The EU Commission is expected to scrutinise the proposals when the Subsidy Control Bill is introduced to parliament on Wednesday to make sure they comply with the Brexit agreement.
State aid was a major point of contention during Brexit negotiations: any move too far from Brussels’ standards on the subsidies used to boost chosen industries could provoke retribution.
Business secretary Kwasi Kwarteng claimed the system would become “more agile and flexible” without a return to the “1970s approach of the government trying to run the economy … or bailing out unsustainable companies”.
Paul Scully, the business minister, added: “The UK’s new bespoke subsidy system will be simple, nimble, and based on common-sense principles – free from excessive red tape.”
The UK government claimed the new system would leave devolved governments “empowered for the first time to decide if they can issue subsidies by following a set of UK-wide principles”.
But allegations of a power grab could be reignited from administrations in Scotland, Wales and Northern Ireland.
Scotland’s first minister Nicola Sturgeon has previously warned Mr Johnson that failing to hand over subsidy powers “would be a full-scale assault on devolution”.
The proposed post-Brexit system will “empower” devolved administrations to suggest subsidises for companies in Scotland, Wales and Northern Ireland – so long as they fit “UK-wide principals”.
Ministers said the new system will stop the awarding of subsidies that will displace jobs from one area of the UK to another to prevent “subsidy races” between authorities seeking to attract the same business.
The UK’s courts and tribunal system will be tasked with enforcing the rules. The new regime will come into effect next year if approved by parliament.
The EU had wanted the UK to introduce a statutory regulator with powers to intervene if the government breaks competition laws.
But last year’s trade deal saw Brussels accept the use of an independent monitoring body. A “subsidy advice unit” is expected to be set up at the Competition and Markets Authority.
Any clashes between the UK and the EU on competition will be overseen by an independent arbitration panel, as agreed during trade deal negotiations.