Commissioner Kroes unveils plans to improve state aid rules to support innovation
A consultation document on measures to boost innovation in small and medium sized enterprises (SMEs) was launched by the European Commission on 21 September. It sets out the Commission's concrete ideas on ways to reinforce innovation and research within SMEs through state aid rules - a key objective for meeting the targets of the re-launched Lisbon Strategy. The proposals are designed to encourage the creation and development of innovative start-ups and to increase the availability of risk capital in Europe through subsidies and fiscal exemptions. Commissioner Kroes said: 'Even though effective competition is the best tool to strengthen innovation and competitiveness in Europe, state aid can also play a very useful supporting role.' According to the consultation document, 'State aid can in some cases effectively and efficiently contribute to foster innovation, when it addresses market failures that hamper the innovation process without excessively distorting competition.' The communication proposes a general test for the approval of state aid measures for innovation: the first condition has to be the identification of a well-defined market failure that will be targeted by the aid instrument. Secondly, state aid needs to be proven as the most appropriate policy instrument, taking into account that sometimes structural policies or regulatory action may be more appropriate. Also the aid should have an incentive effect on innovation and be proportionate to the defined objective. Finally, the distortions of competition and effect on trade should be limited, to ensure that the aid measure is not against the general interest. In the consultation document, the Commission also sets out specific ideas to develop criteria for the rules of state in six specific areas: - support for the creation of innovative start-ups; - relaxing the current regime of state aid to risk capital; - the integration of innovation into existing rules on state aid for R&D, allowing aid to SMEs engaged in innovative activities such as the drawing up of prototypes; - subsidies for SMEs to buy services from innovation intermediaries such as consultants, trainers and database providers; - aid that allows SMEs to recruit researchers and highly qualified engineers and to benefit from personnel exchanges between universities and companies; - promotion of the development of centres of excellence for projects of common European interest. The document is designed to gather stakeholders' views on a series of concrete measures for which state aid could be authorised by the Commission according to precise rules and criteria. On the basis of the consultation, new provisions, including clarifications to increase legal certainty, new funding possibilities for innovation, criteria to target the aid more effectively, and simplification of the regulatory framework, will be integrated into the existing state aid rules. These provisions aim not only at speeding the approval process of Member States who apply them, but also at helping Member States use public funds more effectively. UEAPME, the European small and medium business organisation, has welcomed the initial proposals for reforming rules governing state aid for innovation announced by the Commission. In a press communiqué, Gerhard Huemer, UEAPME Director of Economic and Fiscal Policy said: 'The outline for reforming the rules on state aid for innovation demonstrates that the Commission has understood that, especially for small companies, innovation does not just mean R&D. Innovation is a much broader concept by which businesses develop their capacities, ideas, products and markets.' The Commission has made it clear, in the consultation document, that state aid is not the response to all Europe's competitiveness or innovation problems. 'Preserving competition should be the first priority when designing effective systems to foster innovation in the EU. Competition in a functioning market creates incentives for companies to invest in knowledge and innovation, since this helps them generate competitive advantage and profits,' it argues