EESC urges EC to scrap threshold for exemption from state aid notification rules for public service compensation

Milena Angelova

Although the package in force provides for better legal certainty than previous legislation, there are still some grey areas which create uncertainties for public services providers, says the EESC. "The general reality is that whenever there is uncertainty or a grey area, the competent authorities in the Member States tend to adopt a more cautious behaviour, to be more rigid in their decisions and will therefore limit the flexibility of public sector providers, thus negatively affecting the provision of SGEIs", notes opinion rapporteur Milena Angelova (Employers' Group – BG).   In the EESC's views some of these grey areas could be addressed through additional guidelines and exchange of best practice, with no amendment to legislation.

Some of the key measures suggested by the EESC will however, require legislative changes as well. Under current rules, companies providing SGEIs can receive up to 15 million EUR a year in public compensation without being subject to notification. Beyond this threshold, compensation needs to be notified by Member States as potentially incompatible with State aid rules and the internal market. The EESC believes this threshold should be removed, since compensation mostly covers the extra costs incurred by SGEI providers: "Careful study of the current implementation of such rules proves that lifting this obligation will reduce the administrative costs and complexities that authorities, particularly regional and local authorities, have to face," argues the rapporteur Milena Angelova (Employers' Group – BG), who believes the notification requirement should be restricted to forms of aid or particular activities that might generate potential distortions of competition. "Experience has shown that the Commission clears an overwhelming majority of the SGEIs schemes examined by it. Only three SGEI cases have led to an in-depth investigation procedure and in all cases claims by competitors played a key role, thus securing full discipline without requiring the systematic notification of SGEI schemes."

In the current context of high unemployment, the EESC also suggests that the total exemption currently granted to social services should also cover services aimed at enhancing people's skills and qualifications, thereby improving their job prospects.

In addition, the EESC calls on the Commission to bring down the time-limit for keeping records of all the information necessary to determine the compatibility of the compensation to a maximum of 10 years: . "It seems unreasonable for local authorities to keep records for 20 years when we know that the Commission can only decide on measures taken in the last 10 years", comments the rapporteur, who believes that greater clarity is also needed in cost calculation and the concept of "reasonable profit", which creates a lot of problems for SGEI providers: "to be on the safe side they have to hire expensive consultants, who need to elaborate complex methodologies to calculate these reasonable profits to mitigate the risk of being penalised by the Commission", says the rapporteur.

SGEIs are an important feature of the European economic and social model and have come to play an even more crucial role following the crisis. Currently, public compensation for SGEIs in the EU is mainly governed by  a framework for State aid in the form of public service compensation and a Commission decision. The EESC has drawn up this draft opinion in preparation for the review of the legislation by the Commission in the near future. The EESC's conclusions are based on an extensive study of two waves of biannual reports which the Member States have submitted on the implementation of the current legislation.