Removing barriers to subsidies for arts and culture

When the UK’s new subsidy control rules took effect at the beginning of 2023, the steps for ensuring subsidy compliance for public sector funding and other support for arts, culture and heritage became considerably more onerous.

Before Brexit, there was a generous block exemption under the State aid rules which allowed subsidies to be given for a broad range of cultural and heritage purposes and activities. The block exemption provided a simple method for ensuring State aid compliance provided certain conditions were met. It could be relied upon to give subsidies for a wide range of organisations and activities including, for example, museums, arts centres, theatres and artistic and cultural organisations, natural heritage and much more besides.  Furthermore, it was often possible to provide public sector support for arts, culture and heritage without there being a subsidy at all either because the activities were not carried out on a commercial basis, or because there was not the necessary impact on cross-border trade for the State aid rules to be engaged. The European Commission’s guidance helpfully stated that the State aid rules would be engaged only in relation to funding for “large and renowned cultural institutions and events in a Member State which are widely promoted outside their home region has the potential to affect trade between Member States”.

The position under the Subsidy Control Act 2022 (the Act) is rather different. It is still the case that public sector support can generally be given on a ‘no subsidy’ basis for arts, culture and heritage activities which are not carried out for a commercial purpose. However, for any activities which are carried out for a commercial purpose, it is much less likely that a ‘no subsidy’ approach will be available since the Act applies whenever the support could have an impact on competition or investment within the UK. There no longer has to be an effect on cross-border trade for the subsidy control rules to apply. Furthermore, the Act unfortunately does not replicate the block exemption for culture and heritage.

However, the position could be about to become easier because, following a recent consultation exercise, the Government has confirmed its intention to set up a Streamlined Route for subsidies for arts and culture, and that it will explore the possibility of expanding this Streamlined Route to cover built and natural heritage projects too.  The proposed Streamlined Route will come with a set of eligibility requirements and other terms and conditions, which will no doubt include a maximum permitted subsidy level (based on a fixed limit and/or a maximum proportion of eligible costs). No further detail is known at this stage but, based on the responses to the consultation, we anticipate that the Streamlined Route may cover some or all of the following types of subsidies:

• subsidies which would have fallen within the block exemption for culture and heritage conservation in the State aid rules
• subsidies for charities and not-for-profit organisations
• subsidies for public arts projects of national and/or cultural importance
• subsidies aimed at improving accessibility and participation amongst disadvantaged communities
• subsidies for projects specifically aimed at driving footfall into areas reliant on a tourism economy
• subsidies for capital investment into cultural infrastructure, for building repair and maintenance and for core operational and revenue support.

The timetable for introduction of the new Streamlined Route is not yet known so it will be a case of ‘watch this space’.  Once it has been introduced, a public authority wishing to give a subsidy using the Streamlined Route will need only to comply with the conditions set out in the Streamlined Route and publish details of its subsidy on the Subsidy Database if it has a value of more than £100,000.  The authority will not be required to assess its subsidy against the subsidy control principles, since this assessment will already have been undertaken at scheme level. This is the biggest benefit that the Streamlined Route will bring, since assessing a subsidy against the subsidy control principles can be a difficult and time-consuming exercise.  

All in all, this will mean that the compliance steps will be considerably less onerous for a public authority wishing to subsidise the arts and culture sector if the subsidy can be designed to fall within the Streamlined Route. This should make it quicker and easier to provide public sector support for art and culture. Both the authority and the subsidy recipient will also benefit from the fact that any subsidy given in accordance with the Streamlined Route will not be vulnerable to a legal challenge under the Act.  Whilst in theory there could be a challenge to the Streamlined Route itself, there would be a strict time limit for any such challenge and in our view it would be extremely difficult to bring a successful legal challenge.  

If you are a public authority considering giving a subsidy to the arts and culture sector, or an arts or culture organisation hoping to benefit from public sector support, please contact Bethan Lloyd to find out more about how the subsidy control rules could impact on you.