The United Kingdom Internal Market Act and common frameworks

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On 16 December 2020, the United Kingdom Internal Market Bill completed its passage through the UK Parliament and received Royal Assent the following day.  This blog sets out the key changes made to the Bill at the end of the UK Parliament’s consideration, to provide a link between the new Act and the development of UK-wide common frameworks.

SPICe has previously published a briefing on the Internal Market Bill along with several blogs including The UK Internal Market Bill – The Devolved Administrations Responses.   

The Market Access Principles in the Internal Market Act.

A key element of the Act is to establish two market access principles to protect the flow of goods and services in the UK’s internal market:

•           the principle of mutual recognition.

•           the principle of non-discrimination.

For the sale of goods, the market access principles would in effect mean that if a good meets the required legal standards to be placed on the market in any one of the four nations of the United Kingdom, it can be placed on the market in all four nations.  In addition, the non-discrimination principle means that the sale of goods in one part of the United Kingdom should not be affected by restrictions that discriminate against goods that have been produced another part of the United Kingdom.

In terms of services, the Act provides that where a service provider is authorised to provide a service in any of the four nations of the UK, they may provide the same service in all four nations of the UK.

The Scottish Government suggested that the proposals could lead to a reduction in standards because:

“a reduction in standards in one part of the UK would have the effect of pushing down standards elsewhere in the UK.”

Common Frameworks

A common framework is an agreed approach to a particular policy, including the implementation and governance of it.  They are being developed in the UK to ensure that after the UK’s exit from the EU, in certain policy areas, there is no divergence between the nations of the UK where that would be undesirable. This agreement is underpinned by political commitments by both the UK and devolved Governments not to legislate in areas to be covered by common frameworks until they are agreed. 

The SPICe post-Brexit hub includes a dedicated section on common frameworks. 

Refusal of consent

Ahead of the Bill’s introduction, both the Scottish and Welsh governments expressed concerns about the UK Government’s proposals.  They suggested that common frameworks, rather than the Bill should be used to agree the provisions of an internal market.

The Scottish Government lodged an LCM on 28 September 2020 in which it indicated it would not recommend consent.   On 7 October 2020 the Scottish Parliament agreed “not to consent to the United Kingdom Internal Market Bill, as it reduces and constrains the competence of the Scottish Parliament”. The decision was agreed by 90 votes to 28 with no abstentions.  The Welsh Parliament also agreed to withhold consent to the Bill.

In response, the UK Government 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.

House of Lords amendment in relation to common frameworks

During the Bill’s consideration in the House of Lords, a key amendment to the Bill was agreed. It related to the internal market’s interaction with common frameworks. Tabled by Lord Hope of Craighead, the amendment proposed to disapply the market access principles where the four governments agreed that divergence between the different parts of the UK was acceptable through the common frameworks process. It would also have prevented the UK Government from making secondary legislation in areas where common frameworks were still under discussion.

Whilst the UK Government opposed the amendment, Lord True, a government minister, said he did “acknowledge that there may be an appropriate way to put frameworks into the Bill”.  The House of Commons removed the Lords amendments when it returned to the Commons at the start of December.  However, the House of Lords sought to reinsert the amendments during ping pong (the stage when the Commons and Lords consider amendments back and forward until a final version of the Bill is agreed).  On 16 December, the Government’s Leader in the House of Lords, Lord Callanan, proposed a series of amendments to the way in which the Internal Market Bill interacts with common frameworks.  These amendments were accepted by both Houses, paving the way for the Bill to receive Royal Assent.

How did the new amendments change the Bill and pave the way to agreement?

Clause 10 of the Bill provides for further exclusions from the Market Access Principles as they apply to goods and confers on the Secretary of State a power to make regulations to add to the list of exclusions from the Market Access Principles which is set out in Schedule 1.  The UK Government’s amendment, which appears to seek to achieve the same outcome as Lord Hope’s original proposed amendment, sets out that this power can be used to:

“give effect to an agreement that forms part of a common framework agreement and provides that certain cases, matters, requirements or provision should be excluded from the application of the market access principles”.

The new amendment also sets out what a common framework agreement is. 

A similar amendment is made in the Bill to Clause 17 on “Services: exclusions”. 

The amendments mean that the UK Secretary of State can make regulations to exclude from the scope of the Bill areas affected by the market access principles and services where common frameworks have been agreed. 

Another UK Government amendment gives the Office of the Internal Market (created by the Bill) a role in reporting on the interactions between the Internal Market and common frameworks.

All eyes on common frameworks?

Whilst the UK Government’s amendments appear to have addressed some of the Devolved Administrations’ concerns about the legislation, the changes do not address all of them.  As Jess Sargeant from the Institute for Government has pointed out, common frameworks only cover policy areas returned from the EU and the devolved governments also have concerns about other parts of the bill.  In addition, if common frameworks are not agreed between the four administrations then the Market Access Principles will continue to apply, leaving the Scottish and Welsh Governments’ concerns about a restraint on the devolved legislatures powers unresolved in those areas. Added to this, according to the UK Government’s latest analysis, there are no plans for common frameworks in 115 of the 154 areas of policy identified where EU law intersects with devolved competence. As a result, these 115 areas of policy may continue to be captured by the scope of the Internal Market Act.

Shortly before the Bill concluded its passage through the UK Parliament, the Welsh Government announced that it planned to seek the view of the Administrative Court on the legality of the Internal Market Bill in terms of its interaction with the devolution settlement (the Administrative court is a specialist court which sits within the High Court of Justice of England and Wales.).  The Counsel General and Minister for European Transition, Jeremy Miles MS set out the reasons for the Welsh Government’s concerns:

“The Welsh Government is determined to do everything we can to protect the Senedd in the face of the outrageous attack on its legislative competence made by the UK Government through the UK Internal Market Bill, to which the Senedd has rightly refused consent.

The Bill will today complete the process of Commons Consideration of Lords Amendments. If the Bill is enacted in its present form, this would leave the ambit of the devolution settlement in Wales uncertain and undermined.

Regulation-making powers in the Bill would open the Government of Wales Act 2006 (GoWA) to very wide substantive future amendment, and the powers of the Senedd and Welsh Government to serious diminution, at the hands of the UK Government.

The provisions in the Bill are also so wide and deep in operation that they risk constraining the legislative space for the Senedd in areas which are currently devolved.”

At the time of writing, the Scottish Government has yet to respond to the passing of the Internal Market Act.

The scrutiny challenge

Common frameworks are fundamentally inter-governmental agreements. Some have a legislative basis, and as such, undergo set scrutiny by the UK Parliament and devolved legislatures. Common frameworks which do not require this element of legislative scrutiny are still considered by legislatures, but their role is perhaps less clear. Legislatures are not consenting to frameworks, but rather scrutinising the decisions of Ministers to enter into these common agreements. The UK Internal Market Act 2020 brings the importance of common frameworks to the fore. There may now be a greater emphasis on agreeing common frameworks and a push to get them agreed timeously.

The time needed by legislatures to consider such frameworks will be curtailed by scheduled elections in Scotland and Wales for 2021.

There is also a challenge for legislatures in how they decide to scrutinise common frameworks and how scrutiny of these arrangements continues as they are implemented.

But that’s perhaps a challenge for 2021.

Iain McIver, SPICe Research