London Daily

Focus on the big picture.
Monday, Jun 22, 2026

The EU’s state aid hypocrisy

The EU’s state aid hypocrisy

Another crucial period has begun in the Brexit saga. Boris Johnson has ruled out extending the transition stage beyond 1 January, after which the UK will no longer automatically take over EU regulations or align with EU trade policy.

So the key question surrounding Brexit will finally need to be answered: what are the conditions for the UK to retain a decent amount of market access to the EU?

The answer the EU has given is that the UK must abstain from unfairly subsidising its companies. That is a fair demand, but the EU also wants the UK to continue to align with EU rules on state aid.

The latter is something fiercely resisted by the British, and rightly so. The stakes are high – along with fisheries, it’s seen as the key sticking point in the negotiations. FT columnist Wolfgang Munchau thinks that ‘it is whether [the] EU accepts [an] independent UK state aid policy. If yes, there will be deal. Otherwise no.’

If the EU and the United States were to conclude a trade deal, the EU would be right to oppose submitting itself to the American state aid regime. Likewise, it doesn’t make sense at all for the UK to continue to bind itself to the European state aid machinery.

The UK can, of course, pledge not to engage in unfair state aid. But both sides could also secure that commitment through their own institutions. The UK could, for example, create an independent authority to police state aid, subject to review by Parliament and the UK courts.

Many on the Continent rightly admire Britain’s institutional architecture, with the rule of law as its cornerstone. So why should they distrust the UK here? Things are not always perfect in the UK of course, as Brandon Lewis’s recent comments on international law have shown.

But things aren’t perfect in the EU either. Without even mentioning the likes of Hungary or Bulgaria, it’s sufficient to take a look at my own country, Belgium, where the slow moving judiciary just failed after 12 years to conclude a criminal investigation into the financial conglomerate Fortis, following the 2008 financial crisis. At the end of the investigation, nobody was held responsible. So much for distrusting UK institutions.

Fears that the UK would suddenly massively engage in state aid after Brexit – apparently held by Merkel’s man in Brussels, David McAllister – are a bit odd, as Britain only spent half as much on state aid as the EU average in 2018.

That’s before Covid drove European countries – and Germany more than any other country in the world – to inject monstrous amounts of government cash into the private sector. Perhaps it’s the British that should be wary about the EU holding up its side of the bargain not to engage in unfair state aid, not the other way around.


The EU state aid regime is also becoming ever more politicised, especially in recent years. Margrethe Vestager, European Commissioner for Competition since 2014, has been overruled by the EU’s top court over her attempts to requalify special national tax arrangements provided by Belgium and Ireland as ‘unfair state aid’. Her claims that these tax arrangements were not really open to any company were dismissed.

In the past, Donald Trump has dubbed her the ‘tax lady’, referring to her zeal to use her competition powers to force the likes of Apple to pay massive back-taxes retroactively.

Her interest in extracting more cash from companies stands in sharp contrast with her permissive attitude – long before Covid – toward European governments that bail out companies or restrict competition, at the expense of taxpayers and consumers. This should serve as yet another argument for the UK not to subject itself to the EU’s legal framework for competition policy.

At the heart of all this, is that EU officials are not comfortable with the idea of allowing the UK to steer its own regulatory course, picking and choosing when to align with EU rules, depending on whether this results in market access or not.

Yet such an arrangement is precisely what the EU negotiated with Switzerland back in the 1990s, which has worked fine now for 20 years, despite the EU’s relentless attempts to erode the sovereignty obtained by the Swiss.

The EU’s flexibility here was ultimately of great benefit to both sides. In some areas, the Swiss copy and paste EU rules, so not to distort supply chains. In other areas, for example when it comes to financial regulation, the Swiss only receive partial access to the EU single market, in return for regulatory independence. No talk of the EU’s ‘four freedoms’ being ‘indivisible’ here, when services do not flow as freely as goods.

When you think about it, the EU is all about ‘pick and choose’: member states are permitted not to liberalise services or goods when there is insufficient political support.

They can also choose whether to join the monetary union (even if they lack an opt-out, like Sweden), whether to agree a common EU prosecutor, or whether to permit passport-free travel. During the Covid crisis, borders were shut at will and there have always been vast differences in how properly member states implement EU regulation.

The EU really lacks any argument to dismiss the UK wanting to pick and choose, and it should certainly not use it to refuse a fair and flexible trade deal, which would inflict great damage to the already badly suffering economies of both Britain and mainland Europe.

Policy competition is fundamentally a good thing for the EU. To tackle Covid, an unknown challenge, European governments have taken very different approaches. This trial and error permits member states to observe who got things right and who did not. A top-down approach prevents countries from learning from each other.

