The UK internal market proposals: intergovernmental relations

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Introduction

On 16 July 2020, the UK government published its white paper setting out its thinking on the nature of the UK internal market once the UK leaves the Brexit transition period at the end of this year.

This third and final SPICe blog in the series on the internal market white paper examines the proposals from the perspective of intergovernmental relations in the UK.  The first blog examined what an internal market is and whether the UK needs one and the second blog compared the proposals to the principles and structures which previously supported the functioning of the UK’s internal market as a result of EU membership

Intergovernmental relations and Brexit

Since the UK decided to leave the European Union, the system of intergovernmental relations has come under significant strain.  The system by which the four governments in the UK seek to work together does not appear to have successfully reconciled differing views about Brexit and the future UK-EU relationship.  For example, giving evidence to the Scottish Parliament’s Culture, Tourism, Europe and External Affairs Committee on 18 June 2020, the Scottish Government’s Cabinet Secretary for the Constitution, Europe and External Affairs told the Committee that “Scotland’s interests have scarcely been considered at all by the UK Government”.

The strain on IGR processes was amplified during June 2020 when the UK Government announced it did not intend to seek an extension to the transition period, apparently without first discussing this with the devolved administrations.  Following this, the Scottish and Welsh Governments jointly wrote to the Chancellor of the Duchy of Lancaster to express their disappointment at the way in which the intergovernmental relations overseeing the Brexit process were being handled.

Scottish and Welsh governments’ reactions to the internal market white paper

In this environment, the UK government published its proposals for the UK internal market.  Perhaps inevitably the reaction from both the Scottish and Welsh Governments was frosty. 

Disagreement has centred on whether the UK Government’s plans will provide new powers to the devolved legislatures or whether they will in fact strip away devolved powers from them.  The white paper states that:

“This is the single biggest transfer of powers to the devolved administrations in history, and will see new powers transferred to Scotland, Northern Ireland and Wales in a total of 160 policy areas which intersect with devolved competence.”

In contrast, the Scottish Government has suggested that powers would in fact be taken away from Holyrood.  This issue has been explored in a House of Commons Library blog.

Ahead of the white paper’s publication, the Cabinet Secretary for the Constitution, Europe and External Affairs wrote to the Chancellor of the Duchy of Lancaster to express concern about the UK Government’s proposals and following publication the Cabinet Secretary suggested that the proposals in the white paper were:

“the biggest threat to devolution since the Scottish Parliament was reconvened in 1999, and nothing that UK Government Ministers have said in our discussions today gives me any confidence that that is not the case.”

The Welsh Government was reported as saying it had not seen the plans in advance and any system forced on Wales would be “deeply damaging”.

In contrast, the UK Government Minister leading on the Internal Market white paper, Business Secretary Alok Sharma told the BBC that:

“the devolved administrations “have known the direction of travel” and the UK government would be “engaging with colleagues extensively across all the devolved administrations and getting their views.”

Lack of meaningful engagement?

Both the Scottish and Welsh Governments have cited a lack of meaningful engagement by the UK Government on the approach to Brexit and in the development of the proposals in the white paper.  Professor Michael Keating from the Centre on Constitutional Change described the white paper as having been “produced by the UK Government, not negotiated with the devolved administrations”.

The Welsh Government has also suggested that the rules for the UK internal market should be agreed between the four governments of the UK whilst the Scottish Government suggested “that the purpose of such plans is not economic but is instead purely political”.

For its part, the UK Government highlighted in the white paper that the Scottish Government had withdrawn from cooperating on the internal market workstream of common framework discussions in March 2019 which it said had “impeded our collective approach to  ensuring the continued smooth functioning of UK trade”.

Governance and oversight and a role for the devolved institutions?

The white paper proposes that an independent body should carry out two functions in relation to the Internal Market:

  • Monitoring and advising on the health and evolution of the Internal Market
  • Capturing business and consumer insight into the development of the Internal Market

It is not clear from the white paper, how the role of an independent body would be developed but the UK Government has indicated its role may include providing expert advice to administrations and legislatures across the UK. It is also unclear from the white paper how an independent body would be composed and whether, for example, there would be an opportunity for the devolved administrations to feed into either the membership or workings of such a body. It is also unclear what relationship an independent body would have with the devolved administrations and whether it could influence the nature of legislation that might be relevant to the UK Internal Market in the devolved legislatures.

Whilst the white paper references increased new powers for the devolved legislatures on a number of occasions, it makes little reference to how the devolved institutions will be involved in the governance of an internal market.  Whilst the white paper states that Part 3:

“Considers in more detail the institutional arrangements necessary to ensure its smooth operation on an ongoing basis. In order to ensure a well-functioning Internal Market, the Government intends to build on existing governance arrangements between the UK Government, devolved administrations and UK Parliament and the three devolved legislatures and that this should be transparent and beneficial to businesses, workers and consumers.”

It later adds:

“In this White Paper the Government has made clear that 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. It is also clear that in order to give fullest effect to the system as described, certain supporting functions should be carried out at arms’ length from the UK Government in a way that is both visibly and practically independent.”

As a result, the white paper makes no commitments (beyond “existing governance arrangements”) for a definitive role for either devolved administrations or legislatures in the development or the functioning of the Internal Market 

Conclusion

Intergovernmental relations in the UK were tested by the Brexit process.  It appears likely the UK Government’s Internal Market legislative proposals will continue to place strain on processes that the devolved administrations believe are failing to function effectively. 

Iain McIver, SPICe Research