UK internal market: initial assessment of UK Government proposals

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

Economic performance since devolutio

The UK White Paper illustrates a worldview that appears to regard  difference as  harmful whilst asserting that uniformity and Westminster control is required to maintain economic prosperity across the UK.  However, that view is not supported by the facts.  As devolution has progressed over the last twenty years there have been a number of regional policy differences resulting in non-uniformities in the market.   None the less – in fact because of that fact - Scotland has performed well across a range of indicators since devolution and historic gaps between Scotland and other parts of the UK have been narrowed:

  • Prior to 2008, Scotland’s level of productivity was around 10% lower than the UK average. Latest data for 2018 show that the productivity gap is now around 1%.

  • Since 2008 productivity has grown at an average annual rate of 0.9% per year, compared to the UK average of 0.4% over that period.

  • Gross median weekly earnings for full-time employees in Scotland were £563 in 2018, broadly in line with the UK average. Among the countries of the UK, long-term pay growth has been highest in Scotland since 1997 – 87% higher.

Devolution has not inhibited economic performance nor has it inhibited the functioning of the UK economy.   As the White Paper itself makes clear, the UK market has not exhibited any evidence of increasing barriers to trade, or any decline in flows between the nations and regions of the UK.   As devolution has developed, and devolved competences exercised, the impact – across a range of sectors and activities – has in fact been to formalise the non-uniformity of the UK market.  There are differences in the market, representing local preferences in devolved policy areas, yet  the reality is there are no real barriers to trade apparent in the data.

The basis of the UK proposals appears to be that conformity and control are required for an internal market to function effectively, yet that is at odds with arrangements within other well-functioning internal markets, which highlight the scope for policy devolution.  The US has high levels of labour market mobility and a highly integrated internal market. Within this its states have the power to vary an additional rate of income and corporate tax over and above the federal rate.  The US internal market is also characterised by variation in the minimum wage and in the provision of welfare payments.  In Belgium, although corporation tax rates are set nationally, innovation policy is under the full authority of the regions who can offer grants, R&D tax credits, and payroll incentives. 

In summary, these proposals do not, as it is claimed, simply replace current arrangements within the European Single Market.   The EU operates by members negotiating and agreeing, on an equal basis, single market rules – the UK Government is proposing the opposite. The UK Government wants to be able to decide and impose, even in devolved areas and that is not only unacceptable, but also does not work in the interests of business or consumers, as the actual facts of devolution show.

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