NextGen 2011 Workshop Michael Armitage BROADWAY PARTNERS

NextGen11  Reflec,ons  on  State  Aid  

BroadwayPartners   November  2011  

Agenda

n  State Aid – a recap n  What’s broken? n  Some examples n  What works

State Aid – BIS Beginner’s Guide

“Financial support granted to undertakings must also meet all the conditions set out in the European Community (EC) Treaty for it to be considered as state aid.”

1.  Granted by the State, or via state resources? 2.  Confers selective advantage to an undertaking? 3.  Potential to distort competition? 4.  Affects trade between Member States?

State Aid – What’s the Problem?

Article 87 1. Save as otherwise provided in this Treaty, any aid granted by a Member State or through State resources in any form

whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the production of certain goods shall, in so far as it affects trade between Member States, be incompatible with the common market.

2. The following shall be compatible with the common market: (a) aid having a social character, granted to individual consumers, provided that such aid is granted without

discrimination related to the origin of the products concerned; (b) aid to make good the damage caused by natural disasters or exceptional occurrences; (c) aid granted to the economy of certain areas of the Federal Republic of Germany affected by the division of Germany,

in so far as such aid is required in order to compensate for the economic disadvantages caused by that division.

3. The following may be considered to be compatible with the common market:

(a) aid to promote the economic development of areas where the standard of living is abnormally low or where there is serious underemployment;

(b) aid to promote the execution of an important project of common European interest or to remedy a serious disturbance in the economy of a Member State;

(c) aid to facilitate the development of certain economic activities or of certain economic areas, where such aid does not adversely affect trading conditions to an extent contrary to the common interest;

(d) aid to promote culture and heritage conservation where such aid does not affect trading conditions and competition in the Community to an extent that is contrary to the common interest;

What’s Broken?

What’s Broken? #1 - Capitalism

What’s Broken? #2 - Not Spots

Financial ‘Fixes’

n  Lower interest rates n  Even lower interest rates n  Bank rescues n  TARP n  Yet lower interest rates n  Bail-out funds n  Quantitative Easing n  More Quantitative Easing n  Cash-for-Clunkers

Telecom ‘Fixes’

n  50p levy n  BDUK n  £530m n  Plus, £300m maybe n  State Aid n  Pilot Studies n  PIA n  Procurement Framework n  £150m for mobile

The Result?

What Government does best

•  Make  laws  •  Set  and  collect  taxes  •  Protect  value  of  money  •  Defend  the  country  

The Competitive Advantage of Nations

Conditions for change are clear

n  Financial turmoil n  PFI unaffordable – a new form of

partnership is needed n  Move to localisation n  BDUK n  Demand is there n  Long term, patient money is there

– but not being put to work

Some Ideas….

Create conditions for: n  Improve tax efficient savings – EIS etc. n  Extension of domestic mortgages, at 2.9% n  ‘Shrink-wrapped’ community masts n  Municipal bond markets n  And others…..

What BroadwayPartners Brings

n  Conventional logic says rural broadband is uneconomic

n  Therefore, change the logic! q  Raise returns (uptake and costs) q  Reduce risk (lower discount rate, over

longer payback period) n  Conclusion: returns are sufficiently

attractive if interests are properly aligned

BroadwayPartners  

Thank  you