Evaluating Public Expenditure in the Context of the State Aid Modernisation Programme
Sean Thomas, Oxera Consulting LLP, Andrew Meaney, Oxera Consulting LLP, Nicole Robins, Oxera Consulting LLP
The paper considers the analytical implications of the European Commission’s State Aid Modernisation programme. In particular, we examine the challenges associated with the shift from ex ante assessments of compliance to ex post evaluations.
Ex ante economic appraisals are part of the policy scrutiny process across most European countries. Most countries have some formal requirements for the standard of study that should be conducted, with transport being among the most advanced sectors in terms of the analytical standards being applied. The same cannot be said for ex post evaluations, which are generally not part of the statutory scrutiny process. Moreover, the incentives to conduct a high-quality evaluation are weak.
The European Commission’s State Aid Modernisation (SAM) programme is likely to greatly increase the focus on the field of ex post evaluations. In 2012 the Commission announced an ambitious programme of reforms to shift the scrutiny of state aid compatibility from an ex ante assessment to an ex post assessment. The Commission will require certain schemes to be independently evaluated in order to test their impact as well as their compatibility with the principles of state aid.
The schemes that are of most interest are those with the largest funding requirements, those with the most novel applications of funding, and those with the greatest impacts on technology, regulations or markets.
A more detailed guidance document has subsequently been produced which outlines the scope, methods and process for evaluating a state aid project. The guidance suggests that the Commission expects the evaluation studies to be rigorous in their approach to planning, data collection, stakeholder involvement and empirical methods.
Contribution of this paper
This paper explores the objectives and requirements of the SAM programme through examples of different evaluation studies. We use these to draw out key messages for how researchers can meet the Commission’s requirements.
In particular, we consider two case studies of evaluations that Oxera has been closely involved in. The first of these is the evaluation of the UK’s National Broadband Scheme. This study provides the first example of an evaluation completed in the context of the new state aid rules. It uses a mixture of quantitative and qualitative analysis to test whether the scheme was successful, and the extent to which it created competitive distortions.
The second evaluation study is the First Interim Evaluation of High Speed 1 (HS1), which was published in 2015 and peer-reviewed by Andrew Meaney of Oxera. While this evaluation was not undertaken to comply with the SAM programme, it does provide a strong example of evaluation that is directly relevant to the transport sector, and the scale of project that will be the focus of the Commission’s new approach.
This study used a combination of economic theory and primary data gathering to establish and test the impact of HS1. In contrast to the National Broadband Scheme evaluation, in this case the researchers relied heavily on the existing transport analysis guidance issued by the UK’s Department for Transport as well as concepts from the Magenta Book (the UK government’s evaluation manual).
Between them, these two studies provide a number of important insights into the challenges that researchers will face in complying with the SAM evaluation requirements.
Association for European Transport