Monti may relax his grip on state aid

Mario Monti, Europe's Competition Commissioner, could be stripped of some of his powers to block government state aid payments to companies, under radical plans being hatched in Brussels, writes Clayton Hirst.

The proposals are expected to be announced in the summer and would allow member states to self-police certain state aid decisions.

In the UK it is expected that the Office of Fair Trading willbe given extra powers to investigate whether government grants breached European rules. Mr Monti would have jurisdiction only over large state aid investigations, such as the recent €9bn (£6bn) bailout of France Telecom.

Despite the Commission's attempt to crack down on state aid, EU governments gave more than €80bn last year to companies. In recent months, the Commission has had to deal with an increasing number of aid investigations, including the financing of Network Rail and loans given to British Energy.

The new European state aid proposals are being developed by Philip Lowe, director-general of the Commission's competition department. He is worried that the Commission has become deluged by state aid work.

If Brussels does cede power to member states it will be good news for the UK property industry. In 1999 the Commission outlawed a £200m-a-year urban regeneration grant programme. This provided "gap funding" – paid to property companies when the cost of developing a derelict site was greater than the value of the finished scheme. The Royal Institution of Chartered Surveyors has lobbied for the grant to be reinstated. On average it produced £5 of private money for every £1 of subsidy.