Internal Market Act 2020: position paper

The Act’s impact on business, trade and regulatory policy

37. The Scottish Government acknowledges the importance of avoiding unnecessary barriers to trade. However, it does not follow that the IMA is the necessary means of ensuring that outcome. The IMA’s necessity is always asserted, never demonstrated. This central confusion has been the source, not just of intergovernmental dispute, but also radical new uncertainty as to the effect of devolved law. The Act also acts as a source of regulatory uncertainty for businesses and consumers.

38. Two recent regulatory developments are instructive. The first concerns folic acid fortification of flour and demonstrates what can be achieved across the UK without the need for the IMA.

39. There is clear evidence that inadequate folic acid status increases the chance of foetal neural tube defects (i.e. anencephaly, spina bifida, encephalocele, abbreviated to NTDs). There is therefore a compelling public health rationale to improve the folic acid status of pregnant women.^[16] Although the (then UK-wide) Food Standards Agency recommended mandatory fortification of flour, no regulatory action was taken at the time.

40. Scottish Ministers subsequently requested advice on the steps necessary to proceed with mandatory folate fortification on a Scotland-only basis. However, Food Standards Scotland (FSS) decided in August 2017 not to recommend a Scotland-only policy. This was due to the practicalities of fortifying flour specifically for the Scottish market, not because fortification was unwarranted or ineffective. Indeed, FSS noted the strong evidence supporting the policy.

41. In December 2024, new UK-wide legislation came into force requiring millers and flour producers in the UK to fortify non-wholemeal wheat flour with folic acid by the end of 2026.^[17]

42. In other words, although the Scottish Parliament would have been able to introduce a stand-alone Scottish requirement for folic acid fortification of flour, there was a recognition that, despite the public health benefit, the impact on businesses would have been disproportionate.

43. This outcome was achieved without the need for the IMA; it was the result of rigorous scrutiny and testing of policy outcomes and robust business and regulatory impact processes.

44. The second example demonstrates the real-world impacts on regulation and enforcement caused by the implementation of the Act over the use of Common Frameworks. It relates to England-only precision breeding regulations under the Genetic Technology (Precision Breeding) Act 2023.^[18] While the policy divergence introduced by the new legislation is significant, there was very little engagement on the Act on the part of the UK Government through the relevant Common Frameworks. Engagement on the secondary legislation has been better, but there are limits as to what the secondary legislation can do to ease the issue of diverging policy.

45. The Act and implementing regulations remove gene edited plants (and, in the future, animals) from the regulatory regime which applies to traditional GMOs. The impact of the mutual recognition principle means that these products will now be marketable, bypassing the role of the Scottish Government and Scottish Parliament in determining policy in a devolved area. Rather than removing barriers to trade, this creates a complex and divergent regulatory and enforcement landscape across the UK.

46. The IMA is therefore a source of confusion, not certainty, for businesses and consumers, and creates the possibility of multiple, even contradictory regulatory requirements and enforcement regimes in different parts of UK. This works against informed consumer choice. It also, potentially, threatens the quality guarantee that is essential to the Scottish brand.^[19]

47. For this reason, while the Scottish Government notes the UK Government’s recent announcements on regulatory policy,^[20] it believes that the IMA itself has the potential to contribute to an unclear and potentially burdensome regulatory environment.

48. The IMA is premised on the assumption that divergence is always disruptive and unwelcome. This assumption ignores the benefits that different approaches in different nations can bring – not only to addressing local circumstances, but also to driving policy innovation, which in turn can be a driver of economic growth, as Lord Hope’s points illustrate.

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.