Internal Market Act 2020: position paper

Summary of Recommendations

Recommendation 1: Acknowledging the Act’s far-reaching and damaging impact on the devolution settlements is a precondition for delivering meaningful change.

Recommendation 2: The argument that the Act is necessary due to the provision at Part 5 relating the Windsor Framework is unfounded. The UK Government should confirm that there is no impediment to preserving this provision, which sits largely separate from the rest of the legislation, while addressing the wider defects in the Act.

Recommendation 3: The IMA is demonstrably more restrictive, arbitrary and unpredictable than the system of market oversight which was in place when the UK was an EU member state. The principles of proportionality and subsidiarity, central to the operation of the European Single Market, are entirely absent from the Act. It should be replaced with a more balanced system, which acknowledges and protects the ability to make divergent policy, while ensuring overall market coherence and guarding against regulatory friction that may inhibit growth.

Recommendation 4: The UK Government must set out in detail how it proposes to remove the Act’s effect from the operation of Common Frameworks. The Scottish Government welcomes, and shares, the UK Government’s ambition that Common Frameworks act as the key mechanism for managing policy divergence and ensuring regulatory co-operation. However, the IMA does not allow for the proper functioning of Common Frameworks.

Recommendation 5: The UK Government must adhere to the Common Frameworks Statement of Principles. These principles offer a coherent conceptual model for the operation of an internal market regime that ensures a functioning market while respecting devolution. If the consultation document’s stated ambition for Common Frameworks is to be met, these principles must be upheld, including ensuring the democratic accountability of the devolved legislatures. There must also be at least equivalent flexibility to tailor devolved policy as was afforded under EU rules. The IMA does not allow for these principles to be upheld.

Recommendation 6: The UK Government must acknowledge and address the way the Act works against the operation of a responsive, proportionate and effective system of post-Brexit regulation. Far from providing a stable and predictable regulatory environment, the Act introduces radical uncertainty as to the legal effect of relevant regulation, works against ensuring a level playing field for business, and creates the conditions for endless legal disputes.

Recommendation 7: A new approach to creating a responsive and proportionate regulatory environment for business is needed. This should build on the existing Common Frameworks approach and be grounded in the principles of co-design and, crucially, consent. From its inception, the Act has been justified on the grounds that it is necessary to protect jobs, facilitate trade and underpin economic growth. The logic of this position is clearly flawed; the Act’s necessity is always asserted, never demonstrated. The beneficial economic outcomes we all want to encourage are wholly achievable with a more proportionate, balanced and workable system of market oversight.

Recommendation 9: The UK Government should acknowledge the new constraints on devolved competence which have come with the reservation of subsidy control, and with the Subsidy Control Act 2022.

Recommendation 10: The Part 6 spending powers provisions should be repealed, with funding for devolved matters in Scotland provided in the usual way, to ensure proper policy alignment and democratic oversight. At the very least, there should be no use of the powers without the consent of the Scottish Government, and there should be guarantees of no detriment to the Block Grant as a result of the powers being used.

Recommendation 11: The UK Government must acknowledge that co-decision, co-design and consent are essential features of a well-functioning internal market regime – features entirely absent from the IMA. The unilaterally determined scope of the statutory review limits the likelihood of it delivering the change necessary to reverse the Act’s damage to devolution and see the full restoration of the Scottish Parliament’s powers. Moreover, it ensures that the review commences from a fundamentally damaging point - namely without any sense of co-design or collaboration. Specifically, there is no justification to unilaterally ruling out consideration of repeal of the Act, in part or in whole.

Recommendation 12: The UK Government must acknowledge the fundamental flaws in the IMA’s design and operation, as set out in this paper. It must commit, post-review, to joint working with the devolved Governments on the co-design of a new, agreed and workable model of regulatory co-operation that both guards against unnecessary barriers to trade and respects devolution. There should be a formal role for the Interministerial Standing Committee (IMSC) in directing and overseeing this work.