The UK Parliament is currently considering the Internal Market Bill. 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 devolution perspective a key element of the Bill is the 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 UK (Parts 1&2 of the Bill).
The Scottish Parliament will vote on a motion on whether or not to consent to the United Kingdom Internal Market Bill on 7 October 2020. The Scottish Government’s Legislative Consent Memorandum is considered (along with the LCM from the Welsh Government) in a recent SPICe blog. This blog outlines some of the views of organisations in Scotland on the Bill and provides some examples of how the provisions of the Bill might affect different policy sectors.
The importance of the UK internal market
A number of stakeholders have highlighted that a functioning UK internal market is very important for their interests. For example, the National Farmers Union Scotland (NFUS) told the Finance and Constitution Committee that:
“I will start by saying that the UK internal market is vitally important to the interests of not only Scottish agriculture but, I would argue, the Scottish economy as a whole. Therefore, we would always argue that we want a regulatory framework that operates to basic standards across the UK so that there is no competitive advantage or disadvantage in the UK’s single market.”
Similarly, at the same meeting Scottish Environment Link made comments supporting the principle of an internal market stressing its economic benefits.
In a similar vein, a UK Government press release to coincide with the introduction of the Bill included support for the internal market proposals from Baxters Food Group (based in Fochabers):
“Our Scottish brand is known throughout the UK and it is vitally important to us that we can continue to trade freely in all parts of the country. We welcome the UK Government’s Internal Market legislation which will preserve and protect the current trading conditions. This will continue to guarantee a level playing field for companies like ours and is crucial to our continued success.”
The value of the UK internal market is explored in the SPICe blog The UK internal market: what is it, do we have one and do we need one?
How might the Bill affect regulatory standards?
A key concern of organisations who have publicly commented on the Bill is how it might affect regulatory standards in the UK. These organisations have predominantly come from the environmental or food sectors.
For example, whilst emphasising the benefit of the internal market, the NFUS also added that:
“Stakeholders from across different policy areas have expressed concerns about the proposals in the Bill in terms of the operation of the mutual recognition and non-discrimination principles and what that means for regulatory standards across the four nations of the UK. It has been suggested the Bill could lead to a reluctance from regulators within the UK to pursue higher standards across a number of policy areas including the environment and food.”
The RSPB has also raised concerns with the Market Access Principles in the Bill suggesting that:
“While it doesn’t actually prevent any of the four legislatures from establishing higher environmental standards (which is, of course, what we need), the principles and clauses in the Bill prevent any of the four nations from excluding goods which are operating to lower standards elsewhere in the UK or indeed if imported through a future trading agreement. This effectively means that the Internal Market Bill as currently drafted could thwart any of the four administrations from meeting environmental ambitions they are entitled to set in their country.”
The RSPB used the example of a potential ban on the use of peat in horticulture in Scotland which would not lead to the ban the sale of peat compost in Scotland from other suppliers in the rest of the UK.
The NFUS highlighted concerns that the Bill could lead to a reduction in standards across the UK telling the Finance and Constitution Committee that:
“We cannot allow those principles to operate in such a way that they allow a race to the bottom by opening up the door to the introduction into the UK market of food that is produced to different standards—whether it is animal health and welfare, environmental or other standards—which is then allowed to move within the UK market across all the devolved Administrations. That is definitely a risk to Scottish agriculture and, equally, the integrity of Scotland’s food and drink industry. That industry is built on high standards and provenance, which we need to safeguard very carefully indeed.”
Food Standards Scotland (FSS) stated that the Bill as proposed “would impact our ability to ensure transparency in food safety and standards, and in advice on diet and nutrition”. Building on this, FSS stated:
“The Bill needs to do more to advance the protection of consumers. Cost reduction is not the sole determinant when it comes to public health protection as lessons from previous major food incidents demonstrate. Further, if consumer interest is defined solely by cost then inevitably it will drive down standards, because lower standards are less costly.”
