UK internal market: initial assessment of UK Government proposals

Introduction

The UK Government published proposals for legislation on a UK Internal Market on 16 July.  The proposals are for a Market Access Commitment, comprising legislation for a mutual recognition principle and non-discrimination, and potentially an independent body to consider the effect of legislation on the market and collate the views of stakeholders.  The paper envisages the legislation being in place for the end of the Transition Period on 31 December 2020

The Scottish Government does not support these proposals and will oppose them if, after the brief consultation period, legislation is brought forward at Westminster.  The proposals are neither necessary nor properly thought out. The  UK’s internal trading arrangements are already subject to an effective system of regulation which properly includes consideration of other policy matters which are necessary to achieve a balanced and proportional  approach, and which are co-ordinated with powers held by the respective legislatures across the UK and by the UK Government and devolved governments.   There are currently negotiations between the four governments on potential common frameworks where these are required to replace EU structures with approaches to agreeing alignment and managing differences, in line with agreed principles, and these will ensure coherence in policy development and regulation across the four nations.  The UK Government proposals would confuse at best and negate at worst these current arrangements and would constrain devolved competence in a way never envisaged or proposed before   The proposals would undoubtedly be to the severe detriment of businesses and consumers in Scotland

Overview of UK Internal Market proposals

The UK Government published its White Paper on the ‘UK Internal Market’ on 16 July with a four week consultation period.  No detail or copy had been shared with the Scottish Government in advance of publication.  No draft Bill has been published. 

The proposals, intended to be enacted in law by the end of 2020, would introduce a new Market Access Commitment to apply to policy making in devolved areas, and include:

• A principle of mutual recognition to ensure that compliance with regulation in one part of the UK is accepted as compliance in the other parts, regardless of the views, and indeed laws, of devolved legislatures.  It is important to note, as will be discussed, below, that the system of mutual recognition envisaged in the White Paper is significantly different to the way mutual recognition operates in the EU.

• A principle of non-discrimination so that local products and services cannot be favoured over others because of origin alone.

• An independent monitoring function to report on the “health of the internal market” and lead on business and consumer engagement, making non-binding recommendations – which may either report to the UK Parliament and devolved governments – or only to the UK Parliament.

• The reservation of state aid in which a  new UK subsidy control regime, which is being developed separately, is seen as an integral part of the UK internal market package of measures.

The Scottish Government considers these proposals to be fundamentally inconsistent with devolution.  They will not only permit, but encourage  a lowering of standards without any involvement of the devolved legislatures or Governments,  are fundamentally unnecessary given existing structures and the ongoing development of new ones by means of agreed frameworks , and will be damaging to Scotland’s interests, business and consumers.

•  They are fundamentally inconsistent with devolution because the approach in the paper centralises control in the UK Government and UK Parliament, cutting across devolved powers by imposing new domestic constraints on the exercise of these functions; the approach sees  devolved decision-making as an obstacle or problem that needs to be bypassed through UK-wide legislation, rather than taking an approach which prioritises agreement by means of negotiation and consensus between different decision-making centres across the UK.

• They are unnecessary because there is already a system in place to govern trading arrangements in Scotland and across the UK, consisting of reserved and devolved competences,  and arrangements to manage the intersection of EU law and devolved competence which have been developed jointly by the UK Government and the devolved governments through the Common Frameworks process: these are already providing  considered and agreed approaches in areas of policy and regulation relevant to UK internal trade.

• They allow a lowering of standards because Scotland will be compelled to accept standards, set by the UK Government and Parliament for England (most probably using the English Votes for English Laws mechanism which will exclude MPs from Scotland), regardless of the views and decisions of the Scottish Government and Parliament, and regardless of whether they are appropriate for circumstances in Scotland. The specific objectives set out in the US Government’s mandate for trade talks with the UK; the decision of the UK Government to block amendments to Brexit related legislation which would have protected food and animal welfare standards and the health service from any future trade deals; and the new UK Government’s consistent statements of its desire to deviate from EU standards all raise concerns. The White Paper is clear  (paragraph 177) that doing trade deals with countries like the US which are likely to feature lower food standards is a key driver of these proposals:  “Smooth trading arrangements across the UK constitute a key factor in the UK’s ability to implement international trade deals.”

• They do not, as is claimed, provide business certainty.  It is the UK Government’s approach to EU exit and negotiations – invoking Article 50 without a plan, pursuing a “low deal” or “no deal” trade agreement with the EU which will result in customs checks, regulatory barriers and extra business costs, and persistently running down the clock – that creates uncertainty for the business environment from January 2021 . To deliver certainty on the domestic front, the UK Government should commit to completing UK Common Frameworks in good faith and restoring proper cooperation in inter-governmental relations.   These proposals move in the opposite direction.

• They are damaging to businesses and consumers in Scotland and more widely across the UK.  They are predicated on leaving the EU Single Market of 450 million people.  They would mean losing the benefits of variations in approach to reflect consumer preferences, and health and environmental considerations in Scotland, and the advantages of high quality regulation of meat and fish products.  In addition, the wider UK market would lose the policy innovation made possible by devolved governments taking initiatives that are later adopted elsewhere including in other parts of the UK.