UK internal market: initial assessment of UK Government proposals

The White Paper proposals – political or economic motivation?

These UK  proposals are clearly inconsistent with devolution and the current system of governance of the UK.  They are unnecessary because common frameworks are  already in preparation which can,  and indeed are designed to, manage the practical regulatory and market implications of the UK leaving the EU while allowing legitimate policy choices to continue to be made in line with the devolution settlement. 

It is also difficult to reconcile the proposals with other statements and policies of the UK Government, and there are a number of contradictions on the document itself, which raises the question of whether the motivation is political rather than, as claimed, economic. 

In updating the Scottish Parliament on 30 July the Cabinet Secretary for Constitution, Europe and External Affairs, Michael Russell described the proposals as undermining the basic foundations of devolution and existing mechanisms of co-operation and the entire list of devolved competencies – and as a ‘nakedly political ploy – a predetermined draconian solution in search of a non-existent problem.’  

The analysis in the White Paper makes no provision for the social, environmental and wider benefits delivered by local policies and regulation, and runs counter to the UK Government’s own narrative of place-based approaches to economic development.

The White Paper relies on modelling and studies of the type the UK Government has recently dismissed in the context of Brexit, Indeed, the UK’s chief Brexit negotiator in a well-publicised speech said the impacts of such studies were exaggerated, but they are actually  the basis of much of the White Paper.

In the White Paper, at least one reference - on “conformity costs” - relates to car manufacturing and appears to have been taken from a paper warning about the costs of Brexit [From the Society of Motor Manufacturers and Traders. (2016). SMMT Issue Paper – November 2016]. This seems a curious source of evidence for the UK government to use.  The White Paper also seems to champion  the benefits of freedom of movement for workers, which in reality the UK Government is determined to abandon:  “Human capital and the transfer of employee knowledge and skills is also beneficial ….. Evidence further shows that such knowledge spill overs between regions translate into increased productivity” (p.66). 

An additional layer of confusion exists around the Northern Ireland Protocol, which forms part of the Withdrawal Agreement signed by the UK Government and the EU.  Producers in Northern Ireland will be manufacturing goods in line with EU Single Market regulations.  The UK Government insists it will allow Northern Ireland businesses to have unfettered access to the market in the rest of the UK, which means in effect that companies in Northern Ireland can, whilst operating to a single standard, sell into both the EU Single Market and the entire UK.  By contrast, companies in Scotland will only be able to export to the EU Single Market subject to the additional conditions and procedures that the EU applies to third country products – even if Scotland chooses to continue applying regulations and standards in line with the EU’s.  And the conditions Scottish companies will have to meet when exporting to Northern Ireland will depend on whether or not the product in question is deemed to be at risk of travelling beyond Northern Ireland and entering the EU Single Market.  Neither the list of ‘at risk’ products nor the conditions that will apply have been agreed between the EU and the UK. 

Another striking example of contradictions in the White Paper is the dismissal of any risk from the proposals to the policy of alcohol minimum unit pricing (page 8):

“These principles will not undermine devolution, they will simply prevent any part of the UK from blocking products or services from another part while protecting devolved powers to innovate, such as introducing a plastic bag levy, minimum pricing or introducing smoking bans.” 

However, in a case study on page 82 there are overt references to minimum pricing as a cost.

‘Regulatory measures can also directly reduce price competition or restrict advertising (e.g. rules that prohibit sales below cost or set minimum prices); or deprive market players of their minimum efficient scale by imposing market fragmentation’.