The United Kingdom Internal Market Bill 2019-21 received its First Reading in the House of Commons on 9 September 2020. According to the UK Government, the purpose of the Bill is to:
“preserve the UK internal market, providing continued certainty for people and businesses to work and trade freely across the whole of the UK.”Paragraph 1 of the Explanatory Notes for the UK Internal Market Bill
From a devolved perspective, the Bill makes the following proposals:
- Introduction of a Market Access Commitment underpinned by the principles of mutual recognition and non-discrimination for trade in both goods and services across the four nations of the United Kingdom (Parts 1&2).
- A system for the recognition of professional qualifications across the United Kingdom internal market (Part 3).
- The conferral of new functions on the Competition and Markets Authority (CMA) to monitor and advise on the UK internal market (Part 4).
- Provide UK Ministers with a power to provide financial assistance in all parts of the United Kingdom including in devolved policy areas (Part 6).
- The reservation of State Aid (Part 7).
SPICe has published a briefing setting out more detail on the key provisions in the Bill from a devolved perspective.
On 28 September the Scottish Government lodged its Legislative Consent Memorandum, with the Welsh Government having lodged its Legislative Consent Memorandum three days before. This blog provides a short analysis of the Scottish and Welsh Governments’ positions on the Internal Market Bill as set out in their LCMs.
The Scottish Government set out its position on the Bill at the start of its LCM, writing:
“This Bill, however, is not necessary; nor does it reflect Scottish interests and concerns. Instead, it undermines both the devolution settlement and agreed processes that are already established to agree common frameworks and ways of working across the UK following EU exit.”Paragraph 7 of the Scottish Government’s LCM
The Welsh Government also indicated it was not content with the Bill, suggesting it is not a proportionate response to the need for a UK internal market after the UK has left the EU and that:
“if enacted, [the Bill] would undermine the long-established powers of the Senedd and Welsh Ministers to regulate in relation to matters within devolved competence.”Paragraph 72 of the Welsh Government’s LCM
Both Governments indicated they will not be recommending consent, though the Welsh LCM left room for changing that decision in the event that the Bill is “substantially amended to address our significant concerns”.
A constraint on powers?
The UK Government has stated that the end of the transition period will lead to a range of new powers flowing directly to Edinburgh, Cardiff and Belfast. These powers were previously exercised at EU level. In contrast both LCMs have argued that the provisions in the Internal Market Bill will lead to a constraint on the powers of the devolved legislatures as a result of the provisions in Parts 1 to 3 of the Bill.
The Scottish Government has argued that the Market Access Commitment underpinned by the mutual recognition and non-discrimination principles, along with the proposal for the mutual recognition of qualifications, will serve as a constraint on the devolved powers of the Scottish Parliament. For example, the LCM acknowledges that whilst the Bill does not amend Schedule 5 of the Scotland Act (the list of reservations) it instead provides:
“[…] that provisions of Acts of the Scottish Parliament, or Scottish Statutory Instruments, must conform to the principles of the Bill or else they “do not apply” or have “no effect”. This is in effect a new, wide-ranging constraint on devolved competence.”Paragraph 42 of the Scottish Government’s LCM
The Welsh LCM shares similar concerns as the Scottish Government and also argues that the Market Access Commitment principles could lead to a race to the bottom in terms of standards:
“The rules created in these Parts will have the effect of setting aside any Welsh-made rules (made after commencement of these Parts) as they apply to any goods or services originating from (or imported into, in the case of goods) any other part of the UK. These elements of the Bill open the door to a ‘race to the bottom’ inter alia in terms of setting environmental standards and standards relating to food safety and quality.”Paragraph 75 of the Welsh Government’s LCM
Both the Scottish and Welsh Governments have stated that the provisions in Parts 1-3 of the Bill will in effect act as constraints on the powers of the Scottish and Welsh Parliaments and potentially lead to a reduction in standards across the UK.
Both Governments used their LCMs to reiterate the belief that the UK’s internal market could be underpinned by the agreement of common frameworks. The Scottish Government even stated that the Bill actually “undermines the agreed process of negotiating and agreeing common UK frameworks where these are required to replace existing EU structures” (paragraph 15).
The Scottish Government’s LCM states that it has sought to work with the UK Government on the establishment of common frameworks. The LCM also states that in March 2019 the Scottish Government withdrew from work coordinated by the Department for Business, Energy and Industrial Strategy (BEIS) on the UK internal market. The reason given for its withdrawal was because “it became increasingly evident over the course of 2018 that BEIS-led work on the internal market was going significantly further than work under way on Common Frameworks” (paragraph 29). The Scottish Government added that “it became clear that “the UK Government approach to work on the UK internal market presented a clear risk to the devolution settlement” (paragraph 30).
