After Brexit: The UK Internal Market Act and devolution

Part One: Introduction

1. In 1997, the Scottish electorate voted to establish the Scottish Parliament by a margin of 74% to 26%. On any assessment, devolution has been beneficial to Scotland. It has delivered an overdue measure of autonomy and self-government, and has demonstrated that centralisation and uniformity are not necessary preconditions for policy coherence and economic growth. Longstanding issues of importance to Scotland, from land reform to public health, have been tackled by the Scottish Parliament. Decisions that matter to people in Scotland are taken closer to people in Scotland, by a democratically elected and accountable Parliament.

2. Nevertheless, devolution has, in some quarters, always been a problem to be fixed, in a polity mistakenly conceived of as a "unitary state"^[1] rather than a voluntary political union of nations.

3. EU exit has exposed the implications of this view and the UK Internal Market Act represents its institutionalisation.

4. As this paper will demonstrate, since the EU referendum, "taking back control" has come increasingly to mean wresting control and autonomy from the devolved institutions. Despite the UK Government's stated commitment to work though intergovernmental structures to take an approach to EU exit that recognised the differing needs and priorities of Scotland, Wales and Northern Ireland – and that two of the four UK nations voted decisively to remain in the EU – Scotland's distinct and legitimate interests have been repeatedly ignored.

5. To take one important example: in December 2016, the Scottish Government proposed a means to minimise and mitigate the risks of Brexit, and to protect and enhance devolution.^[2] However, the UK Government refused even to discuss these proposals for reconciling the differing referendum results in different nations. Instead, in early 2017, in her Lancaster House Speech^[3], the then Prime Minister, Theresa May, unilaterally announced that EU exit would require the UK taking itself out of the European Single Market and Customs Union, in direct conflict with the Scottish Government's proposals.

There was no serious attempt by the UK Government to create the conditions for a consensual approach.^[4]

6. Throughout the Brexit period, we have seen an increasing disregard of the Sewel Convention (the constitutional rule that the UK Parliament will not normally legislate for devolved matters, or adjust devolved competence, without the consent of the Scottish Parliament). That rule has been notably overridden on four separate occasions now – all instances where the UK Government recognised that the consent of the Scottish Parliament is required. Rather than an important protection, it has been effectively overruled by the UK Government, as can be seen most recently with the European Union (Future Relationship) Act 2020.^[5] The UK Government's Internal Market Act in some ways represents the culmination of this process: a Brexit that Scotland did not vote for is given as the rationale for radically undermining the powers and democratic accountability of the Scottish Parliament.

7. Legislation that undermines the Scottish Parliament has been accompanied by statements from UK Government Ministers that raise further concerns about the future of devolution - such as the Leader of the House of Commons recently suggesting the UK's constitution should be restored "to its proper constitutional form" after "constitutional tinkering".^[6]

8. The Internal Market Act means that devolved powers will now be exercised in a system designed and controlled by UK Ministers, and imposed on the Scottish Parliament without its consent. These new constraints will operate automatically and without any of the exemptions and protections for – and recognition of the value of – local autonomy that apply in the EU single market. The Act also confers new powers on UK Ministers to change the powers of the Scottish Parliament without its consent: the secondary legislation powers in the Act enable areas currently controlled by devolved parliaments to be brought within scope of the market access principles by UK Ministers altering the Act's exclusions list.

9. This paper explains why the Act is a fundamental threat to the devolution settlement in Scotland. It will show that, contrary to UK Ministers' assurances, the Act does not simply replicate the rules that provide for regulatory coherence in the EU single market; nor do its provisions mirror the internal market rules that pertain in other devolved or federal states. Rather, the Act fundamentally damages the devolution settlement. The paper also demonstrates that, far from ensuring clarity for business and consumers, the Act provides conditions for regulatory incoherence, business uncertainty and consumer confusion. During the passage of the Internal Market Bill, a range of stakeholders – including business and farming organisations, environmental groups, public health charities and professional organisations – raised concerns, which were downplayed, or not acknowledged, by the UK Government.

10. In a United Kingdom context, the Scottish Government recognises that leaving the European Union means that arrangements to replace EU law may be need to be agreed between the four governments in the UK, where these are in Scotland's interests and where they recognise and respect devolution. The Scottish Government has participated in good faith since 2017 in the development of common frameworks. Common frameworks are arrangements across a range of policy areas to manage any policy divergence upon EU exit. They are voluntary, negotiated and agreed by all four governments in the UK, not imposed by one. As this paper will explain, the Act makes progress on finalising these arrangements significantly more challenging.

11. The UK Internal Market Act is a tipping point. Current constitutional arrangements, as they have been understood for more than two decades, are becoming increasingly unsustainable. A majority of the Scottish people who voted in the EU exit referendum, voted to remain in the EU; in addition, Scottish people have not given their consent to the constraints that have been placed on the Scottish Parliament as a result of UK Government decisions and Westminster legislation since the Brexit vote. Yet both these events have happened: Brexit, and significant detrimental changes to the devolution settlement. It is against this background that the Scottish Government believes people in Scotland have the right to choose their own future as an independent country.