# CE2004070EN.01009301.xml

| 20.3.2004 | EN | Official Journal of the European Union | CE 70/93 |
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20.3.2004

EN

Official Journal of the European Union

CE 70/93

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(2004/C 70 E/097)

WRITTEN QUESTION E-2385/03

by Christopher Huhne (ELDR) to the Commission

(18 July 2003)

Subject:   State aids assessment

Subject:

| 1. | Will the Commission state the reasons why, despite the scepticism in evidence in its invitation to comment published in the Official Journal of 27 April 2002, it changed its mind concerning these state aids? What are the criteria that it applied in this case? |
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1.

Will the Commission state the reasons why, despite the scepticism in evidence in its invitation to comment published in the Official Journal of 27 April 2002, it changed its mind concerning these state aids? What are the criteria that it applied in this case?

| 2. | Did cost effectiveness in the pursuit of public policy objectives in any way enter into the assessment and if not, why not? |
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2.

Did cost effectiveness in the pursuit of public policy objectives in any way enter into the assessment and if not, why not?

| 3. | Is the Commission of the view that this is one of the most cost-effective ways that a Member State has yet devised to encourage economic activity in disadvantaged regions? |
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3.

Is the Commission of the view that this is one of the most cost-effective ways that a Member State has yet devised to encourage economic activity in disadvantaged regions?

| 4. | Will the Commission give its estimate of the likely deadweight cost — i.e. the cost to the public exchequer not related to the achievement of the objectives — involved in the UK Government's decision to provide stamp duty exemption for non-residential property in disadvantaged areas? |
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4.

Will the Commission give its estimate of the likely deadweight cost — i.e. the cost to the public exchequer not related to the achievement of the objectives — involved in the UK Government's decision to provide stamp duty exemption for non-residential property in disadvantaged areas?

Answer given by Mr Monti on behalf of the Commission

(12 September 2003)

(12 September 2003)

| 1. | The Commission would like to recall that the invitation to comment published in the Official Journal of the European Union
   (1) was the Commission Decision on the opening of procedure. Article 6 of the Council Regulation on State aid procedure (2) provides that a decision to initiate the formal investigation procedure must include a ‘preliminary assessment of the Commission as to the aid character of the proposed measure’.
  It is settled case-law that: ‘It follows that the classification of a measure as State aid in a decision to initiate the formal investigation procedure is merely provisional. The very aim of initiating the procedure is to enable the Commission to obtain all the views it needs in order to be able to adopt a definitive decision on the point’ (3).
  The Commission considers thus that it did not change its mind, as the Honourable Member suggests, but merely gave a preliminary assessment and invited interested parties to comment in order to be able to take a final decision. The criteria that it applied in that case were those stated in its final Decision (4), in particular, under heading VI entitled ‘assessment of the aid.’ |
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1.

The Commission would like to recall that the invitation to comment published in the Official Journal of the European Union
   (1) was the Commission Decision on the opening of procedure. Article 6 of the Council Regulation on State aid procedure (2) provides that a decision to initiate the formal investigation procedure must include a ‘preliminary assessment of the Commission as to the aid character of the proposed measure’.

Official Journal of the European Union

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It is settled case-law that: ‘It follows that the classification of a measure as State aid in a decision to initiate the formal investigation procedure is merely provisional. The very aim of initiating the procedure is to enable the Commission to obtain all the views it needs in order to be able to adopt a definitive decision on the point’ (3).

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The Commission considers thus that it did not change its mind, as the Honourable Member suggests, but merely gave a preliminary assessment and invited interested parties to comment in order to be able to take a final decision. The criteria that it applied in that case were those stated in its final Decision (4), in particular, under heading VI entitled ‘assessment of the aid.’

