UK internal market: initial assessment of UK Government proposals

Mutual Recognition and Non-Discrimination

The concept of mutual recognition in the White Paper means that meeting the regulatory requirements in one part of the UK would ensure that goods and services could then be legally supplied across the whole UK, whatever the local regulatory requirements.   

Goods – mutual recognition of goods means that a good which can be lawfully sold in one territory, can be lawfully sold in other territories without having to comply with that other territory’s requirements (that would otherwise apply). (Paragraph 133(a))

The UK Government’s mutual recognition proposals would therefore legally require goods to be accepted for sale in Scotland that are produced to whatever standards are set elsewhere in the UK irrespective of whether they comply with the standards and rules set by the Scottish Parliament.    As a result of these proposals, for example, the sale of raw drinking milk could be required in Scotland despite the long standing ban on public health grounds. 

In contrast, mutual recognition in other markets, including in the EU, does not provide an equivalent guaranteed right of access for a good to all markets.   As discussed above, barriers can be permitted if they serve a legitimate policy objective and can be justified as relating to the protection of public safety, health or the environment.

The paper does indicate that some areas will be excluded from mutual recognition and non-discrimination and that these ‘will have to be defined from the outset in legislation’ (Paragraph 144).  Examples include all reserved matters and:

Existing regulatory differences would be out of scope of the UK internal market model. In addition if a devolved administration was to regulate within an area that falls within an exclusion, then the mutual recognition principle would not apply

There is little other detail on potential excluded matters in the White Paper however, nor is there information about  how the legislation will handle defining these and how they will be applied and adjusted in practice.   It is therefore difficult to anticipate how the principle will affect current policy initiatives and the scope for the Scottish Government and Parliament to develop innovative policies that might also affect the market and trade.   However, in another apparent contradiction, the paper sets out (paragraph 9) an overriding principle that these proposals will ‘guarantee the continued right of all UK companies to trade unhindered in every part of the UK’ – which in itself raises significant concerns in relation to private companies pursing a claim to be allowed, for example, to operate in Scotland’s health system or in the provision of water, which is of course a privatised system in England but not in Scotland.

It unfortunately does, however, seem  clear the definition of these excluded matters will be a matter for Westminster legislation.  That would mean that changes would most probably not require  the agreement of the devolved legislatures as would be the case for other changes to devolved competence.  The paper strongly implies there will be no role for devolved legislatures in determining the scope of the mutual recognition requirement in the future:

The evolution and overall shape of the UK's Internal Market will be overseen by the UK Parliament, and that key decisions will be put to the UK Parliament for approval, rather than resting exclusively with the UK Government. (Paragraph 154)

The principle of mutual recognition need not entail an unrestricted right of access for an originating good or service to all markets.  Partial (minimum essential requirements) or comprehensive harmonisation of standards is an important part of the EU single market, and is achieved via the enactment of common legislation and discussed, debated, agreed and enacted via the common EU legislative process.  Apart from common frameworks, which can be by-passed by the prospective legislation, there is no role indicated in the White Paper for the devolved legislatures to collectively discuss, let alone agree on, any legislation flowing from these proposals.

Again there is little detail on the principle of non-discrimination and how it will operate in practice, including the central issue of identifying and enforcing indirect discrimination.  The Scottish Government is concerned that initiatives such as the smoking ban could have been challenged (and could still be) as discriminating against businesses in Scotland when compared to their counterparts elsewhere in the UK.  The abolition of tuition fees for Scottish domiciled students could be challenged as discriminatory against students from elsewhere in the UK.  The effect of the proposals is therefore to construct a test or challenge for decisions of the Scottish Parliament that are clearly within devolved competence but might be argued to affect in some way the internal market, preventing the Scottish Parliament and Scottish Government from exercising leadership in, for example, tackling the harm caused by alcohol abuse, which it has done in the past with no impact on the proper functioning of the European Single Market.