UK internal market: initial assessment of UK Government proposals

Initial Scottish Government assessment of the threat to devolution, regulatory standards, businesses and jobs.

Business and consumers

Much has been made about the need for to operate to a common set of rules.   Business already operates with differences across UK which reflect preferences in local markets or policy initiatives on health and environmental considerations. 

A key finding the RSA [Royal Society for the encouragement of Arts, Manufactures and Commerce] City Growth Commission (October 2014), was that an overly concentrated system of decision-making can reinforce already existing disparities in economic performance. The Commission argued for the devolution for greater responsibilities to be devolved to UK cities and regions, to reflect local priorities within the internal market structure.  For example, concentration of large scale infrastructure projects in London (including Crossrail - Thameslink, London underground and Heathrow airport) add to the already strong concentration of economic activity in London.

Devolution brings policy-making closer to local priorities, with the potential for a more joined-up and effective approach across policy levers to boost economic performance and address challenges.  For example, the Scottish Government is a full partner in all the City Region Deals agreed in Scotland, matching and in some cases exceeding financial contributions made by the UK Government.  We are also supporting the development of Regional Economic Partnerships, which seek to align priorities and resources across public, private and third sector partners in order to stimulate inclusive economic growth.   There are already differences in policy approaches in UK nations, and this does not adversely affect the functioning of the market in the UK.  There are several examples in Scotland covering tax and regulation, including:

  • Business rates and property transaction taxes vary between Scotland and the UK
  • Regulatory differences already exist within the UK single market - for example, SEPA environmental regulation has devolved aspects and we have different planning laws and a separate legal system.
  • Food standards is an area where flexibility is essential to provide proportionate tailored policy to reflect local circumstances and differing risk assessments. 
  • Differences in the construction sector between Scottish and English building regulations and the methodology behind calculating Energy Performance Certificates.

The Scottish Government recognises that business want certainty.   But leaving the EU creates massive uncertainty.   With just five months to go until the end of the implementation period, there remain a number of important questions yet to be addressed from the UK’s negotiations:

  • Will there be tariffs on trade with the EU and what will they apply to?
  • Which regulations to follow? Businesses still do not know, if they make something in the UK to UK standards, whether those will be recognised in the EU (and vice versa).
  • Customs paperwork and processes: there will be checks, but businesses still don’t know what they will have to provide at the border and whether UK certificates will be recognised (and vice versa for the EU).  Businesses do not know how much of their products have to originate in the UK and EU to benefit from preferential trade terms. They also don’t know how this interacts with other trade agreements the UK and EU have, which undermines businesses’ ability to plan their supply chains.
  • How will people and data cross borders to make businesses work?
  • Will professional qualifications be mutually recognised?

The White Paper proposals for mutual recognition and non-discrimination will not provide business certainty but will create the conditions for a lowering of standards when Scottish businesses want to compete on quality and provenance as well as cost. 

  • food safety and animal welfare standards would be undermined by the requirement to accept lower standards set elsewhere
  • Scotland’s distinctive procurement system, which requires public bodies to consider social and environmental benefits and not just take the lowest bid on offer, could be challenged under non-discrimination rules 
  • The quality guarantee that underpins our world-class meat and seafood industries – and the many thousands of jobs they support – could be destroyed by UK ministers effectively imposing lower food and drink standards on Scotland.  In July, UK Ministers again rejected proposals to write requirements to maintain high food and animal welfare standards into law as part of future trade deals 
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