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| 2. and 3. | The assessment of the notified scheme was made on the basis of the following considerations: State aid character of the measure, its legality and exemption grounds. Within the heading of exemption grounds, the Commission analysed the compatibility of the scheme with a number of its guidelines and finally its compatibility with Article 87(3)(c) of the EC Treaty in the light of Community objectives and the effect on trading conditions between Member States.
  The cost-effectiveness of the scheme was addressed by the Commission in points 56 and 57 of its Decision. According to the first, ‘as a regeneration instrument, the stamp duty exemption could fulfil the economic rationale of contributing to reducing risks for investors in brownfield sites. Regeneration has traditionally been perceived as a high-risk, low-return investment, in particular because there is the perception of weak market demand; bureaucratic grant arrangements; unclear procedures in the programs and lack of funding initiatives. Favourable conditions for investment include a perceived total return as well as new business opportunities, transparent existing strategies and the level of risk in the project.’ Point 5 7 follows: ‘it is only when the risk is reduced that investment will increase: this would have several spinoff effects such as reducing the exit-cost, which in turn will further reduce the risks of investing in urban regeneration. The temporary exemption of the stamp duty is likely to contribute to activating the market for regeneration and derelict land in deprived areas as well as having spill-over effects. The system itself would be transparent which matches market demands.’ This is in addition to paragraph 62 which states ‘the average amount of aid to the individual undertakings in the proposed scheme is GBP 50 000 (around EUR 78 500). Aid of this magnitude does not normally distort or threaten to distort competition. In cases where the aid beneficiary receives the stamp duty exemption several times, or receives it cumulated with other kinds of aid, the aid could be significant and thus affect competition and/or affect trade. It is therefore imperative that the cumulation of aid is closely monitored and controlled.’
  Finally, the Commission would like to remind the Honourable Member that the cost-effectiveness of the measure will also be analysed ex post by the Commission at the time of receiving the detailed annual reports, imposed as a condition by Article 3 of the Commission Decision. The second paragraph of Article 3 requires a degree of detail of the reports to allow the Commission to make an evaluation of the effects of the scheme on the physical regeneration of the areas that benefit from it. |
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2. and 3.

The assessment of the notified scheme was made on the basis of the following considerations: State aid character of the measure, its legality and exemption grounds. Within the heading of exemption grounds, the Commission analysed the compatibility of the scheme with a number of its guidelines and finally its compatibility with Article 87(3)(c) of the EC Treaty in the light of Community objectives and the effect on trading conditions between Member States.

The cost-effectiveness of the scheme was addressed by the Commission in points 56 and 57 of its Decision. According to the first, ‘as a regeneration instrument, the stamp duty exemption could fulfil the economic rationale of contributing to reducing risks for investors in brownfield sites. Regeneration has traditionally been perceived as a high-risk, low-return investment, in particular because there is the perception of weak market demand; bureaucratic grant arrangements; unclear procedures in the programs and lack of funding initiatives. Favourable conditions for investment include a perceived total return as well as new business opportunities, transparent existing strategies and the level of risk in the project.’ Point 5 7 follows: ‘it is only when the risk is reduced that investment will increase: this would have several spinoff effects such as reducing the exit-cost, which in turn will further reduce the risks of investing in urban regeneration. The temporary exemption of the stamp duty is likely to contribute to activating the market for regeneration and derelict land in deprived areas as well as having spill-over effects. The system itself would be transparent which matches market demands.’ This is in addition to paragraph 62 which states ‘the average amount of aid to the individual undertakings in the proposed scheme is GBP 50 000 (around EUR 78 500). Aid of this magnitude does not normally distort or threaten to distort competition. In cases where the aid beneficiary receives the stamp duty exemption several times, or receives it cumulated with other kinds of aid, the aid could be significant and thus affect competition and/or affect trade. It is therefore imperative that the cumulation of aid is closely monitored and controlled.’

Finally, the Commission would like to remind the Honourable Member that the cost-effectiveness of the measure will also be analysed ex post by the Commission at the time of receiving the detailed annual reports, imposed as a condition by Article 3 of the Commission Decision. The second paragraph of Article 3 requires a degree of detail of the reports to allow the Commission to make an evaluation of the effects of the scheme on the physical regeneration of the areas that benefit from it.

| 4. | The Commission is well aware that for every aid scheme it approves, there may be beneficiaries who would also have invested, created jobs, provided training, etc. without the incentive of State aid. The aid might nevertheless have affected their choice of location, the size of the project or its timing. The Commission is unable to assess the real dead-weight cost of the Stamp duty exemption for nonresidential properties in disadvantaged areas. |
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4.

The Commission is well aware that for every aid scheme it approves, there may be beneficiaries who would also have invested, created jobs, provided training, etc. without the incentive of State aid. The aid might nevertheless have affected their choice of location, the size of the project or its timing. The Commission is unable to assess the real dead-weight cost of the Stamp duty exemption for nonresidential properties in disadvantaged areas.

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(1)  OJ C 102, 27.4.2002.

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(2)  Council Regulation (EC) No 659/1999 of 22 March 1999 laying down detailed rules for application of Article 93 (now 88) of the Treaty, OJ L 83, 27.3.1999.

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(3)  Case C-204/97 Portugal v Commission [2001] ECR I-3175, paragraph 33; Joined Cases T-371/94 and T-394/94 British Airways and Others and British Midland Airways v Commission [1998] ECR II-2405, paragraph 59.

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(4)  Commission Decision 2003/433/EC of 21 January 2003 on the aid scheme ‘Stamp duty exemption for nonresidential properties in disadvantaged areas’ notified by the United Kingdom, OJ L 149, 17.6.2003.

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