In this post, Harry Gillow of Monckton Chambers assesses the UK Government’s White Paper on an UK internal market post the transition period and why, in his view, the position that it is an assault on the devolution framework is overstated.
The UK Government has recently published its White Paper on the future of the UK internal market, which has been met with predictable fury from the devolved administrations: “a full scale assault on devolution – a blatant move to erode the powers of the Scottish Parliament in key areas”, Nicola Sturgeon calls it, and the Welsh Government claims that an attempt to impose a legislative system unilaterally will be “deeply damaging”.
These claims are, I think, rather disingenuous. The powers repatriated from the EU were never the preserve of the devolved administrations. Devolution began in 1999, at which time the powers in question were already within EU competence. The problem, of course, is that elements of these repatriated powers fall within the sphere of devolved competencies. Take one example: powers to develop food labelling rules. Powers in this area currently held at EU-level will return to the UK after the end of the transition period, but agriculture is a devolved competency within the UK. So while the powers returning to the UK are ‘new’ since devolution, it is easy to obfuscate this distinction – particularly where emotive issues such as international trade deals, and the ever-present bogeyman of US food standards, are concerned.
It’s clear, in fact, that the problems of striking new trade deals post-Brexit underpin the White Paper: as the introduction sets out, “[a]voiding the creation of new barriers is vital for our brilliant manufacturers, producers and service providers trading within the bounds of our nation; for our partners overseas as we seek to build ever richer trading relationships with other countries”. Westminster is understandably concerned that regulatory divergence within the UK could lead to one of the constituent nations refusing to implement parts of a future trade deal, undermining the UK’s ability to reach meaningful agreements on trade.
So what does the White Paper actually propose? The paper deals with four areas: the UK’s internal market post-transition; mutual recognition and non-discrimination; governance, independent advice and monitoring; and subsidy control.
The first and second of these are inextricably linked, setting out both the importance of legislating for the internal market and the Government’s proposed approach. The first part commits to continue to work with the devolved administrations through the Common Frameworks programme; these “aim to protect the UK Internal Market by providing high levels of regulatory coherence in specific policy areas through close collaboration with devolved administrations to manage regulation” by “enabling officials to work together to set and maintain high regulatory standards”. The paper notes, however, that Frameworks alone cannot guarantee internal market integrity: being sector-specific, they do not address economic regulation in totality or deal with the cumulative cross-sectoral effects of regulatory divergence, where changes in one sector affect those in another.
The UK Government therefore sees a legislative underpinning of the single market as essential, which will “commit, to all citizens and businesses, free access to the economic activity across the UK … ensur[ing] continued market access across the UK, delivered through the principles of mutual recognition and non-discrimination.” The Government is of the – probably correct – view that in the absence of a clear legal framework, the courts will struggle, when faced with businesses seeking to enforce their rights, with the lack of clear guidance about the Government’s intentions.
The principles underlying the new legislation are ultimately in line with approach taken to maintaining the regulatory coherence of the European Single Market, mutual recognition and non-discrimination. This has led some to comment on the irony of the Government’s advocacy of an internal market which it has so clearly rejected at a European level – one of the key objections to remaining in the Single Market post-Brexit, whatever the merits of the position, has always been that the UK will lack any say over the rules that affect it. This is, in my view, rather missing the point, however. The devolved nations still send MPs to Westminster, and are therefore still involved in the rule making process (and if they face the prospect of being outvoted that is the case for individual nations with decisions taken by qualified majority at EU level).
The Government recognises that mutual recognition “will not, however, be appropriate or possible in all areas”, and will require “exclusions”. The White Paper notes that this has been a feature of the Union since 1707, notably in the legal industry: these exclusions will cover areas such as taxation and spending, existing reserved areas, and social policies with little effect on the UK’s internal market.
The Government will also legislate for a non-discrimination principle, which “will protect businesses, workers and consumers from discrimination by ensuring that an authority must regulate in a way that avoids differential and unfavourable treatment to goods or services originating in another part of the UK to that afforded to its own goods or services.” The White Paper takes the view that direct discrimination should be prohibited, and states that the Government is taking views on how to legislate for indirect discrimination. The latter may be difficult to get right first time, and any such law may well be a source of considerable litigation in time. Quite apart from the potential for mistakes and misunderstandings as the new system gets off its feet, there is no guarantee that the devolved administrations – particularly the Scottish Government – won’t attempt to test the robustness of the provisions.
It is, nevertheless, clear that the Government is acutely aware of the political sensitivity of these proposals. The White Paper reiterates time and again the UK’s high food safety standards: the Government remains “firmly committed to upholding our standards outside the EU and the European Union (Withdrawal) Act 2018 will transfer existing EU food safety provisions, including existing import requirements, into the statute book. These import standards include a ban on using artificial growth hormones in domestic and imported products and set out that no products, other than potable water, are approved to decontaminate poultry carcasses. Any changes to existing food safety legislation would require new legislation to be brought before the UK Parliament and the devolved legislatures.” Chlorinated chicken, it would seem, is off the menu.
A brief third part notes that intergovernmental arrangements will have to be expanded to account for the new legislation. These will be supported by two new and independently undertaken functions: monitoring and reporting on the health of the internal market, and proactively gathering views to strengthen the evidence base for that. The Government notes the need to ensure that “any existing dispute avoidance and resolution mechanisms can address potential disagreements on the Internal Market”, but states in respect of the independent functions outlined above that “carrying out of these two functions will not lead to third-party determinations that directly overturn the actions of elected administrations”. Once again, the Government’s emphasis on working constructively with devolved administrations is, at least on its face, apparent, and its awareness of the difficulties it faces in negotiating these issues.
Finally, the Government intends to legislate to regulate state aid powers at a UK level (an implicit admission, perhaps, that the Government’s arguments that subsidies were automatically a reserved power was not as strong as it claimed). This, again, has been the subject of much devolved debate, which again, in my view, seems to largely miss the point: the Government remains “committed to developing an open, fair, and transparent subsidy control mechanism”. While we’ll have to wait for the details of this – to be published separately – the White Paper states that spending decisions within the UK-wide structure will continue to be the preserve of the devolved administrations.
It is hard to argue that the Government’s proposals are not largely sensible. For all that the Welsh First Minister might complain that the Government cannot be trusted to make decisions in the best interests of the UK as a whole, there’s no escaping the fact that the devolved administrations are proposing a greater degree of internal divergence within the UK than would be allowed between different nations in the EU. It’s hard not to suspect an ulterior motive here. The Government’s internal market legislation will prevent the Scottish Government erecting internal economic barriers within the UK that would, over time, cause Scotland to diverge ever further from England; de facto independence that might be only too easy to convert to complete separation. But while the new legislation may be bad for the SNP’s cause, it’s undoubtedly good, I would argue, for the British consumer: the White Paper sets out, in considerable detail, the costs associated with internal trade barriers. The UK remains an exceptionally economically integrated nation, with a substantial economic benefit to all of us. The Government’s determination to preserve this is an excellent sign.
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Professor Michael Dougan of Liverpool University has argued that the UK Government’s proposals could undermine the Scottish minimum alcohol pricing legislation. Under EU Law, the Scottish Government succeeded in justifying the legislation on public health grounds, even though it was accepted the legislation constituted an MEQR. Under the new proposals, Scotland might have to permit alcohol imported from the rest of the UK to be sold at below the minimum price as it would not be possible to rely on a public health exception. On this basis, the UK government’s proposals would have an adverse impact on the devolution settlement.