Giving evidence to the Finance and Constitution Committee, the Food and Drink Federation Scotland outlined the importance of high regulatory standards and the impact of international trade deals:
“We are clear that the food industry needs to retain high standards. It needs to do that throughout the UK as well as from a Scottish perspective—as you know, we trade very highly on the quality of our produce…
…anything that is imposed on the industry without proper consultation, discussion and understanding of the different food industries that exist in different parts of the UK would be problematic. The bill may or may not do that, but it certainly seems to allow for anything that can be imported into one part of the UK—in this case it would be England, because the UK Government is responsible for making international trade deals—to be sold in other parts of the UK.”
Impact in other sectors
Since the Bill was introduced, organisations across a number of sectors have remained largely silent about their views on it. However, the UK Government’s summary of consultation responses said that there was overwhelming support for the principles set out in the Bill:
“Overall, the consultation received 271 responses. Analysis found that there was overwhelming support from businesses, industry groups and trade bodies for taking action to mitigate against both direct and indirect discrimination. Their responses justified support for the principles of non-discrimination on the grounds of avoiding new trade barriers; ensuring regulatory consistency to deliver UK-wide benefits to consumers; and certainty for businesses as the Transition Period ends”.
In addition, the Scottish Retail Consortium expressed its support for the Bill at the time it was introduced:
“Scottish consumers and our economy as a whole benefit enormously from the UK’s largely unfettered internal single market, as economies of scale and regulatory consistency helps reduce business costs which in turn keeps down shop prices and provides greater consumer choice. We welcome the government’s recognition of that and the aim to keep it as simple and as easy as possible for retailers and other firms to continue to trade.”
Whilst attention has been on the potential impact of the Bill on environmental and food standards, the possible reach of the Bill is demonstrated by the concerns expressed by the building industry that the Market Access Principles could have an impact on the sector with the possibility of Scottish building regulations being “watered down”. In an article in the Architects Journal, Peter Drummond, a senior member of the Royal Incorporation of Architects in Scotland warned that Scotland could be forced to align with English building regulations, and that the Bill could undermine the Scottish government’s ability to set tougher building regulations, at a time when the Scottish government is in the process of reviewing them. He highlighted three examples:
- Scotland would be unable to retain its stricter regime for construction products and as a result if Scotland were to ultimately seek to ban things like flammable cladding completely, then it might be acting illegally.’
- As goods or services from other UK nations cannot be discriminated against in a procurement exercise, any policy to favour materials with a lower embodied carbon footprint– as this would infer an implicit bias towards local materials – could fall foul of the non-discrimination principle.
- As a result of the Market Access Principle, the current emphasis on zero-carbon models in Scotland would potentially be illegal
The UK Government’s response
In a press release timed to coincide with the Bill’s First Reading in the House of Commons, the UK Government highlighted that the Bill would ensure that businesses in Scotland can continue to trade without any restrictions across the whole of the UK whilst each devolved administration will still be able to set their own standards as they do now.
On 11 September 2020, the Secretary of State for Scotland wrote to the First Minister to address comments made by the Scottish Government in relation to the Bill The Secretary of State’s letter addressed the question of “a race to the bottom” in terms of regulatory standards and how the Bill will affect international trade deals. On the issue of regulatory standards, the Secretary of State wrote:
“The UK is a world leader in food and environmental standards and that will not change.
Also, as you know, the UK Government and all devolved administrations have agreed a common framework on food and feed safety and hygiene law which clearly sets out the ‘rules and regulations related to the production and distribution of food and feed’. Guaranteeing our shared commitment to high standards across the UK.
The UK Government is proud of our record and keenly aware of the premium our high standards place on UK goods in overseas markets.”
The Secretary of State also wrote that a trade deal would not affect the high standards in place in the UK:
“The UK Government has been clear we will not sign a trade deal that would compromise our high standards of food safety, animal welfare and environmental protection.
Of course, we recognise and welcome the Scottish Government’s commitment to high standards in these areas. Our shared view should be the basis of an agreed UK approach to high standards.”
A number of Scottish organisations have expressed support for the continued smooth operation of the UK internal market. However, the inclusion of the Market Access Principles in the Internal Market Bill has led to suggestions from both the Scottish Government and some stakeholders in Scotland that they will present a threat to regulations in areas such as food safety and environmental protection.
The UK Government has stated in response that it is committed to maintaining high regulatory standards and that the Internal Market Bill will not lead to any reduction in standards.
Iain McIver, SPICe Research