exemptions allowed by the SME
framework.
WDA Rent Concessions
Q1. When was this programme terminated?
Reply
1999.
Q2. Are any companies or business still in the 4 ye ar reduction or waived rent period?  If so,
when will the last company be at the end of this period?
Reply
No.
Industrial Development Board – Selective Financial Assistance)
Q1. How is it determined whether the funds under this programme will be provided in the
form of a grant, loan, or share etc....?
Reply
Every offer of assistance under the Selective Financial Assistance (SFA) scheme represents a
package of support tailored to meet the requirements of  the individual company concerned in relation
to the specific project which it is seeking to implement.  As such, each package may contain some or
all of the different components of the SFA scheme, structured in a way which is most appropriate tothe needs of the company and the nature and scale of the project.  In every case the support offered
will represent the minimum assistance from public funds necessary to ensure that the project is carried
out.
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