On 16 July 2020, the UK government published a White Paper on the UK Internal Market. In his Foreword to the White Paper, Secretary of State for Business, Energy and Industrial Strategy Alok Sharma noted that …”from January 20201, hundreds of powers previously exercised at EU level will flow directly to the UK government and the devolved administrations in Edinburgh, Cardiff and Belfast…To allow each home nation to take full advantage of these new opportunities, and ensure businesses can continue to trade freely across the UK as they do now, we are consulting on legislating for a UK Internal Market.”

In the White Paper, the UK government proposes a Market Access Commitment, based on two key principles, namely Mutual Recognition and Non-Discrimination.

Mutual Recognition would mean that rules governing the production and sale of goods and services in one part of the UK would be recognised as meeting the regulatory requirements applicable in the other parts of the UK, and this would also apply to professional qualifications.

Non-Discrimination would prevent rules being applied in one part of the UK which would discriminate against goods or services from another.

The transfer of powers on 1 January 2021 is expected to cover as many as 160 policy areas, and of course many of these cover areas where legislative competence has already been devolved to the governments in Scotland, Wales and Northern Ireland.

As all the governments concerned have recognised the potential for regulatory divergence to result in internal barriers to trade, there is supposed to have been greater progress on a system of Common Frameworks, which have not worked as well as hoped but to which all the governments remain committed, at least in theory. However in March 2019 the Scottish Government withdrew from joint working on the issue of an Internal Market, which it sees as cutting across the legislative competence of the Scottish Parliament, and it has argued that the Common Frameworks should suffice. The UK government in the White Paper cites the agreement reached in 2017 between the UK, Scottish and Welsh governments, and later by the Northern Ireland Executive, that the frameworks should be created where necessary “to enable the functioning of the UK internal market whilst acknowledging policy difference”.

The concern of the UK government is to be able to deliver, in negotiations of Free Trade Agreements with third countries, access to trade in goods and services to the whole of the UK market.

The concern of the devolved administrations is that they have not been very effectively consulted over Common Frameworks and have had little participation in the negotiation of Free Trade Agreements externally, so they fear they could be faced with one or a series of Agreements negotiated by the UK government which could cut across regulatory standards that they wanted to apply, for example on food safety.

The stakes are high. The UK government says that its aims are to secure continued economic opportunities across the UK, to increase competitiveness and create an environment that is the best in the world in which to do business, and to support the welfare, security and economic prosperity of UK citizens. It seeks to maintain frictionless trade between all parts of the UK, to maintain fair competition and prevent discrimination, and to continue to protect business, consumers and civil society by engaging them in the development of the market.

However, to achieve these ends, the UK government will have to work harder on its other ‘design rules’, which are to “foster collaboration and dialogue” and “build trust and ensure openness”: those elements appear at times to have been overlooked in the way in which the UK government has gone about its dealings with the devolved administrations.

The regime introduced would also have to address and cover a “uniform approach on the rules that will govern that way public authorities, including local authorities, support businesses”, that is “subsidy control” or “state aid”.

It would need some form of agreed dispute mechanism, which again is a fraught area as devolved administrations fear the creation of some form of disputes authority with the power to strike down their legislation where it was incompatible with the working of the UK Internal Market. The UK government states in the White Paper that it does not wish to replicate a body with the powers of the European Commission, but can see the case for an independent body, perhaps modelled on those in Australia or Switzerland.

As the UK government proposes to bring forward legislation on the UK Internal Market in the Autumn of 2020, to avoid unnecessary regulatory barriers emerging from the different parts of the UK, there are risks of a major constitutional clash with the devolved administrations over how this can be achieved while respecting the different devolution settlements with Scotland, Wales and Northern Ireland. Some commentators such as the Institute for Government (Jess Sargeant, 14 July 2020) believe that a dispute with the Scottish government in the run up to the 2021 Scottish elections, where a second independence referendum will be an issue, “looks almost inevitable”.

We will continue to follow the development of this issue and the resulting legislation closely. To discuss a tailored briefing on how it is likely to affect your business, please contact William Wilson at info@wyesideconsulting.com tel. +44(0)1225-730-407