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The Internal Market Bill: implications for devolution

Published: 11 September 2020
Author: Nicola McEwen

Analysis from Nicola McEwen on the Internal Market Bill, exploring the suggested recentralisation of power and the implications for the Sewel convention and intergovernmental relations. 

The UK Government’s Internal Market Bill sparked controversy when the Northern Ireland secretary, Brandon Lewis, conceded the government’s willingness to depart from international law in overriding aspects of the UK-EU Withdrawal Agreement. Its implications for devolution are no less controversial.

Under EU membership and during this transitional year, policies of all governments in the UK are made within the framework of EU law, including rules designed to promote and protect the European internal market. These rules will cease to apply to the UK from 1 January. The Internal Market Bill is motivated by the UK Government’s desire to ensure EU exit avoids creating new barriers to trade and mobility for business and professionals within the UK. A legal backstop is deemed necessary to provide certainty that people and businesses will continue to be able to work and trade freely across the UK’s internal borders.

In its current form, however, the Bill suggests a significant recentralisation of power. It reserves competence over state aid/subsidies to the Westminster parliament. It gives the UK Government new spending powers in devolved areas. These could potentially be used to bypass the devolved governments and fund organisations directly to support UK-wide priorities and ‘promote the UK’s shared values’.

Most significantly, perhaps, are the effects of rules on mutual recognition and non-discrimination, which together make up the Market Access Commitment. These rules mean that goods, service providers and professional practitioners that meet regulatory standards in one part of the UK are entitled to enter the market anywhere in the UK, without having to meet local regulations.

These rules would not prevent the devolved parliaments from making laws within their areas of competence, as they do now. But they are likely to affect the extent to which these laws could make a difference.

Let’s assume, for example, that the Scottish Parliament passed a law to introduce a series of measures designed to tackle obesity. Such a law might require producers to reduce the sugar content of food and drink or have bolder labelling on recommended daily intakes and the harmful effects of excessive sugar consumption, or perhaps restrict certain marketing activities of service providers.

The Market Access rules would not prevent such a law from being passed. But these rules would not apply to goods or service providers entering the Scottish market where these had already satisfied the (hypothetically less strict) regulations set in other parts of the UK. Given the likelihood that imported products would make up the bulk of the market, the ability of the Scottish policy to have the desired health benefits would be reduced.

It is easy to see how a wide range of market interventions to promote policy goals in one of the UK’s territories could be curtailed by rules that prevent them from being applied to goods, services or professional practitioners from other parts of the UK. Existing regulatory divergences, such as minimum unit pricing for alcohol, are exempt from the new rules but only so long as they remain substantially unchanged. Permissible exemptions from similar EU internal market rules, including public health, morality, environmental protection, or protection and promotion of local heritage, do not appear to be exempt from the proposed UK internal market rules. Except in a narrow range of areas, including threats to human, animal or plant health, unfettered market access is given priority. EU principles of proportionality and subsidiarity are also excluded.

Under the Sewel convention, the UK Government is seeking the consent of the devolved legislatures for those areas of the Bill that affect devolved competence. Consent is extremely unlikely to be forthcoming. But the Sewel convention has no legal effect, and withholding consent is unlikely to disrupt the Bill’s passage through parliament. As we have seen in other Brexit-related legislation, the UK Parliament has barely blinked as it passed laws that affect devolved matters or alter devolved competence despite the consent of one or more devolved institutions being withheld.

Departure from the EU’s regulatory framework does pose challenges for goods and services trade across the UK’s internal borders. Each of the governments has acknowledged this to varying degrees.

Working together, they have made significant progress in developing UK common frameworks to replace EU frameworks where these are deemed necessary. Work to improve intergovernmental relations is also ongoing, albeit with considerably less progress. A Joint Review of intergovernmental processes, machinery and principles initiated by the leaders of the four administrations in March 2018 has yet to produce any outputs. The UK Government has signalled its intention to bring the review to a close over the coming months, but the deterioration in the relationships its shares with the devolved governments during the Brexit process risk making it even harder to produce consensus on the way ahead.  

And yet, it is in the intergovernmental arena where the challenges that EU exit poses for the domestic market can be addressed without resorting to a recentralisation of power. More effective intergovernmental machinery – and there are plenty of international examples to draw upon – can help to find an appropriate balance between fair market access and legitimate market interventions.


Photo by Clem Onojeghuo on Unsplash

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