In contrast, the UK Government has stated that common frameworks should be developed to support the functioning of the internal market, but that on their own they cannot guarantee the integrity of the internal market. In addition, paragraph 8 of the Explanatory Notes to the Bill outlines that the Common Frameworks Programme aims:
“to protect the UK internal market by providing high levels of regulatory coherence in specific policy areas through close collaboration with devolved administrations.”Paragraph 8 of the Explanatory Notes for the UK Internal Market Bill
This suggests that alongside the Internal Market Bill, the UK Government will seek to agree frameworks to ensure common regulatory approaches to underpin the internal market. If this were to be the case, it might avoid what the Welsh and Scottish Governments have described as the risk of deregulation and lowering of standards which may come about as a result of the proposals in the Internal Market Bill.
Power to provide financial assistance in all parts of the United Kingdom
The Scottish LCM also highlights the proposals in the Bill which confer powers on UK Ministers to provide funding in all parts of the UK, including in devolved policy areas, and potentially go wider than just replacing EU funding. The Scottish Government is concerned by this proposed approach for a number of reasons, including:
- “The provisions are a further source of uncertainty and confusion in the Bill, as well as potentially removing from the Scottish Government its current role in EU funding.” (paragraph 100)
- “Spending on devolved areas is currently the responsibility of the Scottish Government, as approved by the Scottish Parliament” (paragraph 101).
- A “risk of an uncoordinated and potentially incoherent approach to spending in devolved areas if the UK Government and the Scottish Government have separate spending programmes” (paragraph 106).
The Scottish Government states that these provisions should be removed from the Bill. This position is also taken by the Welsh Government who wrote that:
“There is no mechanical link between the market access principles set out in Parts 1-4 and the new financial assistance powers to be exercised by UK Government Ministers, set out in Part 6. The powers are not necessary and will serve to undermine spending decisions made by the Senedd and the Welsh Ministers.”Paragraph 78 of the Welsh Government’s LCM
The Bill proposes to reserve the regulation of distortive or harmful subsidies. The intention is that this would apply once the UK ceases to follow EU State Aid rules to enable the UK Government to establish a UK-wide subsidy control regime as set out in paragraph 297 of the Bill’s Explanatory Notes. Whilst the Welsh Government’s LCM states it is not opposed to a UK wide State Aid approach, it states that a regime should be achieved through discussion and negotiation between the four parts of the UK. The Scottish Government argues that it is concerned that:
“Scottish Ministers will not be appropriately consulted in the design and establishment of any future regime. Any UK-led subsidy framework may not therefore reflect Scotland’s specific needs in terms of the level and types of financial interventions our public sector can make to successfully grow the economy.”Paragraph 111 of the Scottish Government’s LCM
A protected enactment
The Bill proposes to amend the devolution statutes (for Scotland, Wales and Northern Ireland) to make the UK Internal Market Act a “protected enactment.” This means that it will not be possible for the devolved legislatures to amend it by primary or secondary legislation in areas of devolved competence. In the Scotland Act, Schedule 4 provides the list of protected enactments, which already includes provisions of the European Union (Withdrawal) Act 2018 as amended.
The Scottish Government’s LCM highlights that this is another piece of UK Brexit related primary legislation that has been protected in this way. It also expresses concerns at the increase in the use of Schedule 4 of the Scotland Act suggesting it is a further constraint on the powers of the Scottish Parliament.
The Welsh Government also objected to the proposal to make the UK Internal Market Act a protected enactment in the Wales Act suggesting that “protections should only operate on a narrow basis, by agreement between the legislatures.” (paragraph 80).
Both the Scottish and Welsh Governments have indicated that they do not intend to recommend consent to the UK Internal Market Bill, with the Scottish Government stating it does not intend to lodge a legislative consent motion but it will invite the Parliament to debate the Bill.
The key reasons cited by both the Scottish and Welsh Governments in not recommending consent to the Bill are a belief that decisions about the operation of the UK internal market should be taken on a cross-nation basis either through an intergovernmental agreement or through the agreement of common frameworks. Both the Governments have also argued that a number of the proposals in the Internal Market Bill would provide a constraint on the powers of the devolved legislatures.
The Bill is currently being considered by the UK Parliament. In the event legislative consent is not granted by the devolved legislatures, the UK Government will need to decide whether it intends to legislate irrespective of the failure to obtain that consent.
Iain McIver, SPICe Research