When it comes to state aid, the natural compromise is for both the UK and the EU to promise they will not engage in unfair state aid – but trust each other to implement that commitment themselves.

Newsletter

Related Articles

0:00
0:00
Close
UK Expands Alcohol Ban Enforcement Using Tagging Technology Ahead of World Cup
UK Invests £50 Million in Critical Minerals Supply Chain Security
UK Appoints Special Envoy on Preventing Sexual Violence in Conflict
UK Introduces Fines for Landlords of Unsafe Rental Properties
Reform UK Leads Opinion Polls as Immigration Debate Reshapes UK Politics
Police Investigate Edinburgh Attacks as Potential Hate Crimes
King Charles to Publish Personal Tax and Royal Household Financial Records
Nottingham University Hospitals Maternity Inquiry Report Set for Publication
Heat-Health Alerts Issued Across London and Southern England Amid Rising Temperatures
UK Economy Shows Pressure From Middle East Conflict Despite Modest Growth
Brexit Anniversary Reignites Debate Over UK Economic and Political Direction
UK Parliament Continues Legislative Work Amid Leadership Transition
Financial Markets Hold Steady After UK Leadership Shake-Up
Andy Burnham Enters Labour Leadership Race With Strong Parliamentary Backing
Keir Starmer Resigns as UK Prime Minister After Two Years in Office
Reform UK MP Lee Anderson to Raise Pension Concerns Over British Coal Staff Superannuation Scheme
UK Parliament to Debate Newborn Screening for Spinal Muscular Atrophy Following Public Petition
Met Office Warns of Water Safety Risks During Heatwave as Temperatures Peak in England
Treasury Increases Mileage Allowance Payments for 2026–27 Tax Year to 55 Pence Per Mile
UK Government Raises Electricity Generator Levy to 55 Percent in New Revenue Measure
House of Lords Moves Financial Services and Markets Bill to Committee Stage Amid Regulatory Scrutiny
Westminster Hall to Debate Petition on Pro-Israel Influence in UK Politics
UK Parliament Prepares for Estimates Days Debates as Backbench Business Schedule Approved
Armed Forces Bill Nears Final Stages in UK House of Commons With Military Justice Reforms
Donald Trump Comments on UK Political Situation, Citing Immigration and Energy Policy Concerns
Andy Burnham By-Election Victory Fuels Speculation Over Potential Labour Leadership Contest
UK Economy Shows Resilience but Faces Headwinds from Middle East Tensions, UK Finance Says
UK Parliament Opens Week of Debates on Net Zero, Security and Armed Forces Reform
Met Office Issues Amber Extreme Heat Warning as Temperatures Expected to Reach 35C Across England and Wales
Prime Minister Keir Starmer Faces Mounting Leadership Pressure After Makerfield By-Election Defeat
London Hotel Wins World’s Best Afternoon Tea Award at International Hospitality Guide La Liste
Court of Appeal Rules in Favour of Competition and Markets Authority in Phenytoin Drug Case
Chichester Waste Site Suspended After Environment Agency Finds Serious Fire and Pollution Risks
UK Appoints Chris Elmore as Special Envoy on Preventing Sexual Violence in Conflict
Environment Agency Fines Yorkshire Firms Nearly £470,000 for Environmental Permit Breaches
British Chambers of Commerce Says Post-Brexit Trade Deals Have Limited Economic Impact
Resident Doctors to Vote on Government Pay Offer in Ongoing NHS Dispute
UK Public Borrowing Reaches £46.3 Billion in Early Fiscal Year, Driven by Debt Interest Costs
UK Government Unveils £100 Million Package to Strengthen Fire and Rescue Response Capacity
Bank of England Holds Interest Rates at 3.75 Percent Despite Easing Inflation
Met Office Extends Amber Heat Warning as Temperatures Forecast to Reach 38C Across Southern England
Prime Minister Keir Starmer Expected to Resign Amid Mounting Labour Party Pressure
UK Government Tightens Procurement Rules to Prioritise National Security and Supply Chain Resilience
National Drought Group Reviews Water Supply Risks After Dry Spring and Ongoing Heatwave
Andy Burnham Faces Leadership Speculation After Weak Local Election Results for Labour
Charity Commission Appoints Interim Managers to Barnabas Aid Amid Financial Investigation
Government Awards £27 Million Leonardo UK Contract to Maintain Military Aircraft Fleet
Environment Agency Suspends Chichester Waste Site Permit Over Fire and Pollution Risks
Border Force Seizes Record Cannabis Shipment in Major UK Criminal Network Disruption
Lloyds Banking Group to Hire 300 Artificial Intelligence Specialists in Digital Expansion Push
×