Reality Check

General election 2019: Do EU state aid rules stop school bus services?

School bus sign Image copyright Getty Images

The claim: EU state aid rules cause "real difficulties" for the operation of school bus services.

Reality Check verdict: The EU has special rules to allow subsidies for things like this. We haven't been able to find any examples of "real difficulty" being caused in cases like this because of EU state aid rules.

Prime Minister Boris Johnson has talked about European Union (EU) state aid rules and how, after Brexit, he plans to do things differently. He said "the ramifications of EU state aid rules are felt everywhere" and gave this example:

"Buses taking kids to school or helping to move disadvantaged people around the community are facing real difficulties because of some EU state aid rules."

What is state aid?

State aid is financial assistance (subsidies) given by the government to companies or other organisations that has the potential to distort market competition.

The aid can be in the form of direct cash grants or indirect aid - such as preferential borrowing rates or tax credits.

What do EU rules say?

Under EU rules, member-state governments are allowed to provide state aid only with approval from the European Commission (EC).

The state aid regulations recognise though that governments have public service obligations, which means there are services that would not make money that need to be provided anyway.

There are specific sub-rules which allow subsidies for transport of school children or disadvantaged people.

The rules also say that grants under €500,000 (£415,000) over a three-year period do not constitute state aid. If the grant exceeds €500,000 the EU country is obliged to inform the European Commission.

"There is a specific body of rules designed to permit subsidies to be granted for things like school transport and transport of disadvantaged people," said Bernardine Adkins, an EU competition lawyer from Gowling WLG.

"The only problems arise if the state is paying too much, which could be unfair to other operators."

If a company believes it is disadvantaged by unlawful state aid, it can submit a complaint directly to the European Commission.

Image copyright Getty Images

'Real difficulties?'

Reality Check asked the Conservative Party for examples of where EU state aid rules had led to "real difficulties" for bus companies which run these kind of services.

We were sent details of a case from Ireland in 2014.

In that case, the EC looked into allegations from private bus operators that the subsidies the government paid for the operation of school buses, which included paying for new buses and improvements to bus stations and garages, had been unfair to other bus companies.

In the end, no action was taken except an undertaking to start discussing ways in which the scheme could better fit in with EU rules in future.

Image copyright Getty Images
Image caption State-owned Irish bus company Dublin Bus was the subject of a complaint under the EU state aid rules

We asked the EC for any other examples. It highlighted another case in 2012, when a private minibus company made a complaint to the EC about a contract awarded to a community firm by Nottinghamshire and Derbyshire County Councils for home-to-school transport services for children with special needs.

In 2015, the Commission concluded the contracts given were in line with EU laws despite the fact that the UK did not inform it about the grant from Derbyshire County Council, which had exceeded the €500,000 threshold.

Derbyshire County Council told us there were no disruptions to the bus service during the three years it took for this case to be resolved.

What might happen after Brexit?

Boris Johnson's Brexit deal allows for a transition period until the end of 2020 when all the EU laws would still apply.

If he wins the election, and his deal goes through, the exact rules on state aid after transition would depend on the future UK-EU free trade deal that he would hope to negotiate with the EU next year.

However, the rules would be likely to continue to apply in Northern Ireland, for any measures that could affect trade between Northern Ireland and the EU, and would be enforced by the European Commission.

A recent House of Commons paper on state aid says the EU has insisted on including some controls on state aid in almost every free trade agreement it has signed with other countries in the past. It concluded that "the closer the market integration with the EU, the more state aid rules form part of the agreement".

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