Public Funding of Higher Education and Research

If a market system is introduced in a Member State and therefore most of the services an HEI conducts need to be regarded as economic in nature, the Member State would also have to follow the Altmark[1] criteria for these services. This would mean that if the Member State aims to pay certain providers to conduct these services for the public, the Member State would normally need to commission these services in a public procurement procedure. If the Member State aims at having a system where it leaves the choice to the consumer and just pays the bill or gives out vouchers or other financial help to consumers to buy these services themselves, the consumer must also be able to choose the provider freely or choose from a range of providers which have been established according to objective criteria, normally in a public procurement procedure.[2]

If a system has progressed far on the path towards commodification, like in the English case, arguably teaching services[3] should thus generally be procured[4] or public financial support should travel with the student who can choose freely between providers (including foreign and private providers) for this not to constitute state aid. Indeed, Hogenboom has conducted an in-depth analysis of the conformity with state aid rules of the difference made in the English higher education system for loans that can be accessed by students in publicly financed HEIs (?9000) and students in privately financed HEIs (?6000) and concluded that this might likely constitute state aid.[5] Furthermore, there are student number controls for private providers whose students access public loans which do not apply to publicly funded providers.[6] There are also other advantages for certain providers in the English system as regards, for example, VAT exemptions,[7] access to widening participation funding, access to generic teaching funding grants from HEFCE and differences in sustainability requirements. Arguably, the differences convey a selective advantage on certain providers.[8] Such difference in the funding of providers is not unique to England, though. In the Italian free movement law case Dirextra[9] there was a requirement of 10 years of experience before students of HEIs could access certain funding. The case had only been assessed under free movement law, but arguably the HEIs also received a financial advantage which could be regarded as state aid. However, in this case this may be inherently justified by the general nature of the scheme, since all HEIs had to fulfil the age requirement. In so far it might not be selective. Overall, the more commodified a system becomes, the more difficult it may be to exclude private providers from public funding arrangements. Yet, the dangers of funding private providers have been widely discussed and appear to be highlighted by the financial difficulties which have occurred in England in this respect a few years ago.[10]

As regards research, unlike the previous version, the new Research Framework now actually specifies the Altmark criteria for research services in para 31 seq and lays out the rules that need to be adhered to when the state is paying for economic research. Accordingly, if a public authority purchases such research, it has to follow the public procurement rules (para 32). Otherwise the price has at least to reflect the market value which is, in particular, the case if the selection procedure is open, all rights and obligations are made available to everyone interested, there is no preferential treatment and either the results may be widely disseminated and the public purchaser gets the IPR or the public purchases gets free access of all IPR and other parties can get non-exclusive licenses for the market price (para 33). Where this is not the case, ‘Member States may rely on an individual assessment of the terms of the contract between the public purchaser and the undertaking, without prejudice to the general obligation to notify R&D&I aid pursuant to Article 108(3) of the Treaty’ (para 34). The Research Framework thus offers alternatives to a procurement procedure which, if followed, would mean that the purchasing of the research service does not constitute state aid. This seems to provide slightly more leeway which may be due to research, despite being a shared competence now, being an area in which the Member States still hold major responsibilities due to the caveat in Article 4(3) TFEU[11] as well as due to EU research policy having encouraged investment into research and collaboration with the private sector.[12] Nevertheless, as we have seen, the emphasis in these more relaxed approaches is on non-discrimination and open dissemination which can potentially be assumed as minimum standards. Thus directly awarding economic research would generally still have to be regarded as state aid. Instead, such services should be commissioned according to objective criteria and it must be possible for public, private, third sector and foreign providers to apply. As we will explore further in the following chapters, one might wonder if certain governmental funding programmes could be regarded as purchasing economic research and whether they thus should be open for all undertakings to apply for them. This could then create a very different, more commercial character as regards certain publicly funded research.

Economic research services which would infringe the state aid rules might benefit from the de minimis rule. If they qualify as SGEI they may equally benefit from the special SGEI de minimis rule and the exemption for state aid for SGEIs below €15 M. Further, research services that fulfil the conditions of the GBER could be exempted that way. Should none of these exemptions be applicable the aid would need to be notified and could potentially be exempted according to Article 107(3) or 106(2) TFEU. As regards the former, the details in the Research Framework need to be taken into consideration. If, in a rather market based system, teaching services would generally have to be regarded as economic in nature, the overall value is likely to go far beyond the €15 M threshold. Therefore, an infringement of the state aid rules as regards higher education, can only potentially be justified under Article 107(2), (3) or 106(2) TFEU rather than secondary legislation if notified. How successful such an avenue would be, would depend on the particular case.[13]

  • [1] See text surrounding n 267 above.
  • [2] Gideon 2012, p. 181 seq; Gideon 2015a, p. 1056; Gideon 2015b, p. 61.
  • [3] Provided they do fall under the state aid rules and are not meant to be entirely exemptedas the Notice on the Notion of State (n 87) could potentially suggest as was discussed above(Sect.
  • [4] See further Gideon and Sanchez Graells 2016, p. 22 seq. See also Chap. 2, Sect. 2.3.4 aboveand Gideon and Sanchez Graells 2016 on public procurement and the in-house and public-publicexemptions.
  • [5] Hoogenboom 2015.
  • [6] CMA 2015, para 3.3. See also Malik S et al. (2013) Poorest students face ?350 m cut ingrants. The Guardian, 22 November 2013 Accessed 29 November 2013.
  • [7] UCU (2016) Fighting privatisation in tertiary education. Accessed 11 March 2016.
  • [8] Similarly, while assessing regulation in its advocacy role rather than looking at issues of stateaid, the OFT and CMA in their reports pointed out that there should be a more level playing fieldas currently it seems nearly impossible for certain providers to achieve certain statuses (e.g. thereare differences as regards student visa, degree awarding powers, etc.) or obtain certain funding(OFT 2014, para 7.20 seq, CMA 2015, para 5.2 seq). Again, the reforms outlined in the WhitePaper (BIS 2016) aim at introducing changes here which may resolve some of the issues by making the system more permeable, but, at same time, more commercial.
  • [9] C-523/12 Dirextra (Judgment of 12 December 2013, EU:C:2013:831). This has been discussed in Chap. 2, Sect. 2.3.2 above.
  • [10] Malik et al. (n 318), UCU (n 319).
  • [11] See Chap. 2, Sect. above.
  • [12] See Research Framework para 3, European Commission 2012, pp. 2, 6 seq. Contrary to theseeming relaxation of the rules in the new Research Framework, Nicolaides in his evaluation ofEU state aid rules for research and development, concludes that subsidies should be limited andprovided competitively (Nicolaides 2013).
  • [13] In his analysis of the difference in the English loan system, Hoogenboom conclusively submits that it seems unlikely that these exemption are applicable (Hoogenboom 2015).
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